<Page>
-----------------------------
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07342
---------------------------------------------
J.P. Morgan Institutional Funds
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, NY 10036
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-348-4782
----------------------------
Date of fiscal year end: August 31, 2003
----------------
Date of reporting period: September 1, 2002 through August 31, 2003
------------------------------------------
Form N-CSR is to be used by management investment companies to file reports
with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its regulatory,
disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
Include a copy of the report transmitted to stockholders pursuant to
Rule 30e-1 under the Act (17 CFR 270.30e-1).
<Page>
JPMORGAN FUNDS
[GRAPHIC]
ANNUAL REPORT AUGUST 31 2003
INCOME FUNDS
BOND FUND
BOND FUND II
ENHANCED INCOME FUND
FLEMING EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
SHORT TERM BOND FUND
SHORT TERM BOND FUND II
STRATEGIC INCOME FUND
U.S. TREASURY INCOME FUND
[JPMORGAN FLEMING ASSET MANAGEMENT LOGO]
<Page>
[JPMORGAN FLEMING ASSET MANAGEMENT LOGO]
JPMORGAN FLEMING ASSET MANAGEMENT is a premier global wealth manager that has
been working with affluent investors for over a hundred years. This experience
provides us with a keen understanding of the unique needs of the affluent
investor's portfolio. The legacy of our experience coupled with our GLOBAL
INTELLECTUAL CAPITAL is the foundation from which our investment products have
been built. We have investment professionals based in 44 countries across the
globe. This local insight provides us with a global view of every investment
decision we make which we believe is crucial in light of the ever-increasing
rise of globalization in our market place. JPMorgan Fleming Asset Management is
dedicated to working as an EXPERIENCED PARTNER with your financial advisor to
help provide you with the WEALTH SOLUTIONS your portfolio needs.
CONTENTS
<Table>
President's Letter 1
Fund Commentaries: 3
Bond Fund 3
Bond Fund II 5
Enhanced Income Fund 7
Fleming Emerging Markets
Debt Fund 9
Global Strategic Income Fund 11
Short Term Bond Fund 13
Short Term Bond Fund II 15
Strategic Income Fund 17
U.S. Treasury Income Fund 19
Portfolio of Investments 21
Financial Statements 86
Notes to Financial Statements 111
Financial Highlights 154
</Table>
HIGHLIGHTS
- - Economic Weakness Persists
- - Investor Optimism Grows
Investments in a Fund are not bank deposits or obligations of, or guaranteed or
endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal
Reserve Board or any other government agency. You could lose money if you sell
when the Fund's share price is lower than when you invested.
Past performance is no guarantee for future performance. The general market
views expressed in this report are opinions based on current market conditions
and are subject to change without notice. These views are not intended to
predict the future performance of a Fund or the securities markets. References
to specific securities and their issuers are for illustrative purposes only and
are not intended to be, and should not be interpreted as, recommendations to
purchase or sell such securities. Such views are not meant as investment advice
and may not be relied on as an indication of trading intent on behalf of any
Fund.
Prospective investors should refer to the Fund's prospectus for a discussion of
the Fund's investment objective, strategies and risks. Call JPMorgan Funds
Service Center at (800) 348-4782 for a prospectus containing more complete
information about a Fund including management fees and other expenses. Please
read it carefully before investing.
JPMorgan Funds are distributed by J.P. Morgan Fund Distributors, Inc.
<Page>
JPMorgan Income Funds
PRESIDENT'S LETTER OCTOBER 6, 2003
DEAR SHAREHOLDER:
We are pleased to present this annual report for the JPMorgan Income Funds for
the year ended August 31, 2003. Inside you will find in-depth information on
some of our income funds along with an update from the portfolio management
team.
ECONOMIC WEAKNESS PERSISTS
The U.S. economy continued to send mixed signals through most of the period. In
the autumn of 2002, investors were confronted with contradictory economic data,
lackluster corporate earnings, a declining stock market and escalating
geopolitical risk, all of which combined to hold back the recovery. In response,
many elected to buy only the highest quality issues. In November, the Federal
Reserve Board once again eased short-term interest rates, cutting them by 1/2
percent.
Dominating attention during the winter were concerns about an impending war with
Iraq, the outbreak of SARS, an increased threat of terrorism and rising energy
prices. In general, consumer prices were higher, suggesting that household real
income had fallen. Energy was certainly more expensive, putting more pressure on
the American consumer. In fact, consumer confidence -- which had remained strong
through the recession -- began to falter. According to the Conference Board, the
measure of consumer confidence fell in February to its lowest level since 1993.
INVESTOR OPTIMISM GROWS
The news was better in the spring. The combat phase of the Iraq war ended more
quickly than expected. Investors also celebrated better-than-expected corporate
earnings, the passage of a new tax package and a more positive economic outlook.
Money flowed back into the bond market and into riskier, higher yielding issues
as many investors took on more risk for the possibility of an increased return.
Although business remained reluctant to invest and hire, consumers were more
optimistic and continued to take advantage of low mortgage interest rates. To
support the emerging recovery, investors expected the Fed to ease interest rates
by 1/2 percent. In June, however, the Fed cut the Federal Funds Rate by just 1/4
percent to 1%. Yields surged after the conservative cut as investors speculated
that the easing cycle had ended. As economic fundamentals continued to improve,
many economists predicted that third-quarter GDP growth could be near 5%.
FUND FAMILY UPDATE
As you may know, on July 16, 2003, the Board of Trustees of JPMorgan Global
Strategic Income Fund approved the closing of the Fund's B share class. As a
result, assets in B share accounts were transferred to the Fund's A share class
at the close of business on September 12, 2003.
In this challenging environment, your portfolio managers will continue to work
hard to maintain strong performance. They will strive to obtain the highest
possible yields while focusing on the preservation of your principal. The
portfolio management team and all of us at JPMorgan Fleming Asset Management
appreciate your continued investment with us and we anticipate serving your
investment needs for many years to come. Should you have any questions, please
feel free to contact the JPMorgan Funds Service Center at 1-800-348-4782.
Sincerely,
/s/ George C.W. Gatch
George C.W. Gatch
President
JPMorgan Funds
[SIDENOTE]
[PHOTO OF GEORGE C.W. GATCH]
The U.S. economy continued to send mixed signals through most of the period.
<Page>
JPMorgan Bond Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 7/26/1993
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 1,234
Primary Benchmark CITIGROUP BROAD
INVESTMENT GRADE
BOND INDEX
Average Credit Quality AA+
Duration 5.2 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Bond Fund, which seeks to provide high total return consistent with
moderate risk of capital and maintenance of liquidity, returned 3.99%
(Institutional Shares) for the one-year period ended August 31, 2003. This
compares to the 4.43% return of its benchmark index, the Citigroup Broad
Investment Grade Bond Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: The most significant driver of our relative performance over the past year
was our residential mortgage positioning, which was a strong positive through
the second quarter but notably impaired returns during July. Our duration
positioning was a modest positive for performance through January, but
detracted over the summer months. Although our investment-grade holdings
detracted in the fall of 2002, they subsequently benefited from a strong
credit rally. Our underweight to Treasury and Agency debt enhanced returns.
Our allocations to high-yield and emerging markets debt performed well.
Detracting was our position in international non-dollar securities, which
underperformed the U.S. Treasury rally.
Q: HOW WAS THE FUND MANAGED?
A: In general, we maintained a long duration position, focusing on the shortest
part of the yield curve, to hedge against unexpected geopolitical shocks and
to benefit from mispricings and an accommodative Fed policy. For much of the
period, we overweighted prepayment-sensitive mortgages because of their
attractive yields. We actively managed coupon selection, focusing on 30-year
current coupon mortgages (i.e., Fannie Mae, 5% and 5.5%). In investment-grade
corporate bonds, we continued to focus on bottom-up security selection. Our
corporate security overweights generally favored long maturities, which
benefit most from spread compression. Early in 2003, the Fund invested in a
hedged non-dollar position held on our expectation that European economic
growth would lag the United States. We maintained modest positions in
high-yield and emerging markets debt to benefit from attractive yields and
valuation.
2
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------------
CLASS A SHARES
Without Sales Charge 4.32% 7.43% 5.73% 6.04%
With Sales Charge* (0.34%) 5.78% 4.76% 5.55%
CLASS B SHARES
Without CDSC 2.94% 6.61% 5.25% 5.79%
With CDSC** (2.01%) 5.72% 4.94% 5.79%
CLASS C SHARES
Without CDSC 3.52% 6.81% 5.37% 5.85%
With CDSC*** 2.52% 6.81% 5.37% 5.85%
INSTITUTIONAL SHARES 3.99% 7.37% 5.80% 6.17%
SELECT SHARES 3.82% 7.21% 5.60% 5.97%
ULTRA SHARES 4.08% 7.53% 5.94% 6.25%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and 0%
for the ten year period.
