JPM INSTITUTIONAL FUNDS, 497, 1995-06-23

JPM INSTITUTIONAL FUNDS
497, 1995-06-23

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<PAGE>

PROSPECTUS

The JPM Institutional Funds
6 St. James Avenue
Boston, Massachusetts 02116
For information call (800) 766-7722

The JPM Institutional Funds are a family of no-load mutual funds for which
there are no sales charges or exchange or redemption fees. Each fund (a "Fund",
collectively the "Funds") is a series of The JPM Institutional Funds, an open-
end management investment company organized as a Massachusetts business trust
(the "Trust"). With a broad range of investment choices, The JPM Institutional
Funds provide discerning investors with attractive alternatives for meeting
their investment needs.

UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, EACH FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN A CORRESPONDING OPEN-END MANAGEMENT INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND (A "PORTFOLIO",
COLLECTIVELY THE "PORTFOLIOS"). THE FUNDS INVEST IN THEIR RESPECTIVE PORTFOLIOS
THROUGH SIGNATURE FINANCIAL GROUP, INC.'S HUB AND SPOKE(R) FINANCIAL SERVICES
METHOD. HUB AND SPOKE(R) EMPLOYS A TWO-TIER MASTER-FEEDER STRUCTURE AND IS A
REGISTERED SERVICE MARK OF SIGNATURE FINANCIAL GROUP, INC. SEE SPECIAL
INFORMATION CONCERNING HUB AND SPOKE(R) ON PAGE 7.

Each Portfolio is advised by Morgan Guaranty Trust Company of New York
("Morgan" or the "Advisor").

This Prospectus sets forth concisely the information about each Fund that a
prospective investor ought to know before investing and should be retained for
future reference. Additional information about each Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated June 21, 1995 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Funds' Distributor, Signature Broker-Dealer Services, Inc., 6
St. James Avenue, Boston, Massachusetts 02116, Attention: The JPM Institutional
Funds, or by calling (800) 847-9487.

INVESTMENTS IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUNDS ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN ANY OF THE FUNDS 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.
ALTHOUGH THE JPM INSTITUTIONAL MONEY MARKET FUND, THE JPM INSTITUTIONAL TAX
EXEMPT MONEY MARKET FUND AND THE JPM INSTITUTIONAL TREASURY MONEY MARKET FUND
SEEK TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE CAN BE NO
ASSURANCE THAT THEY WILL BE ABLE TO CONTINUE TO DO SO.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

THE DATE OF THIS PROSPECTUS IS JUNE 21, 1995
<PAGE>

THE JPM INSTITUTIONAL MONEY MARKET FUND seeks to maximize current income and
maintain a high level of liquidity. It is designed for investors who seek to
preserve capital and earn current income from a portfolio of high quality money
market instruments.

THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND seeks to provide a high
level of current income exempt from federal income tax and maintain a high
level of liquidity. It is designed for investors who seek current income exempt
from federal income tax, stability of capital and liquidity.

THE JPM INSTITUTIONAL TREASURY MONEY MARKET FUND seeks to provide current in-
come, maintain a high level of liquidity and preserve capital. It is designed
for investors who seek to preserve capital and earn current income from a port-
folio of direct obligations of the U.S. Treasury and repurchase agreement
transactions with respect to those obligations.

THE JPM INSTITUTIONAL SHORT TERM BOND FUND seeks to provide a high total return
while attempting to limit the likelihood of negative quarterly returns. It is
designed for investors who do not require the stable net asset value typical of
a money market fund but who seek less price fluctuation than is typical of a
longer-term bond fund.

THE JPM INSTITUTIONAL BOND FUND seeks to provide a high total return consistent
with moderate risk of capital and maintenance of liquidity. It is designed for
investors who seek a total return over time that is higher than that generally
available from a portfolio of short-term obligations while recognizing the
greater price fluctuation of longer-term instruments.

THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND seeks to provide a high level of
current income exempt from federal income tax consistent with moderate risk of
capital and maintenance of liquidity. It is designed for investors who seek tax
exempt yields greater than those generally available from a portfolio of short-
term tax exempt obligations and who are willing to incur the greater price
fluctuation of longer-term instruments.

THE JPM INSTITUTIONAL INTERNATIONAL BOND FUND seeks to provide a high total re-
turn, consistent with moderate risk of capital, from a portfolio of interna-
tional fixed income securities. It is designed for investors who seek exposure
to the international bond markets in their investment portfolios.

THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND seeks to provide a high total
return from a portfolio of selected equity securities. It is designed for in-
vestors who want an actively managed portfolio of selected equity securities
that seeks to outperform the S&P 500 Index.

THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND seeks to provide a high total re-
turn from a portfolio of equity securities of small companies. It is designed
for investors who are willing to assume the somewhat higher risk of investing
in small companies in order to seek a higher total return over time than might
be expected from a portfolio of stocks of large companies.

THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND seeks to provide a high total
return from a portfolio of equity securities of foreign corporations. It is de-
signed for investors with a long-term investment horizon who want to diversify
their investments by adding international equities and take advantage of in-
vestment opportunities outside the United States.

THE JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND seeks to provide a high to-
tal return from a portfolio of equity securities of companies in emerging mar-
kets. It is designed for long-term investors who want to diversify their in-
vestments by adding exposure to the rapidly growing emerging markets.

THE JPM INSTITUTIONAL DIVERSIFIED FUND seeks to provide a high total return
from a diversified portfolio of equity and fixed income securities. It is de-
signed for investors who wish to invest for long-term objectives such as re-
tirement and who seek over time to attain real appreciation in their invest-
ments, but with somewhat less price fluctuation than a portfolio consisting
solely of equity securities.
<PAGE>

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Funds Are Designed.................................. 1
Financial Highlights....................................................... 4
Special Information Concerning Hub and Spoke(R)............................ 7
Investment Objectives and Policies......................................... 8
Additional Investment Information and Risk
Factors................................................................... 23
Investment Restrictions.................................................... 29
Management of the Trust and the Portfolios................................. 32
Shareholder Servicing...................................................... 36
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 37
Redemption of Shares....................................................... 38
Exchange of Shares......................................................... 40
Dividends and Distributions................................................ 40
Net Asset Value............................................................ 41
Organization............................................................... 41
Taxes...................................................................... 42
Additional Information..................................................... 45
Appendix................................................................... A-1
</TABLE>
<PAGE>

The JPM Institutional Funds

INVESTORS FOR WHOM THE FUNDS ARE DESIGNED

The JPM Institutional Funds offer investors the advantages of no-load mutual
funds and are designed to meet a broad range of investment objectives. Each of
the Funds seeks to achieve its investment objective by investing all of its
investable assets in its corresponding Portfolio, which has the same investment
objective as the Fund. Since the investment characteristics and experience of
each Fund will correspond directly with those of its corresponding Portfolio,
the discussion in this Prospectus focuses on the various investments and in-
vestment policies of each Portfolio.

For investors interested in current income, preserving capital and maintaining
liquidity, there are The JPM Institutional Money Market Fund, The JPM Institu-
tional Tax Exempt Money Market Fund, and The JPM Institutional Treasury Money
Market Fund. For investors seeking exposure to the bond markets, The JPM Insti-
tutional Short Term Bond Fund, The JPM Institutional Bond Fund, The JPM Insti-
tutional Tax Exempt Bond Fund, The JPM Institutional International Bond Fund
and The JPM Institutional New York Total Return Bond Fund are available. (The
JPM Institutional New York Total Return Bond Fund is described in, and its
shares are offered pursuant to, a separate prospectus.) For those investors who
wish to participate primarily in the U.S. equity markets, The JPM Institutional
Selected U.S. Equity Fund and The JPM Institutional U.S. Small Company Fund are
attractive alternatives. The JPM Institutional International Equity Fund and
The JPM Institutional Emerging Markets Equity Fund are available for investors
who seek to diversify their investments by adding international equities. For
investors interested in a diversified portfolio of equity and fixed income se-
curities, The JPM Institutional Diversified Fund is available.

The JPM Institutional Money Market Fund, The JPM Institutional Tax Exempt Money
Market Fund and The JPM Institutional Treasury Money Market Fund each seek to
maintain a stable net asset value of $1.00 per share; there can be no assurance
that they will be able to continue to do so. The net asset value of shares in
the other JPM Institutional Funds fluctuates with changes in the value of the
investments in their corresponding Portfolios. In view of the capitalization of
the companies in which the Portfolio for The JPM Institutional U.S. Small Com-
pany Fund invests, the risks of investment in this Fund and the volatility of
the value of its shares may be greater than the general equity markets. In ad-
dition, with respect to The JPM Institutional International Bond Fund, The JPM
Institutional International Equity Fund and The JPM Institutional Emerging Mar-
kets Equity Fund, investments in securities of foreign issuers, including is-
suers in emerging markets, involve foreign investment risks and may be more
volatile and less liquid than domestic securities. Each of these Portfolios may
make various types of investments in seeking its objectives. Among the permis-
sible investments and investment techniques for certain Portfolios are futures
contracts, options, forward contracts on foreign currencies and certain pri-
vately placed securities. For further information about these investments and
investment techniques, and the Portfolios which may use them, see Investment
Objectives and Policies below.

Each of the Funds requires a minimum initial investment and a minimum for sub-
sequent investments. See Purchase of Shares. In addition, each Fund requires a
shareholder to maintain a minimum investment amount in the shares of the Fund.
If a shareholder reduces his or her investment in shares of a Fund to less than
the Fund's minimum investment amount, the investment will be subject to manda-
tory redemption. See Redemption of Shares-Mandatory Redemption by the Fund.

This Prospectus describes the financial history, investment objectives and pol-
icies, management and operation of each Fund to enable investors to select the
Funds which best suit their needs. The JPM Institutional Funds operate through
Signature Financial Group, Inc.'s ("Signature") Hub and Spoke(R) financial
services method. The Trustees believe that each Fund may achieve economies of
scale over time by investing through Hub and Spoke(R).

The following table illustrates that investors in the Funds incur no share-
holder transaction expenses; their investment in the Funds is subject only to
the operating expenses set forth below for each Fund and its corresponding
Portfolio, as a percentage of average net assets of the Fund. The Trustees of
the Trust believe that the aggregate per share expenses of each Fund and its
corresponding Portfolio will be approximately equal to and may be less than the
expenses that each Fund would incur if it retained the services of an invest-
ment adviser and invested its assets directly in portfolio securities. Fund and
Portfolio expenses are discussed below under the headings Management of the
Trust and the Portfolios-Expenses, and Shareholder Servicing.

1
<PAGE>

SHAREHOLDER TRANSACTION EXPENSES

<TABLE>
<S> <C>
Sales Load Imposed on Purchases............................................ None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>

EXPENSE TABLE

ANNUAL OPERATING EXPENSES*

<TABLE>
<CAPTION>
MONEY MARKET TAX EXEMPT MONEY TREASURY MONEY
FUND MARKET FUND MARKET FUND
------------- ---------------- --------------
<S> <C> <C> <C>
Advisory Fees.................... 0.14% 0.20% 0.20%
Rule 12b-1 Fees.................. None None None
Other Expenses After Expense
Reimbursements.................. 0.06% 0.15% None
----- ----- -----
Total Operating Expenses After
Expense Reimbursements.......... 0.20% 0.35% 0.20%
===== ===== =====
<CAPTION>
SHORT TERM TAX EXEMPT
BOND FUND BOND FUND BOND FUND
------------- ---------------- --------------
<S> <C> <C> <C>
Advisory Fees.................... 0.25% 0.30% 0.30%
Rule 12b-1 Fees.................. None None None
Other Expenses After Expense
Reimbursements.................. 0.20% 0.20% 0.20%
----- ----- -----
Total Operating Expenses After
Expense Reimbursements.......... 0.45% 0.50% 0.50%
===== ===== =====
<CAPTION>
INTERNATIONAL SELECTED U.S. U.S. SMALL
BOND FUND EQUITY FUND COMPANY FUND
------------- ---------------- --------------
<S> <C> <C> <C>
Advisory Fees.................... 0.35% 0.40% 0.60%
Rule 12b-1 Fees.................. None None None
Other Expenses After Expense
Reimbursements.................. 0.30% 0.20% 0.20%
----- ----- -----
Total Operating Expenses After
Expense Reimbursements.......... 0.65% 0.60% 0.80%
===== ===== =====
<CAPTION>
INTERNATIONAL EMERGING MARKETS DIVERSIFIED
EQUITY FUND EQUITY FUND FUND
------------- ---------------- --------------
<S> <C> <C> <C>
Advisory Fees.................... 0.60% 1.00% 0.55%
Rule 12b-1 Fees.................. None None None
Other Expenses After Expense
Reimbursements.................. 0.40% 0.46% 0.10%
----- ----- -----
Total Operating Expenses After
Expense Reimbursements.......... 1.00% 1.46% 0.65%
===== ===== =====
<FN>
* Expenses are expressed as a percentage of average net assets of each of the
Funds for its most recent fiscal year, after any expense reimbursements, except
that expenses are restated to reflect reimbursements for the Money Market
Fund's current fiscal year and expenses, average net assets and reimbursements
are estimated for the International Bond Fund's first fiscal year. The Treasury
Money Market Fund commenced operations in January, 1993, the International Eq-
uity Fund in October, 1993, the Emerging Markets Equity Fund in November, 1993
and the International Bond Fund in December, 1994. All of the other Funds de-
scribed in the Prospectus commenced operations in July, 1993. See Management of
the Trust and the Portfolios.
</FN>
</TABLE>

2
<PAGE>

EXAMPLE

An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:

<TABLE>
<CAPTION>
MONEY MARKET TAX EXEMPT MONEY TREASURY MONEY
FUND MARKET FUND MARKET FUND
------------- ---------------- --------------
<S> <C> <C> <C>
1 Year............................ $ 2 $ 4 $ 2
3 Years........................... $ 6 $ 11 $ 6
5 Years........................... $ 11 $ 20 $11
10 Years.......................... $ 26 $ 44 $26
<CAPTION>
SHORT TERM TAX EXEMPT
BOND FUND BOND FUND BOND FUND
------------- ---------------- --------------
<S> <C> <C> <C>
1 Year............................ $ 5 $ 5 $ 5
3 Years........................... $ 14 $ 16 $16
5 Years........................... $ 25 $ 28 $28
10 Years.......................... $ 57 $ 63 $63
<CAPTION>
INTERNATIONAL SELECTED U.S. U.S. SMALL
BOND FUND EQUITY FUND COMPANY FUND
------------- ---------------- --------------
<S> <C> <C> <C>
1 Year............................ $ 7 $ 6 $ 8
3 Years........................... $ 21 $ 19 $26
5 Years........................... $ 36 $ 33 $44
10 Years.......................... $ 81 $ 75 $99
<CAPTION>
INTERNATIONAL EMERGING MARKETS DIVERSIFIED
EQUITY FUND EQUITY FUND FUND
------------- ---------------- --------------
<S> <C> <C> <C>
1 Year............................ $ 10 $ 15 $ 7
3 Years........................... $ 32 $ 46 $21
5 Years........................... $ 55 $ 80 $36
10 Years.......................... $122 $175 $81
</TABLE>

The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in each Fund
bear. Without giving effect to any expense reimbursements, Total Operating Ex-
penses would have been equal on an annual basis to the following percentages of
a Fund's average daily net assets: The JPM Institutional Money Market Fund,
0.52%; The JPM Institutional Tax Exempt Money Market Fund, 1.00%; The JPM In-
stitutional Treasury Money Market Fund, 0.67%; The JPM Institutional Short Term
Bond Fund, 0.78%; The JPM Institutional Bond Fund, 0.69%; The JPM Institutional
Tax Exempt Bond Fund, 1.98%; The JPM Institutional International Bond Fund,
2.50% (after application of state blue sky expense limitations); The JPM Insti-
tutional Selected U.S. Equity Fund, 1.03%; The JPM Institutional U.S. Small
Company Fund, 1.07%; The JPM Institutional International Equity Fund, 1.16%;
The JPM Institutional Emerging Markets Equity Fund, 1.62%; and The JPM Institu-
tional Diversified Fund, 1.62%.

The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Shareholder Servicing and Financial and Fund Accounting Services
Agreements, the fees paid to Pierpont Group, Inc. under the Fund Services
Agreements, and fees paid to State Street Bank and Trust Company as custodian
of the Portfolios. For a more detailed description of contractual fee arrange-
ments, including expense reimbursements, and of the fees and expenses included
in Other Expenses, see Management of the Trust and the Portfolios and Share-
holder Servicing. In connection with the above example, please note that $1,000
is less than the Funds' minimum investment requirements and that there are no
redemption or exchange fees of any kind. See Purchase of Shares and Redemption
of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

3
<PAGE>

FINANCIAL HIGHLIGHTS

The following selected data for a share outstanding for the indicated periods
have been audited by independent accountants except as noted below. Annual re-
ports for each Fund, which are incorporated by reference into the Statement of
Additional Information, include a discussion of those factors, strategies and
techniques that materially affected its performance during the period of the
report, as well as certain related information. A copy of any annual report is
available without charge upon request.

<TABLE>
<CAPTION>
THE JPM INSTITUTIONAL FUNDS
----------------------------------------------------------------------------------------------
TREASURY MONEY
MONEY MARKET FUND TAX EXEMPT MONEY MARKET FUND MARKET FUND
-------------------------- ------------------------------------- -------------------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
FISCAL YEAR PERIOD SIX MONTHS FISCAL YEAR PERIOD FISCAL YEAR PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 11/30/93(1) 2/28/95 8/31/94 08/31/93(1) 10/31/94 10/31/93(2)
----------- ----------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period..... $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
-------- ------- ------- ----------- ------- ------- -------
Income From Investment
Operations:
Net Investment Income... 0.0385 0.0120 0.0166 0.0228 0.0040 0.0354 0.0220
Net Realized and
Unrealized Gain (Loss)
From Portfolio......... (0.0000)(a) (0.0000)(a) (0.0000)(a) (0.0000)(a) (0.0000)(a) (0.0000)(a) 0.0000(a)
-------- ------- ------- ----------- ------- ------- -------
Total From Investment
Operations.............. 0.0385 0.0120 0.0166 0.0228 0.0040 0.0354 0.0220
-------- ------- ------- ----------- ------- ------- -------
Less Distributions to
Shareholders From:
Net Investment Income... (0.0385) (0.0120) (0.0166) (0.0228) (0.0040) (0.0354) (0.0220)
Net Realized Gain....... -0- (0.0000)(a) -0- (0.0000)(a) (0.0000)(a) (0.0001) -0-
-------- ------- ------- ----------- ------- ------- -------
Total Distributions to
Shareholders............ (0.0385) (0.0120) (0.0166) (0.0228) (0.0040) (0.0355) (0.0220)
-------- ------- ------- ----------- ------- ------- -------
Net Asset Value, End of
Period.................. $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
======== ======= ======= =========== ======= ======= =======
Total Return............. 3.92% 1.21%(b) 1.67%(b) 2.30% 0.40%(b) 3.61% 2.23%(b)
Ratios and Supplemental
Data:
Net Assets (In
Thousands)............. $584,867 $27,188 $72,354 $46,083 $35,004 $80,146 $25,477
Ratio to Average Net
Assets
(Annualized for each
Period):
Expenses................ 0.21% 0.30% 0.35% 0.35% 0.35% 0.20% 0.27%
Net Investment Income... 4.42% 2.88% 3.33% 2.34% 2.25% 3.81% 2.81%
Decrease Reflected in
the Above Expense Ratio
due to Expense
Reimbursements......... 0.31% 1.10% 0.14% 0.65% 1.08% 0.47% 0.76%

- -------
<FN>
(1) Commencement of Operations July 12, 1993.
(2) Commencement of Operations January 4, 1993.
(a) Less than $0.0001 per share.
(b) Not annualized.
</FN>
</TABLE>

<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
THE JPM INSTITUTIONAL FUNDS
- -----------------------------------------------------------------------------------------------------------
INTERNATIONAL
SHORT TERM BOND FUND BOND FUND TAX EXEMPT BOND FUND BOND FUND
- ------------------------ ------------------------ ------------------------------------- -------------
FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE FOR THE
FISCAL YEAR PERIOD FISCAL YEAR PERIOD SIX MONTHS FISCAL YEAR PERIOD FOR THE
ENDED ENDED ENDED ENDED ENDED ENDED ENDED PERIOD ENDED
10/31/94 10/31/93(1) 10/31/94 10/31/93(2) 02/28/95 08/31/94 08/31/93(2) 03/31/95(3)
- ----------- ----------- ----------- ----------- ----------- ----------- ----------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
$ 9.99 $10.00 $10.14 $10.00 $9.75 $10.07 $10.00 $10.00
------- ------- -------- ------- ------- ------- ------ ------
0.47 0.11 0.55 0.15 0.24 0.48 0.06 0.20
(0.39) (0.01) (0.88) 0.14 (0.02) (0.32) 0.07 0.37
------- ------- -------- ------- ------- ------- ------ ------
0.08 0.10 (0.33) 0.29 0.22 0.16 0.13 0.57
------- ------- -------- ------- ------- ------- ------ ------
(0.47) (0.11) (0.55) (0.15) (0.24) (0.48) (0.06) (0.04)
-0- -0- (0.03) -0- -0- -0- -0- -0-
------- ------- -------- ------- ------- ------- ------ ------
(0.47) (0.11) (0.58) (0.15) (0.24) (0.48) (0.06) (0.04)
------- ------- -------- ------- ------- ------- ------ ------
$ 9.60 $ 9.99 $ 9.23 $10.14 $ 9.73 $ 9.75 $10.07 $10.53
======= ======= ======== ======= ======= ======= ====== ======
0.87% 1.01%(a) (3.33)% 2.90%(a) 2.39%(a) 1.61% 1.39%(a) 5.71%(a)
$47,679 $27,605 $253,174 $43,711 $42,019 $16,415 $ 0.2 $3,170
0.45% 0.46% 0.50 % 0.50% 0.50% 0.50% 0.00% 0.65%
4.96% 3.92% 6.00 % 4.83% 5.29% 4.70% 3.56% 6.71%
0.33% 0.84% 0.19 % 0.39% 0.39% 1.48% 2.50% 3.59%

