JPM PIERPONT FUNDS, 485BPOS, 1997-12-29

JPM PIERPONT FUNDS
485BPOS, 1997-12-29

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As filed with the Securities and Exchange Commission on December 29, 1997.
Registration Nos. 033-54632 and 811-07340

U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 45

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 46

J.P. MORGAN FUNDS
(formerly, The JPM Pierpont Funds)
(Exact Name of Registrant as Specified in Charter)

60 State Street, Suite 1300, Boston, Massachusetts 02109
(Address of Principal Executive Offices)

Registrant's Telephone Number, including Area Code:
(617) 557-0700

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

Copy to:Stephen K. West, Esq.
Sullivan & Cromwell
125 Broad Street
New York, New York 10004

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

[ ] Immediately upon filing pursuant to paragraph (b)
[X] on January 2, 1998 pursuant to paragraph (b)
[ ] 60 days after filing pursuant to paragraph (a)(i)
[ ] on (date) pursuant to paragraph (a)(i)
[ ] 75 days after filing pursuant to paragraph (a)(ii)
[ ] on (date) pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

<PAGE>

The Tax Exempt Money Market, Tax Exempt Bond and Diversified Portfolios have
also executed this registration statement.

<PAGE>

J.P. MORGAN FUNDS
(TAX EXEMPT MONEY MARKET AND TAX EXEMPT BOND FUNDS)
CROSS-REFERENCE SHEET
(As Required by Rule 495)

PART A ITEM NUMBER: Prospectus Headings.

1. COVER PAGE: Cover Page.

2. SYNOPSIS: Investors for Whom the Funds are Designed.

3. CONDENSED FINANCIAL INFORMATION: Financial Highlights.

4. GENERAL DESCRIPTION OF REGISTRANT: Cover Page; Investors for Whom the Funds
are Designed; Investment Objectives and Policies; Additional Investment
Information; Investment Restrictions; Special Information Concerning Investment
Structure; Organization; Appendix.

5. MANAGEMENT OF THE FUND: Management of the Trust and the Portfolios;
Shareholder Servicing; Additional Information.

5A.MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not Applicable.

6. CAPITAL STOCK AND OTHER SECURITIES: Special Information Concerning Investment
Structure; Shareholder Servicing; Net Asset Value; Purchase of Shares; Taxes;
Dividends and Distributions; Organization.

7. PURCHASE OF SECURITIES BEING OFFERED: Purchase of Shares; Exchange of Shares;
Investors for Whom the Funds are Designed; Dividends and Distributions; Net
Asset Value.

8. REDEMPTION OR REPURCHASE: Redemption of Shares; Exchange of Shares; Net Asset
Value.

9. PENDING LEGAL PROCEEDINGS: Not Applicable.

PART B ITEM NUMBER: Statement of Additional Information Headings.

10. COVER PAGE: Cover Page.

11. TABLE OF CONTENTS: Table of Contents.

12. GENERAL INFORMATION AND HISTORY: General.

13. INVESTMENT OBJECTIVES AND POLICIES: Investment Objectives and Policies;
Additional Investments; Investment Restrictions; Quality and Diversification
Requirements; Appendix A.

14. MANAGEMENT OF THE FUND: Trustees and Officers.

15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of Shares.

16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Distributor;
Co-Administrator; Services Agent; Custodian and Transfer Agent; Shareholder
Servicing; Independent Accountants; Expenses.

17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.

18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.

19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares; Dividends
and Distributions.

20. TAX STATUS: Taxes.

21. UNDERWRITERS: Distributor.

22. CALCULATION OF PERFORMANCE DATA: Performance Data.

23. FINANCIAL STATEMENTS: Financial Statements.

PART C. Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.

<PAGE>

J.P. MORGAN FUNDS
(DIVERSIFIED FUND)
CROSS-REFERENCE SHEET
(As Required by Rule 495)

PART A ITEM NUMBER: Prospectus Headings.

1. COVER PAGE: Cover Page.

2. SYNOPSIS: Introduction; Investor Expenses.

3. CONDENSED FINANCIAL INFORMATION: Financial Summary, Financial
Highlights.

4. GENERAL DESCRIPTION OF REGISTRANT: Goal; Investment Approach;
Potential Risks and Rewards; Model Allocation; Risk and Reward Elements;
Master/Feeder.

5. MANAGEMENT OF THE FUND: Cover Page; J.P. Morgan; Portfolio Management;
Management and Administration.

5A.MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE: Not Applicable.

6. CAPITAL STOCK AND OTHER SECURITIES: Investing Directly; Dividends and
Distributions; Business Hours and NAV Calculations; Tax Considerations;
Master/Feeder.

7. PURCHASE OF SECURITIES BEING OFFERED: Introduction; Investing Directly;
Opening an Account; Adding to an Account; Telephone Orders; Exchanges; Business
Hours and NAV Calculations; Timing of Orders; Timing of Settlements.

8. REDEMPTION OR REPURCHASE: Selling Shares; Account and Transaction Policies.

9. PENDING LEGAL PROCEEDINGS: Not Applicable.

PART B ITEM NUMBER: Statement of Additional Information Headings.

10. COVER PAGE: Cover Page.

11. TABLE OF CONTENTS: Table of Contents.

12. GENERAL INFORMATION AND HISTORY: General.

13. INVESTMENT OBJECTIVE AND POLICIES: Investment Objective and Policies;
Additional Investments; Investment Restrictions; Quality and Diversification
Requirements; Appendix A.

14. MANAGEMENT OF THE FUND: Trustees and Officers.

15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES: Description of Shares.

16. INVESTMENT ADVISORY AND OTHER SERVICES: Investment Advisor; Distributor;
Co-Administrator; Services Agent; Custodian and Transfer Agent; Shareholder
Servicing; Eligible Institutions; Independent Accountants; Expenses.

17. BROKERAGE ALLOCATION AND OTHER PRACTICES: Portfolio Transactions.

18. CAPITAL STOCK AND OTHER SECURITIES: Massachusetts Trust; Description of
Shares.

19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED: Net Asset
Value; Purchase of Shares; Redemption of Shares; Exchange of Shares; Dividends
and Distributions.

20. TAX STATUS: Taxes.

21. UNDERWRITERS: Distributor.

22. CALCULATION OF PERFORMANCE DATA: Performance Data.

23. FINANCIAL STATEMENTS: Financial Statements.

PART C. Information required to be included in Part C is set forth under the
appropriate items, so numbered, in Part C of this Registration Statement.

<PAGE>

i:\dsfndlgl\pierpont\121797.pea\wrapper.wpf

EXPLANATORY NOTE

This post-effective amendment No. 45 (the "Amendment") to the
Registrant's registration statement on Form N-1A (File No. 033-54632) (the
"Registration Statement") is being filed to update the Registrant's disclosure
in the Prospectuses and Statements of Additional Information relating to the
Registrant's Tax Exempt Money Market and Tax Exempt Bond Funds with financial
information for the fiscal year ended August 31, 1997. Additionally, the filing
is being made to change of the name of The JPM Pierpont Tax Exempt Money Market
Fund, The JPM Pierpont Tax Exempt Bond Fund and The JPM Pierpont Diversified
Fund to the J.P. Morgan Tax Exempt Money Market Fund, the J.P. Morgan Tax Exempt
Bond Fund and the J.P. Morgan Diversified Fund, respectively. As a result, the
Amendment does not affect any of the Registrant's currently effective
prospectuses for each other series of shares of the Registrant.

******************************************************************************

<PAGE>
- --------------------------------------------------------------------------------

PROSPECTUS
J.P. Morgan Tax Exempt Money Market Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) 521-5411

J.P. Morgan Tax Exempt Money Market Fund (the "Fund") seeks to provide a high
level of current income exempt from federal income tax and maintain a high level
of liquidity. It is designed for investors who seek current income exempt from
federal income tax, stability of capital and liquidity.

The Fund is a diversified no-load mutual fund for which there are no sales
charges or exchange or redemption fees. The Fund is a series of the J.P. Morgan
Funds, an open-end management investment company organized as a Massachusetts
business trust (the "Trust").

UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE TAX EXEMPT MONEY MARKET PORTFOLIO (THE
"PORTFOLIO"), A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY
HAVING THE SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE
PORTFOLIO THROUGH A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE ON PAGE 4.

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

This Prospectus sets forth concisely the information about the Fund that a
prospective investor ought to know before investing and it should be retained
for future reference. Additional information about the Fund has been filed with
the Securities and Exchange Commission in a Statement of Additional Information
dated January 2, 1998 (as supplemented from time to time). This information is
incorporated herein by reference and is available without charge upon written
request from the Fund's Distributor, Funds Distributor, Inc. ("FDI"), 60 State
Street, Suite 1300, Boston, Massachusetts 02109, Attention: J.P. Morgan Funds,
or by calling (800) 221-7930.

INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR. ALTHOUGH
THE FUND SEEKS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE, THERE
CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO CONTINUE TO DO SO.

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

THE DATE OF THIS PROSPECTUS IS JANUARY 2, 1998.
<PAGE>
TABLE OF CONTENTS

<TABLE>
<S> <C>
Page
Investors for Whom the Fund is Designed................ 1
Financial Highlights................................... 3
Special Information Concerning Investment
Structure............................................ 4
Investment Objective and Policies...................... 5
Additional Investment Information and Risk
Factors.............................................. 6
Investment Restrictions................................ 8
Management of the Trust and the Portfolio.............. 9
Shareholder Servicing.................................. 11

Page

Purchase of Shares..................................... 12
Redemption of Shares................................... 13
Exchange of Shares..................................... 13
Dividends and Distributions............................ 14
Net Asset Value........................................ 14
Organization........................................... 15
Taxes.................................................. 15
Additional Information................................. 17
</TABLE>
<PAGE>

J.P. Morgan Tax Exempt Money Market Fund

INVESTORS FOR WHOM THE FUND IS DESIGNED

The Fund is designed for investors who seek current income exempt from federal
income tax, stability of capital and liquidity. See Taxes. The Fund seeks to
achieve its investment objective by investing all of its investable assets in
The Tax Exempt Money Market Portfolio, a diversified open-end management
investment company having the same investment objective as the Fund. Since the
investment characteristics and experience of the Fund will correspond directly
with those of the Portfolio, the discussion in this Prospectus focuses on the
investments and investment policies of the Portfolio.

J.P. MORGAN TAX EXEMPT MONEY MARKET FUND SEEKS TO MAINTAIN A STABLE NET ASSET
VALUE OF $1.00 PER SHARE; THERE CAN BE NO ASSURANCE THAT IT WILL BE ABLE TO
CONTINUE TO DO SO.

The Fund requires a minimum initial investment of $2,500. The minimum subsequent
investment is $500. If a shareholder reduces his or her investment in shares of
the Fund to less than the $10,000 applicable minimum investment, the investment
may subject to mandatory redemption. See Redemption of Shares--Mandatory
Redemption by the Fund.

This Prospectus describes the financial history, investment objective and
policies, management and operation of the Fund to enable investors to decide if
the Fund suits their needs. The Fund operates in a two-tier master-feeder
investment fund structure. The Trustees believe that the Fund may achieve
economies of scale over time by utilizing this investment structure.

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

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

* Certain Eligible Institutions (defined below) may impose fees in connection
with the purchase of the Fund's shares through such institutions.

1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*

Advisory Fees............................................................................. 0.18%
Rule 12b-1 Fees........................................................................... None
Other Expenses............................................................................ 0.28%
---------
Total Operating Expenses.................................................................. 0.46%
</TABLE>

Fees and expenses are expressed as a percentage of the average net assets of the
Fund for the fiscal year ended August 31, 1997. See Management of the Trust and
the Portfolio.

EXAMPLE

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

1 Year....................................................................................... $ 5
3 Years...................................................................................... $ 15
5 Years...................................................................................... $ 26
10 Years..................................................................................... $ 58
</TABLE>

The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Administrative Services and the Shareholder Servicing Agreements,
organization expenses, the fees paid to Pierpont Group, Inc. under the Fund
Services Agreements, the fees paid to FDI under the Co-Administration
Agreements, the fees paid to State Street Bank and Trust Company as custodian
and transfer agent, and other usual and customary expenses of the Fund and the
Portfolio. For a more detailed description of contractual fee arrangements, see
Management of the Trust and the Portfolio and Shareholder Servicing. In
connection with the above Example, please note that $1,000 is less than the
Fund's minimum investment requirement and that there are no redemption or
exchange fees of any kind. See Purchase of Shares and Redemption of Shares. THE
EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR ILLUSTRATIVE PURPOSES. IT
SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE PERFORMANCE; ACTUAL EXPENSES
MAY BE MORE OR LESS THAN THOSE SHOWN.

2
<PAGE>
FINANCIAL HIGHLIGHTS

The following selected data for a share outstanding for the indicated periods
should be read in conjuction with the financial statements and related notes
which are contained in the Fund's annual report and are incorporated by
reference into the Statement of Additional Information. The following selected
data have been audited by independent accountants. The Fund's annual report
includes a discussion of those factors, strategies and techniques that
materially affected the Fund's performance during the period of the report, as
well as certain related information. A copy of the Fund's annual report will be
made available without charge upon request.

<TABLE>
<CAPTION>
For the fiscal year ended August 31
-----------------------------------------------------
1997 1996 1995 1994 1993 (1)
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>

Net Asset Value, Beginning of Period.... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
Income from Investment Operations:
Net Investment Income................. 0.0314 0.0318 0.0336 0.0212 0.0214
Net Realized Gain (Loss) on
Investment........................... (0.0000 (a) (0.0000 (a) (0.0002) (0.0000 (a) 0.0001
--------- --------- --------- --------- ---------
Total from Investment Operations........ 0.0314 0.0318 0.0334 0.0212 0.0215
--------- --------- --------- --------- ---------
Less Distributions:
Dividends from Net Investment
Income............................... (0.0314) (0.0318) (0.0336) (0.0212) (0.0214)
Distributions from Net Realized
Gains................................ -- -- -- (0.0000 (a) (0.0002)
--------- --------- --------- --------- ---------
Total Distributions..................... (0.0314) (0.0318) (0.0336) (0.0212) (0.0216)
--------- --------- --------- --------- ---------
Net Asset Value, End of Period.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Total Return............................ 3.18% 3.23% 3.41% 2.14% 2.15%
Ratios and Supplemental Data:
Net Assets, End of Period (In
Thousands)........................... $1,103,955 $1,050,371 $ 985,069 $ 973,599 $1,007,330
Ratio to Average Net Assets:
Expenses............................ 0.46% 0.48% 0.51% 0.52% 0.52%
Net Investment Income............... 3.13% 3.17% 3.35% 2.10% 2.14%
Decrease Reflected in Above Expense
Ratio due to Expense
Reimbursements..................... -- -- 0.00%(b) 0.01% 0.01%
</TABLE>

- ------------
(1) In July, 1993 the Fund's predecessor contributed all of its investable
assets to The Tax Exempt Money Market Portfolio.

(a) Less than $0.0001 per share.

(b) Less than 0.01%.

3
<PAGE>
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 Portfolio, a separate registered investment company with the same investment
objective as the Fund. The investment objective of the Fund or Portfolio may be
changed only with the approval of the holders of the outstanding shares of the
Fund and the Portfolio. The master-feeder investment fund structure has been
developed relatively recently, so shareholders should carefully consider this
investment approach.

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

The Trust may withdraw the investment of 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 described below with respect to the Portfolio.

Certain changes in the Portfolio's investment objective, policies or
restrictions, or a failure by the Fund's shareholders to approve a change in the
Portfolio's investment objective or 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
effect on the outcome of such matters.

4
<PAGE>
For more information about the Portfolio's investment objective, policies and
restrictions, see Investment Objective and Policies, Additional Investment
Information and Risk Factors and Investment Restrictions. For more information
about the Portfolio's management and expenses, see Management of the Trust and
the Portfolio. For more information about changing the investment objective,
policies and restrictions of the Fund or the Portfolio, see Investment
Restrictions.

INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund and the Portfolio is described below,
together with the policies they employ in their efforts to achieve this
objective. Additional information about the investment policies of the Fund and
the Portfolio appears in the Statement of Additional Information under
Investment Objectives and Policies. There can be no assurance that the
investment objective of the Fund or the Portfolio will be achieved.

The Fund's investment objective is to provide a high level of current income
that is exempt from federal income tax and maintain a high level of liquidity.
The Fund is designed for investors who seek current income exempt from federal
income tax, stability of capital and liquidity. See Taxes. The Fund attempts to
achieve its objective by investing all of its investable assets in The Tax
Exempt Money Market Portfolio, 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 the following municipal securities which earn interest exempt from
federal income tax in the opinion of bond counsel for the issuer and which have
effective maturities not greater than thirteen months and by maintaining a
dollar-weighted average portfolio maturity of not more than 90 days. The market
value of obligations in which the Portfolio invests is not guaranteed and may
rise and fall in response to changes in interest rates. During normal market
conditions, the Portfolio will invest substantially all, and not less than 80%,
of its net assets in tax exempt obligations. The Portfolio generally will not
invest in taxable securities, although in abnormal market conditions, if, in the
judgment of the Advisor, tax exempt securities satisfying the Portfolio's
investment objective may not be purchased, the Portfolio may, for defensive
purposes only, temporarily invest up to 20% of its total assets in such
securities.

MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, authorities and
instrumentalities. These obligations may be general obligation bonds secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest, or they may be revenue bonds payable from specific
revenue sources, but not generally backed by the issuer's taxing power. These
include industrial development bonds where payment is the responsibility of the
private industrial user of the facility financed by the bonds. The Portfolio may
invest more than 25% of its assets in industrial development bonds, but may not
invest more than 25% of its assets in these bonds in projects of similar type or
in the same state.

MUNICIPAL NOTES. The Portfolio may also invest in municipal notes of various
types, including notes issued in anticipation of receipt of taxes, the proceeds
of the sale of bonds, other revenues or grant proceeds, as well as municipal
commercial paper and municipal demand obligations such as variable rate demand
notes and master demand obligations. The interest rate on variable rate demand
notes is adjustable at periodic intervals as specified in the notes. Master
demand obligations permit the investment of fluctuating amounts at periodically
adjusted interest rates. They are governed by agreements between the municipal
issuer and Morgan acting as agent, for no additional fee, in its capacity as
Advisor to the Portfolio and as fiduciary for other clients. Although master
demand obligations

5
<PAGE>
are not marketable to third parties, the Portfolio considers them to be liquid
because they are payable on demand. There is no specific percentage limitation
on these investments. For more information about municipal notes, see Investment
Objectives and Policies in the Statement of Additional Information.

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

The Portfolio may purchase municipal obligations together with puts. In
addition, the Portfolio may purchase municipal obligations on a when-issued or
delayed delivery basis, enter into repurchase and reverse repurchase agreements,
loan its portfolio securities and purchase synthetic variable rate instruments.
For a discussion of these transactions, see Additional Investment Information
and Risk Factors.

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. The Portfolio may purchase
securities on a when-issued or delayed delivery basis. Delivery of and payment
for these securities may take as long as a month or more after the date of the
purchase commitment. The value of these securities is subject to market
fluctuation during this period and for fixed income securities no interest
accrues to the Portfolio until settlement. At the time of settlement a
when-issued security may be valued at less than its purchase price. The
Portfolio maintains with the Custodian a separate account with a segregated
portfolio of securities in an amount at least equal to these commitments. When
entering into a when-issued or delayed delivery transaction, the Portfolio will
rely on the other party to consummate the transaction; if the other party fails
to do so, the Portfolio may be disadvantaged. It is the current policy of the
Portfolio not to enter into when-issued commitments exceeding in the aggregate
15% of the market value of the Portfolio's total assets less liabilities other
than the obligations created by these commitments.

REPURCHASE AGREEMENTS. The Portfolio may engage in repurchase agreement
transactions with brokers, dealers or banks that meet the credit guidelines
established by the Portfolio's Trustees. In a repurchase agreement, the
Portfolio buys a security from a seller that has agreed to repurchase it at a
mutually agreed upon date and price, reflecting the interest rate effective for
the term of the agreement. The term of these agreements is usually from
overnight to one week. A repurchase agreement may be viewed as a fully
collateralized loan of money by the Portfolio to the seller. The Portfolio
always receives securities as collateral with a market value at least equal to
the purchase price plus accrued interest and this value is maintained during the
term of the agreement. If the seller

6
<PAGE>
defaults and the collateral value declines, the Portfolio might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, the Portfolio's
realization upon the disposition of collateral may be delayed or limited.
Investments in certain repurchase agreements and certain other investments which
may be considered illiquid are limited. See Illiquid Investments; Privately
Placed and other Unregistered Securities below.

LOANS OF PORTFOLIO SECURITIES. Subject to applicable investment restrictions,
the Portfolio is permitted to lend its securities in an amount up to 33 1/3% of
the value of the Portfolio's net assets. The Portfolio may lend its securities
if such loans are secured continuously by cash or equivalent collateral or by a
letter of credit in favor of the Portfolio at least equal at all times to 100%
of the market value of the securities loaned, plus accrued interest. While such
securities are on loan, the borrower will pay the Portfolio any income accruing
thereon. Loans will be subject to termination by the Portfolio in the normal
settlement time, generally three business days after notice, or by the borrower
on one day's notice. Borrowed securities must be returned when the loan is
terminated. Any gain or loss in the market price of the borrowed securities
which occurs during the term of the loan inures to the Portfolio and its
respective investors. The Portfolio may pay reasonable finders' and custodial
fees in connection with a loan. In addition, the Portfolio will consider all
facts and circumstances, including the creditworthiness of the borrowing
financial institution, and the Portfolio will not make any loans in excess of
one year.

Loans of portfolio securities may be considered extensions of credit by the
Portfolio. The risks to the Portfolio with respect to borrowers of its portfolio
securities are similar to the risks to the Portfolio with respect to sellers in
repurchase agreement transactions. See Repurchase Agreements above. The
Portfolio will not lend its securities to any officer, Trustee, Director,
employee or other affiliate of the Portfolio, the Advisor or the Distributor,
unless otherwise permitted by applicable law.

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

TAXABLE INVESTMENTS. The Portfolio attempts to invest its assets in tax exempt
municipal securities; however, under certain circumstances the Portfolio is
permitted to invest up to 20% of the value of its total assets in securities,
the interest income on which may be subject to federal, state or local income
taxes. The Portfolio may make taxable investments pending investment of proceeds
from sales of its interests or portfolio securities, pending settlement of
purchases of portfolio securities, to maintain liquidity or when it is advisable
in Morgan's opinion because of adverse market conditions. The Portfolio will
invest in taxable securities only if there are no tax exempt securities
available for purchase or if the expected return from an investment in taxable
securities exceeds the expected return on available tax exempt securities. In
abnormal market conditions, if, in the judgement of Morgan, tax exempt
securities satisfying the Portfolio's investment objectives may not be
purchased, the Portfolio may, for defensive purposes only, temporarily invest up
to 20% of its total assets in money market securities, the interest on which is
subject to federal, state, or local income taxes. The taxable investments
permitted for the Portfolio include obligations of the U.S. Government and its
agencies and instrumentalities, bank obligations, commercial paper and
repurchase agreements.

PUTS. The Portfolio may purchase without limit municipal bonds or notes together
with the right to resell them at an agreed price or yield within a specified
period prior to maturity. This right to resell is known as a put. The

7
<PAGE>
aggregate price paid for securities with puts may be higher than the price which
otherwise would be paid. Consistent with the investment objective of the
Portfolio and subject to the supervision of the Trustees, the purpose of this
practice is to permit the Portfolio to be fully invested in tax exempt
securities while maintaining the necessary liquidity to purchase securities on a
when-issued basis, to meet unusually large withdrawals and to purchase at a
later date securities other than those subject to the put. The principal risk of
puts is that the put writer may default on its obligation to repurchase. Morgan
will monitor each writer's ability to meet its obligations under puts.

The amortized cost method is used by the Portfolio to value all municipal
securities; no value is assigned to any puts.

SYNTHETIC VARIABLE RATE INSTRUMENTS. The Portfolio may invest in certain
synthetic variable rate instruments. Such instruments generally involve the
deposit of a long-term tax exempt bond in a custody or trust arrangement and the
creation of a mechanism to adjust the long-term interest rate on the bond to a
variable short-term rate and a right (subject to certain conditions) on the part
of the purchaser to tender it periodically to a third party at par. Morgan will
review the structure of synthetic variable rate instruments to identify credit
and liquidity risks (including the conditions under which the right to tender
the instrument would no longer be available) and will monitor those risks. In
the event that the right to tender the instrument is no longer available, the
risk to the Portfolio will be that of holding the long-term bond, which may
require the disposition of the bond which could be at a loss.

ILLIQUID INVESTMENTS; PRIVATELY PLACED AND OTHER UNREGISTERED SECURITIES. The
Portfolio may not acquire any illiquid securities if, as a result thereof, more
than 10% of the Portfolio's net assets would be in illiquid investments. Subject
to this non-fundamental policy limitation, the Portfolio may acquire investments
that are illiquid or have limited liquidity, such as private placements or
investments that are not registered under the Securities Act of 1933, as amended
(the "1933 Act"), and cannot be offered for public sale in the United States
without first being registered under the 1933 Act. An illiquid investment is any
investment that cannot be disposed of within seven days in the normal course of
business at approximately the amount at which it is valued by the Portfolio. The
price the Portfolio pays for illiquid securities or receives upon resale may be
lower than the price paid or received for similar securities with a more liquid
market. Accordingly the valuation of these securities will reflect any
limitations on their liquidity.

The Portfolio 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.

INVESTMENT RESTRICTIONS

As a diversified investment company, 75% of the assets of the Portfolio are
subject to the following fundamental limitations: (a) the Portfolio may not
invest more than 5% of its total assets in the securities of any one issuer,
except U.S. government securities, and (b) the Portfolio may not own more than
10% of the outstanding voting securities of any one issuer.

8
<PAGE>
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same
investment restrictions as the Portfolio, except that the Fund may invest all of
its investable assets in another open-end investment company with the same
investment objective and restrictions (such as the Portfolio). References below
to the Portfolio's investment restrictions also include the Fund's investment
restrictions.

The Portfolio may not (i) borrow money, except from banks for temporary,
extraordinary or emergency purposes and then only in amounts up to 10% of the
value of the Portfolio's total assets, taken at cost at the time of borrowing,
or purchase securities while borrowings exceed 5% of its total assets; or
mortgage, pledge or hypothecate any assets except in connection with any such
borrowings in amounts up to 10% of the value of the Portfolio's net assets at
the time of borrowing; or (ii) acquire industrial revenue bonds if as a result
more than 5% of the Portfolio's total assets would be invested in industrial
revenue bonds where payment of principal and interest is the responsibility of
companies with fewer than three years of operating history.

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

MANAGEMENT OF THE TRUST AND THE PORTFOLIO

TRUSTEES. Pursuant to the Declarations of Trust for the Trust and for the
Portfolio, the Trustees decide upon matters of general policy and review the
actions of the Advisor and other service providers. The Trustees of the Trust
and of the Portfolio are identified below.

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

A majority of the disinterested Trustees have adopted written procedures
reasonably appropriate to deal with potential conflicts of interest arising from
the fact that the same individuals are Trustees of the Trust, the Portfolio and
the J.P. Morgan Institutional Funds, up to and including creating a separate
board of trustees. See Trustees and Officers in the Statement of Additional
Information for more information about the Trustees and Officers of the Fund and
the Portfolio.

9
<PAGE>
Pierpont Family of Funds for the purpose of providing these services at cost to
these funds. See Trustees and Officers in the Statement of Additional
Information. The principal offices of Pierpont Group, Inc. are located at 461
Fifth Avenue, New York, New York 10017.

ADVISOR. The Fund has not retained the services of an investment adviser because
the Fund seeks to achieve its investment objective by investing all of its
investable assets in the Portfolio. The Portfolio has retained the services of
Morgan as Investment Advisor. Morgan, with principal offices at 60 Wall Street,
New York, New York 10260, is a New York trust company which conducts a general
banking and trust business. Morgan is a wholly owned subsidiary of J.P. Morgan &
Co. Incorporated ("J.P. Morgan"), a bank holding company organized under the
laws of Delaware. Through offices in New York City and abroad, J.P. Morgan,
through the Advisor and other subsidiaries, offers a wide range of services to
governmental, institutional, corporate and individual customers and acts as
investment adviser to individual and institutional clients with combined assets
under management of over $240 billion. Morgan provides investment advice and
portfolio management services to the Portfolio. Subject to the supervision of
the Portfolio's Trustees, Morgan makes the Portfolio's day-to-day investment
decisions, arranges for the execution of portfolio transactions and generally
manages the Portfolio's investments. See Investment Advisor in the Statement of
Additional Information.

The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio (the inception date of
each person's responsibility for the Portfolio and her or his business
experience for the past five years is indicated parenthetically): Daniel B.
Mulvey, Vice President (since August, 1995, employed by Morgan since September
1992), and Richard W. Oswald, Vice President (since October 1996, employed by
Morgan since 1996 and by CBS prior to October, 1996).

As compensation for the services rendered and related expenses borne by Morgan
under the Investment Advisory Agreement with the Portfolio, the Portfolio has
agreed to pay Morgan a fee, which is computed daily and may be paid monthly, at
the annual rate of 0.20% of the Portfolio's average daily net assets up to $1
billion, and 0.10% of average daily net assets in excess of $1 billion.

Under separate agreements, Morgan also provides administrative and related
services to the Fund and the Portfolio and shareholder services to shareholders
of the Fund. See Administrative Services Agent and Shareholder Servicing below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.

CO-ADMINISTRATOR. Pursuant to Co-Administration Agreements with the Trust and
the Portfolio, Funds Distributor, Inc. ("FDI") serves as the Co-Administrator
for the Fund and the Portfolio. FDI (i) provides office space, equipment and
clerical personnel for maintaining the organization and books and records of the
Fund and the Portfolio; (ii) provides officers for the Trust and the Portfolio;
(iii) prepares and files documents required for notification of state securities
administrators; (iv) reviews and files marketing and sales literature; (v) files
Portfolio regulatory documents and mails Portfolio communications to Trustees
and investors; and (vi) maintains related books and records. See Administrative
Services Agent below.

For their services under the Co-Administration Agreements, each of the Fund and
the Portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust and certain other registered
investment companies subject to similar agreements with FDI.