*** Assumes 1% CDSC for the one year period and 0% thereafter.
[CHART]
TEN-YEAR PERFORMANCE (8/31/93 TO 8/31/03)
<Table>
<Caption>
JPMORGAN BOND FUND CITIGROUP BROAD INVESTMENT LIPPER INTERMEDIATE INVESTMENT
(INSTITUTIONAL SHARES) GRADE BOND INDEX GRADE DEBT FUNDS INDEX
Aug-93 $ 3,000,000 $ 3,000,000 $ 3,000,000
Sep-93 $ 3,011,700 $ 3,010,200 $ 3,009,600
Oct-93 $ 3,021,337 $ 3,019,532 $ 3,021,337
Nov-93 $ 2,995,354 $ 2,994,168 $ 2,996,260
Dec-93 $ 3,009,133 $ 3,010,935 $ 3,012,141
Jan-94 $ 3,049,154 $ 3,051,583 $ 3,050,395
Feb-94 $ 2,997,318 $ 3,000,926 $ 2,993,657
Mar-94 $ 2,937,372 $ 2,926,503 $ 2,928,994
Apr-94 $ 2,910,936 $ 2,904,555 $ 2,904,977
May-94 $ 2,915,884 $ 2,904,264 $ 2,899,457
Jun-94 $ 2,905,970 $ 2,898,165 $ 2,894,238
Jul-94 $ 2,958,568 $ 2,952,940 $ 2,940,257
Aug-94 $ 2,961,527 $ 2,956,189 $ 2,945,549
Sep-94 $ 2,926,581 $ 2,913,620 $ 2,912,264
Oct-94 $ 2,920,728 $ 2,910,706 $ 2,908,770
Nov-94 $ 2,911,381 $ 2,903,138 $ 2,900,916
Dec-94 $ 2,927,394 $ 2,925,202 $ 2,915,130
Jan-95 $ 2,976,574 $ 2,985,754 $ 2,964,396
Feb-95 $ 3,044,440 $ 3,055,620 $ 3,027,241
Mar-95 $ 3,068,796 $ 3,073,343 $ 3,047,221
Apr-95 $ 3,112,679 $ 3,115,448 $ 3,087,140
May-95 $ 3,241,856 $ 3,239,131 $ 3,195,498
Jun-95 $ 3,262,279 $ 3,261,805 $ 3,215,630
Jul-95 $ 3,249,883 $ 3,255,281 $ 3,208,556
Aug-95 $ 3,290,506 $ 3,292,717 $ 3,246,096
Sep-95 $ 3,324,398 $ 3,323,668 $ 3,276,934
Oct-95 $ 3,372,602 $ 3,368,206 $ 3,319,861
Nov-95 $ 3,420,156 $ 3,420,750 $ 3,369,327
Dec-95 $ 3,467,012 $ 3,467,956 $ 3,414,476
Jan-96 $ 3,490,934 $ 3,491,538 $ 3,437,012
Feb-96 $ 3,425,305 $ 3,432,182 $ 3,377,208
Mar-96 $ 3,405,096 $ 3,407,470 $ 3,353,905
Apr-96 $ 3,381,260 $ 3,382,255 $ 3,334,452
May-96 $ 3,371,792 $ 3,380,226 $ 3,329,451
Jun-96 $ 3,414,277 $ 3,423,831 $ 3,368,072
Jul-96 $ 3,418,374 $ 3,433,075 $ 3,377,503
Aug-96 $ 3,414,956 $ 3,428,269 $ 3,374,125
Sep-96 $ 3,471,985 $ 3,487,920 $ 3,430,473
Oct-96 $ 3,548,369 $ 3,566,399 $ 3,502,856
Nov-96 $ 3,603,014 $ 3,625,244 $ 3,563,456
Dec-96 $ 3,581,036 $ 3,593,342 $ 3,531,741
Jan-97 $ 3,596,792 $ 3,607,356 $ 3,542,689
Feb-97 $ 3,608,662 $ 3,611,324 $ 3,551,546
Mar-97 $ 3,568,605 $ 3,574,850 $ 3,513,545
Apr-97 $ 3,618,209 $ 3,625,970 $ 3,561,680
May-97 $ 3,653,306 $ 3,660,054 $ 3,593,379
Jun-97 $ 3,699,703 $ 3,703,609 $ 3,635,781
Jul-97 $ 3,795,895 $ 3,803,977 $ 3,732,129
Aug-97 $ 3,763,630 $ 3,771,263 $ 3,698,167
Sep-97 $ 3,818,955 $ 3,826,700 $ 3,751,420
Oct-97 $ 3,859,436 $ 3,881,805 $ 3,796,437
Nov-97 $ 3,873,330 $ 3,900,049 $ 3,807,447
Dec-97 $ 3,913,225 $ 3,939,830 $ 3,842,095
Jan-98 $ 3,958,227 $ 3,990,653 $ 3,893,195
Feb-98 $ 3,959,811 $ 3,987,860 $ 3,887,744
Mar-98 $ 3,981,194 $ 4,003,413 $ 3,902,129
Apr-98 $ 3,998,711 $ 4,024,230 $ 3,920,469
May-98 $ 4,036,299 $ 4,062,863 $ 3,955,753
Jun-98 $ 4,064,957 $ 4,096,178 $ 3,987,399
Jul-98 $ 4,073,086 $ 4,104,780 $ 3,995,374
Aug-98 $ 4,118,298 $ 4,167,584 $ 4,049,312
Sep-98 $ 4,208,488 $ 4,265,938 $ 4,140,016
Oct-98 $ 4,175,662 $ 4,246,742 $ 4,106,482
Nov-98 $ 4,196,541 $ 4,270,099 $ 4,127,014
Dec-98 $ 4,208,711 $ 4,283,336 $ 4,144,761
Jan-99 $ 4,233,542 $ 4,315,033 $ 4,170,458
Feb-99 $ 4,156,068 $ 4,239,520 $ 4,096,224
Mar-99 $ 4,193,888 $ 4,263,685 $ 4,128,584
Apr-99 $ 4,214,858 $ 4,277,755 $ 4,142,621
May-99 $ 4,162,594 $ 4,238,400 $ 4,100,367
Jun-99 $ 4,135,120 $ 4,223,989 $ 4,086,425
Jul-99 $ 4,120,647 $ 4,207,093 $ 4,072,123
Aug-99 $ 4,113,642 $ 4,204,148 $ 4,067,643
Sep-99 $ 4,151,077 $ 4,254,598 $ 4,112,388
Oct-99 $ 4,176,398 $ 4,267,362 $ 4,118,556
Nov-99 $ 4,188,927 $ 4,266,935 $ 4,123,498
Dec-99 $ 4,184,738 $ 4,247,307 $ 4,104,530
Jan-00 $ 4,167,162 $ 4,235,415 $ 4,089,754
Feb-00 $ 4,216,335 $ 4,284,969 $ 4,134,332
Mar-00 $ 4,268,196 $ 4,340,674 $ 4,185,185
Apr-00 $ 4,238,745 $ 4,327,652 $ 4,159,236
May-00 $ 4,229,420 $ 4,323,757 $ 4,151,750
Jun-00 $ 4,311,894 $ 4,414,123 $ 4,239,767
Jul-00 $ 4,335,609 $ 4,454,292 $ 4,275,805
Aug-00 $ 4,410,615 $ 4,517,988 $ 4,335,239
Sep-00 $ 4,438,402 $ 4,548,711 $ 4,363,851
Oct-00 $ 4,461,926 $ 4,577,822 $ 4,379,125
Nov-00 $ 4,537,332 $ 4,651,983 $ 4,448,753
Dec-00 $ 4,643,052 $ 4,739,906 $ 4,538,618
Jan-01 $ 4,730,806 $ 4,818,114 $ 4,618,497
Feb-01 $ 4,764,868 $ 4,860,995 $ 4,662,835
Mar-01 $ 4,776,303 $ 4,886,272 $ 4,681,020
Apr-01 $ 4,732,839 $ 4,863,307 $ 4,655,742
May-01 $ 4,766,915 $ 4,895,405 $ 4,684,608
Jun-01 $ 4,779,786 $ 4,911,560 $ 4,701,941
Jul-01 $ 4,871,558 $ 5,025,017 $ 4,816,198
Aug-01 $ 4,928,555 $ 5,080,292 $ 4,869,176
Sep-01 $ 4,944,819 $ 5,142,779 $ 4,906,669
Oct-01 $ 5,061,517 $ 5,246,663 $ 5,006,765
Nov-01 $ 5,001,285 $ 5,174,260 $ 4,943,680
Dec-01 $ 4,981,280 $ 5,143,731 $ 4,912,040
Jan-02 $ 5,030,096 $ 5,184,367 $ 4,947,407
Feb-02 $ 5,076,373 $ 5,234,137 $ 4,995,397
Mar-02 $ 5,010,888 $ 5,147,774 $ 4,908,477
Apr-02 $ 5,090,060 $ 5,245,581 $ 4,996,829
May-02 $ 5,118,055 $ 5,290,169 $ 5,037,803
Jun-02 $ 5,123,685 $ 5,329,316 $ 5,034,781
Jul-02 $ 5,150,328 $ 5,392,735 $ 5,054,920
Aug-02 $ 5,249,730 $ 5,487,108 $ 5,152,480
Sep-02 $ 5,322,176 $ 5,574,353 $ 5,208,642
Oct-02 $ 5,295,033 $ 5,549,268 $ 5,188,849
Nov-02 $ 5,317,272 $ 5,548,158 $ 5,213,756
Dec-02 $ 5,423,086 $ 5,663,560 $ 5,320,116
Jan-03 $ 5,437,186 $ 5,668,091 $ 5,336,609
Feb-03 $ 5,516,025 $ 5,748,578 $ 5,412,922
Mar-03 $ 5,509,957 $ 5,743,404 $ 5,413,463
Apr-03 $ 5,578,832 $ 5,793,946 $ 5,476,801
May-03 $ 5,674,788 $ 5,901,134 $ 5,578,669
Jun-03 $ 5,667,978 $ 5,890,512 $ 5,577,554
Jul-03 $ 5,417,453 $ 5,691,413 $ 5,389,590
Aug-03 $ 5,459,197 $ 5,730,683 $ 5,377,167
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 7/26/93.
Returns for the Institutional Shares prior to 9/10/01 (offering date of the
Institutional Shares) are calculated using the historical expenses of the J.P.
Morgan Institutional Bond Fund, which are similar to the expenses of the
Institutional Shares.
Returns for the Select Shares prior to 9/10/01 (offering date of the Select
Shares) are calculated using the historical expenses of the J.P. Morgan Bond
Fund, which are similar to the expenses of the Select Shares.
Returns for the Ultra Shares prior to 9/10/01 (offering date of the Ultra
Shares) are calculated using the historical expenses of the J.P. Morgan
Institutional Bond Fund-Ultra, which are lower than the expenses of the Ultra
Shares.
Returns for the Class A and B Shares prior to 9/10/01 (offering date of the
Class A and B Shares) are calculated using the historical expenses of the J.P.
Morgan Bond Fund, which are lower than the expenses of the Class A and B Shares.
Returns for the Class C Shares prior to 3/31/03 (offering date of the Class C
Shares) are calculated using the historical expenses of the Select Shares, which
are lower than the expenses of the Class C Shares.
The graph illustrates comparative performance for $3,000,000 invested in
Institutional Shares of the JPMorgan Bond Fund, Citigroup Broad Investment Grade
Bond Index, and Lipper Intermediate Investment Grade Debt Funds Index from
August 31, 1993 to August 31, 2003. The performance of the Fund assumes
reinvestment of all dividends and capital gains and does not include a sales
charge. The performance of the indices does not include a sales charge and has
been adjusted to reflect reinvestment of all dividends and capital gains of the
securities included in the benchmark. The Citigroup Broad Investment Grade Bond
Index is an unmanaged, market-weighted index that contains approximately 4,700
individually priced investment grade bonds. The Lipper Intermediate Investment
Grade Debt Funds Index represents the total returns of the funds in the
indicated category, as defined by Lipper, Inc. Investors cannot invest directly
in an index.
Institutional Shares have a $3,000,000 minimum initial deposit and carry no
sales charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
3
<Page>
JPMorgan Bond Fund II
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 1/1/1997
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 1,069
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality AA+
Duration 5.2 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Bond Fund II, which seeks to provide as high a level of income as is
consistent with reasonable risk, returned 3.39% (Select Shares) for the
one-year period ended August 31, 2003. This compares to the 4.35% return of
its benchmark index, the Lehman Aggregate Bond Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: The most significant driver of our relative performance over the past year
was our residential mortgage positioning, which was a strong positive through
the second quarter but notably impaired returns during July. Our duration
positioning was a modest positive for performance through January, but
detracted over the summer months. Although our investment-grade holdings
detracted in the fall of 2002, they subsequently benefited from a strong
credit rally. Our underweight to Treasury and Agency debt enhanced returns.
Detracting was our position in international non-dollar securities, which
underperformed the U.S. Treasury rally.
Q: HOW WAS THE FUND MANAGED?
A: In general, we maintained a long duration position, focusing on the shortest
part of the yield curve, to hedge against unexpected geopolitical shocks and
to benefit from mispricings and an accommodative Fed policy. For much of the
period, we overweighted prepayment-sensitive mortgages because of their
attractive yields. We actively managed coupon selection, focusing on 30-year
current coupon mortgages (i.e., Fannie Mae, 5% and 5.5%). In investment-grade
corporate bonds, we continued to focus on bottom-up security selection. Our
corporate security overweights generally favored long maturities, which
benefit most from spread compression. Early in 2003, the Fund invested in a
hedged non-dollar position held on our expectation that European economic
growth would lag the United States.