- -------
<FN>
(1)Commencement of Operations July 8, 1993.
(2)Commencement of Operations July 12, 1993.
(3)Commencement of Operations December 1, 1994.
(a)Not annualized.
</FN>
</TABLE>
5
<PAGE>

FINANCIAL HIGHLIGHTS (CONTINUED)

<TABLE>
<CAPTION>
THE JPM INSTITUTIONAL FUNDS
---------------------------------------------------------------------------------------------------------------
EMERGING
SELECTED U.S. SMALL MARKETS
U.S. EQUITY COMPANY INTERNATIONAL EQUITY EQUITY DIVERSIFIED
FUND FUND FUND FUND FUND
------------------------- ------------------------ --------------------- ----------- -----------------------
FOR THE
FOR THE FOR THE FOR THE SIX FOR THE FISCAL FOR THE FOR THE FOR THE SIX FOR THE
SIX MONTHS PERIOD MONTHS PERIOD YEAR PERIOD PERIOD MONTHS PERIOD
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
11/30/94 5/31/94(1) 11/30/94 5/31/94(1) 10/31/94 10/31/93(2) 10/31/94(3) 12/31/94 6/30/94(4)
----------- ---------- ----------- ---------- -------- ----------- ----------- ----------- ----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period........... $10.92 $10.00 $10.03 $10.00 $10.20 $10.00 $10.00 $ 9.90 $10.00
-------- ------- ------- ------- -------- ------ -------- ------- -------
Income From
Investment
Operations:
Net Investment
Income.......... 0.07 0.08 0.05 0.04 0.06 0.00 0.04 0.14 0.18
Net Realized and
Unrealized Gain
(Loss) From
Portfolio....... (0.33) 0.88 (0.22) -0- 0.57 0.20 2.43 0.14 (0.23)
-------- ------- ------- ------- -------- ------ -------- ------- -------
Total From
Investment
Operations....... (0.26) 0.96 (0.17) 0.04 0.63 0.20 2.47 0.28 (0.05)
-------- ------- ------- ------- -------- ------ -------- ------- -------
Less Distributions
to Shareholders
From:
Net Investment
Income.......... (0.03) (0.04) (0.03) (0.01) -0- -0- -0- (0.26) (0.05)
Net Realized
Gain............ (0.12) -0- -0- -0- -0- -0- -0- (0.06) -0-
-------- ------- ------- ------- -------- ------ -------- ------- -------
Total
Distributions to
Shareholders..... (0.15) (0.04) (0.03) (0.01) -0- -0- -0- (0.32) (0.05)
-------- ------- ------- ------- -------- ------ -------- ------- -------
Net Asset Value,
End of Period.... $10.51 $10.92 $ 9.83 $10.03 $10.83 $10.20 $12.47 $ 9.86 $ 9.90
======== ======= ======= ======= ======== ====== ======== ======= =======
Total Return...... (2.35%)(a) 9.61%(a) (1.72%)(a) 0.42%(a) 6.18% 2.00%(a) 24.70%(a) 2.77%(a) (0.56%)(a)
Ratios and
Supplemental
Data:
Net Assets (In
Thousands)...... $104,431 $47,473 $93,754 $71,141 $213,119 $ 0.2 $146,667 $95,685 $59,222
Ratio to Average
Net Assets
(Annualized for
each Period):
Expenses......... 0.60% 0.60% 0.80% 0.80% 1.00% 6.52% 1.46% 0.65% 0.65%
Net Investment
Income.......... 2.02% 1.74% 1.11% 0.93% 0.95% 0.00% 0.61% 3.57% 2.92%
Decrease
Reflected in the
Above Expense
Ratio due to
Expense
Reimbursements.. 0.16% 0.43% 0.14% 0.27% 0.16% 2.50% 0.16% 0.48% 0.97%

- -------
<FN>
(1)Commencement of Operations July 19, 1993.
(2)Commencement of Operations October 4, 1993.
(3)Commencement of Operations November 15, 1993.
(4)Commencement of Operations July 8, 1993.
(a)Not annualized.
</FN>
</TABLE>

6
<PAGE>

SPECIAL INFORMATION CONCERNING HUB AND SPOKE(R)

The Trust and the Portfolios use certain proprietary rights, know-how and fi-
nancial services referred to as Hub and Spoke(R). Hub and Spoke(R) is a regis-
tered service mark of Signature. Signature Broker-Dealer Services, Inc. (the
Trust's and Portfolios' Administrator and the Trust's Distributor) is a wholly
owned subsidiary of Signature.

Unlike other mutual funds which directly acquire and manage their own portfolio
of securities, each of the Funds is an open-end management investment company
which seeks to achieve its investment objective by investing all of its
investable assets in its corresponding Portfolio, a separate registered invest-
ment company with the same investment objective as its corresponding Fund. The
investment objective of a Fund or a Portfolio may be changed only with the ap-
proval of the holders of the outstanding shares of the Fund and its correspond-
ing Portfolio. The use of Hub and Spoke (R) has been approved by the sharehold-
ers of each Fund.

In addition to selling a beneficial interest to a Fund, the corresponding Port-
folio may sell beneficial interests to other mutual funds or institutional in-
vestors. Such investors will invest in the Portfolio on the same terms and con-
ditions and will bear a proportionate share of the Portfolio's expenses. Howev-
er, the other investors investing in the Portfolio may sell shares of their own
fund using a different pricing structure than the Fund. Such different pricing
structures may result in differences in returns experienced by investors in
other funds that invest in the same Portfolio. Such differences in returns are
not uncommon and are present in other mutual fund structures. Information con-
cerning other holders of interests in each Portfolio is available from the Ad-
ministrator at (800) 847-9487.

The Trust may withdraw the investment of any Fund from its corresponding Port-
folio at any time if the Board of Trustees of the Trust determines that it is
in the best interests of a Fund to do so. Upon any such withdrawal, the Board
of Trustees would consider what action might be taken, including the investment
of all the assets of the Fund in another pooled investment entity having the
same investment objective and restrictions as the Fund or the retaining of an
investment adviser to manage the Fund's assets in accordance with the invest-
ment policies described below with respect to its corresponding Portfolio.

Certain changes in a Portfolio's investment objective, policies or restric-
tions, or a failure by a Fund's shareholders to approve a change in the corre-
sponding Portfolio's investment objective or restrictions, may require with-
drawal of that Fund's interest in that Portfolio. Any such withdrawal could re-
sult in a distribution in kind of portfolio securities (as opposed to a cash
distribution) from that Portfolio which may or may not be readily marketable.
The distribution in kind may result in that Fund having a less diversified
portfolio of investments or adversely affect the Fund's liquidity, and that
Fund could incur brokerage, tax or other charges in converting the securities
to cash. Notwithstanding the above, there are other means for meeting share-
holder redemption requests, such as borrowing.

Smaller funds investing in a Portfolio may be materially affected by the ac-
tions of larger funds investing in that Portfolio. For example, if a large fund
withdraws from a Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because that Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in a Portfolio could have effective voting control of the
operations of the Portfolio. Whenever a Fund is requested to vote on matters
pertaining to its corresponding Portfolio (other than a vote by a Fund to con-
tinue the operation of its corresponding Portfolio upon the withdrawal of an-
other investor in the Portfolio), the Trust will hold a meeting of shareholders
of the Fund and will cast all of its votes proportionately as instructed by the
Fund's shareholders. The Trust will vote the shares held by Fund shareholders
who do not give voting instructions in the same proportion as the shares of
Fund shareholders who do give voting instructions. Shareholders of the Fund who
do not vote will have no effect on the outcome of such matters.

7
<PAGE>

For more information about a Portfolio's investment objective, policies and re-
strictions, see Investment Objectives and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about a Portfolio's management and expenses, see Management of the Trust and
the Portfolios. For more information about changing the investment objective,
policies and restrictions of a Fund or Portfolio, see Investment Restrictions.

INVESTMENT OBJECTIVES AND POLICIES

The investment objective of each of the Funds is described below, together with
the policies it employs in its efforts to achieve this objective. As noted
above, each of the Funds seeks to achieve its investment objective by investing
all of its investable assets in its corresponding Portfolio, which has the same
investment objective as its corresponding Fund. Since the investment character-
istics of each Fund will correspond directly with those of its Portfolio, the
following is a discussion of the various investments and investment policies of
each Portfolio. Additional information about the investment policies of each
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of each Fund or its corresponding Portfolio will be achieved.

THE JPM INSTITUTIONAL MONEY MARKET FUND

The JPM Institutional Money Market Fund's investment objective is to maximize
current income and maintain a high level of liquidity. The Fund is designed for
investors who seek to preserve capital and earn current income from a portfolio
of high quality money market instruments. The Fund attempts to achieve its ob-
jective by investing all of its investable assets in The Money Market Portfo-
lio, an open-end management investment company having the same investment ob-
jective as the Fund.

The Portfolio seeks to achieve its investment objective by maintaining a dol-
lar-weighted average portfolio maturity of not more than 90 days and by invest-
ing in the following high quality U.S. dollar-denominated securities which have
effective maturities of not more than thirteen months. The Portfolio's ability
to achieve maximum current income is affected by its high quality standards
(discussed below).

U.S. GOVERNMENT OBLIGATIONS. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of
the United States. These securities include Treasury securities, obligations of
the Government National Mortgage Association, the Farmers Home Administration
and the Export Import Bank. The Portfolio may also invest in obligations issued
or guaranteed by U.S. Government agencies or instrumentalities where the Port-
folio must look principally to the issuing or guaranteeing agency for ultimate
repayment; some examples of agencies or instrumentalities issuing these obliga-
tions are the Federal Farm Credit System, the Federal Home Loan Banks and the
Federal National Mortgage Association.

BANK OBLIGATIONS. The Portfolio may invest in high quality U.S. dollar-denomi-
nated negotiable certificates of deposit, time deposits and bankers' accept-
ances of (i) banks, savings and loan associations and savings banks which have
more than $2 billion in total assets and are organized under U.S. federal or
state law, (ii) foreign branches of these banks or of foreign banks of equiva-
lent size (Euros) and (iii) U.S. branches of foreign banks of equivalent size
(Yankees). The Portfolio may also invest in obligations of international bank-
ing institutions designated or supported by national governments to promote
economic reconstruction, development or trade between nations (e.g., the Euro-
pean Investment Bank, the Inter-American Development Bank, or the World Bank).
These obligations may be supported by appropriated but unpaid commitments of
their member countries, and there is no assurance these commitments will be un-
dertaken or met in the future.

COMMERCIAL PAPER; BONDS. The Portfolio may invest in high quality commercial
paper and corporate bonds issued by U.S. corporations. The Portfolio may also
invest in bonds and commercial paper of foreign issuers if the obligation is
U.S. dollar-denominated and is not subject to foreign withholding tax.

8
<PAGE>

ASSET-BACKED SECURITIES. The Portfolio 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. 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
debt instruments.

QUALITY INFORMATION. The Portfolio will limit its investments to those securi-
ties which, in accordance with guidelines adopted by the Trustees, present min-
imal credit risks. In addition, the Portfolio will not purchase any security
(other than a U.S. Government security) unless (i) it is rated with the highest
rating assigned to short-term debt securities by at least two nationally recog-
nized statistical rating organizations such as Moody's Investors Service, Inc.
("Moody's") and Standard & Poor's Ratings Group ("Standard & Poor's"), (ii) it
is rated by only one agency with the highest such rating, or (iii) it is not
rated and is determined to be of comparable quality. Determinations of compara-
ble quality shall be made in accordance with procedures established by the
Trustees. For a more detailed discussion of applicable quality requirements,
see Investment Objectives and Policies in the Statement of Additional Informa-
tion. These standards must be satisfied at the time an investment is made. If
the quality of the investment later declines below the quality required for
purchase, the Portfolio shall dispose of the investment, subject in certain
circumstances to a finding by the Trustees that disposing of the investment
would not be in the Portfolio's best interest.

The Portfolio may also invest in securities on a when-issued or delayed deliv-
ery basis and in certain privately placed securities. The Portfolio may also
enter into repurchase and reverse repurchase agreements and loan its portfolio
securities. For a discussion of these investments and for more information on
foreign investments, see Additional Investment Information and Risk Factors.

THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND

The JPM Institutional Tax Exempt Money Market Fund's investment objective is to
provide a high level of current income that is exempt from federal income tax
and maintain a high level of liquidity. The Fund is designed for investors who
seek current income exempt from federal income tax, stability of capital and
liquidity. See Taxes. The Fund attempts to achieve its objective by investing
all of its investable assets in The Tax Exempt Money Market Portfolio, an open-
end management investment company having the same investment objective as the
Fund.

The Portfolio attempts to achieve its investment objective by investing primar-
ily in the following municipal securities which earn interest exempt from fed-
eral income tax in the opinion of bond counsel for the issuer and which have
effective maturities not greater than thirteen months and by maintaining a dol-
lar-weighted average portfolio maturity of not more than 90 days. During normal
market conditions, the Portfolio will invest at least 80% of its net assets in
tax exempt obligations. Interest on these securities may be subject to state
and local taxes. For more detailed information regarding tax matters, including
the applicability of the alternative minimum tax, see Taxes.

MUNICIPAL BONDS. The Portfolio may invest in 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 instrumen-
talities. These obligations may be general obligation bonds secured by the is-
suer's pledge of its full faith, credit and taxing power for the payment of
principal and interest, or they may be revenue bonds payable from specific rev-
enue sources, but not generally backed by the issuer's taxing power. These in-
clude industrial development bonds where payment is the responsibility of the
private industrial user of the facility financed by the bonds. The Portfolio
may invest more than 25% of its assets in industrial development bonds, but may
not invest more than 25% of its assets in these bonds in projects of similar
type or in the same state.

MUNICIPAL NOTES. The Portfolio may also 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
commer-

9
<PAGE>

cial paper and municipal demand obligations such as variable rate demand notes
and master demand obligations. The interest rate on variable rate demand notes
is adjustable at periodic intervals as specified in the notes. Master demand
obligations permit the investment of fluctuating amounts at periodically ad-
justed interest rates. They are governed by agreements between the municipal
issuer and Morgan acting as agent, for no additional fee, in its capacity as
Advisor to the Portfolio and as fiduciary for other clients. Although master
demand obligations are not marketable to third parties, the Portfolio consid-
ers them to be liquid because they are payable on demand. There is no specific
percentage limitation on these investments. For more information about munici-
pal notes, see Investment Objectives and Policies in the Statement of Addi-
tional Information.

QUALITY INFORMATION. The Portfolio will limit its investments to those securi-
ties which, in accordance with guidelines adopted by the Trustees, present
minimal credit risks. In addition, the Portfolio will not purchase any munici-
pal obligation unless (i) it is rated with the highest rating assigned to
short-term debt securities (or, in the case of New York State municipal notes,
with one of the two highest ratings assigned to short-term debt securities) by
at least two nationally recognized statistical rating organizations such as
Moody's and Standard & Poor's, (ii) it is rated by only one agency with such
rating, or (iii) it is not rated and is determined to be of comparable quali-
ty. Determinations of comparable quality shall be made in accordance with pro-
cedures established by the Trustees. For a more detailed discussion of appli-
cable quality requirements, see Investment Objectives and Policies in the
Statement of Additional Information. These standards must be satisfied at the
time an investment is made. If the quality of the investment later declines
below the quality required for purchase, the Portfolio shall dispose of the
investment, subject in certain circumstances to a finding by the Trustees that
disposing of the investment would not be in the Portfolio's best interest. The
credit quality of variable rate demand notes and other municipal obligations
is frequently enhanced by various arrangements with domestic or foreign finan-
cial institutions, such as letters of credit, guarantees and insurance, and
these arrangements are considered when investment quality is evaluated.

The Portfolio may also invest up to 20% of the value of its total assets in
taxable securities and may purchase municipal obligations together with puts.
In addition, the Portfolio may purchase municipal obligations on a when-issued
or delayed delivery basis, enter into repurchase and reverse repurchase agree-
ments, loan its portfolio securities and purchase synthetic variable rate in-
struments. For a discussion of these transactions, see Additional Investment
Information and Risk Factors.

THE JPM INSTITUTIONAL TREASURY MONEY MARKET FUND

The JPM Institutional Treasury Money Market Fund's investment objective is to
provide current income, maintain a high level of liquidity and preserve capi-
tal. The Fund attempts to achieve its investment objective by investing all of
its investable assets in The Treasury Money Market Portfolio, an open-end man-
agement investment company having the same investment objective as the Fund.

The Portfolio seeks to achieve its investment objective by investing in direct
obligations of the U.S. Treasury and engaging in repurchase agreement transac-
tions with respect to those obligations. The Portfolio maintains a dollar-
weighted average portfolio maturity of not more than 90 days and invests in
the following securities which have effective maturities of not more than
thirteen months.

TREASURY SECURITIES. The Portfolio will invest in 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 ("Treasury Securities"). Each such
obligation must have a remaining maturity of thirteen months or less at the
time of purchase by the Portfolio. Treasury Bills have initial maturities of
one year or less; Treasury Notes have initial maturities of one to ten years;
and Treasury Bonds generally have initial maturities of greater than ten
years. The Portfolio will not invest in U.S. Government agency obligations.

10
<PAGE>

Obligations of the U.S. Treasury are guaranteed by the U.S. Government as to
the timely payment of principal and interest, but the market value of such ob-
ligations is not guaranteed and may rise and fall in response to changes in in-
terest rates. Neither the shares of the Fund nor the interests in the Portfolio
are guaranteed or insured by the U.S. Government.

The Portfolio also may purchase Treasury Securities on a when-issued or delayed
delivery basis and may engage in repurchase and reverse repurchase agreement
transactions involving Treasury Securities. For a discussion of these transac-
tions, see Additional Investment Information and Risk Factors.

THE JPM INSTITUTIONAL SHORT TERM BOND FUND

The JPM Institutional Short Term Bond Fund's investment objective is to provide
a high total return while attempting to limit the likelihood of negative quar-
terly returns. Total return will consist of income plus realized and unrealized
capital gains and losses. The Fund seeks to achieve this high total return to
the extent consistent with modest risk of capital and the maintenance of li-
quidity. The Fund attempts to achieve its investment objective by investing all
of its investable assets in The Short Term Bond Portfolio, an open-end manage-
ment investment company having the same investment objective as the Fund.

The JPM Institutional Short Term Bond Fund is designed for investors who place
a strong emphasis on conservation of capital but who also want a return greater
than that of a money market fund and other very low risk investment vehicles.
It is appropriate for investors who do not require the stable net asset value
typical of a money market fund but do want less price fluctuation than is typi-
cal of a longer-term bond fund.

Morgan actively manages the Portfolio's duration, the allocation of securities
across market sectors and the selection of securities within sectors. Based on
fundamental, economic and capital markets research, Morgan adjusts the duration
of the Portfolio in accordance with its outlook for interest rates. Morgan also
actively allocates the Portfolio's assets among the broad sectors of the fixed
income market including, but not limited to, U.S. Government and agency securi-
ties, corporate securities, private placements, asset-backed and mortgage-re-
lated securities. Specific securities which Morgan believes are undervalued are
selected for purchase within the sectors using advanced quantitative tools,
analysis of credit risk, the expertise of a dedicated trading desk, and the
judgment of fixed income portfolio managers and analysts.

Morgan also seeks to limit the likelihood of negative quarterly returns by bal-
ancing the Portfolio's level of income with the possibility of capital losses.
This balancing effort helps determine the Portfolio's duration.

The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. Portfolio transactions are undertaken principally to accom-
plish the Portfolio's objective in relation to expected movements in the gen-
eral level of interest rates, but the Portfolio may also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.

CORPORATE BONDS, ETC. The Portfolio may invest in a broad range of debt securi-
ties of domestic and foreign issuers. These include debt securities of various
types and maturities, e.g., debentures, notes, mortgage securities, equipment
trust certificates and other collateralized securities and zero coupon securi-
ties. Collateralized securities are backed by a pool of assets such as loans or
receivables which generate cash flow to cover the payments due on the securi-
ties. Collateralized securities are subject to certain risks, including a de-
cline in the value of the collateral backing the security, failure of the

11
<PAGE>

collateral to generate the anticipated cash flow or in certain cases more
rapid prepayment because of events affecting the collateral, such as acceler-
ated prepayment of mortgages or other loans backing these securities or de-
struction of equipment subject to equipment trust certificates. In the event
of any such prepayment the Portfolio will be required to reinvest the proceeds
of prepayments at interest rates prevailing at the time of reinvestment, which
may be lower. In addition, the value of zero coupon securities which do not
pay interest is more volatile than that of interest bearing debt securities
with the same maturity. The Portfolio does not intend to invest in common
stock but may invest to a limited extent in convertible debt or preferred
stock. The Portfolio does not expect to invest more than 25% of its assets in
securities of foreign issuers. If the Portfolio invests in non-U.S. dollar de-
nominated securities, it hedges the foreign currency exposure into the U.S.
dollar. See Additional Investment Information and Risk Factors for further in-
formation on foreign investments and convertible securities.

