JP MORGAN INSTITUTIONAL FUNDS, 497, 2000-08-04

JP MORGAN INSTITUTIONAL FUNDS
497, 2000-08-04

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AUGUST 1, 2000 | PROSPECTUS
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J.P. MORGAN BOND FUND - ADVISOR SERIES

------------------------------------
Seeking high total return consistent
with moderate risk of capital and
maintenance of 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
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1 | The fund's goal, principal strategies, principal risks, performance and
expenses

J.P. MORGAN BOND FUND - ADVISOR SERIES
Fund description ................................................... 1
Performance ........................................................ 2
Investor expenses .................................................. 2

3 |

FIXED INCOME MANAGEMENT APPROACH
J.P. Morgan ........................................................ 3
J.P. Morgan Bond Fund - Advisor Series ............................. 3
Who may want to invest ............................................. 3
Fixed income investment process .................................... 4

5 | Investing in the J.P. Morgan Bond Fund - Advisor Series

YOUR INVESTMENT
Investing through a service organization ........................... 5
Account and transaction policies ................................... 5
Dividends and distributions ........................................ 5
Tax considerations ................................................. 6

7 | More about risk and the fund's business operations

FUND DETAILS
Business structure ................................................. 7
Management and administration ...................................... 7
Risk and reward elements ........................................... 9
Investments ........................................................ 11

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

<PAGE>

J.P. MORGAN BOND FUND - ADVISOR SERIES

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 9-12.

[GRAPHIC OMITTED]
GOAL
The fund's goal is to provide high total return consistent with moderate risk of
capital and maintenance of liquidity. This goal can be changed without
shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH
Principal Strategies
The fund invests primarily in fixed income securities, including U.S. government
and agency securities, corporate bonds, private placements, asset-backed and
mortgage-backed securities, that it believes have the potential to provide a
high total return over time. These securities may be of any maturity, but under
normal market conditions the management team will keep the fund's duration
within one year of that of the Salomon Smith Barney Broad Investment Grade Bond
Index (currently about five years). For a description of duration, please see
fixed income investment process on page 4.

Up to 25% of assets may be invested in foreign securities, including 20% in debt
securities denominated in foreign currencies of developed countries. The fund
typically hedges its non-dollar investments back to the U.S. dollar. At least
75% of assets must be invested in securities that, at the time of purchase, are
rated investment-grade (BBB/Baa or better) or are the unrated equivalent,
including at least 65% A or better. No more than 25% of assets may be invested
in securities rated B or BB.

Principal Risks
The fund's share price and total return will vary in response to changes in
interest rates. How well the fund's performance compares to that of similar
fixed income funds will depend on the success of the investment process, which
is described on page 4.

To the extent that the fund seeks higher returns by investing in
non-investment-grade bonds, often called junk bonds, it takes on additional
risks, since these bonds are more sensitive to economic news and their issuers
have a less secure financial position. The fund may use futures contracts and
other derivatives to help manage duration, yield curve exposure, and credit and
spread volatility. To the extent the fund invests in foreign securities, it
could lose money because of foreign government actions, political instability,
currency fluctuation or lack of adequate and accurate information. The fund's
mortgage-backed investments involve risk of losses due to prepayments that occur
earlier or later than expected, like any bond, due to default. The fund may
engage in active and frequent trading, leading to increased portfolio turnover
and the possibility of increased capital gains. See page 6 for further
discussion on the tax treatment of capital gains.

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. You could lose money if you sell when the fund's share price is lower
than when you invested.

<PAGE>

REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN BOND FUND - ADVISOR SERIES)

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including more than $31.7 billion using similar
strategies as the fund.

The portfolio management team is led by William G. Tennille, vice president, who
has been at J.P. Morgan since 1992, Connie J. Plaehn, managing director, who has
been at J.P. Morgan since 1984, and John Snyder, vice president, who has been at
J.P. Morgan since 1993. Mr. Tennille and Ms. Plaehn have been on the team since
January of 1994. Mr. Snyder has been a fixed income portfolio manager since
joining J.P. Morgan.

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Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goal.

o The fund does not represent a complete investment program.

1 | J.P. MORGAN BOND FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)

Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect performance of the J.P. Morgan Bond Fund, a related
fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan Bond Fund's shares from year to year for each of the last 10
calendar years.

The table indicates some of the risks by showing how the J.P. Morgan Bond Fund's
average annual returns for the past one, five and ten years compare to those of
the Salomon Smith Barney Broad Investment Grade Bond Index. This is a widely
recognized, unmanaged index of U.S. Treasury and agency securities and
investment-grade mortgage and corporate bonds used as a measure of overall bond
market performance.

The J.P. Morgan Bond Fund's past performance does not necessarily indicate how
the J.P. Morgan Bond Fund - Advisor Series fund will perform in the future.

Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
------------------------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997
1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
20%
18.17
13.45

10% 10.09
9.87 9.13
6.53
7.36
3.13
0%
(2.97)

(0.73)

(10%)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

[ ] J.P. Morgan Bond Fund

The J.P. Morgan Bond Fund's year-to-date total return as of 6/30/00 was 2.83%.
For the period covered by this year-by-year total return chart, the J.P. Morgan
Bond Fund's highest quarterly return was 6.25% (for the quarter ended 6/30/95);
and the lowest quarterly return was -2.39% (for the quarter ended 3/31/94).

<TABLE>
<CAPTION>
Average annual total return (%)
Shows performance over time, for periods ended December 31, 1999(1)
--------------------------------------------------------------------------------

Past 1 yr. Past 5 yrs. Past 10 yrs.
<S> <C> <C> <C>
J.P. Morgan Bond Fund (after expenses) (0.73) 7.23 7.23
--------------------------------------------------------------------------------
Salomon Smith Barney Broad Investment Grade Bond Index (no
expenses)
(0.83) 7.74 7.65
-------------------------------------------------------------------------------
</TABLE>

<PAGE>

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INVESTOR EXPENSES
The estimated expenses of the fund before and after reimbursement are shown at
right. The fund has no 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 0.30
Distribution (Rule 12b-1) fees(4) 0.25
Service fees(5) 0.25
Other expenses 0.28
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Total operating expenses 1.08
Fee waiver and
expense reimbursement(6) (0.13)
--------------------------------------------------------------------------------
Net expenses(6) 0.95
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Expense example(6)
--------------------------------------------------------------------------------
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
8/1/00 through 2/28/02 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.
Your cost($) 97 331
--------------------------------------------------------------------------------

(1) These returns reflect lower operating expenses than those of the fund.
Therefore, the fund's returns would have been lower had it existed during
the same period.

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

(3) The fund has a master/feeder structure as described on page 7. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the current fiscal year expressed as a percentage of
estimated average net assets.

(4) The plan under Rule 12b-1 (described on page 7) allows such fees to be paid
out of the fund's assets on an ongoing basis. Over time, these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.

(5) Service organizations (described on page 5) 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.

(6) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
operating expenses (which exclude interest, taxes and extraordinary expenses)
exceed 0.95% of the fund's average daily net assets through 2/28/02.

J.P. MORGAN BOND FUND - ADVISOR SERIES | 2

<PAGE>

FIXED INCOME 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 approximately 420 analysts and portfolio
managers around the world and has approximately $369 billion in assets under
management, including assets managed by the fund's advisor, J.P. Morgan
Investment Management Inc.

J.P. MORGAN BOND FUND - ADVISOR SERIES
The fund invests primarily in bonds and other fixed income securities through
another fund. The fund seeks high total return or high current income.

WHO MAY WANT TO INVEST
--------------------------------------------------------------------------------
The fund is designed for investors who:

o want to add an income investment to further diversify a portfolio

o want an investment whose risk/return potential is higher than that of money
market funds but generally less than that of stock funds

o want an investment that pays monthly dividends

The fund is not designed for investors who:

o are investing for aggressive long-term growth

o require stability of principal

3 | FIXED INCOME MANAGEMENT APPROACH

<PAGE>

[GRAPHIC OMITTED]
The fund invests across a range of
different types of securities

[GRAPHIC OMITTED]
The fund makes its portfolio decisions
as described earlier in this prospectus

[GRAPHIC OMITTED]
J.P. Morgan uses a disciplined process
to control the fund's sensitivity
to interest rates

<PAGE>

FIXED INCOME INVESTMENT PROCESS
J.P. Morgan seeks to generate an information advantage through the depth of its
global fixed-income research and the sophistication of its analytical systems.
Using a team-oriented approach, J.P. Morgan seeks to gain insights in a broad
range of distinct areas, and when consistent with the fund's investment
approach, takes positions in many different areas, helping the fund to limit
exposure to concentrated sources of risk.

In managing the fund, J.P. Morgan employs a three-step process that combines
sector allocation, fundamental research for identifying portfolio securities,
and duration management.

Sector allocation The sector allocation team meets monthly, analyzing the
fundamentals of a broad range of sectors in which the fund may invest. The team
seeks to enhance performance and manage risk by underweighting or overweighting
sectors.

Security selection Relying on the insights of different specialists, including
credit analysts, quantitative researchers, and dedicated fixed income traders,
the portfolio managers make buy and sell decisions according to the fund's goal
and strategy.

Duration management Forecasting teams use fundamental economic factors to
develop strategic forecasts of the direction of interest rates. Based on these
forecasts, strategists establish each fund's target duration, a common
measurement of a security's sensitivity to interest rate movements. For
securities owned by the fund, duration measures the average time needed to
receive the present value of all principal and interest payments by analyzing
cash flows and interest rate movements. A fund's duration is generally shorter
than a fund's average maturity because the maturity of a security only measures
the time until final payment is due. The fund's target duration typically
remains relatively close to the duration of the market as a whole, as
represented by the fund's benchmark. The strategists closely monitor the fund
and make tactical adjustments as necessary.

FIXED INCOME MANAGEMENT APPROACH | 4

<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------
INVESTING THROUGH A SERVICE ORGANIZATION
Investors may only purchase, exchange and redeem shares of the fund with the
assistance of a service organization. Your service organization is paid by the
fund to assist you in establishing your fund account, executing transactions,
and monitoring your investment. The minimum amount for initial investments in
the fund is $2,500 and for additional investments $500, although these minimums
may be less for some investors. Service organizations may provide the following
services in connection with their customers' investments in the fund:

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 shareholders

o Assisting customers with investment procedures

ACCOUNT AND TRANSACTION POLICIES
Business hours and NAV calculations The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The fund calculates
its net asset value per share (NAV) every business day as of the close of
trading on the NYSE (normally 4:00 p.m. eastern time). The fund's securities are
typically priced using pricing services or market quotes. When these methods are
not available or do not represent a security's value at the time of pricing
(e.g., when an event occurs on a foreign exchange after the close of trading on
that exchange that would materially impact a security's value at the time the
fund calculates its NAV), the security is valued in accordance with the fund's
fair valuation procedures.

Timing of orders Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. The fund has the right to suspend redemption of shares as
permitted by law and to postpone payment of proceeds for up to seven days.

<PAGE>

Timing of settlements When you buy shares, you will become the owner of record
when the fund receives your payment, generally the day following execution. When
you sell shares, proceeds are generally available the day following execution
and will be forwarded according to your instructions.

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

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

Statements and reports You will receive from your service organization
account statements and confirmation of each purchase or sale of shares. Every
six months the 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
Income dividends are typically declared daily and paid monthly. If an investor's
shares are redeemed during the month, accrued but unpaid dividends are paid with
the redemption proceeds. Shares of the fund earn dividends on the business day
the purchase is effective, but not on the business day the redemption is
effective. The fund distributes capital gains, if any, once a year. However, the
fund may make more or fewer payments in a given year, depending on its
investment results and its tax compliance situation. The fund's dividends and
distributions consist of most or all of its net investment income and net
realized capital gains.

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

5 | YOUR INVESTMENT

<PAGE>

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

--------------------------------------------------------------------------------
Transaction Tax status
--------------------------------------------------------------------------------
Income dividends Ordinary income
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Short-term capital gains Ordinary income
distributions
--------------------------------------------------------------------------------
Long-term capital gains Capital gains
distributions
--------------------------------------------------------------------------------
Sales or exchanges of Capital gains or
shares owned for more losses
than one year
--------------------------------------------------------------------------------
Sales or exchanges of Gains are treated as ordinary
shares owned for one year income; losses are subject
or less to special rules
--------------------------------------------------------------------------------

Because long-term capital gains distributions are taxable as capital gains
regardless of how long you have owned your shares, you may want to avoid making
a substantial investment when the fund is about to declare a long-term capital
gains distribution. Every January, the fund issues tax information on its
distributions for the previous year. Any investor for whom the fund does not
have a valid taxpayer identification number will be subject to backup
withholding for taxes. The tax considerations described in this section do not
apply to tax-deferred accounts or other non-taxable entities. Because each
investor's tax circumstances are unique, please consult your tax professional
about your fund investment.
--------------------------------------------------------------------------------
Shareholder Services Agent
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713
1-800-766-7722

Representatives are available 8:00 a.m. to 6:00 p.m. eastern time on fund
business days.

YOUR INVESTMENT | 6

<PAGE>

FUND DETAILS
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BUSINESS STRUCTURE
As noted earlier, the 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.)

The 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, each of its feeder funds 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.

The 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. The fund's trustees would then consider
whether it should hire its own investment adviser, invest in a different master
portfolio, or take other action.

MANAGEMENT AND ADMINISTRATION

The fund and its master portfolio 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 the 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:

<PAGE>

--------------------------------------------------------------------------------
Advisory services 0.30% of the master portfolio's
average net assets
--------------------------------------------------------------------------------
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% of average
net assets over $7 billion
--------------------------------------------------------------------------------
Shareholder services 0.05% of the fund's average
net assets
--------------------------------------------------------------------------------

The 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.

The fund has adopted a plan under Rule 12b-1 that allows the fund to pay
distribution fees up to 0.25% of the fund's average net assets for the sale and
distribution of its shares. Because these fees are paid out of the fund's assets
on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

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

7 | FUND DETAILS

<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK

| 8

<PAGE>

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RISK AND REWARD ELEMENTS

This table discusses the main elements that make up the fund's overall risk and
reward characteristics. It also outlines the fund's policies toward various
investments, including those that are designed to help the fund manage risk.

------------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Market conditions

o The fund's share price, o Bonds have generally o Under normal circumstances the fund plans to
yield, and total return will outperformed money market remain fully invested in bonds and other fixed
fluctuate in response to investments over the long income securities as noted in the table on pages
bond market movements term, with less risk than 11-12
stocks

o The value of most bonds will o Most bonds will rise in o The fund seeks to limit risk and enhance total
fall when interest rates rise; value when interest rates return or yields through careful management,
the longer a bond's maturity fall sector allocation, individual securities
and the lower its credit selection, and duration management
quality, the more its value o Mortgage-backed and
typically falls asset-backed securities o During severe market downturns, the fund has the
can offer attractive option of investing up to 100% of assets in
o Adverse market conditions returns investment-grade short-term securities
may from time to time cause a
fund to take temporary o J.P. Morgan monitors interest rate trends, as
defensive positions that are well as geographic and demographic information
inconsistent with its related to mortgage-backed securities and
principal investment mortgage prepayments
strategies and may hinder a
fund from achieving its
investment objective

o Mortgage-backed and
asset-backed securities
(securities representing an
interest in, or secured by, a
pool of mortgages or other
assets such as receivables) could generate capital losses or periods of low yields if they are
paid off substantially earlier or later than anticipated
------------------------------------------------------------------------------------------------------------------------------------
Credit quality

o The default of an issuer o Investment-grade bonds o The fund maintains its own policies for balancing
would leave the fund with have a lower risk of credit quality against potential yields and gains
unpaid interest or principal default in light of its investment goals

o Junk bonds (those rated o Junk bonds offer higher o J.P. Morgan develops its own ratings of unrated
BB/Ba or lower) have a higher yields and higher securities and makes a credit quality
risk of default, tend to be potential gains determination for unrated securities
less liquid, and may be more
difficult to value
------------------------------------------------------------------------------------------------------------------------------------
Foreign investments

o The fund could lose money o Foreign bonds, which o Foreign bonds may be a significant investment for
because of foreign government represent a major portion the fund
actions, political of the world's fixed
instability, or lack of income securities, offer o To the extent that the fund invests in foreign
adequate and accurate attractive potential bonds, it may manage the currency exposure of its
information performance and foreign investments relative to its benchmark,
opportunities for and may hedge a portion of its foreign currency
o Currency exchange rate diversification exposure into the U.S. dollar from time to time
movements could reduce gains (see also "Derivatives"); these currency
or create losses o Favorable exchange rate management techniques may not be available for
movements could generate certain emerging markets investments
o Currency and investment gains or reduce losses
risks tend to be higher in
emerging markets o Emerging markets can
offer higher returns
------------------------------------------------------------------------------------------------------------------------------------
Management choices

o The fund could underperform o The fund could outperform o J.P. Morgan focuses its active management on
its benchmark due to its its benchmark due to those areas where it believes its commitment to
sector, securities or duration these same choices research can most enhance returns and manage
choices risks in a consistent way
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

9 | FUND DETAILS

<PAGE>

o Derivatives such as futures, o Hedges that correlate o The fund uses derivatives, such as futures,
options, swaps and forward well with underlying options, swaps and forward foreign currency
foreign currency contracts positions can reduce or contracts, for hedging and for risk management
that are used for hedging the eliminate losses at low (i.e., to adjust duration or yield curve
portfolio or specific cost exposure, or to establish or adjust exposure to
securities may not fully particular securities, markets, or currencies);
offset the underlying o The fund could make money risk management may include management of the
positions1 and this could and protect against fund's exposure relative to its benchmark
result in losses to the fund losses if management's
that would not have otherwise analysis proves correct o The fund only establishes hedges that it expects
occurred will be highly correlated with underlying
o Derivatives that involve positions
o Derivatives used for risk leverage could generate
management may not have the substantial gains at low o While the fund may use derivatives that
intended effects and may cost incidentally involve leverage, it does not use
result in losses or missed them for the specific purpose of leveraging its
opportunities portfolio

o The counterparty to a
derivatives contract could
default

o Certain types of derivatives
involve costs to the fund
which can reduce returns

o Derivatives that involve
leverage could magnify losses
------------------------------------------------------------------------------------------------------------------------------------
Securities lending

o When the fund lends a o The fund may enhance o J.P. Morgan maintains a list of approved
security, there is a risk that income through the borrowers
the loaned securities may not investment of the
be returned if the borrower collateral received from o The fund receives collateral equal to at least
defaults the borrower 100% of the current value of securities loaned

o The collateral will be o The lending agents indemnify the fund against
subject to the risks of the borrower default
securities in which it is
invested o J.P. Morgan's collateral investment guidelines
limit the quality and duration of collateral
investment to minimize losses

o Upon recall, the borrower must return the
securities loaned within the normal settlement
period
------------------------------------------------------------------------------------------------------------------------------------
Illiquid holdings

o The fund could have o These holdings may offer o The fund may not invest more than 15% of net
difficulty valuing these more attractive yields or assets in illiquid holdings
holdings precisely potential growth than
comparable widely traded o To maintain adequate liquidity to meet
o The fund could be unable to securities redemptions, the fund may hold investment-grade
sell these holdings at the short-term securities (including repurchase
time or price desired agreements and reverse purchase agreements) and,
for temporary or extraordinary purposes, may
borrow from banks up to 33 1/3% of the value of
its total assets
------------------------------------------------------------------------------------------------------------------------------------
When-issued and delayed
delivery securities

o When the fund buys o The fund can take o The fund uses segregated accounts to offset
securities before issue or for advantage of attractive leverage risk
delayed delivery, it could be transaction opportunities
exposed to leverage risk if it
does not use segregated accounts
------------------------------------------------------------------------------------------------------------------------------------
Short-term trading

o Increased trading would o The fund could realize o The fund may use short-term trading to take
raise the fund's transaction gains in a short period advantage of attractive or unexpected
costs of time opportunities or to meet demands generated by
shareholder activity. The portfolio turnover rate
o Increased short-term capital o The fund could protect for the portfolio in which the fund invests in
gains distributions would against losses if a bond for the fiscal year ended 10/31/99 was 465%.
raise shareholders' income tax is overvalued and its
liability value later falls
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

(1) A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash payment
based on changes in the value of a securities index. An option is the right to
buy or sell a set quantity of an underlying instrument at a pre-determined
price. A swap is a privately negotiated agreement to exchange one stream of
payments for another. A forward foreign currency contract is an obligation to
buy or sell a given currency on a future date and at a set price.

FUND DETAILS | 10

<PAGE>

--------------------------------------------------------------------------------
Investments
This table discusses the customary types of investments which can be held by the
fund. In each case the related types of risk are listed on the following page
(see below for definitions).This table reads across two pages.

------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities Interests in a stream of payments from specific assets,
such as auto or credit card receivables.
------------------------------------------------------------------------------------------------------------------------------------
Bank obligations Negotiable certificates of deposit, time deposits and bankers'
acceptances of domestic and foreign issuers.
------------------------------------------------------------------------------------------------------------------------------------
Commercial paper Unsecured short term debt issued by domestic and foreign banks or corporations. These securities
are usually
discounted and are rated by S&P or Moody's.
------------------------------------------------------------------------------------------------------------------------------------
Convertible securities Domestic and foreign debt securities that can be
converted into equity securities at a future time and price.
------------------------------------------------------------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic and foreign industrial, utility,
banking, and other financial institutions.
------------------------------------------------------------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instrument which gives the lender a lien
on property as security for the loan payment.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities Domestic and foreign securities (such as Ginnie Maes,
Freddie Macs, Fannie Maes) which represent interests in pools of mortgages,
whereby the principal and interest paid every month is passed through to the
holder of the
securities.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage dollar rolls The purchase of domestic or foreign mortgage-backed
securities with the promise to purchase similar securities upon the maturity of
the original security. Segregated accounts are used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Participation interests Interests that represent a share of domestic or foreign
bank debt or similar securities or obligations.
------------------------------------------------------------------------------------------------------------------------------------
Private placements Bonds or other investments that are sold directly to an
institutional investor.
------------------------------------------------------------------------------------------------------------------------------------
REITs and other real-estate related instruments Securities of issuers that
invest in real estate or are secured by real estate.
------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements Contracts whereby the fund agrees to purchase a security and resell it to the seller on a
particular date and
at a specific price.
------------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby the fund sells a security and agrees to repurchase it from the
buyer on a particular
date and at a specific price. Considered a form of borrowing.
------------------------------------------------------------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of supranational organizations Dollar- or
non-dollar-denominated securities issued by foreign governments or supranational
organizations. Brady bonds are issued in connection with debt restructurings.
------------------------------------------------------------------------------------------------------------------------------------
Swaps Contractual agreement whereby a domestic or foreign party agrees to
exchange periodic payments with a counterparty.
Segregated accounts are used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Tax exempt municipal securities Securities, generally issued as general
obligation and revenue bonds, whose interest is exempt from federal taxation and
state and/or local taxes in the state where the securities were issued.
------------------------------------------------------------------------------------------------------------------------------------
U.S. government securities Debt instruments (Treasury bills, notes, and bonds) guaranteed by the U.S. government
for the timely
payment of principal and interest.
------------------------------------------------------------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred payment securities Domestic and foreign securities offering non-cash or
delayed-cash payment.
Their prices are typically more volatile than those of some other debt
instruments and involve certain special tax considerations.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Risk related to certain investments held by J.P. Morgan Bond Fund - Advisor
Series:

Credit risk The risk a financial obligation will not be met by the issuer of a
security or the counterparty to a contract, resulting in a loss to the
purchaser.

Currency risk The risk currency exchange rate fluctuations may reduce gains or
increase losses on foreign investments. Environmental risk The risk that an
owner or operator of real estate may be liable for the costs associated with
hazardous or toxic substances located on the property.

Extension risk The risk a rise in interest rates will extend the life of a
mortgage-backed security to a date later than the anticipated prepayment date,
causing the value of the investment to fall.

Interest rate risk The risk a change in interest rates will adversely affect the
value of an investment. The value of fixed income securities generally moves in
the opposite direction of interest rates (decreases when interest rates rise and
increases when interest rates fall).