4
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
CLASS A SHARES
Without Sales Charge 3.26% 7.46% 5.64% 5.93%
With Sales Charge* (1.39%) 5.82% 4.67% 5.44%
CLASS B SHARES
Without CDSC 2.47% 6.71% 5.19% 5.71%
With CDSC** (2.43%) 5.83% 4.87% 5.71%
SELECT SHARES 3.39% 7.53% 5.68% 5.95%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and 0%
for the ten year period.
[CHART]
TEN-YEAR PERFORMANCE (8/31/93 TO 8/31/03)
<Table>
<Caption>
JPMORGAN BOND FUND II LEHMAN AGGREGATE LIPPER CORPORATE DEBT
(SELECT SHARES) BOND INDEX A-RATED FUNDS INDEX
Aug-93 $ 1,000,000 $ 1,000,000 $ 1,000,000
Sep-93 $ 1,003,200 $ 1,002,700 $ 1,002,900
Oct-93 $ 1,007,714 $ 1,006,410 $ 1,008,516
Nov-93 $ 997,536 $ 997,856 $ 994,498
Dec-93 $ 1,002,025 $ 1,003,244 $ 999,868
Jan-94 $ 1,018,058 $ 1,016,788 $ 1,016,066
Feb-94 $ 998,307 $ 999,096 $ 992,087
Mar-94 $ 974,348 $ 974,418 $ 963,515
Apr-94 $ 965,676 $ 966,623 $ 952,145
May-94 $ 964,807 $ 966,526 $ 948,813
Jun-94 $ 962,781 $ 964,400 $ 945,587
Jul-94 $ 980,496 $ 983,591 $ 963,553
Aug-94 $ 980,791 $ 984,771 $ 963,842
Sep-94 $ 966,079 $ 970,295 $ 947,842
Oct-94 $ 965,596 $ 969,422 $ 944,620
Nov-94 $ 966,078 $ 967,289 $ 943,297
Dec-94 $ 963,470 $ 973,964 $ 950,749
Jan-95 $ 983,318 $ 993,248 $ 967,673
Feb-95 $ 1,000,329 $ 1,016,887 $ 991,090
Mar-95 $ 1,009,932 $ 1,023,090 $ 998,325
Apr-95 $ 1,022,354 $ 1,037,414 $ 1,012,601
May-95 $ 1,064,884 $ 1,077,562 $ 1,057,966
Jun-95 $ 1,069,144 $ 1,085,428 $ 1,065,477
Jul-95 $ 1,063,370 $ 1,083,040 $ 1,060,256
Aug-95 $ 1,079,959 $ 1,096,145 $ 1,074,994
Sep-95 $ 1,094,322 $ 1,106,777 $ 1,086,604
Oct-95 $ 1,110,299 $ 1,121,165 $ 1,103,012
Nov-95 $ 1,126,843 $ 1,137,983 $ 1,121,101
Dec-95 $ 1,141,830 $ 1,153,915 $ 1,139,151
Jan-96 $ 1,150,165 $ 1,161,530 $ 1,144,505
Feb-96 $ 1,131,303 $ 1,141,320 $ 1,118,639
Mar-96 $ 1,123,270 $ 1,133,331 $ 1,109,578
Apr-96 $ 1,118,328 $ 1,126,984 $ 1,101,034
May-96 $ 1,115,868 $ 1,124,730 $ 1,098,612
Jun-96 $ 1,130,374 $ 1,139,801 $ 1,112,345
Jul-96 $ 1,132,522 $ 1,142,879 $ 1,114,681
Aug-96 $ 1,129,577 $ 1,140,936 $ 1,111,559
Sep-96 $ 1,148,893 $ 1,160,788 $ 1,132,679
Oct-96 $ 1,172,560 $ 1,186,558 $ 1,160,430
Nov-96 $ 1,194,721 $ 1,206,848 $ 1,184,102
Dec-96 $ 1,178,593 $ 1,195,624 $ 1,170,722
Jan-97 $ 1,181,539 $ 1,199,331 $ 1,172,478
Feb-97 $ 1,183,548 $ 1,202,329 $ 1,176,582
Mar-97 $ 1,172,186 $ 1,188,983 $ 1,160,345
Apr-97 $ 1,189,065 $ 1,206,818 $ 1,176,706
May-97 $ 1,200,123 $ 1,218,283 $ 1,187,649
Jun-97 $ 1,215,125 $ 1,232,780 $ 1,203,683
Jul-97 $ 1,251,579 $ 1,266,065 $ 1,242,441
Aug-97 $ 1,233,931 $ 1,255,304 $ 1,226,662
Sep-97 $ 1,251,577 $ 1,273,882 $ 1,247,638
Oct-97 $ 1,268,598 $ 1,292,353 $ 1,263,733
Nov-97 $ 1,270,882 $ 1,298,298 $ 1,269,672
Dec-97 $ 1,282,320 $ 1,311,411 $ 1,283,131
Jan-98 $ 1,298,092 $ 1,328,197 $ 1,298,400
Feb-98 $ 1,296,275 $ 1,327,135 $ 1,296,193
Mar-98 $ 1,300,682 $ 1,331,647 $ 1,300,989
Apr-98 $ 1,307,316 $ 1,338,571 $ 1,306,973
May-98 $ 1,319,866 $ 1,351,288 $ 1,321,088
Jun-98 $ 1,331,481 $ 1,362,774 $ 1,332,846
Jul-98 $ 1,332,413 $ 1,365,636 $ 1,333,113
Aug-98 $ 1,352,266 $ 1,387,895 $ 1,344,977
Sep-98 $ 1,386,207 $ 1,420,372 $ 1,374,970
Oct-98 $ 1,375,672 $ 1,412,844 $ 1,357,646
Nov-98 $ 1,378,836 $ 1,420,897 $ 1,372,444
Dec-98 $ 1,384,214 $ 1,425,160 $ 1,376,836
Jan-99 $ 1,395,980 $ 1,435,279 $ 1,388,539
Feb-99 $ 1,370,573 $ 1,410,161 $ 1,357,713
Mar-99 $ 1,378,248 $ 1,417,917 $ 1,366,674
Apr-99 $ 1,381,831 $ 1,422,455 $ 1,371,184
May-99 $ 1,368,428 $ 1,409,937 $ 1,355,553
Jun-99 $ 1,363,091 $ 1,405,425 $ 1,348,911
Jul-99 $ 1,357,502 $ 1,399,522 $ 1,342,841
Aug-99 $ 1,355,602 $ 1,398,823 $ 1,339,215
Sep-99 $ 1,371,869 $ 1,415,049 $ 1,351,937
Oct-99 $ 1,375,573 $ 1,420,285 $ 1,353,965
Nov-99 $ 1,375,435 $ 1,420,143 $ 1,354,913
Dec-99 $ 1,369,521 $ 1,413,326 $ 1,348,816
Jan-00 $ 1,367,193 $ 1,408,662 $ 1,345,849
Feb-00 $ 1,381,275 $ 1,425,707 $ 1,360,115
Mar-00 $ 1,398,403 $ 1,444,526 $ 1,378,612
Apr-00 $ 1,382,041 $ 1,440,337 $ 1,367,308
May-00 $ 1,376,513 $ 1,439,617 $ 1,361,975
Jun-00 $ 1,403,080 $ 1,469,561 $ 1,392,347
Jul-00 $ 1,415,427 $ 1,482,934 $ 1,404,182
Aug-00 $ 1,433,261 $ 1,504,436 $ 1,422,858
Sep-00 $ 1,443,868 $ 1,513,914 $ 1,430,683
Oct-00 $ 1,450,942 $ 1,523,906 $ 1,436,692
Nov-00 $ 1,473,867 $ 1,548,898 $ 1,457,955
Dec-00 $ 1,507,472 $ 1,577,708 $ 1,487,843
Jan-01 $ 1,534,154 $ 1,603,424 $ 1,515,517
Feb-01 $ 1,545,507 $ 1,617,374 $ 1,529,157
Mar-01 $ 1,551,379 $ 1,625,461 $ 1,534,509
Apr-01 $ 1,533,849 $ 1,618,634 $ 1,525,762
May-01 $ 1,541,365 $ 1,628,346 $ 1,535,832
Jun-01 $ 1,546,760 $ 1,634,534 $ 1,541,976
Jul-01 $ 1,581,252 $ 1,671,147 $ 1,576,978
Aug-01 $ 1,595,800 $ 1,690,365 $ 1,594,798
Sep-01 $ 1,618,460 $ 1,709,974 $ 1,601,018
Oct-01 $ 1,652,124 $ 1,745,712 $ 1,635,600
Nov-01 $ 1,629,490 $ 1,721,621 $ 1,615,809
Dec-01 $ 1,621,017 $ 1,710,603 $ 1,603,691
Jan-02 $ 1,635,120 $ 1,724,459 $ 1,614,916
Feb-02 $ 1,648,691 $ 1,741,186 $ 1,626,867
Mar-02 $ 1,624,290 $ 1,712,282 $ 1,600,837
Apr-02 $ 1,653,040 $ 1,745,501 $ 1,629,172
May-02 $ 1,665,438 $ 1,760,337 $ 1,641,554
Jun-02 $ 1,675,098 $ 1,775,652 $ 1,648,612
Jul-02 $ 1,693,021 $ 1,797,138 $ 1,658,504
Aug-02 $ 1,723,665 $ 1,827,509 $ 1,688,855
Sep-02 $ 1,748,141 $ 1,857,115 $ 1,715,032
Oct-02 $ 1,740,274 $ 1,848,572 $ 1,697,881
Nov-02 $ 1,743,755 $ 1,848,018 $ 1,703,994
Dec-02 $ 1,778,630 $ 1,886,272 $ 1,740,970
Jan-03 $ 1,781,831 $ 1,887,969 $ 1,744,627
Feb-03 $ 1,804,817 $ 1,914,023 $ 1,770,098
Mar-03 $ 1,803,012 $ 1,912,492 $ 1,768,859
Apr-03 $ 1,824,468 $ 1,928,366 $ 1,788,670
May-03 $ 1,854,207 $ 1,964,233 $ 1,826,053
Jun-03 $ 1,851,055 $ 1,960,305 $ 1,821,853
Jul-03 $ 1,764,611 $ 1,894,439 $ 1,759,364
Aug-03 $ 1,782,220 $ 1,906,942 $ 1,770,976
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 1/1/97.
Returns for the Select Shares prior to 1/1/97 (offering date of the Select
Shares) are calculated using performance of a predecessor account and the
historical expenses at the level indicated (absent reimbursements) in the
Expense Summary for the Fund as disclosed in the Prospectus. The account was not
registered with the SEC and was not subject to investment restrictions of
registered mutual funds. If the account had been registered, performance may
have been adversely affected.
Returns for the Class A and B Shares prior to 3/2/01 (offering date of the Class
A and B Shares) are calculated using the historical expenses of the Select
Shares, which are lower than the expenses of the Class A and B Shares.
The graph illustrates comparative performance for $1,000,000 invested in Select
Shares of the JPMorgan Bond Fund II, Lehman Aggregate Bond Index, and Lipper
Corporate Debt A-Rated Funds Index from August 31, 1993 to August 31, 2003.
The performance of the Fund assumes reinvestment of all dividends and capital
gains and does not include a sales charge. The performance of the indices does
not include a sales charge and has been adjusted to reflect reinvestment of all
dividends and capital gains of the securities included in the benchmark. The
Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the
Mortgage-Backed Securities Index and includes U.S. treasury issues, agency
issues, corporate bond issues and mortgage-backed securities. The Lipper
Corporate Debt A-Rated Funds Index represents the total returns of the funds in
the indicated category, as defined by Lipper, Inc. Investors cannot invest
directly in an index.
