JP MORGAN INSTITUTIONAL FUNDS
485BPOS, 1999-12-28
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     As filed with the Securities and Exchange Commission on December 28, 1999.
                    Registration Nos. 033-54642 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. 69



                                       and


         REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
                                AMENDMENT NO. 70



                         J.P. MORGAN INSTITUTIONAL FUNDS
                     (formerly 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

                Margaret W. Chambers, c/o Funds Distributor, Inc.
            60 State Street, Suite 1300, Boston, Massachusetts 02109
                     (Name and Address of Agent for Service)

                           Copy to:   John E. Baumgardner, Jr., Esq.
                                      Sullivan & Cromwell
                                      125 Broad Street
                                      New York, New York 10004

It is proposed that this filing will become effective (check appropriate box):


[ ] Immediately  upon filing  pursuant to paragraph (b)
[X] on December 30, 1999 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.




<PAGE>



<PAGE>




                                EXPLANATORY NOTE


         This post-effective amendment No. 69 to the registration  statement of
J.P. Morgan  Institutional  Funds (the "Registrant") on Form N-1A is being filed
to update the  Registrant's  disclosure in the Prospectus  and  Statement of
Additional  Information  relating to J.P. Morgan  Institutional Tax Exempt Money
Market Fund, and J.P. Morgan Institutional Service Tax Exempt Money Market Fund,
(the "Funds"),  each a series of shares of the  Registrant,  to include  updated
financial  information  for the fiscal year ended  August 31, 1999 and to update
other information in the registration statement.



<PAGE>


<PAGE>




                                                    DECEMBER 30, 1999 PROSPECTUS


J.P. MORGAN INSTITUTIONAL SERVICE MONEY MARKET FUNDS

Prime Money Market Fund

Treasury Money Market Fund

Federal Money Market Fund

Tax Exempt Money Market Fund
                                          --------------------------------------
                                          Seeking to provide high current income

                                          consistent with the preservation of

                                          capital and same-day liquidity




















This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.

As with all mutual funds, the fact that these shares are registered with the
Securities and Exchange Commission does not mean that the commission approves
them or guarantees that the information in this prospectus is correct or
adequate. It is a criminal offense to state or suggest otherwise.

Distributed by Funds Distributor, Inc.                                  JPMorgan




<PAGE>

CONTENTS
- --------------------------------------------------------------------------------
1
Each fund's goal, principal strategies,
       principal risks, performance and
                               expenses

J.P. MORGAN INSTITUTIONAL SERVICE MONEY MARKET FUNDS


J.P. Morgan Institutional Service Prime Money Market Fund ...................  1

J.P. Morgan Institutional Service Treasury Money Market Fund ................  3

J.P. Morgan Institutional Service Federal Money Market Fund .................  5

J.P. Morgan Institutional Service Tax Exempt Money Market Fund ..............  7



9
Principles and techniques common
 to the funds in this prospectus

MONEY MARKET MANAGEMENT APPROACH

J.P. Morgan .................................................................  9

J.P. Morgan Institutional Service Money Market Funds ........................  9

The spectrum of money market funds ..........................................  9

Who may want to invest ......................................................  9

Money market investment process ............................................. 10


11

Investing in the J.P. Morgan Institutional
                Service Money Market Funds


YOUR INVESTMENT

Investing through a service organization .................................... 11

Account and transaction policies ............................................ 11

Dividends and distributions ................................................. 11

Tax considerations .......................................................... 12




13
More about the funds'
  business operations

FUND DETAILS

Master/feeder structure ..................................................... 13

Management and administration ............................................... 13

Financial highlights ........................................................ 15



FOR MORE INFORMATION .................................................back cover



<PAGE>


J.P. MORGAN INSTITUTIONAL SERVICE
PRIME MONEY MARKET FUND
- --------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INSTITUTIONAL SERVICE PRIME MONEY MARKET FUND)

[GRAPHIC]

GOAL
The fund's goal is to maximize current income consistent with the preservation
of capital and same-day liquidity. This goal can be changed only with
shareholder approval.

[GRAPHIC]


INVESTMENT APPROACH
Principal Strategies
The fund looks for investments across a broad spectrum of U.S.
dollar-denominated money market securities, typically emphasizing different
types of securities at different times in order to take advantage of changing
yield differentials. The fund's investments may include obligations issued by
the U.S. Treasury, government agencies, domestic and foreign banks and
corporations, foreign governments, repurchase agreements, reverse repurchase
agreements, as well as asset-backed securities, taxable municipal obligations,
and other money market instruments. Some of these investments may be illiquid or
purchased on a when-issued or delayed delivery basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.

Principal Risks
As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security or the counterparty to a contract could default on its obligation. An
unexpected rise in interest rates could also lead to a loss in share price if
the fund is near the maximum allowable dollar weighted average maturity
(currently not to exceed 90 days) at the time. To the extent that the fund
invests in foreign securities, the fund could lose money because of foreign
government actions, political instability, or lack of adequate and accurate
information. Also, the fund may have difficulty valuing its illiquid holdings
and may be unable to sell them at the time or price it desires. While these
possibilities exist, the fund's investment process and management policies are
designed to minimize the likelihood and impact of these risks. To date, through
this process, the fund's share price has never deviated from $1.


An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.


PORTFOLIO MANAGEMENT
The fund's assets are managed by
J.P. Morgan, which currently manages approximately $326 billion, including more
than $52 billion using similar strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since joining J.P. Morgan in June of 1997 from Goldman Sachs &
Co., where he was an Institutional Money Market Portfolio Manager; and Mark
Settles, vice president, who has been on the team since November 1999 and has
been at J.P. Morgan since 1994. Prior to managing this fund, Mr. Settles was a
fixed income trader on J.P. Morgan's New York and London trading desks. The
traders on the team are Donald Clemmenson, vice president, who has been on the
team since its inception; Gunter Heiland, associate, who has been on the team
since joining J.P. Morgan in June of 1997 from Salomon Brothers, where he was a
sales assistant; and Kimberly Weil, who has been on the team since its
inception.


Before you invest
Investors considering these funds should understand that:
o    There is no assurance that these funds will meet their investment goals
o    These funds do not represent complete investment programs


1   J.P. MORGAN INSTITUTIONAL SERVICE PRIME MONEY MARKET FUND

<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Service Prime Money Market Fund.

The bar chart indicates some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last ten calendar years.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year, five years and ten years.

The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Year-by-year total return (%)Shows changes in returns by calendar year (1,2)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
   1989     1990        1991         1992        1993         1994        1995         1996        1997        1998
<S>         <C>         <C>          <C>         <C>          <C>         <C>          <C>         <C>         <C>
12%
- ---

9%
- ---

6%
- ---

3%
- ---

0%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>

9.13

8.04

6.07

3.67

2.83

3.95

5.21

5.41

5.30

[ ] J.P. Morgan Institutional Service Prime Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 3.57%. For the period
covered by this year-by-year total return chart, the fund's highest quarterly
return was 2.33% (for the quarter ended 6/30/89); and the lowest quarterly
return was 0.69% (for the quarter ended 6/30/93).


PERFORMANCE (unaudited)
Average annual total return (%)Shows performance over time, for periods ended
December 31, 1998(1)
- --------------------------------------------------------------------------------
                                     Past 1 yr.    Past 5 yrs.      Past 10 yrs.
J.P. Morgan Institutional Service
 Prime Money Market Fund
 (after expenses)                      5.30           5.13             5.52
- --------------------------------------------------------------------------------


INVESTOR EXPENSES
The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses are deducted from fund assets prior to performance calculations.


Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)

Management fees                                                 0.12
Marketing (12b-1) fees                                          None
Service fees(4)                                                 0.25
Other expenses                                                  0.19
- --------------------------------------------------------------------
Total operating expenses                                        0.56
Fee waiver and expense
reimbursement(5)                                                0.11
- --------------------------------------------------------------------
Net expenses(5)                                                 0.45
- --------------------------------------------------------------------
<PAGE>


Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
6/1/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
                               1 yr.    3 yrs.      5yrs.       10 yrs.
Your cost($)                    46       161         294          684
- --------------------------------------------------------------------------------


   1 The fund commenced operations on 10/23/97. Returns reflect performance of
     the J.P. Morgan Prime Money Market Fund, a separate feeder fund investing
     in the same master portfolio, prior to that date.


     Returns for periods prior to 7/31/93 reflect performance of The Pierpont
     Money Market Fund, the predecessor of the J.P. Morgan Prime Money Market
     Fund. These returns reflect lower operating expenses than those of the
     fund. Therefore, these returns may be higher than the fund's would have
     been had it existed during the same period.
   2 The fund's fiscal year end is 11/30.
   3 The fund has a master/feeder structure as described on page 13. This table
     shows the fund's expenses and its share of master portfolio expenses for
     the past fiscal year expressed as a percentage of the fund's average net
     assets.
   4 Service Organizations (described on page 11) may charge other fees to their
     customers who are the beneficial owners of shares in connection with their
     customers' accounts. Such fees, if any, may affect the return such
     customers realize with respect to their investments.
   5 Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
     York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the
     fund to the extent expenses exceed 0.45% (excluding extraordinary expenses)
     of the fund's average daily net assets through 2/28/01.


              J.P. MORGAN INSTITUTIONAL SERVICE PRIME MONEY MARKET FUND        2


<PAGE>




J.P. MORGAN INSTITUTIONAL SERVICE'
TREASURY MONEY MARKET FUND                                  TICKER SYMBOL: JPMXX
- --------------------------------------------------------------------------------
                               REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                               (J.P. MORGAN INSTITUTIONAL SERVICE TREASURY MONEY
                               MARKET FUND)

[GRAPHIC]

GOAL
The fund's goal is to provide high current income consistent with the
preservation of capital and same-day liquidity. This goal can be changed without
shareholder approval.

[GRAPHIC]


INVESTMENT APPROACH
Principal Strategies
The fund purchases securities that offer the highest credit quality and provide
regular income. It invests exclusively in U.S. Treasury obligations and
repurchase agreements collateralized by these obligations. Some of these
investments may be purchased on a when-issued or delayed delivery basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.


The portion of the fund's income derived from direct investments in U.S.
Treasury obligations may be exempt from state and local personal income taxes.


Principal Risks
While the fund's U.S. Treasury obligations are backed by the full faith and
credit of the federal government, investors should bear in mind that any
repurchase agreements the fund may hold do not have this guarantee (even though
they are fully collateralized by Treasuries), and that in any case, government
guarantees do not extend to shares of the fund itself.


An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.


Portfolio Management
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $326 billion, including more than $52 billion using similar
strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since its inception, after joining J.P. Morgan in June of 1997
from Goldman Sachs & Co., where he was an Institutional Money Market Portfolio
Manager; and Mark Settles, vice president, who has been on the team since
November 1999 and has been at J.P. Morgan since 1994. Prior to managing this
fund, Mr. Settles was a fixed income trader on J.P. Morgan's New York and London
trading desks. The traders on the team are Donald Clemmenson, vice president,
Gunter Heiland, associate, and Kimberly Weil, each of whom has been on the team
since its inception. Prior to joining J.P. Morgan, Mr. Heiland was a sales
assistant at Salomon Brothers.


Before you invest
Investors considering these funds should understand that:
o    There is no assurance that these funds will meet their investment goals
o    These funds do not represent complete investment programs

3 J.P. MORGAN INSTITUTIONAL SERVICE TREASURY MONEY MARKET FUND


<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Service Treasury Money Market Fund.


The bar chart indicates some of the risks by showing the performance of the
fund's shares during its first complete calendar year of operations.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year and life of the fund.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Total return (%)   Shows changes in returns by calendar year(1)
- --------------------------------------------------------------------------------
                                                                       1998
6%
- ---
3%
- ---
0%
- ---

5.14

[ ] J.P. Morgan Institutional Service Treasury Money Market Fund


The fund's year-to-date, total return as of 9/30/99 was 3.38%. For the period
covered by this total return chart, the fund's highest quarterly return was
1.31% (for the quarter ended 9/30/98); and the lowest quarterly return was 1.17%
(for the quarter ended 12/31/98).

PERFORMANCE (unaudited)
Average annual total return (%) Shows performance over time, for period ended
December 31, 19982
- --------------------------------------------------------------------------------
                                             Past 1 yr.       Life of fund
J.P. Morgan Institutional Service
 Treasury Money Market Fund
 (after expenses)                              5.14               5.23
- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses after reimbursement are deducted from fund assets prior to
performance calculations. Annual fund operating expenses(3) (%) (expenses that
are deducted from fund assets)

Management fees                                                             0.20
Marketing (12b-1) fees                                                      None
Service fees(4)                                                             0.25
Other expenses                                                              0.21
- --------------------------------------------------------------------------------
Total operating expenses                                                    0.66
Fee waiver and expense
reimbursement(5)                                                            0.21
- --------------------------------------------------------------------------------
Net expenses(5)                                                             0.45
- --------------------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
6/1/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
                                   1 yr.        3 yrs.      5 yrs.      10 yrs.
Your cost($)                        46           175         332          789
- --------------------------------------------------------------------------------
1 The fund's fiscal year end is 10/31.
2  The fund commenced operations on 7/7/97 and performance is calculated as of
   7/31/97.
3  The fund has a master/feeder structure as described on page 13. This table
   shows the fund's expenses and its share of master portfolio expenses for the
   past fiscal year expressed as a percentage of the fund's average net assets.

4  Service Organizations (described on page 11) may charge other fees to their
   customers who are the beneficial owners of shares in connection with their
   customers' accounts. Such fees, if any, may affect the return such customers
   realize with respect to their investments.

5  Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
   York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
   to the extent expenses exceed 0.45% (excluding extraordinary expenses) of the
   fund's average daily net assets through 2/28/01.


            J.P. MORGAN INSTITUTIONAL SERVICE TREASURY MONEY MARKET FUND       4
<PAGE>

J.P. MORGAN INSTITUTIONAL SERVICE
FEDERAL MONEY MARKET FUND
- --------------------------------------------------------------------------------
                         REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                         (J.P. MORGAN INSTITUTIONAL SERVICE FEDERAL MONEY MARKET
                         FUND)

[GRAPHIC]

GOAL
The fund's goal is to provide high current income consistent with the
preservation of capital and same-day liquidity. This goal can be changed only
with shareholder approval.

[GRAPHIC]

INVESTMENT APPROACH


Principal Strategies
The fund purchases securities that offer very high credit quality and pay
regular income that is generally free from state and local income taxes. It
invests exclusively in U.S. government agency obligations such as the Federal
Farm Credit Bank, the Tennessee Valley Authority, the Federal Home Loan Bank,
the Student Loan Marketing Association, and in obligations of the U.S. Treasury.
Some of these investments may be purchased on a when-issued or delayed delivery
basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.

Principal Risks
While the fund's U.S. Treasury obligations are backed by the full faith and
credit of the Government, investors should bear in mind that any agency
obligations the fund may hold do not have this guarantee, and that in any case
government guarantees do not extend to shares of the fund itself.


Most of the fund's income is generally exempt from state and local personal
income taxes and from some corporate income taxes (although not federal income
taxes). Because of this beneficial tax status, the fund's yields are generally
lower than those of taxable money market funds when compared on a pre-tax basis.

As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security could default on its obligation. An unexpected rise in interest rates
could also lead to a loss in share price if the fund is near the maximum
allowable dollar weighted average maturity (currently not to exceed 90 days) at
the time. However, the fund's investment process and management policies are
designed to minimize the likelihood and impact of these risks. To date, through
this process, the fund's share price has never deviated from $1.

An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.


PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $326 billion, including more than $52 billion using similar
strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since joining J.P. Morgan in June of 1997 from Goldman Sachs &
Co., where he was an Institutional Money Market Portfolio Manager; and Mark
Settles, vice president, who has been on the team since November 1999 and has
been at J.P. Morgan since 1994. Prior to managing this fund, Mr. Settles was a
fixed income trader on J.P. Morgan's New York and London trading desks. The
traders on the team are Donald Clemmenson, vice president, who has been on the
team since its inception; Gunter Heiland, associate, who has been on the team
since joining J.P. Morgan in June of 1997 from Salomon Brothers, where he was a
sales assistant; and Kimberly Weil, who has been on the team since joining J.P.
Morgan in April of 1993.


Before you invest
Investors considering these funds should understand that:
o    There is no assurance that these funds will meet their investment goals
o    These funds do not represent complete investment programs

5    J.P. MORGAN INSTITUTIONAL SERVICE FEDERAL MONEY MARKET FUND
<PAGE>

Performance (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Service Federal Money Market Fund.


The bar chart indicates some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last five calendar years.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year, five years and life of the fund.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Year-by-year total return (%)Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
                           1994      1995      1996         1997        1998
6%
- ----                                 5.59
                            3.78               4.99         5.18        5.21
3%
- ----

0%
- ----

[ ] J.P. Morgan Institutional Service Federal Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 3.46%. For the period
covered by this year-by-year total return chart, the fund's highest quarterly
return was 1.41% (for the quarter ended 6/30/95); and the lowest quarterly
return was 0.67% (for the quarter ended 3/31/94).


PERFORMANCE (unaudited)
Average annual total return (%)Shows performance over time, for period ended
December 31, 1998(1)
- --------------------------------------------------------------------------------
                                         Past 1 yr.   Past 5 yrs.   Life of fund
J.P. Morgan Institutional Service
Federal Money Market Fund                   5.21        4.95           4.58
- --------------------------------------------------------------------------------


Investor Expenses
The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses after reimbursement are deducted from fund assets prior to
performance calculations.


Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)


Management fees                                                             0.19
Marketing (12b-1) fees                                                      None
Service fees(4)                                                             0.25
Other expenses                                                              0.88
- --------------------------------------------------------------------------------
Total operating expenses                                                    1.32
Fee waiver and expense
reimbursement(5)                                                            0.87
- --------------------------------------------------------------------------------
Net expenses(5)                                                             0.45
- --------------------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
6/1/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
                                        1 yr.    3 yrs.      5 yrs.      10 yrs.
Your cost($)                             46       272         581          1460
- --------------------------------------------------------------------------------
1  The fund commenced operations on 11/6/97. Returns reflect performance of the
   J.P. Morgan Federal Money Market Fund, a separate feeder fund investing in
   the same master portfolio, prior to that date.
2  The fund's fiscal year end is 10/31.
3  The fund has a master/feeder structure as described on page 13. This table
   shows the fund's expenses and its share of master portfolio expenses for the
   past fiscal year expressed as a percentage of the fund's average net assets.
4  Service Organizations (described on page 11) may charge other fees to their
   customers who are the beneficial owners of shares in connection with their
   customers' accounts. Such fees, if any, may affect the return such customers
   realize with respect to their investment.
5  Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
   York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
   to the extent expenses exceed 0.45% (excluding extraordinary expenses) of the
   fund's average daily net assets through 2/28/01.


             J.P. MORGAN INSTITUTIONAL SERVICE FEDERAL MONEY MARKET FUND       6
<PAGE>

4/30/98

J.P. MORGAN INSTITUTIONAL SERVICE
TAX EXEMPT MONEY MARKET FUND
- --------------------------------------------------------------------------------
                             REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                             (J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY
                             MARKET FUND)

[GRAPHIC]

GOAL
The fund's goal is to maximize current income that is exempt from federal income
tax consistent with the preservation of capital and same-day liquidity. This
goal can be changed only with shareholder approval.

[GRAPHIC]

INVESTMENT APPROACH


Principal Strategies
The fund invests primarily in high quality municipal obligations whose income is
exempt from federal income taxes. The fund's municipal obligations must fall
into the highest short-term rating category (top two highest categories for New
York State obligations) or be of equivalent quality. The fund may also invest in
certain structured municipal obligations, and in certain municipal or other
obligations whose income is subject to tax, including the alternative minimum
tax. Although the fund is permitted to hold these other obligations or cash, it
aims to be fully invested in municipal obligations. In order to maintain
liquidity, the fund may buy securities with puts that allow the fund to
liquidate the securities on short notice. Some of the fund's securities may be
purchased on a when-issued or delayed delivery basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.


The fund's income is generally exempt from federal income taxes. A small portion
may be exempt from state or local income taxes.


Principal Risks
As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security or the counterparty to a contract could default on its obligation. An
unexpected rise in interest rates could also lead to a loss in share price if
the fund is near the maximum allowable dollar weighted average maturity
(currently not to exceed 90 days) at the time. However, the fund's investment
process and management policies are designed to minimize the likelihood and
impact of these risks. To date, through this process, the fund's share price has
never deviated from $1.


An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.


Portfolio Management
The fund's assets are managed by
J.P. Morgan, which currently manages approximately $326 billion, including more
than $52 billion using similar strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since joining J.P. Morgan in June of 1997 from Goldman Sachs &
Co., where he was an Institutional Money Market Portfolio Manager; and Richard
Oswald, vice president, who has been on the team since joining J.P. Morgan in
October of 1996. Prior to managing this fund, Mr. Oswald served as Treasurer of
CBS and President of its finance unit. The traders on the team are Donald
Clemmenson, vice president, who has been on the team since its inception; Gunter
Heiland, associate, who has been on the team since joining J.P. Morgan in June
of 1997 from Salomon Brothers, where he was a sales assistant; and Kimberly
Weil, who has been on the team since its inception.


Before you invest
Investors considering these funds should understand that:
o    There is no assurance that these funds will meet their investment goals
o    These funds do not represent complete investment programs

7      J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
<PAGE>

PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Service Tax Exempt Money Market Fund.


The bar chart indicates some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last ten calendar years.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year, five years and ten years.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Year-by-year total return (%)(%)Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------
    1989   1990   1991    1992     1993    1994     1995   1996     1997    1998

6%   6.11
- ---        5.58                                                             3.49
                   4.16
3%                                                    3.52
- ---                                                          3.12   3.26
                           2.71             2.50
0%                                   2.04
- ---
- --------------------------------------------------------------------------------
[ ] J.P. Morgan Institutional Service Tax Exempt Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 2.06%. For the period
covered by this year-by-year total return chart, the fund's highest quarterly
return was 1.60% (for the quarter ended 6/30/89); and the lowest quarterly
return was 0.47% (for the quarter ended 3/31/94).

PERFORMANCE (unaudited)
Average annual total return (%)Shows performance over time, for periods ended
December 31, 1998(1)
- --------------------------------------------------------------------------------
                                         Past 1 yr.    Past 5 yrs.  Past 10 yrs.
J.P. Morgan Institutional Service
 Tax Exempt Money Market Fund               3.49          3.18          3.64
- --------------------------------------------------------------------------------
Investor Expenses
The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses after reimbursement are deducted from fund assets prior to
performance calculations.

Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
Management fees                                                             0.15
Marketing (12b-1) fees                                                      None
Service fees4                                                               0.25
Other expenses                                                              0.73
- --------------------------------------------------------------------------------
Total operating expenses                                                    1.13
Fee waiver and expense
reimbursement(5)                                                            0.68
- --------------------------------------------------------------------------------
Net expenses(5)                                                             0.45
- --------------------------------------------------------------------------------
Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
12/30/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.
- --------------------------------------------------------------------------------
                              1 yr.             3 yrs.      5 yrs.      10 yrs.
Your cost($)                   46                280         545         1303
- --------------------------------------------------------------------------------
1  The fund commenced operations on 11/4/97. Returns reflect performance of the
   J.P. Morgan Tax Exempt Money Market Fund, a separate feeder fund investing in
   the same master portfolio, prior to that date. Returns for periods prior to
   7/31/93 reflect performance of The Pierpont Tax Exempt Money Market Fund, the
   predecessor of the J.P. Morgan Tax Exempt Money Market Fund.
2  The fund's fiscal year end is 8/31.
3  The fund has a master/feeder structure as described on page 13. This table
   shows the fund's expenses and its share of master portfolio expenses for the
   past fiscal year expressed as a percentage of the fund's average net assets.
4  Service Organizations (described on page 11) may charge other fees to their
   customers who are the beneficial owners of shares in connection with their
   customers' accounts. Such fees, if any, may affect the return such customers
   realize with respect to their investments.
5  Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
   York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
   to the extent expenses exceed 0.45% (excluding extraordinary expenses) of the
   fund's average daily net assets through 2/28/01.


          J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND       8
<PAGE>


MONEY MARKET MANAGEMENT APPROACH
- --------------------------------------------------------------------------------
J.P. MORGAN
Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments, and
individuals. Today, J.P. Morgan employs over 380 analysts and portfolio managers
around the world and has approximately $326 billion in assets under management,
including assets managed by the funds' advisor, J.P. Morgan Investment
Management Inc.


J.P. MORGAN INSTITUTIONAL SERVICE MONEY MARKET FUNDS
Each of these funds invests in high-quality short-term debt securities by
investing through a master portfolio (another fund with the same goal). Each
fund accrues dividends daily, pays them to shareholders monthly, and seeks to
maintain a stable $1 share price.

WHO MAY WANT TO INVEST

The funds are designed for investors who:

o want an investment that strives to
  preserve capital

o want regular income from a high
  quality portfolio

o want a highly liquid investment

o are looking for an interim
  investment

o are pursuing a short-term goal

o are seeking income that is generally exempt from state and local income taxes
  (in the case of Federal Money Market Fund) or exempt from federal income tax
  (in the case of Tax Exempt Money Market Fund)

The funds are designed for investors who:

o are investing for long-term growth

o are investing for high income

o require the added security of the
  FDIC insurance

o in the case of Tax Exempt Money Market Fund, are investing through an IRA or
  other tax- advantaged retirement plan

MONEY MARKET FUNDS
AND STABILITY

Money market funds are subject to a range of federal regulations designed to
promote stability. For example, money market funds must maintain a weighted
average maturity of no more than 90 days, and generally may not invest in any
securities with a remaining maturity of more than 13 months. Keeping the
weighted average maturity this short helps funds in their pursuit of a stable $1
share price.


<PAGE>

THE SPECTRUM OF MONEY MARKET FUNDS
The funds described in this prospectus differ primarily in the types of
securities they hold and in the tax status of the income they offer. The table
below provides an overview of the main types of securities in which each fund
may invest. The distinguishing features of each money market fund are described
in more detail on the preceding pages.

Primary investments
- --------------------------------------------------------------------------------
                        Service        Service       Service        Service
                        Prime          Treasury      Federal        Tax Exempt
                        Money Market   Money Market  Money Market   Money Market
- --------------------------------------------------------------------------------
U.S. Treasuries*           o               o            o
- --------------------------------------------------------------------------------
U.S. government
agency
instruments                o                            o*
- --------------------------------------------------------------------------------
Domestic &
foreign bank
obligations                o
- --------------------------------------------------------------------------------
Domestic &
foreign
short-term
corporate
obligations                o
- --------------------------------------------------------------------------------
Foreign
governments                o
- --------------------------------------------------------------------------------
Illiquid holdings          o
- --------------------------------------------------------------------------------
Repurchase
agreements and
reverse repurchase
agreements                 o               o
- --------------------------------------------------------------------------------
Tax-exempt
municipal
obligations**                                                            o
- --------------------------------------------------------------------------------
*  Income is generally exempt from state and local income taxes
** Income is generally exempt from federal income taxes

9       MONEY MARKET MANAGEMENT APPROACH


<PAGE>

- --------------------------------------------------------------------------------
Money Market Investment Process
While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor,
emphasizes investment quality through in-depth research of short-term securities
and their issuers. This allows each fund to focus on providing current income
without compromising share price stability.

In researching short-term securities, J.P. Morgan's credit analysts enhance the
data furnished by rating agencies by drawing on the insights of J.P. Morgan's
fixed income trading specialists and equity analysts. Only securities highly
rated by independent rating agencies as well as J.P. Morgan's proprietary
ratings system are considered for investment.


In managing the funds described in this prospectus, J.P. Morgan employs a
three-step process that combines maturity determination, sector allocation and
fundamental research for identifying portfolio securities:


[GRAPHIC]

J.P.Morgan uses a disciplined process
   to control each fund's sensitivity
                    to interest rates

Maturity determination Based on analysis of a range of factors, including
current yields, economic forecasts, and anticipated fiscal and monetary
policies, J.P. Morgan establishes the desired dollar weighted average maturity
for each fund within the permissible 90-day range. Controlling weighted average
maturity allows the funds to manage risk, since securities with shorter
maturities are typically less sensitive to interest rate shifts than those with
longer maturities.

[GRAPHIC]

 The funds invest across different
sectors for diversification and to
   take advantage of yield spreads

Sector allocation Analysis of the yields available in different sectors of the
short-term debt market allows J.P. Morgan to adjust each fund's sector
allocation, with the goal of enhancing current income while also maintaining
diversification across permissible sectors.

[GRAPHIC]

Security selection Based on the results of the firm's credit research and each
fund's maturity determination and sector allocation, the portfolio managers and
dedicated fixed-income traders make buy and sell decisions according to each
fund's goal and strategy.

[GRAPHIC]

J.P. Morgan uses a disciplined process
to control each fund's sensitivity
to interest rates

[GRAPHIC]

The funds invest across different
sectors for diversification and to
take advantage of yield spreads

[GRAPHIC]

Each fund selects its securities as
described earlier in this prospectus

                                         MONEY MARKET MANAGEMENT APPROACH     10
<PAGE>

YOUR INVESTMENT
- --------------------------------------------------------------------------------
INVESTING THROUGH A SERVICE ORGANIZATION
Prospective investors may only purchase shares of each fund with the assistance
of a service organization. Your service organization is paid by the fund to
assist you in establishing your fund account, executing transactions, and
monitoring your investment. The minimum amount for initial investments in a fund
is $10,000,000 and for additional investments $25,000, although these minimums
may be less for some investors. Service organizations may provide the following
services in connection with their customers' investments in the funds:

o  Acting, directly or through an agent, as the sole
   shareholder of record

o  Maintaining account records for customers

o  Processing orders to purchase, redeem or exchange
   shares for customers

o  Responding to inquiries from prospective and existing shareholders

o  Assisting customers with investment procedures

ACCOUNT AND TRANSACTION POLICIES
Business days and NAV calculations The funds' regular business days are the same
as those of the New York Stock Exchange. The Service Federal and Service Tax
Exempt Money Market Funds calculate their net asset value per share (NAV) every
business day at 4:00 p.m. eastern time. The Service Treasury Money Market Fund
calculates its NAV every business day at 4:30 p.m. eastern time. The Service
Prime Money Market Fund calculates its NAV every business day at 5:00 p.m.
eastern time.

Timing of orders Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Purchase and redemption orders for
each fund must be received at the times indicated in the table below:
Fund                                                          Cut-off Time
Service Prime Money Market                                      5:00 p.m.
Service Treasury Money Market                                   4:30 p.m.
Service Federal Money Market                                    2:00 p.m.
Service Tax Exempt Money Market                                12:00 noon


For the purchase to be effective and dividends to be earned on the same day,
immediately available funds must be received by a fund by its close of business
on that day. Service organizations will be responsible for transmitting accepted
orders and payments to the funds within the time period agreed upon by them. A
fund has the right to suspend redemption of shares as permitted by law and to
postpone payment of proceeds for up to seven days.


Timing of settlements When you buy shares, you will become the owner of record
when a fund receives your payment.

Redemption orders for each fund received by the respective cut-off times will be
paid in immediately available funds, normally on the same day, according to
instructions on file.

When you sell shares that you recently purchased by check, your order will be
executed at the next NAV but the proceeds will not be available until your check
clears. This may take up to 15 days.

Statements and reports The funds send monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months, each fund sends out an annual or semi-annual report containing
information on its holdings and a discussion of recent and anticipated market
conditions and fund performance.

Accounts with below-minimum balances If your account balance falls below the
minimum for 30 days as a result of selling shares (and not because of
performance), the fund reserves the right to request that you buy more shares or
close your account. If your account balance is still below the minimum 60 days
after notification, the fund reserves the right to close out your account and
send the proceeds to the address of record.

DIVIDENDS AND DISTRIBUTIONS
Substantially all income dividends are declared daily and paid monthly. If all
of an investor's shares are redeemed during the month, accrued but unpaid
dividends are paid with


11   YOUR INVESTMENT

<PAGE>

- --------------------------------------------------------------------------------
the redemption proceeds. Shares of the funds earn dividends on the business day
their purchase is effective, but not on the business day their redemption is
effective.

Dividends and distributions are reinvested in additional fund shares.
Alternatively, you may instruct your financial professional or J.P. Morgan Funds
Services to have them sent to you by check, credited to a separate account, or
invested in another J.P. Morgan Institutional Fund.

TAX CONSIDERATIONS
In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. The transactions
below typically create the following tax liabilities:

- --------------------------------------------------------------------------------
Transaction                                            Tax status
- --------------------------------------------------------------------------------
Income dividends from Prime                            Ordinary income
Money Market, Treasury Money
Market and Federal Money
Market Funds
- --------------------------------------------------------------------------------
Income dividends from Tax                              Exempt from federal
Exempt Money Market Fund                               income taxes
- --------------------------------------------------------------------------------
Short-term capital gains                               Ordinary income
distributions

Every January, each fund issues tax information on its distributions for the
previous year.

Any investor for whom a fund does not have a valid taxpayer identification
number will be subject to backup withholding for taxes.

The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.

Because each investor's tax circumstances are unique, please consult your tax
professional about your fund investment.


Shareholder Services Agent
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
1-800-766-7722

Representatives are available 8:00 a.m. to 5:00 p.m. eastern
time on fund business days.

                                                           YOUR INVESTMENT    12


<PAGE>

FUND DETAILS
- --------------------------------------------------------------------------------
MASTER/FEEDER STRUCTURE
As noted earlier, each fund is a "feeder" fund that invests in a master
portfolio. (Except where indicated, this prospectus uses the term "the fund" to
mean the feeder fund and its master portfolio taken together.)

Each master portfolio accepts investments from other feeder funds, and all the
feeders of a given master portfolio bear the portfolio's expenses in proportion
to their assets. However, each feeder can set its own transaction minimums,
fund-specific expenses, and other conditions. This means that one feeder could
offer access to the same master portfolio on more attractive terms, or could
experience better performance, than another feeder. Information about other
feeders is available by calling 1-800-766-7722. Generally, when a master
portfolio seeks a vote, its feeder fund will hold a shareholder meeting and cast
its vote proportionately, as instructed by its shareholders. Fund shareholders
are entitled to one full or fractional vote for each dollar or fraction of a
dollar invested.


Each feeder fund and its master portfolio expect to maintain consistent goals,
but if they do not, the feeder fund will withdraw from the master portfolio,
receiving its assets either in cash or securities. Each feeder fund's trustees
would then consider whether the feeder fund should hire its own investment
adviser, invest in a different master portfolio, or take other action.


MANAGEMENT AND ADMINISTRATION
The feeder funds described in this prospectus and their corresponding master
portfolios are all governed by the same trustees. The trustees are responsible
for overseeing all business activities. The trustees are assisted by Pierpont
Group, Inc., which they own and operate on a cost basis; costs are shared by all
funds governed by these trustees. Funds Distributor Inc., as co-administrator,
along with J.P. Morgan, provides fund officers. J.P. Morgan, as
co-administrator, oversees each fund's other service providers.


J.P. Morgan, subject to the expense reimbursements described earlier in this
prospectus, receives the following fees for investment advisory and other
services:


Advisory services                             0.20% of the first $1 billion of
                                              each master portfolio's average
                                              net assets plus 0.10% over
                                              $1 billion
- --------------------------------------------------------------------------------
Administrative services                       Master portfolio's and fund's pro-
(fee shared with Funds                        rata portions of 0.09% of the
                                              Distributor, Inc.)first $7 billion
                                              of average net assets in
                                              J.P. Morgan-advised portfolios,
                                              plus 0.04% over $7 billion
- --------------------------------------------------------------------------------
Shareholder services                          0.05% of each fund's
                                              average net assets

Each fund has a service plan which allows it to pay service organizations up to
0.25% of the average net assets of the shares held in the name of the service
organization.

J.P. Morgan may also pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.


Year 2000 Fund operations and  shareholders  could be adversely  affected if the
computer  systems used by J.P.  Morgan,  the funds' other service  providers and
other entities with computer systems linked to the funds do not properly process
and calculate January 1, 2000 and dates thereafter. J.P. Morgan has been working
to avoid these problems and has obtained assurances from other service providers
that they have  taken  similar  steps.  However,  it is not  certain  that these
actions will be sufficient to prevent these date-related problems from adversely
impacting fund  operations  and  shareholders.  In addition,  to the extent that
operations  of  issuers  of  securities  held  by  the  funds  are  impaired  by
date-related  problems  or prices of  securities  decline as a result of real or
perceived  date-related problems of issuers held by the funds or generally,  the
net asset value of the fund will decline. While the funds cannot predict at this
time the degree of impact,  it is possible  that  foreign  markets  will be less
prepared than those in the U.S.


13     FUND DETAILS



<PAGE>



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










                     THIS PAGE IS LEFT BLANK INTENTIONALLY


















                                                                              14
<PAGE>



- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial tables are intended to help you understand each fund's financial
performance for the past one through five fiscal years or periods, as
applicable. Certain information reflects financial results for a single fund
share. The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends are distributions). Except where noted, this information has been
audited by Pricewaterhouse-Coopers LLP, whose reports, along with each fund's
financial statements, are included in the respective fund's annual report, which
are available upon request.


J.P. MORGAN INSTITUTIONAL SERVICE PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>

                                                                                        5/31/99
Per-share data              For fiscal periods ended          11/30/97(1)  11/30/98   (unaudited)
- -------------------------------------------------------------------------------------------------
<S>                        <C>                                <C>          <C>          <C>
Net asset value, beginning of period ($)                        1.00        1.00         1.00
- -------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($)                                       0.0057      0.0523       0.0233
Net realized loss on investment ($)                            (0.0000)(2) (0.0000)(2)  (0.0000)(2)
- -------------------------------------------------------------------------------------------------
Total from investment operations ($)                            0.0057      0.0523       0.0233
- -------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($)                                      (0.0057)    (0.0523)     (0.0233)
Net realized gain ($)                                             -        (0.0000)(2)     -
- -------------------------------------------------------------------------------------------------
Total distributions ($)                                        (0.0057)    (0.0523)     (0.0233)
- -------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                              1.00        1.00         1.00
- -------------------------------------------------------------------------------------------------
Total return (%)                                                0.57(3)     5.35         2.35(3)
- -------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                          384     470,836    1,951,530
- -------------------------------------------------------------------------------------------------
Ratio to average net assets:
- -------------------------------------------------------------------------------------------------
  Net Expenses (%)                                              0.45(4)     0.45         0.45(4)
  -----------------------------------------------------------------------------------------------
  Net investment income (%)                                     5.28(4)     5.17         4.63(4)
  -----------------------------------------------------------------------------------------------
  Expenses without
  reimbursement (%)                                            35.55(4,5)   0.56         0.50(4)
  -----------------------------------------------------------------------------------------------
</TABLE>

1  The fund commenced operations on 10/23/97.
2  Less than $0.0001.
3  Not annualized.
4  Annualized.
5  Not representative of ongoing reimbursement ratio since period covers less
   than two months.


<PAGE>

J.P. MORGAN INSTITUTIONAL SERVICE TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>

                                                                                       4/31/99
Per-share data             For fiscal periods ended          10/31/971    10/31/98   (unaudited)
- --------------------------------------------------------------------------------------------------
<S>                                                          <C>          <C>         <C>
Net asset value, beginning of period ($)                        1.00        1.00         1.00
- --------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($)                                       0.0169      0.0514       0.0221
Net realized gain (loss) on investment ($)                      0.0000(2)  (0.0000)(2)  (0.0000)(2)
- --------------------------------------------------------------------------------------------------
Total from investment operations ($)                            0.0169      0.0514       0.0221
- --------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($)                                      (0.0169)    (0.0514)     (0.0221)
Net realized gain ($)                                          (0.0000)(2) (0.0000)(2)     -
- --------------------------------------------------------------------------------------------------
Total distributions ($)                                        (0.0169)    (0.0514)     (0.0221)
- --------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                                1.00        1.00         1.00
- --------------------------------------------------------------------------------------------------
Total return (%)                                                  1.71(3)     5.27         2.23(3)
- --------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                         35,983     471,279      357,424
- --------------------------------------------------------------------------------------------------
Ratio to average net assets:
- --------------------------------------------------------------------------------------------------
  Net Expenses (%)                                                0.28(4)     0.37         0.44(4)
  ------------------------------------------------------------------------------------------------
  Net investment income (%)                                       5.29(4)     5.11         4.45(4)
  ------------------------------------------------------------------------------------------------
  Expenses without
  reimbursement (%)                                               1.71(4)     0.66         0.60(4)
- --------------------------------------------------------------------------------------------------
</TABLE>

1  The fund commenced operations on 7/7/97.
2  Less than $0.0001.
3  Not annualized.
4  Annualized.


15 FUND DETAILS
<PAGE>

J.P. MORGAN INSTITUTIONAL SERVICE FEDERAL MONEY MARKET FUND
<TABLE>
<CAPTION>

                                                                                4/30/99
Per-share data          For the fiscal periods ended          10/31/98        (unaudited)
- --------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>
Net asset value, beginning of period ($)                        1.00             1.00
- --------------------------------------------------------------------------------------------
Income from investment operations:
     Net investment income ($)                                  0.0517           0.0226
     Net realized loss on investment ($)                       (0.0000)(2)      (0.0000)(2)
- --------------------------------------------------------------------------------------------
Total from investment operations ($)                            0.0517          (0.0226)
- --------------------------------------------------------------------------------------------
Less distributions to shareholders from:
     Net investment income ($)                                 (0.0517)         (0.0226)
     Net realized gain                                             --           (0.0000)(2)
- --------------------------------------------------------------------------------------------
Total distributions ($)                                        (0.0517)         (0.0226)
- --------------------------------------------------------------------------------------------
Net asset value, end of period ($)                              1.00             1.00
- --------------------------------------------------------------------------------------------
Total return (%)                                                5.24(3)          2.28(3)
- --------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                        29,459           23,120
- --------------------------------------------------------------------------------------------
Ratio to average net assets:
- --------------------------------------------------------------------------------------------
     Net expenses (%)                                           0.45(4)          0.45(4)
     ---------------------------------------------------------------------------------------
     Net investment income (%)                                  5.07(4)          4.50(4)
     ---------------------------------------------------------------------------------------
     Expenses without
     reimbursement (%)                                          1.32(4)          0.70(4)
- --------------------------------------------------------------------------------------------
</TABLE>
(1)  The fund commenced operations on 11/5/97.
(2)  Less than 0.0001.
(3)  Not annualized.
(4)  Annualized.


J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>

Per-share data          For the fiscal year ended August 31     1998(1)          1999
- --------------------------------------------------------------------------------------------
<S>                                                             <C>              <C>
Net asset value, beginning of period ($)                        1.00             1.00
- --------------------------------------------------------------------------------------------
Income from investment operations:
     Net investment income ($)                                  0.0276           0.0275
     Net realized gain (loss) on investment ($)                (0.0000)(2)       0.0000(2)
- --------------------------------------------------------------------------------------------
Total from investment operations ($)                            0.0276           0.0275
- --------------------------------------------------------------------------------------------
Less distributions to shareholders from:
     Net investment income ($)                                 (0.0276)         (0.0275)
- --------------------------------------------------------------------------------------------
Net asset value, end of period ($)                              1.00             1.00
- --------------------------------------------------------------------------------------------
Total return (%)                                                2.803            2.78
- --------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                         8,237            8,319
- --------------------------------------------------------------------------------------------
Ratio to average net assets:
- --------------------------------------------------------------------------------------------
     Net expenses (%)                                            0.60(4)          0.48
     ---------------------------------------------------------------------------------------
     Net investment income (%)                                   2.95(4)          2.66
     ---------------------------------------------------------------------------------------
     Expenses without
     reimbursement (%)                                           5.83(4)          1.13
- --------------------------------------------------------------------------------------------
</TABLE>

(1)  The fund commenced operations on 11/4/97.
(2)  Less than $0.0001.
(3)  Not annualized.
(4)  Annualized.


                                                                 16 FUND DETAILS

<PAGE>

FOR MORE INFORMATION

For investors who want more information on these funds, the following documents
are available free upon request:

Annual/Semi-annual Reports Contain financial statements, performance data,
information on portfolio holdings, and a written analysis of market conditions
and fund performance for a fund's most recently completed fiscal year or
half-year.

Statement of Additional Information (SAI) Provides a fuller technical and legal
description of a fund's policies, investment restrictions, and business
structure. This prospectus incorporates each fund's SAI by reference.

Copies of the current versions of these documents, along with other information
about the funds, may be obtained by contacting:

J.P. Morgan Institutional Funds
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036

Telephone: 1-800-766-7722

Hearing impaired: 1-888-468-4015

Email: [email protected]

Text-only versions of these documents and this prospectus are available, upon
payment of a duplicating fee, from the Public Reference Room of the Securities
and Exchange Commission in Washington, D.C. (1-800-SEC-0330) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov. The
funds' investment company and 1933 Act registration numbers are:

J.P. Morgan Institutional Service Prime Money Market Fund .........811-07342 and
                                                                       033-54642
J.P. Morgan Institutional Service Treasury Money Market Fund ......811-07342 and
                                                                       033-54642
J.P. Morgan Institutional Service Federal Money Market Fund .......811-07342 and
                                                                       033-54642
J.P. Morgan Institutional Service Tax Exempt Money Market Fund ....811-07342 and
                                                                       033-54642


J.P. MORGAN INSTITUTIONAL FUNDS AND THE MORGAN TRADITION

The J.P. Morgan Institutional Funds combine a heritage of integrity and
financial leadership with comprehensive, sophisticated analysis and management
techniques. Drawing on J.P. Morgan's extensive experience and depth as an
investment manager, the J.P. Morgan Institutional Funds offer a broad array of
distinctive opportunities for mutual fund investors.

JPMorgan
================================================================================
J.P. Morgan Institutional Funds

Advisor                                           Distributor
J.P. Morgan Investemnt Management, Inc.           Funds Distributor, Inc.
522 Fifth Avenue                                  60 State Street
New York, NY 10036                                Boston, MA 02109
1-800-766-7722                                    1-800-221-7930


im0771
<PAGE>

<PAGE>


                                                DECEMBER 30, 1999  |  PROSPECTUS


J.P. MORGAN INSTITUTIONAL MONEY MARKET FUNDS

Prime Money Market Fund

Treasury Money Market Fund

Federal Money Market Fund

Tax Exempt Money Market Fund

                                       ----------------------------------------
                                       Seeking to provide high current income
                                       consistent with the preservation of
                                       capital and same-day liquidity











This prospectus contains essential information for anyone investing in these
funds. Please read it carefully and keep it for reference.

As with all mutual funds, the fact that these shares are registered with the
Securities and Exchange Commission does not mean that the commission approves
them or guarantees that the information in this prospectus is correct or
adequate. It is a criminal offense to state or suggest otherwise.

Distributed by Funds Distributor, Inc.                      JPMorgan


<PAGE>
<TABLE>
<CAPTION>
CONTENTS
- --------------------------------------------------------------------------------
<S>                                           <C>                                                           <C>

1                                              J.P. MORGAN INSTITUTIONAL MONEY MARKET FUNDS
Each fund's goal, principal
strategies, principal risks, performance       J.P. Morgan Institutional Prime Money Market Fund ............. 1
and expenses
                                               J.P. Morgan Institutional Treasury Money Market Fund .......... 3


                                               J.P. Morgan Institutional Federal Money Market Fund ........... 5

                                               J.P. Morgan Institutional Tax Exempt Money Market Fund ........ 7


9                                              MONEY MARKET MANAGEMENT APPROACH
Principles and techniques common
to the funds in this prospectus                J.P. Morgan ................................................... 9

                                               J.P. Morgan Institutional Money Market Funds .................. 9

                                               The spectrum of money market funds ............................ 9

                                               Who may want to invest ........................................ 9

                                               Money market investment process ...............................10


11                                             YOUR INVESTMENT
Investing in the J.P. Morgan
Institutional Money Market Funds               Investing through a financial professional ....................11

                                               Investing through an employer-sponsored retirement plan .......11

                                               Investing through an IRA or rollover IRA ......................11

                                               Investing directly ............................................11

                                               Opening your account ..........................................11

                                               Adding to your account ........................................11

                                               Selling shares ................................................12

                                               Account and transaction policies ..............................12

                                               Dividends and distributions ...................................13

                                               Tax considerations ............................................13


14                                             FUND DETAILS
More about the funds'
business operations                            Master/feeder structure .......................................14

                                               Management and administration .................................14

                                               Financial highlights ..........................................15


                                               FOR MORE INFORMATION ................................. back cover

</TABLE>

<PAGE>

J.P. Morgan INSTITUTIONAL
PRIME MONEY MARKET FUND                                |   TICKER SYMBOL: JPIXX
- --------------------------------------------------------------------------------
                                   REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                            (J.P. MORGAN INSTITUTIONAL PRIME MONEY MARKET FUND)
[graph omitted]

GOAL

The fund's goal is to maximize current income consistent with the preservation
of capital and same-day liquidity. This goal can be changed without shareholder
approval.

[graph omitted]

INVESTMENT APPROACH

Principal Strategies


The fund looks for investments across a broad spectrum of U.S.
dollar-denominated money market securities, typically emphasizing different
types of securities at different times in order to take advantage of changing
yield differentials. The fund's investments may include obligations issued by
the U.S. Treasury, government agencies, domestic and foreign banks and
corporations, foreign governments, repurchase agreements, reverse repurchase
agreements, as well as asset-backed securities, taxable municipal obligations,
and other money market instruments. Some of these investments may be illiquid or
purchased on a when-issued or delayed delivery basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.

Principal Risks

As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security or the counterparty to a contract could default on its obligation. An
unexpected rise in interest rates could also lead to a loss in share price if
the fund is near the maximum allowable dollar weighted average maturity
(currently not to exceed 90 days) at the time. To the extent that the fund
invests in foreign securities, the fund could lose money because of foreign
government actions, political instability, or lack of adequate and accurate
information. Also, the fund may have difficulty valuing its illiquid holdings
and may be unable to sell them at the time or price it desires. While these
possibilities exist, the fund's investment process and management policies are
designed to minimize the likelihood and impact of these risks. To date, through
this process, the fund's share price has never deviated from $1.


An investment in the fund is not a deposit of any bank and is not
insured or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the fund seeks to preserve the value of your
investment at $1 per share, it is possible to lose money by investing in the
fund.

PORTFOLIO MANAGEMENT


The fund's assets are managed by J.P. Morgan, which currently manages
approximately $326 billion, including more than $52 billion using similar
strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since joining J.P. Morgan in June of 1997 from Goldman Sachs &
Co., where he was an Institutional Money Market Portfolio Manager; and Mark
Settles, vice president, who has been on the team since November 1999 and has
been at J.P. Morgan since 1994_. Prior to managing this fund, Mr. Settles was a
fixed income trader on J.P. Morgan's New York and London trading desks. The
traders on the team are Donald Clemmenson, vice president, who has been on the
team since its inception; Gunter Heiland, associate, who has been on the team
since joining J.P. Morgan in June of 1997 from Salomon Brothers, where he was a
sales assistant; and Kimberly Weil, who has been on the team since its
inception.


- --------------------------------------------------------------------------------
BEFORE YOU INVEST
Investors considering these funds should understand that:

o There is no assurance that these funds will meet their investment goals

o These funds do not represent complete investment programs
- --------------------------------------------------------------------------------

1 | J.P. MORGAN INSTITUTIONAL PRIME MONEY MARKET FUND

<PAGE>
- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Prime Money Market Fund.


The bar chart indicates some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last ten calendar years.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year, five years and ten years.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.


Year-by-year total return (%)     Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------

     1989   1990   1991    1992    1993 1994   1995    1996   1997   1998

12%
     9.13
9%
           8.04
6%                 6.07
                          3.67    2.87  4.15    5.98   5.41   5.60    5.56
3%

0%
- --------------------------------------------------------------------------------

o  J.P. Morgan Institutional Prime Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 3.75%. For the period
covered by this year-by-year total return chart, the fund's highest quarterly
return was 2.33% (for the quarter ended 6/30/89); and the lowest quarterly
return was 0.69% (for the quarter ended 6/30/93).

<PAGE>


PERFORMANCE (unaudited)
<TABLE>
<CAPTION>

Average annual total return (%)      Shows performance over time, for periods ended December 31, 1998(1)
- --------------------------------------------------------------------------------------------------------------
                                                                         Past 1 yr.   Past 5 yrs.  Past 10 yrs.
<S>                                                                         <C>          <C>          <C>
J.P. Morgan Institutional Prime Money Market Fund (after expenses)          5.56         5.34         5.63
- --------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
<S>                                <C>                                            <C>

INVESTOR EXPENSES                  Annual fund operating expenses(3) (%)          Expense example
                                   (expenses that are deducted from fund assets)
The expenses of the fund                                                          The example below is intended
before and after reimbursement     Management fees              0.12              to help you compare the cost
are shown at right. The fund                                                      of investing in the fund with
has no sales, redemption,          Marketing (12b-1) fees       None              the cost of investing in other
exchange, or account fees,                                                        mutual funds. The example
although some institutions may     Other expenses               0.22              assumes: $10,000 initial
charge you a fee for shares        ---------------------------------              investment, 5% return each
you buy through them. The          Total operating expenses     0.34              year, net expenses for the
annual fund expenses after                                                        period 6/1/99 through 2/28/01
reimbursement are deducted         Fee waiver and expense                         and total operating expenses
from fund assets prior to          reimbursement(4)             0.14              thereafter, and all shares
performance calculations.          ---------------------------------              sold at the end of each time
                                   Net expenses(4)              0.20              period. The example is for
                                   ---------------------------------              comparison only; the fund's
                                                                                  actual return and your actual
                                                                                  costs may be higher or lower.