Leverage risk The risk of gains or losses disproportionately higher than the
amount invested.

Liquidity risk The risk the holder may not be able to sell the security at the
time or price it desires.

11 | FUND DETAILS

<PAGE>

<TABLE>
<CAPTION>
<S> <C>
--------------------------------------------------------------------------------
0 Permitted (and if applicable, percentage limitation)
percentage of total assets - bold
percentage of net assets - italic
o Permitted, but not typically used
+ Permitted, but no current intention of use

Related Types of Risk

--------------------------------------------------------------------------------
credit, interest rate, market, prepayment 0
--------------------------------------------------------------------------------
credit, currency, liquidity, political 0(1)
--------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market,
political 0(1)
--------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political,
valuation 0(1)
--------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political,
valuation 0(1)
--------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity,
market, 0
natural event, political, prepayment, valuation
--------------------------------------------------------------------------------
credit, currency, extension, interest rate, leverage, market,
political, 0(1)
prepayment
--------------------------------------------------------------------------------
currency, extension, interest rate, leverage, liquidity, market,
political, 0(1,2)
prepayment
--------------------------------------------------------------------------------
credit, currency, extension, interest rate, liquidity, political,
prepayment 0(1)
--------------------------------------------------------------------------------
credit, interest rate, liquidity, market,
valuation 0
--------------------------------------------------------------------------------
credit, interest rate, liquidity, market, natural event, prepayment,
valuation 0
--------------------------------------------------------------------------------
credit 0
--------------------------------------------------------------------------------
credit 0(2)
--------------------------------------------------------------------------------
credit, currency, interest rate, market, political 0(1)
--------------------------------------------------------------------------------
credit, currency, interest rate, leverage, market,
political 0(1)
--------------------------------------------------------------------------------
credit, interest rate, market, natural event, political o
--------------------------------------------------------------------------------
interest rate 0
--------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political,
valuation 0(1)
--------------------------------------------------------------------------------
</TABLE>

Market risk The risk that when the market as a whole declines, the value of a
specific investment will decline proportionately. This systematic risk is common
to all investments and the mutual funds that purchase them.

Natural event risk The risk a natural disaster, such as a hurricane or similar
event, will cause severe economic losses and default in payments by the issuer
of the security.

Political risk The risk governmental policies or other political actions will
negatively impact the value of the investment.

Prepayment risk The risk declining interest rates will result in unexpected
prepayments, causing the value of the investment to fall.

Valuation risk The risk the estimated value of a security does not match the
actual amount that can be realized if the security is sold.

(1) All foreign securities in the aggregate may not exceed 25% of the fund's
assets.

(2) All forms of borrowing (including securities lending and reverse repurchase
agreements) in the aggregate may not exceed 33 1/3 % of the fund's total
assets.

FUND DETAILS | 12

<PAGE>

--------------------------------------------------------------------------------
FOR MORE INFORMATION
--------------------------------------------------------------------------------

For investors who want more information on the fund, 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 the fund's most recently completed fiscal year or
half-year.

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

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

J.P. Morgan Institutional Funds
Morgan Christiana Center - 2/OPS3
J.P. Morgan Funds Services
500 Stanton Christiana Road
Newark, DE 19713

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. (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov. The
fund's investment company and 1933 Act registration numbers are:

J.P. Morgan Bond Fund - Advisor Series ................. 811-07340 and 033-54632

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>

--------------------------------------------------------------------------------
AUGUST 1, 2000 | PROSPECTUS
--------------------------------------------------------------------------------

J.P. MORGAN DIVERSIFIED FUND -
ADVISOR SERIES

----------------------------------
A balanced fund seeking high total
return with reduced risk

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

Distributed by Funds Distributor, Inc. JPMorgan
<PAGE>

CONTENTS
--------------------------------------------------------------------------------

1 | The fund's goal, investment approach, risks, expenses and performance

J.P. MORGAN DIVERSIFIED FUND - ADVISOR SERIES
Fund description .......................................................... 1
Performance ............................................................... 2
Investor expenses ......................................................... 2

3 |

DIVERSIFIED MANAGEMENT APPROACH
J.P. Morgan ............................................................... 3
J.P. Morgan Diversified Fund - Advisor Series ............................. 3
Who may want to invest .................................................... 3
Investment process ........................................................ 4

6 | Investing in the J.P. Morgan Diversified Fund - Advisor Series

YOUR INVESTMENT
Investing through a service organization .................................. 6
Account and transaction policies .......................................... 6
Dividends and distributions ............................................... 6
Tax considerations ........................................................ 7

9 | More about risk and the fund's business operations

FUND DETAILS
Business structure ........................................................ 8
Management and administration ............................................. 8
Risk and reward elements .................................................. 9
Investments ............................................................... 12

FOR MORE INFORMATION .............................................. back cover
<PAGE>

J.P. MORGAN DIVERSIFIED FUND - ADVISOR SERIES

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and its main risks, as
well as fund strategies, please see pages 9-13.

[GRAPHIC OMITTED]
GOAL
The fund seeks to provide a high total return from a diversified portfolio of
stocks and bonds. This goal can be changed without shareholder approval.
Principal strategies

[GRAPHIC OMITTED]
PRINCIPAL STRATEGIES
Investment Approach
Drawing on a variety of analytical tools, the portfolio management team
allocates assets among various types of stock and bond investments, based on the
model allocation shown at right. The team periodically adjusts the fund's actual
asset allocation according to the relative attractiveness of each asset class.

Within this asset allocation framework, the team selects the fund's securities.
With the stock portion of the portfolio, the fund keeps its economic sector
weightings in line with the markets in which it invests, while actively seeking
the most attractive stocks within each sector. In choosing individual stocks,
the team ranks them according to their relative value using a proprietary model
that incorporates research from J.P. Morgan's worldwide network of analysts.
Foreign stocks are chosen using a similar process, while also considering
country allocation and currency exposure.

With the bond portion of the portfolio, the team uses fundamental, economic, and
capital markets research to select securities. The team actively manages the mix
of U.S. and foreign bonds while typically keeping duration - a common
measurement of sensitivity to interest rate movements - within one year of the
average for the U.S. investment-grade bond universe (currently about 5 years).

PRINCIPAL RISKS
The value of your investment in the fund will fluctuate in response to movements
in the stock and bond markets. The fund's broad diversification among asset
classes and among individual stocks and bonds is more effective in reducing
volatility when asset classes perform differently. Fund performance will also
depend on the management team's asset allocation and securities selection.

To the extent the portfolio invests in foreign securities, it could lose money
because of foreign government actions, political instability, currency
fluctuation or lack of adequate and accurate information. While the portfolio
may engage in options, futures and foreign currency transactions for hedging or
risk management purposes only, these transactions sometimes may reduce returns
or increase volatility.

Over the long term, investors can anticipate that the fund's total return and
volatility should exceed those of bonds but remain less than those of medium-
and large- capitalization domestic stocks.

<PAGE>

REGISTRANT NAME: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN DIVERSIFIED FUND - ADVISOR SERIES)

MODEL ALLOCATION

52% medium- 35% U.S. and
and large-cap foreign bonds
U.S. stocks [GRAPHIC OMITTED]
10% foreign stocks
3% small-cap
U.S. stocks

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including more than $8 billion using the same
strategy as the fund.

The portfolio management team is led by John M. Devlin, Vice President, who
joined the team in December of 1993 and has been at J.P. Morgan since 1986, and
Anne Lester, Vice President, who joined the team in June of 2000 and has been at
J.P. Morgan since 1992. Prior to managing this fund Ms. Lester worked in the
Product Development group and prior to that was a fixed income and currency
trader, and portfolio manager in Milan.

--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goal.

o The fund does not represent a complete investment program.

1 | J.P. MORGAN DIVERSIFIED FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)

Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect the performance of the J.P. Morgan Diversified
Fund, a related fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan Diversified Fund's shares from year to year for the last 6
calendar years.

The table indicates some of the risks by showing how the J.P. Morgan Diversified
Fund's average annual returns for the past one and five years and for the life
of the fund compare to the Fund Benchmark and the S&P 500 Index. The Fund
Benchmark is a composite benchmark of unmanaged indices that corresponds to the
J.P. Morgan Diversified Fund's model allocation and that consists of the S&P 500
(52%), Russell 2000 (3%), Salomon Smith Barney Broad Investment Grade Bond
(35%), and MSCI EAFE (10%) indices. The S&P 500 Index is an unmanaged index of
U.S. stocks widely used as a measure of overall U.S. stock market performance.

The J.P. Morgan Diversified Fund's past performance does not necessarily
indicate how the J.P. Morgan Diversified Fund - Advisor Series will perform in
the future.

Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
--------------------------------------------------------------------------------
1994 1995 1996 1997 1998 1999

40%
26.47
20% 18.47 18.29
13.42 13.87
0% 0.60
--------------------------------------------------------------------------------

[ ] J.P. Morgan Diversified Fund

The J.P. Morgan Diversified Fund's year-to-date total return as of 6/30/00 was
-0.19%. For the period covered by this year-by-year total return chart, the
fund's highest quarterly return was 13.39% (for the quarter ended 12/31/98); and
the lowest quarterly return was -6.23% (for the quarter ended 9/30/98).

J.P. Morgan Diversified Fund (after expenses) 13.87 18.01 14.53
--------------------------------------------------------------------------------
Fund Benchmark (no expenses) 13.71 19.29 15.50
--------------------------------------------------------------------------------
S&P 500 Index (no expenses) 21.04 28.55 22.96
--------------------------------------------------------------------------------
</TABLE>

<PAGE>

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

INVESTOR EXPENSES
The estimated expenses of the fund before and after reimbursement are shown at
right. The fund has no 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 0.55
Distribution (Rule 12b-1) fees(4) 0.25
Service fees(5) 0.25
Other expenses 0.34
--------------------------------------------------------------------------------
Total operating expenses 1.39
--------------------------------------------------------------------------------
Fee waiver and
expense reimbursement(6) 0.29
--------------------------------------------------------------------------------
Net expenses(6) 1.10
--------------------------------------------------------------------------------

Expense example(6)
--------------------------------------------------------------------------------
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
8/1/00 through 10/31/01 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.
Your cost ($) 112 401
--------------------------------------------------------------------------------

(1) The J.P. Morgan Diversified Fund commenced operations on 12/15/93.
Returns for the period 9/30/93 through 12/31/93 reflect the performance of J.P.
Morgan Institutional Diversified Fund, another related fund. These returns
reflect lower operating expenses than those of the fund. Therefore, the fund's
returns would have been lower had it existed during the same period.

(2) The fund's fiscal year end is 6/30.

(3) The fund has a master/feeder structure as described on page 8. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the current fiscal year, expressed as a percentage of
the fund's estimated average net assets.

(4) The plan under Rule 12b-1 (described on page 8) allows such fees to be paid
out of the fund's assets on an ongoing basis. Over time, these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.

(5) Service organization (described on page 6) may charge other fees to their
customers who are the beneficial owners of shares in connection with their
customer's accounts. Such fees, if any, may affect the return such customers
realize with respect to their investments.

(6) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York ("Morgan Guaranty"), an affiliate of J.P. Morgan, to reimburse the fund
to the extent operating expenses (which exclude interest, taxes and
extraordinary expenses) exceed 1.10% of the fund's average daily net assets
through 10/31/01.

J.P. MORGAN DIVERSIFIED FUND - ADVISOR SERIES | 2
<PAGE>

DIVERSIFIED MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN DIVERSIFIED FUND - ADVISOR SERIES
This fund invests in a diversified portfolio of stocks and bonds by investing
through a master portfolio (another fund with the same goal). As a shareholder,
you should anticipate risks and rewards beyond those of a typical bond fund, but
less than those of most stock funds.

WHO MAY WANT TO INVEST
--------------------------------------------------------------------------------

The fund is designed for investors who:

o are pursuing a long-term goal such as retirement

o want an investment with the potential to outpace inflation

o seek less risk than a fund investing completely in stocks

o prefer to leave asset allocation decisions in the hands of an investment
professional

The fund is not designed for investors who:

o are looking for the higher long-term potential growth (with the higher risks)
of a fund investing completely in stocks

o require regular income or stability of principal

o are pursuing a short-term goal or investing emergency reserves

3 | DIVERSIFIED MANAGEMENT APPROACH
<PAGE>

[GRAPHIC OMITTED]
J.P. Morgan analysts develop proprietary
fundamental research

[GRAPHIC OMITTED]
Stocks in each industry are ranked
with the help of models

[GRAPHIC OMITTED]
Using research and valuations,
the fund's management team
chooses stocks for the fund
<PAGE>

DIVERSIFIED INVESTMENT PROCESS
The J.P. Morgan Diversified Fund - Advisor Series allocates assets among various
types of stock and bond investments. The mix of equities and fixed income is
based on the depth of J.P. Morgan's research and the sophistication of its
analytical systems. Using a team-oriented approach, J.P. Morgan seeks to gain
insights in a broad range of distinct areas and takes positions in many
different ones, helping the fund to limit exposure to concentrated sources of
risk.

In managing the equity portion of the fund, J.P. Morgan employs a three-step
process:

Research J.P. Morgan takes an in-depth look at company prospects over a
relatively long period - often as much as five years - rather than focusing on
near-term expectations. This approach is designed to provide insight into a
company's real growth potential. J.P. Morgan's in-house research is developed by
an extensive worldwide network of over 125 career equity analysts. The team of
analysts dedicated to U.S. equities includes more than 20 members, with an
average of over ten years of experience.

Valuation The research findings allow J.P. Morgan to rank the companies in each
industry group according to their relative value. The greater a company's
estimated worth compared to the current market price of its stock, the more
undervalued the company. The valuation rankings are produced with the help of a
variety of models that quantify the research team's findings.

Stock selection The fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, the fund's
management team buys stocks that are identified as undervalued and considers
selling them when they appear overvalued. Along with attractive valuation, the
fund's managers often consider a number of other criteria:

o catalysts that could trigger a rise in a stock's price

o high potential reward compared to potential risk

o temporary mispricings caused by market overreactions

DIVERSIFIED MANAGEMENT APPROACH | 4
<PAGE>
[GRAPHIC OMITTED]
The fund invests across a range
of different types of securities

[GRAPHIC OMITTED]
The fund makes its portfolio decisions as
described earlier in this prospectus

[GRAPHIC OMITTED]
J.P. Morgan uses a disciplined process
to control the fund's sensitivity
to interest rates
<PAGE>

In managing the fixed income portion of the fund, J.P. Morgan employs a
three-step process that combines sector allocation, fundamental research for
identifying portfolio securities, and duration management.

Duration management Forecasting teams use fundamental economic factors to
develop strategic forecasts of the direction of interest rates. Based on these
forecasts, strategists establish the fund's target duration, a common
measurement of a security's sensitivity to interest rate movements. For
securities owned by the fund, duration measures the average time needed to
receive the present value of all principal and interest payments by analyzing
cash flows and interest rate movements. The fund's duration is generally shorter
than the fund's average maturity because the maturity of a security only
measures the time until final payment is due. The fund's target duration
typically remains relatively close to the duration of the market as a whole, as
represented by the fund's benchmark. The strategists closely monitor the fund
and make tactical adjustments as necessary.

5 | DIVERSIFIED MANAGEMENT APPROACH
<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------
INVESTING THROUGH A SERVICE ORGANIZATION
Investors may only purchase, exchange and redeem shares of the fund with the
assistance of a service organization. Your service organization is paid by the
fund to assist you in establishing your fund account, executing transactions,
and monitoring your investment. The minimum amount for initial investments in a
fund by a service organization is $2,500 and for additional investments $500,
although these minimums may be less for some investors. Service organizations
may provide the following services in connection with their customers'
investments in the fund:

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 shareholders

o Assisting customers with investment procedures

ACCOUNT AND TRANSACTION POLICIES
Business hours and NAV calculations The fund's regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). The fund calculates
its net asset value per share (NAV) every business day as of the close of
trading on the NYSE (normally 4:00 p.m. eastern time). The fund's securities are
typically priced using market quotes or pricing services. When these methods are
not available or do not represent a security's value at the time of pricing
(e.g., when an event occurs on a foreign exchange after the close of trading on
that exchange that would materially impact a security's value at the time the
fund calculates its NAV), the security is valued in accordance with the fund's
fair valuation procedures.

Timing of orders Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. The fund has the right to suspend redemption of shares and to
postpone payment of proceeds for up to seven days or as permitted by law.
<PAGE>

Timing of settlements When you buy shares, you will become the owner of record
when the fund receives your payment, generally the day following execution. When
you sell shares, the proceeds are generally available the day following
execution and will be forwarded according to your instructions.

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

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

Statements and reports You will receive from your service organization account
statements and confirmation of each purchase or sale of shares. Every six months
the 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.

DIVIDENDS AND DISTRIBUTIONS
The fund typically pays income dividends four times a year and makes capital
gains distributions, if any, once a year. However, the fund may make more or
fewer payments in a given year, depending on its investment results and its tax
compliance situation. These dividends and distributions consist of most or all
of the fund's net investment income and net realized capital gains.

YOUR INVESTMENT | 6
<PAGE>

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

--------------------------------------------------------------------------------
Transaction Tax status
--------------------------------------------------------------------------------
Income dividends Ordinary income
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income
distributions
--------------------------------------------------------------------------------
Long-term capital gains Capital gains
distributions
--------------------------------------------------------------------------------
Sales or exchanges of shares Capital gains or losses
owned for more than one year
--------------------------------------------------------------------------------
Sales or exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject
to special rules
--------------------------------------------------------------------------------

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

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

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

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

--------------------------------------------------------------------------------
Shareholder Services Agent
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713
1-800-766-7722

Representatives are available 8:00 a.m. to 6:00 p.m. eastern time on fund
business days.

7 | YOUR INVESTMENT
<PAGE>

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

BUSINESS STRUCTURE
As noted earlier, the fund is a series of J.P. Morgan Institutional Funds, a
Massachusetts business trust, and 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.)

The master portfolio accepts investments from other feeder funds, and all the
feeders bear the master 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 the master portfolio seeks a vote,
the 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.

The 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. The 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 fund and its master portfolio are 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 the 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:
<PAGE>

--------------------------------------------------------------------------------
Advisory services 0.55% of the master portfolio's
average net assets
--------------------------------------------------------------------------------
Administrative services Master portfolio's and fund's
(fee shared with Funds pro-rata portions of 0.09% of the
Distributor, Inc.) first $7 billion in J.P. Morgan-
advised portfolios, plus 0.04% of
average net assets over $7 billion
--------------------------------------------------------------------------------
Shareholder services 0.05% of the fund's average
net assets
--------------------------------------------------------------------------------

The 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.

The fund has adopted a distribution plan under Rule 12b-1 that allows the fund
to pay distribution fees up to 0.25% of the fund's average net assets for the
sale and distribution of its shares.

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

FUND DETAILS | 8
<PAGE>
--------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS

--------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Market conditions

o The fund's share price and o Stocks have generally o Under normal circumstances the fund
performance will fluctuate in outperformed more stable plans to remain fully invested, with
response to stock and bond invest- ments (such as bonds approximately 65% in stocks and 35% in
market movements and cash equivalents) over the bonds and other fixed income
long term securities; stock investments may
o The value of the fund's include U.S. and foreign common
bonds (and potentially its o Bonds have generally stocks, convertible securities,
convertible securities and outperformed money market preferred stocks, trust or partnership
stocks) will fall when interest investments over the long term, interests, warrants, rights, and
rates rise; the longer with less risk than stock investment company securities; bond
a bond's maturity and the investments may include U.S. and
lower its credit quality, the o A diversified, balanced foreign corporate and government
more its value typically falls portfolio should mitigate the bonds, mortgage-backed and
effects of wide market asset-backed securities, convertible
o Mortgage-backed and asset- fluctuations, especially when securities, participation interests
backed securities (securities stock and bond prices move in and private placements
representing an interest in, different directions
or secured by, a pool of o The fund seeks to limit risk through
mortgages or other assets such o Most bonds will rise in value diversification
as receivables) could generate when interest rates fall
capital losses or periods o The fund seeks to limit risk and
of low yields if they are paid o Mortgage-backed and enhance total return or yields through
off substantially earlier or asset-backed securities can careful management, sector allocation,
later than anticipated offer attractive returns individual securities selection, and
duration management
o Adverse market conditions
may from time to time cause o J.P. Morgan monitors interest rate
the fund to take temporary trends, as well as geographic and
defensive positions that are demographic information, related to
inconsistent with its principal mortgage-backed securities and
investment strategies and mortgage prepayments
may hinder the fund from
achieving its investment o During severe market downturns, the
objective fund has the option of investing up to
100% of assets in investment-grade
short-term securities
--------------------------------------------------------------------------------------------------------------------------
Management choices

o The fund could underperform o The fund could outperform its o J.P. Morgan focuses its active
its benchmark due to its benchmark due to these same management on securities selection,
securities and asset choices the area where it believes its
allocation choices commitment to research can most
enhance returns
--------------------------------------------------------------------------------------------------------------------------
Credit quality

o The default of an issuer would o Investment-grade bonds have a o The fund maintains its own policies
leave the fund with unpaid lower risk of default for balancing credit quality against
interest or principal potential yields and gains in light of
o Junk bonds offer higher yields its investment goals
o Junk bonds (those rated and higher potential gains
BB/Ba or lower) have a higher o At least 75% of the fund's bonds must
risk of default, tend to be be investment-grade (BBB/Baa or
less liquid, and may be more better, of which 65% must be A or
difficult to value better), and no more than 25% BB/Ba or
B; the fund may include unrated bonds
of equivalent quality in these categories

o J.P. Morgan develops its own ratings
of unrated securities and makes a
credit quality determination for
unrated securities
--------------------------------------------------------------------------------------------------------------------------
</TABLE>

9 | FUND DETAILS

<PAGE>

-----------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and reward
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign investments

o Currency exchange rate o Favorable exchange rate o The fund anticipates that total
movements could reduce movements could generate gains foreign investments will not exceed
gains or create losses or reduce losses 30% of assets

o The fund could lose money o Foreign investments, which o The fund actively manages the currency
because of foreign represent a major portion of exposure of its foreign investments
government actions, the world's securities, offer relative to its benchmark, and may
political instability, or attractive potential hedge back into the U.S. dollar from
lack of adequate and performance and opportunities time to time (see also "Derivatives")
accurate information for diversification
--------------------------------------------------------------------------------------------------------------------------
When-issued and delayed
delivery securities

o When the fund buys securities o The fund can take advantage of o The fund uses segregated accounts to
before issue or for delayed attractive transaction offset leverage risk
delivery, it could be exposed opportunities
to leverage risk if it does not
use segregated accounts
-----------------------------------------------------------------------------------------------------------------------------
Short-term trading

o Increased trading would raise o The fund could realize gains in o The fund generally avoids short-term
the fund's brokerage and a short period of time trading, except to take advantage of
related costs attractive or unexpected opportunities
o The fund could protect against or to meet demands generated by
o Increased short-term capital losses if a stock is overvalued shareholder activity. The portfolio
gains distributions would raise and its value later falls turnover rate for the portfolio in
shareholders' income tax which the fund invests for the fiscal
liability year ended 6/30/00 was 101%
-----------------------------------------------------------------------------------------------------------------------------
Derivatives

o Derivatives such as futures, o Hedges that correlate well with o The fund uses derivatives, such as
options, swaps, and forward underlying positions can reduce futures, options, swaps and forward
foreign currency contracts that or eliminate losses at low cost foreign currency contracts, for
are used for hedging the hedging and for risk management (i.e.,
portfolio or specific o The fund could make money and to adjust duration or yield curve
securities may not fully offset protect against losses if exposure, or to establish or adjust
the underlying positions1 and management's analysis proves exposure to particular securities,
this could result in losses to correct markets or currencies); risk
the fund that would not have management may include management of
otherwise occurred o Derivatives that involve the fund's exposure relative to its
leverage could generate benchmark
o Derivatives used for risk substantial gains at low cost
management may not have the o The fund only establishes hedges that
intended effects and may result it expects will be highly correlated
in losses or missed with underlying positions
opportunities
o While the fund may use derivatives
o The counterparty to a that incidentally involve leverage, it
derivatives contract could does not use them for the specific
default purpose of leveraging the portfolio

o Derivatives that involve
leverage could magnify losses

o Certain types of derivatives
involve costs to the fund which
can reduce returns
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash payment
based on changes in the value of a securities index. An option is the right
to buy or sell a set quantity of an underlying instrument at a predetermined
price. A swap is a privately negotiated agreement to exchange one stream of
payments for another. A forward foreign currency contract is an obligation
to buy or sell a given currency on a future date and at a set price.