GOVERNMENT OBLIGATIONS, ETC. The Portfolio may invest in obligations issued or
guaranteed by the U.S. Government and backed by the full faith and credit of
the United States. These securities include Treasury securities, obligations
of the Government National Mortgage Association ("GNMA Certificates"), the
Farmers Home Administration and the Export Import Bank. GNMA Certificates are
mortgage-backed securities which evidence an undivided interest in mortgage
pools. These securities are subject to more rapid repayment than their stated
maturity would indicate because prepayments of principal on mortgages in the
pool are passed through to the holder of the securities. During periods of de-
clining interest rates, prepayments of mortgages in the pool can be expected
to increase. The pass-through of these prepayments would have the effect of
reducing the Portfolio's positions in these securities and requiring the Port-
folio to reinvest the prepayments at interest rates prevailing at the time of
reinvestment. The Portfolio may also invest in obligations issued or guaran-
teed by U.S. Government agencies or instrumentalities where the Portfolio must
look principally to the issuing or guaranteeing agency for ultimate repayment;
some examples of agencies or instrumentalities issuing these obligations are
the Federal Farm Credit System, the Federal Home Loan Banks and the Federal
National Mortgage Association. Although these governmental issuers are respon-
sible for payments on their obligations, they do not guarantee their market
value. The Portfolio may also invest in municipal obligations which may be
general obligations of the issuer or payable only from specific revenue sourc-
es. However, the Portfolio will invest only in municipal obligations that have
been issued on a taxable basis or have an attractive yield excluding tax con-
siderations. In addition, the Portfolio may invest in debt securities of for-
eign governments and governmental entities. See Additional Investment Informa-
tion and Risk Factors for further information on foreign investments.

MONEY MARKET INVESTMENTS. The Portfolio may invest in the types of money mar-
ket instruments in which The JPM Institutional Money Market Fund may invest,
subject to the quality requirements of The JPM Institutional Short Term Bond
Fund. See Quality Information below and Money Market Instruments in the State-
ment of Additional Information. Under normal circumstances, the Portfolio will
purchase these securities to invest temporary cash balances or to maintain li-
quidity to meet withdrawals. However, the Portfolio may also invest in money
market instruments as a temporary defensive measure taken during, or in antic-
ipation of, adverse market conditions.

QUALITY INFORMATION. Under normal market circumstances at least 80% of the
Portfolio's total assets will consist of debt securities that are rated at
least A by Moody's or Standard & Poor's or that are unrated and in Morgan's
opinion are of comparable quality. In the case of the remaining 20% of the
Portfolio's investments, the Portfolio may purchase debt securities that are
rated Baa or better by Moody's or BBB or better by Standard & Poor's or are
unrated and in Morgan's opinion are of comparable quality. Securities rated
Baa by Moody's or BBB by Standard & Poor's are considered investment grade,
but have some speculative characteristics. These standards must be satisfied
at the time an investment is made. If the quality of the investment later de-
clines, the Portfolio may continue to hold the investment. See Appendix A in
the Statement of Additional Information for more detailed information on these
ratings.

12
<PAGE>

ing transactions that may involve options on securities and securities indexes,
futures contracts and options on futures contracts. For a discussion of these
investments and investment techniques, see Additional Investment Information
and Risk Factors.

THE JPM INSTITUTIONAL BOND FUND

The JPM Institutional Bond Fund's investment objective is to provide a high to-
tal return consistent with moderate risk of capital and maintenance of liquidi-
ty. Total return will consist of income plus realized and unrealized capital
gains and losses. Although the net asset value of the Fund will fluctuate, the
Fund attempts to preserve the value of its investments to the extent consistent
with its objective. The Fund attempts to achieve its objective by investing all
of its investable assets in The U.S. Fixed Income Portfolio, an open-end man-
agement investment company having the same investment objective as the Fund.

The JPM Institutional Bond Fund is designed for investors who seek a total re-
turn over time that is higher than that generally available from a portfolio of
shorter-term obligations while recognizing the greater price fluctuation of
longer-term instruments. It may also be a convenient way to add fixed income
exposure to diversify an existing portfolio.

Morgan actively manages the Portfolio's duration, the allocation of securities
across market sectors, and the selection of specific securities within sectors.
Based on fundamental, economic and capital markets research, Morgan adjusts the
duration of the Portfolio in light of market conditions and Morgan's interest
rate outlook. For example, if interest rates are expected to fall, the duration
may be lengthened to take advantage of the expected associated increase in bond
prices. Morgan also actively allocates the Portfolio's assets among the broad
sectors of the fixed income market including, but not limited to, U.S. Govern-
ment and agency securities, corporate securities, private placements, asset-
backed and mortgage-related securities. Specific securities which Morgan be-
lieves are undervalued are selected for purchase within the sectors using ad-
vanced quantitative tools, analysis of credit risk, the expertise of a dedi-
cated trading desk, and the judgment of fixed income portfolio managers and
analysts. Under normal circumstances, Morgan intends to keep the Portfolio es-
sentially fully invested with at least 65% of the Portfolio's assets invested
in bonds.

Duration is a measure of the weighted average maturity of the bonds held in the
Portfolio and can be used as a measure of the sensitivity of the Portfolio's
market value to changes in interest rates. Under normal market conditions the
Portfolio's duration will range between one year shorter and one year longer
than the duration of the U.S. investment grade fixed income universe, as repre-
sented by Salomon Brothers Broad Investment Grade Bond Index, the Portfolio's
benchmark. Currently, the benchmark's duration is approximately 5 years. The
maturities of the individual securities in the Portfolio may vary widely, how-
ever.

Since the Portfolio has a longer duration than that of The JPM Institutional
Short Term Bond Fund, over the long term its total return generally can be ex-
pected to be higher and its net asset value less stable than that of The JPM
Institutional Short Term Bond Fund.

CORPORATE BONDS, ETC. The Portfolio may invest in the corporate debt obliga-
tions permitted for The JPM Institutional Short Term Bond Fund.

GOVERNMENT OBLIGATIONS, ETC. The Portfolio may invest in the government debt
obligations permitted for The JPM Institutional Short Term Bond Fund.

13
<PAGE>

MONEY MARKET INSTRUMENTS. The Portfolio may invest in the types of money mar-
ket instruments in which The JPM Institutional Money Market Fund may invest,
subject to the quality requirements of The JPM Institutional Bond Fund. See
Quality Information below and Money Market Instruments in the Statement of Ad-
ditional Information. Under normal circumstances, the Portfolio will purchase
these securities to invest temporary cash balances or to maintain liquidity to
meet withdrawals. However, the Portfolio may also invest in money market in-
struments as a temporary defensive measure taken during, or in anticipation
of, adverse market conditions.

QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least 65% of its total assets will consist of securities that
are rated at least A by Moody's or Standard & Poor's or that are unrated and
in Morgan's opinion are of comparable quality. In the case of 30% of the Port-
folio's investments, the Portfolio may purchase debt securities that are rated
Baa or better by Moody's or BBB or better by Standard & Poor's or are unrated
and in Morgan's opinion are of comparable quality. The remaining 5% of the
Portfolio's assets may be invested in debt securities that are rated Ba or
better by Moody's or BB or better by Standard & Poor's or are unrated and in
Morgan's opinion are of comparable quality. Securities rated Baa by Moody's or
BBB by Standard & Poor's are considered investment grade, but have some specu-
lative characteristics. Securities rated Ba by Moody's or BB by Standard &
Poor's are below investment grade and considered to be speculative with regard
to payment of interest and principal. These standards must be satisfied at the
time an investment is made. If the quality of the investment later declines,
the Portfolio may continue to hold the investment. See Appendix A in the
Statement of Additional Information for more detailed information on these
ratings.

The Portfolio may also purchase obligations on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and enter
into certain hedging transactions that may involve options on securities and
securities indexes, futures contracts and options on futures contracts. For a
discussion of these investments and investment techniques, see Additional In-
vestment Information and Risk Factors.

THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND

The JPM Institutional Tax Exempt Bond Fund's investment objective is to pro-
vide a high level of current income exempt from federal income tax consistent
with moderate risk of capital and maintenance of liquidity. See Taxes. The
Fund attempts to achieve its investment objective by investing all of its
investable assets in The Tax Exempt Bond Portfolio, an open-end management in-
vestment company having the same investment objective as the Fund.

The Fund is designed for investors who seek tax exempt yields greater than
those generally available from a portfolio of short-term tax exempt obliga-
tions and who are willing to incur the greater price fluctuation of longer-
term instruments.

The Portfolio attempts to achieve its investment objective by investing pri-
marily in municipal securities of the types permitted for The JPM Institu-
tional Tax Exempt Money Market Fund which earn interest exempt from federal
income tax in the opinion of bond counsel for the issuer. During normal market
conditions, the Portfolio will invest at least 80% of its net assets in tax
exempt obligations. Interest on these securities may be subject to state and
local taxes. For more detailed information regarding tax matters, including
the applicability of the alternative minimum tax, see Taxes.

Morgan believes that based upon current market conditions, the Portfolio will
consist of a portfolio of securities with a duration of four to seven years.
In view of the duration of the Portfolio, under normal market conditions, the
Fund's yield can be expected to be higher and its net asset value less stable
than those of The JPM Institutional Tax Exempt Money Market Fund. Duration is
a measure of the weighted average maturity of the bonds held in the Portfolio
and can be used as a measure of the sensitivity of the Portfolio's market
value to changes in interest rates. The maturities of the individual securi-
ties in the Portfolio may vary widely, however, as Morgan adjusts the Portfo-
lio's holdings of long-term

14
<PAGE>

and short-term debt securities to reflect its assessment of prospective changes
in interest rates, which may adversely affect current income.

The value of Portfolio's investments will generally fluctuate inversely with
changes in prevailing interest rates. The value of the Portfolio's investments
will also be affected by changes in the creditworthiness of issuers and other
market factors. The quality criteria applied in the selection of portfolio se-
curities are intended to minimize adverse price changes due to credit consider-
ations. The value of the Portfolio's municipal securities can also be affected
by market reaction to legislative consideration of various tax reform propos-
als. Although the net asset value of Portfolio fluctuates, the Portfolio at-
tempts to preserve the value of its investments to the extent consistent with
its objective.

MUNICIPAL BONDS. The municipal securities in which the Portfolio may invest in-
clude municipal bonds of the types permitted for The JPM Institutional Tax Ex-
empt Money Market Fund. The Portfolio may invest more than 25% of its assets in
industrial development bonds, but may not invest more than 25% of its assets in
industrial development bonds in projects of similar type or in the same state.

MONEY MARKET INSTRUMENTS. The Portfolio may invest in the types of short-term
municipal obligations in which The JPM Institutional Tax Exempt Money Market
Fund may invest. These obligations will meet the quality requirements described
below except that short-term municipal obligations of New York State issuers
may be rated MIG-2 by Moody's or SP-2 by Standard & Poor's. Under normal cir-
cumstances, the Portfolio will purchase these securities to invest temporary
cash balances or to maintain liquidity to meet withdrawals. However, the Port-
folio may also invest in money market instruments as a temporary defensive
measure taken during, or in anticipation of, adverse market conditions.

QUALITY INFORMATION. The Portfolio will not purchase any municipal obligation
unless it is rated at least A, MIG-1 or Prime-1 by Moody's or A, SP-1 or A1 by
Standard & Poor's (except for short-term obligations of New York State issuers
as described above) or it is unrated and in Morgan's opinion it is of compara-
ble quality. These standards must be satisfied at the time an investment is
made. If the quality of the investment later declines, the Portfolio may con-
tinue to hold the investment.

In certain circumstances, the Portfolio may also invest up to 20% of the value
of its total assets in taxable securities. In addition, the Portfolio may pur-
chase municipal obligations together with puts, municipal obligations on a
when-issued or delayed delivery basis, enter into repurchase and reverse repur-
chase agreements, purchase synthetic variable rate instruments, loan its port-
folio securities and purchase certain privately placed securities. For a dis-
cussion of these transactions, see Additional Investment Information and Risk
Factors.

THE JPM INSTITUTIONAL INTERNATIONAL BOND FUND

The JPM Institutional International Bond Fund's investment objective is to pro-
vide a high total return, consistent with moderate risk of capital, from a
portfolio of international fixed income securities. Total return will consist
of income plus realized and unrealized capital gains and losses. The Fund at-
tempts to achieve its objective by investing all of its investable assets in
The Non-U.S. Fixed Income Portfolio, a non-diversified open-end management in-
vestment company having the same investment objective as the Fund. The Portfo-
lio seeks to achieve its objective by investing in the types of fixed income
securities described below. The expected total return of a portfolio of fixed
income securities may not be as high as that of a portfolio of equity securi-
ties.

15
<PAGE>

The Fund is designed for investors who seek exposure to the international bond
markets in their investment portfolios.

Morgan actively manages the Portfolio's allocation across countries, its dura-
tion and the selection of specific securities within countries. Based on funda-
mental economic and capital markets research, quantitative valuation techniques
and experienced judgment, Morgan allocates the Portfolio's assets primarily
among the developed countries of the world outside the United States. Morgan
adjusts the Portfolio's duration in light of market conditions and the Advi-
sor's interest rate outlook for the countries in which it invests. The Advisor
selects securities among the broad sectors of the fixed income market includ-
ing, but not limited to, debt obligations of governments and their agencies,
supranational organizations, corporations and banks, taking into consideration
such factors as their relative value, the likelihood of a change in credit rat-
ing, and the liquidity of the issue. Under normal circumstances, the Advisor
intends to keep the Portfolio essentially fully invested with at least 65% of
the Portfolio's assets invested in bonds of foreign issuers. These investments
will be made in at least three foreign countries. For further information on
international investments, see Additional Information and Risk Factors.

Duration is a measure of the weighted average maturity of the bonds held in the
Portfolio and can be used as a measure of the sensitivity of the Portfolio's
market value to changes in interest rates. Typically, the Portfolio's duration
will range between one year shorter and one year longer than the duration of
the non-U.S. fixed income universe, as represented by Salomon Brothers Non-U.S.
World Government Bond Index (currency hedged), the Portfolio's benchmark. Cur-
rently the benchmark's duration is approximately five years. The maturities of
the individual bonds in the Portfolio may vary widely, however.

The Portfolio may invest in securities denominated in foreign currencies, the
U.S. dollar or multinational currency units such as the ECU. The Advisor will
generally attempt to hedge the Portfolio's foreign currency exposure into the
U.S. dollar. However, the Advisor may from time to time decide to keep foreign
currency positions unhedged or engage in foreign currency transactions if,
based on fundamental research, technical factors and the judgment of experi-
enced currency managers, it believes the foreign currency exposure will benefit
the Portfolio. For further information on foreign currency exchange transac-
tions, see Additional Investment Information and Risk Factors.

The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. Portfolio transactions are undertaken principally to accom-
plish the Portfolio's objective in relation to expected movements in the gen-
eral level of interest rates in each country, but the Portfolio may also engage
in short-term trading consistent with its objective. To the extent the Portfo-
lio engages in short-term trading, it may realize short-term capital gains or
losses and incur increased transaction costs. See Taxes below. The estimated
annual portfolio turnover rate for the Portfolio is generally not expected to
exceed 300%.

CORPORATE BONDS. The Portfolio may invest in a broad range of debt obligations
of foreign issuers. These include debt securities of foreign corporations; debt
obligations of foreign banks and bank holding companies; and debt obligations
issued or guaranteed by supranational organizations such as the World Bank, the
European Investment Bank and the Asian Development Bank. To a limited extent,
the Portfolio may also invest in non-U.S. dollar denominated securities of U.S.
issuers.

GOVERNMENT SECURITIES. The Portfolio may invest in debt obligations issued or
guaranteed by a foreign sovereign government or one of its agencies, authori-
ties, instrumentalities or political subdivisions including a foreign state,
province or municipality.

MONEY MARKET INSTRUMENTS. The Portfolio may invest in money market instruments
of foreign or domestic issuers denominated in U.S. dollars and other curren-
cies. Under normal circumstances the Portfolio will purchase these securities
as a part of its management of the Portfolio's duration to invest temporary
cash balances or to maintain liquidity to meet redemptions. However, the Port-
folio may also invest in money market instruments without limitation as a tem-
porary defensive measure taken in the Advisor's judgment during, or in antici-
pation of, adverse market conditions. For more detailed information about these
money market investments, see Investment Objectives and Policies in the State-
ment of Additional Information.

16
<PAGE>

QUALITY INFORMATION. Under normal circumstances at least 65% of the Portfolio's
total assets will consist of securities that at the time of purchase are rated
at least A by Moody's or Standard & Poor's or that are unrated and in the Advi-
sor's opinion are of comparable quality. In the case of the remaining 35% of
the Portfolio's investments, the Portfolio may purchase securities that are
rated Baa or better by Moody's or BBB or better by Standard & Poor's or are
unrated and in the Advisor's opinion are of comparable quality. Securities
rated Baa by Moody's or BBB by Standard & Poor's are considered investment
grade, but have some speculative characteristics. These standards must be sat-
isfied at the time an investment is made. If the quality of the investment
later declines, the Portfolio may continue to hold the investment. See Appendix
A in the Statement of Additional Information for more detailed information on
these ratings.

NON-DIVERSIFICATION. The Portfolio is registered as a non-diversified invest-
ment company which means that the Portfolio is not limited by the Investment
Company Act of 1940 (the "1940 Act") in the proportion of its assets that may
be invested in the obligations of a single issuer. Thus, the Portfolio may in-
vest a greater proportion of its assets in the securities of a smaller number
of issuers and, as a result, may be subject to greater risk with respect to its
portfolio securities. The Portfolio, however, will comply with the diversifica-
tion requirements imposed by the Internal Revenue Code of 1986, as amended (the
"Code"), for qualification as a regulated investment company. See Taxes below.

The Portfolio may also purchase securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its port-
folio securities, purchase certain privately placed securities and enter into
forward foreign currency exchange contracts. In addition, the Portfolio may use
options on securities and indexes of securities, futures contracts and options
on futures contracts for hedging and risk management purposes. Forward foreign
currency exchange contracts, options and futures contracts are derivative in-
struments. For a discussion of these investments and investment techniques, see
Additional Investment Information and Risk Factors.

THE JPM INSTITUTIONAL SELECTED U.S. EQUITY FUND

The JPM Institutional Selected U.S. Equity Fund's investment objective is to
provide a high total return from a portfolio of selected equity securities. To-
tal return will consist of realized and unrealized capital gains and losses
plus income. The Fund attempts to achieve its investment objective by investing
all of its investable assets in The Selected U.S. Equity Portfolio, an open-end
management investment company having the same investment objective as the Fund.
The Portfolio invests primarily in the common stock of large and medium sized
U.S. corporations.

The JPM Institutional Selected U.S. Equity Fund is designed for investors who
want an actively managed portfolio of selected equity securities that seeks to
outperform the S&P 500 Index.

Morgan seeks to enhance the Portfolio's total return relative to that of the
universe of large and medium sized U.S. companies, typically represented by the
S&P 500 Index, through fundamental analysis, systematic stock valuation and
disciplined portfolio construction. Based on internal fundamental research,
Morgan uses a dividend discount model to rank companies within economic sectors
according to their relative value. From the universe of securities this model
shows as undervalued, Morgan selects stocks for the Portfolio based on a vari-
ety of criteria including the company's managerial strength, prospects for
growth and competitive position. Morgan may modestly under or over-weight se-
lected economic sectors against the S&P 500 Index's sector weightings to seek
to enhance the Portfolio's total return or reduce the fluctuation in its market
value relative to the Index.

The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. The Portfolio does not intend to respond to short-term mar-
ket fluctuations or to acquire securities for the purpose of short-term trad-
ing; however, it may take advantage of short-term trading opportunities that
are consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.

EQUITY INVESTMENTS. During ordinary market conditions, the Advisor intends to
keep the Portfolio essentially fully invested with at least 65% of the Portfo-
lio's net assets invested in equity securities consisting of common stocks and
other securities with equity characteristics such as preferred stocks, war-
rants, rights and convertible securities. The Portfolio's

17
<PAGE>

primary equity investments are the common stocks of large and medium-sized
U.S. corporations and, to a limited extent, similar securities of foreign cor-
porations. The common stock in which the Portfolio may invest includes the
common stock of any class or series or any similar equity interest, such as
trust or limited partnership interests. These equity investments may or may
not pay dividends and may or may not carry voting rights. The Portfolio in-
vests in securities listed on a securities exchange or traded in an over-the-
counter market, and may invest in certain restricted or unlisted securities.

FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations. However, the Portfolio does not expect to invest more than 30%
of its assets at the time of purchase in securities of foreign issuers, nor
does it expect more than 10% to be in securities of foreign issuers not listed
on a national securities exchange or not denominated or principally traded in
U.S. dollars. For further information on foreign investments and foreign cur-
rency exchange transactions, see Additional Investment Information and Risk
Factors.