                                                                                                1 yr. 3 yrs. 5 yrs. 10 yrs.
                                                                                  ----------------------------------------
                                                                                  Your cost($)   20     85     167    407
                                                                                  ----------------------------------------

1 The fund commenced                 3 The fund has a master/feeder               4 Reflects an agreement dated
  operations on 7/12/93. Returns       structure as described on page               6/1/99 by Morgan Guaranty
  reflect performance of The           14. This table is restated to                Trust Company of New York
  Pierpont Money Market Fund,          show the current fee                         ("Morgan Guaranty"), an
  the fund's predecessor, prior        arrangements in effect as of                 affiliate of J.P. Morgan, to
  to that date.                        8/1/98, and shows the fund's                 reimburse the fund to the
                                       expenses and its share of                    extent expenses exceed 0.20%
2 The fund's fiscal year end           master portfolio expenses for                (excluding extraordinary
  is 11/30.                            the past fiscal year, using                  expenses) of the fund's
                                       the current fees as if they                  average daily net assets
                                       had been in effect during the                through 2/28/01.
                                       past fiscal year expressed as
                                       a percentage of the fund's
                                       average net assets.
</TABLE>


                         J.P. MORGAN INSTITUTIONAL PRIME MONEY MARKET FUND  |  2
<PAGE>

J.P. MORGAN INSTITUTIONAL
TREASURY MONEY MARKET FUND                             |   TICKER SYMBOL: JTMXX
- --------------------------------------------------------------------------------
                                    REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                                    (J.P. MORGAN INSTITUTIONAL TREASURY MONEY
                                    MARKET FUND)
[graph omitted]

GOAL

The fund's goal is to provide high current income consistent with the
preservation of capital and same-day liquidity. This goal can be changed only
with shareholder approval.

[graph omitted]

INVESTMENT APPROACH


Principal Strategies

The fund purchases securities that offer the highest credit quality and provide
regular income. It invests exclusively in U.S. Treasury obligations and
repurchase agreements collateralized by these obligations. Some of these
investments may be purchased on a when-issued or delayed delivery basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.


The portion of the fund's income derived from direct investments in U.S.
Treasury obligations may be exempt from state and local personal income taxes.


Principal Risks

While the fund's U.S. Treasury obligations are backed by the full faith and
credit of the federal government, investors should bear in mind that any
repurchase agreements the fund may hold do not have this guarantee (even though
they are fully collateralized by Treasuries), and that in any case, government
guarantees do not extend to shares of the fund itself.


An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.

PORTFOLIO MANAGEMENT


The fund's assets are managed by J.P. Morgan, which currently manages
approximately $326 billion, including more than $52 billion using similar
strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since its inception, after joining J.P. Morgan in June of 1997
from Goldman Sachs & Co., where he was an Institutional Money Market Portfolio
Manager; and Mark Settles, vice president, who has been on the team since
November 1999 and has been at J.P. Morgan since 1994. Prior to managing this
fund, Mr. Settles was a fixed income trader on J.P. Morgan's New York and London
trading desks. The traders on the team are Donald Clemmenson, vice president,
Gunter Heiland, associate, and Kimberly Weil, each of whom has been on the team
since its inception. Prior to joining J.P. Morgan in June of 1997, Mr. Heiland
was a sales assistant at Salomon Brothers.


- --------------------------------------------------------------------------------
BEFORE YOU INVEST
Investors considering these funds should understand that:

o There is no assurance that these funds will meet their investment goals

o These funds do not represent complete investment programs

3  |  J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND

<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)
The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Treasury Money Market Fund.


The bar chart indicates some of the risks by showing the performance of the
fund's shares during its first complete calendar year of operations.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year and life of the fund.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Total returns (%)(%)   Shows changes in returns by calendar year(1)
- --------------------------------------------------------------------------------
                                                                   1998

10%                                                                5.41

5%

0%
- --------------------------------------------------------------------------------


o J.P. Morgan Institutional Treasury Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 3.57%. For the period
covered by this total return chart, the fund's highest quarterly return was
1.37% (for the quarter ended 9/30/98); and the lowest quarterly return was 1.23%
(for the quarter ended 12/31/98).


<PAGE>

<TABLE>
<CAPTION>

PERFORMANCE (unaudited)
Average annual total return (%)   Shows performance over time, for periods ended December 31, 1998(2)
- ----------------------------------------------------------------------------------------------------
                                                                          Past 1 yr.  Life of fund
<S>                                                                         <C>          <C>
J.P. Morgan Institutional Treasury Money Market Fund (after expenses)       5.41         5.49
- ----------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES


The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses after reimbursement are deducted from fund assets prior to
performance calculations.


Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
- --------------------------------------------------------------------------------

Management fees                                                 0.20

Marketing (12b-1) fees                                          None

Other expenses                                                  0.28
- --------------------------------------------------------------------------------

Total operating expenses                                        0.48

Fee waiver and expense
reimbursement(4)                                                0.28
- --------------------------------------------------------------------------------

Net expenses(4)                                                 0.20
- --------------------------------------------------------------------------------

Expense example


The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
6/1/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.


- --------------------------------------------------------------------------------
                                  1 yr.        3 yrs.      5 yrs.      10 yrs.
Your cost($)                       20           106         221         558
- --------------------------------------------------------------------------------

(1) The fund's fiscal year end is 10/31.

(2) The fund commenced operations on 7/7/97 and performance is calculated as of
    7/31/97.


(3) The fund has a master/feeder structure as described on page 14. This table
    is restated to show the current fee arrangements in effect as of 8/1/98, and
    shows the fund's expenses and its share of master portfolio expenses for the
    past fiscal year, using the current fees as if they had been in effect
    during the past fiscal year expressed as a percentage of the fund's average
    net assets.

(4) Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
    York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
    to the extent expenses exceed 0.20% (excluding extraordinary expenses) of
    the fund's average daily net assets through 2/28/01.


                      J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND  |  4

<PAGE>

J.P. MORGAN INSTITUTIONAL
FEDERAL MONEY MARKET FUND                              |   TICKER SYMBOL: JPTXX
- --------------------------------------------------------------------------------
                                    REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                           (J.P. MORGAN INSTITUTIONAL FEDERAL MONEY MARKET FUND)

[graph omitted]

GOAL
The fund's goal is to provide high current income consistent with the
preservation of capital and same-day liquidity. This goal can be changed without
shareholder approval.

[graph omitted]

INVESTMENT APPROACH


Principal Strategies

The fund purchases securities that offer very high credit quality and pay
regular income that is generally free from state and local income taxes. It
invests exclusively in U.S. government agency obligations such as the Federal
Farm Credit Bank, the Tennessee Valley Authority, the Federal Home Loan Bank,
the Student Loan Marketing Association, and in obligations of the U.S. Treasury.
Some of these investments may be purchased on a when-issued or delayed delivery
basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10

Principal Risks
While the fund's U.S. Treasury obligations are backed by the full faith and
credit of the Government, investors should bear in mind that any agency
obligations the fund may hold do not have this guarantee, and that in any case
government guarantees do not extend to shares of the fund itself.


Most of the fund's income is generally exempt from state and local personal
income taxes and from some corporate income taxes (although not federal income
taxes). Because of this beneficial tax status, the fund's yields are generally
lower than those of taxable money market funds when compared on a pre-tax basis.

As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security could default on its obligation. An unexpected rise in interest rates
could also lead to a loss in share price if the fund is near the maximum
allowable dollar weighted average maturity (currently not to exceed 90 days) at
the time. However, the fund's investment process and management policies are
designed to minimize the likelihood and impact of these risks. To date, through
this process, the fund's share price has never deviated from $1.

An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.


PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $326 billion, including more than $52 billion using similar
strategies as the fund. The advisor uses a team of portfolio managers and
traders to manage the fund.

The portfolio management team is led by John Donohue, vice president, who has
been on the team since joining J.P. Morgan in June of 1997 from Goldman Sachs &
Co., where he was an Institutional Money Market Portfolio Manager; and Mark
Settles, vice president, who has been on the team since November 1999 and has
been at J.P. Morgan since 1994. Prior to managing this fund, Mr. Settles was a
fixed income trader on J.P. Morgan's New York and London trading desks. The
traders on the team are Donald Clemmenson, vice president, who has been on the
team since its inception; Gunter Heiland, associate, who has been on the team
since joining J.P. Morgan in June of 1997 from Salomon Brothers, where he was a
sales assistant; and Kimberly Weil, who has been on the team since joining J.P.
Morgan in April of 1993.


- --------------------------------------------------------------------------------
BEFORE YOU INVEST
Investors considering these funds should understand that:

o There is no assurance that these funds will meet their investment goals

o These funds do not represent complete investment programs
- --------------------------------------------------------------------------------

5  |  J.P. MORGAN INSTITUTIONAL FEDERAL MONEY MARKET FUND
<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)

The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Federal Money Market Fund.


The bar chart indicates some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last five calendar years.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year, five years and life of the fund.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Year-by-year total return (%)     Shows changes in returns by calendar year(1)
- --------------------------------------------------------------------------------
                         1994      1995        1996         1997        1998

6%                                 5.79
                                               5.22         5.43        5.39
3%                        3.98

0%

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

o  J.P. Morgan Institutional Federal Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 3.64%. For the period
covered by this year-by-year total return chart, the fund's highest quarterly
return was 1.46% (for the quarter ended 6/30/95); and the lowest quarterly
return was 0.72% (for the quarter ended 3/31/94).


<TABLE>
<CAPTION>
PERFORMANCE (unaudited)
Average annual total return (%)       Shows performance over time, for periods ended December 31, 1998(2)
- ---------------------------------------------------------------------------------------------------------
                                                             Past 1 yr.  Past 5 yrs. Life of fund
<S>                                                             <C>         <C>          <C>
J.P. Morgan Institutional Federal Money Market Fund             5.39        5.15         4.77
- ---------------------------------------------------------------------------------------------------------
</TABLE>

- --------------------------------------------------------------------------------
INVESTOR EXPENSES
The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses after reimbursement are deducted from fund assets prior to
performance calculations.


Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
- --------------------------------------------------------------------

Management fees                                                 0.19

Marketing (12b-1) fees                                          None

Other expenses                                                  0.26
- --------------------------------------------------------------------

Total operating expenses                                        0.45
Fee waiver and expense
reimbursement(4)                                                0.25
- --------------------------------------------------------------------
Net expenses(4)                                                 0.20
- --------------------------------------------------------------------

<PAGE>


Expense example
The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
6/1/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.


- --------------------------------------------------------------------------------
                       1 yr.     3 yrs.        5 yrs.      10 yrs.
Your cost($)            20         101          209         525
- --------------------------------------------------------------------------------

(1) The fund's fiscal year end is 10/31.

(2) The fund commenced operations on 1/4/93 and returns reflect performance as
    of 1/31/93.


(3) The fund has a master/feeder structure as described on page 14. This table
    is restated to show the current fee arrangements in effect as of 8/1/98, and
    shows the fund's expenses and its share of master portfolio expenses for the
    past fiscal year, using the current fees as if they had been in effect
    during the past fiscal year expressed as a percentage of the fund's average
    net assets.

(4) Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
    York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
    to the extent expenses exceed 0.20% (excluding extraordinary expenses) of
    the fund's average daily net assets through 2/28/01.


                       J.P. MORGAN INSTITUTIONAL FEDERAL MONEY MARKET FUND  |  6

<PAGE>
J.P. MORGAN INSTITUTIONAL
TAX EXEMPT MONEY MARKET FUND                           |   TICKER SYMBOL: JPEXX
- --------------------------------------------------------------------------------
                                    REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
                       (J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND)

[graph omitted]

GOAL
The fund's goal is to maximize current income that is exempt from federal income
tax consistent with the preservation of capital and same-day liquidity. This
goal can be changed without shareholder approval.

[graph omitted]

INVESTMENT APPROACH


Principal Strategies

The fund invests primarily in high quality municipal obligations whose income is
exempt from federal income taxes. The fund's municipal obligations must fall
into the highest short-term rating category (top two highest categories for New
York State obligations) or be of equivalent quality. The fund may also invest in
certain structured municipal obligations, and in certain municipal or other
obligations whose income is subject to tax, including the alternative minimum
tax. Although the fund is permitted to hold these other obligations or cash, it
aims to be fully invested in municipal obligations. In order to maintain
liquidity, the fund may buy securities with puts that allow the fund to
liquidate the securities on short notice. Some of the fund's securities may be
purchased on a when-issued or delayed delivery basis.

The fund's yield will vary in response to changes in interest rates. How well
the fund's yield compares to the yields of similar money market funds will
depend on the success of the investment process described on page 10.


The fund's income is generally exempt from federal income taxes. A small portion
may be exempt from state or local income taxes.


Principal Risks

As with all money market funds, the fund's investments are subject to various
risks, which, while generally considered to be minimal, could cause its share
price to fall below $1. For example, the issuer or guarantor of a portfolio
security or the counterparty to a contract could default on its obligation. An
unexpected rise in interest rates could also lead to a loss in share price if
the fund is near the maximum allowable dollar weighted average maturity
(currently not to exceed 90 days) at the time. However, the fund's investment
process and management policies are designed to minimize the likelihood and
impact of these risks. To date, through this process, the fund's share price has
never deviated from $1.


An investment in the fund is not a deposit of any bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at $1
per share, it is possible to lose money by investing in the fund.

PORTFOLIO MANAGEMENT


The fund's assets are managed by J.P. Morgan, which currently manages
approximately $326 billion, including more than $52 billion using similar
strategies as the fund.

The advisor uses a team of portfolio managers and traders to manage the fund.
The portfolio management team is led by John Donohue, vice president, who has
been on the team since joining J.P. Morgan in June of 1997 from Goldman Sachs &
Co., where he was an Institutional Money Market Portfolio Manager; and Richard
Oswald, vice president, who has been on the team since joining J.P. Morgan in
October of 1996. Prior to managing this fund, Mr. Oswald served as Treasurer of
CBS and President of its finance unit. The traders on the team are Donald
Clemmenson, vice president, who has been on the team since its inception; Gunter
Heiland, associate, who has been on the team since joining J.P. Morgan in June
of 1997 from Solomon Brothers where he was a sales assistant; and Kimberly Weil,
who has been on the team since its inception.


- --------------------------------------------------------------------------------
BEFORE YOU INVEST
Investors considering these funds should understand that:

o There is no assurance that these funds will meet their investment goals

o These funds do not represent complete investment programs
- --------------------------------------------------------------------------------



7  |  J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND

<PAGE>

- --------------------------------------------------------------------------------
PERFORMANCE (unaudited)

The bar chart and table shown below provide some indication of the risks of
investing in J.P. Morgan Institutional Tax Exempt Money Market Fund.


The bar chart indicates some of the risks by showing changes in the performance
of the fund's shares from year to year for each of the last ten calendar years.

The table indicates some of the risks by showing the fund's average annual
returns for the past one year, five years, and ten years.


The fund's past performance does not necessarily indicate how the fund will
perform in the future.

Year-by-year total return (%)    Shows changes in returns by calendar year(1,2)
- --------------------------------------------------------------------------------

     1989   1990   1991   1992   1993   1994   1995   1996    1997   1998

9%
     6.11
            5.58
6%
                    4.16
                                        2.66   3.68
3%                        2.71   2.10
                                                      3.24
                                                               3.48   3.32
0%
- --------------------------------------------------------------------------------

o  J.P. Morgan Institutional Tax Exempt Money Market Fund


The fund's year-to-date total return as of 9/30/99 was 2.24%. For the period
covered by this year-by-year total return chart, the fund's highest quarterly
return was 1.60% (for the quarter ended 6/30/89); and the lowest quarterly
return was 0.49% (for the quarter ended 3/31/93).


PERFORMANCE (unaudited)
<TABLE>
<CAPTION>
Average annual total return (%)    Shows performance over time, for periods ended December 31, 1998(1)
- ------------------------------------------------------------------------------------------------------
                                                              Past 1 yr.   Past 5 yrs.   Past 10 yrs.
<S>                                                             <C>           <C>          <C>
J.P. Morgan Institutional Tax Exempt Money Market Fund          3.32          3.27         3.70
- ------------------------------------------------------------------------------------------------------
</TABLE>


<PAGE>
- --------------------------------------------------------------------------------
INVESTOR EXPENSES


The expenses of the fund before and after reimbursement are shown at right. The
fund has no sales, redemption, exchange, or account fees, although some
institutions may charge you a fee for shares you buy through them. The annual
fund expenses after reimbursement are deducted from fund assets prior to
performance calculations.

Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
- ---------------------------------------------
Management fees                   0.15

Marketing (12b-1) fees            None

Other expenses                    0.20
- ---------------------------------------------
Total operating expenses          0.35

Fee waiver and expense
reimbursement(4)                  0.10
- ---------------------------------------------
Net expenses(4)                   0.25
- ---------------------------------------------

Expense example

The example below is intended to help you compare the cost of investing in the
fund with the cost of investing in other mutual funds. The example assumes:
$10,000 initial investment, 5% return each year, net expenses for the period
12/30/99 through 2/28/01 and total operating expenses thereafter, and all shares
sold at the end of each time period. The example is for comparison only; the
fund's actual return and your actual costs may be higher or lower.

- --------------------------------------------------------------------------------
                         1 yr.         3 yrs.      5 yrs.      10 yrs.
Your cost($)              26            101         185         432
- --------------------------------------------------------------------------------

(1) The fund commenced operations on 7/12/93. Returns reflect performance of The
    Pierpont Tax Exempt Money Market Fund, the fund's predecessor, prior to that
    date.

(2) The fund's fiscal year end is 8/31.

(3) The fund has a master/feeder structure as described on page 14. This table
    shows the fund's expenses and its share of master portfolio expenses for the
    past fiscal year expressed as a percentage of the fund's average net assets.

(4) Reflects an agreement dated 6/1/99 by Morgan Guaranty Trust Company of New
    York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
    to the extent expenses (excluding extraordinary expenses) would not be less
    than 0.20% and in no case will expenses exceed 0.25% of the fund's average
    daily net assets through 2/28/01.


                    J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND  |  8
<PAGE>

MONEY MARKET MANAGEMENT APPROACH
- --------------------------------------------------------------------------------


J.P. MORGAN
Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments, and
individuals. Today, J.P. Morgan employs over 380 analysts and portfolio managers
around the world and has approximately $326 billion in assets under management,
including assets managed by the funds' advisor, J.P. Morgan Investment
Management Inc.


J.P. MORGAN INSTITUTIONAL MONEY MARKET FUNDS
Each of these funds invests in high-quality short-term debt securities by
investing through a master portfolio (another fund with the same goal). Each
fund accrues dividends daily, pays them to shareholders monthly, and seeks to
maintain a stable $1 share price.

THE SPECTRUM OF MONEY MARKET FUNDS
The funds described in this prospectus differ primarily in the types of
securities they hold and in the tax status of the income they offer. The table
below provides an overview of the main types of securities in which each fund
may invest. The distinguishing features of each money market fund are described
in more detail on the preceding pages.


WHO MAY WANT TO INVEST

The funds are designed for investors who:

o   want an investment that strives to preserve capital

o   want regular income from a high quality portfolio

o   want a highly liquid investment

o   are looking for an interim investment

o   are pursuing a short-term goal

o   are seeking income that is generally exempt from state and local income
    taxes (in the case of Federal Money Market Fund) or exempt from federal
    income tax (in the case of Tax Exempt Money Market Fund)

The funds are not designed for investors who:

o   are investing for long-term growth

o   are investing for high income

o   require the added security of the FDIC insurance

o   in the case of Tax Exempt Money Market Fund, are investing through an IRA or
    other tax-advantaged retirement plan

MONEY MARKET FUNDS
AND STABILITY

Money market funds are subject
to a range of federal regulations designed to promote stability. For example,
money market funds must maintain a weighted average maturity of no more than 90
days, and generally may not invest in any securities with a remaining maturity
of more than 13 months. Keeping the weighted average maturity this short helps
funds in their pursuit of a stable $1 share price.

<PAGE>

Primary investments
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
   Prime                          Treasury     Federal   Tax Exempt
   Money                             Money       Money        Money
   Market                           Market      Market       Market
- --------------------------------------------------------------------------------
U.S.
Treasuries*                              o           o            o
- --------------------------------------------------------------------------------
U.S.
Government
Agency
instruments                              o          o*
- --------------------------------------------------------------------------------
Domestic
& foreign
bank
obligations                              o
- --------------------------------------------------------------------------------
Domestic
& foreign
short-term
corporate
obligations                              o
- --------------------------------------------------------------------------------
Foreign
governments                              o
- --------------------------------------------------------------------------------
Illiquid
holdings                                 o
- --------------------------------------------------------------------------------
Repurchase
agreements &
reverse
repurchase
agreements                               o           o
- --------------------------------------------------------------------------------
Tax-exempt
municipal
obligations**                            o


*  Income is generally exempt from state and local income taxes
** Income is generally exempt from federal income taxes

9   |   MONEY MARKET MANAGEMENT APPROACH

<PAGE>

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

                                        MONEY MARKET INVESTMENT PROCESS

                                        While each fund follows its own
                                        strategy, the funds as a group share a
                                        single investment philosophy. This
                                        philosophy, developed by the funds'
                                        advisor, emphasizes investment quality
                                        through in-depth research of short-term
                                        securities and their issuers. This
                                        allows each fund to focus on providing
                                        current income without compromising
                                        share price stability.

                                        In researching short-term securities,
                                        J.P. Morgan's credit analysts enhance
                                        the data furnished by rating agencies
                                        by drawing on the insights of J.P.
                                        Morgan's fixed income trading
                                        specialists and equity analysts. Only
                                        securities highly rated by independent
                                        rating agencies as well as J.P.
                                        Morgan's proprietary ratings system are
                                        considered for investment.


                                        In managing the funds described in this
                                        prospectus, J.P. Morgan employs a
                                        three-step process that combines
                                        maturity determination, sector
                                        allocation and fundamental research for
                                        identifying portfolio securities:


[graph omitted]

J.P. Morgan uses a disciplined process  Maturity determination Based on
    to control each fund's sensitivity  analysis of a range of factors,
                     to interest rates  including current yields, economic
                                        forecasts, and anticipated fiscal and
                                        monetary policies, J.P. Morgan
                                        establishes the desired dollar weighted
                                        average maturity for each fund within
                                        the permissible 90-day range.
                                        Controlling weighted average maturity
                                        allows the funds to manage risk, since
                                        securities with shorter maturities are
                                        typically less sensitive to interest
                                        rate shifts than those with longer
                                        maturities.

     [graph omitted]

     The funds invest across different  Sector allocation Analysis of the
    sectors for diversification and to  yields available in different sectors
       take advantage of yield spreads  of the short-term debt market allows
                                        J.P. Morgan to adjust each fund's
                                        sector allocation, with the goal of
                                        enhancing current income while also
                                        maintaining diversification across
                                        permissible sectors.

   [graph omitted]

   Each fund selects its securities as  Security selection Based on the results
  described earlier in this prospectus  of the firm's credit research and each
                                        fund's maturity determination and
                                        sector allocation, the portfolio
                                        managers and dedicated fixed-income
                                        traders make buy and sell decisions
                                        according to each fund's goal and
                                        strategy.



                                         MONEY MARKET MANAGEMENT APPROACH  |  10
<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------

For your convenience, the J.P. Morgan Institutional Funds offer several ways to
start and add to fund investments.

INVESTING THROUGH A FINANCIAL PROFESSIONAL
If you work with a financial professional, either at J.P. Morgan or elsewhere,
he or she is prepared to handle your planning and transaction needs. Your
financial professional will be able to assist you in establishing your fund
account, executing transactions, and monitoring your investment. If your fund
investment is not held in the name of your financial professional and you prefer
to place a transaction order yourself, please use the instructions for investing
directly.

INVESTING THROUGH AN EMPLOYER-SPONSORED
RETIREMENT PLAN
Your fund investments are handled through your plan. Refer to your plan
materials or contact your benefits office for information on buying, selling, or
exchanging fund shares.

INVESTING THROUGH AN IRA OR ROLLOVER IRA
Please contact a J.P. Morgan Retirement Services Specialist at 1-888-576-4472
for information on J.P. Morgan's comprehensive IRA services, including lower
minimum investments.

INVESTING DIRECTLY
Investors may establish accounts without
the help of an intermediary by using the instructions below and at right:

o   Determine the amount you are investing. The minimum amount for initial
    investments in a fund is $10,000,000 and for additional investments $25,000,
    although these minimums may be less for some investors. For more information
    on minimum investments, call 1-800-766-7722.

o   Complete the application, indicating how much of your investment you want to
    allocate to which fund(s). Please apply now for any account privileges you
    may want to use in the future, in order to avoid the delays associated with
    adding them later on.

o   Mail in your application, making your initial investment as shown below.

For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-766-7722.

OPENING YOUR ACCOUNT

By wire

o   Mail your completed application to the Shareholder Services Agent.

o   Call the Shareholder Services Agent to obtain an account number and to place
    a purchase order. Funds that are wired without a purchase order will be
    returned uninvested.

o   After placing your purchase order, instruct your bank to wire the amount
    of your investment to:

Morgan Guaranty Trust Company of New York - Delaware
Routing number: 031-100-238
Credit: J.P. Morgan Institutional Funds
Account number: 001-57-689
FFC: your account number, name of registered owner(s) and fund name

By check

o   Make out a check for the investment amount payable to J.P. Morgan
    Institutional Funds.

o   Mail the check with your completed application to the Shareholder Services
    Agent.

By exchange

o   Call the Shareholder Services Agent to effect an exchange.

<PAGE>


ADDING TO YOUR ACCOUNT

By wire

o   Call the Shareholder Services Agent to place a purchase order. Funds that
    are wired without a purchase order will be returned uninvested.

o   Once you have placed your purchase order, instruct your bank to wire the
    amount of your investment as described above.

By check

o   Make out a check for the investment amount payable to J.P. Morgan
    Institutional Funds.

o   Mail the check with a completed investment slip to the Shareholder Services
    Agent. If you do not have an investment slip, attach a note indicating your
    account number and how much you wish to invest in which fund(s).

By exchange

o   Call the Shareholder Services Agent to effect an exchange.

11  |  YOUR INVESTMENT

<PAGE>
- --------------------------------------------------------------------------------
SELLING SHARES

    By phone -- wire payment
o   Call the Shareholder Services Agent to verify that the wire redemption
    privilege is in place on your account. If it is not, a representative can
    help you add it.

o   Place your wire request. If you are transferring money to a non-Morgan
    account, you will need to provide the representative with the personal
    identification number (PIN) that was provided to you when you opened your
    fund account.

    By phone -- check payment
o   Call the Shareholder Services Agent and place your request. Once your
    request has been verified, a check for the net amount, payable to the
    registered owner(s), will be mailed to the address of record. For checks
    payable to any other party or mailed to any other address, please make your
    request in writing (see below).

    In writing
o   Write a letter of instruction that includes the following information: The
    name of the registered owner(s) of the account; the account number; the fund
    name; the amount you want to sell; and the recipient's name and address or
    wire information, if different from those of the account registration.

o   Indicate whether you want the proceeds sent by check or by wire.

o   Make sure the letter is signed by an authorized party. The Shareholder
    Services Agent may require additional information, such as a signature
    guarantee.

o   Mail the letter to the Shareholder Services Agent.

    By exchange
o   Call the Shareholder Services Agent to effect an exchange.

    Redemption in kind
o   Each fund reserves the right to make redemptions of over $250,000 in
    securities rather than in cash.

ACCOUNT AND TRANSACTION POLICIES

Telephone orders The funds accept telephone orders from all shareholders. To
guard against fraud, the funds require shareholders to use a PIN, and may record
telephone orders or take other reasonable precautions. However, if a fund does
take such steps to ensure the authenticity of an order, you may bear any loss if
the order later proves fraudulent.

Exchanges You may exchange shares in these funds for shares in any other J.P.
Morgan Institutional or J.P. Morgan mutual fund at no charge (subject to the
securities laws of your state). When making exchanges, it is important to
observe any applicable minimums. Keep in mind that, for tax purposes, an
exchange is considered a sale.

A fund may alter, limit, or suspend its exchange policy at any time.

Business days and NAV calculations The funds' regular business days are the same
as those of the New York Stock Exchange. The Federal and Tax Exempt Money Market
Funds calculate their net asset value per share (NAV) every business day at 4:00
p.m. eastern time. The Treasury Money Market Fund calculates its NAV every
business day at 4:30 p.m. eastern time. The Prime Money Market Fund calculates
its NAV every business day at 5:00 p.m. eastern time.

Timing of orders Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Purchase and redemption orders for
each fund must be received at the times indicated in the table below:

Fund                             Cut-off Time

Prime Money Market               5:00 p.m.

Treasury Money Market            4:30 p.m.

Federal Money Market             2:00 p.m.

Tax Exempt Money Market          12:00 noon

- --------------------------------------------------------------------------------
Shareholder Services Agent
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036
1-800-766-7722

Representatives are available 8:00 a.m. to 5:00 p.m. eastern
time on fund business days.
- --------------------------------------------------------------------------------

                                                          YOUR INVESTMENT  |  12
<PAGE>

- --------------------------------------------------------------------------------
For the purchase to be effective and dividends to be earned on the same day,
immediately available funds must be received by a fund by its close of business
on that day. A fund has the right to suspend redemption of shares as permitted
by law and to postpone payment of proceeds for up to seven days.


Timing of settlements When you buy shares, you will become the owner
of record when a fund receives your payment.

Redemption orders for each fund
received by the cut-off times will be paid in immediately available funds,
normally on the same day, according to instructions on file. In-kind redemptions
(described on page 12) will be available as promptly as is feasible.

When you sell shares that you recently purchased by check, your order will be
executed at the next NAV but the proceeds will not be available until your check
clears. This may take up to 15 days.

Statements and reports The funds send monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months, each fund sends out an annual or semi-annual report containing
information on its holdings and a discussion of recent and anticipated market
conditions and fund performance.

Accounts with below-minimum balances If your account balance falls below the
minimum for 30 days as a result of selling shares (and not because of
performance), the fund reserves the right to request that you buy more shares or
close your account. If your account balance is still below the minimum 60 days
after notification, the fund reserves the right to close out your account and
send the proceeds to the address of record.

DIVIDENDS AND DISTRIBUTIONS

Substantially all income dividends are declared daily and paid monthly. If all
of an investor's shares are redeemed during the month, accrued but unpaid
dividends are paid with the redemption proceeds. Shares of the funds earn
dividends on the business day their purchase is effective, but not on the
business day their redemption is effective.

Dividends and distributions are reinvested in additional fund shares.
Alternatively, you may instruct your financial professional or J.P. Morgan Funds
Services to have them sent to you by check, credited to a separate account, or
invested in another J.P. Morgan Institutional Fund.

TAX CONSIDERATIONS

In general, selling shares, exchanging shares, and receiving distributions
(whether reinvested or taken in cash) are all taxable events. The transactions
below typically create the following tax liabilities:
- -------------------------------------------------------------------------------
Transaction                                            Tax status

Income dividends from Prime                            Ordinary income
Money Market, Treasury Money
Market and Federal Money
Market Funds

Income dividends from Tax                              Exempt from federal
Exempt Money Market Fund                               income taxes

Short-term capital gains                               Ordinary income
distributions

Every January, each fund issues tax information on its distributions for the
previous year.

Any investor for whom a fund does not have a valid taxpayer identification
number will be subject to backup withholding for taxes.

The tax considerations described in this section do not apply to tax-deferred
accounts or other non-taxable entities.

Because each investor's tax circumstances are unique, please consult your tax
professional about your fund investment.

13  |  YOUR INVESTMENT

<PAGE>


FUND DETAILS
- --------------------------------------------------------------------------------

MASTER/FEEDER STRUCTURE
As noted earlier, each fund is a series of J.P. Morgan Institutional Funds, a
Massachusetts business trust, and a "feeder" fund that invests in a master
portfolio. (Except where indicated, this prospectus uses the term "the fund" to
mean the feeder fund and its master portfolio taken together.)

Each master portfolio accepts investments from other feeder funds, and all the
feeders of a given master portfolio bear the portfolio's expenses in proportion
to their assets. However, each feeder can set its own transaction minimums,
fund-specific expenses, and other conditions. This means that one feeder could
offer access to the same master portfolio on more attractive terms, or could
experience better performance, than another feeder. Information about other
feeders is available by calling 1-800-766-7722. Generally, when a master
portfolio seeks a vote, its feeder fund will hold a shareholder meeting and cast
its vote proportionately, as instructed by its shareholders. Fund shareholders
are entitled to one full or fractional vote for each dollar or fraction of a
dollar invested.


Each feeder fund and its master portfolio expect to maintain consistent goals,
but if they do not, the feeder fund will withdraw from the master portfolio,
receiving its assets either in cash or securities.Each feeder fund's trustees
would then consider whether the feeder fund should hire its own investment
adviser, invest in a different master portfolio, or take other action.


MANAGEMENT AND ADMINISTRATION
The feeder funds described in this prospectus and their corresponding master
portfolios are all governed by the same trustees. The trustees are responsible
for overseeing all business activities. The trustees are assisted by Pierpont
Group, Inc., which they own and operate on a cost basis; costs are shared by all
funds governed by these trustees. Funds Distributor Inc., as co-administrator,
along with J.P. Morgan, provides fund officers. J.P. Morgan, as
co-administrator, oversees each fund's other service providers.


J.P. Morgan, subject to the expense reimbursements described earlier in this
prospectus, receives the following fees for investment advisory and other
services:


Advisory services                   0.20% of the first $1 billion of
                                    each master portfolio's average
                                    net assets plus 0.10% over
                                    $1 billion

Administrative services             Master portfolio's and fund's -
   (fee shared with Funds           prorata portions of 0.09% of
Distributor, Inc.)                  the first $7 billion of average
                                    net assets in J.P. Morgan-
                                    advised portfolios, plus 0.04%
                                    over $7 billion

Shareholder services                0.10% of each fund's
                                    average net assets

J.P. Morgan may also pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.


Year 2000 Fund operations and shareholders could be adversely affected if the
computer systems used by J.P. Morgan, the funds' other service providers and
other entities with computer systems linked to the funds do not properly process
and calculate January 1, 2000 and dates thereafter. J.P. Morgan has been working
to avoid these problems and has obtained assurances from other service providers
that they have taken similar steps. However, it is not certain that these
actions will be sufficient to prevent these date-related problems from adversely
impacting fund operations and shareholders. In addition, to the extent that
operations of issuers of securities held by the funds are impaired by
date-related problems or prices of securities decline as a result of real or
perceived date-related problems of issuers held by the funds or generally, the
net asset value of the fund will decline. While the funds cannot predict at this
time the degree of impact, it is possible that foreign markets will be less
prepared than those in the U.S.


                                                             FUND DETAILS  |  14

<PAGE>

- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The financial tables are intended to help you understand each fund's financial
performance for the past one through five fiscal years or periods, as
applicable. Certain information reflects financial results for a single fund
share. The total returns in the tables represent the rate that an investor would
have earned (or lost) on an investment in a fund (assuming reinvestment of all
dividends are distributions). Except where noted, this information has been
audited by PricewaterhouseCoopers LLP, whose reports, along with each fund's
financial statements, are included in the respective fund's annual report, which
are available upon request.
- --------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL PRIME MONEY MARKET FUND
<TABLE>
<CAPTION>

Per-share data    For fiscal periods ended
- ----------------------------------------------------------------------------------------------------------------------------
                                                   11/30/94    11/30/95     11/30/96     11/30/97    11/30/98    5/31/99
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                                               (unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
<S>                                                  <C>         <C>          <C>         <C>          <C>         <C>
Net asset value, beginning of period ($)              1.00        1.00         1.00        1.00         1.00        1.00
- ----------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
 Net investment income ($)                          0.0385      0.0577       0.0529      0.0543       0.0547      0.0245
 Net realized gain (loss) on investment ($)        (0.0000)(1)  0.0003       0.0001     (0.0000)(1)  (0.0000)1   (0.0000)(1)
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($)                0.0385      0.0580       0.0530      0.0543       0.0547      0.0245
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
 Net investment income ($)                         (0.0385)    (0.0577)     (0.0529)    (0.0543)     (0.0547)    (0.0245)
 Net realized gain ($)                                  --          --      (0.0003)    (0.0003)          --          --
- ----------------------------------------------------------------------------------------------------------------------------
Total distributions ($)                            (0.0385)    (0.0577)     (0.0532)    (0.0546)     (0.0547)    (0.0245)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                    1.00        1.00         1.00        1.00         1.00        1.00
- ----------------------------------------------------------------------------------------------------------------------------
Total return (%)                                      3.92        5.93         5.46        5.59         5.61        2.482
- ----------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)            584,867     999,746    1,220,401   1,387,792    3,458,634   4,545,562
- ----------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ----------------------------------------------------------------------------------------------------------------------------
 Net Expenses (%)                                     0.21        0.20         0.20        0.20         0.20        0.203
- ----------------------------------------------------------------------------------------------------------------------------
 Net investment income (%)                            4.42        5.77         5.28        5.42         5.45        4.923
- ----------------------------------------------------------------------------------------------------------------------------
 Expenses without reimbursement (%)                   0.52        0.35         0.31        0.29         0.31        0.293
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>

1  Less than $0.0001                           3  Annualized.
2  Not Annualized.


<PAGE>

- --------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
<TABLE>
<CAPTION>


Per-share data                                   For fiscal periods ended
- ------------------------------------------------------------------------------------------------------------------
                                                             10/31/97(1)           10/31/98              4/30/99
- ------------------------------------------------------------------------------------------------------------------
                                                                                                       (unaudited)
- ------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>                   <C>                   <C>
Net asset value, beginning of period ($)                        1.00                  1.00                  1.00
- ------------------------------------------------------------------------------------------------------------------
Income from investment operations:
 Net investment income ($)                                    0.0176                0.0539                0.0233
 Net realized gain (loss) on investment ($)                   0.00002              (0.0000)2             (0.0000)2
- ------------------------------------------------------------------------------------------------------------------
Total from investment operations ($)                          0.0176                0.0539                0.0233
- ------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
 Net investment income ($)                                   (0.0176)              (0.0539)              (0.0233)
 Net realized gain ($)                                       (0.0000)(2)           (0.0000)(2)                --
- ------------------------------------------------------------------------------------------------------------------
Total distributions ($)                                      (0.0176)              (0.0539)              (0.0233)
- ------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                              1.00                  1.00                  1.00
- ------------------------------------------------------------------------------------------------------------------
Total return (%)                                               1.773                  5.53                 2.363
- ------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                       80,924               231,319               267,469
- ------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- ------------------------------------------------------------------------------------------------------------------
 Net Expenses (%)                                              0.044                 0.11                  0.194
- ------------------------------------------------------------------------------------------------------------------
 Net investment income (%)                                     5.534                 5.37                  4.694
- ------------------------------------------------------------------------------------------------------------------
 Expenses without reimbursement (%)                            1.104                 0.44                  0.404
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

1  The fund commenced operations 7/8/97        3  Not Annualized.
2  Less than $0.0001                           4  Annualized.



15 |  FUND DETAILS
<PAGE>

<TABLE>
<CAPTION>

- -------------------------------------------------------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL FEDERAL MONEY MARKET FUND
Per-share data                      For the fiscal periods ended
- -------------------------------------------------------------------------------------------------------------------------------
                                                      10/31/94    10/31/95    10/31/96     10/31/97    10/31/98     4/30/99
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                                   (unaudited)
- -------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>         <C>          <C>         <C>          <C>         <C>
Net asset value, beginning of period ($)                 1.00        1.00         1.00        1.00         1.00        1.00
- -------------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
 Net investment income ($)                             0.0354      0.0555       0.0508      0.0521       0.0535      0.0238
 Net realized gain (loss) on investment ($)           (0.0000)(1)  0.0003       0.0006      0.0001      (0.0000)(1) (0.0000)(1)
- -------------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($)                   0.0354      0.0558       0.0514      0.0522       0.0535      0.0238
- -------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
 Net investment income ($)                            (0.0354)    (0.0555)     (0.0508)    (0.0521)     (0.0535)    (0.0238)
 Net realized gain ($)                                (0.0001)         --      (0.0003)    (0.0007)          --     (0.0000)(1)
- -------------------------------------------------------------------------------------------------------------------------------
Total distributions ($)                               (0.0355)    (0.0555)     (0.0511)    (0.0528)     (0.0535)    (0.0238)
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                       1.00        1.00         1.00        1.00         1.00        1.00
- -------------------------------------------------------------------------------------------------------------------------------
Total return (%)                                         3.61        5.69         5.23        5.41         5.48        2.402
- -------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                80,146     145,108      109,050     137,306      969,873     939,873
- -------------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- -------------------------------------------------------------------------------------------------------------------------------
 Net Expenses (%)                                        0.20        0.20         0.20        0.20         0.20       0.203
- -------------------------------------------------------------------------------------------------------------------------------
 Net investment income (%)                               3.81        5.56         5.09        5.19         5.31       4.803
- -------------------------------------------------------------------------------------------------------------------------------
 Expenses without reimbursement (%)                      0.67        0.51         0.46        0.46         0.41       0.353
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>

1 Less than $0.0001.
2 Not annualized.
3 Annualized.

- --------------------------------------------------------------------------------
J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND
<TABLE>
<CAPTION>



Per-share data               For the fiscal years ended August 31
- -------------------------------------------------------------------------------------------------------------------------
                                                                1995        1996         1997        1998         1999
- -------------------------------------------------------------------------------------------------------------------------
<S>                                                             <C>         <C>          <C>         <C>          <C>
Net asset value, beginning of period ($)                        1.00        1.00         1.00        1.00         1.00
- -------------------------------------------------------------------------------------------------------------------------
Income from investment operations:
 Net investment income ($)                                      0.0352      0.0331       0.0330      0.0339       0.0302
 Net realized gain (loss) on investment ($)                    (0.0002)    (0.0000)(1)  (0.0000)(1)  0.0000(1)   (0.0000)(1)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations ($)                            0.0350      0.0331       0.0330      0.0339       0.0302
- -------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
 Net investment income ($)                                     (0.0352)    (0.0331)     (0.0330)    (0.0339)     (0.0302)
- -------------------------------------------------------------------------------------------------------------------------
Total distributions ($)                                        (0.0352)    (0.0331)     (0.0330)    (0.0339)     (0.0302)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period ($)                              1.00        1.00         1.00        1.00         1.00
- -------------------------------------------------------------------------------------------------------------------------
Total return (%)                                                3.57        3.36         3.35        3.45         3.06
- -------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period ($ thousands)                      100,142     163,569      290,943     594,291      416,549
- -------------------------------------------------------------------------------------------------------------------------
Ratio to average net assets:
- -------------------------------------------------------------------------------------------------------------------------
 Net Expenses (%)                                               0.35        0.35         0.29        0.22         0.20
- -------------------------------------------------------------------------------------------------------------------------
 Net investment income (%)                                      3.49        3.28         3.29        3.37         3.02
- -------------------------------------------------------------------------------------------------------------------------
 Expenses without reimbursement/waiver(%)                       0.50        0.42         0.39        0.35         0.35
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
1  Less than $0.0001.


                                                                FUND DETAILS  16

<PAGE>

FOR MORE INFORMATION

For investors who want more information on these funds, the following documents
are available free upon request:

Annual/Semi-annual Reports Contain financial statements, performance data,
information on portfolio holdings, and a written analysis of market conditions
and fund performance for a fund's most recently completed fiscal year or
half-year.

Statement of Additional Information (SAI) Provides a fuller technical and legal
description of a fund's policies, investment restrictions, and business
structure. This prospectus incorporates each fund's SAI by reference.

Copies of the current versions of these documents, along with other information
about the funds, may be obtained by contacting:

J.P. Morgan Institutional Funds
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036

Telephone:  1-800-766-7722

Hearing impaired:  1-888-468-4015

Email:  [email protected]

Text-only versions of these documents and this prospectus are available, upon
payment of a duplicating fee, from the Public Reference Room of the Securities
and Exchange Commission in Washington, D.C. (1-800-SEC-0330) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov. The
funds' investment company and 1933 Act registration numbers are:

J.P. Morgan Institutional Prime Money Market Fund             811-07342 and
                                                                  033-54642

J.P. Morgan Institutional Treasury Money Market Fund          811-07342 and
                                                                  033-54642

J.P. Morgan Institutional Federal Money Market Fund           811-07342 and
                                                                  033-54642

J.P. Morgan Institutional Tax Exempt Money Market Fund        811-07342 and
                                                                  033-54642

J.P. MORGAN INSTITUTIONAL
FUNDS AND THE MORGAN
TRADITION
The J.P. Morgan Institutional Funds combine a heritage of integrity and
financial leadership with comprehensive, sophisticated analysis and management
techniques. Drawing on J.P. Morgan's extensive experience and depth as an
investment manager, the J.P. Morgan Institutional Funds offer a broad array of
distinctive opportunities for mutual fund investors.

JPMorgan
- --------------------------------------------------------------------------------
J.P. Morgan Institutional Funds

Advisor                                     Distributor
J.P. Morgan Investment Management Inc.      Funds Distributor, Inc.
522 Fifth Avenue                            60 State Street
New York, NY 10036                          Boston, MA 02109
1-800-766-7722                              1-800-221-7930
<PAGE>

                         J.P. MORGAN INSTITUTIONAL FUNDS


                J.P. MORGAN INSTITUTIONAL PRIME MONEY MARKET FUND
              J.P. MORGAN INSTITUTIONAL TREASURY MONEY MARKET FUND
               J.P. MORGAN INSTITUTIONAL FEDERAL MONEY MARKET FUND









                       STATEMENT OF ADDITIONAL INFORMATION


                                DECEMBER 30, 1999




















THIS  STATEMENT OF  ADDITIONAL  INFORMATION  IS NOT A  PROSPECTUS,  BUT CONTAINS
ADDITIONAL  INFORMATION  WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
DATED DECEMBER 30, 1999 FOR THE FUNDS LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO
TIME.  ADDITIONALLY,  THIS STATEMENT OF ADDITIONAL  INFORMATION  INCORPORATES BY
REFERENCE THE FINANCIAL  STATEMENTS INCLUDED IN THE SHAREHOLDER REPORTS RELATING
TO THE FUNDS LISTED ABOVE DATED OCTOBER 31, 1998 (FOR THE TREASURY  MONEY MARKET
FUND AND THE FEDERAL  MONEY  MARKET  FUND) AND  NOVEMBER 30, 1998 (FOR THE PRIME
MONEY MARKET FUND). THE PROSPECTUS AND THESE FINANCIAL  STATEMENTS FOR THE FUNDS
LISTED ABOVE,  INCLUDING  THE  INDEPENDENT  ACCOUNTANTS'  REPORTS  THEREON,  ARE
AVAILABLE, WITHOUT CHARGE, UPON REQUEST FROM FUNDS DISTRIBUTOR, INC., ATTENTION:
J.P. MORGAN INSTITUTIONAL FUNDS (800) 221-7930.



<PAGE>


                                Table of Contents


                                                                      Page



General..................................................................1
Investment Objectives and Policies.......................................1
Investment Restrictions..................................................9
Trustees and Officers...................................................13
Investment Advisor......................................................17
Distributor.............................................................19
Co-Administrator........................................................20
Services Agent..........................................................21
Custodian and Transfer Agent............................................22
Shareholder Servicing...................................................23
Financial Professionals.................................................23
Independent Accountants.................................................24
Expenses................................................................24
Purchase of Shares......................................................25
Redemption of Shares....................................................26
Exchange of Shares......................................................27
Dividends and Distributions.............................................27
Net Asset Value.........................................................27
Performance Data........................................................28
Portfolio Transactions..................................................30
Massachusetts Trust.....................................................31
Description of Shares...................................................32
Special Information Concerning
Investment Structure....................................................34
Taxes...................................................................35
Additional Information..................................................38
Financial Statements....................................................39
Appendix A - Description of Security Ratings...........................A-1




<PAGE>





<PAGE>


GENERAL

         This  Statement  of  Additional  Information  relates  only to the J.P.
Morgan  Institutional  Prime Money Market Fund,  the J.P.  Morgan  Institutional
Treasury  Money  Market Fund and the J.P.  Morgan  Institutional  Federal  Money
Market Fund  (each,  a "Fund" and  collectively,  the  "Funds").  Each Fund is a
series of shares of beneficial interest of the J.P. Morgan  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 "J.P. Morgan Institutional
Fund").  The other J.P.  Morgan  Institutional  Funds are  covered  by  separate
Statements of Additional Information.


         This  Statement  of  Additional  Information  describes  the  financial
history, investment objective and policies,  management and operation of each of
the Funds and  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.


         Unlike other mutual funds which  directly  acquire and manage their own
portfolio of securities,  each Fund seeks to achieve its investment objective by
investing all of its investable assets in a corresponding  Master Portfolio (the
"Portfolio"),  a corresponding open-end management investment company having the
same investment  objective as the Fund. Each Fund invests in a Portfolio through
a two-tier  master-feeder  investment fund structure.  See "Special  Information
Concerning Investment Structure."

     Each  Portfolio  is  advised  by J.P.  Morgan  Investment  Management  Inc.
("JPMIM" or the "Advisor").

         Investments in a Fund are not deposits or obligations of, or guaranteed
or endorsed  by,  Morgan  Guaranty  Trust  Company of New York,  ("Morgan"),  an
affiliate of the Advisor or any other bank.  Shares of a Fund are not  federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other  governmental  agency.  An  investment in a Fund is subject to risk
that may cause the value of the investment to fluctuate, and when the investment
is  redeemed,  the  value  may be higher  or lower  than the  amount  originally
invested by the investor.

INVESTMENT OBJECTIVES AND POLICIES


         The following  discussion  supplements  the  information  regarding the
investment objective of each Fund and the policies to be employed to achieve the
objective  by  each  Portfolio  as  set  forth  herein  and  in  the  applicable
Prospectus. The investment objectives of each Fund and the investment objectives
of its corresponding Portfolio are identical. Accordingly, references below to a
Portfolio also include the corresponding Fund;  similarly,  references to a Fund
also include the corresponding Portfolio unless the context requires otherwise.


         J.P.  Morgan  Institutional  Prime Money  Market Fund (the "Prime Money
Market Fund") is designed for investors who seek high current income  consistent
with the preservation of capital and same-day liquidity from a portfolio of high
quality  money  market  instruments.  The Prime Money Market  Fund's  investment
objective is to maximize  current income  consistent  with the  preservation  of
capital and same day liquidity.  The Prime Money Market Fund attempts to achieve
this  objective by  investing  all of its  investable  assets in The Prime Money
Market Portfolio (the "Portfolio"), a diversified open-end management investment
company having the same investment objective as the Prime Money Market Fund.

         The Portfolio seeks to achieve its investment  objective by maintaining
a  dollar-weighted  average  portfolio  maturity of not more than 90 days and by
investing in U.S. dollar denominated  securities  described in this Statement of
Additional Information that meet certain rating criteria, present minimal credit
risk  and have  effective  maturities  of not more  than  thirteen  months.  The
Portfolio's  ability to achieve  maximum  current income is affected by its high
quality standards. See "Quality and Diversification Requirements."

         J.P.  Morgan  Institutional  Treasury  Money Market Fund (the "Treasury
Money Market  Fund") is designed  for  investors  who seek high  current  income
consistent  with the  preservation  of capital  and  same-day  liquidity  from a
portfolio of high quality money market  instruments.  The Treasury  Money Market
Fund's  investment  objective is to provide current income,  consistent with the
preservation of capital and same-day  liquidity.  The Treasury Money Market Fund
attempts to accomplish this objective by investing all of its investable  assets
in The Treasury Money Market Portfolio (the "Portfolio"), a diversified open-end
management  investment  company  having  the same  investment  objective  as the
Treasury Money Market Fund.

         The  Portfolio   attempts  to  achieve  its  investment   objective  by
maintaining a  dollar-weighted  average  portfolio  maturity of not more than 90
days  and by  investing  in U.S.  Treasury  securities  and  related  repurchase
agreement  transactions as described in this Statement of Additional Information
that have effective  maturities of not more than thirteen  months.  See "Quality
and Diversification Requirements."

         J.P. Morgan Institutional Federal Money Market Fund (the "Federal Money
Market Fund") is designed for investors who seek high current income  consistent
with the preservation of capital and same-day liquidity from a portfolio of high
quality money market  instruments.  The Federal  Money Market Fund's  investment
objective is to provide  current  income,  consistent  with the  preservation of
capital and  same-day  liquidity.  The  Federal  Money  Market Fund  attempts to
accomplish  this  objective by  investing  all of its  investable  assets in The
Federal  Money  Market  Portfolio  (the  "Portfolio"),  a  diversified  open-end
management  investment  company  having  the same  investment  objective  as the
Federal Money Market Fund.

         The  Portfolio   attempts  to  achieve  its  investment   objective  by
maintaining a  dollar-weighted  average  portfolio  maturity of not more than 90
days and by investing in U.S. Treasury  securities and in obligations of certain
U.S.  Government  agencies,   as  described  in  this  Statement  of  Additional
Information that have effective maturities of not more than thirteen months. See
"Quality and Diversification Requirements."

Money Market Instruments

     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 (other than
the Treasury Money Market Fund) may invest in  obligations  issued or guaranteed
by U.S. Government agencies or  instrumentalities.  These obligations may or may
not be backed by the "full  faith and credit" of the United  States.  Securities
which are  backed by the full  faith and  credit of the  United  States  include
obligations of the Government  National Mortgage  Association,  the Farmers Home
Administration, and the Export-Import Bank. In the case of securities not backed
by the full  faith  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 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. The Prime Money Market Fund, subject to
its applicable investment policies, may also invest in short-term obligations of
foreign   sovereign   governments  or  of  their  agencies,   instrumentalities,
authorities  or  political   subdivisions.   See  "Foreign  Investments."  These
securities must be denominated in the U.S. dollar.

         Bank  Obligations.  The Prime Money Market Fund, 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
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 Prime Money  Market Fund will not invest in  obligations  for
which the Advisor,  or any of its affiliated persons, is the ultimate obligor or
accepting  bank.  The Prime Money Market Fund, may also invest in obligations of
international   banking   institutions   designated  or  supported  by  national
governments  to promote  economic  reconstruction,  development or trade between
nations (e.g.,  the European  Investment  Bank, the  Inter-American  Development
Bank, or the World Bank).

         Commercial  Paper. The Prime Money Market Fund may invest in commercial
paper,  including  master  demand  obligations.  Master demand  obligations  are
obligations that provide for a periodic adjustment in the interest rate paid and
permit daily  changes in the amount  borrowed.  Master  demand  obligations  are
governed by  agreements  between the issuer and Morgan  acting as agent,  for no
additional fee. The monies loaned to the borrower come from accounts  managed by
Morgan or its affiliates,  pursuant to arrangements with such accounts. Interest
and principal  payments are credited to such accounts.  Morgan,  an affiliate of
the Advisor,  has the right to increase or decrease  the amount  provided to the
borrower under an obligation.  The borrower has the right to pay without penalty
all or any  part of the  principal  amount  then  outstanding  on an  obligation
together with interest to the date of payment. Since these obligations typically
provide that the interest rate is tied to the Federal Reserve  commercial  paper
composite  rate,  the rate on master  demand  obligations  is subject to change.
Repayment of a master demand obligation to participating accounts depends on the
ability  of the  borrower  to pay the  accrued  interest  and  principal  of the
obligation  on demand which is  continuously  monitored by Morgan.  Since master
demand obligations typically are not rated by credit rating agencies,  the Prime
Money Market Fund 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 Prime Money Market 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
Prime Money Market Fund to be liquid  because they are payable upon demand.  The
Prime Money  Market Fund does not have any  specific  percentage  limitation  on
investments  in master demand  obligations.  It is possible that the issuer of a
master  demand  obligation  could be a client of Morgan to whom  Morgan,  in its
capacity as a commercial bank, has made a loan.