FUND DETAILS | 10
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and reward
-----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

Securities lending

o When the fund lends a security, o The fund may enhance income o J.P. Morgan maintains a list of
there is a risk that the loaned through the investment of the approved borrowers
securities may not be returned collateral received from the
if the borrower defaults borrower o The fund receives collateral equal to
at least 100% of the current value of
o The collateral will be subject the securities loaned
to the risks of the securities
in which it is invested o The lending agents indemnify the fund
against borrower default

o J.P. Morgan's collateral investment
guidelines limit the quality and
duration of collateral investment to
minimize losses

o Upon recall, the borrower must return
the securities loaned within the
normal settlement period
-----------------------------------------------------------------------------------------------------------------------------
Illiquid holdings

o The fund could have difficulty o These holdings may offer more o The fund may not invest more than 15%
valuing these holdings attractive yields or potential of net assets in illiquid holdings
precisely growth than comparable widely
traded securities o To maintain adequate liquidity to meet
o The fund could be unable to redemptions, the fund may hold
sell these holdings at the time investment-grade short-term securities
or price it desires Potential (including repurchase agreements) and,
rewards for temporary or extraordinary
purposes, may borrow from banks up to
331/3% of the value of its total
assets
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

11 | FUND DETAILS
<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)

| 12
<PAGE>

<TABLE>
<CAPTION>
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
Asset-backed securities Interests in a stream of payments from specific assets, such as auto or credit card
receivables.
------------------------------------------------------------------------------------------------------------------------------------
Bank obligations Negotiable certificates of deposit, time deposits and bankers' acceptances of domestic and
foreign issuers.
------------------------------------------------------------------------------------------------------------------------------------
Commercial paper Unsecured short term debt issued by domestic and foreign banks or corporations. These securities
are usually
discounted and are rated by S&P or Moody's.
------------------------------------------------------------------------------------------------------------------------------------
Convertible securities Domestic and foreign debt securities that can be converted into equity securities at a
future time and price.
------------------------------------------------------------------------------------------------------------------------------------
Corporate bonds Debt securities of domestic and foreign industrial, utility, banking, and other financial
institutions.
------------------------------------------------------------------------------------------------------------------------------------
Mortgages (directly held) Domestic debt instruments which give the lender a lien on property as security for the
loan payment.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage-backed securities Domestic and foreign securities (such as Ginnie Maes, Freddie Macs, Fannie Maes) which
represent
interests in pools of mortgages, whereby the principal and interest paid every month is passed through to the
holder of the
securities.
------------------------------------------------------------------------------------------------------------------------------------
Mortgage dollar rolls The purchase of mortgage-backed securities with the promise to purchase similar securities
upon the maturity
of the original security. Segregated accounts are used to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Participation interests Interests that represent a share of bank debt or similar securities or obligations.
------------------------------------------------------------------------------------------------------------------------------------
Private placements Bonds or other investments that are sold directly to an institutional investor.
------------------------------------------------------------------------------------------------------------------------------------
REITs and other real-estate related instruments Securities of issuers that invest in real estate or are secured
by real estate.
------------------------------------------------------------------------------------------------------------------------------------
Repurchase agreements Contracts whereby the fund agrees to purchase a security and resell it to the seller on a
particular date and
at a specific price.
------------------------------------------------------------------------------------------------------------------------------------
Reverse repurchase agreements Contracts whereby the fund sells a security and agrees to repurchase it from the
buyer on a particular
date and at a specific price. Considered a form of borrowing.
------------------------------------------------------------------------------------------------------------------------------------
Sovereign debt, Brady bonds, and debt of supranational organizations Dollar- or non-dollar-denominated securities
issued by foreign
governments or supranational organizations. Brady bonds are issued in connection with debt restructurings.
------------------------------------------------------------------------------------------------------------------------------------
Swaps Contractual agreement whereby a party agrees to exchange periodic payments with a counterparty. Segregated
accounts are used
to offset leverage risk.
------------------------------------------------------------------------------------------------------------------------------------
Tax exempt municipal securities Securities, generally issued as general obligation and revenue bonds, whose
interest is exempt from
federal taxation and state and/or local taxes in the state where the securities were issued.
------------------------------------------------------------------------------------------------------------------------------------
U.S. government securities Debt instruments (Treasury bills, notes, and bonds) guaranteed by the U.S. government
for the timely
payment of principal and interest.
------------------------------------------------------------------------------------------------------------------------------------
Zero coupon, pay-in-kind, and deferred payment securities Domestic and foreign securities offering non-cash or
delayed-cash payment.
Their prices are typically more volatile than those of some other debt instruments and involve certain special
tax considerations.
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Risk related to certain investments held by J.P. Morgan Diversified Fund -
Advisor Series:

Credit risk The risk a financial obligation will not be met by the issuer of a
security or the counterparty to a contract, resulting in a loss to the
purchaser.

Currency risk The risk currency exchange rate fluctuations may reduce gains or
increase losses on foreign investments.

Environmental risk The risk that an owner or operator of real estate may be
liable for the costs associated with hazardous or toxic substances located on
the property.

Extension risk The risk a rise in interest rates will extend the life of a
mortgage-backed security to a date later than the anticipated prepayment date,
causing the value of the investment to fall.

Leverage risk The risk of gains or losses disproportionately higher than the
amount invested.

13 | FUND DETAILS

<PAGE>

Investments

O Permitted (and if applicable, percentage of net
assets limitation)
o Permitted, but not typically used

Related Types of Risk
-------------------------------------------------------------------------------------
<S> <C>
credit, interest rate, market, prepayment O
-------------------------------------------------------------------------------------
credit, currency, liquidity, political O
-------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political O
-------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation O
-------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation O
-------------------------------------------------------------------------------------
credit, environmental, extension, interest rate, liquidity, market, o
natural event, political, prepayment, valuation
-------------------------------------------------------------------------------------
credit, currency, extension, interest rate, leverage, liquidity, market, O
political, prepayment
-------------------------------------------------------------------------------------
currency, extension, interest rate, leverage, liquidity, market, political, O(1)
prepayment
-------------------------------------------------------------------------------------
credit, currency, extension, interest rate, liquidity, political, prepayment O
-------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, valuation O
-------------------------------------------------------------------------------------
credit, interest rate, liquidity, market, natural event, prepayment, valuation O
-------------------------------------------------------------------------------------
credit O
-------------------------------------------------------------------------------------
credit O
-------------------------------------------------------------------------------------
credit, currency, interest rate, market, political O
-------------------------------------------------------------------------------------
credit, currency, interest rate, leverage, market, political O
-------------------------------------------------------------------------------------
credit, interest rate, market, natural event, political o
-------------------------------------------------------------------------------------
interest rate O
-------------------------------------------------------------------------------------
credit, currency, interest rate, liquidity, market, political, valuation O
-------------------------------------------------------------------------------------
</TABLE>
Liquidity risk The risk the holder may not be able to sell the security at the
time or price it desires.

Natural event risk The risk a natural disaster, such as a hurricane or similar
event, will cause severe economic losses and default in payments by the issuer
of the security.

Political risk The risk governmental policies or other political actions will
negatively impact the value of the investment.

Prepayment risk The risk declining interest rates will result in unexpected
prepayments, causing the value of the investment to fall.

Valuation risk The risk the estimated value of a security does not match the
actual amount that can be realized if the security is sold.

(1) All forms of borrowing (including securities lending and reverse repurchase
agreements) in the aggregate may not exceed 33 1/3% of the fund's total
assets.

FUND DETAILS | 14
<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)

15 |

<PAGE>

(THIS PAGE INTENTIONALLY LEFT BLANK)

| 16
<PAGE>

--------------------------------------------------------------------------------
FOR MORE INFORMATION
--------------------------------------------------------------------------------

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

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

J.P. Morgan Institutional Funds
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713

Telephone: 1-800-766-7722

Hearing impaired: 1-888-468-4015

Email: [email protected]

The fund's investment company and 1933 Act registration numbers are:

J.P. Morgan Diversified Fund - Advisor Series .......... 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>

--------------------------------------------------------------------------------
AUGUST 1, 2000 | PROSPECTUS
--------------------------------------------------------------------------------

J.P. MORGAN U.S. EQUITY FUNDS - ADVISOR SERIES

U.S. Equity Fund - Advisor Series
U.S. Small Company Fund - Advisor Series
U.S. Small Company Opportunities Fund - Advisor Series

----------------------------------------
Seeking to outperform U.S. stock markets
over the long term through a disciplined
management approach

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

Distributed by Funds Distributor, Inc. JPMorgan

<PAGE>

CONTENTS
--------------------------------------------------------------------------------

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

J.P. MORGAN U.S. EQUITY FUNDS - ADVISOR SERIES
J.P. Morgan U.S. Equity Fund - Advisor Series ............................... 1
J.P. Morgan U.S. Small Company Fund - Advisor Series ........................ 3
J.P. Morgan U.S. Small Company Opportunities Fund - Advisor Series .......... 5

7 | Principles and techniques common to the funds in this prospectus

U.S. EQUITY MANAGEMENT APPROACH
J.P. Morgan ................................................................. 7
J.P. Morgan U.S. Equity Funds - Advisor Series .............................. 7
The spectrum of U.S. Equity Funds ........................................... 7
Who may want to invest ...................................................... 7
U.S. equity investment process .............................................. 8

9 | Investing in the J.P. Morgan U.S. Equity Funds - Advisor Series

YOUR INVESTMENT
Investing through service organizations ..................................... 9
Account and transaction policies ............................................ 9
Dividends and distributions ................................................. 9
Tax considerations .......................................................... 10

11 | More about risk and the funds' business operations

FUND DETAILS
Business structure .......................................................... 11
Management and administration ............................................... 11
Risk and reward elements .................................................... 12

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

<PAGE>

J.P. MORGAN U.S. EQUITY FUND - ADVISOR SERIES

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see page 12.

[GRAPHIC OMITTED]
GOAL
The fund's goal is to provide high total return from a portfolio of selected
equity securities. This goal can be changed without shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH
Principal Strategies
The fund invests primarily in large- and medium-capitalization U.S. companies.
Industry by industry, the fund's weightings are similar to those of the Standard
& Poor's 500 Stock Index (S&P 500). The fund can moderately underweight or
overweight industries when it believes it will benefit performance.

Within each industry, the fund focuses on those stocks that are ranked as most
undervalued according to the investment process described on page 8. The fund
generally considers selling stocks that appear overvalued.

Principal Risks
The value of your investment in the fund will fluctuate in response to movements
in the stock market. Fund performance will also depend on the effectiveness of
J.P. Morgan's research and the management team's stock picking decisions.

By emphasizing undervalued stocks, the fund seeks to produce returns that exceed
those of the S&P 500. At the same time, by controlling the industry weightings
of the fund so they can differ only moderately from the industry weightings of
the S&P 500, the fund seeks to limit its volatility to that of the overall
market, as represented by this index.

<PAGE>

REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN U.S. EQUITY FUND - ADVISOR SERIES)

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including more than $16 billion using similar
strategies as the fund.

The portfolio management team is comprised of 23 research analysts, who select
stocks in their respective sectors using the investment process described on
page 8. Henry D. Cavanna, managing director, and Bradford L. Frishberg, vice
president, oversee the portfolio and manage its cash flows. Mr. Cavanna joined
the team in February of 1998, and has been at J.P. Morgan since 1971. He served
as manager of U.S. equity portfolios prior to managing the fund. Mr. Frishberg
has been at J.P. Morgan since 1996 and is a portfolio manager in the equity and
balanced groups. Prior to joining J.P. Morgan, he managed portfolios for Aetna
Investment Management in Hong Kong.

--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goal.

o The fund does not represent a complete investment program.

1 | J.P. MORGAN U.S. EQUITY FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)
Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect performance of the J.P. Morgan U.S. Equity Fund, a
related fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan U.S. Equity Fund's shares from year to year for each of the
fund's last 10 calendar years.

The table indicates some of the risks by showing how the J.P. Morgan U.S. Equity
Fund's average annual returns for the past one, five and ten years compare to
those of the S&P 500 Index. This is a widely recognized, unmanaged index of U.S.
stocks used as a measure of overall U.S. stock market performance.

The J.P. Morgan U.S. Equity Fund's past performance does not necessarily
indicate how the fund will perform in the future.

<TABLE>
<CAPTION>
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
--------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997
1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>
40%
34.12
32.48
30%
28.41
21.06
24.45
20%

14.69
11.02
10%
8.73

0% 1.38
-----------------------------------------------------------------------------------------------------------------------------------
(0.61)
(10%)
</TABLE>

[ ] J.P. Morgan U.S. Equity Fund

J.P. Morgan U.S. Equity Fund's year-to-date total return as of June 30,
2000 was 1.02%. For the period covered by this year-by-year total return chart,
the J.P. Morgan U.S. Equity Fund's highest quarterly return was 21.33% (for the
quarter ended 12/31/98); and the lowest quarterly return was -11.83% (for the
quarter ended 9/30/90).

Average annual total return (%) Shows performance over time, for periods ended December 31, 1999(1)
-----------------------------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Past 10 yrs.
<S> <C> <C> <C>
J.P. Morgan U.S. Equity Fund (after expenses) 14.69 24.07 16.97
-----------------------------------------------------------------------------------------------------------------------------------
S&P 500 Index (no expenses) 21.04 28.55 18.21
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------
Management fees 0.40
Distribution (Rule 12b-1) fees(4) 0.25
Service fees(5) 0.25
Other expenses 0.28
--------------------------------------------------------------------------------
Total annual fund
operating expenses 1.18
Fee waiver and expense
reimbursement(6) (0.13)
--------------------------------------------------------------------------------
Net expenses(6) 1.05
--------------------------------------------------------------------------------

Expense example(6)
--------------------------------------------------------------------------------
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
8/1/2000 through 9/30/2001, 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.
Your cost($) 107 358
--------------------------------------------------------------------------------

(1) These returns reflect lower operating expenses than those of the fund.
Therefore, the fund's returns would have been lower had the fund existed
during the same period.

(2) The fund's fiscal year end is 5/31.

(3) The fund has a master/feeder structure as described on page 11. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the current fiscal year, expressed as a percentage of
the fund's estimated average net assets.

(4) The plan under Rule 12b-1 (described on page 11) allows such fees to be paid
out of the fund's assets on an ongoing basis. Over time, these fees will
increase the cost of your invest- ment and may cost you more than paying
other types of sales charges.

(5) Service organizations (described on page 9) may charge other fees to their
customers who are 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.

(6) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
operating expenses (which exclude interest, taxes and extraordinary expenses)
exceed 1.05% of the fund's average daily net assets through 9/30/01.

J.P. MORGAN U.S. EQUITY FUND - ADVISOR SERIES | 2

<PAGE>

J.P. MORGAN U.S. SMALL COMPANY FUND - ADVISOR SERIES
--------------------------------------------------------------------------------

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see page 12.

[GRAPHIC OMITTED]
GOAL
The fund's goal is to provide high total return from a portfolio of small
company stocks. This goal can be changed without shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH
Principal Strategies
The fund invests primarily in small and medium sized U.S. companies whose market
capitalizations are greater than $100 million and less than $2 billion. Industry
by industry, the fund's weightings are similar to those of the Russell 2000
Index. The fund can moderately underweight or overweight industries when it
believes it will benefit performance.

Within each industry, the fund focuses on those stocks that are ranked as most
undervalued according to the process described on page 8. The fund generally
considers selling stocks that appear overvalued or have grown into large-cap
stocks.

Small-cap stocks have historically offered higher long-term growth than
large-cap stocks, and have also involved higher risks. The fund's small-cap
emphasis means it is likely to be more sensitive to economic news and is likely
to fall further in value during broad market downturns. The fund pursues returns
that exceed those of the Russell 2000 Index while seeking to limit its
volatility relative to this index.

<PAGE>

REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN U.S. SMALL COMPANY FUND - ADVISOR SERIES)

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including more than $3 billion using similar
strategies as the fund.

The portfolio management team is led by Marian U. Pardo, managing director,
Alexandra F. Wells, vice president, and Daniel J. Anniello, vice president. Ms.
Pardo has been at J.P. Morgan since 1968, except for five months in 1998 when
she was president of a small investment management firm. Prior to managing the
fund, Ms. Pardo managed small and large cap equity portfolios, equity and
convertible funds, and several institutional portfolios. Ms.Wells joined the
team in March 1998 and has been with J.P. Morgan since 1992. Prior to managing
the fund, Ms. Wells managed large cap equity portfolios, and prior to that
served as an equity research analyst. Mr. Anniello has been a small company
portfolio manager since 2000 and employed by J.P. Morgan since 1997. Prior to
joining J.P. Morgan, Mr. Anniello worked at Warburg Pincus Asset Management and
the U.S. Securities and Exchange Commission.

--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goal.

o The fund does not represent a complete investment program.

3 | J.P. MORGAN U.S. SMALL COMPANY FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)
Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect performance of the J.P. Morgan U.S. Small Company
Fund, a related fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan U.S. Small Company Fund's shares from year to year for each
of the fund's last 10 calendar years.

The table indicates some of the risks by showing how the J.P. Morgan U.S. Small
Company Fund's average annual returns for the past one, five and ten years
compare to those of the Russell 2000 Index. This is a widely recognized,
unmanaged index of small cap U.S. stocks used as a measure of overall U.S. small
company stock market performance.

The J.P. Morgan U.S. Small Company 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)
-----------------------------------------------------------------------------------------------------------------------------------
1990 1991 1992 1993 1994 1995 1996 1997
1998 1999
<S> <C> <C> <C> <C> <C> <C> <C> <C>
<C> <C>

60%
59.59

44.00
31.86
30%
20.75 22.75
18.98
8.58
0%
-----------------------------------------------------------------------------------------------------------------------------------
(5.89)
(5.49)

(24.34)
(30%)
</TABLE>

[ ] J.P. Morgan U.S. Small Company Fund

J.P. Morgan U.S. Small Company Fund's year-to-date total return as of June
30, 2000 was 0.48%. For the period covered by this year-by-year total return
chart, the J.P. Morgan U.S. Small Company Fund's highest quarterly return was
34.68% (for the quarter ended 12/31/99); and the lowest quarterly return was
-30.03% (for the quarter ended 9/30/90).

Average annual total return (%) Shows performance over time, for periods ended December 31, 1999(1)
-----------------------------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Past 10 yrs.
<S> <C> <C> <C>
J.P. Morgan U.S. Small Company Fund (after expenses) 44.00 21.61 14.59
-----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Index (no expenses) 21.50 18.92 15.39
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Annual fund operating expenses(3) (%)
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------
Management fees 0.60
Distribution (Rule 12b-1) fees(4) 0.25
Service fees(5) 0.25
Other expenses 0.27
--------------------------------------------------------------------------------
Total annual fund
operating expenses 1.37
Fee waiver and expense
reimbursement(6) (0.12)
--------------------------------------------------------------------------------
Net expenses(6) 1.25
--------------------------------------------------------------------------------

Expense example(6)
--------------------------------------------------------------------------------
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
8/1/00 through 9/30/01, 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.
Your cost($) 127 418
--------------------------------------------------------------------------------

(1) These returns reflect lower operating expenses than those of the fund.
Therefore, the fund's returns would have been lower had the fund existed
during the same period.

(2) The fund's fiscal year end is 5/31.

(4) The plan under Rule 12b-1 (described on page 11) allows such fees to be paid
out of the fund's assets on an ongoing basis. Over time, these fees will
increase the cost of your investment and may cost you more than paying
other types of sales charges.

(6) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
operating expenses (which exclude interest, taxes and extraordinary expenses)
exceed 1.25% of the fund's average daily net assets through 9/30/01.

J.P. MORGAN U.S. SMALL COMPANY FUND - ADVISOR SERIES | 4

<PAGE>

J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND - ADVISOR SERIES
--------------------------------------------------------------------------------

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see page 12.

[GRAPHIC OMITTED]
GOAL
The fund's goal is to provide long-term growth from a portfolio of small company
growth stocks. This goal can be changed without shareholder approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH
Principal Strategies
The fund invests primarily in stocks of small U.S. companies whose market
capitalization is greater than $150 million and less than $1.25 billion when
purchased. While the fund holds stocks in many industries to reduce the impact
of poor performance in any one sector, it tends to emphasize industries with
higher growth potential and does not track the sector weightings of the overall
small company stock market.

In searching for companies, the fund combines the approach described on page 8
with a growth-oriented approach that focuses on each company's business
strategies and its competitive environment. The fund seeks to buy stocks when
they are undervalued or fairly valued and are poised for long-term growth.
Stocks become candidates for sale when they appear overvalued or when the
company is no longer a small-cap company, but the fund may also continue to hold
them if it believes further substantial growth is possible.

Small-cap stocks have historically offered higher long-term growth than medium-
or large-cap stocks, and have also involved higher risks. The fund's small-cap
emphasis means it is likely to be more sensitive to economic news and is likely
to fall further in value during broad market downturns. Because the fund seeks
to outperform the Russell 2000 Growth Index while not tracking its industry
weightings, investors should expect higher volatility compared to this index or
to more conservatively managed small-cap funds.

<PAGE>

REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND - ADVISOR SERIES)

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including more than $1.2 billion using similar
strategies as the fund.

The portfolio management team is led by Marian U. Pardo, managing director,
Saira Durcanin, vice president and CFA, and Carolyn Jones, associate. Ms. Pardo
has been at J.P. Morgan since 1968, except for five months in 1998 when she was
president of a small investment management firm. Prior to managing the fund, Ms.
Pardo managed small and large cap equity portfolios, equity and convertible
funds, and several institutional portfolios. Ms. Durcanin has been with J.P.
Morgan since July 1995 as a small company equity analyst and portfolio manager
after graduating from the University of Wisconsin with an M.S. in finance. Ms.
Jones has been with J.P. Morgan since July 1998. Prior to managing this fund,
Ms. Jones served as a portfolio manager in J.P. Morgan's private banking group
and as a product specialist at Merrill Lynch Asset Management.

--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goal.

o The fund does not represent a complete investment program.

5 | J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)
Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect performance of the J.P. Morgan U.S. Small Company
Opportunities Fund, a related fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan U.S. Small Company Opportunities Fund's shares from year to
year for each of the last two calendar years.

The table indicates some of the risks by showing how the J.P. Morgan U.S. Small
Company Opportunities Fund's average annual returns for the past year and for
its life compare to those of the Russell 2000 Growth Index. This is a widely
recognized, unmanaged index of small cap U.S. growth stocks used as a measure of
overall U.S. small cap growth stock performance.

The J.P. Morgan U.S. Small Company Opportunities 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(1,2,3)
--------------------------------------------------------------------------------
1998 1999

80%

61.63
60%

40%

20%

5.21
0%
--------------------------------------------------------------------------------

[ ] J.P. Morgan U.S. Small Company Opportunities Fund

J.P. Morgan U.S. Small Company Opportunities Fund year-to-date total return
as of June 30, 2000 was 1.43%. For the period covered by this total return
chart, the J.P. Morgan U.S. Small Company Opportunities Fund's highest quarterly
return was 42.58% (for the quarter ended 12/31/99); and the lowest quarterly
return was -20.19% (for the quarter ended 9/30/98).

