As filed with the Securities and Exchange Commission on September 26, 1997.
Registration Nos. 33-54642 and 811-07342
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 38
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 39
THE JPM INSTITUTIONAL FUNDS
(Exact Name of Registrant as Specified in Charter)
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)
Registrant's Telephone Number, including Area Code:
(617) 557-0700
John E. Pelletier, c/o Funds Distributor, Inc.
60 State Street, Suite 1300, Boston, Massachusetts 02109
(Name and Address of Agent for Service)
Copy to: Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
It is proposed that this filing will become effective (check appropriate box):
[X] Immediately upon filing pursuant to paragraph (b)
[ ] on (date) pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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<PAGE>
The Registrant has previously registered an indefinite number of its shares
under the Securities Act of 1933, as amended, pursuant to Rule 24F-2 under the
Investment Company Act of 1940, as amended. The Registrant has filed Rule 24f-2
notices with respect to its series as follows: Tax Exempt Money Market and Tax
Exempt Bond Funds (for their fiscal years ended August 31, 1996) on October 24,
1996; International Bond Fund (for its fiscal year ended September 30, 1996) on
November 27, 1996; Federal Money Market, Short Term Bond, Bond, Emerging Markets
Equity and International Equity Funds (for their fiscal years ended October 31,
1996) on December 20, 1996; Prime Money Market Fund (for its fiscal year ended
November 30, 1996) on January 17, 1997; European Equity, Japan Equity and Asia
Growth Funds (for their fiscal years ended December 31, 1996) on February 27,
1997; New York Total Return Bond Fund (for its fiscal year ended March 31, 1997)
on May 21, 1997; U.S. Equity, Disciplined Equity and U.S. Small Company Funds
(for their fiscal years ended May 31, 1997) on July 22, 1997; and Diversified
Fund (for its fiscal year ended June 30, 1997) on August 28, 1997. The
Registrant expects to file Rule 24f-2 notices with respect to its Global
Strategic Income, Treasury Money Market, Service Treasury Money Market and
Service Federal Money Market Funds (for their fiscal years ending October 31,
1997) on or before December 30, 1997; International Opportunities and Service
Prime Money Market Funds (for their fiscal years ending November 30, 1997) on or
before January 29, 1998; Service Tax Exempt Money Market Fund (for its fiscal
year ending August 31, 1998) on or before October 30, 1998.
The Prime Money Market Portfolio, The Tax Exempt Money Market Portfolio, The
Federal Money Market Portfolio, The Short Term Bond Portfolio, The U.S. Fixed
Income Portfolio, The Tax Exempt Bond Portfolio, The U.S. Equity Portfolio, The
U.S. Small Company Portfolio, The International Equity Portfolio, The
Diversified Portfolio, The Emerging Markets Equity Portfolio, The New York Total
Return Bond Portfolio, The Non-U.S. Fixed Income Portfolio, The Series Portfolio
and Series Portfolio II have also executed this Registration Statement.
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<PAGE>
THE JPM INSTITUTIONAL FUNDS
(ALL FUNDS EXCEPT DIVERSIFIED, DISCIPLINED EQUITY, INTERNATIONAL
OPPORTUNITIES, GLOBAL STRATEGIC INCOME, TREASURY MONEY MARKET
AND SERVICE MONEY MARKET FUNDS)
CROSS-REFERENCE SHEET
(As Required by Rule 495)
PART A ITEM NUMBER: Prospectus Headings.
1. COVER PAGE: Cover Page.
2. SYNOPSIS: Investors for Whom the Funds are Designed.
3. CONDENSED FINANCIAL INFORMATION: Financial Highlights.
4. GENERAL DESCRIPTION OF REGISTRANT: Cover Page; Investors for Whom the
Funds are Designed; Investment Objectives and Policies; Additional
Investment Information; Investment Restrictions; Special Information
Concerning Investment Structure; Organization; Appendix.
5. MANAGEMENT OF THE FUND: Management of the Trust and the Portfolios;
Shareholder Servicing; Additional Information.
5A. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not Applicable.
6. CAPITAL STOCK AND OTHER SECURITIES: Special Information Concerning
Investment Structure; Shareholder Servicing; Net Asset Value; Purchase
of Shares; Taxes; Dividends and Distributions; Organization.
7. PURCHASE OF SECURITIES BEING OFFERED: Purchase of Shares; Exchange of
Shares; Investors for Whom the Funds are Designed; Dividends and
Distributions; Net Asset Value.
8. REDEMPTION OR REPURCHASE: Redemption of Shares; Exchange of Shares; Net
Asset Value.
9. PENDING LEGAL PROCEEDINGS: Not Applicable.
PART B ITEM NUMBER: Statement of Additional Information Headings.
10. COVER PAGE: Cover Page.
11. TABLE OF CONTENTS: Table of Contents.
12. GENERAL INFORMATION AND HISTORY: General.
13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies;
Additional Investments; Investment Restrictions; Quality and
Diversification Requirements; Appendix A.
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<PAGE>
14. MANAGEMENT OF THE FUND: Trustees and Officers.
15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of
Shares.
16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Distributor;
Co-Administrator; Services Agent; Custodian and Transfer Agent;
Shareholder Servicing; Independent Accountants; Expenses.
17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.
18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.
19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares;
Dividends and Distributions.
20. TAX STATUS: Taxes.
21. UNDERWRITERS: Distributor.
22. CALCULATION OF PERFORMANCE DATA: Performance Data.
23. FINANCIAL STATEMENTS: Financial Statements.
PART C. Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.
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<PAGE>
EXPLANATORY NOTE
This post-effective amendment No. 38 to the Registrant's registration
statement on Form N-1A (File No. 33-54642) is being filed to update the
Registrant's disclosure in the Prospectuses and Statement of Additional
Information relating to the Registrant's U.S. Equity, U.S. Small Company and
Disciplined Equity Funds with financial information for the fiscal year ended
May 31, 1997. As a result, the Amendment does not affect any of the Registrant's
currently effective prospectuses for each other series of shares of the
Registrant.
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<PAGE>
PROSPECTUS
The JPM Institutional U.S. Equity Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) 766-7722
The JPM Institutional U.S. Equity Fund (the "Fund") seeks to provide a high
total return from a portfolio of selected equity securities. It is designed for
investors who want an actively managed portfolio of selected equity securities
that seeks to outperform the S&P 500 Index.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM
Institutional Funds, an open-end management investment company organized as a
Massachusetts business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE U.S. EQUITY PORTFOLIO (THE "PORTFOLIO"), A
CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO
THROUGH A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE SPECIAL
INFORMATION CONCERNING INVESTMENT STRUCTURE ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated September 26, 1997 (as supplemented from time to time). This information
is incorporated herein by reference and is available without charge upon
request from the Fund's Distributor, Funds Distributor, Inc., 60 State Street,
Suite 1300, Boston, Massachusetts 02109, Attention: The JPM Institutional
Funds, or by calling (800) 221-7930.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment
Structure................................................................. 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 5
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Servicing...................................................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 14
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... A-1
</TABLE>
<PAGE>
The JPM Institutional U.S. Equity Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who wish to participate primarily in the
U.S. equity markets. The Fund seeks to achieve its investment objective by in-
vesting all of its investable assets in The U.S. Equity Portfolio, a diversi-
fied open-end management investment company having the same investment objec-
tive as the Fund. Since the investment characteristics and experience of the
Fund will correspond directly with those of the Portfolio, the discussion in
this Prospectus focuses on the investments and investment policies of the
Portfolio. The net asset value of shares in the Fund fluctuates with changes
in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. For further information about these in-
vestments and investment techniques, see Investment Objective and Policies be-
low.
The Fund requires a minimum initial investment of $3 million. Certain omnibus
accounts require a minimum initial investment of $6 million. The minimum sub-
sequent investment is $25,000. See Purchase of Shares. If a shareholder re-
duces his or her investment in the Fund to less than the applicable minimum
investment amount for more than 30 days, the investment may be be subject to
mandatory redemption. See Redemption of Shares--Mandatory Redemption by the
Fund.
This Prospectus describes the financial history, investment objective and pol-
icies, management and operation of the Fund to enable investors to decide if
the Fund suits their needs. The Fund operates in a two-tier master-feeder in-
vestment fund structure. The Trustees believe that the Fund may achieve econo-
mies of scale over time by utilizing this investment structure.
The following table illustrates that investors in the Fund incur no share-
holder transaction expenses; their investment in the Fund is subject only to
the operating expenses set forth below for the Fund and the Portfolio, as a
percentage of average net assets of the Fund. The Trustees of the Trust be-
lieve that the aggregate per share expenses of the Fund and the Portfolio will
be approximately equal to and may be less than the expenses that the Fund
would incur if it retained the services of an investment adviser and invested
its assets directly in portfolio securities. Fund and Portfolio expenses are
discussed below under the headings Management of the Trust and the Portfolio
and Shareholder Servicing.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases*........................................... None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
* Certain Eligible Institutions (defined below) may impose fees in connection
with the purchase of the Fund's shares through such institutions. See Eligible
Institutions.
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.40%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.20%
-----
Total Operating Expenses (after expense reimbursement).................... 0.60%
=====
</TABLE>
* Fees and expenses are expressed as a percentage of the average net assets of
the Fund after expense reimbursements for the fiscal year ended May 31, 1997
and through September 30, 1998. See Management of the Trust and the Portfolio.
Without reimbursements, Other Expenses and Total Operating Expenses for the
Fund would be equal to 0.25% and 0.65%, respectively, for the most recently
completed fiscal year.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................................... $ 6
3 Years..................................................................... $19
5 Years..................................................................... $33
10 Years.................................................................... $75
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund
bear. The fees and expenses included in Other Expenses are the fees paid to
Morgan under the Administrative Services and the Shareholder Servicing Agree-
ments, organization expenses, the fees paid to Pierpont Group, Inc. under the
Fund Services Agreements, the fees paid to Funds Distributor, Inc. under the
Co-Administration Agreements, the fees paid to State Street Bank and Trust
Company as custodian and transfer agent, and other usual and customary ex-
penses of the Fund and the Portfolio. For a more detailed description of con-
tractual fee arrangements and of the fees and expenses included in Other Ex-
penses, see Management of the Trust and the Portfolio and Shareholder Servic-
ing. In connection with the above example, please note that $1,000 is less
than the Fund's minimum investment requirement and that there are no redemp-
tion or exchange fees of any kind. See Purchase of Shares and Redemption of
Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE
PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE;
ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
should be read in conjunction with the financial statements and related notes
which are contained in the Fund's annual report and are incorporated by refer-
ence into the Statement of Additional Information. The following selected data
have been audited by independent accountants. The Fund's annual report in-
cludes a discussion of those factors, strategies and techniques that materi-
ally affected the Fund's performance during the period of the report, as well
as certain related information. A copy of the Fund's annual report will be
made available without charge upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR ENDED JULY 19, 1993
MAY 31, (COMMENCEMENT OF
---------------------------- OPERATIONS) TO
1997 1996 1995 MAY 31, 1994
-------- -------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period.................. $ 14.00 $12.10 $10.92 $10.00
-------- -------- -------- -------
Income From Investment
Operations:
Net Investment Income..... 0.17 0.27 0.18 0.08
Net Realized and
Unrealized Gain on
Investment............... 3.02 2.66 1.42 0.88
-------- -------- -------- -------
Total From Investment
Operations................. 3.19 2.93 1.60 0.96
-------- -------- -------- -------
Less Distributions to
Shareholders From:
Net Investment Income..... (0.25) (0.20) (0.14) (0.04)
Net Realized Gain......... (1.28) (0.83) (0.28) --
-------- -------- -------- -------
Total Distributions to
Shareholders............... (1.53) (1.03) (0.42) (0.04)
-------- -------- -------- -------
Net Asset Value, End of
Period..................... $ 15.66 $14.00 $12.10 $10.92
======== ======== ======== =======
Total Return................ 25.21% 25.43% 15.40% 9.61%(a)
Ratios and Supplemental
Data:
Net Assets (in thousands). $329,776 $221,368 $172,497 $47,473
Ratios to Average Net
Assets:
Expenses................ 0.60% 0.60% 0.60% 0.60%(b)
Net Investment Income... 1.33% 2.08% 2.07% 1.74%(b)
Decrease Reflected in
Expense Ratio due to
Expense Reimbursement.. 0.05% 0.02% 0.11% 0.43%(b)
</TABLE>
- -------
(a)Not annualized.
(b)Annualized.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the
same investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will bear a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their
3
<PAGE>
own fund using a different pricing structure than the Fund. Such different
pricing structures may result in differences in returns experienced by invest-
ors in other funds that invest in the Portfolio. Such differences in returns
are not uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from Morgan
at (800) 766-7722.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution) from
the Portfolio which may or may not be readily marketable. The distribution in
kind may result in the Fund having a less diversified portfolio of investments
or adversely affect the Fund's liquidity, and the Fund could incur brokerage,
tax or other charges in converting the securities to cash. Notwithstanding the
above, there are other means for meeting shareholder redemption requests, such
as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
the Portfolio. For more information about changing the investment objective,
policies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their effort to achieve this objective.
Additional information about the investment policies of the Fund and the Port-
folio appears in the Statement of Additional Information under Investment Ob-
jectives and Policies. There can be no assurance that the investment objective
of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a port-
folio of selected equity securities. Total return will consist of realized and
unrealized capital gains and losses plus income. The Fund attempts to achieve
its investment objective by investing all of its investable assets in The U.S.
Equity Portfolio, a diversified open-end
4
<PAGE>
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 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.
The portfolio turnover rate for the Portfolio for the fiscal year ended May 31,
1997 was 99%. The average brokerage commission rate per share paid by the Port-
folio for the fiscal year ended May 31, 1997 was $0.05.
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 primary equity in-
vestments are the common stocks of large and medium-sized U.S. corporations
and, to a limited extent, similar securities of foreign corporations. The com-
mon 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 part-
nership interests. These equity investments may or may not pay dividends and
may or may not carry voting rights. The Portfolio invests in securities listed
on a securities exchange or traded in an over-the-counter (OTC) market, and may
invest in certain restricted or unlisted securities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
corporations included in the S&P 500 Index or listed on a national securities
exchange. However, the Portfolio does not expect to invest more than 5% of its
assets at the time of purchase in securities of foreign issuers. For further
information on foreign investments and foreign currency exchange transactions,
see 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.
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock. Convert-
ible securities entitle the holder to exchange the securities for a specified
number of shares of common stock, usually of the same company, at specified
prices within a certain period of time.
5
<PAGE>
COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price fluctu-
ations. As a result, warrants may be more volatile investments than the under-
lying common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase secu-
rities 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 fluc-
tuation during this period and for fixed income investments no interest ac-
crues to the Portfolio until settlement. At the time of settlement, a when-is-
sued security may be valued at less than its purchase price. The Portfolio
maintains with the Custodian a separate account with a segregated portfolio of
securities in an amount at least equal to these commitments. When entering
into a when-issued or delayed delivery transaction, the Portfolio will rely on
the other party to consummate the transaction; if the other party fails to do
so, the Portfolio may be disadvantaged. It is the current policy of the Port-
folio not to enter into when-issued commitments exceeding in the aggregate 15%
of the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Portfolio's Trustees. In a repurchase agreement, the Portfolio
buys a security from a seller that has agreed to repurchase it at a mutually
agreed upon date and price, reflecting the interest rate effective for the
term of the agreement. The term of these agreements is usually from overnight
to one week. A repurchase agreement may be viewed as a fully collateralized
loan of money by the Portfolio to the seller. The Portfolio always receives
securities as collateral with a market value at least equal to the purchase
price plus accrued interest and this value is maintained during the term of
the agreement. If the seller defaults and the collateral value declines, the
Portfolio might incur a loss. If bankruptcy proceedings are commenced with re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3%
of the value of the Portfolio's net assets. The Portfolio may lend its securi-
ties if such loans are secured continuously by cash or equivalent collateral
or by a letter of credit in favor of the Portfolio at least equal at all times
to 100% of the market value of the securities loaned, plus accrued interest.
While such securities are on loan, the borrower will pay the Portfolio any in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may pay reasonable finders' and
custodial fees in connection with a loan. In addition, the Portfolio will con-
sider all facts and circumstances, including the creditworthiness of the bor-
rowing financial institution, and the Portfolio will not make any loans in ex-
cess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase agreement transaction agreement transactions. See Repurchase
Agreements above. The Portfolio will not lend its securi-
6
<PAGE>
ties to any officer, Trustee, Director, employee or other affiliate of the
Portfolio, the Advisor or the Distributor, unless otherwise permitted by ap-
plicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into re-
verse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date
and price, reflecting the interest rate effective for the term of the agree-
ment. For purposes of the Investment Company Act of 1940 (the "1940 Act"), it
is considered a form of borrowing by the Portfolio and, therefore, is a form
of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objectives and Policies in the
Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment
risks from those affecting securities of U.S. domestic issuers. There may be
limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to 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 the Portfo-
lio by domestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing securities on foreign exchanges, purchasers normally pay fixed commissions
that are generally higher than the negotiated commissions charged in the
United States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
DEPOSITORY RECEIPTS. Depository receipts are typically issued by a U.S. or
foreign bank or trust company and evidence ownership of underlying securities
of a U.S. or foreign issuer. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying securities. As a
result, available information concerning the issuer may not be as current as
for sponsored depositary instruments, and their prices may be more volatile if
they were sponsored by the issuers of the underlying securities.
Since the Portfolio's investments in foreign securities involve foreign cur-
rencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange Trans-
actions.
7
<PAGE>
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These con-
tracts are derivative instruments, as their value derives from the spot ex-
change rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usu-
ally large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. Neither spot transactions nor forward foreign cur-
rency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio's securities or in foreign exchange rates, or prevent loss if the prices
of these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally traded in a foreign currency. To do this, the Portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts to sell a foreign currency in exchange for another foreign currency if
the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of fluc-
tuations in the value of the currency purchased vis a vis the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The projec-
tion of currency market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the Portfolio's net assets would be in illiquid investments.
Subject to this non-fundamental policy limitation, the Portfolio may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the Securities Act of
1933, as amended (the "1933 Act") and cannot be offered for public sale in the
United States without first being registered under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which it is val-
ued 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 secu-
rities will reflect any limitations on their liquidity.
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the 1933 Act. These securities may be de-
termined to be liquid in accordance with guidelines established by the Advisor
and approved by the Trustees. The Trustees will monitor the Advisor's imple-
mentation of these guidelines on a periodic basis.
8
<PAGE>
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of Ad-
ditional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective and long-term investment perspec-
tive. The Portfolio may make money market investments pending other investment
or settlement, for liquidity or in adverse market conditions. The money market
investments permitted for the Portfolio include obligations of the U.S. Govern-
ment and its agencies and instrumentalities, other debt securities, commercial
paper, bank obligations and repurchase agreements. For more detailed informa-
tion about these money market investments, see Investment Objectives and Poli-
cies in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S. govern-
ment securities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
The Portfolio may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of the Port-
folio's total assets, taken at cost at the time of borrowing, or purchase secu-
rities while borrowings exceed 5% of its total assets; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowings in amounts
up to 10% of the value of the Portfolio's net assets at the time of borrowing;
(ii) purchase securities or other obligations of issuers conducting their prin-
cipal business activity in the same industry if its investments in such indus-
try would exceed 25% of the value of the Portfolio's total assets, except this
limitation shall not apply to investments in U.S. Government securities; or
(iii) purchase securities of any issuer if, as a result of the purchase, more
than 5% of total Portfolio assets would be invested in securities of companies
with fewer than three years of operating history (including predecessors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions in the Statement of Additional Information.
9
<PAGE>
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the Port-
folio, the Trustees decide upon matters of general policy and review the ac-
tions of the Advisor and other service providers. The Trustees of the Trust and
of the Portfolio are identified 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; Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Former Senior Vice President, Capital
Cities/ABC, Inc. and 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, the Portfolio and
The JPM Pierpont Funds, up to and including creating a separate board of trust-
ees. See Trustees and Officers in the Statement of Additional Information for
more information about the Trustees and Officers of the Fund and the Portfolio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services to the Trust, the Portfolio and
certain other registered investment companies subject to similar agreements
with Pierpont Group, Inc. Pierpont Group, Inc. was organized in 1989 at the re-
quest of the Trustees of The Pierpont Family of Funds for the purpose of pro-
viding these services at cost to those funds. See Trustees and Officers in the
Statement of Additional Information. The principal offices of Pierpont Group,
Inc. are located at 461 Fifth Avenue, New York, New York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized un-
der the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with com-
bined assets under management of over $234 billion. Morgan provides investment
advice and portfolio management services to the Portfolio. Subject to the su-
pervision of the Portfolio's Trustees, Morgan makes the Portfolio's day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages the Portfolio's investments. See Investment Advisor in the
Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental re-
search, systematic stock selection and disciplined portfolio construction. Mor-
gan has managed portfolios of U.S. equity securities on behalf of its clients
for over forty years. The portfolio managers making investments in U.S. equity
securities work in conjunction with Morgan's domestic equity analysts, as well
as capital
10
<PAGE>
market, credit and economic research analysts, traders and administrative of-
ficers. The U.S. equity analysts each cover a different industry, monitoring a
universe of 700 predominantly large and medium-sized U.S. companies.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date
of each person's responsibility for the Portfolio and his business experience
for the past five years is indicated parenthetically): William B. Petersen,
Managing Director (since February, 1993, employed by Morgan since prior to
1992 as a portfolio manager of U.S. equity investments) and William M. Riegel,
Jr., Managing Director (since February, 1993, employed by Morgan since prior
to 1992 as a portfolio manager of U.S. equity investments).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.40% of the Portfolio's average daily net assets.
Under separate agreements, Morgan also provides administrative and related
services to the Fund and the Portfolio and shareholder services to sharehold-
ers of the Fund. See Administrative Services Agent and Shareholder Servicing
below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER
BANK.
CO-ADMINISTRATOR AND DISTRIBUTOR. Pursuant to Co-Administration Agreements
with the Trust and the Portfolio, Funds Distributor, Inc. ("FDI") serves as
the Co-Administrator for the Trust and the Portfolio. FDI (i) provides office
space, equipment and clerical personnel for maintaining the organization and
books and records of the Trust and the Portfolio; (ii) provides officers for
the Trust and the Portfolio; (iii) prepares and files documents required for
notification of state securities administrators; (iv) reviews and files mar-
keting and sales literature; (v) files Portfolio regulatory documents and
mails Portfolio communications to Trustees and investors; and (vi) maintains
related books and records. See Administrative Services Agent below.
For its services under the Co-Administration Agreements, each of the Fund and
the Portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust, the Portfolio and certain
other investment companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to Administrative Services Agreements
with the Trust and the Portfolio, Morgan provides certain administrative and
related services to the Fund and the Portfolio, including services related to
tax compliance, preparation of financial statements, calculation of perfor-
mance data, oversight of service providers and certain regulatory and Board of
Trustees matters.
Under the Administrative Services Agreements, each of the Fund and the Portfo-
lio has agreed to pay Morgan fees equal to its allocable share of an annual
complex-wide charge. This charge is calculated daily based on the aggregate
net assets of the Portfolio, the other portfolios in which series of the Trust
or The JPM Pierpont Funds invest and JPM Series Trust and in accordance with
the following annual schedule: 0.09% on the first $7 billion of their aggre-
gate average daily net assets and 0.04% of their aggregate average daily net
assets in excess of $7 billion, less the complex-wide fees payable to FDI.
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Fund's and the Portfolio's
custodian and fund accounting and transfer agent and the Fund's dividend dis-
bursing agent. State Street also keeps the books of account for the Fund and
the Portfolio.
EXPENSES. In addition to the fees payable to Morgan, FDI and Pierpont Group,
Inc. under the various agreements discussed under Trustees, Advisor, Co-Admin-
istrator, and Administrative Services Agent above and Shareholder Servicing
below, the Fund and the Portfolio are responsible for usual and customary ex-
penses associated with their respective operations. Such expenses include or-
ganization expenses, legal fees, accounting and audit expenses, insurance
costs, the com -
11
<PAGE>
pensation and expenses of the Trustees, registration fees under federal securi-
ties laws, and extraordinary expenses applicable to the Fund or the Portfolio.
For the Fund, such expenses also include transfer, registrar and dividend dis-
bursement costs, the expenses of printing and mailing reports, notices and
proxy statements to Fund shareholders, and filing fees under state securities
laws. For the Portfolio, such expenses also include registration fees under
foreign securities laws, custodian fees and brokerage expenses.
Morgan has agreed that it will reimburse the Fund through at least September
30, 1998 to the extent necessary to maintain the Fund's total operating ex-
penses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 0.60% of the Fund's average daily net assets. This limit does not cover
extraordinary expenses during the period. There is no assurance that Morgan
will continue this waiver beyond the specified period.
SHAREHOLDER SERVICING
Pursuant to a Shareholder Servicing Agreement with the Trust, 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 "Eligi-
ble Institution"). The Fund pays Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.10% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
The Fund's shares may be sold to or through Eligible Institutions, including
financial institutions and broker-dealers, that may be paid fees by Morgan or
its affiliates for services provided to their clients that invest in the Fund.
See Eligible Institutions. Organizations that provide recordkeeping or other
services to certain employee benefit or retirement plans that include the Fund
as an investment alternative may also be paid a fee.
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 the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Distribu-
tor. Investors must be customers of either Morgan or an Eligible Institution or
employer-sponsored retirement plans that have designated the Fund as an invest-
ment option for the plans. Prospective investors who are not already customers
of Morgan may apply to become customers of Morgan for the sole purpose of Fund
transactions. There are no charges associated with becoming a Morgan customer
for this purpose. Morgan reserves the right to determine the customers that it
will accept, and the Trust reserves the right to determine the purchase orders
that it will accept.
The Fund requires a minimum initial investment of $3 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain investors, including investors for whom the Advisor is a fi-
duciary, who maintain related accounts with The JPM Institutional Funds or the
Advisor, who make investments for a group of clients, such as financial advi-
sors, trust companies and investment advisors, or who maintain retirement ac-
counts with The JPM Institutional Funds.
For investors such as investment advisors, trust companies and financial advi-
sors who make investments for a group of clients, the minimum investment in the
Fund is (i) $3 million if the account is opened for one client or (ii) $6 mil-
lion for an aggregated purchase order for more than one client. The Fund may
permit an investor who is investing for a group of clients to attain the $6
million minimum investment within a reasonable period of time that will be no
longer than thirteen months after opening its account. An employer-sponsored
retirement plan opening an account in the Fund, will be required to attain the
$6 million minimum balance within thirteen months of opening the account.
12
<PAGE>
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assist-
ance of an Eligible Institution that may establish its own terms, conditions
and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the next business day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for as-
sistance in placing an order for Fund shares. If the Fund or its agent receives
a purchase order prior to 4:00 P.M. New York time on any business day, the pur-
chase 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 pur-
chase order after 4:00 P.M. New York time, the purchase is effective and is
made at the net asset value determined on the next business day, and the pur-
chaser 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. Although
there is no sales charge levied directly by the Fund, Eligible Institutions may
establish their own terms and conditions for providing their services and may
charge investors a transaction-based or other fee for their services. Such
charges may vary among Eligible Institutions but in all cases will be retained
by the Eligible Institution and not remitted to the Fund or Morgan.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a redemp-
tion request to the Fund or may telephone J.P. Morgan 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.
The Fund executes effective redemption requests at the next determined net as-
set value per share. See Net Asset Value. See Additional Information below for
an explanation of the telephone redemption policy of The JPM Institutional
Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited the next business day in immediately 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 trans-
ferred 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
the Fund falls below the applicable minimum investment amount for more than 30
days because of a redemption of shares, the Fund may redeem the remaining
shares in the account 60 days after written notice to the shareholder unless
the account is increased to the minimum investment amount or more.
13
<PAGE>
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the share hold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal income
tax on dividends, distributions and redemption proceeds when non-corporate in-
vestors have not provided a certified taxpayer identification number. In addi-
tion, if a shareholder sends a check for the purchase of Fund shares and shares
are purchased before the check has cleared, the transmittal of redemption pro-
ceeds from the shares will occur upon clearance of the check which may take up
to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other pe-
riods as the 1940 Act or the Securities and Exchange Commission may permit. See
Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund, or JPM Pierpont Fund or shares of JPM Series Trust without charge. An ex-
change 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 that
fund's minimum investment amount. Shareholders should read the prospectus of
the fund into which they are exchanging and may only exchange between fund ac-
counts that are registered in the same name, address and taxpayer identifica-
tion number. Shares are exchanged on the basis of relative net asset value per
share. Exchanges are in effect redemptions from one fund and purchases of an-
other fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Institutional Funds,
The JPM Pierpont Funds and JPM Series Trust. See also Additional Information
below for an explanation of the telephone exchange policy of The JPM Institu-
tional Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state securi-
ties laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all the Fund's net investment income, if
any, are declared and paid at least four times a year. The Fund may also de-
clare an additional dividend of net investment income in a given year to the
extent necessary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains for the Fund are declared and
paid on an annual basis, except that an additional capital gains distribution
may be made in a given year to the extent necessary to avoid the imposition of
federal excise tax on the Fund. Declared dividends and distributions are pay-
able to shareholders of record on the record date.
Dividends and capital gains distributions paid for the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited to the shareholder's account at Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the re-
mainder by the
14
<PAGE>
number of its outstanding shares, rounded to the nearest cent. Expenses, in-
cluding the fees payable to Morgan, are accrued daily. See Net Asset Value in
the Statement of Additional Information for information on valuation of portfo-
lio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on the holidays listed under Net Asset Value in the Statement of Addi-
tional Information.
ORGANIZATION
The Trust was organized on 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 un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, shares of 24 series have been authorized and are available for
sale to the public. Only shares of the Fund are offered through this Prospec-
tus. No series of shares has any preference over any other series of shares.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust does not intend to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for ac-
tion by shareholder vote as may be required by either the 1940 Act or the Dec-
laration of Trust. The Trustees will call a meeting of shareholders to vote on
removal of a Trustee upon the written request of the record holders of ten per-
cent of Trust shares and will assist shareholders in communicating with each
other as prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio is organized as a trust under the laws of the State of New York.
The Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that nei-
ther the Fund nor its shareholders will be adversely affected by reason of the
Fund's investing in the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult their own tax advisors with respect to specific questions as to feder-
al, state or local taxes. See Taxes in the Statement of Additional Information.
Annual statements as to the current federal tax status of distributions, if ap-
plicable, are mailed to shareholders after the end of the taxable year for the
Fund.
The Trust intends that the Fund will continue to qualify as a separate regu-
lated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. For the Fund to qualify as a regulated investment company,
the Portfolio, in addition to other requirements, limits its investments so
that at the close of each quarter of its taxable year (a) no more than 25% of
its total assets are invested in the securities of any one issuer, except U.S.
Government securi -
15
<PAGE>
ties, and (b) with regard to 50% of its total assets, no more than 5% of its
total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not
be subject to federal income taxes or federal excise taxes if substantially all
of its net investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for fed-
eral income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or re-
invested in additional shares. The Fund expects a portion of these distribu-
tions to corporate shareholders to be eligible for the dividends-received de-
duction.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regardless
of whether taken in cash or reinvested in additional shares. Long-term capital
gains distributions to corporate shareholders are not eligible for the divi-
dends-received deduction. As a result of the enactment of the Taxpayer Relief
Act of 1997 (the "Act"), long-term capital gain of an individual is generally
subject to a maximum rate of 28% in respect of a capital asset held directly by
such individual for more than one year but not more than eighteen months, and
the maximum rate is reduced to 20% in respect of a capital asset held in excess
of 18 months. The Act authorizes the Treasury department to promulgate regula-
tions that would apply these rules in the case of long-term capital gain dis-
tributions made by the Fund.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of Fund shares held by a shareholder by the
same amount as the distribution. If the net asset value of the shares is re-
duced below a shareholder's cost as a result of such a distribution, the dis-
tribution, although constituting a return of capital to the shareholder, will
be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term cap-
ital gain or loss if the shares have been held for more than one year, and oth-
erwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares. In addition, no loss will be allowed on the redemption or ex-
change of shares of the Fund, if within a period beginning 30 days before the
date of such redemption or exchange and ending 30 days after such date, the
shareholder acquires (such as through dividend reinvestment) securities that
are substantially identical to shares of the Fund.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption and monthly statements, reflecting all other account activity, includ-
ing dividends and any distributions reinvested in additional shares or credited
as cash.
All shareholders are given the privilege to initiate transactions automatically
by telephone upon opening an account. However, an investor should be aware that
a transaction authorized by telephone and reasonably believed to be genuine by
the Fund, Morgan, his Eligible Institution or the Distributor may subject the
investor to risk of loss if such instruction is subsequently found not to be
genuine. The Fund will employ reasonable procedures, including requiring in-
vestors to
16
<PAGE>
give their Personal Identification Number and tape recording of telephone in-
structions, to confirm that instructions communicated from investors by tele-
phone are genuine; if it does not, the Fund, the Shareholder Servicing Agent
or a shareholder's Eligible Institution may be liable for any losses due to
unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "yield". The yield refers to the net income generated
by an investment in the Fund over a stated 30-day period. This income is then
annualized--i.e., the amount of income generated by the investment during the
30-day period is assumed to be generated each 30-day period for twelve periods
and is shown as a percentage of the investment. The income earned on the in-
vestment is also assumed to be reinvested at the end of the sixth 30-day peri-
od.