     Asset-backed  Securities.  The Prime  Money  Market Fund may also invest in
securities generally referred to as asset-backed  securities,  which directly or
indirectly represent a participation  interest in, or are secured by and payable
from, a stream of payments generated by particular assets, such as motor vehicle
or credit card receivables or other  asset-backed  securities  collateralized by
such assets.  Asset-backed  securities  provide periodic payments that generally
consist of both interest and principal  payments.  Consequently,  the life of an
asset-backed  security  varies with the prepayment  experience of the underlying
obligations.  Payments of principal and interest may be guaranteed up to certain
amounts  and for a  certain  time  period  by a letter  of  credit  issued  by a
financial institution unaffiliated with the entities issuing the securities. The
asset-backed  securities  in which a Fund may invest  are  subject to the Fund's
overall credit requirements.  However,  asset-backed securities, in general, are
subject to certain risks.  Most of these risks are related to limited  interests
in  applicable  collateral.  For  example,  credit  card  debt  receivables  are
generally  unsecured and the debtors are entitled to the  protection of a number
of state and federal  consumer  credit laws, many of which give such debtors the
right to set off  certain  amounts  on credit  card debt  thereby  reducing  the
balance  due.  Additionally,  if the letter of credit is  exhausted,  holders of
asset-backed  securities may also experience delays in payments or losses if the
full  amounts  due on  underlying  sales  contracts  are not  realized.  Because
asset-backed  securities  are  relatively  new, the market  experience  in these
securities is limited and the market's ability to sustain  liquidity through all
phases of the market cycle has not been tested.

         Repurchase  Agreements.  Each of the Funds 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 a 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 any Fund 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 Treasury Money
Market Fund will only enter into repurchase  agreements  involving U.S. Treasury
securities.  The  Federal  Money  Market  Fund may only  enter  into  repurchase
agreements  involving U.S. Treasury  securities and Permitted Agency Securities.
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.  Each
Fund will be fully collateralized within the meaning of paragraph (a)(4) of Rule
2a-7 under the Investment  Company Act of 1940, as amended (the "1940 Act").  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.

         The  Prime  Money  Market  Fund may  make  investments  in  other  debt
securities with remaining effective maturities of not more than thirteen months,
including,  without  limitation,   corporate  and  foreign  bonds,  asset-backed
securities and other  obligations  described in the Prospectus or this Statement
of Additional Information.

Foreign Investments

         The Prime Money Market Fund may invest in certain  foreign  securities.
All  investments  must be U.S.  dollar-denominated.  Investment in securities of
foreign  issuers  and in  obligations  of foreign  branches  of  domestic  banks
involves somewhat different  investment risks from those affecting securities of
U.S. domestic issuers.  There may be limited publicly available information with
respect to foreign  issuers,  and foreign  issuers are not generally  subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. Any foreign commercial paper must not
be subject to foreign withholding tax at the time of purchase.

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

Additional Investments

     Municipal  Bonds. The Prime Money Market Fund may invest in municipal bonds
issued by or on behalf of  states,  territories  and  possessions  of the United
States and the District of Columbia and their political subdivisions,  agencies,
authorities and  instrumentalities.  The Prime Money Market Fund may also invest
in municipal  notes of various types,  including notes issued in anticipation of
receipt of taxes,  the  proceeds of the sale of bonds,  other  revenues or grant
proceeds, as well as municipal commercial paper and municipal demand obligations
such as  variable  rate  demand  notes  and  master  demand  obligations.  These
municipal  bonds and notes will be taxable  securities;  income  generated  from
these investments will be subject to federal, state and local taxes.


         When-Issued  and  Delayed  Delivery  Securities.  Each of the Funds 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 Fund until settlement takes
place.  At the time a Fund makes the  commitment  to  purchase  securities  on a
when-issued or delayed delivery basis, it will record the  transaction,  reflect
the value each day of such securities in determining its net asset value and, if
applicable,  calculate  the maturity for the purposes of average  maturity  from
that date.  At the time of  settlement a  when-issued  security may be valued at
less than the purchase price. To facilitate  such  acquisitions,  each Fund 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 Fund will meet its  obligations  from maturities or sales of
the securities  held in the segregated  account and/or from cash flow. If a Fund
chooses to dispose of the right to acquire a when-issued  security  prior to its
acquisition,   it  could,  as  with  the  disposition  of  any  other  portfolio
obligation, incur a gain or loss due to market fluctuation.  Also, a Fund may be
disadvantaged if the other party to the transaction defaults.


         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 or any order pursuant thereto.  These limits
currently require that, as determined  immediately after a purchase is made, (i)
not more than 5% of the value of 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.

         Reverse Repurchase Agreements. Each of the Funds may enter into reverse
repurchase  agreements.  In a  reverse  repurchase  agreement,  a Fund  sells  a
security and agrees to repurchase  the same  security at a mutually  agreed upon
date and  price  reflecting  the  interest  rate  effective  for the term of the
agreement.  For purposes of the 1940 Act a reverse repurchase  agreement is also
considered  as the  borrowing  of money by the Fund  and,  therefore,  a form of
leverage. Leverage may cause any gains or losses for a Fund to be magnified. The
Funds  will  invest  the  proceeds  of  borrowings   under  reverse   repurchase
agreements. In addition, except for liquidity purposes, a Fund will enter into a
reverse  repurchase  agreement only when the expected return from the investment
of the proceeds is greater than the expense of the transaction.  A Fund will not
invest the proceeds of a reverse repurchase agreement for a period which exceeds
the duration of the reverse repurchase  agreement.  Each Fund 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 Fund's
limitations on reverse repurchase agreements and bank borrowings.

         Loans  of  Portfolio  Securities.   Subject  to  applicable  investment
restrictions,  each Fund is permitted to lend its  securities in an amount up to
33 1/3% of the value of the  Fund's net  assets.  Each of the Funds may lend its
securities  if such  loans  are  secured  continuously  by  cash  or  equivalent
collateral  or by a letter of credit in favor of the Fund at least  equal at all
times  to 100% of the  market  value  of the  securities  loaned,  plus  accrued
interest.  While such securities are on loan, the borrower will pay the Fund any
income  accruing  thereon.  Loans will be subject to termination by the Funds 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 Fund and its
respective  investors.  The Funds may pay reasonable finders' and custodial fees
in  connection  with a loan.  In  addition,  a Fund will  consider all facts and
circumstances   including  the   creditworthiness  of  the  borrowing  financial
institution,  and no Fund will  make any  loans in excess of one year.  Loans of
portfolio  securities may be considered  extensions of credit by the Funds.  The
risks to each Fund with  respect to borrowers of its  portfolio  securities  are
similar  to the  risks to each  Fund  with  respect  to  sellers  in  repurchase
agreement  transactions.  See "Repurchase  Agreements".  The Funds will not lend
their securities to any officer, Trustee, Director,  employee or other affiliate
of the Funds,  the Advisor or the  Distributor,  unless  otherwise  permitted by
applicable law.

         Illiquid   Investments,   Privately  Placed  and  Certain  Unregistered
Securities.  The  Prime  Money  Market  Fund may  invest  in  privately  placed,
restricted,  Rule 144A or other unregistered securities. No Fund may acquire any
illiquid holdings if, as a result thereof,  more than 10% of a Fund's net assets
would  be in  illiquid  investments.  Subject  to  this  non-fundamental  policy
limitation,  the Funds may acquire investments that are illiquid or have limited
liquidity,  such  as the  Prime  Money  Market  Fund's  investments  in  private
placements or investments  that are not  registered  under the Securities Act of
1933,  as amended  (the "1933 Act") and cannot be offered for public sale in the
United  States  without first being  registered  under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at  approximately  the amount at which it is valued by
the Funds.  The price the Funds pay for  illiquid  securities  or receives  upon
resale may be lower than the price paid or received for similar  securities with
a more liquid market. Accordingly the valuation of these securities will reflect
any limitations on their liquidity.

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

         As to illiquid investments, a Fund is subject to a risk that should the
Fund decide to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net assets could be
adversely affected. Where an illiquid security must be registered under the 1933
Act,  before it may be sold,  a Fund may be  obligated to pay all or part of the
registration  expenses, and a considerable period may elapse between the time of
the  decision to sell and the time the Fund may be  permitted to sell a security
under an effective  registration  statement.  If, during such a period,  adverse
market  conditions  were to develop,  a Fund might obtain a less favorable price
than prevailed when it decided to sell.

         Synthetic  Instruments.  The  Prime  Money  Market  Fund may  invest in
certain synthetic instruments. Such instruments generally involve the deposit of
asset-backed  securities in a trust arrangement and the issuance of certificates
evidencing  interests  in the trust.  The  certificates  are  generally  sold in
private  placements  in  reliance  on Rule 144A.  The  Advisor  will  review the
structure of synthetic  instruments to identify  credit and liquidity  risks and
will monitor  those  risks.  See  "Illiquid  Investments,  Privately  Placed and
Certain Unregistered Securities".

Quality and Diversification Requirements

         Each of the Funds intends to meet the  diversification  requirements of
the 1940 Act. Current 1940 Act  diversification  requirements  require that with
respect to 75% of the assets of each Fund: (1) the Fund may not invest more than
5% of its total assets in the securities of any one issuer,  except  obligations
of the U.S. Government, its agencies and instrumentalities, and (2) the Fund may
not own more than 10% of the outstanding voting securities of any one issuer. As
for the other 25% of the Fund's assets not subject to the  limitation  described
above,  there is no limitation on investment of these assets under the 1940 Act,
so that all of such  assets may be  invested  in  securities  of any one issuer.
Investments  not subject to the  limitations  described  above could  involve an
increased risk to 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.

         At the time any of the Funds invests in any taxable  commercial  paper,
master demand obligation,  bank obligation or repurchase  agreement,  the issuer
must have  outstanding  debt rated A or higher by Moody's or  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 Morgan's opinion.

         Prime Money Market Fund. In order to maintain a stable net asset value,
the Prime Money  Market  Fund will (i) limit its  investment  in the  securities
(other than U.S. Government  securities) of any one issuer to no more than 5% of
its assets,  measured at the time of purchase,  except for investments  held for
not more than three business days and (ii) limit  investments to securities that
present  minimal  credit  risks  and  securities  (other  than  U.S.  Government
securities) that are rated within the highest  short-term  rating category by at
least two nationally recognized  statistical rating organizations  ("NRSROs") or
by the only NRSRO that has rated the security. Securities which originally had a
maturity of over one year are subject to more complicated, but generally similar
rating  requirements.  A description of illustrative credit ratings is set forth
in  "Appendix  A." The Fund may also  purchase  unrated  securities  that are of
comparable quality to the rated securities described above. Additionally, if the
issuer of a  particular  security  has issued  other  securities  of  comparable
priority and security and which have been rated in  accordance  with (ii) above,
that  security  will be  deemed  to have the same  rating  as such  other  rated
securities.

         In  addition,  the Board of Trustees has adopted  procedures  which (i)
require  the Board of  Trustees  to approve or ratify  purchases  by the Fund of
securities  (other  than U.S.  Government  securities)  that are  unrated;  (ii)
require the Fund to maintain a dollar-weighted average portfolio maturity of not
more than 90 days and to invest only in securities with a remaining  maturity of
not more than 397 days;  and (iii)  require  the Fund,  in the event of  certain
downgradings  of or defaults on portfolio  holdings,  to dispose of the holding,
subject in certain  circumstances to a finding by the Trustees that disposing of
the holding would not be in the Fund's best interest.

         Treasury  Money  Market  Fund.  In order to maintain a stable net asset
value,  the  Treasury  Money  Market Fund will limit its  investments  to direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, and
related repurchase agreement  transactions,  each having a remaining maturity of
not more  than  thirteen  months at the time of  purchase  and will  maintain  a
dollar-weighted average portfolio maturity of not more than 90 days.

         Federal  Money  Market  Fund.  In order to  maintain a stable net asset
value,  the  Federal  Money  Market  Fund will limit its  investments  to direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, and
certain U.S. Government agency securities with remaining  maturities of not more
than thirteen months at the time of purchase and will maintain a dollar-weighted
average portfolio maturity of not more than 90 days.

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.

         The Prime Money Market Fund and the Federal Money Market Fund and their
corresponding Portfolios:

1. May not make any investment  inconsistent with the Fund's classification as a
diversified investment company under the Investment Company Act of 1940.

2. May not purchase any security which would cause the Fund to  concentrate  its
investments  in the  securities of issuers  primarily  engaged in any particular
industry except as permitted by the SEC. In the case of Prime Money Market Fund,
this  restriction  does not apply to instruments  considered to be domestic bank
money market instruments.

3. May not issue senior  securities,  except as permitted  under the  Investment
Company Act of 1940 or any rule, order or interpretation thereunder;

4. May not borrow money, except to the extent permitted by applicable law;

5. May not underwrite securities of other issuers, except to the extent that the
Fund, in disposing of portfolio securities,  may be deemed an underwriter within
the meaning of the 1933 Act;

6. May not purchase or sell real estate, except that, to the extent permitted by
applicable  law,  the Fund may (a)  invest in  securities  or other  instruments
directly or indirectly  secured by real estate,  and (b) invest in securities or
other instruments issued by issuers that invest in real estate;

7. May not purchase or sell  commodities or commodity  contracts unless acquired
as a result of ownership of  securities or other  instruments  issued by persons
that purchase or sell commodities or commodities  contracts;  but this shall not
prevent the Fund from  purchasing,  selling and entering into financial  futures
contracts (including futures contracts on indices of securities,  interest rates
and  currencies),  options on financial  futures  contracts  (including  futures
contracts on indices of securities,  interest rates and  currencies),  warrants,
swaps,  forward contracts,  foreign currency spot and forward contracts or other
derivative instruments that are not related to physical commodities; and

8. May make loans to other  persons,  in accordance  with the Fund's  investment
objective and policies and to the extent permitted by applicable law.

         The Treasury Money Market Fund may not:

1.  Enter into  reverse  repurchase  agreements  which  together  with any other
borrowing exceed in the aggregate one-third of the market value of the Fund's or
the  Portfolio's  total  assets,  less  liabilities  other than the  obligations
created by reverse repurchase agreements;

2. Borrow  money,  except in amounts not to exceed one third of the Fund's total
assets (including the amount borrowed) less liabilities  (other than borrowings)
(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.1

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 or the
Portfolio'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. This limitation also shall
not apply to issues of the U.S.  Government  and repurchase  agreements  related
thereto;

4. Purchase the  securities or other  obligations  of issuers  conducting  their
principal  business  activity in the same  industry if,  immediately  after such
purchase,  the value of its  investment in such industry would exceed 25% of the
value of the Fund's or the Portfolio's total assets; provided, however, that the
Fund may invest all or part of its assets in an open-end  management  investment
company with the same  investment  objective and  restrictions  as the Fund. For
purposes of  industry  concentration,  there is no  percentage  limitation  with
respect to investments in U.S. Government  securities and repurchase  agreements
related thereto;

5. Make loans, except through purchasing or holding debt obligations, repurchase
agreements,  or loans of portfolio  securities in accordance  with the Fund's or
the Portfolio's  investment  objective and policies (see "Investment  Objectives
and Policies");

6. Purchase or sell puts, calls, straddles, spreads, or any combination thereof,
real estate,  commodities,  or commodity  contracts or interests in oil, gas, or
mineral exploration or development programs;

7. Purchase securities on margin, make short sales of securities,  or maintain a
short  position,  provided  that  this  restriction  shall  not be  deemed to be
applicable  to the purchase or sale of  when-issued  securities or of securities
for delivery at a future date;

8. Acquire securities of other investment companies,  except as permitted by the
1940  Act  or  in  connection  with  a  merger,  consolidation,  reorganization,
acquisition of assets or an offer of exchange;  provided,  however, that nothing
in this  investment  restriction  shall prevent the Trust from  investing all or
part of the Fund's assets in an open-end management  investment company with the
same investment objective and restrictions as the Fund;

9.       Act as an underwriter of securities; or

10.  Issue  senior  securities,  except as may  otherwise  be  permitted  by the
foregoing  investment  restrictions or under the 1940 Act or any rule,  order or
interpretation thereunder.

         The Treasury  Money Market Fund's  Portfolio has adopted  substantially
similar  fundamental  investment  restrictions,  except investment  restrictions
numbered 7 and 8 above are non-fundamental at the Portfolio level.
Any differences are not expected to materially impact portfolio management.

         Non-Fundamental  Investment  Restrictions - Prime Money Market Fund and
Federal Money Market Fund. The investment  restrictions  described below are not
fundamental policies of the Funds and their corresponding  Portfolios and may be
changed by their Trustees.  These  non-fundamental  investment  policies require
that the Funds and their corresponding Portfolios:

(i) May not 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 10% of the market value
of the Fund's total assets would be in investments which are illiquid;

(ii) May not purchase securities on margin,  make short sales of securities,  or
maintain a short position, provided that this restriction shall not be deemed to
be  applicable  to the  purchase  or sale of  when-issued  or  delayed  delivery
securities.

(iii)  May not  acquire  securities  of other  investment  companies,  except as
permitted by the 1940 Act or any order pursuant thereto.

(iv) The Prime  Money  Market Fund may not 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  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 and
shall not apply to reverse repurchase agreements.

(v) The Federal  Money Market Fund may not borrow money (not  including  reverse
repurchase  agreements),  except from banks for  temporary or  extraordinary  or
emergency purposes and then only in amounts up to 10% of the value of the Fund's
or the  Portfolio's  total assets,  taken at cost at the time of such  borrowing
(and  provided that such  borrowings  and reverse  repurchase  agreements do not
exceed in the  aggregate  one-third  of the  market  value of the Fund's and the
Portfolio's total assets less liabilities other than the obligations represented
by the bank borrowings and reverse repurchase agreements).  Mortgage, pledge, or
hypothecate  any assets  except in  connection  with any such  borrowing  and in
amounts  up to 10% of the value of the Fund's or the  Portfolio's  net assets at
the  time  of such  borrowing.  The  Fund or the  Portfolio  will  not  purchase
securities  while  borrowings  exceed 5% of the Fund's or the Portfolio's  total
assets, respectively; 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  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.

         Non-Fundamental  Investment  Restrictions - Treasury Money Market Fund.
The investment  restriction  described below is not a fundamental  policy of the
Fund or the  Portfolio  and may be changed by their  respective  Trustees.  This
non-fundamental investment policy requires that 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 10% of the Fund's net assets
would be in investments that are illiquid.

         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,  the Advisor 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 the Advisor 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,  the
Advisor  may  classify  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

         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.


     FREDERICK S.  ADDY--Trustee;  Retired;  Former Executive Vice President and
Chief Financial Officer,  Amoco  Corporation.  His address is 5300 Arbutus Cove,
Austin, Texas 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,  Florida
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, New Jersey 08540, and his date of birth is May 23, 1934.

     MATTHEW HEALEY2--Trustee,  Chairman and Chief Executive Officer;  Chairman,
Pierpont Group, Inc., since prior to 1993. His address is Pine Tree Country Club
Estates, 10286 Saint Andrews Road, Boynton Beach, Florida 33436, and his date of
birth is August 23, 1937.

     MICHAEL P.  MALLARDI--Trustee;  Retired;  Prior to April 1996,  Senior Vice
President, Capital Cities/ABC, Inc. and President,  Broadcast Group. His address
is 10 Charnwood Drive,  Suffern,  New York 10910, and his date of birth is March
17, 1934.

         The  Trustees of the Trust are the same as the  Trustees of each of the
Portfolios. In accordance with applicable state requirements,  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 J.P.
Morgan 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 J.P.  Morgan Funds and J.P.  Morgan 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.

     Trustee compensation expenses paid by the Trust for the calendar year ended
December 31, 1998 are set forth below.

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


                                                      TOTAL TRUSTEE COMPENSATION
                                  AGGREGATE TRUSTEE   ACCRUED BY THE MASTER
                                  COMPENSATION        PORTFOLIOS(*), J.P. MORGAN
                                  PAID BY THE TRUST   FUNDS, J.P. MORGAN SERIES
                                  DURING 1998         TRUST AND THE TRUST DURING
                                  --------------       1998(***)
NAME OF TRUSTEE
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Frederick S. Addy, Trustee        $20,055             $75,000
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

William G. Burns, Trustee         $20,055             $75,000
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Arthur C. Eschenlauer, Trustee    $20,055             $75,000
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Matthew Healey, Trustee (**)      $20,055             $75,000
  Chairman and Chief Executive
  Officer
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Michael P. Mallardi, Trustee      $20,055             $75,000
- --------------------------------- ------------------- --------------------------


(*) Includes the Portfolios and 16 other portfolios  (collectively,  the "Master
Portfolios") for which JPMIM acts as investment advisor.


(**) During 1998,  Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
of Pierpont Group,  Inc.,  compensation  in the amount of $157,400,  contributed
$23,610  to a  defined  contribution  plan on his  behalf  and paid  $17,700  in
insurance premiums for his benefit.

(***) No investment  company within the fund complex has a pension or retirement
plan.  Currently  there are 17  investment  companies (14  investment  companies
comprising  the Master  Portfolios,  the J.P.  Morgan Funds,  the Trust and J.P.
Morgan Series Trust) in the fund complex.

         The Trustees  decide upon  general  policies  and are  responsible  for
overseeing the Trust's and Portfolio's business affairs.  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 J.P. Morgan
Family of Funds  (formerly 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.  The principal  offices of Pierpont Group, Inc. are located at 461
Fifth Avenue, New York, New York 10017.

         The aggregate  fees paid to Pierpont  Group,  Inc. by each Fund and its
corresponding Portfolio during the indicated fiscal periods are set forth below:

Prime Money  Market Fund -- For the fiscal years ended  November 30, 1996,  1997
and 1998: $48,339, $43,684 and $65,619, respectively.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $157,428, $143,027 and $173,032, respectively.

Treasury  Money  Market  Fund -- For the period  July 8, 1997  (commencement  of
operations) through October 31, 1997 and the fiscal year ended October 31, 1998:
$543 and $5,064, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of operations)  through October 31, 1997: $800 and the fiscal year ended October
31, 1998: $543 and $15,548, respectively.

Federal Money Market Fund -- For the fiscal years ended  October 31, 1996,  1997
and 1998: $6,320, $3,750 and $15,457, respectively.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $16,144, $12,004 and $25,893, respectively.

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 1993. His address is Pine Tree Country Club Estates,  10286 Saint
Andrews Road,  Boynton  Beach,  Florida  33436.  His date of birth is August 23,
1937.

     MARGARET W. CHAMBERS;  Vice President and Secretary.  Senior Vice President
and General  Counsel of FDI since April,  1998.  From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company,  L.P. From January 1986 to July 1996,  she was an associate  with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.


     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  distributed or  administered by FDI. Her date of
birth is August 1, 1957.


     DOUGLAS C. CONROY; Vice President and Assistant  Treasurer.  Assistant Vice
President   and   Assistant   Department   Manager  of  Treasury   Services  and
Administration of FDI and an officer of certain investment companies distributed
or  administered  by FDI.  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.  His
date of birth is March 31, 1969.


     JOHN P. COVINO - Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of FDI. Prior to
November  1998,  Mr. Covino was employed by Fidelity  Investments  where he held
multiple  positions in their  Institutional  Brokerage  Group.  Prior to joining
Fidelity,  Mr.  Covino was employed by SunGard  Brokerage  systems  where he was
responsible for the technology and development of the accounting  product group.
His date of birth is October 8, 1963.

     JACQUELINE  HENNING (of The Prime Money Market Portfolio  only);  Assistant
Secretary and Assistant Treasurer.  Managing Director, State Street Cayman Trust
Company, Ltd. since October 1994. Address: P.O. Box 2508 GT, Elizabethan Square,
2nd Floor,  Shedden Road,  George Town, Grand Cayman,  Cayman Islands,  BWI. Her
date of birth is March 24, 1942.

     KAREN JACOPPO-WOOD;  Vice President and Assistant Secretary. Vice President
and  Senior  Counsel  of FDI and an  officer  of  certain  investment  companies
distributed  or  administered  by FDI.  From  June  1994 to  January  1996,  Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder, Stevens & Clark, Inc.
Her date of birth is December 29, 1966.

     CHRISTOPHER  J.  KELLEY;  Vice  President  and  Assistant  Secretary.  Vice
President and Senior Associate  General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996,  Mr.  Kelley was Assistant  Counsel at Forum  Financial
Group. His date of birth is December 24, 1964.

     KATHLEEN  K.  MORRISEY;  Vice  President  and  Assistant  Secretary.   Vice
President  and  Assistant   Secretary  of  FDI.  Manager  of  Treasury  Services
Administration  and an  officer  of  certain  investment  companies  advised  or
administered  by  Montgomery  Asset  Management,  L.P.  and  Dresdner RCM Global
Investors,  Inc., and their  respective  affiliates.  From July 1994 to November
1995, Ms.  Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Her date of birth is July 5, 1972.

     MARY A. NELSON; Vice President and Assistant Treasurer.  Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies  distributed or administered by FDI. Her
date of birth is April 22, 1964.


     MARY JO PACE;  Assistant Treasurer.  Vice President,  Morgan Guaranty Trust
Company of New York.  Ms.  Pace  serves in the Funds  Administration  group as a
Manager for the Budgeting and Expense Processing Group. Prior to September 1995,
Ms. Pace served as a Fund Administrator for Morgan Guaranty Trust Company of New
York. Her address is 60 Wall Street, New York, New York 10260. Her date of birth
is March 13, 1966.

     STEPHANIE D. PIERCE; Vice President and Assistant Secretary. Vice President
and Client  Development  Manager for FDI since  April  1998.  From April 1997 to
March 1998,  Ms.  Pierce was employed by Citibank,  NA as an officer of Citibank
and Relationship  Manager on the Business and Professional Banking team handling
over 22,000 clients.  Address:  200 Park Avenue,  New York, New York 10166.  Her
date of birth is August 18, 1968.


     GEORGE A. RIO; President and Treasurer. Executive Vice President and Client
Service  Director of FDI since April 1998. From June 1995 to March 1998, Mr. Rio
was Senior  Vice  President  and Senior Key Account  Manager  for Putnam  Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of Business  Development
for First Data Corporation. His date of birth is January 2, 1955.


     CHRISTINE ROTUNDO;  Assistant  Treasurer.  Vice President,  Morgan Guaranty
Trust Company of New York. Ms. Rotundo serves in the Funds  Administration group
as a Manager  of the Tax  Group  and is  responsible  for U.S.  mutual  fund tax
matters.  Prior to September 1995, Ms. Rotundo served as a Senior Tax Manager in
the Investment  Company  Services Group of Deloitte & Touche LLP. Her address is
60 Wall Street,  New York,  New York 10260.  Her date of birth is September  26,
1965.

INVESTMENT ADVISOR

         The Funds have not  retained  the  services  of an  investment  adviser
because each Fund seeks to achieve its investment  objective by investing all of
its investable assets in a corresponding  Portfolio.  Subject to the supervision
of the  Portfolio's  Trustees,  the Advisor  makes each  Portfolio's  day-to-day
investment decisions,  arranges for the execution of Portfolio  transactions and
generally  manages the Portfolio's  investments.  Effective October 1, 1998 each
Portfolio's  investment  advisor is JPMIM.  Prior to that  date,  Morgan was the
investment  advisor.  JPMIM,  a wholly  owned  subsidiary  of J.P.  Morgan & Co.
Incorporated  ("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 Morgan serves as trustee.


         J.P.  Morgan,  through  the  Advisor  and other  subsidiaries,  acts as
investment advisor to individuals,  governments,  corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of approximately $326 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 120 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, and Singapore to cover companies,  industries and countries on
site. In addition,  the investment management divisions employ approximately 380
capital market researchers,  portfolio managers and traders. The Advisor's fixed
income  investment   process  is  based  on  analysis  of  real  rates,   sector
diversification and quantitative and credit analysis.

         The investment advisory services the Advisor provides to the Portfolios
are not  exclusive  under the terms of the Advisory  Agreements.  The Advisor is
free to and does render  similar  investment  advisory  services to others.  The
Advisor serves as investment  advisor to personal investors and other investment
companies and acts as fiduciary for trusts,  estates and employee benefit plans.
Certain of the assets of trusts and estates  under  management  are  invested in
common trust funds for which the Advisor  serves as trustee.  The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolios.  Such accounts are supervised by employees of the Advisor who
may also be acting in similar  capacities  for the  Portfolios.  See  "Portfolio
Transactions."

         Morgan,  also a  wholly  owned  subsidiary  of J.P.  Morgan,  is a bank
holding company organized under the laws of the State of Delaware. Morgan, whose
principal offices are at 60 Wall Street, New York, New York 10260, is a New York
trust company which  conducts a general  banking and trust  business.  Morgan is
subject to regulation by the New York State Banking  Department  and is a member
bank of the Federal Reserve System. Through offices in New York City and abroad,
Morgan   offers  a  wide  range  of   services,   primarily   to   governmental,
institutional,  corporate and high net worth individual  customers in the United
States and throughout the world.

         The  Portfolios  are managed by employees 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
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  Investment
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 0.20% of each  Portfolio's  average  daily net  assets up to $1
billion and 0.10% of each  Portfolio's  average daily net assets in excess of $1
billion.

         The table below sets forth for each Portfolio  listed the advisory fees
paid to Morgan and JPMIM, as applicable,  for the fiscal periods indicated.  See
the Prospectus and below for applicable expense limitations.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $4,503,793, $5,063,662 and $7,199,733, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31, 1997 and the fiscal year ended October 31,
1998: $49,123 and $1,080,743, respectively.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $653,326, $659,707 and $1,736,610 respectively.

         The Investment  Advisory  Agreements provide that they will continue in
effect for a period of two years after execution only if  specifically  approved
thereafter  annually  in the same  manner  as the  Distribution  Agreement.  See
"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 and their subsidiaries, 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  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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation  of the  Glass-Steagall  Act  or  other  applicable  banking  laws  or
regulations.  On November 12, 1999, the  Gramm-Leach-Bliley  Act was signed into
law, the relevant provisions of which go into effect March 11, 2000. Until March
11, 2000, federal banking law,  specifically the Glass-Steagall Act and the Bank
Holding Company Act,  generally  prohibits banks and bank holding  companies and
their  subsidiaries,  such as the  Advisor,  from  engaging  in the  business of
underwriting  or distributing  securities.  Pursuant to  interpretations  issued
under these laws by the Board of Governors of the Federal Reserve  System,  such
entities  also may not  sponsor,  organize  or  control  a  registered  open-end
investment company  continuously engaged in the issuance of its shares (together
with  underwriting and distributing  securities,  the "Prohibited  Activities"),
such as the Trust. These laws and interpretations do not prohibit a bank 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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation of the laws in effect until March 11, 2000.  Effective March 11, 2000,
the  sections  of  the   Glass-Steagall  Act  which  prohibited  the  Prohibited
Activities are repealed,  and the Bank Holding  Company Act is amended to permit
bank holding  companies  which satisfy  certain  capitalization,  managerial and
other criteria (the  "Criteria") to engage in the  Prohibited  Activities;  bank
holding  companies  which do not satisfy the  Criteria may continue to engage in
any activity  that was  permissible  for a bank holding  company  under the Bank
Holding  Company  Act as of  November  11,  1999.  Because  the  services  to be
performed for the Portfolio under the Advisory  Agreement were permissible for a
bank holding company as of November 11, 1999, the Advisor  believes that it also
may perform  such  services  after March 11, 2000  whether or not the  Advisor's
parent  satisfies  the  Criteria.  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.


     Under  separate  agreements,   Morgan  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.  FDI is a wholly owned
indirect  subsidiary  of Boston  Institutional  Group,  Inc.  FDI also serves as
exclusive   placement   agent  for  the   Portfolio.   FDI  currently   provides
administration  and  distribution  services  for a number  of  other  investment
companies.

         The  Distribution  Agreement  shall  continue in effect with respect to
each of the  Funds  for a period  of two  years  after  execution  only if it is
approved at least annually thereafter (i) by a vote of the holders of a majority
of the  Fund's  outstanding  shares or by its  Trustees  and (ii) by a vote of a
majority  of the  Trustees  of the Trust who are not  "interested  persons"  (as
defined by the 1940 Act) of the parties to the Distribution  Agreement,  cast in
person at a meeting  called  for the  purpose  of voting on such  approval  (see
"Trustees  and   Officers").   The   Distribution   Agreement   will   terminate
automatically  if assigned by either party thereto and is terminable at any time
without  penalty by a vote of a majority of the Trustees of the Trust, a vote of
a majority of the Trustees who are not "interested  persons" of the Trust, or by
a vote of the holders of a majority of the Fund's  outstanding shares as defined
under "Additional Information," in any case without payment of any penalty on 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.

         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 marketing and sales literature; (v) files
Portfolio  regulatory  documents and mails Portfolio  communications to Trustees
and investors; and (vi) maintains related books and records.

         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 the Prospectus and below for applicable expense limitations.

Prime Money  Market Fund --For the period  August 1, 1996  through  November 30,
1996, the fiscal year ended November 30, 1997 and the fiscal year ended November
30, 1998: $15,195, $38,699 and $51,507, respectively.

The Prime  Money  Market  Portfolio  -- For the  period  August 1, 1996  through
November 30, 1996, and the fiscal years ended November 30, 1997 and November 30,
1998: $33,012, $96,662 and $115,137, respectively.

Treasury  Money  Market  Fund -- For the period  July 8, 1997  (commencement  of
operations) through October 31, 1997 and the fiscal year ended October 31, 1998:
$437 and $3,897, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31, 1997 and the fiscal year ended October 31,
1998: $406 and $7,258, respectively.

Federal Money Market Fund -- For the period  August 1, 1996 through  October 31,
1996,  the fiscal year ended  October 31, 1997 and the fiscal year ended October
31, 1998: $945, $3,405 and $11,206, respectively.

The Federal  Money  Market  Portfolio  -- For the period  August 1, 1996 through
October 31,  1996,  the fiscal  year ended  October 31, 1997 and the fiscal year
ended October 31, 1996: $1,663, $6,218 and $12,377, respectively.

         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 the  Prospectus  and  below for
applicable expense limitations.

Prime Money  Market Fund -- For the period  December  1, 1995  through  July 31,
1996: $97,980.

The Prime Money Market Portfolio -- For the period December 1, 1995 through July
31, 1996: $272,989.

Federal  Money  Market Fund -- For the period  November 1, 1995 through July 31,
1996: $15,525.

The Federal Money Market  Portfolio -- For period  November 1, 1995 through July
31, 1996: $28,623.

SERVICES AGENT

          The Trust,  on behalf of each Fund,  and the  Portfolios  have entered
into Administrative  Services Agreements (the "Services Agreements") with Morgan
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 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 J.P. Morgan Series Trust in accordance with
the following annual schedule:  0.09% of 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 J.P. Morgan Series Trust.

         Under prior administrative  services agreements in effect from December
29, 1995 through July 31, 1996, with Morgan, each Fund's corresponding Portfolio
(except the  Treasury  Money  Market  Portfolio)  paid Morgan a fee equal to its
proportionate share of an annual complex-wide charge. This charge was calculated
daily based on the aggregate  net assets of the Master  Portfolios in accordance
with the  following  schedule:  0.06%  of the  first $7  billion  of the  Master
Portfolios'  aggregate  average  daily  net  assets,  and  0.03%  of the  Master
Portfolios' aggregate average daily net assets in excess of $7 billion.


         The table below sets forth for each Fund  listed and its  corresponding
Portfolio  the fees paid to Morgan as Services  Agent.  See the  Prospectus  and
below for applicable expense limitations.


Prime Money Market Fund --For the fiscal years ended November 30, 1996, 1997 and
1998: $286,611, $386,048 and $696,768, respectively.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $891,730, $1,256,131 and $1,788,454, respectively.

Treasury  Money  Market  Fund -- For the period  July 8, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $4,761 and $51,775, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31,  1997 and for the fiscal year  October 31,
1998: $7,289 and $155,752, respectively.

Federal Money Market Fund -- For the fiscal years ended  October 31, 1996,  1997
and 1998: $26,536, $33,554 and $151,777.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $73,206, $101,963 and $264,799.

      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 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
transactions and holding portfolio  securities and cash. The custodian maintains
portfolio  transaction records. As transfer agent and dividend disbursing agent,
State Street is  responsible  for  maintaining  account  records  detailing  the
ownership  of Fund  shares and for  crediting  income,  capital  gains and other
changes in share ownership to shareholder accounts.

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 a Financial  Professional.  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;  monitoring the activities of the Funds' transfer  agent;  and providing
other related services.

         Effective  August 1, 1998, under the Shareholder  Servicing  Agreement,
each Fund has agreed to pay Morgan for these  services a fee at the annual  rate
of 0.10%  (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).
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 for the fiscal periods indicated. See
the Prospectus and below for applicable expense limitations.

Prime Money  Market Fund -- For the fiscal years ended  November 30, 1996,  1997
and 1998: $600,276, $625,222 and $1,682,644, respectively.

Treasury  Money  Market  Fund -- For the period  July 8, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $8,000 and $116,683, respectively.

Federal Money Market Fund -- For the fiscal years ended  October 31, 1996,  1997
and 1998: $75,343, $54,403 and $370,516, respectively.

         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
and providing  administrative services to the Funds and the Portfolios under the
Services  Agreements,  and the  activities  of JPMIM in acting as Advisor to the
Portfolios  under the  Investment  Advisory  Agreements,  may raise issues under
these laws.  However,  Morgan and JPMIM  believe that they 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.

         The Funds may be sold to or through  financial  intermediaries  who are
customers  of  J.P.  Morgan  ("financial  professionals"),  including  financial
institutions  and  broker-dealers,  that may be paid fees by J.P.  Morgan or its
affiliates for services  provided to their clients that invest in the Funds. See
"Financial  Professionals"  below.  Organizations that provide  recordkeeping or
other services to certain  employee benefit or retirement plans that include the
Funds as an investment alternative may also be paid a fee.

FINANCIAL PROFESSIONALS

         The   services   provided  by  financial   professionals   may  include
establishing  and  maintaining  shareholder  accounts,  processing  purchase and
redemption  transactions,  arranging  for  bank  wires,  performing  shareholder
subaccounting, answering client inquiries regarding the Trust, assisting clients
in changing  dividend  options,  account  designations and addresses,  providing
periodic  statements  showing the client's account balance and integrating these
statements with those of other  transactions  and balances in the client's other
accounts serviced by the financial professional,  transmitting proxy statements,
periodic reports,  updated prospectuses and other communications to shareholders
and,  with  respect to  meetings of  shareholders,  collecting,  tabulating  and
forwarding  executed proxies and obtaining such other information and performing
such  other  services  as Morgan or the  financial  professional's  clients  may
reasonably request and agree upon with the financial professional.

         Although  there  is no  sales  charge  levied  directly  by  the  Fund,
financial  professionals  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 financial professionals but
in all cases will be retained by the financial  professional and not be remitted
to the Fund or J.P. Morgan.

INDEPENDENT ACCOUNTANTS

         The  independent  accountants  of the  Trust  and  the  Portfolios  are
PricewaterhouseCoopers  LLP,  1177 Avenue of the  Americas,  New York,  New York
10036.  PricewaterhouseCoopers  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., JPMIM,  Morgan
and FDI under  various  agreements  discussed  under  "Trustees  and  Officers,"
"Investment  Advisor,"  "Co-Administrator,  "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  and  audit
expenses,  insurance costs, the compensation and expenses of the Trustees, costs
associated  with their  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   custodian   fees.  For  additional
information regarding waivers or expense subsidies, see the Prospectus.

         J.P.  Morgan has agreed  that it will  reimburse  the Funds noted below
until  February  28, 2001 to the extent  necessary  to maintain the Fund's total
operating expenses (which include expenses of the Fund and the Portfolio) at the
following annual rates of the Fund's average daily net assets.


         Prime Money Market Fund:                                      0.20%
         Treasury Money Market Fund:                                   0.20%
         Federal Money Market Fund:                                    0.20%

          These   limits   do   not   cover   extraordinary   expenses.    These
reimbursement/waiver  arrangements  will continue  through at least February 28,
2001.

          The table  below  sets  forth for each Fund  listed the fees and other
expenses J.P. Morgan  reimbursed  under the expense  reimbursement  arrangements
described above or pursuant to prior expense reimbursement  arrangements for the
fiscal periods indicated.

Prime Money Market Fund --For the fiscal years ended November 30, 1996, 1997 and
1998: $1,231,624, $1,069,381 and $2,571,638, respectively.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $9,993, N/A and N/A, respectively.

Treasury  Money  Market  Fund -- For the period  July 8, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $95,577 and $297,103, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31,  1997 and for the fiscal year  October 31,
1998: $118,095 and $828,462, respectively.

Federal Money Market Fund -- For the fiscal years ended  October 31, 1996,  1997
and 1998: $225,001, $195,337 and $876,403.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $238,343, $250,377 and $415,825.

PURCHASE OF SHARES


         Additional Minimum Balance  Information.  If your account balance falls
below the minimum for 30 days as a result of selling  shares (and not because of
performance),  each Fund  reserves the right to request that you buy more shares
or close your  account.  If your  account  balance is still below the minimum 60
days after  notification,  the Fund reserves the right to close out your account
and send the proceeds to the address of record.


         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  instructions  relating to a Fund account from Morgan as  shareholder
servicing  agent for the customer.  All purchase  orders must be accepted by the
Distributor.  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.

         References  in  the   Prospectus   and  this  Statement  of  Additional
Information to customers of Morgan or a financial professional include customers
of their affiliates and references to transactions by customers with Morgan or a
financial  professional  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 the Advisor, 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);  and (iii) be liquid securities which are
not  restricted as to transfer  either by law or liquidity of market.  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 a
Financial Professional, and the Financial Professional 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.
Shareholders  redeeming  shares  of the  Funds  should  be aware  that the Funds
attempt to maintain a stable net asset value of $1.00 per share; however,  there
can be no  assurance  that they will be able to  continue  to do so, and in that
case the net asset  value of the  Fund's  shares  might  deviate  from $1.00 per
share.  Accordingly,  a redemption  request  might result in payment of a dollar
amount which differs from the number of shares  redeemed.  See "Net Asset Value"
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 the Treasury  Money Market and Federal Money
Market Funds and their  corresponding  Portfolios have elected to be governed by
Rule  18f-1  under  the  1940  Act  pursuant  to  which  such  Funds  and  their
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 such 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.

         Further  Redemption   Information.   Investors  should  be  aware  that
redemptions  from a 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
shareholder's  taxpayer  identification  number and address.  In addition,  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  proceeds
from the shares will occur upon  clearance  of the check which may take up to 15
days. 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 Fund into shares of any other
J.P. Morgan  Institutional  Fund or J.P. Morgan mutual fund,  without charge. An
exchange may be made so long as after the  exchange the investor has shares,  in
each fund in which he or she remains an investor,  with a value of at least 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 accounts
that are  registered  in the same  name,  address  and  taxpayer  identification
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 another fund
and the usual purchase and redemption procedures and requirements are applicable
to exchanges.  Each Fund generally  intends to pay redemption  proceeds in cash,
however,  since it reserves the right at its sole  discretion to pay redemptions
over $250,000 in-kind as a portfolio of representative securities rather than in
cash, the Fund reserves the right to deny an exchange  request in excess of that
amount. See "Redemption of Shares".  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.  Shares of the Fund to be acquired
are purchased for settlement when the proceeds from redemption become available.
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 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 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, Columbus Day, Veteran's Day,  Thanksgiving Day, and
Christmas  Day. In the event that  trading in the money  markets is scheduled to
end earlier than the close of the New York Stock Exchange in observance of these
holidays, the Funds and their corresponding Portfolios would expect to close for
purchases and  redemptions an hour in advance of the end of trading in the money
markets.  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. On any business day when the Bond Market
Association ("BMA") recommends that the securities market close early, the Funds
reserve the right to cease  accepting  purchase and  redemption  orders for same
business day credit at the time BMA recommends that the securities market close.
On days the Funds close early, purchase and redemption orders received after the
Funds close will be credited the next  business day. 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 Fund's liabilities.  The following is a discussion of the procedures used by
the Portfolios corresponding to each Fund in valuing their assets.

         The Portfolios'  portfolio  securities are valued by the amortized cost
method.  The purpose of this method of  calculation  is to attempt to maintain a
constant net asset value per share of the Fund of $1.00.  No  assurances  can be
given that this goal can be  attained.  The  amortized  cost method of valuation
values a security at its cost at the time of purchase and  thereafter  assumes a
constant amortization to maturity of any discount or premium,  regardless of the
impact of fluctuating interest rates on the market value of the instrument. If a
difference  of  more  than  1/2 of 1%  occurs  between  valuation  based  on the
amortized  cost method and valuation  based on market  value,  the Trustees will
take  steps  necessary  to reduce  such  deviation,  such as  changing  a Fund's
dividend policy,  shortening the average portfolio maturity,  realizing gains or
losses,  or reducing the number of  outstanding  Fund shares.  Any  reduction of
outstanding  shares will be effected by having each shareholder  contribute to a
Fund's capital the necessary  shares on a pro rata basis.  Each shareholder will
be deemed to have  agreed to such  contribution  in these  circumstances  by his
investment in the Funds. See "Taxes."

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 the Prospectus.

         Yield Quotations.  As required by regulations of the SEC, current yield
for the Funds is computed by  determining  the net change  exclusive  of capital
changes in the value of a hypothetical  pre-existing account having a balance of
one share at the  beginning  of a seven-day  calendar  period,  dividing the net
change in account  value of the  account at the  beginning  of the  period,  and
multiplying the return over the seven-day  period by 365/7.  For purposes of the
calculation, net change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends  declared on both
the original share and any such additional shares, but does not reflect realized
gains or losses or unrealized appreciation or depreciation.  Effective yield for
each Fund is computed by  annualizing  the  seven-day  return with all dividends
reinvested in additional Fund shares.

   Below is set forth historical yield information for the periods indicated:


Prime Money Market Fund (5/31/99  unaudited):  7-day current yield: 4.81%; 7-day
effective yield: 4.93%.

Treasury  Money Market Fund (4/30/99  unaudited):  7-day current  yield:  4.65%;
7-day effective yield: 4.75%.

Federal Money Market Fund (4/30/99 unaudited): 7-day current yield: 4.68%; 7-day
effective yield: 4.79%.


Total Return Quotations.  Historical performance information for the Prime Money
Market Fund will be that of its  corresponding  predecessor J.P. Morgan Fund and
will be presented in accordance with applicable SEC staff  interpretations.  The
applicable  financial  information  in the  registration  statement for the J.P.
Morgan Funds  (Registration Nos. 033-54632 and 811-07340) is incorporated herein
by reference.

         Below is set forth historical  return  information for each Fund or its
predecessor for the periods indicated:


Prime Money Market Fund (5/31/99  unaudited):  Average  annual total  return,  1
year: 5.28%;  average annual total return, 5 years: 5.48%;  average annual total
return, 10 years: 5.45%;  aggregate total return, 1 year: 5.28%; aggregate total
return, 5 years: 30.58%; aggregate total return, 10 years: 70.06%.

Treasury Money Market Fund (4/30/99  unaudited):  Average annual total return, 1
year:  4.87%;  average annual total return,  5 years:  N/A; average annual total
return,  commencement  of  operations  (July 7,  1997)  to  period  end:  5.36%;
aggregate total return, 1 year:  4.87%;  aggregate total return,  5 years:  N/A;
aggregate total return, commencement of operations (July 7, 1997) to period end:
9.93%.

Federal Money Market Fund (4/30/99  unaudited):  Average annual total return,  1
year: 5.17%;  average annual total return, 5 years: 5.27%;  average annual total
return, 10 years:  N/A; average annual total return,  commencement of operations
(January 4, 1993) to period end: 4.76%;  aggregate total return, 1 year:  5.17%;
aggregate total return, 5 years: 29.29%;  aggregate total return, 10 years: N/A;
aggregate total return,  commencement of operations  (January 4, 1993) to period
end: 34.12%.


         Aggregate total returns,  reflecting the cumulative  percentage  change
over a measuring period, may also be calculated.

         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.


         Comparative  performance  information  may be used from time to time in
advertising the Funds' shares, including appropriate market indices or data from
Lipper  Analytical  Services,   Inc.,   Micropal,   Inc.,  Ibbotson  Associates,
Morningstar   Inc.,  the  Dow  Jones  Industrial   Average  and  other  industry
publications.


         From time to time, the Funds may, in addition to any other  permissible
information,  include the  following  types of  information  in  advertisements,
supplemental  sales literature and reports to  shareholders:  (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost  averaging);  (2)  discussions  of general  economic
trends;  (3)  presentations of statistical data to supplement such  discussions;
(4)  descriptions of past or anticipated  portfolio  holdings for one or more of
the Funds;  (5)  descriptions  of investment  strategies  for one or more of the
Funds;  (6)  descriptions  or  comparisons  of various  savings  and  investment
products  (including,  but  not  limited  to,  qualified  retirement  plans  and
individual  stocks and  bonds),  which may or may not  include  the  Funds;  (7)
comparisons of investment  products  (including the Funds) with relevant markets
or industry  indices or other  appropriate  benchmarks;  (8) discussions of Fund
rankings or ratings by recognized rating  organizations;  and (9) discussions of
various  statistical  methods  quantifying the Fund's volatility relative to its
benchmark or to past performance,  including risk adjusted  measures.  The Funds
may also include calculations,  such as hypothetical compounding examples, which
describe   hypothetical   investment  results  in  such   communications.   Such
performance  examples will be based on an express set of assumptions and are not
indicative of the performance of any of the Funds.

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."

         Fixed income and debt  securities  are generally  traded at a net price
with  dealers  acting  as  principal  for their  own  accounts  without a stated
commission. The price of the security usually includes profit to the dealers. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of  compensation  to the  underwriter,  generally  referred  to as the
underwriter's  concession or discount.  On occasion,  certain  securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.

     Portfolio transactions for the Portfolios will be undertaken principally to
accomplish  a  Portfolio's  objective  in relation to expected  movements in the
general level of interest rates. The Portfolios may engage in short-term trading
consistent with their objectives. See "Investment Objectives and Policies."

         In connection  with  portfolio  transactions  for the  Portfolios,  the
Advisor intends to seek best execution on a competitive basis for both purchases
and sales of securities.

         The  Portfolios  have a policy of  investing  only in  securities  with
maturities of not more than thirteen months, which will result in high portfolio
turnovers.  Since  brokerage  commissions  are not normally paid on  investments
which the Portfolios make,  turnover  resulting from such investments should not
adversely affect the net asset value or net income of the Portfolios.

         Subject to the  overriding  objective  of obtaining  best  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.

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  January  9,  1997,  the name of The  Treasury  Money  Market
Portfolio was changed to The Federal Money Market  Portfolio.  Effective May 12,
1997,  the name of The Money  Market  Portfolio  was  changed to The Prime Money
Market  Portfolio.  Effective January 1, 1998, the name of the Trust was changed
from "The JPM  Institutional  Funds" to "J.P. Morgan  Institutional  Funds," and
each Fund's name changed 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 a Fund.  However,  upon payment of such liability,  the shareholder
will be  entitled  to  reimbursement  from the  general  assets  of a 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
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).
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 one vote for each dollar
of  net  asset  value  (or a  proportionate  fractional  vote  in  respect  of a
fractional  dollar  amount),  on  matters  on which  shares of the Fund shall be
entitled to vote.  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 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 22 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.

         For  information  relating to  mandatory  redemption  of Fund shares or
their redemption at the option of the Trust under certain circumstances, see the
Prospectus.


         As of November  30,  1999,  the  following  owned of record,  or to the
knowledge  of  management,  beneficially  owned more than 5% of the  outstanding
shares of:

     Prime Money Market Fund: JPMIM as  Institutional  Prime Money Market Offset
Omnibus Account (24.88%); and Morgan as Agent for ASW Holding (5.08%).

     Treasury  Money Market  Fund:  Morgan as Agent for J.  Robertson  (29.28%);
Morgan as Agent for F. Batten Jr. Trust (17.00%); EH Skove (11.60%);  Hare & Co.
(10.05%); OnStream Inc. (7.50%(; and New Jersey Natural Gas Co. (5.19%).

     Federal Money Market Fund:  Global Card Holdings  Inc.  (7.64%);  Morgan as
Agent for M. Monaghan (5.65%).


SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE

         Unlike other mutual funds which  directly  acquire and manage their own
portfolio of securities,  each Fund is an open-end management investment company
which  seeks  to  achieve  its  investment  objective  by  investing  all of its
investable  assets in a corresponding  Master Portfolio,  a separate  registered
investment company with the same investment  objective and policies as the Fund.
Generally,  when a  Master  Portfolio  seeks  a vote  to  change  a  fundamental
investment  restriction,  its feeder fund(s) will hold a shareholder meeting and
cast  its  vote  proportionately,   as  instructed  by  its  shareholders.  Fund
shareholders  are  entitled to one vote for each dollar of net asset value (or a
proportionate  fractional  vote in respect of a fractional  dollar  amount),  on
matters on which shares of the Fund shall be entitled to vote.

         In addition to selling a beneficial interest to a Fund, a Portfolio may
sell beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
bear a  proportionate  share of the  Portfolio's  expenses.  However,  the other
investors  investing in the  Portfolio may sell shares of their own fund using a
different pricing structure than the Fund. Such different pricing structures may
result in  differences  in returns  experienced by investors in other funds that
invest in the  Portfolio.  Such  differences in returns are not uncommon and are
present in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from Morgan at (800) 521-5411.

         The Trust may withdraw the investment of a Fund from a 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
investment objective and restrictions in accordance with the investment policies
with respect to the Portfolio described above and in each Fund's prospectus.