Average annual total return (%) Shows performance over time, for periods ended December 31, 1999(1)
-----------------------------------------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund(1,2)
<S> <C> <C>
J.P. Morgan U.S. Small Company Opportunities Fund (after expenses) 61.63 30.85
-----------------------------------------------------------------------------------------------------------------------------------
Russell 2000 Growth Index (no expenses) 43.09 19.31
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

Annual fund operating expenses(4) (%)
(expenses that are deducted from fund assets)
--------------------------------------------------------------------------------
Management fees 0.60
Distribution (Rule 12b-1) fees(5) 0.25
Service fees(6) 0.25
Other expenses 0.27
--------------------------------------------------------------------------------
Total annual fund
operating expenses 1.37
Fee waiver and expense
reimbursement(7) (0.12)
--------------------------------------------------------------------------------
Net expenses(7) 1.25
--------------------------------------------------------------------------------

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
8/1/00 through 9/30/01, 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.
Your cost($) 127 418
--------------------------------------------------------------------------------

(1) These returns reflect lower operating expenses than those of the fund.
Therefore, the fund's returns would have been lower had the fund existed
during the same period.

(2) The U.S. Small Company Opportunities Fund commenced operations on 6/16/97
and returns reflect performance of the U.S. Small Company Opportunities Fund
from 6/30/97.

(3) The fund's fiscal year end is 5/31.

(4) The fund has a master/feeder structure as described on page 11. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the current fiscal year, expressed as a percentage of
the fund's estimated average net assets.

(5) The plan under Rule 12b-1 (described on page 11) allows such fees to be paid
out of the fund's assets on an ongoing basis. Over time, these fees will
increase the cost of your investment and may cost you more than paying other
types of sales charges.

(6) Service organizations (described on page 9) may charge other fees to their
customers who are 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.

(7) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
operating expenses (which exclude interest, taxes and extraordinary expenses)
exceed 1.25% of the fund's average daily net assets through 9/30/01.

J.P. MORGAN U.S. SMALL COMPANY OPPORTUNITIES FUND - ADVISOR SERIES | 6

<PAGE>

U.S. EQUITY MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN U.S. EQUITY FUNDS - ADVISOR SERIES
These funds invest primarily in U.S. stocks either directly or through another
fund. As a shareholder, you should anticipate risks and rewards beyond those of
a typical bond fund or a typical balanced fund.

THE SPECTRUM OF U.S. EQUITY FUNDS
The funds described in this prospectus pursue a range of goals and offer varying
degrees of risk and potential reward. Differences between these funds include:

o how much emphasis they give to the most undervalued stocks

o how closely they follow the industry weightings of their benchmarks

o how many securities they typically maintain in their portfolios

o the size or market capitalization of the companies in which they invest

o whether they focus on before-tax or after-tax returns

The table below shows degrees of the relative risk and return that these funds
potentially offer. These and other distinguishing features of each U.S. equity
fund are described on the following pages.

<PAGE>

--------------------------------------------------------------------------------
Who May Want To Invest

The funds are designed for investors who:

o are pursuing a long-term goal such as retirement

o want to add an investment with growth potential to further diversify a
portfolio

o want funds that seek to outperform the markets in which they each invest over
the long term

The funds are not designed for investors who:

o want funds that pursue market trends or focus only on particular industries or
sectors

o require regular income or stability of principal

o are pursuing a short-term goal or investing emergency reserves

Potential risk and return

The positions of the funds in this graph reflect
long-term performance goals only and are
relative, not absolute.

R U.S. Small Company Opportunities Fund o
e
t
u U.S. Small Company Fund o
r
n
o U.S. Equity Fund

--------------------------------------------------------------------------------
Risk

7 | U.S. EQUITY MANAGEMENT APPROACH

<PAGE>

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

[GRAPHIC OMITTED]
J.P. Morgan analysts develop proprietary
fundamental research

[GRAPHIC OMITTED]
Stocks in each industry are ranked
with the help of models

[GRAPHIC OMITTED]
Using research and valuations,
each fund's management team
chooses stocks for its fund

<PAGE>

U.S. EQUITY INVESTMENT PROCESS
The J.P. Morgan U.S. equity funds invest primarily in U.S. stocks.

While each fund follows its own strategy, the funds as a group share a single
investment philosophy. This philosophy, developed by the funds' advisor, focuses
on stock picking while largely avoiding sector or market-timing strategies.

In managing the funds, J.P. Morgan employs a three-step process:

Research J.P. Morgan takes an in-depth look at company prospects over a
relatively long period -- often as much as five years -- rather than focusing on
near-term expectations. This approach is designed to provide insight into a
company's real growth potential. J.P. Morgan's in-house research is developed by
an extensive worldwide network of over 125 career equity analysts. The team of
analysts dedicated to U.S. equities includes more than 20 members, with an
average of over ten years of experience.

Stock selection Each fund buys and sells stocks according to its own policies,
using the research and valuation rankings as a basis. In general, each
management team buys stocks that are identified as undervalued and considers
selling them when they appear overvalued. Along with attractive valuation, the
funds' managers often consider a number of other criteria:

o catalysts that could trigger a rise in a stock's price

o high potential reward compared to potential risk

o temporary mispricings caused by market overreactions.

U.S. EQUITY MANAGEMENT APPROACH | 8

<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------
INVESTING THROUGH A SERVICE ORGANIZATION
Investors may only purchase, exchange and redeem shares of a 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
each fund is $2,500 and for additional investments $500, although these minimums
may be less for some investors. Service organizations may provide the following
services in connection with their customers' investments in a fund:

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 shareholders

o Assisting customers with investment procedures

ACCOUNT AND TRANSACTION POLICIES Business days and NAV calculations The
funds' regular business days and hours are the same as those of the New York
Stock Exchange (NYSE). Each fund calculates its net asset value per share (NAV)
every business day as of the close of trading on the NYSE (normally 4:00 p.m.
eastern time). The funds' securities are typically priced using market quotes or
pricing services. When these methods are not available or do not represent a
security's value at the time of pricing (e.g., when an event occurs on a foreign
exchange after the close of trading that would materially impact a security's
value at the time each fund calculates its NAV), the security is valued in
accordance with the fund's fair valuation procedures.

Timing of orders Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. 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.

<PAGE>

Timing of settlements When you buy shares, you will become the owner of record
when a fund receives your payment, generally the day following execution. When
you sell shares, cash proceeds are generally available the day following
execution and will be forwarded according to your instructions.

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

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

Statements and reports You will receive from your service organization account
statements and confirmation of each purchase or sale of shares. 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), 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, each fund reserves the right to close out your account
and send the proceeds to the address of record.

DIVIDENDS AND DISTRIBUTIONS
Income dividends are typically paid four times a year for U.S. Equity and twice
a year for the U.S. Small Company and U.S. Small Company Opportunities funds.

Each fund typically makes capital gains distributions, if any, once a year.
However, a fund may make more or fewer payments in a given year, depending on
its investment results and tax compliance situation. Dividends and distributions
consist of substantially all of the fund's net investment income and realized
capital gains.

9 | YOUR INVESTMENT

<PAGE>

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

--------------------------------------------------------------------------------
Transaction Tax status
--------------------------------------------------------------------------------
Income dividends Ordinary income
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income
distributions
--------------------------------------------------------------------------------
Long-term capital gains Capital gains
distributions
--------------------------------------------------------------------------------
Sales or exchanges of shares Capital gains or losses
owned for more than one year
--------------------------------------------------------------------------------
Sales or exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject
to special rules
--------------------------------------------------------------------------------

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.

--------------------------------------------------------------------------------
Transfer Agent Shareholder Services Agent
State Street Bank and Trust Company Morgan Christiana Center
P.O. Box 8411 J.P. Morgan Funds Services - 2/OPS3
Boston, MA 02266-8411 500 Stanton Christiana Road
Attention: J.P. Morgan Funds Services Newark, DE 19713
1-800-766-7722

Representatives are available
8:00 a.m. to 6:00 p.m. eastern
time on fund business days.

YOUR INVESTMENT | 10

<PAGE>

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

BUSINESS STRUCTURE
As noted earlier, each fund is a series of J.P. Morgan Institutional Funds, a
Massachusetts business trust, and 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 master 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 fund and its master portfolio expect to maintain consistent goals, but if
they do not, the fund will withdraw from the master portfolio, receiving its
assets either in cash or securities. Each fund's trustees would then consider
whether the fund should hire its own investment adviser, invest in a different
master portfolio, or take other action.

MANAGEMENT AND ADMINISTRATION

The funds described in this prospectus and their corresponding master portfolios
are 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.

<PAGE>

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 Percentage of the master
portfolio's average net assets
--------------------------------------------------------------------------------
U.S. Equity 0.40%
U.S. Small Company 0.60%
U.S. Small Company
Opportunities 0.60%
--------------------------------------------------------------------------------
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% of average
net assets over $7 billion
--------------------------------------------------------------------------------
Shareholder services 0.05% of the 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.

Each fund has adopted a plan under Rule 12b-1 that allows the fund to pay
distribution fees up to 0.25% of the fund's average net assets for the sale and
distribution of its shares. Because these fees are paid out of the fund's assets
on an ongoing basis, over time these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.

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

11 | FUND DETAILS

<PAGE>
--------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS

This table discusses the main elements that make up each fund's overall risk and
reward characteristics. It also outlines each fund's policies toward various
investments, including those that are designed to help certain funds manage
risk.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
-----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Market conditions

o Each fund's share price and o Stocks have generally outperformed o Under normal circumstances the funds plan to
performance will fluctuate more stable investments (such remain fully invested, with at least 65% in
in response to stock market as bonds and cash equivalents) stocks; stock investments may include U.S. and
movements over the long term foreign common stocks, convertible securities,
preferred stocks, trust or partnership
o Adverse market conditions interests, warrants, rights, and investment
may from time to time cause company securities
a fund to take temporary
defensive positions that are o The funds seek to limit risk through
inconsistent with its principal diversification
investment strategies and may
hinder a fund from achieving o During severe market downturns, the funds have
its investment objective the option of investing up to 100% of assets in
investment-grade short-term securities
-----------------------------------------------------------------------------------------------------------------------------------
Management choices

o A fund could underperform its o A fund could outperform o J.P. Morgan focuses its active management on
benchmark due to its securities its benchmark due to these securities selection, the area where it believes
and asset allocation choices same choices its commitment to research can most enhance
returns
-----------------------------------------------------------------------------------------------------------------------------------
Foreign investments

o Currency exchange rate movements o Favorable exchange rate movements o Each fund anticipates that its total foreign
could reduce gains or create could generate gains or reduce investments will not exceed 20% of assets
losses losses
o Each fund actively manages the currency exposure
o A fund could lose money because o Foreign investments, which represent of its foreign investments relative to its
of foreign government actions, a major portion of the world's benchmark, and may hedge back into the U.S.
political instability, or lack securities, offer attractive dollar from time to time (see also
of adequate and accurate potential performance and "Derivatives")
information opportunities for diversification
-----------------------------------------------------------------------------------------------------------------------------------
When-issued and delayed
delivery securities

o When a fund buys securities before o A fund can take advantage of o Each fund uses segregated accounts to offset
issue or for delayed delivery, it attractive transaction leverage risk
could be exposed to leverage opportunities
risk if it does not use segregated
accounts
-----------------------------------------------------------------------------------------------------------------------------------
Short-term trading

o Increased trading would raise a o A fund could realize gains o The funds generally avoid short-term trading,
a fund's brokerage and related in a short period of time except to take advantage of attractive or
costs unexpected opportunities or to meet demands
generated by shareholder activity. The turnover
o Increased short-term capital o A fund could protect against rate for the portfolio in which each fund
gains distributions would raise losses if a stock is overvalued invests for its most recent fiscal year end is
shareholders' income tax liability and its value later falls as follows: U.S. Equity (89%), U.S. Small
Company (104%) and U.S. Small Company
Opportunities
(132%)
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

FUND DETAILS | 12

<PAGE>

o Derivatives such as futures, options, o Hedges that correlate well with o The funds use derivatives for hedging and for
swaps, and forward foreign currency underlying positions can reduce or risk management (i.e., to establish or adjust
contracts that are used for hedging eliminate losses at low cost exposure to particular securities, markets or
the portfolio or specific securities currencies); risk management may include
may not fully offset the underlying o A fund could make money and protect management of a fund's exposure relative to its
positions1 and this could result in against losses if management's benchmark (the U.S. Small Company Opportunities
losses to the fund that would not have analysis proves correct Fund - Advisor Series is permitted to use
otherwise occurred derivatives, however, it has no current
o Derivatives that involve leverage intention to do so)
o Derivatives used for risk management could generate substantial gains at
may not have the intended effects and low cost o The funds only establish hedges that they expect
may result in losses or missed will be highly correlated with underlying
opportunities positions

o The counterparty to a derivatives o While the funds may use derivatives that
contract could default incidentally involve leverage, they do not use
them for the specific purpose of leveraging
o Derivatives that involve leverage their portfolios
could magnify losses

o Certain types of derivatives involve
costs to the funds which can reduce
returns
-----------------------------------------------------------------------------------------------------------------------------------
Securities lending

o When a fund lends a security, there is o A fund may enhance income through o J.P. Morgan maintains a list of approved
a risk that the loaned securities may the investment of the collateral borrowers
not be returned if the borrower received from the borrower
defaults o The fund receives collateral equal to at least
100% of the current value of securities loaned
o The collateral will be subject to the
risks of the securities in which it is o The lending agents indemnify a fund against
invested borrower default

o J.P. Morgan's collateral investment guidelines
limit the quality and duration of collateral
investment to minimize losses

o A fund could have difficulty valuing o These holdings may offer more o No fund may invest more than 15% of net assets
these holdings precisely attractive yields or potential in illiquid holdings
growth than comparable widely
o A fund could be unable to sell these traded securities o To maintain adequate liquidity to meet
holdings at the time or price it redemptions, each fund may hold investment-grade
desires short-term securities (including repurchase
agreements and reverse repurchase agreements)
and, for temporary or extraordinary purposes,
may borrow from banks up to 33 1/3% of the value
of its total assets
-----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

13 | 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
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713

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. (1-202-942-8090) and may be viewed
on-screen or downloaded from the SEC's Internet site at http://www.sec.gov. Each
fund's investment company and 1933 Act registration numbers are:

<TABLE>

<S> <C>
J.P. Morgan U.S. Equity Fund - Advisor Series ................................ 811-07342 and 033-54642
J.P. Morgan U.S. Small Company Fund - Advisor Series ......................... 811-07342 and 033-54642
J.P. Morgan U.S. Small Company Opportunities Fund - Advisor Series ........... 811-07342 and 033-54642
</TABLE>

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

IMPR32

<PAGE>

--------------------------------------------------------------------------------
August 1, 2000 | Prospectus
--------------------------------------------------------------------------------

J.P. MORGAN INTERNATIONAL EQUITY FUNDS - ADVISOR SERIES

International Equity Fund - Advisor Series

International Opportunities Fund - Advisor Series

-----------------------------------
Seeking high total return primarily
from stocks outside the United
States

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

Distributed by Funds Distributor, Inc. JPMorgan

<PAGE>

CONTENTS
--------------------------------------------------------------------------------

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

J.P. MORGAN INTERNATIONAL EQUITY FUNDS ADVISOR SERIES
J.P. Morgan International Equity Fund - Advisor Series .................... 1
J.P. Morgan International Opportunities Fund - Advisor Series ............. 3

5 | Principles and techniques common to the funds in this prospectus

INTERNATIONAL EQUITY MANAGEMENT APPROACH
J.P. Morgan ............................................................... 5
J.P. Morgan International Equity funds .................................... 5
The spectrum of International Equity funds ................................ 5
Who may want to invest .................................................... 5
International equity investment process ................................... 6

7 | Investing in the J.P. Morgan International Equity Funds Advisor Series

YOUR INVESTMENT
Investing through a service organization .................................. 7
Account and transaction policies .......................................... 7
Dividends and distributions ............................................... 7
Tax considerations ........................................................ 8

9 | More about risk and the funds' business operations

FUND DETAILS
Business structure ........................................................ 9
Management and administration ............................................. 9
Risk and reward elements .................................................. 11

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

<PAGE>

J.P. MORGAN INTERNATIONAL
EQUITY FUND - ADVISOR SERIES
--------------------------------------------------------------------------------

[GRAPHIC OMITTED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 11-12.

[GRAPHIC OMITTED]
GOAL
The fund's goal is to provide high total return from a portfolio of foreign
company equity securities. This goal can be changed without shareholder
approval.

[GRAPHIC OMITTED]
INVESTMENT APPROACH
Principal Strategies
The fund invests primarily in equity securities from developed countries
included in the Morgan Stanley Capital International Europe, Australasia, and
Far East Index (EAFE), which is the fund's benchmark. The fund typically does
not invest in U.S. companies.

The fund's industry weightings generally approximate those of the EAFE Index,
although it does not seek to mirror the index in its choice of individual
securities, and may overweight or underweight countries relative to the EAFE
Index. In choosing stocks, the fund emphasizes those that are ranked as
undervalued according to J.P. Morgan's proprietary research, while
underweighting or avoiding those that appear overvalued. The fund makes its
currency management decisions as described on pages 6 and 11.

Principal Risks
The value of your investment in the fund will fluctuate in response to movements
in international stock markets and currency exchange rates. Fund performance
will also depend on the effectiveness of J.P. Morgan's research and the
management team's stock picking and currency management decisions.

In general, international investing involves higher risks than investing in U.S.
markets but offers attractive opportunities for diversification. Foreign markets
tend to be more volatile than those of the U.S., and changes in currency
exchange rates could reduce market performance. To the extent that the fund
hedges its currency exposure into the U.S. dollar, it may reduce the effects of
currency fluctuations. The fund may also hedge from one foreign currency to
another. Foreign stocks are generally riskier than their domestic counterparts.
You should be prepared to ride out periods of underperformance.

<PAGE>

--------------------------------------------------------------------------------
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INTERNATIONAL EQUITY FUND - ADVISOR SERIES)

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including approximately $10.7 billion using similar
strategies as the fund.

The portfolio management team is led by Paul A. Quinsee, managing director,
who joined the team in April of 1993 and has been at J.P. Morgan since 1992, by
Nigel F. Emmett, vice president, who has been on the team since joining J.P.
Morgan in August of 1997 and by Jenny C. Sicat, vice president, who joined the
team in August 2000 and has been at J.P. Morgan since 1995. Previously, Mr.
Emmett was an assistant manager at Brown Brothers Harriman and Co. and a
portfolio manager at Gartmore Investment Management. Prior to joining the team,
Ms. Sicat was a portfolio manager in the Emerging Markets focusing on currencies
and derivatives.

--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goals.

o The fund does not represent a complete investment program.

1 | J.P. MORGAN INTERNATIONAL EQUITY FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)
Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect performance of the J.P. Morgan International Equity
Fund, a related fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan International Equity Fund's shares from year to year for each
of the last 9 calendar years.

The table indicates some of the risks by showing how the J.P. Morgan
International Equity Fund's average annual returns for the past one and five
years and life of the J.P. Morgan International Equity Fund compare to those of
the EAFE Index. This is an unmanaged index used to track the average performance
of over 900 securities listed on the stock exchanges of countries in Europe,
Australasia and the Far East.

The J.P. Morgan International Equity Fund's past performance does not
necessarily indicate how the J.P. Morgan International Equity Fund - Advisor
Series will perform in the future.

<TABLE>
<CAPTION>
Year-by-year total return (%) Shows changes in returns by calendar year(1,2)
---------------------------------------------------------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996 1997 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
<C> <C>

40%

29.92
24.37
20%
13.48
10.58
8.41
7.59
5.65
1.17
0%

(10.77)

(20%)
</TABLE>

[ ] J.P. Morgan International Equity Fund

The J.P. Morgan International Equity Fund's year-to-date total returns as of
6/30/00 was -5.21%. For the period covered by this year-by-year total return
chart, the J.P. Morgan International Equity Fund's highest quarterly return was
20.23% (for the quarter ended 12/31/98); and the lowest quarterly return was
-18.05% (for the quarter ended 9/30/98).

<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for periods ended December 31, 1999(1)
------------------------------------------------------------------------------------------------------------------
Past 1 yr. Past 5 yrs. Life of fund
<S> <C> <C> <C>
J.P. Morgan International Equity Fund (after expenses) 29.92 11.71 7.76
------------------------------------------------------------------------------------------------------------------
EAFE Index (no expenses) 26.96 12.83 8.68
------------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

--------------------------------------------------------------------------------
INVESTOR EXPENSES
The estimated expenses of the fund before and after reimbursement are shown at
right. The fund has no redemption, distribution, 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 0.60
Distribution (Rule 12b-1) fees(4) 0.25
Service fees(5) 0.25
Other expenses 0.40
--------------------------------------------------------------------------------
Total operating expenses 1.50
Fee waiver and
expense reimbursement(6) (0.05)
--------------------------------------------------------------------------------
Net expenses(6) 1.45
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1 yr. 3 yrs.
Your cost($) 148 469
--------------------------------------------------------------------------------

(1) The J.P. Morgan International Equity Fund commenced operations on 6/1/90
and performance is calculated as of 6/30/90. These returns reflect lower
operating expenses than those of the fund. Therefore, the
fund's returns would have been lower had it existed during the same period.

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

(3) The fund has a master/feeder structure as described on page 9. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the current fiscal year expressed as a percentage of
the fund's estimated average net assets.

(4) The plan under Rule 12b-1 (described on page 9) allows such fees to be paid
out of the fund's assets on an ongoing basis. Over time, these fees will
increase the cost or your investment and may cost you more than paying
other types of sales charges.

(5) Service organizations (described on page 7) 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.

(6) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
operating expenses (which exclude interest, taxes and extraordinary expenses)
exceed 1.45% of the fund's average daily net assets through 2/28/02.

J.P. MORGAN INTERNATIONAL EQUITY FUND - ADVISOR SERIES | 2

<PAGE>

J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND - ADVISOR SERIES
--------------------------------------------------------------------------------

[GRAPHIC OMMITED]
RISK/RETURN SUMMARY
For a more detailed discussion of the fund's investments and their main risks,
as well as fund strategies, please see pages 11-12.

[GRAPHIC OMMITED]
GOAL
The fund's goal is to provide high total return from a portfolio of equity
securities of foreign companies in developed and, to a lesser extent, emerging
markets. This goal can be changed without shareholder approval.

[GRAPHIC OMMITED]
INVESTMENT APPROACH
Principal Strategies
The fund's assets are invested primarily in companies from developed markets
other than the U.S. The fund's assets may also be invested to a limited extent
in companies from emerging markets. Developed countries include Australia,
Canada, Japan, New Zealand, the United Kingdom, and most of the countries of
western Europe; emerging markets include most other countries in the world.

The fund focuses on stock picking, emphasizing those stocks that are ranked as
undervalued according to J.P. Morgan's proprietary research, while
underweighting or avoiding those that appear overvalued. While the fund
generally follows the process described on page 6, its country allocations and
sector weightings may differ significantly from those of the MSCI All Country
World Index Free (ex-U.S.), the fund's benchmark. The fund makes its currency
management decisions as described on pages 6 and 11.

In general, international investing involves higher risks than investing in U.S.
markets but offers attractive opportunities for diversification. Foreign markets
tend to be more volatile than those of the U.S., and changes in currency
exchange rates could reduce market performance. These risks are higher in
emerging markets. To the extent that the fund hedges its currency exposure into
the U.S. dollar, it may reduce the effects of currency fluctuations. The fund
may also hedge from one foreign currency to another. However, the fund does not
typically use this strategy for its emerging markets currency exposure. Foreign
stocks are generally riskier than their domestic counterparts. You should be
prepared to ride out periods of underperformance.

<PAGE>
REGISTRANT: J.P. MORGAN INSTITUTIONAL FUNDS
(J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND - ADVISOR SERIES)

PORTFOLIO MANAGEMENT
The fund's assets are managed by J.P. Morgan, which currently manages
approximately $369 billion, including approximately $769 million using similar
strategies as the fund.

--------------------------------------------------------------------------------
Before you invest

Investors considering the fund should understand that:

o The fund seeks to achieve its goal by investing its assets in a master
portfolio, which is another fund with the same goal.

o There is no assurance that the fund will meet its investment goals.

o The fund does not represent a complete investment program.

3 | J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND - ADVISOR SERIES

<PAGE>

--------------------------------------------------------------------------------
PERFORMANCE OF A RELATED FUND (unaudited)
Shares of the fund have not previously been offered. Accordingly, the bar chart
and table shown below provide some indication of the risks of investing in the
fund because returns reflect performance of the J.P. Morgan International
Opportunities Fund, a related fund investing in the same master portfolio.