The Portfolio may also invest in securities on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and money
market instruments, and enter into certain hedging transactions that may in-
volve options on securities and securities indexes, futures contracts and op-
tions on futures contracts. For a discussion of these investments and invest-
ment techniques, see Additional Investment Information and Risk Factors.

THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND

The JPM Institutional U.S. Small Company Fund's investment objective is to
provide a high total return from a portfolio of equity securities of small
companies. Total return will consist of realized and unrealized capital gains
and losses plus income. The Fund attempts to achieve its investment objective
by investing all of its investable assets in The U.S. Small Company Portfolio,
an open-end management investment company having the same investment objective
as the Fund. The Portfolio invests primarily in the common stock of small U.S.
companies. The small company holdings of the Portfolio are primarily companies
included in the Russell 2500 Index.

The JPM Institutional U.S. Small Company Fund is designed for investors who
are willing to assume the somewhat higher risk of investing in small companies
in order to seek a higher return over time than might be expected from a port-
folio of stocks of large companies. The Fund may also serve as an efficient
vehicle to diversify an existing portfolio by adding the equities of smaller
U.S. companies.

Morgan seeks to enhance the Portfolio's total return relative to that of the
U.S. small company universe. To do so, Morgan uses fundamental research, sys-
tematic stock valuation and a disciplined portfolio construction process. Mor-
gan continually screens the universe of small capitalization companies to
identify for further analysis those companies which exhibit favorable charac-
teristics such as significant and predictable cash flow and high quality man-
agement. Based on fundamental research and using a dividend discount model,
Morgan ranks these companies within economic sectors according to their rela-
tive value. Morgan then selects for purchase the most attractive companies
within each economic sector.

Morgan uses a disciplined portfolio construction process to seek to enhance
returns and reduce volatility in the market value of the Portfolio relative to
that of the U.S. small company universe. Morgan believes that under normal
market conditions, the Portfolio will have sector weightings comparable to
that of the U.S. small company universe, although it may moderately under or
over-weight selected economic sectors. In addition, as a company moves out of
the market capitalization range of the small company universe, it generally
becomes a candidate for sale by the Portfolio.

The Portfolio intends to manage its investments actively in pursuit of its in-
vestment objective. Since the Portfolio has a long-term investment perspec-
tive, it does not intend to respond to short-term market fluctuations or to
acquire securities

18
<PAGE>

for the purpose of short-term trading; however, it may take advantage of
short-term trading opportunities that are consistent with its objective. To
the extent the Portfolio engages in short-term trading, it may incur increased
transaction costs. See Taxes below.

PERMISSIBLE INVESTMENTS. The Portfolio may invest in the same types of securi-
ties and use the same investment techniques, subject to the same limitations,
as permitted for The JPM Institutional Selected U.S. Equity Fund.

THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND

The JPM Institutional International Equity Fund's investment objective is to
provide a high total return from a portfolio of equity securities of foreign
corporations. Total return will consist of realized and unrealized capital
gains and losses plus income. The Fund attempts to achieve its investment ob-
jective by investing all of its investable assets in The Non-U.S. Equity Port-
folio, an open-end management investment company having the same investment
objective as the Fund.

The JPM Institutional International Equity Fund is designed for investors with
a long-term investment horizon who want to diversify their portfolios by in-
vesting in an actively managed portfolio of non-U.S. securities that seeks to
outperform the Morgan Stanley Europe, Australia and Far East Index (the "EAFE
Index").

The Portfolio seeks to achieve its investment objective through country allo-
cation, stock selection and management of currency exposure. Morgan uses a
disciplined portfolio construction process to seek to enhance returns and re-
duce volatility in the market value of the Portfolio relative to that of the
EAFE Index.

Based on fundamental research, quantitative valuation techniques, and experi-
enced judgment, Morgan uses a structured decision-making process to allocate
the Portfolio primarily across the developed countries of the world outside
the United States by under- or over-weighting selected countries in the EAFE
Index. Currently, Japan has the heaviest weighting in the EAFE Index and in
the Portfolio. At April 30, 1995, the approximate Japan weighting was 45% in
the EAFE Index and 50% in the Portfolio.

Using a dividend discount model and based on analysts' industry expertise, se-
curities within each country are ranked within economic sectors according to
their relative value. Based on this valuation, Morgan selects the securities
which appear the most attractive for the Portfolio. Morgan believes that under
normal market conditions, economic sector weightings generally will be similar
to those of the relevant equity index.

Finally, Morgan actively manages currency exposure, in conjunction with coun-
try and stock allocation, in an attempt to protect and possibly enhance the
Portfolio's market value. Through the use of forward foreign currency exchange
contracts, Morgan will adjust the Portfolio's foreign currency weightings to
reduce its exposure to currencies deemed unattractive and, in certain circum-
stances, increase exposure to currencies deemed attractive, as market condi-
tions warrant, based on fundamental research, technical factors, and the judg-
ment of a team of experienced currency managers. For further information on
foreign currency exchange transactions, see Additional Investment Information
and Risk Factors.

The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. The Portfolio does not expect to trade in securities for
short-term profits; however, when circumstances warrant, securities may be
sold without regard to the length of time held. To the extent the Portfolio
engages in short-term trading, it may incur increased transaction costs. See
Taxes below.

EQUITY INVESTMENTS. In normal circumstances, Morgan intends to keep the Port-
folio essentially fully invested with at least 65% of the value of its total
assets in equity securities of foreign issuers, consisting of common stocks
and other securities with equity characteristics such as preferred stock, war-
rants, rights and convertible securities. The Portfolio's primary equity in-
vestments are the common stock of established companies based in developed
countries outside the

19
<PAGE>

United States. Such investments will be made in at least three foreign coun-
tries. The common stock in which the Portfolio may invest includes the common
stock of any class or series or any similar equity interest such as trust or
limited partnership interests. The Portfolio may also invest in securities of
issuers located in developing countries. See Additional Investment Information
and Risk Factors. The Portfolio invests in securities listed on foreign or do-
mestic securities exchanges and securities traded in foreign or domestic over-
the-counter markets, and may invest in certain restricted or unlisted securi-
ties.

The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its port-
folio securities, purchase certain privately placed securities, enter into
forward contracts on foreign currencies and enter into certain hedging trans-
actions that may involve options on securities and securities indexes, futures
contracts and options on futures contracts. For a discussion of these invest-
ments and investment techniques, see Additional Investment Information and
Risk Factors.

THE JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND

The JPM Institutional Emerging Markets Equity Fund's investment objective is
to achieve a high total return from a portfolio of equity securities of compa-
nies in emerging markets. Total return will consist of realized and unrealized
capital gains and losses plus income. The Fund attempts to achieve its invest-
ment objective by investing all its investable assets in The Emerging Markets
Equity Portfolio, an open-end management investment company having the same
investment objective as the Fund.

The JPM Institutional Emerging Markets Equity Fund is designed for long-term
investors who want exposure to the rapidly growing emerging markets. THE FUND
DOES NOT REPRESENT A COMPLETE INVESTMENT PROGRAM NOR IS THE FUND SUITABLE FOR
ALL INVESTORS. Many investments in emerging markets can be considered specula-
tive, and therefore may offer higher potential for gains and losses and may be
more volatile than investments in the developed markets of the world. See Ad-
ditional Investment Information and Risk Factors.

As used in this Prospectus, "emerging markets" include any country which is
generally considered to be an emerging or developing country by the World
Bank, the International Finance Corporation, the United Nations or its author-
ities. These countries generally include every country in the world except
Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Ire-
land, Italy, Japan, Netherlands, New Zealand, Norway, Spain, Sweden, Switzer-
land, United Kingdom and United States. The Portfolio will focus its invest-
ments in those emerging markets countries which it believes have strongly de-
veloping economies and in which the markets are becoming more sophisticated.

A company in an emerging market is one that: (i) has its principal securities
trading market in an emerging market country; (ii) is organized under the laws
of, and with a principal office in, an emerging market; or (iii) (alone or on
a consolidated basis) derives 50% or more of its total revenue from either
goods produced, sales made or services performed in emerging markets.

The Advisor seeks to achieve the Portfolio's investment objective by a disci-
plined process of country allocation and company selection. Based on fundamen-
tal research, quantitative analysis, and experienced judgment, the Advisor
identifies those countries where economic and political factors, including
currency movements, are likely to produce above-average returns. Based on
their relative value, the Advisor then selects those companies in each
country's major industry sectors which it believes are best positioned and
managed to take advantage of these economic and political factors.

20
<PAGE>

regard to the length of time held. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.

EQUITY INVESTMENTS. In normal circumstances, the Advisor intends to keep the
Portfolio essentially fully invested with at least 65% of the value of its to-
tal assets in equity securities of emerging markets issuers, consisting of
common stocks and other securities with equity characteristics such as pre-
ferred stock, warrants, rights and convertible securities. The Portfolio's
primary equity investments are the common stock of established companies in
the emerging markets countries the Advisor has identified as attractive. The
assets of the Portfolio ordinarily will be invested in the securities of is-
suers in at least three different emerging markets countries. The common stock
in which the Portfolio may invest includes the common stock of any class or
series or any similar equity interest such as trust or limited partnership in-
terests. The Portfolio invests in securities listed on securities exchanges,
traded in over-the-counter markets, and may invest in certain restricted or
unlisted securities.

Certain emerging markets are closed in whole or in part to equity investments
by foreigners except through specifically authorized investment funds. Securi-
ties of other investment companies may be acquired by the Portfolio to the ex-
tent permitted under the 1940 Act-that is, the Portfolio may invest up to 10%
of its total assets in securities of other investment companies so long as not
more than 3% of the outstanding voting stock of any one investment company is
held by the Portfolio. In addition, not more than 5% of the Portfolio's total
assets may be invested in the securities of any one investment company. As a
shareholder in an investment fund, the Portfolio would bear its share of that
investment fund's expenses, including its advisory and administration fees. At
the same time the Portfolio and the Fund would continue to pay their own oper-
ating expenses.

The Portfolio may also invest in money market instruments denominated in U.S.
dollars and other currencies, securities on a when-issued or delayed delivery
basis, enter into repurchase and reverse repurchase agreements, loan its port-
folio securities, purchase certain privately placed securities and enter into
forward foreign currency exchange contracts. In addition, the Portfolio may
use options on securities and securities indexes, futures contracts and op-
tions on futures contracts for hedging and risk management purposes. For a
discussion of these investments and investment techniques, see Additional In-
vestment Information and Risk Factors.

THE JPM INSTITUTIONAL DIVERSIFIED FUND

The JPM Institutional Diversified Fund's investment objective is to provide a
high total return from a diversified portfolio of equity and fixed income se-
curities. Total return will consist of income plus realized and unrealized
capital gains and losses. The Fund attempts to achieve its investment objec-
tive by investing all of its investable assets in The Diversified Portfolio,
an open-end management investment company having the same investment objective
as the Fund.

The Portfolio seeks to provide a total return that approaches that of the uni-
verse of equity securities of large and medium sized U.S. companies and that
exceeds the return typical of a portfolio of fixed income securities. The
Portfolio attempts to achieve this return by investing in equity and fixed in-
come instruments, as described below.

The JPM Institutional Diversified Fund is designed primarily for investors who
wish to invest for long-term objectives such as retirement. It is appropriate
for investors who seek to attain real appreciation in the market value of
their investments over the long term, but with somewhat less price fluctuation
than a portfolio consisting only of equity securities. The Fund may be an at-
tractive option for investors who want a professional investment adviser to
decide how their investments should be allocated between equity and fixed in-
come securities.

Under normal circumstances, the Portfolio will be invested approximately 65%
in equities and 35% in fixed income securities. However, Morgan may allocate
the Portfolio's investments between these asset classes in a manner consistent

21
<PAGE>

with the Portfolio's investment objective and current market conditions. Using
a variety of analytical tools, Morgan assesses the relative attractiveness of
each asset class and determines an optimal allocation between them. Morgan then
selects securities within each asset class based on fundamental research and
quantitative analysis.

The Portfolio intends to manage its portfolio actively in pursuit of its in-
vestment objective. Since the Portfolio has a long-term investment perspective,
it does not intend to respond to short-term market fluctuations or to acquire
securities for the purpose of short-term trading; however, it may take advan-
tage of short-term trading opportunities that are consistent with its objec-
tive. To the extent the Portfolio engages in short-term trading, it may incur
increased transaction costs. See Taxes below.

EQUITY INVESTMENTS. For the equity portion of the Portfolio, Morgan seeks to
achieve a high total return through fundamental analysis, systematic stock val-
uation and disciplined portfolio construction. Based on internal fundamental
research, Morgan uses a dividend discount model to value equity securities and
rank a universe of large and medium capitalization companies within economic
sectors according to their relative value. Morgan then buys and sells securi-
ties within each economic sector based on this valuation process to seek to en-
hance the Portfolio's return. In addition, Morgan uses this disciplined portfo-
lio construction process to seek to reduce the volatility of the equity portion
of the Portfolio relative to that of the S&P 500 Index.

The Portfolio's equity investments will be primarily the common stock of large
and medium sized U.S. companies with market capitalizations above $1.5 billion,
including common stock of any class or series or any similar equity interest,
such as trust or limited partnership interests. The Portfolio's equity invest-
ments may also include preferred stock, warrants, rights and convertible secu-
rities. The Portfolio may also invest in the equity securities of small compa-
nies and of foreign issuers. The small company holdings of the Portfolio are
primarily companies included in the Russell 2000 Index. The Portfolio's equity
securities may or may not pay dividends and may or may not carry voting rights.

FIXED INCOME INVESTMENTS. For the fixed income portion of the Portfolio, Morgan
seeks to provide a high total return by actively managing the duration of the
Portfolio's fixed income securities, the allocation of securities across market
sectors, and the selection of securities within sectors. Based on fundamental,
economic and capital markets research, Morgan adjusts the duration of the Port-
folio's fixed income investments in light of market conditions. Morgan also ac-
tively allocates the Portfolio's fixed income investments among the broad sec-
tors of the fixed income market. Securities which Morgan believes are underval-
ued are selected for purchase from the sectors using advanced quantitative
tools, analysis of credit risk, the expertise of a dedicated trading desk, and
the judgment of fixed income portfolio managers and analysts.

Duration is a measure of the weighted average maturity of the fixed income se-
curities held in the Portfolio and can be used as a measure of the sensitivity
of the Portfolio's market value to changes in interest rates. Under normal mar-
ket conditions the duration of the fixed income portion of the Portfolio will
range between one year shorter and one year longer than the duration of the
U.S. investment grade fixed income universe, as represented by the Salomon
Brothers Broad Investment Grade Bond Index. Currently, the Index's duration is
approximately five years. The maturities of the individual fixed income securi-
ties in the Portfolio may vary widely, however.

The Portfolio may invest in a broad range of debt securities of domestic and
foreign issuers. These include corporate bonds, debentures, notes, mortgage-re-
lated securities, and asset-backed securities; U.S. Government and agency secu-
rities; and private placements. See The JPM Institutional Short Term Bond Fund
for more detailed information on fixed income securities.

QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least 65% of that portion of the Portfolio invested in fixed
income securities will consist of securities that are rated at least A by
Moody's or

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<PAGE>

Standard & Poor's or that are unrated and in Morgan's opinion are of compara-
ble quality. In the case of 30% of the Portfolio's fixed income investments,
the Portfolio may purchase debt securities that are rated Baa or better by
Moody's or BBB or better by Standard & Poor's or are unrated and in Morgan's
opinion are of comparable quality. The remaining 5% of the Portfolio's fixed
income investments may be debt securities that are rated Ba or better by
Moody's or BB or better by Standard & Poor's or are unrated and in Morgan's
opinion are of comparable quality. Securities rated Baa by Moody's or BBB by
Standard & Poor's are considered investment grade, but have some speculative
characteristics. Securities rated Ba by Moody's or BB by Standard & Poor's are
below investment grade and considered to be speculative with regard to payment
of interest and principal. These standards must be satisfied at the time an
investment is made. If the quality of the investment later declines, the Port-
folio may continue to hold the investment. See Appendix A in the Statement of
Additional Information for more detailed information on these ratings.

FOREIGN INVESTMENTS. The Portfolio may invest in common stocks and convertible
securities of foreign corporations as well as fixed income securities of for-
eign government and corporate issuers. However, the Portfolio does not expect
to invest more than 30% of its assets at the time of purchase in securities of
foreign issuers. For further information on foreign investments and foreign
currency exchange transactions, see Additional Investment Information and Risk
Factors.

The Portfolio may also invest in securities on a when-issued or delayed deliv-
ery basis, enter into repurchase and reverse repurchase agreements, loan its
portfolio securities, purchase certain privately placed securities and money
market instruments and enter into forward contracts on foreign currencies. In
addition, the Portfolio may use options on securities and indexes of securi-
ties, futures contracts and options on futures contracts for hedging and risk
management purposes. For a discussion of these investments and investment
techniques, see Additional Investment Information and Risk Factors.

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

CONVERTIBLE SECURITIES. The Portfolios for The JPM Institutional Short Term
Bond Fund, The JPM Institutional Bond Fund, The JPM Institutional Interna-
tional Bond Fund, The JPM Institutional Selected U.S. Equity Fund, The JPM In-
stitutional U.S. Small Company Fund, The JPM Institutional Emerging Markets
Equity Fund, The JPM Institutional International Equity Fund and The JPM In-
stitutional Diversified Fund may invest in convertible securities of domestic
and, subject to each Portfolio's investment restrictions, foreign issuers. The
convertible securities in which the Portfolios may invest include any debt se-
curities or preferred stock which may be converted into common stock or which
carry the right to purchase common stock. Convertible securities entitle the
holder to exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a certain pe-
riod of time.

WARRANTS. The Portfolios for The JPM Institutional Selected U.S. Equity Fund,
The JPM Institutional U.S. Small Company Fund, The JPM Institutional Interna-
tional Equity Fund, The JPM Institutional Emerging Markets Equity Fund and The
JPM Institutional Diversified Fund may invest in warrants, which entitle the
holder to buy common stock from the issuer at a specific price (the strike
price) for a specific period of time. The strike price of warrants sometimes
is much lower than the current market price of the underlying securities, yet
warrants are subject to similar price fluctuations. As a result, warrants may
be more volatile investments than the underlying securities.

Warrants do not entitle the holder to dividends or voting rights with respect
to the underlying securities and do not represent any rights in the assets of
the issuing company. Also the value of the warrant does not necessarily change
with the value of the underlying securities and a warrant ceases to have value
if it is not exercised prior to the expiration date.

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each of the Portfolios may pur-
chase securities on a when-issued or delayed delivery basis. Delivery of and
payment for these securities may take as long as a month or more after the
date of the purchase commitment. The value of these securities is subject to
market fluctuation during this period and no interest or income accrues to the
Portfolio until settlement. At the time of settlement, a when-issued security
may be valued at

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<PAGE>

less than its purchase price. Each Portfolio maintains with the Custodian a
separate account with a segregated portfolio of securities in an amount at
least equal to these commitments. When entering into a when-issued or delayed
delivery transaction, the Portfolio relies on the other party to consummate
the transaction; if the other party fails to do so, the Portfolio may be dis-
advantaged. It is the current policy of each Portfolio not to enter into when-
issued commitments exceeding in the aggregate 15% of the market value of the
Portfolio's total assets less liabilities other than the obligations created
by these commitments.

REPURCHASE AGREEMENTS. Each of the Portfolios may engage in repurchase agree-
ment transactions with brokers, dealers or banks that meet the credit guide-
lines established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective
for the term of the agreement. The Portfolio for The JPM Institutional Trea-
sury Money Market Fund only enters into repurchase agreements involving U.S.
Treasury securities. The term of these agreements is usually from overnight to
one week. A repurchase agreement may be viewed as a fully collateralized loan
of money by the Portfolio to the seller. The Portfolio always receives securi-
ties as collateral with a market value at least equal to the purchase price
plus accrued interest and this value is maintained during the term of the
agreement. If the seller defaults and the collateral value declines, the Port-
folio might incur a loss. If bankruptcy proceedings are commenced with respect
to the seller, the Portfolio's realization upon the disposition of collateral
may be delayed or limited. Investments in cer-
tain repurchase agreements and certain other investments which may be consid-
ered illiquid are limited. See Illiquid Investments; Privately Placed and
other Unregistered Securities below.

LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
each of the Portfolios is permitted to lend its securities in an amount up to
33 1/3% of the value of the Portfolio's net assets. Each of the Portfolios may
lend its securities if such loans are secured continuously by cash or equiva-
lent collateral or by a letter of credit in favor of the Portfolio at least
equal at all times to 100% of the market value of the securities loaned, plus
accrued interest. While such securities are on loan, the borrower will pay the
Portfolio any income accruing thereon. Loans will be subject to termination by
the Portfolio in the normal settlement time, generally five business days af-
ter notice, or by the borrower on one day's notice. Borrowed securities must
be returned when the loan is terminated. Any gain or loss in the market price
of the borrowed securities which occurs during the term of the loan inures to
a Portfolio and its respective investors. The Portfolios may pay reasonable
finders' and custodial fees in connection with a loan. In addition, the Port-
folios will consider all facts and circumstances, including the creditworthi-
ness of the borrowing financial institution, and the Portfolios will not make
any loans in excess of one year. The Portfolios will not lend their securities
to any officer, Trustee, Director, employee or other affiliate of the Portfo-
lios, the Advisor or the Distributor, unless otherwise permitted by applicable
law.