The Fund may also advertise "total return" and non-standardized total return
data. The total return shows what an investment in the Fund would have earned
over a specified period of time (one, five or ten years or since commencement
of operations, if less) assuming that all distributions and dividends by the
Fund were reinvested on the reinvestment dates during the period and less all
recurring fees. These methods of calculating yield and total return are re-
quired by regulations of the Securities and Exchange Commission. Yield and to-
tal return data similarly calculated, unless otherwise indicated, over other
specified periods of time may also be used. See Performance Data in the State-
ment of Additional Information. All performance figures are based on histori-
cal earnings and are not intended to indicate future performance. Shareholders
may obtain performance information by calling Morgan at (800) 766-7722.
17
<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell exchange traded and OTC put and call
options on equity securities or indexes of equity securities, (b) purchase and
sell futures contracts on indexes of equity securities, and (c) purchase and
sell put and call options on futures contracts on indexes of equity securities.
Each of these instruments is a derivative instrument as its value derives from
the underlying asset or index.
The Portfolio may use futures contracts and options for hedging purposes. See
Risk Management in the Statement of Additional Information. The Portfolio may
not use futures contracts and options for speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. Because combined options positions involve multiple trades, they result
in higher transaction costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio securi-
ties, these techniques themselves entail certain other risks. If the Advisor
applies a strategy at an inappropriate time or judges market conditions or
trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments, or if it could not close out its positions
because of an illiquid secondary market. In addition, the Portfolio will incur
transaction costs, including trading commissions and option premiums, in con-
nection with its futures and options transactions and these transactions could
significantly increase the Portfolio's turnover rate.
The Portfolio may purchase put and call options on securities, indexes of secu-
rities and futures contracts, or purchase and sell futures contracts, only if
such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the Port-
folio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
A-1
<PAGE>
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price in-
creases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its po-
sition in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the pre-
mium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium re-
ceived for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the op-
tion. The characteristics of writing call options are similar to those of writ-
ing put options, except that writing calls generally is a profitable strategy
if prices remain the same or fall. Through receipt of the option premium a call
writer offsets part of the effect of a price decline. At the same time, because
a call writer must be prepared to deliver the underlying instrument in return
for the strike price, even if its current value is greater, a call writer gives
up some ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell (write) put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indexes are similar to options on securities, ex-
cept that the exercise of securities index options is settled by cash payment
and does not involve the actual purchase or sale of securities. In addition,
these options are designed to reflect price fluctuations in a group of securi-
ties or segment of the securities market rather than price fluctuations in a
single security. The Portfolio, in purchasing or selling index options, is sub-
ject to the risk that the value of its portfolio securities may not change as
much as an index because the Portfolio's investments generally will not match
the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a speci-
fied quantity of an underlying instrument at a specified future date or to make
a cash payment based on the value of a securities index. When the Portfolio
sells a
A-2
<PAGE>
futures contract, it agrees to sell a specified quantity of the underlying in-
strument at a specified future date or to receive a cash payment based on the
value of a securities index. The price at which the purchase and sale will take
place is fixed when the Portfolio enters into the contract. Futures can be held
until their delivery dates or the position can be (and normally is) closed out
before then. There is no assurance, however, that a liquid market will exist
when the Portfolio wishes to close out a particular position.
When the Portfolio purchases a futures contract, the value of the futures con-
tract tends to increase and decrease in tandem with the value of its underlying
instrument. Therefore, purchasing futures contracts will tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. When the Portfolio sells a futures contract, by contrast, the value of its
futures position will tend to move in a direction contrary to the value of the
underlying instrument. Selling futures contracts, therefore, will tend to off-
set both positive and negative market price changes, much as if the underlying
instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties and Exchange Commission. Securities held in a segregated account cannot be
sold while the futures contract or option is outstanding, unless they are re-
placed with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede port-
folio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-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.
PROS382-979
The JPM Institutional U.S. Equity Fund
PROSPECTUS
September 26, 1997
<PAGE>
PROSPECTUS
The JPM Institutional U.S. Small Company Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) 766-7722
The JPM Institutional U.S. Small Company Fund (the "Fund") seeks to provide a
high total return from a portfolio of equity securities of small companies. It
is designed for investors who are willing to assume the somewhat higher risk of
investing in small companies in order to seek a higher total return over time
than might be expected from a portfolio of stocks of large companies.
The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of The JPM
Institutional Funds, an open-end management investment company organized as a
Massachusetts business trust (the "Trust").
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE U.S. SMALL COMPANY PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT
COMPANY HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN
THE PORTFOLIO THROUGH A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE ON PAGE 3.
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated September 26, 1997 (as supple mented from time to time). This information
is incorporated herein by reference and is available without charge upon
written request from the Fund's Distributor, Funds Distributor, Inc., 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: The JPM
Institutional Funds, or by calling (800) 221-7930.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS SEPTEMBER 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investors for Whom the Fund is Designed.................................... 1
Financial Highlights....................................................... 3
Special Information Concerning Investment Structure........................ 3
Investment Objective and Policies.......................................... 4
Additional Investment Information and Risk Factors......................... 6
Investment Restrictions.................................................... 9
Management of the Trust and the Portfolio.................................. 10
Shareholder Servicing...................................................... 12
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Purchase of Shares......................................................... 12
Redemption of Shares....................................................... 13
Exchange of Shares......................................................... 14
Dividends and Distributions................................................ 14
Net Asset Value............................................................ 15
Organization............................................................... 15
Taxes...................................................................... 15
Additional Information..................................................... 16
Appendix................................................................... A-1
</TABLE>
<PAGE>
The JPM Institutional U.S. Small Company Fund
INVESTORS FOR WHOM THE FUND IS DESIGNED
The Fund is designed for investors who wish to invest in a portfolio of equity
securities of small companies. The Fund seeks to achieve its investment objec-
tive by investing all of its investable assets in The U.S. Small Company Port-
folio, a diversified open-end management investment company having the same in-
vestment objective as the Fund. Since the investment characteristics and expe-
rience of the Fund will correspond directly with those of the Portfolio, the
discussion in this Prospectus focuses on the investments and investment poli-
cies of the Portfolio. The net asset value of shares in the Fund fluctuates
with changes in the value of the investments in the Portfolio.
The Portfolio may make various types of investments in seeking its objective.
Among the permissible investments and investment techniques for the Portfolio
are futures contracts, options, forward contracts on foreign currencies and
certain privately placed securities. In view of the capitalization of the com-
panies in which the Portfolio invests, the risks of investment in the Fund and
the volatility of the value of its shares may be greater than the general eq-
uity markets. For further information about these investments and investment
techniques, see Investment Objective and Policies below.
The Fund generally requires a minimum initial investment of $1 million. The
minimum subsequent investment is $25,000. See Purchase of Shares. If a share-
holder reduces his or her investment in the Fund to less than the applicable
minimum investment amount for more than 30 days, the investment may be subject
to mandatory redemption. See Redemption of Shares--Mandatory Redemption by the
Fund.
This Prospectus describes the financial history, investment objective and poli-
cies, management and operation of the Fund to enable investors to decide if the
Fund suits their needs. The Fund operates in a two-tier master-feeder invest-
ment fund structure. The Trustees believe that the Fund may achieve economies
of scale over time by utilizing this investment structure.
The following table illustrates that investors in the Fund incur no shareholder
transaction expenses; their investment in the Fund is subject only to the oper-
ating expenses set forth below for the Fund and the Portfolio, as a percentage
of average net assets of the Fund. The Trustees of the Trust believe that the
aggregate per share expenses of the Fund and the Portfolio will be approxi-
mately equal to and may be less than the expenses that the Fund would incur if
it retained the services of an investment adviser and invested its assets di-
rectly in portfolio securities. Fund and Portfolio expenses are discussed below
under the headings Management of the Trust and the Portfolio and Shareholder
Servicing.
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Sales Load Imposed on Purchases*........................................... None
Sales Load Imposed on Reinvested Dividends................................. None
Deferred Sales Load........................................................ None
Redemption Fees............................................................ None
Exchange Fees.............................................................. None
</TABLE>
- -------
* Certain Eligible Institutions (defined below) may impose fees in connection
with the purchase of the Fund's shares through such institutions. See Eligible
Institutions.
1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*
<TABLE>
<S> <C>
Advisory Fees............................................................. 0.60%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.20%
-----
Total Operating Expenses (after expense reimbursement).................... 0.80%
=====
</TABLE>
* Fees and expenses are expressed as a percentage of the average net assets of
the Fund after expense reimbursement for the fiscal year ended May 31, 1997 and
through September 30, 1998. See Management of the Trust and the Portfolio.
Without reimbursements, Other Expenses and Total Operating Expenses for the
Fund would be equal to 0.25% and 0.85%, respectively, for the most recently
completed fiscal year.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<S> <C>
1 Year...................................................................... $ 8
3 Years..................................................................... $26
5 Years..................................................................... $44
10 Years.................................................................... $99
</TABLE>
The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Administrative Services and the Shareholder Servicing Agreements, or-
ganization expenses, the fees paid to Pierpont Group, Inc. under the Fund Serv-
ices Agreements, the fees paid to Funds Distributor, Inc. under the Co-Adminis-
tration Agreements, the fees paid to State Street Bank and Trust Company as
custodian and transfer agent, and other usual and customary expenses of the
Fund and the Portfolio. For a more detailed description of contractual fee ar-
rangements and of the fees and expenses included in Other Expenses, see Manage-
ment of the Trust and the Portfolio and Shareholder Servicing. In connection
with the above example, please note that $1,000 is less than the Fund's minimum
investment requirement and that there are no redemption or exchange fees of any
kind. See Purchase of Shares and Redemption of Shares. THE EXAMPLE IS HYPOTHET-
ICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE CONSID-
ERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR
LESS THAN THOSE SHOWN.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the indicated periods
should be read in conjunction with the financial statements and related notes
which are contained in the Fund's annual report and are incorporated by
reference into the Statement of Additional Information. The following selected
data have been audited by independent accountants. The Fund's annual report
includes a discussion of those factors, strategies and techniques that
materially affected the Fund's performance during the period of the report, as
well as certain related information. A copy of the Fund's annual report will
be made available without charge upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FISCAL YEAR ENDED JULY 19, 1993
MAY 31, (COMMENCEMENT OF
---------------------------- OPERATIONS) TO
1997 1996 1995 MAY 31, 1994*
-------- -------- -------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of
Period......................... $ 13.97 $11.16 $10.03 $10.00
-------- -------- -------- -------
Income From Investment
Operations:
Net Investment Income......... 0.10 0.13 0.10 0.04
Net Realized and Unrealized
Gain on Investment........... 1.07 3.66 1.12 --
-------- -------- -------- -------
Total From Investment
Operations..................... 1.17 3.79 1.22 0.04
-------- -------- -------- -------
Less Distributions to
Shareholders From:
Net Investment Income......... (0.13) (0.12) (0.09) (0.01)
Net Realized Gain............. (0.92) (0.86) -- --
-------- -------- -------- -------
Total Distributions to
Shareholders................... (1.05) (0.98) (0.09) (0.01)
-------- -------- -------- -------
Net Asset Value, End of Period.. $ 14.09 $13.97 $11.16 $10.03
======== ======== ======== =======
Total Return.................... 9.44% 35.60% 12.26% 0.42%(a)
======== ======== ======== =======
Ratios and Supplemental Data:
Net Assets, End of Period (in
thousands)................... $401,797 $291,931 $149,279 $71,141
Ratio to Average Net Assets:
Expenses.................... 0.80% 0.80% 0.80% 0.80%(b)
Net Investment Income....... 0.81% 1.20% 1.14% 0.93%(b)
Decrease Reflected in
Expense Ratio due to
Expense Reimbursement...... 0.05% 0.03% 0.11% 0.27%(b)
</TABLE>
- -------
(a)Not annualized.
(b)Annualized.
*Investment operations commenced on November 4, 1993.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
Unlike other mutual funds which directly acquire and manage their own portfo-
lio of securities, the Fund is an open-end management investment company which
seeks to achieve its investment objective by investing all of its investable
assets in the Portfolio, a separate registered investment company with the
same investment objective as the Fund. The investment objective of the Fund or
Portfolio may be changed only with the approval of the holders of the out-
standing shares of the Fund and the Portfolio. The master-feeder investment
fund structure has been developed relatively recently, so shareholders should
carefully consider this investment approach.
In addition to selling a beneficial interest to the Fund, the Portfolio may
sell beneficial interests to other mutual funds or institutional investors.
Such investors will invest in the Portfolio on the same terms and conditions
and will bear a proportionate share of the Portfolio's expenses. However, the
other investors investing in the Portfolio may sell shares of their
3
<PAGE>
own fund using a different pricing structure than the Fund. Such different
pricing structures may result in differences in returns experienced by invest-
ors in other funds that invest in the Portfolio. Such differences in returns
are not uncommon and are present in other mutual fund structures. Information
concerning other holders of interests in the Portfolio is available from Morgan
at (800) 766-7722.
The Trust may withdraw the investment of the Fund from the Portfolio at any
time if the Board of Trustees of the Trust determines that it is in the best
interests of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all the
assets of the Fund in another pooled investment entity having the same invest-
ment objective and restrictions as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described below with respect to the Portfolio.
Certain changes in the Portfolio's investment objective, policies or restric-
tions, or a failure by the Fund's shareholders to approve a change in the Port-
folio's investment objective or restrictions, may require withdrawal of the
Fund's interest in the Portfolio. Any such withdrawal could result in a distri-
bution in kind of portfolio securities (as opposed to a cash distribution) from
the Portfolio which may or may not be readily marketable. The distribution in
kind may result in the Fund having a less diversified portfolio of investments
or adversely affect the Fund's liquidity, and the Fund could incur brokerage,
tax or other charges in converting the securities to cash. Notwithstanding the
above, there are other means for meeting shareholder redemption requests, such
as borrowing.
Smaller funds investing in the Portfolio may be materially affected by the ac-
tions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns. Addition-
ally, because the Portfolio would become smaller, it may become less diversi-
fied, resulting in potentially increased portfolio risk (however, these possi-
bilities also exist for traditionally structured funds which have large or in-
stitutional investors who may withdraw from a fund). Also, funds with a greater
pro rata ownership in the Portfolio could have effective voting control of the
operations of the Portfolio. Whenever the Fund is requested to vote on matters
pertaining to the Portfolio (other than a vote by the Fund to continue the op-
eration of the Portfolio upon the withdrawal of another investor in the Portfo-
lio), the Trust will hold a meeting of shareholders of the Fund and will cast
all of its votes proportionately as instructed by the Fund's shareholders. The
Trust will vote the shares held by Fund shareholders who do not give voting in-
structions in the same proportion as the shares of Fund shareholders who do
give voting instructions. Shareholders of the Fund who do not vote will have no
effect on the outcome of such matters.
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment In-
formation and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
the Portfolio. For more information about changing the investment objective,
policies and restrictions of the Fund or the Portfolio, see Investment Restric-
tions.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund and the Portfolio is described below, to-
gether with the policies they employ in their efforts to achieve this objec-
tive. Additional information about the investment policies of the Fund and the
Portfolio appears in the Statement of Additional Information under Investment
Objectives and Policies. There can be no assurance that the investment objec-
tive of the Fund or the Portfolio will be achieved.
The Fund's investment objective is to provide a high total return from a port-
folio of equity securities of small companies. Total return will consist of re-
alized and unrealized capital gains and losses plus income. The Fund attempts
to achieve its investment objective by investing all of its investable assets
in The U.S. Small Company Portfolio, a diversified open-end management invest-
ment company having the same investment objective as the Fund. The Portfolio
invests primarily in the common stock of small U.S. companies. The small com-
pany holdings of the Portfolio are primarily companies included in the market
capitalization size range of the Russell 2500 Index.
4
<PAGE>
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 for the purpose of short-term trading; however, it may take
advantage of short-term trading opportunities that are consistent with its ob-
jective. To the extent the Portfolio engages in short-term trading, it may in-
cur increased transaction costs. See Taxes below. The portfolio turnover for
the Portfolio for the fiscal year ended May 31, 1997 was 98%. The average bro-
kerage commission rate per share paid by the Portfolio for the fiscal year
ended May 31, 1997 was $0.0467
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 primary equity in-
vestments are the common stocks of small U.S. companies and, to a limited ex-
tent, similar securities of foreign corporations. The common stock in which
the Portfolio may invest includes the common stock of any class or series or
any similar equity interest, such as trust or limited partnership interests.
The small company holdings of the Portfolio are primarily companies included
in the Russell 2500 Index. These equity investments may or may not pay divi-
dends and may or may not carry voting rights. The Portfolio invests in securi-
ties listed on a securities exchange or traded in an over-the-counter (OTC)
market, and may invest in certain restricted or unlisted securities.
FOREIGN INVESTMENTS. The Portfolio may invest in equity securities of foreign
issuers that are listed on a national securities exchange or denominated or
principally traded in U.S. dollars. However, the Portfolio does not expect to
invest more than 5% of its assets at the time of purchase in foreign equity
securities. 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.
5
<PAGE>
ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS
CONVERTIBLE SECURITIES. The convertible securities in which the Portfolio may
invest include any debt securities or preferred stock which may be converted
into common stock or which carry the right to purchase common stock. Convert-
ible securities entitle the holder to exchange the securities for a specified
number of shares of common stock, usually of the same company, at specified
prices within a certain period of time.
COMMON STOCK WARRANTS. The Portfolio may invest in common stock warrants that
entitle the holder to buy common stock from the issuer of the warrant at a
specific price (the strike price) for a specific period of time. The market
price of warrants may be substantially lower than the current market price of
the underlying common stock, yet warrants are subject to similar price fluctu-
ations. As a result, warrants may be more volatile investments than the under-
lying common stock.
Warrants generally do not entitle the holder to dividends or voting rights
with respect to the underlying common stock and do not represent any rights in
the assets of the issuer company. A warrant will expire worthless if it is not
exercised on or prior to the expiration date.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase secu-
rities 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 fluc-
tuation during this period and for fixed income investments no interest ac-
crues to the Portfolio until settlement. At the time of settlement, a when-is-
sued security may be valued at less than its purchase price. The Portfolio
maintains with the Custodian a separate account with a segregated portfolio of
securities in an amount at least equal to these commitments. When entering
into a when-issued or delayed delivery transaction, the Portfolio will rely on
the other party to consummate the transaction; if the other party fails to do
so, the Portfolio may be disadvantaged. It is the current policy of the Port-
folio not to enter into when-issued commitments exceeding in the aggregate 15%
of the Portfolio's total assets less liabilities other than the obligations
created by these commitments.
REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement trans-
actions with brokers, dealers or banks that meet the credit guidelines estab-
lished by the Portfolio's Trustees. In a repurchase agreement, the Portfolio
buys a security from a seller that has agreed to repurchase it at a mutually
agreed upon date and price, reflecting the interest rate effective for the
term of the agreement. The term of these agreements is usually from overnight
to one week. A repurchase agreement may be viewed as a fully collateralized
loan of money by the Portfolio to the seller. The Portfolio always receives
securities as collateral with a market value at least equal to the purchase
price plus accrued interest and this value is maintained during the term of
the agreement. If the seller defaults and the collateral value declines, the
Portfolio might incur a loss. If bankruptcy proceedings are commenced with re-
spect to the seller, the Portfolio's realization upon the disposition of col-
lateral may be delayed or limited. Investments in certain repurchase agree-
ments and certain other investments which may be considered illiquid are lim-
ited. See Illiquid Investments; Privately Placed and other Unregistered Secu-
rities below.
LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3%
of the value of the Portfolio's net assets. The Portfolio may lend its securi-
ties if such loans are secured continuously by cash or equivalent collateral
or by a letter of credit in favor of the Portfolio at least equal at all times
to 100% of the market value of the securities loaned, plus accrued interest.
While such securities are on loan, the borrower will pay the Portfolio any in-
come accruing thereon. Loans will be subject to termination by the Portfolio
in the normal settlement time, generally three business days after notice, or
by the borrower on one day's notice. Borrowed securities must be returned when
the loan is terminated. Any gain or loss in the market price of the borrowed
securities which occurs during the term of the loan inures to the Portfolio
and its respective investors. The Portfolio may
6
<PAGE>
pay reasonable finders' and custodial fees in connection with a loan. In addi-
tion, the Portfolio will consider all facts and circumstances, including the
creditworthiness of the borrowing financial institution, and the Portfolio
will not make any loans in excess of one year.
Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfo-
lio securities are similar to the risks to the Portfolio with respect to sell-
ers in repurchase agreement transactions. See Repurchase Agreements above. The
Portfolio will not lend its securities to any officer, Trustee, Director, em-
ployee or other affiliate of the Portfolio, the Advisor or the Distributor,
unless otherwise permitted by applicable law.
REVERSE REPURCHASE AGREEMENTS. The Portfolio is permitted to enter into re-
verse repurchase agreements. In a reverse repurchase agreement, the Portfolio
sells a security and agrees to repurchase it at a mutually agreed upon date
and price, reflecting the interest rate effective for the term of the agree-
ment. For purposes of the Investment Company Act of 1940 (the "1940 Act"), it
is considered a form of borrowing by the Portfolio and, therefore, is a form
of leverage. Leverage may cause any gains or losses of the Portfolio to be
magnified. For more information, see Investment Objectives and Policies in the
Statement of Additional Information.
FOREIGN INVESTMENT INFORMATION. The Portfolio may invest in certain foreign
securities. Investment in securities of foreign issuers and in obligations of
foreign branches of domestic banks involves somewhat different investment
risks from those affecting securities of U.S. domestic issuers. There may be
limited publicly available information with respect to foreign issuers, and
foreign issuers are not generally subject to uniform accounting, auditing and
financial standards and requirements comparable to those applicable to 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 the Portfo-
lio by domestic companies.
Investors should realize that the value of the Portfolio's investments in for-
eign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation, na-
tionalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administrations or economic or monetary
policies in the United States or abroad could result in appreciation or depre-
ciation of portfolio securities and could favorably or unfavorably affect the
Portfolio's operations. Furthermore, the economies of individual foreign na-
tions may differ from the U.S. economy, whether favorably or unfavorably, in
areas such as growth of gross national product, rate of inflation, capital re-
investment, resource self-sufficiency and balance of payments position; it may
also be more difficult to obtain and enforce a judgment against a foreign is-
suer. Any foreign investments made by the Portfolio must be made in compliance
with U.S. and foreign currency restrictions and tax laws restricting the
amounts and types of foreign investments.
In addition, while the volume of transactions effected on foreign stock ex-
changes has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Portfolio's for-
eign investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settle-
ment periods for foreign securities, which are often longer than those for se-
curities of U.S. issuers, may affect portfolio liquidity. In buying and sell-
ing securities on foreign exchanges, purchasers normally pay fixed com- mis-
sions that are generally higher than the negotiated commissions charged in the
United States. In addition, there is generally less government supervision and
regulation of securities exchanges, brokers and issuers located in foreign
countries than in the United States.
DEPOSITORY RECEIPTS. Depository receipts are typically issued by a U.S. or
foreign bank or trust company and evidence ownership of underlying securities
of a U.S. or foreign issuer. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying securities. As a
result, available information concerning the issuer may not be as current as
for sponsored depositary instruments, and their prices may be more volatile
than if they were sponsored by the issuers of the underlying securities.
7
<PAGE>
Since the Portfolio's investments in foreign securities involve foreign cur-
rencies, the value of its assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. See Foreign Currency Exchange Trans-
actions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS. Because the Portfolio may buy and sell
securities and receive interest and dividends in currencies other than the
U.S. dollar, the Portfolio may enter from time to time into foreign currency
exchange transactions. The Portfolio either enters into these transactions on
a spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange market or uses forward contracts to purchase or sell foreign curren-
cies. The cost of the Portfolio's spot currency exchange transactions is gen-
erally the difference between the bid and offer spot rate of the currency be-
ing purchased or sold.
A forward foreign currency exchange contract is an obligation by the Portfolio
to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These con-
tracts are derivative instruments, as their value derives from the spot ex-
change rates of the currencies underlying the contract. These contracts are
entered into in the interbank market directly between currency traders (usu-
ally large commercial banks) and their customers. A forward foreign currency
exchange contract generally has no deposit requirement and is traded at a net
price without commission. Neither spot transactions nor forward foreign cur-
rency exchange contracts eliminate fluctuations in the prices of the Portfo-
lio's securities or in foreign exchange rates, or prevent loss if the prices
of these securities should decline.
The Portfolio may enter into foreign currency exchange transactions in an at-
tempt to protect against changes in foreign currency exchange rates between
the trade and settlement dates of specific securities transactions or antici-
pated securities transactions. The Portfolio may also enter into forward con-
tracts to hedge against a change in foreign currency exchange rates that would
cause a decline in the value of existing investments denominated or princi-
pally traded in a foreign currency. To do this, the Portfolio would enter into
a forward contract to sell the foreign currency in which the investment is de-
nominated or principally traded in exchange for U.S. dollars or in exchange
for another foreign currency. The Portfolio will only enter into forward con-
tracts to sell a foreign currency in exchange for another foreign currency if
the Advisor expects the foreign currency purchased to appreciate against the
U.S. dollar.
Although these transactions are intended to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they limit any
potential gain that might be realized should the value of the hedged currency
increase. In addition, forward contracts that convert a foreign currency into
another foreign currency will cause the Portfolio to assume the risk of fluc-
tuations in the value of the currency purchased vis a vis the hedged currency
and the U.S. dollar. The precise matching of the forward contract amounts and
the value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will change as a
consequence of market movements in the value of such securities between the
date the forward contract is entered into and the date it matures. The projec-
tion of currency market movements is extremely difficult, and the successful
execution of a hedging strategy is highly uncertain.
ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof,
more than 15% of the Portfolio's net assets would be in illiquid investments.
Subject to this non-fundamental policy limitation, the Portfolio may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the Securities Act of
1933, as amended (the "1933 Act") and cannot be offered for public sale in the
United States without first being registered under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in
the normal course of business at approximately the amount at which it is val-
ued 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 secu-
rities will reflect any limitations on their liquidity.
8
<PAGE>
The Portfolio may also purchase Rule 144A securities sold to institutional in-
vestors without registration under the 1933 Act. These securities may be deter-
mined to be liquid in accordance with guidelines established by the Advisor and
approved by the Trustees. The Trustees will monitor the Advisor's implementa-
tion of these guidelines on a periodic basis.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes. For more detailed information about these transactions,
see the Appendix to this Prospectus and Risk Management in the Statement of Ad-
ditional Information.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objectives and long-term investment perspec-
tive. The Portfolio may make money market investments pending other investment
or settlement, for liquidity or in adverse market conditions. The money market
investments permitted for the Portfolio include obligations of the U.S. Govern-
ment and its agencies and instrumentalities, other debt securities, commercial
paper, bank obligations and repurchase agreements. For more detailed informa-
tion about these money market investments, see Investment Objectives and Poli-
cies in the Statement of Additional Information.
INVESTMENT RESTRICTIONS
As a diversified investment company, 75% of the assets of the Fund are subject
to the following fundamental limitations: (a) the Fund may not invest more than
5% of its total assets in the securities of any one issuer, except U.S. govern-
ment securities, and (b) the Fund may not own more than 10% of the outstanding
voting securities of any one issuer.
The investment objective of the Fund and the Portfolio, together with the in-
vestment restrictions described below and in the Statement of Additional Infor-
mation, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same invest-
ment restrictions as the Portfolio, except that the Fund may invest all of its
investable assets in another open-end investment company with the same invest-
ment objective and restrictions (such as the Portfolio). References below to
the Portfolio's investment restrictions also include the Fund's investment re-
strictions.
The Portfolio may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of the Port-
folio's total assets, taken at cost at the time of borrowing, or purchase secu-
rities while borrowings exceed 5% of its total assets; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowings in amounts
up to 10% of the value of the Portfolio's net assets at the time of borrowing;
(ii) purchase securities or other obligations of issuers conducting their prin-
cipal business activity in the same industry if its investments in such indus-
try would exceed 25% of the value of the Portfolio's total assets, except this
limitation shall not apply to investments in U.S. Government securities; or
(iii) purchase securities of any issuer if, as a result of the purchase, more
than 5% of total Portfolio assets would be invested in securities of companies
with fewer than three years of operating history (including predecessors).
For a more detailed discussion of the above investment restrictions, as well as
a description of certain other investment restrictions, see Investment Restric-
tions in the Statement of Additional Information.
9
<PAGE>
MANAGEMENT OF THE TRUST AND THE PORTFOLIO
TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the Port-
folio, the Trustees decide upon matters of general policy and review the ac-
tions of the Advisor and other service providers. The Trustees of the Trust and
of the Portfolio are identified 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;
Chairman, Pierpont Group, Inc.
Michael P. Mallardi................. Former Senior Vice President, Capital
Cities/ABC, Inc. and 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, the Portfolio and
The JPM Pierpont Funds up to and including creating a separate board of trust-
ees. See Trustees and Officers in the Statement of Additional Information for
more information about the Trustees and Officers of the Fund and the Portfolio.
The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pier-
pont Group, Inc. in providing these services to the Trust, the Portfolio and
certain other registered investment companies subject to similar agreements
with Pierpont Group, Inc. Pierpont Group, Inc. was organized in 1989 at the re-
quest of the Trustees of The Pierpont Family of Funds for the purpose of pro-
viding these services at cost to those funds. See Trustees and Officers in the
Statement of Additional Information. The principal offices of Pierpont Group,
Inc. are located at 461 Fifth Avenue, New York, New York 10017.
ADVISOR. The Fund has not retained the services of an investment adviser be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall
Street, New York, New York 10260, is a New York trust company which conducts a
general banking and trust business. Morgan is a wholly owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"), a bank holding company organized un-
der the laws of Delaware. Through offices in New York City and abroad, J.P.
Morgan, through the Advisor and other subsidiaries, offers a wide range of
services to governmental, institutional, corporate and individual customers and
acts as investment adviser to individual and institutional clients with com-
bined assets under management of over $234 billion. Morgan provides investment
advice and portfolio management services to the Portfolio. Subject to the su-
pervision of the Portfolio's Trustees, Morgan makes the Portfolio's day-to-day
investment decisions, arranges for the execution of portfolio transactions and
generally manages the Portfolio's investments. See Investment Advisor in the
Statement of Additional Information.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental re-
search, systematic stock selection and disciplined portfolio construction. Mor-
gan has invested in equity securities of small U.S. companies on behalf of its
clients since the 1960s. The portfolio managers making investments in small
U.S. companies work in conjunction with Morgan's domestic equity analysts, as
well as capital
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market, credit and economic research analysts, traders and administrative of-
ficers. The U.S. equity analysts each cover a different industry, following
both the small and large companies in their respective industries. They cur-
rently monitor a universe of over 300 small companies.
The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date
of each person's responsibility for the Portfolio and his business experience
for the past five years is indicated parenthetically): James B. Otness, Manag-
ing Director (since February, 1993, employed by Morgan since prior to 1992 as
a portfolio manager of equity securities of small and medium sized U.S. compa-
nies); Michael J. Kelly, Vice President (since May, 1996, employed by Morgan
since prior to 1992 as a portfolio manager of small and medium sized U.S. com-
panies and an equity research analyst); and Candice Eggerss, Vice President
(since May, 1996, employed by Morgan since May, 1996; previously employed by
Weiss, Peck and Greer from June 1993 to May 1996; employed by Equitable Capi-
tal Management prior to June 1993).
As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly,
at the annual rate of 0.60% of the Portfolio's average daily net assets.
Under separate agreements, Morgan also provides administrative and related
services to the Fund and the Portfolio and shareholder services to sharehold-
ers of the Fund. See Administrative Services Agent and Shareholder Servicing
below. INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARAN-
TEED OR ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER
BANK.
CO-ADMINISTRATOR AND DISTRIBUTOR. Pursuant to Co-Administration Agreements
with the Trust and the Portfolio, Funds Distributor, Inc. ("FDI") serves as
the Co-Administrator for the Trust and the Portfolio. FDI (i) provides office
space, equipment and clerical personnel for maintaining the organization and
books and records of the Trust and the Portfolio; (ii) provides officers for
the Trust and the Portfolio; (iii) prepares and files documents required for
notification of state securities administrators; (iv) reviews and files mar-
keting and sales literature; (v) files Portfolio regulatory documents and
mails Portfolio communications to Trustees and investors; and (vi) maintains
related books and records. See Administrative Services Agent below.
For its services under the Co-Administration Agreements, each of the Fund and
the Portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust, the Portfolio and certain
other investment companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to Administrative Services Agreements
with the Trust and the Portfolio, Morgan provides certain administrative and
related services to the Fund and the Portfolio, including services related to
tax compliance, preparation of financial statements, calculation of perfor-
mance data, oversight of service providers and certain regulatory and Board of
Trustees matters.
Under the Administrative Services Agreements, each of the Fund and the Portfo-
lio has agreed to pay Morgan fees equal to its allocable share of an annual
complex-wide charge. This charge is calculated daily based on the aggregate
net assets of the Portfolio, the other portfolios in which series of the Trust
or The JPM Pierpont Funds invest and JPM Series Trust and in accordance with
the following annual schedule: 0.09% on the first $7 billion of their aggre-
gate average daily net assets and 0.04% of their aggregate average daily net
assets in excess of $7 billion, less the complex-wide fees payable to FDI .
CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Fund's and the Portfolio's
custodian and fund accounting and transfer agent and the Fund's dividend dis-
bursing agent. State Street also keeps the books of account for the Fund and
the Portfolio.
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<PAGE>
EXPENSES. In addition to the fees payable to Morgan, FDI and Pierpont Group,
Inc. under the various agreements discussed under Trustees, Advisor, Co-Admin-
istrator, and Administrative Services Agent above and Shareholder Servicing be-
low, the Fund and the Portfolio are responsible for usual and customary ex-
penses associated with their respective operations. Such expenses include or-
ganization expenses, legal fees, accounting and audit expenses, insurance
costs, the compensation and expenses of the Trustees, registration fees under
federal securities laws, and extraordinary expenses applicable to the Fund or
the Portfolio. For the Fund, such expenses also include transfer, registrar and
dividend disbursement costs, the expenses of printing and mail reports, notices
and proxy statements to Fund shareholders, and filing fees under state securi-
ties laws. For the Portfolio, such expenses also include registration fees un-
der foreign securities laws, custodian fees and brokerage expenses.