Select Shares have a $1,000,000 minimum initial deposit and carry no sales
charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
5
<Page>
JPMorgan Enhanced Income Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 11/30/2001
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 354
Primary Benchmark 3 MONTH
LIBOR INDEX
Average Credit Quality AA
Duration 0.4 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Enhanced Income Fund, which seeks high current income consistent
with principal preservation, returned 1.14% for the one-year period ended
August 31, 2003. This compares to the 1.49% return of its benchmark index,
the 3 Month LIBOR Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: Some of the underperformance during the period was due to the widening of
mortgage spreads and an increase in implied volatility (indicating a more
bearish market) in mid-June and July. The Fund was positioned with a longer
duration than that of its benchmark and had a large allocation to mortgages.
Although our allocations to the credit and mortgage sectors added yield, they
were also a slight drag as corporate and mortgage securities underperformed.
We took a longer duration position because we believed the short end of the
yield curve would remain anchored. Unfortunately, interest rates rose sharply
at the end of the period. Detracting was our yield-curve positioning, which
was a negative when the curve steepened. We lowered the volatility of the
Fund toward the end of the period by reducing our allocation to mortgages.
Q: HOW WAS THE FUND MANAGED?
A: We tactically traded our duration during the period, maintaining a slightly
longer duration than the benchmark because we expected the Fed to ease rates
and keep them low for the foreseeable future. To enhance yield and reduce
interest rate volatility, we purchased agencies, including callable agencies.
However, in January and February, we reduced our agency holdings, purchasing
sovereign debt and asset-backed securities at higher yields. We reduced our
exposure to the utilities sector and continued to add selectively to our
positions in broker-dealer and finance paper. We opportunistically purchased
several A-2/P-2 commercial paper issues and added floating rate corporate and
asset-backed securities to provide additional yield. We increased our
allocation to mortgage-backed securities because of their higher yields and
because we thought they would perform well in a low interest rate
environment.
6
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR (11/30/01)
-----------------------------------------------
INSTITUTIONAL SHARES 1.14% 1.55%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (11/30/01 TO 8/31/03)
<Table>
<Caption>
JPMORGAN ENHANCED INCOME FUND LIPPER ULTRA-SHORT
(INSTITUTIONAL SHARES) 3 MONTH LIBOR INDEX OBLIGATIONS AVERAGE
Nov-01 $ 3,000,000 $ 3,000,000 $ 3,000,000
Dec-01 $ 3,005,700 $ 3,005,700 $ 3,003,900
Jan-02 $ 3,008,706 $ 3,010,509 $ 3,007,805
Feb-02 $ 3,014,422 $ 3,014,724 $ 3,013,821
Mar-02 $ 3,020,451 $ 3,019,547 $ 3,012,012
Apr-02 $ 3,032,231 $ 3,024,681 $ 3,024,964
May-02 $ 3,037,992 $ 3,029,520 $ 3,032,829
Jun-02 $ 3,043,764 $ 3,034,367 $ 3,037,681
Jul-02 $ 3,044,069 $ 3,039,222 $ 3,039,808
Aug-02 $ 3,047,722 $ 3,044,085 $ 3,047,407
Sep-02 $ 3,051,684 $ 3,048,651 $ 3,055,635
Oct-02 $ 3,055,651 $ 3,053,529 $ 3,058,691
Nov-02 $ 3,061,762 $ 3,058,415 $ 3,065,114
Dec-02 $ 3,061,150 $ 3,062,391 $ 3,074,923
Jan-03 $ 3,069,415 $ 3,066,066 $ 3,079,843
Feb-03 $ 3,071,256 $ 3,069,132 $ 3,089,082
Mar-03 $ 3,074,635 $ 3,072,815 $ 3,092,789
Apr-03 $ 3,081,092 $ 3,075,887 $ 3,097,428
May-03 $ 3,090,643 $ 3,079,271 $ 3,102,384
Jun-03 $ 3,090,334 $ 3,082,966 $ 3,102,074
Jul-03 $ 3,073,955 $ 3,086,049 $ 3,089,355
Aug-03 $ 3,082,089 $ 3,088,826 $ 3,093,989
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 11/30/01.
The graph illustrates comparative performance for $3,000,000 invested in
Institutional Shares of the JPMorgan Enhanced Income Fund, 3 Month LIBOR Index,
and the Lipper Ultra-Short Obligations Average from November 30, 2001 to August
31, 2003. The performance of the Fund assumes reinvestment of all dividends and
capital gains and does not include a sales charge. The performance of the
indices does not include a sales charge and has been adjusted to reflect
reinvestment of all dividends and capital gains of securities included in the
benchmark. The 3 Month LIBOR Index is an abbreviation for the "London Interbank
Offered Rate". Similarly to the Fed Funds Rate, it represents the rate at which
banks are willing to loan each other reserves. The LIBOR is an average of the
rate charged on dollar-denominated deposits traded between banks in London. The
benchmark presented is the total return of the 3 Month LIBOR for the period
presented. The Lipper Ultra-Short Obligations Average describes the average
total returns for all the funds in the indicated category, as defined by Lipper,
Inc. Investors cannot invest directly in an index.
Institutional Shares have a $3,000,000 minimum initial deposit and carry no
sales charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
7
<Page>
JPMorgan Fleming Emerging Markets Debt Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 4/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 60
Primary Benchmark EMERGING MARKETS
BOND INDEX GLOBAL
Average Credit Quality BB
Duration 5.6 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Fleming Emerging Markets Debt Fund, which seeks to provide a high
total return from a portfolio of fixed-income securities of emerging markets
issuers, had a total return of 30.49% for the one-year period ended August
31, 2003. This compares to the 26.84% return from the Emerging Markets Bond
Index Global.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The performance of the Fund benefited from our overweight to Brazil, which we
adopted in the belief that the Lula administration would surprise critics.
Although our overweight detracted in the first months of the period, the
position performed strongly on the recovery in confidence in Brazilian
finances. Another contributor was our underweighting of high-grade credits
that trade fairly with U.S. Treasuries, expressed mostly through the Asian
credits. As Brazil rallied, these issues lost favor as a safe haven. The
recovery in Brazil also helped Colombia and Peru, and our overweighting to
both countries enhanced performance. We avoided the collapse of Uruguay
bonds, liquidating our holdings prior to the steep sell-off that eventually
led to a restructuring. Detractors during the period were underweights to
Turkey and Venezuela, which both recovered dramatically following periods of
uncertainty -- for Turkey, the Iraq war and for Venezuela, a two-month oil
strike.
Q: HOW WAS THE FUND MANAGED?
A: The emerging bond market posted strong performance through most of the
period. It rallied strongly as fears about the election in Brazil gave way to
growing confidence that the new government would show strong fiscal
discipline and pursue important reforms. As investors sought higher yielding
investments, the rally continued. The spring was marked by increased inflows
into the emerging bond market and ongoing improvements in country
fundamentals. In June, liquidity rose further when the U.S. Federal Reserve
Board cut the Federal Funds Rate to 1%. Although the market was affected by
the weakness in the U.S. Treasury and mortgage markets, spreads in the broad
market indices tightened going into period end.
We maintained an overweight to Brazil on the positive announcements of the
government's economic team. However, we took advantage of investor interest
in August to modestly reduce our position. Noting the progress of reform
proposals, we added Colombia. We also increased Mexico because the political
environment seems to be improving and oil prices have risen. Although we held
only a modest overweight to Russia during spring, we took advantage of market
weakness in August to add to our holdings. We liquidated our holdings in
Uruguay, reduced Venezuela to a more significant underweight position, and
reduced our overweight in Peru in response to political developments that
could dampen the market's enthusiasm for the credit. Because of our concern
about the impact of regional strife on regional fundamentals and market
sentiment, we held an underweight position in most Middle Eastern names. We
also took profits in Turkey, moving to a market-weight position.
8
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (4/17/97)
----------------------------------------------
SELECT SHARES 30.49% 10.61% 18.39% 9.43%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (4/17/97 TO 8/31/03)
<Table>
<Caption>
JPMORGAN FLEMING EMERGING EMERGING MARKETS LIPPER EMERGING MARKETS
MARKETS DEBT FUND (SELECT SHARES) BOND INDEX GLOBAL DEBT FUNDS INDEX
Apr-97 $ 1,000,000 $ 1,000,000 $ 1,000,000
Apr-97 $ 1,020,000 $ 1,000,000 $ 1,000,000
May-97 $ 1,051,008 $ 1,033,900 $ 1,041,100
Jun-97 $ 1,068,034 $ 1,056,542 $ 1,073,686
Jul-97 $ 1,090,036 $ 1,100,178 $ 1,119,855
Aug-97 $ 1,078,917 $ 1,094,787 $ 1,116,047
Sep-97 $ 1,105,783 $ 1,125,222 $ 1,151,426
Oct-97 $ 986,026 $ 1,005,948 $ 1,027,878
Nov-97 $ 1,034,835 $ 1,048,601 $ 1,067,246
Dec-97 $ 1,053,462 $ 1,074,291 $ 1,099,050
Jan-98 $ 1,051,144 $ 1,079,448 $ 1,096,742
Feb-98 $ 1,080,891 $ 1,107,945 $ 1,127,122
Mar-98 $ 1,107,373 $ 1,133,096 $ 1,156,427
Apr-98 $ 1,108,481 $ 1,135,702 $ 1,157,121
May-98 $ 1,072,455 $ 1,101,404 $ 1,110,026
Jun-98 $ 1,033,310 $ 1,073,538 $ 1,065,070
Jul-98 $ 1,045,090 $ 1,079,765 $ 1,073,590
Aug-98 $ 763,229 $ 784,557 $ 701,591
Sep-98 $ 808,794 $ 852,343 $ 732,952
Oct-98 $ 862,417 $ 906,807 $ 778,395
Nov-98 $ 914,162 $ 969,014 $ 849,152
Dec-98 $ 885,640 $ 950,312 $ 817,478
Jan-99 $ 846,141 $ 928,645 $ 793,853
Feb-99 $ 855,702 $ 937,839 $ 807,428
Mar-99 $ 920,650 $ 1,000,018 $ 860,718
Apr-99 $ 1,000,286 $ 1,061,519 $ 922,518
May-99 $ 930,566 $ 1,006,744 $ 872,148
Jun-99 $ 974,954 $ 1,045,403 $ 907,819
Jul-99 $ 949,995 $ 1,027,945 $ 894,293
Aug-99 $ 944,675 $ 1,028,665 $ 893,309
Sep-99 $ 977,267 $ 1,060,965 $ 915,374
Oct-99 $ 1,019,582 $ 1,098,523 $ 953,636
Nov-99 $ 1,050,782 $ 1,127,963 $ 992,259
Dec-99 $ 1,115,615 $ 1,180,188 $ 1,044,551
Jan-00 $ 1,104,459 $ 1,162,013 $ 1,035,359
Feb-00 $ 1,194,803 $ 1,224,413 $ 1,101,829
Mar-00 $ 1,237,816 $ 1,257,717 $ 1,128,713
Apr-00 $ 1,206,376 $ 1,234,575 $ 1,099,818
May-00 $ 1,163,429 $ 1,206,056 $ 1,067,264
Jun-00 $ 1,229,744 $ 1,262,259 $ 1,124,255
Jul-00 $ 1,274,015 $ 1,298,233 $ 1,157,421
Aug-00 $ 1,311,853 $ 1,339,647 $ 1,192,491
Sep-00 $ 1,281,681 $ 1,325,178 $ 1,171,384
Oct-00 $ 1,254,381 $ 1,298,277 $ 1,142,099
Nov-00 $ 1,232,931 $ 1,293,084 $ 1,134,219
Dec-00 $ 1,285,330 $ 1,350,239 $ 1,179,928
Jan-01 $ 1,353,324 $ 1,415,320 $ 1,244,588
Feb-01 $ 1,332,754 $ 1,396,496 $ 1,230,399
Mar-01 $ 1,305,966 $ 1,380,856 $ 1,209,975
Apr-01 $ 1,295,257 $ 1,374,227 $ 1,201,989
May-01 $ 1,333,078 $ 1,407,346 $ 1,234,803
Jun-01 $ 1,361,073 $ 1,428,879 $ 1,256,536
Jul-01 $ 1,272,059 $ 1,354,863 $ 1,203,636
Aug-01 $ 1,332,354 $ 1,415,561 $ 1,245,642
Sep-01 $ 1,270,933 $ 1,369,272 $ 1,186,101
Oct-01 $ 1,278,685 $ 1,369,956 $ 1,201,164
Nov-01 $ 1,307,072 $ 1,352,421 $ 1,239,121
Dec-01 $ 1,346,807 $ 1,368,515 $ 1,271,834
Jan-02 $ 1,379,535 $ 1,393,832 $ 1,297,143
Feb-02 $ 1,436,509 $ 1,446,101 $ 1,343,840
Mar-02 $ 1,444,554 $ 1,447,692 $ 1,355,801
Apr-02 $ 1,455,966 $ 1,461,879 $ 1,371,257
May-02 $ 1,438,640 $ 1,454,277 $ 1,359,875
Jun-02 $ 1,344,984 $ 1,380,982 $ 1,268,084
Jul-02 $ 1,263,344 $ 1,318,423 $ 1,192,886
Aug-02 $ 1,360,495 $ 1,414,932 $ 1,278,178
Sep-02 $ 1,307,572 $ 1,375,738 $ 1,236,381
Oct-02 $ 1,404,463 $ 1,460,346 $ 1,322,186
Nov-02 $ 1,452,355 $ 1,501,820 $ 1,365,686
Dec-02 $ 1,500,864 $ 1,547,926 $ 1,414,578
Jan-03 $ 1,523,527 $ 1,573,467 $ 1,445,557
Feb-03 $ 1,577,459 $ 1,623,818 $ 1,498,320
Mar-03 $ 1,617,211 $ 1,650,123 $ 1,536,227
Apr-03 $ 1,725,403 $ 1,744,180 $ 1,636,389
May-03 $ 1,790,623 $ 1,816,564 $ 1,710,027
Jun-03 $ 1,778,268 $ 1,816,564 $ 1,710,882
Jul-03 $ 1,722,252 $ 1,752,258 $ 1,661,095
Aug-03 $ 1,775,639 $ 1,794,837 $ 1,703,453
</Table>
Source: Lipper Analytical Services. Past performance is no guarantee of future
results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 4/17/97.