         Certain  changes in a Portfolio's  fundamental  investment  policies or
restrictions,  or a failure by a Fund's  shareholders  to approve such change in
the Portfolio's  investment  restrictions,  may require withdrawal of the Fund's
interest in the Portfolio. Any such withdrawal could result in a distribution 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 a Portfolio  may be materially  affected by
the actions 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.

         Additionally,  because a Portfolio would become smaller,  it may become
less diversified,  resulting in potentially  increased  portfolio risk (however,
these  possibilities  also exist for  traditionally  structured funds which have
large or institutional investors who may withdraw from a fund). Also, funds with
a greater  pro rata  ownership  in the  Portfolio  could have  effective  voting
control of the  operations of the  Portfolio.  Whenever the Fund is requested to
vote on matters  pertaining to the  Portfolio  (other than a vote by the Fund to
continue the operation of the Portfolio upon the withdrawal of another  investor
in the Portfolio), the Trust will hold a meeting of shareholders of the Fund and
will  cast  all  of its  votes  proportionately  as  instructed  by  the  Fund's
shareholders.  The Trust will vote the shares held by Fund  shareholders  who do
not give  voting  instructions  in the same  proportion  as the  shares  of Fund
shareholders  who do give voting  instructions.  Shareholders of the Fund who do
not vote will have no affect on the outcome of such matters.

TAXES


         The following  discussion of tax  consequences is based on U.S. federal
tax laws in  effect on the date of this  Statement  of  Additional  Information.
These  laws  and   regulations   are  subject  to  change  by   legislative   or
administrative action, possibly on a retroactive basis.


         Each Fund  intends  to  qualify  and remain  qualified  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 securities or foreign currency; and (b) 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,  investments in other regulated investment companies, and
other securities limited, in respect of any one issuer, to an amount not greater
than 5% of the Fund's total assets, and 10% of the outstanding voting securities
of such  issuer,  and (ii) not more than 25% of the value of its total assets is
invested  in the  securities  of any one  issuer  (other  than  U.S.  Government
securities  or  securities  of  other  regulated  investment  companies).  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 generally 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 and realized  net  short-term
capital  gain in excess of net  long-term  capital  losses  (other  than  exempt
interest  dividends)  are  generally  taxable  to  shareholders  of the Funds as
ordinary  income whether such  distributions  are taken in cash or reinvested in
additional shares.  Distributions to corporate shareholders of the Funds are not
eligible for the dividends  received  deduction.  Distributions of net long-term
capital  gains (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 gains,
regardless  of whether such  distributions  are taken in cash or  reinvested  in
additional  shares and  regardless of how long a shareholder  has held shares in
the Fund. In general,  long-term capital gain of an individual  shareholder will
be subject to a 20% rate of tax.

         To maintain a constant $1.00 per share net asset value, the Trustees of
the Trust may direct that the number of outstanding  shares be reduced pro rata.
If this  adjustment is made, it will reflect the lower market value of portfolio
securities and not realized  losses.  The adjustment may result in a shareholder
having more  dividend  income than net income in his account for a period.  When
the number of outstanding shares of a Fund is reduced,  the shareholder's  basis
in the shares of the Fund may be  adjusted  to reflect  the  difference  between
taxable income and net dividends  actually  distributed.  This difference may be
realized as a capital  loss when the shares are  liquidated.  Subject to certain
limited exceptions, capital losses cannot be used to offset ordinary income. See
"Net Asset Value."


         Gains or losses on sales of  portfolio  securities  will be  treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where, if applicable,  a put option is acquired
or a call option is written thereon or straddle rules are otherwise  applicable.
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.


         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
reduced  below a  shareholder's  cost as a result  of such a  distribution,  the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described above.

         Any gain or loss realized on the  redemption or exchange of Fund shares
by a shareholder  who is not a dealer in securities will be treated as long-term
capital  gain or loss if the shares  have been held for more than one year,  and
otherwise  as  short-term  capital  gain or loss.  Long-term  capital gain of an
individual  holder is  subject  to maximum  tax rate of 20%.  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.  Investors  are urged to consult their tax advisors
concerning the limitations on the deductibility of capital losses. 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.


         The Prime Money Market Fund may invest in Equity  Securities of foreign
issuers. If the Fund purchases shares in certain foreign corporations  (referred
to as passive foreign investment  companies  ("PFICs") under the Code), the 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  the  Fund  as a  result  of  such  distributions.
Alternatively,  the Fund may in some cases be  permitted to include 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.

   The  Prime  Money  Market  Fund will be  permitted  to "mark to  market"  any
marketable  stock held by the Fund in a PFIC. If the Fund made such an election,
it 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.


         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.

         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 (or any successor form) 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.


         State and Local Taxes. Each Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business.  In addition,
the treatment of a Fund and its  shareholders  in those states which have income
tax laws  might  differ  from  treatment  under  the  federal  income  tax laws.
Shareholders  should consult their own tax advisors with respect to any state or
local taxes.

         Other  Taxation.  The Trust is  organized as a  Massachusetts  business
trust and,  under current law,  neither the Trust nor any Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts, provided that 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, J.P. Morgan or Financial Professionals 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  1940  Act 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.

The Year 2000 Initiative


         With  the  new  millennium  rapidly  approaching,   organizations  have
continued  to  examine  their  computer  systems  to  ensure  they are year 2000
compliant.  The issue, in simple terms, is that many existing  computer  systems
use only two  numbers to  identify a year in the date field with the  assumption
that the first two  digits  are  always  "19." As the  century is implied in the
date, on January 1, 2000, computers that are not year 2000 compliant will assume
the year is 1900. Systems that calculate,  compare,  or sort using the incorrect
date will cause erroneous results, ranging from system malfunctions to incorrect
or incomplete transaction processing.  If not remedied,  potential risks include
business interruption or shutdown, financial loss, reputation loss, and/or legal
liability.

         J.P.  Morgan has  undertaken a firmwide  initiative to address the year
2000 issue and has developed a  comprehensive  plan to prepare,  as appropriate,
its  computer  systems.   Each  business  line  has  taken   responsibility  for
identifying  and fixing the  problem  within its own area of  operation  and for
addressing  all  interdependencies.  A  multidisciplinary  team of internal  and
external experts supports the business teams by providing direction and firmwide
coordination.  Working together,  the business and multidisciplinary  teams have
completed a thorough  education and awareness  initiative and a global inventory
and  assessment  of  J.P.  Morgan's  technology  and  application  portfolio  to
understand  the scope of the year 2000 impact at J.P.  Morgan.  J.P.  Morgan has
renovated and tested these  technologies  and  applications in partnership  with
external consulting and software development organizations, as well as with year
2000 tool  providers.  J.P.  Morgan has also worked with key  external  parties,
including clients, counterparties,  vendors, exchanges, depositories, utilities,
suppliers,  agents and regulatory agencies, to stem the potential risks the year
2000 problem poses to J.P.  Morgan and to the global  financial  community.  For
potential  failure  scenarios  where the risks are deemed  significant and where
such risk is considered to have a higher probability of occurrence,  J.P. Morgan
has developed business  recovery/contingency  plans. These plans will define the
infrastructure  that  should be put in place for  managing a failure  during the
millennium event itself.

         Costs associated with efforts to prepare J.P.  Morgan's systems for the
year 2000  approximated  $93.3 million in 1997, $132.7 million in 1998 and $36.6
million  for the first  eight  months of 1999.  J.P.  Morgan is  continuing  its
efforts  to prepare  its  systems  for the year  2000.  The total cost to become
year-2000  compliant is estimated at $300 million (for firmwide systems upgrade,
not just for systems relating to mutual funds),  for internal systems renovation
and testing, testing equipment, and both internal and external resources working
on the  project.  The costs  associated  with  J.P.  Morgan  becoming  year-2000
compliant will be borne by J.P. Morgan and not the Funds.


FINANCIAL STATEMENTS

         The  following   financial   statements   and  the  report  thereon  of
PricewaterhouseCoopers  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 Annual Report;   Date of Semi-
Name of Fund                        Date Annual Report       Annual Report;
                                    Filed; and Accession     Date Semi-Annual
                                    Number                   Report Filed; and
                                                             Accession Number
- ----------------------------------- ----------------------- --------------------
- ----------------------------------- ----------------------- --------------------

J.P. Morgan Institutional Prime     11/30/98                05/31/99
Money Market Fund                   02/1/99                 07/29/99
                                    0001047469-99-002872    0001047469-99-029014
- ----------------------------------- ----------------------- --------------------
- ----------------------------------- ----------------------- --------------------

J.P. Morgan Institutional Treasury  10/31/98                04/30/99
Money Market Fund                   12/31/98                08/10/99
                                    0001047469-98-045633    0001047469-99-030655
- ----------------------------------- ----------------------- --------------------
- ----------------------------------- ----------------------- --------------------

J.P. Morgan Institutional Federal   10/31/98                04/30/99
Money Market Fund                   01/07/99                06/28/99
                                    0001047469-99-000354    0001047469-99-025455
- ----------------------------------- ----------------------- --------------------





<PAGE>


APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA - Debt rated AAA have 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 have a very  strong  capacity  to pay  interest  and  repay
principal and differ from the highest rated issues only in a small degree.

A - Debt rated A have a strong  capacity  to pay  interest  and repay  principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB - Debt rated BBB are regarded as having an adequate capacity to pay interest
and  repay  principal.   Whereas  they  normally  exhibit  adequate   protection
parameters,  adverse  economic  conditions  or changing  circumstances  are more
likely to lead to a weakened  capacity to pay interest and repay  principal  for
debt in this category than for debt in higher rated categories.

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.



<PAGE>


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.

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.



<PAGE>


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.


- --------
     1Although  the Fund is  permitted to fulfill  plans to purchase  additional
securities pending the anticipated sale of other portfolio securities or assets,
the Fund has no current  intention of engaging in this form of  leverage.  2 Mr.
Healey is an "interested  person" (as defined in the 1940 Act) of the Trust. Mr.
Healey  is also an  "interested  person"  (as  defined  in the 1940  Act) of the
Advisor due to his son's affiliation with JPMIM.

<PAGE>






                         J.P. MORGAN INSTITUTIONAL FUNDS



         J.P. MORGAN INSTITUTIONAL SERVICE TAX EXEMPT MONEY MARKET FUND








                       STATEMENT OF ADDITIONAL INFORMATION



                                DECEMBER 30, 1999















THIS  STATEMENT OF  ADDITIONAL  INFORMATION  IS NOT A  PROSPECTUS,  BUT CONTAINS
ADDITIONAL  INFORMATION  WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
DATED DECEMBER 30, 1999, FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO
TIME.  ADDITIONALLY,  THIS STATEMENT OF ADDITIONAL  INFORMATION  INCORPORATES BY
REFERENCE THE FINANCIAL  STATEMENTS  INCLUDED IN THE SHAREHOLDER REPORT RELATING
TO THE FUND DATED AUGUST 31, 1999. THE PROSPECTUS AND THE FINANCIAL  STATEMENTS,
INCLUDING THE INDEPENDENT  ACCOUNTANTS' REPORT THEREON,  ARE AVAILABLE,  WITHOUT
CHARGE,  UPON REQUEST  FROM FUNDS  DISTRIBUTOR,  INC.,  ATTENTION:  J.P.  MORGAN
INSTITUTIONAL SERVICE FUNDS (800) 221-7930.



<PAGE>



                                Table of Contents



                                                                        Page
General....................................................................1
Investment Objective and Policies..........................................1
Investment Restrictions...................................................11
Trustees and Officers.....................................................13
Investment Advisor........................................................17
Distributor...............................................................19
Co-Administrator..........................................................20
Services Agent............................................................20
Custodian and Transfer Agent..............................................21
Shareholder Servicing.....................................................21
Service Organization......................................................22
Independent Accountants...................................................23
Expenses..................................................................23
Purchase of Shares........................................................24
Redemption of Shares......................................................25
Exchange of Shares........................................................25
Dividends and Distributions...............................................26
Net Asset Value...........................................................26
Performance Data..........................................................27
Portfolio Transactions....................................................28
Massachusetts Trust.......................................................30
Description of Shares.....................................................31
Special Information Concerning
Investment Structure......................................................32
Taxes.....................................................................34
Additional Information....................................................36
Financial Statements......................................................38
Appendix A - Description of Security Ratings.............................A-1




<PAGE>


GENERAL

         This  Statement  of  Additional  Information  relates  only to the J.P.
Morgan Institutional Service Tax Exempt Money Market Fund (the "Fund"). The Fund
is a series of shares of beneficial  interest of the J.P.  Morgan  Institutional
Funds,  an open-end  management  investment  company  formed as a  Massachusetts
business  trust (the  "Trust").  In addition to the Fund,  the Trust consists of
other  series  representing  separate  investment  funds  (each a  "J.P.  Morgan
Institutional  Fund"). The other J.P. Morgan  Institutional Funds are covered by
separate Statements of Additional Information.


         This  Statement  of  Additional  Information  describes  the  financial
history, investment objective and policies, management and operation of the Fund
and provides additional  information with respect to the Fund and should be read
in  conjunction   with  the  Fund's  current   Prospectus  (the   "Prospectus").
Capitalized  terms not otherwise  defined  herein have the meanings  accorded to
them in the  Prospectus.  The Fund's  executive  offices are located at 60 State
Street, Suite 1300, Boston, Massachusetts 02109.


         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 a corresponding  Master Portfolio (the
"Portfolio"),   an  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."

     The Portfolio is advised by J.P. Morgan Investment Management Inc. ("JPMIM"
or the "Advisor").

         Investments  in the  Fund  are  not  deposits  or  obligations  of,  or
guaranteed  or  endorsed  by,  Morgan   Guaranty  Trust  Company  of  New  York,
("Morgan"),  an affiliate of the Advisor,  or any other bank. Shares of the Fund
are not federally  insured by the Federal  Deposit  Insurance  Corporation,  the
Federal Reserve Board, or any other  governmental  agency.  An investment in the
Fund is subject to risk that may cause the value of the investment to fluctuate,
and when the  investment is redeemed,  the value may be higher or lower than the
amount originally invested by the investor.

INVESTMENT OBJECTIVE AND POLICIES


         The following  discussion  supplements  the  information  regarding the
investment  objective of the Fund and the policies to be employed to achieve the
objective  by the  Portfolio  as set forth  herein  and in the  Prospectus.  The
investment   objective  of  the  Fund  and  the  investment   objective  of  its
corresponding  Portfolio are  identical.  Accordingly,  references  below to the
Portfolio also include the Fund; similarly,  references to the Fund also include
the Portfolio unless the context requires otherwise.


         The Fund is  designed  for  investors  who  seek  high  current  income
consistent  with the  preservation  of  capital  and same day  liquidity  from a
portfolio  of high  quality  money  market  instruments.  The Fund's  investment
objective  is maximize  current  income that is exempt from  federal  income tax
consistent with the preservation of capital and same-day liquidity. See "Taxes."
The Fund attempts to achieve this  objective by investing all of its  investable
assets in The Tax Exempt Money Market Portfolio (the "Portfolio"), a diversified
open-end management  investment company having the same investment  objective as
the Fund.

         The  Portfolio   attempts  to  achieve  its  investment   objective  by
maintaining a  dollar-weighted  average  portfolio  maturity of not more than 90
days and by investing in U.S.  dollar-denominated  securities  described in this
Statement of Additional  Information that meet certain rating criteria,  present
minimal credit risks, have effective maturities of not more than thirteen months
and earn interest  wholly exempt from federal  income tax in the opinion of bond
counsel for the issuer. If attractive  municipal  obligations are not available,
the Fund may hold cash rather than invest in taxable  money market  instruments.
The  Portfolio,  however,  may  temporarily  invest up to 20% of total assets in
taxable securities in abnormal market  conditions,  for defensive purposes only.
For purposes of this  calculation,  obligations that generate income that may be
treated as a preference item for purposes of the  alternative  minimum tax shall
not  be  considered  taxable   securities.   See  "Quality  and  Diversification
Requirements."  Interest on these  securities  may be subject to state and local
taxes.  For more  detailed  information  regarding  tax matters,  including  the
applicability of the alternative minimum tax, see "Taxes."

Money Market Instruments

     A description of the various types of money market  instruments that may be
purchased by the Fund  appears  below.  Also see  "Quality  and  Diversification
Requirements."

Tax Exempt Obligations

     The Fund may invest in tax exempt obligations to the extent consistent with
the Fund's investment objective and policies. A description of the various types
of tax exempt  obligations which may be purchased by the Fund appears below. See
"Quality and Diversification Requirements."

         Municipal  Bonds.  Municipal bonds are debt  obligations  issued by the
  states,  territories  and possessions of the United States and the District of
  Columbia, by their political subdivisions and by duly constituted  authorities
  and  corporations.   For  example,   states,   territories,   possessions  and
  municipalities  may issue  municipal  bonds to raise funds for various  public
  purposes such as airports, housing,  hospitals, mass transportation,  schools,
  water  and  sewer  works.  They  may also  issue  municipal  bonds  to  refund
  outstanding  obligations  and  to  meet  general  operating  expenses.  Public
  authorities  issue  municipal  bonds to obtain funding for privately  operated
  facilities,  such as housing and pollution control facilities,  for industrial
  facilities or for water supply, gas, electricity or waste disposal facilities.

         Municipal  bonds may be general  obligation or revenue  bonds.  General
  obligation bonds are secured by the issuer's pledge of its full faith,  credit
  and taxing power for the payment of principal and interest.  Revenue bonds are
  payable from revenues derived from particular facilities, from the proceeds of
  a special  excise tax or from other  specific  revenue  sources.  They are not
  generally payable from the general taxing power of a municipality.



<PAGE>


     Municipal  Notes.  Municipal notes are subdivided into three  categories of
short-term   obligations:   municipal  notes,  municipal  commercial  paper  and
municipal demand obligations.

         Municipal notes are short-term  obligations with a maturity at the time
  of issuance  ranging  from six months to five years.  The  principal  types of
  municipal  notes include tax  anticipation  notes,  bond  anticipation  notes,
  revenue  anticipation notes, grant anticipation notes and project notes. Notes
  sold in  anticipation of collection of taxes, a bond sale, or receipt of other
  revenues  are  usually  general  obligations  of the issuing  municipality  or
  agency.

         Municipal  commercial  paper  typically  consists  of  very  short-term
  unsecured  negotiable  promissory notes that are sold to meet seasonal working
  capital or interim  construction  financing needs of a municipality or agency.
  While  these  obligations  are  intended to be paid from  general  revenues or
  refinanced  with  long-term  debt,  they  frequently  are backed by letters of
  credit,  lending  agreements,  note  repurchase  agreements  or  other  credit
  facility agreements offered by banks or institutions.

     Municipal demand  obligations are subdivided into two types:  variable rate
demand notes and master demand obligations.

         Variable  rate demand  notes are tax exempt  municipal  obligations  or
  participation interests that provide for a periodic adjustment in the interest
  rate paid on the notes. They permit the holder to demand payment of the notes,
  or to demand  purchase  of the notes at a purchase  price  equal to the unpaid
  principal  balance,  plus accrued interest either directly by the issuer or by
  drawing on a bank  letter of credit or guaranty  issued  with  respect to such
  note. The issuer of the municipal obligation may have a corresponding right to
  prepay at its  discretion the  outstanding  principal of the note plus accrued
  interest  upon notice  comparable  to that  required  for the holder to demand
  payment.  The  variable  rate  demand  notes in which the Fund may  invest are
  payable,  or are  subject to  purchase,  on demand  usually on notice of seven
  calendar days or less.  The terms of the notes provide that interest rates are
  adjustable at intervals ranging from daily to six months,  and the adjustments
  are based upon the prime  rate of a bank or other  appropriate  interest  rate
  index specified in the respective notes. Variable rate demand notes are valued
  at  amortized  cost;  no value is assigned to the right of the Fund to receive
  the par value of the obligation upon demand or notice.

         Master demand  obligations are tax exempt  municipal  obligations  that
  provide for a periodic  adjustment  in the interest rate paid and permit daily
  changes in the amount  borrowed.  The interest on such  obligations is, in the
  opinion of counsel for the  borrower,  excluded  from gross income for federal
  income tax  purposes.  For a  description  of the  attributes of master demand
  obligations,  see  "Money  Market  Instruments"  above.  Although  there is no
  secondary  market  for  master  demand   obligations,   such  obligations  are
  considered by the Fund to be liquid because they are payable upon demand.  The
  Fund has no specific  percentage  limitations  on investments in master demand
  obligations.

         The Fund may purchase  securities of the type  described  above if they
  have effective maturities within thirteen months. As required by regulation of
  the Securities  and Exchange  Commission  (the "SEC"),  this means that on the
  date of acquisition  the final stated  maturity (or if called for  redemption,
  the redemption  date) must be within  thirteen  months or the maturity must be
  deemed to be no more than 397 days because of a maturity shortening mechanism,
  such as a variable interest rate,  coupled with a conditional or unconditional
  right to resell the  investment to the issuer or a third party.  See "Variable
  Rate Demand Notes" and "Puts." A substantial  portion of the Fund's  portfolio
  is subject to maturity shortening  mechanisms  consisting of variable interest
  rates  coupled  with  unconditional  rights to resell  the  securities  to the
  issuers either  directly or by drawing on a domestic or foreign bank letter of
  credit or other credit support arrangement. See "Foreign Investments."

         Puts.  The Fund may purchase  without  limit  municipal  bonds or notes
  together  with the  right to  resell  the  bonds or notes to the  seller at an
  agreed price or yield within a specified  period prior to the maturity date of
  the bonds or notes.  Such a right to resell is commonly  known as a "put." The
  aggregate  price for bonds or notes with puts may be higher than the price for
  bonds or notes without puts.  Consistent with the Fund's investment  objective
  and subject to the  supervision of the Trustees,  the purpose of this practice
  is to permit  the Fund to be fully  invested  in tax exempt  securities  while
  preserving  the  necessary  liquidity to purchase  securities on a when-issued
  basis,  to meet unusually large  redemptions,  and to purchase at a later date
  securities  other than those subject to the put. The principal risk of puts is
  that the writer of the put may default on its  obligation to  repurchase.  The
  Advisor will monitor each writer's ability to meet its obligations under puts.

         Puts may be  exercised  prior to the  expiration  date in order to fund
  obligations to purchase other securities or to meet redemption requests. These
  obligations  may arise  during  periods in which  proceeds  from sales of Fund
  shares and from recent sales of portfolio  securities are insufficient to meet
  obligations  or  when  the  funds   available  are  otherwise   allocated  for
  investment. In addition, puts may be exercised prior to the expiration date in
  order to take  advantage of  alternative  investment  opportunities  or in the
  event the Advisor revises its evaluation of the creditworthiness of the issuer
  of the underlying  security.  In determining whether to exercise puts prior to
  their  expiration  date and in selecting  which puts to exercise,  the Advisor
  considers the amount of cash available to the Fund,  the  expiration  dates of
  the  available  puts,  any  future   commitments  for  securities   purchases,
  alternative  investment  opportunities,  the  desirability  of  retaining  the
  underlying  securities  in the Fund's  portfolio  and the yield,  quality  and
  maturity dates of the underlying securities.

         The Fund values any municipal bonds and notes which are subject to puts
  at amortized  cost.  No value is assigned to the put. The cost of any such put
  is  carried  as an  unrealized  loss  from  the time of  purchase  until it is
  exercised or expires.  The Board of Trustees  would,  in  connection  with the
  determination  of the  value of a put,  consider,  among  other  factors,  the
  creditworthiness  of the writer of the put, the duration of the put, the dates
  on  which  or the  periods  during  which  the  put may be  exercised  and the
  applicable rules and regulations of the SEC.

         Since the value of the put is partly  dependent  on the  ability of the
  put writer to meet its obligation to repurchase, the Fund's policy is to enter
  into put transactions only with municipal  securities dealers who are approved
  by the Advisor.  Each dealer will be approved on its own merits, and it is the
  Fund's general policy to enter into put  transactions  only with those dealers
  which are determined to present  minimal credit risks. In connection with such
  determination,  the  Trustees  will review  regularly  the  Advisor's  list of
  approved dealers, taking into consideration,  among other things, the ratings,
  if available,  of their equity and debt  securities,  their  reputation in the
  municipal   securities   markets,   their  net  worth,   their  efficiency  in
  consummating transactions and any collateral arrangements,  such as letters of
  credit,  securing the puts written by them.  Commercial bank dealers  normally
  will be members of the  Federal  Reserve  System,  and other  dealers  will be
  members of the National Association of Securities Dealers,  Inc. or members of
  a national securities exchange.  The Trustees have directed the Advisor not to
  enter into put  transactions  with any  dealer  which in the  judgment  of the
  Advisor  becomes more than a minimal  credit risk.  In the event that a dealer
  should  default on its  obligation to repurchase an underlying  security,  the
  Fund is unable to predict  whether  all or any  portion of any loss  sustained
  could subsequently be recovered from such dealer.

         The Trust has been advised by counsel that the Fund will be  considered
  the owner of the  securities  subject to the puts so that the  interest on the
  securities is tax exempt  income to the Fund.  Such advice of counsel is based
  on  certain  assumptions  concerning  the terms of the puts and the  attendant
  circumstances.

  Taxable Investments

         The Fund  attempts  to invest its assets in tax exempt  securities  and
  when  investments are not available,  may hold cash or may invest to a limited
  extent in  taxable  securities.  While the Fund does not  currently  intend to
  invest in taxable  securities,  in abnormal  market  conditions  for defensive
  purposes  only,  it may  invest up to 20% of the value of its total  assets in
  securities,  the interest income on which may be subject to federal,  state or
  local income  taxes.  The taxable  investments  permitted for the Fund include
  obligations  of the U.S.  Government  and its agencies and  instrumentalities,
  bank obligations, commercial paper and repurchase agreements.

         The Fund may make  investments in other debt  securities with remaining
  effective  maturities  of not more than  thirteen  months,  including  without
  limitation corporate bonds, and other obligations  described in the Prospectus
  or this Statement of Additional Information.

     U.S. Treasury Securities.  The Fund may invest in direct obligations of the
U.S.  Treasury,  including  Treasury  bills,  notes and bonds,  all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.

         Additional  U.S.  Government  Obligations.   The  Fund  may  invest  in
  obligations   issued   or   guaranteed   by  U.S.   Government   agencies   or
  instrumentalities.  These  obligations  may or may not be  backed by the "full
  faith and  credit" of the United  States.  Securities  which are backed by the
  full  faith  and  credit  of the  United  States  include  obligations  of the
  Government National Mortgage Association, the Farmers Home Administration, and
  the Export-Import Bank. In the case of securities not backed by the full faith
  and credit of the United States, the Fund must look principally to the federal
  agency issuing or guaranteeing  the obligation for ultimate  repayment and may
  not be able to assert a claim  against the United  States  itself in the event
  the agency or  instrumentality  does not meet its  commitments.  Securities in
  which the Fund may invest  that are not backed by the full faith and credit of
  the United  States  include,  but are not limited to: (i)  obligations  of the
  Tennessee Valley Authority,  the Federal Home Loan Mortgage  Corporation,  the
  Federal  Home Loan Banks and the U.S.  Postal  Service,  each of which has the
  right  to  borrow  from  the  U.S.  Treasury  to meet  its  obligations;  (ii)
  securities  issued by the Federal  National  Mortgage  Association,  which are
  supported by the  discretionary  authority of the U.S.  Government to purchase
  the agency's  obligations;  and (iii)  obligations  of the Federal Farm Credit
  System and the Student Loan Marketing  Association,  each of whose obligations
  may be satisfied only by the individual credits of the issuing agency.

         Bank Obligations. The Fund, 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 and are organized  under
  the laws of the United  States or any state,  (ii)  foreign  branches of these
  banks or of foreign banks of equivalent  size (Euros) and (iii) U.S.  branches
  of foreign  banks of  equivalent  size  (Yankees).  The Fund may not invest in
  obligations of foreign  branches of foreign banks. The Fund will not invest in
  obligations for which the Advisor,  or any of its affiliated  persons,  is the
  ultimate obligor or accepting bank.

         Commercial  Paper. The Fund may invest in commercial  paper,  including
  master demand  obligations.  Master demand  obligations are  obligations  that
  provide for a periodic  adjustment  in the interest rate paid and permit daily
  changes in the amount  borrowed.  Master  demand  obligations  are governed by
  agreements  between the issuer and Morgan  acting as agent,  for no additional
  fee. The monies loaned to the borrower come from accounts managed by Morgan or
  its  affiliates,  pursuant to  arrangements  with such accounts.  Interest and
  principal payments are credited to such accounts.  Morgan, an affiliate of the
  Advisor,  has the right to  increase or  decrease  the amount  provided to the
  borrower  under an  obligation.  The  borrower  has the  right to pay  without
  penalty  all or any  part  of the  principal  amount  then  outstanding  on an
  obligation  together  with  interest  to the  date  of  payment.  Since  these
  obligations  typically  provide that the interest  rate is tied to the Federal
  Reserve commercial paper composite rate, the rate on master demand obligations
  is subject to change. Repayment of a master demand obligation to participating
  accounts  depends on the ability of the  borrower to pay the accrued  interest
  and principal of the obligation on demand which is  continuously  monitored by
  Morgan.  Since master  demand  obligations  typically  are not rated by credit
  rating  agencies,  the Fund may invest in such unrated  obligations only if at
  the time of an investment  the obligation is determined by the 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 Fund to be
  liquid  because  they are  payable  upon  demand.  The Fund  does not have any
  specific percentage limitation on investments in master demand obligations. It
  is possible that the issuer of a master demand obligation could be a client of
  Morgan to whom Morgan, in its capacity as a commercial bank, has made a loan.

         Repurchase  Agreements.   The  Fund,  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  Fund's
  Trustees.  In a repurchase  agreement,  the Fund buys a security from a seller
  that has agreed to repurchase the same security at a mutually agreed upon date
  and price.  The resale  price  normally  is in excess of the  purchase  price,
  reflecting an agreed upon interest  rate.  This interest rate is effective for
  the period of time the Fund is invested in the agreement and is not related to
  the coupon rate on the underlying security. A repurchase agreement may also be
  viewed as a fully  collateralized loan of money by the Fund to the seller. The
  period of these repurchase agreements will usually be short, from overnight to
  one week,  and at no time will the Fund invest in  repurchase  agreements  for
  more than 397 days. The securities which are subject to repurchase agreements,
  however, may have maturity dates in excess of 397 days from the effective date
  of the  repurchase  agreement.  The Fund will  always  receive  securities  as
  collateral  whose market value is, and during the entire term of the agreement
  remains,  at least equal to 100% of the dollar amount  invested by the Fund in
  the agreement plus accrued  interest,  and the Fund will make payment for such
  securities only upon physical delivery or upon evidence of book entry transfer
  to the account of the Custodian.  The Fund will be fully collateralized within
  the meaning of paragraph (a)(4) of Rule 2a-7 under the Investment  Company Act
  of 1940, as amended (the "1940 Act"). If the seller  defaults,  the Fund might
  incur a loss if the value of the collateral securing the repurchase  agreement
  declines and might incur  disposition costs in connection with liquidating the
  collateral.  In addition, if bankruptcy proceedings are commenced with respect
  to the seller of the security,  realization upon disposal of the collateral by
  the Fund may be delayed or limited.

         The Fund may make  investments in other debt  securities with remaining
  effective  maturities  of not more than  thirteen  months,  including  without
  limitation corporate bonds, and other obligations  described in the Prospectus
  or this Statement of Additional Information.

  Additional Investments


         When-Issued  and Delayed  Delivery  Securities.  The Fund may  purchase
  securities on a when-issued or delayed delivery basis.  For example,  delivery
  of and payment for these  securities  can take place a month or more after the
  date of the  purchase  commitment.  The purchase  price and the interest  rate
  payable,  if any, on the securities are fixed on the purchase  commitment date
  or at the time the settlement  date is fixed.  The value of such securities is
  subject to market fluctuation and for money market instruments and other fixed
  income  securities  no  interest  accrues to the Fund until  settlement  takes
  place.  At the time the Fund makes the commitment to purchase  securities on a
  when-issued or delayed delivery basis, it will record the transaction, reflect
  the value each day of such  securities in determining its net asset value and,
  if  applicable,  calculate  the maturity for the purposes of average  maturity
  from that date. At the time of settlement a when-issued security may be valued
  at less than the purchase  price. To facilitate  such  acquisitions,  the Fund
  will  maintain  with the  Custodian a segregated  account with liquid  assets,
  consisting  of  cash,  U.S.   Government   securities  or  other   appropriate
  securities, in an amount at least equal to such commitments. On delivery dates
  for such  transactions,  the Fund will meet its obligations from maturities or
  sales of the securities held in the segregated  account and/or from cash flow.
  If the Fund chooses to dispose of the right to acquire a when-issued  security
  prior to its  acquisition,  it  could,  as with the  disposition  of any other
  portfolio obligation, incur a gain or loss due to market fluctuation.  Also, a
  Fund may be disadvantaged if the other party to the transaction defaults.


         Investment Company Securities. Securities of other investment companies
  may be acquired by the Fund and  Portfolio to the extent  permitted  under the
  1940 Act or any order pursuant  thereto.  These limits currently require that,
  as determined  immediately  after a purchase is made,  (i) not more than 5% of
  the value of the Fund's total assets will be invested in the securities of any
  one  investment  company,  (ii) not more  than 10% of the  value of its  total
  assets will be invested in the aggregate in securities of investment companies
  as a group, and (iii) not more than 3% of the outstanding  voting stock of any
  one investment company will be owned by the Fund,  provided however,  that the
  Fund may invest all of its investable assets in an open-end investment company
  that  has  the  same  investment  objective  as the  Fund  (its  corresponding
  Portfolio).  As a  shareholder  of  another  investment  company,  the 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 the Fund
  or Portfolio bears directly in connection with its own operations.

         Reverse  Repurchase  Agreements.   The  Fund  may  enter  into  reverse
  repurchase  agreements.  In a reverse  repurchase  agreement,  a Fund  sells a
  security and agrees to repurchase the same security at a mutually  agreed upon
  date and price  reflecting  the interest  rate  effective  for the term of the
  agreement. For purposes of the 1940 Act a reverse repurchase agreement is also
  considered  as the  borrowing of money by the Fund and,  therefore,  a form of
  leverage. Leverage may cause any gains or losses for the Fund to be magnified.
  The Fund will  invest the  proceeds of  borrowings  under  reverse  repurchase
  agreements.  In addition,  except for liquidity purposes,  the Fund will enter
  into a reverse  repurchase  agreement  only when the expected  return from the
  investment of the proceeds is greater than the expense of the transaction. The
  Fund will not invest the  proceeds  of a reverse  repurchase  agreement  for a
  period which  exceeds the duration of the reverse  repurchase  agreement.  The
  Fund 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 the Fund's limitations on reverse repurchase  agreements and
  bank borrowings.

         Loans  of  Portfolio  Securities.   Subject  to  applicable  investment
  restrictions,  the Fund is permitted to lend its securities in an amount up to
  33 1/3% of the  value  of the  Fund's  net  assets.  The  Fund  may  lend  its
  securities  if such  loans  are  secured  continuously  by cash or  equivalent
  collateral or by a letter of credit in favor of the Fund at least equal at all
  times to 100% of the  market  value of the  securities  loaned,  plus  accrued
  interest.  While such  securities  are on loan, the borrower will pay the Fund
  any income accruing thereon.  Loans will be subject to termination by the Fund
  in the normal settlement time,  generally three business days after notice, or
  by the borrower on one day's notice. Borrowed securities must be returned when
  the loan is  terminated.  Any gain or loss in the market price of the borrowed
  securities which occurs during the term of the loan inures to the Fund and its
  respective investors.  The Fund may pay reasonable finders' and custodial fees
  in connection  with a loan. In addition,  the Fund will consider all facts and
  circumstances  including  the  creditworthiness  of  the  borrowing  financial
  institution, and the Fund will not make any loans in excess of one year. Loans
  of portfolio  securities  may be considered  extensions of credit by the Fund.
  The risks to the Fund with respect to borrowers  of its  portfolio  securities
  are  similar to the risks to the Fund with  respect  to sellers in  repurchase
  agreement transactions.  See "Repurchase  Agreements".  The Fund will not lend
  its securities to any officer, Trustee, Director,  employee or other affiliate
  of the Fund, the Advisor or the  Distributor,  unless  otherwise  permitted by
  applicable law.

         Illiquid   Investments,   Privately  Placed  and  Certain  Unregistered
  Securities. The Fund may invest in privately placed, restricted,  Rule 144A or
  other unregistered securities.  The Fund may not acquire any illiquid holdings
  if, as a result  thereof,  more than 10% of the Fund's net assets  would be in
  illiquid investments.  Subject to this non-fundamental policy limitation,  the
  Portfolio may acquire investments that are illiquid or have limited liquidity,
  such as private  placements or investments  that are not registered  under the
  Securities  Act of 1933, as amended (the "1933 Act") and cannot be offered for
  public sale in the United States without first being registered under the 1933
  Act.  An  illiquid  investment  is any  investment  that cannot be disposed of
  within seven days in the normal course of business at approximately the amount
  at which it is valued by the  Portfolio.  The  price  the  Portfolio  pays for
  illiquid  securities  or receives upon resale may be lower than the price paid
  or received for similar securities with a more liquid market.  Accordingly the
  valuation of these securities will reflect any limitations on their liquidity.

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

         As to illiquid  investments,  the Fund is subject to a risk that should
  the Fund  decide to sell them when a ready buyer is not  available  at a price
  the Fund  deems  representative  of their  value,  the value of the Fund's net
  assets  could be  adversely  affected.  Where  an  illiquid  security  must be
  registered  under  the  1933  Act,  before  it may be  sold,  the  Fund may be
  obligated to pay all or part of the registration  expenses, and a considerable
  period may elapse  between  the time of the  decision to sell and the time the
  Fund may be  permitted  to sell a  security  under an  effective  registration
  statement.  If,  during  such a  period,  adverse  market  conditions  were to
  develop,  the Fund might obtain a less favorable  price than prevailed when it
  decided to sell.

         Synthetic  Instruments.  The  Fund  may  invest  in  certain  synthetic
  variable rate instruments. Such instruments generally involve the deposit of a
  long-term tax exempt bond in a custody or trust  arrangement  and the creation
  of a mechanism to adjust the long-term interest rate on the bond to a variable
  short-term rate and a right (subject to certain conditions) on the part of the
  purchaser to tender it periodically to a third part at par. Morgan will review
  the structure of synthetic  variable rate  instruments to identify  credit and
  liquidity risks  (including the conditions under which the right to tender the
  instrument  would no longer be available) and will monitor those risks. In the
  event that the right to tender the instrument is no longer available, the risk
  to the Portfolio will be that of holding the long-term bond, which may require
  the  disposition  of the bond  which  could be at a loss.  In the case of some
  types of  instruments  credit  enhancement  is not  provided,  and if  certain
  events,  which may include (a) default in the payment of principal or interest
  on the underlying  bond, (b) downgrading of the bond below investment grade or
  (c) a loss of the  bond's  tax  exempt  status,  occur,  then (i) the put will
  terminate, (ii) the risk to the Fund will be that of holding a long-term bond,
  and (iii) the  disposition  of the bond may be  required  which  could be at a
  loss.

  Quality and Diversification Requirements

         The Fund intends to meet the  diversification  requirements of the 1940
  Act.  Current  1940 Act  requirements  require that with respect to 75% of the
  assets of the Fund are 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.  Investments  not
  subject to the limitations  described above could involve an increased risk to
  the Fund should an issuer,  or a state or its related  entities,  be unable to
  make  interest  or  principal  payments  or should  the  market  value of such
  securities decline.

         At the time the Fund invests in any taxable  commercial  paper,  master
  demand obligation,  bank obligation or repurchase  agreement,  the issuer must
  have outstanding  debt rated A or higher by Moody's or 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  Morgan's
  opinion.

         For purposes of diversification  and concentration  under the 1940 Act,
  identification  of the issuer of municipal bonds or notes depends on the terms
  and  conditions  of the  obligation.  If the assets and revenues of an agency,
  authority,  instrumentality  or other political  subdivision are separate from
  those of the government  creating the subdivision and the obligation is backed
  only by the  assets and  revenues  of the  subdivision,  such  subdivision  is
  regarded  as  the  sole  issuer.  Similarly,  in  the  case  of an  industrial
  development  revenue bond or pollution  control  revenue  bond, if the bond is
  backed  only by the assets  and  revenues  of the  nongovernmental  user,  the
  nongovernmental  user is  regarded as the sole  issuer.  If in either case the
  creating  government or another entity guarantees an obligation,  the guaranty
  is regarded as a separate  security and treated as an issue of such guarantor.
  Since  securities  issued or  guaranteed by states or  municipalities  are not
  voting  securities,  there  is no  limitation  on the  percentage  of a single
  issuer's  securities which the Fund may own so long as it does not invest more
  than 5% of its total assets that are subject to the diversification limitation
  in the securities of such issuer,  except  obligations issued or guaranteed by
  the U.S. Government. Consequently, the Fund may invest in a greater percentage
  of the  outstanding  securities  of a single  issuer than would an  investment
  company which invests in voting securities. See "Investment Restrictions."

         In order to attain  its  objective  of  maintaining  a stable net asset
  value,  the Fund will limit its investments to securities that present minimal
  credit risks and securities  (other than New York State municipal  notes) that
  are rated within the highest  rating  assigned to short-term  debt  securities
  (or,  in the case of New York  State  municipal  notes,  within one of the two
  highest ratings assigned to short-term debt securities) by at least two NRSROs
  or by the only NRSRO that has rated the security.  Securities which originally
  had a maturity of over one year are subject to more complicated, but generally
  similar rating  requirements.  The Fund may also purchase  unrated  securities
  that are of  comparable  quality  to the  rated  securities  described  above.
  Additionally,  if  the  issuer  of a  particular  security  has  issued  other
  securities  of  comparable  priority and security and which have been rated in
  accordance  with the criteria  described above that security will be deemed to
  have the same rating as such other rated securities.

         In  addition,  the Board of Trustees has adopted  procedures  which (i)
  require the Fund to maintain a dollar-weighted  average portfolio  maturity of
  not more  than 90 days  and to  invest  only in  securities  with a  remaining
  maturity of not more than  thirteen  months and (ii) require the Fund,  in the
  event of certain downgrading of or defaults on portfolio holdings,  to dispose
  of the holding,  subject in certain circumstances to a finding by the Trustees
  that disposing of the holding would not be in the Fund's best interest.

         The credit  quality of variable  rate demand notes and other  municipal
  obligations is frequently enhanced by various credit support arrangements with
  domestic  or  foreign  financial  institutions,  such as  letters  of  credit,
  guarantees  and  insurance,   and  these   arrangements  are  considered  when
  investment  quality  is  evaluated.  The rating of  credit-enhanced  municipal
  obligations  by a NRSRO may be based  primarily or  exclusively  on the credit
  support arrangement.

  INVESTMENT RESTRICTIONS

         The  investment  restrictions  of the Fund and Portfolio are identical,
  unless  otherwise  specified.  Accordingly,  references below to the Fund also
  include  the  Portfolio  unless the  context  requires  otherwise;  similarly,
  references to the Portfolio also include the Fund unless the context  requires
  otherwise.

         The investment  restrictions below have been adopted by the Trust, with
  respect to the Fund,  and,  except as noted,  by the  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 the Fund is
  requested to vote on a change in the  fundamental  investment  restrictions of
  the  Portfolio,  the Trust will hold a meeting of Fund  shareholders  and will
  cast its votes as instructed by the Fund's shareholders.

         The Fund may not:

     1.   Borrow  money,  except  from  banks for  temporary,  extraordinary  or
          emergency  purposes and then only in amounts up to 10% of the value of
          the Fund's total assets,  taken at cost at the time of such borrowing;
          or mortgage,  pledge or  hypothecate  any assets  except in connection
          with any  such  borrowing  in  amounts  up to 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,  for example,  facilitates the
          orderly sale of portfolio  securities in the event of abnormally heavy
          redemption  requests  or in the event of  redemption  requests  during
          periods of tight market  supply.  This provision is not for leveraging
          purposes;

2.       Invest more than 25% of its total assets in securities of  governmental
         units located in any one state,  territory, or possession of the United
         States.  The Fund may  invest  more  then 25% of its  total  assets  in
         industrial development and pollution control obligations whether or not
         the users of facilities  financed by such  obligations  are in the same
         industry;1

3.       Purchase  industrial  revenue  bonds if, as a result of such  purchase,
         more than 5% of total  Fund  assets  would be  invested  in  industrial
         revenue   bonds  where  payment  of  principal  and  interest  are  the
         responsibility  of  companies  with fewer than three years of operating
         history;

     4.   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. Each state and each political subdivision,
          agency or instrumentality of such state and each multi-state agency of
          which such state is a member will be a separate issuer if the security
          is backed  only by the  assets and  revenues  of that  issuer.  If the
          security is guaranteed by another entity, the guarantor will be deemed
          to be the issuer. This limitation shall not apply to securities issued
          or   guaranteed   by   the   U.S.   Government,    its   agencies   or
          instrumentalities  or to  permitted  investments  of up to  25% of the
          Fund's total assets;2

5.       Make loans, except through the purchase or holding of debt obligations,
         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  except  to the  extent  that  securities  subject  to a demand
         obligation,  stand-by  commitments  and  puts  may  be  purchased  (see
         "Investment  Objectives  and  Policies");   real  estate;  commodities;
         commodity  contracts;  or interests in oil, gas, or mineral exploration
         or  development  programs.  However,  the Fund may  purchase  municipal
         bonds, notes or commercial paper secured by interests in real estate;

7.       Purchase  securities  on margin,  make short  sales of  securities,  or
         maintain a short position,  provided that this restriction shall not be
         deemed  to be  applicable  to  the  purchase  or  sale  of  when-issued
         securities or of securities for delayed delivery;

8. Acquire securities of other investment companies,  except as permitted by the
1940 Act;

9.       Act as an underwriter of securities; or

10.      Issue senior  securities,  except as may  otherwise be permitted by the
         foregoing  investment  restrictions  or under the 1940 Act or any rule,
         order or interpretation thereunder.

         The Tax Exempt  Money  Market  Portfolio,  except as noted  below,  has
adopted substantially similar fundamental  investment  restrictions.  Investment
restrictions  numbered 3, 7 and 8 above are  non-fundamental  for the Portfolio.
The Portfolio's fundamental borrowing restriction allows the Portfolio to borrow
to the  extent  permitted  by  law,  currently  33-1/3%  of  total  assets.  The
Portfolio,   however,  has  adopted  a  non-fundamental  investment  restriction
limiting its borrowing ability to 10% of total assets. These differences are not
expected to materially affect the management of the Portfolio.

         Non-Fundamental  Investment  Restriction.  The  investment  restriction
described below is not a fundamental  policy of the Fund may be changed by their
respective Trustees.  This  non-fundamental  investment policy requires that the
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 10% of
         the Fund's net assets would be in investments that are illiquid.

         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,  the Advisor 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 the Advisor 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,  the
Advisor 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 the Portfolio,
their business addresses,  principal  occupations during the past five years and
dates of birth are set forth below.


     FREDERICK S.  ADDY--Trustee;  Retired;  Former Executive Vice President and
Chief Financial Officer,  Amoco  Corporation.  His address is 5300 Arbutus Cove,
Austin, Texas 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,  Florida
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, New Jersey 08540, and his date of birth is May 23, 1934.

     MATTHEW HEALEY3--Trustee,  Chairman and Chief Executive Officer;  Chairman,
Pierpont Group, Inc., since prior to 1993. His address is Pine Tree Country Club
Estates, 10286 Saint Andrews Road, Boynton Beach, Florida 33436, and his date of
birth is August 23, 1937.

     MICHAEL P.  MALLARDI--Trustee;  Retired;  Prior to April 1996,  Senior Vice
President, Capital Cities/ABC, Inc. and President,  Broadcast Group. His address
is 10 Charnwood Drive,  Suffern,  New York 10910, and his date of birth is March
17, 1934.

         The  Trustees  of  the  Trust  are  the  same  as the  Trustees  of the
Portfolio.  In accordance with applicable state requirements,  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,  the Portfolio and the J.P. Morgan 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 J.P.  Morgan Funds and J.P.  Morgan Series
Trust and is reimbursed  for expenses  incurred in connection  with service as a
Trustee.  The  Trustees may hold various  other  directorships  unrelated to the
Fund.

     Trustee compensation expenses paid by the Trust for the calendar year ended
December 31, 1998 are set forth below.

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


                                                     TOTAL TRUSTEE COMPENSATION
                                 AGGREGATE TRUSTEE   ACCRUED BY THE MASTER
                                 COMPENSATION        PORTFOLIOS(*), J.P. MORGAN
                                 PAID BY THE TRUST   FUNDS, J.P. MORGAN SERIES
                                 DURING 1998         TRUST AND THE TRUST DURING
                                 --------------      1998(***)
NAME OF TRUSTEE
- -------------------------------- ------------------- ---------------------------
- -------------------------------- ------------------- ---------------------------

Frederick S. Addy, Trustee       $20,055             $75,000
- -------------------------------- ------------------- ---------------------------
- -------------------------------- ------------------- ---------------------------

William G. Burns, Trustee        $20,055             $75,000
- -------------------------------- ------------------- ---------------------------
- -------------------------------- ------------------- ---------------------------

Arthur C. Eschenlauer, Trustee   $20,055             $75,000
- -------------------------------- ------------------- ---------------------------
- -------------------------------- ------------------- ---------------------------

Matthew Healey, Trustee (**)     $20,055             $75,000
  Chairman and Chief Executive
  Officer
- -------------------------------- ------------------- ---------------------------
- -------------------------------- ------------------- ---------------------------

Michael P. Mallardi, Trustee     $20,055             $75,000
- -------------------------------- ------------------- ---------------------------

(*)      Includes  the  Portfolio  and 18 other  portfolios  (collectively,  the
         "Master Portfolios") for which JPMIM acts as investment adviser.

(**) During 1998,  Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
     of  Pierpont  Group,   Inc.,   compensation  in  the  amount  of  $157,400,
     contributed  $23,610 to a defined  contribution plan on his behalf and paid
     $17,700 in insurance premiums for his benefit.

(***)No investment  company  within the fund complex has a pension or retirement
     plan.  Currently there are 17 investment companies (14 investment companies
     comprising the Master Portfolios, the J.P. Morgan Funds, the Trust and J.P.
     Morgan Series Trust) in the fund complex.

         The Trustees  decide upon  general  policies  and are  responsible  for
overseeing the Trust's and Portfolio's  business affairs.  The Portfolio and the
Trust have 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  Portfolio  and the Trust.  Pierpont  Group,  Inc.  was
organized in July 1989 to provide services for The Pierpont Family of Funds (now
the J.P.  Morgan  Family  of  Funds),  and the  Trustees  are the equal and sole
shareholders of Pierpont Group,  Inc. The Trust and the Portfolio have agreed to
pay Pierpont Group, Inc. a fee in an amount representing its reasonable costs in
performing  these  services  to the  Trust,  the  Portfolio  and  certain  other
registered  investment  companies  subject to similar  agreements  with Pierpont
Group, Inc. These costs are periodically reviewed by the Trustees. The principal
offices of Pierpont Group,  Inc. are located at 461 Fifth Avenue,  New York, New
York 10017.

         The  aggregate  fees  paid to  Pierpont  Group,  Inc.  by the  Fund and
Portfolio during the indicated fiscal years are set forth below:


Fund -- For the period  November 4, 1997  (commencement  of operations)  through
August 31, 1998 and for the fiscal year ended August 31, 1999: $26 and $282.

Portfolio -- For the fiscal years ended August 31, 1997, 1998 and 1999: $43,285,
$53,097 and $46,121.


Officers

         The Trust's and Portfolio's  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  Portfolio.  The Trust and the Portfolio have no
employees.

         The  officers  of  the  Trust  and  the  Portfolio,   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 the 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 1993.  His  address is Pine Tree  Country  Club  Estates,  10286  Saint
Andrews Road,  Boynton  Beach,  Florida  33436.  His date of birth is August 23,
1937.

     MARGARET W. CHAMBERS;  Vice President and Secretary.  Senior Vice President
and General  Counsel of FDI since April,  1998.  From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company,  L.P. From January 1986 to July 1996,  she was an associate  with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.


     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  distributed or  administered by FDI. Her date of
birth is August 1, 1957.


     DOUGLAS C. CONROY; Vice President and Assistant  Treasurer.  Assistant Vice
President   and   Assistant   Department   Manager  of  Treasury   Services  and
Administration of FDI and an officer of certain investment companies distributed
or  administered  by FDI.  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.  His
date of birth is March 31, 1969.


     JOHN P. COVINO - Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of FDI. Prior to
November  1998,  Mr. Covino was employed by Fidelity  Investments  where he held
multiple  positions in their  Institutional  Brokerage  Group.  Prior to joining
Fidelity,  Mr.  Covino was employed by SunGard  Brokerage  systems  where he was
responsible for the technology and development of the accounting  product group.
His date of birth is October 8, 1963.

     KAREN JACOPPO-WOOD;  Vice President and Assistant Secretary. Vice President
and  Senior  Counsel  of FDI and an  officer  of  certain  investment  companies
distributed  or  administered  by FDI.  From  June  1994 to  January  1996,  Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder, Stevens & Clark, Inc.
Her date of birth is December 29, 1966.

     CHRISTOPHER  J.  KELLEY;  Vice  President  and  Assistant  Secretary.  Vice
President and Senior Associate  General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996,  Mr.  Kelley was Assistant  Counsel at Forum  Financial
Group. His date of birth is December 24, 1964.

     KATHLEEN  K.  MORRISEY.  Vice  President  and  Assistant  Secretary.   Vice
President  and  Assistant   Secretary  of  FDI.  Manager  of  Treasury  Services
Administration  and an  officer  of  certain  investment  companies  advised  or
administered  by  Montgomery  Asset  Management,  L.P.  and  Dresdner RCM Global
Investors,  Inc., and their  respective  affiliates.  From July 1994 to November
1995, Ms.  Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Her date of birth is July 5, 1972.

     MARY A. NELSON; Vice President and Assistant Treasurer.  Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies  distributed or administered by FDI. Her
date of birth is April 22, 1964.


     MARY JO PACE;  Assistant Treasurer.  Vice President,  Morgan Guaranty Trust
Company of New York.  Ms.  Pace  serves in the Funds  Administration  group as a
Manager for the Budgeting and Expense Processing Group. Prior to September 1995,
Ms. Pace served as a Fund Administrator for Morgan Guaranty Trust Company of New
York. Her address is 60 Wall Street, New York, New York 10260. Her date of birth
is March 13, 1966.