10
<PAGE>

ADMINISTRATIVE SERVICES AGENT. Pursuant to Administrative Services Agreements
with the Trust and the Portfolio, Morgan provides certain administrative and
related services to the Fund and the Portfolio, including services related to
tax compliance, preparation of financial statements, calculation of performance
data, oversight of service providers and certain regulatory and Board of
Trustees matters.

Under the Administrative Services Agreements, each of the Fund and the Portfolio
has agreed to pay Morgan fees equal to its allocable share of an annual
complex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio, the other portfolios in which Series of the Trust or
the J.P. Morgan Institutional Funds invest and the J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7 billion of
their aggregate average daily net assets and 0.04% of such aggregate average
daily net assets in excess of $7 billion, less the complex-wide fees payable to
FDI.

DISTRIBUTOR. FDI, a registered broker-dealer, also serves as the Distributor of
shares of the Fund and as exclusive placement agent for the Portfolio. FDI is a
wholly-owned indirect subsidiary of Boston Institutional Group, Inc. FDI's
principal business address is 60 State Street, Suite 1300, Boston, Massachusetts
02109.

CUSTODIAN. State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Fund's and the Portfolio's
custodian and fund accounting and transfer agent and the Fund's dividend
disbursing agent. State Street also keeps the books of account for the Fund and
the Portfolio.

EXPENSES. In addition to the fees payable to Morgan, FDI and Pierpont Group,
Inc. under the various agreements discussed under Trustees, Advisor,
Administrator and Administrative Services Agent above and Shareholder Servicing
below, 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, registration fees under
federal securities laws, and extraordinary expenses applicable to the Fund or
the Portfolio. For the Fund, such expenses also include transfer, registrar and
dividend disbursement costs, the expenses of printing and mailing reports,
notices and proxy statements to Fund shareholders, and registration fees under
state securities laws. For the Portfolio, such expenses also include custodian
fees and brokerage expenses.

SHAREHOLDER SERVICING

Pursuant to a Shareholder Servicing Agreement with the Trust, Morgan acts as
shareholder servicing agent for its customers and other Fund investors who are
customers of an eligible institution which is a customer of Morgan (an "Eligible
Institution"). The Fund pays Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset value of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.15% of the Fund's average daily net assets up to $2 billion and
0.10% of average daily net assets in excess of $2 billion. Under the terms of
the Shareholder Servicing Agreement with the Fund, Morgan may delegate one or
more of its responsibilities to other entities at Morgan's expense.

The Fund's Shares may be sold to or through Eligible Institutions, including
financial institutions and broker-dealers, that may be paid fees by Morgan or
its affiliates for services provided to their clients that invest in the Fund.
See Eligible Institutions. Organizations that provide recordkeeping or other
services to certain employee benefit or retirement plans that include the Fund
as an investment alternative may also be paid a fee.

11
<PAGE>
Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) 521-5411.

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

PURCHASE OF SHARES

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

The Fund requires a minimum initial investment of $2,500. The minimum subsequent
investment for all investors is $500. These minimum investment requirements may
be waived for certain investors, including investors for whom the Advisor is a
fiduciary, who are employees of the Advisor, who maintain related accounts with
The J.P. Morgan Funds or the Advisor, who make investments for a group of
clients, such as financial advisors, trust companies and investment advisors, or
who maintain retirement accounts with the Fund or other J.P. Morgan Funds.

PURCHASE PRICE AND SETTLEMENT. The Fund's shares are sold on a continuous basis
without a sales charge at the net asset value per share next determined after
receipt of an order. Prospective investors may purchase shares with the
assistance of an Eligible Institution that may establish its own terms,
conditions and charges.

To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor and to transfer
immediately available funds to the Fund's Distributor on the same day. Any
shareholder may also call J.P. Morgan Funds Services at (800) 521-5411 for
assistance in placing an order for Fund shares. Purchase orders must be received
by 12:00 noon. New York time on a business day for the purchase to be effective
and dividends to be earned on the same day. The Fund does not accept orders
after 4:00 P.M. If funds are received after 4:00 P.M. New York time for any
reason, including that the day is a Federal Reserve holiday, the purchase is not
effective and dividends are not earned until the next business day.

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

12
<PAGE>
Although there is no sales charge levied directly by the Fund, Eligible
Institutions may establish their own terms and conditions for providing their
services and may charge investors a transaction-based or other fee for their
services. Such charges may vary among Eligible Institutions but in all cases
will be retained by the Eligible Institutions and not remitted to the Fund or
Morgan.

REDEMPTION OF SHARES

METHOD OF REDEMPTION. To redeem shares in the Fund, an investor may instruct
Morgan or his or her Eligible Institution, as appropriate, to submit a
redemption request to the Fund or may telephone J.P. Morgan Funds Services
directly at (800) 521-5411 and give the Shareholder Service Representative a
preassigned shareholder Personal Identification Number and the amount of the
redemption. The Fund executes effective redemption requests at the next
determined net asset value per share. See Net Asset Value. See Additional
Information below for an explanation of the telephone redemption policy of the
J.P. Morgan Funds.

A redemption request received on a business day prior to 12 noon. New York time
is effective on that day. A redemption request received after that time becomes
effective on the next day. Proceeds of an effective redemption are generally
deposited the same day in immediately available funds to the shareholder's
account at Morgan or at his Eligible Institution or, in the case of certain
Morgan customers, are mailed by check or wire transferred in accordance with the
customer's instructions. If a redemption request becomes effective on a day when
the New York Stock Exchange is open but which is a Federal Reserve holiday, the
proceeds are paid the next business day. See Further Redemption Information.

MANDATORY REDEMPTION BY THE FUND. If the value of a shareholder's holdings in
the Fund falls below the applicable minimum investment amount for more than 30
days because of a redemption of shares, the Fund may redeem the remaining shares
in the account 60 days after written notice to the shareholder unless the
account is increased to the minimum investment amount or more.

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

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

EXCHANGE OF SHARES

13
<PAGE>

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. See Purchase
of Shares and Redemption of Shares in this Prospectus and in the prospectuses
for the other J.P. Morgan Funds and J.P. Morgan Institutional Funds and J.P.
Morgan Series Trust. See also Additional Information below for an explanation of
the telephone exchange policy of the J.P. Morgan Funds.

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

DIVIDENDS AND DISTRIBUTIONS

All of the Fund's net investment income is declared as a dividend daily and paid
monthly. If an investor's shares are redeemed during a month, accrued but unpaid
dividends are paid with the redemption proceeds. The net investment income of
the Fund for dividend purposes consists of its pro rata share of the net income
of the Portfolio less the Fund's expenses. Dividends and distributions are
payable to shareholders of record at the time of declaration. The net investment
income of the Fund for each business day is determined immediately prior to the
determination of net asset value. Net investment income for other days is
determined at the time net asset value is determined on the prior business day.
Shares of the Fund earn dividends on the business day their purchase is
effective, but not on the business day their redemption is effective. See
Purchase of Shares and Redemption of Shares.

Net short-term capital gains, if any, will be distributed in accordance with the
requirements of the Internal Revenue Code of 1986, as amended (the "Code"), and
may be reflected in the Fund's daily dividends. Substantially all the realized
net capital gains, if any, of the Fund are declared and paid on an annual basis,
except that an additional capital gains distribution may be made in a given year
to the extent necessary to avoid the imposition of federal excise tax on the
Fund.

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 Morgan or at his Eligible Institution
or, in the case of certain Morgan customers, are mailed by check in accordance
with the customer's instructions. The Fund reserves the right to discontinue,
alter or limit the automatic reinvestment privilege at any time.

NET ASSET VALUE

Net asset value per share for the Fund is determined by subtracting from the
value of the Fund's total assets (i.e., the value of its investment in the
Portfolio and other assets) the amount of its liabilities and dividing the
remainder by the number of its outstanding shares, rounded to the nearest cent.
Expenses, including the fees payable to Morgan, are accrued daily. The Portfolio
values all portfolio securities by the amortized cost method. This method
attempts to maintain for the Fund a constant net asset value per share of $1.00.
No assurances can be given that this goal can be attained. See Net Asset Value
in the Statement of Additional Information for more information on valuation of
portfolio securities for the Portfolio.

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<PAGE>
The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund on the holidays listed under Net Asset Value in the Statement of Additional
Information.

ORGANIZATION

The Trust was organized on November 4, 1992 as an unincorporated business trust
under Massachusetts law and is an entity commonly known as a "Massachusetts
business trust". The Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional shares ($0.001 par value) of one or more
series. To date, 20 series of shares have been authorized and are available for
sale to the public. Only shares of the Fund are offered through this Prospectus.
No series of shares has any preference over any other series of shares. See
Massachusetts Trust in the Statement of Additional Information.

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

Shareholders of the Fund are entitled to one vote for each share and to the
appropriate fractional vote for each fractional share. There is no cumulative
voting. Shares have no preemptive or conversion rights. Shares are fully paid
and nonassessable by the Fund. The Trust has adopted a policy of not issuing
share certificates. The Trust does not intend 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 Declaration of
Trust. The Trustees will call a meeting of shareholders to vote on removal of a
Trustee upon the written request of the record holders of ten percent of Trust
shares and will assist shareholders in communicating with each other as
prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.

The Portfolio is organized as a trust under the laws of the State of New York.
The Portfolio's Declaration of Trust provides that the Fund and other entities
investing in the Portfolio (e.g., other investment companies, insurance company
separate accounts and common and commingled trust funds) will each be liable for
all obligations of the Portfolio. However, the risk of the Fund incurring
financial loss on account of such liability is limited to circumstances in which
both inadequate insurance existed and the Portfolio itself was unable to meet
its obligations. Accordingly, the Trustees of the Trust believe that neither the
Fund nor its shareholders will be adversely affected by reason of the Fund's
investing in the Portfolio.

TAXES

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

15
<PAGE>
investment company, the Portfolio, in addition to other requirements, limits its
investments so that at the close of each quarter of its taxable year (a) no more
than 25% of its total assets are invested in the securities of any one issuer,
except U.S. Government securities, and (b) with regard to 50% of its total
assets, no more than 5% of its total assets are invested in the securities of a
single issuer, except U.S. Government securities. As a regulated investment
company, the Fund should not be subject to federal income taxes or federal
excise taxes if substantially all of its net investment income and capital gains
less any available capital loss carryforwards are distributed to shareholders
within allowable time limits. The Portfolio intends to qualify as an association
treated as a partnership for federal income tax purposes. As such, the Portfolio
should not be subject to tax. The Fund's status as a regulated investment
company is dependent on, among other things, the Portfolio's continued
qualification as a partnership for federal income tax purposes.

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

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

Interest on certain tax exempt municipal obligations issued after August 7, 1986
is a preference item for purposes of the alternative minimum tax applicable to
individuals and corporations. Under tax regulations to be issued, the portion of
an exempt-interest dividend of a regulated investment company that is allocable
to these obligations will be treated as a preference item for purposes of the
alternative minimum tax.

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

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

Distributions of taxable net investment income and realized net short-term
capital gains in excess of net long-term capital losses are taxable as ordinary
income to shareholders of the Fund whether such distributions are taken in cash
or reinvested in additional shares. Distributions of this type to corporate
shareholders of the Fund are not eligible for the dividends-received deduction.
As a result of the enactment of the Taxpayer Relief Act of 1997 (the

16
<PAGE>

"Act"), long-term capital gain of an individual is generally subject to a
maximum rate of 28% in respect of a capital asset held directly by such
individual for more than one year but not more than eighteen months, and the
maximum rate is reduced to 20% in respect of a capital asset held in excess of
18 months. The Act authorizes the Treasury department to promulgate regulations
that would apply these rules in the case of long-term capital gain distributions
made by the Fund.

Any gain or loss realized on the redemption or exchange of Fund shares by a
shareholder who is not a dealer in securities will be treated as long-term
capital gain or loss if the shares have been held for more than one year, and
otherwise as short-term capital gain or loss. However, any loss realized by a
shareholder upon the redemption or exchange of shares in the Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
long-term capital gain distributions received by the shareholder with respect to
such shares. In addition, any loss realized by a shareholder upon the redemption
or exchange of shares in the Fund held six months or less will be disallowed to
the extent of any exempt-interest dividends received by the shareholder with
respect to the shares. See Taxes in the Statement of Additional Information.

ADDITIONAL INFORMATION

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

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

The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Donoghue's Money Market and Tax Free Money Market fund averages and
other industry publications. The Fund may advertise "yield," "effective yield,"
and "tax equivalent yield". Yield refers to the net income generated by an
investment in the Fund over a stated seven-day period. This income is then
annualized--i.e., the amount of income generated by the investment during that
week is assumed to be generated each week over a 52-week period and is shown as
a percentage of the investment. Effective yield is calculated similarly to the
yield, but, when annualized, the income earned by an investment in the Fund is
assumed to be

17
<PAGE>
reinvested; the effective yield will be slightly higher than the yield because
of the compounding effect of this assumed reinvestment. Tax equivalent yield is
calculated similarly to the yield for the Fund, except that the yield is
increased using a stated income tax rate to demonstrate the taxable yield
necessary to produce an after-tax equivalent to the Fund.

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. These methods of calculating yield and total return are required
by regulations of the Securities and Exchange Commission. Yield and total return
data similarly calculated, unless otherwise indicated, over other specified
periods of time may also be used. See Performance Data in the Statement of
Additional Information. All performance figures are based on historical earnings
and are not intended to indicate future performance. Shareholders may obtain
performance information by calling Morgan at (800) 521-5411.

18
<PAGE>

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

J.P. Morgan
Tax Exempt
Money Market
Fund

NO DEALER, SALESMAN OR ANY OTHER
PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, IN
CONNECTION WITH THE OFFER CONTAINED
IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH OTHER INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY
THE TRUST OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN
OFFER BY THE TRUST OR BY THE
DISTRIBUTOR TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY
ANY OF THE SECURITIES OFFERED
HEREBY IN ANY JURISDICTION TO ANY
PERSON TO WHOM IT IS UNLAWFUL FOR
THE TRUST OR THE DISTRIBUTOR TO
MAKE SUCH OFFER IN SUCH PROSPECTUS
JURISDICTION. JANUARY 2, 1998

PROS228-9681

******************************************************************************

J.P. MORGAN FUNDS

J.P. MORGAN TAX EXEMPT MONEY MARKET FUND

STATEMENT OF ADDITIONAL INFORMATION

JANUARY 2, 1998

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS, BUT CONTAINS
ADDITIONAL INFORMATION WHICH SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS
DATED FOR THE FUND LISTED ABOVE, AS SUPPLEMENTED FROM TIME TO TIME, WHICH MAY BE
OBTAINED UPON REQUEST FROM FUNDS DISTRIBUTOR, INC., ATTENTION: J.P. MORGAN FUNDS
(800) 221-7930.

<PAGE>

Table of Contents

Page

General . . . . . . . . . . . . . . . . . . . 2
Investment Objective and Policies . . . . . . 2
Investment Restrictions . . . . . . . . . . . 11
Trustees and Officers . . . . . . . . . . . . 13
Investment Advisor . . . . . . . . . . . . . . 17
Distributor . . . . . . . . . . . . . . . . . 19
Co-Administrator . . . . . . . . . . . . . . . 19
Services Agent . . . . . . . . . . . . . . . . 20
Custodian and Transfer Agent . . . . . . . . . 21
Shareholder Servicing . . . . . . . . . . . . 21
Independent Accountants . . . . . . . . . . . 22
Expenses . . . . . . . . . . . . . . . . . . . 22
Purchase of Shares . . . . . . . . . . . . . . 23
Redemption of Shares . . . . . . . . . . . . . 23
Exchange of Shares . . . . . . . . . . . . . . 24
Dividends and Distributions . . . . . . . . . 24
Net Asset Value . . . . . . . . . . . . . . . 25
Performance Data . . . . . . . . . . . . . . . 25
Portfolio Transactions . . . . . . . . . . . . 26
Massachusetts Trust . . . . . . . . . . . . . 38
Description of Shares . . . . . . . . . . . . 29
Taxes . . . . . . . . . . . . . . . . . . . . 31
Additional Information . . . . . . . . . . . 34
Appendix A - Description of Securities
Ratings . . . . . . . . . . . . . . . . . . . A-36

<PAGE>

GENERAL

This Statement of Additional Information relates only to the J.P.
Morgan Tax Exempt Money Market Fund ("Fund"). The Fund is a series of shares of
beneficial interest of the J.P. Morgan 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 Fund"). The other J.P. Morgan Funds are covered by
separate Statements of Additional Information.

This Statement of Additional Information describes the financial
history, investment objective and policies, management and operation of the
Fund. The Fund operates through a two-tier master-feeder investment fund
structure.

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

INVESTMENT OBJECTIVE AND POLICIES

The following discussion supplements the information regarding the
investment objective of the Fund and the policies to be employed to achieve this
objective by the Portfolio as set forth above and in the Prospectus. The
investment objective of the Fund and the investment objective of the Portfolio
are identical. 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 Fund is designed to be an economical and convenient means of making
substantial investments in instruments that are exempt from federal income tax.
The Fund's investment objective is to provide a high level of current income
that is exempt from federal income tax and maintain a high level of liquidity.
See "Taxes." The Fund attempts to achieve this objective by investing all of its
investable assets in The Tax Exempt Money Market Portfolio (the "Portfolio"), a
diversified open-end management investment company having the same investment
objective as the Fund.

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

Money Market Instruments

As discussed in the Prospectus, the Fund may invest in money market
instruments to the extent consistent with its investment objective and policies.
A description of the various types of money market instruments that may be
purchased by the 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.

Bank Obligations. The Fund, unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks which have more than $2 billion in total assets and are organized under
the laws of the United States or any state, (ii) foreign branches of these banks
or of foreign banks of equivalent size (Euros) and (iii) U.S. branches of
foreign banks of equivalent size (Yankees). The Fund may not invest in
obligations of foreign branches of foreign banks. 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.

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 Guaranty Trust Company of New York
acting as agent, for no additional fee, in its capacity as investment advisor to
the Portfolio and as fiduciary for other clients for whom it exercises
investment discretion. The monies loaned to the borrower come from accounts
managed by the Advisor or its affiliates, pursuant to arrangements with such
accounts. Interest and principal payments are credited to such accounts. The
Advisor, acting as a fiduciary on behalf of its clients, has the right to
increase or decrease the amount provided to the borrower under an obligation.
The borrower has the right to pay without penalty all or any part of the
principal amount then outstanding on an obligation together with interest to the
date of payment. Since these obligations typically provide that the interest
rate is tied to the Federal Reserve commercial paper composite rate, the rate on
master demand obligations is subject to change. Repayment of a master demand
obligation to participating accounts depends on the ability of the borrower to
pay the accrued interest and principal of the obligation on demand which is
continuously monitored by the Advisor. Since master demand obligations typically
are not rated by credit rating agencies, the Fund may invest in such unrated
obligations only if at the time of an investment the obligation is determined by
the Advisor to have a credit quality which satisfies the Fund's quality
restrictions. See "Quality and Diversification Requirements." Although there is
no secondary market for master demand obligations, such obligations are
considered by the Fund to be liquid because they are payable upon demand. The
Fund does not have any specific percentage limitation on investments in master
demand obligations. It is possible that the issuer of a master demand obligation
could be a client of Morgan to whom Morgan, in its capacity as a commercial
bank, has made a loan.

Repurchase Agreements. The Fund, unless otherwise noted in the
Prospectus or below, may enter into repurchase agreements with brokers, dealers
or banks that meet the credit guidelines approved by the Fund's Trustees. In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
resale price normally is in excess of the purchase price, reflecting an agreed
upon interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than 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 the agreement
plus accrued interest, and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the Custodian. The Fund will be fully collateralized within the meaning of
paragraph (a)(4) of Rule 2a-7 under the Investment Company Act of 1940, as
amended (the "1940 Act"). If the seller defaults, Fund might incur a loss if the
value of the collateral securing the repurchase agreement declines and might
incur disposition costs in connection with liquidating the collateral. In
addition, if bankruptcy proceedings are commenced with respect to the seller of
the security, realization upon disposal of the collateral by the Fund may be
delayed or limited.

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

Tax Exempt Obligations

As discussed in the Prospectus, 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 in the Prospectus and below. See "Quality and
Diversification Requirements."

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Additional Investments

When-Issued and Delayed Delivery Securities. The Fund may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and for money market instruments and other fixed income securities
no interest accrues to the Fund until settlement takes place. At the time the
Fund makes the commitment to purchase securities on a when-issued or delayed
delivery basis, it will record the transaction, reflect the value each day of
such securities in determining its net asset value and, if applicable, calculate
the maturity for the purposes of average maturity from that date. At the time of
settlement a when-issued security may be valued at less than the purchase price.
To facilitate such acquisitions, the Fund will maintain with the Custodian a
segregated account with liquid assets, consisting of cash, U.S. Government
securities or other appropriate securities, in an amount at least equal to such
commitments. On delivery dates for such transactions, the Portfolio 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. It is the current policy of the Fund's not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Portfolio's total assets, less liabilities other than the obligations
created by when-issued commitments.

Investment Company Securities. Securities of other investment companies
may be acquired by the Fund and the Portfolio to the extent permitted under the
1940 Act. These limits require that, as determined immediately after a purchase
is made, (i) not more than 5% of the value of 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 a Fund,
provided however, that the Fund may invest all of its investable assets in an
open-end investment company that has the same investment objective as the Fund
(its corresponding Portfolio). As a shareholder of another investment company,
the Fund or Portfolio would bear, along with other shareholders, its pro rata
portion of the other investment company's expenses, including advisory fees.
These expenses would be in addition to the advisory and other expenses that the
Fund or Portfolio bears directly in connection with its own operations.

Reverse Repurchase Agreements. The Fund, unless otherwise noted in the
Prospectus or below, 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. 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. The Fund will invest the
proceeds of borrowings under reverse repurchase agreements. In addition, the
Fund will enter into a reverse repurchase agreement only when the interest
income to be earned from the investment of the proceeds is greater than the
interest expense of the transaction. The Fund will not invest the proceeds of a
reverse repurchase agreement for a period which exceeds the duration of the
reverse repurchase agreement. The Fund will establish and maintain with the
Custodian a separate account with a segregated portfolio of securities in an
amount at least equal to its purchase obligations under its reverse repurchase
agreements. See "Investment Restrictions" for the Fund's limitations on reverse
repurchase agreements and bank borrowings.

Loans of Portfolio Securities. The Fund may lend its securities if such
loans are secured continuously by cash or equivalent collateral or by a letter
of credit in favor of the Fund at least equal at all times to 100% of the market
value of the securities loaned, plus accrued interest. While such securities are
on loan, the borrower will pay the Fund any income accruing thereon. Loans will
be subject to termination by the Fund in the normal settlement time, generally
three business days after notice, or by the borrower on one day's notice.
Borrowed securities must be returned when the loan is terminated. Any gain or
loss in the market price of the borrowed securities which occurs during the term
of the loan inures to the Fund and its respective investors. The Fund may pay
reasonable finders' and custodial fees in connection with a loan. In addition,
the Fund will consider all facts and circumstances including the
creditworthiness of the borrowing financial institution, and the Fund will not
make any loans in excess of one year. The Fund will not lend its securities to
any officer, Trustee, Director, employee or other affiliate of the Fund, the
Advisor or the Distributor, unless otherwise permitted by applicable law. If
interest rates rise during the term of a reverse repurchase agreement, entering
into the reverse repurchase agreement may have a negative impact on the Fund's
ability to maintain a net asset value of $1.00 per share.

Privately Placed and Certain Unregistered Securities. The Fund may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus.

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 Securities Act of 1933, as amended (the "1933 Act"), before it may be sold,
the Fund may be obligated to pay all or part of the registration expenses, and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell.

Synthetic Instruments. The Fund may invest in certain synthetic
variable rate instruments as described in the Prospectus. In the case of some
types of instruments credit enhancement is not provided, and if certain events,
which may include (a) default in the payment of principal or interest on the
underlying bond, (b) downgrading of the bond below investment grade or (c) a
loss of the bond's tax exempt status, occur, then (i) the put will terminate,
(ii) the risk to the Fund will be that of holding a long-term bond, and (iii) in
the case of the Fund, the disposition of the bond may be required which could be
at a loss.

Quality and Diversification Requirements

The Fund intends to meet the diversification requirements of the 1940
Act. To meet these requirements, 75% of the assets of the Fund are subject to
the following fundamental limitations: (1) the Fund may not invest more than 5%
of its total assets in the securities of any one issuer, except obligations of
the U.S. Government, its agencies and instrumentalities, and (2) the Fund may
not own more than 10% of the outstanding voting securities of any one issuer. As
for the other 25% of the Fund's assets not subject to the limitation described
above, there is no limitation on investment of these assets under the 1940 Act,
so that all of such assets may be invested in securities of any one issuer,
subject to the limitation of any applicable state securities laws or as
described below. Investments not subject to the limitations described above
could involve an increased risk to a Fund should an issuer, or the state or its
related entities, be unable to make interest or principal payments or should the
market value of such securities decline.

At the time the Fund invests in any taxable commercial paper, master
demand obligations, bank obligation or repurchase agreement, the issuer must
have outstanding debt rated A or higher by Moody's or Standard & Poor's, the
issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no such ratings are
available, the investment must be of comparable quality in Morgan's opinion.

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

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

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

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

INVESTMENT RESTRICTIONS

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

The investment restrictions below have been adopted by the Trust, with
respect to the Fund, and by the Portfolio. Except where otherwise noted, these
investment restrictions are "fundamental" policies which, under the 1940 Act,
may not be changed without the vote of a majority of the outstanding voting
securities of the Fund or Portfolio, as the case may be. A "majority of the
outstanding voting securities" is defined in the 1940 Act as the lesser of (a)
67% or more of the voting securities present at a meeting if the holders of more
than 50% of the outstanding voting securities are present or represented by
proxy, or (b) more than 50% of the outstanding voting securities. The percentage
limitations contained in the restrictions below apply at the time of the
purchase of securities. Whenever the Fund is requested to vote on a change in
the fundamental investment restrictions of the Portfolio, the Trust will hold a
meeting of Fund shareholders and will cast its votes as instructed by the Fund's
shareholders.

The Fund and the Portfolio may not:

1. Borrow money, except from banks for temporary, extraordinary or emergency
purposes and then only in amounts up to 10% of the value of the Fund's total
assets, taken at cost at the time of such borrowing; or mortgage, pledge or
hypothecate any assets except in connection with any such borrowing in amounts
up to 10% of the value of the Fund's net assets at the time of such borrowing.
The Fund will not purchase securities while borrowings exceed 5% of the Fund's
total assets, provided, however, that the Fund may increase its interest in an
open-end management investment company with the same investment objective and
restrictions as the Fund's while such borrowings are outstanding. This borrowing
provision, for example, facilitates the orderly sale of portfolio securities in
the event of abnormally heavy redemption requests or in the event of redemption
requests during periods of tight market supply. This provision is not for
leveraging purposes;

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

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

4. Purchase the securities or other obligations of any one issuer if,
immediately after such purchase, more than 5% of the value of the Fund's total
assets would be invested in securities or other obligations of any one such
issuer, provided, however, that the Fund may invest all or part of its
investable assets in an open-end management investment company with the same
investment objective and restrictions as the Fund's. Each state and each
political subdivision, agency or instrumentality of such state and each
multi-state agency of which such state is a member will be a separate issuer if
the security is backed only by the assets and revenues of that issuer. If the
security is guaranteed by another entity, the guarantor will be deemed to be the
issuer. This limitation shall not apply to securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities or to permitted
investments of up to 25% of the Fund's total assets;2

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

6. Purchase or sell puts, calls, straddles, spreads, or any combination thereof
except to the extent that securities subject to a demand obligation, stand-by
commitments and puts may be purchased (see "Investment Objectives and
Policies"); real estate; commodities; commodity contracts; or interests in oil,
gas, or mineral exploration or development programs. However, the Fund may
purchase municipal bonds, notes or commercial paper secured by interests in real
estate;

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

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

9. Act as an underwriter of securities; or

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

Non-Fundamental Investment Restriction - The investment restriction
described below is not a fundamental policy of the Fund or Portfolio and may be
changed by their respective Trustees. This non-fundamental investment policy
requires that the Fund may not:

(i) acquire any illiquid securities, such as repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of over
seven calendar days, if as a result thereof, more than 10% of the Fund's
net assets would be in investments that are illiquid.

Notwithstanding any other fundamental or non-fundamental investment
restriction or policy, the Fund reserves the right, without the approval of
shareholders, to invest all of its assets in the securities of a single open-end
registered investment company with substantially the same investment objective,
restrictions and policies as the Fund.

There will be no violation of any investment restriction if that
restriction is complied with at the time the relevant action is taken
notwithstanding a later change in market value of an investment, in net or total
assets, in the securities rating of the investment, or any other later change.

For purposes of fundamental investment restrictions regarding industry
concentration, the Advisor may classify issuers by industry in accordance with
classifications set forth in the Directory of Companies Filing Annual Reports
With The Securities and Exchange Commission or other sources. In the absence of
such classification or if the Advisor determines in good faith based on its own
information that the economic characteristics affecting a particular issuer make
it more appropriately considered to be engaged in a different industry, the
Advisor may classify an issuer accordingly. For instance, personal credit
finance companies and business credit finance companies are deemed to be
separate industries and wholly owned finance companies are considered to be in
the industry of their parents if their activities are primarily related to
financing the activities of their parents.

TRUSTEES AND OFFICERS

Trustees

The Trustees of the Trust, who are also the Trustees of the Portfolio,
their business addresses, principal occupations during the past five years and
dates of birth are set forth below.

FREDERICK S. ADDYAATrustee; Retired; Executive Vice President and Chief
Financial Officer since prior to April 1994, Amoco Corporation. His address is
5300 Arbutus Cove, Austin, TX 78746, and his date of birth is January 1, 1932.

WILLIAM G. BURNSAATrustee; Retired, Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779,
and his date of birth is November 2, 1932.

ARTHUR C. ESCHENLAUERAATrustee; Retired; Former Senior Vice President,
Morgan Guaranty Trust Company of New York. His address is 14 Alta Vista Drive,
RD #2, Princeton, NJ 08540, and his date of birth is May 23, 1934.