The mountain chart illustrates comparative performance for $1,000,000 invested
in the Select Shares of the JPMorgan Fleming Emerging Markets Debt Fund,
Emerging Markets Bond Index Global and Lipper Emerging Markets Debt Funds Index
from April 17, 1997 to August 31, 2003. The performance of the Fund assumes
reinvestment of all dividends and capital gains and does not include a sales
charge. The performance of the indices reflects an initial investment at the end
of the month following the Fund's inception. The performance of the indices does
not include a sales charge and has been adjusted to reflect reinvestment of all
dividends and capital gains of the securities included in the benchmark. The
Emerging Markets Bond Index Global is an unmanaged index which tracks total
return for external currency-denominated debt (Brady bonds, loans, Eurobonds and
U.S. dollar-denominated local market instruments) in emerging markets. The
Lipper Emerging Markets Debt Funds Index represents the total returns of the
funds in the indicated category, as defined by Lipper, Inc. Investors cannot
invest directly in an index.
The Select Shares have a minimum investment of $1,000,000 and carry no sales
charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
9
<Page>
JPMorgan Global Strategic Income Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 3/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 111
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality A
Duration 4.5 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Global Strategic Income Fund, which seeks to provide high total
return from a portfolio of fixed-income securities of foreign and domestic
issuers, had a total return of 8.86% (Institutional Shares) for the one-year
period ended August 31, 2003. This compares to the 4.35% return of the Lehman
Aggregate Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our strong performance was largely the result of our strategic overweights to
high-yield and emerging markets debt at a time when investor risk aversion
decreased. Our underweight to investment-grade corporates detracted, but the
selection of longer-duration securities was positive. Our positioning and
security selection in residential mortgages was positive, as was our
overweight to commercial mortgage-backed securities. The non-callable
mortgage market continues to be buoyed by a healthy supply of investor
capital. Our underweight to Treasury and Agency debt enhanced returns.
Detracting was our position in international non-dollar securities, which
underperformed the U.S. rally as the market priced in the easier U.S.
monetary policy.
Q: HOW WAS THE FUND MANAGED?
A: High-yield and emerging markets debt were our largest sector overweights,
although we reduced our risk exposure in the second quarter of 2003. We
remained overweight to non-callable mortgages. In investment-grade corporate
bonds, we continued to focus on bottom-up security selection. We reduced our
underweight position during the second quarter, adding longer maturities
because they benefit from spread compression. We actively managed coupon
selection within the residential mortgage-backed sector, focusing on 30-year
current coupons (i.e., Fannie Mae, 5% and 5.5%). Early in 2003, we increased
our hedged non-dollar position because we expected European economic growth
to lag the United States. Consistent with our strategy, we maintained a
significant underweight to Treasury and agency debt.
10
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (3/17/97)
----------------------------------------------
CLASS A SHARES
Without Sales Charge 8.33% 5.00% 4.80% 4.98%
With Sales Charge* 3.42% 3.42% 3.84% 4.24%
CLASS B SHARES
Without CDSC 7.74% 4.03% 4.22% 4.53%
With CDSC** 2.74% 3.16% 3.91% 4.53%
INSTITUTIONAL SHARES 8.86% 5.58% 5.31% 5.42%
SELECT SHARES 8.48% 5.24% 4.94% 5.09%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and 1%
CDSC for the period since inception.
[CHART]
LIFE OF FUND PERFORMANCE (3/17/97 TO 8/31/03)
<Table>
<Caption>
JPMORGAN GLOBAL STRATEGIC INCOME FUND LEHMAN AGGREGATE LIPPER MULTI-SECTOR
(INSTITUTIONAL SHARES) BOND INDEX INCOME FUNDS INDEX
Mar-97 $ 3,000,000 $ 3,000,000 $ 3,000,000
Mar-97 $ 2,967,900 $ 3,000,000 $ 3,000,000
Apr-97 $ 3,018,651 $ 3,045,000 $ 3,026,700
May-97 $ 3,069,968 $ 3,073,928 $ 3,076,943
Jun-97 $ 3,114,483 $ 3,110,507 $ 3,120,636
Jul-97 $ 3,200,131 $ 3,194,491 $ 3,192,098
Aug-97 $ 3,179,010 $ 3,167,338 $ 3,172,946
Sep-97 $ 3,242,590 $ 3,214,214 $ 3,237,039
Oct-97 $ 3,184,548 $ 3,260,820 $ 3,222,149
Nov-97 $ 3,222,444 $ 3,275,820 $ 3,235,360
Dec-97 $ 3,256,602 $ 3,308,906 $ 3,267,713
Jan-98 $ 3,296,658 $ 3,351,260 $ 3,309,213
Feb-98 $ 3,327,976 $ 3,348,579 $ 3,325,098
Mar-98 $ 3,358,927 $ 3,359,964 $ 3,361,341
Apr-98 $ 3,365,980 $ 3,377,436 $ 3,371,089
May-98 $ 3,369,683 $ 3,409,522 $ 3,364,010
Jun-98 $ 3,365,302 $ 3,438,503 $ 3,355,600
Jul-98 $ 3,381,456 $ 3,445,723 $ 3,368,686
Aug-98 $ 3,260,400 $ 3,501,889 $ 3,169,597
Sep-98 $ 3,316,479 $ 3,583,833 $ 3,224,114
Oct-98 $ 3,276,681 $ 3,564,839 $ 3,199,289
Nov-98 $ 3,327,142 $ 3,585,158 $ 3,312,223
Dec-98 $ 3,341,116 $ 3,595,914 $ 3,304,605
Jan-99 $ 3,366,508 $ 3,621,445 $ 3,322,120
Feb-99 $ 3,322,744 $ 3,558,069 $ 3,277,603
Mar-99 $ 3,368,597 $ 3,577,639 $ 3,318,573
Apr-99 $ 3,422,495 $ 3,589,087 $ 3,376,980
May-99 $ 3,351,307 $ 3,557,503 $ 3,306,401
Jun-99 $ 3,341,253 $ 3,546,119 $ 3,302,764
Jul-99 $ 3,331,564 $ 3,531,226 $ 3,295,168
Aug-99 $ 3,315,239 $ 3,529,460 $ 3,271,443
Sep-99 $ 3,338,446 $ 3,570,402 $ 3,285,183
Oct-99 $ 3,361,815 $ 3,583,612 $ 3,289,454
Nov-99 $ 3,392,407 $ 3,583,254 $ 3,311,164
Dec-99 $ 3,424,296 $ 3,566,054 $ 3,339,640
Jan-00 $ 3,390,738 $ 3,554,286 $ 3,308,247
Feb-00 $ 3,448,719 $ 3,597,293 $ 3,351,916
Mar-00 $ 3,476,654 $ 3,644,777 $ 3,350,911
Apr-00 $ 3,451,970 $ 3,634,207 $ 3,303,663
May-00 $ 3,424,699 $ 3,632,390 $ 3,262,367
Jun-00 $ 3,502,097 $ 3,707,944 $ 3,345,557
Jul-00 $ 3,535,017 $ 3,741,686 $ 3,356,263
Aug-00 $ 3,586,982 $ 3,795,941 $ 3,383,784
Sep-00 $ 3,592,362 $ 3,819,855 $ 3,353,669
Oct-00 $ 3,594,518 $ 3,845,066 $ 3,283,242
Nov-00 $ 3,607,817 $ 3,908,125 $ 3,244,499
Dec-00 $ 3,696,931 $ 3,980,816 $ 3,327,234
Jan-01 $ 3,804,511 $ 4,045,704 $ 3,442,024
Feb-01 $ 3,810,979 $ 4,080,901 $ 3,449,596
Mar-01 $ 3,786,970 $ 4,101,306 $ 3,390,263
Apr-01 $ 3,761,976 $ 4,084,080 $ 3,361,107
May-01 $ 3,793,952 $ 4,108,585 $ 3,390,685
Jun-01 $ 3,776,121 $ 4,124,198 $ 3,359,490
Jul-01 $ 3,796,890 $ 4,216,580 $ 3,392,749
Aug-01 $ 3,850,426 $ 4,265,070 $ 3,437,873
Sep-01 $ 3,722,977 $ 4,314,545 $ 3,331,299
Oct-01 $ 3,804,882 $ 4,404,719 $ 3,412,916
Nov-01 $ 3,869,565 $ 4,343,934 $ 3,445,680
Dec-01 $ 3,844,413 $ 4,316,133 $ 3,439,133
Jan-02 $ 3,867,095 $ 4,351,093 $ 3,457,704
Feb-02 $ 3,870,962 $ 4,393,299 $ 3,469,806
Mar-02 $ 3,862,059 $ 4,320,370 $ 3,472,929
Apr-02 $ 3,899,135 $ 4,404,185 $ 3,527,107
May-02 $ 3,901,084 $ 4,441,621 $ 3,537,335
Jun-02 $ 3,839,057 $ 4,480,263 $ 3,469,418
Jul-02 $ 3,799,899 $ 4,534,474 $ 3,424,663
Aug-02 $ 3,877,416 $ 4,611,107 $ 3,488,704
Sep-02 $ 3,878,580 $ 4,685,807 $ 3,494,635
Oct-02 $ 3,902,627 $ 4,664,252 $ 3,505,818
Nov-02 $ 3,975,216 $ 4,662,853 $ 3,589,256
Dec-02 $ 4,030,074 $ 4,759,374 $ 3,662,477
Jan-03 $ 4,053,448 $ 4,763,657 $ 3,709,723
Feb-03 $ 4,107,764 $ 4,829,396 $ 3,769,821
Mar-03 $ 4,141,448 $ 4,825,532 $ 3,808,650
Apr-03 $ 4,238,772 $ 4,865,584 $ 3,934,716
May-03 $ 4,294,300 $ 4,956,084 $ 4,023,247
Jun-03 $ 4,301,600 $ 4,946,172 $ 4,053,421
Jul-03 $ 4,178,575 $ 4,779,981 $ 3,956,950
Aug-03 $ 4,221,473 $ 4,811,528 $ 3,989,001
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 3/17/97.