     STEPHANIE D. PIERCE; Vice President and Assistant Secretary. Vice President
and Client  Development  Manager for FDI since  April  1998.  From April 1997 to
March 1998,  Ms.  Pierce was employed by Citibank,  NA as an officer of Citibank
and Relationship  Manager on the Business and Professional Banking team handling
over 22,000 clients.  Address:  200 Park Avenue,  New York, New York 10166.  Her
date of birth is August 18, 1968.


     GEORGE A. RIO; President and Treasurer. Executive Vice President and Client
Service  Director of FDI since April 1998. From June 1995 to March 1998, Mr. Rio
was Senior  Vice  President  and Senior Key Account  Manager  for Putnam  Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of Business  Development
for First Data Corporation. His date of birth is January 2, 1955.


     CHRISTINE ROTUNDO;  Assistant  Treasurer.  Vice President,  Morgan Guaranty
Trust Company of New York. Ms. Rotundo serves in the Funds  Administration group
as a Manager  of the Tax  Group  and is  responsible  for U.S.  mutual  fund tax
matters.  Prior to September 1995, Ms. Rotundo served as a Senior Tax Manager in
the Investment  Company  Services Group of Deloitte & Touche LLP. Her address is
60 Wall Street,  New York,  New York 10260.  Her date of birth is September  26,
1965.

INVESTMENT ADVISOR

         The Fund has not retained the services of an investment adviser because
the Fund seeks to achieve  its  investment  objective  by  investing  all of its
investable  assets in a corresponding  Portfolio.  Subject to the supervision of
the  Portfolio's  Trustees,   the  Advisor  makes  the  Portfolio's   day-to-day
investment decisions,  arranges for the execution of Portfolio  transactions and
generally  manages the Portfolio's  investments.  Effective  October 1, 1998 the
Portfolio's  investment  advisor is JPMIM.  Prior to that  date,  Morgan was the
Portfolio's investment advisor.  JPMIM, a wholly owned subsidiary of J.P. Morgan
& Co. Incorporated ("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 Morgan serves as trustee.


         J.P.  Morgan,  through  the  Advisor  and other  subsidiaries,  acts as
investment advisor to individuals,  governments,  corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of approximately $326 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 120 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, and Singapore to cover companies,  industries and countries on
site. In addition,  the investment management divisions employ approximately 380
capital market researchers,  portfolio managers and traders. The Advisor's fixed
income  investment   process  is  based  on  analysis  of  real  rates,   sector
diversification and quantitative and credit analysis.

         The investment  advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Advisory Agreement. 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  Portfolio.  Such accounts are supervised by employees of the Advisor who
may also be acting in  similar  capacities  for the  Portfolio.  See  "Portfolio
Transactions."


         Morgan,  also a  wholly  owned  subsidiary  of J.P.  Morgan,  is a bank
holding company organized under the laws of the State of Delaware. Morgan, whose
principal offices are at 60 Wall Street, New York, New York 10260, is a New York
trust company which  conducts a general  banking and trust  business.  Morgan is
subject to regulation by the New York State Banking  Department  and is a member
bank of the Federal Reserve System. Through offices in New York City and abroad,
Morgan   offers  a  wide  range  of   services,   primarily   to   governmental,
institutional,  corporate and high net worth individual  customers in the United
States and throughout the world.


         The Portfolio is managed by employees of the Advisor who, in acting for
their  customers,  including  the  Portfolio,  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
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  Investment
Advisory Agreement,  the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.20% of the
Portfolio's  average  daily  net  assets  up to $1  billion  and  0.10%  of  the
Portfolio's average daily net assets in excess of $1 billion.


         The Portfolio paid the following  advisory fees to Morgan and JPMIM, as
applicable,  for the  fiscal  years  ended  August  31,  1997,  1998  and  1999:
$2,267,159, $2,710,567 and $3,052,997.


         The  Investment  Advisory  Agreement  provides that it will continue in
effect for a period of two years after execution only if  specifically  approved
thereafter  annually  in the same  manner  as the  Distribution  Agreement.  See
"Distributor"   below.   The  Investment   Advisory   Agreement  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 and their subsidiaries, 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  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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation  of the  Glass-Steagall  Act  or  other  applicable  banking  laws  or
regulations.  On November 12, 1999, the  Gramm-Leach-Bliley  Act was signed into
law, the relevant provisions of which go into effect March 11, 2000. Until March
11, 2000, federal banking law,  specifically the Glass-Steagall Act and the Bank
Holding Company Act,  generally  prohibits banks and bank holding  companies and
their  subsidiaries,  such as the  Advisor,  from  engaging  in the  business of
underwriting  or distributing  securities.  Pursuant to  interpretations  issued
under these laws by the Board of Governors of the Federal Reserve  System,  such
entities  also may not  sponsor,  organize  or  control  a  registered  open-end
investment company  continuously engaged in the issuance of its shares (together
with  underwriting and distributing  securities,  the "Prohibited  Activities"),
such as the Trust. These laws and interpretations do not prohibit a bank 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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation of the laws in effect until March 11, 2000.  Effective March 11, 2000,
the  sections  of  the   Glass-Steagall  Act  which  prohibited  the  Prohibited
Activities are repealed,  and the Bank Holding  Company Act is amended to permit
bank holding  companies  which satisfy  certain  capitalization,  managerial and
other criteria (the  "Criteria") to engage in the  Prohibited  Activities;  bank
holding  companies  which do not satisfy the  Criteria may continue to engage in
any activity  that was  permissible  for a bank holding  company  under the Bank
Holding  Company  Act as of  November  11,  1999.  Because  the  services  to be
performed for the Portfolio under the Advisory  Agreement were permissible for a
bank holding company as of November 11, 1999, the Advisor  believes that it also
may perform  such  services  after March 11, 2000  whether or not the  Advisor's
parent  satisfies  the  Criteria.  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.


     Under  separate  agreements,   Morgan  provides  certain  financial,   fund
accounting  and  administrative  services  to the  Trust and the  Portfolio  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 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 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.  FDI is a wholly  owned  indirect
subsidiary  of Boston  Institutional  Group,  Inc.  FDI also serves as exclusive
placement agent for the Portfolio.  FDI currently  provides  administration  and
distribution services for a number of other investment companies.

         The Distribution Agreement shall continue in effect with respect to the
Fund for a period of two years after  execution  only if it is approved at least
annually  thereafter  (i) by a vote of the  holders of a majority  of the Fund's
outstanding  shares or by its  Trustees  and (ii) by a vote of a majority of the
Trustees of the Trust who are not  "interested  persons" (as defined by the 1940
Act) of the parties to the Distribution  Agreement,  cast in person at a meeting
called for the purpose of voting on such approval (see "Trustees and Officers").
The  Distribution  Agreement will terminate  automatically if assigned by either
party  thereto  and is  terminable  at any time  without  penalty by a vote of a
majority of the Trustees of the Trust,  a vote of a majority of the Trustees who
are not  "interested  persons"  of the Trust,  or by a vote of the  holders of a
majority  of  the  Fund's   outstanding  shares  as  defined  under  "Additional
Information,"  in any case  without  payment of any penalty on 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  Portfolio
dated  August 1,  1996,  FDI also  serves  as the  Trust's  and the  Portfolio's
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 Portfolio,  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  Portfolio,  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.

         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 marketing and sales literature; (v) files
regulatory  documents  and  mails  Portfolio   communications  to  Trustees  and
investors; and (vi) maintains related books and records.

         For its services under the Co-Administration  Agreements,  the Fund and
Portfolio have 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  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 Fund paid the following  administrative  fees to FDI for the fiscal
period November 4, 1997 (commencement of operations) through August 31, 1998 and
the fiscal year ended August 31, 1999: $28 and $187.

         The  Portfolio  paid the following  administrative  fees to FDI for the
fiscal years ended August 31, 1997, 1998 and 1999: $25,082, $24,913 and $20,175.


SERVICES AGENT

         The Trust,  on behalf of the Fund,  and the Portfolio have entered into
Administrative  Services  Agreements  (the  "Services  Agreements")  with Morgan
pursuant to which Morgan is responsible for certain  administrative  and related
services  provided to the Fund and  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 Services  Agreements,  the Fund and the Portfolio have 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 J.P. Morgan Series Trust in accordance with the following
annual schedule:  0.09% of 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 the 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 J.P. Morgan Series Trust.


         The Fund paid the following  fees paid Morgan as Services Agent for the
fiscal period November 4, 1997  (commencement of operations)  through August 31,
1998 and for the fiscal year ended August 31, 1999: $392 and $3,144.

         The Portfolio paid the following fees paid Morgan as Services Agent for
the fiscal years ended August 31, 1997,  1998 and 1999:  $397,340,  $502,654 and
$542,467.


CUSTODIAN AND TRANSFER AGENT


         State  Street Bank and Trust  Company  ("State  Street"),  225 Franklin
Street,  Boston,  Massachusetts 02110, serves as the Trust's and the Portfolio's
custodian  and fund  accounting  agent  and the  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
transactions and holding portfolio  securities and cash. The custodian maintains
portfolio  transaction records. As transfer agent and dividend disbursing agent,
State Street is  responsible  for  maintaining  account  records  detailing  the
ownership  of Fund  shares and for  crediting  income,  capital  gains and other
changes in share ownership to shareholder accounts.


SHAREHOLDER SERVICING

         The  Trust  on  behalf  of the  Fund  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 a Service  Organization.  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 the 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
Fund's transfer agent; transmitting purchase and redemption orders to the Fund's
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;  monitoring  the  activities  of the Fund's  transfer  agent;  and
providing other related services.

         Under the Shareholder  Servicing Agreement,  the Fund has agreed to pay
Morgan for these services a fee at the annual rate (expressed as a percentage of
the average  daily net asset value of Fund shares  owned by or for  shareholders
for whom Morgan is acting as shareholder  servicing agent) of 0.05%. Morgan acts
as shareholder servicing agent for all shareholders.


         The Fund paid the following shareholder servicing fee to Morgan for the
period November 4, 1997 (commencement of operations) through August 31, 1998 and
for the fiscal year ended August 31, 1999: $696 and $5,935.


         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
and providing  administrative  services to the Fund and the Portfolio  under the
Services  Agreements,  and the  activities  of JPMIM in acting as Advisor to the
Portfolio under the Investment  Advisory  Agreement may raise issues under these
laws.  However,  JPMIM and Morgan  believe that they 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 Fund or the Portfolio  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.

SERVICE ORGANIZATION

         The  Trust,  on  behalf of the Fund,  has  adopted a service  plan (the
"Plan")  with  respect to the shares  which  authorizes  the Fund to  compensate
Service  Organizations  for providing certain account  administration  and other
services to their customers who are beneficial  owners of such shares.  Pursuant
to the Plan,  the Trust,  on behalf of the Fund,  enters  into  agreements  with
Service  Organizations  which  purchase  shares  on  behalf  of their  customers
("Service Agreements"). Under such Service Agreements, the Service Organizations
may: (a) act,  directly or through an agent,  as the sole  shareholder of record
and nominee for all  customers,  (b) maintain or assist in  maintaining  account
records for each  customer  who  beneficially  owns  shares,  and (c) process or
assist in processing  customer orders to purchase,  redeem and exchange  shares,
and handle or assist in handling  the  transmission  of funds  representing  the
customers'  purchase  price or redemption  proceeds.  As  compensation  for such
services,  the Trust on behalf of the Fund  pays  each  Service  Organization  a
service  fee in an amount up to 0.25% (on an  annualized  basis) of the  average
daily net assets of the shares of the Fund  attributable  to or held in the name
of such Service  Organization for its customers (0.20% where J.P. Morgan acts as
a service organization).

         Conflicts of interest  restrictions  (including the Employee Retirement
Income  Security Act of 1974) may apply to a Service  Organization's  receipt of
compensation  paid by the Trust in connection  with the  investment of fiduciary
funds  in  shares.  Service  Organizations,  including  banks  regulated  by the
Comptroller of the Currency,  the Federal  Reserve Board or the Federal  Deposit
Insurance Corporation,  and investment advisers and other money managers subject
to the jurisdiction of the Securities and Exchange Commission, the Department of
Labor or state  securities  commissions,  are urged to  consult  legal  advisers
before  investing  fiduciary  assets in shares.  In  addition,  under some state
securities laws,  banks and other financial  institutions  purchasing  shares on
behalf of their customers may be required to register as dealers.

         The Trustees of the Trust, including a majority of Trustees who are not
interested  persons  of the Trust and who have no direct or  indirect  financial
interest  in the  operation  of such  Plan or the  related  Service  Agreements,
initially  voted to approve the Plan and Service  Agreements at a meeting called
for the purpose of voting on such Plan and Service  Agreements on April 9, 1997.
The Plan was approved by the initial  shareholders of each Fund on June 3, 1997,
remains in effect  until July 10, 1998 and will  continue  in effect  thereafter
only if such  continuance  is  specifically  approved  annually by a vote of the
Trustees in the manner  described above. The Plan may not be amended to increase
materially  the amount to be spent for the services  described  therein  without
approval of the  shareholders  of the Fund,  and all material  amendments of the
Plan must also be approved by the Trustees in the manner  described  above.  The
Plan may be  terminated  at any time by a majority of the  Trustees as described
above or by vote of a  majority  of the  outstanding  shares  of the  Fund.  The
Service  Agreements  may be  terminated  at any  time,  without  payment  of any
penalty, by vote of a majority of the disinterested  Trustees as described above
or by a vote of a  majority  of the  outstanding  shares of the Fund on not more
than 60 days' written notice to any other party to the Service  Agreements.  The
Service  Agreements shall terminate  automatically  if assigned.  So long as the
Plans are in effect,  the selection and nomination of those Trustees who are not
interested  persons  shall be determined  by the  non-interested  members of the
Board of Trustees.  The Trustees have determined that, in their judgment,  there
is a  reasonable  likelihood  that the Plan  will  benefit  the  Funds  and Fund
shareholders.  In the  Trustees'  quarterly  review  of  the  Plan  and  Service
Agreements,  they will consider their continued appropriateness and the level of
compensation provided therein.

INDEPENDENT ACCOUNTANTS

         The  independent  accountants  of  the  Trust  and  the  Portfolio  are
PricewaterhouseCoopers  LLP,  1177 Avenue of the  Americas,  New York,  New York
10036.  PricewaterhouseCoopers  LLP  conducts an annual  audit of the  financial
statements  of the Fund and the  Portfolio,  assists in the  preparation  and/or
review of the Fund's and the  Portfolio's  federal and state  income tax returns
and consults  with the Fund and the  Portfolio as to matters of  accounting  and
federal and state income taxation.

EXPENSES

         In addition to the fees payable to Pierpont Group, Inc., JPMIM,  Morgan
and FDI under  various  agreements  discussed  under  "Trustees  and  Officers,"
"Investment Advisor,"  "Co-Administrator",  "Distributor",  "Services Agent" and
"Shareholder  Servicing"  above,  the Fund and the Portfolio are responsible for
usual and customary expenses associated with their respective  operations.  Such
expenses  include  organization  expenses,  legal  fees,  accounting  and  audit
expenses,  insurance costs, the compensation and expenses of the Trustees, costs
associated  with their  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  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
Portfolio, such expenses also include custodian fees. For additional information
regarding waivers or expense subsidies, see the Prospectus.


         J.P.  Morgan has agreed that it will  reimburse the Fund until February
28, 2001 to the extent necessary to 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  assets.  This  limit  does not  cover
extraordinary expenses.

         J.P.  Morgan  reimbursed the following in fees and other expenses under
the expense reimbursement arrangement described above for the period November 3,
1997  (commencement  of  operations)  through August 31, 1998 and for the fiscal
year ended August 31, 1999: $72,847 and $77,179.


PURCHASE OF SHARES


         Additional Minimum Balance  Information.  If your account balance falls
below the minimum for 30 days as a result of selling  shares (and not because of
performance), the Fund reserves the right to request that you buy more shares or
close your account.  If your account  balance is still below the minimum 60 days
after  notification,  the Fund  reserves the right to close out your account and
send the proceeds to the address of record.


         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  instructions  relating to a Fund account from Morgan as  shareholder
servicing  agent for the customer.  All purchase  orders must be accepted by the
Distributor.  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.

         References  in  the   Prospectus   and  this  Statement  of  Additional
Information to customers of Morgan or a Service  Organization  include customers
of their affiliates and references to transactions by customers with Morgan or a
Service  Organization  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
the Fund may make transactions in shares of the Fund.

         The 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 the Advisor, appropriate
investments for the Portfolio.  In addition,  securities accepted in payment for
shares must:  (i) meet the  investment  objective and policies of the Portfolio;
(ii) be acquired by the Fund for  investment  and not for resale (other than for
resale  to the  Portfolio);  and  (iii)  be  liquid  securities  which  are  not
restricted  as to  transfer  either  by law or  liquidity  of  market.  The 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 a
Service Organization, and the Service Organization may charge the investor a fee
for this service and other services it provides to its customers.


<PAGE>



REDEMPTION OF SHARES

         Investors   may  redeem   shares  as  described   in  the   Prospectus.
Shareholders redeeming shares of the Fund should be aware that the Fund attempts
to maintain a stable net asset value of $1.00 per share;  however,  there can be
no assurance that it will be able to continue to do so, and in that case the net
asset  value  of  the  Fund's   shares  might  deviate  from  $1.00  per  share.
Accordingly,  a redemption  request  might result in payment of a dollar  amount
which differs from the number of shares redeemed. See "Net Asset Value" below.

         If the Trust,  on behalf of the Fund, and the Portfolio  determine that
it would be  detrimental to the best interest of the remaining  shareholders  of
the 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 the Fund,  has  elected to be governed by Rule 18f-1 under the 1940
Act pursuant to which the Portfolio is 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  Portfolio
and therefore  shareholders  of the Fund that receive  redemptions  in kind will
receive  securities of the  Portfolio.  The Portfolio has advised the Trust that
the Portfolio will not redeem in kind except in  circumstances in which the Fund
is permitted to redeem in kind.

         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
shareholder's  taxpayer  identification  number and address.  In addition,  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  proceeds
from the shares will occur upon  clearance  of the check which may take up to 15
days. The Trust,  on behalf of the Fund, and the Portfolio  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 the Fund into shares of any other
J.P.  Morgan  Institutional  or J.P.  Morgan  mutual fund,  without  charge.  An
exchange may be made so long as after the  exchange the investor has shares,  in
each fund in which he or she remains an investor,  with a value of at least 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 accounts
that are  registered  in the same  name,  address  and  taxpayer  identification
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 another fund
and the usual purchase and redemption procedures and requirements are applicable
to exchanges.  The Fund generally  intends to pay  redemption  proceeds in cash,
however,  since it reserves the right at its sole  discretion to pay redemptions
over $250,000 in-kind as a portfolio of representative securities rather than in
cash, the Fund reserves the right to deny an exchange  request in excess of that
amount. See "Redemption of Shares".  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.  Shares of the Fund to be acquired
are purchased for settlement when the proceeds from redemption become available.
The  Trust  reserves  the  right to  discontinue,  alter or limit  the  exchange
privilege at any time.


DIVIDENDS AND DISTRIBUTIONS

         The Fund declares and pays dividends and  distributions as described 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


         The Fund  computes  its net asset  value once  daily on Monday  through
Friday as described 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, Columbus Day, Veterans Day, Thanksgiving Day, and Christmas Day.
In the event that trading in the money  markets is scheduled to end earlier than
the close of the New York Stock  Exchange in observance of these  holidays,  the
Fund and Portfolio  would expect to close for purchases and  redemptions an hour
in  advance  of the end of  trading  in the  money  markets.  The  Fund  and the
Portfolio 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. On any business  day when the Bond Market  Association  ("BMA")  recommends
that the  securities  market close early,  the Fund  reserves the right to cease
accepting  purchase and  redemption  orders for same  business day credit at the
time BMA recommends  that the securities  market close.  On days the Fund closes
early,  purchase and  redemption  orders  received after the Fund closes will be
credited the next  business day. The days on which net asset value is determined
are the Fund's business days.


         The net  asset  value of the Fund is equal to the  value of the  Fund's
investment in the Portfolio  (which is equal to the Fund's pro rata share of the
total  investment of the Fund and of any other  investors in the Portfolio  less
the  Fund's  pro rata  share of the  Portfolio's  liabilities)  less the  Fund's
liabilities.  The  following  is a  discussion  of the  procedures  used  by the
Portfolio in valuing its assets.

         The Portfolio's  portfolio  securities are valued by the amortized cost
method.  The purpose of this method of  calculation  is to attempt to maintain a
constant net asset value per share of the Fund of $1.00.  No  assurances  can be
given that this goal can be  attained.  The  amortized  cost method of valuation
values a security at its cost at the time of purchase and  thereafter  assumes a
constant amortization to maturity of any discount or premium,  regardless of the
impact of fluctuating interest rates on the market value of the instrument. If a
difference  of  more  than  1/2 of 1%  occurs  between  valuation  based  on the
amortized  cost method and valuation  based on market  value,  the Trustees will
take steps  necessary  to reduce such  deviation,  such as  changing  the Fund's
dividend policy,  shortening the average portfolio maturity,  realizing gains or
losses,  or reducing the number of  outstanding  Fund shares.  Any  reduction of
outstanding shares will be effected by having each shareholder contribute to the
Fund's capital the necessary  shares on a pro rata basis.  Each shareholder will
be deemed to have  agreed to such  contribution  in these  circumstances  by his
investment in the Fund. See "Taxes."

PERFORMANCE DATA

         From time to time,  the Fund 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 Fund may be obtained by calling the number  provided on the
cover page of this Statement of Additional Information.

         Yield Quotations.  As required by regulations of the SEC, current yield
for the Fund is  computed by  determining  the net change  exclusive  of capital
changes in the value of a hypothetical  pre-existing account having a balance of
one share at the  beginning  of a seven-day  calendar  period,  dividing the net
change in account  value of the  account at the  beginning  of the  period,  and
multiplying the return over the seven-day  period by 365/7.  For purposes of the
calculation, net change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends  declared on both
the original share and any such additional shares, but does not reflect realized
gains or losses or unrealized appreciation or depreciation.  Effective yield for
the Fund is computed by  annualizing  the  seven-day  return with all  dividends
reinvested in additional  Fund shares.  The tax equivalent  yield is computed by
first  computing  the yield as  discussed  above.  Then the portion of the yield
attributable to securities the income of which was exempt for federal income tax
purposes is  determined.  This portion of the yield is then divided by one minus
the stated assumed federal income tax rate for individuals and then added to the
portion of the yield that is not attributable to securities, the income of which
was tax exempt.

         Below  is set  forth  historical  yield  information  for  the  periods
indicated:


     The  historical  yield  information of the Fund for the period ended August
31, 1999 is as follows:  7-day current yield:  2.77%; 7-day tax equivalent yield
at 39.6% tax rate: 4.59%; 7-day effective yield: 2.80%.


         Total return quotations. Historical performance information for periods
prior to the establishment of the Fund will be that of its related series of the
J.P.  Morgan Funds and will be presented in accordance with applicable SEC staff
interpretations.  The  applicable  financial  information  in  the  registration
statement for the J.P. Morgan Funds  (Registration Nos. 033-54632 and 811-07340)
is incorporated herein by reference.

         The  historical   performance   information  shown  below  may  reflect
operating expenses which were lower than those of the Fund. These returns may be
higher  than would  have  occurred  if an  investment  had been made  during the
periods indicated in the Fund.


     Historical  return  information  for the Fund's  related series of the J.P.
Morgan Funds for the years ended August 31, 1999 is as follows:  Average  annual
total  return,  1 year:  2.78%;  Average  annual total return,  5 years:  3.25%;
average annual total return,  10 years:  3.41%;  aggregate total return, 1 year:
2.78%;  aggregate total return,  5 years:  17.35%;  aggregate  total return,  10
years: 39.82%.


         Aggregate total returns,  reflecting the cumulative  percentage  change
over a measuring period, may also be calculated.

         General.  The Fund's  performance will vary from time to time depending
upon market  conditions,  the  composition of the  Portfolio,  and its operating
expenses. Consequently, any given performance quotation should not be considered
representative of the 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 the  Fund  with  certain  bank  deposits  or other
investments that pay a fixed yield or return for a stated period of time.


         Comparative  performance  information  may be used from time to time in
advertising the Fund's shares, including appropriate market indices or data from
Lipper  Analytical  Services,   Inc.,   Micropal,   Inc.,  Ibbotson  Associates,
Morningstar   Inc.,  the  Dow  Jones  Industrial   Average  and  other  industry
publications.


         From time to time,  the Fund may, in addition to any other  permissible
information,  include the  following  types of  information  in  advertisements,
supplemental  sales literature and reports to  shareholders:  (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost  averaging);  (2)  discussions  of general  economic
trends;  (3)  presentations of statistical data to supplement such  discussions;
(4)  descriptions  of past or anticipated  portfolio  holdings for the Fund; (5)
descriptions  of  investment  strategies  for  the  Fund;  (6)  descriptions  or
comparisons  of various  savings and  investment  products  (including,  but not
limited to, qualified  retirement plans and individual stocks and bonds),  which
may or may  not  include  the  Fund;  (7)  comparisons  of  investment  products
(including  the  Fund)  with  relevant  markets  or  industry  indices  or other
appropriate  benchmarks;   (8)  discussions  of  Fund  rankings  or  ratings  by
recognized  rating  organizations;  and (9)  discussions of various  statistical
methods  quantifying the Fund's volatility  relative to its benchmark or to past
performance,  including  risk  adjusted  measures.  The Fund  may  also  include
calculations,   such  as  hypothetical   compounding  examples,  which  describe
hypothetical  investment  results  in  such  communications.   Such  performance
examples will be based on an express set of  assumptions  and are not indicative
of the performance of the Fund.

PORTFOLIO TRANSACTIONS

     The Advisor  places orders for the Portfolio 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 the Portfolio. See "Investment Objectives and Policies."

         Fixed  income and debt  securities  and  municipal  bonds and notes are
generally  traded at a net price with dealers  acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings,  securities are purchased at a
fixed  price  which  includes  an amount  of  compensation  to the  underwriter,
generally referred to as the underwriter's  concession or discount. On occasion,
certain  securities may be purchased  directly from an issuer,  in which case no
commissions or discounts are paid.

         Portfolio transactions for the Portfolio will be undertaken principally
to accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio may engage in short-term  trading
consistent  with its  objective.  See  "Investment  Objective  and  Policies  --
Portfolio  Turnover."  The Portfolio  will not seek profits  through  short-term
trading,  but the Portfolio may dispose of any portfolio  security  prior to its
maturity if it believes  such  disposition  is  appropriate  even if this action
realizes profits or losses.

         In  connection  with  portfolio  transactions  for the  Portfolio,  the
Advisor intends to seek the best price and execution on a competitive  basis for
both purchases and sales of securities.

         The  Portfolio  has a  policy  of  investing  only in  securities  with
maturities of not more than thirteen months, which will result in high portfolio
turnover. Since brokerage commissions are not normally paid on investments which
the  Portfolio  makes,  turnover  resulting  from such  investments  should  not
adversely affect the net asset value or net income of the Portfolio.

         Subject to the  overriding  objective  of obtaining  best  execution of
orders,  the  Advisor  may  allocate  a  portion  of the  Portfolio's  brokerage
transactions  to  affiliates  of the  Advisor.  In order for  affiliates  of the
Advisor to effect any portfolio transactions for the 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 the 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  Portfolio  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 the 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 the  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 the Portfolio.  In some instances,
this procedure might adversely affect the Portfolio.


<PAGE>


MASSACHUSETTS TRUST

         The  Trust  is  a  trust  fund  of  the  type   commonly   known  as  a
"Massachusetts  business  trust" of which the 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  January 1, 1998, the name of the Trust was changed from "The
JPM Institutional  Funds" to "J.P. Morgan  Institutional  Funds," and the Fund's
name changed 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 the  Fund  and that  every
written agreement,  obligation,  instrument or undertaking made on behalf of the
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 Fund.

         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 the Fund is liable to
the 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 the Fund,
except  as such  liability  may  arise  from his or its own bad  faith,  willful
misfeasance, gross negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall look solely to Fund
property for  satisfaction  of claims arising in connection  with the affairs of
the 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 the 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.


<PAGE>


DESCRIPTION OF SHARES

     The Trust is an  open-end  management  investment  company  organized  as a
Massachusetts  business trust in which the 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 the Fund (or in the assets of other series,  if applicable).
Each share represents an equal proportional interest in the Fund with each other
share.  Upon liquidation of the Fund,  holders are entitled to share pro rata in
the net assets of the Fund available for distribution to such shareholders.  See
"Massachusetts  Trust."  Shares of the 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 one vote for each dollar
of  net  asset  value  (or a  proportionate  fractional  vote  in  respect  of a
fractional  dollar  amount),  on  matters  on which  shares of the Fund shall be
entitled to vote.  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 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 22 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.

         For  information  relating to  mandatory  redemption  of Fund shares or
their redemption at the option of the Trust under certain circumstances, see the
Prospectus.


     As of November 30, 1999, the following  owned of record more than 5% of the
outstanding shares of the Fund: Hare & Co. (100.00%).


         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 the Fund.

SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE

         Unlike other mutual funds which  directly  acquire and manage their own
portfolio 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 Master  Portfolio,  a separate  registered  investment
company with the same investment objective and policies as the Fund.  Generally,
when a  Master  Portfolio  seeks  a vote  to  change  a  fundamental  investment
restriction,  its feeder  fund(s) will hold a  shareholder  meeting and cast its
vote proportionately,  as instructed by its shareholders.  Fund shareholders are
entitled  to one vote for each  dollar  of net asset  value (or a  proportionate
fractional vote in respect of a fractional  dollar amount),  on matters on which
shares of the Fund shall be entitled to vote.

         In addition to selling a beneficial interest to the Fund, the Portfolio
may sell beneficial interests to other mutual funds or institutional  investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will bear a proportionate share of the Portfolio's expenses.  However, the other
investors  investing in the  Portfolio may sell shares of their own fund using a
different pricing structure than the Fund. Such different pricing structures may
result in  differences  in returns  experienced by investors in other funds that
invest in the  Portfolio.  Such  differences in returns are not uncommon and are
present in other mutual fund structures. Information 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
investment objective and restrictions in accordance with the investment policies
with respect to the Portfolio described above and in the Fund's prospectus.

         Certain changes in the Portfolio's  fundamental  investment policies or
restrictions,  or a failure by the Fund's shareholders to approve such change in
the Portfolio's  investment  restrictions,  may require withdrawal of the Fund's
interest in the Portfolio. Any such withdrawal could result in a distribution 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 actions 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.

         Additionally, because the Portfolio would become smaller, it may become
less diversified,  resulting in potentially  increased  portfolio risk (however,
these  possibilities  also exist for  traditionally  structured funds which have
large or institutional investors who may withdraw from a fund). Also, funds with
a greater  pro rata  ownership  in the  Portfolio  could have  effective  voting
control of the  operations of the  Portfolio.  Whenever the Fund is requested to
vote on matters  pertaining to the  Portfolio  (other than a vote by the Fund to
continue the operation of the Portfolio upon the withdrawal of another  investor
in the Portfolio), the Trust will hold a meeting of shareholders of the Fund and
will  cast  all  of its  votes  proportionately  as  instructed  by  the  Fund's
shareholders.  The Trust will vote the shares held by Fund  shareholders  who do
not give  voting  instructions  in the same  proportion  as the  shares  of Fund
shareholders  who do give voting  instructions.  Shareholders of the Fund who do
not vote will have no affect on the outcome of such matters.

TAXES


         The following  discussion of tax  consequences is based on U.S. federal
tax laws in  effect on the date of this  Statement  of  Additional  Information.
These  laws  and   regulations   are  subject  to  change  by   legislative   or
administrative action, possibly on a retroactive basis.


         The Fund  intends  to  qualify  and  remain  qualified  as a  regulated
investment  company under  Subchapter M of the Code.  As a regulated  investment
company, the 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;  and (b) diversify its
holdings so that, at the end of each fiscal  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,  investments 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).  As a  regulated  investment  company,  the 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,  the 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. The 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 the
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  generally
will be taxable to a shareholder in the year declared rather than the year paid.

         The Fund  intends to qualify to pay  exempt-interest  dividends  to its
shareholders  by having,  at the close of each quarter of its taxable  year,  at
least 50% of the value of its total assets consist of tax exempt securities.  An
exempt-interest dividend is that part of dividend distributions made by the Fund
which is properly  designated as consisting of interest  received by the Fund on
tax exempt securities. Shareholders will not incur any federal income tax on the
amount of  exempt-interest  dividends received by them from the Fund, other than
the alternative minimum tax under certain  circumstances.  In view of the Fund's
investment policies,  it is expected that a substantial portion of all dividends
will be  exempt-interest  dividends,  although  the Fund  may from  time to time
realize and  distribute  net  short-term  capital  gains and may invest  limited
amounts in taxable securities under certain circumstances.

         Distributions  of net  investment  income and realized  net  short-term
capital  gains in  excess of net  long-term  capital  loss  (other  than  exempt
interest  dividends)  are  generally  taxable  to  shareholders  of the  Fund as
ordinary  income whether such  distributions  are taken in cash or reinvested in
additional shares.  Distributions to corporate  shareholders of the Fund are not
eligible for the dividends  received  deduction.  Distributions of net long-term
capital  gains (i.e.,  net  long-term  capital gain in excess of net  short-term
capital  loss) are  taxable to  shareholders  of the Fund as  long-term  capital
gains,  regardless of whether such distributions are taken in cash or reinvested
in additional shares and regardless of how long a shareholder has held shares in
the Fund. In general,  long-term capital gain of an individual  shareholder will
be subject to a 20% rate of tax.

         To maintain a constant $1.00 per share net asset value, the Trustees of
the Trust may direct that the number of outstanding  shares be reduced pro rata.
If this  adjustment is made, it will reflect the lower market value of portfolio
securities and not realized  losses.  The adjustment may result in a shareholder
having more  dividend  income than net income in his account for a period.  When
the number of outstanding shares of the Fund is reduced, the shareholder's basis
in the shares of the Fund may be  adjusted  to reflect  the  difference  between
taxable income and net dividends  actually  distributed.  This difference may be
realized as a capital  loss when the shares are  liquidated.  Subject to certain
limited exceptions, capital losses cannot be used to offset ordinary income. See
"Net Asset Value."


         Gains or losses on sales of  portfolio  securities  will be  treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where, if applicable,  a put option is acquired
or a call option is written thereon or straddle rules are otherwise  applicable.
Other gains or losses on the sale of securities will be short-term capital gains
or losses.  Gains and losses on the sale, lapse or other  termination of options
on securities  will be treated as gains and losses from the sale of  securities.
If an option written by the 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 the
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.


         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
reduced  below a  shareholder's  cost as a result  of such a  distribution,  the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described above.

         Any gain or loss realized on the  redemption or exchange of Fund shares
by a shareholder  who is not a dealer in securities will be treated as long-term
capital  gain or loss if the shares  have been held for more than one year,  and
otherwise  as  short-term  capital  gain or loss.  Long-term  capital gain of an
individual  holder is  subject  to maximum  tax rate of 20%.  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.  Investors  are urged to consult their tax advisors
concerning the limitations on the deductibility of capital losses. Additionally,
any loss  realized  on a  redemption  or  exchange of shares of the Fund will be
disallowed to the extent the shares  disposed of are replaced by securities that
are  substantially  identical  to shares of the Fund  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.

         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.

         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,  the 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 (or any successor form) is
provided.  Transfers by gift of shares of the 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.


         State and Local Taxes.  The 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 the Fund and its shareholders in those states which have income
tax laws  might  differ  from  treatment  under  the  federal  income  tax laws.
Shareholders  should consult their own tax advisors with respect to any state or
local taxes.

         Other  Taxation.  The Trust is  organized as a  Massachusetts  business
trust and,  under current law,  neither the Trust nor the Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts,  provided that the
Fund continues to qualify as a regulated  investment  company under Subchapter M
of the Code.  The  Portfolio is organized as a New York trust.  The Portfolio is
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 the
Fund in the  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 Fund, J.P.  Morgan or Service  Organizations  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 1940 Act and the  Portfolio's
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  Fund or the  Distributor.  The  Prospectus  and this  Statement  of
Additional  Information  do  not  constitute  an  offer  by the  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.

The Year 2000 Initiative


         With  the  new  millennium  rapidly  approaching,   organizations  have
continued  to  examine  their  computer  systems  to  ensure  they are year 2000
compliant.  The issue, in simple terms, is that many existing  computer  systems
use only two  numbers to  identify a year in the date field with the  assumption
that the first two  digits  are  always  "19." As the  century is implied in the
date, on January 1, 2000, computers that are not year 2000 compliant will assume
the year is 1900. Systems that calculate,  compare,  or sort using the incorrect
date will cause erroneous results, ranging from system malfunctions to incorrect
or incomplete transaction processing.  If not remedied,  potential risks include
business interruption or shutdown, financial loss, reputation loss, and/or legal
liability.

         J.P.  Morgan has  undertaken a firmwide  initiative to address the year
2000 issue and has developed a  comprehensive  plan to prepare,  as appropriate,
its  computer  systems.   Each  business  line  has  taken   responsibility  for
identifying  and fixing the  problem  within its own area of  operation  and for
addressing  all  interdependencies.  A  multidisciplinary  team of internal  and
external experts supports the business teams by providing direction and firmwide
coordination.  Working together,  the business and multidisciplinary  teams have
completed a thorough  education and awareness  initiative and a global inventory
and  assessment  of  J.P.  Morgan's  technology  and  application  portfolio  to
understand  the scope of the year 2000 impact at J.P.  Morgan.  J.P.  Morgan has
renovated and tested these  technologies  and  applications in partnership  with
external consulting and software development organizations, as well as with year
2000 tool  providers.  J.P.  Morgan has also worked with key  external  parties,
including clients, counterparties,  vendors, exchanges, depositories, utilities,
suppliers,  agents and regulatory agencies, to stem the potential risks the year
2000 problem poses to J.P.  Morgan and to the global  financial  community.  For
potential  failure  scenarios  where the risks are deemed  significant and where
such risk is considered to have a higher probability of occurrence,  J.P. Morgan
has developed business  recovery/contingency  plans. These plans will define the
infrastructure  that  should be put in place for  managing a failure  during the
millennium event itself.

         Costs associated with efforts to prepare J.P.  Morgan's systems for the
year 2000  approximated  $93.3 million in 1997, $132.7 million in 1998 and $36.6
million  for the first  eight  months of 1999.  J.P.  Morgan is  continuing  its
efforts  to prepare  its  systems  for the year  2000.  The total cost to become
year-2000  compliant is estimated at $300 million (for firmwide systems upgrade,
not just for systems relating to mutual funds),  for internal systems renovation
and testing, testing equipment, and both internal and external resources working
on the  project.  The costs  associated  with  J.P.  Morgan  becoming  year-2000
compliant will be borne by J.P. Morgan and not the Funds.


FINANCIAL STATEMENTS


         The    financial    statements    and    the    report    thereon    of
PricewaterhouseCoopers  LLP are incorporated herein by reference from the Fund's
August 31,  1999  annual  report  filing  made with the SEC on October  29, 1999
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder  (Accession
Number  0000912057-99-002835).  The financial  statements are available  without
charge upon request by calling J.P. Morgan Funds Services at (800) 766-7722. The
Fund's financial statements include the financial statements of the Portfolio.






<PAGE>



APPENDIX A
Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA  - Debt rated AAA have 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 have a very  strong  capacity  to pay  interest  and repay
     principal and differ from the highest rated issues only in a small degree.

A    - Debt rated A have a strong  capacity to pay interest and repay  principal
     although  they are  somewhat  more  susceptible  to the adverse  effects of
     changes in circumstances and economic  conditions than debt in higher rated
     categories.

BBB  - Debt  rated  BBB are  regarded  as  having an  adequate  capacity  to pay
     interest  and  repay  principal.   Whereas  it  normally  exhibit  adequate
     protection   parameters,    adverse   economic   conditions   or   changing
     circumstances  are  more  likely  to lead  to a  weakened  capacity  to pay
     interest and repay  principal  for debt in this  category  than for debt in
     higher rated categories.

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.


<PAGE>


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.
     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.

- --------
         1Pursuant  to an  interpretation  of the staff of the SEC, the Fund may
         not invest more than 25% of its assets in industrial  development bonds
         in projects of similar type or in the same state. The Fund shall comply
         with this  interpretation  until such time as it may be modified by the
         staff  of the  SEC.  2For  purposes  of  interpretation  of  Investment
         Restriction  No. 4  "guaranteed  by  another  entity"  includes  credit
         substitutions,  such as  letters  of credit or  insurance,  unless  the
         Advisor  determines that the security meets the Fund's credit standards
         without regard to the credit substitution.


         3Mr.  Healey is an "interested  person" (as defined in the 1940 Act) of
         the Trust. Mr. Healey is also an "interested person" (as defined in the
         1940 Act) of the Advisor due to his son's affiliation with JPMIM.

<PAGE>







                         J.P. MORGAN INSTITUTIONAL FUNDS


            J.P. MORGAN INSTITUTIONAL SERVICE PRIME MONEY MARKET FUND
          J.P. MORGAN INSTITUTIONAL SERVICE TREASURY MONEY MARKET FUND
           J.P. MORGAN INSTITUTIONAL SERVICE FEDERAL MONEY MARKET FUND









                       STATEMENT OF ADDITIONAL INFORMATION


                                DECEMBER 30, 1999



















THIS  STATEMENT OF  ADDITIONAL  INFORMATION  IS NOT A  PROSPECTUS,  BUT CONTAINS
ADDITIONAL  INFORMATION  WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
DATED DECEMBER 30, 1999 FOR THE FUND OR FUNDS LISTED ABOVE, AS SUPPLEMENTED FROM
TIME  TO  TIME.   ADDITIONALLY,   THIS   STATEMENT  OF  ADDITIONAL   INFORMATION
INCORPORATES BY REFERENCE THE FINANCIAL  STATEMENTS  INCLUDED IN THE SHAREHOLDER
REPORTS  RELATING  TO THE FUNDS  LISTED  ABOVE  DATED  OCTOBER 31, 1998 (FOR THE
TREASURY  MONEY MARKET FUND AND THE FEDERAL  MONEY MARKET FUND) AND NOVEMBER 30,
1998 (FOR THE PRIME MONEY  MARKET  FUND).  THE  PROSPECTUS  AND THESE  FINANCIAL
STATEMENTS FOR THE FUNDS LISTED ABOVE,  INCLUDING THE  INDEPENDENT  ACCOUNTANTS'
REPORTS  THEREON,  ARE  AVAILABLE,  WITHOUT  CHARGE,  UPON  REQUEST  FROM  FUNDS
DISTRIBUTOR,  INC.,  ATTENTION:  J.P. MORGAN  INSTITUTIONAL  SERVICE FUNDS (800)
221-7930.



<PAGE>



                                Table of Contents



                                                                  Page
General..............................................................1
Investment Objectives and Policies...................................1
Investment Restrictions..............................................9
Trustees and Officers...............................................14
Investment Advisor..................................................18
Distributor.........................................................21
Co-Administrator....................................................21
Services Agent......................................................22
Custodian and Transfer Agent........................................23
Shareholder Servicing...............................................24
Service Organization................................................25
Independent Accountants.............................................26
Expenses............................................................26
Purchase of Shares..................................................27
Redemption of Shares................................................28
Exchange of Shares..................................................29
Dividends and Distributions.........................................29
Net Asset Value.....................................................29
Performance Data....................................................30
Portfolio Transactions..............................................32
Massachusetts Trust.................................................33
Description of Shares...............................................34
Special Information Concerning
Investment Structure................................................36
Taxes...............................................................37
Additional Information..............................................40
Financial Statements................................................42
Appendix A - Description of Security Ratings.......................A-1




<PAGE>




GENERAL

         This  Statement  of  Additional  Information  relates  only to the J.P.
Morgan   Institutional   Service  Prime  Money  Market  Fund,  the  J.P.  Morgan
Institutional   Service   Treasury  Money  Market  Fund  and  the  J.P.   Morgan
Institutional   Service   Federal   Money  Market  Fund  (each,   a  "Fund"  and
collectively,  the  "Funds").  Each Fund is a series  of  shares  of  beneficial
interest  of  the  J.P.  Morgan  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 "J.P.  Morgan  Institutional  Fund").  The other J.P.
Morgan  Institutional  Funds are covered by separate  Statements  of  Additional
Information.


         This  Statement  of  Additional  Information  describes  the  financial
history, investment objective and policies,  management and operation of each of
the Funds and  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.


         Unlike other mutual funds which  directly  acquire and manage their own
portfolio of securities,  each Fund seeks to achieve its investment objective by
investing all of its investable assets in a corresponding  Master Portfolio (the
"Portfolio"),  a corresponding open-end management investment company having the
same investment  objective as the Fund. Each Fund invests in a Portfolio through
a two-tier  master-feeder  investment fund structure.  See "Special  Information
Concerning Investment Structure."

     Each  Portfolio  is  advised  by J.P.  Morgan  Investment  Management  Inc.
("JPMIM" or the "Advisor").

         Investments in a Fund are not deposits or obligations of, or guaranteed
or endorsed  by,  Morgan  Guaranty  Trust  Company of New York,  ("Morgan"),  an
affiliate of the Advisor,  or any other bank. Shares of a Fund are not federally
insured by the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other  governmental  agency.  An  investment in a Fund is subject to risk
that may cause the value of the investment to fluctuate, and when the investment
is  redeemed,  the  value  may be higher  or lower  than the  amount  originally
invested by the investor.

INVESTMENT OBJECTIVES AND POLICIES


         The following  discussion  supplements  the  information  regarding the
investment objective of each Fund and the policies to be employed to achieve the
objective  by  each  Portfolio  as  set  forth  herein  and  in  the  applicable
Prospectus. The investment objectives of each Fund and the investment objectives
of its corresponding Portfolio are identical. Accordingly, references below to a
Portfolio also include the corresponding Fund;  similarly,  references to a Fund
also include the corresponding Portfolio unless the context requires otherwise.


         J.P. Morgan  Institutional  Service Prime Money Market Fund (the "Prime
Money Market  Fund") is designed  for  investors  who seek high  current  income
consistent  with the  preservation  of capital  and  same-day  liquidity  from a
portfolio  of high  quality  money  market  instruments.  The Prime Money Market
Fund's  investment  objective is to maximize current income  consistent with the
preservation  of capital and  same-day  liquidity.  The Prime Money  Market Fund
attempts to achieve this objective by investing all of its investable  assets in
The Prime Money Market  Portfolio  (the  "Portfolio"),  a  diversified  open-end
management  investment company having the same investment objective as the Prime
Money Market Fund.

         The Portfolio seeks to achieve its investment  objective by maintaining
a  dollar-weighted  average  portfolio  maturity of not more than 90 days and by
investing in U.S. dollar denominated  securities  described in this Statement of
Additional Information that meet certain rating criteria, present minimal credit
risk  and have  effective  maturities  of not more  than  thirteen  months.  The
Portfolio's  ability to achieve  maximum  current income is affected by its high
quality standards. See "Quality and Diversification Requirements."

         J.P.  Morgan  Institutional  Service  Treasury  Money  Market Fund (the
"Treasury  Money Market  Fund") is designed for  investors who seek high current
income consistent with the preservation of capital and same-day liquidity from a
portfolio of high quality money market  instruments.  The Treasury  Money Market
Fund's  investment  objective is to provide current income,  consistent with the
preservation of capital and same-day  liquidity.  The Treasury Money Market Fund
attempts to accomplish this objective by investing all of its investable  assets
in The Treasury Money Market Portfolio (the "Portfolio"), a diversified open-end
management  investment  company  having  the same  investment  objective  as the
Treasury Money Market Fund.

         The  Portfolio   attempts  to  achieve  its  investment   objective  by
maintaining a  dollar-weighted  average  portfolio  maturity of not more than 90
days  and by  investing  in U.S.  Treasury  securities  and  related  repurchase
agreement  transactions as described in this Statement of Additional Information
that have effective  maturities of not more than thirteen  months.  See "Quality
and Diversification Requirements."

         J.P.  Morgan  Institutional  Service  Federal  Money  Market  Fund (the
"Federal  Money Market  Fund") is designed for  investors  who seek high current
income consistent with the preservation of capital and same-day liquidity from a
portfolio of high quality  money market  instruments.  The Federal  Money Market
Fund's  investment  objective is to provide current income,  consistent with the
preservation  of capital and same-day  liquidity.  The Federal Money Market Fund
attempts to accomplish this objective by investing all of its investable  assets
in The Federal Money Market Portfolio (the "Portfolio"),  a diversified open-end
management  investment  company  having  the same  investment  objective  as the
Federal Money Market Fund.

         The  Portfolio   attempts  to  achieve  its  investment   objective  by
maintaining a  dollar-weighted  average  portfolio  maturity of not more than 90
days and by investing in U.S. Treasury  securities and in obligations of certain
U.S.  Government  agencies,   as  described  in  this  Statement  of  Additional
Information that have effective maturities of not more than thirteen months. See
"Quality and Diversification Requirements."

Money Market Instruments

     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 (other than
the Treasury Money Market Fund) may invest in  obligations  issued or guaranteed
by U.S. Government agencies or  instrumentalities.  These obligations may or may
not be backed by the "full  faith and credit" of the United  States.  Securities
which are  backed by the full  faith and  credit of the  United  States  include
obligations of the Government  National Mortgage  Association,  the Farmers Home
Administration, and the Export-Import Bank. In the case of securities not backed
by the full  faith  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 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. The Prime Money Market Fund, subject to
its applicable investment policies, may also invest in short-term obligations of
foreign   sovereign   governments  or  of  their  agencies,   instrumentalities,
authorities  or  political   subdivisions.   See  "Foreign  Investments."  These
securities must be denominated in the U.S. dollar.

         Bank  Obligations.  The Prime Money Market Fund, 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
and are organized under the laws of the United States or any state, (ii) foreign
branches of these banks or of foreign banks of equivalent size (Euros) and (iii)
U.S.  branches of foreign banks of equivalent  size  (Yankees).  The Prime Money
Market Fund will not invest in obligations for which the Advisor,  or any of its
affiliated  persons,  is the ultimate obligor or accepting bank. The Prime Money
Market Fund may also invest in obligations of international banking institutions
designated   or  supported   by  national   governments   to  promote   economic
reconstruction,  development  or  trade  between  nations  (e.g.,  the  European
Investment Bank, the Inter-American Development Bank, or the World Bank).

         Commercial  Paper. The Prime Money Market Fund may invest in commercial
paper,  including  master  demand  obligations.  Master demand  obligations  are
obligations that provide for a periodic adjustment in the interest rate paid and
permit daily  changes in the amount  borrowed.  Master  demand  obligations  are
governed by  agreements  between the issuer and Morgan  acting as agent,  for no
additional fee. The monies loaned to the borrower come from accounts  managed by
Morgan or its affiliates,  pursuant to arrangements with such accounts. Interest
and principal  payments are credited to such accounts.  Morgan,  an affiliate of
the Advisor,  has the right to increase or decrease  the amount  provided to the
borrower under an obligation.  The borrower has the right to pay without penalty
all or any  part of the  principal  amount  then  outstanding  on an  obligation
together with interest to the date of payment. Since these obligations typically
provide that the interest rate is tied to the Federal Reserve  commercial  paper
composite  rate,  the rate on master  demand  obligations  is subject to change.
Repayment of a master demand obligation to participating accounts depends on the
ability  of the  borrower  to pay the  accrued  interest  and  principal  of the
obligation  on demand which is  continuously  monitored by Morgan.  Since master
demand obligations typically are not rated by credit rating agencies,  the Prime
Money Market Fund 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 Prime Money Market 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
Prime Money Market Fund to be liquid  because they are payable upon demand.  The
Prime Money  Market Fund does not have any  specific  percentage  limitation  on
investments  in master demand  obligations.  It is possible that the issuer of a
master  demand  obligation  could be a client of Morgan to whom  Morgan,  in its
capacity as a commercial bank, has made a loan.

         Asset-backed Securities. The Prime Money Market Fund may also invest in
securities generally referred to as asset-backed  securities,  which directly or
indirectly represent a participation  interest in, or are secured by and payable
from, a stream of payments generated by particular assets, such as motor vehicle
or credit card receivables or other  asset-backed  securities  collateralized by
such assets.  Asset-backed  securities  provide periodic payments that generally
consist of both interest and principle  payments.  Consequently,  the life of an
asset-backed  security  varies with the prepayment  experience of the underlying
obligations.  Payments of principal and interest may be guaranteed up to certain
amounts  and for a  certain  time  period  by a letter  of  credit  issued  by a
financial institution unaffiliated with the entities issuing the securities. The
asset-backed  securities  in which a Fund may invest  are  subject to the Fund's
overall credit requirements.  However,  asset-backed securities, in general, are
subject to certain risks.  Most of these risks are related to limited  interests
in  applicable  collateral.  For  example,  credit  card  debt  receivables  are
generally  unsecured and the debtors are entitled to the  protection of a number
of state and federal  consumer  credit laws, many of which give such debtors the
right to set off  certain  amounts  on credit  card debt  thereby  reducing  the
balance  due.  Additionally,  if the letter of credit is  exhausted,  holders of
asset-backed  securities may also experience delays in payments or losses if the
full  amounts  due on  underlying  sales  contracts  are not  realized.  Because
asset-backed  securities  are  relatively  new, the market  experience  in these
securities is limited and the market's ability to sustain  liquidity through all
phases of the market cycle has not been tested.

         Repurchase  Agreements.  Each of the Funds 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 any Fund 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 Treasury Money
Market Fund will only enter into repurchase  agreements  involving U.S. Treasury
securities.  The  Federal  Money  Market  Fund may only  enter  into  repurchase
agreements  involving U.S. Treasury  securities and Permitted Agency Securities.
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.  Each
Fund will be fully collateralized within the meaning of paragraph (a)(4) of Rule
2a-7 under the Investment  Company Act of 1940, as amended (the "1940 Act").  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.

         The  Prime  Money  Market  Fund may  make  investments  in  other  debt
securities with remaining effective maturities of not more than thirteen months,
including, without limitation, corporate and foreign bonds and other obligations
described in the Prospectus or this Statement of Additional Information.