MATTHEW HEALEY (*)AATrustee, Chairman and Chief Executive Officer;
Chairman, Pierpont Group, Inc., since prior to 1992. His address is Pine Tree
Club Estates, 10286 Saint Andrews Road, Boynton Beach, FL 33436, and his date of
birth is August 23, 1937.

MICHAEL P. MALLARDIAATrustee; Retired; Senior Vice President, Capital
Cities/ABC, Inc. and President, Broadcast Group since prior to April 1996. His
address is 10 Charnwood Drive, Suffern, NY 10910, and his date of birth is March
17, 1934.
- ----------------------
(*) Mr. Healey is an "interested person" of the Trust, the Advisor and each
Portfolio as that term is defined in the 1940 Act.

The Trustees of the Trust are the same as the Trustees of the
Portfolio. In accordance with applicable state requirements, a majority of the
disinterested Trustees have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest arising from the fact that the same
individuals are Trustees of the Trust, the Portfolio and the J.P. Morgan Fund,
up to and including creating a separate board of trustees.

Each Trustee is currently paid an annual fee of $75,000 (adjusted as of
April 1, 1997) for serving as Trustee of the Trust, each of the Master
Portfolios (as defined below), J.P. Morgan Funds and J.P. MORGAN Series Trust
and is reimbursed for expenses incurred in connection with service as a Trustee.
The Trustees may hold various other directorships unrelated to the Fund.

Trustee compensation expenses accrued by the Trust for the calendar
year ended December 31, 1996 are set forth below.

TOTAL TRUSTEE COMPENSATION
ACCRUED BY THE MASTER
AGGREGATE TRUSTEE PORTFOLIOS(*), J.P. MORGAN
COMPENSATION FUNDS, J.P. MORGAN SERIES
ACCRUED BY THE TRUST TRUST AND THE TRUST DURING
NAME OF TRUSTEE DURING 1996 1996 (***)

Frederick S. Addy, Trustee $12,593 $65,000

William G. Burns, Trustee $12,593 $65,000

Arthur C. Eschenlauer, Trustee $12,593 $65,000

Matthew Healey, Trustee(**), $12,593 $65,000
Chairman and Chief Executive
Officer

Michael P. Mallardi, Trustee $12,593 $65,000

(*) Includes the Portfolio and 23 other porstfolios (collectively the "Master
Portfolios") for which Morgan acts as investment advisor..

(**) During 1996, Pierpont Group, Inc. paid Mr. Healey, in his role as Chairman
of Pierpont Group, Inc., compensation in the amount of $140,000, contributed
$21,000 to a defined contribution plan on his behalf and paid $21,500 in
insurance premiums for his benefit.

(***) No investment company within the fund complex has a pension or retirement
plan. Currently there are 18 investment companies (15 investment companies
comprising the Master Portfolios, the J.P. Morgan Funds, the Trust and J.P.
MORGAN Series Trust) in the fund complex.

The Trustees, in addition to reviewing actions of the Trust's and the
Portfolio's various service providers, decide upon matters of general policy.
The Portfolio and the Trust have entered into a Fund Services Agreement with
Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities over the affairs of the Portfolio and the Trust.
Pierpont Group, Inc. was organized in July 1989 to provide services for The
Pierpont Family of Funds, and the Trustees are the equal and sole shareholders
of Pierpont Group, Inc. The Trust and the Portfolio have agreed to pay Pierpont
Group, Inc. a fee in an amount representing its reasonable costs in performing
these services to the Trust, the Portfolio and certain other registered
investment companies subject to similar agreements with Pierpont Group, Inc.
These costs are periodically reviewed by the Trustees. The Principal offices of
Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, NY 10017.

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

Fund -- For the fiscal year ended August 31, 1995: $101,846. For the fiscal year
ended August 31, 1996: $53,896. For the fiscal year ended August 31, 1997:
$37,100.

Portfolio -- For the fiscal year ended August 31, 1995: $110,325. For the fiscal
year ended August 31, 1996: $62,310. For the fiscal year ended August 31, 1997:
$43,285

Officers

The Trust's and Portfolio's executive officers (listed below), other
than the Chief Executive Officer, are provided and compensated by Funds
Distributor, Inc. ("FDI"), a wholly owned indirect subsidiary of Boston
Institutional Group, Inc. The officers conduct and supervise the business
operations of the Trust and the Portfolio. The Trust and the Portfolio have no
employees.

The officers of the Trust and the Portfolio, their principal
occupations during the past five years and dates of birth are set forth below.
Unless otherwise specified, each officer holds the same position with the Trust
and the Portfolio. The business address of each of the officers unless otherwise
noted is Funds Distributor, Inc., 60 State Street, Suite 1300, Boston,
Massachusetts 02109.

MATTHEW HEALEY; Chief Executive Officer; Chairman, Pierpont Group,
since prior to 1993. His address is Pine Tree Club Estates, 10286 Saint Andrews
Road, Boynton Beach, FL 33436. His date of birth is August 23, 1937.

MARIE E. CONNOLLY; Vice President and Assistant Treasurer. President,
Chief Executive Officer, Chief Compliance Officer and Director of FDI, Premier
Mutual Fund Services, Inc., an affiliate of FDI ("Premier Mutual") and an
officer of certain investment companies advised or administered by the Dreyfus
Corporation ("Dreyfus") or its affiliates. From December 1991 to July 1994, she
was President and Chief Compliance Officer of FDI. Her date of birth is August
1, 1957.

DOUGLAS C. CONROY; Vice President and Assistant Treasurer. Assistant Vice
President and Manager of Treasury Services and Administration of FDI and an
officer of certain investment companies advised or administered by Dreyfus or
its affiliates. Prior to April 1997, Mr. Conroy was Supervisor of Treasury
Services and Administration of FDI. From April 1993 to January 1995, Mr. Conroy
was a Senior Fund Accountant for Investors Bank & Trust Company. Prior to March
1993, Mr. Conroy was employed as a fund accountant at The Boston Company, Inc.
His date of birth is March 31, 1969.

RICHARD W. INGRAM; President and Treasurer. Executive Vice President
and Director of Client Services and Treasury Administration of FDI, Senior Vice
President of Premier Mutual and an officer of RCM Capital Funds, Inc., RCM
Equity Funds, Inc., Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or Harris Trust and
Savings Bank ("Harris") or their respective affiliates. Prior to April 1997, Mr.
Ingram was Senior Vice President and Director of Client Service and Treasury
Administration of FDI. From March 1994 to November 1995, Mr. Ingram was Vice
President and Division Manager of First Data Investor Services Group, Inc. From
1989 to 1994, Mr. Ingram was Vice President, Assistant Treasurer and Tax
Director - Mutual Funds of The Boston Company, Inc. His date of birth is
September 15, 1955.

KAREN JACOPPO-WOOD; Vice President and Assistant Secretary. Assistant Vice
President of FDI and an officer of RCM Capital Funds, Inc. and RCM Equity Funds,
Inc., Waterhouse Investors Cash Management Fund, Inc. and Harris or their
respective affiliates. From June 1994 to January 1996, Ms. Jacoppo-Wood was a
Manager, SEC Registration, Scudder, Stevens & Clark, Inc. From 1988 to May 1994,
Ms. Jacoppo-Wood was a senior paralegal at The Boston Company Advisors, Inc.
("TBCA"). Her date of birth is December 29, 1966.

ELIZABETH A. KEELEY; Vice President and Assistant Secretary. Vice President
and Senior Counsel of FDI and Premier Mutual and an officer of RCM Capital
Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors Cash Management Fund,
Inc. and certain investment companies advised or administered by Dreyfus or
Harris or their respective affiliates. Prior to August 1996, Ms. Keeley was
Assistant Vice President and Counsel of FDI and Premier Mutual. Prior to
September 1995, Ms. Keeley was enrolled at Fordham University School of Law and
received her JD in May 1995. Address: 200 Park Avenue, New York, New York 10166.
Her date of birth is September 14, 1969.

CHRISTOPHER J. KELLEY; Vice President and Assistant Secretary. Vice
President and Associate General Counsel of FDI and Premier Mutual and an officer
of Waterhouse Investors Cash Management Fund, Inc. and certain investment
companies advised or administered by Harris or its affiliates. From April 1994
to July 1996, Mr. Kelley was Assistant Counsel at Forum Financial Group. From
1992 to 1994, Mr. Kelley was employed by Putnam Investments in legal and
compliance capacities. His date of birth is December 24, 1964.

MARY A. NELSON; Vice President and Assistant Treasurer. Vice President and
Manager of Treasury Services and Administration of FDI and Premier Mutual, an
officer of RCM Capital Funds, Inc., RCM Equity Funds, Inc., Waterhouse Investors
Cash Management Fund, Inc. and certain investment companies advised or
administered by Dreyfus or Harris or their respective affiliates. From 1989 to
1994, Ms. Nelson was an Assistant Vice President and Client Manager for The
Boston Company, Inc. Her date of birth is April 22, 1964.

MICHAEL S. PETRUCELLI; Vice President and Assistant Secretary. Senior Vice
President and Director of Strategic Client Initiatives for FDI since December
1996. From December 1989 through November 1996, Mr. Petrucelli was employed with
GE Investments where he held various financial, business development and
compliance positions. He also served as Treasurer of the GE Funds and as
Director of GE Investment Services. Address: 200 Park Avenue, New York, New
York, 10166. His date of birth is May 18, 1961.

JOSEPH F. TOWER III; Vice President and Assistant Treasurer. Executive Vice
President, Treasurer and Chief Financial Officer, Chief Administrative Officer
and Director Of FDI. Senior Vice President, Treasurer and Chief Financial
Officer, Chief Administrative Officer and Director of Premier Mutual and an
officer of Waterhouse Investors Cash Management Fund, Inc. and certain
investment companies advised or administered by Dreyfus or its affiliates. Prior
to April 1997, Mr. Tower was Senior Vice President, Treasurer and Chief
Financial Officer, Chief Administrative Officer and Director of FDI. From July
1988 to November 1993, Mr. Tower was Financial Manager of The Boston Company,
Inc. His date of birth is June 13, 1962.

INVESTMENT ADVISOR

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

J.P. Morgan, through the Advisor and other subsidiaries, acts as
investment advisor to individuals, governments, corporations, employee benefit
plans, mutual funds and other institutional investors with combined assets under
management of over $240 billion.

J.P. Morgan has a long history of service as adviser, underwriter and
lender to an extensive roster of major companies and as a financial advisor to
national governments. The firm, through its predecessor firms, has been in
business for over a century and has been managing investments since 1913.

The basis of the Advisor's investment process is fundamental investment
research as the firm believes that fundamentals should determine an asset's
value over the long term. J.P. Morgan currently employs over 100 full time
research analysts, among the largest research staffs in the money management
industry, in its investment management divisions located in New York, London,
Tokyo, Frankfurt, Melbourne and Singapore to cover companies, industries and
countries on site. In addition, the investment management divisions employ
approximately 300 capital market researchers, portfolio managers and traders.
The Advisor's fixed income investment process is based on analysis of real
rates, sector diversification and quantitative and credit analysis.

The investment advisory services the Advisor provides to the Portfolio
are not exclusive under the terms of the Advisory Agreement. The Advisor is free
to and does render similar investment advisory services to others. The Advisor
serves as investment advisor to personal investors and other investment
companies and acts as fiduciary for trusts, estates and employee benefit plans.
Certain of the assets of trusts and estates under management are invested in
common trust funds for which the Advisor serves as trustee. The accounts which
are managed or advised by the Advisor have varying investment objectives and the
Advisor invests assets of such accounts in investments substantially similar to,
or the same as, those which are expected to constitute the principal investments
of the Portfolio. Such accounts are supervised by 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 --IBC/Donoghue's Tax Exempt Money Fund Average.

J.P. Morgan Investment Management Inc., also a wholly owned subsidiary
of J.P. Morgan, is a registered investment adviser under the Investment Advisers
Act of 1940, as amended, which manages employee benefit funds of corporations,
labor unions and state and local governments and the accounts of other
institutional investors, including investment companies. Certain of the assets
of employee benefit accounts under its management are invested in commingled
pension trust funds for which the Advisor serves as trustee. J.P. Morgan
Investment Management Inc. advises the Advisor on investment of the commingled
pension trust funds.

The 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 J.P.
Morgan Investment Management Inc. and certain other investment management
affiliates of J.P. Morgan.

As compensation for the services rendered and related expenses such as
salaries of advisory personnel borne by the Advisor under the Investment
Advisory Agreement, the Portfolio and the Fund has agreed to pay the Advisor a
fee, which is computed daily and may be paid monthly, equal to the annual rate
of 0.20% of the Portfolio's average daily net assets up to $1 billion and 0.10%
of net assets in excess of $1 billion.

For the fiscal year ended August 31, 1995, 1996, and 1997 the advisory
fees paid by the Portfolio to the Advisor were $2,150,291, $2,154,248 and
$2,267,159, respectively. See "Expenses" in the Prospectus and below for
applicable expense limitations.

The Investment Advisory Agreement provides that it will continue in
effect for a period of two years after execution only if specifically approved
thereafter annually in the same manner as the Distribution Agreement. See
"Distributor" below. The Investment Advisory Agreement will terminate
automatically if assigned and is terminable at any time without penalty by a
vote of a majority of the Portfolio's Trustees, or by a vote of the holders of a
majority of the Portfolio's outstanding voting securities, on 60 days' written
notice to the Advisor and by the Advisor on 90 days' written notice to the
Portfolio. See "Additional Information."

The Glass-Steagall Act and other applicable laws generally prohibit
banks such as the Advisor from engaging in the business of underwriting or
distributing securities, and the Board of Governors of the Federal Reserve
System has issued an interpretation to the effect that under these laws a bank
holding company registered under the federal Bank Holding Company Act or certain
subsidiaries thereof may not sponsor, organize, or control a registered open-end
investment company continuously engaged in the issuance of its shares, such as
the Trust. The interpretation does not prohibit a holding company or a
subsidiary thereof from acting as investment advisor and custodian to such an
investment company. The Advisor believes that it may perform the services for
the Portfolio contemplated by the Advisory Agreement without violation of the
Glass-Steagall Act or other applicable banking laws or regulations. State laws
on this issue may differ from the interpretation of relevant federal law, and
banks and financial institutions may be required to register as dealers pursuant
to state securities laws. However, it is possible that future changes in either
federal or state statutes and regulations concerning the permissible activities
of banks or trust companies, as well as further judicial or administrative
decisions and interpretations of present and future statutes and regulations,
might prevent the Advisor from continuing to perform such services for the
Portfolio.

If the Advisor were prohibited from acting as investment advisor to the
Portfolio, it is expected that the Trustees of the Portfolio would recommend to
investors that they approve the Portfolio's entering into a new investment
advisory agreement with another qualified investment advisor selected by the
Trustees.

Under separate agreements, Morgan also provides certain financial, fund
accounting and administrative services to the Trust and the 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 each of the Fund's shares. In that
capacity, FDI has been granted the right, as agent of the Trust, to solicit and
accept orders for the purchase of 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 the holders of a majority of the Fund's
outstanding shares or by its Trustees and (ii) by a vote of a majority of the
Trustees of the Trust who are not "interested persons" (as defined by the 1940
Act) of the parties to the Distribution Agreement, cast in person at a meeting
called for the purpose of voting on such approval (see "Trustees and Officers").
The Distribution Agreement will terminate automatically if assigned by either
party thereto and is terminable at any time without penalty by a vote of a
majority of the Trustees of the Trust, a vote of a majority of the Trustees who
are not "interested persons" of the Trust, or by a vote of the holders of a
majority of the Fund's outstanding shares as defined under "Additional
Information," in any case without payment of any penalty on 60 days' written
notice to the other party. The principal offices of FDI are located at 60 State
Street, Suite 1300, Boston, Massachusetts 02109.

CO-ADMINISTRATOR

Under Co-Administration Agreements with the Trust and the Portfolio
dated August 1, 1996, FDI also serves as the Trust's and the Portfolio's
Co-Administrator. The Co-Administration Agreements may be renewed or amended by
the respective Trustees without a shareholder vote. The Co-Administration
Agreements are terminable at any time without penalty by a vote of a majority of
the Trustees of the Trust or the Portfolio, as applicable, on not more than 60
days' written notice nor less than 30 days' written notice to the other party.
The Co-Administrator may subcontract for the performance of its obligations,
provided, however, that unless the Trust or the Portfolio, as applicable,
expressly agrees in writing, the Co-Administrator shall be fully responsible for
the acts and omissions of any subcontractor as it would for its own acts or
omissions. See "Services Agent" below.

For its services under the Co-Administration Agreements, the Fund and
Portfolio have agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The amount
allocable to the Fund or Portfolio is based on the ratio of its net assets to
the aggregate net assets of the Trust, the Master Portfolios and certain other
investment companies subject to similar agreements with FDI.

The table below sets forth for the Fund and the Portfolio the
administrative fees paid to FDI for the fiscal periods indicated. See "Expenses"
in the Prospectus and below for applicable expense limitations.

Portfolio -- For the period August 1, 1996 through August 31, 1996: $2,284. For
the fiscal year ended August 31, 1997: $25,082.

Fund -- For the period August 1, 1996 through August 31, 1996: $3,298. For
the fiscal year ended August 31, 1997: $35,900.

The table below sets forth for the Fund and the Portfolio the
administrative fees paid to Signature Broker-Dealer Services, Inc. (which
provided distribution and administrative services to the Trust and placement
agent and administrative services to the Portfolio prior to August 1, 1996) for
the fiscal periods indicated.
See "Expenses" in the Prospectus and below for applicable expense limitations.

Portfolio -- For the fiscal year ended August 31, 1994: $62,565. For the
fiscal year ended August 31, 1995: $72,729. For the period September 1, 1995
through July 31, 1996: $110,848.

Fund -- For the fiscal year ended August 31, 1994: $306,768. For the fiscal year
ended August 31, 1995: $290,271. For the period September 1, 1995 through July
31, 1996: $157,587.

SERVICES AGENT

The Trust, on behalf of the Fund, and the Portfolio have entered into
Administrative Services Agreements (the "Services Agreements") with Morgan
pursuant to which Morgan is responsible for certain administrative and related
services provided to the Fund and 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 amended Administrative 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% on the first $7 billion of
their aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion, less the complex-wide fees payable to
FDI. The portion of this charge payable by the Fund and Portfolio is determined
by the proportionate share that its net assets bear to the total net assets of
the Trust, the Master Portfolios, the other investors in the Master Portfolios
for which Morgan provides similar services and J.P. MORGAN Series Trust.

Under prior administrative services agreements in effect from December
29, 1995 through July 31, 1996, with Morgan, Portfolio paid Morgan a fee equal
to its proportionate share of an annual complex-wide charge. This charge was
calculated daily based on the aggregate net assets of Master Portfolios in
accordance with the following schedule: 0.06% of the first $7 billion of the
Master Portfolios' aggregate average daily net assets, and 0.03% of the
Portfolios' aggregate average daily net assets in excess of $7 billion. Prior to
December 29, 1995, the Trust and the Portfolio had entered into Financial and
Fund Accounting Services Agreements with Morgan, the provisions of which
included certain of the activities described above and, prior to September 1,
1995, also included reimbursement of usual and customary expenses.

The table below sets forth for the Fund and the Portfolio the fees paid
to Morgan, net of fee waivers and reimbursements, as Services Agent. See
"Expenses" in the Prospectus and below for applicable expense limitations.

Portfolio -- For the fiscal year ended August 31, 1995: $169,754. For the fiscal
year ended August 31, 1996: $205,419. For the fiscal year ended August 31, 1997:
$397,340.

Fund -- For the fiscal year ended August 31, 1995: $(30,971)*. For the fiscal
year ended August 31, 1996: $173,920. For the fiscal year ended August 31, 1997:
$336,003.
- ------------------------------------

(*) Indicates a reimbursement by Morgan for expenses in excess of its fees under
the Services Agreements. No fees were paid for the fiscal period.

CUSTODIAN AND TRANSFER AGENT

State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Trust's and the Portfolio's
custodian and fund accounting agent and the Fund's transfer and dividend
disbursing agent. Pursuant to the Custodian Contracts, State Street is
responsible for maintaining the books of account and records of portfolio
transactions and holding portfolio securities and cash. In addition, the
Custodian has entered into subcustodian agreements on behalf of Portfolio with
Bankers Trust Company for the purpose of holding TENR Notes and with Bank of New
York and Chemical Bank, N.A. for the purpose of holding certain variable rate
demand notes. The Custodian maintains portfolio transaction records. As transfer
agent and dividend disbursing agent, State Street is responsible for maintaining
account records detailing the ownership of Fund shares and for crediting income,
capital gains and other changes in share ownership to shareholder accounts.

SHAREHOLDER SERVICING

The Trust on behalf of the Fund has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for its customers and for other Fund investors who are customers
of an Eligible Institution. Under this agreement, Morgan is responsible for
performing shareholder account, administrative and servicing functions, which
include but are not limited to, answering inquiries regarding account status and
history, the manner in which purchases and redemptions of Fund shares may be
effected, and certain other matters pertaining to a Fund; assisting customers in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to coordinate the establishment and
maintenance of shareholder accounts and records with the Fund's transfer agent;
transmitting purchase and redemption orders to the Funds' transfer agent and
arranging for the wiring or other transfer of funds to and from customer
accounts in connection with orders to purchase or redeem Fund shares; verifying
purchase and redemption orders, transfers among and changes in accounts;
informing the Distributor of the gross amount of purchase orders for Fund
shares; and monitoring the activities of the Fund's transfer agent; 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 values of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder servicing agent). Morgan
acts as shareholder servicing agent for all shareholders.

The shareholder servicing fees paid by the Fund to Morgan, net of fee
waivers and reimbursements were $2,227,944, $1,680,618, and $1,607,959 for the
fiscal years ended August 31, 1995, 1996 and 1997, respectively. See "Expenses"
in the Prospectus and below for applicable expense limitations.

As discussed under "Investment Advisor," the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
and providing administrative services to the Fund and the Portfolio under the
Services Agreements and in acting as Advisor to the Portfolio under the
Investment Advisory Agreement, may raise issues under these laws. However,
Morgan believes that it may properly perform these services and the other
activities described in the Prospectus without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.

If Morgan were prohibited from providing any of the services under the
Shareholder Servicing Agreement and the Services Agreements, the Trustees would
seek an alternative provider of such services. In such event, changes in the
operation of the Fund or the Portfolio might occur and a shareholder might no
longer be able to avail himself or herself of any services then being provided
to shareholders by Morgan.

INDEPENDENT ACCOUNTANTS

The independent accountants of the Trust and the Portfolio are Price
Waterhouse LLP, 1177 Avenue of the Americas, New York, New York 10036. Price
Waterhouse LLP conducts an annual audit of the financial statements of 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., Morgan and FDI
under various agreements discussed under "Trustees and Officers," "Investment
Advisor," "Co-Administrator and 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 expenses, insurance costs,
the compensation and expenses of the Trustees, costs associated with the
registration under federal securities laws, and extraordinary expenses
applicable to the Fund or the Portfolio. For the Fund, such expenses also
include transfer, registrar and dividend disbursing costs, the expenses of
printing and mailing reports, notices and proxy statements to Fund shareholders;
and filing fees under state securities laws. For the Portfolio, such expenses
also include custodian fees and brokerage expenses. Under fee arrangements prior
to September 1, 1995, Morgan as Services Agent was responsible for
reimbursements to the Trust and the Portfolio and the usual and customary
expenses described above (excluding organization and extraordinary expenses,
custodian fees and brokerage expenses). For additional information regarding
waivers or expense subsidies, see "Management of the Trust and the Portfolio" in
the Prospectus.

PURCHASE OF SHARES

Investors may open Fund accounts and purchase shares as described in
the Prospectus under "Purchase of Shares." References in the Prospectus and this
Statement of Additional Information to customers of Morgan or an Eligible
Institution include customers of their affiliates and references to transactions
by customers with Morgan or an Eligible Institution include transactions with
their affiliates. Only Fund investors who are using the services of a financial
institution acting as shareholder servicing agent pursuant to an agreement with
the Trust on behalf of 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 Morgan, appropriate
investments for the Fund's corresponding Portfolio. In addition, securities
accepted in payment for shares must: (i) meet the investment objective and
policies of the Portfolio; (ii) be acquired by the Fund for investment and not
for resale (other than for resale to the Portfolio); and(iii) be liquid
securities which are not restricted as to transfer either by law or liquidity of
market. The Fund reserves the right to accept or reject at its own option any
and all securities offered in payment for its shares.

Prospective investors may purchase shares with the assistance of an
Eligible Institution, and the Eligible Institution may charge the investor a fee
for this service and other services it provides to its customers.

REDEMPTION OF SHARES

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

If the Trust, on behalf of the Fund and the Portfolio determine that it
would be detrimental to the best interest of the remaining shareholders of a
Fund to make payment wholly or partly in cash, payment of the redemption price
may be made in whole or in part by a distribution in kind of securities from the
Portfolio, in lieu of cash, in conformity with the applicable rule of the SEC.
If shares are redeemed in kind, the redeeming shareholder might incur
transaction costs in converting the assets into cash. The method of valuing
portfolio securities is described under "Net Asset Value," and such valuation
will be made as of the same time the redemption price is determined. The Trust,
on behalf of the Fund, has elected to be governed by Rule 18f-1 under the 1940
Act pursuant to which the Portfolio is obligated to redeem shares soley in cash
up to the lesser of $250,000 or one percent of the net asset value of the Fund
during any 90-day period for any one shareholder. The Trust will redeem Fund
shares in kind only if it has received a redemption in kind from the Portfolio
and therefore shareholders of the Fund that receive redemptions in kind will
receive securities of the Portfolio. The Portfolio has advised the Trust that
the Portfolio will not redeem in kind except in circumstances in which the Fund
is permitted to redeem in kind.

Further Redemption Information. The Trust, on behalf of the Fund, and
the Portfolio reserve the right to suspend the right of redemption and to
postpone the date of payment upon redemption as follows: (i) for up to seven
days, (ii) during periods when the New York Stock Exchange is closed for other
than weekends and holidays or when trading on such Exchange is restricted as
determined by the SEC by rule or regulation, (iii) during periods in which an
emergency, as determined by the SEC, exists that causes disposal by the
Portfolio of, or evaluation of the net asset value of, its portfolio securities
to be unreasonable or impracticable, or (iv) for such other periods as the SEC
may permit.

EXCHANGE OF SHARES

An investor may exchange shares from the Fund into any other J.P.
Morgan Fund, J.P. Morgan Institutional Fund, or shares of J.P. Morgan Series
Trust, as described under "Exchange of Shares" in the Prospectus. For complete
information, the Prospectus as it relates to the Fund into which a transfer is
being made should be read prior to the transfer. Requests for exchange are made
in the same manner as requests for redemptions. See "Redemption of Shares."
Shares of the Fund to be acquired are purchased for settlement when the proceeds
from redemption become available. The Trust reserves the right to discontinue,
alter or limit the exchange privilege at any time.

DIVIDENDS AND DISTRIBUTIONS

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

Net investment income of the Fund consists of accrued interest or
discount and amortized premium, less the accrued expenses of the Fund applicable
to that dividend period including the fees payable to Morgan.

Determination of the net income for the Fund is made at the times
described in the Prospectus; in addition, net investment income for days other
than business days is determined at the time net asset value is determined on
the prior business day.

If a shareholder has elected to receive dividends and/or capital gain
distributions in cash and the postal or other delivery service is unable to
deliver checks to the shareholder's address of record, such shareholder's
distribution option will automatically be converted to having all dividend and
other distributions reinvested in additional shares. No interest will accrue on
amounts represented by uncashed distribution or redemption checks.

NET ASSET VALUE

The Fund computes its net asset value once daily on Monday through
Friday as described under "Net Asset Value" in the Prospectus. The net asset
value will not be computed on the day the following legal holidays are observed:
New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Verteran's Day, Columbus Day,
Thanksgiving Day, and Christmas Day. In the event that trading in the money
markets is scheduled to end earlier than the close of the New York Stock
Exchange in observance of these holidays, the Fund and Portfolio would expect to
close for purchases and redemptions an hour in advance of the end of trading in
the money markets. The Fund and the Portfolio may also close for purchases and
redemptions at such other times as may be determined by the Board of Trustees to
the extent permitted by applicable law. On any business day when the Public
Securities Association ("PSA") recommends that the securities market close
early, the Fund reserves the right to cease accepting purchase and redemption
orders for same business day credit at the time PSA recommends that the
securities market close. On days the Fund closes early, purchase and redemption
orders received after the PSA-recommended closing time will be credited the next
business day. The days on which net asset value is determined are the Fund's
business days.

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

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

PERFORMANCE DATA

From time to time, the Fund may quote performance in terms of yield,
actual distributions, total return or capital appreciation in reports, sales
literature and advertisements published by the Trust. Current performance
information for the Fund may be obtained by calling the number provided on the
cover page of this Statement of Additional Information. See "Additional
Information" in the Prospectus.

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

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

Fund (12/15/97): 7-day current yield: 3.28%; 7-day tax equivalent yield at 39.6%
tax rate: 5.43%; 7-day effective yield: 3.34%.

Historical performance information for any period or portion thereof
prior to the establishment of a Fund will be that of its corresponding
predecessor J.P. Morgan Fund, as permitted by applicable SEC staff
interpretations, if the J.P. Morgan Fund commenced operations before the
corresponding J.P. Morgan Fund.

Below is set forth historical return information for the Fund for the
periods indicated:

8/31/97: Average annual total return, 1 year: 3.18%; Average annual total
return, 5 years: 2.83%; average annual total return, 10 years: 3.83%; aggregate
total return, 1 year: 3.18%; aggregate total return, 5 years: 15.09%; aggregate
total return, 10 years: 45.29%.

General. The Fund's performance will vary from time to time depending
upon market conditions, the composition of the Portfolio, and its operating
expenses. Consequently, any given performance quotation should not be considered
representative of a Fund's performance for any specified period in the future.
In addition, because performance will fluctuate, it may not provide a basis for
comparing an investment in the Fund with certain bank deposits or other
investments that pay a fixed yield or return for a stated period of time.

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

PORTFOLIO TRANSACTIONS

The Advisor places orders for the Portfolio for all purchases and sales of
portfolio securities, enters into repurchase agreements, and may enter into
reverse repurchase agreements and execute loans of portfolio securities on
behalf of the Portfolio. See "Investment Objectives and Policies."