The bar chart indicates some of the risks by showing changes in the performance
of the J.P. Morgan International Opportunities Fund's shares from year to year
for each of the last 2 calendar years.

The table indicates some of the risks by showing how the J.P. Morgan
International Opportunities Fund's average annual return for the past one year
and life of fund compare to that of the MSCI All Country World Index Free
(ex.-U.S.). This is an unmanaged index that measures developed and emerging
foreign stock market performance.

The J.P. Morgan International Opportunities 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(1,2)
--------------------------------------------------------------------------------
1998 1999

40% 40.05
20%
3.47
0%
--------------------------------------------------------------------------------

[ ] J.P. Morgan International Opportunities Fund

The J.P. Morgan International Opportunities Fund's year-to-date total return as
of 6/30/00 was -3.79%. For the period covered by this total return chart, the
J.P. Morgan International Opportunities Fund's highest quarterly return was
21.81% (for the quarter ended 12/31/98); and the lowest quarterly return was
-21.38% (for the quarter ended 9/30/98).

<TABLE>
<CAPTION>
Average annual total return (%) Shows performance over time, for period ended December 31, 1999(1)
--------------------------------------------------------------------------------------------------------------
Past 1 yr. Life of fund
<S> <C> <C>
J.P. Morgan International Opportunities Fund (after expenses) 40.05 14.75
--------------------------------------------------------------------------------------------------------------
MSCI All Country World Index Free (ex-U.S.) (no expenses) 30.91 15.87
--------------------------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

--------------------------------------------------------------------------------
INVESTOR EXPENSES
The estimated expenses of the fund before and after reimbursement are shown at
right. The fund has no redemption, distribution, 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 0.60
Distribution (Rule 12b-1) fees(4) 0.25
Service fees(5) 0.25
Other expenses 0.36
--------------------------------------------------------------------------------
Total operating expenses 1.46
Fee waiver and
expense reimbursement(6) (0.01)
--------------------------------------------------------------------------------
Net expenses(6) 1.45
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
1 yr. 3 yrs.
Your cost($) 148 461
--------------------------------------------------------------------------------

(1) The J.P. Morgan International Opportunities Fund commenced operations on
2/26/97 and performance is calculated as of 2/28/97. These returns reflect
lower operating expenses than those of the fund. Therefore, the
fund's returns would have been lower 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 9. This table
shows the fund's estimated expenses and its estimated share of master
portfolio expenses for the past fiscal year expressed as a percentage of
the fund's estimated average net assets.

(6) Reflects an agreement dated 8/1/00 by Morgan Guaranty Trust Company of
New York, an affiliate of J.P. Morgan, to reimburse the fund to the extent
operating expenses (which exclude interest, taxes and extraordinary expenses)
exceed 1.45% of the fund's average daily net assets through 2/28/02.

J.P. MORGAN INTERNATIONAL OPPORTUNITIES FUND - ADVISOR SERIES | 4

<PAGE>

INTERNATIONAL EQUITY MANAGEMENT APPROACH
--------------------------------------------------------------------------------

J.P. MORGAN INTERNATIONAL EQUITY FUNDS
These funds invest primarily in stocks and other equity securities of companies
outside the U.S. through a master portfolio (another fund with the same goal).
As a shareholder, you should anticipate risks and rewards beyond those of a
typical U.S. stock fund.

THE SPECTRUM OF INTERNATIONAL EQUITY FUNDS
The funds described in this prospectus pursue a range of goals and offer varying
degrees of risk and potential reward. Differences between these funds include:

o the parts of the world in which they invest

o how closely they follow the weightings of their benchmarks

o how many securities they typically maintain in their portfolios

The table below shows degrees of the relative risk and return that these funds
potentially offer. These and other distinguishing features of each international
equity fund were described on the preceding pages.

WHO MAY WANT TO INVEST
--------------------------------------------------------------------------------
The funds are designed for investors who:

o are pursuing a long-term goal

o want to add a non-U.S. investment with growth potential to further diversify
a portfolio

o want funds that seek to consistently outperform the markets in which they
invest

The funds are not designed for investors who:

o are uncomfortable with the risks of international investing

o are looking for a less aggressive stock investment

o require regular income or stability of principal

o are pursuing a short-term goal or investing emergency reserves

Potential risk and return
--------------------------------------------------------------------------------

The positions of the funds in this graph reflect long-term performance goals
only and are relative, not absolute.

Return

o International
Opportunities Fund

o International Equity Fund

Risk
--------------------------------------------------------------------------------

5 | INTERNATIONAL EQUITY MANAGEMENT APPROACH
<PAGE>

[GRAPHIC OMITTED]
J.P. Morgan uses top-down analysis
in determining which countries
to emphasize

[GRAPHIC OMITTED]
Stocks in each industry are ranked
with the help of models, then selected
for investment

[GRAPHIC OMITTED]
J.P. Morgan may adjust currency
exposure to seek to manage
risks and enhance returns

<PAGE>

INTERNATIONAL EQUITY 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, focuses
on allocating assets by country, selecting stocks and managing currency
exposure. The funds largely avoid using sector or market-timing strategies.

Through its extensive global equity research and analytical systems, J.P. Morgan
seeks to generate an information advantage. Using fundamental analysis as well
as macro-economic models, J.P. Morgan develops proprietary research on
countries, companies, and currencies. In these processes, the analysts focus on
a relatively long period rather than on near-term expectations alone. The team
of analysts dedicated to international equities includes approximately 75
members around the world, with an average of approximately ten years of
experience.

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

Country allocation J.P. Morgan takes an in-depth look at the relative valuations
and economic prospects of different countries, ranking the attractiveness of
their markets. Using these rankings, a team of strategists establishes a country
allocation for each fund. Country allocation may vary either significantly or
moderately from the benchmark, depending on the fund. J.P. Morgan considers the
developed countries of Europe, excluding the U.K., as a whole while monitoring
the fund's exposure to any one country.

Stock selection Various models are used to quantify J.P. Morgan's fundamental
stock research, producing a ranking of companies in each industry group
according to their relative value. Each fund's management team then buys and
sells stocks, using the research and valuation rankings as well as its
assessment of other factors, including:

o catalysts that could trigger a change in a stock's price

o potential reward compared to potential risk

o temporary mispricings caused by market overreactions

Currency management The funds have access to J.P. Morgan's currency specialists
in determining the extent and nature of each fund's exposure to various foreign
currencies.

INTERNATIONAL EQUITY MANAGEMENT APPROACH | 6
<PAGE>

YOUR INVESTMENT
--------------------------------------------------------------------------------
INVESTING THROUGH A SERVICE ORGANIZATION
Investors may only purchase, exchange and redeem shares of a 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
each fund is $2,500 and for additional investments $500, although these minimums
may be less for some investors. Service organizations may provide the following
services in connection with their customers' investments in a fund:

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 shareholders

o Assisting customers with investment procedures

ACCOUNT AND TRANSACTION POLICIES
Business hours and NAV calculations The funds' regular business days and hours
are the same as those of the New York Stock Exchange (NYSE). Each fund
calculates its net asset value per share (NAV) every business day as of the
close of trading on the NYSE (normally 4:00 p.m. eastern time). The funds'
securities are typically priced using market quotes or pricing services. When
these methods are not available or do not represent a security's value at the
time of pricing, (e.g., when an event occurs on a foreign exchange after the
close of trading on that exchange that would materially impact a security's
value at the time each fund calculates its NAV) the security is valued in
accordance with the fund's fair valuation procedures.

Timing of orders Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until the
close of trading on the NYSE every business day and are executed the same day,
at that day's NAV. 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.

<PAGE>

Timing of settlements When you buy shares, you will become the owner of record
when a fund receives your payment, generally the day following execution. When
you sell shares, proceeds are generally available the day following execution
and will be forwarded according to your instructions.

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

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

Statements and reports You will receive from your service organization account
statements and confirmation of each purchase or sale of shares. 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.

DIVIDENDS AND DISTRIBUTIONS
Each fund typically pays income dividends and makes capital gains distributions,
if any, once a year. A fund may declare an additional income dividend in a given
year, depending on its tax situation. However, a fund may also make fewer
payments in a given year, depending on its investment results. Dividends and
distributions consist of substantially all of the fund's net investment income
and realized capital gains.

7 | YOUR INVESTMENT

<PAGE>

--------------------------------------------------------------------------------
Transaction Tax status
--------------------------------------------------------------------------------
Income dividends Ordinary income
--------------------------------------------------------------------------------
Short-term capital gains Ordinary income
distributions
--------------------------------------------------------------------------------
Long-term capital gains Capital gains
distributions
--------------------------------------------------------------------------------
Sales or exchanges of shares Capital gains or losses
owned for more than one year
--------------------------------------------------------------------------------
Sales or exchanges of shares Gains are treated as ordinary
owned for one year or less income; losses are subject
to special rules
--------------------------------------------------------------------------------

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.

Representatives are available 8:00 a.m. to 6:00 p.m. eastern time on fund
business days.

YOUR INVESTMENT | 8

<PAGE>

FUND DETAILS
--------------------------------------------------------------------------------
BUSINESS STRUCTURE
As noted earlier, each fund is a series of J.P. Morgan Institutional Funds, a
Massachusetts business trust, and 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:

<PAGE>

--------------------------------------------------------------------------------
Advisory services Percentage of the master
portfolio's average net assets
International Equity 0.60%
International Opportunities 0.60%
--------------------------------------------------------------------------------
Administrative services Master portfolio's and fund's
(fee shared with Funds pro-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%
of average net assets over $7 billion
--------------------------------------------------------------------------------
Shareholder services 0.05% of the 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 pay fees to certain firms and professionals for providing
recordkeeping or other services in connection with investments in a fund.

9 | FUND DETAILS

<PAGE>

THIS PAGE INTENTIONALLY LEFT BLANK

| 10

<PAGE>

--------------------------------------------------------------------------------
RISK AND REWARD ELEMENTS

This table identifies the main elements that make up each fund's overall risk
and reward characteristics. It also outlines each fund's policies toward various
investments, including those that are designed to help certain funds manage
risk.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign and other market
conditions

o Each fund's share price and o Stocks have generally o Under normal circumstances the funds plan
performance will fluctuate in outperformed more stable invest- to remain fully invested, with at least
response to stock and bond ments (such as bonds and cash 65% in stocks; stock investments may
market movements equivalents) over the long term include convertible securities, preferred
stocks, depository receipts (such as ADRs
o The value of most bonds will o Foreign investments, which and EDRs), trust or partnership interests,
fall when interest rates rise; represent a major portion of the warrants, rights, and investment company
the longer a bond's maturity and world's securities, offer securities
the lower its credit quality, attractive potential performance
the more its value typically and opportunities for o The funds seek to limit risk and enhance
falls diversification performance through active management,
country allocation and diversification
o A fund could lose money because o Most bonds will rise in value
of foreign government actions, when interest rates fall o During severe market downturns, the funds
political instability, or lack have the option of investing up to 100% of
of adequate and/or accurate o Foreign bonds, which represent a assets in investment-grade short-term
information major portion of the world's securities
fixed income securities, offer
o Investment risks tend to be attractive potential performance
higher in emerging markets. and opportunities for
These markets also present diversification
higher liquidity and valuation
risks o Emerging markets can offer
higher returns
o Adverse market conditions may
from time to time cause the fund
to take temporary defensive
positions that are inconsistent
with its principal investment
strategies and may hinder the
fund from achieving its
investment objective
------------------------------------------------------------------------------------------------------------------------------------
Management choices

o A fund could underperform its o A fund could outperform its o J.P. Morgan focuses its active management
benchmark due to its securities benchmark due to these same on securities selection, the area where it
choices and other management choices believes its commitment to research can
decisions most enhance returns
------------------------------------------------------------------------------------------------------------------------------------
Foreign currencies

o Currency exchange rate movements o Favorable exchange rate o Each fund manages the currency exposure of
could reduce gains or create movements could generate gains its foreign investments relative to its
losses or reduce losses benchmark and may hedge a portion of its
foreign currency exposure into the U.S.
o Currency risks tend to be higher dollar from time to time (see also
in emerging markets "Derivatives")
------------------------------------------------------------------------------------------------------------------------------------
When-issued and delayed
delivery securities

o When a fund buys securities o A fund can take advantage of o Each fund uses segregated accounts to
before issue or for delayed attractive transaction offset leverage risk
delivery, it could be exposed to opportunities
leverage risk if it does not use
segregated accounts
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

11 | FUND DETAILS

<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
Potential risks Potential rewards Policies to balance risk and
reward
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Derivatives

o Derivatives such as futures, o Hedges that correlate well with o The funds use derivatives, such as
options, swaps, and forward underlying positions can reduce futures, options, swaps, and forward
foreign currency contracts1 that or eliminate losses at low cost foreign currency contracts, for hedging
are used for hedging the and for risk management (i.e., to
portfolio or specific securities o A fund could make money and establish or adjust exposure to particular
may not fully offset the protect against losses if the securities, markets or currencies); risk
underlying positions and this investment analysis proves management may include management of a
could result in losses to the correct fund's exposure relative to its benchmark
fund that would not have
otherwise occurred o Derivatives that involve o The funds only establish hedges that they
leverage could generate expect will be highly correlated with
o Derivatives used for risk substantial gains at low cost underlying positions
management may not have the
intended effects and may result o While the funds may use derivatives that
in losses or missed incidentally involve leverage, they do not
opportunities use them for the specific purposes of
leveraging their portfolios
o The counterparty to a
derivatives contract could
default

o Derivatives that involve
leverage could magnify losses

o Certain types of derivatives
involve costs to a fund which
can reduce returns
------------------------------------------------------------------------------------------------------------------------------------
Securities lending

o When a fund lends a security, o A fund may enhance income o J.P. Morgan maintains a list of approved
there is a risk that the loaned through the investment of the borrowers
securities may not be returned collateral received from the
if the borrower defaults borrower o The fund receives collateral equal to at
least 100% of the current value of
o The collateral will be subject securities loaned
to the risks of the securities
in which it is invested o The lending agents indemnify a fund
against borrower default

o J.P. Morgan's collateral investment
guidelines limit the quality and duration
of collateral investment to minimize losses

o Upon recall, the borrower must return the
securities loaned within the normal
settlement period
------------------------------------------------------------------------------------------------------------------------------------
Illiquid holdings

o A fund could have difficulty o These holdings may offer more o No fund may invest more than 15% of net
valuing these holdings precisely attractive yields or potential assets in illiquid holdings
growth than comparable widely
o A fund could be unable to sell traded securities o To maintain adequate liquidity, each fund
these holdings at the time or may hold investment-grade short-term
price it desired securities (including repurchase
agreements and reverse repurchase
agreements) and, for temporary or
extraordinary purposes, may borrow from
banks up to 331/3% of the value of its
total assets
------------------------------------------------------------------------------------------------------------------------------------
Short-term trading

o Increased trading could raise a o A fund could realize gains in a o The funds generally avoid short-term
fund's brokerage and related short period of time trading, except to take advantage of
costs attractive or unexpected opportunities or
o A fund could protect against to meet demands generated by shareholder
o Increased short-term capital losses if a stock is overvalued activity. The portfolio turnover rates for
gains distributions could raise and its value later falls the portfolio in which each fund invests
shareholders' income tax for its most recent fiscal year end were:
liability The International Equity Portfolio at
10/31/99 (70%) and The International
Opportunities Portfolio at 11/30/99 (80%)
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>

(1) A futures contract is an agreement to buy or sell a set quantity of an
underlying instrument at a future date, or to make or receive a cash
payment based on changes in the value of a securities index. An option is
the right to buy or sell a set quantity of an underlying instrument at a
predetermined price. A swap is a privately negotiated agreement to exchange
one stream of payments for another. A forward foreign currency contract is
an obligation to buy or sell a given currency on a future date and at a set
price.

FUND DETAILS | 12

<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.

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

J.P. Morgan Institutional Funds
Morgan Christiana Center
J.P. Morgan Funds Services - 2/OPS3
500 Stanton Christiana Road
Newark, DE 19713

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. (1-202-942-8090) 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 International Equity Fund - Advisor Series.......................... 811-07342 and 033-54642
J.P. Morgan International Opportunities Fund - Advisor Series................... 811-07342 and 033-54642
</TABLE>

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 BOND FUND - ADVISOR SERIES

STATEMENT OF ADDITIONAL INFORMATION

AUGUST 1, 2000

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
DATED AUGUST 1, 2000 FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO
TIME. ADDITIONALLY, THIS STATEMENT OF ADDITIONAL INFORMATION INCORPORATES BY
REFERENCE THE MOST RECENT ANNUAL AND SEMI-ANNUAL FINANCIAL STATEMENTS OF THE
FUND'S MASTER PORTFOLIO, INCLUDING THE INDEPENDENT ACCOUNTANTS' REPORT ON THE
ANNUAL FINANCIAL STATEMENTS. THESE FINANCIAL STATEMENTS 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................. 32
Trustees and Advisory Board............. 34
Officers................................ 37
Investment Advisor...................... 39
Distributor............................. 42
Co-Administrator........................ 42
Services Agent.......................... 43
Custodian and Transfer Agent............ 45
Shareholder Servicing................... 45
Service Organizations................... 29
Distribution Plan....................... 30
Independent Accountants................. 47
Expenses................................ 47
Purchase of Shares...................... 48
Redemption of Shares.................... 49
Exchange of Shares...................... 50
Dividends and Distributions............. 50
Net Asset Value......................... 50
Performance Data........................ 51
Portfolio Transactions.................. 54
Massachusetts Trust..................... 55
Description of Shares................... 56
Special Information Concerning
Investment Structure................... 58
Taxes.................................... 59
Additional Information................... 63
Financial Statements..................... 64
Appendix A - Description of Security
Ratings................................ A-1

<PAGE>

GENERAL

This Statement of Additional Information relates only to J.P. Morgan
Bond Fund - Advisor Series (the "Fund"). The Fund is a series of shares of
beneficial interest of 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 objectives 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 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." Accordingly, references below to the Fund also include the
Portfolio; similarly, references to the Portfolio also include the Fund unless
the context requires otherwise.

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 OBJECTIVES AND POLICIES

The Fund is designed to be an economical and convenient means of making
substantial investments in a broad range of corporate and government debt
obligations and related investments of domestic and foreign issuers, subject to
certain quality and other restrictions. See "Quality and Diversification
Requirements." The Fund's investment objective is to provide a high total return
consistent with moderate risk of capital and maintenance of liquidity. Although
the net asset value of the Fund will fluctuate, the Fund attempts to conserve
the value of its investments to the extent consistent with its objective. The
Fund attempts to achieve its objective by investing all of its investable assets
in The U.S. Fixed Income Portfolio (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 investing
primarily in high grade and investment grade corporate and government debt
obligations and related securities of domestic and foreign issuers described in
the Prospectus and this Statement of Additional Information.

The following discussion supplements the information regarding the
investment objective of the Fund and the policies to be employed to achieve this
objective by the Portfolio as set forth above and in the Prospectus. The
investment objective of the Fund and its Portfolio is identical. Accordingly,
references below to the Fund also include the Fund's Portfolio; similarly,
references to the Portfolio also include the Fund that invests in the Portfolio
unless the context requires otherwise.

Fixed Income Investments

The Fund may invest in a broad range of debt securities of domestic and
foreign corporate and government issuers. The corporate securities in which the
Fund may invest include debt securities of various types and maturities, e.g.,
debentures, notes, mortgage securities, equipment trust certificates and other
collateralized securities and zero coupon securities. Collateralized securities
are backed by a pool of assets such as loans or receivables which generate cash
flow to cover the payments due on the securities. Collateralized securities are
subject to certain risks, including a decline in the value of the collateral
backing the security, failure of the collateral to generate the anticipated cash
flow or in certain cases more rapid prepayment because of events affecting the
collateral, such as accelerated prepayment of mortgages or other loans backing
these securities or destruction of equipment subject to equipment trust
certificates. In the event of any such prepayment the Fund will be required to
reinvest the proceeds of prepayments at interest rates prevailing at the time of
reinvestment, which may be lower. In addition, the value of zero coupon
securities which do not pay interest is more volatile than that of interest
bearing debt securities with the same maturity.

Corporate Bonds and Other Debt Securities

The Fund may invest in bonds and other debt securities of domestic and
foreign issuers to the extent consistent with its investment objective and
policies. A description of these investments appears below. See "Quality and
Diversification Requirements." For information on short-term investments in
these securities, see "Money Market Instruments."

Mortgage-Backed Securities. The Fund may invest in mortgage-backed
securities. Each mortgage pool underlying mortgage-backed securities consists of
mortgage loans evidenced by promissory notes secured by first mortgages or first
deeds of trust or other similar security instruments creating a first lien on
owner occupied and non-owner occupied one-unit to four-unit residential
properties, multifamily (i.e., five or more) properties, agriculture properties,
commercial properties and mixed use properties. The investment characteristics
of adjustable and fixed rate mortgage-backed securities differ from those of
traditional fixed income securities. The major differences include the payment
of interest and principal on mortgage-backed securities on a more frequent
(usually monthly) schedule and the possibility that principal may be prepaid at
any time due to prepayments on the underlying mortgage loans or other assets.
These differences can result in significantly greater price and yield volatility
than is the case with traditional fixed income securities. As a result, a faster
than expected prepayment rate will reduce both the market value and the yield to
maturity from those which were anticipated. A prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity and
market value.

Government Guaranteed Mortgage-Backed Securities. Government National
Mortgage Association mortgage-backed certificates ("Ginnie Maes") are supported
by the full faith and credit of the United States. Certain other U.S. Government
securities, issued or guaranteed by federal agencies or government sponsored
enterprises, are not supported by the full faith and credit of the United
States, but may be supported by the right of the issuer to borrow from the U.S.
Treasury. These securities include obligations of instrumentalities such as the
Federal Home Loan Mortgage Corporation ("Freddie Macs") and the Federal National
Mortgage Association ("Fannie Maes"). No assurance can be given that the U.S.
Government will provide financial support to these federal agencies,
authorities, instrumentalities and government sponsored enterprises in the
future.

There are several types of guaranteed mortgage-backed securities
currently available, including guaranteed mortgage pass-through certificates and
multiple class securities, which include guaranteed real estate mortgage
investment conduit certificates ("REMIC Certificates"), other collateralized
mortgage obligations ("CMOs") and stripped mortgage-backed securities.

Mortgage pass-through securities are fixed or adjustable rate
mortgage-backed securities which provide for monthly payments that are a
"pass-through" of the monthly interest and principal payments (including any
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees or other amounts paid to any guarantor, administrator and/or
servicer of the underlying mortgage loans.

Multiple class securities include CMOs and REMIC Certificates issued by
U.S. Government agencies, instrumentalities (such as Fannie Mae) and sponsored
enterprises (such as Freddie Mac) or by trusts formed by private originators of,
or investors in, mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks, insurance companies, investment banks and
special purpose subsidiaries of the foregoing. In general, CMOs are debt
obligations of a legal entity that are collateralized by, and multiple class
mortgage-backed securities represent direct ownership interests in, a pool of
mortgage loans or mortgaged-backed securities and payments on which are used to
make payments on the CMOs or multiple class mortgage-backed securities.

CMOs and guaranteed REMIC Certificates issued by Fannie Mae and Freddie
Mac are types of multiple class mortgage-backed securities. Investors may
purchase beneficial interests in REMICs, which are known as "regular" interests
or "residual" interests. The Fund does not intend to purchase residual interests
in REMICs. The REMIC Certificates represent beneficial ownership interests in a
REMIC trust, generally consisting of mortgage loans or Fannie Mae, Freddie Mac
or Ginnie Mae guaranteed mortgage-backed securities (the "Mortgage Assets"). The
obligations of Fannie Mae and Freddie Mac under their respective guaranty of the
REMIC Certificates are obligations solely of Fannie Mae and Freddie Mac,
respectively.

CMOs and REMIC Certificates are issued in multiple classes. Each class
of CMOs or REMIC Certificates, often referred to as a "tranche," is issued at a
specific adjustable or fixed interest rate and must be fully retired no later
than its final distribution date. Principal prepayments on the assets underlying
the CMOs or REMIC Certificates may cause some or all of the classes of CMOs or
REMIC Certificates to be retired substantially earlier than their final
scheduled distribution dates. Generally, interest is paid or accrues on all
classes of CMOs or REMIC Certificates on a monthly basis.