Foreign Investments

         The Prime Money Market Fund may invest in certain  foreign  securities.
All  investments  must be U.S.  dollar-denominated.  Investment in securities of
foreign  issuers  and in  obligations  of foreign  branches  of  domestic  banks
involves somewhat different  investment risks from those affecting securities of
U.S. domestic issuers.  There may be limited publicly available information with
respect to foreign  issuers,  and foreign  issuers are not generally  subject to
uniform accounting, auditing and financial standards and requirements comparable
to those applicable to domestic companies. Any foreign commercial paper must not
be subject to foreign withholding tax at the time of purchase.

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

Additional Investments

         Municipal  Bonds.  The Prime Money  Market Fund may invest in municipal
bonds  issued by or on behalf of  states,  territories  and  possessions  of the
United  States and the  District of Columbia and their  Political  subdivisions,
agencies,  authorities  and  instrumentalities.  The Prime Money Market Fund may
also invest in  municipal  notes of various  types,  including  notes  issued in
anticipation  of  receipt of taxes,  the  proceeds  of the sale of bonds,  other
revenues or grant proceeds,  as well as municipal commercial paper and municipal
demand  obligations  such as  variable  rate  demand  notes  and  master  demand
obligations.  These municipal bonds and notes will be taxable securities; income
generated  from these  investments  will be subject to federal,  state and local
taxes.


         When-Issued  and  Delayed  Delivery  Securities.  Each of the Funds 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 Fund until settlement takes
place.  At the time a Fund makes the  commitment  to  purchase  securities  on a
when-issued or delayed delivery basis, it will record the  transaction,  reflect
the value each day of such securities in determining its net asset value and, if
applicable,  calculate  the maturity for the purposes of average  maturity  from
that date.  At the time of  settlement a  when-issued  security may be valued at
less than the purchase price. To facilitate  such  acquisitions,  each Fund 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 Fund will meet its  obligations  from maturities or sales of
the securities  held in the segregated  account and/or from cash flow. If a Fund
chooses to dispose of the right to acquire a when-issued  security  prior to its
acquisition,   it  could,  as  with  the  disposition  of  any  other  portfolio
obligation, incur a gain or loss due to market fluctuation.  Also, a Fund may be
disadvantaged if the other party to the transactions defaults.


         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 or any order pursuant thereto.  These limits
currently require that, as determined  immediately after a purchase is made, (i)
not more than 5% of the value of 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.

         Reverse Repurchase Agreements. Each of the Funds may enter into reverse
repurchase  agreements.  In a  reverse  repurchase  agreement,  a Fund  sells  a
security and agrees to repurchase  the same  security at a mutually  agreed upon
date and  price  reflecting  the  interest  rate  effective  for the term of the
agreement.  For purposes of the 1940 Act a reverse repurchase  agreement is also
considered  as the  borrowing  of money by the Fund  and,  therefore,  a form of
leverage. Leverage may cause any gains or losses for a Fund to be magnified. The
Funds  will  invest  the  proceeds  of  borrowings   under  reverse   repurchase
agreements. In addition, except for liquidity purposes, a Fund will enter into a
reverse  repurchase  agreement only when the expected return from the investment
of the proceeds is greater than the expense of the transaction.  A Fund will not
invest the proceeds of a reverse repurchase agreement for a period which exceeds
the duration of the reverse repurchase  agreement.  Each Fund 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 Fund's
limitations on reverse repurchase agreements and bank borrowings.

         Loans  of  Portfolio  Securities.   Subject  to  applicable  investment
restrictions,  each Fund is permitted to lend its  securities in an amount up to
33 1/3% of the value of the  Fund's net  assets.  Each of the Funds may lend its
securities  if such  loans  are  secured  continuously  by  cash  or  equivalent
collateral  or by a letter of credit in favor of the Fund at least  equal at all
times  to 100% of the  market  value  of the  securities  loaned,  plus  accrued
interest.  While such securities are on loan, the borrower will pay the Fund any
income  accruing  thereon.  Loans will be subject to termination by the Funds 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 Fund and its
respective  investors.  The Funds may pay reasonable finders' and custodial fees
in  connection  with a loan.  In  addition,  a Fund will  consider all facts and
circumstances   including  the   creditworthiness  of  the  borrowing  financial
institution, and no Fund will make any loans in excess of one year. The risks to
each Fund with respect to borrowers of its portfolio  securities  are similar to
the  risks  to the  Funds  with  respect  to  sellers  in  repurchase  agreement
transactions.  See  "Repurchase  Agreements".  The  Funds  will not  lend  their
securities to any officer, Trustee, Director, employee or other affiliate of the
Funds, the Advisor or the Distributor,  unless otherwise permitted by applicable
law.

         Illiquid   Investments,   Privately  Placed  and  Certain  Unregistered
Securities.  The Funds,  except the Treasury  Money  Market Fund,  may invest in
privately placed,  restricted,  Rule 144A or other unregistered  securities.  No
Fund may acquire any illiquid holdings if, as a result thereof, more than 10% of
a  Funds'  net  assets  would  be  in  illiquid  investments.  Subject  to  this
fundamental policy limitation (Prime Money Market Fund only), the Portfolios may
acquire investments that are illiquid or have limited liquidity, such as private
placements or investments  that are not  registered  under the Securities Act of
1933,  as amended  (the "1933 Act") and cannot be offered for public sale in the
United  States  without first being  registered  under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at  approximately  the amount at which it is valued by
the Portfolios. The price the Portfolios pay for illiquid securities or receives
upon resale may be lower than the price paid or received for similar  securities
with a more liquid market.  Accordingly  the valuation of these  securities will
reflect any limitations on their liquidity.

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

         As to illiquid investments, a Fund is subject to a risk that should the
Fund decide to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net assets could be
adversely affected. Where an illiquid security must be registered under the 1933
Act,  before it may be sold,  a Fund may be  obligated to pay all or part of the
registration  expenses, and a considerable period may elapse between the time of
the  decision to sell and the time the Fund may be  permitted to sell a security
under an effective  registration  statement.  If, during such a period,  adverse
market  conditions  were to develop,  a Fund might obtain a less favorable price
than prevailed when it decided to sell.

         Synthetic  Instruments.  The  Prime  Money  Market  Fund may  invest in
certain synthetic instruments. Such instruments generally involve the deposit of
asset-backed  securities in a trust arrangement and the issuance of certificates
evidencing  interests  in the trust.  The  certificates  are  generally  sold in
private  placements  in  reliance  on Rule 144A.  The  Advisor  will  review the
structure of synthetic  instruments to identify  credit and liquidity  risks and
will monitor  those  risks.  See  "Illiquid  Investments,  Privately  Placed and
Certain Unregistered Securities".

Quality and Diversification Requirements

         Each of the Funds intends to meet the  diversification  requirements of
the 1940 Act. Current 1940 Act requirements  require that with respect to 75% of
the assets of each Fund are 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.  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.

         At the time any of the Funds  invest in any taxable  commercial  paper,
master demand obligation,  bank obligation or repurchase  agreement,  the issuer
must have  outstanding  debt rated A or higher by Moody's or  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 Morgan's opinion.

         Prime Money Market Fund. In order to maintain a stable net asset value,
the Prime Money  Market  Fund will (i) limit its  investment  in the  securities
(other than U.S. Government  securities) of any one issuer to no more than 5% of
its assets,  measured at the time of purchase,  except for investments  held for
not more than three business days; and (ii) limit investments to securities that
present  minimal  credit  risks  and  securities  (other  than  U.S.  Government
securities) that are rated within the highest  short-term  rating category by at
least two nationally recognized  statistical rating organizations  ("NRSROs") or
by the only NRSRO that has rated the security. Securities which originally had a
maturity of over one year are subject to more complicated, but generally similar
rating  requirements.  A description of illustrative credit ratings is set forth
in  "Appendix  A." The Fund may also  purchase  unrated  securities  that are of
comparable quality to the rated securities described above. Additionally, if the
issuer of a  particular  security  has issued  other  securities  of  comparable
priority and security and which have been rated in  accordance  with (ii) above,
that  security  will be  deemed  to have the same  rating  as such  other  rated
securities.

         In  addition,  the Board of Trustees has adopted  procedures  which (i)
require  the Board of  Trustees  to approve or ratify  purchases  by the Fund of
securities  (other  than U.S.  Government  securities)  that are  unrated;  (ii)
require the Fund to maintain a dollar-weighted average portfolio maturity of not
more than 90 days and to invest only in securities with a remaining  maturity of
not more than  thirteen  months;  and (iii)  require  the Fund,  in the event of
certain  downgradings  of or defaults on portfolio  holdings,  to dispose of the
holding,  subject in certain  circumstances  to a finding by the  Trustees  that
disposing of the holding would not be in the Fund's best interest.

         Treasury  Money  Market  Fund.  In order to maintain a stable net asset
value,  the  Treasury  Money  Market Fund will limit its  investments  to direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, and
related repurchase agreement  transactions,  each having a remaining maturity of
not more  than  thirteen  months at the time of  purchase  and will  maintain  a
dollar-weighted average portfolio maturity of not more than 90 days.

         Federal  Money  Market  Fund.  In order to  maintain a stable net asset
value,  the  Federal  Money  Market  Fund will limit its  investments  to direct
obligations of the U.S. Treasury, including Treasury bills, notes and bonds, and
certain U.S. Government agency securities with remaining  maturities of not more
than thirteen months at the time of purchase and will maintain a dollar-weighted
average portfolio maturity of not more than 90 days.

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,  except as noted,  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.




         The Treasury Money Market Fund and its corresponding portfolio:

1. May not make any investment  inconsistent with the Fund's classification as a
diversified investment company under the Investment Company Act of 1940.

2. May not purchase any security which would cause the Fund to  concentrate  its
investments  in the  securities of issuers  primarily  engaged in any particular
industry except as permitted by the SEC;

3. May not issue senior  securities,  except as permitted  under the  Investment
Company Act of 1940 or any rule, order or interpretation thereunder;

4. May not borrow money, except to the extent permitted by applicable law;

5. May not underwrite securities of other issuers, except to the extent that the
Fund, in disposing of portfolio securities,  may be deemed an underwriter within
the meaning of the 1933 Act;

6. May not purchase or sell real estate, except that, to the extent permitted by
applicable  law,  the Fund may (a)  invest in  securities  or other  instruments
directly or indirectly secured by real estate, (b) invest in securities or other
instruments issued by issuers that invest in real estate;

7. May not purchase or sell  commodities or commodity  contracts unless acquired
as a result of ownership of  securities or other  instruments  issued by persons
that purchase or sell commodities or commodities  contracts;  but this shall not
prevent the Fund from  purchasing,  selling and entering into financial  futures
contracts (including futures contracts on indices of securities,  interest rates
and  currencies),  options on financial  futures  contracts  (including  futures
contracts on indices of securities,  interest rates and  currencies),  warrants,
swaps,  forward contracts,  foreign currency spot and forward contracts or other
derivative instruments that are not related to physical commodities; and

8. May make loans to other  persons,  in accordance  with the Fund's  investment
objective and policies and to the extent permitted by applicable law.

         The Prime Money Market Fund may not:

1. 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 10% of the Fund's net assets
would be in investments which are illiquid;

2. Enter into reverse repurchase agreements exceeding in the aggregate one-third
of the market  value of the Fund's total  assets,  less  liabilities  other than
obligations created by reverse repurchase agreements;

3. 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 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 and shall not apply to reverse repurchase agreements;

4.  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.  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;

5. 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  investment 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. For
purposes of  industry  concentration,  there is no  percentage  limitation  with
respect to investments in U.S. Government securities, negotiable certificates of
deposit, time deposits, and bankers' acceptances of U.S. branches of U.S. banks;

6. Make  loans,  except  through  purchasing  or holding  debt  obligations,  or
entering  into  repurchase  agreements,  or loans  of  portfolio  securities  in
accordance with the Fund's  investment  objective and policies (see  "Investment
Objectives and Policies");

7. Purchase or sell puts, calls, straddles, spreads, or any combination thereof,
real estate,  commodities,  or commodity  contracts or interests in oil, gas, or
mineral  exploration or  development  programs.  However,  the Fund may purchase
bonds or  commercial  paper issued by  companies  which invest in real estate or
interests therein including real estate investment trusts;

8. Purchase securities on margin, make short sales of securities,  or maintain a
short  position,  provided  that  this  restriction  shall  not be  deemed to be
applicable  to the purchase or sale of  when-issued  securities or of securities
for delivery at a future date;

9. Acquire securities of other investment companies,  except as permitted by the
1940 Act;

10.      Act as an underwriter of securities; or

11.  Issue  senior  securities,  except as may  otherwise  be  permitted  by the
foregoing  investment  restrictions or under the 1940 Act or any rule,  order or
interpretation thereunder.

         The Prime Money Market  Portfolio,  except as noted below,  has adopted
substantially   similar   fundamental   investment   restrictions.    Investment
restrictions  numbered 8 and 9 above are non-fundamental for the Portfolio.  The
Portfolio's  fundamental borrowing restriction allows the Portfolio to borrow to
the extent permitted by law,  currently 33-1/3% of total assets.  The Portfolio,
however,  has adopted a  non-fundamental  investment  restriction  limiting  its
borrowing ability to 10% of total assets.
These  differences  are not expected to materially  affect the management of the
Portfolio.

         The Federal Money Market Fund may not:

1.  Enter into  reverse  repurchase  agreements  which  together  with any other
borrowing  exceeds in the aggregate  one-third of the market value of the Fund's
or the Portfolio's  total assets,  less  liabilities  other than the obligations
created by reverse repurchase agreements;

2. Borrow money (not including reverse repurchase agreements), except from banks
for temporary or extraordinary or emergency purposes and then only in amounts up
to 10% of the value of the Fund's or the Portfolio's total assets, taken at cost
at the time of such  borrowing  (and provided that such  borrowings  and reverse
repurchase  agreements  do not exceed in the  aggregate  one-third of the market
value of the Fund's and the Portfolio's total assets less liabilities other than
the  obligations  represented  by the bank  borrowings  and  reverse  repurchase
agreements).  Mortgage,  pledge,  or hypothecate any assets except in connection
with any such  borrowing  and in amounts up to 10% of the value of the Fund's or
the  Portfolio's  net  assets  at the  time of such  borrowing.  The Fund or the
Portfolio will not purchase  securities while borrowings exceed 5% of the Fund's
or the Portfolio's total assets, respectively;  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 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;

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 or the
Portfolio'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. This limitation also shall
not apply to issues of the U.S.  Government  and repurchase  agreements  related
thereto;

4. Purchase the  securities or other  obligations  of issuers  conducting  their
principal  business  activity in the same  industry if,  immediately  after such
purchase,  the value of its  investment in such industry would exceed 25% of the
value of the Fund's or the Portfolio's total assets; provided, however, that the
Fund may invest all or part of its assets in an open-end  management  investment
company with the same  investment  objective and  restrictions  as the Fund. For
purposes of  industry  concentration,  there is no  percentage  limitation  with
respect to investments in U.S. Government  securities and repurchase  agreements
related thereto;

5. Make loans, except through purchasing or holding debt obligations, repurchase
agreements,  or loans of portfolio  securities in accordance  with the Fund's or
the Portfolio's  investment  objective and policies (see "Investment  Objectives
and Policies");

6. Purchase or sell puts, calls, straddles, spreads, or any combination thereof,
real estate,  commodities,  or commodity  contracts or interests in oil, gas, or
mineral exploration or development programs;

7. Purchase securities on margin, make short sales of securities,  or maintain a
short  position,  provided  that  this  restriction  shall  not be  deemed to be
applicable  to the purchase or sale of  when-issued  securities or of securities
for delivery at a future date;

8. Acquire securities of other investment companies,  except as permitted by the
1940  Act  or  in  connection  with  a  merger,  consolidation,  reorganization,
acquisition of assets or an offer of exchange;  provided,  however, that nothing
in this  investment  restriction  shall prevent the Trust from  investing all or
part of the Fund's assets in an open-end management  investment company with the
same investment objective and restrictions as the Fund;

9.       Act as an underwriter of securities; or

10.  Issue  senior  securities,  except as may  otherwise  be  permitted  by the
foregoing  investment  restrictions or under the 1940 Act or any rule,  order or
interpretation thereunder.

         The Federal Money Market Portfolio,  except as noted below, has adopted
substantially   similar   fundamental   investment   restrictions.    Investment
restrictions  numbered 7 and 8 above are non-fundamental for the Portfolio.  The
Portfolio's  fundamental borrowing restriction allows the Portfolio to borrow to
the extent permitted by law,  currently 33-1/3% of total assets.  The Portfolio,
however,  has adopted a  non-fundamental  investment  restriction  limiting  its
borrowing ability to 10% of total assets.
These  differences are note expected to materially  affect the management of the
portfolio.

         Non-Fundamental  Investment  Restrictions - Treasury Money Market Fund.
The investment  restrictions described below are not fundamental policies of the
Fund  and  its   Portfolio  and  may  be  changed  by  their   Trustees.   These
non-fundamental  investment policies require that the Fund and its corresponding
Portfolio:

(i) May not 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 10% of the market value
of the Fund's total assets would be in investments which are illiquid;

(ii) May not purchase securities on margin,  make short sales of securities,  or
maintain a short position, provided that this restriction shall not be deemed to
be  applicable  to the  purchase  or sale of  when-issued  or  delayed  delivery
securities

(iii)  May not  acquire  securities  of other  investment  companies,  except as
permitted by the 1940 Act or any order pursuant thereto.

         Non-Fundamental  Investment Restrictions - Prime Money Market Fund. The
investment  restriction described below is not a fundamental policy of the Prime
Money  Market Fund or its  corresponding  Portfolio  and may be changed by their
respective Trustees.  This  non-fundamental  investment policy requires that the
Prime Money Market Fund and its corresponding Portfolio may not:

(i)      enter into reverse repurchase  agreements or borrow money,  except from
         banks for  extraordinary  or emergency  purposes,  if such  obligations
         exceed in the  aggregate  one-third  of the market  value of the Fund's
         total  assets,  less  liabilities  other  than  obligations  created by
         reverse repurchase agreements and borrowings.

         Non-Fundamental  Investment  Restrictions  - Federal Money Market.  The
investment  restriction  described below is not a fundamental policy of the Fund
or  the  Portfolio  and  may be  changed  by  their  respective  Trustees.  This
non-fundamental investment policy requires that the 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 10% of
         the Fund's net assets would be in investments that are illiquid.

         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,  the Advisor 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 the Advisor 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,  the
Advisor  may  classify  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.


     FREDERICK S.  ADDY--Trustee;  Retired;  Former Executive Vice President and
Chief Financial Officer,  Amoco  Corporation.  His address is 5300 Arbutus Cove,
Austin, Texas 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,  Florida
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, New Jersey 08540, and his date of birth is May 23, 1934.

     MATTHEW HEALEY1--Trustee,  Chairman and Chief Executive Officer;  Chairman,
Pierpont Group, Inc., since prior to 1993. His address is Pine Tree Country Club
Estates, 10286 Saint Andrews Road, Boynton Beach, Florida 33436, and his date of
birth is August 23, 1937.

     MICHAEL P.  MALLARDI--Trustee;  Retired;  Prior to April 1996,  Senior Vice
President, Capital Cities/ABC, Inc. and President,  Broadcast Group. His address
is 10 Charnwood Drive,  Suffern,  New York 10910, and his date of birth is March
17, 1934.

         The  Trustees of the Trust are the same as the  Trustees of each of the
Portfolios. In accordance with applicable state requirements,  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 J.P.
Morgan 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 J.P.  Morgan Funds and J.P.  Morgan 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.

     Trustee compensation expenses paid by the Trust for the calendar year ended
December 31, 1998 are set forth below.

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

                                                      TOTAL TRUSTEE COMPENSATION
                                                      ACCRUED BY THE MASTER
                                 AGGREGATE TRUSTEE    PORTFOLIOS(*), J.P. MORGAN
                                 COMPENSATION         FUNDS, J.P. MORGAN SERIES
                                 PAID BY THE          TRUST AND THE TRUST DURING
NAME OF TRUSTEE                  TRUST DURING 1998    1998(***)
- -------------------------------- -------------------- --------------------------
- -------------------------------- -------------------- --------------------------

Frederick S. Addy, Trustee       $ 20,055             $ 75,000
- -------------------------------- -------------------- --------------------------
- -------------------------------- -------------------- --------------------------

William G. Burns, Trustee        $ 20,055             $ 75,000
- -------------------------------- -------------------- --------------------------
- -------------------------------- -------------------- --------------------------

Arthur C. Eschenlauer, Trustee   $ 20,055             $ 75,000
- -------------------------------- -------------------- --------------------------
- -------------------------------- -------------------- --------------------------

Matthew Healey, Trustee(**),     $ 20,055             $ 75,000
 Chairman and Chief Executive
 Officer
- -------------------------------- -------------------- --------------------------
- -------------------------------- -------------------- --------------------------

Michael P. Mallardi, Trustee     $ 20,055             $ 75,000

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


(*)  Includes the Portfolios and 16 other portfolios (collectively,  the "Master
     Portfolios") for which JPMIM acts as investment adviser.


(**) During 1998,  Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
     of  Pierpont  Group,   Inc.,   compensation  in  the  amount  of  $157,400,
     contributed  $23,610 to a defined  contribution plan on his behalf and paid
     $17,700 in insurance premiums for his benefit.

(***)No investment  company  within the fund complex has a pension or retirement
     plan.  Currently there are 17 investment companies (14 investment companies
     comprising the Master Portfolios, the J.P. Morgan Funds, the Trust and J.P.
     Morgan Series Trust) in the fund complex.

         The Trustees  decide upon  general  policies  and are  responsible  for
overseeing the Trust's and Portfolio's business affairs.  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 (now the J.P. Morgan 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.  The
principal offices of Pierpont Group,  Inc. are located at 461 Fifth Avenue,  New
York, New York 10017.

         The aggregate  fees paid to Pierpont  Group,  Inc. by each Fund (except
the  Federal  Money  Market  Fund) and its  corresponding  Portfolio  during the
indicated fiscal periods are set forth below:

Prime Money  Market Fund -- For the period  October  23, 1997  (commencement  of
operations) through November 30, 1997 and for the fiscal year ended November 30,
1998: $1 and $8,475, respectively.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $157,428, $143,027 and $173,032, respectively.

Treasury  Money  Market  Fund -- For the period  July 7, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $251 and $10,469, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31, 1997 and for the fiscal year ended October
31, 1998: $800 and $15,548, respectively.

Federal Money Market Fund -- For the period  November 5, 1997  (commencement  of
operations) through October 31, 1998: $264

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $16,144, $12,004 and $25,893, respectively.

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 1993.  His  address is Pine Tree  Country  Club  Estates,  10286  Saint
Andrews Road,  Boynton  Beach,  Florida  33436.  His date of birth is August 23,
1937.

     MARGARET W. CHAMBERS;  Vice President and Secretary.  Senior Vice President
and General  Counsel of FDI since April,  1998.  From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company,  L.P. From January 1986 to July 1996,  she was an associate  with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.


     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  distributed or  administered by FDI. Her date of
birth is August 1, 1957.


     DOUGLAS C. CONROY; Vice President and Assistant  Treasurer.  Assistant Vice
President   and   Assistant   Department   Manager  of  Treasury   Services  and
Administration of FDI and an officer of certain investment companies distributed
or  administered  by FDI.  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.  His
date of birth is March 31, 1969.


     JOHN P. COVINO - Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of FDI. Prior to
November  1998,  Mr. Covino was employed by Fidelity  Investments  where he held
multiple  positions in their  Institutional  Brokerage  Group.  Prior to joining
Fidelity,  Mr.  Covino was employed by SunGard  Brokerage  systems  where he was
responsible for the technology and development of the accounting  product group.
His date of birth is October 8, 1963.

     JACQUELINE  HENNING (of The Prime Money Market Portfolio  only);  Assistant
Secretary and Assistant  Treasurer of the Portfolios  only.  Managing  Director,
State Street Cayman Trust Company,  Ltd. since October 1994.  Address:  P.O. Box
2508 GT, Elizabethan Square, 2nd Floor, Shedden Road, George Town, Grand Cayman,
Cayman Islands, BWI. Her date of birth is March 24, 1942.

     KAREN JACOPPO-WOOD;  Vice President and Assistant Secretary. Vice President
and  Senior  Counsel  of FDI and an  officer  of  certain  investment  companies
distributed  or  administered  by FDI.  From  June  1994 to  January  1996,  Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder, Stevens & Clark, Inc.
Her date of birth is December 29, 1966.

     CHRISTOPHER  J.  KELLEY;  Vice  President  and  Assistant  Secretary.  Vice
President and Senior Associate  General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996,  Mr.  Kelley was Assistant  Counsel at Forum  Financial
Group. His date of birth is December 24, 1964.

     KATHLEEN  K.  MORRISEY;  Vice  President  and  Assistant  Secretary.   Vice
President  and  Assistant   Secretary  of  FDI.  Manager  of  Treasury  Services
Administration  and an  officer  of  certain  investment  companies  advised  or
administered  by  Montgomery  Asset  Management,  L.P.  and  Dresdner RCM Global
Investors,  Inc., and their  respective  affiliates.  From July 1994 to November
1995, Ms.  Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Her date of birth is July 5, 1972.

     MARY A. NELSON; Vice President and Assistant Treasurer.  Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies  distributed or administered by FDI. Her
date of birth is April 22, 1964.


     MARY JO PACE;  Assistant Treasurer.  Vice President,  Morgan Guaranty Trust
Company of New York.  Ms.  Pace  serves in the Funds  Administration  group as a
Manager for the Budgeting and Expense Processing Group. Prior to September 1995,
Ms. Pace served as a Fund Administrator for Morgan Guaranty Trust Company of New
York. Her address is 60 Wall Street, New York, New York 10260. Her date of birth
is March 13, 1966.

     STEPHANIE D. PIERCE; Vice President and Assistant Secretary. Vice President
and Client  Development  Manager for FDI since  April  1998.  From April 1997 to
March 1998,  Ms.  Pierce was employed by Citibank,  NA as an officer of Citibank
and Relationship  Manager on the Business and Professional Banking team handling
over 22,000 clients.  Address:  200 Park Avenue,  New York, New York 10166.  Her
date of birth is August 18, 1968.


     GEORGE A. RIO; President and Treasurer. Executive Vice President and Client
Service  Director of FDI since April 1998. From June 1995 to March 1998, Mr. Rio
was Senior  Vice  President  and Senior Key Account  Manager  for Putnam  Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of Business  Development
for First Data Corporation. His date of birth is January 2, 1955.


     CHRISTINE ROTUNDO;  Assistant  Treasurer.  Vice President,  Morgan Guaranty
Trust Company of New York. Ms. Rotundo serves in the Funds  Administration group
as a Manager  of the Tax  Group  and is  responsible  for U.S.  mutual  fund tax
matters.  Prior to September 1995, Ms. Rotundo served as a Senior Tax Manager in
the Investment  Company  Services Group of Deloitte & Touche LLP. Her address is
60 Wall Street,  New York,  New York 10260.  Her date of birth is September  26,
1965.

INVESTMENT ADVISOR

         The Funds have not  retained  the  services  of an  investment  adviser
because each Fund seeks to achieve its investment  objective by investing all of
its investable assets in a corresponding  Portfolio.  Subject to the supervision
of the  Portfolio's  Trustees,  the Advisor  makes each  Portfolio's  day-to-day
investment decisions,  arranges for the execution of Portfolio  transactions and
generally  manages the Portfolio's  investments.  Effective October 1, 1998 each
Portfolio's  investment  advisor is JPMIM.  Prior to that  date,  Morgan was the
investment  advisor.  JPMIM,  a wholly  owned  subsidiary  of J.P.  Morgan & Co.
Incorporated  ("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 Morgan serves as trustee.


         J.P.  Morgan,  through  the  Advisor  and other  subsidiaries,  acts as
investment advisor to individuals,  governments,  corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of approximately $326 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 120 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, and Singapore to cover companies,  industries and countries on
site. In addition,  the investment management divisions employ approximately 380
capital market researchers,  portfolio managers and traders. The Advisor's fixed
income  investment   process  is  based  on  analysis  of  real  rates,   sector
diversification and quantitative and credit analysis.

         The investment advisory services the Advisor provides to the Portfolios
are not  exclusive  under the terms of the Advisory  Agreements.  The Advisor is
free to and does render  similar  investment  advisory  services to others.  The
Advisor serves as investment  advisor to personal investors and other investment
companies and acts as fiduciary for trusts,  estates and employee benefit plans.
Certain of the assets of trusts and estates  under  management  are  invested in
common trust funds for which the Advisor  serves as trustee.  The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolios.  Such accounts are supervised by employees of the Advisor who
may also be acting in similar  capacities  for the  Portfolios.  See  "Portfolio
Transactions."

        Morgan, also a wholly owned subsidiary of J.P. Morgan, is a bank holding
company  organized  under  the laws of the  State  of  Delaware.  Morgan,  whose
principal offices are at 60 Wall Street, New York, New York 10260, is a New York
trust company which  conducts a general  banking and trust  business.  Morgan is
subject to regulation by the New York State Banking  Department  and is a member
bank of the Federal Reserve System. Through offices in New York City and abroad,
Morgan   offers  a  wide  range  of   services,   primarily   to   governmental,
institutional,  corporate and high net worth individual  customers in the United
States and throughout the world.

         The  Portfolios  are managed by employees 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
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  Investment
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 0.20% of each  Portfolio's  average  daily net  assets up to $1
billion and 0.10% of each  Portfolio's  average daily net assets in excess of $1
billion.

         The table below sets forth for each Portfolio  listed the advisory fees
paid to Morgan and JPMIM, as applicable,  for the fiscal periods indicated.  See
the Prospectus and below for applicable expense limitations.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $4,503,793, $5,063,662 and $7,199,733, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31, 1997 and for the fiscal year ended October
31, 1998: $49,123 and $1,080,743, respectively.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $653,326, $659,707 and $1,736,610, respectively.

         The Investment  Advisory  Agreements provide that they will continue in
effect for a period of two years after execution only if  specifically  approved
thereafter  annually  in the same  manner  as the  Distribution  Agreement.  See
"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 and their subsidiaries, 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  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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation  of the  Glass-Steagall  Act  or  other  applicable  banking  laws  or
regulations.  On November 12, 1999, the  Gramm-Leach-Bliley  Act was signed into
law, the relevant provisions of which go into effect March 11, 2000. Until March
11, 2000, federal banking law,  specifically the Glass-Steagall Act and the Bank
Holding Company Act,  generally  prohibits banks and bank holding  companies and
their  subsidiaries,  such as the  Advisor,  from  engaging  in the  business of
underwriting  or distributing  securities.  Pursuant to  interpretations  issued
under these laws by the Board of Governors of the Federal Reserve  System,  such
entities  also may not  sponsor,  organize  or  control  a  registered  open-end
investment company  continuously engaged in the issuance of its shares (together
with  underwriting and distributing  securities,  the "Prohibited  Activities"),
such as the Trust. These laws and interpretations do not prohibit a bank 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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation of the laws in effect until March 11, 2000.  Effective March 11, 2000,
the  sections  of  the   Glass-Steagall  Act  which  prohibited  the  Prohibited
Activities are repealed,  and the Bank Holding  Company Act is amended to permit
bank holding  companies  which satisfy  certain  capitalization,  managerial and
other criteria (the  "Criteria") to engage in the  Prohibited  Activities;  bank
holding  companies  which do not satisfy the  Criteria may continue to engage in
any activity  that was  permissible  for a bank holding  company  under the Bank
Holding  Company  Act as of  November  11,  1999.  Because  the  services  to be
performed for the Portfolio under the Advisory  Agreement were permissible for a
bank holding company as of November 11, 1999, the Advisor  believes that it also
may perform  such  services  after March 11, 2000  whether or not the  Advisor's
parent  satisfies  the  Criteria.  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.


         Under separate  agreements,  Morgan 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.  FDI is a wholly owned
indirect  subsidiary  of Boston  Institutional  Group,  Inc.  FDI also serves as
exclusive   placement   agent  for  the   Portfolio.   FDI  currently   provides
administration  and  distribution  services  for a number  of  other  investment
companies.

         The  Distribution  Agreement  shall  continue in effect with respect to
each of the  Funds  for a period  of two  years  after  execution  only if it is
approved at least annually thereafter (i) by a vote of the holders of a majority
of the  Fund's  outstanding  shares or by its  Trustees  and (ii) by a vote of a
majority  of the  Trustees  of the Trust who are not  "interested  persons"  (as
defined by the 1940 Act) of the parties to the Distribution  Agreement,  cast in
person at a meeting  called  for the  purpose  of voting on such  approval  (see
"Trustees  and   Officers").   The   Distribution   Agreement   will   terminate
automatically  if assigned by either party thereto and is terminable at any time
without  penalty by a vote of a majority of the Trustees of the Trust, a vote of
a majority of the Trustees who are not "interested  persons" of the Trust, or by
a vote of the holders of a majority of the Fund's  outstanding shares as defined
under "Additional Information," in any case without payment of any penalty on 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.

         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 marketing and sales literature; (v) files
Portfolio  regulatory  documents and mails Portfolio  communications to Trustees
and investors; and (vi) maintains related books and records.

         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.

Prime Money  Market Fund -- For the period  October  23, 1997  (commencement  of
operations)  through November 30, 1997 and for the fiscal year ended October 31,
1998: $3 and $6,691, respectively.

The Prime  Money  Market  Portfolio  -- For the  period  August 1, 1996  through
November 30, 1996,  the fiscal year ended  November 30, 1997 and the fiscal year
ended November 30, 1998: $33,012, $96,662 and $115,137, respectively.

Treasury  Money  Market  Fund -- For the period  July 7, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $231 and $7,650, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31, 1997 and for the fiscal year ended October
31, 1998: $406 and $7,258, respectively.

Federal Money Market Fund -- For the period  November 5, 1997  (commencement  of
operations) through October 31, 1998: $227

The Federal  Money  Market  Portfolio  -- For the period  August 1, 1996 through
October 31, 1996, the fiscal year ended October 31, 1997 and for the fiscal year
ended October 31, 1998: $1,663, $6,218 and $12,377, respectively.

         The table  below  sets  forth for each  Portfolio  listed  (except  the
Treasury  Money  Market  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 the
Prospectus and below for applicable expense limitations.

The Prime Money Market Portfolio -- For the period December 1, 1995 through July
31, 1996: $272,989.

The Federal  Money  Market  Portfolio  -- For  November 1, 1995 through July 31,
1996: $28,623.

SERVICES AGENT

         The Trust, on behalf of each Fund, and the Portfolios have entered into
Administrative  Services  Agreements  (the  "Services  Agreements")  with Morgan
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 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 J.P. Morgan Series Trust in accordance with the following
annual schedule:  0.09% of 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 J.P. Morgan Series Trust.

         Under prior administrative  services agreements in effect from December
29, 1995 through July 31, 1996, with Morgan, each Fund's corresponding Portfolio
(except the  Treasury  Money  Market  Portfolio)  paid Morgan a fee equal to its
proportionate share of an annual complex-wide charge. This charge was calculated
daily based on the aggregate  net assets of the Master  Portfolios in accordance
with the  following  schedule:  0.06%  of the  first $7  billion  of the  Master
Portfolios'  aggregate  average  daily  net  assets,  and  0.03%  of the  Master
Portfolios' aggregate average daily net assets in excess of $7 billion.


         The table below sets forth for each Fund  listed and its  corresponding
Portfolio  the fees paid to Morgan as Services  Agent.  See the  Prospectus  and
below for applicable expense limitations.


Prime Money  Market Fund -- For the period  October  23, 1997  (commencement  of
operations) through November 30, 1997 and for the fiscal year ended November 30,
1998: $36 and $93,367, respectively.

The Prime Money  Market  Portfolio  -- For the fiscal  years ended  November 30,
1996, 1997 and 1998: $891,730, $1,256,131 and $1,788,454, respectively.

Treasury  Money  Market  Fund -- For the period  July 7, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $2,510 and $103,623, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31, 1997 and for the fiscal year ended October
31, 1998: $7,289 and $155,752, respectively.

Federal Money Market Fund -- For the period  November 5, 1997  (commencement  of
operations) through October 31, 1998: $3,189.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $73,206, $101,963 and $264,799, respectively.

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 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
transactions and holding portfolio  securities and cash. The custodian maintains
portfolio  transaction records. As transfer agent and dividend disbursing agent,
State Street is  responsible  for  maintaining  account  records  detailing  the
ownership  of Fund  shares and for  crediting  income,  capital  gains and other
changes in share ownership to shareholder accounts.

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 a Service  Organization.  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;  monitoring the activities of the Funds' transfer  agent;  and providing
other related services.

         Under the Shareholder Servicing Agreement,  each Fund has agreed to pay
Morgan for these services a fee at the 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 0.05%. Morgan acts
as shareholder servicing agent for all shareholders.

         The table below sets forth for each Fund the shareholder servicing fees
paid by each Fund to Morgan for the fiscal periods indicated. See the Prospectus
and below for applicable expense limitations.

Prime Money  Market Fund -- For the period  October  23, 1997  (commencement  of
operations)  through November 30, 1997 and for the fiscal year ended October 31,
1998: $60 and $164,079, respectively.

Treasury  Money  Market  Fund -- For the period  July 7, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $25,501 and $180,336, respectively.

Federal Money Market Fund -- For the period  November 5, 1997  (commencement  of
operations) through October 31, 1998: $5,626.

         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
and providing  administrative services to the Funds and the Portfolios under the
Services  Agreements,  and the  activities  of JPMIM in acting as Advisor to the
Portfolios  under the  Investment  Advisory  Agreements,  may raise issues under
these laws.  However,  JPMIM and Morgan  believe that they 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.

SERVICE ORGANIZATION

         The Trust,  on behalf of each  Fund,  has  adopted a service  plan (the
"Plan")  with  respect to the shares which  authorizes  the Funds to  compensate
Service  Organizations  for providing certain account  administration  and other
services to their customers who are beneficial  owners of such shares.  Pursuant
to the Plan,  the Trust,  on behalf of each Fund,  enters into  agreements  with
Service  Organizations  which  purchase  shares  on  behalf  of their  customers
("Service Agreements"). Under such Service Agreements, the Service Organizations
may: (a) act,  directly or through an agent,  as the sole  shareholder of record
and nominee for all  customers,  (b) maintain or assist in  maintaining  account
records for each  customer  who  beneficially  owns  shares,  and (c) process or
assist in processing  customer orders to purchase,  redeem and exchange  shares,
and handle or assist in handling  the  transmission  of funds  representing  the
customers'  purchase  price or redemption  proceeds.  As  compensation  for such
services,  the Trust on behalf of each  Fund pays each  Service  Organization  a
service  fee in an amount up to 0.25% (on an  annualized  basis) of the  average
daily net assets of the shares of each Fund  attributable to or held in the name
of such Service Organization for its customers (0.20% where J.P.
Morgan acts as a service organization).

         Conflicts of interest  restrictions  (including the Employee Retirement
Income  Security Act of 1974) may apply to a Service  Organization's  receipt of
compensation  paid by the Trust in connection  with the  investment of fiduciary
funds  in  shares.  Service  Organizations,  including  banks  regulated  by the
Comptroller of the Currency,  the Federal  Reserve Board or the Federal  Deposit
Insurance Corporation,  and investment advisers and other money managers subject
to the jurisdiction of the Securities and Exchange Commission, the Department of
Labor or state  securities  commissions,  are urged to  consult  legal  advisers
before  investing  fiduciary  assets in shares.  In  addition,  under some state
securities laws,  banks and other financial  institutions  purchasing  shares on
behalf of their customers may be required to register as dealers.

         The Trustees of the Trust, including a majority of Trustees who are not
interested  persons  of the Trust and who have no direct or  indirect  financial
interest  in the  operation  of such  Plan or the  related  Service  Agreements,
initially  voted to approve the Plan and Service  Agreements at a meeting called
for the purpose of voting on such Plan and Service  Agreements on April 9, 1997.
The Plan was approved by the initial  shareholders of each Fund on June 3, 1997,
remains in effect  until July 10, 1998 and will  continue  in effect  thereafter
only if such  continuance  is  specifically  approved  annually by a vote of the
Trustees in the manner  described above. The Plan may not be amended to increase
materially  the amount to be spent for the services  described  therein  without
approval of the  shareholders of the affected Fund, and all material  amendments
of the Plan must also be approved by the Trustees in the manner described above.
The  Plan  may be  terminated  at any  time by a  majority  of the  Trustees  as
described  above  or by vote of a  majority  of the  outstanding  shares  of the
affected  Fund. The Service  Agreements  may be terminated at any time,  without
payment of any penalty,  by vote of a majority of the disinterested  Trustees as
described  above or by a vote of a  majority  of the  outstanding  shares of the
affected Fund on not more than 60 days' written notice to any other party to the
Service  Agreements.  The Service  Agreements  shall terminate  automatically if
assigned.  So long as the Plans are in effect,  the selection and  nomination of
those  Trustees  who are not  interested  persons  shall  be  determined  by the
non-interested  members of the Board of Trustees.  The Trustees have  determined
that, in their  judgment,  there is a reasonable  likelihood  that the Plan will
benefit the Funds and Fund  shareholders.  In the Trustees'  quarterly review of
the  Plan  and  Service   Agreements,   they  will  consider   their   continued
appropriateness and the level of compensation provided therein.

INDEPENDENT ACCOUNTANTS

         The  independent  accountants  of the  Trust  and  the  Portfolios  are
PricewaterhouseCoopers  LLP,  1177 Avenue of the  Americas,  New York,  New York
10036.  PricewaterhouseCoopers  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., JPMIM, Morgan,
FDI and Service Organizations under various agreements discussed under "Trustees
and  Officers,"   "Investment   Advisor,"   "Co-Administrator",   "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 and audit expenses, insurance costs, the compensation and expenses of
the  Trustees,  costs  associated  with their  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 custodian fees.
For  additional  information  regarding  waivers or expense  subsidies,  see the
Prospectus.


         J.P.  Morgan has agreed  that it will  reimburse  the Funds noted below
until  further  notice to the extent  necessary  to  maintain  the Fund's  total
operating expenses (which include expenses of the Fund and the Portfolio) at the
following annual rates of the Fund's average daily net assets.

         Prime Money Market Fund:                                      0.45%
         Treasury Money Market Fund:                                   0.45%
         Federal Money Market Fund:                                    0.45%

         These   limits   do   not   cover   extraordinary    expenses.    These
reimbursements/waiver  arrangements  will continue through at least February 28,
2001.

         The table  below  sets  forth for each Fund  listed  the fees and other
expenses J.P. Morgan  reimbursed  under the expense  reimbursement  arrangements
described above or pursuant to prior expense reimbursement  arrangements for the
fiscal periods indicated.

Prime Money  Market Fund -- For the period  October  23, 1997  (commencement  of
operations) through November 30, 1997 and for the fiscal year ended November 30,
1998:  $41,830 and $375,568,  respectively.  The Prime Money Market Portfolio --
For the fiscal years ended November 30, 1996, 1997 and 1998: $9,993, N/A and N/A
respectively.

Treasury  Money  Market  Fund -- For the period  July 7, 1997  (commencement  of
operations)  through  October 31, 1997 and for the fiscal year ended October 31,
1998: $76,815 and $503,809, respectively.

The Treasury Money Market Portfolio -- For the period July 7, 1997 (commencement
of  operations)  through  October 31,  1997 and for the fiscal year  October 31,
1998: $118,095 and $828,462, respectively.

Federal Money Market Fund -- For the period  November 5, 1997  (commencement  of
operations) through October 31, 1998: $93,222.

The Federal  Money Market  Portfolio  -- For the fiscal years ended  October 31,
1996, 1997 and 1998: $238,343, $250,377 and $415,825.

PURCHASE OF SHARES


         Additional Minimum Balance  Information.  If your account balance falls
below the minimum for 30 days as a result of selling  shares (and not because of
performance),  each Fund  reserves the right to request that you buy more shares
or close your  account.  If your  account  balance is still below the minimum 60
days after  notification,  the Fund reserves the right to close out your account
and send the proceeds to the address of record.


         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  instructions  relating to a Fund account from Morgan as  shareholder
servicing  agent for the customer.  All purchase  orders must be accepted by the
Distributor.  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.

         References  in  the   Prospectus   and  this  Statement  of  Additional
Information to customers of Morgan or a Service  Organization  include customers
of their affiliates and references to transactions by customers with Morgan or a
Service  Organization  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.

         Shares  may be  purchased  for  accounts  held in the name of a Service
Organization that provides certain account  administration and other services to
its  customers,  including  acting  directly  or  through  an  agent as the sole
shareholder of record,  maintenance or assistance in maintaining account records
and processing  orders to purchase,  redeem and exchange shares.  Shares of each
Fund bear the cost of service  fees at the  annual  rate of up to 0.25% of 1% of
the average daily net assets of such shares.

         It is possible that an institution or its affiliate may offer shares of
different  funds which invest in the same  Portfolio to its  customers  and thus
receive different  compensation with respect to different funds. Certain aspects
of the shares may be altered,  after advance  notice to  shareholders,  if it is
deemed necessary in order to satisfy certain tax regulatory requirements.

         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 the Advisor, 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);  and (iii) be liquid securities which are
not  restricted as to transfer  either by law or liquidity of market.  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 a
Service Organization, and the Service Organization 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.
Shareholders  redeeming  shares  of the  Funds  should  be aware  that the Funds
attempt to maintain a stable net asset value of $1.00 per share; however,  there
can be no  assurance  that they will be able to  continue  to do so, and in that
case the net asset  value of the  Fund's  shares  might  deviate  from $1.00 per
share.  Accordingly,  a redemption  request  might result in payment of a dollar
amount which differs from the number of shares  redeemed.  See "Net Asset Value"
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 the Treasury  Money Market and Federal Money
Market Funds and their  corresponding  Portfolios have elected to be governed by
Rule  18f-1  under  the  1940  Act  pursuant  to  which  such  Funds  and  their
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 such 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.

         Further  Redemption   Information.   Investors  should  be  aware  that
redemptions  from a 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
shareholder's  taxpayer  identification  number and address.  In addition,  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  proceeds
from the shares will occur upon  clearance  of the check which may take up to 15
days. 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 Fund into shares of any other
J.P.  Morgan  Institutional  or J.P.  Morgan  mutual fund,  without  charge.  An
exchange may be made so long as after the  exchange the investor has shares,  in
each fund in which he or she remains an investor,  with a value of at least 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 accounts
that are  registered  in the same  name,  address  and  taxpayer  identification
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 another fund
and the usual purchase and redemption procedures and requirements are applicable
to exchanges.  Each Fund generally  intends to pay redemption  proceeds in cash,
however,  since it reserves the right at its sole  discretion to pay redemptions
over $250,000 in-kind as a portfolio of representative securities rather than in
cash, the Fund reserves the right to deny an exchange  request in excess of that
amount. See "Redemption of Shares".  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.  Shares of the Fund to be acquired
are purchased for settlement when the proceeds from redemption become available.
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 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 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, Columbus Day, Veteran's Day,  Thanksgiving Day, and
Christmas  Day. In the event that  trading in the money  markets is scheduled to
end earlier than the close of the New York Stock Exchange in observance of these
holidays, the Funds and their corresponding Portfolios would expect to close for
purchases and  redemptions an hour in advance of the end of trading in the money
markets.  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. On any business day when the Bond Market
Association ("BMA") recommends that the securities market close early, the Funds
reserve the right to cease  accepting  purchase and  redemption  orders for same
business day credit at the time BMA recommends that the securities market close.
On days the Funds close early, purchase and redemption orders received after the
Funds close will be credited the next  business day. 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 Fund's liabilities.  The following is a discussion of the procedures used by
the Portfolios corresponding to each Fund in valuing their assets.

         The Portfolios'  portfolio  securities are valued by the amortized cost
method.  The purpose of this method of  calculation  is to attempt to maintain a
constant net asset value per share of the Fund of $1.00.  No  assurances  can be
given that this goal can be  attained.  The  amortized  cost method of valuation
values a security at its cost at the time of purchase and  thereafter  assumes a
constant amortization to maturity of any discount or premium,  regardless of the
impact of fluctuating interest rates on the market value of the instrument. If a
difference  of  more  than  1/2 of 1%  occurs  between  valuation  based  on the
amortized  cost method and valuation  based on market  value,  the Trustees will
take  steps  necessary  to reduce  such  deviation,  such as  changing  a Fund's
dividend policy,  shortening the average portfolio maturity,  realizing gains or
losses,  or reducing the number of  outstanding  Fund shares.  Any  reduction of
outstanding  shares will be effected by having each shareholder  contribute to a
Fund's capital the necessary  shares on a pro rata basis.  Each shareholder will
be deemed to have  agreed to such  contribution  in these  circumstances  by his
investment in the Funds. See "Taxes."

PERFORMANCE DATA

         From time to time,  the Funds may quote  performance in terms of yield,
actual  distributions,  total return or capital  appreciation in reports,  sales
literature  and  advertisements  published  by the  Trust.  Current  performance
information  for the Funds may be obtained by calling the number provided on the
cover  page  of  this  Statement  of  Additional  Information.  See  "Additional
Information" in the Prospectus.

         Yield Quotations.  As required by regulations of the SEC, current yield
for the Funds is computed by  determining  the net change  exclusive  of capital
changes in the value of a hypothetical  pre-existing account having a balance of
one share at the  beginning  of a seven-day  calendar  period,  dividing the net
change in account  value of the  account at the  beginning  of the  period,  and
multiplying the return over the seven-day  period by 365/7.  For purposes of the
calculation, net change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends  declared on both
the original share and any such additional shares, but does not reflect realized
gains or losses or unrealized appreciation or depreciation.  Effective yield for
each Fund is computed by  annualizing  the  seven-day  return with all dividends
reinvested in additional Fund shares.

         Below  is set  forth  historical  yield  information  for  the  periods
indicated:


Prime Money Market Fund (5/31/99  unaudited):  7-day current yield: 4.57%; 7-day
effective yield: 4.67%.

Treasury  Money Market Fund (4/30/99  unaudited):  7-day current  yield:  4.40%;
7-day effective yield: 4.49%.

Federal Money Market Fund (4/30/99 unaudited): 7-day current yield: 4.47%; 7-day
effective yield: 4.57%.


     Total Return  Quotations.  Historical  performance  information for periods
prior to the establishment of the J.P. Morgan Institutional  Service Prime Money
Market and J.P. Morgan Institutional  Service Federal Money Market Funds will be
that of the  respective  related  series  of the J.P.  Morgan  Funds and will be
presented  in  accordance  with  applicable  SEC  staff   interpretations.   The
applicable  financial  information  in the  registration  statement for the J.P.
Morgan Funds  (Registration Nos. 033-54632 and 811-07340) is incorporated herein
by reference.

     The  historical  performance  information  shown  below for the Prime Money
Market and Federal Money Market Funds may reflect operating  expenses which were
lower than  those of the  Funds.  These  returns  may be higher  than would have
occurred if an investment had been made during the periods indicated in the J.P.
Morgan  Institutional  Service Prime Money Market or J.P.  Morgan  Institutional
Service Federal Money Market Funds.

         Below is set forth historical  return  information for each Fund or its
related series of the J.P. Morgan Funds for the periods indicated:


Prime Money Market Fund (5/31/99  unaudited):  Average  annual total  return,  1
year: 5.02%;  average annual total return, 5 years: 5.26%;  average annual total
return, 10 years: 5.33%;  aggregate total return, 1 year: 5.02%; aggregate total
return, 5 years: 29.23%; aggregate total return, 10 years: 68.13%.

Treasury Money Market Fund (4/30/99  unaudited):  Average annual total return, 1
year:  4.87%;  average annual total return,  5 years:  N/A; average annual total
return,  commencement  of  operations  (July 7,  1997)  to  period  end:  5.10%;
aggregate total return, 1 year:  4.87%;  aggregate total return,  5 years:  N/A;
aggregate total return, commencement of operations (July 7, 1997) to period end:
9.45%.

Federal Money Market Fund (4/30/99  unaudited):  Average annual total return,  1
year: 4.93%;  average annual total return, 5 years: 5.06%;  average annual total
return,  commencement  of  operations  (November 5, 1997) to period end:  5.09%;
aggregate total return, 1 year: 4.93%;  aggregate total return, 5 years: 28.01%;
aggregate total return,  commencement of operations (November 5, 1997) to period
end: 7.63%.


         Aggregate total returns,  reflecting the cumulative  percentage  change
over a measuring period, may also be calculated.

         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.


         Comparative  performance  information  may be used from time to time in
advertising the Funds' shares, including appropriate market indices or data from
Lipper  Analytical  Services,   Inc.,   Micropal,   Inc.,  Ibbotson  Associates,
Morningstar   Inc.,  the  Dow  Jones  Industrial   Average  and  other  industry
publications.


         From time to time, the Funds may, in addition to any other  permissible
information,  include the  following  types of  information  in  advertisements,
supplemental  sales literature and reports to  shareholders:  (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost  averaging);  (2)  discussions  of general  economic
trends;  (3)  presentations of statistical data to supplement such  discussions;
(4)  descriptions of past or anticipated  portfolio  holdings for one or more of
the Funds;  (5)  descriptions  of investment  strategies  for one or more of the
Funds;  (6)  descriptions  or  comparisons  of various  savings  and  investment
products  (including,  but  not  limited  to,  qualified  retirement  plans  and
individual  stocks and  bonds),  which may or may not  include  the  Funds;  (7)
comparisons of investment  products  (including the Funds) with relevant markets
or industry  indices or other  appropriate  benchmarks;  (8) discussions of Fund
rankings or ratings by recognized rating  organizations;  and (9) discussions of
various  statistical  methods  quantifying the Fund's volatility relative to its
benchmark or to past performance,  including risk adjusted  measures.  The Funds
may also include calculations,  such as hypothetical compounding examples, which
describe   hypothetical   investment  results  in  such   communications.   Such
performance  examples will be based on an express set of assumptions and are not
indicative of the performance of any of the Funds.

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."

         Fixed income and debt  securities  are generally  traded at a net price
with  dealers  acting  as  principal  for their  own  accounts  without a stated
commission. The price of the security usually includes profit to the dealers. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of  compensation  to the  underwriter,  generally  referred  to as the
underwriter's  concession or discount.  On occasion,  certain  securities may be
purchased directly from an issuer, in which case no commissions or discounts are
paid.

     Portfolio transactions for the Portfolios will be undertaken principally to
accomplish  a  Portfolio's  objective  in relation to expected  movements in the
general level of interest rates. The Portfolios may engage in short-term trading
consistent with their  objectives.  See  "Investment  Objectives and Policies --
Portfolio Turnover."