REVERSE REPURCHASE AGREEMENTS. Each of the Portfolios is permitted to enter
into reverse repurchase agreements. In a reverse repurchase agreement, the
Portfolio sells a security and agrees to repurchase it at a mutually agreed
upon date and price, reflecting the interest rate effective for the term of
the agreement. For the purposes of the 1940 Act, it is considered as a form of
borrowing by the Portfolio and, therefore, is a form of leverage. Leverage may
cause any gains or losses of the Portfolio to be magnified. For more informa-
tion, see Investment Objectives and Policies in the Statement of Additional
Information.

FOREIGN INVESTMENT INFORMATION. The Portfolios for The JPM Institutional Money
Market Fund, The JPM Institutional Short Term Bond Fund, The JPM Institutional
Bond Fund, The JPM Institutional Selected U.S. Equity Fund, The JPM Institu-
tional U.S. Small Company Fund and The JPM Institutional Diversified Fund may
invest in certain foreign securities. The Portfolios for The JPM Institutional
International Bond Fund, The JPM Institutional International Equity Fund and
The JPM Institutional Emerging Markets Equity Fund invest primarily in foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different invest-

24
<PAGE>

ment 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 domes-
tic companies. Dividends and interest paid by foreign issuers may be subject
to withholding and other foreign taxes which may decrease the net return on
foreign investments as compared to dividends and interest paid to these Port-
folios by domestic companies.

Investors should realize that the value of each Portfolio's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolios must be made in compli-
ance with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.

In addition, while the volume of transactions effected in foreign bond markets
or on foreign stock exchanges has increased in recent years, in most cases it
remains appreciably below that of domestic markets or security exchanges. Ac-
cordingly, a Portfolio's foreign investments may be less liquid and their
prices may be more volatile than comparable investments in securities of U.S.
issuers or companies. Moreover, the settlement periods for foreign securities,
which are often longer than those for securities of U.S. issuers, may affect
portfolio liquidity. In buying and selling securities on foreign exchanges,
purchasers normally pay fixed commissions that are generally higher than the
negotiated commissions charged in the United States. In addition, there is
generally less government supervision and regulation of securities exchanges,
brokers, financial institutions and issuers located in foreign countries than
in the United States.

Although the Portfolios for The JPM Institutional International Bond Fund and
The JPM Institutional International Equity Fund invest primarily in securities
of established issuers based in developed foreign countries, they may also in-
vest in securities of issuers in emerging markets countries. The Portfolio for
The JPM Institutional Emerging Markets Equity Fund invests primarily in equity
securities of companies in emerging markets countries. Investments in securi-
ties of issuers in emerging markets countries may involve a high degree of
risk and many may be considered speculative. These investments carry all of
the risks of investing in securities of foreign issuers outlined in this sec-
tion to a heightened degree. These heightened risks include (i) greater risks
of expropriation, confiscatory taxation, nationalization, and less social, po-
litical and economic stability; (ii) the small current size of the markets for
securities of emerging markets issuers and the currently low or nonexistent
volume of trading, resulting in lack of liquidity and in price volatility;
(iii) certain national policies which may restrict the Portfolios' investment
opportunities including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests; and (iv) the absence of de-
veloped legal structures governing private or foreign investment and private
property.

Each of the Portfolios may invest in securities of foreign issuers directly or
in the form of American Depositary Receipts ("ADRs"), European Depositary Re-
ceipts ("EDRs") or other similar securities of foreign issuers. These securi-
ties may not necessarily be denominated in the same currency as the securities
they represent. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying foreign securities. Certain
such institutions issuing ADRs may not be sponsored by the issuer of the un-
derlying foreign securities. A non-sponsored depository may not provide the
same shareholder information that a sponsored depository is required to pro-
vide under its contractual arrangements with the issuer of the underlying for-
eign securities. EDRs are receipts issued by a European financial
institution evidencing a similar arrangement. Generally, ADRs, in registered
form, are designed for use in the U.S. securities markets, and EDRs, in bearer
form, are designed for use in European securities markets.

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<PAGE>

In the case of the Portfolios for The JPM Institutional Short Term Bond Fund,
The JPM Institutional Bond Fund, The JPM Institutional International Bond Fund,
The JPM Institutional Selected U.S. Equity Fund, The JPM Institutional U.S.
Small Company Fund, The JPM Institutional International Equity Fund, The JPM
Institutional Emerging Markets Equity Fund and The JPM Institutional Diversi-
fied Fund, since investments in foreign securities involve foreign currencies,
the value of their assets as measured in U.S. dollars may be affected favorably
or unfavorably by changes in currency rates and in exchange control regula-
tions, including currency blockage. See Foreign Currency Exchange Transactions.

For a discussion of investment risks associated with the general economic and
political conditions in Japan, see Investment Objectives and Policies in the
Statement of Additional Information.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolios for The JPM In-
stitutional Short Term Bond Fund, The JPM Institutional Bond Fund, The JPM In-
stitutional International Bond Fund, The JPM Institutional Selected U.S. Equity
Fund, The JPM Institutional U.S. Small Company Fund, The JPM Institutional In-
ternational Equity Fund, The JPM Institutional Emerging Markets Equity Fund and
The JPM Institutional Diversified Fund buy and sell securities and receive in-
terest and dividends in currencies other than the U.S. dollar, the Portfolios
for these Funds may enter from time to time into foreign currency exchange
transactions. The Portfolios either enter into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the foreign currency exchange
market or use forward contracts to purchase or sell foreign currencies. The
cost of a Portfolio's spot currency exchange transactions is generally the dif-
ference between the bid and offer spot rate of the currency being purchased or
sold.

A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contracts. These contracts are entered into in
the interbank market directly between currency traders (usually large commer-
cial banks) and their customers. A forward foreign currency exchange contract
generally has no deposit requirement and is traded at a net price without com-
mission. The Portfolios will not enter into forward contracts for speculative
purposes. Neither spot transactions nor forward foreign currency exchange con-
tracts eliminate fluctuations in the prices of the Portfolio's securities or in
foreign exchange rates, or prevent loss if the prices of these securities
should decline.

Each of these Portfolios may enter into foreign currency exchange transactions
in an attempt to protect against changes in foreign currency exchange rates be-
tween the trade and settlement dates of specific securities transactions or an-
ticipated securities transactions. The Portfolios may also enter into forward
contracts to hedge against a change in foreign currency exchange rates that
would cause a decline in the value of existing investments denominated or prin-
cipally traded in a foreign currency. To do this, a Portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars or in exchange for
another foreign currency. A Portfolio will only enter into forward contracts to
sell a foreign currency in exchange for another foreign currency if the Advisor
expects the foreign currency purchased to appreciate against the U.S. dollar.

Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of fluctu-
ations in the value of the currency purchased against the hedged currency and
the U.S. dollar. The precise matching of the forward contract amounts and the
value of the securities involved will not generally be possible because the fu-
ture value of such securities in foreign currencies will change as a conse-
quence of market movements in the value of such securities between the date the
forward contract is entered into and the date it matures. The projection of
currency market movements is extremely difficult, and the successful execution
of a hedging strategy is highly uncertain.

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<PAGE>

TAXABLE INVESTMENTS FOR THE JPM INSTITUTIONAL TAX EXEMPT FUNDS. The Portfolios
for The JPM Institutional Tax Exempt Money Market Fund and The JPM Institu-
tional Tax Exempt Bond Fund each attempt to invest its assets in tax exempt mu-
nicipal securities; however, these Portfolios are each permitted to invest up
to 20% of the value of their respective total assets in securities, the inter-
est income on which may be subject to federal, state or local income taxes.
These Portfolios may make taxable investments pending investment of proceeds
from sales of their interests or portfolio securities, pending settlement of
purchases of portfolio securities, to maintain liquidity or when it is advis-
able in Morgan's opinion because of adverse market conditions. The Portfolios
will invest in taxable securities only if there are no tax exempt securities
available for purchase or if the after tax yield from an investment in taxable
securities exceeds the yield on available tax exempt securities. In abnormal
market conditions, if, in the judgment of Morgan, tax exempt securities satis-
fying The JPM Institutional Tax Exempt Bond Fund's investment objective may not
be purchased, its corresponding Portfolio may, for defensive purposes only,
temporarily invest more than 20% of its net assets in debt securities the in-
terest on which is subject to federal, state or local income taxes. The taxable
investments permitted for these Portfolios include obligations of the U.S. Gov-
ernment and its agencies and instrumentalities, bank obligations, commercial
paper and repurchase agreements and, in the case of The JPM Institutional Tax
Exempt Bond Fund, other debt securities which meet the Fund's quality require-
ments. See Taxes.

PUTS FOR THE JPM INSTITUTIONAL TAX EXEMPT FUNDS. The Portfolios for The JPM In-
stitutional Tax Exempt Money Market Fund and The JPM Institutional Tax Exempt
Bond Fund may purchase without limit municipal bonds or notes together with the
right to resell them at an agreed price or yield within a specified period
prior to maturity. This right to resell is known as a put. The aggregate price
paid for securities with puts may be higher than the price which otherwise
would be paid. Consistent with the investment objectives of these Portfolios
and subject to the supervision of the Trustees, the purpose of this practice is
to permit the Portfolios to be fully invested in tax exempt securities while
maintaining the necessary liquidity to purchase securities on a when-issued ba-
sis, to meet unusually large withdrawals, to purchase at a later date securi-
ties other than those subject to the put and, in the case of The JPM Institu-
tional Tax Exempt Bond Fund, to facilitate Morgan's ability to manage the port-
folio actively. The principal risk of puts is that the put writer may default
on its obligation to repurchase. Morgan will monitor each writer's ability to
meet its obligations under puts.

The amortized cost method is used by the Portfolio for The JPM Institutional
Tax Exempt Money Market Fund to value all municipal securities; no value is as-
signed to any puts. This method is also used by the Portfolio for The JPM In-
stitutional Tax Exempt Bond Fund to value municipal securities with maturities
of less than 60 days; when these securities are subject to puts separate from
the underlying securities, no value is assigned to the puts. The cost of any
such put is carried as an unrealized loss from the time of purchase until it is
exercised or expires. See the Statement of Additional Information for the valu-
ation procedure if the Portfolio for The JPM Institutional Tax Exempt Bond Fund
were to invest in municipal securities with maturities of 60 days or more that
are subject to separate puts.

SYNTHETIC VARIABLE RATE INSTRUMENTS FOR THE JPM INSTITUTIONAL TAX EXEMPT
FUNDS. The Portfolios for The JPM Institutional Tax Exempt Money Market Fund
and The JPM Institutional Tax Exempt Bond Fund may invest in certain synthetic
variable rate instruments. Such instruments generally involve the deposit of a
long-term tax exempt bond in a custody or trust arrangement and the creation of
a mechanism to adjust the long-term interest rate on the bond to a variable
short-term rate and a right (subject to certain conditions) on the part of the
purchaser to tender it periodically to a third party at par. Morgan will review
the structure of synthetic variable rate instruments to identify credit and li-
quidity risks (including the conditions under which the right to tender the in-
strument would no longer be available) and will monitor those risks. In the
event that the right to tender the instrument is no longer available, the risk
to the Portfolios will be that of holding the long-term bond, which in the case
of the Portfolio for The JPM Institutional Tax Exempt Money Market Fund may re-
quire the disposition of the bond which could be at a loss.

ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED
SECURITIES. Subject to the limitations described below, each of the Portfolios
may acquire investments that are illiquid or have limited liquidity, such as
private placements

27
<PAGE>

or investments that are not registered under the Securities Act of 1933 (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 in-
vestment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio.
The price the Portfolio pays for illiquid securities or receives upon resale
may be lower than the price paid or received for similar securities with a
more liquid market. Accordingly the valuation of these securities will reflect
any limitations on their liquidity.

Acquisition of illiquid investments by the Portfolio for The JPM Institutional
Money Market Fund is subject to the 10% fundamental policy limitation de-
scribed below under Investment Restrictions. Acquisitions of illiquid invest-
ments by the Portfolios for the other JPM Institutional Funds is subject to
the following non-fundamental policies. The Portfolio for each of The JPM In-
stitutional Tax Exempt Money Market Fund and The JPM Institutional Treasury
Money Market Fund may not acquire any illiquid securities if, as a result
thereof, more than 10% of the market value of the Portfolio's net assets would
be in illiquid investments. The Portfolio for each of The JPM Institutional
Short Term Bond, Bond, Tax Exempt Bond, International Bond, Selected U.S. Eq-
uity, U.S. Small Company, International Equity, Emerging Markets Equity and
Diversified Funds may not invest in additional illiquid securities if, as a
result, more than 15% of the market value of its net assets would be invested
in illiquid securities.

Each of the Portfolios may also purchase Rule 144A securities sold to institu-
tional investors without registration under the 1933 Act. These securities may
be determined to be liquid in accordance with guidelines established by the
Advisor and approved by the Trustees. The Trustees will monitor the Advisor's
implementation of these guidelines on a periodic basis.

FUTURES AND OPTIONS TRANSACTIONS. The Portfolios for each of the JPM Institu-
tional Bond, Short Term Bond, International Bond and Diversified Funds may (a)
purchase exchange traded and over-the-counter (OTC) put and call options on
fixed income securities and indexes of fixed income securities, (b) purchase
and sell futures contracts on fixed income securities and indexes of fixed in-
come securities and (c) purchase put and call options on futures contracts on
fixed income securities and indexes of fixed income securities. The Portfolios
for each of the Bond, Short Term Bond and Diversified Funds may also purchase
and sell futures contracts on fixed income securities and purchase put and
call options on futures contracts on fixed income securities. In addition, the
Portfolios for the International Bond and Diversified Funds may sell (write)
exchange traded and OTC put and call options on indexes of fixed income secu-
rities and on futures contracts on indexes of fixed income securities; the Di-
versified Fund may also sell these options on fixed income securities and on
futures contracts on fixed income securities. Each of these instruments is a
derivative instrument as its value derives from the underlying asset or index.

The Portfolios for each of the JPM Institutional Selected U.S. Equity, U.S.
Small Company, International Equity, Emerging Markets Equity and Diversified
Funds may (a) purchase exchange traded and OTC put and call options on equity
securities or indexes of equity securities, (b) purchase and sell futures con-
tracts on indexes of equity securities, and (c) purchase put and call options
on futures contracts on indexes of equity securities. In addition, the Portfo-
lios for the Emerging Markets Equity and Diversified Funds may sell (write)
exchange traded and OTC put and call options on equity securities and indexes
of equity securities and on futures contracts on indexes of equity securities.

Each of these Portfolios may use futures contracts and options for hedging
purposes. The Portfolios for each of the JPM Institutional International Bond,
Emerging Markets Equity and Diversified Funds may also use futures contracts
and options for risk management purposes. See Risk Management in the Statement
of Additional Information. None of the Portfolios may use futures contracts
and options for speculation.

Each of these Portfolios may utilize options and futures contracts to manage
their exposure to changing interest rates and/or security prices. Some options
and futures strategies, including selling futures contracts and buying puts,
tend to

28
<PAGE>

hedge a Portfolio's investments against price fluctuations. Other strategies,
including buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be com-
bined with each other or with forward contracts in order to adjust the risk
and return characteristics of a Portfolio's overall strategy in a manner
deemed appropriate to the Advisor and consistent with a Portfolio's objective
and policies. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.

The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their
use will increase a Portfolio's return. While the use of these instruments by
a Portfolio may reduce certain risks associated with owning its portfolio se-
curities, these techniques themselves entail certain other risks. If the Advi-
sor applies a strategy at an inappropriate time or judges market conditions or
trends incorrectly, options and futures strategies may lower a Portfolio's re-
turn. Certain strategies limit a Portfolio's possibilities to realize gains as
well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments or if it could not close out its positions
because of an illiquid secondary market. In addition, a Portfolio will incur
transaction costs, including trading commissions and option premiums, in con-
nection with its futures and options transactions and these transactions could
significantly increase the Portfolio's turnover rate.

Each of the Portfolios may purchase put and call options on securities, in-
dexes of securities and futures contracts, or purchase and sell futures con-
tracts, only if such options are written by other persons and if (i) the ag-
gregate premiums paid on all such options which are held at any time do not
exceed 20% of the Portfolio's net assets, and (ii) the aggregate margin depos-
its required on all such futures or options thereon held at any time do not
exceed 5% of the Portfolio's total assets. In addition, the Portfolios for the
JPM Institutional Emerging Markets Equity and Diversified Funds will not pur-
chase or sell (write) futures contracts, options on futures contracts or com-
modity options for risk management purposes if, as a result, the aggregate
initial margin and options premiums required to establish these positions ex-
ceed 5% of the net asset value of such Portfolio.

For more detailed information about these transactions, see the Appendix to
this Prospectus and Risk Management in the Statement of Additional Informa-
tion.

MONEY MARKET INSTRUMENTS. The Portfolios for The JPM Institutional Selected
U.S. Equity Fund, The JPM Institutional U.S. Small Company Fund, The JPM In-
stitutional International Equity Fund, The JPM Institutional Emerging Markets
Equity Fund and The JPM Institutional Diversified Fund are permitted to invest
in money market instruments, although each of these Portfolios intends to stay
invested in equity securities (or, in the case of The JPM Institutional Diver-
sified Fund, equity and longer-term fixed income securities) to the extent
practical in light of its objectives and long-term investment perspective.
These Portfolios may make money market investments pending other investment or
settlement, for liquidity or in adverse market conditions as described above
under Taxable Investments for The JPM Institutional Tax Exempt Funds. The
money market investments permitted for these Portfolios include obligations of
the U.S. Government and its agencies and instrumentalities, other debt securi-
ties, commercial paper, bank obligations and repurchase agreements. The Port-
folios for The JPM Institutional International Equity and Emerging Markets Eq-
uity Funds may also invest in short-term obligations of sovereign foreign gov-
ernments, their agencies, instrumentalities and political subdivisions. For
more detailed information about these money market investments, see Investment
Objectives and Policies in the Statement of Additional Information.

INVESTMENT RESTRICTIONS

The investment objective of each Fund and its corresponding Portfolio, to-
gether with the investment restrictions described below and in the Statement
of Additional Information, except as noted, are deemed fundamental policies,
i.e.,

29
<PAGE>

they may be changed only with the approval of the holders of a majority of the
outstanding voting securities of a Fund and its corresponding Portfolio. Each
Fund has the same investment restrictions as its corresponding Portfolio, ex-
cept that each Fund may invest all of its investable assets in another open-end
investment company with the same investment objective and restrictions (such as
its corresponding Portfolio). References below to a Fund's investment restric-
tions also include its corresponding Portfolio's investment restrictions.

As diversified investment companies, 75% of the assets of each of The JPM In-
stitutional Funds, except for The JPM Institutional International Bond Fund,
are subject to the following fundamental limitations: (a) the Fund may not in-
vest more than 5% of its total assets in the securities of any one issuer, ex-
cept U.S. Government securities, and (b) the Fund may not own more than 10% of
the outstanding voting securities of any one issuer. The JPM Institutional
Money Market and Treasury Money Market Funds are subject to additional non-fun-
damental requirements governing non-tax exempt money market funds. These non-
fundamental requirements generally prohibit The JPM Institutional Money Market
and Treasury Money Market Funds from investing more than 5% of their respective
total assets in the securities of any single issuer, except obligations of the
U.S. Government and its agencies and instrumentalities.

The Portfolio for The JPM Institutional International Bond Fund is registered
as a non-diversified investment company which means that the Portfolio is not
limited by the 1940 Act in the proportion of its assets that may be invested in
the obligations of a single issuer. Thus, the Portfolio may invest a greater
proportion of its assets in the securities of a smaller number of issuers and,
as a result, may be subject to greater risk with respect to its portfolio secu-
rities. The Portfolio, however, will comply with the diversification require-
ments imposed by the Code for qualification as a regulated investment company.
See Taxes below.

The JPM Institutional Money Market Fund may not (i) acquire any illiquid secu-
rities if as a result more than 10% of the market value of its total assets
would be in investments which are illiquid, (ii) enter into reverse repurchase
agreements exceeding one-third of the market value of its total assets, less
certain liabilities, (iii) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of Fund to-
tal assets, taken at cost at the time of borrowing, or purchase securities
while borrowings exceed 5% of its total assets; or mortgage, pledge or hypothe-
cate any assets except in connection with any such borrowings in amounts up to
10% of the value of the Fund's net assets at the time of borrowing (the "10%
Emergency Borrowing Restriction"), or (iv) invest more than 25% of its assets
in any one industry, except there is no percentage limitation with respect to
investments in U.S. Government securities, negotiable certificates of deposit,
time deposits, and bankers' acceptances of U.S. branches of U.S. banks.