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

Portfolio transactions for the Portfolio will be undertaken principally
to accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio may engage in short-term trading
consistent with its objective. See "Investment Objective and Policies --
Portfolio Turnover". The Portfolio will not seek profits through short-term
trading, but the Portfolio may dispose of any portfolio security prior to its
maturity if it believes such disposition is appropriate even if this action
realizes profits or losses.

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

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

Subject to the overriding objective of obtaining the best possible
execution of orders, the Advisor may allocate a portion of the Portfolio's
brokerage transactions to affiliates of the Advisor. In order for affiliates of
the Advisor to effect any portfolio transactions for the Portfolio, the
commissions, fees or other remuneration received by such affiliates must be
reasonable and fair compared to the commissions, fees, or other remuneration
paid to other brokers in connection with comparable transactions involving
similar securities being purchased or sold on a securities exchange during a
comparable period of time. Furthermore, the Trustees of the Portfolio, including
a majority of the Trustees who are not "interested persons," have adopted
procedures which are reasonably designed to provide that any commissions, fees,
or other remuneration paid to such affiliates are consistent with the foregoing
standard.

Portfolio securities will not be purchased from or through or sold to
or through the Co-Administrator, the Distributor or the Advisor or any other
"affiliated person" (as defined in the 1940 Act) of the Co-Administrator,
Distributor or Advisor when such entities are acting as principals, except to
the extent permitted by law. In addition, the Portfolio will not purchase
securities during the existence of any underwriting group relating thereto of
which the Advisor or an affiliate of the Advisor is a member, except to the
extent permitted by law.

On those occasions when the Advisor deems the purchase or sale of a
security to be in the best interests of the Portfolio as well as other customers
including other Portfolios, the Advisor to the extent permitted by applicable
laws and regulations, may, but is not obligated to, aggregate the securities to
be sold or purchased for the Portfolio with those to be sold or purchased for
other customers in order to obtain best execution, including lower brokerage
commissions if appropriate. In such event, allocation of the securities so
purchased or sold as well as any expenses incurred in the transaction will be
made by the Advisor in the manner it considers to be most equitable and
consistent with its fiduciary obligations to the Portfolio. In some instances,
this procedure might adversely affect the Portfolio.

MASSACHUSETTS TRUST

The Trust is a trust fund of the type commonly known as a
"Massachusetts business trust" of which the Fund is a separate and distinct
series. A copy of the Declaration of Trust for the Trust is on file in the
office of the Secretary of The Commonwealth of Massachusetts. The Declaration of
Trust and the By-Laws of the Trust are designed to make the Trust similar in
most respects to a Massachusetts business corporation. The principal distinction
between the two forms concerns shareholder liability described below.

Under Massachusetts law, shareholders of such a trust may, under
certain circumstances, be held personally liable as partners for the obligations
of the trust which is not the case for a corporation. However, the Trust's
Declaration of Trust provides that the shareholders shall not be subject to any
personal liability for the acts or obligations of the Fund and that every
written agreement, obligation, instrument or undertaking made on behalf of the
Fund shall contain a provision to the effect that the shareholders are not
personally liable thereunder.

No personal liability will attach to the shareholders under any
undertaking containing such provision when adequate notice of such provision is
given, except possibly in a few jurisdictions. With respect to all types of
claims in the latter jurisdictions, (i) tort claims, (ii) contract claims where
the provision referred to is omitted from the undertaking, (iii) claims for
taxes, and (iv) certain statutory liabilities in other jurisdictions, a
shareholder may be held personally liable to the extent that claims are not
satisfied by the Fund. However, upon payment of such liability, the shareholder
will be entitled to reimbursement from the general assets of the Fund. The
Trustees intend to conduct the operations of the Trust in such a way so as to
avoid, as far as possible, ultimate liability of the shareholders for
liabilities of the Fund.

The Trust's Declaration of Trust further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as individuals or
personally, that no Trustee, officer, employee or agent of the Fund is liable to
a Fund or to a shareholder, and that no Trustee, officer, employee, or agent is
liable to any third persons in connection with the affairs of the Fund, except
as such liability may arise from his or its own bad faith, willful misfeasance,
gross negligence or reckless disregard of his or its duties to such third
persons. It also provides that all third persons shall look solely to Fund
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee, or agent is entitled to be indemnified
against all liability in connection with the affairs of the Fund.

The Trust shall continue without limitation of time subject to the
provisions in the Declaration of Trust concerning termination by action of the
shareholders or by action of the Trustees upon notice to the shareholders.

DESCRIPTION OF SHARES

The Trust is an open-end management investment company organized as a
Massachusetts business trust in which the Fund represents a separate series of
shares of beneficial interest. See "Massachusetts Trust."

The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares (of any
series, if applicable) without changing the proportionate beneficial interest of
each shareholder in a Fund (or in the assets of other series, if applicable). To
date shares of 28 series have been authorized of which 25 are currently
available for sale to the public. Each share represents an equal proportional
interest in a Fund with each other share. Upon liquidation of a Fund, holders
are entitled to share pro rata in the net assets of a Fund available for
distribution to such shareholders. See "Massachusetts Trust." Shares of a Fund
have no preemptive or conversion rights and are fully paid and nonassessable.
The rights of redemption and exchange are described in the Prospectus and
elsewhere in this Statement of Additional Information.

The shareholders of the Trust are entitled to a full vote for each full
share held and to a fractional vote for each fractional share. Subject to the
1940 Act, the Trustees themselves have the power to alter the number and the
terms of office of the Trustees, to lengthen their own terms, or to make their
terms of unlimited duration subject to certain removal procedures, and appoint
their own successors, provided, however, that immediately after such appointment
the requisite majority of the Trustees have been elected by the shareholders of
the Trust. The voting rights of shareholders are not cumulative so that holders
of more than 50% of the shares voting can, if they choose, elect all Trustees
being selected while the shareholders of the remaining shares would be unable to
elect any Trustees. It is the intention of the Trust not to hold meetings of
shareholders annually. The Trustees may call meetings of shareholders for action
by shareholder vote as may be required by either the 1940 Act or the Trust's
Declaration of Trust.

Shareholders of the Trust have the right, upon the declaration in
writing or vote of more than two-thirds of its outstanding shares, to remove a
Trustee. The Trustees will call a meeting of shareholders to vote on removal of
a Trustee upon the written request of the record holders of 10% of the Trust's
shares. In addition, whenever ten or more shareholders of record who have been
such for at least six months preceding the date of application, and who hold in
the aggregate either shares having a net asset value of at least $25,000 or at
least 1% of the Trust's outstanding shares, whichever is less, shall apply to
the Trustees in writing, stating that they wish to communicate with other
shareholders with a view to obtaining signatures to request a meeting for the
purpose of voting upon the question of removal of any Trustee or Trustees and
accompanied by a form of communication and request which they wish to transmit,
the Trustees shall within five business days after receipt of such application
either: (1) afford to such applicants access to a list of the names and
addresses of all shareholders as recorded on the books of the Trust; or (2)
inform such applicants as to the approximate number of shareholders of record,
and the approximate cost of mailing to them the proposed communication and form
of request. If the Trustees elect to follow the latter course, the Trustees,
upon the written request of such applicants, accompanied by a tender of the
material to be mailed and of the reasonable expenses of mailing, shall, with
reasonable promptness, mail such material to all shareholders of record at their
addresses as recorded on the books, unless within five business days after such
tender the Trustees shall mail to such applicants and file with the SEC,
together with a copy of the material to be mailed, a written statement signed by
at least a majority of the Trustees to the effect that in their opinion either
such material contains untrue statements of fact or omits to state facts
necessary to make the statements contained therein not misleading, or would be
in violation of applicable law, and specifying the basis of such opinion. After
opportunity for hearing upon the objections specified in the written statements
filed, the SEC may, and if demanded by the Trustees or by such applicants shall,
enter an order either sustaining one or more of such objections or refusing to
sustain any of them. If the SEC shall enter an order refusing to sustain any of
such objections, or if, after the entry of an order sustaining one or more of
such objections, the SEC shall find, after notice and opportunity for hearing,
that all objections so sustained have been met, and shall enter an order so
declaring, the Trustees shall mail copies of such material to all shareholders
with reasonable promptness after the entry of such order and the renewal of such
tender.

The Trustees have authorized the issuance and sale to the public of
shares of 24 series of the Trust. The Trustees have no current intention to
create any classes within the initial series or any subsequent series. The
Trustees may, however, authorize the issuance of shares of additional series and
the creation of classes of shares within any series with such preferences,
privileges, limitations and voting and dividend rights as the Trustees may
determine. The proceeds from the issuance of any additional series would be
invested in separate, independently managed portfolios with distinct investment
objectives, policies and restrictions, and share purchase, redemption and net
asset valuation procedures. Any additional classes would be used to distinguish
among the rights of different categories of shareholders, as might be required
by future regulations or other unforeseen circumstances. All consideration
received by the Trust for shares of any additional series or class, and all
assets in which such consideration is invested, would belong to that series or
class, subject only to the rights of creditors of the Trust and would be subject
to the liabilities related thereto. Shareholders of any additional series or
class will approve the adoption of any management contract or distribution plan
relating to such series or class and of any changes in the investment policies
related thereto, to the extent required by the 1940 Act.

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

As of December 5, 1997, the following owned of record or, to the
knowledge of management, beneficially owned more than 5% of the outstanding
shares of J.P. Morgan Tax Exempt Money Market Fund:

Kingsley & Co/JPM Asset Sweep Fund Omnibus Account (16.21%)

The address of each owner listed above is c/o Morgan, 522 Fifth Avenue,
New York, New York 10036. As of the date of this Statement of Additional
Information, the officers and Trustees as a group owned less than 1% of the
shares of the Fund.

TAXES

The Fund intends to continue to qualify as a regulated investment
company under Subchapter M of the Code. As a regulated investment company, a
Fund must, among other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to loans of stock and securities,
gains from the sale or other disposition of stock, securities or foreign
currency and other income (including but not limited to gains from options,
futures, and forward contracts) derived with respect to its business of
investing in such stock, securities or foreign currency; (b) derive less than
30% of its gross income from the sale or other disposition of stock, securities,
options, futures or forward contracts (other than options, futures or forward
contracts on foreign currencies) held less than three months, or foreign
currencies (or options, futures or forward contracts on foreign currencies) held
less than three months, but only if such currencies (or options, futures or
forward contracts on foreign currencies) are not directly related to a Fund's
principal business of investing in stocks or securities (or options and futures
with respect to stocks or securities); and (c) diversify its holdings so that,
at the end of each quarter of its taxable year, (i) at least 50% of the value of
the Fund's total assets is represented by cash, cash items, U.S. Government
securities, securities of other regulated investment companies, and other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the Fund's total assets, and 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. Government
securities or securities of other regulated investment companies). Effective as
of an investor's first taxable year beginning after August 5, 1997, the 30% of
gross income test described in (b) above will no longer apply to the Funds
wishing to satisfy the requirements of subchapter M of the Code.

As a regulated investment company, the Fund (as opposed to its
shareholders) will not be subject to federal income taxes on the net investment
income and capital gain that it distributes to its shareholders, provided that
at least 90% of its net investment income and realized net short-term capital
gain in excess of net long-term capital loss for the taxable year is distributed
in accordance with the Code's timing requirements.

Under the Code, a Fund will be subject to a 4% excise tax on a portion
of its undistributed taxable income and capital gains if it fails to meet
certain distribution requirements by the end of the calendar year. 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 a Fund
in October, November or December as of a record date in such month and actually
paid in January of the following year will be treated as if they were paid on
December 31 of the year declared. Therefore, such dividends will be taxable to a
shareholder in the year declared rather than the year paid.

The Fund intends to qualify to pay exempt-interest dividends to its
shareholders by having, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consist of tax exempt securities. An
exempt-interest dividend is that part of dividend distributions made by the Fund
which is properly designated as consisting of interest received by the Fund on
tax exempt securities. Shareholders will not incur any federal income tax on the
amount of exempt-interest dividends received by them from the Fund, other than
the alternative minimum tax under certain circumstances. In view of the Fund's
investment policies, it is expected that a substantial portion of all dividends
will be exempt-interest dividends, although the Fund may from time to time
realize and distribute net short-term capital gains and may invest limited
amounts in taxable securities under certain circumstances. See "Investment
Objective(s) and Policies" in the Prospectus.

Distributions of net investment income, certain foreign currency gains,
and realized net short-term capital gain in excess of net long-term capital loss
(other than exempt interest dividends) are generally taxable to shareholders of
the 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. If dividend payments
exceed income earned by the Fund, the over distribution would be considered a
return of capital rather than a dividend payment. The Fund intends to pay
dividends in such a manner so as to minimize the possibility of a return of
capital. Distributions of net long-term capital gain (i.e., net long-term
capital gain in excess of net short-term capital loss) are taxable to
shareholders of 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. As a result of
the enactment of the Taxpayer Relief Act of 1997 (the "Act"), long-term capital
gain of an individual is generally subject to a maximum rate of 28% in respect
of a capital asset held directly by such individual for more than one year but
not more than eighteen months, and the maximum rate is reduced to 20% in respect
of a capital asset held in excess of 18 months. The Act authorizes the Treasury
department to promulgate regulations that would apply these rules in the case of
long-term capital gain distributions made by the Fund. The Treasury Department
has indicated that, under such regulations, individual shareholders will be
taxed at a minimum rate of 28% in respect of capital gains distributions
designated as 28% rate gain distributions and will be taxed at a maximum rate of
20% in respect of capital gains distributions designated as 20% rate gain
distributions, regardless of how long such shareholders have held their shares
in the Fund. See "Taxes" in the Prospectus for a discussion of the federal
income tax treatment of any gain or loss realized on the redemption or exchange
of the Fund's shares. Additionally, any loss realized on a redemption or
exchange of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before
such disposition, such as pursuant to reinvestment of a dividend in shares of
the Fund.

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

Gains or losses on sales of portfolio securities will be treated as
long-term capital gains or losses if the securities have been held for more than
one year except in certain cases where a put 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.
Except as described below, 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.

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 straddles treated as short sales for tax purposes
may also result in the loss of the holding period of underlying securities for
purposes of the 30% of gross income test described above, and therefore, the
Portfolio's ability to enter into forward currency contracts, options and
futures contracts may be limited under current law. Effective as of August 5,
1997, the 30% gross income test will no longer apply to the Fund.

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.

Foreign Shareholders. Dividends of net investment income and
distributions of realized net short-term gain in excess of net long-term loss to
a shareholder who, as to the United States, is a nonresident alien individual,
fiduciary of a foreign trust or estate, foreign corporation or foreign
partnership (a "foreign shareholder") will be subject to U.S. withholding tax at
the rate of 30% (or lower treaty rate) unless the dividends are effectively
connected with a U.S. trade or business of the shareholder, in which case the
dividends will be subject to tax on a net income basis at the graduated rates
applicable to U.S. individuals or domestic corporations. Distributions treated
as long term capital gains to foreign shareholders will not be subject to U.S.
tax unless the distributions are effectively connected with the shareholder's
trade or business in the United States or, in the case of a shareholder who is a
nonresident alien individual, the shareholder was present in the United States
for more than 182 days during the taxable year and certain other conditions are
met.

In the case of a foreign shareholder who is a nonresident alien
individual or foreign entity, a Fund may be required to withhold U.S. federal
income tax as "backup withholding" at the rate of 31% from distributions treated
as long-term capital gains and from the proceeds of redemptions, exchanges or
other dispositions of Fund shares unless IRS Form W-8 is provided. Transfers by
gift of shares of a Fund by a foreign shareholder who is a nonresident alien
individual will not be subject to U.S. federal gift tax, but the value of shares
of the Fund held by such a shareholder at his or her death will be includible in
his or her gross estate for U.S. federal estate tax purposes.

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 a Fund and its shareholders in those states which have income
tax laws might differ from treatment under the federal income tax laws.
Shareholders should consult their own tax advisors with respect to any state or
local taxes.

Other Taxation. The Trust is organized as a Massachusetts business
trust and, under current law, neither the Trust nor the Fund is liable for any
income or franchise tax in The Commonwealth of Massachusetts, provided that the
Fund continues to qualify as a regulated investment company under Subchapter M
of the Code. The Portfolio is organized as a New York trust. The Portfolio is
not subject to any federal income taxation or income or franchise tax in the
State of New York or The Commonwealth of Massachusetts. The investment by the
Fund in the Portfolio does not cause the Fund to be liable for any income or
franchise tax in the State of New York.

ADDITIONAL INFORMATION

As used in this Statement of Additional Information and the Prospectus,
the term "majority of the outstanding voting securities" means the vote of (i)
67% or more of the Fund's shares or the Portfolio's outstanding voting
securities present at a meeting, if the holders of more than 50% of the Fund's
outstanding shares or the Portfolio's outstanding voting securities are present
or represented by proxy, or (ii) more than 50% of the Fund's outstanding shares
or the Portfolio's outstanding voting securities, whichever is less.

Telephone calls to the Fund, Morgan or Eligible Institutions as
shareholder servicing agent may be tape recorded. With respect to the securities
offered hereby, this Statement of Additional Information and the Prospectus do
not contain all the information included in the Trust's Registration Statement
filed with the SEC under the 1933 Act and the Trust's and the 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 and the report thereon of Price
Waterhouse LLP of the Fund are incorporated herein by reference from its annual
report filing made with the SEC pursuant to Section 30(b) of the 1940 Act and
Rule 30b2-1 thereunder. The following financial report is available without
charge upon request by calling JP Morgan Funds Services at (800) 766-7722. The
Fund's financial statements include the financial statements of the Portfolio.

Date of Semi-Annual Report; Date of Annual Report;
Date Semi-Annual Report Filed; Date Annual Report
and Accession Number Filed; and Accession
Name of Fund Number

J.P. Morgan Tax Exempt N/A 08/31/97
Money Market Fund 10/30 /97
0001016969-97-000076

<PAGE>

APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

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

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

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

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

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

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

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

Commercial Paper, including Tax Exempt

A - Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designations 1, 2, and 3 to indicate the relative degree of safety.

A-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.

Short-Term Tax-Exempt Notes

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

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

MOODY'S

Corporate and Municipal Bonds

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

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

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

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

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

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

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

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

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

Commercial Paper, including Tax Exempt

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

- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection.
- - Broad margins in earnings coverage of fixed financial
charges and high internal cash generation.
- - Well established access to a range
of financial markets and assured sources of alternate liquidity.

Short-Term Tax Exempt Notes

MIG-1 - The short-term tax-exempt note rating MIG-1 is the highest rating
assigned by Moody's for notes judged to be the best quality. Notes with this
rating enjoy strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.

MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.

- --------
1 Pursuant to an interpretation of the staff of the SEC, the Fund may not
invest more than 25% of its assets in industrial development bonds in projects
of similar type or in the same state. The Fund shall comply with this
interpretation until such time as it may be modified by the staff of the SEC.

2 For purposes of interpretation of Investment Restriction No. 4
"guaranteed by another entity" includes credit substitutions, such as letters of
credit or insurance, unless the Advisor determines that the security meets the
Fund's credit standards without regard to the credit substitution.

*******************************************************************************
<PAGE>
- --------------------------------------------------------------------------------

PROSPECTUS
J.P. Morgan Tax Exempt Bond Fund
60 State Street
Boston, Massachusetts 02109
For information call (800) 521-5411

J.P. Morgan Tax Exempt Bond Fund (the "Fund") seeks to provide a high level of
current income exempt from federal income tax consistent with moderate risk of
capital and maintenance of liquidity. It is designed for investors who seek tax
exempt yields greater than those generally available from a portfolio of
short-term tax exempt obligations and who are willing to incur the greater price
fluctuation of longer-term instruments.

UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN PORTFOLIO
OF SECURITIES, THE FUND SEEKS TO ACHIEVE ITS INVESTMENT OBJECTIVE BY INVESTING
ALL OF ITS INVESTABLE ASSETS IN THE TAX EXEMPT BOND PORTFOLIO (THE "PORTFOLIO"),
A CORRESPONDING DIVERSIFIED OPEN-END MANAGEMENT INVESTMENT COMPANY HAVING THE
SAME INVESTMENT OBJECTIVE AS THE FUND. THE FUND INVESTS IN THE PORTFOLIO THROUGH
A TWO-TIER MASTER-FEEDER INVESTMENT FUND STRUCTURE. SEE SPECIAL INFORMATION
CONCERNING INVESTMENT STRUCTURE ON PAGE 4.

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

INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK. SHARES
OF THE FUND ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN
INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY CAUSE THE VALUE OF THE
INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS REDEEMED, THE VALUE MAY BE
HIGHER OR LOWER, THAN THE AMOUNT ORIGINALLY INVESTED BY THE INVESTOR.

THE DATE OF THIS PROSPECTUS IS JANUARY 2, 1998.
<PAGE>
TABLE OF CONTENTS

Page
Investors for Whom the Fund is Designed........... 1
Financial Highlights.............................. 3
Special Information Concerning Investment
Structure....................................... 4
Investment Objective and Policies................. 5
Additional Investment Information and Risk
Factors......................................... 7
Investment Restrictions........................... 10
Management of the Trust and the Portfolio......... 10
Shareholder Servicing............................. 13

Page

Purchase of Shares................................ 13
Redemption of Shares.............................. 14
Exchange of Shares................................ 15
Dividends and Distributions....................... 15
Net Asset Value................................... 16
Organization...................................... 16
Taxes............................................. 17
Additional Information............................ 19
Appendix.......................................... 20
</TABLE>
<PAGE>
J.P. Morgan Tax Exempt Bond Fund

INVESTORS FOR WHOM THE FUND IS DESIGNED

The Fund is designed for investors who seek tax exempt yields greater than those
generally available from a portfolio of short-term tax exempt obligations and
who are willing to incur the greater price fluctuation of longer-term
instruments. The Fund seeks to achieve its investment objective by investing all
of its investable assets in The Tax Exempt Bond Portfolio, a diversified
open-end management investment company having the same investment objective as
the Fund. Since the investment characteristics and experience of the Fund will
correspond directly with those of the Portfolio, the discussion in this
Prospectus focuses on the investments and investment policies of the Portfolio.
The net asset value of shares in the Fund fluctuates with changes in the value
of the investments in the Portfolio.

The Fund requires a minimum initial investment of $2,500. The minimum subsequent
investment is $500. If a shareholder reduces his or her investment in the Fund
to less than the applicable minimum investment, the investment may be subject to
mandatory redemption. See Redemption of Shares--Mandatory Redemption by the
Fund.

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

* Certain Eligible Institutions (defined below) may impose fees in connection
with the purchase of the Fund's shares through such institutions.

1
<PAGE>
EXPENSE TABLE
ANNUAL OPERATING EXPENSES*

Advisory Fees........................................................... 0.30%
Rule 12b-1 Fees......................................................... None
Other Expenses.......................................................... 0.34%
------
Total Operating Expenses................................................ 0.64%
</TABLE>

* Fees and expenses are expressed as a percentage of the average net assets for
the fiscal year ended August 31, 1997. See Management of the Trust and the
Portfolio.

EXAMPLE

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

1 Year.................................................................. $ 7
3 Years................................................................. $ 20
5 Years................................................................. $ 36
10 Years................................................................ $ 80
</TABLE>

The above expense table is designed to assist investors in understanding the
various direct and indirect costs and expenses that investors in the Fund bear.
The fees and expenses included in Other Expenses are the fees paid to Morgan
under the Administrative Services and the Shareholder Servicing Agreements,
organization expenses, the fees paid to Pierpont Group, Inc. under the Fund
Services Agreements, the fees paid to FDI under the Co-Administration
Agreements, the fees paid to State Street Bank and Trust Company as custodian
and transfer agent, and other usual and customary expenses of the Fund and the
Portfolio. For a more detailed description of contractual fee arrangements,
including expense reimbursements, see Management of the Trust and the Portfolio
and Shareholder Servicing. In connection with the above example, please note
that $1,000 is less than the Fund's minimum investment requirement and that
there are no redemption or exchange fees of any kind. See Purchase of Shares and
Redemption of Shares. THE EXAMPLE IS HYPOTHETICAL; IT IS INCLUDED SOLELY FOR
ILLUSTRATIVE PURPOSES. IT SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
PERFORMANCE; ACTUAL EXPENSES MAY BE MORE OR LESS THAN THOSE SHOWN.

2
<PAGE>
FINANCIAL HIGHLIGHTS

The following selected data for a share outstanding for the indicated periods
should be read in conjunction with the financial statements and related notes
which are contained in the Fund's annual report and are incorporated by
reference into the Statement of Additional Information. The following selected
data have been audited by independent accountants. The Fund's annual report
includes a discussion of those factors, strategies and techniques that
materially affected the Fund's performance during the period of the report, as
well as certain related information. A copy of the Fund's annual report will be
made available without charge upon request.

For the fiscal year ended August 31
-------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period............. $ 11.63 $ 11.73 $ 11.45 $ 12.04 $ 11.60
--------- --------- --------- --------- -----------
Income from
Investment
Operations:
Net Investment
Income........... 0.55 0.55 0.55 0.51 0.55
Net Realized and
Unrealized Gain
(Loss) on
Investment....... 0.24 (0.08) 0.29 (0.35) 0.56
--------- --------- --------- --------- -----------
Total from
Investment
Operations......... 0.79 0.47 0.84 0.16 1.11
--------- --------- --------- --------- -----------
Less Distributions:
Dividends from Net
Investment
Income........... (0.55) (0.55) (0.55) (0.51) (0.55)
Distributions from
Net Realized
Gains............ (0.02) (0.02) (0.01) (0.24) (0.12)
--------- --------- --------- --------- -----------
Total
Distributions...... (0.57) (0.57) (0.56) (0.75) (0.67)
--------- --------- --------- --------- -----------
Net Asset Value, End
of Period.......... $ 11.85 $ 11.63 $ 11.73 $ 11.45 $ 12.04
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
Total Return........ 6.95% 4.01% 7.63% 1.35% 9.88%
Ratios and
Supplemental Data:
Net Assets, End of
Period (In
Thousands)....... $ 401,007 $ 369,987 $ 352,005 $ 392,460 $485,013
Ratio to Average
Net Assets:
Expenses........ 0.64% 0.64% 0.71% 0.71% 0.74%
Net Investment
Income......... 4.67% 4.67% 4.87% 4.39% 4.64%
Decrease
Reflected in
the Above
Expense Ratio
due to Expense
Reimbursements... -- -- -- -- 0.01%
Portfolio
Turnover......... -- -- -- -- 41%(a)
</TABLE>

- ------------
(a) 1993 Portfolio Turnover reflects the period September 1, 1992 to July 11,
1993. After July 11, 1993, all the Fund's investable assets were invested
in The Tax Exempt Bond Portfolio.

3
<PAGE>
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE

INVESTMENT OBJECTIVE AND POLICIES

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

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

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

Morgan believes that based upon current market conditions, the Portfolio will
consist of a portfolio of securities with a duration of four to seven years. In
view of the duration of the Portfolio, under normal market conditions, the
Fund's yield can be expected to be higher and its net asset value less stable
than those of a money market fund. Duration is a measure of the weighted average
maturity of the bonds held in the Portfolio and can be used as a measure of the
sensitivity of the Portfolio's market value to changes in interest rates. The
maturities of the individual securities in the Portfolio may vary widely,
however, as Morgan adjusts the Portfolio's holdings of long-term and short-term
debt securities to reflect its assessment of prospective changes in interest
rates, which may adversely affect current income.

The Portfolio intends to manage its portfolio actively in pursuit of its
investment objective. Portfolio transactions are undertaken principally to
accomplish the Portfolio's objective in relation to expected movements in the
general level of interest rates, but the Portfolio may also engage in short-term
trading consistent with its objective. To the extent the Portfolio engages in
short-term trading, it may incur increased transaction costs. See Taxes below.
The portfolio turnover rate for the fiscal year ended August 31, 1997 was 25%.

The value of Portfolio's investments will generally fluctuate inversely with
changes in prevailing interest rates. The value of the Portfolio's investments
will also be affected by changes in the creditworthiness of issuers and other
market factors. The quality criteria applied in the selection of portfolio
securities are intended to minimize adverse

5
<PAGE>
price changes due to credit considerations. The value of the Portfolio's
municipal securities can also be affected by market reaction to legislative
consideration of various tax reform proposals. Although the net asset value of
the Portfolio fluctuates, the Portfolio attempts to preserve the value of its
investments to the extent consistent with its objective.

MUNICIPAL BONDS. The Portfolio may invest in bonds issued by or on behalf of
states, territories and possessions of the United States and the District of
Columbia and their political subdivisions, agencies, authorities and
instrumentalities. These obligations may be general obligation bonds secured by
the issuer's pledge of its full faith, credit and taxing power for the payment
of principal and interest, or they may be revenue bonds payable from specific
revenue sources, but not generally backed by the issuer's taxing power. These
include industrial development bonds where payment is the responsibility of the
private industrial user of the facility financed by the bonds. The Portfolio may
invest more than 25% of its assets in industrial development bonds, but may not
invest more than 25% of its assets in industrial development bonds in projects
of similar type or in the same state.

MONEY MARKET INSTRUMENTS. The Portfolio may also invest in municipal notes of
various types, including notes issued in anticipation of receipt of taxes, the
proceeds of the sale of bonds, other revenues or grant proceeds, as well as
municipal commercial paper and municipal demand obligations such as variable
rate demand notes and master demand obligations. The interest rate on variable
rate demand notes is adjustable at periodic intervals as specified in the notes.
Master demand obligations permit the investment of fluctuating amounts at
periodically adjusted interest rates. They are governed by agreements between
the municipal issuer and Morgan acting as agent, for no additional fee, in its
capacity as Advisor to the Portfolio and as fiduciary for other clients.
Although master demand obligations are not marketable to third parties, the
Portfolio considers them to be liquid because they are payable on demand. For
more information about municipal notes, see Investment Objectives and Policies
in the Statement of Additional Information.

The Portfolio will invest in money market instruments that meet the quality
requirements described below except that short-term municipal obligations of New
York State issuers may be rated MIG-2 by Moody's or SP-2 by Standard & Poor's.
Under normal circumstances, the Portfolio will purchase these securities to
invest temporary cash balances or to maintain liquidity to meet withdrawals.
However, the Portfolio may also invest in money market instruments as a
temporary defensive measure taken during, or in anticipation of, adverse market
conditions.