         In connection  with  portfolio  transactions  for the  Portfolios,  the
Advisor intends to seek best execution on a competitive basis for both purchases
and sales of securities.

         The  Portfolios  have a policy of  investing  only in  securities  with
maturities of not more than thirteen months, which will result in high portfolio
turnovers.  Since  brokerage  commissions  are not normally paid on  investments
which the Portfolios make,  turnover  resulting from such investments should not
adversely affect the net asset value or net income of the Portfolios.

         Subject to the  overriding  objective  of obtaining  best  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.

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  January  9,  1997,  the name of The  Treasury  Money  Market
Portfolio was changed to The Federal Money Market  Portfolio.  Effective May 12,
1997,  the name of The Money  Market  Portfolio  was  changed to The Prime Money
Market  Portfolio.  Effective January 1, 1998, the name of the Trust was changed
from "The JPM  Institutional  Funds" to "J.P. Morgan  Institutional  Funds," and
each Fund's name changed 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 a Fund.  However,  upon payment of such liability,  the shareholder
will be  entitled  to  reimbursement  from the  general  assets  of a 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
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).
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 one vote for each dollar
of  net  asset  value  (or a  proportionate  fractional  vote  in  respect  of a
fractional  dollar  amount),  on  matters  on which  shares of the Fund shall be
entitled to vote.  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 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 22 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.

         For  information  relating to  mandatory  redemption  of Fund shares or
their redemption at the option of the Trust under certain circumstances, see the
Prospectus.


     As of November 30, 1999, the following owned of record, or to the knowledge
of management, beneficially owned more than 5% of the outstanding shares of:

Prime Money  Market  Fund:  Hare & Co.  (29.15%);  Harris Trust and Savings Bank
(28.85%); Chicago Trust Company (31.99%).

Treasury  Money Market Fund:  Hare & Co.  (39.51%);  The Chicago  Trust  Company
(56.88%).

Federal Money Market Fund:  Hare & Co. (100.00%).


SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE

         Unlike other mutual funds which  directly  acquire and manage their own
portfolio of securities,  each Fund is an open-end management investment company
which  seeks  to  achieve  its  investment  objective  by  investing  all of its
investable  assets in a corresponding  Master Portfolio,  a separate  registered
investment company with the same investment  objective and policies as the Fund.
Generally,  when a  Master  Portfolio  seeks  a vote  to  change  a  fundamental
investment  restriction,  its feeder fund(s) will hold a shareholder meeting and
cast  its  vote  proportionately,   as  instructed  by  its  shareholders.  Fund
shareholders  are  entitled to one vote for each dollar of net asset value (or a
proportionate  fractional  vote in respect of a fractional  dollar  amount),  on
matters on which shares of the Fund shall be entitled to vote.

         In addition to selling a beneficial interest to a Fund, a Portfolio may
sell beneficial interests to other mutual funds or institutional investors. Such
investors will invest in the Portfolio on the same terms and conditions and will
bear a  proportionate  share of the  Portfolio's  expenses.  However,  the other
investors  investing in the  Portfolio may sell shares of their own fund using a
different pricing structure than the Fund. Such different pricing structures may
result in  differences  in returns  experienced by investors in other funds that
invest in the  Portfolio.  Such  differences in returns are not uncommon and are
present in other mutual fund structures. Information concerning other holders of
interests in the Portfolio is available from Morgan at (800) 521-5411.

         The Trust may withdraw the investment of a Fund from a 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
investment objective and restrictions in accordance with the investment policies
with respect to the Portfolio described above and in each Fund's Prospectus.

         Certain  changes in a Portfolio's  fundamental  investment  policies or
restrictions,  or a failure by a Fund's  shareholders  to approve such change in
the Portfolio's  investment  restrictions,  may require withdrawal of the Fund's
interest in the Portfolio. Any such withdrawal could result in a distribution 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 a Portfolio  may be materially  affected by
the actions 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.

         Additionally,  because a Portfolio would become smaller,  it may become
less diversified,  resulting in potentially  increased  portfolio risk (however,
these  possibilities  also exist for  traditionally  structured funds which have
large or institutional investors who may withdraw from a fund). Also, funds with
a greater  pro rata  ownership  in the  Portfolio  could have  effective  voting
control of the  operations of the  Portfolio.  Whenever the Fund is requested to
vote on matters  pertaining to the  Portfolio  (other than a vote by the Fund to
continue the operation of the Portfolio upon the withdrawal of another  investor
in the Portfolio), the Trust will hold a meeting of shareholders of the Fund and
will  cast  all  of its  votes  proportionately  as  instructed  by  the  Fund's
shareholders.  The Trust will vote the shares held by Fund  shareholders  who do
not give  voting  instructions  in the same  proportion  as the  shares  of Fund
shareholders  who do give voting  instructions.  Shareholders of the Fund who do
not vote will have no affect on the outcome of such matters.

TAXES


         The following  discussion of tax  consequences is based on U.S. federal
tax laws in  effect on the date of this  Statement  of  Additional  Information.
These  laws  and   regulations   are  subject  to  change  by   legislative   or
administrative action, possibly on a retroactive basis.


         Each Fund  intends  to  qualify  and remain  qualified  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;  and (b) diversify its
holdings so that, at the end of each fiscal  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,  investments 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).  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 generally, will be
taxable to a shareholder in the year declared rather than the year paid.

         Distributions  of net  investment  income and realized  net  short-term
capital  gains 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.  Distributions to corporate shareholders of the Funds are not
eligible for the dividends  received  deduction.  Distributions of net long-term
capital  gains (i.e.,  net long-term  capital gains in excess of net  short-term
capital 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. In general,  long-term capital gain of an individual  shareholder will
be subject to a 20% rate of tax.

         To maintain a constant $1.00 per share net asset value, the Trustees of
the Trust may direct that the number of outstanding  shares be reduced pro rata.
If this  adjustment is made, it will reflect the lower market value of portfolio
securities and not realized  losses.  The adjustment may result in a shareholder
having more  dividend  income than net income in his account for a period.  When
the number of outstanding shares of a Fund is reduced,  the shareholder's  basis
in the shares of the Fund may be  adjusted  to reflect  the  difference  between
taxable income and net dividends  actually  distributed.  This difference may be
realized as a capital  loss when the shares are  liquidated.  Subject to certain
limited exceptions, capital losses cannot be used to offset ordinary income. See
"Net Asset Value."


         Gains or losses on sales of  portfolio  securities  will be  treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain  cases where,  if applicable a put option is acquired
or a call option is written thereon or straddle rules are otherwise  applicable.
Other gains or losses on the sale of securities will be short-term capital gains
or losses.  Gains and losses on the sale, lapse or other  termination of options
on securities  will be treated as gains and losses from the sale of  securities.
If an option  written by a Portfolio  lapses or is terminated  through a closing
transaction,  such as a  repurchase  by the  Portfolio  of the  option  from its
holder, the Portfolio will realize a short-term capital gain or loss,  depending
on whether  the  premium  income is greater or less than the amount  paid by the
Portfolio in the closing transaction. If securities are purchased by a Portfolio
pursuant  to the  exercise  of a put option  written by it, the  Portfolio  will
subtract the premium received from its cost basis in the securities purchased.


         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
reduced  below a  shareholder's  cost as a result  of such a  distribution,  the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described above.

         Any gain or loss realized on the  redemption or exchange of Fund shares
by a shareholder  who is not a dealer in securities will be treated as long-term
capital  gain or loss if the shares  have been held for more than one year,  and
otherwise  as  short-term  capital  gain or loss.  Long-term  capital gain of an
individual  holder is  subject  to maximum  tax rate of 20%.  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.  Investors  are urged to consult their tax advisors
concerning the limitations on the deductibility of capital losses. 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.


         The Prime Money Market Fund may invest in Equity  Securities of foreign
issuers. If the Fund purchases shares in certain foreign corporations  (referred
to as passive foreign investment  companies  ("PFICs") under the Code), the 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  the  Fund  as a  result  of  such  distributions.
Alternatively,  the Fund may in some cases be  permitted to include 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.

         The Prime Money  Market Fund will be  permitted to "mark to market" any
marketable  stock held by the Fund in a PFIC. If the Fund made such an election,
it 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.


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

         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 (or any successor form) 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.


         State and Local Taxes. Each Fund may be subject to state or local taxes
in jurisdictions in which the Fund is deemed to be doing business.  In addition,
the treatment of a Fund and its  shareholders  in those states which have income
tax laws  might  differ  from  treatment  under  the  federal  income  tax laws.
Shareholders  should consult their own tax advisors with respect to any state or
local taxes.

         Other  Taxation.  The Trust is  organized as a  Massachusetts  business
trust and,  under current law,  neither the Trust nor any Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts, provided that 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,  J.P. Morgan or Service  Organizations 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 1940 Act 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.

The Year 2000 Initiative


         With  the  new  millennium  rapidly  approaching,   organizations  have
continued  to  examine  their  computer  systems  to  ensure  they are year 2000
compliant.  The issue, in simple terms, is that many existing  computer  systems
use only two  numbers to  identify a year in the date field with the  assumption
that the first two  digits  are  always  "19." As the  century is implied in the
date, on January 1, 2000, computers that are not year 2000 compliant will assume
the year is 1900. Systems that calculate,  compare,  or sort using the incorrect
date will cause erroneous results, ranging from system malfunctions to incorrect
or incomplete transaction processing.  If not remedied,  potential risks include
business interruption or shutdown, financial loss, reputation loss, and/or legal
liability.

         J.P.  Morgan has  undertaken a firmwide  initiative to address the year
2000 issue and has developed a  comprehensive  plan to prepare,  as appropriate,
its  computer  systems.   Each  business  line  has  taken   responsibility  for
identifying  and fixing the  problem  within its own area of  operation  and for
addressing  all  interdependencies.  A  multidisciplinary  team of internal  and
external experts supports the business teams by providing direction and firmwide
coordination.  Working together,  the business and multidisciplinary  teams have
completed a thorough  education and awareness  initiative and a global inventory
and  assessment  of  J.P.  Morgan's  technology  and  application  portfolio  to
understand  the scope of the year 2000 impact at J.P.  Morgan.  J.P.  Morgan has
renovated and tested these  technologies  and  applications in partnership  with
external consulting and software development organizations, as well as with year
2000 tool  providers.  J.P.  Morgan has also worked with key  external  parties,
including clients, counterparties,  vendors, exchanges, depositories, utilities,
suppliers,  agents and regulatory agencies, to stem the potential risks the year
2000 problem poses to J.P.  Morgan and to the global  financial  community.  For
potential  failure  scenarios  where the risks are deemed  significant and where
such risk is considered to have a higher probability of occurrence,  J.P. Morgan
has developed business  recovery/contingency  plans. These plans will define the
infrastructure  that  should be put in place for  managing a failure  during the
millennium event itself.

         Costs associated with efforts to prepare J.P.  Morgan's systems for the
year 2000  approximated  $93.3 million in 1997, $132.7 million in 1998 and $36.6
million  for the first  eight  months of 1999.  J.P.  Morgan is  continuing  its
efforts  to prepare  its  systems  for the year  2000.  The total cost to become
year-2000  compliant is estimated at $300 million (for firmwide systems upgrade,
not just for systems relating to mutual funds),  for internal systems renovation
and testing, testing equipment, and both internal and external resources working
on the  project.  The costs  associated  with  J.P.  Morgan  becoming  year-2000
compliant will be borne by J.P. Morgan and not the Funds.


FINANCIAL STATEMENTS

         The  following   financial   statements   and  the  report  thereon  of
PricewaterhouseCoopers  LLP of each Fund (except the Federal  Money Market 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 Annual Report;  Date of Semi-Annual
Name of Fund/Portfolio             Date Annual Report      Report; Date Semi-
                                   Filed; and Accession    Annual Report Filed;
                                   Number                  and Accession Number
- ---------------------------------- ----------------------- ---------------------
- ---------------------------------- ----------------------- ---------------------

J.P. Morgan Institutional Service  11/30/98                5/31/99
Prime Money Market Fund            2/1/99                  07/29/99
                                   0001047469-99-002874    0001047469-99-029011
- ---------------------------------- ----------------------- ---------------------
- ---------------------------------- ----------------------- ---------------------

J.P. Morgan Institutional Service  10/31/98                4/30/99
Treasury Money Market Fund         12/31/98                08/10/99
                                   0001047469-98-045632    0001047469-99-030652
- ---------------------------------- ----------------------- ---------------------

J.P. Morgan Institutional Service  10/31/98                4/30/99
Federal Money Market Fund          01/07/99                06/28/99
                                   0001047469-99-000356    0001047469-99-025456
- ---------------------------------- ----------------------- ---------------------



<PAGE>



APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA  - Debt rated AAA have 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 have a very  strong  capacity  to pay  interest  and repay
     principal and differ from the highest rated issues only in a small degree.

A    - Debt rated A have a strong  capacity to pay interest and repay  principal
     although  they are  somewhat  more  susceptible  to the adverse  effects of
     changes in circumstances and economic  conditions than debt in higher rated
     categories.

BBB  - Debt  rated  BBB are  regarded  as  having an  adequate  capacity  to pay
     interest  and repay  principal.  Whereas  they  normally  exhibit  adequate
     protection   parameters,    adverse   economic   conditions   or   changing
     circumstances  are  more  likely  to lead  to a  weakened  capacity  to pay
     interest and repay  principal  for debt in this  category  than for debt in
     higher rated categories.

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.



<PAGE>


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.

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.



<PAGE>


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.

- --------
     1Mr.  Healey is an "interested  person" (as defined in the 1940 Act) of the
Trust. Mr. Healey is also an "interested person" (as defined in the 1940 Act) of
the Advisor due to his son's affiliation with J.P. Morgan Investment  Management
Inc.

<PAGE>







                         J.P. MORGAN INSTITUTIONAL FUNDS



             J.P. MORGAN INSTITUTIONAL TAX EXEMPT MONEY MARKET FUND








                       STATEMENT OF ADDITIONAL INFORMATION



                                DECEMBER 30, 1999
























THIS  STATEMENT OF  ADDITIONAL  INFORMATION  IS NOT A  PROSPECTUS,  BUT CONTAINS
ADDITIONAL  INFORMATION  WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
DATED DECEMBER 30, 1999, FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO
TIME.  ADDITIONALLY,  THIS STATEMENT OF ADDITIONAL  INFORMATION  INCORPORATES BY
REFERENCE THE FINANCIAL  STATEMENTS  INCLUDED IN THE SHAREHOLDER REPORT RELATING
TO THE FUND DATED AUGUST 31, 1999. THE PROSPECTUS AND THE FINANCIAL  STATEMENTS,
INCLUDING THE INDEPENDENT  ACCOUNTANTS' REPORT THEREON,  ARE AVAILABLE,  WITHOUT
CHARGE,  UPON REQUEST  FROM FUNDS  DISTRIBUTOR,  INC.,  ATTENTION:  J.P.  MORGAN
INSTITUTIONAL FUNDS (800) 221-7930.



<PAGE>


                                Table of Contents


                                                                       Page



General...................................................................1
Investment Objective and Policies.........................................1
Investment Restrictions..................................................10
Trustees and Officers....................................................13
Investment Advisor.......................................................16
Distributor..............................................................19
Co-Administrator.........................................................19
Services Agent...........................................................20
Custodian and Transfer Agent.............................................20
Shareholder Servicing....................................................21
Financial Professionals..................................................22
Independent Accountants..................................................22
Expenses.................................................................22
Purchase of Shares.......................................................23
Redemption of Shares.....................................................24
Exchange of Shares.......................................................24
Dividends and Distributions..............................................25
Net Asset Value..........................................................25
Performance Data.........................................................26
Portfolio Transactions...................................................27
Massachusetts Trust......................................................28
Description of Shares....................................................29
Special Information Concerning
Investment Structure.....................................................31
Taxes....................................................................32
Additional Information...................................................35
Financial Statements.....................................................37
Appendix A - Description of Security Ratings............................A-1




<PAGE>




GENERAL

         This  Statement  of  Additional  Information  relates  only to the J.P.
Morgan  Institutional  Tax Exempt Money Market Fund (the "Fund").  The Fund is a
series of shares of beneficial interest of the J.P. Morgan  Institutional Funds,
an open-end  management  investment  company formed as a Massachusetts  business
trust (the "Trust"). In addition to the Fund, the Trust consists of other series
representing  separate  investment  funds  (each  a "J.P.  Morgan  Institutional
Fund").  The other J.P.  Morgan  Institutional  Funds are  covered  by  separate
Statements of Additional Information.


         This  Statement  of  Additional  Information  describes  the  financial
history, investment objective and policies, management and operation of the Fund
and provides additional  information with respect to the Fund and should be read
in  conjunction   with  the  Fund's  current   Prospectus  (the   "Prospectus").
Capitalized  terms not otherwise  defined  herein have the meanings  accorded to
them in the  Prospectus.  The Fund's  executive  offices are located at 60 State
Street, Suite 1300, Boston, Massachusetts 02109.


         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 a corresponding  Master Portfolio (the
"Portfolio"),   an  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."

     The Portfolio is advised by J.P. Morgan Investment Management Inc. ("JPMIM"
or the "Advisor").

         Investments  in the  Fund  are  not  deposits  or  obligations  of,  or
guaranteed  or  endorsed  by,  Morgan   Guaranty  Trust  Company  of  New  York,
("Morgan"),  an affiliate  of the Advisor or any other bank.  Shares of the Fund
are not federally  insured by the Federal  Deposit  Insurance  Corporation,  the
Federal Reserve Board, or any other  governmental  agency.  An investment in the
Fund is subject to risk that may cause the value of the investment to fluctuate,
and when the  investment is redeemed,  the value may be higher or lower than the
amount originally invested by the investor.

INVESTMENT OBJECTIVE AND POLICIES


         The following  discussion  supplements  the  information  regarding the
investment  objective of the Fund and the policies to be employed to achieve the
objective  by the  Portfolio  as set forth  herein  and in the  Prospectus.  The
investment   objective  of  the  Fund  and  the  investment   objective  of  its
corresponding  Portfolio are  identical.  Accordingly,  references  below to the
Portfolio also include the Fund; similarly,  references to the Fund also include
the Portfolio unless the context requires otherwise.


         The Fund is  designed  for  investors  who  seek  high  current  income
consistent  with the  preservation  of capital  and  same-day  liquidity  from a
portfolio  of high  quality  money  market  instruments.  The Fund's  investment
objective is to maximize  current  income that is exempt from federal income tax
consistent with the preservation of capital and same-day liquidity. See "Taxes."
The Fund attempts to achieve this  objective by investing all of its  investable
assets in The Tax Exempt Money Market Portfolio (the "Portfolio"), a diversified
open-end management  investment company having the same investment  objective as
the Fund.

         The  Portfolio   attempts  to  achieve  its  investment   objective  by
maintaining a  dollar-weighted  average  portfolio  maturity of not more than 90
days and by investing in U.S.  dollar-denominated  securities  described in this
Statement of Additional  Information that meet certain rating criteria,  present
minimal credit risks, have effective maturities of not more than thirteen months
and earn interest  wholly exempt from federal  income tax in the opinion of bond
counsel for the issuer. If attractive  municipal  obligations are not available,
the Fund may hold cash rather than invest in taxable  money market  instruments.
The  Portfolio,  however,  may  temporarily  invest up to 20% of total assets in
taxable securities in abnormal market  conditions,  for defensive purposes only.
For purposes of this  calculation,  obligations that generate income that may be
treated as a preference item for purposes of the  alternative  minimum tax shall
not  be  considered  taxable   securities.   See  "Quality  and  Diversification
Requirements."  Interest on these  securities  may be subject to state and local
taxes.  For more  detailed  information  regarding  tax matters,  including  the
applicability of the alternative minimum tax, see "Taxes."

Money Market Instruments

     A description of the various types of money market  instruments that may be
purchased by the Fund  appears  below.  Also see  "Quality  and  Diversification
Requirements."

Tax Exempt Obligations

     The Fund may invest in tax exempt obligations to the extent consistent with
the Fund's investment objective and policies. A description of the various types
of tax exempt  obligations which may be purchased by the Fund appears below. See
"Quality and Diversification Requirements."

          Municipal Bonds.  Municipal bonds are debt  obligations  issued by the
  states,  territories  and possessions of the United States and the District of
  Columbia, by their political subdivisions and by duly constituted  authorities
  and  corporations.   For  example,   states,   territories,   possessions  and
  municipalities  may issue  municipal  bonds to raise funds for various  public
  purposes such as airports, housing,  hospitals, mass transportation,  schools,
  water  and  sewer  works.  They  may also  issue  municipal  bonds  to  refund
  outstanding  obligations  and  to  meet  general  operating  expenses.  Public
  authorities  issue  municipal  bonds to obtain funding for privately  operated
  facilities,  such as housing and pollution control facilities,  for industrial
  facilities or for water supply, gas, electricity or waste disposal facilities.

          Municipal  bonds may be general  obligation or revenue bonds.  General
  obligation bonds are secured by the issuer's pledge of its full faith,  credit
  and taxing power for the payment of principal and interest.  Revenue bonds are
  payable from revenues derived from particular facilities, from the proceeds of
  a special  excise tax or from other  specific  revenue  sources.  They are not
  generally payable from the general taxing power of a municipality.

     Municipal  Notes.  Municipal notes are subdivided into three  categories of
short-term   obligations:   municipal  notes,  municipal  commercial  paper  and
municipal demand obligations.

          Municipal notes are short-term obligations with a maturity at the time
  of issuance  ranging  from six months to five years.  The  principal  types of
  municipal  notes include tax  anticipation  notes,  bond  anticipation  notes,
  revenue  anticipation notes, grant anticipation notes and project notes. Notes
  sold in  anticipation of collection of taxes, a bond sale, or receipt of other
  revenues  are  usually  general  obligations  of the issuing  municipality  or
  agency.

          Municipal  commercial  paper  typically  consists  of very  short-term
  unsecured  negotiable  promissory notes that are sold to meet seasonal working
  capital or interim  construction  financing needs of a municipality or agency.
  While  these  obligations  are  intended to be paid from  general  revenues or
  refinanced  with  long-term  debt,  they  frequently  are backed by letters of
  credit,  lending  agreements,  note  repurchase  agreements  or  other  credit
  facility agreements offered by banks or institutions.

     Municipal demand  obligations are subdivided into two types:  variable rate
demand notes and master demand obligations.

          Variable  rate demand notes are tax exempt  municipal  obligations  or
  participation interests that provide for a periodic adjustment in the interest
  rate paid on the notes. They permit the holder to demand payment of the notes,
  or to demand  purchase  of the notes at a purchase  price  equal to the unpaid
  principal  balance,  plus accrued interest either directly by the issuer or by
  drawing on a bank  letter of credit or guaranty  issued  with  respect to such
  note. The issuer of the municipal obligation may have a corresponding right to
  prepay at its  discretion the  outstanding  principal of the note plus accrued
  interest  upon notice  comparable  to that  required  for the holder to demand
  payment.  The  variable  rate  demand  notes in which the Fund may  invest are
  payable,  or are  subject to  purchase,  on demand  usually on notice of seven
  calendar days or less.  The terms of the notes provide that interest rates are
  adjustable at intervals ranging from daily to six months,  and the adjustments
  are based upon the prime  rate of a bank or other  appropriate  interest  rate
  index specified in the respective notes. Variable rate demand notes are valued
  at  amortized  cost;  no value is assigned to the right of the Fund to receive
  the par value of the obligation upon demand or notice.

          Master demand  obligations are tax exempt  municipal  obligations that
  provide for a periodic  adjustment  in the interest rate paid and permit daily
  changes in the amount  borrowed.  The interest on such  obligations is, in the
  opinion of counsel for the  borrower,  excluded  from gross income for federal
  income tax  purposes.  For a  description  of the  attributes of master demand
  obligations,  see  "Money  Market  Instruments"  above.  Although  there is no
  secondary  market  for  master  demand   obligations,   such  obligations  are
  considered by the Fund to be liquid because they are payable upon demand.  The
  Fund has no specific  percentage  limitations  on investments in master demand
  obligations.

          The Fund may purchase  securities of the type described  above if they
  have effective maturities within thirteen months. As required by regulation of
  the Securities  and Exchange  Commission  (the "SEC"),  this means that on the
  date of acquisition  the final stated  maturity (or if called for  redemption,
  the redemption  date) must be within  thirteen  months or the maturity must be
  deemed to be no more than 397 days because of a maturity shortening mechanism,
  such as a variable interest rate,  coupled with a conditional or unconditional
  right to resell the  investment to the issuer or a third party.  See "Variable
  Rate Demand Notes" and "Puts." A substantial  portion of the Fund's  portfolio
  is subject to maturity shortening  mechanisms  consisting of variable interest
  rates  coupled  with  unconditional  rights to resell  the  securities  to the
  issuers either  directly or by drawing on a domestic or foreign bank letter of
  credit or other credit support arrangement. See "Foreign Investments."

          Puts.  The Fund may purchase  without limit  municipal  bonds or notes
  together  with the  right to  resell  the  bonds or notes to the  seller at an
  agreed price or yield within a specified  period prior to the maturity date of
  the bonds or notes.  Such a right to resell is commonly  known as a "put." The
  aggregate  price for bonds or notes with puts may be higher than the price for
  bonds or notes without puts.  Consistent with the Fund's investment  objective
  and subject to the  supervision of the Trustees,  the purpose of this practice
  is to permit  the Fund to be fully  invested  in tax exempt  securities  while
  preserving  the  necessary  liquidity to purchase  securities on a when-issued
  basis,  to meet unusually large  redemptions,  and to purchase at a later date
  securities  other than those subject to the put. The principal risk of puts is
  that the writer of the put may default on its  obligation to  repurchase.  The
  Advisor will monitor each writer's ability to meet its obligations under puts.

          Puts may be exercised  prior to the  expiration  date in order to fund
  obligations to purchase other securities or to meet redemption requests. These
  obligations  may arise  during  periods in which  proceeds  from sales of Fund
  shares and from recent sales of portfolio  securities are insufficient to meet
  obligations  or  when  the  funds   available  are  otherwise   allocated  for
  investment. In addition, puts may be exercised prior to the expiration date in
  order to take  advantage of  alternative  investment  opportunities  or in the
  event the Advisor revises its evaluation of the creditworthiness of the issuer
  of the underlying  security.  In determining whether to exercise puts prior to
  their  expiration  date and in selecting  which puts to exercise,  the Advisor
  considers the amount of cash available to the Fund,  the  expiration  dates of
  the  available  puts,  any  future   commitments  for  securities   purchases,
  alternative  investment  opportunities,  the  desirability  of  retaining  the
  underlying  securities  in the Fund's  portfolio  and the yield,  quality  and
  maturity dates of the underlying securities.

          The Fund  values any  municipal  bonds and notes  which are subject to
  puts at amortized  cost. No value is assigned to the put. The cost of any such
  put is carried as an  unrealized  loss from the time of  purchase  until it is
  exercised or expires.  The Board of Trustees  would,  in  connection  with the
  determination  of the  value of a put,  consider,  among  other  factors,  the
  creditworthiness  of the writer of the put, the duration of the put, the dates
  on  which  or the  periods  during  which  the  put may be  exercised  and the
  applicable rules and regulations of the SEC.

          Since the value of the put is partly  dependent  on the ability of the
  put writer to meet its obligation to repurchase, the Fund's policy is to enter
  into put transactions only with municipal  securities dealers who are approved
  by the Advisor.  Each dealer will be approved on its own merits, and it is the
  Fund's general policy to enter into put  transactions  only with those dealers
  which are determined to present  minimal credit risks. In connection with such
  determination,  the  Trustees  will review  regularly  the  Advisor's  list of
  approved dealers, taking into consideration,  among other things, the ratings,
  if available,  of their equity and debt  securities,  their  reputation in the
  municipal   securities   markets,   their  net  worth,   their  efficiency  in
  consummating transactions and any collateral arrangements,  such as letters of
  credit,  securing the puts written by them.  Commercial bank dealers  normally
  will be members of the  Federal  Reserve  System,  and other  dealers  will be
  members of the National Association of Securities Dealers,  Inc. or members of
  a national securities exchange.  The Trustees have directed the Advisor not to
  enter into put  transactions  with any  dealer  which in the  judgment  of the
  Advisor  becomes more than a minimal  credit risk.  In the event that a dealer
  should  default on its  obligation to repurchase an underlying  security,  the
  Fund is unable to predict  whether  all or any  portion of any loss  sustained
  could subsequently be recovered from such dealer.

          The Trust has been advised by counsel that the Fund will be considered
  the owner of the  securities  subject to the puts so that the  interest on the
  securities is tax exempt  income to the Fund.  Such advice of counsel is based
  on  certain  assumptions  concerning  the terms of the puts and the  attendant
  circumstances.

  Taxable Investments

         The  Portfolio  attempts to invest its assets in tax exempt  securities
  and when  investments  are not  available,  may hold  cash or may  invest to a
  limited extent in taxable securities. While the Fund does not currently intend
  to invest in taxable  securities,  in abnormal market conditions for defensive
  purposes  only,  it may  invest up to 20% of the value of its total  assets in
  securities,  the interest income on which may be subject to federal,  state or
  local  income  taxes.  The taxable  investments  permitted  for the  Portfolio
  include   obligations   of  the  U.S.   Government   and  its   agencies   and
  instrumentalities,   bank   obligations,   commercial   paper  and  repurchase
  agreements.

         The Fund may make  investments in other debt  securities with remaining
  effective  maturities  of not more than  thirteen  months,  including  without
  limitation corporate bonds, and other obligations  described in the Prospectus
  or this Statement of Additional Information.

     U.S. Treasury Securities.  The Fund may invest in direct obligations of the
U.S.  Treasury,  including  Treasury  bills,  notes and bonds,  all of which are
backed as to principal and interest payments by the full faith and credit of the
United States.

          Additional  U.S.  Government  Obligations.  The  Fund  may  invest  in
  obligations   issued   or   guaranteed   by  U.S.   Government   agencies   or
  instrumentalities.  These  obligations  may or may not be  backed by the "full
  faith and  credit" of the United  States.  Securities  which are backed by the
  full  faith  and  credit  of the  United  States  include  obligations  of the
  Government National Mortgage Association, the Farmers Home Administration, and
  the Export-Import Bank. In the case of securities not backed by the full faith
  and credit of the United States, the Fund must look principally to the federal
  agency issuing or guaranteeing  the obligation for ultimate  repayment and may
  not be able to assert a claim  against the United  States  itself in the event
  the agency or  instrumentality  does not meet its  commitments.  Securities in
  which the Fund may invest  that are not backed by the full faith and credit of
  the United  States  include,  but are not limited to: (i)  obligations  of the
  Tennessee Valley Authority,  the Federal Home Loan Mortgage  Corporation,  the
  Federal  Home Loan Banks and the U.S.  Postal  Service,  each of which has the
  right  to  borrow  from  the  U.S.  Treasury  to meet  its  obligations;  (ii)
  securities  issued by the Federal  National  Mortgage  Association,  which are
  supported by the  discretionary  authority of the U.S.  Government to purchase
  the agency's  obligations;  and (iii)  obligations  of the Federal Farm Credit
  System and the Student Loan Marketing  Association,  each of whose obligations
  may be satisfied only by the individual credits of the issuing agency.

          Bank  Obligations.  The Fund, 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 and are organized  under
  the laws of the United  States or any state,  (ii)  foreign  branches of these
  banks or of foreign banks of equivalent  size (Euros) and (iii) U.S.  branches
  of foreign  banks of  equivalent  size  (Yankees).  The Fund may not invest in
  obligations of foreign  branches of foreign banks. The Fund will not invest in
  obligations for which the Advisor,  or any of its affiliated  persons,  is the
  ultimate obligor or accepting bank.

          Commercial Paper. The Fund may invest in commercial  paper,  including
  master demand  obligations.  Master demand  obligations are  obligations  that
  provide for a periodic  adjustment  in the interest rate paid and permit daily
  changes in the amount  borrowed.  Master  demand  obligations  are governed by
  agreements  between the issuer and Morgan  acting as agent,  for no additional
  fee. The monies loaned to the borrower come from accounts managed by Morgan or
  its  affiliates,  pursuant to  arrangements  with such accounts.  Interest and
  principal payments are credited to such accounts.  Morgan, an affiliate of the
  Advisor,  has the right to  increase or  decrease  the amount  provided to the
  borrower  under an  obligation.  The  borrower  has the  right to pay  without
  penalty  all or any  part  of the  principal  amount  then  outstanding  on an
  obligation  together  with  interest  to the  date  of  payment.  Since  these
  obligations  typically  provide that the interest  rate is tied to the Federal
  Reserve commercial paper composite rate, the rate on master demand obligations
  is subject to change. Repayment of a master demand obligation to participating
  accounts  depends on the ability of the  borrower to pay the accrued  interest
  and principal of the obligation on demand which is  continuously  monitored by
  Morgan.  Since master  demand  obligations  typically  are not rated by credit
  rating  agencies,  the Fund may invest in such unrated  obligations only if at
  the time of an investment  the obligation is determined by the 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 Fund to be
  liquid  because  they are  payable  upon  demand.  The Fund  does not have any
  specific percentage limitation on investments in master demand obligations. It
  is possible that the issuer of a master demand obligation could be a client of
  Morgan to whom Morgan, in its capacity as a commercial bank, has made a loan.

          Repurchase  Agreements.  The  Fund,  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  Fund's
  Trustees.  In a repurchase  agreement,  the Fund buys a security from a seller
  that has agreed to repurchase the same security at a mutually agreed upon date
  and price.  The resale  price  normally  is in excess of the  purchase  price,
  reflecting an agreed upon interest  rate.  This interest rate is effective for
  the period of time the Fund is invested in the agreement and is not related to
  the coupon rate on the underlying security. A repurchase agreement may also be
  viewed as a fully  collateralized loan of money by the Fund to the seller. The
  period of these repurchase agreements will usually be short, from overnight to
  one week,  and at no time will the Fund invest in  repurchase  agreements  for
  more than 397 days. The securities which are subject to repurchase agreements,
  however, may have maturity dates in excess of 397 days from the effective date
  of the  repurchase  agreement.  The Fund will  always  receive  securities  as
  collateral  whose market value is, and during the entire term of the agreement
  remains,  at least equal to 100% of the dollar amount  invested by the Fund in
  the agreement plus accrued  interest,  and the Fund will make payment for such
  securities only upon physical delivery or upon evidence of book entry transfer
  to the account of the Custodian.  The Fund will be fully collateralized within
  the meaning of paragraph (a)(4) of Rule 2a-7 under the Investment  Company Act
  of 1940, as amended (the "1940 Act"). If the seller  defaults,  the Fund might
  incur a loss if the value of the collateral securing the repurchase  agreement
  declines and might incur  disposition costs in connection with liquidating the
  collateral.  In addition, if bankruptcy proceedings are commenced with respect
  to the seller of the security,  realization upon disposal of the collateral by
  the Fund may be delayed or limited.

          The Fund may make  investments in other debt securities with remaining
  effective  maturities  of not more than  thirteen  months,  including  without
  limitation corporate bonds, and other obligations  described in the Prospectus
  or this Statement of Additional Information.

  Additional Investments


         When-Issued  and Delayed  Delivery  Securities.  The Fund may  purchase
  securities on a when-issued or delayed delivery basis.  For example,  delivery
  of and payment for these  securities  can take place a month or more after the
  date of the  purchase  commitment.  The purchase  price and the interest  rate
  payable,  if any, on the securities are fixed on the purchase  commitment date
  or at the time the settlement  date is fixed.  The value of such securities is
  subject to market fluctuation and for money market instruments and other fixed
  income  securities  no  interest  accrues to the Fund until  settlement  takes
  place.  At the time the Fund makes the commitment to purchase  securities on a
  when-issued or delayed delivery basis, it will record the transaction, reflect
  the value each day of such  securities in determining its net asset value and,
  if  applicable,  calculate  the maturity for the purposes of average  maturity
  from that date. At the time of settlement a when-issued security may be valued
  at less than the purchase  price. To facilitate  such  acquisitions,  the Fund
  will  maintain  with the  Custodian a segregated  account with liquid  assets,
  consisting  of  cash,  U.S.   Government   securities  or  other   appropriate
  securities, in an amount at least equal to such commitments. On delivery dates
  for such  transactions,  the Fund will meet its obligations from maturities or
  sales of the securities held in the segregated  account and/or from cash flow.
  If the Fund chooses to dispose of the right to acquire a when-issued  security
  prior to its  acquisition,  it  could,  as with the  disposition  of any other
  portfolio obligation, incur a gain or loss due to market fluctuation.  Also, a
  Fund may be disadvantaged if the other party to the transaction defaults.


          Investment   Company   Securities.   Securities  of  other  investment
  companies  may be acquired by the Fund and  Portfolio to the extent  permitted
  under the 1940 Act or any  order  pursuant  thereto.  These  limits  currently
  require that, as determined immediately after a purchase is made, (i) not more
  than 5% of the  value of the  Fund's  total  assets  will be  invested  in the
  securities of any one investment company,  (ii) not more than 10% of the value
  of its total  assets  will be  invested  in the  aggregate  in  securities  of
  investment companies as a group, and (iii) not more than 3% of the outstanding
  voting stock of any one investment company will be owned by the Fund, provided
  however,  that the Fund may invest all of its investable assets in an open-end
  investment  company  that has the same  investment  objective as the Fund (its
  corresponding  Portfolio). As a shareholder of another investment company, the
  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
  the Fund or Portfolio bears directly in connection with its own operations.

          Reverse  Repurchase  Agreements.  The  Fund  may  enter  into  reverse
  repurchase  agreements.  In a reverse  repurchase  agreement,  a Fund  sells a
  security and agrees to repurchase the same security at a mutually  agreed upon
  date and price  reflecting  the interest  rate  effective  for the term of the
  agreement. For purposes of the 1940 Act a reverse repurchase agreement is also
  considered  as the  borrowing of money by the Fund and,  therefore,  a form of
  leverage. Leverage may cause any gains or losses for the Fund to be magnified.
  The Fund will  invest the  proceeds of  borrowings  under  reverse  repurchase
  agreements.  In addition,  except for liquidity purposes,  the Fund will enter
  into a reverse  repurchase  agreement  only when the expected  return from the
  investment of the proceeds is greater than the expense of the transaction. The
  Fund will not invest the  proceeds  of a reverse  repurchase  agreement  for a
  period which  exceeds the duration of the reverse  repurchase  agreement.  The
  Fund 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 the Fund's limitations on reverse repurchase  agreements and
  bank borrowings.

          Loans  of  Portfolio  Securities.  Subject  to  applicable  investment
  restrictions,  the Fund is permitted to lend its securities in an amount up to
  33 1/3% of the  value  of the  Fund's  net  assets.  The  Fund  may  lend  its
  securities  if such  loans  are  secured  continuously  by cash or  equivalent
  collateral or by a letter of credit in favor of the Fund at least equal at all
  times to 100% of the  market  value of the  securities  loaned,  plus  accrued
  interest.  While such  securities  are on loan, the borrower will pay the Fund
  any income accruing thereon.  Loans will be subject to termination by the Fund
  in the normal settlement time,  generally three business days after notice, or
  by the borrower on one day's notice. Borrowed securities must be returned when
  the loan is  terminated.  Any gain or loss in the market price of the borrowed
  securities which occurs during the term of the loan inures to the Fund and its
  respective investors.  The Fund may pay reasonable finders' and custodial fees
  in connection  with a loan. In addition,  the Fund will consider all facts and
  circumstances  including  the  creditworthiness  of  the  borrowing  financial
  institution, and the Fund will not make any loans in excess of one year. Loans
  of portfolio  securities  may be considered  extensions of credit by the Fund.
  The risks to the Fund with respect to borrowers  of its  portfolio  securities
  are  similar to the risks to the Fund with  respect  to sellers in  repurchase
  agreement transactions.  See "Repurchase  Agreements".  The Fund will not lend
  its securities to any officer, Trustee, Director,  employee or other affiliate
  of the Fund, the Advisor or the  Distributor,  unless  otherwise  permitted by
  applicable law.

          Illiquid  Investments,   Privately  Placed  and  Certain  Unregistered
  Securities. The Fund may invest in privately placed, restricted,  Rule 144A or
  other unregistered securities.  The Fund may not acquire any illiquid holdings
  if, as a result  thereof,  more than 10% of the Fund's net assets  would be in
  illiquid investments.  Subject to this non-fundamental policy limitation,  the
  Portfolio may acquire investments that are illiquid or have limited liquidity,
  such as private  placements or investments  that are not registered  under the
  Securities  Act of 1933, as amended (the "1933 Act") and cannot be offered for
  public sale in the United States without first being registered under the 1933
  Act.  An  illiquid  investment  is any  investment  that cannot be disposed of
  within seven days in the normal course of business at approximately the amount
  at which it is valued by the  Portfolio.  The  price  the  Portfolio  pays for
  illiquid  securities  or receives upon resale may be lower than the price paid
  or received for similar securities with a more liquid market.  Accordingly the
  valuation of these securities will reflect any limitations on their liquidity.

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

          As to illiquid investments,  the Fund is subject to a risk that should
  the Fund  decide to sell them when a ready buyer is not  available  at a price
  the Fund  deems  representative  of their  value,  the value of the Fund's net
  assets  could be  adversely  affected.  Where  an  illiquid  security  must be
  registered  under  the  1933  Act,  before  it may be  sold,  the  Fund may be
  obligated to pay all or part of the registration  expenses, and a considerable
  period may elapse  between  the time of the  decision to sell and the time the
  Fund may be  permitted  to sell a  security  under an  effective  registration
  statement.  If,  during  such a  period,  adverse  market  conditions  were to
  develop,  the Fund might obtain a less favorable  price than prevailed when it
  decided to sell.

          Synthetic  Instruments.  The  Fund may  invest  in  certain  synthetic
  variable rate instruments. Such instruments generally involve the deposit of a
  long-term tax exempt bond in a custody or trust  arrangement  and the creation
  of a mechanism to adjust the long-term interest rate on the bond to a variable
  short-term rate and a right (subject to certain conditions) on the part of the
  purchaser to tender it periodically to a third part at par. Morgan will review
  the structure of synthetic  variable rate  instruments to identify  credit and
  liquidity risks  (including the conditions under which the right to tender the
  instrument  would no longer be available) and will monitor those risks. In the
  event that the right to tender the instrument is no longer available, the risk
  to the Portfolio will be that of holding the long-term bond, which may require
  the  disposition  of the bond  which  could be at a loss.  In the case of some
  types of  instruments  credit  enhancement  is not  provided,  and if  certain
  events,  which may include (a) default in the payment of principal or interest
  on the underlying  bond, (b) downgrading of the bond below investment grade or
  (c) a loss of the  bond's  tax  exempt  status,  occur,  then (i) the put will
  terminate, (ii) the risk to the Fund will be that of holding a long-term bond,
  and (iii) the  disposition  of the bond may be  required  which  could be at a
  loss.

  Quality and Diversification Requirements

          The Fund intends to meet the diversification  requirements of the 1940
  Act. Current 1940 Act diversification  requirements  require that with respect
  to 75% of the assets of the Fund:  (1) the Fund may not invest more than 5% of
  its total assets in the  securities of any one issuer,  except  obligations of
  the U.S. Government, its agencies and instrumentalities,  and (2) the Fund may
  not own more than 10% of the outstanding  voting securities of any one issuer.
  As for the  other 25% of the  Fund's  assets  not  subject  to the  limitation
  described  above,  there is no  limitation on investment of these assets under
  the 1940 Act, so that all of such assets may be invested in  securities of any
  one issuer.  Investments not subject to the limitations  described above could
  involve an  increased  risk to the Fund  should an  issuer,  or a state or its
  related entities,  be unable to make interest or principal  payments or should
  the market value of such securities decline.

          At the time the Fund invests in any taxable  commercial paper,  master
  demand obligation,  bank obligation or repurchase  agreement,  the issuer must
  have outstanding  debt rated A or higher by Moody's or 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  Morgan's
  opinion.

          For purposes of diversification  and concentration under the 1940 Act,
  identification  of the issuer of municipal bonds or notes depends on the terms
  and  conditions  of the  obligation.  If the assets and revenues of an agency,
  authority,  instrumentality  or other political  subdivision are separate from
  those of the government  creating the subdivision and the obligation is backed
  only by the  assets and  revenues  of the  subdivision,  such  subdivision  is
  regarded  as  the  sole  issuer.  Similarly,  in  the  case  of an  industrial
  development  revenue bond or pollution  control  revenue  bond, if the bond is
  backed  only by the assets  and  revenues  of the  nongovernmental  user,  the
  nongovernmental  user is  regarded as the sole  issuer.  If in either case the
  creating  government or another entity guarantees an obligation,  the guaranty
  is regarded as a separate  security and treated as an issue of such guarantor.
  Since  securities  issued or  guaranteed by states or  municipalities  are not
  voting  securities,  there  is no  limitation  on the  percentage  of a single
  issuer's  securities which the Fund may own so long as it does not invest more
  than 5% of its total assets that are subject to the diversification limitation
  in the securities of such issuer,  except  obligations issued or guaranteed by
  the U.S. Government. Consequently, the Fund may invest in a greater percentage
  of the  outstanding  securities  of a single  issuer than would an  investment
  company which invests in voting securities. See "Investment Restrictions."

          In order to attain its  objective  of  maintaining  a stable net asset
  value,  the Fund will limit its investments to securities that present minimal
  credit risks and securities  (other than New York State municipal  notes) that
  are rated within the highest  rating  assigned to short-term  debt  securities
  (or,  in the case of New York  State  municipal  notes,  within one of the two
  highest ratings assigned to short-term debt securities) by at least two NRSROs
  or by the only NRSRO that has rated the security.  Securities which originally
  had a maturity of over one year are subject to more complicated, but generally
  similar rating  requirements.  The Fund may also purchase  unrated  securities
  that are of  comparable  quality  to the  rated  securities  described  above.
  Additionally,  if  the  issuer  of a  particular  security  has  issued  other
  securities  of  comparable  priority and security and which have been rated in
  accordance  with the criteria  described above that security will be deemed to
  have the same rating as such other rated securities.

          In addition,  the Board of Trustees has adopted  procedures  which (i)
  require the Fund to maintain a dollar-weighted  average portfolio  maturity of
  not more  than 90 days  and to  invest  only in  securities  with a  remaining
  maturity of not more than  thirteen  months and (ii) require the Fund,  in the
  event of certain downgrading of or defaults on portfolio holdings,  to dispose
  of the holding,  subject in certain circumstances to a finding by the Trustees
  that disposing of the holding would not be in the Fund's best interest.

          The credit  quality of variable rate demand notes and other  municipal
  obligations is frequently enhanced by various credit support arrangements with
  domestic  or  foreign  financial  institutions,  such as  letters  of  credit,
  guarantees  and  insurance,   and  these   arrangements  are  considered  when
  investment  quality  is  evaluated.  The rating of  credit-enhanced  municipal
  obligations  by a NRSRO may be based  primarily or  exclusively  on the credit
  support arrangement.

  INVESTMENT RESTRICTIONS

          The investment  restrictions  of the Fund and Portfolio are identical,
  unless  otherwise  specified.  Accordingly,  references below to the Fund also
  include  the  Portfolio  unless the  context  requires  otherwise;  similarly,
  references to the Portfolio also include the Fund unless the context  requires
  otherwise.

          The investment restrictions below have been adopted by the Trust, with
  respect to the Fund, and by the 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  the Fund is requested to vote on a
  change in the fundamental investment restrictions of the Portfolio,  the Trust
  will hold a meeting of Fund shareholders and will cast its votes as instructed
  by the Fund's shareholders.

         The Fund and its corresponding Portfolio:

1. May not make any investment  inconsistent with the Fund's classification as a
diversified investment company under the Investment Company Act of 1940;

2. May not purchase any security which would cause the Fund to  concentrate  its
investments  in the  securities of issuers  primarily  engaged in any particular
industry except as permitted by the SEC;

3. May not issue senior  securities,  except as permitted  under the  Investment
Company Act of 1940 or any rule, order or interpretation thereunder;

4. May not borrow money, except to the extent permitted by applicable law;

5. May not underwrite securities of other issuers, except to the extent that the
Fund, in disposing of portfolio securities,  may be deemed an underwriter within
the meaning of the 1933 Act;

6. May not purchase or sell real estate, except that, to the extent permitted by
applicable  law,  the Fund may (a)  invest in  securities  or other  instruments
directly or indirectly  secured by real estate,  and (b) invest in securities or
other instruments issued by issuers that invest in real estate;

7. May not purchase or sell  commodities or commodity  contracts unless acquired
as a result of ownership of  securities or other  instruments  issued by persons
that purchase or sell commodities or commodities  contracts;  but this shall not
prevent the Fund from  purchasing,  selling and entering into financial  futures
contracts (including futures contracts on indices of securities,  interest rates
and  currencies),  options on financial  futures  contracts  (including  futures
contracts on indices of securities,  interest rates and  currencies),  warrants,
swaps,  forward contracts,  foreign currency spot and forward contracts or other
derivative instruments that are not related to physical commodities; and

8. May make loans to other  persons,  in accordance  with the Fund's  investment
objective and policies and to the extent permitted by applicable law.

         Non-Fundamental  Investment  Restrictions.  The investment restrictions
described below are not fundamental  policies of the Fund and its  corresponding
Portfolio and may be changed by their Trustees. These non-fundamental investment
policies require that the Fund and its corresponding Portfolio:

(i) May not 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 10% of the market value
of the Fund's total assets would be in investments which are illiquid;

(ii) May not purchase securities on margin,  make short sales of securities,  or
maintain a short position, provided that this restriction shall not be deemed to
be  applicable  to the  purchase  or sale of  when-issued  or  delayed  delivery
securities

(iii)  May not  acquire  securities  of other  investment  companies,  except as
permitted by the 1940 Act or any order pursuant thereto.

(iv) May not borrow money,  except from banks for  temporary,  extraordinary  or
emergency purposes and then only in amounts up to 10% of the value of the Fund's
total assets, taken at cost at the time of such borrowing;  or mortgage,  pledge
or  hypothecate  any assets  except in  connection  with any such  borrowing  in
amounts  up to 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, for example, facilitates the orderly sale of portfolio
securities in the event of abnormally heavy redemption  requests or in the event
of redemption  requests during periods of tight market supply. This provision is
not for leveraging purposes.

(v) May not purchase  industrial revenue bonds if, as a result of such purchase,
more than 5% of total Fund assets would be invested in industrial  revenue bonds
where payment of principal and interest are the responsibility of companies with
fewer than three years of operating history.

         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,  the Advisor 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 the Advisor 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,  the
Advisor 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 the Portfolio,
their business addresses,  principal  occupations during the past five years and
dates of birth are set forth below.


     FREDERICK S.  ADDY--Trustee;  Retired;  Former Executive Vice President and
Chief Financial Officer,  Amoco  Corporation.  His address is 5300 Arbutus Cove,
Austin, Texas 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,  Florida
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, New Jersey 08540, and his date of birth is May 23, 1934.

     MATTHEW HEALEY1--Trustee,  Chairman and Chief Executive Officer;  Chairman,
Pierpont Group, Inc., since prior to 1993. His address is Pine Tree Country Club
Estates, 10286 Saint Andrews Road, Boynton Beach, Florida 33436, and his date of
birth is August 23, 1937.

     MICHAEL P.  MALLARDI--Trustee;  Retired;  Prior to April 1996,  Senior Vice
President, Capital Cities/ABC, Inc. and President,  Broadcast Group. His address
is 10 Charnwood Drive,  Suffern,  New York 10910, and his date of birth is March
17, 1934.

         The  Trustees  of  the  Trust  are  the  same  as the  Trustees  of the
Portfolio.  In accordance with applicable state requirements,  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,  the Portfolio and the J.P. Morgan 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 J.P.  Morgan Funds and J.P.  Morgan 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
Fund.

<PAGE>
     Trustee compensation expenses paid by the Trust for the calendar year ended
December 31, 1998 are set forth below.

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


                                                      TOTAL TRUSTEE COMPENSATION
                                  AGGREGATE TRUSTEE   ACCRUED BY THE MASTER
                                  COMPENSATION        PORTFOLIOS(*), J.P. MORGAN
                                  PAID BY THE TRUST   FUNDS, J.P. MORGAN SERIES
                                  DURING 1998         TRUST AND THE TRUST DURING
                                  --------------      1998(***)
NAME OF TRUSTEE
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------
Frederick S. Addy, Trustee        $20,055             $75,000
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------


William G. Burns, Trustee         $20,055             $75,000
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Arthur C. Eschenlauer, Trustee    $20,055             $75,000
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Matthew Healey, Trustee (**)      $20,055             $75,000
  Chairman and Chief Executive
  Officer
- --------------------------------- ------------------- --------------------------
- --------------------------------- ------------------- --------------------------

Michael P. Mallardi, Trustee      $20,055             $75,000
- --------------------------------- ------------------- --------------------------

(*)      Includes  the  Portfolio  and 18 other  portfolios  (collectively,  the
         "Master Portfolios") for which JPMIM acts as investment adviser.

(**) During 1998,  Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
     of  Pierpont  Group,   Inc.,   compensation  in  the  amount  of  $157,400,
     contributed  $23,610 to a defined  contribution plan on his behalf and paid
     $17,700 in insurance premiums for his benefit.

(***)    No  investment  company  within  the  fund  complex  has a  pension  or
         retirement  plan.  Currently  there  are 17  investment  companies  (14
         investment companies comprising the Master Portfolios,  the J.P. Morgan
         Funds, the Trust and J.P. Morgan Series Trust) in the fund complex.

         The Trustees  decide upon  general  policies  and are  responsible  for
overseeing the Trust's and Portfolio's  business affairs.  The Portfolio and the
Trust have 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  Portfolio  and the Trust.  Pierpont  Group,  Inc.  was
organized in July 1989 to provide services for The Pierpont Family of Funds (now
the J.P.  Morgan  Family  of  Funds),  and the  Trustees  are the equal and sole
shareholders of Pierpont Group,  Inc. The Trust and the Portfolio have agreed to
pay Pierpont Group, Inc. a fee in an amount representing its reasonable costs in
performing  these  services  to the  Trust,  the  Portfolio  and  certain  other
registered  investment  companies  subject to similar  agreements  with Pierpont
Group, Inc. These costs are periodically reviewed by the Trustees. The principal
offices of Pierpont Group,  Inc. are located at 461 Fifth Avenue,  New York, New
York 10017.