The JPM Institutional Treasury Money Market Fund may not (i) enter into reverse
repurchase agreements which together with any other borrowings exceed one-third
of the market value of its total assets, less certain liabilities, or (ii) bor-
row money (not including reverse repurchase agreements), except from banks for
temporary or extraordinary or emergency purposes and then only in amounts up to
10% of the value of its total assets, taken at cost at the time of borrowing
(and provided that such borrowings and reverse repurchase agreements do not ex-
ceed in the aggregate one-third of the market value of the Fund's total assets
less liabilities other than the obligations represented by the bank borrowings
and reverse repurchase agreements), or purchase securities while borrowings ex-
ceed 5% of its total assets; or mortgage, pledge or hypothecate any assets ex-
cept in connection with any such borrowings in amounts up to 10% of the value
of the Fund's net assets at the time of borrowing, or (iii) make loans, except
through purchasing or holding debt obligations, repurchase agreements, or loans
of portfolio securities in accordance with the Fund's investment objective and
policies.

The JPM Institutional Tax Exempt Money Market and Tax Exempt Bond Funds are
subject to the 10% Emergency Borrowing Restriction, except that borrowings may
be for temporary as well as extraordinary or emergency purposes in the case of
The Tax Exempt Money Market Fund, and may not acquire industrial revenue bonds
if as a result more than 5% of total Fund assets would be invested in indus-
trial revenue bonds where payment of principal and interest is the responsibil-
ity of companies with fewer than three years of operating history.

30
<PAGE>

Each of the JPM Institutional Short Term Bond and Diversified Funds may not (i)
purchase securities or other obligations of issuers conducting their principal
business activity in the same industry if its investments in such industry
would exceed 25% of the value of the Fund's total assets, except this limita-
tion shall not apply to investments in U.S. Government securities (the "Indus-
try Concentration Restriction"; for purposes of this limitation, the staff of
the SEC considers (a) all supranational organizations as a group to be a single
industry and (b) each foreign government and its political subdivisions to be a
single industry); (ii) borrow money (not including reverse repurchase agree-
ments), except from banks for temporary or extraordinary or emergency purposes
and then only in amounts up to 30% of the value of its total assets, taken at
cost at the time of borrowing (and provided that such borrowings and reverse
repurchase agreements do not exceed in the aggregate one-third of the market
value of the Fund's total assets less liabilities other than the obligations
represented by the bank borrowings and reverse repurchase agreements), or pur-
chase securities while borrowings exceed 5% of its total assets; or mortgage,
pledge or hypothecate any assets except in connection with any such borrowings
in amounts not to exceed 30% of the value of the Fund's net assets at the time
of borrowing; or (iii) enter into reverse repurchase agreements and other per-
mitted borrowings which constitute senior securities under the 1940 Act, ex-
ceeding in the aggregate one-third of the market value of the Fund's total as-
sets, less certain liabilities (the "Senior Securities Restriction").

The JPM Institutional Bond Fund is subject to the Industry Concentration Re-
striction and the Senior Securities Restriction and may not borrow money, ex-
cept from banks for extraordinary or emergency purposes and then only in
amounts up to 30% of the value of the Fund's total assets taken at cost at the
time of borrowing and except in connection with reverse repurchase agreements
or purchase securities while borrowings, including reverse repurchase agree-
ments, exceed 5% of its total assets; or mortgage, pledge or hypothecate any
assets except in connection with any such borrowing in amounts up to 30% of the
value of the Fund's net assets at the time of borrowing.

The JPM Institutional Selected U.S. Equity and U.S. Small Company Funds are
subject to the 10% Emergency Borrowing Restriction, the Industry Concentration
Restriction, and may not purchase securities of any issuer if, as a result of
the purchase, more than 5% of total Fund assets would be invested in securities
of companies with fewer than three years of operating history (including prede-
cessors).

The JPM Institutional International Equity Fund is subject to the Industry Con-
centration Restriction and the Senior Securities Restriction. In addition, the
Fund may not borrow money, except from banks for extraordinary or emergency
purposes and then only in amounts up to 30% of the value of the Fund's net as-
sets at the time of borrowing, and except in connection with reverse repurchase
agreements and then only in amounts up to 33 1/3% of the value of the Fund's
net assets; or purchase securities while borrowings, including reverse repur-
chase agreements, exceed 5% of its total assets; or mortgage, pledge or hypoth-
ecate any assets except in connection with any such borrowing and in amounts
not to exceed 30% of the value of the Fund's net assets at the time of such
borrowing.

The JPM Institutional International Bond and Emerging Markets Equity Funds are
subject to the Industry Concentration Restriction and may not (i) borrow money
except that the Fund may (a) borrow money from banks for temporary or emergency
purposes (not for leveraging purposes) and (b) enter into reverse repurchase
agreements for any purpose, provided that (a) and (b) in total do not exceed
one-third of the Fund's total assets less liabilities (other than borrowings),
or (ii) issue senior securities except as permitted by the 1940 Act or any
rule, order or interpretation thereunder.

For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions in the Statement of Additional Information.

31
<PAGE>

MANAGEMENT OF THE TRUST AND THE PORTFOLIOS

TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolios, the Trustees decide upon matters of general policy and review the
actions of the Advisor, Administrator, Distributor, Services Agent, and other
service providers. The Trustees of the Trust and of each Portfolio are identi-
fied below.

<TABLE>
<S> <C>
Frederick S. Addy................... Former Executive Vice President and Chief
Financial Officer, Amoco Corporation
William G. Burns.................... Former Vice Chairman of the Board and Chief
Financial Officer, NYNEX Corporation
Arthur C. Eschenlauer............... Former Senior Vice President, Morgan
Guaranty Trust Company of New York
Matthew Healey...................... Chairman and Chief Executive Officer, The
JPM Institutional Funds and The Pierpont
Funds; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Senior Vice President, Capital Cities/ABC,
Inc., President, Broadcast Group
</TABLE>

A majority of the disinterested Trustees have adopted written procedures rea-
sonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are trustees of the Trust, each Portfolio
and The Pierpont Funds, up to and including creating a separate board of
trustees. See Trustees and Officers in the Statement of Additional Information
for more information about the Trustees and Officers of the Funds and the
Portfolios.

Each of the Portfolios and the Trust have entered into a Fund Services Agree-
ment with Pierpont Group, Inc. to assist the Trustees in exercising their
overall supervisory responsibilities for the Portfolios' and the Trust's af-
fairs. The fees to be paid under the agreements approximate the reasonable
cost of Pierpont Group, Inc. in providing these services. Pierpont Group, Inc.
was organized in 1989 at the request of the Trustees of The Pierpont Family of
Funds for the purpose of providing these services at cost to those funds. See
Trustees and Officers in the Statement of Additional Information. The princi-
pal offices of Pierpont Group, Inc. are located at 461 Fifth Avenue, New York,
New York 10017.

ADVISOR. None of the Funds has retained the services of an investment adviser
because each Fund seeks to achieve its investment objective by investing all
of its investable assets in its corresponding Portfolio. Each Portfolio has
retained the services of Morgan as Investment Advisor. Morgan, with principal
offices at 60 Wall Street, New York, New York 10260, is a New York trust com-
pany which conducts a general banking and trust business. Morgan is a wholly
owned subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan"), a bank
holding company organized under the laws of Delaware. Through offices in New
York City and abroad, J.P. Morgan, through the Advisor and other subsidiaries,
offers a wide range of services to governmental, institutional, corporate and
individual customers and acts as investment adviser to individual and institu-
tional clients with combined assets under management of over $145 billion (of
which the Advisor advises over $30 billion). Morgan provides investment advice
and portfolio management services to each Portfolio. Subject to the supervi-
sion of each Portfolio's Trustees, Morgan makes each Portfolio's day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages each Portfolio's investments. See Investment Advisor in the
Statement of Additional Information.

Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For fixed income portfolios, this process focuses on the
systematic analysis of real interest rates, sector diversification, quantita-
tive and credit analysis, and, for foreign fixed income securities, country
selection. Morgan has managed portfolios of domestic fixed income securities
on behalf of its clients for over 60 years and international fixed income se-
curities on behalf of its clients since 1977. The portfolio managers making
investments in domestic and international fixed income securities work in con-
junction with fixed income, credit, capital market and economic research ana-
lysts, as well as traders and administrative officers.

32
<PAGE>

For equity portfolios, this process utilizes fundamental research, systematic
stock selection, disciplined portfolio construction and, in the case of foreign
equities, country exposure and currency management. Morgan has managed portfo-
lios of U.S. equity securities on behalf of its clients for over 40 years, eq-
uity securities of small U.S. companies since the 1960s, international equity
securities since 1974 and emerging markets equity securities since 1990. The
portfolio mangers making investments in domestic, international or emerging
markets equity securities work in conjunction with Morgan's equity analysts, as
well as capital market, credit and economic research analysts, traders and ad-
ministrative officers, in Morgan's offices around the globe. The U.S. equity
analysts each cover a different industry, following both the small and large
companies in their respective industries, and currently monitor universes of
700 predominately large and medium-sized and 300 small companies. The interna-
tional equity analysts, located in London, Tokyo, Singapore and Melbourne, each
cover a different industry, monitoring a universe of nearly 1,000 non-U.S. com-
panies. The emerging markets research analysts, located in New York, London and
Singapore, each cover a different industry, monitoring a universe of approxi-
mately 900 companies in emerging markets countries.

The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the respective Portfolios or their
predecessor entities (the inception date of each person's responsibility for a
Portfolio (or its predecessor) and his or her business experience for the past
five years is indicated parenthetically): The JPM Institutional Money Market
Fund: Robert R. Johnson, Vice President (since June, 1988, employed by Morgan
since prior to 1990) and Daniel B. Mulvey, Vice President (since January, 1995,
employed by Morgan since September, 1991, previously securities trader, Equita-
ble Life Insurance Company); The JPM Institutional Tax Exempt Money Market
Fund: Elizabeth A. Augustin, Vice President (since January, 1992, employed by
Morgan since prior to 1990) and Elbridge T. Gerry, III, Vice President (since
January, 1992, employed by Morgan since prior to 1990); The JPM Institutional
Treasury Money Market Fund: James A. Hayes, Vice President (since January,
1993, employed by Morgan since prior to 1990) and Robert R. Johnson, Vice Pres-
ident (since January, 1993, employed by Morgan since prior to 1990); The JPM
Institutional Short Term Bond Fund: Connie J. Plaehn, Vice President (since Ju-
ly, 1993, employed by Morgan since prior to 1990 as a portfolio manager of U.S.
fixed income investments) and William G. Tennille, Vice President (since Janu-
ary, 1994, employed by Morgan since March, 1992, previously Managing Director,
Manufacturers Hanover Trust Company as a portfolio manager of U.S. fixed income
investments); The JPM Institutional Bond Fund: William G. Tennille, Vice Presi-
dent (since January, 1994, employed by Morgan since March, 1992, previously
Managing Director, Manufacturers Hanover Trust Company as a portfolio manager
of U.S. fixed income investments) and Connie J. Plaehn, Vice President (since
January, 1994, employed by Morgan since prior to 1990 as a portfolio manager of
U.S. fixed income investments); The JPM Institutional Tax Exempt Bond Fund:
Elbridge T. Gerry, III, Vice President (since January, 1992, employed by Morgan
since prior to 1990) and Elizabeth A. Augustin, Vice President (since January,
1992, employed by Morgan since prior to 1990); The JPM Institutional Interna-
tional Bond Fund: Robert P. Browne, Vice President (since October 1994, em-
ployed by Morgan since 1990 as a portfolio manager of international fixed in-
come investments) and Lili B.L. Dung, Vice President (since October 1994, em-
ployed by Morgan since prior to 1990 as a portfolio manager of international
fixed income investments); The JPM Institutional Selected U.S. Equity Fund:
William B. Petersen, Managing Director (since February, 1993, employed by Mor-
gan since prior to 1990 as a portfolio manager of U.S. equity investments) and
William M. Riegel, Jr., Vice President (since February, 1993, employed by Mor-
gan since prior to 1990 as a portfolio manager of U.S. equity investments); The
JPM Institutional U.S. Small Company Fund: James B. Otness, Managing Director
(since February, 1993, employed by Morgan since prior to 1990 as a portfolio
manager of equity securities of small and medium sized U.S. companies) and Fred
W. Kittler, Vice President (since February, 1993, employed by Morgan since
prior to 1990 as a portfolio manager of equity securities of small and medium
sized U.S. companies); The JPM Institutional International Equity Fund: Paul A.
Quinsee, Vice President (since April, 1993, employed by Morgan since February,
1992, previously Vice President and Citibank N.A. prior to 1992 as a portfolio
manager of international equity investments) and Thomas P. Madsen, Managing Di-
rector (since April, 1993, employed by Morgan since prior to 1990 as a portfo-
lio manager of international equity investments); The JPM Institutional Emerg-
ing Markets Equity Fund: Douglas J. Dooley, Managing Director (since November,
1993, employed by

33
<PAGE>

Morgan since prior to 1990 and has been a portfolio manager of emerging markets
investments since 1990) and Satyen Mehta, Vice President (since November, 1993,
employed by Morgan since prior to 1990 and has been a portfolio manager of
emerging markets investments since 1990); and The JPM Institutional Diversified
Fund: Gerald H. Osterberg, Vice President (since July, 1993, employed by Morgan
since prior to 1990), and Paul J. Stegmayer, Vice President (since July, 1993,
employed by Morgan since prior to 1990).

As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with each Portfolio, the Portfolios
have agreed to pay Morgan a fee, which is computed daily and may be paid month-
ly, equal to the following annual rates of each Portfolio's average daily net
assets: the Portfolios for The JPM Institutional Money Market, The JPM Institu-
tional Tax Exempt Money Market, and The JPM Institutional Treasury Money Market
Funds, 0.20% of net assets up to $1 billion, and 0.10% of net assets in excess
of $1 billion; the Portfolio for The JPM Institutional Short Term Bond Fund,
0.25%; the Portfolios for The JPM Institutional Bond and The JPM Institutional
Tax Exempt Bond Funds, 0.30%; The JPM Institutional International Bond Fund,
0.35%; the Portfolio for The JPM Institutional Selected U.S. Equity Fund,
0.40%; the Portfolios for The JPM Institutional U.S. Small Company and The JPM
Institutional International Equity Funds, 0.60%; the Portfolio for The JPM In-
stitutional Emerging Markets Equity Fund, 1.00%; and the Portfolio for The JPM
Institutional Diversified Fund, 0.55%. While the advisory fee for the Portfolio
for The JPM Institutional Emerging Markets Equity Fund is higher than that of
most investment companies, it is similar to the advisory fees of other emerging
markets funds. INVESTMENTS IN THE JPM INSTITUTIONAL FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF
NEW YORK OR ANY OTHER BANK.

Morgan also acts as Services Agent to the Trust and the Portfolios and provides
shareholder services to shareholders of the Funds. See Services Agent and
Shareholder Servicing below.

ADMINISTRATOR AND DISTRIBUTOR. Under Administration Agreements with the Trust
and each Portfolio, Signature Broker-Dealer Services, Inc. ("SBDS") serves as
the Administrator for the Trust and the Portfolios. In this capacity, SBDS ad-
ministers and manages all aspects of the Funds' and the Portfolios' day-to-day
operations subject to the supervision of the Trustees, except as set forth un-
der Advisor, Services Agent, Custodian and Shareholder Servicing. In connection
with its responsibilities as Administrator, SBDS (i) furnishes ordinary cleri-
cal and related services for day-to-day operations including certain record-
keeping responsibilities; (ii) takes responsibility for compliance with all ap-
plicable federal and state securities and other regulatory requirements; (iii)
is responsible for the registration of sufficient Fund shares under federal and
state securities laws; (iv) takes responsibility for monitoring each Fund's
status as a regulated investment company under the Code; and (v) performs such
administrative and managerial oversight of the activities of the Trust's and
the Portfolios' custodian and transfer agent as the Trustees may direct from
time to time. Under the terms of the Trust's and the Portfolios' Financial and
Fund Accounting Services Agreements with Morgan, the fees of the Administrator
are covered by Morgan's expense undertakings described under Services Agent be-
low.

Under the Trust's Administration Agreement, the annual administration fee rate
is calculated based on the aggregate average daily net assets of The JPM Insti-
tutional Funds, as well as The Pierpont Funds and The JPM Advisor Funds, which
are two other families of mutual funds investing in the Portfolios. The fee
rate is calculated daily in accordance with the following schedule: 0.040% of
the first $1 billion of these funds' aggregate average daily net assets, 0.032%
of the next $2 billion of these funds' aggregate average daily net assets,
0.024% of the next $2 billion of these funds' aggregate average daily net as-
sets and 0.016% of these funds' aggregate average daily net assets in excess of
$5 billion. This fee rate is then applied to the net assets of each Fund. The
Administrator may voluntarily waive a portion of its fees.

Under the Portfolios' Administration Agreements, the annual administration fee
rate is calculated based on the aggregate average daily net assets of the Port-
folios, as well as all of the other portfolios in which series of The Pierpont
Funds or The JPM Advisor Funds invest. The fee rate is calculated daily in ac-
cordance with the following schedule: 0.010% of the first $1 billion of these
portfolios' aggregate average daily net assets, 0.008% of the next $2 billion
of these portfolios'

34
<PAGE>

aggregate average daily net assets, 0.006% of the next $2 billion of these
portfolios' aggregate average daily net assets and 0.004% of these portfolios'
aggregate average daily net assets in excess of $5 billion. This fee rate is
then applied to the net assets of each Portfolio. The Administrator may volun-
tarily waive a portion of its fees.

SBDS, a registered broker-dealer, also serves as the Distributor of shares of
the Funds and the Exclusive Placement Agent for the Portfolios. SBDS is a
wholly owned subsidiary of Signature. Signature and its affiliates currently
provide administration and distribution services for a number of registered
investment companies through offices located in Boston, New York, London, To-
ronto and George Town, Grand Cayman.

SERVICES AGENT. Under Financial and Fund Accounting Services Agreements with
the Trust and each Portfolio (each a "Services Agreement" and collectively,
the "Services Agreement's", Morgan acts as Services Agent to the Trust and
each Portfolio and provides the following two services to them. These agree-
ments provide that, Morgan is responsible for certain accounting and opera-
tional services provided to the Funds and the Portfolios, including services
related to tax returns and financial reports. In the case of the Funds, these
services also include matters related to computing the amount of dividends and
the net asset value per share and keeping the books of account.

In addition, as provided in the agreements, Morgan is responsible for the an-
nual costs of certain usual and customary expenses incurred by each Fund and
its corresponding Portfolio (the "expense undertakings"). The expenses covered
by the expense undertakings include, but are not limited to, transfer, regis-
trar, and dividend disbursing costs, legal and accounting expenses, fees of
the Administrator, insurance, the compensation and expenses of the Trustees,
the expenses of printing and mailing reports, notices, and proxies to Fund
shareholders, and registration fees under federal or state securities laws.
Each Fund and its corresponding Portfolio will pay these expenses directly and
such amounts will be deducted from the fees to be paid to Morgan under these
agreements. If such amounts are more than the amount of Morgan's fees under
the agreements, Morgan will reimburse the Fund or its corresponding Portfolio,
as appropriate, for such excess amounts. Under the Trust's Services Agreement,
the following expenses are not included in the expense undertaking: the fees
of Pierpont Group, Inc., shareholder servicing fees, the services agent fee,
organization expenses and extraordinary expenses as defined in this agreement.
Under each Portfolio's Services Agreement, the following expenses are not in-
cluded in the expense undertaking: the fees of Pierpont Group, Inc., custodian
fees, advisory fees, brokerage expenses, the services agent fee, organization
expenses and extraordinary expenses as defined in this agreement.

The Trust's Services Agreement provides for each Fund to pay Morgan a fee for
these services, which is computed daily and may be paid monthly, equal to
0.05% of each Fund's average daily net assets.

The Portfolios' Services Agreements provide for each Portfolio to pay Morgan a
fee for these services, which is computed daily and may be paid monthly, equal
to the following annual rates of each Portfolio's average daily net assets:
the Portfolios for The JPM Institutional Money Market, The JPM Institutional
Tax Exempt Money Market and The JPM Institutional Treasury Money Market Funds,
0.03%; the Portfolio for The JPM Institutional Short Term Bond Fund, 0.05% on
net assets up to $200 million, and 0.03% on net assets thereafter; the Portfo-
lios for The JPM Institutional Bond, The JPM Institutional Tax Exempt Bond,
The JPM Institutional Selected U.S. Equity, The JPM Institutional U.S. Small
Company and The JPM Institutional Diversified Funds, 0.10% on net assets up to
$200 million, 0.05% on the next $200 million in net assets, and 0.03% on net
assets thereafter; the Portfolio for The JPM Institutional International Bond
Fund, 0.12% on net assets up to $200 million, 0.08% on the next $200 million
in net assets, and 0.04% on net assets thereafter; and the Portfolios for The
JPM Institutional International Equity and The JPM Institutional Emerging Mar-
kets Equity Funds, 0.15% on net assets up to $200 million, 0.10% on the next
$200 million in net assets, 0.05% on the next $200 million in net assets, and
0.03% on net assets thereafter.

As noted above, the fee levels of each Fund and its corresponding Portfolio
are expense undertakings and reflect payments made directly to third parties
by the Fund and its corresponding Portfolio for services rendered, as well as
pay-

35
<PAGE>

ments to Morgan for services rendered. The Trustees regularly review amounts
paid to and accounted for by Morgan pursuant to these agreements. Under the
agreements, Morgan may delegate one or more of its responsibilities to other
entities, including SBDS, at Morgan's expense. See Expenses below.

CUSTODIAN. State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02101, serves as the Funds' and the Portfolios' Custodian and
Transfer and Dividend Disbursing Agent.