Morgan has agreed that it will reimburse the Fund through at least September
30, 1998 to the extent necessary to maintain the Fund's total operating ex-
penses (which includes expenses of the Fund and the Portfolio) at the annual
rate of 0.80% of the Fund's average daily net assets. This limit does not cover
extraordinary expenses during the period. There is no assurance that Morgan
will continue this waiver beyond the specified period.
SHAREHOLDER SERVICING
Pursuant to a Shareholder Servicing Agreement with the Trust, 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 "Eligi-
ble Investor"). The Fund pays Morgan for these services at an annual rate (ex-
pressed as a percentage of the average daily net asset values of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.10% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.
The Fund's shares may be sold to or through Eligible Institutions, including
financial institutions and broker-dealers, that may be paid fees by Morgan or
its affiliates for services provided to their clients that invest in the Fund.
Organizations that provide recordkeeping or other services to certain employee
benefit or retirement plans that include the Fund as an investment alternative
may also be paid a fee.
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 525 Fifth Avenue, New York, New York 10036
or call (800) 766-7722.
The business days of the Fund and the Portfolio are the days the New York Stock
Exchange is open.
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Morgan
as shareholder servicing agent and the Fund is authorized to accept any in-
structions relating to a Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Distribu-
tor. Investors must be customers of either Morgan or an Eligible Institution or
employer-sponsored retirement plans that have designated the Fund as an invest-
ment option for the plans. Prospective investors who are not already customers
of Morgan may apply to become customers of Morgan for the sole purpose of Fund
transactions. There are no charges associated with becoming a Morgan customer
for this purpose. Morgan reserves the right to determine the customers that it
will accept, and the Fund reserves the right to determine the purchase orders
that it will accept, and the Trust reserves the right to determine the purchase
orders that it will accept.
The Fund requires a minimum initial investment of $1 million and a minimum sub-
sequent investment of $25,000. These minimum investment requirements may be
waived for certain investors, including investors for whom the Advisor is a fi-
duciary, who maintain related accounts with The JPM Institutional Funds or the
Advisor, who make investments for a group of clients, such as financial advi-
sors, trust companies and investment advisors, or who maintain retirement ac-
counts with The JPM Institutional Funds.
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<PAGE>
For investors such as investment advisors, trust companies and financial advi-
sors who make investments for a group of clients, the minimum investment in the
Fund is (i) $1 million if the account is opened for one client or (ii) $2 mil-
lion for an aggregated purchase order for more than one client. The Fund may
permit an investor who is investing for a group of clients to attain the $2
million minimum investment within a reasonable period of time that will be no
longer than thirteen months after opening its account. An employer-sponsored
retirement plan opening an account in the Fund, will be required to attain the
$2 million minimum balance within thirteen months of opening the account.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the assis-
tance of an Eligible Institution that may establish its own terms, conditions
and charges.
To purchase shares in the Fund, investors should request their Morgan represen-
tative (or a representative of their Eligible Institution) to assist them in
placing a purchase order with the Fund's Distributor and to transfer immedi-
ately available funds to the Fund's Distributor on the next business day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 766-7722 for as-
sistance with placing an order for Fund shares. If the Fund or its agent re-
ceives 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 de-
termined that day and the purchaser generally becomes a holder of record on the
next business day upon the Fund's receipt of payment. If the Fund receives a
purchase order after 4:00 P.M. New York time, the purchase is effective and is
made at the net asset value determined on the next business day, and the pur-
chaser 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. Although
there is no sales charge levied directly by the Fund, Eligible Institutions may
establish their own terms and conditions for providing their services and may
charge investors a transaction-based or other fee for their services. Such
charges may vary among Eligible Institutions but in all cases will be retained
by the Eligible Institution and not remitted to the Fund or Morgan.
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a redemp-
tion request to the Fund or may telephone J.P. Morgan 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.
The Fund executes effective redemption requests at the next determined net as-
set value per share. See Net Asset Value. See Additional Information below for
an explanation of the telephone redemption policy of The JPM Institutional
Funds.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective re-
demption are generally deposited the next business day in immediately 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 trans-
ferred in accordance with the customer's instructions, and, subject to Further
Redemption Information below, in any event are paid within seven days.
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<PAGE>
MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the applicable minimum investment amount for more than 30
days because of a redemption of shares, the Fund may redeem the remaining
shares in the account 60 days after written notice to the shareholder unless
the account is increased to the minimum investment amount or more.
FURTHER REDEMPTION INFORMATION. Investors should be aware that redemptions from
the Fund may not be processed if a redemption request is not submitted in
proper form. To be in proper form, the Fund must have received the sharehold-
er's taxpayer identification number and address. As discussed under Taxes be-
low, the Fund may be required to impose "back-up" withholding of federal income
tax on dividends, distributions and redemption proceeds when non-corporate in-
vestors have not provided a certified taxpayer identification number. In addi-
tion, if a shareholder sends a check for the purchase of Fund shares and shares
are purchased before the check has cleared, the transmittal of redemption pro-
ceeds from the shares will occur upon clearance of the check which may take up
to 15 days.
The Fund reserves the right to suspend the right of redemption and to postpone
the date of payment upon redemption for up to seven days and for such other pe-
riods as the 1940 Act or the Securities and Exchange Commission may permit. See
Redemption of Shares in the Statement of Additional Information.
EXCHANGE OF SHARES
An investor may exchange shares from the Fund into any other JPM Institutional
Fund or JPM Pierpont Fund or shares of JPM Series Trust without charge. An ex-
change 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 that
fund's minimum investment amount. Shareholders should read the prospectus of
the fund into which they are exchanging and may only exchange between fund ac-
counts that are registered in the same name, address and taxpayer identifica-
tion number. Shares are exchanged on the basis of relative net asset value per
share. Exchanges are in effect redemptions from one fund and purchases of an-
other fund and the usual purchase and redemption procedures and requirements
are applicable to exchanges. See Purchase of Shares and Redemption of Shares in
this Prospectus and in the prospectuses for the other JPM Institutional Funds,
The JPM Pierpont Funds and JPM Series Trust. See also Additional Information
below for an explanation of the telephone exchange policy of The JPM Institu-
tional Funds.
Shareholders subject to federal income tax who exchange shares in one fund for
shares in another fund may recognize capital gain or loss for federal income
tax purposes. The Fund reserves the right to discontinue, alter or limit its
exchange privilege at any time. For investors in certain states, state securi-
ties laws may restrict the availability of the exchange privilege.
DIVIDENDS AND DISTRIBUTIONS
Dividends consisting of substantially all of the Fund's net investment income,
if any, are declared and paid twice a year. The Fund may also declare an addi-
tional dividend of net investment income in a given year to the extent neces-
sary to avoid the imposition of federal excise tax on the Fund.
Substantially all the realized net capital gains, if any, of the Fund are de-
clared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund. Declared dividends and distribu-
tions are payable to shareholders of record on the record
date.
Dividends and capital gains distributions paid by the Fund are automatically
reinvested in additional shares of the Fund unless the shareholder has elected
to have them paid in cash. Dividends and distributions to be paid in cash are
credited
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<PAGE>
to the shareholder's account at Morgan or at his Eligible Institution or, in
the case of certain Morgan customers, are mailed by check in accordance with
the customer's instructions. The Fund reserves the right to discontinue, alter
or limit the automatic reinvestment privilege at any time.
NET ASSET VALUE
Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the re-
mainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. See Net As-
set Value in the Statement of Additional Information for information on valua-
tion of portfolio securities for the Portfolio.
The Fund computes its net asset value once daily at 4:15 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on the holidays listed under Net Asset Value in the Statement of Addi-
tional Information.
ORGANIZATION
The Trust was organized on 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 un-
limited number of full and fractional shares ($0.001 par value) of one or more
series. To date, shares of 24 series have been authorized and are available for
sale to the public. Only shares of the Fund are offered through this Prospec-
tus. No series of shares has any preference over any other series of shares.
See Massachusetts Trust in the Statement of Additional Information.
The Declaration of Trust for the Trust provides that no Trustee, shareholder,
officer, employee, or agent of the Fund shall be held to any personal liabili-
ty, nor shall resort be had to their private property for the satisfaction of
any obligation or claim or otherwise in connection with the affairs of the
Fund, but that the Trust property only shall be liable.
Shareholders of the Fund are entitled to one vote for each share and to the ap-
propriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and non- assessable by the Fund. The Trust does not intend to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for ac-
tion by shareholder vote as may be required by either the 1940 Act or the Dec-
laration of Trust. The Trustees will call a meeting of shareholders to vote on
removal of a Trustee upon the written request of the record holders of ten per-
cent of Trust shares and will assist shareholders in communicating with each
other as prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.
The Portfolio is organized as a trust under the laws of the State of New York.
The Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable
for all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in
which both inadequate insurance existed and the Portfolio itself was unable to
meet its obligations. Accordingly, the Trustees of the Trust believe that nei-
ther the Fund nor its shareholders will be adversely affected by reason of the
Fund's investing in the Portfolio.
TAXES
The following discussion of tax consequences is based on U.S. federal tax laws
in effect on the date of this Prospectus. These laws and regulations are sub-
ject to change by legislative or administrative action. Investors are urged to
consult
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<PAGE>
their own tax advisors with respect to specific questions as to federal taxes,
state or local taxes. See Taxes in the Statement of Additional Information. An-
nual statements as to the current federal tax status of distributions, if ap-
plicable, are mailed to shareholders after the end of the taxable year for the
Fund.
The Trust intends that the Fund will continue to qualify as a separate regu-
lated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended. For the Fund to qualify as a regulated investment company,
the Portfolio, in addition to other requirements, limits its investments so
that at the close of each quarter of its taxable year (a) no more than 25% of
its total assets are invested in the securities of any one issuer, except U.S.
Government securities, and (b) with regard to 50% of its total assets, no more
than 5% of its total assets are invested in the securities of a single issuer,
except U.S. Government securities. As a regulated investment company, the Fund
should not be subject to federal income taxes or federal excise taxes if sub-
stantially all of its net investment income and capital gains less any avail-
able capital loss carryforwards are distributed to shareholders within allow-
able time limits. The Portfolio intends to qualify as an association treated as
a partnership for federal income tax purposes. As such, the Portfolio should
not be subject to tax. The Fund's status as a regulated investment company is
dependent on, among other things, the Portfolio's continued qualification as a
partnership for federal income tax purposes.
If a correct and certified taxpayer identification number is not on file, the
Fund is required, subject to certain exemptions, to withhold 31% of certain
payments made or distributions declared to non-corporate shareholders.
Distributions of net investment income and realized net short-term capital
gains in excess of net long-term capital losses are taxable as ordinary income
to shareholders of the Fund whether such distributions are taken in cash or re-
invested in additional shares. The Fund expects a portion of the distributions
of this type to corporate shareholders of the Fund to be eligible for the divi-
dends-received deduction.
Distributions of net long-term capital gains in excess of net short-term capi-
tal losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regardless
of whether taken in cash or reinvested in additional shares. Long-term capital
gains distributions to corporate shareholders are not eligible for the divi-
dends-received deduction. As a result of the enactment of the Taxpayer Relief
Act of 1997 (the "Act"), long-term capital gain of an individual is generally
subject to a maximum rate of 28% in respect of a capital asset held directly by
such individual for more than one year but not more than eighteen months, and
the maximum rate is reduced to 20% in respect of a capital asset held in excess
of 18 months. The Act authorizes the Treasury department to promulgate regula-
tions that would apply these rules in the case of long-term capital gain dis-
tributions made by the Fund.
Any distribution of net investment income or capital gains will have the effect
of reducing the net asset value of the Fund's shares held by a shareholder by
the same amount as the distribution. If the net asset value of the shares is
reduced below a shareholder's cost as a result of such a distribution, the dis-
tribution, although constituting a return of capital to the shareholder, will
be taxable as described above.
Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term cap-
ital gain or loss if the shares have been held for more than one year, and oth-
erwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect
to such shares. In addition, no loss will be allowed on the redemption or ex-
change of shares of the Fund, if within the period beginning 30 days before the
date of such redemption or exchange and ending 30 days after such date, the
shareholder acquires (such as through dividend reinvestment) securities that
are substantially identical to shares of the Fund.
ADDITIONAL INFORMATION
The Fund sends to its shareholders annual and semi-annual reports. The finan-
cial statements appearing in annual reports are audited by independent accoun-
tants. Shareholders also will be sent confirmations of each purchase and re-
demption
16
<PAGE>
and monthly statements, reflecting all other account activity, including divi-
dends 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. The 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 Shareholder
Servicing Agent or a shareholder's Eligible Institution, may be liable for any
losses due to unauthorized or fraudulent instructions.
The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poor's 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "total return" and non-standardized total return data.
The total return shows what an investment in the Fund would have earned over a
specified period of time (one, five or ten years or since commencement of op-
erations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all re-
curring fees. This method of calculating total return is required by regula-
tions of the Securities and Exchange Commission. Total return data similarly
calculated, unless otherwise indicated, over other specified periods of time
may also be used. See Performance Data in the Statement of Additional Informa-
tion. All performance figures are based on historical earnings and are not in-
tended to indicate future performance. Shareholders may obtain performance in-
formation by calling Morgan at (800) 766-7722.
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<PAGE>
APPENDIX
The Portfolio may (a) purchase and sell exchange traded and OTC put and call
options on equity securities or indexes of equity securities, (b) purchase and
sell futures contracts on indexes of equity securities, and (c) purchase and
sell put and call options on futures contracts on indexes of equity securities.
Each of these investments is a derivative instrument as its value derives from
the underlying asset or index.
The Portfolio may use futures contracts and options for hedging and risk man-
agement purposes. The Portfolio may not use futures contracts and options for
speculation.
The Portfolio may utilize options and futures contracts to manage its exposure
to changing interest rates and/or security prices. Some options and futures
strategies, including selling futures contracts and buying puts, tend to hedge
the Portfolio's investments against price fluctuations. Other strategies, in-
cluding buying futures contracts, writing puts and calls, and buying calls,
tend to increase market exposure. Options and futures contracts may be combined
with each other or with forward contracts in order to adjust the risk and re-
turn characteristics of the Portfolio's overall strategy in a manner deemed ap-
propriate to the Advisor and consistent with the Portfolio's objective and pol-
icies. Because combined options positions involve multiple trades, they result
in higher transaction costs and may be more difficult to open and close out.
The use of options and futures is a highly specialized activity which involves
investment strategies and risks different from those associated with ordinary
portfolio securities transactions, and there can be no guarantee that their use
will increase the Portfolio's return. While the use of these instruments by the
Portfolio may reduce certain risks associated with owning its portfolio securi-
ties, these techniques themselves entail certain other risks. If the Advisor
applies a strategy at an inappropriate time or judges market conditions or
trends incorrectly, options and futures strategies may lower the Portfolio's
return. Certain strategies limit the Portfolio's possibilities to realize gains
as well as limiting its exposure to losses. The Portfolio could also experience
losses if the prices of its options and futures positions were poorly corre-
lated with its other investments or if it could not close out its positions be-
cause of an illiquid secondary market. In addition, the 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.
The Portfolio may purchase put and call options on securities, indexes of secu-
rities and futures contracts, or purchase and sell futures contracts, only if
such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the Port-
folio's total assets.
OPTIONS
PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio ob-
tains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Portfolio pays
the current market price for the option (known as the option premium). Options
have various types of underlying instruments, including specific securities,
indexes of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by al-
lowing it to expire or by exercising the option. The Portfolio may also close
out a put option position by entering into an offsetting transaction, if a liq-
uid market exists. If the option is allowed to expire, the Portfolio will lose
the entire premium it paid. If the Portfolio exercises a put option on a secu-
rity, it will sell the instrument underlying the option at the strike price. If
the Portfolio exercises an option on an index, settlement is in cash and does
not involve the actual sale of securities. If an option is American style, it
may be exercised on any day up to its expiration date. A European style option
may be exercised only on its expiration date.
The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the in-
strument underlying the option does not fall enough to offset the cost of pur-
chasing the option, a put buyer can expect to suffer a loss (limited to the
amount of the premium paid, plus related transaction costs).
A-1
<PAGE>
The features of call options are essentially the same as those of put options,
except that the purchaser of a call option obtains the right to purchase,
rather than sell, the instrument underlying the option at the option's strike
price. A call buyer typically attempts to participate in potential price in-
creases of the instrument underlying the option with risk limited to the cost
of the option if security prices fall. At the same time, the buyer can expect
to suffer a loss if security prices do not rise sufficiently to offset the cost
of the option.
SELLING (WRITING) PUT AND CALL OPTIONS. When the Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its po-
sition in a put option it writes before exercise by purchasing an offsetting
option in the market at its current price. If the market is not liquid for a
put option the Portfolio has written, however, the Portfolio must continue to
be prepared to pay the strike price while the option is outstanding, regardless
of price changes, and must continue to post margin as discussed below.
If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the pre-
mium it received. If security prices remain the same over time, it is likely
that the writer will also profit, because it should be able to close out the
option at a lower price. If security prices fall, the put writer would expect
to suffer a loss. This loss should be less than the loss from purchasing and
holding the underlying instrument directly, however, because the premium re-
ceived for writing the option should offset a portion of the decline.
Writing a call option obligates the Portfolio to sell or deliver the option's
underlying instrument in return for the strike price upon exercise of the op-
tion. The characteristics of writing call options are similar to those of writ-
ing put options, except that writing calls generally is a profitable strategy
if prices remain the same or fall. Through receipt of the option premium a call
writer offsets part of the effect of a price decline. At the same time, because
a call writer must be prepared to deliver the underlying instrument in return
for the strike price, even if its current value is greater, a call writer gives
up some ability to participate in security price increases.
The writer of an exchange traded put or call option on a security, an index of
securities or a futures contract is required to deposit cash or securities or a
letter of credit as margin and to make mark to market payments of variation
margin as the position becomes unprofitable.
OPTIONS ON INDEXES. The Portfolio may purchase and sell (write) put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indexes are similar to options on securities, ex-
cept that the exercise of securities index options is settled by cash payment
and does not involve the actual purchase or sale of securities. In addition,
these options are designed to reflect price fluctuations in a group of securi-
ties or segment of the securities market rather than price fluctuations in a
single security. The Portfolio, in purchasing or selling index options, is sub-
ject to the risk that the value of its portfolio securities may not change as
much as an index because the Portfolio's investments generally will not match
the composition of an index.
For a number of reasons, a liquid market may not exist and thus the Portfolio
may not be able to close out an option position that it has previously entered
into. When the Portfolio purchases an OTC option, it will be relying on its
counterparty to perform its obligations, and the Portfolio may incur additional
losses if the counterparty is unable to perform.
FUTURES CONTRACTS
When the Portfolio purchases a futures contract, it agrees to purchase a speci-
fied quantity of an underlying instrument at a specified future date or to make
a cash payment based on the value of a securities index. When the Portfolio
sells a
A-2
<PAGE>
futures contract, it agrees to sell a specified quantity of the underlying in-
strument at a specified future date or to receive a cash payment based on the
value of a securities index. The price at which the purchase and sale will take
place is fixed when the Portfolio enters into the contract. Futures can be held
until their delivery dates or the position can be (and normally is) closed out
before then. There is no assurance, however, that a liquid market will exist
when the Portfolio wishes to close out a particular position.
When the Portfolio purchases a futures contract, the value of the futures con-
tract tends to increase and decrease in tandem with the value of its underlying
instrument. Therefore, purchasing futures contracts will tend to increase the
Portfolio's exposure to positive and negative price fluctuations in the under-
lying instrument, much as if it had purchased the underlying instrument direct-
ly. When the Portfolio sells a futures contract, by contrast, the value of its
futures position will tend to move in a direction contrary to the value of the
underlying instrument. Selling futures contracts, therefore, will tend to off-
set both positive and negative market price changes, much as if the underlying
instrument had been sold.
The purchaser or seller of a futures contract is not required to deliver or pay
for the underlying instrument unless the contract is held until the delivery
date. However, when the Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant
(FCM). Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will
be obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.
The Portfolio will segregate liquid assets in connection with its use of op-
tions and futures contracts to the extent required by the staff of the Securi-
ties and Exchange Commission. Securities held in a segregated account cannot be
sold while the futures contract or option is outstanding, unless they are re-
placed with other suitable assets. As a result, there is a possibility that
segregation of a large percentage of the Portfolio's assets could impede port-
folio management or the Portfolio's ability to meet redemption requests or
other current obligations.
For further information about the Portfolio's use of futures and options and a
more detailed discussion of associated risks, see Investment Objectives and
Policies in the Statement of Additional Information.
A-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.
PROS384-979
The JPM Institutional U.S. Small Company Fund
PROSPECTUS
September 26, 1997
<PAGE>
PROSPECTUS
The JPM Institutional Disciplined Equity Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) 766-7722
The investment objective of The JPM Institutional Disciplined Equity Fund (the
"Fund") is to provide high total return from a broadly diversified portfolio of
equity securities. Total return will consist of realized and unrealized capital
gains and losses plus income.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING ALL OF ITS INVESTABLE AS-
SETS IN THE DISCIPLINED EQUITY PORTFOLIO (THE "PORTFOLIO"), WHICH HAS THE SAME
INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO THROUGH A
TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE INFORMATION ABOUT THE
MASTER-FEEDER STRUCTURE ON PAGE 2. THE PORTFOLIO INVESTS PRIMARILY IN THE COM-
MON STOCK AND OTHER EQUITY SECURITIES OF LARGE AND MEDIUM SIZED U.S. COMPANIES.
The fund is a series of The JPM Institutional Funds, an open end management in-
vestment company organized as a Massachusetts business trust (the "Trust").
The Portfolio is advised by Morgan Guaranty Trust Company of New York ("Morgan"
or the "Advisor").
This Prospectus sets forth concisely the information about the Fund that a pro-
spective investor should know before investing and should be retained for fu-
ture reference. Additional information has been filed with the Securities and
Exchange Commission in a Statement of Additional Information dated September
26, 1997, as amended or supplemented from time to time. This information is in-
corporated herein by reference and is available without charge upon written re-
quest from the Fund's Distributor or by calling (800) 221-7930. The Fund's Dis-
tributor is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston, Mas-
sachusetts 02109, Attention: The JPM Institutional Funds.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR EN-
DORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORA-
TION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY. THE VALUE OF AN
INVESTMENT IN THE FUND MAY FLUCTUATE AND MAY, AT THE TIME IT IS REDEEMED, BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED.
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 SEPTEMBER 26, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Expense Table.............................................................. 1
Financial Highlights....................................................... 2
Information About the Master-Feeder
Structure................................................................. 2
Who May Be a Suitable Investor in the Fund................................. 3
Investment Objective and Policies.......................................... 3
Additional Investment Practices and Risks.................................. 4
Performance Information Derived from Private Accounts...................... 6
Management of the Fund and Portfolio....................................... 7
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Shareholder Inquiries and Services......................................... 9
Purchase of Shares......................................................... 10
Redemption of Shares....................................................... 11
Exchange of Shares......................................................... 11
Dividends and Distributions................................................ 11
Net Asset Value............................................................ 12
Taxes...................................................................... 12
Organization............................................................... 12
Additional Information..................................................... 13
</TABLE>
<PAGE>
The JPM Institutional Disciplined Equity Fund
EXPENSE TABLE
An investment in the Fund is not subject to any sales charges or redemption
fees. Operating expenses described below include the expenses of both the Fund
and the Portfolio. The Trustees believe that the Fund's operating expenses are
approximately equal to or less than would be the case if the Fund invested its
assets directly in securities instead of investing all of its investable assets
in the Portfolio.
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Charge Imposed on Purchases(1).............................. None
Sales Charge Imposed on Reinvested Distributions.......................... None
Deferred Sales Load....................................................... None
Redemption Fees........................................................... None
Exchange Fee.............................................................. None
ANNUAL OPERATING EXPENSES(2)
Advisory Fees............................................................. 0.35%
Rule 12b-1 Fees........................................................... None
Other Expenses (after expense reimbursement).............................. 0.10%
-----
Total Operating Expenses (after expense reimbursement).................... 0.45%
=====
</TABLE>
- -------
(1) Certain Eligible Institutions (defined below) may impose fees in connection
with the purchase of the Fund's shares through such institutions.
(2) These expenses are expressed as a percentage of average net assets for the
Fund after expense reimbursement for the period indicated in Financial High-
lights below and through September 30, 1998. See Management of the Fund and
Portfolio-- Expenses. Without such reimbursement, Other Expenses and Total Op-
erating Expenses were 0.99% and 1.34%, respectively, on an annualized basis.
EXAMPLE
An investor would pay the following expenses on a hypothetical $1,000 invest-
ment, assuming a 5% annual return and redemption at the end of each time peri-
od. (The Fund's minimum initial investment is greater than $1,000.)
<TABLE>
<S> <C>
1 Year.................................................................... $ 5
3 Years................................................................... $ 14
5 Years................................................................... $ 25
10 Years................................................................... $ 57
</TABLE>
The above expense table is designed to assist investors in understanding the
various estimated direct and indirect costs and expenses that investors in the
Fund bear. For a complete description of contractual arrangements and other ex-
penses applicable to the Fund and the Portfolio, see Management of the Fund and
Portfolio and Shareholder Inquiries and Services -- Shareholder Servicing. THE
EXAMPLE IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES AND SHOULD NOT BE CONSID-
ERED A REPRESENTATION OF FUTURE PERFORMANCE OR EXPENSES. ACTUAL EXPENSES MAY BE
MORE OR LESS THAN THOSE SHOWN.
1
<PAGE>
FINANCIAL HIGHLIGHTS
The following selected data for a share outstanding for the Fund for the indi-
cated period should be read in conjunction with the financial statements and
related notes which are contained in the Fund's annual report and are incorpo-
rated by reference into the Statement of Additional Information. The following
selected data have been audited by independent accountants. The Fund's annual
report includes a discussion of those factors, strategies and techniques that
materially affected the Fund's performance during the period of the report, as
well as certain related information. A copy of the Fund's annual report will be
made available without charge upon request.
<TABLE>
<CAPTION>
FOR THE PERIOD
JANUARY 3, 1997
(COMMENCEMENT OF
OPERATIONS) TO
MAY 31, 1997
----------------
<S> <C>
Net Asset Value, Beginning of Period.......................... $ 10.00
-------
Income from Investment Operations:
Net Investment Income........................................ 0.04
Net Realized and Unrealized Gain on Investment............... 1.43
-------
Total from Investment Operations.............................. 1.47
-------
Net Asset Value, End of Period................................ $ 11.47
=======
Total Return.................................................. 14.70%(a)
=======
Ratios and Supplemental Data:
Net Assets, End of Period (in thousands)..................... $49,726
Ratios to Average Net Assets:
Expenses..................................................... 0.45%(b)
Net Investment Income........................................ 1.58%(b)
Decrease Reflected in Expense Ratio due to Expense Reimburse-
ment........................................................ 0.89%(b)
</TABLE>
- -------
(a) Not Annualized.
(b) Annualized.
INFORMATION ABOUT THE MASTER-FEEDER STRUCTURE
The Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio, which has an identical investment objec-
tive. The Fund is a feeder fund and the Portfolio is the master fund in a so-
called master-feeder structure.
In addition to the Fund, other feeder funds may invest in the Portfolio, and
information about these other feeder funds is available from the Fund's Dis-
tributor. The other feeder funds invest in the Portfolio on the same terms as
the Fund and bear a proportionate share of the Portfolio's expenses. The other
feeder funds may sell shares on different terms and under a different pricing
structure than the Fund, which may produce different performance results.
There are certain risks associated with an investment in a master-feeder struc-
ture. Large scale redemptions by other feeder funds in the Portfolio may reduce
the diversification of the Portfolio's investments, reduce economies of scale
and increase the Portfolio's operating expenses. If the Board of Trustees of
the Portfolio approves a change to the investment objective of the Portfolio
that is not approved by the Fund's Board of Trustees, the Fund would be re-
quired to withdraw its investment in the Portfolio and engage the services of
an investment advisor or find a substitute master fund. Withdrawal of the
Fund's interest in the Portfolio might cause the Fund to incur expenses it
would not otherwise be required to pay.
If the Fund is requested to vote on a matter affecting the Portfolio, the Fund
will call a meeting of its shareholders to vote on the matter. The Fund will
vote on any matter at the meeting of the Portfolio's investors in the same pro-
portion
2
<PAGE>
that the Fund's shareholders voted on the matter. The Fund will vote the
shares held by Fund shareholders who do not vote in the same proportion as the
shares of Fund shareholders who do vote.
WHO MAY BE A SUITABLE INVESTOR IN THE FUND
The Fund is designed for investors seeking enhanced total return relative to
that of large and medium sized U.S. companies, typically represented by the
Standard & Poor's 500 Composite Stock Price Index (the "S&P 500 Index" or the
"Index"). The Portfolio is designed to have a volatility of return similar to
that of the Index. The Portfolio invests in a portfolio of common stocks and
other equity securities of large and medium sized companies broadly diversi-
fied across sectors, industries and issuers. THE FUND DOES NOT REPRESENT A
COMPLETE INVESTMENT PROGRAM NOR IS THE FUND SUITABLE FOR ALL INVESTORS.
INVESTMENT OBJECTIVE AND POLICIES
The Fund's investment objective is to provide high total return from a broadly
diversified portfolio of equity securities. Total return will consist of real-
ized and unrealized capital gains and losses plus income. The Fund seeks to
achieve its objective by investing all of its investable assets in the Portfo-
lio, which has the same objective as the Fund. The Portfolio invests primarily
in the common stock and other equity securities of large and medium sized U.S.
companies.
The Advisor intends to manage the Portfolio actively in pursuit of its invest-
ment objective. The Portfolio does not intend to respond to short-term market
fluctuations or to acquire securities for the purpose of short-term trading;
however, it may take advantage of short-term trading opportunities that are
consistent with its objective. To the extent the Portfolio engages in short-
term trading, it may realize short-term capital gains or losses and incur in-
creased transaction costs. The Portfolio turnover rate generally should not
exceed 100%. The portfolio turnover rate for the fiscal period December 30,
1996 (commencement of operations) through May 31, 1997 was 20%. The average
brokerage commission rate per share paid by the Portfolio for the fiscal pe-
riod December 30, 1996 (commencement of operations) through May 31, 1997 was
$0.0280.
Since the investment characteristics of the Fund correspond directly to those
of the Portfolio, the following is a discussion of the investment policies and
risks of the Portfolio.
PRIMARY INVESTMENTS. Under normal market conditions, the Advisor intends to
keep the Portfolio essentially fully invested and at least 65% of its total
assets will be invested in common stocks and other equity securities. Equity
securities include exchange-traded, over-the-counter and unlisted common and
preferred stocks, warrants, rights, convertible securities, depository re-
ceipts, trust certificates, limited partnership interests and equity partici-
pations. The Portfolio may invest to a limited extent in equity securities of
foreign issuers.
HOW INVESTMENTS ARE SELECTED. The Portfolio seeks to enhance returns exclu-
sively through the selection of undervalued securities. Based on the insights
gained from the fundamental research of the Advisor's equity analysts, the Ad-
visor uses a dividend discount model to value securities and to rank a uni-
verse of large and medium capitalization companies within industry sectors ac-
cording to their relative value. The Advisor then buys and sells securities
within each industry sector based on this valuation process.
In addition, the Advisor uses its disciplined portfolio construction process
to seek to reduce the Portfolio's volatility relative to the S&P 500. The Ad-
visor attempts to match the Portfolio to various risk characteristics of the
Index. For instance, the Advisor keeps the industry sector weightings, the av-
erage market capitalization and other broad characteristics of the Portfolio
comparable to those of the Index and limits the underweighting or
overweighting of individual securities relative to their weighting in the In-
dex. Finally, the Portfolio holds a large number of stocks to enhance its di-
versification.
THE S&P 500 INDEX. The Index is a market weighted compilation of 500 common
stocks selected on a statistical basis by Standard & Poor's. Total return for
the Index assumes reinvestment of dividends. The Index is typically composed
of
3
<PAGE>
issues in the following sectors: industrial, financial, public utilities and
transportation. Most stocks that comprise the Index are traded on the New York
Stock Exchange, although some are traded on the American Stock Exchange and in
the over-the-counter market.
ADDITIONAL INVESTMENT PRACTICES AND RISKS
WARRANTS AND CONVERTIBLE SECURITIES. Warrants acquired by the Portfolio enti-
tle it to buy common stock from the issuer at a specified price and time. War-
rants are subject to the same market risks as stocks, but may be more volatile
in price. The Portfolio's investment in warrants will not entitle it to re-
ceive dividends or exercise voting rights and will become worthless if the
warrants cannot be profitably exercised before their expiration dates. Con-
vertible debt securities and preferred stock entitle the Portfolio to acquire
the issuer's stock by exchange or purchase for a predetermined rate. Convert-
ible securities are subject both to the credit and interest rate risks associ-
ated with fixed income securities and to the stock market risk associated with
equity securities.
DEPOSITORY RECEIPTS. Depository receipts are typically issued by a U.S. or
foreign bank or trust company and evidence ownership of underlying securities
of a U.S. or foreign issuer. Unsponsored programs are organized independently
and without the cooperation of the issuer of the underlying securities. As a
result, available information concerning the issuer may not be as current as
for sponsored depository instruments, and their prices may be more volatile
than if they were sponsored by the issuers of the underlying securities.