Stripped Mortgage-Backed Securities. Stripped mortgage-backed
securities ("SMBS") are derivative multiclass mortgage securities, issued or
guaranteed by the U.S. Government, its agencies or instrumentalities or by
private issuers. Although the market for such securities is increasingly liquid,
privately issued SMBS may not be readily marketable and will be considered
illiquid for purposes of the Fund's limitation on investments in illiquid
securities. The Advisor may determine that SMBS which are U.S. Government
securities are liquid for purposes of the Fund's limitation on investments in
illiquid securities in accordance with procedures adopted by the Board of
Trustees. The market value of the class consisting entirely of principal
payments generally is unusually volatile in response to changes in interest
rates. The yields on a class of SMBS that receives all or most of the interest
from Mortgage Assets are generally higher than prevailing market yields on other
mortgage-backed securities because their cash flow patterns are more volatile
and there is a greater risk that the initial investment will not be fully
recouped.

Mortgages (directly held). The Fund may invest directly in mortgages.
Mortgages are debt instruments secured by real property. Unlike mortgage-backed
securities, which generally represent an interest in a pool of mortgages, direct
investments in mortgages involve prepayment and credit risks of an individual
issuer and real property. Consequently, these investments require different
investment and credit analysis by the Advisor.

The directly placed mortgages in which the Fund invests may include
residential mortgages, multifamily mortgages, mortgages on cooperative apartment
buildings, commercial mortgages, and sale-leasebacks. These investments are
backed by assets such as office buildings, shopping centers, retail stores,
warehouses, apartment buildings and single-family dwellings. In the event that
the Fund forecloses on any non-performing mortgage, and acquires a direct
interest in the real property, the Fund will be subject to the risks generally
associated with the ownership of real property. There may be fluctuations in the
market value of the foreclosed property and its occupancy rates, rent schedules
and operating expenses. There may also be adverse changes in local, regional or
general economic conditions, deterioration of the real estate market and the
financial circumstances of tenants and sellers, unfavorable changes in zoning,
building environmental and other laws, increased real property taxes, rising
interest rates, reduced availability and increased cost of mortgage borrowings,
the need for unanticipated renovations, unexpected increases in the cost of
energy, environmental factors, acts of God and other factors which are beyond
the control of the Fund or the Advisor. Hazardous or toxic substances may be
present on, at or under the mortgaged property and adversely affect the value of
the property. In addition, the owners of property containing such substances may
be held responsible, under various laws, for containing, monitoring, removing or
cleaning up such substances. The presence of such substances may also provide a
basis for other claims by third parties. Costs of clean-up or of liabilities to
third parties may exceed the value of the property. In addition, these risks may
be uninsurable. In light of these and similar risks, it may be impossible to
dispose profitably of properties in foreclosure.

Zero Coupon, Pay-in-Kind and Deferred Payment Securities. Zero coupon
securities are securities that are sold at a discount to par value and on which
interest payments are not made during the life of the security. Upon maturity,
the holder is entitled to receive the par value of the security. Pay-in-kind
securities are securities that have interest payable by delivery of additional
securities. Upon maturity, the holder is entitled to receive the aggregate par
value of the securities. The Fund accrues income with respect to zero coupon and
pay-in-kind securities prior to the receipt of cash payments. Deferred payment
securities are securities that remain zero coupon securities until a
predetermined date, at which time the stated coupon rate becomes effective and
interest becomes payable at regular intervals. While interest payments are not
made on such securities, holders of such securities are deemed to have received
"phantom income." Because the Fund will distribute "phantom income" to
shareholders, to the extent that shareholders elect to receive dividends in cash
rather than reinvesting such dividends in additional shares, the Fund will have
fewer assets with which to purchase income producing securities. Zero coupon,
pay-in-kind and deferred payment securities may be subject to greater
fluctuation in value and lesser liquidity in the event of adverse market
conditions than comparably rated securities paying cash interest at regular
interest payment periods.

Asset-Backed Securities. Asset-backed securities 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. Payments of principal and interest may be guaranteed up to certain
amounts and for a certain time period by a letter of credit issued by a
financial institution unaffiliated with the entities issuing the securities. The
asset-backed securities in which the Fund may invest are subject to the Fund's
overall credit requirements. However, asset-backed securities, in general, are
subject to certain risks. Most of these risks are related to limited interests
in applicable collateral. For example, credit card debt receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts on credit card debt thereby reducing the
balance due. Additionally, if the letter of credit is exhausted, holders of
asset-backed securities may also experience delays in payments or losses if the
full amounts due on underlying sales contracts are not realized. Because
asset-backed securities are relatively new, the market experience in these
securities is limited and the market's ability to sustain liquidity through all
phases of the market cycle has not been tested.

Corporate Fixed Income Securities. The Fund may invest in publicly and
privately issued debt obligations of U.S. and non-U.S. corporations, including
obligations of industrial, utility, banking and other financial issuers. These
securities are subject to the risk of an issuer's inability to meet principal
and interest payments on the obligation and may also be subject to price
volatility due to such factors as market interest rates, market perception of
the creditworthiness of the issuer and general market liquidity.

Money Market Instruments

The Fund may invest in money market instruments to the extent
consistent with its investment objective and policies. Under normal
circumstances, the Fund will purchase these securities to invest temporary cash
balances or to maintain liquidity to meet withdrawals. However, the Fund may
also invest in money market instruments as a temporary defensive measure taken
during, or in anticipation of, adverse market conditions. A description of the
various types of money market instruments that may be purchased by the Fund
appears below.

Also see "Quality and Diversification Requirements."

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

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

Foreign Government Obligations. The Fund, subject to its applicable
investment policies, may also invest in short-term obligations of foreign
sovereign governments or of their agencies, instrumentalities, authorities or
political subdivisions. These securities may be denominated in the U.S. dollar
or in another currency. See "Foreign Investments."

Bank Obligations. The Fund may invest in negotiable certificates of
deposit, time deposits and bankers' acceptances of (i) banks, savings and loan
associations and savings banks which have more than $2 billion in total assets
(the "Asset Limitation") and are organized under the laws of the United States
or any state, (ii) foreign branches of these banks or of foreign banks of
equivalent size (Euros) and (iii) U.S. branches of foreign banks of equivalent
size (Yankees). See "Foreign Investments." The Fund will not invest in
obligations for which the Advisor, or any of its affiliated persons, is the
ultimate obligor or accepting bank. The Fund may also invest in obligations of
international banking institutions designated or supported by national
governments to promote economic reconstruction, development or trade between
nations (e.g., the European Investment Bank, the Inter-American Development
Bank, or the World Bank).

Commercial Paper. The Fund may invest in commercial paper, including
master demand obligations. Master demand obligations are obligations that
provide for a periodic adjustment in the interest rate paid and permit daily
changes in the amount borrowed. Master demand obligations are governed by
agreements between the issuer and 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 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 may enter into repurchase agreements
with brokers, dealers or banks that meet the Advisor's credit guidelines. In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
resale price normally is in excess of the purchase price, reflecting an agreed
upon interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Fund to the seller. 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 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 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 each agreement
plus accrued interest, and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the custodian. 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, including
without limitation corporate bonds and other obligations described in this
Statement of Additional Information.

Tax Exempt Obligations

In certain circumstances 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. The 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.

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.

Premium Securities. During a period of declining interest rates, many
municipal securities in which the Fund invests likely will bear coupon rates
higher than current market rates, regardless of whether the securities were
initially purchased at a premium. In general, such securities have market values
greater than the principal amounts payable on maturity, which would be reflected
in the net asset value of the Fund's shares. The values of such "premium"
securities tend to approach the principal amount as they near maturity.

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 subject to puts with
remaining maturities of less than 60 days by the amortized cost method. If the
Fund were to invest in municipal bonds and notes with maturities of 60 days or
more that are subject to puts separate from the underlying securities, the puts
and the underlying securities would be valued at fair value as determined in
accordance with procedures established by the Board of Trustees. 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. Prior to
investing in such securities, the Fund, if deemed necessary based upon the
advice of counsel, will apply to the SEC for an exemptive order, which may not
be granted, relating to the amortized valuation of such securities.

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 Advisor reviews regularly the 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. Other put
writers will have outstanding debt rated Aa or better by Moody's Investors
Service, Inc. ("Moody's") or AA or better by Standard & Poor's Ratings Group
("Standard & Poor's"), or will be of comparable quality in the Advisor's opinion
or such put writers' obligations will be collateralized and of comparable
quality in the Advisor's opinion. The Trustees have directed the Advisor not to
enter into put transactions with any dealer which in the judgment of the Advisor
become 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.

Entering into a put with respect to a tax exempt security may be
treated, depending upon the terms of the put, as a taxable sale of the tax
exempt security by the Fund with the result that, while the put is outstanding,
the Fund will no longer be treated as the owner of the security and the interest
income derived with respect to the security will be treated as taxable income to
the Fund.

Foreign Investments

The Fund may invest in certain foreign securities. It may invest up to
20% of total assets in fixed income securities of foreign issuers denominated in
foreign currencies. Any foreign commercial paper purchased by the Fund must not
be subject to foreign withholding tax at the time of purchase.

Foreign investments may be made directly in securities of foreign
issuers or in the form of American Depositary Receipts ("ADRs"), European
Depositary Receipts ("EDRs") and Global Depositary Receipts ("GDRs") or in other
similar securities of foreign issuers. ADRs are securities, typically issued by
a U.S. financial institution (a "depositary"), that evidence ownership interests
in a security or a pool of securities issued by a foreign issuer and deposited
with the depositary. ADRs include American Depositary Shares and New York
Shares. EDRs are receipts issued by a European financial institution. GDRs,
which are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
securities, typically issued by a non-U.S. financial institution, that evidence
ownership interests in a security or a pool of securities issued by either a
U.S. or foreign issuer. ADRs, EDRs, GDRs and CDRs may be available for
investment through "sponsored" or "unsponsored" facilities. A sponsored facility
is established jointly by the issuer of the security underlying the receipt and
a depositary, whereas an unsponsored facility may be established by a depositary
without participation by the issuer of the receipt's underlying security. An
unsponsored depositary may not provide the same shareholder information that a
sponsored depositary is required to provide under its contractual arrangements
with the issuer of the underlying foreign security. Generally, ADRs, in
registered form, are designed for use in the U.S. securities markets, and EDRs,
in bearer form, are designed for use in European securities markets.

Holders of an unsponsored depositary receipt generally bear all costs
of the unsponsored facility. The depositary of an unsponsored facility
frequently is under no obligation to distribute shareholder communications
received from the issuer of the deposited security or to pass through to the
holders of the receipts voting rights with respect to the deposited securities.

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.
Dividends and interest paid by foreign issuers may be subject to withholding and
other foreign taxes which may decrease the net return on foreign investments as
compared to dividends and interest paid to the Fund by domestic companies.

Investors should realize that the value of the Fund's investments in
foreign securities may be adversely affected by changes in political or social
conditions, diplomatic relations, confiscatory taxation, expropriation,
nationalization, limitation on the removal of funds or assets, or imposition of
(or change in) exchange control or tax regulations in those foreign countries.
In addition, changes in government administration 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 investment 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.

In addition, while the volume of transactions effected on foreign
exchanges has increased in recent years, in most cases it remains appreciably
below that of domestic security exchanges. Accordingly, the Fund's foreign
investments may be less liquid and their prices may be more volatile than
comparable investments in securities of U.S. companies. Moreover, the settlement
periods for foreign securities, which are often longer than those for securities
of U.S. issuers, may affect portfolio liquidity. In addition, there is generally
less government supervision and regulation of securities exchanges, brokers and
issuers located in foreign countries than in the United States.

Since investments in foreign securities may involve foreign currencies,
the value of the Fund's assets as measured in U.S. dollars may be affected
favorably or unfavorably by changes in currency rates and in exchange control
regulations, including currency blockage. The Fund may enter into forward
commitments for the purchase or sale of foreign currencies in connection with
the settlement of foreign securities transactions or to manage the Fund's
currency exposure. See "Foreign Currency Exchange Transactions" below.

Foreign Currency Exchange Transactions. Because the Fund may buy and
sell securities and receive interest in currencies other than the U.S. dollar,
the Fund may enter from time to time into foreign currency exchange
transactions. The Fund either enters into these transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market
or uses forward contracts to purchase or sell foreign currencies. The cost of
the Fund's spot currency exchange transactions is generally the difference
between the bid and offer spot rate of the currency being purchased or sold.

A forward foreign currency exchange contract is an obligation by the
Fund to purchase or sell a specific currency at a future date, which may be any
fixed number of days from the date of the contract. Forward foreign currency
exchange contracts establish an exchange rate at a future date. These contracts
are derivative instruments, as their value derives from the spot exchange rates
of the currencies underlying the contract. These contracts are entered into in
the interbank market directly between currency traders (usually large commercial
banks) and their customers. A forward foreign currency exchange contract
generally has no deposit requirement and is traded at a net price without
commission. Neither spot transactions nor forward foreign currency exchange
contracts eliminate fluctuations in the prices of the Fund's securities or in
foreign exchange rates, or prevent loss if the prices of these securities should
decline.

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

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

Sovereign Fixed Income Securities. The Fund may invest in fixed income
securities issued or guaranteed by a foreign sovereign government or its
agencies, authorities or political subdivisions. Investment in sovereign fixed
income securities involves special risks not present in corporate fixed income
securities. The issuer of the sovereign debt or the governmental authorities
that control the repayment of the debt may be unable or unwilling to repay
principal or interest when due, and the Fund may have limited recourse in the
event of a default. During periods of economic uncertainty, the market prices of
sovereign debt, and the Fund's net asset value, may be more volatile than prices
of U.S. debt obligations. In the past, certain foreign countries have
encountered difficulties in servicing their debt obligations, withheld payments
of principal and interest and declared moratoria on the payment of principal and
interest on their sovereign debts.

A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient foreign exchange, the relative size of the debt service burden, the
sovereign debtor's policy toward international lenders and local political
constraints. Sovereign debtors may also be dependent on expected disbursements
from foreign governments, multilateral agencies and other entities to reduce
principal and interest arrearages on their debt. The failure of a sovereign
debtor to implement economic reforms, achieve specified levels of economic
performance or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.

Brady Bonds. The Fund may invest in Brady bonds, which are securities
created through the exchange of existing commercial bank loans to public and
private entities in certain emerging markets for new bonds in connection with
debt restructurings. Brady bonds have been issued since 1989 and do not have a
long payment history. In light of the history of defaults of countries issuing
Brady bonds on their commercial bank loans, investments in Brady bonds may be
viewed as speculative. Brady bonds may be fully or partially collateralized or
uncollateralized, are issued in various currencies (but primarily the dollar)
and are actively traded in over-the-counter secondary markets. Incomplete
collateralization of interest or principal payment obligations results in
increased credit risk. Dollar-denominated collateralized Brady bonds, which may
be fixed-rate bonds or floating-rate bonds, are generally collateralized by U.S.
Treasury zero coupon bonds having the same maturity as the Brady bonds.

Obligations of Supranational Entities. The Fund may invest in
obligations of supranational entities designated or supported by governmental
entities to promote economic reconstruction or development and of international
banking institutions and related government agencies. Examples include the
International Bank for Reconstruction and Development (the "World Bank"), the
European Coal and Steel Community, the Asian Development Bank and the
Inter-American Development Bank. Each supranational entity's lending activities
are limited to a percentage of its total capital (including "callable capital"
contributed by its governmental members at the entity's call), reserves and net
income. There is no assurance that participating governments will be able or
willing to honor their commitments to make capital contributions to a
supranational entity.

Investing in Emerging Markets

The Fund may also invest in countries with emerging economies or
securities markets. Political and economic structures in many of such countries
may be undergoing significant evolution and rapid development, and such
countries may lack the social, political and economic stability characteristic
of more developed countries. Certain of such countries may have in the past
failed to recognize private property rights and have at times nationalized or
expropriated the assets of private companies. As a result, the risks described
above, including the risks of nationalization or expropriation of assets, may be
heightened. In addition, unanticipated political or social developments may
affect the values of the Fund's investments in those countries and the
availability to the Fund of additional investments in those countries. The small
size and inexperience of the securities markets in certain of such countries and
the limited volume of trading in securities in those countries may make the
Fund's investments in such countries illiquid and more volatile than investments
in more developed countries, and the Fund may be required to establish special
custodial or other arrangements before making certain investments in those
countries. There may be little financial or accounting information available
with respect to issuers located in certain of such countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers.

Transaction costs in emerging markets may be higher than in the United
States and other developed securities markets. As legal systems in emerging
markets develop, foreign investors may be adversely affected by new or amended
laws and regulations or may not be able to obtain swift and equitable
enforcement of existing law.

Restrictions on Investment and Repatriation. Certain emerging markets
limit, or require governmental approval prior to, investments by foreign
persons. Repatriation of investment income and capital from certain emerging
markets is subject to certain governmental consents. Even where there is no
outright restriction on repatriation of capital, the mechanics of repatriation
may affect the operation of the Fund.

Additional Investments

Convertible Securities. The Fund may invest in convertible securities
of domestic and, subject to the Fund's investment restrictions, foreign issuers.
The convertible securities in which the Fund may invest include any debt
securities or preferred stock which may be converted into common stock or which
carry the right to purchase common stock. Convertible securities entitle the
holder to exchange the securities for a specified number of shares of common
stock, usually of the same company, at specified prices within a certain period
of time.

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, the Fund may be disadvantaged if the other party to
the transaction defaults.

Risks Associated with Derivative Securities and Contracts. The risks
associated with the Fund's transactions in derivative securities and contracts
may include some or all of the following: market risk, leverage and volatility
risk, correlation risk, credit risk, and liquidity and valuation risk.

Market Risk. Investments in structured securities are subject to the
market risks described above. Entering into a derivative contract involves a
risk that the applicable market will move against the Fund's position and that
the Fund will incur a loss. For derivative contracts other than purchased
options, this loss may substantially exceed the amount of the initial investment
made or the premium received by the Fund.

Leverage and Volatility Risk. Derivative instruments may sometimes
increase or leverage the Fund's exposure to a particular market risk. Leverage
enhances the price volatility of derivative instruments held by the Fund. If the
Fund enters into futures contracts, writes options or engages in certain foreign
currency exchange transactions, it is required to maintain a segregated account
consisting of cash or liquid assets, hold offsetting portfolio securities or
cover written options which may partially offset the leverage inherent in these
transactions. Segregation of a large percentage of assets could impede portfolio
management or an investor's ability to meet redemption requests.

Correlation Risk. The Fund's success in using derivative contracts to
hedge portfolio assets depends on the degree of price correlation between the
derivative contract and the hedged asset. Imperfect correlation may be caused by
several factors, including temporary price disparities among the trading markets
for the derivative contract, the assets underlying the derivative contract and
the Fund's assets.

Credit Risk. Derivative securities and over-the-counter derivative
contracts involve a risk that the issuer or counterparty will fail to perform
its contractual obligations.

Liquidity and Valuation Risk. Some derivative securities are not
readily marketable or may become illiquid under adverse market conditions. In
addition, during periods of extreme market volatility, a commodity exchange may
suspend or limit trading in an exchange-traded derivative contract, which may
make the contract temporarily illiquid and difficult to price. The Fund's
ability to terminate over-the-counter derivative contracts may depend on the
cooperation of the counterparties to such contracts. For thinly traded
derivative securities and contracts, the only source of price quotations may be
the selling dealer or counterparty.

Investment Company Securities. Securities of other investment companies
may be acquired by the Fund and the 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 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. The Fund has applied for exemptive relief from the SEC to permit
the Fund's Portfolio to invest in affiliated investment companies. If the
requested relief is granted, the Fund's Portfolio would then be permitted to
invest in affiliated funds, subject to certain conditions specified in the
applicable order.

The Securities and Exchange Commission ("SEC") has granted the Portfolio an
exemptive order permitting it to invest its uninvested cash in any of the
following affiliated money market funds: J.P. Morgan Institutional Prime Money
Market Fund, J.P. Morgan Institutional Tax Exempt Money Market Fund, J.P. Morgan
Institutional Federal Money Market Fund and J.P. Morgan Institutional Treasury
Money Market Fund. The order sets the following conditions: (1) the Portfolio
may invest in one or more of the permitted money market funds up to an aggregate
limit of 25% of its assets; and (2) the Advisor will waive and/or reimburse its
advisory fee from the Portfolio in an amount sufficient to offset any doubling
up of investment advisory and shareholder servicing fees.

Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements. In a reverse repurchase agreement, the Fund sells a
security and agrees to repurchase the same security at a mutually agreed upon
date and price reflecting the interest rate effective for the term of the
agreement. For purposes of the 1940 Act a reverse repurchase agreement is also
considered as the borrowing of money by the Fund and, therefore, a form of
leverage. Leverage may cause any gains or losses for the Fund to be magnified.
The Fund will invest the proceeds of borrowings under reverse repurchase
agreements. In addition, except for liquidity purposes, the Fund will enter into
a reverse repurchase agreement only when the expected return from the investment
of the proceeds is greater than the expense of the transaction. The Fund will
not invest the proceeds of a reverse repurchase 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. All forms of borrowing (including
reverse repurchase agreements, securities lending and mortgage dollar rolls) are
limited in the aggregate and may not exceed 33-1/3% of the Fund's total assets.
See "Investment Restrictions".

Mortgage Dollar Roll Transactions. The Fund may engage in mortgage
dollar roll transactions with respect to mortgage securities issued by the
Government National Mortgage Association, the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. In a mortgage dollar
roll transaction, the Fund sells a mortgage backed security and simultaneously
agrees to repurchase a similar security on a specified future date at an agreed
upon price. During the roll period, the Fund will not be entitled to receive any
interest or principal paid on the securities sold. The Fund is compensated for
the lost interest on the securities sold by the difference between the sales
price and the lower price for the future repurchase as well as by the interest
earned on the reinvestment of the sales proceeds. The Fund may also be
compensated by receipt of a commitment fee. When the Fund enters into a mortgage
dollar roll transaction, liquid assets in an amount sufficient to pay for the
future repurchase are segregated with the custodian. Mortgage dollar roll
transactions are considered reverse repurchase agreements for purposes of the
Fund's investment restrictions.

Loans of Portfolio Securities. Subject to applicable investment
restrictions, the Fund is permitted to 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. The Fund will not lend its securities to
any officer, Trustee, Member of Advisory Board, Director, employee or other
affiliate of the Fund, the Advisor or the Distributor, unless otherwise
permitted by applicable law. All forms of borrowing (including reverse
repurchase agreements, securities lending and mortgage dollar rolls) are limited
in the aggregate and may not exceed 33-1/3% of the Fund's total assets.

Illiquid Investments; Privately Placed and Other Unregistered
Securities. The Fund may not acquire any illiquid securities if, as a result
thereof, more than 15% of its net assets would be in illiquid investments.
Subject to this non-fundamental policy limitation, the Fund may acquire
investments that are illiquid or have limited liquidity, such as private
placements or investments that are not registered under the Securities Act of
1933, as amended (the "1933 Act"), and cannot be offered for public sale in the
United States without first being registered under the 1933 Act. An illiquid
investment is any investment that cannot be disposed of within seven days in the
normal course of business at approximately the amount at which it is valued by
the Fund. The price the Fund pays for illiquid securities or receives upon
resale may be lower than the price paid or received for similar securities with
a more liquid market. Accordingly the valuation of these securities will reflect
any limitations on their liquidity.

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.

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.

The Fund will comply with the diversification requirements imposed by
the Internal Revenue Code of 1986, as amended (the "Code"), for qualification as
a regulated investment company. See "Taxes".

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.

The Fund invests in a diversified portfolio of securities that are
considered "high grade," "investment grade" and "below investment grade" as
described in Appendix A. In addition, at the time the Fund invests in any
commercial paper, bank obligation, repurchase agreement, or any other money
market instruments, the investment must have received a short term rating of
investment grade or better (currently Prime-3 or better by Moody's or A-3 or
better by Standard & Poor's) or the investment must have been issued by an
issuer that received a short term investment grade rating or better with respect
to a class of investments or any investment within that class that is comparable
in priority and security with the investment being purchased by the Fund. If no
such ratings exist, the investment must be of comparable investment quality in
the Advisor's opinion, but will not be eligible for purchase if the issuer or
its parent has long term outstanding debt rated below BBB.