Returns for the Institutional Shares prior to 9/10/01 (offering date of the
Institutional Shares) are calculated using the historical expenses of the J.P.
Morgan Institutional Global Strategic Income Fund, which are similar to the
expenses of the Institutional Shares.
Returns for the Select Shares prior to 9/10/01 (offering date of the Select
Shares) are calculated using the historical expenses of the J.P. Morgan Global
Strategic Income Fund, which are similar to the expenses of the Select Shares.
Returns for the Class A and B Shares prior to 9/10/01 (offering date of the
Class A and B Shares) are calculated using the historical expenses of the J.P.
Morgan Global Strategic Income Fund, which are lower than the expenses of the
Class A and B Shares.
The graph illustrates comparative performance for $3,000,000 invested in
Institutional Shares of the JPMorgan Global Strategic Income Fund, Lehman
Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from March 17,
1997 to August 31, 2003. The performance of the Fund assumes reinvestment of all
dividends and capital gains and does not include a sales charge. The performance
of the indices reflects an initial investment at the end of the month following
the Fund's inception. The performance of the indices does not include a sales
charge and has been adjusted to reflect reinvestment of all dividends and
capital gains of the securities included in the benchmark. The Lehman Aggregate
Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed
Securities Index and includes U.S. treasury issues, agency issues, corporate
bond issues and mortgage-backed securities. The Lipper Multi-Sector Income Funds
Index represents the total returns of the funds in the indicated category, as
defined by Lipper, Inc. Investors cannot invest directly in an index.
Institutional Shares have a $3,000,000 minimum initial deposit and carry no
sales charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
11
<Page>
JPMorgan Short Term Bond Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 9/13/1993
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 937
Primary Benchmark MERRILL LYNCH
1-3 YEAR
TREASURY INDEX
Average Credit Quality AA
Duration 1.8 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Short Term Bond Fund, which seeks to provide high total return
consistent with low volatility of principal, returned 2.44% (Institutional
Shares) for the one-year period ended August 31, 2003. This compares to the
2.54% return of its benchmark index, the Merrill Lynch 1-3 Year Treasury
Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: Most of the underperformance during the period was due to the confluence of
an extremely rapid rise in interest rates, the widening of mortgage spreads
and an increase in implied volatility (indicating a more bearish market) in
mid-June and July. Overall, our corporate sector allocation was a positive
for performance. However, the contribution from our duration positioning and
large mortgage allocation was negative. We took a longer duration position
than that of the benchmark because we believed the short end of the yield
curve would remain anchored and that the potential for a backup in the
longer-term maturities was limited. Unfortunately, interest rates rose
sharply at the end of the period and mortgage spreads widened. An additional
detractor was our yield curve position, which did not benefit performance
when the curve steepened. Toward the end of the period, we lowered the
volatility of the Fund by reducing our allocation to mortgages.
Q: HOW WAS THE FUND MANAGED?
A: We tactically traded our duration during the period, maintaining a slightly
longer duration than the benchmark because we expected the Fed to ease rates
and keep them low for the foreseeable future. To enhance yield and reduce
interest rate volatility, we purchased agencies, including callable agencies.
However, in January and February, we reduced our agency holdings, purchasing
sovereign debt and asset-backed securities at higher yields. We reduced our
exposure to the utilities sector and continued to add selectively to our
positions in broker-dealer and finance paper. We increased our allocation to
mortgage-backed securities because of their higher yields and because we
thought they would perform well in a low interest rate environment.
12
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
CLASS A SHARES
Without Sales Charge 2.08% 5.51% 5.01% 5.15%
With Sales Charge* 0.58% 4.96% 4.69% 4.99%
INSTITUTIONAL SHARES 2.44% 5.91% 5.38% 5.44%
SELECT SHARES 2.28% 5.67% 5.10% 5.19%
</Table>
* Sales Charge for Class A Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (8/31/93 TO 8/31/03)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND LIPPER SHORT-TERM INVESTMENT
(INSTITUTIONAL SHARES) MERRILL LYNCH 1-3 YEAR TREASURY INDEX GRADE DEBT FUNDS INDEX
Aug-93 $ 3,000,000 $ 3,000,000 $ 3,000,000
Sep-93 $ 3,006,300 $ 3,009,600 $ 3,009,900
Oct-93 $ 3,006,300 $ 3,015,619 $ 3,024,950
Nov-93 $ 3,007,202 $ 3,016,524 $ 3,026,462
Dec-93 $ 3,017,426 $ 3,027,685 $ 3,046,134
Jan-94 $ 3,036,134 $ 3,047,062 $ 3,066,238
Feb-94 $ 3,022,168 $ 3,027,561 $ 3,049,068
Mar-94 $ 3,003,431 $ 3,012,423 $ 3,025,895
Apr-94 $ 2,990,216 $ 3,001,880 $ 3,014,094
May-94 $ 2,992,907 $ 3,006,082 $ 3,017,409
Jun-94 $ 3,002,783 $ 3,015,101 $ 3,019,823
Jul-94 $ 3,022,902 $ 3,041,030 $ 3,037,338
Aug-94 $ 3,034,389 $ 3,051,674 $ 3,053,436
Sep-94 $ 3,027,107 $ 3,044,655 $ 3,049,161
Oct-94 $ 3,032,858 $ 3,051,353 $ 3,054,040
Nov-94 $ 3,022,546 $ 3,037,622 $ 3,048,543
Dec-94 $ 3,028,591 $ 3,044,609 $ 3,041,226
Jan-95 $ 3,063,723 $ 3,086,929 $ 3,072,247
Feb-95 $ 3,104,777 $ 3,129,220 $ 3,108,499
Mar-95 $ 3,124,337 $ 3,146,744 $ 3,125,596
Apr-95 $ 3,153,706 $ 3,174,750 $ 3,152,476
May-95 $ 3,212,680 $ 3,230,308 $ 3,210,166
Jun-95 $ 3,229,065 $ 3,247,751 $ 3,230,069
Jul-95 $ 3,235,523 $ 3,261,067 $ 3,240,405
Aug-95 $ 3,258,172 $ 3,280,634 $ 3,262,116
Sep-95 $ 3,277,395 $ 3,296,709 $ 3,277,774
Oct-95 $ 3,300,009 $ 3,324,401 $ 3,308,585
Nov-95 $ 3,329,379 $ 3,353,656 $ 3,336,378
Dec-95 $ 3,355,681 $ 3,379,479 $ 3,359,399
Jan-96 $ 3,384,540 $ 3,408,204 $ 3,389,633
Feb-96 $ 3,361,864 $ 3,393,890 $ 3,377,091
Mar-96 $ 3,367,242 $ 3,390,835 $ 3,362,232
Apr-96 $ 3,368,926 $ 3,393,548 $ 3,364,586
May-96 $ 3,380,380 $ 3,400,675 $ 3,371,315
Jun-96 $ 3,403,367 $ 3,425,159 $ 3,395,588
Jul-96 $ 3,412,556 $ 3,438,518 $ 3,409,510
Aug-96 $ 3,425,524 $ 3,450,209 $ 3,421,444
Sep-96 $ 3,456,354 $ 3,481,605 $ 3,454,290
Oct-96 $ 3,498,175 $ 3,520,948 $ 3,491,250
Nov-96 $ 3,525,811 $ 3,548,059 $ 3,520,228
Dec-96 $ 3,526,869 $ 3,548,059 $ 3,521,636
Jan-97 $ 3,544,856 $ 3,564,735 $ 3,539,596
Feb-97 $ 3,555,490 $ 3,572,934 $ 3,551,631
Mar-97 $ 3,555,846 $ 3,571,504 $ 3,548,079
Apr-97 $ 3,581,092 $ 3,600,791 $ 3,576,464
May-97 $ 3,606,518 $ 3,625,276 $ 3,600,426
Jun-97 $ 3,628,879 $ 3,650,291 $ 3,625,629
Jul-97 $ 3,666,619 $ 3,690,444 $ 3,666,961
Aug-97 $ 3,670,652 $ 3,693,765 $ 3,669,528
Sep-97 $ 3,701,119 $ 3,721,838 $ 3,698,151
Oct-97 $ 3,716,663 $ 3,749,379 $ 3,720,709
Nov-97 $ 3,724,840 $ 3,758,378 $ 3,730,011
Dec-97 $ 3,751,659 $ 3,783,935 $ 3,752,391
Jan-98 $ 3,793,677 $ 3,820,639 $ 3,785,037
Feb-98 $ 3,797,471 $ 3,824,078 $ 3,790,336
Mar-98 $ 3,812,661 $ 3,839,756 $ 3,805,876
Apr-98 $ 3,832,106 $ 3,857,803 $ 3,823,764
May-98 $ 3,854,715 $ 3,878,250 $ 3,844,412
Jun-98 $ 3,869,748 $ 3,898,416 $ 3,861,712
Jul-98 $ 3,892,967 $ 3,916,739 $ 3,878,704
Aug-98 $ 3,920,218 $ 3,966,090 $ 3,905,079