INVESTMENTS IN OTHER INVESTMENT COMPANIES. The Portfolio is permitted to in-
vest up to 10% of its total assets in shares of other investment companies and
up to 5% of its total assets in any one investment company as long as that in-
vestment does not represent more than 3% of the total voting stock of the ac-
quired investment company. Investments in the securities of other investment
companies may involve duplication of advisory fees and other expenses.
RESTRICTED AND ILLIQUID SECURITIES. The Portfolio may invest up to 15% of its
net assets in illiquid securities, including certain restricted and private
placement securities. 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 se-
curities will reflect any limitations on their liquidity. The Portfolio may
also purchase Rule 144A securities eligible for resale to institutional in-
vestors without registration under the Securities Act of 1933. These securi-
ties may be determined to be liquid in accordance with guidelines established
by the Advisor and approved by the Trustees. The Trustees will monitor the Ad-
visor's implementation of these guidelines on a periodic basis.
MONEY MARKET INSTRUMENTS. The Portfolio is permitted to invest in money market
instruments although it intends to stay invested in equity securities to the
extent practical in light of its objective. Under normal circumstances, the
Portfolio will purchase money market instruments to invest temporary cash bal-
ances or to maintain liquidity to meet redemptions. However, the Portfolio may
also invest in money market instruments without limitation as a temporary de-
fensive measure taken in the Advisor's judgment during, or in anticipation of,
adverse market conditions. These money market instruments include obligations
issued or guaranteed by the U.S. Government or any of its agencies and instru-
mentalities, commercial paper, bank obligations, repurchase agreements and
other debt obligations of U.S. and foreign issuers. If a repurchase agreement
counterparty defaults on its obligations, the Portfolio may, under some cir-
cumstances, be limited or delayed in disposing of the repurchase agreement
collateral to recover its investment.
WHEN-ISSUED AND FORWARD COMMITMENT TRANSACTIONS. The Portfolio may purchase
when-issued securities and enter into other forward commitments to purchase or
sell securities. The value of securities purchased on a when-issued or forward
commitment basis may decline between the purchase date and the settlement
date.
FUTURES AND OPTIONS TRANSACTIONS. The Portfolio may enter into derivative con-
tracts to hedge against fluctuations in securities prices, changes in interest
rates or as a substitute for the purchase or sale of securities. The Portfolio
may also use derivative contracts for risk management purposes. See Risk Man-
agement in the Statement of Additional Informa-
4
<PAGE>
tion. The Portfolio may purchase and sell (write) exchange traded and over-
the-counter put and call options on securities and securities indexes, pur-
chase and sell futures contracts on securities and securities indexes and pur-
chase and sell (write) put and call options on futures contracts on securities
and securities indexes. Some options and futures strategies, including selling
futures contracts, buying puts and writing calls, tend to hedge the Portfo-
lio's investments against price fluctuations. Other strategies, including buy-
ing futures contracts, writing puts and buying calls, tend to increase market
exposure. Options and futures contracts may be combined with each other in or-
der to adjust the risk and return characteristics of the Portfolio's overall
strategy in a manner consistent with the Portfolio's objective and policies.
All of the Portfolio's transactions in derivative contracts involve a risk of
loss or depreciation due to unanticipated adverse changes in securities pric-
es. The Portfolio may incur liabilities to a counterparty in connection with
transactions in futures contracts and the writing of options that exceeds the
Portfolio's initial investment. The Portfolio may also lose the entire premium
paid for purchased options that expire before they can be profitably exercised
by the Portfolio. In addition, the Portfolio incurs transaction costs in open-
ing and closing positions in derivative contracts.
Derivative contracts may sometimes increase or leverage the Portfolio's expo-
sure to a particular market risk thereby increasing the price volatility of
the Portfolio. The Portfolio is required to offset the leverage inherent in
derivative contracts by maintaining a segregated account consisting of cash or
liquid securities, by holding offsetting portfolio securities or contracts or
by covering written options.
The Portfolio's success in using derivative contracts to hedge portfolio as-
sets depends on the degree of price correlation between the derivative con-
tract and the hedged asset. Imperfect correlation may be caused by several
factors, including temporary price disparities among the trading markets for
the derivative contract, the assets underlying the derivative contract and the
Portfolio's assets.
During periods of extreme market volatility, a commodity or options exchange
may suspend or limit trading in an exchange-traded derivative contract, which
may make the contract temporarily illiquid and difficult to price. The Portfo-
lio's ability to terminate over-the-counter derivative contracts may depend on
the cooperation of the counterparties to such contracts. For thinly traded de-
rivative contracts, the only source of price quotations may be the selling
dealer or counterparty. In addition, derivative securities and over-the-
counter derivative contracts involve a risk that the issuer or counterparty
will fail to perform its contractual obligations.
The Portfolio will not engage in a transaction in futures or options on
futures for risk management purposes if, immediately thereafter, the sum of
initial margin deposits and premiums required to establish risk management po-
sitions in futures contracts and options on futures would exceed 5% of the
Portfolio's net assets.
PORTFOLIO SECURITIES LOANS. The Portfolio may lend portfolio securities with a
value up to one-third of its total assets. Each loan must be fully collateral-
ized by cash or other eligible assets. The Portfolio may pay reasonable fees
in connection with securities loans. The Advisor will evaluate the creditwor-
thiness of prospective institutional borrowers and monitor the adequacy of the
collateral to reduce the risk of default by borrowers.
BORROWING AND REVERSE REPURCHASE AGREEMENTS. The Portfolio may (1) borrow
money from banks solely for temporary or emergency (but not for leverage) pur-
poses and (2) enter into reverse repurchase agreements for any purpose. The
aggregate amount of such borrowings and reverse repurchase agreements may not
exceed one-third of the Portfolio's total assets less liabilities (other than
borrowings). For the purposes of the Investment Company Act of 1940 (the "1940
Act"), reverse repurchase agreements are considered a form of borrowing by the
Portfolio and, therefore, a form of leverage. Leverage may cause any gains or
losses of the Portfolio to be magnified.
SHORT-TERM TRADING. The Portfolio may sell a portfolio security without regard
to the length of time such security has been held if, in the Advisor's view,
the security meets the criteria for disposal. The annual portfolio turnover
rate of
5
<PAGE>
the Portfolio is generally not expected to exceed 100%. A high portfolio turn-
over rate involves higher costs to the Portfolio in the form of dealer spreads
and brokerage commissions. This policy is currently subject to certain re-
quirements for qualification of the Fund as a regulated investment company un-
der the Internal Revenue Code of 1986, as amended (the "Code"). Effective as
of June 1, 1998, the limitations imposed by the Code with respect to short-
term trading will no longer apply to the Fund. See "Taxes" in the Statement of
Additional Information. These limitations may, in certain circumstances, have
made it more difficult for the Fund to manage the risk and to engage in cer-
tain foreign currency, option or other transactions. The elimination of these
restrictions should give the Fund more flexibility with respect to its invest-
ment and hedging strategies.
INVESTMENT POLICIES AND RESTRICTIONS. Except as otherwise stated in this Pro-
spectus or the Statement of Additional Information, the Fund's and the Portfo-
lio's investment objective, policies and restrictions are not fundamental and
may be changed without shareholder approval. The Portfolio is diversified and
therefore may not, with respect to 75% of its total assets (1) invest more
than 5% of its total assets in the securities of any one issuer, other than
U.S. Government securities, or (2) acquire more than 10% of the outstanding
voting securities of any one issuer. The Portfolio will not concentrate (in-
vest 25% or more of its total assets) in the securities of issuers in any one
industry.
PERFORMANCE INFORMATION DERIVED FROM PRIVATE ACCOUNTS
The Fund commenced operations on January 3, 1997 and has a limited investment
performance record. However, the Fund's investment objective and policies and
the Portfolio's strategies are substantially similar to those employed by the
Advisor and its affiliates with respect to certain discretionary investment
management accounts under their management ("Private Accounts"). The chart be-
low shows the historical investment performance for a composite of these Pri-
vate Accounts ("Private Account Composite").
The investment performance of the Private Account Composite does not represent
the Fund's performance nor should it be interpreted as indicative of the
Fund's future performance. The accounts in the Private Account Composite are
not subject to the investment limitations, diversification requirements and
other restrictions imposed on registered mutual funds by the 1940 Act and the
Code. If the accounts included in the Private Account Composite had been sub-
ject to the requirements imposed on mutual funds, their performance might have
been lower.
The investment performance results of the Private Account Composite reflect
the deduction of the Fund's total annual operating expenses, after expense re-
imbursements of 0.45%. The Fund's total annual operating expenses after ex-
pense reimbursements are higher than the highest investment advisory fee
charged to any private account in the Private Account Composite. The Private
Account Composite performance figures are time-weighted rates of return which
include all income and accrued income and realized and unrealized gains or
losses.
6
<PAGE>
<TABLE>
<CAPTION>
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------- --------------------------------
THREE FROM ONE FIVE FROM
MONTHS FEBRUARY 1, 1997* YEAR YEARS NOVEMBER 1, 1989**
------------- ----------------- ------ ------ ------------------
<S> <C> <C> <C> <C> <C> <C> <C>
AS OF JUNE 30,
1997
Disciplined
Equity Fund..... 18.15% 14.09% N/A N/A N/A
S&P 500 Index.... 17.46% 13.51% 34.70% 19.78% 16.55%
Private Account
Composite....... 18.10% 14.28% 35.23% 20.34% 17.93%
AS OF AUGUST 31,
1997
Disciplined
Equity Fund .... 7.36% 17.28% N/A N/A N/A
S&P 500 Index.... 6.48% 15.68% 40.65% 19.77% 16.45%
Private Account
Composite....... 7.42% 17.45% 42.44% 20.62% 17.92%
</TABLE>
* The inception date of the Fund is January 3, 1997 and performance is calcu-
lated as of February 1, 1997.
**The inception date of the Private Account Composite is November 1, 1989.
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURNS FOR THE YEAR ENDED DECEMBER 31,
1996 1995 1994 1993 1992 1991 1990
------- ------- ------ ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Private Account
Composite.............. 23.25% 37.87% 2.21% 10.20% 11.75% 30.39% -2.94%
S&P 500 Index........... 22.96% 37.58% 1.32% 10.08% 7.62% 30.47% -3.11%
</TABLE>
The Private Account Composite includes all discretionary accounts managed by
the Advisor and its affiliates invested solely in equity securities of large
and medium sized companies using the same investment strategy that the Advisor
employs on behalf of the Portfolio. The inception date for the Private Account
Composite was November 1, 1989. Prior to January 1, 1993, when the Association
for Investment Management and Research (AIMR) performance presentation require-
ments went into effect, the Advisor's composites may not have included all dis-
cretionary accounts.
MANAGEMENT OF THE FUND AND PORTFOLIO
TRUSTEES. The Fund is a series of the Trust, and the Portfolio is a subtrust of
The Series Portfolio (the "Portfolio Trust"). The Trustees of the Trust and the
Portfolio Trust decide upon matters of general policy and review the actions of
Morgan and other service providers. The Trustees of the Trust and the Portfolio
Trust are identified below. A majority of the non-interested Trustees have
adopted written procedures to deal with any potential conflicts of interest
that may arise because the same persons are Trustees of both the Trust, the
Portfolio Trust and The JPM Pierpont Funds.
<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 of
the Trust and the Portfolio Trust;
Chairman, Pierpont Group, Inc.
Michael P. Mallardi............. Former Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group
</TABLE>
7
<PAGE>
ADVISOR. The Fund has not retained the services of an investment advisor be-
cause the Fund seeks to achieve its investment objective by investing all of
its investable assets in the Portfolio. The Portfolio has retained the services
of Morgan as investment advisor. Morgan provides investment advice and portfo-
lio management services to the Portfolio. Subject to the supervision of the
Trustees, Morgan makes the Portfolio's day-to-day investment decisions, ar-
ranges for the execution of portfolio transactions and generally manages the
Portfolio's investments.
Morgan, with principal offices at 60 Wall Street, New York, New York 10260, is
a New York trust company that 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 advisor to individual
and institutional clients with combined assets under management of over $234
billion.
Morgan uses a sophisticated, disciplined, collaborative process for managing
all asset classes. For equity portfolios, this process utilizes fundamental re-
search, systematic stock selection and disciplined portfolio construction. Mor-
gan believes that the market price of a security will, over time, move towards
its fundamental value, notwithstanding short-term fluctuations in price. Morgan
maintains an active presence in all of the world's leading financial markets.
James C. Wiess, Vice President, is primarily responsible for the day-to-day
management and implementation of Morgan's investment process for the Portfolio
since its inception. Mr. Wiess has been employed by Morgan since 1992.
As compensation for the services rendered and related expenses borne by Morgan
under its investment advisory agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee which is computed daily and may be paid monthly at
the annual rate of 0.35% of the Portfolio's average daily net assets. INVEST-
MENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.
CO-ADMINISTRATOR. Pursuant to Co-Administration Agreements with the Trust and
the Portfolio Trust, Funds Distributor, Inc. ("FDI") serves as the Co-Adminis-
trator for the Fund and the Portfolio. FDI (i) provides office space, equipment
and clerical personnel for maintaining the organization and books and records
of the Fund and the Portfolio; (ii) provides officers for the Trust and the
Portfolio Trust; (iii) prepares and files documents required for notification
of state securities administrators; (iv) reviews and files marketing and sales
literature; (v) files Portfolio regulatory documents and mails Portfolio commu-
nications to Trustees and investors; and (vi) maintains related books and rec-
ords.
For its services under the Co-Administration Agreements, each of the Fund and
the Portfolio has agreed to pay FDI fees equal to its allocable share of an an-
nual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust, the Portfolio Trust and cer-
tain other investment companies subject to similar agreements with FDI.
ADMINISTRATIVE SERVICES AGENT. Pursuant to Administrative Services Agreements
with the Trust and the Portfolio Trust, Morgan provides administrative and re-
lated services to the Fund and the Portfolio, including services related to tax
compliance, preparation of financial statements, calculation of performance da-
ta, oversight of service providers and certain regulatory and Board of Trustees
matters.
Under the Administrative Services Agreements, each of the Fund and the Portfo-
lio has agreed to pay Morgan fees equal to its allocable share of an annual
complex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio, the other portfolios in which series of the Trust or
The JPM Pierpont Funds invest and JPM Series
8
<PAGE>
Trust and in accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their ag-
gregate average daily net assets in excess of $7 billion, less the complex-
wide fees payable to FDI.
DISTRIBUTOR. FDI, a registered broker-dealer, also serves as the Distributor
of shares of the Fund. FDI is a wholly owned indirect subsidiary of Boston In-
stitutional Group, Inc. FDI's principal business address is 60 State Street,
Suite 1300, Boston, Massachusetts 02109.
FUND SERVICES AGREEMENT. Pursuant to Fund Services Agreements with the Trust
and the Portfolio Trust, Pierpont Group, Inc. ("PGI"), 461 Fifth Avenue, New
York, New York 10017, assists the Trustees in exercising their overall super-
visory responsibilities for the affairs of the Trust and the Portfolio Trust.
PGI provides these services for a fee approximating its reasonable cost for
providing these services to the Trust, Portfolio Trust and certain other reg-
istered investment companies with similar agreements with PGI.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company ("State
Street"), 225 Franklin Street, Boston, Massachusetts 02110, serves as the cus-
todian and fund accounting agent for the Fund and the Portfolio and as the
Fund's transfer and dividend disbursing agent. State Street keeps the books of
account for the Fund and the Portfolio.
EXPENSES. In addition to the fees payable to the service providers identified
above, the Fund and the Portfolio are responsible for usual and customary ex-
penses associated with their respective operations. These include, among other
things, organization expenses, legal fees, audit and accounting expenses, in-
surance costs, the compensation and expenses of the Trustees, interest, taxes
and extraordinary expenses (such as for litigation). For the Fund, such ex-
penses also include printing and mailing reports, notices and proxy statements
to shareholders and registration fees under federal and state securities laws.
For the Portfolio, such expenses also include registration fees under foreign
securities laws and brokerage commissions.
Morgan has agreed that it will, at least through September 30, 1998, maintain
the Fund's total operating expenses (which include expenses of the Fund and
the Portfolio) at the annual rate of 0.45% of the Fund's average daily net as-
sets. This expense limitation does not cover extraordinary expenses during the
period. There is no assurance that Morgan will continue this waiver beyond the
specified period.
SHAREHOLDER INQUIRIES AND SERVICES
Shareholders may call J.P. Morgan Funds Services at (800) 766-7722 for infor-
mation about the Fund and assistance with shareholder transactions.
SHAREHOLDER SERVICING. Under a shareholder servicing agreement with the Trust,
Morgan, acting directly or through an agent (designated as an Eligible Insti-
tution), provides account administration and personal and account maintenance
services to Fund shareholders. These services include assisting in the mainte-
nance of accurate account records; processing orders to purchase and redeem
shares of the Fund; and responding to shareholder inquiries. The Fund has
agreed to pay Morgan a fee for these services at an annual rate of 0.10% of
the average daily net assets of the Fund.
The Fund may be sold to or through Eligible Institutions, including financial
institutions and broker-dealers, that may be paid fees by Morgan or its affil-
iates for services provided to their clients that invest in the Fund. See Eli-
gible Institutions. Organizations that provide recordkeeping or other services
to certain employee benefit or retirement plans that include the Fund as an
investment alternative may also be paid a fee.
The business days of the Fund and the Portfolio are the days the New York
Stock Exchange is open.
9
<PAGE>
PURCHASE OF SHARES
METHOD OF PURCHASE. Investors may open accounts with the Fund only through the
Distributor. All purchase transactions in Fund accounts are processed by Mor-
gan as shareholder servicing agent and the Fund is authorized to accept any
instructions relating to the Fund account from Morgan as shareholder servicing
agent for the customer. All purchase orders must be accepted by the Fund's
Distributor. Investors must be customers of either Morgan or an Eligible In-
stitution or an employer-sponsored retirement plans that have designated the
Fund as an investment option for the plans. Prospective investors who are not
already customers of Morgan may apply to become customers of Morgan for the
sole purpose of Fund transactions. There are no charges associated with becom-
ing 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 deter-
mine the purchase orders that it will accept.
MINIMUM INVESTMENT REQUIREMENTS. The Fund requires a minimum initial invest-
ment of $1,000,000. The minimum subsequent investment is $25,000. These mini-
mum investment requirements may be waived for certain investors including in-
vestors for whom the Advisor is a fiduciary, or who maintain related accounts
with the Fund, other JPM Institutional funds or with the Advisor or who make
investments for a group of clients, such as financial advisors, trust compa-
nies and investment advisors, or who maintain retirement accounts with the
Fund.
PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous ba-
sis without a sales charge at the net asset value next determined after re-
ceipt of an order. Prospective investors may purchase shares with the assis-
tance of an Eligible Institution that may establish its own terms, conditions
and charges.
To purchase Fund shares, investors should request their Morgan representative
(or a representative of their Eligible Institution) to assist them in placing
a purchase order with the Fund's Distributor and to transfer immediately
available funds to the Fund's Distributor on the next business day. Any share-
holder may also call J.P. Morgan Funds Services at (800) 766-7722 for assis-
tance in placing an order for shares. If the Fund or its agent receives a pur-
chase 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 becomes a holder of record on the next business day
upon the Fund's receipt of payment in immediately available funds. If the Fund
or its agent 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 purchase 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
subaccounting, answering client inquiries regarding the Trust, assisting cli-
ents in changing dividend options, account designations and addresses, provid-
ing periodic statements showing the client's account balance and integrating
these statements with those of other transactions and balances in the client's
other accounts serviced by the Eligible Institution, transmitting proxy state-
ments, periodic reports, updated prospectuses and other communications to
shareholders and, with respect to meetings of shareholders, collecting, tabu-
lating and forwarding executed proxies and obtaining such other information
and performing such other services as Morgan or the Eligible Institution's
clients may reasonably request and agree upon with the Eligible Institution.
Although there is no sales charge levied directly by the Fund, Eligible Insti-
tutions may establish their own terms and conditions for providing their serv-
ices and may charge investors a transaction-based or other fee for their serv-
ices. Such charges may vary among Eligible Institutions but in all cases will
be retained by the Eligible Institution and not remitted to the Fund or Mor-
gan.
10
<PAGE>
REDEMPTION OF SHARES
METHOD OF REDEMPTION. To redeem Fund shares, an investor may instruct Morgan or
his or her Eligible Institution, as appropriate, to submit a redemption request
to the Fund or may telephone J.P. Morgan 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. The Fund exe-
cutes effective redemption requests at the next determined net asset value per
share ("NAV"). See Net Asset Value.
A redemption request received by the Fund or its agent prior to 4:00 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Cash proceeds of an effective
redemption are generally deposited the next business day in immediately avail-
able funds to the shareholder's account at Morgan or at his Eligible Institu-
tion or, in the case of certain Morgan customers, are mailed by check or wire
transferred in accordance with the customer's instructions, and, subject to
Further Redemption Information below, in any event are paid within seven days.
OTHER REDEMPTION PROCESSING INFORMATION. Redemption requests may not be proc-
essed if the redemption request is not submitted in proper form. To be in
proper form the Fund must have received the shareholder's certified taxpayer
identification number and address. In addition, if shares were paid for by
check and the check has not yet cleared, redemption proceeds will not be trans-
mitted until the check has cleared, which may take up to 15 days. The Fund re-
serves the right to suspend the right of redemption or postpone the payment of
redemption proceeds to the extent permitted by the Securities and Exchange Com-
mission.
MANDATORY REDEMPTION. If a redemption of shares reduces the value of a share-
holder's account balance below the required initial minimum investment, the
Fund may redeem the remaining shares in the account 60 days after providing
written notice to the shareholder of the mandatory redemption. An account will
not be subject to mandatory redemption if the shareholder purchases sufficient
shares during the 60-day period to increase the account balance to the required
minimum investment amount.
EXCHANGE OF SHARES
Shares of the Fund may be exchanged for shares of any of The JPM Pierpont Funds
or The JPM Institutional Funds at net asset value without a sales charge.
Shareholders should read the prospectus of the fund into which they are ex-
changing and may only exchange between fund accounts that are registered in the
same name, address and taxpayer identification number. After the exchange,
shareholders must meet the minimum investment requirements for the fund in
which they are then investing. An exchange is a redemption of shares from one
fund and a purchase of shares in another and is therefore a taxable transaction
that may have tax consequences. The Fund reserves the right to discontinue, al-
ter or limit the exchange privilege at any time. Exchanges are available only
in states where an exchange may legally be made.
DIVIDENDS AND DISTRIBUTIONS
The Fund's net investment income and realized net capital gains, if any, will
be distributed at least annually. Dividends and distributions will be payable
to shareholders of record on the record date. The Fund's dividends and distri-
butions are paid in additional Fund shares unless the shareholder elects to
have them paid in cash. The tax treatment of dividends and distributions is the
same whether they are paid in shares or cash. Cash dividends and distributions
are either (1) credited to the shareholder's account at Morgan or the share-
holder's Eligible Institution or (2) in the case of certain Morgan clients,
paid by a check mailed in accordance with the client's instructions.
11
<PAGE>
NET ASSET VALUE
The Fund computes its NAV at 4:15 p.m. New York time on each business day. The
NAV is determined by subtracting from the value of the Fund's total assets (the
value of the Fund's investment in the Portfolio) the amount of its liabilities
and dividing the remainder by the number of outstanding shares.
TAXES
The Fund intends to elect to be treated as a regulated investment company under
Subchapter M of the Code. To qualify as such, the Fund must satisfy certain re-
quirements relating to the sources of its income, diversification of its assets
and distribution of its income to shareholders. As a regulated investment com-
pany, the Fund will not be subject to federal income or excise tax on any net
investment income and net realized capital gains that are distributed to share-
holders in accordance with certain timing requirements of the Code.
Dividends paid by the Fund from net investment income, certain net foreign cur-
rency gains, and the excess of net short-term capital gain over net long-term
capital loss will be taxable to its shareholders as ordinary income. Distribu-
tions paid by the Fund from the excess of net long-term capital gain over net
short-term capital loss and designated as "capital gain dividends" will be tax-
able as long-term capital gains regardless of how long shareholders have held
their shares. These tax consequences will apply whether distributions are re-
ceived in additional shares or in cash. As a result of the enactment of the
Taxpayer Relief Act of 1997 (the "Act"), long-term capital gain of an individ-
ual is generally subject to a maximum rate of 28% in respect of a capital asset
held directly by such individual for more than one year but not more than eigh-
teen months, and the maximum rate is reduced to 20% in respect of a capital as-
set held in excess of 18 months. The Act authorizes the Treasury department to
promulgate regulations that would apply these rules in the case of capital gain
dividends distributed by the Fund. The Fund's dividends that are paid to its
corporate shareholders and are attributable to qualifying dividends received by
the Portfolio from U.S. domestic corporations may be eligible, in the hands of
these corporate shareholders, for the corporate dividends-received deduction,
subject to certain holding period requirements and debt financing limitations
under the Code. Shareholders will be informed annually about the amount and
character, for federal income tax purposes, of distributions received from the
Fund.
The Fund anticipates that it may be required to pay foreign taxes on its income
from certain foreign investments, which will reduce its return from those in-
vestments. The Fund will not be eligible to pass through any foreign taxes to
its shareholders, who therefore will not directly take such taxes into account
on their own tax returns.
Investors should consider the adverse tax implications of buying shares before
a distribution. Investors who purchase shares shortly before the record date
for a distribution will pay a per share price that includes the value of the
anticipated distribution and will be taxed on the distribution even though the
distribution represents a return of a portion of the purchase price.
Redemptions of shares, whether for cash or in-kind, are taxable events on which
a shareholder may recognize a gain or loss and may be subject to special tax
rules if the redeemed shares were held less than six months or if a reinvest-
ment occurs. Individuals and certain other shareholders may be subject to 31%
backup withholding of federal income tax on distributions and redemptions if
they fail to furnish their correct taxpayer identification number and certain
certifications or if they are otherwise subject to backup withholding.
In addition to federal taxes, a shareholder may be subject to state or local
taxes on distributions of income and gains received on shares of the Fund.
Shareholders are urged to consult their own tax advisors concerning specific
questions about federal, state and local taxes.
ORGANIZATION
The Trust was organized on November 4, 1992 as a Massachusetts business trust.
The Trust currently has 24 series of shares, including the Fund, that are of-
fered to the public.
12
<PAGE>
Shareholders of the Fund are entitled to one full or fractional vote for each
share of the Fund. There is no cumulative voting and shares have no preemption
or conversion rights. The Trust does not intend to hold annual meetings of
shareholders. The Trustees will call special meetings of shareholders to the
extent required by the Trust's Declaration of Trust or the 1940 Act. The 1940
Act requires the Trustees, under certain circumstances, to call a meeting to
allow shareholders to vote on the removal of a Trustee and to assist share-
holders in communicating with each other.
ADDITIONAL INFORMATION
SHAREHOLDER REPORTS AND CONFIRMATIONS. The Fund sends to its shareholders an-
nual and semiannual reports. The financial statements appearing in annual re-
ports are audited by independent accountants. Shareholders will also be sent
confirmations of each purchase and redemption transaction and monthly state-
ments reflecting all account activity.
TELEPHONE TRANSACTIONS. All shareholders are entitled to initiate redemptions
and other transactions by telephone. However, a transaction authorized by tel-
ephone and reasonably believed by the Fund, Morgan, an Eligible Institution or
the Distributor to be genuine may result in a loss to the investor if the
transaction is not in fact genuine. The Fund will employ reasonable procedures
to confirm that investor instructions communicated by telephone are genuine.
These include requiring investors to give their personal identification num-
bers and tape recording telephone instructions. If these procedures are not
followed, the Fund, Morgan, the investor's Eligible Institution or the Dis-
tributor may be liable for any losses resulting from unauthorized or fraudu-
lent instructions.
PERFORMANCE ADVERTISING. The Fund may advertise historical performance infor-
mation and compare its performance to other investments or relevant indexes.
An advertisement may also include data supplied by Lipper Analytical Services,
Inc., Micropal Inc., Morningstar Inc., Ibbotson Associates and other industry
publications.
The Fund may advertise average annual total return and other forms of total
return data. Average annual total return is determined by computing the aver-
age annual percentage change in value of $1,000 invested at NAV for specified
periods ending with the most recent calendar quarter. The total return calcu-
lation assumes a complete redemption of the investment at the end of the rele-
vant period. The Fund may also advertise total return on a cumulative, aver-
age, year-by-year or other basis for specified periods. The investment results
of the Fund will fluctuate over time and should not be considered a represen-
tation of the Fund's performance in the future.
Performance information may be obtained by calling Morgan at (800) 766-7722.
13
<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 an offer in such jurisdiction.
PROS304-979
The
JPM Institutional
Disciplined
Equity Fund
PROSPECTUS
September 26, 1997
<PAGE>
THE JPM INSTITUTIONAL FUNDS
THE JPM INSTITUTIONAL U.S. EQUITY FUND
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
STATEMENT OF ADDITIONAL INFORMATION
SEPTEMBER 26, 1997
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
FOR THE FUND OR FUNDS LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO TIME, WHICH MAY
BE OBTAINED UPON REQUEST FROM FUNDS DISTRIBUTOR, INC., ATTENTION: THE JPM
INSTITUTIONAL FUNDS (800) 221-7930.
i:\dsfndlgl\institut\092697.pea\sai.wpf
1
<PAGE>
Table of Contents
PAGE
General . . . . . . . . . . . . . . 1 . . . .
Investment Objectives and Policies . . . . . 1
Investment Restrictions . . . . . . . . . .14
Trustees and Officers . . . . . . . . . . .18
Investment Advisor . . . . . . . . . . . . .23
Distributor . . . . . . . . . . . .26 . . . .
Co-Administrator . . . . . . . . . . . . . .27
Services Agent . . . . . . . . . . . . . . .28
Custodian and Transfer Agent . . . . . . . .29
Shareholder Servicing . . . . . . . . . . .30
Independent Accountants . . . . . . . . . .31
Expenses . . . . . . . . . . . . . .31 . . . .
Purchase of Shares . . . . . . . . . . . . .31
Redemption of Shares . . . . . . . . . . . .32
Exchange of Shares . . . . . . . . . . . . .33
Dividends and Distributions . . . . . . . .33
Net Asset Value . . . . . . . . . . . . . .33
Performance Data . . . . . . . . . . . . . .34
Portfolio Transactions . . . . . . . . . . .36
Massachusetts Trust . . . . . . . . . . . .38
Description of Shares . . . . . . . . . . .39
Taxes . . . . . . . . . . . . . . .41 . . . .
Additional Information . . . . . . . . . .45
Financial Statements . . . . . . . . . . . .46
Appendix A - Description of Securities
Ratings . . . . . . . . . . . . . . . . . A-1
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2
<PAGE>
GENERAL
This Statement of Additional Information relates only to The JPM
Institutional U.S. Equity Fund, The JPM Institutional Disciplined Equity Fund
and The JPM Institutional U.S. Small Company Fund (collectively, the "Funds").
Each of the Funds is a series of shares of beneficial interest of The JPM
Institutional Funds, an open-end management investment company formed as a
Massachusetts business trust (the "Trust"). In addition to the Funds, the Trust
consists of other series representing separate investment funds (each a "JPM
Institutional Fund"). The other JPM Institutional Funds are covered by separate
Statements of Additional Information.
This Statement of Additional Information describes the financial
history, investment objectives and policies, management and operation of each of
the Funds to enable investors to select the Funds which best suit their needs.
The Funds operate through a two-tier master-feeder investment fund structure.
This Statement of Additional Information provides additional
information with respect to the Funds and should be read in conjunction with the
relevant Fund's current Prospectus (the "Prospectus"). Capitalized terms not
otherwise defined herein have the meanings accorded to them in the Prospectus.
The Funds' executive offices are located at 60 State Street, Suite 1300, Boston,
Massachusetts 02109.
INVESTMENT OBJECTIVES AND POLICIES
THE JPM INSTITUTIONAL U.S. EQUITY FUND (the "U.S. Equity Fund") is
designed for investors who want an actively managed portfolio of selected equity
securities that seeks to outperform the S&P 500 Index. The U.S. Equity Fund's
investment objective is to provide a high total return from a portfolio of
selected equity securities. The Fund attempts to achieve its investment
objective by investing all of its investable assets in The U.S. Equity Portfolio
(the "Portfolio"), a diversified open-end management investment company having
the same investment objective as the U.S. Equity Fund.
In normal circumstances, at least 65% of the Portfolio's net assets
will be invested in equity securities consisting of common stocks and other
securities with equity characteristics comprised of preferred stock, warrants,
rights, convertible securities, trust certifications, limited partnership
interests and equity participations (collectively, "Equity Securities"). The
Portfolio's primary equity investments are the common stock of large and medium
sized U.S. corporations and, to a limited extent, similar securities of foreign
corporations.
INVESTMENT PROCESS FOR THE U.S. EQUITY PORTFOLIO
Fundamental research: Morgan's approximately 25 domestic equity
analysts, each an industry specialist with an average in excess of 10 years of
experience, follow approximately 700 predominantly large- and medium-sized U.S.
companies -- approximately 500 of which form the universe for the Portfolio's
investments. Their research goal is to forecast normalized, longer term earnings
and dividends for the companies that they cover. In doing this, they may work in
concert with
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Morgan's international equity analysts in order to gain a broader perspective
for evaluating industries and companies in today's global economy.
Systematic valuation: The analysts' forecasts are converted into
comparable expected returns using a proprietary dividend discount model, which
calculates the long-term earnings by comparing a company's current stock price
with its forecasted dividends and earnings. Within each sector, companies are
ranked by their expected return and grouped into quintiles: those with the
highest expected returns (Quintile 1) are deemed the most undervalued relative
to their long-term earnings power, while those with the lowest expected returns
(Quintile 5) are deemed the most overvalued.