Below Investment Grade Debt. Certain lower rated securities purchased
by the Fund, such as those rated Ba or B by Moody's or BB or B by Standard &
Poor's (commonly known as junk bonds), may be subject to certain risks with
respect to the issuing entity's ability to make scheduled payments of principal
and interest and to greater market fluctuations. While generally providing
greater income than investments in higher quality securities, lower quality
fixed income securities involve greater risk of loss of principal and income,
including the possibility of default or bankruptcy of the issuers of such
securities, and have greater price volatility, especially during periods of
economic uncertainty or change. These lower quality fixed income securities tend
to be affected by economic changes and short-term corporate and industry
developments to a greater extent than higher quality securities, which react
primarily to fluctuations in the general level of interest rates. To the extent
that the Fund invests in such lower quality securities, the achievement of its
investment objective may be more dependent on the Advisor's own credit analysis.

Lower quality fixed income securities are affected by the market's
perception of their credit quality, especially during times of adverse
publicity, and the outlook for economic growth. Economic downturns or an
increase in interest rates may cause a higher incidence of default by the
issuers of these securities, especially issuers that are highly leveraged. The
market for these lower quality fixed income securities is generally less liquid
than the market for investment grade fixed income securities. It may be more
difficult to sell these lower rated securities to meet redemption requests, to
respond to changes in the market, or to value accurately the Fund's portfolio
securities for purposes of determining the Fund's net asset value. See Appendix
A for more detailed information on these ratings.

In determining suitability of investment in a particular unrated
security, the Advisor takes into consideration asset and debt service coverage,
the purpose of the financing, history of the issuer, existence of other rated
securities of the issuer, and other relevant conditions, such as comparability
to other issuers.

Options and Futures Transactions

The Fund may purchase and sell (a) exchange traded and over-the-counter
(OTC) put and call options on fixed income securities, indexes of fixed income
securities and futures contracts on fixed income securities and indexes of fixed
income securities and (b) futures contracts on fixed income securities and
indexes of fixed income securities. Each of these instruments is a derivative
instrument as its value derives from the underlying asset or index.

The Fund may use futures contracts and options for hedging and risk
management purposes. The Fund may not use futures contracts and options for
speculation.

The Fund may utilize options and futures contracts to manage its
exposure to changing interest rates and/or security prices. Some options and
futures strategies, including selling futures contracts and buying puts, tend to
hedge the Fund's investments against price fluctuations. Other strategies,
including buying futures contracts and buying calls, tend to increase market
exposure. Options and futures contracts may be combined with each other or with
forward contracts in order to adjust the risk and return characteristics of the
Fund's overall strategy in a manner deemed appropriate to the Advisor and
consistent with the Fund's objective and policies. Because combined options
positions involve multiple trades, they result in higher transaction costs and
may be more difficult to open and close out.

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

The Fund may purchase put and call options on securities, indexes of
securities and futures contracts, or purchase and sell futures contracts, only
if such options are written by other persons and if (i) the aggregate premiums
paid on all such options which are held at any time do not exceed 20% of the
Fund's net assets, and (ii) the aggregate margin deposits required on all such
futures or options thereon held at any time do not exceed 5% of the Fund's total
assets. In addition, the Fund will not purchase or sell (write) futures
contracts, options on futures contracts or commodity options for risk management
purposes if, as a result, the aggregate initial margin and options premiums
required to establish these positions exceed 5% of the net asset value of the
Fund.

Options

Purchasing Put and Call Options. By purchasing a put option, the Fund
obtains the right (but not the obligation) to sell the instrument underlying the
option at a fixed strike price. In return for this right, the Fund pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indexes
of securities, indexes of securities prices, and futures contracts. The Fund may
terminate its position in a put option it has purchased by allowing it to expire
or by exercising the option. The Fund may also close out a put option position
by entering into an offsetting transaction, if a liquid market exits. If the
option is allowed to expire, the Fund will lose the entire premium it paid. If
the Fund exercises a put option on a security, it will sell the instrument
underlying the option at the strike price. If the Fund exercises an option on an
index, settlement is in cash and does not involve the actual sale of securities.
If an option is American style, it may be exercised on any day up to its
expiration date. A European style option may be exercised only on its expiration
date.

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

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

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

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

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

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

Options on Indexes. The Fund may purchase and sell put and call options
on any securities index based on securities in which the Fund may invest.
Options on securities indexes are similar to options on securities, except that
the exercise of securities index options is settled by cash payment and does not
involve the actual purchase or sale of securities. In addition, these options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
The Fund, in purchasing or selling index options, is subject to the risk that
the value of its portfolio securities may not change as much as an index because
the Fund's investments generally will not match the composition of an index.

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

Exchange Traded and OTC Options. All options purchased or sold by the
Fund will be traded on a securities exchange or will be purchased or sold by
securities dealers (OTC options) that meet creditworthiness standards approved
by the Advisor. While exchange-traded options are obligations of the Options
Clearing Corporation, in the case of OTC options, the Fund relies on the dealer
from which it purchased the option to perform if the option is exercised. Thus,
when the Fund purchases an OTC option, it relies on the dealer from which it
purchased the option to make or take delivery of the underlying securities.
Failure by the dealer to do so would result in the loss of the premium paid by
the Fund as well as loss of the expected benefit of the transaction.

Provided that the Fund has arrangements with certain qualified dealers
who agree that the Fund may repurchase any option it writes for a maximum price
to be calculated by a predetermined formula, the Fund may treat the underlying
securities used to cover written OTC options as liquid. In these cases, the OTC
option itself would only be considered illiquid to the extent that the maximum
repurchase price under the formula exceeds the intrinsic value of the option.

Futures Contracts

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

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

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

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

Options on Futures Contracts. The Fund may purchase and sell put and
call options, including put and call options on futures contracts. Futures
contracts obligate the buyer to take and the seller to make delivery at a future
date of a specified quantity of a financial instrument or an amount of cash
based on the value of a securities index. Currently, futures contracts are
available on various types of fixed income securities, including but not limited
to U.S. Treasury bonds, notes and bills, Eurodollar certificates of deposit and
on indexes of fixed income securities.

Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract entitles its holder to decide on or before a future date whether to
enter into such a contract. If the holder decides not to exercise its option,
the holder may close out the option position by entering into an offsetting
transaction or may decide to let the option expire and forfeit the premium
thereon. The purchaser of an option on a futures contract pays a premium for the
option but makes no initial margin payments or daily payments of cash in the
nature of "variation" margin payments to reflect the change in the value of the
underlying contract as does a purchaser or seller of a futures contract.

The seller of an option on a futures contract receives the premium paid
by the purchaser and may be required to pay initial margin. Amounts equal to the
initial margin and any additional collateral required on any options on futures
contracts sold by the Fund are paid by the Fund into a segregated account, in
the name of the FCM, as required by the 1940 Act and the SEC's interpretations
thereunder.

Combined Positions. The Fund may purchase and write options in
combination with each other, or in combination with futures or forward
contracts, to adjust the risk and return characteristics of the overall
position. For example, the Fund may purchase a put option and write a call
option on the same underlying instrument, in order to construct a combined
position whose risk and return characteristics are similar to selling a futures
contract. Another possible combined position would involve writing a call option
at one strike price and buying a call option at a lower price, in order to
reduce the risk of the written call option in the event of a substantial price
increase. Because combined options positions involve multiple trades, they
result in higher transaction costs and may be more difficult to open and close
out.

Correlation of Price Changes. Because there are a limited number of
types of exchange-traded options and futures contracts, it is likely that the
standardized options and futures contracts available will not match the Fund's
current or anticipated investments exactly. The Fund may invest in options and
futures contracts based on securities with different issuers, maturities, or
other characteristics from the securities in which it typically invests, which
involves a risk that the options or futures position will not track the
performance of the Fund's other investments.

Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Fund's investments well. Options and futures contracts prices are affected by
such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Fund may purchase or sell futures
contracts or purchase put and call options, including put and call options on
futures contracts with a greater or lesser value than the securities it wishes
to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in the Fund's options or
futures positions are poorly correlated with its other investments, the
positions may fail to produce anticipated gains or result in losses that are not
offset by gains in other investments.

Liquidity of Options and Futures Contracts. There is no assurance a
liquid market will exist for any particular option or futures contract at any
particular time even if the contract is traded on an exchange. In addition,
exchanges may establish daily price fluctuation limits for options and futures
contracts and may halt trading if a contract's price moves up or down more than
the limit in a given day. On volatile trading days when the price fluctuation
limit is reached or a trading halt is imposed, it may be impossible for the Fund
to enter into new positions or close out existing positions. If the market for a
contract is not liquid because of price fluctuation limits or otherwise, it
could prevent prompt liquidation of unfavorable positions, and could potentially
require the Fund to continue to hold a position until delivery or expiration
regardless of changes in its value. As a result, the Fund's access to other
assets held to cover its options or futures positions could also be impaired.
(See "Exchange Traded and OTC Options" above for a discussion of the liquidity
of options not traded on an exchange.)

Position Limits. Futures exchanges can limit the number of futures and
options on futures contracts that can be held or controlled by an entity. If an
adequate exemption cannot be obtained, the Fund or the Advisor may be required
to reduce the size of its futures and options positions or may not be able to
trade a certain futures or options contract in order to avoid exceeding such
limits.

Asset Coverage for Futures Contracts and Options Positions. Although
the Fund will not be commodity pools, certain derivatives subject the Fund to
the rules of the Commodity Futures Trading Commission which limit the extent to
which the Fund can invest in such derivatives. The Fund may invest in futures
contracts and options with respect thereto for hedging purposes without limit.
However, the Fund may not invest in such contracts and options for other
purposes if the sum of the amount of initial margin deposits and premiums paid
for unexpired options with respect to such contracts, other than for bona fide
hedging purposes, exceeds 5% of the liquidation value of the Fund's assets,
after taking into account unrealized profits and unrealized losses on such
contracts and options; provided, however, that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount may be excluded in
calculating the 5% limitation.

In addition, the Fund will comply with guidelines established by the
SEC with respect to coverage of options and futures contracts by mutual funds,
and if the guidelines so require, will set aside appropriate liquid assets in a
segregated custodial account in the amount prescribed. Securities held in a
segregated account cannot be sold while the futures contract or option is
outstanding, unless they are replaced with other suitable assets. As a result,
there is a possibility that segregation of a large percentage of the Fund's
assets could impede portfolio management or the Fund's ability to meet
redemption requests or other current obligations.

Swaps and Related Swap Products. The Fund may engage in swap
transactions, including, but not limited to, interest rate, currency, securities
index, basket, specific security and commodity swaps, interest rate caps, floors
and collars and options on interest rate swaps (collectively defined as "swap
transactions").

The Fund may enter into swap transactions for any legal purpose
consistent with its investment objective and policies, such as for the purpose
of attempting to obtain or preserve a particular return or spread at a lower
cost than obtaining that return or spread through purchases and/or sales of
instruments in cash markets, to protect against currency fluctuations, as a
duration management technique, to protect against any increase in the price of
securities the Fund anticipates purchasing at a later date, or to gain exposure
to certain markets in the most economical way possible. The Fund will not sell
interest rate caps, floors or collars if it does not own securities with coupons
which provide the interest that the Fund may be required to pay.

Swap agreements are two-party contracts entered into primarily by
institutional counterparties for periods ranging from a few weeks to several
years. In a standard swap transaction, two parties agree to exchange the returns
(or differentials in rates of return) that would be earned or realized on
specified notional investments or instruments. The gross returns to be exchanged
or "swapped" between the parties are calculated by reference to a "notional
amount," i.e., the return on or increase in value of a particular dollar amount
invested at a particular interest rate, in a particular foreign currency or
commodity, or in a "basket" of securities representing a particular index. The
purchaser of an interest rate cap or floor, upon payment of a fee, has the right
to receive payments (and the seller of the cap is obligated to make payments) to
the extent a specified interest rate exceeds (in the case of a cap) or is less
than (in the case of a floor) a specified level over a specified period of time
or at specified dates. The purchaser of an interest rate collar, upon payment of
a fee, has the right to receive payments (and the seller of the collar is
obligated to make payments) to the extent that a specified interest rate falls
outside an agreed upon range over a specified period of time or at specified
dates. The purchaser of an option on an interest rate swap, upon payment of a
fee (either at the time of purchase or in the form of higher payments or lower
receipts within an interest rate swap transaction) has the right, but not the
obligation, to initiate a new swap transaction of a pre-specified notional
amount with pre-specified terms with the seller of the option as the
counterparty.

The "notional amount" of a swap transaction is the agreed upon basis
for calculating the payments that the parties have agreed to exchange. For
example, one swap counterparty may agree to pay a floating rate of interest
(e.g., 3 month LIBOR) calculated based on a $10 million notional amount on a
quarterly basis in exchange for receipt of payments calculated based on the same
notional amount and a fixed rate of interest on a semi-annual basis. In the
event the Fund is obligated to make payments more frequently than it receives
payments from the other party, it will incur incremental credit exposure to that
swap counterparty. This risk may be mitigated somewhat by the use of swap
agreements which call for a net payment to be made by the party with the larger
payment obligation when the obligations of the parties fall due on the same
date. Under most swap agreements entered into by the Fund, payments by the
parties will be exchanged on a "net basis", and the Fund will receive or pay, as
the case may be, only the net amount of the two payments.

The amount of the Fund's potential gain or loss on any swap transaction
is not subject to any fixed limit. Nor is there any fixed limit on the Fund's
potential loss if it sells a cap or collar. If the Fund buys a cap, floor or
collar, however, the Fund's potential loss is limited to the amount of the fee
that it has paid. When measured against the initial amount of cash required to
initiate the transaction, which is typically zero in the case of most
conventional swap transactions, swaps, caps, floors and collars tend to be more
volatile than many other types of instruments.

The use of swap transactions, caps, floors and collars involves
investment techniques and risks which are different from those associated with
portfolio security transactions. If the Advisor is incorrect in its forecasts of
market values, interest rates, and other applicable factors, the investment
performance of the Fund will be less favorable than if these techniques had not
been used. These instruments are typically not traded on exchanges. Accordingly,
there is a risk that the other party to certain of these instruments will not
perform its obligations to the Fund or that the Fund may be unable to enter into
offsetting positions to terminate its exposure or liquidate its position under
certain of these instruments when it wishes to do so. Such occurrences could
result in losses to the Fund.

The Advisor will, however, consider such risks and will enter into swap
and other derivatives transactions only when it believes that the risks are not
unreasonable.

The Fund will maintain cash or liquid assets in a segregated account
with its custodian in an amount sufficient at all times to cover its current
obligations under its swap transactions, caps, floors and collars. If the Fund
enters into a swap agreement on a net basis, it will segregate assets with a
daily value at least equal to the excess, if any, of the Fund's accrued
obligations under the swap agreement over the accrued amount the Fund is
entitled to receive under the agreement. If the Fund enters into a swap
agreement on other than a net basis, or sells a cap, floor or collar, it will
segregate assets with a daily value at least equal to the full amount of the
Fund's accrued obligations under the agreement.

The Fund will not enter into any swap transaction, cap, floor, or
collar, unless the counterparty to the transaction is deemed creditworthy by the
Advisor. If a counterparty defaults, the Fund may have contractual remedies
pursuant to the agreements related to the transaction. The swap markets in which
many types of swap transactions are traded have grown substantially in recent
years, with a large number of banks and investment banking firms acting both as
principals and as agents utilizing standardized swap documentation. As a result,
the markets for certain types of swaps (e.g., interest rate swaps) have become
relatively liquid. The markets for some types of caps, floors and collars are
less liquid.

The liquidity of swap transactions, caps, floors and collars will be as
set forth in guidelines established by the Advisor and approved by the Trustees
which are based on various factors, including (1) the availability of dealer
quotations and the estimated transaction volume for the instrument, (2) the
number of dealers and end users for the instrument in the marketplace, (3) the
level of market making by dealers in the type of instrument, (4) the nature of
the instrument (including any right of a party to terminate it on demand) and
(5) the nature of the marketplace for trades (including the ability to assign or
offset the Fund's rights and obligations relating to the instrument). Such
determination will govern whether the instrument will be deemed within the 15%
restriction on investments in securities that are not readily marketable.

During the term of a swap, cap, floor or collar, changes in the value
of the instrument are recognized as unrealized gains or losses by marking to
market to reflect the market value of the instrument. When the instrument is
terminated, the Fund will record a realized gain or loss equal to the
difference, if any, between the proceeds from (or cost of) the closing
transaction and the Fund's basis in the contract.

The federal income tax treatment with respect to swap transactions,
caps, floors, and collars may impose limitations on the extent to which the Fund
may engage in such transactions.

Risk Management

The Fund may employ non-hedging risk management techniques. Examples of
risk management strategies include synthetically altering the duration of the
portfolio or the mix of securities in a portfolio. For example, if the Advisor
wishes to extend maturities in a fixed income portfolio in order to take
advantage of an anticipated decline in interest rates, but does not wish to
purchase the underlying long term securities, it might cause the Fund to
purchase futures contracts on long term debt securities. Similarly, if the
Advisor wishes to decrease fixed income securities or purchase equities, it
could cause the Fund to sell futures contracts on debt securities and purchase
futures contracts on a stock index. Such non-hedging risk management techniques
are not speculative, but because they involve leverage include, as do all
leveraged transactions, the possibility of losses as well as gains that are
greater than if these techniques involved the purchase and sale of the
securities themselves rather than their synthetic derivatives.

Portfolio Turnover

The table below sets forth the portfolio turnover rates for the Fund's
Portfolio. A rate of 100% indicates that the equivalent of all of the
Portfolio's assets have been sold and reinvested in a year. High portfolio
turnover may result in the realization of substantial net capital gains or
losses. To the extent net short term capital gains are realized, any
distributions resulting from such gains are considered ordinary income for
federal income tax purposes. See "Taxes" below.

The U.S. Fixed Income Portfolio -- For the fiscal years ended October 31,
1997, 1998 and 1999: 93%, 115% and 465%, respectively. For the semi-annual
period ended April 30, 2000 (unaudited): 247%.

INVESTMENT RESTRICTIONS

The investment restrictions of the Fund and the Portfolio are
identical, unless otherwise specified. Accordingly, references below to the Fund
also include the Fund's 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 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 the 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 and (c) make direct
investments in mortgages;

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 the Portfolio and
may be changed by their Trustees. These non-fundamental investment policies
require that the Fund and the 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 15% of the market value
of the Fund's net 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, or to short sales that are covered in accordance with SEC rules; and

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

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 the fundamental investment restriction regarding
industry concentration, JPMIM 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 JPMIM 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,
JPMIM 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 MEMBERS OF THE ADVISORY BOARD

Trustees

The Trustees of the Trust, who are also, the Trustees of the Portfolio,
their principal occupations during the past five years and dates of birth are
set forth below. The mailing address of the Trustees is c/o Pierpont Group,
Inc., 461 Fifth Avenue, New York, New York 10017.

FREDERICK S. ADDY - Trustee, Retired, Former Executive Vice President and
Chief Financial Officer, Amoco Corporation. His date of birth is January 1,
1932.

WILLIAM G. BURNS - Trustee, Retired, Former Vice Chairman and Chief
Financial Officer, NYNEX. 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 date of birth is May 23, 1934.

MATTHEW HEALEY1 - Trustee, Chairman and Chief Executive Officer; Chairman,
Pierpont Group, Inc., since prior to 1995. 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 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 for serving as
Trustee of the Trust, each of the Master Portfolios (as defined below), 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 paid by the Trust for the calendar year ended
December 31, 1999 are set forth below.

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

TOTAL TRUSTEE COMPENSATION ACCRUED BY THE
MASTER PORTFOLIOS(*), J.P. MORGAN FUNDS,
AGGREGATE TRUSTEE J.P. MORGAN SERIES TRUST AND THE TRUST
COMPENSATION DURING 1999(**)
PAID BY THE
NAME OF TRUSTEE TRUST DURING 1999
-------------------------------------- --------------------- -------------------------------------------

Frederick S. Addy, Trustee $22,488 $75,000
-------------------------------------- --------------------- -------------------------------------------

William G. Burns, Trustee $22,488 $75,000
-------------------------------------- --------------------- -------------------------------------------

Arthur C. Eschenlauer, Trustee $22,488 $75,000
-------------------------------------- --------------------- -------------------------------------------

Matthew Healey, Trustee(***), $22,488 $75,000
Chairman and Chief Executive
Officer
-------------------------------------- --------------------- -------------------------------------------

Michael P. Mallardi, Trustee $22,488 $75,000
-------------------------------------- --------------------- -------------------------------------------
</TABLE>

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

(**) 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 Trust, J.P. Morgan Funds and
J.P. Morgan Series Trust) in the fund complex.

(***) During 1999, Pierpont Group, Inc. paid Mr. Healey, in his role as
Chairman of Pierpont Group, Inc., compensation in the amount of $153,800,
contributed $23,100 to a defined contribution plan on his behalf and paid
$17,300 in insurance premiums for his benefit.

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 the 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 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 Portfolio have
agreed to pay Pierpont Group, Inc. a fee in an amount representing its
reasonable costs in performing these services. 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 Portfolio during
the indicated fiscal periods are set forth below:

The U.S. Fixed Income Portfolio -- For the fiscal years ended October 31,
1997, 1998 and 1999: $35,577, $35,661 and $30,562, respectively. For the
semi-annual period ended April 30, 2000 (unaudited): $12,713.

Advisory Board

The Trustees determined as of January 26, 2000 to establish an advisory
board and appoint four members ("Members of the Advisory Board") thereto. Each
member serves at the pleasure of the Trustees. The advisory board is distinct
from the Trustees and provides advice to the Trustees as to investment,
management and operations of the Trust; but has no power to vote upon any matter
put to a vote of the Trustees. The advisory board and the members thereof also
serve each of the Trusts and the Master Portfolios. It is also the current
intention of the Trustees that the Members of the Advisory Board will be
proposed at the next shareholders' meeting, expected to be held within a year
from the date hereof, for election as Trustees of each of the Trusts and the
Master Portfolios. The creation of the Advisory Board and the appointment of the
members thereof was designed so that the Board of Trustees will continuously
consist of persons able to assume the duties of Trustees and be fully familiar
with the business and affairs of each of the Trusts and the Master Portfolios,
in anticipation of the current Trustees reaching the mandatory retirement age of
seventy. Each member of the Advisory Board is paid an annual fee of $75,000 for
serving in this capacity for the Trust, each of the Master Portfolios, the J.P.
Morgan Funds and the J.P. Morgan Series Trust and is reimbursed for expenses
incurred in connection for such service. The members of the Advisory Board may
hold various other directorships unrelated to these funds. The mailing address
of the Members of the Advisory Board is c/o Pierpont Group, Inc., 461 Fifth
Avenue, New York, New York 10017. Their names, principal occupations during the
past five years and dates of birth are set forth below:

Ann Maynard Gray - Former President, Diversified Publishing Group and
Vice President, Capital Cities/ABC, Inc. Her date of birth is August 22, 1945.

John R. Laird - Retired; Former Chief Executive Officer, Shearson
Lehman Brothers and The Boston Company. His date of birth is June 21, 1942.

Gerard P. Lynch - Retired; Former Managing Director, Morgan Stanley
Group and President and Chief Operating Officer, Morgan Stanley Services, Inc.
His date of birth is October 5, 1936.

James J. Schonbachler - Retired; Prior to September, 1998, Managing
Director, Bankers Trust Company and Chief Executive Officer and Director,
Bankers Trust A.G., Zurich and BT Brokerage Corp. His date of birth is January
26, 1943.

Officers

The Trust's and Portfolio's executive officers (listed below), other
than the Chief Executive officer and the officers who are employees of the
Advisor, 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 - Chairman and Chief Executive Officer; Chairman,
Pierpont Group, since prior to 1995. His address is c/o Pierpont Group, Inc.,
461 Fifth Avenue, New York, New York 10017. 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.