QUALITY INFORMATION. It is the current policy of the Portfolio that under normal
circumstances at least 90% of total assets will consist of securities that at
the time of purchase are rated Baa or better by Moody's Investors Service, Inc.
("Moody's") or BBB or better by Standard & Poor's Ratings Group ("Standard &
Poor's"). The remaining 10% of total assets may be invested in securities that
are rated B or better by Moody's or Standard & Poor's. In each case, the
Portfolio may invest in securities which are unrated if in the Advisor's opinion
such securities are of comparable quality. Securities rated Baa by Moody's or
BBB by Standard & Poor's are considered investment grade, but have some
speculative characteristics. Securities rated Ba or B by Moody's and BB or B by
Standard & Poor's are below investment grade and considered to be speculative
with regard to payment of interest and principal. These standards must be
satisfied at the time an investment is made. If the quality of the investment
later declines, the Portfolio may continue to hold the investment.

In certain circumstances, the Portfolio may also invest up to 20% of the value
of its total assets in taxable securities. In addition, the Portfolio may
purchase municipal obligations together with puts, purchase municipal
obligations on

6
<PAGE>
a when-issued or delayed delivery basis, enter into repurchase and reverse
repurchase agreements, purchase synthetic variable rate instruments, lend its
portfolio securities and purchase certain privately placed securities. For a
discussion of these transactions, see Additional Investment Information and Risk
Factors.

ADDITIONAL INVESTMENT INFORMATION AND RISK FACTORS

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

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

7
<PAGE>
defaults and the collateral value declines, the Portfolio might incur a loss. If
bankruptcy proceedings are commenced with respect to the seller, the Portfolio's
realization upon the disposition of collateral may be delayed or limited.
Investments in certain repurchase agreements and certain other investments which
may be considered illiquid are limited. See Illiquid Investments; Privately
Placed and other Unregistered Securities below.

TAXABLE INVESTMENTS. The Portfolio attempts to invest its assets in tax exempt
municipal securities; however, under certain circumstances the Portfolio is
permitted to invest up to 20% of the value of its total assets in securities,
the interest income on which may be subject to federal, state or local income
taxes. The Portfolio may make taxable investments pending investment of proceeds
from sales of its interests or portfolio securities, pending settlement of
purchases of portfolio securities, to maintain liquidity or when it is advisable
in Morgan's opinion because of adverse market conditions. The Portfolio will
invest in taxable securities only if there are no tax exempt securities
available for purchase or if the expected return from an investment in taxable
securities exceeds the expected return on available tax exempt securities. In
abnormal market conditions, if, in the judgment of Morgan, tax exempt securities
satisfying the Portfolio's investment objective may not be purchased, the
Portfolio may, for defensive purposes only, temporarily invest more than 20% of
its net assets in debt securities the interest on which is subject to federal,
state or local income taxes. The taxable investments permitted for the Portfolio
include obligations of the U.S. Government and its agencies and
instrumentalities, bank obligations, commercial paper and repurchase agreements
and other debt securities which meet the Portfolio's quality requirements. See
Taxes.

8
<PAGE>
aggregate price paid for securities with puts may be higher than the price which
otherwise would be paid. Consistent with the investment objective of the
Portfolio and subject to the supervision of the Trustees, the purpose of this
practice is to permit the Portfolio to be fully invested in tax exempt
securities while maintaining the necessary liquidity to purchase securities on a
when-issued basis, to meet unusually large withdrawals, to purchase at a later
date securities other than those subject to the put and to facilitate Morgan's
ability to manage the portfolio actively. The principal risk of puts is that the
put writer may default on its obligation to repurchase. Morgan will monitor each
writer's ability to meet its obligations under puts.

The amortized cost method is used by the Portfolio to value all municipal
securities with maturities of less than 60 days; when these securities are
subject to puts separate from the underlying securities, no value is assigned to
the puts. The cost of any such put is carried as an unrealized loss from the
time of purchase until it is exercised or expires. See the Statement of
Additional Information for the valuation procedure if the Portfolio were to
invest in municipal securities with maturities of 60 days or more that are
subject to separate puts.

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

FUTURES AND OPTIONS TRANSACTIONS. The Portfolio is permitted to enter into the
futures and options transactions described in the Appendix to this Prospectus
for hedging purposes.

9
<PAGE>
INVESTMENT RESTRICTIONS

The investment objective of the Fund and the Portfolio, together with the
investment restrictions described below and in the Statement of Additional
Information, except as noted, are deemed fundamental policies, i.e., they may be
changed only with the approval of the holders of a majority of the outstanding
voting securities of the Fund and the Portfolio. The Fund has the same
investment restrictions as the Portfolio, except that the Fund may invest all of
its investable assets in another open-end investment company with the same
investment objective and restrictions (such as the Portfolio). References below
to the Portfolio's investment restrictions also include the Fund's investment
restrictions.

The Portfolio may not (i) borrow money, except from banks for extraordinary or
emergency purposes and then only in amounts up to 10% of the value of the
Portfolio's total assets, taken at cost at the time of borrowing, or purchase
securities while borrowings exceed 5% of its total assets; or mortgage, pledge
or hypothecate any assets except in connection with any such borrowings in
amounts up to 10% of the value of the Portfolio's net assets at the time of
borrowing; or (ii) acquire industrial revenue bonds if as a result more than 5%
of the Portfolio's total assets would be invested in industrial revenue bonds
where payment of principal and interest is the responsibility of companies with
fewer than three years of operating history.

MANAGEMENT OF THE TRUST AND THE PORTFOLIO

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

10
<PAGE>

and the J.P. Morgan Institutional Funds, up to and including creating a separate
board of trustees. See Trustees and Officers in the Statement of Additional
Information for more information about the Trustees and Officers of the Fund and
the Portfolio.

The Portfolio and the Trust have each entered into a Fund Services Agreement
with Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities for the Portfolio's and the Trust's affairs. The
fees to be paid under the agreements approximate the reasonable cost of Pierpont
Group, Inc. in providing these services to the Trust, the Portfolio and certain
other registered investment companies subject to similar agreements with
Pierpont Group, Inc. Pierpont Group, Inc. was organized in 1989 at the request
of the Trustees of The Pierpont Family of Funds for the purpose of providing
these services at cost to these funds. See Trustees and Officers in the
Statement of Additional Information. The principal offices of Pierpont Group,
Inc. are located at 461 Fifth Avenue, New York, New York 10017.

Morgan uses a sophisticated, disciplined, collaborative process for managing all
asset classes. For fixed income portfolios, this process focuses on the
systematic analysis of real interest rates, sector diversification and
quantitative and credit analysis. Morgan has managed portfolios of domestic
fixed income securities on behalf of its clients for over fifty years. The
Portfolio managers making investments in domestic fixed income securities work
in conjunction with fixed income, credit, capital market and economic research
analysts, as well as traders and administrative officers.

The following persons are primarily responsible for the day-to-day management
and implementation of Morgan's process for the Portfolio and its predecessor
entity (the inception date of each person's responsibility for the Portfolio (or
its predecessor) and his or her business experience for the past five years is
indicated parenthetically): Robert Meiselas, Vice President (since January,
1992, employed by Morgan since prior to 1992) Elaine Young, Vice President
(since July, 1997, employed by Morgan since August 1994).

11
<PAGE>
Under separate agreements, Morgan also provides administrative and related
services to the Fund and the Portfolio and shareholder services to shareholders
of the Fund. See Administrative Services Agent and Shareholder Servicing below.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, MORGAN GUARANTY TRUST COMPANY OF NEW YORK OR ANY OTHER BANK.

CO-ADMINISTRATOR. Pursuant to Co-Administration Agreements with the Trust and
the Portfolio, FDI serves as the Co-Administrator for the Fund and the
Portfolio. FDI (i) provides office space, equipment and clerical personnel for
maintaining the organization and books and records of the Fund and the
Portfolio; (ii) provides officers for the Trust and the Portfolio; (iii)
prepares and files documents required for notification of state securities
administrators; (iv) reviews and files marketing and sales literature; (v) files
Portfolio regulatory documents and mails Portfolio communications to Trustees
and investors; and (vi) maintains related books and records. See Administrative
Services Agent below.

For its services under the Co-Administration Agreements, each of the Fund and
the Portfolio has agreed to pay FDI fees equal to its allocable share of its
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the Fund or the Portfolio is based on the ratio of its net
assets to the aggregate net assets of the Trust and certain other registered
investment companies subject to similar agreements with FDI.

Under the Administrative Services Agreements, each of the Fund and the Portfolio
has agreed to pay Morgan fees equal to its allocable share of an annual
complex-wide charge. This charge is calculated daily based on the aggregate net
assets of the Portfolio, the other portfolios in which series of the Trust or
the J.P. Morgan Institutional Funds invest and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first $7 billion of
their aggregate average daily net assets and 0.04% of such aggregate average
daily net assets in excess of $7 billion, less the complex-wide fee payable to
FDI.

EXPENSES. In addition to the fees payable to Morgan, FDI and Pierpont Group,
Inc. under the various agreements discussed under Trustees, Advisor,
Co-Administrator and Administrative Services Agent above and Shareholder
Servicing below, 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, registration
fees under federal securities laws, and extraordinary expenses applicable to the
Fund or the Portfolio. For the Fund, such expenses also include transfer,

12
<PAGE>
registrar and dividend disbursement costs, the expenses of printing and mailing
reports, notices and proxy statements to Fund shareholders, and registration
fees under state securities laws. For the Portfolio, such expenses also include
custodian fees and brokerage expenses.

SHAREHOLDER SERVICING

Pursuant to a Shareholder Servicing Agreement with the Trust, Morgan acts as
shareholder servicing agent for its customers and other Fund investors who are
customers of an eligible institution which is a customer of Morgan (an "Eligible
Institution"). The Fund pays Morgan for these services at an annual rate
(expressed as a percentage of the average daily net asset value of Fund shares
owned by or for shareholders for whom Morgan is acting as shareholder servicing
agent) of 0.20% of the Fund's average daily net assets. Under the terms of the
Shareholder Servicing Agreement with the Fund, Morgan may delegate one or more
of its responsibilities to other entities at Morgan's expense.

The Fund's shares may be sold to or through Eligible Institutions, including
financial institutions and broker-dealers, that may be paid fees by Morgan or
its affiliates for services provided to their clients that invest in the Fund.
See Eligible Institutions. Organizations that provide recordkeeping or other
services to certain employee benefit or retirement plans that include the Fund
as an investment alternative may also be paid a fee.

Shareholders should address all inquiries to J.P. Morgan Funds Services, Morgan
Guaranty Trust Company of New York, 522 Fifth Avenue, New York, New York 10036
or call (800) 521-5411.

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

PURCHASE OF SHARES

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

The Fund requires a minimum initial investment of $2,500. The minimum subsequent
investment for all investors is $500. These minimum investment requirements may
be waived for certain investors, including investors for whom the Advisor is a
fiduciary, who are employees of the Advisor, who maintain related accounts with
the J.P. Morgan Funds or the Advisor, who make investments for a group of
clients, such as financial advisors, trust companies and investment advisors, or
who maintain retirement accounts with the Fund or other J.P. Morgan Funds.

13
<PAGE>
To purchase shares in the Fund, investors should request their Morgan
representative (or a representative of their Eligible Institution) to assist
them in placing a purchase order with the Fund's Distributor. Any shareholder
may also call J.P. Morgan Funds Services at (800) 521-5411 for assistance in
placing an order for Fund shares. If the Fund receives a purchase order prior to
4:00 P.M. New York time on any business day, the purchase of Fund shares is
effective and is made at the net asset value determined that day. If the Fund
receives a purchase order after 4:00 P.M. New York time, the purchase is
effective and is made at net asset value determined on the next business day.
All purchase orders for Fund shares must be accompanied by instructions to
Morgan (or an Eligible Institution) to transfer immediately available funds to
the Fund's Distributor on settlement date. The settlement date is generally the
business day after the purchase is effective. The purchaser will begin to
receive the daily dividends on the settlement date. See Dividends and
Distributions.

Although there is no sales charge levied directly by the Fund, Eligible
Institutions may establish their own terms and conditions for providing their
services and may charge investors a transaction-based or other fee for their
services. Such charges may vary among Eligible Institutions but in all cases
will be retained by the Eligible Institution and not remitted to the Fund or
Morgan.

REDEMPTION OF SHARES

A redemption request received by the Fund or its agent prior to 4:15 P.M. New
York time is effective on that day. A redemption request received after that
time becomes effective on the next business day. Proceeds of an effective
redemption are deposited on settlement date in immediately available funds to
the shareholder's account at Morgan or at his Eligible Institution or, in the
case of certain Morgan customers, are mailed by check or wire transferred in
accordance with the customer's instructions. The redeemer will continue to
receive dividends on these shares through the day before the settlement date.
Settlement date is generally the next business day after a redemption is
effective and, subject to Further Redemption Information below, in any event is
within seven days. See Dividends and Distributions.

14
<PAGE>

EXCHANGE OF SHARES

An investor may exchange shares from the Fund into any other J.P. Morgan Fund or
J.P. Morgan Institutional Fund or series of J.P. Morgan Series Trust without
charge. An exchange may be made so long as after the exchange the investor has
shares, in each fund in which he or she remains an investor, with a value of at
least that fund's minimum investment amount. Shareholders should read the
prospectus of the fund into which they are exchanging and may only exchange
between fund accounts that are registered in the same name, address and taxpayer
identification number. Shares are exchanged on the basis of relative net asset
value per share. Exchanges are in effect redemptions from one fund and purchases
of another fund and the usual purchase and redemption procedures and
requirements are applicable to exchanges. See Purchase of Shares and Redemption
of Shares in this Prospectus and in the prospectuses for the other J.P. Morgan
Funds, J.P. Morgan Institutional Funds and J.P. Morgan Series Trust. See also
Additional Information below for an explanation of the telephone exchange policy
of the J.P. Morgan Funds.

DIVIDENDS AND DISTRIBUTIONS

The Fund intends to distribute substantially all of its net investment income.
The net investment income of the Fund is declared as a dividend daily
immediately prior to the determination of the net asset value of the Fund on
that day and paid monthly. If an investor's shares are redeemed during a month,
accrued but unpaid dividends are paid with the redemption proceeds. The net
investment income of the Fund for dividend purposes consists of its pro rata
share of the net income of the Portfolio less the Fund's expenses. Expenses of
the Fund and the Portfolio,

15
<PAGE>
including the fees payable to Morgan, are accrued daily. Shares will accrue
dividends as long as they are issued and outstanding. Shares are issued and
outstanding as of the settlement date of a purchase order to the settlement date
of a redemption order.

Substantially all the realized net capital gains, if any, of the Fund are
declared and paid on an annual basis, except that an additional capital gains
distribution may be made in a given year to the extent necessary to avoid the
imposition of federal excise tax on the Fund.

NET ASSET VALUE

The Fund computes its net asset value once daily at 4:00 P.M. New York time on
Monday through Friday, except that the net asset value is not computed for the
Fund the holidays listed under Net Asset Value in the Statement of Additional
Information.

ORGANIZATION

16
<PAGE>
percent of Trust shares and will assist shareholders in communicating with each
other as prescribed in Section 16(c) of the 1940 Act. For further organization
information, including certain shareholder rights, see Description of Shares in
the Statement of Additional Information.

TAXES

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

The Trust intends that the Fund will continue to qualify as a separate regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended. For the Fund to qualify as a regulated investment company, the
Portfolio, in addition to other requirements, limits its investments so that at
the close of each quarter of its taxable year (a) no more than 25% of its total
assets are invested in the securities of any one issuer, except U.S. Government
securities, and (b) with regard to 50% of its total assets, no more than 5% of
its total assets are invested in the securities of a single issuer, except U.S.
Government securities. As a regulated investment company, the Fund should not be
subject to federal income taxes or federal excise taxes if substantially all of
its net investment income and capital gains less any available capital loss
carryforwards are distributed to shareholders within allowable time limits. The
Portfolio intends to qualify as an association treated as a partnership for
federal income tax purposes. As such, the Portfolio should not be subject to
tax. The Fund's status as a regulated investment company is dependent on, among
other things, the Portfolio's continued qualification as a partnership for
federal income tax purposes.

17
<PAGE>
Interest on certain tax exempt municipal obligations issued after August 7, 1986
is a preference item for purposes of the alternative minimum tax applicable to
individuals and corporations. Under tax regulations to be issued, the portion of
an exempt-interest dividend of a regulated investment company that is allocable
to these obligations will be treated as a preference item for purposes of the
alternative minimum tax.

Distributions of net long-term capital gains in excess of net short-term capital
losses are taxable to shareholders of the Fund as long-term capital gains
regardless of how long a shareholder has held shares in the Fund and regardless
of whether taken in cash or reinvested in additional shares. Long-term capital
gains distributions to corporate shareholders are not eligible for the
dividends-received deduction. As a result of the enactment of the Taxpayer
Relief Act of 1997 (the "Act"), long-term capital gain of an individual is
generally subject to a maximum rate of 28% in respect of a capital asset held
directly by such individual for more than one year but not more than eighteen
months, and the maximum rate is reduced to 20% in respect of a capital asset
held in excess of 18 months. The Act authorizes the Treasury department to
promulgate regulations that would apply these sales in the case of long-term
capital gain distributions made by the Fund.

Any distribution of capital gains will have the effect of reducing the net asset
value of Fund shares held by a shareholder by the same amount as the
distribution. 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.

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<PAGE>
loss realized by a shareholder upon the redemption or exchange of shares in the
Fund held six months or less will be disallowed to the extent of any
exempt-interest dividends received by the shareholder with respect to these
shares. See Taxes in the Statement of Additional Information.

ADDITIONAL INFORMATION

The Fund may make historical performance information available and may compare
its performance to other investments or relevant indexes, including data from
Lipper Analytical Services, Inc., Micropal Inc., Morningstar Inc., Ibbotson
Associates, Standard & Poors 500 Composite Stock Price Index, the Dow Jones
Industrial Average, the Frank Russell Indexes and other industry publications.
The Fund may advertise "yield" and "tax equivalent yield". Yield refers to the
net income generated by an investment in the Fund over a stated 30-day period.
This income is then annualized--i.e., the amount of income generated by the
investment during the 30-day period is assumed to be generated each 30-day
period for twelve periods and is shown as a percentage of the investment. The
income earned on the investment is also assumed to be reinvested at the end of
the sixth 30-day period. The tax equivalent yield is calculated similarly to the
yield for the Fund, except that the yield is increased using a stated income tax
rate to demonstrate the taxable yield necessary to produce an after-tax
equivalent to the Fund.

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<PAGE>
APPENDIX

The Portfolio is permitted to enter into the futures and options transactions
described below, but it does not currently intend to do so.

The Portfolio may (a) purchase and sell exchange traded and over-the-counter
(OTC) put and call options on fixed income securities and indexes of fixed
income securities, (b) purchase and sell futures contracts on fixed income
securities and indexes of fixed income securities and (c) purchase put and call
options on futures contracts on fixed income securities and indexes of fixed
income securities.

The Portfolio may use futures contracts and options for hedging purposes. The
Portfolio may not use futures contracts and options for speculation.

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

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

The Portfolio may purchase put and call options on securities, indexes of
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
Portfolio's net assets, and (ii) the aggregate margin deposits required on all
such futures or options thereon held at any time do not exceed 5% of the
Portfolio's total assets.

OPTIONS

PURCHASING PUT AND CALL OPTIONS. By purchasing a put option, the Portfolio
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 Portfolio pays the
current market price for the option (known as the option premium). Options have
various types of underlying instruments, including specific securities, indexes
of securities, indexes of securities prices, and futures contracts. The
Portfolio may terminate its position in a put option it has purchased by
allowing it to expire or by

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<PAGE>
exercising the option. The Portfolio may also close out a put option position by
entering into an offsetting transaction, if a liquid market exists. If the
option is allowed to expire, the Portfolio will lose the entire premium it paid.
If the Portfolio exercises a put option on a security, it will sell the
instrument underlying the option at the strike price. If the Portfolio exercises
an option on an index, settlement is in cash and does not involve the actual
sale of securities. If an option is American style, it may be exercised on any
day up to its expiration date. A European style option may be exercised only on
its expiration date.

The buyer of a typical put option can expect to realize a gain if the price of
the underlying instrument falls substantially. However, if the price of the
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 Portfolio writes a put option,
it takes the opposite side of the transaction from the option's purchaser. In
return for receipt of the premium, the Portfolio assumes the obligation to pay
the strike price for the instrument underlying the option if the other party to
the option chooses to exercise it. The Portfolio may seek to terminate its
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 Portfolio has written, however, the Portfolio must continue to be
prepared to pay the strike price while the option is outstanding, regardless of
price changes, and must continue to post margin as discussed below.

If the price of the underlying instrument rises, a put writer would generally
expect to profit, although its gain would be limited to the amount of the
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 Portfolio 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 Portfolio may purchase and sell (write) put and call
options on any securities index based on securities in which the Portfolio may
invest. Options on securities indexes are similar to options on securities,
except that the exercise of securities index options is settled by cash payment
and does not involve the

21
<PAGE>
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
Portfolio, in purchasing or selling index options, is subject to the risk that
the value of its portfolio securities may not change as much as an index because
the Portfolio's investments generally will not match the composition of an
index.

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

FUTURES CONTRACTS

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

When the Portfolio 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 Portfolio's exposure to positive and negative price fluctuations in
the underlying instrument, much as if it had purchased the underlying instrument
directly. When the Portfolio sells a futures contract, by contrast, the value of
its futures position will tend to move in a direction contrary to the value of
the underlying instrument. Selling futures contracts, therefore, will tend to
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 Portfolio buys or sells a futures contract it will be
required to deposit "initial margin" with its Custodian in a segregated account
in the name of its futures broker, known as a futures commission merchant (FCM).
Initial margin deposits are typically equal to a small percentage of the
contract's value. If the value of either party's position declines, that party
will be required to make additional "variation margin" payments equal to the
change in value on a daily basis. The party that has a gain may be entitled to
receive all or a portion of this amount. The Portfolio may be obligated to make
payments of variation margin at a time when it is disadvantageous to do so.
Furthermore, it may not always be possible for the Portfolio to close out its
futures positions. Until it closes out a futures position, the Portfolio will be
obligated to continue to pay variation margin. Initial and variation margin
payments do not constitute purchasing on margin for purposes of the Portfolio's
investment restrictions. In the event of the bankruptcy of an FCM that holds
margin on behalf of the Portfolio, the Portfolio may be entitled to return of
margin owed to it only in proportion to the amount received by the FCM's other
customers, potentially resulting in losses to the Portfolio.

The Portfolio will segregate liquid, high quality assets in connection with its
use of options and futures contracts to the extent required by the staff of the
Securities and Exchange Commission. Securities held in a segregated account

22
<PAGE>
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 Portfolio's assets could impede
portfolio management or the Portfolio's ability to meet redemption requests or
other current obligations.

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

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<PAGE>

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

J.P. Morgan
Tax Exempt
Bond Fund

PROS206-9681

******************************************************************************

J.P.MORGAN FUNDS

J.P. MORGAN TAX EXEMPT BOND FUND

STATEMENT OF ADDITIONAL INFORMATION

JANUARY 2, 1998

<PAGE>

Table of Contents

Page

General . . . . . . . . . . . . . . . . . . . 2
Investment Objective and Policies . . . . . . 2
Investment Restrictions . . . . . . . . . . . 13
Trustees and Officers . . . . . . . . . . . . 15
Investment Advisor . . . . . . . . . . . . . . 19
Distributor . . . . . . . . . . . . . . . . . 21
Co-Administrator . . . . . . . . . . . . . . . 21
Services Agent . . . . . . . . . . . . . . . . 22
Custodian and Transfer Agent . . . . . . . . . 23
Shareholder Servicing . . . . . . . . . . . . 23
Independent Accountants . . . . . . . . . . . 24
Expenses . . . . . . . . . . . . . . . . . . . 24
Purchase of Shares . . . . . . . . . . . . . . 25
Redemption of Shares . . . . . . . . . . . . . 25
Exchange of Shares . . . . . . . . . . . . . . 26
Dividends and Distributions . . . . . . . . . 26
Net Asset Value . . . . . . . . . . . . . . . 26
Performance Data . . . . . . . . . . . . . . . 27
Portfolio Transactions . . . . . . . . . . . . 28
Massachusetts Trust . . . . . . . . . . . . . 29
Description of Shares . . . . . . . . . . . . 30
Taxes . . . . . . . . . . . . . . . . . . . . 32
Additional Information . . . . . . . . . . . 35
Appendix A - Description of Securities
Ratings . . . . . . . . . . . . . . . . . . . A-38

<PAGE>

GENERAL

This Statement of Additional Information relates only to the J.P.
Morgan Tax Exempt Bond Fund (the "Fund"). The Fund is a series of shares of
beneficial interest of the J.P. Morgan 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 Fund"). The other J.P.
Morgan 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. The Fund operates through a two-tier master-feeder investment fund
structure.

INVESTMENT OBJECTIVE AND POLICIES

The Fund is designed to be an economical and convenient means of making
substantial investments in debt obligations that are exempt from federal income
tax. The Tax Exempt Bond Fund's investment objective is to provide a high level
of current income exempt from federal income tax consistent with moderate risk
of capital and maintenance of liquidity. See "Taxes." The Fund attempts to
achieve its investment objective by investing all of its investable assets in
The Tax Exempt Bond Portfolio (the "Portfolio"), a diversified open-end
management investment company having the same investment objective as the Tax
Exempt Bond Fund.

The Portfolio attempts to achieve its investment objective by investing
primarily in securities of states, territories and possessions of the United
States and their political subdivisions, agencies and instrumentalities, the
interest of which is exempt from federal income tax in the opinion of bond
counsel for the issuer, but it may invest up to 20% of its total assets in
taxable obligations. The Fund seeks to maintain a current yield that is greater
than that obtainable from a portfolio of short term tax exempt obligations,
subject to certain quality restrictions. See "Quality and Diversification
Requirements."

Money Market Instruments

Bank Obligations. The Fund, unless otherwise noted in the Prospectus or
below, may invest in negotiable certificates of deposit, time deposits and
bankers' acceptances of (i) banks, savings and loan associations and savings
banks which have more than $2 billion in total and are organized under the laws
of the United States or any state, (ii) foreign branches of these banks or of
foreign banks of equivalent size (Euros) and (iii) U.S. branches of foreign
banks of equivalent size (Yankees). The Fund may not invest in obligations of
foreign branches of foreign banks. 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.

Repurchase Agreements. The Fund, unless otherwise noted in the
Prospectus or below, may enter into repurchase agreements with brokers, dealers
or banks that meet the credit guidelines approved by the Fund's Trustees. In a
repurchase agreement, the Fund buys a security from a seller that has agreed to
repurchase the same security at a mutually agreed upon date and price. The
resale price normally is in excess of the purchase price, reflecting an agreed
upon interest rate. This interest rate is effective for the period of time the
Fund is invested in the agreement and is not related to the coupon rate on the
underlying security. A repurchase agreement may also be viewed as a fully
collateralized loan of money by the Fund to the seller. The period of these
repurchase agreements will usually be short, from overnight to one week, and at
no time will the Fund invest in repurchase agreements for more than 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 the agreement
plus accrued interest, and the Fund will make payment for such securities only
upon physical delivery or upon evidence of book entry transfer to the account of
the Custodian. If the seller defaults, the Fund might incur a loss if the value
of the collateral securing the repurchase agreement declines and might incur
disposition costs in connection with liquidating the collateral. In addition, if
bankruptcy proceedings are commenced with respect to the seller of the security,
realization upon disposal of the collateral by the Fund may be delayed or
limited.

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

Tax Exempt Obligations

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

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

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.

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
Tax Exempt Bond 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 Tax Exempt Bond 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 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 each
Fund's general policy to enter into put transactions only with those dealers
which are determined to present minimal credit risks. In connection with such
determination, the Trustees will review regularly the Advisor's list of approved
dealers, taking into consideration, among other things, the ratings, if
available, of their equity and debt securities, their reputation in the
municipal securities markets, their net worth, their efficiency in consummating
transactions and any collateral arrangements, such as letters of credit,
securing the puts written by them. Commercial bank dealers normally will be
members of the Federal Reserve System, and other dealers will be members of the
National Association of Securities Dealers, Inc. or members of a national
securities exchange. In the case of the Tax Exempt Bond Fund, 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 becomes more
than a minimal credit risk. In the event that a dealer should default on its
obligation to repurchase an underlying security, the Funds are unable to predict
whether all or any portion of any loss sustained could subsequently be recovered
from such dealer.

Additional Investments

When-Issued and Delayed Delivery Securities. The Fund may purchase
securities on a when-issued or delayed delivery basis. For example, delivery of
and payment for these securities can take place a month or more after the date
of the purchase commitment. The purchase price and the interest rate payable, if
any, on the securities are fixed on the purchase commitment date or at the time
the settlement date is fixed. The value of such securities is subject to market
fluctuation and for money market instruments and other fixed income securities
no interest accrues to the Fund until settlement takes place. At the time the
Fund makes the commitment to purchase securities on a when-issued or delayed
delivery basis, it will record the transaction, reflect the value each day of
such securities in determining its net asset value and, if applicable, calculate
the maturity for the purposes of average maturity from that date. At the time of
settlement a when-issued security may be valued at less than the purchase price.
To facilitate such acquisitions, the Fund will maintain with the Custodian a
segregated account with liquid assets, consisting of cash, U.S. Government
securities or other appropriate securities, in an amount at least equal to such
commitments. On delivery dates for such transactions, the Fund will meet its
obligations from maturities or sales of the securities held in the segregated
account and/or from cash flow. If the Fund chooses to dispose of the right to
acquire a when-issued security prior to its acquisition, it could, as with the
disposition of any other portfolio obligation, incur a gain or loss due to
market fluctuation. It is the current policy of the Fund not to enter into
when-issued commitments exceeding in the aggregate 15% of the market value of
the Fund's total assets, less liabilities other than the obligations created by
when-issued commitments.