Disciplined portfolio construction: A diversified portfolio is
constructed using disciplined buy and sell rules. Purchases are concentrated
among first- quintile stocks; the specific names selected reflect the portfolio
manager's judgment concerning the soundness of the underlying forecasts, the
likelihood that the perceived misvaluation will be corrected within a reasonable
time frame, and the magnitude of the risks versus the rewards. Once a stock
falls into the third quintile -- because its price has risen or its fundamentals
have deteriorated -- it generally becomes a candidate for sale. The portfolio
manager seeks to hold sector weightings close to those of the S&P 500 Index,
reflecting Morgan's belief that its research has the potential to add value at
the individual stock level, but not at the sector level. Sector neutrality is
also seen as a way to help protect the portfolio from macroeconomic risks, and
- -- together with diversification -- represents an important element of Morgan's
risk control strategy. A dedicated trading desk handles all transactions for the
Portfolio.
THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND (the "Disciplined Equity
Fund") is designed for investors seeking enhanced total return relative to that
of large and medium sized companies, typically represented by the S&P 500 Index.
The Disciplined Equity Fund's investment objective is to provide high total
return from a broadly diversified portfolio of equity securities. The Fund
attempts to achieve its investment objective by investing all of its investable
assets in The Disciplined Equity Portfolio (the "Portfolio"), a diversified
open-end management investment company having the same investment objective as
the Disciplined Equity Fund.
The Portfolio invests primarily in a diversified portfolio of common
stocks and other equity securities. Under normal circumstances, the Portfolio
expects to invest at least 65% of its total assets in such securities.
INVESTMENT PROCESS FOR THE DISCIPLINED EQUITY PORTFOLIO
Fundamental research: Morgan's approximately 25 domestic equity
analysts, each an industry specialist with an average in excess of 10 years of
experience, follow approximately 600 medium and large capitalization U.S.
companies. Their research goal is to forecast intermediate-term earnings and
prospective dividend growth rates for the companies that they cover.
Systematic valuation: The analysts' forecasts are converted into
comparable expected returns using a proprietary dividend discount model, which
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calculates the intermediate-term earnings by comparing a company's current stock
price with its forecasted dividends and earnings. Within each sector, companies
are ranked by their expected return and grouped into quintiles: those with the
highest expected returns (Quintile 1) are deemed the most undervalued relative
to their long-term earnings power, while those with the lowest expected returns
(Quintile 5) are deemed the most overvalued.
Disciplined portfolio construction: A broadly diversified portfolio is
constructed using disciplined buy and sell rules. Purchases are allocated among
stocks in the first three quintiles. A stock that falls into the fourth and
fifth quintiles generally becomes a candidate for sale, either because its price
has risen or its fundamentals have deteriorated. The Portfolio's sector
weightings are matched to those of the S&P 500 Index, reflecting Morgan's belief
that its research has the potential to add value at the individual stock level,
but not at the sector level. Morgan also controls the Portfolio's exposure to
style and theme bets and maintains near-market security weightings in individual
security holdings. This process results in an investment portfolio containing
approximately 300 stocks.
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND (the "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 portfolio of stocks of large companies. The U.S.
Small Company Fund's investment objective is to provide a high total return from
a portfolio of Equity Securities of small companies. The Fund attempts to
achieve its investment objective by investing all of its investable assets in
The U.S. Small Company Portfolio (the "Portfolio"), a diversified open-end
management investment company having the same investment objective as the U.S.
Small Company Fund.
The Portfolio attempts to achieve its investment objective by investing
primarily in the common stock of small U.S. companies included in the Russell
2500 Index, which is composed of 2,500 common stocks of U.S. companies with
market capitalizations ranging between $100 million and $1.5 billion.
INVESTMENT PROCESS FOR THE U.S. SMALL COMPANY PORTFOLIO
Fundamental research: Morgan's approximately 25 domestic equity
analysts, each an industry specialist with an average in excess of 10 years of
experience, continuously monitor the small cap stocks in their respective
sectors with the aim of identifying companies that exhibit superior financial
strength and operating returns. Meetings with management and on-site visits play
a key role in shaping their assessments. Their research goal is to forecast
normalized, long-term earnings and dividends for the most attractive small cap
companies among those they monitor -- a universe that contains a total of
approximately 600 names. Because Morgan's analysts follow both the larger and
smaller companies in their industries -- in essence, covering their industries
from top to bottom -- they are able to bring broad perspective to the research
they do on both.
Systematic valuation: The analysts' forecasts are converted into
comparable expected returns using a proprietary dividend discount model, which
calculates the long-term earnings by comparing a company's current stock price
with the its
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forecasted dividends and earnings. Within each industry, companies are ranked
by their expected returns and grouped into quintiles: those with the highest
expected returns (Quintile 1) are deemed the most undervalued relative to their
long-term earnings power, while those with the lowest expected returns (Quintile
5) are deemed the most overvalued.
Disciplined portfolio construction: A diversified portfolio is
constructed using disciplined buy and sell rules. Purchases are concentrated
among the stocks in the top two quintiles of the rankings; the specific names
selected reflect the portfolio manager's judgment concerning the soundness of
the underlying forecasts, the likelihood that the perceived misevaluation will
soon be corrected, and the magnitude of the risks versus the rewards. Once a
stock falls into the third quintile -- because its price has risen or its
fundamentals have deteriorated -- it generally becomes a candidate for sale. The
portfolio manager seeks to hold sector weightings close to those of the Russell
2500 Index, the Portfolio's benchmark, reflecting Morgan's belief that its
research has the potential to add value at the individual stock level, but not
at the sector level. Sector neutrality is also seen as a way to help to protect
the portfolio from macroeconomic risks, and -- together with diversification --
represents an important element of Morgan's investment strategy.
The following discussion supplements the information regarding the
investment objective of each of the Funds and the policies to be employed to
achieve this objective by their corresponding Portfolios as set forth above and
in the Prospectus. The investment objective of each Fund and its corresponding
Portfolio is identical. Accordingly, references below to a Fund also include the
Fund's corresponding Portfolio; similarly, references to a Portfolio also
include the corresponding Fund that invests in the Portfolio unless the context
requires otherwise.
MONEY MARKET INSTRUMENTS
As discussed in the Prospectus, each Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased by the Funds appears below. Also see "Quality and Diversification
Requirements."
U.S. TREASURY SECURITIES. Each of the Funds may invest in direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, all
of which are backed as to principal and interest payments by the full faith and
credit of the United States.
ADDITIONAL U.S. GOVERNMENT OBLIGATIONS. Each of the Funds may invest in
obligations issued or guaranteed by U.S. Government agencies or
instrumentalities. These obligations may or may not be backed by the "full faith
and credit" of the United States. Securities which are backed by the full faith
and credit of the United States include obligations of the Government National
Mortgage Association, the Farmers Home Administration, and the Export-Import
Bank. In the case of securities not backed by the full faith and credit of the
United States, each Fund must look principally to the federal agency issuing or
guaranteeing the obligation for ultimate repayment and may not be able to assert
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a claim against the United States itself in the event the agency or
instrumentality does not meet its commitments. Securities in which each Fund may
invest that are not backed by the full faith and credit of the United States
include, but are not limited to: (i) obligations of the Tennessee Valley
Authority, the Federal Home Loan Mortgage Corporation, the Federal Home Loan
Banks and the U.S. Postal Service, each of which has the right to borrow from
the U.S. Treasury to meet its obligations; (ii) securities issued by the Federal
National Mortgage Association, which are supported by the discretionary
authority of the U.S. Government to purchase the agency's obligations; and (iii)
obligations of the Federal Farm Credit System and the Student Loan Marketing
Association, each of whose obligations may be satisfied only by the individual
credits of the issuing agency.
FOREIGN GOVERNMENT OBLIGATIONS. Each of the Funds, subject to its
applicable investment policies, may also invest in short-term obligations of
foreign sovereign governments or of their agencies, instrumentalities,
authorities or political subdivisions. These securities may be denominated in
the U.S. dollar or in another currency. See "Foreign Investments."
BANK OBLIGATIONS. Each of the Funds, unless otherwise noted in the
Prospectus or below, may invest in negotiable certificates of deposit, time
deposits and bankers' acceptances of (i) banks, savings and loan associations
and savings banks which have more than $2 billion in total assets (the "Asset
Limitation") and are organized under the laws of the United States or any state,
(ii) foreign branches of these banks or of foreign banks of equivalent size
(Euros) and (iii) U.S. branches of foreign banks of equivalent size (Yankees).
See "Foreign Investments." The Funds will not invest in obligations for which
the Advisor, or any of its affiliated persons, is the ultimate obligor or
accepting bank. Each of the Funds may also invest in obligations of
international banking institutions designated or supported by national
governments to promote economic reconstruction, development or trade between
nations (e.g., the European Investment Bank, the Inter-American Development
Bank, or the World Bank).
COMMERCIAL PAPER. Each of the Funds may invest in commercial paper,
including master demand obligations. Master demand obligations are obligations
that provide for a periodic adjustment in the interest rate paid and permit
daily changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and Morgan Guaranty Trust Company of New York
acting as agent, for no additional fee, in its capacity as investment advisor to
the Portfolios and as fiduciary for other clients for whom it exercises
investment discretion. The monies loaned to the borrower come from accounts
managed by the Advisor or its affiliates, pursuant to arrangements with such
accounts. Interest and principal payments are credited to such accounts. The
Advisor, acting as a fiduciary on behalf of its clients, has the right to
increase or decrease the amount provided to the borrower under an obligation.
The borrower has the right to pay without penalty all or any part of the
principal amount then outstanding on an obligation together with interest to the
date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change. Repayment of a master demand
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obligation to participating accounts depends on the ability of the borrower to
pay the accrued interest and principal of the obligation on demand which is
continuously monitored by the Advisor. Since master demand obligations typically
are not rated by credit rating agencies, the Funds may invest in such unrated
obligations only if at the time of an investment the obligation is determined by
the Advisor to have a credit quality which satisfies the Fund's quality
restrictions. See "Quality and Diversification Requirements." Although there is
no secondary market for master demand obligations, such obligations are
considered by the Funds to be liquid because they are payable upon demand. The
Funds do not have any specific percentage limitation on investments in master
demand obligations. It is possible that the issuer of a master demand obligation
could be a client of Morgan to whom Morgan, in its capacity as a commercial
bank, has made a loan.
REPURCHASE AGREEMENTS. Each of the Funds, unless otherwise noted in the
Prospectus or below, may enter into repurchase agreements with brokers, dealers
or banks that meet the credit guidelines approved by the Funds' Trustees. In a
repurchase agreement, a Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
resale price normally is in excess of the purchase price, reflecting an agreed
upon interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by a Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Funds invest in repurchase agreements for more than thirteen
months. The securities which are subject to repurchase agreements, however, may
have maturity dates in excess of thirteen months from the effective date of the
repurchase agreement. The Funds will always receive securities as collateral
whose market value is, and during the entire term of the agreement remains, at
least equal to 100% of the dollar amount invested by the Funds in each agreement
plus accrued interest, and the Funds will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the Custodian. If the seller defaults, a Fund might incur a loss if the value of
the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization upon disposal of the collateral by a Fund may be delayed or limited.
Each of the Funds may make investments in other debt securities with
remaining effective maturities of not more than thirteen months, including
without limitation corporate and foreign bonds, asset-backed securities and
other obligations described in the Prospectus or this Statement of Additional
Information.
EQUITY INVESTMENTS
As discussed in the Prospectus, the Portfolios for the U.S. Equity,
Disciplined Equity and U.S. Small Company Funds (collectively, the "Equity
Portfolios") invest primarily in Equity Securities. The Equity Securities in
which the Equity Portfolios invest include those listed on any domestic or
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foreign securities exchange or traded in the over-the-counter (OTC) market as
well as certain restricted or unlisted securities. A discussion of the various
types of equity investments which may be purchased by these Portfolios appears
in the Prospectus and below. See "Quality and Diversification Requirements."
EQUITY SECURITIES. The Equity Securities in which the Equity Portfolios
may invest may or may not pay dividends and may or may not carry voting rights.
Common stock occupies the most junior position in a company's capital structure.
The convertible securities in which the Equity Portfolios may invest
include any debt securities or preferred stock which may be converted into
common stock or which carry the right to purchase common stock. Convertible
securities entitle the holder to exchange the securities for a specified number
of shares of common stock, usually of the same company, at specified prices
within a certain period of time.
The terms of any convertible security determine its ranking in a
company's capital structure. In the case of subordinated convertible debentures,
the holders' claims on assets and earnings are subordinated to the claims of
other creditors, and are senior to the claims of preferred and common
shareholders. In the case of convertible preferred stock, the holders' claims on
assets and earnings are subordinated to the claims of all creditors and are
senior to the claims of common shareholders.
COMMON STOCK WARRANTS
The Equity Portfolios may invest in common stock warrants that entitle
the holder to buy common stock from the issuer of the warrant at a specific
price (the strike price) for a specific period of time. The market price of
warrants may be substantially lower than the current market price of the
underlying common stock, yet warrants are subject to similar price fluctuations.
As a result, warrants may be more volatile investments than the underlying
common stock.
Warrants generally do not entitle the holder to dividends or voting
rights with respect to the underlying common stock and do not represent any
rights in the assets of the issuer company. A warrant will expire worthless if
it is not exercised on or prior to the expiration date.
FOREIGN INVESTMENTS
The Funds may invest in certain foreign securities. The U.S. Equity
Fund may invest in equity securities of foreign corporations included in the S&P
500 Index or listed on a national securities exchange. The U.S. Small Company
Fund may invest in equity securities of foreign issuers that are listed on a
national securities exchange or denominated or principally traded in the U.S.
dollar. The Funds do not expect to invest more than 5%, respectively, of their
total assets at the time of purchase in securities of foreign issuers.
Foreign investments may be made directly in securities of foreign
issuers or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or other
similar securities of foreign issuers. ADRs are securities, typically issued by
a U.S.
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financial institution (a "depositary"), that evidence ownership interests in a
security or a pool of securities issued by a foreign issuer and deposited with
the depositary. ADRs include American Depositary Shares and New York Shares.
EDRs are receipts issued by a European financial institution. GDRs, which are
sometimes referred to as Continental Depositary Receipts ("CDRs"), are
securities, typically issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by either a
U.S. or foreign issuer. ADRs, EDRs, GDRs and CDRs may be available for
investment through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security.
Holders of an unsponsored depositary receipt generally bear all costs
of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.
Since investments in foreign securities may involve foreign currencies,
the value of a Fund's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Funds may enter into forward
commitments for the purchase or sale of foreign currencies in connection with
the settlement of foreign securities transactions or to manage the Funds'
currency exposure as described in the Prospectus.
For a description of the risks associated with investing in foreign
securities, see "Additional Investment Information (Practices) and Risk Factors
(Risks)" in the Prospectus.
ADDITIONAL INVESTMENTS
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Each of the Portfolios may
purchase securities on a when-issued or delayed delivery basis. For example,
delivery of and payment for these securities can take place a month or more
after the date of the purchase commitment. The purchase price and the interest
rate payable, if any, on the securities are fixed on the purchase commitment
date or at the time the settlement date is fixed. The value of such securities
is subject to market fluctuation and for money market instruments and other
fixed income securities no interest accrues to a Portfolio until settlement
takes place. At the time a Portfolio makes the commitment to purchase securities
on a when-issued or delayed delivery basis, it will record the transaction,
reflect the value each day of such securities in determining its net asset value
and, if applicable, calculate the maturity for the purposes of average maturity
from that date. At the time of settlement a when-issued security may be valued
at less than the purchase price. To facilitate such acquisitions, each Portfolio
will maintain with the Custodian a segregated account with liquid assets,
consisting of cash, U.S. Government securities or other appropriate securities,
in an amount at least equal to such commitments. On delivery dates for such
transactions, each Portfolio will meet its obligations from maturities or sales
of the securities held in the segregated account and/or from cash flow. If a
Portfolio
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chooses to dispose of the right to acquire a when-issued security prior to its
acquisition, it could, as with the disposition of any other portfolio
obligation, incur a gain or loss due to market fluctuation. It is the current
policy of each Portfolio (excluding the Disciplined Equity 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 when-issued commitments.
INVESTMENT COMPANY SECURITIES. Securities of other investment companies
may be acquired by each of the Funds and their corresponding Portfolios to the
extent permitted under the 1940 Act. These limits require that, as determined
immediately after a purchase is made, (i) not more than 5% of the value of a
Fund's total assets will be invested in the securities of any one investment
company, (ii) not more than 10% of the value of its total assets will be
invested in the aggregate in securities of investment companies as a group, and
(iii) not more than 3% of the outstanding voting stock of any one investment
company will be owned by a Fund, provided however, that a Fund may invest all of
its investable assets in an open-end investment company that has the same
investment objective as the Fund (its corresponding Portfolio). As a shareholder
of another investment company, a Fund or Portfolio would bear, along with other
shareholders, its pro rata portion of the other investment company's expenses,
including advisory fees. These expenses would be in addition to the advisory and
other expenses that a Fund or Portfolio bears directly in connection with its
own operations. The Funds and the Portfolios have applied for exemptive relief
from the SEC to permit the Portfolios to invest in affiliated investment
companies. If the requested relief is granted, the Portfolios would then be
permitted to invest in affiliated Funds, subject to certain conditions specified
in the applicable order.
REVERSE REPURCHASE AGREEMENTS. Each of the Portfolios, unless otherwise
noted in the Prospectus or below, may enter into reverse repurchase agreements.
In a reverse repurchase agreement, a Portfolio sells a security and agrees to
repurchase the same security at a mutually agreed upon date and price. For
purposes of the 1940 Act a reverse repurchase agreement is also considered as
the borrowing of money by the Portfolio and, therefore, a form of leverage. The
Portfolios will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, a Portfolio will enter into a reverse repurchase
agreement only when the interest income to be earned from the investment of the
proceeds is greater than the interest expense of the transaction. A Portfolio
will not invest the proceeds of a reverse repurchase agreement for a period
which exceeds the duration of the reverse repurchase agreement. Each Portfolio
will establish and maintain with the Custodian a separate account with a
segregated portfolio of securities in an amount at least equal to its purchase
obligations under its reverse repurchase agreements. See "Investment
Restrictions" for each Portfolio's limitations on reverse repurchase agreements
and bank borrowings.
LOANS OF PORTFOLIO SECURITIES. Each of the Portfolios may lend its
securities if such loans are secured continuously by cash or equivalent
collateral or by a letter of credit in favor of the Portfolio at least equal at
all times to 100% of the market value of the securities loaned, plus accrued
interest. While such securities are on loan, the borrower will pay the Portfolio
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any income accruing thereon. Loans will be subject to termination by the
Portfolios in the normal settlement time, generally three business days after
notice, or by the borrower on one day's notice. Borrowed securities must be
returned when the loan is terminated. Any gain or loss in the market price of
the borrowed securities which occurs during the term of the loan inures to a
Portfolio and its respective investors. The Portfolios may pay reasonable
finders' and custodial fees in connection with a loan. In addition, a Portfolio
will consider all facts and circumstances including the creditworthiness of the
borrowing financial institution, and no Portfolio will make any loans in excess
of one year. The Portfolios will not lend their securities to any officer,
Trustee, Director, employee or other affiliate of the Portfolios, the Advisor or
the Distributor, unless otherwise permitted by applicable law.
PRIVATELY PLACED AND CERTAIN UNREGISTERED SECURITIES. The Portfolios
for each of the Funds may invest in privately placed, restricted, Rule 144A or
other unregistered securities as described in the Prospectus.
As to illiquid investments, a Portfolio is subject to a risk that
should the Portfolio decide to sell them when a ready buyer is not available at
a price the Portfolio deems representative of their value, the value of the
Portfolio's net assets could be adversely affected. Where an illiquid security
must be registered under the Securities Act of 1933, as amended (the "1933
Act"), before it may be sold, a Portfolio may be obligated to pay all or part of
the registration expenses, and a considerable period may elapse between the time
of the decision to sell and the time the Portfolio may be permitted to sell a
security under an effective registration statement. If, during such a period,
adverse market conditions were to develop, a Portfolio might obtain a less
favorable price than prevailed when it decided to sell.
QUALITY AND DIVERSIFICATION REQUIREMENTS
Each of the Funds intends to meet the diversification requirements of
the 1940 Act. To meet these requirements, 75% of the assets of these Funds is
subject to the following fundamental limitations: (1) the Fund may not invest
more than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. Government, its agencies and instrumentalities, and (2)
the Fund may not own more than 10% of the outstanding voting securities of any
one issuer. As for the other 25% of the Fund's assets not subject to the
limitation described above, there is no limitation on investment of these assets
under the 1940 Act, so that all of such assets may be invested in securities of
any one issuer, subject to the limitation of any applicable state securities
laws as described below. Investments not subject to the limitations described
above could involve an increased risk to a Fund should an issuer, or a state or
its related entities, be unable to make interest or principal payments or should
the market value of such securities decline.
The Funds will also comply with the diversification requirements imposed by
the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as
a regulated investment company. See "Taxes."
The Funds may invest in convertible debt securities, for which there
are no specific quality requirements. In addition, at the time a Fund invests in
any
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commercial paper, bank obligation or repurchase agreement, the issuer must have
outstanding debt rated A or higher by Moody's or Standard & Poor's, the issuer's
parent corporation, if any, must have outstanding commercial paper rated Prime-1
by Moody's or A-1 by Standard & Poor's, or if no such ratings are available, the
investment must be of comparable quality in the Advisor's opinion. At the time a
Fund invests in any other short-term debt securities, they must be rated A or
higher by Moody's or Standard & Poor's, or if unrated, the investment must be of
comparable quality in the Advisor's opinion.
In determining suitability of investment in a particular unrated
security, the Advisor takes into consideration asset and debt service coverage,
the purpose of the financing, history of the issuer, existence of other rated
securities of the issuer, and other relevant conditions, such as comparability
to other issuers.
OPTIONS AND FUTURES TRANSACTIONS
EXCHANGE TRADED AND OTC OPTIONS. All options purchased or sold by the Portfolios
will be traded on a securities exchange or will be purchased or sold by
securities dealers (OTC options) that meet creditworthiness standards approved
by the Portfolio's Board of Trustees. While exchange-traded options are
obligations of the Options Clearing Corporation, in the case of OTC options, a
Portfolio relies on the dealer from which it purchased the option to perform if
the option is exercised. Thus, when a Portfolio purchases an OTC option, it
relies on the dealer from which it purchased the option to make or take delivery
of the underlying securities. Failure by the dealer to do so would result in the
loss of the premium paid by the Portfolio as well as loss of the expected
benefit of the transaction.
Provided that a Portfolio has arrangements with certain qualified
dealers who agree that the Portfolio may repurchase any option it writes for a
maximum price to be calculated by a predetermined formula, a Portfolio may treat
the underlying securities used to cover written OTC options as liquid. In these
cases, the OTC option itself would only be considered illiquid to the extent
that the maximum repurchase price under the formula exceeds the intrinsic value
of the option.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Portfolios permitted to
enter into futures and options transactions may purchase or sell (write) futures
contracts and purchase put and call options, including put and call options on
futures contracts. In addition, the Portfolio for the Disciplined Equity Fund
may sell (write) put and call options, including options on futures. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index. Currently, futures contracts are
available on various types of fixed income securities, including but not limited
to U.S. Treasury bonds, notes and bills, Eurodollar certificates of deposit and
on indexes of fixed income securities and indexes of equity securities.
Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract
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entitles its holder to decide on or before a future date whether to enter into
such a contract. If the holder decides not to exercise its option, the holder
may close out the option position by entering into an offsetting transaction or
may decide to let the option expire and forfeit the premium thereon. The
purchaser of an option on a futures contract pays a premium for the option but
makes no initial margin payments or daily payments of cash in the nature of
"variation" margin payments to reflect the change in the value of the underlying
contract as does a purchaser or seller of a futures contract.
The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by a Portfolio are paid by the Portfolio into a segregated
account, in the name of the Futures Commission Merchant, as required by the 1940
Act and the SEC's interpretations thereunder.
COMBINED POSITIONS. The Portfolios permitted to purchase and write options may
do so in combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, certain Portfolios may purchase a put option and write a
call option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.
CORRELATION OF PRICE CHANGES. Because there are a limited number of types of
exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match a
Portfolio's current or anticipated investments exactly. A Portfolio may invest
in options and futures contracts based on securities with different issuers,
maturities, or other characteristics from the securities in which it typically
invests, which involves a risk that the options or futures position will not
track the performance of the Portfolio's other investments.
Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. A Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in a Portfolio's options
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or futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.
LIQUIDITY OF OPTIONS AND FUTURES CONTRACTS. There is no assurance a liquid
market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for a
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially require a Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and OTC Options" above
for a discussion of the liquidity of options not traded on an exchange.)
POSITION LIMITS. Futures exchanges can limit the number of futures and options
on futures contracts that can be held or controlled by an entity. If an adequate
exemption cannot be obtained, a Portfolio or the Advisor may be required to
reduce the size of its futures and options positions or may not be able to trade
a certain futures or options contract in order to avoid exceeding such limits.
ASSET COVERAGE FOR FUTURES CONTRACTS AND OPTIONS POSITIONS. The Portfolios
intend to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which a Portfolio can commit assets to
initial margin deposits and option premiums. In addition, the Portfolios will
comply with guidelines established by the SEC with respect to coverage of
options and futures contracts by mutual funds, and if the guidelines so require,
will set aside appropriate liquid assets in a segregated custodial account in
the amount prescribed. Securities held in a segregated account cannot be sold
while the futures contract or option is outstanding, unless they are replaced
with other suitable assets. As a result, there is a possibility that segregation
of a large percentage of a Portfolio's assets could impede portfolio management
or the Portfolio's ability to meet redemption requests or other current
obligations.
RISK MANAGEMENT
The Portfolio for the Disciplined Equity Fund may employ non-hedging
risk management techniques. Risk management strategies are used to keep the Fund
fully invested and to reduce the transaction costs associated with cash flows
into and out of the Fund. The objective where equity futures are used to
"equitize" cash is to match the notional value of all futures contracts to the
Fund's cash balance. The notional value of futures and of the cash is monitored
daily. As the cash is invested in securities and/or paid out to participants in
redemptions, the Advisor simultaneously adjusts the futures positions. Through
such procedures, the Portfolio not only gains equity exposure from the use of
futures, but also benefits from increased flexibility in responding to client
cash flow needs. Additionally, because it can be less expensive to trade a list
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of securities as a package or program trade rather than as a group of individual
orders, futures provide a means through which transaction costs can be reduced.
Such non-hedging risk management techniques are not speculative, but because
they involve leverage include, as do all leveraged transactions, the possibility
of losses as well as gains that are greater than if these techniques involved
the purchase and sale of the securities themselves rather than their synthetic
derivatives.
PORTFOLIO TURNOVER
The table below sets forth the portfolio turnover rates for the
Portfolios corresponding to the Funds. A rate of 100% indicates that the
equivalent of all of the Portfolio's assets have been sold and reinvested in a
year. High portfolio turnover may result in the realization of substantial net
capital gains or losses. To the extent net short term capital gains are
realized, any distributions resulting from such gains are considered ordinary
income for federal income tax purposes. See "Taxes" below.
THE U.S. EQUITY PORTFOLIO (U.S. Equity Fund) -- For the fiscal year ended May
31, 1996: 85%. For the fiscal year ended May 31, 1997: 99%.
THE U.S. SMALL COMPANY PORTFOLIO (U.S. Small Company Fund) -- For the fiscal
year ended May 31, 1996: 93%. For the fiscal year ended May 31, 1997: 98%.
THE DISCIPLINED EQUITY PORTFOLIO (Disciplined Equity Fund) -- For the period
December 30, 1996 (commencement of operations) through May 31, 1997: 20%.
INVESTMENT RESTRICTIONS
The investment restrictions of each Fund and its corresponding
Portfolio are identical, unless otherwise specified. Accordingly, references
below to a Fund also include the Fund's corresponding Portfolio unless the
context requires otherwise; similarly, references to a Portfolio also include
its corresponding Fund unless the context requires otherwise.
The investment restrictions below have been adopted by the Trust with
respect to each Fund and by each corresponding Portfolio. Except where otherwise
noted, these investment restrictions are "fundamental" policies which, under the
1940 Act, may not be changed without the vote of a majority of the outstanding
voting securities of the Fund or Portfolio, as the case may be. A "majority of
the outstanding voting securities" is defined in the 1940 Act as the lesser of
(a) 67% or more of the voting securities present at a meeting if the holders of
more than 50% of the outstanding voting securities are present or represented by
proxy, or (b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions below apply at the time of the
purchase of securities. Whenever a Fund is requested to vote on a change in the
fundamental investment restrictions of its corresponding Portfolio, the Trust
will hold a meeting of Fund shareholders and will cast its votes as instructed
by the Fund's shareholders.
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Each of the U.S. EQUITY FUND and the U.S. SMALL COMPANY FUND and their
corresponding PORTFOLIOS may not:
1. Purchase the securities or other obligations of issuers conducting their
principal business activity in the same industry if, immediately after such
purchase the value of its investments in such industry would exceed 25% of the
value of the Fund's total assets; provided, however, that the Fund may invest
all or part of its investable assets in an open-end management investment
company with the same investment objective and restrictions as the Fund's. For
purposes of industry concentration, there is no percentage limitation with
respect to investments in U.S. Government securities;
2. Borrow money, except from banks for extraordinary or emergency purposes and
then only in amounts not to exceed 10% of the value of the Fund's total assets,
taken at cost, at the time of such borrowing. Mortgage, pledge, or hypothecate
any assets except in connection with any such borrowing and in amounts not to
exceed 10% of the value of the Fund's net assets at the time of such borrowing.
The Fund will not purchase securities while borrowings exceed 5% of the Fund's
total assets; provided, however, that the Fund may increase its interest in an
open-end management investment company with the same investment objective and
restrictions as the Fund's while such borrowings are outstanding. This borrowing
provision is included to facilitate the orderly sale of portfolio securities,
for example, in the event of abnormally heavy redemption requests, and is not
for investment purposes. Collateral arrangements for premium and margin payments
in connection with the Fund's hedging activities are not deemed to be a pledge
of assets;
3. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in securities or other obligations of any one such
issuer; provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with the same
investment objective and restrictions as the Fund's. This limitation shall not
apply to issues of the U.S. Government, its agencies or instrumentalities and to
permitted investments of up to 25% of the Fund's total assets;
4. Purchase the securities of an issuer if, immediately after such purchase, the
Fund owns more than 10% of the outstanding voting securities of such issuer;
provided, however, that the Fund may invest all or part of its investable assets
in an open-end management investment company with the same investment objective
and restrictions as the Fund's;
5. Make loans, except through the purchase or holding of debt obligations
(including privately placed securities), or the entering into of repurchase
agreements, or loans of portfolio securities in accordance with the Fund's
investment objective and policies (see "Investment Objectives and Policies");
6. Purchase or sell puts, calls, straddles, spreads, or any combination thereof,
real estate, commodities, or commodity contracts, except for the Fund's
interests in hedging activities as described under "Investment Objectives and
Policies"; or interests in oil, gas, or mineral exploration or development
programs.
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However, the Fund may purchase securities or commercial paper issued by
companies which invest in real estate or interests therein, including real
estate investment trusts;
7. Purchase securities on margin, make short sales of securities, or maintain a
short position, except in the course of the Fund's hedging activities, provided
that this restriction shall not be deemed to be applicable to the purchase or
sale of when-issued securities or delayed delivery securities;
8. Acquire securities of other investment companies, except as permitted by the
1940 Act;
9. Act as an underwriter of securities;
10. Issue any senior security, except as appropriate to evidence indebtedness
which the Fund is permitted to incur pursuant to Investment Restriction No. 2.
The Fund's arrangements in connection with its hedging activities as described
in "Investment Objectives and Policies" shall not be considered senior
securities for purposes hereof; or
11. Purchase any equity security if, as a result, the Fund would then have more
than 5% of its total assets invested in securities of companies (including
predecessors) that have been in continuous operation for fewer than three years.
Unless Sections 8(b)(1) and 13(a) of the 1940 Act or any SEC or SEC
staff interpretations thereof are amended or modified, the DISCIPLINED EQUITY
FUND and its corresponding PORTFOLIO may not:
1. Purchase any security if, as a result, more than 25% its total assets would
be invested in securities of issuers in any single industry. This limitation
shall not apply to securities issued or guaranteed as to principal or interest
by the U.S. Government, its agencies or instrumentalities.
2. Issue senior securities. For purposes of this restriction, borrowing money in
accordance with paragraph 3 below, making loans in accordance with paragraph 7
below, the issuance of shares of beneficial interest in multiple classes or
series, the purchase or sale of options, futures contracts, forward commitments,
swaps and transactions in repurchase agreements are not deemed to be senior
securities.
3. Borrow money, except in amounts not to exceed one third of the Fund's total
assets (including the amount borrowed) (i) from banks for temporary or
short-term purposes or for the clearance of transactions, (ii) in connection
with the redemption of Fund shares or to finance failed settlements of portfolio
trades without immediately liquidating portfolio securities or other assets,
(iii) in order to fulfill commitments or plans to purchase additional securities
pending the anticipated sale of other portfolio securities or assets and (iv)
pursuant to reverse repurchase agreements entered into by the Fund.
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4. Underwrite the securities of other issuers, except to the extent that, in
connection with the disposition of portfolio securities, the Fund may be deemed
to be an underwriter under the 1933 Act.
