THE JPM INSTITUTIONAL FUNDS
Supplement dated February 14, 1997 to the
Statement of Additional Information dated December 27, 1996, as supplemented
January 17, 1997 and the following Prospectuses:
The JPM Institutional Funds, dated December 27, 1996, as supplemented January 17
and February 10, 1997
The JPM Institutional Bond Fund, dated September 27, 1996, as supplemented
December 27, 1996
The JPM Institutional Bond Fund's corresponding Portfolio may invest 20% of its
total assets in debt securities of foreign issuers denominated in foreign
currencies and may engage in related foreign currency exchange transactions. The
Portfolio may invest an additional 5% of its total assets in securities of
foreign issuers denominated in the U.S.
dollar.
The first paragraph of the sub-section entitled "Quality Information" for the
Fund in the Prospectuses is revised as follows:
QUALITY INFORMATION. It is a current policy of the Portfolio that under normal
circumstances at least 75% of its total assets will consist of securities that
at the time of purchase are rated Baa or better by Moody's Investors Service,
Inc. ("Moody's") or BBB or better by Standard & Poor's Ratings Group ("Standard
& Poor's"), of which at least 65% of total assets will be rated A or better. The
remaining 25% may be invested in securities that are rated B or better by
Moody's or Standard & Poor's. In each case, the Portfolio may invest in
securities which are unrated if in Morgan's opinion such securities are of
comparable quality. Securities rated Baa by Moody's or BBB by Standard & Poor's
are considered investment grade, but have some speculative characteristics.
Securities rated Ba or B by Moody's or BB or B by Standard & Poor's are below
investment grade and considered to be speculative with regard to payment of
interest and principal. These standards must be satisfied at the time an
investment is made. If the quality of the investment later declines, the
Portfolio may continue to hold the investment.
The following paragraph supplements the section entitled "Additional Investment
Information and Risk Factors" applicable to the Fund in the Prospectuses:
BELOW INVESTMENT GRADE DEBT. Certain lower rated securities purchased by the
Portfolio, such as those rated Ba or B by Moody's or BB or B by Standard &
Poor's (commonly known as junk bonds), may be subject to certain risks with
respect to the issuing entity's ability to make scheduled payments of principal
and interest and to greater market fluctuations. While
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generally providing greater income than investments in higher quality
securities, lower quality fixed income securities involve greater risk of loss
of principal and income, including the possibility of default or bankruptcy of
the issuers of such securities, and have greater price volatility, especially
during periods of economic uncertainty or change. These lower quality fixed
income securities tend to be affected by economic changes and short-term
corporate and industry developments to a greater extent than higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. To the extent that the Portfolio invests in such lower quality
securities, the achievement of its investment objective may be more dependent on
the Advisor's own credit analysis.
Lower quality fixed income securities are affected by the market's perception of
their credit quality, especially during times of adverse publicity, and the
outlook for economic growth. Economic downturns or an increase in interest rates
may cause a higher incidence of default by the issuers of these securities,
especially issuers that are highly leveraged. The market for these lower quality
fixed income securities is generally less liquid than the market for investment
grade fixed income securities. It may be more difficult to sell these lower
rated securities to meet redemption requests, to respond to changes in the
market, or to determine accurately the Fund's net asset value.
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