Investment Company Securities. Securities of other investment companies
may be acquired by the Fund and the Portfolio to the extent permitted under the
1940 Act. These limits require that, as determined immediately after a purchase
is made, (i) not more than 5% of the value of 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 and its Portfolio. As a shareholder of another investment company, a Fund
or Portfolio would bear, along with other shareholders, its pro rata portion of
the other investment company's expenses, including advisory fees. These expenses
would be in addition to the advisory and other expenses that a Fund or Portfolio
bears directly in connection with its own operations.

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

Privately Placed and Certain Unregistered Securities. The Fund may
invest in privately placed, restricted, Rule 144A or other unregistered
securities as described in the Prospectus.

Quality and Diversification Requirements

The Fund intends to meet the diversification requirements of the 1940
Act. To meet these requirements, 75% of the assets of the Fund are subject to
the following fundamental limitations: (1) the Fund may not invest more than 5%
of its total assets in the securities of any one issuer, except obligations of
the U.S. Government, its agencies and instrumentalities, and (2) the Fund may
not own more than 10% of the outstanding voting securities of any one issuer. As
for the other 25% of the Fund's assets not subject to the limitation described
above, there is no limitation on investment of these assets under the 1940 Act,
so that all of such assets may be invested in securities of any one issuer,
subject to the limitation of any applicable state securities laws or as
described below. 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, for purposes of diversification and concentration under the
1940 Act, identification of the issuer of municipal bonds or notes depends on
the terms and conditions of the obligation. If the assets and revenues of an
agency, authority, instrumentality or other political subdivision are separate
from those of the government creating the subdivision and the obligation is
backed only by the assets and revenues of the subdivision, such subdivision is
regarded as the sole issuer. Similarly, in the case of an industrial development
revenue bond or pollution control revenue bond, if the bond is backed only by
the assets and revenues of the nongovernmental user, the nongovernmental user is
regarded as the sole issuer. If in either case the creating government or
another entity guarantees an obligation, the guaranty is regarded as a separate
security and treated as an issue of such guarantor. Since securities issued or
guaranteed by states or municipalities are not voting securities, there is no
limitation on the percentage of a single issuer's securities which the Fund may
own so long as it does not invest more than 5% of its total assets that are
subject to the diversification limitation in the securities of such issuer,
except obligations issued or guaranteed by the U.S. Government. Consequently,
the Fund may invest in a greater percentage of the outstanding securities of a
single issuer than would an investment company which invests in voting
securities. See "Investment Restrictions."

The Fund invests principally in a diversified portfolio of "investment
grade" tax exempt securities. On the date of investment with respect to at least
90% of its total assets, (i) municipal bonds must be rated within the four
highest ratings of Moody's, currently Aaa, Aa, A and Baa, or of Standard &
Poor's, currently AAA, AA, A and BBB, (ii) municipal notes must be rated MIG-1
by Moody's or SP-1 by Standard & Poor's (or, in the case of New York State
municipal notes, MIG-1 or MIG-2 by Moody's or SP-1 or SP-2 by Standard & Poor's)
and (iii) municipal commercial paper must be rated Prime-1 by Moody's or A-1 by
Standard & Poor's or, if not rated by either Moody's or Standard & Poor's,
issued by an issuer either (a) having an outstanding debt issue rated A or
higher by Moody's or Standard & Poor's or (b) having comparable quality in the
opinion of the Advisor and, with respect to the remaining 10% of its assets,
must be rated B or better by Moody's or Standard & Poor's, or of comparable
quality. The Fund may invest in other tax exempt securities which are not rated
if, in the opinion of the Advisor, such securities are of comparable quality to
the rated securities discussed above. In addition, at the time the Fund invests
in any commercial paper, bank obligation or repurchase agreement, the issuer
must have outstanding debt rated A or higher by Moody's or Standard & Poor's,
the issuer's parent corporation, if any, must have outstanding commercial paper
rated Prime-1 by Moody's or A-1 by Standard & Poor's, or if no such ratings are
available, the investment must be of comparable quality in the Advisor's
opinion.

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

Options and Futures Transactions

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

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

Futures Contracts and Options on Futures Contracts. The Portfolio is permitted
to enter into futures and options transactions and may purchase or sell (write)
futures contracts and purchase 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 and indexes of equity securities.

Unlike a futures contract, which requires the parties to buy and sell a
security or make a cash settlement payment based on changes in a financial
instrument or securities index on an agreed date, an option on a futures
contract 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 Portfolio are paid by the Portfolio into a segregated
account, in the name of the Futures Commission Merchant, as required by the 1940
Act and the SEC's interpretations thereunder.

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

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

Options and futures contracts prices can also diverge from the prices
of their underlying instruments, even if the underlying instruments match the
Portfolio's investments well. Options and futures contracts prices are affected
by such factors as current and anticipated short term interest rates, changes in
volatility of the underlying instrument, and the time remaining until expiration
of the contract, which may not affect security prices the same way. Imperfect
correlation may also result from differing levels of demand in the options and
futures markets and the securities markets, from structural differences in how
options and futures and securities are traded, or from imposition of daily price
fluctuation limits or trading halts. The Portfolio may purchase or sell options
and futures contracts with a greater or lesser value than the securities it
wishes to hedge or intends to purchase in order to attempt to compensate for
differences in volatility between the contract and the securities, although this
may not be successful in all cases. If price changes in the Portfolio'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
Portfolio to enter into new positions or close out existing positions. If the
market for a contract is not liquid because of price fluctuation limits or
otherwise, it could prevent prompt liquidation of unfavorable positions, and
could potentially requires the Portfolio to continue to hold a position until
delivery or expiration regardless of changes in its value. As a result, the
Portfolio's access to other assets held to cover its options or futures
positions could also be impaired. (See "Exchange Traded and OTC Options" above
for a discussion of the liquidity of options not traded on an exchange.)

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

Asset Coverage for Futures Contracts and Options Positions. The Portfolio
intends to comply with Section 4.5 of the regulations under the Commodity
Exchange Act, which limits the extent to which the Portfolio can commit assets
to initial margin deposits and option premiums. In addition, the Portfolio 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 Portfolio's assets could impede portfolio
management or the Portfolio's ability to meet redemption requests or other
current obligations.

Portfolio Turnover

The portfolio turnover rates for the for the fiscal years ended August
31, 1995, August 31, 1996 and August 31,1997 were 47% , 25% and 25%,
respectively. 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.

INVESTMENT RESTRICTIONS

The Fund and the Portfolio may not:

1. Borrow money, except from banks for extraordinary or emergency purposes and
then only in amounts up to 10% of the value of the Fund's total assets, taken at
cost at the time of such borrowing; or mortgage, pledge, or hypothecate any
assets except in connection with any such borrowing in amounts up to 10% of the
value of the Fund's net assets at the time of such borrowing. The Fund will not
purchase securities while borrowings exceed 5% of the Fund's total assets;
provided, however, that the Fund may increase its interest in an open-end
management investment company with the same investment objective and
restrictions as the Fund's while such borrowings are outstanding. This borrowing
provision facilitates the orderly sale of portfolio securities, for example, in
the event of abnormally heavy redemption requests. This provision is not for
investment purposes. Collateral arrangements for premium and margin payments in
connection with the Fund's hedging activities are not deemed to be a pledge of
assets;

2. Purchase securities or other obligations of any one issuer if, immediately
after such purchase, more than 5% of the value of the Fund's total assets would
be invested in securities or other obligations of any one such issuer; provided,
however, that the Fund may invest all or part of its investable assets in an
open-end management investment company with the same investment objective and
restrictions as the Fund's. Each state and each political subdivision, agency or
instrumentality of such state and each multi-state agency of which such state is
a member will be a separate issuer if the security is backed only by the assets
and revenue of that issuer. If the security is guaranteed by another entity, the
guarantor will be deemed to be the issuer.1 This limitation shall not apply to
securities issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or to permitted investments of up to 25% of the Fund's total
assets;

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

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

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

6. Purchase or sell puts, calls, straddles, spreads, or any combination thereof
except to the extent that securities subject to a demand obligation, stand-by
commitments and puts may be purchased (see "Investment Objectives and
Policies"); real estate; commodities; commodity contracts, except for the Fund's
interests in hedging activities as described under "Investment Objectives and
Policies"; or interests in oil, gas, or mineral exploration or development
programs. However, the Fund may purchase municipal bonds, notes or commercial
paper secured by interests in real estate;

7. Purchase securities on margin, make short sales of securities, or maintain a
short position, except in the course of the Fund's hedging activities, unless at
all times when a short position is open the Fund owns an equal amount of such
securities or owns securities which, without payment of any further
consideration, are convertible into or exchangeable for securities of the same
issue as, and equal in amount to, the securities sold short; provided that this
restriction shall not be deemed to be applicable to the purchase or sale of
when-issued or delayed delivery securities;

8. Issue any senior security, except as appropriate to evidence indebtedness
which the Fund is permitted to incur pursuant to Investment Restriction No. 1.
The Fund's arrangements in connection with its hedging activities as described
in "Investment Objectives and Policies" shall not be considered senior
securities for purposes hereof;

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

10. Act as an underwriter of securities.

Non-Fundamental Investment Restrictions - The investment restriction
described below is not a fundamental policy of the Fund or the Portfolio and may
be changed by the respective Trustees. This non-fundamental investment policy
requires that the Fund may not:

(i) acquire any illiquid securities, such as repurchase agreements with more
than seven days to maturity or fixed time deposits with a duration of over seven
calendar days, if as a result thereof, more than 15% of the Fund's net assets
would be in investments that are illiquid.

TRUSTEES AND OFFICERS

Trustees

The Trustees of the Trust, who are also the Trustees of the Portfolio,
their business addresses, principal occupations during the past five years and
dates of birth are set forth below.

WILLIAM G. BURNSAATrustee; Retired, Former Vice Chairman and Chief
Financial Officer, NYNEX. His address is 2200 Alaqua Drive, Longwood, FL 32779,
and his date of birth is November 2, 1932.

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(*) Mr. Healey is an "interested person" of the Trust, the Advisor and each
Portfolio as that term is defined in the 1940 Act.

The Trustees of the Trust are the same as the Trustees of the
Portfolio. In accordance with applicable state requirements, a majority of the
disinterested Trustees have adopted written procedures reasonably appropriate to
deal with potential conflicts of interest arising from the fact that the same
individuals are Trustees of the Trust, the Portfolios and the J.P. Morgan Fund,
up to and including creating a separate board of trustees.

Each Trustee is currently paid an annual fee of $75,000 (adjusted as of
April 1, 1997) for serving as Trustee of the Trust, each of the Master
Portfolios (as defined below), J.P. Morgan Funds and J.P. Morgan Series Trust
and is reimbursed for expenses incurred in connection with service as a Trustee.
The Trustees may hold various other directorships unrelated to the Fund.

Trustee compensation expenses accrued by the Trust for the calendar year
ended December 31, 1996 are set forth below.

TOTAL TRUSTEE COMPENSATION
ACCRUED BY THE MASTER
AGGREGATE TRUSTEE PORTFOLIOS(*), J.P. MORGAN
COMPENSATION PIERPONT FUNDS, J.P. MORGAN SERIES
ACCRUED BY THE TRUST AND THE TRUST DURING
NAME OF TRUSTEE TRUST DURING 1996 1996(***)

Frederick S. Addy, Trustee $12,593 $65,000

William G. Burns, Trustee $12,593 $65,000

Arthur C. Eschenlauer, Trustee $12,593 $65,000

Matthew Healey, Trustee(**), $12,593 $65,000
Chairman and Chief Executive
Officer

Michael P. Mallardi, Trustee $12,593 $65,000

(*) Includes the Portfolio and 23 other Portfolios (collectively the "Master
Portfolios") for which Morgan acts as investment adviser.

(**) During 1996, Pierpont Group, Inc. paid Mr. Healey, in his role as
Chairman of Pierpont Group, Inc., compensation in the amount of $140,000,
contributed $21,000 to a defined contribution plan on his behalf and paid
$21,500 in insurance premiums for his benefit.

The Trustees, in addition to reviewing actions of the Trust's and the
Portfolio's various service providers, decide upon matters of general policy.
The Portfolio and the Trust have entered into a Fund Services Agreement with
Pierpont Group, Inc. to assist the Trustees in exercising their overall
supervisory responsibilities over the affairs of the Portfolio and the Trust.
Pierpont Group, Inc. was organized in July 1989 to provide services for The
Pierpont Family of Funds, and the Trustees are the equal and sole shareholders
of Pierpont Group, Inc. The Trust and the Portfolio have agreed to pay Pierpont
Group, Inc. a fee in an amount representing its reasonable costs in performing
these services to the Trust, the Portfolio and certain other registered
investment companies subject to similar agreements with Pierpont Group, Inc.
These costs are periodically reviewed by the Trustees. The pricipal offices of
Pierpont Group, Inc. are located at 461 Fifth Avenue, New York, NY 10017.

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

Fund -- For the fiscal year ended August 31, 1995: $35,144. For the fiscal
year ended August 31, 1996: $20,062. For the fiscal year ended August 31, 1997:
$13,245.

Portfolio -- For the fiscal year ended August 31, 1995: $38,804. For the
fiscal year ended August 31, 1996: $24,602. For the fiscal year ended August 31,
1997: $18,912.

Officers

INVESTMENT ADVISOR

For the fiscal years ended August 31, 1995, 1996, and 1997 the advisory
fees paid by the Portfolio were $1,178,720, $1,354,145, and $1,620,498,
respectively. See "Expenses" in the Prospectus and below for applicable expense
limitations.

DISTRIBUTOR

CO-ADMINISTRATOR

Portfolio -- For the period August 1, 1996 through August 31, 1996: $920.
For the fiscal year ended August 31, 1997: $ 10,663.

Fund -- For the period August 1, 1996 through August 31, 1996: $1,169. For
the fiscal year ended August 31, 1997: $12,383.

Portfolio -- For the fiscal year ended August 31, 1994: $28,345. For the
fiscal year ended August 31, 1995: $28,290. For the period September 1, 1996
through July 31, 1996: $43,154.

Fund -- For the fiscal year ended August 31, 1994: $137,890. For the fiscal
year ended August 31, 1995: $97,520. For the period September 1, 1996 through
July 31, 1996: $57,864.

SERVICES AGENT

The Trust, on behalf of the Fund, and the Portfolio have entered into
Administrative Services Agreements (the "Services Agreements") with Morgan,
pursuant to which Morgan is responsible for certain administrative and related
services provided to the Fund and Portfolio. The Services Agreements may be
terminated at any time, without penalty, by the Trustees or Morgan, in each case
on not more than 60 days' nor less than 30 days' written notice to the other
party.

Under the Services Agreements, the Fund and the Portfolio have agreed
to pay Morgan fees equal to its allocable share of an annual complex-wide
charge. This charge is calculated daily based on the aggregate net assets of the
Master Portfolios and J.P. MORGAN Series Trust in accordance with the following
annual schedule: 0.09% on the first $7 billion of their aggregate average daily
net assets and 0.04% of their aggregate average daily net assets in excess of $7
billion, less the complex-wide fees payable to FDI. The portion of this charge
payable by the Fund and Portfolio is determined by the proportionate share that
its net assets bear to the total net assets of the Trust, the Master Portfolios,
the other investors in the Master Portfolios for which Morgan provides similar
services and J.P. MORGAN Series Trust.

Under prior administrative services agreements in effect from December
29, 1995 through July 31, 1996, with Morgan, the Portfolio paid Morgan a fee
equal to its proportionate share of an annual complex-wide charge. This charge
was calculated daily based on the aggregate net assets of Master Portfolios in
accordance with the following schedule: 0.06% of the first $7 billion of the
Master Portfolios' aggregate average daily net assets, and 0.03% of the Master
Portfolios' aggregate average daily net assets in excess of $7 billion. Prior to
December 29, 1995, the Trust and the Portfolio had entered into Financial and
Fund Accounting Services Agreements with Morgan, the provisions of which
included certain of the activities described above and, prior to September 1,
1995, also included reimbursement of usual and customary expenses.

The table below sets forth for the Fund listed and the Portfolio the
fees paid to Morgan, net of fee waivers and reimbursements, as Services Agent.
See "Expenses" in the Prospectus and below for applicable expense limitations.

Portfolio -- For the fiscal year ended August 31, 1995: $189,892. For the
fiscal year ended August 31, 1996: $80,281. For the fiscal year ended August 31,
1997: $169,209. Fund -- For the fiscal year ended August 31, 1995: $168,215. For
the fiscal year ended August 31, 1996: $63,000. For the fiscal year ended August
31, 1997: $117,520.

CUSTODIAN AND TRANSFER AGENT

State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, Massachusetts 02110, serves as the Trust's and the Portfolio's
custodian and fund accounting agent and the Fund's transfer and dividend
disbursing agent. Pursuant to the Custodian Contracts, State Street is
responsible for maintaining the books of account and records of portfolio
transactions and holding portfolio securities and cash. In addition, the
Custodian has entered into subcustodian agreements on behalf of the Portfolio
with Bankers Trust Company for the purpose of holding TENR Notes and with Bank
of New York and Chemical Bank, N.A. for the purpose of holding certain variable
rate demand notes. The Custodian maintains portfolio transaction records. As
transfer agent and dividend disbursing agent, State Street is responsible for
maintaining account records detailing the ownership of Fund shares and for
crediting income, capital gains and other changes in share ownership to
shareholder accounts.

SHAREHOLDER SERVICING

The Trust on behalf of the Fund has entered into a Shareholder
Servicing Agreement with Morgan pursuant to which Morgan acts as shareholder
servicing agent for its customers and for other Fund investors who are customers
of an Eligible Institution. Under this agreement, Morgan is responsible for
performing shareholder account, administrative and servicing functions, which
include but are not limited to, answering inquiries regarding account status and
history, the manner in which purchases and redemptions of Fund shares may be
effected, and certain other matters pertaining to a Fund; assisting customers in
designating and changing dividend options, account designations and addresses;
providing necessary personnel and facilities to coordinate the establishment and
maintenance of shareholder accounts and records with the Fund's transfer agent;
transmitting purchase and redemption orders to the Fund's transfer agent and
arranging for the wiring or other transfer of funds to and from customer
accounts in connection with orders to purchase or redeem Fund shares; verifying
purchase and redemption orders, transfers among and changes in accounts;
informing the Distributor of the gross amount of purchase orders for Fund
shares; monitoring the activities of the Fund's transfer agent; and providing
other related services.

Under the Shareholder Servicing Agreement, the Fund has agreed to pay
Morgan for these services a fee at an annual rate of 0.075% (expressed as a
percentage of the average daily net asset values of Fund shares owned by or for
shareholders for whom Morgan is acting as shareholder servicing agent). Morgan
acts as shareholder servicing agent for all shareholders.

The shareholder servicing fees paid by the Fund to Morgan, were $635,645,
$702,939 and $750,088, for the fiscal years ended August 31, 1995, 1996, and
1997 respectively.

As discussed under "Investment Advisor," the Glass-Steagall Act and
other applicable laws and regulations limit the activities of bank holding
companies and certain of their subsidiaries in connection with registered
open-end investment companies. The activities of Morgan in acting as shareholder
servicing agent for Fund shareholders under the Shareholder Servicing Agreement
and providing administrative services to the Fund and the Portfolio under the
Services Agreements and in acting as Advisor to the Portfolio under the
Investment Advisory Agreements may raise issues under these laws. However,
Morgan believes that it may properly perform these services and the other
activities described in the Prospectus without violation of the Glass-Steagall
Act or other applicable banking laws or regulations.

INDEPENDENT ACCOUNTANTS

EXPENSES

In addition to the fees payable to Pierpont Group, Inc., Morgan and FDI
under various agreements discussed under "Trustees and Officers," "Investment
Advisor," "Co-Administrator and Distributor," "Services Agent" and "Shareholder
Servicing" above, the Fund and the Portfolio are responsible for usual and
customary expenses associated with their respective operations. Such expenses
include organization expenses, legal fees, accounting expenses, insurance costs,
the compensation and expenses of the Trustees, costs associated with
registration under federal securities laws, and extraordinary expenses
applicable to the Fund or the Portfolio. For the Fund, such expenses also
include transfer, registrar and dividend disbursing costs, the expenses of
printing and mailing reports, notices and proxy statements to Fund shareholders;
and filing fees under state securities laws. For the Portfolio, such expenses
also include custodian fees and brokerage expenses. Under fee arrangements prior
to September 1, 1995, Morgan as Services Agent was responsible for
reimbursements to the Trust and the Portfolio and the usual and customary
expenses described above (excluding organization and extraordinary expenses,
custodian fees and brokerage expenses).

PURCHASE OF SHARES

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 Morgan, appropriate
investments for the Fund's corresponding Portfolio. In addition, securities
accepted in payment for shares must: (i) meet the investment objective and
policies of Portfolio; (ii) be acquired by the Fund for investment and not for
resale (other than for resale to the Portfolio); (iii) be liquid securities
which are not restricted as to transfer either by law or liquidity of market;
and (iv) if stock, have a value which is readily ascertainable as evidenced by a
listing on a stock exchange, OTC market or by readily available market
quotations from a dealer in such securities. The Fund reserves the right to
accept or reject at its own option any and all securities offered in payment for
its shares.

REDEMPTION OF SHARES

Investors may redeem shares as described in the Prospectus under
"Redemption of Shares." Accordingly, a redemption request might result in
payment of a dollar amount which differs from the number of shares redeemed.
See "Net Asset Value" in the Prospectus and below.

If the Trust, on behalf of the Fund, and the Portfolio determines that
it would be detrimental to the best interest of the remaining shareholders of a
Fund to make payment wholly or partly in cash, payment of the redemption price
may be made in whole or in part by a distribution in kind of securities from the
Portfolio, in lieu of cash, in conformity with the applicable rule of the SEC.
If shares are redeemed in kind, the redeeming shareholder might incur
transaction costs in converting the assets into cash. The method of valuing
portfolio securities is described under "Net Asset Value," and such valuation
will be made as of the same time the redemption price is determined. The Trust
on behalf of the 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.

Further Redemption Information. 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 Fund into any other J.P. Morgan
Fund, J.P. Morgan Institutional Fund or shares of J.P. MORGAN Series Trust as
described under "Exchange of Shares" in the Prospectus. For complete
information, the Prospectus as it relates to the Fund into which a transfer is
being made should be read prior to the transfer. Requests for exchange are made
in the same manner as requests for redemptions. See "Redemption of Shares."
Shares of the Fund to be acquired are purchased for settlement when the proceeds
from redemption become available. In the case of investors in certain states,
state securities laws may restrict the availability of the exchange privilege.
The Trust reserves the right to discontinue, alter or limit the exchange
privilege at any time.

DIVIDENDS AND DISTRIBUTIONS

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

NET ASSET VALUE

Portfolio securities with a maturity of 60 days or more, including
securities that are listed on an exchange or traded over the counter, are valued
using prices supplied daily by an independent pricing service or services that
(i) are based on the last sale price on a national securities exchange or, in
the absence of recorded sales, at the readily available closing bid price on
such exchange or at the quoted bid price in the OTC market, if such exchange or
market constitutes the broadest and most representative market for the security
and (ii) in other cases, take into account various factors affecting market
value, including yields and prices of comparable securities, indication as to
value from dealers and general market conditions. If such prices are not
supplied by the Portfolio's independent pricing service, such securities are
priced in accordance with procedures adopted by the Trustees. All portfolio
securities with a remaining maturity of less than 60 days are valued by the
amortized cost method. Securities listed on a foreign exchange are valued at the
last quoted sale price available before the time when net assets are valued.
Because of the large number of municipal bond issues outstanding and the varying
maturity dates, coupons and risk factors applicable to each issuer's bonds, no
readily available market quotations exist for most municipal securities. The
Portfolios value municipal securities on the basis of prices from a pricing
service which uses information with respect to transactions in bonds, quotations
from bond dealers, market transactions in comparable securities and various
relationships between securities in determining values.

PERFORMANCE DATA

As required by regulations of the SEC, the annualized yield for the
Fund is computed by dividing each 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, as described under "Additional Information" in the
Prospectus.

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

Fund (12/15/97): 30-day yield: 4.45%; 30-day tax equivalent yield at 39.6%
tax rate: 7.37%.

Total Return Quotations. As required by regulations of the SEC, the
annualized 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
annualized total return is then calculated by determining the annual rate
required for the initial payment to grow to the amount which would have been
received upon redemption.

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

Historical performance information for any period or portion thereof
prior to the establishment of a Fund will be that of its corresponding
predecessor J.P. Morgan fund, as permitted by applicable SEC staff
interpretations, if the J.P. Morgan Fund commenced operations before the
corresponding J.P. Morgan Fund.

Below is set forth historical return information for the Fund for the
periods indicated:

8/31/97: Average annual total return, 1 year: 6.95%; average annual total
return, 5 years: 5.92%; average annual total return, 10 years: 6.90%; aggregate
total return, 1 year: 6.95%; aggregate total return, 5 years: 35.64%; aggregate
total return, 10 years: 103.67%.

PORTFOLIO TRANSACTIONS

Fixed income, 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 transacitons for the Portfolio will be undertaken principally
to accomplish a Portfolio's objective in relation to expected movements in the
general level of interest rates. The Portfolio may engage in short-term trading
consistent with its objective. See "Investment Objective and Policies --
Portfolio Turnover"

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

If a Portfolio that 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 a Portfolio will be subject to limitations established
by each of the exchanges governing the maximum number of options in each class
which may be written by a single investor or group of investors acting in
concert, regardless of whether the options are written on the same or different
exchanges or are held or written in one or more accounts or through one or more
brokers. The number of options which a Portfolio may write may be affected by
options written by the Advisor for other investment advisory clients. An
exchange may order the liquidation of positions found to be in excess of these
limits, and it may impose certain other sanctions.

MASSACHUSETTS TRUST

The Trust's Declaration of Trust further provides that the name of the
Trust refers to the Trustees collectively as Trustees, not as individuals or
personally, that no Trustee, officer, employee or agent of the Fund is liable to
the Fund or to a shareholder, and that no Trustee, officer, employee, or agent
is liable to any third persons in connection with the affairs of the Fund,
except as such liability may arise from his or its own bad faith, willful
misfeasance, gross negligence or reckless disregard of his or its duties to such
third persons. It also provides that all third persons shall look solely to Fund
property for satisfaction of claims arising in connection with the affairs of
the Fund. With the exceptions stated, the Trust's Declaration of Trust provides
that a Trustee, officer, employee, or agent is entitled to be indemnified
against all liability in connection with the affairs of the Fund.

DESCRIPTION OF SHARES

The Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares ($0.001 par value) of one or more series
and classes within any series and to divide or combine the shares (of any
series, if applicable) without changing the proportionate beneficial interest of
each shareholder in a Fund (or in the assets of other series, if applicable). To
date shares of 21 series have been authorized of which 20 are currently
available for sale to the public. Each share represents an equal proportional
interest in a 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 a Fund
have no preemptive or conversion rights and are fully paid and nonassessable.
The rights of redemption and exchange are described in the Prospectus and
elsewhere in this Statement of Additional Information.

The Trustees have authorized the issuance and sale to the public of
shares of 20 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
"Redemption of Shares" in the Prospectus.

TAXES

The Fund intends to qualify to pay exempt-interest dividends to its
shareholders by having, at the close of each quarter of its taxable year, at
least 50% of the value of its total assets consist of tax exempt securities. An
exempt-interest dividend is that part of dividend distributions made by the Fund
which is properly designated as consisting of interest received by the Fund on
tax exempt securities. Shareholders will not incur any federal income tax on the
amount of exempt-interest dividends received by them from the Fund, other than
the alternative minimum tax under certain circumstances. In view of the Fund's
investment policies, it is expected that a substantial portion of all dividends
will be exempt-interest dividends, although the Fund may from time to time
realize and distribute net short-term capital gains and may invest limited
amounts in taxable securities under certain circumstances. See "Investment
Objective(s) and Policies" in the Prospectus.

Distributions of net investment income, certain foreign currency gains,
and realized net short-term capital gain in excess of net long-term capital loss
(other than exempt interest dividends) are generally taxable to shareholders of
the 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. If dividend payments
exceed income earned by the Fund, the excess distribution would be considered a
return of capital rather than a dividend payment. The Fund intends to pay
dividends in such a manner so as to minimize the possibility of a return of
capital. Distributions of net long-term capital gain (i.e., net long-term
capital gain in excess of net short-term capital loss) are taxable to
shareholders of 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. As a result of
the enactment of the Taxpayer Relief Act of 1997 (the "Act"), long-term capital
gain of an individual is generally subject to a maximum rate of 28% in respect
of a capital asset held directly by such individual for more than one year but
not more than eighteen months, and the maximum rate is reduced to 20% in respect
of a capital asset held in excess of 18 months. The Act authorizes the Treasury
department to promulgate regulations that would apply these rules in the case of
long-term capital gain distributions made by the Fund. The Treasury Department
has indicated that, under such regulations, individual shareholders will be
taxed at a minimum rate of 28% in respect of capital gains distributions
designated as 28% rate gain distributions and will be taxed at a maximum rate of
20% in respect of capital gains distributions designated as 20% rate gain
distributions, regardless of how long such shareholders have held their shares
in the Fund. See "Taxes" in the Prospectus for a discussion of the federal
income tax treatment of any gain or loss realized on the redemption or exchange
of the Fund's shares. Additionally, any loss realized on a redemption or
exchange of shares of the Fund will be disallowed to the extent the shares
disposed of are replaced within a period of 61 days beginning 30 days before
such disposition, such as pursuant to reinvestment of a dividend in shares of
the Fund.

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 straddles treated as short sales for tax purposes
may also result in the loss of the holding period of underlying securities for
purposes of the 30% of gross income test described above, and therefore, the
Portfolio's ability to enter into forward currency contracts, options and
futures contracts may be limited under current law. Effective as of August 5,
1997, the 30% of gross income test will no longer apply to the Fund.

In the case of a foreign shareholder who is a nonresident alien
individual or foreign entity, the Fund may be required to withhold U.S. federal
income tax as "backup withholding" at the rate of 31% from distributions treated
as long-term capital gains and from the proceeds of redemptions, exchanges or
other dispositions of Fund shares unless IRS Form W-8 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.

ADDITIONAL INFORMATION

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.