5. Purchase or sell real estate except that the Fund may (i) acquire or lease
office space for its own use, (ii) invest in securities of issuers that invest
in real estate or interests therein, (iii) invest in securities that are secured
by real estate or interests therein, (iv) purchase and sell mortgage-related
securities and (v) hold and sell real estate acquired by the Fund as a result of
the ownership of securities.
6. Purchase or sell commodities or commodity contracts, except the Fund may
purchase and sell financial futures contracts, options on financial futures
contracts and warrants and may enter into swap and forward commitment
transactions.
7. Make loans, except that the Fund (1) may lend portfolio securities with a
value not exceeding one-third of the Fund's net assets, (2) enter into
repurchase agreements, and (3) purchase all or a portion of an issue of debt
securities (including privately issued debt securities), bank loan participation
interests, bank certificates of deposit, bankers' acceptances, debentures or
other securities, whether or not the purchase is made upon the original issuance
of the securities.
8. With respect to 75% of its total assets, purchase securities of an issuer
(other than the U.S. Government, its agencies, instrumentalities or authorities
or repurchase agreements collateralized by U.S. Government securities), if:
a. such purchase would cause more than 5% of the Fund's total assets to
be invested in the securities of such issuer; or
b. such purchase would cause the Fund to hold more than 10% of the
outstanding voting securities of such issuer.
(Although permitted to do so by restriction No. 3 above, the Fund has no
current intention to engage in borrowing for financial leverage.)
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - U.S. EQUITY FUND AND U.S.
SMALL COMPANY FUND. The investment restriction described below is not a
fundamental policy of these Funds or their corresponding Portfolios and may be
changed by their respective Trustees. This non-fundamental investment policy
requires that each such Fund may not:
(i) acquire any illiquid securities, such as repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of over seven
calendar days, if as a result thereof, more than 15% of the market value of the
Fund's net assets would be in investments that are illiquid.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS - DISCIPLINED EQUITY FUND. The
investment restrictions described below are not fundamental policies of the Fund
and its corresponding Portfolio and may be changed by its respective Trustees.
These non-fundamental investment policies require that the Fund may not:
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(i) Acquire securities of other investment companies, except as permitted by the
1940 Act or any rule, order or interpretation thereunder, or in connection with
a merger, consolidation, reorganization, acquisition of assets or an offer of
exchange;
(ii) Acquire any illiquid securities, such as repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of over seven
calendar days, if as a result thereof, more than 15% of the market value of the
Fund's net assets would be in investments that are illiquid;
(iii) Sell any security short, except to the extent permitted by the 1940 Act.
Transactions in futures contracts and options shall not constitute selling
securities short; or
(iv) Purchase securities on margin, but the Fund may obtain such short term
credits as may be necessary for the clearance of transactions.
ALL FUNDS. There will be no violation of any investment restriction if
that restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.
For purposes of fundamental investment restrictions regarding industry
concentration, Morgan may classify issuers by industry in accordance with
classifications set forth in the DIRECTORY OF COMPANIES FILING ANNUAL REPORTS
WITH THE SECURITIES AND EXCHANGE COMMISSION or other sources. In the absence of
such classification or if Morgan determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, Morgan
may classify an issuer accordingly. For instance, personal credit finance
companies and business credit finance companies are deemed to be separate
industries and wholly owned finance companies are considered to be in the
industry of their parents if their activities are primarily related to financing
the activities of their parents.
TRUSTEES AND OFFICERS
TRUSTEES
The Trustees of the Trust, who are also the Trustees of each of the
Portfolios, their business addresses, principal occupations during the past five
years and dates of birth are set forth below.
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FREDERICK S. ADDY--Trustee; Retired; Executive Vice President and Chief
Financial Officer since prior to April 1994, Amoco Corporation. His address is
5300 Arbutus Cove, Austin, TX 78746, and his date of birth is January 1, 1932.
WILLIAM G. BURNS--Trustee; Retired, Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779,
and his date of birth is November 2, 1932.
ARTHUR C. ESCHENLAUER--Trustee; Retired; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. His address is 14 Alta Vista Drive,
RD #2, Princeton, NJ 08540, and his date of birth is May 23, 1934.
MATTHEW HEALEY (*)--Trustee, Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc., since prior to 1992. His address is Pine Tree
Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL 33436, and his date of
birth is August 23, 1937.
MICHAEL P. MALLARDI--Trustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group since prior to April 1996. His
address is 10 Charnwood Drive, Suffern, NY 10910, and his date of birth is
March 17, 1934.
- ----------------------
(*) Mr. Healey is an "interested person" of the Trust, the Advisor and each
Portfolio as that term is defined in the 1940 Act.
The Trustees of the Trust are the same as the Trustees of each of the
Portfolios. A majority of the disinterested Trustees have adopted written
procedures reasonably appropriate to deal with potential conflicts of interest
arising from the fact that the same individuals are Trustees of the Trust, each
of the Portfolios and The JPM Pierpont Funds, up to and including creating a
separate board of trustees.
Each Trustee is currently paid an annual fee of $75,000 (adjusted as of
April 1, 1997) for serving as Trustee of the Trust, each of the Master
Portfolios (as defined below), The JPM Pierpont Funds and JPM Series Trust and
is reimbursed for expenses incurred in connection with service as a Trustee. The
Trustees may hold various other directorships unrelated to these funds.
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Trustee compensation expenses accrued by the Trust for the calendar
year ended December 31, 1996 are set forth below.
TOTAL TRUSTEE COMPENSATION
ACCRUED BY THE MASTER
AGGREGATE TRUSTEE PORTFOLIOS(*), THE JPM
COMPENSATION PIERPONT FUNDS, JPM SERIES
ACCRUED BY THE TRUST AND THE TRUST DURING
NAME OF TRUSTEE TRUST DURING 1996 1996 (***)
- --------------- ----------------- ----------
Frederick S. Addy, Trustee $12,593 $65,000
William G. Burns, Trustee $12,593 $65,000
Arthur C. Eschenlauer, Trustee $12,593 $65,000
Matthew Healey, Trustee(**), $12,593 $65,000
Chairman and Chief Executive
Officer
Michael P. Mallardi, Trustee $12,593 $65,000
(*) Includes the Portfolios, The Prime Money Market Portfolio, The Federal Money
Market Portfolio, The Tax Exempt Money Market Portfolio, The Short Term Bond
Portfolio, The U.S. Fixed Income Portfolio, The Tax Exempt Bond Portfolio, The
New York Total Return Bond Portfolio, The Non-U.S. Fixed Income Portfolio, The
Diversified Portfolio, The International Equity Portfolio, The Emerging Markets
Equity Portfolio, The Series Portfolio and Series Portfolio II, (collectively
the "Master Portfolios").
(**) During 1996, Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
of Pierpont Group, Inc., compensation in the amount of $140,000, contributed
$21,000 to a defined contribution plan on his behalf and paid $21,500 in
insurance premiums for his benefit.
(***) No investment company within the fund complex has a pension or retirement
plan. Currently there are 18 investment companies (15 investment companies
comprising the Master Portfolios, The JPM Pierpont Funds, the Trust and JPM
Series Trust) in the fund complex.
The Trustees, in addition to reviewing actions of the Trust's and the
Portfolios' various service providers, decide upon matters of general policy.
Each of the Portfolios and the Trust has entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities over the affairs of the Portfolios and the Trust.
Pierpont Group, Inc. was organized in July 1989 to provide services for The
Pierpont Family of Funds, and the Trustees are the equal and sole shareholders
of Pierpont Group, Inc. The Trust and the Portfolios have agreed to pay Pierpont
Group, Inc. a fee in an amount representing its reasonable costs in performing
these services to the Trust, the Portfolios and certain other registered
investment companies subject to similar agreements with Pierpont Group, Inc.
These costs are periodically reviewed by the Trustees.
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The aggregate fees paid to Pierpont Group, Inc. by each Fund and its
corresponding Portfolio during the indicated fiscal years are set forth below:
U.S. EQUITY FUND -- For the fiscal year ended May 31, 1995: $11,003. For the
fiscal year ended May 31, 1996: $13,993. For the fiscal year ended May 31, 1997:
$9,112.
THE U.S. EQUITY PORTFOLIO -- For the fiscal year ended May 31, 1995: $52,948.
For the fiscal year ended May 31, 1996: $46,626. For the fiscal year ended May
31, 1997: $26,486.
U.S. SMALL COMPANY FUND -- For the fiscal year ended May 31, 1995: $10,158. For
the fiscal year ended May 31, 1996: $14,539. For the fiscal year ended May 31,
1997: $11,350.
THE U.S. SMALL COMPANY PORTFOLIO -- For the fiscal year ended May 31, 1995:
$48,688. For the fiscal year ended May 31, 1996: $48,688. For the fiscal year
ended May 31, 1997: $31,320.
DISCIPLINED EQUITY FUND -- For the period January 3, 1997 (commencement of
operations) through May 31, 1997: $320.
THE DISCIPLINED EQUITY PORTFOLIO -- For the period December 30, 1996
(commencement of operations) through May 31, 1997: $607.
OFFICERS
The Trust's and Portfolios' executive officers (listed below), other
than the Chief Executive Officer, are provided and compensated by Funds
Distributor, Inc. ("FDI"), a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The officers conduct and supervise the business
operations of the Trust and the Portfolios. The Trust and the Portfolios have no
employees.
The officers of the Trust and the Portfolios, their principal
occupations during the past five years and dates of birth are set forth below.
Unless otherwise specified, each officer holds the same position with the Trust
and each Portfolio. The business address of each of the officers unless
otherwise noted is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts
02109.
MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1992. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. His date of birth is August 23, 1937.
MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI, Premier
Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies advised or administered by the Dreyfus
Corporation ("Dreyfus") or its affiliates. From December 1991 to July 1994, she
was President and Chief Compliance Officer of FDI. Her date of birth is August
1, 1957.
DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant Vice
President and Manager of Treasury Services and Administration of FDI and an
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officer of certain investment companies advised or administered by Dreyfus or
its affiliates. Prior to April 1997, Mr. Conroy was Supervisor of Treasury
Services and Administration of FDI. From April 1993 to January 1995, Mr. Conroy
was a Senior Fund Accountant for Investors Bank & Trust Company. Prior to March
1993, Mr. Conroy was employed as a fund accountant at The Boston Company, Inc.
His date of birth is March 31, 1969.
JACQUELINE HENNING; Assistant Secretary and Assistant Treasurer of the
Portfolios only. Managing Director, State Street Cayman Trust Company, Ltd.
since October 1994. Prior to October 1994, Mrs. Henning was head of mutual funds
at Morgan Grenfell in Cayman and for five years was Managing Director of Bank
of Nova Scotia Trust Company (Cayman) Limited from September 1988 to September
1993. Address: P.O. Box 2508 GT, Elizabethan Square, 2nd Floor, Shedden Road,
George Town, Grand Cayman, Cayman Islands. Her date of birth is March 24, 1942.
RICHARD W. INGRAM; President and Treasurer. Executive Vice President
and Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or Harris Trust and
Savings Bank ("Harris") or their respective affiliates. Prior to April 1997, Mr.
Ingram was Senior Vice President and Director of Client Service and Treasury
Administration of FDI. From March 1994 to November 1995, Mr. Ingram was Vice
President and Division Manager of First Data Investor Services Group, Inc. From
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc. His date of birth is
September 15, 1955.
KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant Vice
President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity Funds,
Inc., Waterhouse Investors Cash Management Fund, Inc. and Harris or their
respective affiliates. From June 1994 to January 1996, Ms. Jacoppo-Wood was a
Manager, SEC Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994,
Ms. Jacoppo-Wood was a senior paralegal at The Boston Company Advisors, Inc.
("TBCA"). Her date of birth is December 29, 1966.
ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Vice President
and Senior Counsel of FDI and Premier Mutual and an officer of RCM Capital
Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund,
Inc. and certain investment companies advised or administered by Dreyfus or
Harris or their respective affiliates. Prior to August 1996, Ms. Keeley was
Assistant Vice President and Counsel of FDI and Premier Mutual. Prior to
September 1995, Ms. Keeley was enrolled at Fordham University School of Law and
received her JD in May 1995. Address: 200 Park Avenue, New York, New York 10166.
Her date of birth is September 14, 1969.
CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI and Premier Mutual and an officer
of Waterhouse Investors Cash Management Fund, Inc. and certain investment
companies advised or administered by Harris or its affiliates. From April 1994
to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial Group. From
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1992 to 1994, Mr. Kelley was employed by Putnam Investments in legal and
compliance capacities. His date of birth is December 24, 1964.
LENORE J. MCCABE; Assistant Secretary and Assistant Treasurer of the
Portfolios only. Assistant Vice President, State Street Bank and Trust Company
since November 1994. Assigned as Operations Manager, State Street Cayman Trust
Company, Ltd. since February 1995. Prior to November, 1994, employed by Boston
Financial Data Services, Inc. as Control Group Manager. Address: P.O. Box 2508
GT, Elizabethan Square, 2nd Floor, Shedden Road, George Town, Grand Cayman,
Cayman Islands. Her date of birth is May 31, 1961.
MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual, an
officer of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors
Cash Management Fund, Inc. and certain investment companies advised or
administered by Dreyfus or Harris or their respective affiliates. From 1989 to
1994, Ms. Nelson was an Assistant Vice President and Client Manager for The
Boston Company, Inc. Her date of birth is April 22, 1964.
JOHN E. PELLETIER; Vice President and Secretary. Senior Vice President,
General Counsel, Secretary and Clerk of FDI and Premier Mutual and an officer of
RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash
Management Fund, Inc. and certain investment companies advised or administered
by Dreyfus or Harris or their respective affiliates. From February 1992 to April
1994, Mr. Pelletier served as Counsel for TBCA. His date of birth is June 24,
1964.
MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior Vice
President and Director of Strategic Client Initiatives for FDI since December
1996. From December 1989 through November 1996, Mr. Petrucelli was employed with
GE Investments where he held various financial, business development and
compliance positions. He also served as Treasurer of the GE Funds and as
Director of GE Investment Services. Address: 200 Park Avenue, New York, New
York, 10166. His date of birth is May 18, 1961.
JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Executive Vice
President, Treasurer and Chief Financial Officer, Chief Administrative Officer
and Director Of FDI. Senior Vice President, Treasurer and Chief Financial
Officer, Chief Administrative Officer and Director of Premier Mutual and an
officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or its affiliates. Prior
to April 1997, Mr. Tower was Senior Vice President, Treasurer and Chief
Financial Officer, Chief Administrative Officer and Director of FDI. From July
1988 to November 1993, Mr. Tower was Financial Manager of The Boston Company,
Inc. His date of birth is June 13, 1962.
INVESTMENT ADVISOR
The investment advisor to the Portfolios is Morgan Guaranty Trust
Company of New York, a wholly owned subsidiary of J.P. Morgan & Co. Incorporated
("J.P. Morgan"), a bank holding company organized under the laws of the State of
Delaware. The Advisor, whose principal offices are at 60 Wall Street, New York,
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New York 10260, is a New York trust company which conducts a general banking and
trust business. The Advisor is subject to regulation by the New York State
Banking Department and is a member bank of the Federal Reserve System. Through
offices in New York City and abroad, the Advisor offers a wide range of
services, primarily to governmental, institutional, corporate and high net worth
individual customers in the United States and throughout the world.
J.P. Morgan, through the Advisor and other subsidiaries, acts as
investment advisor to individuals, governments, corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of over $234 billion.
J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as a financial advisor to
national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.
The basis of the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. Morgan currently employs over 100 full time
research analysts, among the largest research staffs in the money management
industry, in its investment management divisions located in New York, London,
Tokyo, Frankfurt, Melbourne and Singapore to cover companies, industries and
countries on site. In addition, the investment management divisions employ
approximately 300 capital market researchers, portfolio managers and traders.
The conclusions of the equity analysts' fundamental research is quantified into
a set of projected returns for individual companies through the use of a
dividend discount model. These returns are projected for 2 to 5 years to enable
analysts to take a longer term view. These returns, or normalized earnings, are
used to establish relative values among stocks in each industrial sector. These
values may not be the same as the markets' current valuations of these
companies. This provides the basis for ranking the attractiveness of the
companies in an industry according to five distinct quintiles or rankings. This
ranking is one of the factors considered in determining the stocks purchased and
sold in each sector.
The investment advisory services the Advisor provides to the Portfolios
are not exclusive under the terms of the Advisory Agreements. The Advisor is
free to and does render similar investment advisory services to others. The
Advisor serves as investment advisor to personal investors and other investment
companies and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which the Advisor serves as trustee. The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolios. Such accounts are supervised by officers and employees of the
Advisor who may also be acting in similar capacities for the Portfolios. See
"Portfolio Transactions."
Sector weightings are generally similar to a benchmark with the
emphasis on security selection as the method to achieve investment performance
superior
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to the benchmark. The benchmarks for the Portfolios in which the Funds invest
are currently: The U.S. Equity Portfolio and The Disciplined Equity
Portfolio--S&P 500 Index; and The U.S. Small Company Portfolio--Russell 2500
Index.
J.P. Morgan Investment Management Inc., also a wholly owned subsidiary
of J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, which manages employee benefit funds of corporations,
labor unions and state and local governments and the accounts of other
institutional investors, including investment companies. Certain of the assets
of employee benefit accounts under its management are invested in commingled
pension trust funds for which the Advisor serves as trustee. J.P. Morgan
Investment Management Inc. advises the Advisor on investment of the commingled
pension trust funds.
The Portfolios are managed by officers of the Advisor who, in acting for
their customers, including the Portfolios, do not discuss their investment
decisions with any personnel of J.P. Morgan or any personnel of other divisions
of the Advisor or with any of its affiliated persons, with the exception of J.P.
Morgan Investment Management Inc. and certain other investment management
affiliates of J.P. Morgan.
As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Advisory
Agreements, the Portfolio corresponding to each Fund has agreed to pay the
Advisor a fee, which is computed daily and may be paid monthly, equal to the
annual rates of each Portfolio's average daily net assets shown below.
DISCIPLINED EQUITY: 0.35%
U.S. EQUITY: 0.40%
U.S. SMALL COMPANY: 0.60%
The table below sets forth for each Fund listed the advisory fees paid
by its corresponding Portfolio to the Advisor for the fiscal periods indicated.
See "Expenses" in the Prospectus and below for applicable expense limitations.
See also the Fund's financial statements which are incorporated herein by
reference.
THE U.S. EQUITY PORTFOLIO (U.S. Equity Fund) -- For the fiscal year ended May
31, 1995: $2,025,936. For the fiscal year ended May 31, 1996: $2,744,054. For
the fiscal year ended May 31, 1997: $3,049,388.
THE U.S. SMALL COMPANY PORTFOLIO (U.S. Small Company Fund) -- For the fiscal
year ended May 31, 1995: $3,514,331. For the fiscal year ended May 31, 1996:
$4,286,311. For the fiscal year ended May 31, 1997: $5,424,514.
THE DISCIPLINED EQUITY PORTFOLIO (Disciplined Equity Fund) -- For the period
December 30, 1996 (commencement of operations) through May 31, 1997: $73,985.
The Investment Advisory Agreements provide that they will continue in
effect for a period of two years after execution only if specifically approved
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thereafter annually in the same manner as the Distribution Agreement. See
"Distributor" below. Each of the Investment Advisory Agreements will terminate
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Portfolio's Trustees, or by a vote of the holders of a
majority of the Portfolio's outstanding voting securities, on 60 days' written
notice to the Advisor and by the Advisor on 90 days' written notice to the
Portfolio. See "Additional Information."
The Glass-Steagall Act and other applicable laws generally prohibit
banks such as the Advisor from engaging in the business of underwriting or
distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Trust. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment advisor and custodian to such an
investment company. The Advisor believes that it may perform the services for
the Portfolios contemplated by the Advisory Agreements without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent the Advisor from continuing to perform such services for the
Portfolios.
If the Advisor were prohibited from acting as investment advisor to any
Portfolio, it is expected that the Trustees of the Portfolio would recommend to
investors that they approve the Portfolio's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.
Under separate agreements, Morgan also provides certain financial, fund
accounting and administrative services to the Trust and the Portfolios and
shareholder services for the Trust. See "Services Agent" and "Shareholder
Servicing" below.
DISTRIBUTOR
FDI serves as the Trust's exclusive Distributor and holds itself
available to receive purchase orders for each of the Fund's shares. In that
capacity, FDI has been granted the right, as agent of the Trust, to solicit and
accept orders for the purchase of each of the Fund's shares in accordance with
the terms of the Distribution Agreement between the Trust and FDI. Under the
terms of the Distribution Agreement between FDI and the Trust, FDI receives no
compensation in its capacity as the Trust's distributor.
The Distribution Agreement shall continue in effect with respect to
each of the Funds for a period of two years after execution only if it is
approved at least annually thereafter (i) by a vote of the holders of a majority
of the Fund's outstanding shares or by its Trustees and (ii) by a vote of a
majority of
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the Trustees of the Trust who are not "interested persons" (as defined by the
1940 Act) of the parties to the Distribution Agreement, cast in person at a
meeting called for the purpose of voting on such approval (see "Trustees and
Officers"). The Distribution Agreement will terminate automatically if assigned
by either party thereto and is terminable at any time without penalty by a vote
of a majority of the Trustees of the Trust, a vote of a majority of the Trustees
who are not "interested persons" of the Trust, or by a vote of the holders of a
majority of the Fund's outstanding shares as defined under "Additional
Information," in any case without payment of any penalty on 60 days' written
notice to the other party. The principal offices of FDI are located at 60 State
Street, Suite 1300, Boston, Massachusetts 02109.
CO-ADMINISTRATOR
Under Co-Administration Agreements with the Trust and the Portfolios
dated August 1, 1996, FDI also serves as the Trust's and the Portfolios'
Co-Administrator. The Co-Administration Agreements may be renewed or amended by
the respective Trustees without a shareholder vote. The Co-Administration
Agreements are terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust or the Portfolios, as applicable, on not more than 60
days' written notice nor less than 30 days' written notice to the other party.
The Co-Administrator may subcontract for the performance of its obligations,
provided, however, that unless the Trust or the Portfolios, as applicable,
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and omissions of any subcontractor as it would for its own acts or
omissions. See "Services Agent" below.
For its services under the Co-Administration Agreements, each Fund and
Portfolio has agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to each Fund or Portfolio is based on the ratio of its net assets to
the aggregate net assets of the Trust, the Master Portfolios and certain other
investment companies subject to similar agreements with FDI.
The table below sets forth for each Fund listed and its corresponding
Portfolio the administrative fees paid to FDI for the fiscal periods indicated.
See "Expenses" in the Prospectus and below for applicable expense limitations.
THE U.S. EQUITY PORTFOLIO -- For the period August 1, 1996 through May 31, 1997:
$16,536.
THE U.S. EQUITY FUND -- For the period August 1, 1996 through May 31,
1997: $7,865.
THE U.S. SMALL COMPANY PORTFOLIO -- For the period August 1, 1996 through May
31, 1997: $19,652.
U.S. SMALL COMPANY FUND -- For the period August 1, 1996 through May 31, 1997:
$9,753.
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THE DISCIPLINED EQUITY PORTFOLIO -- For the period December 30, 1996
(commencement of operations) through May 31, 1997: $520.
DISCIPLINED EQUITY FUND -- For the period January 3, 1997 (commencement of
operations) through May 31, 1997: $392.
The table below sets forth for each Fund listed and its corresponding
Portfolio the administrative fees paid to Signature Broker-Dealer Services, Inc.
(which provided distribution and administrative services to the Trust and
placement agent and administrative services to the Portfolios prior to August 1,
1996) for the fiscal periods indicated. See "Expenses" in the Prospectus and
below for applicable expense limitations.
THE U.S. EQUITY PORTFOLIO -- For the fiscal year ended May 31, 1995: $32,670.
For the fiscal year ended May 31, 1996: $62,404. For the period June 1, 1996
through July 31, 1996: $14,675.
U.S. EQUITY FUND -- For the fiscal year ended May 31, 1995: $30,529. For the
fiscal year ended May 31, 1996: $41,556. For the period June 1, 1996 through
July 31, 1996: $4,553.
THE U.S. SMALL COMPANY PORTFOLIO -- For the fiscal year ended May 31, 1995:
$38,215. For the fiscal year ended May 31, 1996: $65,079. For the period June
1, 1996 through July 31, 1996: $17,162.
U.S. SMALL COMPANY FUND -- For the fiscal year ended May 31, 1995: $27,525. For
the fiscal year ended May 31, 1996: $42,829. For the period June 1, 1996 through
July 31, 1996: $5,925.
SERVICES AGENT
The Trust, on behalf of each Fund, and the Portfolios have entered into
Administrative Services Agreements (the "Services Agreements") with Morgan
effective December 29, 1995, as amended August 1, 1996, pursuant to which Morgan
is responsible for certain administrative and related services provided to each
Fund and its corresponding Portfolio. The Services Agreements may be terminated
at any time, without penalty, by the Trustees or Morgan, in each case on not
more than 60 days' nor less than 30 days' written notice to the other party.
Under the amended Services Agreements, each of the Funds and the
Portfolios has agreed to pay Morgan fees equal to its allocable share of an
annual complex- wide charge. This charge is calculated daily based on the
aggregate net assets of the Master Portfolios and JPM Series Trust in accordance
with the following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average daily
net assets in excess of $7 billion, less the complex-wide fees payable to FDI.
The portion of this charge payable by each Fund and Portfolio is determined by
the proportionate share that its net assets bear to the total net assets of the
Trust, the Master Portfolios, the other investors in the Master Portfolios for
which Morgan provides similar services and JPM Series Trust.
Under Administrative Services Agreements in effect from December 29,
1995 through July 31, 1996, with Morgan, certain Funds and their corresponding
Portfolios paid Morgan a fee equal to its proportionate share of an annual
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complex-wide charge. This charge was calculated daily based on the aggregate net
assets of those Portfolios in accordance with the following schedule: 0.06% of
the first $7 billion of the Portfolios' aggregate average daily net assets, and
0.03% of the Portfolios' aggregate average daily net assets in excess of $7
billion.
Prior to December 29, 1995, the Trust and certain Portfolios had
entered into Financial and Fund Accounting Services Agreements with Morgan, the
provisions of which included certain of the activities described above and,
prior to September 1, 1995, also included reimbursement of usual and customary
expenses. The table below sets forth for each Fund listed and its corresponding
Portfolio the fees paid to Morgan, net of fee waivers and reimbursements, as
Services Agent. See "Expenses" in the Prospectus and below for applicable
expense limitations.
THE U.S. EQUITY PORTFOLIO -- For the fiscal year ended May 31, 1995: $236,537.
For the fiscal year ended May 31, 1996: $138,134. For the fiscal year ended May
31, 1997: $232,617.
U.S. EQUITY FUND -- For the fiscal year ended May 31, 1995: $(95,210)1. For the
fiscal year ended May 31, 1996: $15,882. For the fiscal year ended May 31, 1997:
$80,756.
THE U.S. SMALL COMPANY PORTFOLIO -- For the fiscal year ended May 31, 1995:
$241,373. For the fiscal year ended May 31, 1996: $144,277. For the fiscal year
ended May 31, 1997: $275,962.
U.S. SMALL COMPANY FUND -- For the fiscal year ended May 31, 1995: $(73,786)*.
For the fiscal year ended May 31, 1996: $21,392. For the fiscal year ended May
31, 1997: $100,607.
THE DISCIPLINED EQUITY PORTFOLIO -- For the period December 30, 1996
(commencement of operations) through May 31, 1997: $6,614.
DISCIPLINED EQUITY FUND -- For the period January 3, 1997 (commencement of
operations) through May 31, 1997: $3,801.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Trust's and each of the
Portfolio's custodian and fund accounting agent and each Fund's transfer and
dividend disbursing agent. Pursuant to the Custodian Contracts, State Street is
responsible for maintaining the books of account and records of portfolio trans
actions and holding portfolio securities and cash. In the case of foreign assets
held outside the United States, the Custodian employs various subcustodians who
were approved by the Trustees of the Portfolios in accordance with the
regulations of the SEC. The Custodian maintains portfolio transaction records.
As transfer agent and dividend disbursing agent, State Street is responsible for
- --------
1Indicates a reimbursement by Morgan for expenses in excess of its fees
under the Services Agreements. No fees were paid for the fiscal period.
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maintaining account records detailing the ownership of Fund shares and for
crediting income, capital gains and other changes in share ownership to
shareholder accounts.
SHAREHOLDER SERVICING
The Trust on behalf of each of the Funds has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for its customers and for other Fund investors who are customers
of an Eligible Institution. Under this agreement, Morgan is responsible for
performing shareholder account, administrative and servicing functions, which
include but are not limited to, answering inquiries regarding account status and
history, the manner in which purchases and redemptions of Fund shares may be
effected, and certain other matters pertaining to a Fund; assisting customers in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to coordinate the establishment and
maintenance of shareholder accounts and records with the Funds' transfer agent;
transmitting purchase and redemption orders to the Funds' transfer agent and
arranging for the wiring or other transfer of funds to and from customer
accounts in connection with orders to purchase or redeem Fund shares; verifying
purchase and redemption orders, transfers among and changes in accounts;
informing the Distributor of the gross amount of purchase orders for Fund
shares; and providing other related services.
Under the Shareholder Servicing Agreement, each Fund has agreed to pay
Morgan for these services a fee at the following annual rates (expressed as a
percentage of the average daily net asset values of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder servicing agent): U.S.
Equity, Disciplined Equity and U.S. Small Company Funds, 0.10%. Morgan acts as
shareholder servicing agent for all shareholders.
The table below sets forth for each Fund listed the shareholder
servicing fees paid by each Fund to Morgan, net of fee waivers and
reimbursements, for the fiscal periods indicated. See "Expenses" in the
Prospectus and below for applicable expense limitations.
U.S. EQUITY FUND -- For the fiscal year ended May 31, 1995: $55,090. For the
fiscal year ended May 31, 1996: $151,111. For the fiscal year ended May 31,
1997: $264,300.
U.S. SMALL COMPANY FUND -- For the fiscal year ended May 31, 1995: $49,479. For
the fiscal year ended May 31, 1996: $162,465. For the fiscal year ended May 31,
1997: $329,689.
DISCIPLINED EQUITY FUND -- For the period January 3, 1997 (commencement of
operations) through May 31, 1997: $12,168.
As discussed under "Investment Advisor," the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
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and providing administrative services to the Funds and the Portfolios under the
Services Agreements and in acting as Advisor to the Portfolios under the
Investment Advisory Agreements, may raise issues under these laws. However,
Morgan believes that it may properly perform these services and the other
activities described in the Prospectus without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.
If Morgan were prohibited from providing any of the services under the
Shareholder Servicing Agreement and the Services Agreements, the Trustees would
seek an alternative provider of such services. In such event, changes in the
operation of the Funds or the Portfolios might occur and a shareholder might no
longer be able to avail himself or herself of any services then being provided
to shareholders by Morgan.
INDEPENDENT ACCOUNTANTS
The independent accountants of the Trust and the Portfolios are Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. Price
Waterhouse LLP conducts an annual audit of the financial statements of each of
the Funds and the Portfolios, assists in the preparation and/or review of each
of the Fund's and the Portfolio's federal and state income tax returns and
consults with the Funds and the Portfolios as to matters of accounting and
federal and state income taxation.
EXPENSES
In addition to the fees payable to Pierpont Group, Inc., Morgan and FDI
under various agreements discussed under "Trustees and Officers," "Investment
Advisor," "Co-Administrator and Distributor," "Services Agent" and "Shareholder
Servicing" above, the Funds and the Portfolios are responsible for usual and
customary expenses associated with their respective operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance costs,
the compensation and expenses of the Trustees, registration fees under federal
securities laws and extraordinary expenses applicable to the Funds or the
Portfolios. For the Funds, such expenses also include transfer, registrar and
dividend disbursing costs, the expenses of printing and mailing reports, notices
and proxy statements to Fund shareholders and filing fees under state securities
laws. For the Portfolios, such expenses also include applicable registration
fees under foreign securities laws, custodian fees and brokerage expenses. Under
fee arrangements prior to September 1, 1995, Morgan as Services Agent was
responsible for reimbursements to the Trust and certain Portfolios and the usual
and customary expenses described above (excluding organization and extraordinary
expenses, custodian fees and brokerage expenses). For additional information
regarding waivers or expense subsidies, see "Management of the Trust and the
Portfolio" in the Prospectus.
PURCHASE OF SHARES
Investors may open Fund accounts and purchase shares as described in
the Prospectus under "Purchase of Shares." References in the Prospectus and this
Statement of Additional Information to customers of Morgan or an Eligible
Institution include customers of their affiliates and references to transactions
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by customers with Morgan or an Eligible Institution include transactions with
their affiliates. Only Fund investors who are using the services of a financial
institution acting as shareholder servicing agent pursuant to an agreement with
the Trust on behalf of a Fund may make transactions in shares of a Fund.
Each Fund may, at its own option, accept securities in payment for
shares. The securities delivered in such a transaction are valued by the method
described in "Net Asset Value" as of the day the Fund receives the securities.
This is a taxable transaction to the shareholder. Securities may be accepted in
payment for shares only if they are, in the judgment of Morgan, appropriate
investments for the Fund's corresponding Portfolio. In addition, securities
accepted in payment for shares must: (i) meet the investment objective and
policies of the acquiring Fund's corresponding Portfolio; (ii) be acquired by
the applicable Fund for investment and not for resale (other than for resale to
the Fund's corresponding Portfolio); (iii) be liquid securities which are not
restricted as to transfer either by law or liquidity of market; and (iv) if
stock, have a value which is readily ascertainable as evidenced by a listing on
a stock exchange, OTC market or by readily available market quotations from a
dealer in such securities. Each Fund reserves the right to accept or reject at
its own option any and all securities offered in payment for its shares.