         The  aggregate  fees paid to Pierpont  Group,  Inc. by the Fund and the
Portfolio during the indicated fiscal years are set forth below:


Fund -- For the fiscal  years  ended  August 31,  1997,  1998 and 1999:  $6,074,
$14,685 and $13,444.

Portfolio -- For the fiscal years ended August 31, 1997, 1998 and 1999: $43,285,
$53,097 and $46,121.



Officers

         The Trust's and Portfolio's  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  Portfolio.  The Trust and the Portfolio have no
employees.

         The  officers  of  the  Trust  and  the  Portfolio,   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 the 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 1993.  His  address is Pine Tree  Country  Club  Estates,  10286  Saint
Andrews Road,  Boynton  Beach,  Florida  33436.  His date of birth is August 23,
1937.

     MARGARET W. CHAMBERS;  Vice President and Secretary.  Senior Vice President
and General  Counsel of FDI since April,  1998.  From August 1996 to March 1998,
Ms. Chambers was Vice President and Assistant General Counsel for Loomis, Sayles
& Company,  L.P. From January 1986 to July 1996,  she was an associate  with the
law firm of Ropes & Gray. Her date of birth is October 12, 1959.


     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  distributed or  administered by FDI. Her date of
birth is August 1, 1957.


     DOUGLAS C. CONROY; Vice President and Assistant  Treasurer.  Assistant Vice
President   and   Assistant   Department   Manager  of  Treasury   Services  and
Administration of FDI and an officer of certain investment companies distributed
or  administered  by FDI.  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.  His
date of birth is March 31, 1969.


     JOHN P. COVINO - Vice President and Assistant Treasurer. Vice President and
Treasury Group Manager of Treasury Servicing and Administration of FDI. Prior to
November  1998,  Mr. Covino was employed by Fidelity  Investments  where he held
multiple  positions in their  Institutional  Brokerage  Group.  Prior to joining
Fidelity,  Mr.  Covino was employed by SunGard  Brokerage  systems  where he was
responsible for the technology and development of the accounting  product group.
His date of birth is October 8, 1963.

     KAREN JACOPPO-WOOD;  Vice President and Assistant Secretary. Vice President
and  Senior  Counsel  of FDI and an  officer  of  certain  investment  companies
distributed  or  administered  by FDI.  From  June  1994 to  January  1996,  Ms.
Jacoppo-Wood was a Manager of SEC Registration at Scudder, Stevens & Clark, Inc.
Her date of birth is December 29, 1966.

     CHRISTOPHER  J.  KELLEY;  Vice  President  and  Assistant  Secretary.  Vice
President and Senior Associate  General Counsel of FDI and Premier Mutual and an
officer of certain investment companies distributed or administered by FDI. From
April 1994 to July 1996,  Mr.  Kelley was Assistant  Counsel at Forum  Financial
Group. His date of birth is December 24, 1964.

     KATHLEEN  K.  MORRISEY.  Vice  President  and  Assistant  Secretary.   Vice
President  and  Assistant   Secretary  of  FDI.  Manager  of  Treasury  Services
Administration  and an  officer  of  certain  investment  companies  advised  or
administered  by  Montgomery  Asset  Management,  L.P.  and  Dresdner RCM Global
Investors,  Inc., and their  respective  affiliates.  From July 1994 to November
1995, Ms.  Morrisey was a Fund Accountant II for Investors Bank & Trust Company.
Her date of birth is July 5, 1972.

     MARY A. NELSON; Vice President and Assistant Treasurer.  Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual and an
officer of certain investment companies  distributed or administered by FDI. Her
date of birth is April 22, 1964.


     MARY JO PACE;  Assistant Treasurer.  Vice President,  Morgan Guaranty Trust
Company of New York.  Ms.  Pace  serves in the Funds  Administration  group as a
Manager for the Budgeting and Expense Processing Group. Prior to September 1995,
Ms. Pace served as a Fund Administrator for Morgan Guaranty Trust Company of New
York. Her address is 60 Wall Street, New York, New York 10260. Her date of birth
is March 13, 1966.

     STEPHANIE D. PIERCE; Vice President and Assistant Secretary. Vice President
and Client  Development  Manager for FDI since  April  1998.  From April 1997 to
March 1998,  Ms.  Pierce was employed by Citibank,  NA as an officer of Citibank
and Relationship  Manager on the Business and Professional Banking team handling
over 22,000 clients.  Address:  200 Park Avenue,  New York, New York 10166.  Her
date of birth is August 18, 1968.


     GEORGE A. RIO; President and Treasurer. Executive Vice President and Client
Service  Director of FDI since April 1998. From June 1995 to March 1998, Mr. Rio
was Senior  Vice  President  and Senior Key Account  Manager  for Putnam  Mutual
Funds. From May 1994 to June 1995, Mr. Rio was Director of Business  Development
for First Data Corporation. His date of birth is January 2, 1955.


     CHRISTINE ROTUNDO;  Assistant  Treasurer.  Vice President,  Morgan Guaranty
Trust Company of New York. Ms. Rotundo serves in the Funds  Administration group
as a Manager  of the Tax  Group  and is  responsible  for U.S.  mutual  fund tax
matters.  Prior to September 1995, Ms. Rotundo served as a Senior Tax Manager in
the Investment  Company  Services Group of Deloitte & Touche LLP. Her address is
60 Wall Street,  New York,  New York 10260.  Her date of birth is September  26,
1965.

INVESTMENT ADVISOR

         The Fund has not retained the services of an investment adviser because
the Fund seeks to achieve  its  investment  objective  by  investing  all of its
investable  assets in a corresponding  Portfolio.  Subject to the supervision of
the  Portfolio's  Trustees,   the  Advisor  makes  the  Portfolio's   day-to-day
investment decisions,  arranges for the execution of Portfolio  transactions and
generally  manages the Portfolio's  investments.  Effective  October 1, 1998 the
Portfolio's  investment  advisor is JPMIM.  Prior to that  date,  Morgan was the
Portfolio's investment advisor.  JPMIM, a wholly owned subsidiary of J.P. Morgan
& Co. Incorporated ("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 Morgan serves as trustee.


         J.P.  Morgan,  through  the  Advisor  and other  subsidiaries,  acts as
investment advisor to individuals,  governments,  corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of approximately $326 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 120 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, and Singapore to cover companies,  industries and countries on
site. In addition,  the investment management divisions employ approximately 380
capital market researchers,  portfolio managers and traders. The Advisor's fixed
income  investment   process  is  based  on  analysis  of  real  rates,   sector
diversification and quantitative and credit analysis.

         The investment  advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Advisory Agreement. 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  Portfolio.  Such accounts are supervised by employees of the Advisor who
may also be acting in  similar  capacities  for the  Portfolio.  See  "Portfolio
Transactions."

        Morgan, also a wholly owned subsidiary of J.P. Morgan, is a bank holding
  company  organized  under the laws of the  State of  Delaware.  Morgan,  whose
  principal  offices are at 60 Wall Street,  New York, New York 10260,  is a New
  York trust company which conducts a general banking and trust business. Morgan
  is subject to  regulation by the New York State  Banking  Department  and is a
  member bank of the Federal  Reserve  System.  Through offices in New York City
  and abroad, Morgan offers a wide range of services, primarily to governmental,
  institutional, corporate and high net worth individual customers in the United
  States and throughout the world.

         The Portfolio is managed by employees of the Advisor who, in acting for
their  customers,  including  the  Portfolio,  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
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  Investment
Advisory Agreement,  the Portfolio has agreed to pay the Advisor a fee, which is
computed daily and may be paid monthly, equal to the annual rate of 0.20% of the
Portfolio's  average  daily  net  assets  up to $1  billion  and  0.10%  of  the
Portfolio's average daily net assets in excess of $1 billion.


         The Portfolio paid the following  advisory fees to Morgan and JPMIM, as
applicable,  for the  fiscal  years  ended  August  31,  1997,  1998  and  1999:
$2,267,159, $2,710,567 and $3,052,997.


         The  Investment  Advisory  Agreement  provides that it will continue in
effect for a period of two years after execution only if  specifically  approved
thereafter  annually  in the same  manner  as the  Distribution  Agreement.  See
"Distributor"   below.   The  Investment   Advisory   Agreement  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 and their subsidiaries, 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  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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation  of the  Glass-Steagall  Act  or  other  applicable  banking  laws  or
regulations.  On November 12, 1999, the  Gramm-Leach-Bliley  Act was signed into
law, the relevant provisions of which go into effect March 11, 2000. Until March
11, 2000, federal banking law,  specifically the Glass-Steagall Act and the Bank
Holding Company Act,  generally  prohibits banks and bank holding  companies and
their  subsidiaries,  such as the  Advisor,  from  engaging  in the  business of
underwriting  or distributing  securities.  Pursuant to  interpretations  issued
under these laws by the Board of Governors of the Federal Reserve  System,  such
entities  also may not  sponsor,  organize  or  control  a  registered  open-end
investment company  continuously engaged in the issuance of its shares (together
with  underwriting and distributing  securities,  the "Prohibited  Activities"),
such as the Trust. These laws and interpretations do not prohibit a bank 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  Portfolio  contemplated  by the  Advisory  Agreement  without
violation of the laws in effect until March 11, 2000.  Effective March 11, 2000,
the  sections  of  the   Glass-Steagall  Act  which  prohibited  the  Prohibited
Activities are repealed,  and the Bank Holding  Company Act is amended to permit
bank holding  companies  which satisfy  certain  capitalization,  managerial and
other criteria (the  "Criteria") to engage in the  Prohibited  Activities;  bank
holding  companies  which do not satisfy the  Criteria may continue to engage in
any activity  that was  permissible  for a bank holding  company  under the Bank
Holding  Company  Act as of  November  11,  1999.  Because  the  services  to be
performed for the Portfolio under the Advisory  Agreement were permissible for a
bank holding company as of November 11, 1999, the Advisor  believes that it also
may perform  such  services  after March 11, 2000  whether or not the  Advisor's
parent  satisfies  the  Criteria.  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.


     Under  separate  agreements,   Morgan  provides  certain  financial,   fund
accounting  and  administrative  services  to the  Trust and the  Portfolio  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 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 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.  FDI is a wholly  owned  indirect
subsidiary  of Boston  Institutional  Group,  Inc.  FDI also serves as exclusive
placement agent for the Portfolio.  FDI currently  provides  administration  and
distribution services for a number of other investment companies.

         The Distribution Agreement shall continue in effect with respect to the
Fund for a period of two years after  execution  only if it is approved at least
annually  thereafter  (i) by a vote of the  holders of a majority  of the Fund's
outstanding  shares or by its  Trustees  and (ii) by a vote of a majority of the
Trustees of the Trust who are not  "interested  persons" (as defined by the 1940
Act) of the parties to the Distribution  Agreement,  cast in person at a meeting
called for the purpose of voting on such approval (see "Trustees and Officers").
The  Distribution  Agreement will terminate  automatically if assigned by either
party  thereto  and is  terminable  at any time  without  penalty by a vote of a
majority of the Trustees of the Trust,  a vote of a majority of the Trustees who
are not  "interested  persons"  of the Trust,  or by a vote of the  holders of a
majority  of  the  Fund's   outstanding  shares  as  defined  under  "Additional
Information,"  in any case  without  payment of any penalty on 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  Portfolio
dated  August 1,  1996,  FDI also  serves  as the  Trust's  and the  Portfolio's
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 Portfolio,  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  Portfolio,  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.

         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 marketing and sales literature; (v) files
Portfolio  regulatory  documents and mails Portfolio  communications to Trustees
and investors; and (vi) maintains related books and records.

         For its services under the Co-Administration  Agreements,  the Fund and
Portfolio have 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  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 Fund  paid FDI the  following  administrative  fees for the  fiscal
years ended August 31, 1997, 1998 and 1999: $6,410, $11,546 and $8,980.

         The Portfolio paid FDI the following administrative fees for the fiscal
years ended August 31, 1997, 1998 and 1999: $25,082, $24,913 and $20,175.



SERVICES AGENT

         The Trust,  on behalf of the Fund,  and the Portfolio have entered into
Administrative  Services  Agreements  (the  "Services  Agreements")  with Morgan
pursuant to which Morgan is responsible for certain  administrative  and related
services  provided to the Fund and  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 Services  Agreements,  the Fund and the Portfolio have 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 J.P. Morgan Series Trust in accordance with the following
annual schedule:  0.09% of 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 the 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 J.P. Morgan Series Trust.


         The Fund paid to Morgan, as Services Agent, the following fees, for the
fiscal  years  ended  August 31,  1997,  1998 and 1999:  $60,316,  $147,096  and
$147,085.

         The Portfolio paid to Morgan,  as Services  Agent,  the following fees,
for the fiscal years ended August 31, 1997,  1998 and 1999:  $397,340,  $502,654
and $542,467.


CUSTODIAN AND TRANSFER AGENT


         State  Street Bank and Trust  Company  ("State  Street"),  225 Franklin
Street,  Boston,  Massachusetts 02110, serves as the Trust's and the Portfolio's
custodian  and fund  accounting  agent  and the  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
transactions and holding portfolio  securities and cash. The custodian maintains
portfolio  transaction records. As transfer agent and dividend disbursing agent,
State Street is  responsible  for  maintaining  account  records  detailing  the
ownership  of Fund  shares and for  crediting  income,  capital  gains and other
changes in share ownership to shareholder accounts.



SHAREHOLDER SERVICING

         The  Trust  on  behalf  of the  Fund  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 a Financial  Professional.  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 the 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
Fund's transfer agent; transmitting purchase and redemption orders to the Fund's
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;  monitoring  the  activities  of the Fund's  transfer  agent;  and
providing other related services.

         Under the Shareholder  Servicing Agreement,  the Fund has agreed to pay
Morgan  for these  services  a fee at the annual  rate of  0.10%(expressed  as a
percentage  of the average  daily net asset value of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder  servicing agent).  Morgan
acts as shareholder servicing agent for all shareholders.


         The  shareholder  servicing  fees  paid by the Fund to  Morgan  for the
fiscal  years ended  August 31,  1997,  1998 and 1999 were as follows:  $97,098,
$278,809 and $552,311. See "Expenses" in the Prospectus and below for applicable
expense limitations.


         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
and providing  administrative  services to the Fund and the Portfolio  under the
Services  Agreements,  and the  activities  of JPMIM in acting as Advisor to the
Portfolio under the Investment  Advisory  Agreement may raise issues under these
laws.  However,  Morgan and JPMIM believes that they 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 Fund or the Portfolio  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.

         The Fund may be sold to or  through  financial  intermediaries  who are
customers  of  J.P.  Morgan  ("financial  professionals"),  including  financial
institutions  and  broker-dealers,  that may be paid fees by J.P.  Morgan or its
affiliates  for services  provided to their clients that invest in the Fund. See
"Financial  Professionals"  below.  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.

FINANCIAL PROFESSIONALS

         The   services   provided  by  financial   professionals   may  include
establishing  and  maintaining  shareholder  accounts,  processing  purchase and
redemption  transactions,  arranging  for  bank  wires,  performing  shareholder
subaccounting, answering client inquiries regarding the Trust, assisting clients
in changing  dividend  options,  account  designations and addresses,  providing
periodic  statements  showing the client's account balance and integrating these
statements with those of other  transactions  and balances in the client's other
accounts serviced by the financial professional,  transmitting proxy statements,
periodic reports,  updated prospectuses and other communications to shareholders
and,  with  respect to  meetings of  shareholders,  collecting,  tabulating  and
forwarding  executed proxies and obtaining such other information and performing
such  other  services  as Morgan or the  financial  professional's  clients  may
reasonably request and agree upon with the financial professional.

         Although  there  is no  sales  charge  levied  directly  by  the  Fund,
financial  professionals  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 financial professionals but
in all cases will be retained by the financial  professional and not be remitted
to the Fund or J.P. Morgan.

INDEPENDENT ACCOUNTANTS

         The  independent  accountants  of  the  Trust  and  the  Portfolio  are
PricewaterhouseCoopers  LLP,  1177 Avenue of the  Americas,  New York,  New York
10036.  PricewaterhouseCoopers  LLP  conducts an annual  audit of the  financial
statements  of the Fund and the  Portfolio,  assists in the  preparation  and/or
review of the Fund's and the  Portfolio's  federal and state  income tax returns
and consults  with the Fund and the  Portfolio as to matters of  accounting  and
federal and state income taxation.

EXPENSES


         In addition to the fees payable to Pierpont Group, Inc., JPMIM,  Morgan
and FDI under  various  agreements  discussed  under  "Trustees  and  Officers,"
"Investment Advisor,"  "Co-Administrator",  "Distributor,"  "Services Agent" and
"Shareholder  Servicing"  above,  the Fund and the Portfolio are responsible for
usual and customary expenses associated with their respective  operations.  Such
expenses  include  organization  expenses,  legal  fees,  accounting  and  audit
expenses,  insurance costs, the compensation and expenses of the Trustees, costs
associated  with their  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  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
Portfolio, such expenses also include custodian fees. For additional information
regarding waivers or expense subsidies, see the Prospectus.


         J.P.  Morgan has agreed that it will  reimburse all Fund expenses until
February 28, 2001 except those  allocated to the Fund by the  Portfolio.  If the
Portfolio's  allocation  of  expenses  to the Fund  exceeds  0.25% of the Fund's
average  daily net assets,  J.P.  Morgan will  reimburse  the Fund to the extent
necessary  to  maintain  the Fund's  expenses at the annual rate of 0.25% of the
Fund's average daily net assets.  If the  Portfolio's  allocation of expenses to
the Fund falls below 0.20% of the Fund's average daily net assets,  J.P.  Morgan
will  reimburse  the Fund's  expenses  in excess of those  required to bring the
Fund's  expenses  to the annual  rate of 0.20% of the Fund's  average  daily net
assets. These limits do not cover extraordinary expenses.

         The table  below sets  forth the fees and other  expenses  J.P.  Morgan
reimbursed  under the  expense  reimbursement  arrangements  described  above or
pursuant to prior  expense  reimbursement  arrangements  for the fiscal  periods
indicated.


Fund -- For the fiscal  years ended August 31,  1997,  1998 and 1999:  $199,947,
$646,533 and $809,338.

Portfolio -- For the fiscal years ended August 31, 1997, 1998 and 1999: N/A, N/A
and N/A.


PURCHASE OF SHARES


         Additional Minimum Balance  Information.  If your account balance falls
below the minimum for 30 days as a result of selling  shares (and not because of
performance), the Fund reserves the right to request that you buy more shares or
close your account.  If your account  balance is still below the minimum 60 days
after  notification,  the Fund  reserves the right to close out your account and
send the proceeds to the address of record.


         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  instructions  relating to a Fund account from Morgan as  shareholder
servicing  agent for the customer.  All purchase  orders must be accepted by the
Distributor.  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.

         References  in  the   Prospectus   and  this  Statement  of  Additional
Information to customers of Morgan or a financial professional include customers
of their affiliates and references to transactions by customers with Morgan or a
financial  professional  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
the Fund may make transactions in shares of the Fund.

         The 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 the Advisor, appropriate
investments for the Portfolio.  In addition,  securities accepted in payment for
shares must:  (i) meet the  investment  objective and policies of the Portfolio;
(ii) be acquired by the Fund for  investment  and not for resale (other than for
resale  to the  Portfolio);  and  (iii)  be  liquid  securities  which  are  not
restricted  as to  transfer  either  by law or  liquidity  of  market.  The 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 a
Financial Professional, and the Financial Professional 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.
Shareholders redeeming shares of the Fund should be aware that the Fund attempts
to maintain a stable net asset value of $1.00 per share;  however,  there can be
no assurance that it will be able to continue to do so, and in that case the net
asset  value  of  the  Fund's   shares  might  deviate  from  $1.00  per  share.
Accordingly,  a redemption  request  might result in payment of a dollar  amount
which differs from the number of shares redeemed. See "Net Asset Value" below.

         If the Trust,  on behalf of the Fund, and the Portfolio  determine that
it would be  detrimental to the best interest of the remaining  shareholders  of
the 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 the Fund,  has  elected to be governed by Rule 18f-1 under the 1940
Act pursuant to which the Portfolio is 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  Portfolio
and therefore  shareholders  of the Fund that receive  redemptions  in kind will
receive  securities of the  Portfolio.  The Portfolio has advised the Trust that
the Portfolio will not redeem in kind except in  circumstances in which the Fund
is permitted to redeem in kind.

         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
shareholder's  taxpayer  identification  number and address.  In addition,  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  proceeds
from the shares will occur upon  clearance  of the check which may take up to 15
days. The Trust,  on behalf of the Fund, and the Portfolio  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 the Fund into shares of any other
J.P.  Morgan  Institutional  or J.P.  Morgan  mutual fund,  without  charge.  An
exchange may be made so long as after the  exchange the investor has shares,  in
each fund in which he or she remains an investor,  with a value of at least 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 accounts
that are  registered  in the same  name,  address  and  taxpayer  identification
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 another fund
and the usual purchase and redemption procedures and requirements are applicable
to exchanges.  The Fund generally  intends to pay  redemption  proceeds in cash,
however,  since it reserves the right at its sole  discretion to pay redemptions
over $250,000 in-kind as a portfolio of representative securities rather than in
cash, the Fund reserves the right to deny an exchange  request in excess of that
amount. See "Redemption of Shares".  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.  Shares of the Fund to be acquired
are purchased for settlement when the proceeds from redemption become available.
The  Trust  reserves  the  right to  discontinue,  alter or limit  the  exchange
privilege at any time.


DIVIDENDS AND DISTRIBUTIONS

         The Fund declares and pays dividends and  distributions as described 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


         The Fund  computes  its net asset  value once  daily on Monday  through
Friday as described 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,  Columbus Day,  Veteran's Day,  Thanksgiving  Day, and Christmas
Day. In the event that trading in the money  markets is scheduled to end earlier
than the close of the New York Stock  Exchange in observance of these  holidays,
the Fund and Portfolio  would expect to close for purchases and  redemptions  an
hour in advance of the end of  trading  in the money  markets.  The Fund and the
Portfolio 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. On any business  day when the Bond Market  Association  ("BMA")  recommends
that the  securities  market close early,  the Fund  reserves the right to cease
accepting  purchase and  redemption  orders for same  business day credit at the
time BMA recommends  that the securities  market close.  On days the Fund closes
early,  purchase and  redemption  orders  received after the Fund closes will be
credited the next  business day. The days on which net asset value is determined
are the Fund's business days.


         The net  asset  value of the Fund is equal to the  value of the  Fund's
investment in the Portfolio  (which is equal to the Fund's pro rata share of the
total  investment of the Fund and of any other  investors in the Portfolio  less
the  Fund's  pro rata  share of the  Portfolio's  liabilities)  less the  Fund's
liabilities.  The  following  is a  discussion  of the  procedures  used  by the
Portfolio in valuing its assets.

         The Portfolio's  portfolio  securities are valued by the amortized cost
method.  The purpose of this method of  calculation  is to attempt to maintain a
constant net asset value per share of the Fund of $1.00.  No  assurances  can be
given that this goal can be  attained.  The  amortized  cost method of valuation
values a security at its cost at the time of purchase and  thereafter  assumes a
constant amortization to maturity of any discount or premium,  regardless of the
impact of fluctuating interest rates on the market value of the instrument. If a
difference  of  more  than  1/2 of 1%  occurs  between  valuation  based  on the
amortized  cost method and valuation  based on market  value,  the Trustees will
take steps  necessary  to reduce such  deviation,  such as  changing  the Fund's
dividend policy,  shortening the average portfolio maturity,  realizing gains or
losses,  or reducing the number of  outstanding  Fund shares.  Any  reduction of
outstanding shares will be effected by having each shareholder contribute to the
Fund's capital the necessary  shares on a pro rata basis.  Each shareholder will
be deemed to have  agreed to such  contribution  in these  circumstances  by his
investment in the Fund. See "Taxes."

PERFORMANCE DATA

         From time to time,  the Fund 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 Fund may be obtained by calling the number  provided on the
cover page of this Statement of Additional Information.

         Yield Quotations.  As required by regulations of the SEC, current yield
for the Fund is  computed by  determining  the net change  exclusive  of capital
changes in the value of a hypothetical  pre-existing account having a balance of
one share at the  beginning  of a seven-day  calendar  period,  dividing the net
change in account  value of the  account at the  beginning  of the  period,  and
multiplying the return over the seven-day  period by 365/7.  For purposes of the
calculation, net change in account value reflects the value of additional shares
purchased with dividends from the original share and dividends  declared on both
the original share and any such additional shares, but does not reflect realized
gains or losses or unrealized appreciation or depreciation.  Effective yield for
the Fund is computed by  annualizing  the  seven-day  return with all  dividends
reinvested in additional  Fund shares.  The tax equivalent  yield is computed by
first  computing  the yield as  discussed  above.  Then the portion of the yield
attributable to securities the income of which was exempt for federal income tax
purposes is  determined.  This portion of the yield is then divided by one minus
the stated assumed federal income tax rate for individuals and then added to the
portion of the yield that is not attributable to securities, the income of which
was tax exempt.


     Historical  yield  information  for the period  ended August 31, 1999 is as
follows:  7-day current yield:  3.01%;  7-day tax equivalent  yield at 39.6% tax
rate: 4.98%; 7-day effective yield: 3.05%.


         Total Return  Quotations.  Historical  performance  information for the
periods prior to the establishment of the Fund will be that of its corresponding
predecessor J.P. Morgan fund and will be presented in accordance with applicable
SEC Staff interpretations.


     Historical return  information for the Fund for the period ended August 31,
1999 is as follows:  Average annual total return, 1 year: 3.06%;  Average annual
total return,  5 years:  3.36%;  average annual total return,  10 years:  3.48%;
aggregate total return, 1 year: 3.06%;  aggregate total return, 5 years: 17.96%;
aggregate total return, 10 years: 40.79%.


         Aggregate total returns,  reflecting the cumulative  percentage  change
over a measuring period, may also be calculated.

         General.  The Fund's  performance will vary from time to time depending
upon market  conditions,  the  composition of the  Portfolio,  and its operating
expenses. Consequently, any given performance quotation should not be considered
representative of the 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 the  Fund  with  certain  bank  deposits  or other
investments that pay a fixed yield or return for a stated period of time.


         Comparative  performance  information  may be used from time to time in
advertising the Fund's shares, including appropriate market indices or data from
Lipper  Analytical  Services,   Inc.,   Micropal,   Inc.,  Ibbotson  Associates,
Morningstar   Inc.,  the  Dow  Jones  Industrial   Average  and  other  industry
publications.


         From time to time,  the Fund may, in addition to any other  permissible
information,  include the  following  types of  information  in  advertisements,
supplemental  sales literature and reports to  shareholders:  (1) discussions of
general economic or financial principles (such as the effects of compounding and
the benefits of dollar-cost  averaging);  (2)  discussions  of general  economic
trends;  (3)  presentations of statistical data to supplement such  discussions;
(4)  descriptions  of past or anticipated  portfolio  holdings for the Fund; (5)
descriptions  of  investment  strategies  for  the  Fund;  (6)  descriptions  or
comparisons  of various  savings and  investment  products  (including,  but not
limited to, qualified  retirement plans and individual stocks and bonds),  which
may or may  not  include  the  Fund;  (7)  comparisons  of  investment  products
(including  the  Fund)  with  relevant  markets  or  industry  indices  or other
appropriate  benchmarks;   (8)  discussions  of  Fund  rankings  or  ratings  by
recognized  rating  organizations;  and (9)  discussions of various  statistical
methods  quantifying the Fund's volatility  relative to its benchmark or to past
performance,  including  risk  adjusted  measures.  The Fund  may  also  include
calculations,   such  as  hypothetical   compounding  examples,  which  describe
hypothetical  investment  results  in  such  communications.   Such  performance
examples will be based on an express set of  assumptions  and are not indicative
of the performance of the Fund.

PORTFOLIO TRANSACTIONS

     The Advisor  places orders for the Portfolio 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 the Portfolio. See "Investment Objectives and Policies."

         Fixed  income and debt  securities  and  municipal  bonds and notes are
generally  traded at a net price with dealers  acting as principal for their own
accounts without a stated commission. The price of the security usually includes
profit to the dealers. In underwritten offerings,  securities are purchased at a
fixed  price  which  includes  an amount  of  compensation  to the  underwriter,
generally referred to as the underwriter's  concession or discount. On occasion,
certain  securities may be purchased  directly from an issuer,  in which case no
commissions or discounts are paid.

         Portfolio transactions for the Portfolio will be undertaken principally
to accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio may engage in short-term  trading
consistent  with its  objective.  See  "Investment  Objective  and  Policies  --
Portfolio  Turnover."  The Portfolio  will not seek profits  through  short-term
trading,  but the Portfolio may dispose of any portfolio  security  prior to its
maturity if it believes  such  disposition  is  appropriate  even if this action
realizes profits or losses.

         In  connection  with  portfolio  transactions  for the  Portfolio,  the
Advisor intends to seek the best price and execution on a competitive  basis for
both purchases and sales of securities.

         The  Portfolio  has a  policy  of  investing  only in  securities  with
maturities of not more than thirteen months, which will result in high portfolio
turnover. Since brokerage commissions are not normally paid on investments which
the  Portfolio  makes,  turnover  resulting  from such  investments  should  not
adversely affect the net asset value or net income of the Portfolio.

         Subject to the  overriding  objective  of obtaining  best  execution of
orders,  the  Advisor  may  allocate  a  portion  of the  Portfolio's  brokerage
transactions  to  affiliates  of the  Advisor.  In order for  affiliates  of the
Advisor to effect any portfolio transactions for the 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 the 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  Portfolio  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 the 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 the  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 the Portfolio.  In some instances,
this procedure might adversely affect the Portfolio.

MASSACHUSETTS TRUST

         The  Trust  is  a  trust  fund  of  the  type   commonly   known  as  a
"Massachusetts  business  trust" of which the 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  January 1, 1998, the name of the Trust was changed from "The
JPM Institutional  Funds" to "J.P. Morgan  Institutional  Funds," and the Fund's
name changed 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 the  Fund  and that  every
written agreement,  obligation,  instrument or undertaking made on behalf of the
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 Fund.

         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 the Fund is liable to
the 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 the Fund,
except  as such  liability  may  arise  from his or its own bad  faith,  willful
misfeasance, gross negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall look solely to Fund
property for  satisfaction  of claims arising in connection  with the affairs of
the 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 the 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 the 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 the Fund (or in the assets of other series,  if applicable).
Each share represents an equal proportional interest in the Fund with each other
share.  Upon liquidation of the Fund,  holders are entitled to share pro rata in
the net assets of the Fund available for distribution to such shareholders.  See
"Massachusetts  Trust."  Shares of the 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 one vote for each dollar
of  net  asset  value  (or a  proportionate  fractional  vote  in  respect  of a
fractional  dollar  amount),  on  matters  on which  shares of the Fund shall be
entitled to vote.  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 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 22 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.

         For  information  relating to  mandatory  redemption  of Fund shares or
their redemption at the option of the Trust under certain circumstances, see the
Prospectus.


     As of November 30, 1999, the following  owned of record more than 5% of the
outstanding shares of the Fund: E. H. Skove (5.37%).


         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 the Fund.

SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE

         Unlike other mutual funds which  directly  acquire and manage their own
portfolio 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 Master  Portfolio,  a separate  registered  investment
company with the same investment objective and policies as the Fund.  Generally,
when a  Master  Portfolio  seeks  a vote  to  change  a  fundamental  investment
restriction,  its feeder  fund(s) will hold a  shareholder  meeting and cast its
vote proportionately,  as instructed by its shareholders.  Fund shareholders are
entitled  to one vote for each  dollar  of net asset  value (or a  proportionate
fractional vote in respect of a fractional  dollar amount),  on matters on which
shares of the Fund shall be entitled to vote.

         In addition to selling a beneficial interest to the Fund, the Portfolio
may sell beneficial interests to other mutual funds or institutional  investors.
Such investors will invest in the Portfolio on the same terms and conditions and
will bear a proportionate share of the Portfolio's expenses.  However, the other
investors  investing in the  Portfolio may sell shares of their own fund using a
different pricing structure than the Fund. Such different pricing structures may
result in  differences  in returns  experienced by investors in other funds that
invest in the  Portfolio.  Such  differences in returns are not uncommon and are
present in other mutual fund structures. Information 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
investment objective and restrictions in accordance with the investment policies
with respect to the Portfolio described above and in the Fund's prospectus.

         Certain changes in the Portfolio's  fundamental  investment policies or
restrictions,  or a failure by the Fund's shareholders to approve such change in
the Portfolio's  investment  restrictions,  may require withdrawal of the Fund's
interest in the Portfolio. Any such withdrawal could result in a distribution 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 actions 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.

         Additionally, because the Portfolio would become smaller, it may become
less diversified,  resulting in potentially  increased  portfolio risk (however,
these  possibilities  also exist for  traditionally  structured funds which have
large or institutional investors who may withdraw from a fund). Also, funds with
a greater  pro rata  ownership  in the  Portfolio  could have  effective  voting
control of the  operations of the  Portfolio.  Whenever the Fund is requested to
vote on matters  pertaining to the  Portfolio  (other than a vote by the Fund to
continue the operation of the Portfolio upon the withdrawal of another  investor
in the Portfolio), the Trust will hold a meeting of shareholders of the Fund and
will  cast  all  of its  votes  proportionately  as  instructed  by  the  Fund's
shareholders.  The Trust will vote the shares held by Fund  shareholders  who do
not give  voting  instructions  in the same  proportion  as the  shares  of Fund
shareholders  who do give voting  instructions.  Shareholders of the Fund who do
not vote will have no affect on the outcome of such matters.

TAXES


         The following  discussion of tax  consequences is based on U.S. federal
tax laws in  effect on the date of this  Statement  of  Additional  Information.
These  laws  and   regulations   are  subject  to  change  by   legislative   or
administrative action, possibly on a retroactive basis.


         The Fund  intends  to  qualify  and  remain  qualified  as a  regulated
investment  company under  Subchapter M of the Code.  As a regulated  investment
company, the 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 securities or foreign currency; and (b) 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).  As  a
regulated investment company, the 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,  the 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. The 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 the
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  generally
will be taxable to a shareholder in the year declared rather than the year paid.

         The Fund  intends to qualify to pay  exempt-interest  dividends  to its
shareholders  by having,  at the close of each quarter of its taxable  year,  at
least 50% of the value of its total assets consist of tax exempt securities.  An
exempt-interest dividend is that part of dividend distributions made by the Fund
which is properly  designated as consisting of interest  received by the Fund on
tax exempt securities. Shareholders will not incur any federal income tax on the
amount of  exempt-interest  dividends received by them from the Fund, other than
the alternative minimum tax under certain  circumstances.  In view of the Fund's
investment policies,  it is expected that a substantial portion of all dividends
will be  exempt-interest  dividends,  although  the Fund  may from  time to time
realize and  distribute  net  short-term  capital  gains and may invest  limited
amounts in taxable securities under certain circumstances.

         Distributions  of net  investment  income and realized  net  short-term
capital  gains in excess of net  long-term  capital  losses  (other  than exempt
interest  dividends)  are  generally  taxable  to  shareholders  of the  Fund as
ordinary  income whether such  distributions  are taken in cash or reinvested in
additional shares.  Distributions to corporate  shareholders of the Fund are not
eligible for the dividends  received  deduction.  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 the Fund as  long-term  capital
gains,  regardless of whether such distributions are taken in cash or reinvested
in additional shares and regardless of how long a shareholder has held shares in
the Fund. In general,  long-term capital gain of an individual  shareholder will
be subject to a 20% rate of tax.

         To maintain a constant $1.00 per share net asset value, the Trustees of
the Trust may direct that the number of outstanding  shares be reduced pro rata.
If this  adjustment is made, it will reflect the lower market value of portfolio
securities and not realized  losses.  The adjustment may result in a shareholder
having more  dividend  income than net income in his account for a period.  When
the number of outstanding shares of the Fund is reduced, the shareholder's basis
in the shares of the Fund may be  adjusted  to reflect  the  difference  between
taxable income and net dividends  actually  distributed.  This difference may be
realized as a capital  loss when the shares are  liquidated.  Subject to certain
limited exceptions, capital losses cannot be used to offset ordinary income. See
"Net Asset Value."


         Gains or losses on sales of  portfolio  securities  will be  treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where, if applicable,  a put option is acquired
or a call option is written thereon or straddle rules are otherwise  applicable.
Other gains or losses on the sale of securities will be short-term capital gains
or losses.  Gains and losses on the sale, lapse or other  termination of options
on securities  will be treated as gains and losses from the sale of  securities.
If an option written by the 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 the
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.


         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
reduced  below a  shareholder's  cost as a result  of such a  distribution,  the
distribution, although constituting a return of capital to the shareholder, will
be taxable as described above.

         Any gain or loss realized on the  redemption or exchange of Fund shares
by a shareholder  who is not a dealer in securities will be treated as long-term
capital  gain or loss if the shares  have been held for more than one year,  and
otherwise  as  short-term  capital  gain or loss.  Long-term  capital gain of an
individual  holder is  subject  to maximum  tax rate of 20%.  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.  Investors  are urged to consult their tax advisors
concerning the limitations on the deductibility of capital losses. Additionally,
any loss  realized  on a  redemption  or  exchange of shares of the Fund will be
disallowed to the extent the shares  disposed of are replaced by securities that
are  substantially  identical  to shares of the Fund  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.

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

         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,  the 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 (or any successor form) is
provided.  Transfers by gift of shares of the 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.


         State and Local Taxes.  The 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 the Fund and its shareholders in those states which have income
tax laws  might  differ  from  treatment  under  the  federal  income  tax laws.
Shareholders  should consult their own tax advisors with respect to any state or
local taxes.

         Other  Taxation.  The Trust is  organized as a  Massachusetts  business
trust and,  under current law,  neither the Trust nor the Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts,  provided that the
Fund continues to qualify as a regulated  investment  company under Subchapter M
of the Code.  The  Portfolio is organized as a New York trust.  The Portfolio is
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 the
Fund in the  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 Fund, J.P. Morgan or Financial  Professionals 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 1940 Act and the  Portfolio's
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  Fund or the  Distributor.  The  Prospectus  and this  Statement  of
Additional  Information  do  not  constitute  an  offer  by the  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.

The Year 2000 Initiative


         With With the new millennium  rapidly  approaching,  organizations have
continued  to  examine  their  computer  systems  to  ensure  they are year 2000
compliant.  The issue, in simple terms, is that many existing  computer  systems
use only two  numbers to  identify a year in the date field with the  assumption
that the first two  digits  are  always  "19." As the  century is implied in the
date, on January 1, 2000, computers that are not year 2000 compliant will assume
the year is 1900. Systems that calculate,  compare,  or sort using the incorrect
date will cause erroneous results, ranging from system malfunctions to incorrect
or incomplete transaction processing.  If not remedied,  potential risks include
business interruption or shutdown, financial loss, reputation loss, and/or legal
liability.

         J.P.  Morgan has  undertaken a firmwide  initiative to address the year
2000 issue and has developed a  comprehensive  plan to prepare,  as appropriate,
its  computer  systems.   Each  business  line  has  taken   responsibility  for
identifying  and fixing the  problem  within its own area of  operation  and for
addressing  all  interdependencies.  A  multidisciplinary  team of internal  and
external experts supports the business teams by providing direction and firmwide
coordination.  Working together,  the business and multidisciplinary  teams have
completed a thorough  education and awareness  initiative and a global inventory
and  assessment  of  J.P.  Morgan's  technology  and  application  portfolio  to
understand  the scope of the year 2000 impact at J.P.  Morgan.  J.P.  Morgan has
renovated and tested these  technologies  and  applications in partnership  with
external consulting and software development organizations, as well as with year
2000 tool  providers.  J.P.  Morgan has also worked with key  external  parties,
including clients, counterparties,  vendors, exchanges, depositories, utilities,
suppliers,  agents and regulatory agencies, to stem the potential risks the year
2000 problem poses to J.P.  Morgan and to the global  financial  community.  For
potential  failure  scenarios  where the risks are deemed  significant and where
such risk is considered to have a higher probability of occurrence,  J.P. Morgan
has developed business  recovery/contingency  plans. These plans will define the
infrastructure  that  should be put in place for  managing a failure  during the
millennium event itself.

         Costs associated with efforts to prepare J.P.  Morgan's systems for the
year 2000  approximated  $93.3 million in 1997, $132.7 million in 1998 and $36.6
million  for the first  eight  months of 1999.  J.P.  Morgan is  continuing  its
efforts  to prepare  its  systems  for the year  2000.  The total cost to become
year-2000  compliant is estimated at $300 million (for firmwide systems upgrade,
not just for systems relating to mutual funds),  for internal systems renovation
and testing, testing equipment, and both internal and external resources working
on the  project.  The costs  associated  with  J.P.  Morgan  becoming  year-2000
compliant will be borne by J.P. Morgan and not the Funds.


FINANCIAL STATEMENTS


         The    financial    statements    and    the    report    thereon    of
PricewaterhouseCoopers  LLP are incorporated herein by reference from the Fund's
August 31,  1999  annual  report  filing  made with the SEC on October  29, 1999
pursuant to Section 30(b) of the 1940 Act and Rule 30b2-1 thereunder  (Accession
Number  0000912057-99-002830).  The financial  statements are available  without
charge upon request by calling J.P. Morgan Funds Services at (800) 766-7722. The
Fund's financial statements include the financial statements of the Portfolio.



<PAGE>




APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA  - Debt rated AAA have 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 have a very  strong  capacity  to pay  interest  and repay
     principal and differ from the highest rated issues only in a small degree.

A    - Debt rated A have a strong  capacity to pay interest and repay  principal
     although  they are  somewhat  more  susceptible  to the adverse  effects of
     changes in circumstances and economic  conditions than debt in higher rated
     categories.

BBB  - Debt  rated  BBB are  regarded  as  having an  adequate  capacity  to pay
     interest  and repay  principal.  Whereas  they  normally  exhibit  adequate
     protection   parameters,    adverse   economic   conditions   or   changing
     circumstances  are  more  likely  to lead  to a  weakened  capacity  to pay
     interest and repay  principal  for debt in this  category  than for debt in
     higher rated categories.

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.




<PAGE>



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.

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.



<PAGE>



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.


- --------
         1 Mr. Healey is an "interested  person" (as defined in the 1940 Act) of
         the Trust. Mr. Healey is also an "interested person" (as defined in the
         1940 Act) of the Advisor due to his son's affiliation with JPMIM.



<PAGE>

                                     PART C

ITEM 23.  EXHIBITS.

     (a)  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).

     (a)1 Amendment No. 5 to  Declaration of Trust;  Amendment and Fifth Amended
and Restated  Establishment  and  Designation  of Series of Shares of Beneficial
Interest.*

     (a)2 Amendment No. 6 to  Declaration of Trust;  Amendment and Sixth Amended
and Restated  Establishment  and  Designation  of Series of Shares of Beneficial
Interest was 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).

     (a)3 Amendment No. 7 to Declaration of Trust; Amendment and Seventh Amended
and Restated  Establishment  and  Designation  of Series of Shares of Beneficial
Interest was 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).

     (a)4 Amendment No. 8 to Declaration of Trust;  Amendment and Eighth Amended
and Restated  Establishment  and  Designation  of Series of Shares of Beneficial
Interest was filed as Exhibit No. 1(d) to Post-Effective Amendment No. 40 to the
Registration    Statement    on    October    9,    1997    (Accession    Number
0001016964-97-000158).

     (a)5 Amendment No. 9 to  Declaration of Trust;  Amendment and Ninth Amended
and Restated  Establishment  and  Designation  of Series of Shares of Beneficial
Interest was filed as Exhibit No. 1(e) to Post-Effective Amendment No. 50 to the
Registration    Statement    on   December    29,   1997    (Accession    Number
0001041455-97-000014).


     (a)6 Amendment No. 10 to Declaration of Trust;  Amendment and Tenth Amended
and Restated  Establishment  and  Designation  of Series of Shares of Beneficial
Interest  and  change  voting  procedures  to  dollar-based  voting was filed as
Exhibit  No.  (a)6  to  Post-Effective  Amendment  No.  60 to  the  Registration
Statement on December 31, 1998(Accession Number 0001041455-98-000097).

     (a)7  Amendment  No. 11 to  Declaration  of Trust.  Incorporated  herein by
reference to Post-Effective Amendment No. 63 to the Registration Statement filed
on April 29, 1999 (Accession Number 00001041455-99-000041).

     (b) Restated By-Laws of Registrant.*

     (e) Distribution  Agreement between Registrant and Funds Distributor,  Inc.
("FDI").*

     (g) Custodian  Contract between  Registrant and State Street Bank and Trust
Company ("State Street").*

     (h)1 Co-Administration Agreement between Registrant and FDI.*

     (h)2 Restated Shareholder Servicing Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan  Guaranty") filed as Exhibit (h)2 to
Post Effective Amendment No. 54 to the Registration Statement on August 25, 1998
(Accession No. 0001041455-98-000053).

     (h)3 Transfer  Agency and Service  Agreement  between  Registrant and State
Street.*

     (h)4 Restated  Administrative  Services  Agreement  between  Registrant and
Morgan Guaranty.*

     (h)5 Fund Services Agreement,  as amended,  between Registrant and Pierpont
Group, Inc.*

     (h)6  Service  Plan with  respect  to  Registrant's  Service  Money  Market
Funds.**

     (i) Opinion and consent of Sullivan & Cromwell.*

     (j) Consent of independent accountants (filed herewith).

     (l) Purchase agreements with respect to Registrant's initial shares.*

     (n) Financial Data Schedules (not required).


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

     * 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 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH THE FUND.

     Not applicable.

ITEM 25.  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  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 26.  BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISER.

Not Applicable.

ITEM 27.  PRINCIPAL UNDERWRITERS.

     (a)  Funds   Distributor,   Inc.  (the   "Distributor")  is  the  principal
underwriter of the Registrant's shares.

     Funds  Distributor,  Inc. acts as principal  underwriter  for the following
investment companies other than the Registrant:

American Century California Tax-Free and Municipal Funds
American Century Capital Portfolios, Inc.
American Century Government Income Trust
American Century International Bond Funds
American Century Investment Trust
American Century Municipal Trust
American Century Mutual Funds, Inc.
American Century Premium Reserves, Inc.
American Century Quantitative Equity Funds
American Century Strategic Asset Allocations, Inc.
American Century Target Maturities Trust
American Century Variable Portfolios, Inc.
American Century World Mutual Funds, Inc.
BJB Investment Funds
The Brinson Funds
Dresdner RCM Capital Funds, Inc.
Dresdner RCM Equity Funds, Inc.
Founders Funds, Inc.
Harris Insight Funds Trust
HT Insight Funds, Inc. d/b/a Harris Insight Funds
J.P. Morgan Funds
J.P. Morgan Series Trust
J.P. Morgan Series Trust II
LaSalle Partners Funds, Inc.
Monetta Fund, Inc.
Monetta Trust
The Montgomery Funds
The Montgomery Funds II
The Munder Framlington Funds Trust
The Munder Funds Trust
The Munder Funds, Inc.
Orbitex Group of Funds
St. Clair Funds, Inc.
The Skyline Funds
Waterhouse Investors Family of Funds, Inc.
WEBS Index Fund, Inc.

     Funds Distributor,  Inc. does not act as depositor or investment adviser to
any of the investment companies.

     Funds  Distributor,  Inc. is registered  with the  Securities  and Exchange
Commission as a  broker-dealer  and is a member of the National  Association  of
Securities Dealers. Funds Distributor, Inc. is located at 60 State Street, Suite
1300,  Boston,  Massachusetts  02109.  Funds  Distributor,  Inc.  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  following  is a list of the  executive  officers,  directors  and
partners of Funds Distributor, Inc.:


Director, President and Chief Executive Officer:   Marie E. Connolly
Executive Vice President:                          George Rio
Executive Vice President:                          Donald R. Roberson
Executive Vice President:                          William S. Nichols
Director, Senior Vice President, Treasurer and
  Chief Financial Officer:                         Joseph F. Tower, III
Senior Vice President, General Counsel, Chief
  Compliance Officer, Secretary and Clerk          Margaret M. Chambers
Senior Vice President:                             Paula R. David
Senior Vice President:                             Judith K. Benson
Senior Vice President:                             Gary S. MacDonald
Director, Chairman of the Board, Executive
   Vice President                                  William J. Nutt

(c) Not applicable.

ITEM 28.  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 29.  MANAGEMENT SERVICES.

Not Applicable.

ITEM 30.  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.

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements  of the  Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration  statement
to be signed on its behalf by the undersigned,  thereto duly authorized,  in the
City of New York and State of New York on the 28th day of December, 1999.

     J.P. MORGAN  INSTITUTIONAL  FUNDS, The Tax Exempt Money Market Portfolio



By    /s/ Stephanie D. Pierce
      ----------------------------
      Stephanie D. Pierce
      Vice President and Assistant Secretary


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 December 28, 1999.


George Rio*
- ------------------------------
George Rio
President and Treasurer

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


*By      /s/ Stephanie D. Pierce
         ----------------------------
            Stephanie D. Pierce
         as attorney-in-fact pursuant to a power of attorney.

<PAGE>






                                INDEX TO EXHIBITS

Exhibit No.       Description of Exhibit
- -------------    ------------------------
EX-99.(j)         Consent of Independent Accountants





We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A of our report dated  January 19,  1999,  relating to the
financial  statements and financial highlights which appears in the November 30,
1998 Annual Report to  Shareholders  of J.P.  Morgan  Institutional  Prime Money
Market Fund and financial  statements and supplementary  data of The Prime Money
Market Portfolio, which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights"  in the  Prospectus  and  "Independent  Accountants"  and "Financial
Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  December 17, 1998,  relating to the
financial  statements and financial  highlights which appears in the October 31,
1998 Annual Report to Shareholders of J.P. Morgan  Institutional  Treasury Money
Market Fund and  financial  statements  and  supplementary  data of The Treasury
Money  Market  Portfolio,  which are also  incorporated  by  reference  into the
Registration  Statement.  We also  consent  to the  references  to us under  the
headings "Financial Highlights" in the Prospectus and "Independent  Accountants"
and "Financial Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  December 17, 1998,  relating to the
financial  statements and financial  highlights which appears in the October 31,
1998 Annual Report to Shareholders of J.P.  Morgan  Institutional  Federal Money
Market Fund and financial statements and supplementary data of The Federal Money
Market Portfolio, which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights"  in the  Prospectus  and  "Independent  Accountants"  and "Financial
Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  October 19,  1999,  relating to the
financial  statements and financial  highlights  which appears in the August 31,
1999 Annual Report to Shareholders of J.P. Morgan Institutional Tax Exempt Money
Market Fund and financial  statements and  supplementary  data of The Tax Exempt
Money  Market  Portfolio,  which  is also  incorporated  by  reference  into the
Registration  Statement.  We also  consent  to the  references  to us under  the
headings "Financial Highlights" in the Prospectus and "Independent  Accountants"
and "Financial Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A of our report dated  January 19,  1999,  relating to the
financial  statements and financial highlights which appears in the November 30,
1998 Annual Report to Shareholders of J.P.  Morgan  Institutional  Service Prime
Money Market Fund and financial  statements and supplementary  data of The Prime
Money  Market  Portfolio,  which are also  incorporated  by  reference  into the
Registration  Statement.  We also  consent  to the  references  to us under  the
headings "Financial Highlights" in the Prospectus and "Independent  Accountants"
and "Financial Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  December 17, 1998,  relating to the
financial  statements and financial  highlights which appears in the October 31,
1998 Annual Report to Shareholders of J.P. Morgan Institutional Service Treasury
Money  Market  Fund  and  financial  statements  and  supplementary  data of The
Treasury Money Market  Portfolio,  which are also incorporated by reference into
the  Registration  Statement.  We also consent to the references to us under the
headings "Financial Highlights" in the Prospectus and "Independent  Accountants"
and "Financial Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  December 17, 1998,  relating to the
financial  statements and financial  highlights which appears in the October 31,
1998 Annual Report to Shareholders of J.P. Morgan Institutional  Service Federal
Money Market Fund and financial statements and supplementary data of The Federal
Money  Market  Portfolio,  which are also  incorporated  by  reference  into the
Registration  Statement.  We also  consent  to the  references  to us under  the
headings "Financial Highlights" in the Prospectus and "Independent  Accountants"
and "Financial Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  October 19,  1999,  relating to the
financial  statements and financial  highlights  which appears in the August 31,
1999 Annual Report to  Shareholders  of J.P.  Morgan  Institutional  Service Tax
Exempt Money Market Fund and financial  statements and supplementary data of The
Tax Exempt Money Market Portfolio,  which is also incorporated by reference into
the  Registration  Statement.  We also consent to the references to us under the
headings "Financial Highlights" in the Prospectus and "Independent  Accountants"
and "Financial Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  October 19,  1999,  relating to the
financial  statements and financial  highlights  which appears in the August 31,
1999 Annual Report to  Shareholders  of J.P. Morgan Tax Exempt Money Market Fund
and financial  statements and supplementary  data of The Tax Exempt Money Market
Portfolio,  which  is also  incorporated  by  reference  into  the  Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights"  in the  Prospectus  and  "Independent  Accountants"  and "Financial
Statements" in the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A of our report dated  January 19,  1999,  relating to the
financial  statements and financial highlights which appears in the November 30,
1998 Annual Report to  Shareholders  of J.P.  Morgan Prime Money Market Fund and
financial statements and supplementary data of The Prime Money Market Portfolio,
which are also  incorporated by reference into the  Registration  Statement.  We
also consent to the references to us under the headings  "Financial  Highlights"
in the Prospectus and "Independent  Accountants"  and "Financial  Statements" in
the Statement of Additional Information.

We  hereby  consent  to the  incorporation  by  reference  in this  Registration
Statement  on Form N-1A or our report dated  December 17, 1998,  relating to the
financial  statements and financial  highlights which appears in the October 31,
1998 Annual Report to Shareholders of J.P. Morgan Treasury Money Market Fund and
financial  statements  and  supplementary  data  of The  Treasury  Money  Market
Portfolio,  which  are also  incorporated  by  reference  into the  Registration
Statement. We also consent to the references to us under the headings "Financial
Highlights"  in the  Prospectus  and  "Independent  Accountants"  and "Financial
Statements" in the Statement of Additional Information.

/s/PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
New York, New York
December 28, 1999





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