EXPENSES. In addition to the expenses that Morgan assumes under the Services
Agreements, Morgan has agreed that it will reimburse each Fund through at least
the indicated dates to the extent necessary to maintain the Fund's total oper-
ating expenses (which includes expenses of the Fund and its corresponding Port-
folio) at the following percentages of their daily net assets: The JPM Institu-
tional Money Market Fund, 0.20% until November 30, 1995; The JPM Institutional
Tax Exempt Money Market Fund, 0.35% until August 31, 1995; The JPM Institu-
tional Treasury Money Market Fund, 0.20% until October 31, 1995; The JPM Insti-
tutional Short Term Bond Fund, 0.45% until October 31, 1995; The JPM Institu-
tional Bond Fund, 0.50% until October 31, 1995; The JPM Institutional Tax Ex-
empt Bond Fund, 0.50% until August 31, 1995; The JPM Institutional Interna-
tional Bond Fund, 0.65% until September 30, 1995; The JPM Institutional Se-
lected U.S. Equity Fund, 0.60% until September 30, 1995; The JPM Institutional
U.S. Small Company Fund, 0.80% until September 30, 1995; The JPM Institutional
International Equity Fund, 1.00% until October 31, 1995; The JPM Institutional
Emerging Markets Equity Fund, 1.60% until October 31, 1995; and The JPM Insti-
tutional Diversified Fund, 0.65% until June 30, 1996. These limits on certain
expenses do not cover extraordinary increases in these expenses during the pe-
riod and no longer apply in the event of a precipitous decline in assets due to
unforeseen circumstances. There is no assurance that Morgan will continue waiv-
ers beyond the specified periods, except as required by the following sentence.
Morgan has agreed to waive fees as necessary, if in any fiscal year the sum of
any Fund's expenses exceeds the limits set by applicable regulations of state
securities commissions. Such annual limits are currently 2.5% of the first $30
million of average net assets, 2% of the next $70 million of such net assets
and 1.5% of such net assets in excess of $100 million for any fiscal year.

SHAREHOLDER SERVICING

Each Fund has entered into a Shareholder Servicing Agreement with Morgan pursu-
ant to which Morgan acts as shareholder servicing agent for its customers and
other Fund investors who are customers of an eligible institution which is a
customer of Morgan (an "Eligible Institution"). Each Fund has agreed to pay
Morgan for these services at the following annual rates (expressed as a per-
centage of the average daily net asset values of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder servicing agent): The JPM
Institutional Money Market, The JPM Institutional Treasury Money Market and The
JPM Institutional Tax Exempt Money Market Funds, 0.11% of average daily net as-
sets; The JPM Institutional Short Term Bond, The JPM Institutional Bond, The
JPM Institutional Tax Exempt Bond, The JPM Institutional International Bond
Fund, The JPM Institutional Selected U.S. Equity, The JPM Institutional U.S.
Small Company, The JPM Institutional International Equity, The JPM Institu-
tional Emerging Markets Equity and The JPM Institutional Diversified Funds,
0.05% of average daily net assets. Under the terms of the Shareholder Servicing
Agreement with each Fund, Morgan may delegate one or more of its responsibili-
ties to other entities at Morgan's expense.

Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) 766-7722.

The business days of each Fund and its corresponding Portfolio are the days the
New York Stock Exchange is open.

36
<PAGE>

PURCHASE OF SHARES

METHOD OF PURCHASE. Investors may open accounts with a Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Funds are authorized to accept any in-
structions relating to a Fund account from Morgan as agent for the customer.
All purchase orders must be accepted by the Fund's Distributor. Investors must
be customers of Morgan or an Eligible Institution. Investors may also be em-
ployer-sponsored retirement plans that have designated the Funds as investment
options for the plans. Prospective investors who are not already customers of
Morgan may apply to become customers of Morgan for the sole purpose of Fund
transactions. There are no charges associated with becoming a Morgan customer
for this purpose. Morgan reserves the right to determine the customers that it
will accept, and the Fund reserves the right to determine the purchase orders
that it will accept.

Each of The JPM Institutional Funds requires the minimum initial investment and
minimum subsequent investment shown below:
<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
INVESTMENT INVESTMENT
----------- ----------
<S> <C> <C>
The JPM Institutional Money Market Fund.................. $10,000,000 $25,000
The JPM Institutional Tax Exempt Money Market Fund....... $10,000,000 $25,000
The JPM Institutional Treasury Money Market Fund......... $10,000,000 $25,000
The JPM Institutional Short Term Bond Fund............... $ 5,000,000 $25,000
The JPM Institutional Bond Fund.......................... $ 5,000,000 $25,000
The JPM Institutional Tax Exempt Bond Fund............... $ 5,000,000 $25,000
The JPM Institutional International Bond Fund............ $ 1,000,000 $25,000
The JPM Institutional Selected U.S. Equity Fund.......... $ 3,000,000 $25,000
The JPM Institutional U.S. Small Company Fund............ $ 1,000,000 $25,000
The JPM Institutional International Equity Fund.......... $ 1,000,000 $25,000
The JPM Institutional Emerging Markets Equity Fund....... $ 500,000 $25,000
The JPM Institutional Diversified Fund................... $ 3,000,000 $25,000
</TABLE>

These minimum investment requirements may be waived for certain retirement
plans. For purposes of minimum investment requirements, the Funds may aggregate
investments by related shareholders.

PURCHASE PRICE AND SETTLEMENT. Each Fund's shares are sold on a continuous ba-
sis without a sales charge at the net asset value per share next determined af-
ter receipt of an order. Prospective investors may purchase shares with the as-
sistance of another Eligible Institution that may establish its own terms, con-
ditions and charges.

THE JPM INSTITUTIONAL MONEY MARKET, TAX EXEMPT MONEY MARKET, AND TREASURY MONEY
MARKET FUNDS. To purchase shares in The JPM Institutional Money Market Fund,
The JPM Institutional Tax Exempt Money Market Fund or The JPM Institutional
Treasury Money Market Fund, investors should request their Morgan representa-
tive (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Distributor on the same day. Any shareholder may
also call J.P. Morgan Funds Services at (800) 766-7722 for assistance with
placing an order for Fund shares. Immediately available funds must be received
by 11:00 A.M. New York time on a business day in the case of The JPM Institu-
tional Tax Exempt Money Market Fund, and by 3:00 P.M. New York time on a busi-
ness day for The JPM Institutional Money Market Fund and The JPM Institutional
Treasury Money Market Fund, for the purchase to be effective and dividends to
be earned on the same day. None of The JPM Institutional Money Market Fund, The
JPM Institutional Treasury Money Market Fund, or The JPM Institutional Tax Ex-
empt Money Market Fund accepts orders after the indicated time. If funds are
received

37
<PAGE>

after that time, for any reason, including that the day is a Federal Reserve
holiday, the purchase is not effective and dividends are not earned until the
next business day.

THE JPM INSTITUTIONAL SHORT TERM BOND, BOND, TAX EXEMPT BOND AND INTERNATIONAL
BOND FUNDS. To purchase shares in The JPM Institutional Short Term Bond Fund,
The JPM Institutional Bond Fund, The JPM Institutional Tax Exempt Bond Fund or
The JPM Institutional International Bond Fund, investors should request their
Morgan representative (or a representative of their Eligible Institution) to
assist them in placing a purchase order with the Fund's Distributor. Any share-
holder may also call J.P. Morgan Funds Services at (800) 766-7722 for assis-
tance with placing an order for Fund shares. If the Fund receives a purchase
order prior to 4:00 P.M. New York time on any business day, the purchase of
Fund shares is effective and is made at the net asset value determined that
day. If the Fund receives a purchase order after 4:00 P.M. New York time, the
purchase is effective and is made at net asset value determined on the next
business day. All purchase orders for Fund shares must be accompanied by in-
structions to Morgan (or an Eligible Institution) to transfer immediately
available funds to the Funds' Distributor on settlement date. The settlement
date is generally the business day after the purchase is effective. For Funds
other than The JPM Institutional International Bond Fund, the purchaser will
begin to receive the daily dividends on the settlement date. See Dividends and
Distributions.

THE JPM INSTITUTIONAL SELECTED U.S. EQUITY, U.S. SMALL COMPANY, INTERNATIONAL
EQUITY, EMERGING MARKETS EQUITY AND DIVERSIFIED FUNDS. To purchase shares in
The JPM Institutional Selected U.S. Equity Fund, The JPM Institutional U.S.
Small Company Fund, The JPM Institutional International Equity Fund, The JPM
Emerging Markets Equity Fund or The JPM Institutional Diversified Fund, invest-
ors should request their Morgan representative (or a representative of their
Eligible Institution) to assist them in placing a purchase order with the
Fund's Distributor and to transfer immediately available funds to the Funds'
Distributor on the next business day. Any shareholder may also call J.P. Morgan
Funds Services at (800) 766-7722 for assistance with placing an order for Fund
shares. If the Fund receives a purchase order prior to 4:00 P.M. New York time
on any business day, the purchase of Fund shares is effective and is made at
the net asset value determined that day, and the purchaser generally becomes a
holder of record on the next business day upon the Fund's receipt of payment.
If the Fund receives a purchase order after 4:00 P.M. New York time, the pur-
chase is effective and is made at the net asset value determined on the next
business day, and the purchaser becomes a holder of record on the following
business day upon the Fund's receipt of payment.

ELIGIBLE INSTITUTIONS. The services provided by Eligible Institutions may in-
clude establishing and maintaining shareholder accounts, processing purchase
and redemption transactions, arranging for bank wires, performing shareholder
sub-accounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing periodic statements showing the client's account balance and integrating
these statements with those of other transactions and balances in the client's
other accounts serviced by the Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other information and
performing such other services as Morgan or the Eligible Institution's clients
may reasonably request and agree upon with the Eligible Institution. Eligible
Institutions may separately establish their own terms, conditions and charges
for providing the aforementioned services and for providing other services.

REDEMPTION OF SHARES

METHOD OF REDEMPTION. To redeem shares in any of The JPM Institutional Funds,
an investor may instruct Morgan or his Eligible Institution, as appropriate, to
submit a redemption request to the appropriate Fund or may telephone J.P. Mor-
gan Funds Services directly at (800) 766-7722 and give the Shareholder Service
Representative a preassigned shareholder Personal Identification Number and the
amount of the redemption. Each Fund executes effective redemption requests at
the next determined net asset value per share. See Net Asset Value. See Addi-
tional Information below for an explanation of the telephone redemption policy
of The JPM Institutional Funds.

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<PAGE>

THE JPM INSTITUTIONAL MONEY MARKET, TAX EXEMPT MONEY MARKET, AND TREASURY
MONEY MARKET FUNDS. A redemption request received on a business day prior to
1:00 P.M. New York time in the case of The JPM Institutional Money Market Fund
or The JPM Institutional Treasury Money Market Fund, and prior to 11:00 A.M.
New York time in the case of The JPM Institutional Tax Exempt Money Market
Fund, is effective on that day. A redemption request received after that time
becomes effective on the next day. Proceeds of an effective redemption are
generally deposited the same day in immediately available funds to the share-
holder's account at Morgan or at his Eligible Institution or, in the case of
certain Morgan customers, are mailed by check or wire transferred in accor-
dance with the customer's instructions. If a redemption request becomes effec-
tive on a day when the New York Stock Exchange is open but which is a Federal
Reserve holiday, the proceeds are paid the next business day. See Further Re-
demption Information.

THE JPM INSTITUTIONAL SHORT TERM BOND, BOND, TAX EXEMPT BOND AND INTERNATIONAL
BOND FUNDS. A redemption request received by The JPM Institutional Short Term
Bond Fund, The JPM Institutional Bond Fund, The JPM Institutional Tax Exempt
Bond Fund or The JPM Institutional International Bond Fund prior to 4:00 P.M.
New York time is effective on that day. A redemption request received after
that time becomes effective on the next business day. Proceeds of an effective
redemption are deposited on settlement date in immediately available funds to
the shareholder's account at Morgan or at his Eligible Institution or, in the
case of certain Morgan customers, are mailed by check or wire transferred in
accordance with the customer's instructions. For Funds other than The JPM In-
stitutional International Bond Fund the redeemer will continue to receive div-
idends on these shares through the day before the settlement date. Settlement
date is generally the next business day after a redemption is effective and,
subject to Further Redemption Information below, in any event is within seven
days. See Dividends and Distributions.

THE JPM INSTITUTIONAL SELECTED U.S. EQUITY, U.S. SMALL COMPANY, INTERNATIONAL
EQUITY, EMERGING MARKETS EQUITY AND DIVERSIFIED FUNDS. A redemption request
received by The JPM Institutional Selected U.S. Equity Fund, The JPM Institu-
tional U.S. Small Company Fund, The JPM Institutional International Equity
Fund, The JPM Institutional Emerging Markets Equity Fund or The JPM Institu-
tional Diversified Fund prior to 4:00 P.M. New York time is effective on that
day. A redemption request received after that time becomes effective on the
next business day. Proceeds of an effective redemption are generally deposited
the next business day in immediately available funds to the shareholder's ac-
count at Morgan or at his Eligible Institution or, in the case of certain Mor-
gan customers, are mailed by check or wire transferred in accordance with the
customer's instructions, and, subject to Further Redemption Information below,
in any event are paid within seven days.

MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
any Fund falls below the Fund's initial investment amount (these are set forth
under "Purchase of Shares" above) for more than 30 days because of a redemp-
tion of shares, the shareholder's remaining shares may be redeemed 60 days af-
ter written notice unless the account is increased to the Fund's minimum in-
vestment amount or more.

FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions
from The JPM Institutional Funds may not be processed if a redemption request
is not submitted in proper form. To be in proper form, The JPM Institutional
Funds must have received the shareholder's taxpayer identification number and
address. As discussed under Taxes below, The JPM Institutional Funds may be
required to impose "back-up" withholding of federal income tax on dividends,
distributions and redemption proceeds when non-corporate investors have not
provided a certified taxpayer identification number. In addition, if a share-
holder sends a check for the purchase of Fund shares and shares are purchased
before the check has cleared, the transmittal of redemption proceeds from the
shares will occur upon clearance of the check which may take up to 15 days.

Each of The JPM Institutional Funds reserves the right to suspend the right of
redemption and to postpone the date of payment upon redemption for up to seven
days and for such other periods as the 1940 Act or the Securities and Exchange
Commission may permit. See Redemption of Shares in the Statement of Additional
Information.

39
<PAGE>

EXCHANGE OF SHARES

An investor may exchange shares from any JPM Institutional Fund into any other
JPM Institutional Fund or Pierpont Fund without charge. An exchange may be made
so long as after the exchange the investor has shares, in each fund in which he
or she remains an investor, with a value of at least each of those fund's mini-
mum investment amounts. See Method of Purchase for the minimum investment
amount for each of The JPM Institutional Funds. See the prospectus for The
Pierpont Funds for the minimum purchase amounts for those funds. Shares are ex-
changed on the basis of relative net asset value per share. Exchanges are in
effect redemptions from one fund and purchases of another fund and the usual
purchase and redemption procedures and requirements are applicable to ex-
changes. See Purchase of Shares and Redemption of Shares in this Prospectus and
in the prospectus for The Pierpont Funds. See also Additional Information below
for an explanation of the telephone exchange policy of The JPM Institutional
Funds.

Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. Each Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state securi-
ties laws may restrict the availability of the exchange privilege.

DIVIDENDS AND DISTRIBUTIONS

THE JPM INSTITUTIONAL MONEY MARKET, TAX EXEMPT MONEY MARKET AND TREASURY MONEY
MARKET FUNDS. In the case of The JPM Institutional Money Market Fund, The JPM
Institutional Tax Exempt Money Market Fund and The JPM Institutional Treasury
Money Market Fund, all of each Fund's net investment income is declared as a
dividend daily and paid monthly. If an investor's shares are redeemed during a
month, accrued but unpaid dividends are paid with the redemption proceeds. The
net investment income of each Fund for dividend purposes consists of its pro
rata share of the net income of the corresponding Portfolio less the Fund's ex-
penses. Dividends and distributions are payable to shareholders of record at
the time of declaration. The net investment income of The JPM Institutional
Money Market Fund, The JPM Institutional Tax Exempt Money Market Fund and The
JPM Institutional Treasury Money Market Fund for each business day is deter-
mined immediately prior to the determination of net asset value. Net investment
income for other days is determined at the time net asset value is determined
on the prior business day. Shares of The JPM Institutional Money Market Fund,
The JPM Institutional Tax Exempt Money Market Fund and The JPM Institutional
Treasury Money Market Fund earn dividends on the business day their purchase is
effective, but not on the business day redemption proceeds are paid. See Pur-
chase of Shares and Redemption of Shares.

Substantially all the realized net capital gains, if any, of The JPM Institu-
tional Money Market Fund, The JPM Institutional Tax Exempt Money Market Fund,
and The JPM Institutional Treasury Money Market Fund are declared and paid on
an annual basis, except that an additional capital gains distribution may be
made in a given year to the extent necessary to avoid the imposition of federal
excise tax on a Fund.

THE JPM INSTITUTIONAL SHORT TERM BOND, BOND AND TAX EXEMPT BOND FUNDS. Each of
The JPM Institutional Short Term Bond Fund, The JPM Institutional Bond Fund and
The JPM Institutional Tax Exempt Bond Fund intends to distribute substantially
all of its net investment income. The net investment income of each Fund is de-
clared as a dividend daily immediately prior to the determination of the net
asset value of the Fund on that day and paid monthly. If an investor's shares
are redeemed during a month, accrued but unpaid dividends are paid with the re-
demption proceeds. The net investment income of each Fund for dividend purposes
consists of its pro rata share of the net income of the corresponding Portfolio
less the Fund's expenses. Expenses of each Fund and Portfolio, including the
fees payable to Morgan, are accrued daily. Shares will accrue dividends as long
as they are issued and outstanding. Shares are issued and outstanding as of the
settlement date of a purchase order to the settlement date of a redemption or-
der.

40
<PAGE>

Substantially all the realized net capital gains of The JPM Institutional Short
Term Bond Fund, The JPM Institutional Bond Fund and The JPM Institutional Tax
Exempt Bond Fund are declared and paid on an annual basis, except that an addi-
tional capital gains distribution may be made in a given year to the extent
necessary to avoid the imposition of federal excise tax on a Fund.

THE JPM INSTITUTIONAL INTERNATIONAL BOND, SELECTED U.S. EQUITY, U.S. SMALL COM-
PANY, INTERNATIONAL EQUITY, EMERGING MARKETS EQUITY AND DIVERSIFIED
FUNDS. Income dividends are declared and paid quarterly for The JPM Institu-
tional International Bond Fund. Dividends consisting of substantially all the
Fund's net investment income, if any, are declared and paid twice a year for
The JPM Institutional Selected U.S. Equity, The JPM Institutional U.S. Small
Company and The JPM Institutional Diversified Funds and annually for The JPM
Institutional International Equity and The JPM Institutional Emerging Markets
Equity Funds. These Funds may also declare an additional dividend of net in-
vestment income in a given year to the extent necessary to avoid the imposition
of federal excise tax on the Funds. Substantially all the realized net capital
gains for these Funds are declared and paid on an annual basis, except that an
additional capital gains distribution may be made in a given year to the extent
necessary to avoid the imposition of federal excise tax on a Fund. Declared
dividends and distributions are payable to shareholders of record on the record
date.

Dividends and capital gains distributions paid for each of The JPM Institu-
tional Funds are automatically reinvested in additional shares of the same Fund
unless the shareholder has elected to have them paid in cash. Dividends and
distributions to be paid in cash are credited to the shareholder's account at
Morgan or at his Eligible Institution or, in the case of certain Morgan custom-
ers, are mailed by check in accordance with the customer's instructions. The
JPM Institutional Funds reserve the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.

NET ASSET VALUE

Net asset value per share for each Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in its cor-
responding Portfolio and other assets) the amount of its liabilities and divid-
ing the remainder by the number of its outstanding shares, rounded to the near-
est cent. Expenses, including the fees payable to Morgan, are accrued daily.
Each of the Portfolios for The JPM Institutional Money Market, The JPM Institu-
tional Tax Exempt Money Market Fund and The JPM Institutional Treasury Money
Market Fund value all portfolio securities by the amortized cost method. This
method attempts to maintain for each of these Funds a constant net asset value
per share of $1.00. No assurances can be given that this goal can be attained.
See Net Asset Value in the Statement of Additional Information for more infor-
mation on valuation of portfolio securities for these Portfolios.

Each of The JPM Institutional Funds computes its net asset value once daily on
Monday through Friday, except that the net asset value is not computed for a
Fund on a day in which no orders to purchase or redeem Fund shares have been
received or on the holidays listed under Net Asset Value in the Statement of
Additional Information. The JPM Institutional Funds compute net asset value as
follows, New York time: The JPM Institutional Money Market Fund, The JPM Insti-
tutional Tax Exempt Money Market Fund, The JPM Institutional Treasury Money
Market Fund, The JPM Institutional Tax Exempt Bond Fund, The JPM Institutional
International Equity Fund and The JPM Institutional Emerging Markets Equity
Fund, 4:00 P.M.; The JPM Institutional Bond Fund, The JPM Institutional Short
Term Bond Fund, The JPM Institutional International Bond Fund, The JPM Institu-
tional Selected U.S. Equity Fund, The JPM Institutional U.S. Small Company Fund
and The JPM Institutional Diversified Fund, 4:15 P.M.