<PAGE>

FINANCIAL STATEMENTS

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

Date of Semi-Annual Date of Annual
Report; Date Semi- Report; Date Annual
Annual Report Filed; Report Filed; and
Name of Fund and Accession Number Accession Number

J.P. Morgan Tax Exempt Bond Fund N/A 08/31/97
10/30/97
0001016969-97-000076

<PAGE>

APPENDIX A

Description of Security Ratings

STANDARD & POOR'S

Corporate and Municipal Bonds

AAA - Debt rated AAA has the highest ratings assigned by Standard & Poor's to a
debt obligation. Capacity to pay interest and repay principal is extremely
strong.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in a small degree.

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-1 - This designation indicates that the degree of safety regarding timely
payment is very strong.

Short-Term Tax-Exempt Notes

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

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

- - Leading market positions in well established industries.
- - High rates of return on funds employed.
- - Conservative capitalization structures with moderate reliance on debt and
ample asset protection. - Broad margins in earnings coverage of fixed financial
charges and high internal cash generation. - Well established access to a range
of financial markets and assured sources of alternate liquidity.

Short-Term Tax Exempt Notes

MIG-2 - MIG-2 rated notes are of high quality but with margins of protection not
as large as MIG-1.

- --------
3 For purposes of interpretation of Investment Restriction No. 2,
"guaranteed by another entity" includes credit substitutions, such as letters of
credit or insurance, unless the Advisor determines that the security meets the
Fund's credit standards without regard to the credit substitution.

4 Pursuant to an interpretation of the staff of the SEC, the Fund may not
invest more than 25% of its assets in industrial development bonds in projects
of similar type or in the same state. The Fund shall comply with this
interpretation until such time as it may be modified by the staff of the SEC.

*******************************************************************************

<PAGE>

JANUARY 2, 1998 PROSPECTUS

J.P. MORGAN DIVERSIFIED FUND

------------------------------
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.

Shares in the fund are not bank deposits and are not guaranteed or insured by
any bank, government entity, or the FDIC.

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 as an investment or guarantees that the information in this prospectus is
correct or adequate. It is a criminal offense for anyone to state
or suggest otherwise.

Distributed by Funds Distributor, Inc. JPMORGAN

<PAGE>

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

2
- ----
The fund's goal, investment approach, risks, expenses, performance, and
financial highlights

J.P. MORGAN DIVERSIFIED FUND

Fund description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Investor expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Financial highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

4
- ----
Investing in the J.P. Morgan Diversified Fund

YOUR INVESTMENT

Investing through a financial professional . . . . . . . . . . . . . . . . . . 4
Investing through an employer-sponsored retirement plan. . . . . . . . . . . . 4
Investing through an IRA or Rollover IRA . . . . . . . . . . . . . . . . . . . 4
Investing directly . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Opening an account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Adding to an account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Selling shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Account and transaction policies . . . . . . . . . . . . . . . . . . . . . . . 5
Dividends and distributions. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Tax considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

7
- ----
More about risk and the fund's business operations
FUND DETAILS

Master/feeder structure. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Management and administration. . . . . . . . . . . . . . . . . . . . . . . . . 7
Risk and reward elements . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

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

<PAGE>

INTRODUCTION
- --------------------------------------------------------------------------------

J.P. MORGAN DIVERSIFIED FUND

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:

- are pursuing a long-term goal such as retirement

- want an investment with the potential to outpace inflation

- seek less risk than a fund investing completely in stocks

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

It is NOT designed for investors who:

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

- require regular income or stability of principal

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

J.P. MORGAN

Known for its commitment to proprietary research and its disciplined investment
strategies, J.P. Morgan is the asset management choice for many of the world's
most respected corporations, financial institutions, governments, and
individuals. Today, J.P. Morgan employs over 300 analysts and portfolio managers
around the world and has more than $240 billion in assets under management,
including assets managed by the fund's advisor, Morgan Guaranty Trust Company of
New York.

BEFORE YOU INVEST

Investors considering the fund should understand that:

- - The value of the fund's shares will fluctuate over time. You could lose money
if you sell when the fund's share price is lower than when you invested.

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

- - Future returns will not necessarily resemble past performance.

1
<PAGE>

J.P. MORGAN DIVERSIFIED FUND | TICKER SYMBOL: PPDVX
- --------------------------------------------------------------------------------
REGISTRANT NAME: J.P. MORGAN FUNDS
(J.P. MORGAN DIVERSIFIED FUND)

[GRAPHIC]
GOAL

The fund seeks to provide a high total return from a diversified portfolio of
stocks and bonds.

[GRAPHIC]
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 five
years).

[GRAPHIC]
POTENTIAL RISKS AND REWARDS

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.

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.

The fund's securities are described in more detail on page 8, along with their
main risks, which may cause the fund's share price to decline, and the fund's
strategies to reduce these risks.

MODEL ALLOCATION

[CHART]

52% medium- and large-cap U.S. stocks

35% U.S. and foreign bonds

10% foreign stocks

3% small-cap U.S. stocks

PORTFOLIO MANAGEMENT

The fund's assets are managed by J.P. Morgan, which currently manages over $240
billion, including more than $8 billion using the same strategy as the fund.

The portfolio management team is led by Gerald Osterberg, vice president, who
has been on the team since the fund's inception in July of 1993 and has been at
J.P. Morgan since 1966, and John M. Devlin, vice president, who joined the team
in December of 1993 and has been at J.P. Morgan since 1986.

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

INVESTOR EXPENSES

The current expenses you should expect to pay as an investor in the fund are
shown at right. The fund has no sales, redemption, exchange, or account fees,
although some institutions may charge you a fee for shares you buy through them.
The annual fund expenses shown are deducted from fund assets prior to
performance calculations.

Footnotes for this section are shown on next page.

ANNUAL FUND OPERATING EXPENSES(1) (%)

Management fees (actual) 0.55

Marketing (12b-1) fees none

Other expenses(2)
(after reimbursement) 0.43
- -------------------------------------------------------
TOTAL OPERATING EXPENSES(2)
(AFTER REIMBURSEMENT) 0.98
- -------------------------------------------------------

EXPENSE EXAMPLE

The example below uses the same assumptions as other fund prospectuses: $1,000
initial investment, 5% annual total return, expenses unchanged, all shares sold
at the end of each time period. The example is for comparison only; the fund's
actual return and expenses will be different.

- -------------------------------------------------------
1 yr. 3 yrs. 5 yrs. 10 yrs.

YOUR COST($) 10 31 54 120
- -------------------------------------------------------

2 J.P. MORGAN DIVERSIFIED FUND

<PAGE>

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

PERFORMANCE

AVERAGE ANNUAL TOTAL RETURN (%) Shows performance over time, for periods ended December 31, 1996
- ---------------------------------------------------------------------------------------------------
1 yr. 3 yrs. Since inception(3)
<S> <C> <C> <C>

J.P. MORGAN DIVERSIFIED FUND (after expenses) 13.42 13.00 12.52
- ---------------------------------------------------------------------------------------------------
FUND BENCHMARK(4) (no expenses) 14.10 13.56 12.94
- ---------------------------------------------------------------------------------------------------
S&P 500 INDEX(5) (no expenses) 22.96 19.68 18.87
- ---------------------------------------------------------------------------------------------------

YEAR-BY-YEAR TOTAL RETURN (%) Shows changes in returns by calendar year
- ---------------------------------------------------------------------------------------------------
[GRAPH]
1993(3) 1994 1995 1996
<S> <C> <C> <C> <C>

- - J.P. MORGAN DIVERSIFIED FUND 1.74 0.60 26.47 13.42

- - FUND BENCHMARK(4) 1.43 0.46 27.75 14.10

- - S&P 500 INDEX(5) 2.32 1.32 37.58 22.96

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

</TABLE>

FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------
PER-SHARE DATA For fiscal periods ended June 30
- ---------------------------------------------------------------------------------------------------
1994(3) 1995 1996 1997
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ($) 10.00 9.81 11.20 12.22
- ---------------------------------------------------------------------------------------------------
Income from investment operations:
Net investment income ($) 0.09 0.28 0.30 0.37
Net realized and unrealized gain (loss)
on investment and foreign currency ($) (0.27) 1.37 1.48 2.02
- ---------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS ($) (0.18) 1.65 1.78 2.39
- ---------------------------------------------------------------------------------------------------
Less distributions to shareholders from:
Net investment income ($) (0.01) (0.20) (0.32) (0.32)
Net realized gain ($) -- (0.06) (0.44) (0.40)
- ---------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS ($) (0.01) (0.26) (0.76) (0.72)
- ---------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD ($) 9.81 11.20 12.22 13.89
- ---------------------------------------------------------------------------------------------------

SUPPLEMENTAL DATA
- ---------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (1.82)(6) 17.08 16.51 20.52
- ---------------------------------------------------------------------------------------------------
NET ASSETS AT END OF PERIOD ($ thousands) 7,023 22,396 53,198 70,338
- ---------------------------------------------------------------------------------------------------
RATIO OF EXPENSES TO AVERAGE NET ASSETS (%) 0.98(7) 0.98 0.98 0.98
- ---------------------------------------------------------------------------------------------------
RATIO OF NET INVESTMENT INCOME TO AVERAGE
NET ASSETS (%) 2.80(7) 3.39 3.04 3.00
- ---------------------------------------------------------------------------------------------------
DECREASE REFLECTED IN EXPENSE RATIO DUE TO
EXPENSE REIMBURSEMENT (%) 1.52(7) 0.91 0.38 0.27
- ---------------------------------------------------------------------------------------------------

</TABLE>
The Financial Highlights have been audited by Price Waterhouse LLP, the fund's
independent accountants.

(1) The fund has a master/feeder structure as described on page 7. This table
shows the fund's expenses and its share of master portfolio expenses for
the past fiscal year, expressed as a percentage of the fund's average net
assets and reflecting reimbursement for ordinary expenses over 0.98%.

(2) Without reimbursement, other expenses and total operating expenses would
have been 0.70% and 1.25%, respectively. There is no guarantee that
reimbursement will continue beyond 10/31/98.

(3) The fund commenced operations on 12/15/93. Except in the Financial
Highlights, returns reflect performance of J.P. Morgan Institutional
Diversified Fund (a separate feeder fund investing in the same master
portfolio) from 9/30/93 through 12/15/93.

(4) A composite benchmark of unmanaged indices that corresponds to the fund's
model allocation and that consists of the S&P 500 (52%), Russell 2000 (3%),
Salomon Brothers Broad Investment Grade Bond (35%), and MSCI EAFE (10%)
indices.

(5) The S&P500 Index is an unmanaged index of U.S. stocks widely used as a
measure of overall stock market performance.

(6) Not annualized.

(7) Annualized.

J.P. MORGAN DIVERSIFIED FUND 3

<PAGE>
YOUR INVESTMENT
- --------------------------------------------------------------------------------

For your convenience, the J.P. Morgan Funds offer several ways to initiate and
maintain fund investments.

INVESTING THROUGH A FINANCIAL PROFESSIONAL

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

INVESTING THROUGH AN EMPLOYER-SPONSORED RETIREMENT PLAN

Your fund investments are handled through your plan. Consult your plan materials
or contact your benefits office for information on buying, selling, or
exchanging fund shares.

INVESTING THROUGH AN IRA OR ROLLOVER IRA

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

INVESTING DIRECTLY

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

- - Determine the amount you are investing. 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. For more
information on minimum investments, call 1-800-521-5411.

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

- - Mail in your application, making your initial investment as shown at right.

For answers to any questions, please speak with a J.P. Morgan Funds Services
Representative at 1-800-521-5411.

OPENING YOUR ACCOUNT

BY WIRE

- - Mail your completed application to the Shareholder Services Agent.

- - Call the Shareholder Services Agent to obtain an account number and to
place a purchase order. FUNDS THAT ARE WIRED WITHOUT A PURCHASE ORDER WILL
BE RETURNED UNINVESTED.

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

State Street Bank & Trust Company
ROUTING NUMBER: 011-000-028
CREDIT: J.P. Morgan Funds
ACCOUNT NUMBER: 9904-226-9
FFC: your account number, name of registered owner(s) and fund name

BY CHECK

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

- - Mail the check with your completed application to the Transfer Agent.

BY EXCHANGE

- - Call the Shareholder Services Agent for an exchange.

ADDING TO YOUR ACCOUNT

BY WIRE

- - Call the Shareholder Services Agent to place a purchase order. FUNDS THAT
ARE WIRED WITHOUT A PURCHASE ORDER WILL BE RETURNED UNINVESTED.

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

BY CHECK

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

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

BY EXCHANGE

- - Call the Shareholder Services Agent for an exchange.

4 YOUR INVESTMENT

<PAGE>

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

SELLING SHARES

BY WIRE

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

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

BY PHONE

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

IN WRITING

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

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

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

- - Mail the letter to the Shareholder Services Agent.

BY EXCHANGE

- - Call the Shareholder Services Agent for an exchange.

ACCOUNT AND TRANSACTION POLICIES

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

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

BUSINESS HOURS AND NAV CALCULATIONS The fund's regular business days and hours
are the same as those of the New York Stock Exchange. The fund calculates its
net asset value per share (NAV) every business day at 4:15 p.m. eastern time.

TIMING OF ORDERS Orders to buy or sell shares are executed at the next NAV
calculated after the order has been accepted. Orders are accepted until 4:00
p.m. eastern time 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.

- --------------------------------------------------------------------------------
TRANSFER AGENT SHAREHOLDER SERVICES AGENT
STATE STREET BANK AND TRUST COMPANY J.P. MORGAN FUNDS SERVICES
P.O. Box 8411 522 Fifth Avenue
Boston, MA 02266-8411 New York, NY 10036
Attention: J.P. Morgan Funds Services 1-800-521-5411

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

YOUR INVESTMENT 5
<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 will not be available until your check
clears. This may take up to 15 days.

STATEMENTS AND REPORTS The fund sends monthly account statements as well as
confirmations after each purchase or sale of shares (except reinvestments).
Every six months the fund sends out an annual or semi-annual report, containing
information on the fund's 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 may 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 may close out your account and send the proceeds to the
address of record.

DIVIDENDS AND DISTRIBUTIONS

The fund typically pays income dividends four times a year (usually in March,
June, September, and December) and makes capital gains distributions, if any,
once a year (usually in September). These dividends and distributions consist of
most or all of the fund's net investment income and net realized capital gains.

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

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:

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

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.

6 YOUR INVESTMENT
<PAGE>

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

MASTER/FEEDER STRUCTURE

As noted earlier, the fund is a "feeder" fund that invests in a master
portfolio. (Except where indicated, this prospectus uses the term "the fund" to
mean the feeder fund and its master portfolio taken together.)

The master portfolio accepts investments from other feeder funds, and 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 1-800-521-5411. Generally, when the master portfolio seeks a vote,
the fund will hold a shareholder meeting and cast its vote proportionately, as
instructed by its shareholders. Fund shareholders are entitled to one vote per
fund share.

The 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. The 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 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, 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:

- -------------------------------------------------------------------------------
ADVISORY SERVICES 0.55% 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 first
Distributor, Inc.) $7 billion in J.P. Morgan-advised
portfolios, plus 0.04% of average
net assets over $7 billion
- -------------------------------------------------------------------------------
SHAREHOLDER SERVICES 0.25% of the fund's average net
assets
- -------------------------------------------------------------------------------

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 7
<PAGE>

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

RISK AND REWARD ELEMENTS

This table discusses the main elements that make up the fund's overall risk and
reward characteristics (described on page 2). It also outlines the fund's
policies toward various securities, including those that are designed to help
the fund manage risk.

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
POTENTIAL RISKS POTENTIAL REWARDS POLICIES TO BALANCE RISK AND REWARD
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>

MARKET CONDITIONS
- - The fund's share price and - Stocks and bonds have generally - Under normal circumstances the
performance will fluctuate in outperformed more stable investments fund plans to remain fully
response to stock and bond (such as short-term bonds and cash invested, with approximately 65%
market movements equivalents) over the long term in stocks and 35% in bonds;
stock investments may include
- - The value of the fund's bonds U.S. and foreign common stocks,
(and potentially its convertible - A diversified, balanced portfolio convertible securities,
securities and stocks) could fall should mitigate the effects preferred stocks, trust or
when interest rates rise; the of wide market fluctuations, partnership interests, warrants,
longer a bond's duration and the especially when stock and bond rights, and investment company
lower its credit quality, the more prices move in different directions securities; bond investments
its value typically falls may include U.S. and foreign
- The fund's bonds could rise in corporate and government bonds,
- - The fund's mortgage-backed and value when interest rates fall and mortgage-backed and asset-
asset-backed securities could backed securities (securities
generate capital losses or periods - Mortgage-backed and asset-backed representing an interest in, or
of low yields if they are paid off securities can offer attractive secured by, a pool of mortgages
substantially earlier or later than returns or other assets such as receivables)
anticipated
- The fund seeks to limit risk through
diversification in a large number of
stocks, and to a lesser extent bonds
(typically holding more than 1,000
stock and bond positions)

- The fund seeks to keep the average
duration of its bond portfolio within
one year of that for the U.S.
investment-grade bond universe

- The fund monitors interest rate
trends, as well as geographic and
demographic information related, to
mortgage-backed securities and
mortgage prepayments

- During severe market downturns, the
fund has the option of investing up
to 100% of assets in investment-grade
short-term securities
- ------------------------------------------------------------------------------------------------------------------------------------
MANAGEMENT CHOICES
- - The fund could underperform its - The fund could outperform its - J.P. Morgan focuses its active
benchmark due to its asset benchmark due to these same choices management on asset allocation and
allocation and securities choices securities selection, areas where
it believes its research advantage
can enhance returns
- ------------------------------------------------------------------------------------------------------------------------------------
CREDIT QUALITY
- - The default of an issuer - Investment-grade bonds have
would leave the fund with a lower risk of default - At least 75% of the fund's bonds
unpaid interest or principal must be investment-grade (BBB/Baa or
- Junk bonds offer higher yields better, of which 65% must be A or
- - Junk bonds (those rated BB/Ba or and higher potential gains better), and no more than 25% BB/Ba
lower) have a higher risk of default or B; the fund may include unrated
bonds of equivalent quality in
these categories

- The fund does not buy bonds lower
than B
- ------------------------------------------------------------------------------------------------------------------------------------
FOREIGN INVESTMENTS
- - Currency exchange rate movements - Favorable exchange rate movements - The fund anticipates that total
could reduce gains or create losses could generate gains or reduce losses foreign investments will not exceed
30% of assets
- - The fund could lose money because - Foreign investments, which represent
of foreign government actions, a major portion of the world's - The fund actively manages the
political instability, or lack of securities, offer attractive currency exposure of its foreign
adequate and accurate information potential performance and stock and bond investments relative
opportunities for diversification to its benchmark, and may hedge into
the U.S. dollar from time to time
(see also "Derivatives")

</TABLE>

8 FUND DETAILS
<PAGE>

DERIVATIVES
- - Derivatives such as futures, - Hedges that correlate well - The fund uses derivatives for
options, and foreign currency with underlying positions can hedging and for risk management
forward contracts that are used reduce or eliminate losses at (i.e., to adjust duration or to
for hedging the portfolio or low cost establish or adjust exposure to
specific securities may not fully particular securities, markets or
offset the underlying positions(1) - The fund could make money and currencies); risk management may
protect against losses if include management of the fund's
- - Derivatives used for risk management's analysis proves exposure relative to its benchmark
management may not have the correct
intended effects and may result - The fund only establishes hedges
in losses or missed opportunities - Derivatives that involve leverage that it expects will be highly
could generate substantial gains correlated with underlying positions
- - Derivatives that involve leverage at low cost
could magnify losses - While the fund may use derivatives
that incidentally involve leverage,
it does not use them for the
specific purpose of leveraging the
portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
ILLIQUID HOLDINGS
- - The fund could have difficulty - These holdings may offer more - The fund may not invest more than
valuing these holdings precisely attractive yields or potential 15% of net assets in illiquid
growth than comparable widely holdings
- - The fund could be unable to sell traded securities
these holdings at the time or - To maintain adequate liquidity to
price it desires meet redemptions, the fund may hold
investment-grade short-term
securities (including repurchase
agreements) and, for temporary or
extraordinary purposes, may borrow
from banks up to 30% of the value of
its total assets
- ------------------------------------------------------------------------------------------------------------------------------------
WHEN-ISSUED AND DELAYED
DELIVERY SECURITIES
- - When the fund buys securities - The fund can take advantage of - The fund uses segregated accounts
before issue or for delayed attractive transaction to offset leverage risk
delivery, it could be exposed to opportunities
leverage risk if it does not use
segregated accounts
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM TRADING
- - Increased trading would raise the - The fund could realize gains - The fund anticipates a portfolio
fund's brokerage and related costs in a short period of time turnover rate of approximately 150%

- - Increased short-term capital gains - The fund could protect against - The fund generally avoids short-term
distributions would raise losses if a stock is overvalued trading, except to take advantage
shareholders' income tax liability and its value later falls of attractive or unexpected
opportunities or to meet demands
generated by shareholder activity

</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 the value of a securities index. An option is the right to
buy or sell securities that is granted in exchange for an agreed-upon sum.
A foreign currency forward contract is an obligation to buy or sell a given
currency on a future date and at a set price.

FUND DETAILS 9
<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 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 SAI by reference.

Copies of the current versions of these documents may be obtained by contacting:

J.P. MORGAN DIVERSIFIED FUND
J.P. Morgan Funds Services
522 Fifth Avenue
New York, NY 10036

TELEPHONE: 1-800-521-5411

HEARING IMPAIRED: 1-888-468-4015

EMAIL: [email protected]

Text-only versions of these documents and this prospectus are available
from the Public Reference Room of the Securities and Exchange Commission
in Washington, D.C. (1-800-SEC-0330) and may be viewed on-screen or
downloaded from the SEC's Internet site at http://www.sec.gov. The fund's
investment company and 1933 Act registration numbers are 811-07340 and
033-54632.

J.P. MORGAN FUNDS AND THE MORGAN TRADITION

The J.P. Morgan 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 Funds offer a broad array of distinctive opportunities for mutual
fund investors.

JPMORGAN
- --------------------------------------------------------------------------------
J.P. MORGAN FUNDS

ADVISOR DISTRIBUTOR
Morgan Guaranty Trust Company of New York Funds Distributor, Inc.
522 Fifth Avenue 60 State Street
New York, NY 10036 Boston, MA 02109
1-800-521-5411 1-800-221-7930

PROS285-981

*******************************************************************************

<PAGE>

PART C

ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements

The following financial statements are included in Part A:

Financial Highlights: J.P. Morgan Tax Exempt Money Market Fund
J.P. Morgan Tax Exempt Bond Fund
J.P. Morgan Diversified Fund

The following financial statements are incorporated by reference into Part B:

J.P. MORGAN TAX EXEMPT MONEY MARKET FUND
Statement of Assets and Liabilities at August 31, 1997
Statement of Operations for the fiscal year ended August 31, 1997
Statement of Changes in Net Assets for the fiscal years ended August 31, 1997
and 1996.
Financial Highlights
Notes to Financial Statements August 31, 1997

THE TAX EXEMPT MONEY MARKET PORTFOLIO Schedule of Investments at August 31, 1997
Statement of Assets and Liabilities at August 31, 1997
Statement of Operations for the fiscal year ended August 31, 1997
Statement of Changes in Net Assets for the fiscal years ended August 31, 1997
and 1996.
Supplementary Data
Notes to Financial Statements August 31, 1997

J.P. MORGAN TAX EXEMPT BOND FUND
Statement of Assets and Liabilities at August 31, 1997 Statement of Operations
for the Fiscal Year Ended August 31, 1997
Statement of Changes in Net Assets for the fiscal years ended August 31, 1997
and 1996.
Financial Highlights
Notes to Financial Statements August 31, 1997

THE TAX EXEMPT BOND PORTFOLIO Schedule of Investments at August 31, 1997
Statement of Assets and Liabilities at August 31, 1997
Statement of Operations for the Fiscal Year Ended August 31, 1997
Statement of Changes in Net Assets for the fiscal years ended August 31, 1997
and 1996.
Supplementary Data
Notes to Financial Statements August 31, 1997

(b) Exhibits

Exhibit Number

1. Declaration of Trust, as amended, was filed as Exhibit No. 1 to
Post-Effective Amendment No. 26 to the Registration Statement filed on September
27, 1996 (Accession Number 0000912057-96-021331).

1(a). Amendment No. 5 to Declaration of Trust; Amendment and Fifth Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest.*

1(b). Amendment No. 6 to Declaration of Trust; Amendment and Sixth Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest was filed as Exhibit No. 1(b) to Post-Effective Amendment No. 32 to the
Registration Statement February 28, 1997 (Accession Number
0001016964-97-000038).

1(c). Amendment No. 7 to Declaration of Trust; Amendment and Seventh Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest was filed as Exhibit No. 1(c) to Post-Effective Amendment No. 34 to the
Registration Statement filed on April 30, 1997 (Accession Number
0001019694-97-000063).

1(d) Amendment No. 8 to Declaration of Trust; Amendment and Eighth Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest was filed as Exhibit No. 1(d) to Post-Effective Amendment No. 41 to the
Registration Statement filed on October 21, 1997 (Accession Number
0001042058-97-000006).

1(e) Amendment No. 9 to Declaration of Trust; Amendment and Ninth Amended and
Restated Establishment and Designation of Series of Shares of Beneficial
Interest. (filed herewith)

2. Restated By-Laws of Registrant.*

6. Distribution Agreement between Registrant and Funds Distributor, Inc.
("FDI").*

8. Custodian Contract between Registrant and State Street Bank and Trust
Company ("State Street").*

9(a). Co-Administration Agreement between Registrant and FDI.*

9(b). Restated Shareholder Servicing Agreement between Registrant and Morgan
Guaranty Trust Company of New York ("Morgan Guaranty") was filed as Exhibit No.
9(b) to Post-Effective Amendment No. 33 to the Registration Statement filed on
March 6, 1997 (Accession Number 0001019694-97-000048).

9(c). Transfer Agency and Service Agreement between Registrant and State
Street.*

9(d). Restated Administrative Services Agreement between Registrant and
Morgan Guaranty.*

9(e). Fund Services Agreement, as amended, between Registrant and Pierpont
Group, Inc.*

10. Opinion and consent of Sullivan & Cromwell.*

11. Consents of independent accountants. (filed herewith)

13. Purchase agreements with respect to Registrant's initial shares.*

16. Schedule for computation of performance quotations.*

18. Powers of Attorney were filed as Exhibit No. 18 to Post-Effective Amendment
No. 41 to the Registration Statement filed on October 21, 1997 (Accession Number
0001042058-97-000006).

27. Financial Data Schedules. (filed herewith)
- ------------------------

* Incorporated herein by reference to Post-Effective Amendment No. 30
to the Registration Statement filed on December 27, 1996
(Accession Number 0001016964-96-000066).

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.

Not applicable.

ITEM 26. NUMBER OF HOLDERS OF SECURITIES.

Shares of Beneficial Interest ($0.001 par value).
Title of Class: Number of Record Holders as of December 5, 1997.

J.P. Morgan Prime Money Market Fund: 3,548
J.P. Morgan Tax Exempt Money Market Fund: 1,568
J.P. Morgan Federal Money Market Fund: 334
J.P. Morgan Short Term Bond Fund: 82
J.P. Morgan Bond Fund: 660
J.P. Morgan Tax Exempt Bond Fund: 932
J.P. Morgan New York Total Return Bond Fund: 181
J.P. Morgan Diversified Fund: 540
J.P. Morgan U.S. Equity Fund: 2,035
J.P. Morgan U.S. Small Company Fund: 1,613
J.P. Morgan International Equity Fund: 1,054
J.P. Morgan Emerging Markets Equity Fund: 969
J.P. Morgan European Equity Fund: 73
J.P. Morgan Asia Growth Fund: 30
J.P. Morgan Japan Equity Fund: 28
J.P. Morgan International Opportunities Fund: 369
J.P. Morgan Global Strategic Income Fund: 16
J.P. Morgan Latin American Equity Fund: 0
J.P. Morgan Emerging Markets Debt Fund: 30
J.P. Morgan U.S. Small Company Opportunities Fund: 559

ITEM 27. INDEMNIFICATION.

Reference is made to Section 5.3 of Registrant's Declaration of Trust and
Section 5 of Registrant's Distribution Agreement.

Registrant, its Trustees and officers are insured against certain expenses in
connection with the defense of claims, demands, actions, suits, or proceedings,
and certain liabilities that might be imposed as a result of such actions, suits
or proceedings.

Insofar as indemnification for liabilities arising under the Securities Act of
1933, as amended (the "1933 Act"), may be permitted to directors, trustees,
officers and controlling persons of the Registrant and the principal underwriter
pursuant to the foregoing provisions or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, trustee, officer, or controlling person of the Registrant
and the principal underwriter in connection with the successful defense of any
action, suite or proceeding) is asserted against the Registrant by such
director, trustee, officer or controlling person or principal underwriter in
connection with the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER.

Not Applicable.

ITEM 29. PRINCIPAL UNDERWRITERS.

(a) FDI, located at 60 State Street, Suite 1300, Boston, Massachusetts 02109, is
the principal underwriter of the Registrant's shares.

FDI acts as principal underwriter of the following investment companies other
than the Registrant:

BJB Investment Funds
Burridge Funds
Foreign Fund, Inc.
Fremont Mutual Funds, Inc.
Harris Insight Funds Trust
H.T. Insight Funds, Inc. d/b/a Harris Insight Funds
LKCM Fund
Monetta Fund, Inc.
Monetta Trust
The Munder Framlington Funds Trust
The Munder Funds, Inc.
The Munder Funds Trust
The PanAgora Institutional Funds
RCM Capital Funds, Inc.
RCM Equity Funds, Inc.
The Skyline Funds
St. Clair Money Market Fund
Waterhouse Investors Cash Management Funds, Inc.
J.P. Morgan Institutional Funds
J.P. Morgan Series Trust
J.P. Morgan Series Trust II

FDI does not act as depositor or investment adviser of any investment companies.

FDI is registered with the Securities and Exchange Commission as a broker-dealer
and is a member of the National Association of Securities Dealers. FDI is an
indirect wholly-owned subsidiary of Boston Institutional Group, Inc., a holding
company all of whose outstanding shares are owned by key employees.