JACQUELINE HENNING - Assistant Secretary and Assistant Treasurer of (The
U.S. Fixed Income and Short Term Bond 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 since 1990. 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.

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 as Manager of the Funds
Infrastructure group and is responsible for the management of special projects.
Prior to January 2000, she served as Manager of the Tax Group in the Funds
Administration group and was responsible for U.S. mutual fund tax matters. Her
address is 60 Wall Street, New York, New York 10260. Her date of birth is
September 26, 1965.

.........ELBA VASQUEZ - Vice President and Assistant Secretary. Vice
President of FDI since February 1999. Ms. Vasquez served as a Sales Associate
for FDI from May 1996. Prior to that she served in various mutual fund sales and
marketing positions for U.S. Trust Company of New York. Her date of birth is
December 14, 1961.

CODE OF ETHICS

.........The Trust, Advisor and FDI have adopted codes of ethics pursuant
to Rule 17j-1 under the 1940 Act. Each of these codes permits personnel subject
to such code to invest in securities, including securities that may be purchased
or held by the Portfolio. Such purchases, however, are subject to preclearance
and other procedures reasonably necessary to prevent a access persons from
engaging in any unlawful conduct set forth in Rule 17j-1 under the 1940 Act.

INVESTMENT ADVISOR

The Fund have not retained the services of an investment advisor
because the Fund seeks to achieve its investment objective by investing all of
its investable assets in the 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. Prior to October 28, 1998, 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 advisor under the
Investment Advisers Act of 1940, as amended, 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 $369 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.

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. Morgan, also a wholly
owned subsidiary of J.P. Morgan, is a bank holding company organized under the
laws of the State of Delaware.

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 approximately 420 full
time research analysts, capital market researchers, portfolio managers and
traders and has one of the largest research staffs in the money management
industry. The Advisor has investment management divisions located in New York,
London, Tokyo, Frankfurt, and Singapore to cover companies, industries and
countries on site. 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 Agreements. The Advisor is
free to and does render similar investment advisory services to others. The
Advisor serves as investment advisor to personal investors and other investment
companies and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which the Advisor serves as trustee. The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolios. Such accounts are supervised by officers and employees of the
Advisor who may also be acting in similar capacities for the Portfolio. See
"Portfolio Transactions."

Sector weightings are generally similar to a benchmark with the
emphasis on security selection as the method to achieve investment performance
superior to the benchmark. The benchmark for the Portfolio in which the Fund
invests is currently -- Salomon Brothers Broad Investment Grade Bond Index.

The Portfolio is managed by officers 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 Advisory
Agreements, 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 0.30% the Portfolio's
average daily net assets shown below.

The table below sets forth for the Fund listed the advisory fees paid
by the Portfolio to Morgan and JPMIM, as applicable, for the fiscal period
indicated.

The U.S. Fixed Income Portfolio -- For the fiscal years ended October 31,
1997, 1998 and 1999: $2,908,384, $3,583,060 and $4,514,768, respectively. For
the semi-annual period ended April 30, 2000 (unaudited): $2,083,567.

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."

Under separate agreements, Morgan also 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.

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 a majority of the outstanding securities"
of the Fund (as defined in the 1940 Act and below) 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 Members of the Advisory Board" and "Officers"). The
Distribution Agreement will terminate automatically if assigned by either party.
The Distribution Agreement is also terminable with respect to the Fund 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 a majority of the outstanding voting securities of the
Fund", that is (i) 67% or more of the Fund's outstanding voting securities
present at a meeting if the holders of more than 50% of the Fund's outstanding
voting securities are present or represented by proxy, or (ii) more than 50% of
the Fund's outstanding voting securities, whichever is less. FDI is a wholly
owned indirect subsidiary of Boston Institutional Group, Inc. 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
Portfolios; (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,
Members of the Advisory Board 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, J.P. Morgan Funds, the Master Portfolios
and other investment companies subject to similar agreements with FDI.

The table below sets forth for the Portfolio the administrative fees
paid to FDI for the fiscal periods indicated.

The U.S. Fixed Income Portfolio -- For the fiscal years ended October 31,
1997, 1998 and 1999: $23,296, $22,913 and $19,016, respectively. For the
semi-annual period ended April 30, 2000 (unaudited): $6,486.

SERVICES AGENT

The Trust, on behalf of the Fund, and the Fund's 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 the 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, Morgan provides certain administrative
and related services to the Fund and the Portfolio, including services related
to tax compliance, preparation of financial statements, calculation of
performance data, oversight of service providers and certain regulatory and
Board of Trustee matters.

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
their net assets bear to the total net assets of the Trust, J.P. Morgan Funds,
the Master Portfolios, the other investors in the Master Portfolios for which
Morgan provides similar services and J.P. Morgan Series Trust.

The table below sets forth for the Portfolio the fees paid to Morgan as
Services Agent. See the Prospectus and "Expenses" below for applicable expense
limitations.

The U.S. Fixed Income Portfolio -- For the fiscal years ended October 31,
1997, 1998 and 1999: $300,675, $348,110 and $390,355, respectively. For the
semi-annual period ended April 30, 2000 (unaudited): $185,234.

CUSTODIAN AND TRANSFER AGENT

The Bank of New York ("BONY"), One Wall Street, New York, New York
10286, serves as the Trust's and each of the Portfolio's custodian and fund
accounting agent. Pursuant to the Custodian Contracts and Fund Accounting
Agreements with the Trust, BONY is responsible for holding portfolio securities
and cash and maintaining the books of account and records of portfolio
transactions. In the case of foreign assets held outside the United States, the
custodian employs various subcustodians in accordance with the regulations of
the SEC.

State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Fund's transfer and dividend
disbursing agent. 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
includes but is 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; 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 0.05% (expressed as a
percentage of the average daily net asset value of Fund shares owned by or for
shareholders).

The Fund may is sold to or through service organizations who are
customers of J.P. Morgan ("service organizations"), 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
"Service Organization" below. Organizations that provide record keeping or other
services to certain employee benefit or retirement plans that include the Fund
as an investment alternative may also be paid a fee.

SERVICE ORGANIZATIONS

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.

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 advisors
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 June 12, 2000.
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.

DISTRIBUTION PLAN

Rule 12b-1 (the "Rule") under the 1940 Act provides, among other
things, that an investment company may bear expenses of distributing its shares
only pursuant to a plan adopted in accordance with the Rule. On June 12, 2000,
the Trustees adopted such a plan on behalf of the Fund (the "Distribution Plan")
pursuant to which the Fund pays for distributing its shares at an annual rate
not to exceed 0.25% of the value of the average daily net assets of the Fund.
Under the Distribution Plan, the Fund may make payments to certain financial
institutions, securities dealers, and other industry professionals that have
entered into written agreements with the Fund in respect of these services. The
amounts to be paid to such institutions is based on the daily value of shares
owned by their clients. The fees payable under the Distribution Plan for
advertising, marketing and distributing are payable without regard to actual
expenses incurred. The Trustees believe that there is a reasonable likelihood
that the Distribution Plan will benefit the Fund and its shareholders.

Quarterly reports of the amounts expended under the Distribution Plan,
and the purposes for which such expenditures were incurred, will be made to the
Trustees for their review. In addition, the Distribution Plan provides that it
may not be amended to increase materially the costs which holders of the Fund's
shares may bear for distribution without approval of such shareholders and that
all material amendments of the Distribution Plan must be approved by the
Trustees, and by the Trustees who are neither "interested persons" (as defined
in the 1940 Act) of the Trust nor have any direct or indirect financial interest
in the operation of the Distribution Plan or in the related Distribution Plan
agreements, by vote cast in person at a meeting called for the purpose of
considering such amendments. The Distribution Plan and related agreements are
subject to annual approval by such vote of the Trustees cast in person at a
meeting called for the purpose of voting on the Distribution Plan and related
agreements. The Distribution Plan is terminable at any time by vote of a
majority of the Trustees who are not "interested persons" and who have no direct
or indirect financial interest in the operation of the Distribution Plan or in
the related agreements or by vote of the holders of a majority of shares, as the
case may be. A related Distribution Plan agreement is terminable without
penalty, at any time, by such vote of the Trustees or by vote of the holders of
a majority of the Fund's shares upon not more than 60 days' written notice to
any other party to such agreement. A Distribution Plan agreement will terminate
automatically in the event of its assignment (as defined in the 1940 Act).

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 Members of the
Advisory Board," "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 and Members of the Advisory Board, 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 applicable
registration fees under foreign securities laws, custodian fees and brokerage
expenses.

J.P. Morgan has agreed that it will reimburse the Fund to the extent
necessary to maintain the Fund's total operating expenses (which include
expenses of the Fund and the Portfolio) at annual rate of 0.95% of the Fund's
average daily net assets.

This limit does not cover extraordinary expenses. This reimbursement
arrangement will continue through at least February 28, 2002.

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

The U.S. Fixed Income Portfolio -- For the fiscal years ended October 31,
1997, 1998 and 1999: N/A, N/A and N/A, respectively. For the semi-annual period
ended April 30, 2000 (unaudited): 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 Fund accounts and purchase
shares only through Service Organizations. All purchase transactions in the Fund
accounts received by the service organization are processed by Morgan as
shareholder servicing agent for the customer. All purchase orders must be
accepted by the Service Organization. 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 service organization 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 Fund's Portfolio. In addition, securities accepted in
payment for shares must: (i) meet the investment objective and policies of the
acquiring Fund's Portfolio; (ii) be acquired by the Fund for investment and not
for resale (other than for resale to the Fund's 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.

Service Organizations may establish their own minimums and charge the
investor a fee for this service and other services they provide to their
customers.

<PAGE>

REDEMPTION OF SHARES

Investors may redeem shares as described in the Prospectus.

If the Trust on behalf of the Fund and its 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
Fund, 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 and the Portfolio, have elected to be governed by Rule 18f-1 under the
1940 Act pursuant to which the Fund and the Portfolio are obligated to redeem
shares solely in cash up to the lesser of $250,000 or one percent of the net
asset value of the Fund during any 90 day period for any one shareholder. The
Trust will redeem Fund shares in kind only if it has received a redemption in
kind from the 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. The Trust is in
the process of seeking exemptive relief from the SEC with respect to redemptions
in kind by the Fund. If the requested relief is granted, the Fund would then be
permitted to pay redemptions to greater than 5% shareholders in securities,
rather than in cash, to the extent permitted by the SEC and applicable law. 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.

Further Redemption Information Investors should be aware that
redemptions from the Fund may not be processed by the Service Organization.
Please call your Service Organization for more details on what constitutes
proper form and on availability of redemption proceeds. The Trust, on behalf of
the Fund, and the Portfolio, reserves 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 any other J.P.
Morgan Advisor Fund without charge. An exchange may be made so long as after the
exchange the investor has shares, in the 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 stocks 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 Fund reserves
the right to discontinue, alter or limit its exchange privilege at any time.

DIVIDENDS AND DISTRIBUTIONS

The Fund declares and pays dividends and distributions as described
under "Dividends and Distributions" in the Prospectus.

Dividends and capital gains distributions paid by the Fund are
automatically reinvested in additional shares of the Fund unless the shareholder
has elected to have them paid in cash. Dividends and distributions to be paid in
cash are credited to the shareholder's account at his or her Service
Organization. The Fund reserves the right to discontinue, alter or limit the
automatic reinvestment privilege at any time.

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 may be held pursuant to the Service Organization's procedures
regarding lost shareholders which could include automatically investing 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 separately for each class of
shares outstanding once daily as of the close of trading on the New York Stock
Exchange (normally 4:00 p.m. eastern time) on each business day 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,
Thanksgiving Day, and Christmas Day. On days when U.S. trading markets close
early in observance of these holidays, the Fund will close for purchases and
redemptions at the same time. 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. The days on which net
asset value is determined are the Fund's business days.

Portfolio securities with a maturity of 60 days or more, are generally
valued using bid quotations generally readily available from and supplied daily
by third party pricing services or brokers of comparable securities. If such
prices are not supplied by the Fund's third party pricing service or brokers,
such securities are priced in accordance with fair value procedures adopted by
the Trustees. All portfolio securities with a remaining maturity of less than 60
days are valued by the amortized cost method.

Trading in securities in most foreign markets is normally completed before
the close of trading in U.S. markets and may also take place on days on which
the U.S. markets are closed. If events materially affecting the value of
securities occur between the time when the market in which they are traded close
and the time when the Portfolio's net asset value is calculated, such securities
will be valued at fair value in accordance with procedures established by and
under the general supervision of the Trustees.

PERFORMANCE DATA

From time to time, the 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. See also the Prospectus.

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

The Fund may advertise "total return" and non-standardized total return
data. The total return shows what an investment in the Fund would have earned
over a specified period of time (one, five or ten years or since commencement of
operations, if less) assuming that all distributions and dividends by the Fund
were reinvested on the reinvestment dates during the period and less all
recurring fees. This method of calculating total return is required by
regulations of the SEC. Total return data similarly calculated, unless otherwise
indicated, over other specified periods of time may also be used. All
performance figures are based on historical earnings and are not intended to
indicate future performance.

Yield Quotations. As required by regulations of the SEC, the annualized
yield for the Fund is computed by dividing the Fund's net investment income per
share earned during a 30-day period by the net asset value on the last day of
the period. The average daily number of shares outstanding during the period
that are eligible to receive dividends is used in determining the net investment
income per share. Income is computed by totaling the interest earned on all debt
obligations during the period and subtracting from that amount the total of all
recurring expenses incurred during the period. The 30-day yield is then
annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income.

Set forth below is the historical yield information for the Fund's related
series, J.P. Morgan Bond Fund.

J.P. Morgan Bond Fund (4/30/00): 30-day yield: 6.36%.

Total Return Quotations. The Fund may advertise "total return" and
non-standardized total return data. The total return shows what an investment in
the Fund would have earned over a specified period of time (one, five or ten
years or since commencement of operations, if less) assuming that all
distributions and dividends by the Fund were reinvested on the reinvestment
dates during the period and less all recurring fees. This method of calculating
total return is required by regulations of the SEC. Total return data similarly
calculated, unless otherwise indicated, over other specified periods of time may
also be used. All performance figures are based on historical earnings and are
not intended to indicate future performance.

As required by regulations of the SEC, the average annual total return
of the Fund for a period is computed by assuming a hypothetical initial payment
of $1,000. It is then assumed that all of the dividends and distributions by the
Fund over the period are reinvested. It is then assumed that at the end of the
period, the entire amount is redeemed. The average annual total return is then
calculated by determining the annual rate required for the initial payment to
grow to the amount which would have been received upon redemption.

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

The historical performance information shown below for the Fund's
related feeder, J.P. Morgan Bond Fund, reflects operating expenses which were
lower than those of the Fund. These returns are higher than would have occurred
if an investment in the Fund had been made during the periods indicated. All
performance information will be presented in accordance with applicable SEC
staff interpretations. The applicable financial information in the registration
statement for the J.P. Morgan Fund (Registration Nos. 033-54632 and 811-07340)
is incorporated herein by reference.

J.P. Morgan Bond Fund (4/30/00): Average annual total return, 1 year:
(0.33%); average annual total return, 5 years: (6.19%); average annual total
return, 10 years: (7.21%); aggregate total return, 1 year: (0.33%); aggregate
total return, 5 years: (35.02%); aggregate total return, 10 years: (100.54%).

General. The Fund's performance will vary from time to time depending
upon market conditions, the composition of its 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.

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 any of the Fund.

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

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

Subject to the overriding objective of obtaining the best execution of
orders, the Advisor may allocate a portion of the Portfolio's brokerage
transactions to affiliates of the Advisor. Under the 1940 Act, persons
affiliated with the Portfolio and persons who are affiliated with such persons
are prohibited from dealing with the Portfolio as principal in the purchase and
sale of securities unless a permissive order allowing such transactions is
obtained from the SEC. However, affiliated persons of the Portfolio may serve as
its broker in listed or over-the-counter transactions conducted on an agency
basis provided that, among other things, the fee or commission received by such
affiliated broker is reasonable and fair compared to the fee or commission
received by non-affiliated brokers in connection with comparable transactions.
In addition, the Portfolio may no purchase securities during the existence of
any underwriting syndicate for such securities of which Morgan or an affiliate
is a member or in a private placement in which Morgan or an affiliate serves as
placement agent except pursuant to procedures adopted by the Board of Trustees
of the Portfolio that either comply with rules adopted by the SEC or with
interpretations of the SEC's staff.

Investment decisions made by the Advisor are the product of many
factors in addition to basic suitability for the particular fund or other client
in question. Thus, a particular security may be bought or sold for certain
clients even though it could have been bought or sold for other clients at the
same time. Likewise, a particular security may be bought for one or more clients
when one or more other clients are selling the same security. The Portfolio may
only sell a security to other portfolios or accounts managed by the Advisor or
its affiliates in accordance with procedures adopted by the Trustees.

It also sometimes happens that two or more clients simultaneously
purchase or sell the same security. 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 clients including other funds, 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 clients 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 the Advisor's fiduciary obligations to the
Portfolio. In some instances, this procedure might adversely affect the
Portfolio.

If the Portfolio writes options effects a closing purchase transaction
with respect to an option written by it, normally such transaction will be
executed by the same broker-dealer who executed the sale of the option. The
writing of options by the Portfolio will be subject to limitations established
by each of the exchanges governing the maximum number of options in each class
which may be written by a single investor or group of investors acting in
concert, regardless of whether the options are written on the same or different
exchanges or are held or written in one or more accounts or through one or more
brokers. The number of options which the Portfolio may write may be affected by
options written by the Advisor for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.

MASSACHUSETTS TRUST

The Trust is a "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.
Under Massachusetts law, shareholders of such a trust may, under certain
circumstances, be held personally liable as partners for the obligations of the
trust. However, the Trust's Declaration of Trust provides that the shareholders
will 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 will contain a provision to the effect that the
shareholders are not personally liable thereunder.

Effective January 1, 1998, the name of the Trust was changed from "The
JPM Institutional Funds" to "J.P. Morgan Institutional 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, Member of the Advisory Board, officer, employee or
agent of the Fund is liable to the Fund or to a shareholder, and that no
Trustee, Member of the Advisory Board, 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,
Member of the Advisory Board, 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 non-assessable. 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 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. The Trustees are also required, under certain circumstances, to assist
shareholders in communicating with other shareholders.

The Trustees have authorized the issuance and sale to the public of
shares of 33 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.

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. 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 as the Fund or the retaining of an
investment adviser to manage the Fund's assets 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 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, the Fund (as opposed to its
shareholders) will not be subject to federal income taxes on the net investment
income and capital gains that it distributes to its shareholders, provided that
at least 90% of its net investment income and realized net short-term capital
gains in excess of net long-term capital losses for the taxable year is
distributed in accordance with the Code's 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.

Distributions of net investment income, certain foreign currency gains,
and realized net short-term capital gain in excess of net long-term capital
losses 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. The Fund generally pays a monthly dividend. If
dividend payments exceed income earned by the Fund, the over distribution would
be considered a return of capital rather than a dividend payment. The Fund
intends to pay dividends in such a manner so as to minimize the possibility of a
return of capital. Distributions of net long-term capital gain (i.e., net
long-term capital gains in excess of net short-term capital losses) are taxable
to shareholders of the 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.

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 the straddle rules described below 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. Investors should thus consider the consequences
of purchasing shares in the Fund shortly before the Fund declares a sizable
dividend distribution.

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. In addition, no loss will be allowed on the
redemption or exchange of shares of the Fund, if within a period beginning 30
days before the date of such redemption or exchange and ending 30 days after
such date, the shareholder acquires (such as through dividend reinvestment)
securities that are substantially identical to shares of the Fund. Investors are
urged to consult their tax advisors concerning the limitations on the
deductibility of capital losses.

Under the Code, gains or losses attributable to disposition of foreign
currency or to certain foreign currency contracts, or to fluctuations in
exchange rates between the time the Portfolio accrues income or receivables or
expenses or other liabilities denominated in a foreign currency and the time the
Portfolio actually collects such income or pays such liabilities, are generally
treated as ordinary income or ordinary loss. Similarly, gains or losses on the
disposition of debt securities held by the Portfolio, if any, denominated in
foreign currency, to the extent attributable to fluctuations in exchange rates
between the acquisition and disposition dates are also treated as ordinary
income or loss.

Forward currency contracts, options and futures contracts entered into
by the Portfolio may create "straddles" for U.S. federal income tax purposes and
this may affect the character and timing of gains or losses realized by the
Portfolio on forward currency contracts, options and futures contracts or on the
underlying securities.

Certain options, futures and foreign currency contracts held by the
Portfolio at the end of each taxable year will be required to be "marked to
market" for federal income tax purposes -- i.e., treated as having been sold at
market value. For options and futures contracts, 60% of any gain or loss
recognized on these deemed sales and on actual dispositions will be treated as
long-term capital gain or loss, and the remainder will be treated as short-term
capital gain or loss regardless of how long the Portfolio has held such options
or futures. However, gain or loss recognized on certain foreign currency
contracts will be treated as ordinary income or loss.

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-8BEN 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 any 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

Telephone calls to the Fund, J.P. Morgan or a service organization 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.

FINANCIAL STATEMENTS

The following financial statements of the Portfolio and the report of
PricewaterhouseCoopers LLP with respect to the annual financials are
incorporated herein by reference from the 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 J.P. Morgan Funds Services at (800) 766-7722.

---------------------------------- ----------------------------------- ---------------------------------
Date of Annual Report; Date Annual Date of Semi-Annual Report; Date
Name of Portfolio Report Filed; and Accession Number Semi-Annual Report Filed; and
Accession Number
---------------------------------- ----------------------------------- ---------------------------------
The U.S. Fixed Income Portfolio 10/31/99; 1/5/00; 4/30/00; 7/7/00
0000912057-00-000294 0000912057-00-031053
---------------------------------- ----------------------------------- ---------------------------------
</TABLE>

<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.

BB - Debt rated BB are regarded as having less near-term vulnerability to
default than other speculative issues. However, they face major ongoing
uncertainties or exposure to adverse business, financial or economic
conditions which could lead to inadequate capacity to meet timely
interest and principal payments.

B - An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.

CCC - An obligation rated CCC is currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions
for the obligor to meet its financial commitment on the obligation. In
the event of adverse business, financial, or economic conditions, the
obligor is not likely to have the capacity to meet its financial
commitment on the obligation.

CC - An obligation rated CC is currently highly vulnerable to nonpayment.

C - The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments
on this obligation are being continued.

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.

A-2 - This designation indicates that the degree of safety regarding timely
payment is satisfactory.

A-3 - This designation indicates that the degree of safety regarding timely
payment is adequate.

Short-Term Tax-Exempt Notes

SP-1 - The short-term tax-exempt note rating of SP-1 is the highest
rating assigned by Standard & Poor's and has a very strong or
strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics are
given a "plus" (+) designation.

SP-2 - The short-term tax-exempt note rating of SP-2 has a satisfactory
capacity to pay principal and interest.

MOODY'S

Corporate and Municipal Bonds

Aaa - Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred
to as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa - Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.

A - Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
sometime in the future.

Baa - Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.

Ba - Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection
of interest and principal payments may be very moderate, and thereby
not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B - Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or
of maintenance of other terms of the contract over any long period of
time may be small.

Caa - Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest.

Ca - Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.

C - Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.

Commercial Paper, including Tax Exempt

Prime-1 - Issuers rated Prime-1 (or related supporting institutions)
have a superior capacity for repayment of short-term
promissory obligations. Prime-1 repayment capacity will
normally be evidenced by the following characteristics:

- Leading market positions in well established industries.

- High rates of return on funds employed.

- Conservative capitalization structures with moderate reliance on debt and
ample asset protection.

- Broad margins in earnings coverage of fixed financial charges and high
internal cash generation.

- Well established access to a range of financial markets and assured
sources of alternate liquidity.

Prime-2 Issuers rated Prime-2 (or supporting institutions) have a
strong ability for repayment of senior short-term debt
obligations. This will normally be evidenced by many of the
characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject
to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions.
Ample alternate liquidity is maintained.

Prime-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings
and profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is
maintained.

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.