Sep-98 $ 3,989,997 $ 4,018,442 $ 3,946,473
Oct-98 $ 3,991,593 $ 4,038,133 $ 3,941,342
Nov-98 $ 3,996,783 $ 4,034,498 $ 3,951,590
Dec-98 $ 4,015,967 $ 4,048,619 $ 3,968,582
Jan-99 $ 4,038,457 $ 4,063,194 $ 3,988,424
Feb-99 $ 4,020,283 $ 4,044,503 $ 3,975,263
Mar-99 $ 4,051,642 $ 4,072,410 $ 4,006,270
Apr-99 $ 4,066,228 $ 4,085,442 $ 4,020,692
May-99 $ 4,051,996 $ 4,082,991 $ 4,015,465
Jun-99 $ 4,045,513 $ 4,095,648 $ 4,023,095
Jul-99 $ 4,051,581 $ 4,108,754 $ 4,027,520
Aug-99 $ 4,066,167 $ 4,120,670 $ 4,035,575
Sep-99 $ 4,097,069 $ 4,147,454 $ 4,062,210
Oct-99 $ 4,112,229 $ 4,158,652 $ 4,071,147
Nov-99 $ 4,132,378 $ 4,166,554 $ 4,084,582
Dec-99 $ 4,144,776 $ 4,172,387 $ 4,093,159
Jan-00 $ 4,148,506 $ 4,170,718 $ 4,094,797
Feb-00 $ 4,169,248 $ 4,198,662 $ 4,121,413
Mar-00 $ 4,179,672 $ 4,224,693 $ 4,142,844
Apr-00 $ 4,200,152 $ 4,235,678 $ 4,143,673
May-00 $ 4,218,213 $ 4,253,044 $ 4,158,175
Jun-00 $ 4,240,569 $ 4,297,275 $ 4,204,331
Jul-00 $ 4,268,133 $ 4,324,348 $ 4,230,398
Aug-00 $ 4,286,913 $ 4,356,348 $ 4,261,280
Sep-00 $ 4,322,923 $ 4,387,714 $ 4,297,501
Oct-00 $ 4,337,621 $ 4,411,408 $ 4,310,393
Nov-00 $ 4,392,708 $ 4,453,316 $ 4,349,618
Dec-00 $ 4,444,103 $ 4,506,311 $ 4,395,724
Jan-01 $ 4,481,878 $ 4,562,640 $ 4,458,143
Feb-01 $ 4,517,285 $ 4,592,297 $ 4,489,350
Mar-01 $ 4,549,358 $ 4,630,413 $ 4,521,674
Apr-01 $ 4,547,993 $ 4,642,915 $ 4,532,526
May-01 $ 4,574,371 $ 4,668,915 $ 4,560,627
Jun-01 $ 4,594,956 $ 4,684,790 $ 4,579,326
Jul-01 $ 4,652,393 $ 4,737,259 $ 4,635,651
Aug-01 $ 4,685,890 $ 4,764,735 $ 4,665,783
Sep-01 $ 4,751,492 $ 4,843,353 $ 4,710,108
Oct-01 $ 4,801,858 $ 4,888,881 $ 4,745,905
Nov-01 $ 4,778,329 $ 4,878,125 $ 4,722,650
Dec-01 $ 4,782,152 $ 4,880,077 $ 4,717,927
Jan-02 $ 4,802,237 $ 4,889,837 $ 4,731,609
Feb-02 $ 4,821,926 $ 4,913,308 $ 4,745,331
Mar-02 $ 4,792,994 $ 4,879,897 $ 4,723,977
Apr-02 $ 4,855,303 $ 4,934,552 $ 4,761,769
May-02 $ 4,873,268 $ 4,954,291 $ 4,788,435
Jun-02 $ 4,901,046 $ 4,995,907 $ 4,793,702
Jul-02 $ 4,953,977 $ 5,056,857 $ 4,808,083
Aug-02 $ 4,972,307 $ 5,074,050 $ 4,838,374
Sep-02 $ 5,015,068 $ 5,116,165 $ 4,869,824
Oct-02 $ 5,032,120 $ 5,127,932 $ 4,872,745
Nov-02 $ 5,015,514 $ 5,112,548 $ 4,874,695
Dec-02 $ 5,048,616 $ 5,160,606 $ 4,923,441
Jan-03 $ 5,069,820 $ 5,160,090 $ 4,931,319
Feb-03 $ 5,095,676 $ 5,181,762 $ 4,960,907
Mar-03 $ 5,103,829 $ 5,191,089 $ 4,968,348
Apr-03 $ 5,121,693 $ 5,200,952 $ 4,989,712
May-03 $ 5,145,253 $ 5,220,716 $ 5,018,153
Jun-03 $ 5,146,796 $ 5,228,547 $ 5,027,186
Jul-03 $ 5,081,432 $ 5,200,313 $ 4,982,947
Aug-03 $ 5,094,877 $ 5,203,953 $ 4,987,432
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 9/13/93.
Returns for the Institutional Shares prior to 9/10/01 (offering date of the
Institutional Shares) are calculated using the historical expenses of the J.P.
Morgan Institutional Short Term Bond Fund, which are similar to the expenses of
the Institutional Shares. The returns presented prior to 9/13/93 are based on
the historical expenses of the J.P. Morgan Short Term Bond Fund, which are
higher than the expenses of the Institutional Shares.
Returns for the Select Shares prior to 9/10/01 (offering date of the Select
Shares) are calculated using the historical expenses of the J.P. Morgan Short
Term Bond Fund, which are similar to the expenses of the Select Shares.
Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A
Shares) are calculated using the historical expenses of the J.P. Morgan Short
Term Bond Fund, which are lower than the expenses of the Class A Shares.
The graph illustrates comparative performance for $3,000,000 invested in
Institutional Shares of the JPMorgan Short Term Bond Fund, Merrill Lynch 1-3
Year Treasury Index, and Lipper Short-Term Investment Grade Debt Funds Index
from August 31, 1993 to August 31, 2003. The performance of the Fund assumes
reinvestment of all dividends and capital gains and does not include a sales
charge. The performance of the indices reflects an initial investment at the end
of the month following the Fund's inception. The performance of the indices does
not include a sales charge and has been adjusted to reflect reinvestment of all
dividends and capital gains of the securities included in the benchmark. The
Merrill Lynch 1-3 Year Treasury Index is an unmanaged index which measures
short-term bond performance. The Lipper Short-Term Investment Grade Debt Funds
Index represents the total returns of the funds in the indicated category, as
defined by Lipper, Inc. Investors cannot invest directly in an index.
Institutional Shares have a $3,000,000 minimum initial deposit and carry no
sales charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
13
<Page>
JPMorgan Short Term Bond Fund II
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 11/30/1990
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $1,554
Primary Benchmark LEHMAN 1-3 YEAR
U.S. GOV'T
BOND INDEX
Average Credit Quality AA+
Duration 1.8 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Short Term Bond Fund II, which seeks a high level of income,
consistent with preservation of capital, returned 2.15% (Select Shares) for
the one-year period ended August 31, 2003. This compares to the 2.60% return
of its benchmark index, the Lehman 1-3 Year U.S. Gov't Bond Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: Most of the underperformance during the period was due to the confluence of
an extremely rapid rise in interest rates, the widening of mortgage spreads
and an increase in implied volatility (indicating a more bearish market) in
mid-June and July. Overall, our corporate sector allocation was a positive
for performance. However, the contribution from our duration positioning and
large mortgage allocation was negative. We took a longer duration position
than that of the benchmark because we believed the short end of the yield
curve would remain anchored and that the potential for a backup in the
longer-term maturities was limited. Unfortunately, interest rates rose
sharply at the end of the period and mortgage spreads widened. An additional
detractor was our yield curve position, which did not benefit performance
when the curve steepened. Toward the end of the period, we lowered the
volatility of the Fund by reducing our allocation to mortgages.
Q: HOW WAS THE FUND MANAGED?
A: We tactically traded our duration during the period, maintaining a slightly
longer duration than the benchmark because we expected the Fed to ease rates
and keep them low for the foreseeable future. To enhance yield and reduce
interest rate volatility, we purchased agencies, including callable agencies.
However, in January and February, we reduced our agency holdings, purchasing
sovereign debt and asset-backed securities at higher yields. We reduced our
exposure to the utilities sector and continued to add selectively to our
positions in broker-dealer and finance paper. We increased our allocation to
mortgage-backed securities because of their higher yields and because we
thought they would perform well in a low interest rate environment.
14
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-------------------------------------------------------------------
CLASS A SHARES
Without Sales Charge 1.88% 5.39% 4.76% 5.01%
With Sales Charge* 0.33% 4.86% 4.45% 4.86%
CLASS M SHARES
Without Sales Charge 1.64% 5.15% 4.55% 4.91%
With Sales Charge** 0.09% 4.62% 4.24% 4.75%
SELECT SHARES 2.15% 5.65% 5.07% 5.27%
</Table>
* Sales Charge for Class A Shares is 1.50%.