Prospective investors may purchase shares with the assistance of an
Eligible Institution, and the Eligible Institution may charge the investor a fee
for this service and other services it provides to its customers.
REDEMPTION OF SHARES
Investors may redeem shares as described in the Prospectus under
"Redemption of Shares." Accordingly, a redemption request might result in
payment of a dollar amount which differs from the number of shares redeemed. See
"Net Asset Value" in the Prospectus and below.
If the Trust on behalf of a Fund and its corresponding Portfolio
determine that it would be detrimental to the best interest of the remaining
shareholders of a Fund to make payment wholly or partly in cash, payment of the
redemption price may be made in whole or in part by a distribution in kind of
securities from the Portfolio, in lieu of cash, in conformity with the
applicable rule of the SEC. If shares are redeemed in kind, the redeeming
shareholder might incur transaction costs in converting the assets into cash.
The method of valuing portfolio securities is described under "Net Asset Value,"
and such valuation will be made as of the same time the redemption price is
determined. The Trust on behalf of all of the Funds and their corresponding
Portfolios have elected to be governed by Rule 18f-1 under the 1940 Act pursuant
to which the Funds and the corresponding Portfolios are obligated to redeem
shares solely in cash up to the lesser of $250,000 or one percent of the net
asset value of the Fund during any 90 day period for any one shareholder. The
Trust will redeem Fund shares in kind only if it has received a redemption in
kind from the corresponding Portfolio and therefore shareholders of the Fund
that receive redemptions in kind will receive securities of the Portfolio. The
Portfolios have advised the Trust that the Portfolios will not redeem in kind
except in circumstances in which a Fund is permitted to redeem in kind.
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FURTHER REDEMPTION INFORMATION. The Trust, on behalf of a Fund, and the
Portfolios reserve the right to suspend the right of redemption and to postpone
the date of payment upon redemption as follows: (i) for up to seven days, (ii)
during periods when the New York Stock Exchange is closed for other than
weekends and holidays or when trading on such Exchange is restricted as
determined by the SEC by rule or regulation, (iii) during periods in which an
emergency, as determined by the SEC, exists that causes disposal by the
Portfolio of, or evaluation of the net asset value of, its portfolio securities
to be unreasonable or impracticable, or (iv) for such other periods as the SEC
may permit.
EXCHANGE OF SHARES
An investor may exchange shares from any JPM Institutional Fund into
any other JPM Institutional Fund or JPM Pierpont Fund, as described under
"Exchange of Shares" in the Prospectus. For complete information, the Prospectus
as it relates to the Fund into which a transfer is being made should be read
prior to the transfer. Requests for exchange are made in the same manner as
requests for redemptions. See "Redemption of Shares." Shares of the Fund to be
acquired are purchased for settlement when the proceeds from redemption become
available. In the case of investors in certain states, state securities laws may
restrict the availability of the exchange privilege. The Trust reserves the
right to discontinue, alter or limit the exchange privilege at any time.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays dividends and distributions as described
under "Dividends and Distributions" in the Prospectus.
If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.
NET ASSET VALUE
Each of the Funds computes its net asset value once daily on Monday
through Friday as described under "Net Asset Value" in the Prospectus. The net
asset value will not be computed on the day the following legal holidays are
observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day. The Funds and the Portfolios may also close for purchases and
redemptions at such other times as may be determined by the Board of Trustees to
the extent permitted by applicable law. The days on which net asset value is
determined are the Funds' business days.
The net asset value of each Fund is equal to the value of the Fund's
investment in its corresponding Portfolio (which is equal to the Fund's pro rata
share of the total investment of the Fund and of any other investors in the
Portfolio less the Fund's pro rata share of the Portfolio's liabilities) less
the
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Fund's liabilities. The following is a discussion of the procedures used by the
Portfolios corresponding to each Fund in valuing their assets.
In the case of the Equity Portfolios, the value of investments listed
on a domestic securities exchange, other than options on stock indexes, is based
on the last sale prices on such exchange at 4:00 P.M. or, in the absence of
recorded sales, at the average of readily available closing bid and asked prices
on such exchange. Securities listed on a foreign exchange are valued at the last
quoted sale price available before the time when net assets are valued. Unlisted
securities are valued at the average of the quoted bid and asked prices in the
OTC market. The value of each security for which readily available market
quotations exist is based on a decision as to the broadest and most
representative market for such security. For purposes of calculating net asset
value all assets and liabilities initially expressed in foreign currencies will
be converted into U.S. dollars at the prevailing market rates available at the
time of valuation.
Options on stock indexes traded on national securities exchanges are
valued at the close of options trading on such exchanges which is currently 4:10
P.M., New York time. Stock index futures and related options, which are traded
on commodities exchanges, are valued at their last sales price as of the close
of such commodities exchanges which is currently 4:15 P.M., New York time.
Securities or other assets for which market quotations are not readily available
(including certain restricted and illiquid securities) are valued at fair value
in accordance with procedures established by and under the general supervision
and responsibility of the Trustees. Such procedures include the use of
independent pricing services which use prices based upon yields or prices of
securities of comparable quality, coupon, maturity and type; indications as to
values from dealers; and general market conditions. Short-term investments which
mature in 60 days or less are valued at amortized cost if their original
maturity was 60 days or less, or by amortizing their value on the 61st day prior
to maturity, if their original maturity when acquired by the Portfolio was more
than 60 days, unless this is determined not to represent fair value by the
Trustees.
Trading in securities on most foreign exchanges and OTC markets is
normally completed before the close of the New York Stock Exchange and may also
take place on days on which the New York Stock Exchange is closed. If events
materially affecting the value of securities occur between the time when the
exchange on which they are traded closes and the time when a Portfolio's net
asset value is calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
PERFORMANCE DATA
From time to time, the Funds may quote performance in terms of yield,
actual distributions, total return or capital appreciation in reports, sales
literature and advertisements published by the Trust. Current performance
information for the Funds may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.
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TOTAL RETURN QUOTATIONS. As required by regulations of the SEC, the
annualized total return of the Funds for a period is computed by assuming a
hypothetical initial payment of $1,000. It is then assumed that all of the
dividends and distributions by the Fund over the period are reinvested. It is
then assumed that at the end of the period, the entire amount is redeemed. The
annualized total return is then calculated by determining the annual rate
required for the initial payment to grow to the amount which would have been
received upon redemption.
Aggregate total returns, reflecting the cumulative percentage change
over a measuring period, may also be calculated.
Historical performance information for any period or portion thereof
prior to the establishment of a Fund will be that of its corresponding
predecessor JPM Pierpont fund, as permitted by applicable SEC staff
interpretations, if the JPM Pierpont Fund commenced operations before the
corresponding JPM Institutional Fund. The applicable financial information in
the registration statements for The JPM Pierpont Funds (Registration Nos.
33-54632 and 811-7340) is incorporated herein by reference.
Below is set forth historical return information for the Funds for the
periods indicated:
U.S. EQUITY FUND (5/31/97): Average annual total return, 1 year: 25.21%; average
annual total return, 5 years: 16.65%; average annual total return, ten years:
14.53%; aggregate total return, 1 year: 25.21%; aggregate total return, 5 years:
116.01%; aggregate total return, ten years: 288.17%.
U.S. SMALL COMPANY FUND (5/31/97): Average annual total return, 1 year: 9.44%;
average annual total return, 5 years: 16.15%; average annual total return, 10
years: 11.11%; aggregate total return, 1 year: 9.44%; aggregate total return, 5
years: 111.43%; aggregate total return, 10 years: 186.69%.
DISCIPLINED EQUITY FUND (5/31/97): Average annual total return, 1 year: N/A;
average annual total return, 5 years: N/A; average annual total return
commencement of operations2 to period end: 14.70%; aggregate total return,
1 year: N/A; aggregate total return, 5 years: N/A; aggregate total return
commencement of operations to period end: 14.70%.
GENERAL. A Fund's performance will vary from time to time depending
upon market conditions, the composition of its corresponding Portfolio, and its
operating expenses. Consequently, any given performance quotation should not be
considered representative of a Fund's performance for any specified period in
the future. In addition, because performance will fluctuate, it may not provide
a basis for comparing an investment in a Fund with certain bank deposits or
other investments that pay a fixed yield or return for a stated period of time.
- --------
2The Disciplined Equity Fund commenced operations on January 3, 1997.
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Comparative performance information may be used from time to time in
advertising the Funds' shares, including appropriate market indices including
the benchmarks indicated under "Investment Advisor" above or data from Lipper
Analytical Services, Inc., Micropal, Inc., Ibbotson Associates, Morningstar
Inc., the Dow Jones Industrial Average and other industry publications.
PORTFOLIO TRANSACTIONS
The Advisor places orders for all Portfolios for all purchases and sales of
portfolio securities, enters into repurchase agreements, and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of all the Portfolios. See "Investment Objectives and Policies."
In connection with portfolio transactions for the Equity Portfolios,
the overriding objective is to obtain the best possible execution of purchase
and sale orders.
In selecting a broker, the Advisor considers a number of factors
including: the price per unit of the security; the broker's reliability for
prompt, accurate confirmations and on-time delivery of securities; the firm's
financial condition; as well as the commissions charged. A broker may be paid a
brokerage commission in excess of that which another broker might have charged
for effecting the same transaction if, after considering the foregoing factors,
the Advisor decides that the broker chosen will provide the best possible
execution. The Advisor monitors the reasonableness of the brokerage commissions
paid in light of the execution received. The Trustees of each Portfolio review
regularly the reasonableness of commissions and other transaction costs incurred
by the Portfolios in light of facts and circumstances deemed relevant from time
to time, and, in that connection, will receive reports from the Advisor and
published data concerning transaction costs incurred by institutional investors
generally. Research services provided by brokers to which the Advisor has
allocated brokerage business in the past include economic statistics and
forecasting services, industry and company analyses, portfolio strategy
services, quantitative data, and consulting services from economists and
political analysts. Research services furnished by brokers are used for the
benefit of all the Advisor's clients and not solely or necessarily for the
benefit of an individual Portfolio. The Advisor believes that the value of
research services received is not determinable and does not significantly reduce
its expenses. The Portfolios do not reduce their fee to the Advisor by any
amount that might be attributable to the value of such services.
The Portfolios paid the following approximate brokerage commissions for
the indicated fiscal periods:
U.S. EQUITY (May): 1997: $1,614,293; 1996: $1,375,696; 1995: $1,179,132.
U.S. SMALL COMPANY (May): 1997: $2,174,321; 1996: $1,554,459; 1995: $1,217,016.
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DISCIPLINED EQUITY (For the period December 30, 1996 (commencement of operations
of the Disciplined Equity Portfolio) through May 31, 1997): $25,351.
The increases in brokerage commissions reflected above were due to
increased portfolio activity and an increase in net investments by investors in
a Portfolio or its predecessor.
Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisor may allocate a portion of a Portfolio's
brokerage transactions to affiliates of the Advisor. In order for affiliates of
the Advisor to effect any portfolio transactions for a Portfolio, the
commissions, fees or other remuneration received by such affiliates must be
reasonable and fair compared to the commissions, fees, or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. Furthermore, the Trustees of each Portfolio,
including a majority of the Trustees who are not "interested persons," have
adopted procedures which are reasonably designed to provide that any
commissions, fees, or other remuneration paid to such affiliates are consistent
with the foregoing standard.
Portfolio securities will not be purchased from or through or sold to
or through the Co-Administrator, the Distributor or the Advisor or any other
"affiliated person" (as defined in the 1940 Act) of the Co-Administrator,
Distributor or Advisor when such entities are acting as principals, except to
the extent permitted by law. In addition, the Portfolios will not purchase
securities during the existence of any underwriting group relating thereto of
which the Advisor or an affiliate of the Advisor is a member, except to the
extent permitted by law.
On those occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of a Portfolio as well as other customers
including other Portfolios, the Advisor to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for a Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction will be
made by the Advisor in the manner it considers to be most equitable and
consistent with its fiduciary obligations to a Portfolio. In some instances,
this procedure might adversely affect a Portfolio.
If a Portfolio that writes options effects a closing purchase
transaction with respect to an option written by it, normally such transaction
will be
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executed by the same broker-dealer who executed the sale of the option. The
writing of options by a Portfolio will be subject to limitations established by
each of the exchanges governing the maximum number of options in each class
which may be written by a single investor or group of investors acting in
concert, regardless of whether the options are written on the same or different
exchanges or are held or written in one or more accounts or through one or more
brokers. The number of options which a Portfolio may write may be affected by
options written by the Advisor for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.
MASSACHUSETTS TRUST
The Trust is a trust fund of the type commonly known as a
"Massachusetts business trust" of which each Fund is a separate and distinct
series. A copy of the Declaration of Trust for the Trust is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The Declaration of
Trust and the By-Laws of the Trust are designed to make the Trust similar in
most respects to a Massachusetts business corporation. The principal distinction
between the two forms concerns shareholder liability described below.
Effective May 12, 1997, the name of the U.S. Equity Fund was changed
from "The JPM Institutional Selected U.S. Equity Fund" to "The JPM Institutional
U.S. Equity Fund", and the Fund's corresponding Portfolio changed its name
accordingly.
Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust which is not the case for a corporation. However, the Trust's
Declaration of Trust provides that the shareholders shall not be subject to any
personal liability for the acts or obligations of any Fund and that every
written agreement, obligation, instrument or undertaking made on behalf of any
Fund shall contain a provision to the effect that the shareholders are not
personally liable thereunder.
No personal liability will attach to the shareholders under any
undertaking containing such provision when adequate notice of such provision is
given, except possibly in a few jurisdictions. With respect to all types of
claims in the latter jurisdictions, (i) tort claims, (ii) contract claims where
the provision referred to is omitted from the undertaking, (iii) claims for
taxes, and (iv) certain statutory liabilities in other jurisdictions, a
shareholder may be held personally liable to the extent that claims are not
satisfied by the Fund. However, upon payment of such liability, the shareholder
will be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Trust in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Funds.
The Trust's Declaration of Trust further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as individuals or
personally, that no Trustee, officer, employee or agent of a Fund is liable to a
Fund or to a shareholder, and that no Trustee, officer, employee, or agent is
liable to any third persons in connection with the affairs of a Fund, except as
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such liability may arise from his or its own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or its duties to such third
persons. It also provides that all third persons shall look solely to Fund
property for satisfaction of claims arising in connection with the affairs of a
Fund. With the exceptions stated, the Trust's Declaration of Trust provides that
a Trustee, officer, employee, or agent is entitled to be indemnified against all
liability in connection with the affairs of a Fund.
The Trust shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.
DESCRIPTION OF SHARES
The Trust is an open-end management investment company organized as a
Massachusetts business trust in which each Fund represents a separate series of
shares of beneficial interest. See "Massachusetts Trust."
The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares (of any
series, if applicable) without changing the proportionate beneficial interest of
each shareholder in a Fund (or in the assets of other series, if applicable). To
date shares of the 24 series have been authorized and are available for sale to
the public. Each share represents an equal proportional interest in a Fund with
each other share. Upon liquidation of a Fund, holders are entitled to share pro
rata in the net assets of a Fund available for distribution to such
shareholders. See "Massachusetts Trust." Shares of a Fund have no preemptive or
conversion rights and are fully paid and nonassessable. The rights of redemption
and exchange are described in the Prospectus and elsewhere in this Statement of
Additional Information.
The shareholders of the Trust are entitled to a full vote for each full
share held and to a fractional vote for each fractional share. Subject to the
1940 Act, the Trustees themselves have the power to alter the number and the
terms of office of the Trustees, to lengthen their own terms, or to make their
terms of unlimited duration subject to certain removal procedures, and appoint
their own successors, PROVIDED, HOWEVER, that immediately after such appointment
the requisite majority of the Trustees have been elected by the shareholders of
the Trust. The voting rights of shareholders are not cumulative so that holders
of more than 50% of the shares voting can, if they choose, elect all Trustees
being selected while the shareholders of the remaining shares would be unable to
elect any Trustees. It is the intention of the Trust not to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for action
by shareholder vote as may be required by either the 1940 Act or the Trust's
Declaration of Trust.
Shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of its outstanding shares, to remove a
Trustee. The Trustees will call a meeting of shareholders to vote on removal of
a Trustee upon the written request of the record holders of 10% of the Trust's
shares. In addition, whenever ten or more shareholders of record who have been
such for at
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least six months preceding the date of application, and who hold in the
aggregate either shares having a net asset value of at least $25,000 or at least
1% of the Trust's outstanding shares, whichever is less, shall apply to the
Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting for the
purpose of voting upon the question of removal of any Trustee or Trustees and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the names and
addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of request. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the SEC,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statements
filed, the SEC may, and if demanded by the Trustees or by such applicants shall,
enter an order either sustaining one or more of such objections or refusing to
sustain any of them. If the SEC shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more of
such objections, the SEC shall find, after notice and opportunity for hearing,
that all objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all shareholders
with reasonable promptness after the entry of such order and the renewal of such
tender.
The Trustees have authorized the issuance and sale to the public of
shares of 24 series of the Trust. The Trustees have no current intention to
create any classes within the initial series or any subsequent series. The
Trustees may, however, authorize the issuance of shares of additional series and
the creation of classes of shares within any series with such preferences,
privileges, limitations and voting and dividend rights as the Trustees may
determine. The proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with distinct investment
objectives, policies and restrictions, and share purchase, redemption and net
asset valuation procedures. Any additional classes would be used to distinguish
among the rights of different categories of shareholders, as might be required
by future regulations or other unforeseen circumstances. All consideration
received by the Trust for shares of any additional series or class, and all
assets in which such consideration is invested, would belong to that series or
class, subject only to the rights of creditors of the Trust and would be subject
to the liabilities related thereto. Shareholders of any additional series or
class will approve the adoption of any management contract or distribution plan
relating to such series or class and of any changes in the investment policies
related thereto, to the extent required by the 1940 Act.
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For information relating to mandatory redemption of Fund shares or
their redemption at the option of the Trust under certain circumstances, see
"Redemption of Shares" in the Prospectus.
As of August 31, 1997, the following owned of record or, to the
knowledge of management, beneficially owned more than 5% of the outstanding
shares of:
U.S. Equity Fund -- Morgan as Trustee for Major League Baseball Master
Pension Trust (8.82%); Wachovia Bank of North Carolina, Trustee U/A
DTD 1/1/88 for Newmont Gold Co. Master Pension Trust (7.32%); Morgan
as Agent for Diversified Growth Fund (6.85%); Morgan as Trustee for
Degussa Defined Benefit Trust (6.44%); Lin Television Corp. Retirement
Plan - P.E. Maloney, J. Moylan and D. Jacobson (5.59%); and
Disciplined Equity Fund -- The Queen's Health Systems (32.12%); Charles
Schwab & Co. Inc. Special Custody Account for Benefit of Customers
(22.90%); Wachovia Bank NA Trustee U/A 7/1/97 Master Builders Inc.
Master Trust (13.31%).
The address of each owner listed above is c/o Morgan, 522 Fifth Avenue,
New York, New York 10036. As of the date of this Statement of Additional
Information, the officers and Trustees as a group owned less than 1% of the
shares of each Fund.
TAXES
Each Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code. As a regulated investment company, a
Fund must, among other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock, securities or foreign
currency and other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months, or foreign
currencies (or options, futures or forward contracts on foreign currencies) held
less than three months, but only if such currencies (or options, futures or
forward contracts on foreign currencies) are not directly related to a Fund's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities); and (c) diversify its holdings so that,
at the end of each quarter of its taxable year, (i) at least 50% of the value of
the Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of other regulated investment companies, and other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets, and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies). Effective as
of June 1, 1998, the 30% of gross income test described in (b) above will no
longer apply to the Funds.
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As a regulated investment company, a Fund (as opposed to its
shareholders) will not be subject to federal income taxes on the net investment
income and capital gain that it distributes to its shareholders, provided that
at least 90% of its net investment income and realized net short-term capital
gain in excess of net long-term capital loss for the taxable year is distributed
in accordance with the Code's timing requirements.
Under the Code, a Fund will be subject to a 4% excise tax on a portion
of its undistributed taxable income and capital gains if it fails to meet
certain distribution requirements by the end of the calendar year. Each Fund
intends to make distributions in a timely manner and accordingly does not expect
to be subject to the excise tax.
For federal income tax purposes, dividends that are declared by a Fund
in October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will be taxable to a
shareholder in the year declared rather than the year paid.
Distributions of net investment income, certain foreign currency gains,
and realized net short-term capital gain in excess of net long-term capital loss
(other than exempt interest dividends) are generally taxable to shareholders of
the Funds as ordinary income whether such distributions are taken in cash or
reinvested in additional shares. The Funds expect that a portion of these
distributions to corporate shareholders will be eligible for the
dividends-received deduction subject to applicable limitations under the Code.
If dividend payments exceed income earned by the Fund, the over distribution
would be considered a return of capital rather than a dividend payment. The Fund
intends to pay dividends in such a manner so as to minimize the possibility of a
return of capital. Distributions of net long-term capital gain (i.e., net
long-term capital gain in excess of net short-term capital loss) are taxable to
shareholders of a Fund as long-term capital gain, regardless of whether such
distributions are taken in cash or reinvested in additional shares and
regardless of how long a shareholder has held shares in the Fund. As a result of
the enactment of the Taxpayer Relief Act of 1997 (the "Act"), long-term capital
gain of an individual is generally subject to a maximum rate of 28% in respect
of a capital asset held directly by such individual for more than one year but
not more than eighteen months, and the maximum rate is reduced to 20% in respect
of a capital asset held in excess of 18 months. The Act authorizes the Treasury
department to promulgate regulations that would apply these rules in the case of
long-term capital gain distributions made by the Fund. See "Taxes" in the
Prospectus for a discussion of the federal income tax treatment of any gain or
loss realized on the redemption or exchange of a Fund's shares. Additionally,
any loss realized on a redemption or exchange of shares of a Fund will be
disallowed to the extent the shares disposed of are replaced within a period of
61 days beginning 30 days before such disposition, such as pursuant to
reinvestment of a dividend in shares of the Fund.
Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where a put is acquired or a call option is
written thereon or the straddle rules described below are otherwise applicable.
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Other gains or losses on the sale of securities will be short-term capital gains
or losses. Gains and losses on the sale, lapse or other termination of options
on securities will be treated as gains and losses from the sale of securities.
Except as described below, if an option written by a Portfolio lapses or is
terminated through a closing transaction, such as a repurchase by the Portfolio
of the option from its holder, the Portfolio will realize a short-term capital
gain or loss, depending on whether the premium income is greater or less than
the amount paid by the Portfolio in the closing transaction. If securities are
purchased by a Portfolio pursuant to the exercise of a put option written by it,
the Portfolio will subtract the premium received from its cost basis in the
securities purchased.
Under the Code, gains or losses attributable to disposition of foreign
currency or to certain foreign currency contracts, or to fluctuations in
exchange rates between the time a Portfolio accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time a
Portfolio actually collects such income or pays such liabilities, are generally
treated as ordinary income or ordinary loss. Similarly, gains or losses on the
disposition of debt securities held by a Portfolio, if any, denominated in
foreign currency, to the extent attributable to fluctuations in exchange rates
between the acquisition and disposition dates are also treated as ordinary
income or loss.
Forward currency contracts, options and futures contracts entered into
by a Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities. Certain straddles treated as short sales for tax purposes
may also result in the loss of the holding period of underlying securities for
purposes of the 30% of gross income test described above, and therefore, a
Portfolio's ability to enter into forward currency contracts, options and
futures contracts may be limited.
Certain options, futures and foreign currency contracts held by a
Portfolio at the end of each taxable year will be required to be "marked to
market" for federal income tax purposes -- i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. However, gain or loss recognized on certain foreign currency
contracts will be treated as ordinary income or loss.
The Equity Portfolios may invest in Equity Securities of foreign
issuers. If a Portfolio purchases shares in certain foreign corporations
(referred to as passive foreign investment companies ("PFICs") under the Code),
the corresponding Fund may be subject to federal income tax on a portion of an
"excess distribution" from such foreign corporation, including any gain from the
disposition of such shares, even though a portion of such income may have to be
distributed as a taxable dividend by the Fund to its shareholders. In addition,
certain interest charges may be imposed on a Fund as a result of such
distributions. Alternatively, a Fund may in some cases be permitted to include
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each year in its income and distribute to shareholders a pro rata portion of the
foreign investment fund's income, whether or not distributed to the Fund.
For taxable years of the Portfolios beginning after 1997, the
Portfolios will be permitted to "mark to market" any marketable stock held by a
Portfolio in a PFIC. If a Portfolio made such an election, the corresponding
Fund would include in income each year an amount equal to its share of the
excess, if any, of the fair market value of the PFIC stock as of the close of
the taxable year over the adjusted basis of such stock. The Fund would be
allowed a deduction for its share of the excess, if any, of the adjusted basis
of the PFIC stock over its fair market value as of the close of the taxable
year, but only to the extent of any net mark-to-market gains with respect to the
stock included by the Fund for prior taxable years.
FOREIGN SHAREHOLDERS. Dividends of net investment income and
distributions of realized net short-term gain in excess of net long-term loss to
a shareholder who, as to the United States, is a nonresident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Distributions treated
as long term capital gains to foreign shareholders will not be subject to U.S.
tax unless the distributions are effectively connected with the shareholder's
trade or business in the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder was present in the United States
for more than 182 days during the taxable year and certain other conditions are
met.
In the case of a foreign shareholder who is a nonresident alien
individual or foreign entity, a Fund may be required to withhold U.S. federal
income tax as "backup withholding" at the rate of 31% from distributions treated
as long-term capital gains and from the proceeds of redemptions, exchanges or
other dispositions of Fund shares unless IRS Form W-8 is provided. Transfers by
gift of shares of a Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of shares
of the Fund held by such a shareholder at his or her death will be includible in
his or her gross estate for U.S. federal estate tax purposes.
FOREIGN TAXES. It is expected that the Funds may be subject to foreign
withholding taxes or other foreign taxes with respect to income (possibly
including, in some cases, capital gains) received from sources within foreign
countries.
STATE AND LOCAL TAXES. Each Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business. In addition,
the treatment of a Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.
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OTHER TAXATION. The Trust is organized as a Massachusetts business
trust and, under current law, neither the Trust nor any Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts, provided that each
Fund continues to qualify as a regulated investment company under Subchapter M
of the Code. The Portfolios are organized as New York trusts. The Portfolios are
not subject to any federal income taxation or income or franchise tax in the
State of New York or The Commonwealth of Massachusetts. The investment by a Fund
in its corresponding Portfolio does not cause the Fund to be liable for any
income or franchise tax in the State of New York.
ADDITIONAL INFORMATION
As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" means the vote of (i)
67% or more of the Fund's shares or the Portfolio's outstanding voting
securities present at a meeting, if the holders of more than 50% of the Fund's
outstanding shares or the Portfolio's outstanding voting securities are present
or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares
or the Portfolio's outstanding voting securities, whichever is less.
Telephone calls to the Funds, Morgan or Eligible Institutions as
shareholder servicing agent may be tape recorded. With respect to the securities
offered hereby, this Statement of Additional Information and the Prospectus do
not contain all the information included in the Trust's Registration Statement
filed with the SEC under the 1933 Act and the Trust's and the Portfolios'
Registration Statements filed under the 1940 Act. Pursuant to the rules and
regulations of the SEC, certain portions have been omitted. The Registration
Statements including the exhibits filed therewith may be examined at the office
of the SEC in Washington D.C.
Statements contained in this Statement of Additional Information and
the Prospectus concerning the contents of any contract or other document are not
necessarily complete, and in each instance, reference is made to the copy of
such contract or other document filed as an exhibit to the applicable
Registration Statements. Each such statement is qualified in all respects by
such reference.
No dealer, salesman or any other person has been authorized to give any
information or to make any representations, other than those contained in the
Prospectus and this Statement of Additional Information, in connection with the
offer contained therein and, if given or made, such other information or
representations must not be relied upon as having been authorized by any of the
Trust, the Funds or the Distributor. The Prospectus and this Statement of
Additional Information do not constitute an offer by any Fund or by the
Distributor to sell or solicit any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful for the Fund or
the Distributor to make such offer in such jurisdictions.
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FINANCIAL STATEMENTS
The following financial statements and the report thereon of Price
Waterhouse LLP of each Fund are incorporated herein by reference from their
respective annual report filings made with the SEC pursuant to Section 30(b) of
the 1940 Act and Rule 30b2-1 thereunder. Any of the following financial reports
are available without charge upon request by calling JP Morgan Funds Services at
(800) 766-7722. Each Fund's financial statements include the financial
statements of the Fund's corresponding Portfolio.
Date of Semi-Annual Date of Annual
Report; Date Semi- Report; Date Annual
Annual Report Filed; Report Filed; and
Name of Fund and Accession Number Accession Number
- ------------------------------ ------------------------ ----------------------
The JPM Institutional U.S. N/A 05/31/97
Equity Fund 08/05/97
0000912057-96-026057
The JPM Institutional U.S. N/A 05/31/97
Small Company Fund 08/05/97
0000912057-97-026025
The JPM Institutional N/A 05/31/97
Disciplined Equity Fund 08/04/97
0000912057-97-025982
- ------------------------------ ------------------------ ----------------------
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APPENDIX A
DESCRIPTION OF SECURITY RATINGS
STANDARD & POOR'S
CORPORATE AND MUNICIPAL BONDS
AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.
A - Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than for debt in higher rated categories.
BB - Debt rated BB is regarded as having less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments.
B - An obligation rated B is more vulnerable to nonpayment than obligations
rated BB, but the obligor currently has the capacity to meet its financial
commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.
CCC - An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.
CC - An obligation rated CC is currently highly vulnerable to nonpayment.
C - The C rating may be used to cover a situation where a bankruptcy petition
has been filed or similar action has been taken, but payments on this obligation
are being continued.
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COMMERCIAL PAPER, INCLUDING TAX EXEMPT
A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.
A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.
SHORT-TERM TAX-EXEMPT NOTES
SP-1 - The short-term tax-exempt note rating of SP-1 is the highest rating
assigned by Standard & Poor's and has a very strong or strong capacity to pay
principal and interest. Those issues determined to possess overwhelming safety
characteristics are given a "plus" (+) designation.
SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory capacity
to pay principal and interest.
MOODY'S
CORPORATE AND MUNICIPAL BONDS
Aaa - Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa - Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A - Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba - Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well-assured. Often the protection of interest
and principal payments may be very moderate, and thereby not well safeguarded
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during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B - Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca - Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C - Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
COMMERCIAL PAPER, INCLUDING TAX EXEMPT
Prime-1 - Issuers rated Prime-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- - Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- - Well established access to a range
of financial markets and assured sources of alternate liquidity.
SHORT-TERM TAX EXEMPT NOTES
MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes with this
rating enjoy strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.
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PART C
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements
The following financial statements are included in Part A:
Financial Highlights: The JPM Institutional U.S. Equity Fund
The JPM Institutional U.S. Small Company Fund
The JPM Institutional Disciplined Equity Fund
The following financial statements are incorporated by reference into Part B:
THE JPM INSTITUTIONAL U.S. EQUITY FUND
Statement of Assets and Liabilities at May 31, 1997
Statement of Operations for the Fiscal Year Ended May 31, 1997
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements May 31, 1997
THE U.S. EQUITY PORTFOLIO
Schedule of Investments at May 31, 1997
Statement of Assets and Liabilities at May 31, 1997
Statement of Operations for the Fiscal Year Ended May 31, 1997
Statement of Changes in Net Assets
Supplementary Data Notes to Financial Statements May 31, 1997
THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
Statement of Assets and Liabilities at May 31, 1997
Statement of Operations for the Fiscal Year Ended May 31, 1997
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements May 31, 1997
THE U.S. SMALL COMPANY PORTFOLIO
Schedule of Investments at May 31, 1997
Statement of Assets and Liabilities at May 31, 1997
Statement of Operations for the Fiscal Year Ended May 31, 1997
Statement of Changes in Net Assets
Supplementary Data Notes to Financial Statements May 31, 1997
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THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
Statement of Assets and Liabilities at May 31, 1997
Statement of Operations for the Period January 3, 1997 (commencement of
operations) to May 31, 1997
Statement of Changes in Net Assets for the Period January 3, 1997
(commencement of operations) to May 31, 1997
Financial Highlights for the Period January 3, 1997 (commencement of
operations) to May 31, 1997 Notes to Financial Statements May 31, 1997
THE DISCIPLINED EQUITY PORTFOLIO
Schedule of Investments at May 31, 1997
Statement of Assets and Liabilities at May 31, 1997
Statement of Operations for the Period from December 30, 1996 (commencement of
operations) to May 31, 1997
Statement of Changes in Net Assets for the Period from December 30, 1996
(commencement of operations) to May 31, 1997
Supplementary Data
Notes to Financial Statements May 31, 1997
(b) Exhibits
Exhibit Number
1. Declaration of Trust, as amended, was filed as Exhibit No. 1 to
Post-Effective Amendment No. 25 to the Registration Statement filed on
September 26, 1996 (Accession Number 0000912057-96-021281).
1(a). Amendment No. 5 to Declaration of Trust; Fifth Amended and Restated
Establishment and Designation of Series of Shares of Beneficial
Interest.*
1(b).Amendment No. 6 to Declaration of Trust; Sixth Amended and Restated
Establishment and Designation of Series of Shares of Beneficial Interest
filed as Exhibit No. 1(b) to Post-Effective Amendment No. 31 to the
Registration Statement on February 28, 1997 (Accession Number
0001016964-97-000041).