(b) The information required by this Item 29(b) with respect to each director,
officer and partner of FDI is incorporated herein by reference to Schedule A of
Form BD filed by FDI with the Securities and Exchange Commission pursuant to the
Securities Act of 1934 (SEC File No. 8-20518).

ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.

PIERPONT GROUP, INC.: 461 Fifth Avenue, New York, New York 10017 (records
relating to its assisting the Trustees in carrying out their duties in
supervising the Registrant's affairs).

MORGAN GUARANTY TRUST COMPANY OF NEW YORK: 60 Wall Street, New York, New York
10260-0060, 522 Fifth Avenue, New York, New York 10036 or 9 West 57th Street,
New York, New York 10019 (records relating to its functions as shareholder
servicing agent, and administrative services agent).

STATE STREET BANK AND TRUST COMPANY: 1776 Heritage Drive, North Quincy,
Massachusetts 02171 and 40 King Street West, Toronto, Ontario, Canada M5H 3Y8
(records relating to its functions as fund accountant, custodian, transfer agent
and dividend disbursing agent).

FUNDS DISTRIBUTOR, INC.: 60 State Street, Suite 1300, Boston, Massachusetts
02109 (records relating to its functions as distributor and co-administrator).
ITEM 31. MANAGEMENT SERVICES.

Not Applicable.

ITEM 32. UNDERTAKINGS.

(a) If the information called for by Item 5A of Form N-1A is contained in
the latest annual report to shareholders, the Registrant shall
furnish each person to whom a prospectus is delivered with a copy of
the Registrant's latest annual report to shareholders upon request
and without charge.

(b) The Registrant undertakes to comply with Section 16(c) of the 1940
Act as though such provisions of the 1940 Act were applicable to the
Registrant, except that the request referred to in the third full
paragraph thereof may only be made by shareholders who hold in the
aggregate at least 10% of the outstanding shares of the Registrant,
regardless of the net asset value of shares held by such requesting
shareholders.

(c) The Registrant undertakes to file a Post-Effective Amendment on behalf of
J.P. Morgan Global Strategic Income Fund, J.P. Morgan Latin American Equity
Fund and J.P. Morgan Disciplined Equity Fund using financial statements
which need not be certified, within four to six months from the
commencement of public investment operations of such funds.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereto duly authorized, in the
City of Boston and Commonwealth of Massachusetts on the 26th day of December,
1997.

J.P. MORGAN FUNDS

By /s/Richard W. Ingram
-----------------------
Richard W. Ingram
President and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this registration
statement has been signed below by the following persons in the capacities
indicated on December 26th, 1997.

/s/ Richard W. Ingram
- ------------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer)

Matthew Healey*
- -----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer)

Frederick S. Addy*
- ------------------------------
Frederick S. Addy
Trustee

William G. Burns*
- ------------------------------
William G. Burns
Trustee

Arthur C. Eschenlauer*
- ------------------------------
Arthur C. Eschenlauer
Trustee

Michael P. Mallardi*
- ------------------------------
Michael P. Mallardi
Trustee

*By /s/ Richard W. Ingram
----------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney previously filed.

<PAGE>

SIGNATURES

Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of the J.P. Morgan Funds (the "Trust") (File No.
033-54632) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of Boston, and Commonwealth of Massachusetts, on the
26th day of December, 1997.

THE TAX EXEMPT MONEY MARKET PORTFOLIO AND THE TAX EXEMPT BOND PORTFOLIO

/s/Richard W. Ingram
By -------------------------
Richard W. Ingram
President and Treasurer

Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on December 26, 1997.

/s/ Richard W. Ingram
- ----------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios

Matthew Healey*
- ----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer) of
the Portfolios

Frederick S. Addy*
- ----------------------------
Frederick S. Addy
Trustee of the Portfolios

William G. Burns*
- ----------------------------
William G. Burns
Trustee of the Portfolios

Arthur C. Eschenlauer*
- ----------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios

Michael P. Mallardi*
- ----------------------------
Michael P. Mallardi
Trustee of the Portfolios

/s/ Richard W. Ingram
*By ------------------------
Richard W. Ingram
as attorney-in-fact pursuant to a power of attorney previously filed.

<PAGE>

SIGNATURES

Each Portfolio has duly caused this registration statement on Form N-1A
("Registration Statement") of the J.P. Morgan Funds (the "Trust") (File No.
033-54632) to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of George Town, and Grand Cayman, on the 26th day of
December, 1997.

THE DIVERSIFIED PORTFOLIO

/s/Lenore J. McCabe
By -------------------------
Lenore J. McCabe
Assistant Secretary and Assistant Treasurer

Pursuant to the requirements of the Securities Act of 1933, the Trust's
Registration Statement has been signed below by the following persons in the
capacities indicated on December 26, 1997.

Richard W. Ingram*
- ----------------------------
Richard W. Ingram
President and Treasurer (Principal Financial and Accounting Officer) of the
Portfolios

Matthew Healey*
- ----------------------------
Matthew Healey
Trustee, Chairman and Chief Executive Officer (Principal Executive Officer) of
the Portfolios

Frederick S. Addy*
- ----------------------------
Frederick S. Addy
Trustee of the Portfolios

William G. Burns*
- ----------------------------
William G. Burns
Trustee of the Portfolios

Arthur C. Eschenlauer*
- ----------------------------
Arthur C. Eschenlauer
Trustee of the Portfolios

Michael P. Mallardi*
- ----------------------------
Michael P. Mallardi
Trustee of the Portfolios

/s/Lenore J. McCabe
*By ------------------------
Lenore J. McCabe
as attorney-in-fact pursuant to a power of attorney previously filed.

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Description of Exhibit
- ------------- ----------------------

EX-99.B1d Amendment No. 9 to Declaration of Trust; Ninth
Amended and Restated Establishment and Designation of
Series of Shares of Beneficial Interest

EX-11 Consents of independent accountants

EX-27.1-27.18 Financial Data Schedules

<PAGE>

Appendix I

J.P. MORGAN FUNDS
(formerly The JPM Pierpont Funds)

AMENDMENT NO. 9 TO DECLARATION OF TRUST

Amendment and
Ninth Amended and Restated Establishment and
Designation of Series of Shares of
Beneficial Interest (par value $0.001 per share)
dated November 12, 1997, effective January 1, 1998

Pursuant to Sections 6.9 and 9.3 of the Declaration of Trust, dated as
of November 4, 1992, as amended (the "Declaration of Trust"), of The JPM
Pierpont Funds (the "Trust"), the Trustees of the Trust hereby (i) change the
name of the Trust from "The JPM Pierpont Funds" to "J.P. Morgan Funds", and (ii)
amend and restate the Eighth Amended and Restated Establishment and Designation
of Series appended to the Declaration of Trust to change the names of the
existing series of Shares of the Trust accordingly (each a "Fund" and
collectively the "Funds").

1. The Funds shall be renamed and redesignated as follows:

J.P. Morgan Federal Money Market Fund
J.P. Morgan Prime Money Market Fund
J.P. Morgan Tax Exempt Money Market Fund
J.P. Morgan Bond Fund
J.P. Morgan Tax Exempt Bond Fund
J.P. Morgan U.S. Equity Fund
J.P. Morgan U.S. Small Company Fund
J.P. Morgan International Equity Fund
J.P. Morgan Short Term Bond Fund
J.P. Morgan Diversified Fund
J.P. Morgan Emerging Markets Equity Fund
J.P. Morgan New York Total Return Bond Fund
J.P. Morgan Asia Growth Fund
J.P. Morgan Japan Equity Fund
J.P. Morgan European Equity Fund
J.P. Morgan Global Strategic Income Fund
J.P. Morgan International Opportunities Fund
J.P. Morgan U.S. Small Company Opportunities Fund
J.P. Morgan Emerging Markets Debt Fund
J.P. Morgan Latin American Equity Fund
J.P. Morgan Disciplined Equity Fund

and shall have the following special and relative rights:

2. Each Fund shall be authorized to hold cash, invest in securities,
instruments and other properties and use investment techniques as from time to
time described in the Trust's then currently effective registration statement
under the Securities Act of 1933 to the extent pertaining to the offering of
Shares of such Fund. Each Share of a Fund shall be redeemable, shall be entitled
to one vote (or fraction thereof in respect of a fractional share) on matters on
which Shares of the Fund shall be entitled to vote, shall represent a pro rata
beneficial interest in the assets allocated or belonging to the Fund, and shall
be entitled to receive its pro rata share of the net assets of the Fund upon
liquidation of the Fund, all as provided in Section 6.9 of the Declaration of
Trust. The proceeds of sales of Shares of a Fund, together with any income and
gain thereon, less any diminution or expenses thereof, shall irrevocably belong
to that Fund, unless otherwise required by law.

3. Shareholders of each Fund shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to the Fund as provided in, Rule 18f-2, as
from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.

4. The assets and liabilities of the Trust shall be allocated among the
Funds as set forth in Section 6.9 of the Declaration of Trust.

5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall have
the right at any time and from time to time to reallocate assets and expenses,
to change the designation of any Fund, previously, now or hereafter created, or
otherwise to change the special and relative rights of any Fund or any such
other series of Shares.

IN WITNESS WHEREOF, the undersigned have executed this instrument as of
the date first written above. This instrument may be executed by the Trustees on
separate counterparts but shall be effective on January 1, 1998 and only when
signed by a majority of the Trustees.

/s/ Frederick S. Addy
Frederick S. Addy

/s/ William G. Burns
William G. Burns

/s/ Arthur C. Eschenlauer
Arthur C. Eschenlauer

/s/ Matthew Healey
Matthew Healey

/s/ Michael P. Mallardi
Michael P. Mallardi

CONSENTS OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of this Post-Effective
Amendment No. 45 to the registration statement on Form N-1A (the "Registration
Statement") of our reports dated October 23, 1997, relating to the financial
statements and financial highlights of The JPM Pierpont Tax Exempt Bond Fund and
The JPM Pierpont Tax Exempt Money Market Fund and the financial statements and
supplementary data of The Tax Exempt Bond Portfolio and The Tax Exempt Money
Market Portfolio appearing in the August 31, 1997 Annual Reports, which are also
incorporated by reference into the Registration Statement.

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statement of our report dated August 20,
1997, relating to the financial statements and financial highlights of The JPM
Pierpont Diversified Fund and the financial statements and supplementary data of
The Diversified Portfolio appearing in the June 30, 1997 Annual Report, which is
also incorporated by reference into the Registration Statement.

We also consent to the references to us under the headings "Independent
Accountants" and "Financial Statements" in the Statement of Additional
Information.

/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
December 29, 1997

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE
REPORT ON FORM N-SAR DATED MAY 31, 1997 FOR THE JPM PIERPONT PRIME MONEY
MARKET FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK>0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 012
<NAME> THE JPM PIERPONT PRIME MONEY MARKET FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 2251883
<INVESTMENTS-AT-VALUE> 2251883
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 15
<TOTAL-ASSETS> 2251898
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 1526
<TOTAL-LIABILITIES> 1526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2250927
<SHARES-COMMON-STOCK> 2250576
<SHARES-COMMON-PRIOR> 2154906
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 2250372
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 60547
<EXPENSES-NET> 2243
<NET-INVESTMENT-INCOME> 58304
<REALIZED-GAINS-CURRENT> (41)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 58263
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 58304
<DISTRIBUTIONS-OF-GAINS> 615
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7084655
<NUMBER-OF-SHARES-REDEEMED> 7040595
<SHARES-REINVESTED> 51610
<NET-CHANGE-IN-ASSETS> 95014
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 101
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2243
<AVERAGE-NET-ASSETS> 2267383
<PER-SHARE-NAV-BEGIN> 1
<PER-SHARE-NII> .03
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .03
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1
<EXPENSE-RATIO> .38
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED AUGUST 31, 1997 FOR THE JPM PIERPONT TAX EXEMPT MONEY MARKET
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 007
<NAME> THE JPM PIERPONT TAX EXEMPT MONEY MARKET FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 1104691
<INVESTMENTS-AT-VALUE> 1104691
<RECEIVABLES> 0
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1104693
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 738
<TOTAL-LIABILITIES> 738
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1104268
<SHARES-COMMON-STOCK> 1103923
<SHARES-COMMON-PRIOR> 1050312
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (313)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1103955
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 35897
<OTHER-INCOME> 0
<EXPENSES-NET> 2299
<NET-INVESTMENT-INCOME> 33598
<REALIZED-GAINS-CURRENT> (27)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 33572
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 33598
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 4142253
<NUMBER-OF-SHARES-REDEEMED> 4117141
<SHARES-REINVESTED> 28499
<NET-CHANGE-IN-ASSETS> 53584
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2299
<AVERAGE-NET-ASSETS> 1072924
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .031
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .031
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .46
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT FEDERAL MONEY MARKET
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 001
<NAME> THE JPM PIERPONT FEDERAL MONEY MARKET FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 218579
<INVESTMENTS-AT-VALUE> 218579
<RECEIVABLES> 7
<ASSETS-OTHER> 11
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 218597
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 245
<TOTAL-LIABILITIES> 245
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 218361
<SHARES-COMMON-STOCK> 218361
<SHARES-COMMON-PRIOR> 185318
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 218352
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5737
<OTHER-INCOME> 0
<EXPENSES-NET> 435
<NET-INVESTMENT-INCOME> 5301
<REALIZED-GAINS-CURRENT> (10)
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 5291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5301
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 927100
<NUMBER-OF-SHARES-REDEEMED> 898221
<SHARES-REINVESTED> 4165
<NET-CHANGE-IN-ASSETS> 32928
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 262
<AVERAGE-NET-ASSETS> 219578
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> .024
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> .024
<PER-SHARE-DISTRIBUTIONS> .000
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> .40
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT SHORT TERM BOND FUND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 002
<NAME> THE JPM PIERPONT SHORT TERM BOND FUND
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 11247
<RECEIVABLES> 6
<ASSETS-OTHER> 8
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 11261
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 40
<TOTAL-LIABILITIES> 40
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 11329
<SHARES-COMMON-STOCK> 1146
<SHARES-COMMON-PRIOR> 833
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (55)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (53)
<NET-ASSETS> 11220
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 372
<OTHER-INCOME> 0
<EXPENSES-NET> 15
<NET-INVESTMENT-INCOME> 357
<REALIZED-GAINS-CURRENT> 20
<APPREC-INCREASE-CURRENT> (111)
<NET-CHANGE-FROM-OPS> 266
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (357)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 656
<NUMBER-OF-SHARES-REDEEMED> 369
<SHARES-REINVESTED> 27
<NET-CHANGE-IN-ASSETS> 314
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (75)
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 51
<AVERAGE-NET-ASSETS> 12257
<PER-SHARE-NAV-BEGIN> 9.86
<PER-SHARE-NII> .29
<PER-SHARE-GAIN-APPREC> (.07)
<PER-SHARE-DIVIDEND> .29
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.79
<EXPENSE-RATIO> .50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT BOND FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 003
<NAME> THE JPM PIERPONT BOND FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 152456
<RECEIVABLES> 133
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 152591
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 132
<TOTAL-LIABILITIES> 132
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 155158
<SHARES-COMMON-STOCK> 15097
<SHARES-COMMON-PRIOR> 14487
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1371)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1347)
<NET-ASSETS> 152459
<DIVIDEND-INCOME> 54
<INTEREST-INCOME> 5207
<OTHER-INCOME> 0
<EXPENSES-NET> 230
<NET-INVESTMENT-INCOME> 4758
<REALIZED-GAINS-CURRENT> 604
<APPREC-INCREASE-CURRENT> (2580)
<NET-CHANGE-FROM-OPS> 2782
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4724
<DISTRIBUTIONS-OF-GAINS> 1045
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 3288
<NUMBER-OF-SHARES-REDEEMED> 3130
<SHARES-REINVESTED> 453
<NET-CHANGE-IN-ASSETS> 610
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 224
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 230
<AVERAGE-NET-ASSETS> 150177
<PER-SHARE-NAV-BEGIN> 10.30
<PER-SHARE-NII> .32
<PER-SHARE-GAIN-APPREC> (.13)
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .07
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.10
<EXPENSE-RATIO> .68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED AUGUST 31, 1997 FOR THE JPM PIERPONT TAX EXEMPT BOND FUND AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 006
<NAME> THE JPM PIERPONT TAX EXEMPT BOND FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 401363
<RECEIVABLES> 192
<ASSETS-OTHER> 1
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 401556
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 550
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 550
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 381561
<SHARES-COMMON-STOCK> 33828
<SHARES-COMMON-PRIOR> 32541
<ACCUMULATED-NII-CURRENT> 2
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 287
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 19156
<NET-ASSETS> 401506
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 18542
<OTHER-INCOME> 0
<EXPENSES-NET> 996
<NET-INVESTMENT-INCOME> 17546
<REALIZED-GAINS-CURRENT> 807
<APPREC-INCREASE-CURRENT> 6508
<NET-CHANGE-FROM-OPS> 24861
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 17546
<DISTRIBUTIONS-OF-GAINS> 702
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 14822
<NUMBER-OF-SHARES-REDEEMED> 14047
<SHARES-REINVESTED> 1190
<NET-CHANGE-IN-ASSETS> 31019
<ACCUMULATED-NII-PRIOR> 2
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 996
<AVERAGE-NET-ASSETS> 375379
<PER-SHARE-NAV-BEGIN> 11.63
<PER-SHARE-NII> .55
<PER-SHARE-GAIN-APPREC> .24
<PER-SHARE-DIVIDEND> .55
<PER-SHARE-DISTRIBUTIONS> .02
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.85
<EXPENSE-RATIO> .64
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM-SAR DATED SEPTEMBER 30, 1997 FOR THE JPM PIERPONT NEW YORK TOTAL RETURN
BOND FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 013
<NAME> THE JPM PIERPONT NEW YORK TOTAL RETURN BOND FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 67598
<RECEIVABLES> 1
<ASSETS-OTHER> 5
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 67604
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 114
<TOTAL-LIABILITIES> 114
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 64510
<SHARES-COMMON-STOCK> 6355
<SHARES-COMMON-PRIOR> 5465
<ACCUMULATED-NII-CURRENT> 21
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 226
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2733
<NET-ASSETS> 67490
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1455
<OTHER-INCOME> 0
<EXPENSES-NET> 98
<NET-INVESTMENT-INCOME> 1357
<REALIZED-GAINS-CURRENT> 226
<APPREC-INCREASE-CURRENT> 1690
<NET-CHANGE-FROM-OPS> 3273
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1357
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 17935
<NUMBER-OF-SHARES-REDEEMED> 9553
<SHARES-REINVESTED> 995
<NET-CHANGE-IN-ASSETS> 11293
<ACCUMULATED-NII-PRIOR> 21
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 102
<AVERAGE-NET-ASSETS> 61319
<PER-SHARE-NAV-BEGIN> 10.28
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> .34
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .23
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.62
<EXPENSE-RATIO> .72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MAY 31, 1997 FOR THE JPM PIERPONT U.S. EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 010
<NAME> THE JPM PIERPONT U.S. EQUITY FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 362,601
<RECEIVABLES> 391
<ASSETS-OTHER> 38
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 363,030
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 427
<TOTAL-LIABILITIES> 427
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 252,841
<SHARES-COMMON-STOCK> 14,722
<SHARES-COMMON-PRIOR> 15,804
<ACCUMULATED-NII-CURRENT> 1,269
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 37,796
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 70,697
<NET-ASSETS> 362,603
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 4,932
<EXPENSES-NET> 1,120
<NET-INVESTMENT-INCOME> 3,812
<REALIZED-GAINS-CURRENT> 50,364
<APPREC-INCREASE-CURRENT> 22,399
<NET-CHANGE-FROM-OPS> 76,576
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 5,464
<DISTRIBUTIONS-OF-GAINS> 31,903
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 59,295
<NUMBER-OF-SHARES-REDEEMED> 100,748
<SHARES-REINVESTED> 34,833
<NET-CHANGE-IN-ASSETS> 32,589
<ACCUMULATED-NII-PRIOR> 3,430
<ACCUMULATED-GAINS-PRIOR> 14,362
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,120
<AVERAGE-NET-ASSETS> 337,770
<PER-SHARE-NAV-BEGIN> 22.15
<PER-SHARE-NII> 0.250
<PER-SHARE-GAIN-APPREC> 4.720
<PER-SHARE-DIVIDEND> 0.360
<PER-SHARE-DISTRIBUTIONS> 2.130
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 24.63
<EXPENSE-RATIO> 0.800
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON
FORM N-SAR DATED MAY 31, 1997 FOR THE JPM PIERPONT U.S. SMALL COMPANY FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 011
<NAME> THE JPM PIERPONT U.S. SMALL COMPANY FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAY-31-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 238535
<RECEIVABLES> 125
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 238770
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 685
<TOTAL-LIABILITIES> 685
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 187527
<SHARES-COMMON-STOCK> 9140
<SHARES-COMMON-PRIOR> 8431
<ACCUMULATED-NII-CURRENT> 593
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 18766
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 31099
<NET-ASSETS> 237985
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2001
<EXPENSES-NET> 472
<NET-INVESTMENT-INCOME> 1529
<REALIZED-GAINS-CURRENT> 23594
<APPREC-INCREASE-CURRENT> (5713)
<NET-CHANGE-FROM-OPS> 19410
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1768)
<DISTRIBUTIONS-OF-GAINS> (17936)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1966
<NUMBER-OF-SHARES-REDEEMED> (1837)
<SHARES-REINVESTED> 580
<NET-CHANGE-IN-ASSETS> 17068
<ACCUMULATED-NII-PRIOR> 902
<ACCUMULATED-GAINS-PRIOR> 13108
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 760
<AVERAGE-NET-ASSETS> 216432
<PER-SHARE-NAV-BEGIN> 26.20
<PER-SHARE-NII> .18
<PER-SHARE-GAIN-APPREC> 2.00
<PER-SHARE-DIVIDEND> (.21)
<PER-SHARE-DISTRIBUTIONS> (2.13)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 26.04
<EXPENSE-RATIO> .90
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT INTERNATIONAL EQUITY
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 004
<NAME> THE JPM PIERPONT INTERNATIONAL EQUITY FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 163549
<INVESTMENTS-AT-VALUE> 171476
<RECEIVABLES> 30
<ASSETS-OTHER> 2
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 171508
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101
<TOTAL-LIABILITIES> 101
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57885
<SHARES-COMMON-STOCK> 15701
<SHARES-COMMON-PRIOR> 17642
<ACCUMULATED-NII-CURRENT> 662
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 4934
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7926
<NET-ASSETS> 171407
<DIVIDEND-INCOME> 1448
<INTEREST-INCOME> 335
<OTHER-INCOME> 0
<EXPENSES-NET> 1083
<NET-INVESTMENT-INCOME> 700
<REALIZED-GAINS-CURRENT> 4940
<APPREC-INCREASE-CURRENT> (225)
<NET-CHANGE-FROM-OPS> 5415
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 4419
<DISTRIBUTIONS-OF-GAINS> 9302
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2133
<NUMBER-OF-SHARES-REDEEMED> 4936
<SHARES-REINVESTED> 862
<NET-CHANGE-IN-ASSETS> (29313)
<ACCUMULATED-NII-PRIOR> 4380
<ACCUMULATED-GAINS-PRIOR> 9296
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1083
<AVERAGE-NET-ASSETS> 194853
<PER-SHARE-NAV-BEGIN> 11.38
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> .27
<PER-SHARE-DIVIDEND> .25
<PER-SHARE-DISTRIBUTIONS> .52
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.92
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED APRIL 30, 1997 FOR THE JPM PIERPONT EMERGING MARKETS
EQUITY FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 005
<NAME> THE JPM PIERPONT EMERGING MARKETS EQUITY FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> APR-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 58032
<RECEIVABLES> 73
<ASSETS-OTHER> 23
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 58068
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 46
<TOTAL-LIABILITIES> 46
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57158
<SHARES-COMMON-STOCK> 5104
<SHARES-COMMON-PRIOR> 5806
<ACCUMULATED-NII-CURRENT> (117)
<OVERDISTRIBUTION-NII> (4191)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 5172
<NET-ASSETS> 58022
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 611
<EXPENSES-NET> 492
<NET-INVESTMENT-INCOME> 119
<REALIZED-GAINS-CURRENT> 1211
<APPREC-INCREASE-CURRENT> 5495
<NET-CHANGE-FROM-OPS> 6826
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (323)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1430
<NUMBER-OF-SHARES-REDEEMED> 2158
<SHARES-REINVESTED> 26
<NET-CHANGE-IN-ASSETS> (702)
<ACCUMULATED-NII-PRIOR> 87
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 60161
<PER-SHARE-NAV-BEGIN> 10.18
<PER-SHARE-NII> .02
<PER-SHARE-GAIN-APPREC> 1.23
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.37
<EXPENSE-RATIO> 1.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON FORM
N-SAR DATED JUNE 30, 1997 FOR THE JPM PIERPONT DIVERSIFIED FUND AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK>0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 008
<NAME> THE JPM PIERPONT DIVERSIFIED FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 70343
<RECEIVABLES> 53
<ASSETS-OTHER> 10
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 70406
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 68
<TOTAL-LIABILITIES> 68
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 56623
<SHARES-COMMON-STOCK> 5065
<SHARES-COMMON-PRIOR> 4354
<ACCUMULATED-NII-CURRENT> 1143
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2581
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9991
<NET-ASSETS> 70338
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 2024
<EXPENSES-NET> 200
<NET-INVESTMENT-INCOME> 1824
<REALIZED-GAINS-CURRENT> 3370
<APPREC-INCREASE-CURRENT> 6452
<NET-CHANGE-FROM-OPS> 11646
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1471
<DISTRIBUTIONS-OF-GAINS> 1828
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1823
<NUMBER-OF-SHARES-REDEEMED> 1375
<SHARES-REINVESTED> 263
<NET-CHANGE-IN-ASSETS> 17140
<ACCUMULATED-NII-PRIOR> 690
<ACCUMULATED-GAINS-PRIOR> 1140
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 761
<AVERAGE-NET-ASSETS> 60790
<PER-SHARE-NAV-BEGIN> 12.22
<PER-SHARE-NII> .37
<PER-SHARE-GAIN-APPREC> 2.02
<PER-SHARE-DIVIDEND> .32
<PER-SHARE-DISTRIBUTIONS> .40
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.89
<EXPENSE-RATIO> .98
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT ON FORM
N-SAR DATED JUNE 30, 1997 FOR THE JPM PIERPONT EUROPEAN EQUITY FUND AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK>0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 014
<NAME> THE JPM PIERPONT EUROPEAN EQUITY FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 3051
<RECEIVABLES> 5
<ASSETS-OTHER> 20
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3076
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 80
<TOTAL-LIABILITIES> 80
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2528
<SHARES-COMMON-STOCK> 229
<SHARES-COMMON-PRIOR> 178
<ACCUMULATED-NII-CURRENT> 27
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 75
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 366
<NET-ASSETS> 2996
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 34
<EXPENSES-NET> 7
<NET-INVESTMENT-INCOME> 27
<REALIZED-GAINS-CURRENT> 77
<APPREC-INCREASE-CURRENT> 231
<NET-CHANGE-FROM-OPS> 335
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 116
<NUMBER-OF-SHARES-REDEEMED> 65
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 924
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (2)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 38
<AVERAGE-NET-ASSETS> 2750
<PER-SHARE-NAV-BEGIN> 11.61
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 1.37
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.10
<EXPENSE-RATIO> 1.42
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL DATA EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM PIERPONT ASIA GROWTH FUND AND
IS QUALIFIED IN ITS ENTRIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK>0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 015
<NAME> THE JPM PIERPONT ASIA GROWTH FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1829
<RECEIVABLES> 6
<ASSETS-OTHER> 12
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1847
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 85
<TOTAL-LIABILITIES> 85
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1765
<SHARES-COMMON-STOCK> 182
<SHARES-COMMON-PRIOR> 116
<ACCUMULATED-NII-CURRENT> 7
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (28)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 18
<NET-ASSETS> 1762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 10
<EXPENSES-NET> 3
<NET-INVESTMENT-INCOME> 7
<REALIZED-GAINS-CURRENT> (15)
<APPREC-INCREASE-CURRENT> (40)
<NET-CHANGE-FROM-OPS> (48)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 606
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (13)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 37
<AVERAGE-NET-ASSETS> 1490
<PER-SHARE-NAV-BEGIN> 10.02
<PER-SHARE-NII> .04
<PER-SHARE-GAIN-APPREC> (.36)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.70
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMERY FINANCIAL DATA EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM PIERPONT JAPAN EQUITY FUND
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK>0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 016
<NAME> THE JPM PIERPONT JAPAN EQUITY FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 1124
<RECEIVABLES> 5
<ASSETS-OTHER> 13
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1142
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<ACCUM-APPREC-OR-DEPREC> (4)
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<OTHER-INCOME> 1
<EXPENSES-NET> (2)
<NET-INVESTMENT-INCOME> (1)
<REALIZED-GAINS-CURRENT> 41
<APPREC-INCREASE-CURRENT> 67
<NET-CHANGE-FROM-OPS> 107
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
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<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 71
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</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED MAY 31, 1997 FOR THE JPM PIERPONT INTERNATIONAL
OPPORTUNITIES FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 017
<NAME> THE JPM PIERPONT INTERNATIONAL OPPORTUNITIES FUND
<MULTIPLIER> 1000

<S> <C>
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<FISCAL-YEAR-END> NOV-30-1997
<PERIOD-START> FEB-26-1997
<PERIOD-END> MAY-31-1997
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<ACCUMULATED-NET-GAINS> (132)
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE REPORT
ON FORM N-SAR DATED JUNE 30, 1997 FOR THE JPM PIERPONT EMERGING MARKETS DEBT
FUND AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH REPORT.
</LEGEND>
<CIK> 0000894089
<NAME> THE JPM PIERPONT FUNDS
<SERIES>
<NUMBER> 018
<NAME> THE JPM PIERPONT EMERGING MARKETS DEBT FUND
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> OTHER
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<PERIOD-START> APR-17-1997
<PERIOD-END> JUN-30-1997
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<PAID-IN-CAPITAL-COMMON> 7098
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<ACCUMULATED-NET-GAINS> 81
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<ACCUM-APPREC-OR-DEPREC> 265
<NET-ASSETS> 7573
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<PER-SHARE-NAV-BEGIN> 10.00
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<AVG-DEBT-PER-SHARE> 0

</TABLE>