ORGANIZATION

The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust." The Declaration of Trust permits the Trustees to issue an

41
<PAGE>

unlimited number of full and fractional shares ($0.001 par value) of one or
more series. To date, shares of the twelve series described in this Prospectus
have been authorized and are available for sale to the public. Shares of one
additional series, The JPM Institutional New York Total Return Bond Fund, have
also been authorized and are available for sale to the public. The JPM Insti-
tutional New York Total Return Bond Fund is described in, and offered pursuant
to, a separate prospectus. No series of shares has any preference over any
other series of shares. See Massachusetts Trust in the Statement of Additional
Information.

The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of any Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of any
Fund, but that the Trust property only shall be liable.

Shareholders of each Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non-assessable by each Fund. The Trust does not intend to hold meetings of
shareholders annually. As of June 13, 1995, the following technically met the
definition of a control person of the indicated JPM Institutional Fund: The
JPM Institutional Short Term Bond Fund--Alcatel Network Systems, Inc. Retire-
ment Savings Plan; and The JPM Institutional International Bond Fund--J.P.
Morgan as Agent for General Motors Savings Plan. The Trustees may call meet-
ings of shareholders for action by shareholder vote as may be required by ei-
ther the 1940 Act or the Declaration of Trust. The Trustees will call a meet-
ing of shareholders to vote on removal of a Trustee upon the written request
of the record holders of ten percent of Trust shares and will assist share-
holders in communicating with each other as prescribed in Section 16(c) of the
1940 Act. For further organization information, including certain shareholder
rights, see Description of Shares in the Statement of Additional Information.

Each Portfolio, in which all the assets of each corresponding Fund are invest-
ed, is organized as a trust under the laws of the State of New York. Each
Portfolio's Declaration of Trust provides that the Fund and other entities in-
vesting in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of a Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that nei-
ther a Fund nor its shareholders will be adversely affected by reason of a
Fund's investing in a Portfolio.

TAXES

The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to fed-
eral taxes and with respect to the applicability of state or local taxes. See
Taxes in the Statement of Additional Information. Annual statements as to the
current federal tax status of distributions, if applicable, are mailed to
shareholders after the end of the taxable year for the Funds.

The Trust intends to qualify each of the Funds as a separate regulated invest-
ment company under Subchapter M of the Code. As a regulated investment compa-
ny, each Fund should not be subject to federal income taxes or federal excise
taxes if all of its net investment income and capital gains less any available
capital loss carryforwards are distributed to shareholders within allowable
time limits. Each Portfolio intends to qualify as an association treated as a
partnership for federal income tax purposes. As such, each Portfolio should
not be subject to tax. Each Fund's status as a regulated investment company is
dependent on, among other things, the corresponding Portfolio's continued
qualification as a partnership for federal income tax purposes.

42
<PAGE>

If a correct and certified taxpayer identification number is not on file, a
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to noncorporate shareholders.

THE JPM INSTITUTIONAL MONEY MARKET FUND; THE JPM INSTITUTIONAL TREASURY MONEY
MARKET FUND; THE JPM INSTITUTIONAL SHORT TERM BOND FUND; THE JPM INSTITUTIONAL
BOND FUND; THE JPM INSTITUTIONAL INTERNATIONAL BOND FUND; THE JPM INSTITU-
TIONAL SELECTED U.S. EQUITY FUND; THE JPM INSTITUTIONAL U.S. SMALL COMPANY
FUND; THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND; THE JPM INSTITUTIONAL
EMERGING MARKETS EQUITY FUND AND THE JPM INSTITUTIONAL DIVERSIFIED FUND. Dis-
tributions of net investment income and realized net short-term capital gains
in excess of net long-term capital losses are taxable as ordinary income to
shareholders of The JPM Institutional Money Market Fund, The JPM Institutional
Treasury Money Market Fund, The JPM Institutional Short Term Bond Fund, The
JPM Institutional Bond Fund, The JPM Institutional International Bond Fund,
The JPM Institutional Selected U.S. Equity Fund, The JPM Institutional U.S.
Small Company Fund, The JPM Institutional International Equity Fund, The JPM
Institutional Emerging Markets Equity Fund and The JPM Institutional Diversi-
fied Fund, whether such distributions are taken in cash or reinvested in addi-
tional shares. Distributions of this type to corporate shareholders of The JPM
Institutional Money Market Fund, The JPM Institutional Treasury Money Market
Fund, The JPM Institutional Short Term Bond Fund, The JPM Institutional Bond
Fund and The JPM Institutional International Bond Fund are not eligible for
the dividends-received deduction; however, The JPM Institutional Selected U.S.
Equity, The JPM Institutional U.S. Small Company and The JPM Institutional Di-
versified Funds expect a portion of these distributions to corporate share-
holders to be eligible for the dividends-received deduction. Distributions of
this type to corporate shareholders of The JPM Institutional International Eq-
uity Fund and The JPM Institutional Emerging Markets Equity Fund will not
qualify for the dividends-received deduction because the income of these Funds
will not consist of dividends paid by United States corporations.

Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of each of these Funds as long-term
capital gains regardless of how long a shareholder has held shares in the Fund
and regardless of whether taken in cash or reinvested in additional shares.
Long-term capital gains distributions to corporate shareholders are not eligi-
ble for the dividends-received deduction. The JPM Institutional Money Market
Fund and The JPM Institutional Treasury Money Market Fund do not expect to re-
alize long-term capital gains and thus do not contemplate paying distributions
taxable to shareholders who are subject to tax as long-term capital gains.

In the case of The JPM Institutional Short Term Bond Fund, The JPM Institu-
tional Bond Fund and The JPM Institutional International Bond Fund any distri-
bution of capital gains will have the effect of reducing the net asset value
of Fund shares held by a shareholder by the same amount as the distribution.
In the case of The JPM Institutional Selected U.S. Equity Fund, The JPM Insti-
tutional U.S. Small Company Fund, The JPM Institutional International Equity
Fund, The JPM Institutional Emerging Markets Equity Fund and The JPM Institu-
tional Diversified Fund any distribution of net investment income or capital
gains will have the same effect. If the net asset value of the shares is re-
duced below a shareholder's cost as a result of such a distribution, the dis-
tribution, although constituting a return of capital to the shareholder, will
be taxable as described above.

Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of
any long-term capital gain distributions received by the shareholder with re-
spect to such shares.

In the case of The JPM Institutional Treasury Money Market Fund, shareholders
should consult their tax advisors to assess the consequences of investing in
the Fund under state and local laws. Interest income derived from Treasury Se-
curities is generally not subject to state and local personal income taxation.
Most states allow a pass-through to the individual

43
<PAGE>

shareholders of the Fund of the tax-exempt character of this income, subject to
certain restrictions, for purposes of those states' personal income taxes.

The JPM Institutional International Equity Fund, The JPM Institutional Interna-
tional Bond Fund and The JPM Institutional Emerging Markets Equity Fund are
subject to foreign withholding taxes with respect to income received from
sources within certain foreign countries. So long as more than 50% of the value
of the Fund's total assets at the close of any taxable year consists of stock
or securities of foreign corporations, the Fund may elect to treat any such
foreign income taxes paid by it as paid directly by its shareholders. The Fund
will make such an election only if it deems it to be in the best interests of
its shareholders and will notify shareholders in writing each year if it makes
the election and of the amount of foreign income taxes, if any, to be treated
as paid by the shareholders. If the Fund makes the election, each shareholder
will be required to include in income his proportionate share of the amount of
foreign income taxes paid by the Fund and will be entitled to claim either a
credit (which is subject to certain limitations) or, if the shareholder item-
izes deductions, a deduction for his share of the foreign income taxes in com-
puting his federal income tax liability. (No deduction will be permitted to in-
dividuals in computing their alternative minimum tax liability.)

In the case of the JPM Institutional International Bond Fund, distributions of
foreign exchange gains resulting from certain transactions, including the sale
of foreign currencies and bonds, are taxed as ordinary income. Consequently,
the Fund's dividends may be more or less than the interest earned by the Fund.
If these transactions result in reducing the Fund's net income, a portion of
the dividends may be classified as a return of capital (which lowers a share-
holder's tax basis).

THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET AND TAX EXEMPT BOND FUNDS. The
JPM Institutional Tax Exempt Money Market Fund and The JPM Institutional Tax
Exempt Bond Fund each intends to qualify to pay exempt-interest dividends to
its shareholders by having, at the close of each quarter of its taxable year,
at least 50% of the value of its total assets consist of tax exempt securities.
An exempt-interest dividend is that part of dividend distributions made by
these Funds which consists of interest received by the Funds on tax exempt se-
curities. Exempt-interest dividends received from these Funds will be treated
for federal income tax purposes as tax exempt interest income. In view of the
Funds' investment policies, it is expected that a substantial portion of the
Funds' dividends will be exempt-interest dividends, although the Funds may from
time to time realize and distribute net short-term capital gains and may invest
limited amounts in taxable securities under certain circumstances. See Taxable
Investments for The JPM Institutional Tax Exempt Funds.

Interest on certain tax exempt municipal obligations issued after August 7,
1986 is a preference item for purposes of the alternative minimum tax applica-
ble to individuals and corporations. Under tax regulations to be issued, the
portion of an exempt-interest dividend of a regulated investment company that
is allocable to these obligations will be treated as a preference item for pur-
poses of the alternative minimum tax. The JPM Institutional Tax Exempt Money
Market Fund and The JPM Institutional Tax Exempt Bond Fund have limited their
investments to those securities the interest on which will not be treated as
preference items for purposes of the alternative minimum tax in the opinion of
bond counsel for the issuer. The JPM Institutional Tax Exempt Money Market Fund
and The JPM Institutional Tax Exempt Bond Fund currently have no intention of
investing in obligations subject to the alternative minimum tax under normal
market conditions.

Corporations should, however, be aware that interest on all municipal securi-
ties will be included in calculating (i) adjusted current earnings for purposes
of the alternative minimum tax applicable to them, (ii) the additional tax im-
posed on certain corporations by the Superfund Revenue Act of 1986, and (iii)
the foreign branch profits tax imposed on effec-tively connected earnings and
profits of United States branches of foreign corporations. Furthermore, special
tax provisions may apply to certain financial institutions and property and ca-
sualty insurance companies, and they should consult their tax advisors before
purchasing shares of these Funds.

44
<PAGE>

Interest on indebtedness incurred or continued by a shareholder (whether a
corporation or an individual) to purchase or carry shares of these Funds is
not deductible. The Treasury has been given authority to issue regulations
which would disallow the interest deduction if incurred to purchase or carry
shares of these Funds owned by the taxpayer's spouse, minor child or entity
controlled by the taxpayer. Entities or persons who are "substantial users"
(or related persons) of facilities financed by tax exempt bonds should consult
their tax advisors before purchasing shares of these Funds.

Distributions of taxable net investment income, realized net short-term capi-
tal gains in excess of net long-term capital losses, and net long-term capital
gains in excess of net short-term capital losses by these Funds, as well as
gains or losses realized on the redemption or exchange of shares of these
Funds, are generally treated as described above under the heading Taxes, The
JPM Institutional Money Market Fund, The JPM Institutional Treasury Money Mar-
ket Fund, The JPM Institutional Short Term Bond Fund, The JPM Institutional
Bond Fund, The JPM Institutional International Bond Fund, The JPM Institu-
tional Selected U.S. Equity Fund, The JPM Institutional U.S. Small Company
Fund, The JPM Institutional International Equity Fund, The JPM Institutional
Emerging Markets Equity Fund and The JPM Institutional Diversified Fund. Any
loss realized by a shareholder, however, upon the redemption or exchange of
shares in these Funds held six months or less will be disallowed to the extent
of any exempt-interest dividends received by the shareholder with respect to
these shares. See Taxes in the Statement of Additional Information. In addi-
tion, in the case of The JPM Institutional Tax Exempt Bond Fund, any distribu-
tion of capital gains will have the effect of reducing the net asset value of
Fund shares as described under the same heading.

ADDITIONAL INFORMATION

Each of The JPM Institutional Funds sends to its shareholders annual and semi-
annual reports. The financial statements appearing in annual reports are au-
dited by independent accountants. Shareholders also will be sent confirmations
of each purchase and redemption and monthly statements, reflecting all account
activity, including dividends and any distributions reinvested in additional
shares or credited as cash.

All shareholders are given the privilege to initiate transactions automati-
cally by telephone upon opening an account. However, an investor should be
aware that a transaction authorized by telephone and reasonably believed to be
genuine by the Fund, Morgan, his Eligible Institution or the Distributor may
subject the investor to risk of loss if such instruction is subsequently found
not to be genuine. Each Fund will employ reasonable procedures, including re-
quiring investors to give their Personal Identification Number and tape re-
cording of telephone instructions, to confirm that instructions communicated
from investors by telephone are genuine; if it does not, it, the Services
Agent or a shareholder's Eligible Institution may be liable for any losses due
to unauthorized or fraudulent instructions.

The JPM Institutional Funds may make historical performance information avail-
able and may compare their performance to other investments or relevant index-
es, including data from Lipper Analytical Services, Inc., Micropal Inc., Morn-
ingstar, Inc., Ibbotson Associates, Standard & Poor's 500 Composite Stock
Price Index, the Dow Jones Industrial Average, the Frank Russell Indexes and
other industry publications. The JPM Institutional International Bond Fund may
also compare its performance to the Salomon Brothers Non-U.S. World Government
Bond Index. The JPM Institutional International Equity Fund may also compare
its performance to the EAFE Index and the Financial Times World Stock Index.
The JPM Institutional Money Market, Treasury and Tax Exempt Money Market Funds
may compare their performance to Donoghue's money market fund averages. The
JPM Institutional Money Market Fund, The JPM Institutional Tax Exempt Money
Market Fund, The JPM Institutional Treasury Money Market Fund, The JPM Insti-
tutional Short Term Bond Fund, The JPM Institutional Bond Fund, The JPM Insti-
tutional Tax Exempt Bond Fund and The JPM Institutional International Bond
Fund may advertise "yield"; The JPM Institutional Money Market Fund, The JPM
Institutional Tax Exempt Money Market Fund and The JPM Institutional Treasury
Money Market Fund may also advertise "effective yield"; and The JPM Institu-
tional Tax Exempt Money Market Fund and The JPM Institutional Tax Exempt Bond
Fund may also advertise "tax equivalent yield."

45
<PAGE>

In the case of The JPM Institutional Money Market Fund, The JPM Institutional
Tax Exempt Money Market Fund and The JPM Institutional Treasury Money Market
Fund, the yield refers to the net income generated by an investment in each of
these Funds over a stated seven-day period. This income is then annualized--
i.e., the amount of income generated by the investment during that week is as-
sumed to be generated each week over a 52-week period and is shown as a per-
centage of the investment. In the case of The JPM Institutional Short Term Bond
Fund, The JPM Institutional Bond Fund, The JPM Institutional Tax Exempt Bond
Fund, The JPM Institutional International Bond Fund and The JPM Institutional
Selected U.S. Equity Fund, the yield refers to the net income generated by an
investment in each of these Funds over a stated 30-day period. This income is
then annualized--i.e., the amount of income generated by the investment during
the 30-day period is assumed to be generated each 30-day period for twelve pe-
riods and is shown as a percentage of the investment. The income earned on the
investment is also assumed to be reinvested at the end of the sixth 30-day pe-
riod. In the case of The JPM Institutional Money Market Fund, The JPM Institu-
tional Tax Exempt Money Market Fund and The JPM Institutional Treasury Money
Market Fund, the effective yield is calculated similarly to the yield for each
of these Funds, but, when annualized, the income earned by an investment in
each of the Funds is assumed to be reinvested; the effective yield will be
slightly higher than the yield because of the compounding effect of this as-
sumed reinvestment. In the case of The JPM Institutional Tax Exempt Money Mar-
ket Fund and The JPM Institutional Tax Exempt Bond Fund, the tax equivalent
yield is calculated similarly to the yield for each of these Funds, except that
the yield is increased using a stated income tax rate to demonstrate the tax-
able yield necessary to produce an after-tax equivalent to each of these Funds.

Each of The JPM Institutional Funds may advertise "total return" and non-stan-
dardized total return data. The total return shows what an investment in each
of these Funds would have earned over a specified period of time (one, five or
ten years or since commencement of operations, if less) assuming that all dis-
tributions and dividends by the Fund were reinvested on the reinvestment dates
during the period and less all recurring fees. These methods of calculating
yield and total return are required by regulations of the Securities and Ex-
change Commission. Yield and total return data similarly calculated, unless
otherwise indicated, over other specified periods of time may also be used. See
Performance Data in the Statement of Additional Information. All performance
figures are based on historical earnings and are not intended to indicate fu-
ture performance. Performance information may be obtained by calling The JPM
Institutional Funds' Distributor at (800) 847-9487.

46
<PAGE>

APPENDIX

As described in the Prospectus, certain Portfolios may engage in futures and
options transactions.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, a Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.

The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).

The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price in-
creases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.

SELLING (WRITING) PUT AND CALL OPTIONS. When a Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its po-
sition in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.

If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the pre-
mium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium re-
ceived for writing the option should offset a portion of the decline.

Writing a call option obligates a Portfolio to sell or deliver the option's un-
derlying instrument in return for the strike price upon exercise of the option.
The characteristics of writing call options are similar to those of writing put
options, except that writing calls generally is a profitable strategy if prices
remain the same or fall. Through receipt of the option premium a call writer
offsets part of the effect of a price decline. At the same time, because a call
writer must be prepared to deliver the underlying instrument in return for the
strike price, even if its current value is greater, a call writer gives up some
ability to participate in security price increases.

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<PAGE>

The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.

OPTIONS ON INDEXES. Each Portfolio permitted to enter into options transactions
may purchase put and call options on any securities index based on securities
in which the Portfolio may invest. The Portfolios for the JPM Institutional
Emerging Markets Equity and Diversified Funds may also sell (write) put and
call options on such indexes. Options on securities indexes are similar to op-
tions on securities, except that the exercise of securities index options is
settled by cash payment and does not involve the actual purchase or sale of se-
curities. In addition, these options are designed to reflect price fluctuations
in a group of securities or segment of the securities market rather than price
fluctuations in a single security. A Portfolio, in purchasing or selling index
options, is subject to the risk that the value of its portfolio securities may
not change as much as an index because the Portfolio's investments generally
will not match the composition of an index.

For a number of reasons, a liquid market may not exist and thus a Portfolio may
not be able to close out an option position that it has previously entered in-
to. When a Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and a Portfolio may incur additional
losses if the counterparty is unable to perform.

FUTURES CONTRACTS

When a Portfolio purchases a futures contract, it agrees to purchase a speci-
fied quantity of an underlying instrument at a specified future date or to make
a cash payment based on the value of a securities index. When a Portfolio sells
a futures contract, it agrees to sell a specified quantity of the underlying
instrument at a specified future date or to receive a cash payment based on the
value of a securities index. The price at which the purchase and sale will take
place is fixed when the Portfolio enters into the contract. Futures can be held
until their delivery dates or the position can be (and normally is) closed out
before then. There is no assurance, however, that a liquid market will exist
when the Portfolio wishes to close out a particular position.

When a Portfolio purchases a futures contract, the value of the futures con-
tract tends to increase and decrease in tandem with the value of its underlying
instrument. Therefore, purchasing futures contracts will tend to increase a
Portfolio's exposure to positive and negative price fluctuations in the under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. When a Portfolio sells a futures contract, by contrast, the value of its
futures position will tend to move in a direction contrary to the value of the
underlying instrument. Selling futures contracts, therefore, will tend to off-
set both positive and negative market price changes, much as if the underlying
instrument had been sold.

The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when a Portfolio buys or sells a futures contract it will be re-
quired to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. A Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for a Portfolio to close out its
futures positions. Until it closes out a futures position, a Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolios'
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of a Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.

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<PAGE>

Each Portfolio will segregate liquid, high quality assets in connection with
its use of options and futures contracts to the extent required by the staff of
the Securities and Exchange Commission. Securities held in a segregated account
cannot be sold while the futures contract or option is outstanding, unless they
are replaced with other suitable assets. As a result, there is a possibility
that segregation of a large percentage of a Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.

For further information about the Portfolios' use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.

A-3
<PAGE>

---------------------------------------

No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in this
Prospectus, in connection with the offer contained in this Prospectus and, if
given or made, such other information or representations must not be relied
upon as having been authorized by the Trust or the Distributor. This Prospectus
does not constitute an offer by the Trust or by the Distributor to sell or a
solicitation of any offer to buy any of the securities offered hereby in any
jurisdiction to any person to whom it is unlawful for the Trust or the
Distributor to make such offer in such jurisdiction.

The
JPM
Institutional
Funds

The JPM Institutional Money Market Fund
The JPM Institutional Tax Exempt Money Market Fund
The JPM Institutional Treasury Money Market Fund
The JPM Institutional Short Term Bond Fund
The JPM Institutional Bond Fund
The JPM Institutional Tax Exempt Bond Fund
The JPM Institutional International Bond Fund
The JPM Institutional Selected U.S. Equity Fund
The JPM Institutional U.S. Small Company Fund
The JPM Institutional International Equity Fund
The JPM Institutional Emerging Markets Equity Fund
The JPM Institutional Diversified Fund

PROSPECTUS
June 21, 1995