1(c).Amendment No. 7 to Declaration of Trust; Seventh Amended and Restated
Establishment and Designation of Series of Shares of Beneficial Interest
filed as Exhibit No. 1(c) to Post-Effective Amendment No. 32 to the
Registration Statement on April 15, 1997 (Accession Number 0001016964-
97-000053).
2. Restated By-Laws of Registrant.*
4. Form of Share Certificate.*
6. Distribution Agreement between Registrant and Funds Distributor, Inc.
("FDI").*
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8. Custodian Contract between Registrant and State Street Bank and Trust
Company ("State Street").*
9(a). Co-Administration Agreement between Registrant and FDI.*
9(b). Restated Shareholder Servicing Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty").**
9(c). Transfer Agency and Service Agreement between Registrant and State
Street.*
9(d). Restated Administrative Services Agreement between Registrant and Morgan
Guaranty.*
9(e). Fund Services Agreement, as amended, between Registrant and Pierpont
Group, Inc.*
9(f). Service Plan with respect to Registrant's Service Money Market Funds.**
10. Opinion and consent of Sullivan & Cromwell.*
11. Consents of independent accountants. (filed herewith)
13. Purchase agreements with respect to Registrant's initial shares.*
16. Schedule for computation of performance quotations.*
17. Financial Data Schedules. (filed herewith)
18. Powers of Attorney were filed as Exhibit No. 18 to Post-Effective
Amendment No. 37 to the Registration Statement filed on August 1, 1997
(Accession Number 0001016964-97-000137).
- -------------------------
* Incorporated herein by reference to Post-Effective Amendment No. 29 to
the Registration Statement filed on December 26, 1996 (Accession Number
0001016964-96-000061).
** Incorporated herein by reference to Post-Effective Amendment No. 33 to
the Registration Statement filed on April 30, 1997 (Accession Number
00001016964-97-000059).
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
Not applicable.
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ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
Shares of Beneficial Interest ($0.001 par value).
Title of Class: Number of Record Holders as of September 12, 1997.
The JPM Institutional Prime Money Market Fund: 183
The JPM Institutional Federal Money Market Fund: 28
The JPM Institutional Bond Fund: 163
The JPM Institutional Diversified Fund: 55
The JPM Institutional U.S. Small Company Fund: 471
The JPM Institutional International Equity Fund: 388
The JPM Institutional Emerging Markets Equity Fund: 470
The JPM Institutional International Bond Fund: 17
The JPM Institutional Short Term Bond Fund: 34
The JPM Institutional U.S. Equity Fund: 147
The JPM Institutional Tax Exempt Money Market Fund: 74
The JPM Institutional Tax Exempt Bond Fund: 195
The JPM Institutional New York Total Return Bond Fund: 81
The JPM Institutional European Equity Fund: 17
The JPM Institutional Japan Equity Fund: 16
The JPM Institutional Asia Growth Fund: 12
The JPM Institutional Disciplined Equity Fund: 120
The JPM Institutional International Opportunities Fund: 177
The JPM Institutional Global Strategic Income Fund: 97
The JPM Institutional Treasury Money Market Fund: 17
The JPM Institutional Service Money Market Fund: N/A
The JPM Institutional Service Prime Money Market Fund: 11
The JPM Institutional Service Federal Money Market Fund: 11
The JPM Institutional Service Tax Exempt Money Market Fund: 11
The JPM Institutional Service Treasury Money Market Fund: 13
ITEM 27. INDEMNIFICATION.
Reference is made to Section 5.3 of Registrant's Declaration of Trust and
Section 5 of Registrant's Distribution Agreement.
Registrant, its Trustees and officers are insured against certain expenses in
connection with the defense of claims, demands, actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, trustee, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suite or proceeding) is asserted against the Registrant
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by such director, trustee, officer or controlling person or principal
underwriter in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933 Act
and will be governed by the final adjudication of such issue.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.
Not Applicable.
ITEM 29. PRINCIPAL UNDERWRITERS.
(a) FDI, located at 60 State Street, Suite 1300, Boston, Massachusetts 02109, is
the principal underwriter of the Registrant's shares.
FDI acts as principal underwriter of the following investment companies other
than the Registrant:
BJB Investment Funds
Burridge Funds
Foreign Fund, Inc.
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
H.T. Insight Funds, Inc. d/b/a
Harris Insight Funds
LKCM Fund
Monetta Fund, Inc.
Monetta Trust
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
The Skyline Funds
St. Clair Money Market Fund
Waterhouse Investors Cash Management Funds, Inc.
The JPM Pierpont Funds
JPM Series Trust
JPM Series Trust II
FDI is registered with the Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities Dealers. FDI is an
indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.
(b) The information required by this Item 29(b) with respect to each director,
officer and partner of FDI is incorporated herein by reference to Schedule A of
Form BD filed by FDI with the Securities and Exchange Commission pursuant to the
Securities Act of 1934 (SEC File No. 8-20518).
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(c) Not applicable.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
PIERPONT GROUP, INC.: 461 Fifth Avenue, New York, New York 10017 (records
relating to its assisting the Trustees in carrying out their duties in
supervising the Registrant's affairs).
MORGAN GUARANTY TRUST COMPANY OF NEW YORK: 60 Wall Street, New York, New York
10260-0060, 522 Fifth Avenue, New York, New York 10036 or 9 West 57th Street,
New York, New York 10019 (records relating to its functions as shareholder
servicing agent, and administrative services agent).
STATE STREET BANK AND TRUST COMPANY: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 and 40 King Street West, Toronto, Ontario, Canada M5H 3Y8
(records relating to its functions as fund accountant, custodian, transfer agent
and dividend disbursing agent).
FUNDS DISTRIBUTOR, INC.: 60 State Street, Suite 1300, Boston, Massachusetts
02109 (records relating to its functions as distributor and co-administrator).
ITEM 31. MANAGEMENT SERVICES.
Not Applicable.
ITEM 32. UNDERTAKINGS.
(a) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall furnish
each person to whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders upon request and
without charge.
(b) The Registrant undertakes to comply with Section 16(c) of the 1940 Act
as though such provisions of the 1940 Act were applicable to the
Registrant, except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value of shares held by such requesting
shareholders.
(c) The Registrant undertakes to file a Post-Effective Amendment on behalf
of The JPM Institutional Treasury Money Market Fund, The JPM
Institutional Service Treasury Money Market Fund, The JPM Institutional
Service Federal Money Market Fund, The JPM Institutional Service Prime
Money Market Fund and The JPM Institutional Service Tax Exempt Money
Market Fund using financial statements which need not be certified,
within four to six months from the commencement of public investment
operations of such funds.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston and Commonwealth of Massachusetts on the 25th
day of September, 1997.
THE JPM INSTITUTIONAL FUNDS
By /s/ Richard W. Ingram
-----------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on September 25, 1997.
/s/ Richard W. Ingram
- ------------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer)
Matthew Healey*
- -----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer)
Frederick S. Addy*
- ------------------------------
Frederick S. Addy
Trustee
William G. Burns*
- ------------------------------
William G. Burns
Trustee
Arthur C. Eschenlauer*
- ------------------------------
Arthur C. Eschenlauer
Trustee
Michael P. Mallardi*
- ------------------------------
Michael P. Mallardi
Trustee
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*By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney previously filed.
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SIGNATURES
Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of The JPM Institutional Funds (the "Trust") (File
No. 33-54642) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and Commonwealth of Massachusetts on the 25th
day of September, 1997.
THE FEDERAL MONEY MARKET PORTFOLIO, THE TAX EXEMPT MONEY MARKET PORTFOLIO, THE
TAX EXEMPT BOND PORTFOLIO, THE NEW YORK TOTAL RETURN BOND PORTFOLIO AND SERIES
PORTFOLIO II
By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
President and Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on September 25, 1997.
/s/ Richard W. Ingram
- ----------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios
Matthew Healey*
- ----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer) of
the Portfolios
Frederick S. Addy*
- ----------------------------
Frederick S. Addy
Trustee of the Portfolios
William G. Burns*
- ----------------------------
William G. Burns
Trustee of the Portfolios
Arthur C. Eschenlauer*
- ----------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios
Michael P. Mallardi*
- ----------------------------
Michael P. Mallardi
Trustee of the Portfolios
i:\dsfndlgl\institut\092697.pea\wrapper.wpf
C-9
<PAGE>
*By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney previously filed.
i:\dsfndlgl\institut\092697.pea\wrapper.wpf
C-10
<PAGE>
SIGNATURES
Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of The JPM Institutional Funds (the "Trust") (File
No. 33-54642) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of George Town, Grand Cayman, on the 25th day of
September, 1997.
THE PRIME MONEY MARKET PORTFOLIO, THE SHORT TERM BOND PORTFOLIO, THE U.S.
FIXED INCOME PORTFOLIO, THE U.S. EQUITY PORTFOLIO, THE U.S. SMALL COMPANY
PORTFOLIO, THE INTERNATIONAL EQUITY PORTFOLIO, THE DIVERSIFIED PORTFOLIO, THE
EMERGING MARKETS EQUITY PORTFOLIO, THE NON-U.S. FIXED INCOME PORTFOLIO AND THE
SERIES PORTFOLIO
/s/ Lenore J. McCabe
By -------------------------
Lenore J. McCabe
Assistant Secretary and Assistant Treasurer
Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on September 25, 1997.
Richard W. Ingram*
- ----------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios
Matthew Healey*
- ----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer) of
the Portfolios
Frederick S. Addy*
- ----------------------------
Frederick S. Addy
Trustee of the Portfolios
William G. Burns*
- ----------------------------
William G. Burns
Trustee of the Portfolios
Arthur C. Eschenlauer*
- ----------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios
i:\dsfndlgl\institut\092697.pea\wrapper.wpf
C-11
<PAGE>
Michael P. Mallardi*
- ----------------------------
Michael P. Mallardi
Trustee of the Portfolios
/s/ Lenore J. McCabe
*By ------------------------
Lenore J. McCabe
as attorney-in-fact pursuant to a power of attorney previously filed.
i:\dsfndlgl\institut\092697.pea\wrapper.wpf
C-12
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description of Exhibit
- ------------- ----------------------
EX-99.B11 Consents of independent accountants
EX-27.1 - EX-27.19 Financial Data Schedules
i:\dsfndlgl\institut\092697.pea\wrapper.wpf
C-13
CONSENTS OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 38 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated July 21, 1997, relating to the financial
statements and financial highlights of The JPM Institutional U.S. Equity Fund,
The JPM Institutional U.S. Small Company Fund and The Jpm institutional
Disciplined Equity Fund and the financial statements and supplementary data of
The U.S. Equity Portfolio, The U.S. Small Company Portfolio and The Disciplined
Equity Portfolio appearing in the May 31, 1997 Annual Reports, which are also
incorporated by reference into the Registration Statement.
We also consent to the reference to us under the heading "Independent
Accountants" in the Statement of Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
1177 Avenue of the Americas
New York, New York 10036
September 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM INSTITUTIONAL JAPAN EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 001
<NAME> THE JPM INSTITUTIONAL JAPAN EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 5894
<RECEIVABLES> 13
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 5912
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 49
<TOTAL-LIABILITIES> 49
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 5989
<SHARES-COMMON-STOCK> 632
<SHARES-COMMON-PRIOR> 173
<ACCUMULATED-NII-CURRENT> (4)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (99)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (23)
<NET-ASSETS> 5863
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 8
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 5
<REALIZED-GAINS-CURRENT> 92
<APPREC-INCREASE-CURRENT> 606
<NET-CHANGE-FROM-OPS> 703
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 464
<NUMBER-OF-SHARES-REDEEMED> 6
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4361
<ACCUMULATED-NII-PRIOR> (9)
<ACCUMULATED-GAINS-PRIOR> (192)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 33
<AVERAGE-NET-ASSETS> 3960
<PER-SHARE-NAV-BEGIN> 8.67
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .56
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.28
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM INSTITUTIONAL ASIA
GROWTH FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 002
<NAME> THE JPM INSTITUTIONAL ASIA GROWTH FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1705
<RECEIVABLES> 5
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1723
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50
<TOTAL-LIABILITIES> 50
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1737
<SHARES-COMMON-STOCK> 170
<SHARES-COMMON-PRIOR> 332
<ACCUMULATED-NII-CURRENT> 8
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (97)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 25
<NET-ASSETS> 1673
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 15
<EXPENSES-NET> 1
<NET-INVESTMENT-INCOME> 14
<REALIZED-GAINS-CURRENT> 36
<APPREC-INCREASE-CURRENT> (137)
<NET-CHANGE-FROM-OPS> (87)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28
<NUMBER-OF-SHARES-REDEEMED> 190
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (1689)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (133)
<OVERDISTRIB-NII-PRIOR> (6)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 34
<AVERAGE-NET-ASSETS> 2685
<PER-SHARE-NAV-BEGIN> 10.14
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> (.36)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.84
<EXPENSE-RATIO> 1.25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM INSTITUTIONAL EUROPEAN
EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 003
<NAME> THE JPM INSTITUTIONAL EUROPEAN EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 10739
<RECEIVABLES> 5
<ASSETS-OTHER> 41
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 10785
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 58
<TOTAL-LIABILITIES> 58
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8780
<SHARES-COMMON-STOCK> 823
<SHARES-COMMON-PRIOR> 565
<ACCUMULATED-NII-CURRENT> 105
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 426
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1416
<NET-ASSETS> 10727
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 115
<EXPENSES-NET> 6
<NET-INVESTMENT-INCOME> 109
<REALIZED-GAINS-CURRENT> 368
<APPREC-INCREASE-CURRENT> 650
<NET-CHANGE-FROM-OPS> 1127
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 263
<NUMBER-OF-SHARES-REDEEMED> 5
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 4195
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 58
<OVERDISTRIB-NII-PRIOR> (4)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38
<AVERAGE-NET-ASSETS> 8516
<PER-SHARE-NAV-BEGIN> 11.56
<PER-SHARE-NII> .13
<PER-SHARE-GAIN-APPREC> 1.35
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.04
<EXPENSE-RATIO> 1.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS LEGEND CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM INSTITUTIONAL DIVERSIFIED FUND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 004
<NAME> THE JPM INSTITUTIONAL DIVERSIFIED FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 237295
<RECEIVABLES> 196
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 237503
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 54
<TOTAL-LIABILITIES> 54
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 183264
<SHARES-COMMON-STOCK> 17731
<SHARES-COMMON-PRIOR> 16081
<ACCUMULATED-NII-CURRENT> 3923
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 11252
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 39010
<NET-ASSETS> 237449
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 7626
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 7626
<REALIZED-GAINS-CURRENT> 17072
<APPREC-INCREASE-CURRENT> 20498
<NET-CHANGE-FROM-OPS> 45196
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 7166
<DISTRIBUTIONS-OF-GAINS> 12353
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9198
<NUMBER-OF-SHARES-REDEEMED> 8978
<SHARES-REINVESTED> 1430
<NET-CHANGE-IN-ASSETS> 44230
<ACCUMULATED-NII-PRIOR> 2938
<ACCUMULATED-GAINS-PRIOR> 7062
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2235
<AVERAGE-NET-ASSETS> 228404
<PER-SHARE-NAV-BEGIN> 12.02
<PER-SHARE-NII> .37
<PER-SHARE-GAIN-APPREC> 1.96
<PER-SHARE-DIVIDEND> .36
<PER-SHARE-DISTRIBUTIONS> .60
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.39
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MAY 31, 1997 FOR THE JPM INSTITUTIONAL U.S. SMALL COMPANY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 005
<NAME> THE JPM INSTITUTIONAL U.S. SMALL COMPANY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 401134
<RECEIVABLES> 725
<ASSETS-OTHER> 29
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 401888
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 91
<TOTAL-LIABILITIES> 91
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 334061
<SHARES-COMMON-STOCK> 28511
<SHARES-COMMON-PRIOR> 20897
<ACCUMULATED-NII-CURRENT> 553
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 17869
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 49314
<NET-ASSETS> 401797
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3056
<EXPENSES-NET> 389
<NET-INVESTMENT-INCOME> 2667
<REALIZED-GAINS-CURRENT> 25048
<APPREC-INCREASE-CURRENT> 6794
<NET-CHANGE-FROM-OPS> 34509
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3199)
<DISTRIBUTIONS-OF-GAINS> (21834)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10786
<NUMBER-OF-SHARES-REDEEMED> (3792)
<SHARES-REINVESTED> 620
<NET-CHANGE-IN-ASSETS> 109866
<ACCUMULATED-NII-PRIOR> 1191
<ACCUMULATED-GAINS-PRIOR> 14651
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 570
<AVERAGE-NET-ASSETS> 330177
<PER-SHARE-NAV-BEGIN> 13.97
<PER-SHARE-NII> .10
<PER-SHARE-GAIN-APPREC> 1.07
<PER-SHARE-DIVIDEND> (.13)
<PER-SHARE-DISTRIBUTIONS> (.92)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.09
<EXPENSE-RATIO> .80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MAY 31, 1997 FOR THE JPM DISCIPLINED EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 006
<NAME> THE JPM INSTITUTIONAL DISCIPLINED EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 49552
<RECEIVABLES> 224
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 49787
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 61
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46564
<SHARES-COMMON-STOCK> 4336
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 192
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (144)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3114
<NET-ASSETS> 49726
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 192
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 192
<REALIZED-GAINS-CURRENT> (144)
<APPREC-INCREASE-CURRENT> 3114
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4595
<NUMBER-OF-SHARES-REDEEMED> (259)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 49726
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 73
<AVERAGE-NET-ASSETS> 30419
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 1.43
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.47
<EXPENSE-RATIO> .45
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MAY 31, 1997 FOR THE JPM INSTITUTIONAL PRIME MONEY
MARKET FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 007
<NAME> THE JPM INSTITUTIONAL PRIME MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 1127939
<INVESTMENTS-AT-VALUE> 1127939
<RECEIVABLES> 84
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1128041
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1858
<TOTAL-LIABILITIES> 1858
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1126490
<SHARES-COMMON-STOCK> 1126480
<SHARES-COMMON-PRIOR> 1220306
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (306)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1126183
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 33445
<EXPENSES-NET> 114
<NET-INVESTMENT-INCOME> 33331
<REALIZED-GAINS-CURRENT> (20)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 33311
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33331
<DISTRIBUTIONS-OF-GAINS> 372
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2874778
<NUMBER-OF-SHARES-REDEEMED> 2991542
<SHARES-REINVESTED> 22938
<NET-CHANGE-IN-ASSETS> (93826)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 86
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 648
<AVERAGE-NET-ASSETS> 1254066
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MAY 31, 1997 FOR THE JPM INSTITUTIONAL INTERNATIONAL
OPPORTUNITIES FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 008
<NAME> THE JPM INSTITUTIONAL INTERNATIONAL OPPORTUNITIES FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 119,818
<RECEIVABLES> 3,332
<ASSETS-OTHER> 77
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 123,227
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 50
<TOTAL-LIABILITIES> 50
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 118,037
<SHARES-COMMON-STOCK> 11,770
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 704
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 397
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,038
<NET-ASSETS> 123,177
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 734
<EXPENSES-NET> 30
<NET-INVESTMENT-INCOME> 704
<REALIZED-GAINS-CURRENT> 397
<APPREC-INCREASE-CURRENT> 4,038
<NET-CHANGE-FROM-OPS> 5,139
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11,900
<NUMBER-OF-SHARES-REDEEMED> 130
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 123,227
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 63
<AVERAGE-NET-ASSETS> 90,245
<PER-SHARE-NAV-BEGIN> 10.000
<PER-SHARE-NII> 0.060
<PER-SHARE-GAIN-APPREC> 0.410
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.470
<EXPENSE-RATIO> 1.000
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FROM N-SAR DATED APRIL 30, 1997 FOR THE JPM INSTITUTIONAL GLOBAL STRATEGIC
INCOME FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 009
<NAME> THE JPM INSTITUTIONAL GLOBAL STRATEGIC INCOME FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 2-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 58167
<RECEIVABLES> 20
<ASSETS-OTHER> 35
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58222
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 288
<TOTAL-LIABILITIES> 288
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57839
<SHARES-COMMON-STOCK> 5799
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 40
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (121)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 176
<NET-ASSETS> 57934
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 413
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 413
<REALIZED-GAINS-CURRENT> (121)
<APPREC-INCREASE-CURRENT> 176
<NET-CHANGE-FROM-OPS> 468
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 373
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5786
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 13
<NET-CHANGE-IN-ASSETS> 5799
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30
<AVERAGE-NET-ASSETS> 51201
<PER-SHARE-NAV-BEGIN> 10
<PER-SHARE-NII> .08
<PER-SHARE-GAIN-APPREC> (.02)
<PER-SHARE-DIVIDEND> .07
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.99
<EXPENSE-RATIO> .65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL SUMMARY DATA EXTRACTED FROM THE REPORT
ON FROM N-SAR DATED APRIL 30, 1997 FOR THE JPM INSTITUTIONAL EMERGING MARKETS
EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 010
<NAME> THE JPM INSTITUTIONAL EMERGING MARKETS EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 375110
<RECEIVABLES> 302
<ASSETS-OTHER> 53
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 375465
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2259
<TOTAL-LIABILITIES> 2259
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 350828
<SHARES-COMMON-STOCK> 32596
<SHARES-COMMON-PRIOR> 28600
<ACCUMULATED-NII-CURRENT> 114
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5458)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 27722
<NET-ASSETS> 373206
<DIVIDEND-INCOME> 3078
<INTEREST-INCOME> 560
<OTHER-INCOME> 0
<EXPENSES-NET> 2340
<NET-INVESTMENT-INCOME> 1298
<REALIZED-GAINS-CURRENT> 6875
<APPREC-INCREASE-CURRENT> 29982
<NET-CHANGE-FROM-OPS> 38157
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2687)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 9064
<NUMBER-OF-SHARES-REDEEMED> 5177
<SHARES-REINVESTED> 109
<NET-CHANGE-IN-ASSETS> 3996
<ACCUMULATED-NII-PRIOR> 1502
<ACCUMULATED-GAINS-PRIOR> (12333)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 344040
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> .09
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.45
<EXPENSE-RATIO> 1.37
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM INSTITUTIONAL INTERNATIONAL EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 011
<NAME> THE JPM INSTITUTIONAL INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 647013
<INVESTMENTS-AT-VALUE> 677109
<RECEIVABLES> 847
<ASSETS-OTHER> 18
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 677974
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 615
<TOTAL-LIABILITIES> 615
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 628109
<SHARES-COMMON-STOCK> 59827
<SHARES-COMMON-PRIOR> 63585
<ACCUMULATED-NII-CURRENT> 2818
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 16335
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 30097
<NET-ASSETS> 677359
<DIVIDEND-INCOME> 5364
<INTEREST-INCOME> 1255
<OTHER-INCOME> 0
<EXPENSES-NET> 3317
<NET-INVESTMENT-INCOME> 3302
<REALIZED-GAINS-CURRENT> 16535
<APPREC-INCREASE-CURRENT> 1369
<NET-CHANGE-FROM-OPS> 21206
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 16232
<DISTRIBUTIONS-OF-GAINS> 12924
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 6698
<NUMBER-OF-SHARES-REDEEMED> 11528
<SHARES-REINVESTED> 1072
<NET-CHANGE-IN-ASSETS> (49505)
<ACCUMULATED-NII-PRIOR> 15748
<ACCUMULATED-GAINS-PRIOR> 12725
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3317
<AVERAGE-NET-ASSETS> 718804
<PER-SHARE-NAV-BEGIN> 11.43
<PER-SHARE-NII> .05
<PER-SHARE-GAIN-APPREC> .29
<PER-SHARE-DIVIDEND> .25
<PER-SHARE-DISTRIBUTIONS> .20
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.32
<EXPENSE-RATIO> .93
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM INSTITUTIONAL BOND FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 012
<NAME> THE JPM INSTITUTIONAL BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 790055
<RECEIVABLES> 82
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 790149
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 2289
<TOTAL-LIABILITIES> 2289
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 791460
<SHARES-COMMON-STOCK> 81214
<SHARES-COMMON-PRIOR> 84945
<ACCUMULATED-NII-CURRENT> 198
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2912
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (6708)
<NET-ASSETS> 787861
<DIVIDEND-INCOME> 294
<INTEREST-INCOME> 26925
<OTHER-INCOME> 0
<EXPENSES-NET> 1921
<NET-INVESTMENT-INCOME> 25298
<REALIZED-GAINS-CURRENT> 2917
<APPREC-INCREASE-CURRENT> (13265)
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 25113
<DISTRIBUTIONS-OF-GAINS> 1207
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 21228
<NUMBER-OF-SHARES-REDEEMED> 2672
<SHARES-REINVESTED> 1312
<NET-CHANGE-IN-ASSETS> 3732
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1160
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1921
<AVERAGE-NET-ASSETS> 778295
<PER-SHARE-NAV-BEGIN> 9.84
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> (.12)
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.70
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM INSTITUTIONAL SHORT TERM BOND
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 013
<NAME> THE JPM INSTITUTIONAL SHORT TERM BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 22091
<RECEIVABLES> 8
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 22112
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 38
<TOTAL-LIABILITIES> 38
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22430
<SHARES-COMMON-STOCK> 2257
<SHARES-COMMON-PRIOR> 1808
<ACCUMULATED-NII-CURRENT> (11)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (272)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (73)
<NET-ASSETS> 22074
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 727
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 727
<REALIZED-GAINS-CURRENT> 24
<APPREC-INCREASE-CURRENT> (201)
<NET-CHANGE-FROM-OPS> 550
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (727)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1309
<NUMBER-OF-SHARES-REDEEMED> 934
<SHARES-REINVESTED> 73
<NET-CHANGE-IN-ASSETS> 448
<ACCUMULATED-NII-PRIOR> (11)
<ACCUMULATED-GAINS-PRIOR> (296)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 23911
<PER-SHARE-NAV-BEGIN> 9.85
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> .30
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.78
<EXPENSE-RATIO> .25
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM INSTITUTIONAL FEDERAL MONEY MARKET
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 014
<NAME> THE JPM INSTITUTIONAL FEDERAL MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 101355
<INVESTMENTS-AT-VALUE> 101355
<RECEIVABLES> 16
<ASSETS-OTHER> 15
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 101386
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 141
<TOTAL-LIABILITIES> 141
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 101249
<SHARES-COMMON-STOCK> 101249
<SHARES-COMMON-PRIOR> 108991
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 101244
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2871
<OTHER-INCOME> 0
<EXPENSES-NET> 109
<NET-INVESTMENT-INCOME> 2762
<REALIZED-GAINS-CURRENT> 3
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2760
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 2762
<DISTRIBUTIONS-OF-GAINS> 61
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 159852
<NUMBER-OF-SHARES-REDEEMED> 169399
<SHARES-REINVESTED> 1804
<NET-CHANGE-IN-ASSETS> (7806)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 92
<AVERAGE-NET-ASSETS> 109948
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MARCH 31, 1997 FOR THE JPM INSTITUTIONAL INTERNATIONAL BOND
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 015
<NAME> THE JPM INSTITUTIONAL INTERNATIONAL BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 1722
<INVESTMENTS-AT-VALUE> 1722
<RECEIVABLES> 0
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1735
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 90
<TOTAL-LIABILITIES> 90
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1256
<SHARES-COMMON-STOCK> 202
<SHARES-COMMON-PRIOR> 1178
<ACCUMULATED-NII-CURRENT> 31
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 484
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (126)
<NET-ASSETS> 1645
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 192
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 192
<REALIZED-GAINS-CURRENT> 748
<APPREC-INCREASE-CURRENT> (423)
<NET-CHANGE-FROM-OPS> 517
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 909
<DISTRIBUTIONS-OF-GAINS> 325
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 298
<NUMBER-OF-SHARES-REDEEMED> (1403)
<SHARES-REINVESTED> 129
<NET-CHANGE-IN-ASSETS> (11664)
<ACCUMULATED-NII-PRIOR> 367
<ACCUMULATED-GAINS-PRIOR> 590
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 120
<AVERAGE-NET-ASSETS> 7539
<PER-SHARE-NAV-BEGIN> 11.30
<PER-SHARE-NII> 2.23
<PER-SHARE-GAIN-APPREC> (1.71)
<PER-SHARE-DIVIDEND> 2.71
<PER-SHARE-DISTRIBUTIONS> .97
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.14
<EXPENSE-RATIO> .49
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REPORT ON FORM N-SAR DATED MARCH 31, 1997 FOR THE JPM INSTITUTIONAL NEW
YORK TOTAL RETURN BOND FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 016
<NAME> THE JPM INSTITUTIONAL NEW YORK TOTAL RETURN BOND FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<INVESTMENTS-AT-COST> 90655
<INVESTMENTS-AT-VALUE> 91110
<RECEIVABLES> 12
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 4
<TOTAL-ASSETS> 91126
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 334
<TOTAL-LIABILITIES> 334
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90357
<SHARES-COMMON-STOCK> 8809
<SHARES-COMMON-PRIOR> 4636
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 44
<ACCUMULATED-NET-GAINS> 64
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 455
<NET-ASSETS> 90792
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3398
<EXPENSES-NET> 49
<NET-INVESTMENT-INCOME> 3349
<REALIZED-GAINS-CURRENT> 65
<APPREC-INCREASE-CURRENT> 224
<NET-CHANGE-FROM-OPS> 3060
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3349
<DISTRIBUTIONS-OF-GAINS> 49
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50415
<NUMBER-OF-SHARES-REDEEMED> 8086
<SHARES-REINVESTED> 875
<NET-CHANGE-IN-ASSETS> 42866
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 93
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 150
<AVERAGE-NET-ASSETS> 71290
<PER-SHARE-NAV-BEGIN> 10.34
<PER-SHARE-NII> .48
<PER-SHARE-GAIN-APPREC> .02
<PER-SHARE-DIVIDEND> .48
<PER-SHARE-DISTRIBUTIONS> .01
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.31
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED FEBRUARY 28, 1997 FOR THE JPM INSTITUTIONAL TAX EXEMPT
BOND FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 017
<NAME> THE JPM INSTITUTIONAL TAX EXEMPT BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 167270
<INVESTMENTS-AT-VALUE> 169603
<RECEIVABLES> 812
<ASSETS-OTHER> 19
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 170434
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 649
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 649
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 166806
<SHARES-COMMON-STOCK> 16854
<SHARES-COMMON-PRIOR> 12215
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 15
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2994
<NET-ASSETS> 169785
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3762
<EXPENSES-NET> 88
<NET-INVESTMENT-INCOME> 3674
<REALIZED-GAINS-CURRENT> 27
<APPREC-INCREASE-CURRENT> 2333
<NET-CHANGE-FROM-OPS> 6034
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3674
<DISTRIBUTIONS-OF-GAINS> 35
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5318
<NUMBER-OF-SHARES-REDEEMED> 757
<SHARES-REINVESTED> 78
<NET-CHANGE-IN-ASSETS> 4639
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 8
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 175
<AVERAGE-NET-ASSETS> 151227
<PER-SHARE-NAV-BEGIN> 9.92
<PER-SHARE-NII> .24
<PER-SHARE-GAIN-APPREC> .15
<PER-SHARE-DIVIDEND> .24
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.07
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED FEBRUARY 28, 1997 FOR THE JPM INSTITUTIONAL TAX EXEMPT
MONEY MARKET FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 018
<NAME> THE JPM INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> FEB-28-1997
<INVESTMENTS-AT-COST> 169739
<INVESTMENTS-AT-VALUE> 169739
<RECEIVABLES> 27
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 169786
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 279
<TOTAL-LIABILITIES> 279
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 169526
<SHARES-COMMON-STOCK> 169526
<SHARES-COMMON-PRIOR> 163593
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (19)
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 169507
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3653
<OTHER-INCOME> 0
<EXPENSES-NET> 349
<NET-INVESTMENT-INCOME> 3304
<REALIZED-GAINS-CURRENT> 5
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 3309
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3304
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 294945
<NUMBER-OF-SHARES-REDEEMED> 291273
<SHARES-REINVESTED> 2262
<NET-CHANGE-IN-ASSETS> 5939
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (24)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 451
<AVERAGE-NET-ASSETS> 207393
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .02
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .34
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON FORM
N-SAR DATED MAY 31, 1997 FOR THE JPM INSTITUTIONAL U.S. EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894088
<NAME> THE JPM INSTITUTIONAL FUNDS
<SERIES>
<NUMBER> 019
<NAME> THE JPM INSTITUTIONAL U.S EQUITY FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 328,898
<RECEIVABLES> 1,242
<ASSETS-OTHER> 36
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 330,176
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 401
<TOTAL-LIABILITIES> 401
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 244,566
<SHARES-COMMON-STOCK> 21,060
<SHARES-COMMON-PRIOR> 18,462
<ACCUMULATED-NII-CURRENT> 1,443
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 26,884
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 56,883
<NET-ASSETS> 329,776
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3,863
<EXPENSES-NET> 342
<NET-INVESTMENT-INCOME> 3,521
<REALIZED-GAINS-CURRENT> 35,970
<APPREC-INCREASE-CURRENT> 24,882
<NET-CHANGE-FROM-OPS> 64,374
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4,444
<DISTRIBUTIONS-OF-GAINS> 22,485
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 84,614
<NUMBER-OF-SHARES-REDEEMED> 37,589
<SHARES-REINVESTED> 23,939
<NET-CHANGE-IN-ASSETS> 108,407
<ACCUMULATED-NII-PRIOR> 2,788
<ACCUMULATED-GAINS-PRIOR> 10,015
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 264,684
<PER-SHARE-NAV-BEGIN> 14.000
<PER-SHARE-NII> 0.170
<PER-SHARE-GAIN-APPREC> 3.020
<PER-SHARE-DIVIDEND> 0.250
<PER-SHARE-DISTRIBUTIONS> 1.280
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 15.660
<EXPENSE-RATIO> 0.600
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