** Sales Charge for Class M Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (8/31/93 TO 8/31/03)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND II LEHMAN 1-3 YEAR LIPPER SHORT-TERM INVESTMENT
(SELECT SHARES) U.S. GOV'T BOND INDEX GRADE DEBT FUNDS INDEX
Aug-93 $ 1,000,000 $ 1,000,000 $ 1,000,000
Sep-93 $ 1,003,200 $ 1,003,200 $ 1,003,300
Oct-93 $ 1,005,407 $ 1,005,407 $ 1,008,317
Nov-93 $ 1,007,317 $ 1,005,608 $ 1,008,821
Dec-93 $ 1,010,037 $ 1,009,631 $ 1,015,378
Jan-94 $ 1,014,683 $ 1,015,991 $ 1,022,079
Feb-94 $ 1,012,349 $ 1,009,794 $ 1,016,356
Mar-94 $ 1,011,033 $ 1,004,644 $ 1,008,632
Apr-94 $ 1,009,820 $ 1,000,826 $ 1,004,698
May-94 $ 1,012,648 $ 1,002,127 $ 1,005,803
Jun-94 $ 1,016,597 $ 1,004,632 $ 1,006,608
Jul-94 $ 1,021,782 $ 1,013,674 $ 1,012,446
Aug-94 $ 1,024,949 $ 1,017,019 $ 1,017,812
Sep-94 $ 1,026,077 $ 1,014,680 $ 1,016,387
Oct-94 $ 1,029,257 $ 1,017,014 $ 1,018,013
Nov-94 $ 1,029,360 $ 1,012,742 $ 1,016,181
Dec-94 $ 1,033,992 $ 1,014,667 $ 1,013,742
Jan-95 $ 1,042,678 $ 1,028,466 $ 1,024,082
Feb-95 $ 1,052,375 $ 1,042,453 $ 1,036,166
Mar-95 $ 1,058,268 $ 1,048,291 $ 1,041,865
Apr-95 $ 1,064,195 $ 1,057,621 $ 1,050,825
May-95 $ 1,076,646 $ 1,075,706 $ 1,070,055
Jun-95 $ 1,082,675 $ 1,081,515 $ 1,076,690
Jul-95 $ 1,087,763 $ 1,085,841 $ 1,080,135
Aug-95 $ 1,092,876 $ 1,092,356 $ 1,087,372
Sep-95 $ 1,097,903 $ 1,097,709 $ 1,092,591
Oct-95 $ 1,105,259 $ 1,106,820 $ 1,102,862
Nov-95 $ 1,112,443 $ 1,116,228 $ 1,112,126
Dec-95 $ 1,119,007 $ 1,124,711 $ 1,119,800
Jan-96 $ 1,126,728 $ 1,134,271 $ 1,129,878
Feb-96 $ 1,126,277 $ 1,129,847 $ 1,125,697
Mar-96 $ 1,128,980 $ 1,128,943 $ 1,120,744
Apr-96 $ 1,131,803 $ 1,130,072 $ 1,121,529
May-96 $ 1,134,859 $ 1,132,558 $ 1,123,772
Jun-96 $ 1,141,781 $ 1,140,826 $ 1,131,863
Jul-96 $ 1,146,919 $ 1,145,275 $ 1,136,503
Aug-96 $ 1,150,245 $ 1,149,513 $ 1,140,481
Sep-96 $ 1,160,367 $ 1,159,973 $ 1,151,430
Oct-96 $ 1,172,667 $ 1,173,081 $ 1,163,750
Nov-96 $ 1,181,931 $ 1,181,762 $ 1,173,409
Dec-96 $ 1,181,931 $ 1,181,998 $ 1,173,879
Jan-97 $ 1,186,541 $ 1,187,672 $ 1,179,865
Feb-97 $ 1,189,626 $ 1,190,522 $ 1,183,877
Mar-97 $ 1,188,912 $ 1,189,570 $ 1,182,693
Apr-97 $ 1,199,850 $ 1,199,324 $ 1,192,155
May-97 $ 1,206,569 $ 1,207,720 $ 1,200,142
Jun-97 $ 1,215,619 $ 1,216,053 $ 1,208,543
Jul-97 $ 1,229,355 $ 1,229,308 $ 1,222,320
Aug-97 $ 1,228,372 $ 1,230,537 $ 1,223,176
Sep-97 $ 1,238,321 $ 1,239,889 $ 1,232,717
Oct-97 $ 1,245,627 $ 1,249,064 $ 1,240,236
Nov-97 $ 1,246,998 $ 1,252,187 $ 1,243,337
Dec-97 $ 1,254,355 $ 1,260,577 $ 1,250,797
Jan-98 $ 1,266,648 $ 1,272,552 $ 1,261,679
Feb-98 $ 1,266,901 $ 1,273,698 $ 1,263,445
Mar-98 $ 1,270,575 $ 1,278,538 $ 1,268,625
Apr-98 $ 1,276,547 $ 1,284,675 $ 1,274,588
May-98 $ 1,283,695 $ 1,291,483 $ 1,281,471
Jun-98 $ 1,290,627 $ 1,298,070 $ 1,287,237
Jul-98 $ 1,296,564 $ 1,304,171 $ 1,292,901
Aug-98 $ 1,304,992 $ 1,320,082 $ 1,301,693
Sep-98 $ 1,323,392 $ 1,337,903 $ 1,315,491
Oct-98 $ 1,320,878 $ 1,344,459 $ 1,313,781
Nov-98 $ 1,320,481 $ 1,343,114 $ 1,317,197
Dec-98 $ 1,324,575 $ 1,348,218 $ 1,322,861
Jan-99 $ 1,331,065 $ 1,353,341 $ 1,329,475
Feb-99 $ 1,326,540 $ 1,347,251 $ 1,325,088
Mar-99 $ 1,335,958 $ 1,356,412 $ 1,335,423
Apr-99 $ 1,339,966 $ 1,360,617 $ 1,340,231
May-99 $ 1,339,028 $ 1,359,665 $ 1,338,488
Jun-99 $ 1,340,501 $ 1,363,608 $ 1,341,032
Jul-99 $ 1,343,584 $ 1,367,835 $ 1,342,507
Aug-99 $ 1,345,465 $ 1,371,665 $ 1,345,192
Sep-99 $ 1,355,422 $ 1,380,581 $ 1,354,070
Oct-99 $ 1,360,166 $ 1,384,308 $ 1,357,049
Nov-99 $ 1,362,206 $ 1,386,939 $ 1,361,527
Dec-99 $ 1,365,748 $ 1,388,187 $ 1,364,386
Jan-00 $ 1,366,294 $ 1,387,909 $ 1,364,932
Feb-00 $ 1,374,082 $ 1,397,347 $ 1,373,804
Mar-00 $ 1,381,090 $ 1,405,731 $ 1,380,948
Apr-00 $ 1,376,670 $ 1,409,245 $ 1,381,224
May-00 $ 1,381,075 $ 1,414,460 $ 1,386,059
Jun-00 $ 1,396,682 $ 1,429,877 $ 1,401,444
Jul-00 $ 1,406,738 $ 1,439,028 $ 1,410,133
Aug-00 $ 1,417,007 $ 1,449,965 $ 1,420,427
Sep-00 $ 1,431,319 $ 1,461,275 $ 1,432,500
Oct-00 $ 1,435,899 $ 1,469,166 $ 1,436,798
Nov-00 $ 1,451,837 $ 1,483,417 $ 1,449,873
Dec-00 $ 1,468,534 $ 1,501,663 $ 1,465,241
Jan-01 $ 1,484,394 $ 1,521,485 $ 1,486,048
Feb-01 $ 1,495,081 $ 1,531,374 $ 1,496,450
Mar-01 $ 1,507,042 $ 1,543,778 $ 1,507,225
Apr-01 $ 1,508,549 $ 1,548,255 $ 1,510,842
May-01 $ 1,515,036 $ 1,556,771 $ 1,520,209
Jun-01 $ 1,520,338 $ 1,562,375 $ 1,526,442
Jul-01 $ 1,536,910 $ 1,580,655 $ 1,545,217
Aug-01 $ 1,547,054 $ 1,590,613 $ 1,555,261
Sep-01 $ 1,567,165 $ 1,617,176 $ 1,570,036
Oct-01 $ 1,583,777 $ 1,633,348 $ 1,581,968
Nov-01 $ 1,577,125 $ 1,628,775 $ 1,574,217
Dec-01 $ 1,575,075 $ 1,629,752 $ 1,572,642
Jan-02 $ 1,580,430 $ 1,633,663 $ 1,577,203
Feb-02 $ 1,588,807 $ 1,641,832 $ 1,581,777
Mar-02 $ 1,579,592 $ 1,630,010 $ 1,574,659
Apr-02 $ 1,599,021 $ 1,649,734 $ 1,587,256
May-02 $ 1,604,937 $ 1,656,167 $ 1,596,145
Jun-02 $ 1,613,283 $ 1,670,907 $ 1,597,901
Jul-02 $ 1,629,577 $ 1,691,125 $ 1,602,694
Aug-02 $ 1,636,095 $ 1,698,059 $ 1,612,791
Sep-02 $ 1,648,039 $ 1,711,813 $ 1,623,275
Oct-02 $ 1,653,642 $ 1,716,093 $ 1,624,248
Nov-02 $ 1,649,177 $ 1,711,288 $ 1,624,898
Dec-02 $ 1,660,392 $ 1,727,716 $ 1,641,147
Jan-03 $ 1,666,867 $ 1,728,062 $ 1,643,773
Feb-03 $ 1,673,034 $ 1,736,011 $ 1,653,636
Mar-03 $ 1,675,377 $ 1,739,483 $ 1,656,116
Apr-03 $ 1,680,905 $ 1,742,962 $ 1,663,237
May-03 $ 1,687,965 $ 1,750,108 $ 1,672,718
Jun-03 $ 1,690,160 $ 1,752,908 $ 1,675,729
Jul-03 $ 1,667,681 $ 1,741,514 $ 1,660,982
Aug-03 $ 1,670,807 $ 1,742,211 $ 1,662,477
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 11/30/90.
Returns for the Class A Shares prior to 5/6/96 (offering date of the Class A
Shares) are calculated using the historical expenses of the Select Shares, which
are lower than the expenses of the Class A Shares.
Returns for the Class M Shares prior to 7/1/99 (offering date of the Class M
Shares) are calculated using the historical expenses of the Class A Shares,
which are lower than the expenses of the Class M Shares.
The graph illustrates comparative performance for $1,000,000 invested in Select
Shares of the JPMorgan Short Term Bond Fund II, Lehman 1-3 Year U.S. Gov't Bond
Index, and Lipper Short-Term Investment Grade Debt Funds Index from August 31,
1993 to August 31, 2003. The performance of the Fund assumes reinvestments of
all dividends and capital gains and does not include a sales charge. The
performance of the indices does not include a sales charge and has been adjusted
to reflect reinvestment of all dividends and capital gains of the securities
included in the benchmark. The Lehman 1-3 Year U.S. Gov't Bond Index is composed
of bonds covered by the U.S. Government Bond Index with maturities of one to
three years. The Lipper Short-Term Investment Grade Debt Funds Index represents
the total returns of the funds in the indicated category, as defined by Lipper,
Inc. Investors cannot invest directly in an index.
Select Shares have a $1,000,000 minimum initial deposit and carry no sales
charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
15
<Page>
JPMorgan Strategic Income Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 11/30/1998
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $22
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality BBB+
Duration 4.5 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Strategic Income Fund, which seeks to provide a high level of
income, had a total return of 9.77% (Class A Shares) for the one-year period
ended August 31, 2003. This compares to the 4.35% return of the Lehman
Aggregate Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our strong performance was largely the result of our strategic overweights to
high-yield and emerging markets debt at a time when investor risk aversion
decreased. Our underweight to investment-grade corporates detracted, but the
selection of longer duration securities was positive. Our positioning and
security selection in residential mortgages was positive, as was our
overweight to commercial mortgage-backed securities. The non-callable
mortgage market continues to be buoyed by a healthy supply of investor
capital. Our underweight to Treasury and Agency debt enhanced returns.
Detracting was our position in international non-dollar securities, which
underperformed the U.S. rally as the market priced in the easier U.S.
monetary policy.
Q: HOW WAS THE FUND MANAGED?
A: High-yield and emerging markets debt were our largest sector overweights,
although we reduced our risk exposure in the second quarter of 2003. We
remained overweight to non-callable mortgages. In investment-grade corporate
bonds, we continued to focus on bottom-up security selection. We reduced our
underweight position during the second quarter, adding longer maturities
because they benefit from spread compression. We actively managed coupon
selection within the residential mortgage-backed sector, focusing on 30-year
current coupons (i.e., Fannie Mae 5% and 5.5%). Early in 2003, we increased
our hedged non-dollar position because we expected European economic growth
to lag the United States. Consistent with our strategy, we maintained a
significant underweight to Treasury and agency debt.
16
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS (11/30/98)
---------------------------------------------
CLASS A SHARES
Without Sales Charge 9.77% 4.58% 4.47%
With Sales Charge* 4.87% 2.98% 3.47%
CLASS B SHARES
Without CDSC 9.11% 4.07% 4.04%
With CDSC** 4.11% 3.18% 3.71%
CLASS C SHARES
Without CDSC 9.10% 4.04% 4.04%
With CDSC*** 8.10% 4.04% 4.04%
CLASS M SHARES
Without Sales Charge 9.44% 4.37% 4.22%
With Sales Charge**** 6.21% 3.31% 3.55%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the period since
inception.
*** Assumes 1% CDSC for the one year period and 0% thereafter.
**** Sales Charge on Class M Shares is 3.0%.
[CHART]
LIFE OF FUND PERFORMANCE (11/30/98 TO 8/31/03)
<Table>
<Caption>
JPMORGAN STRATEGIC INCOME FUND LIPPER MULTI-SECTOR
(CLASS A SHARES) LEHMAN AGGREGATE BOND INDEX INCOME FUNDS INDEX
Nov-98 $ 9,550 $ 10,000 $ 10,000
Dec-98 $ 9,471 $ 10,030 $ 9,977
Jan-99 $ 9,445 $ 10,101 $ 10,030
Feb-99 $ 9,430 $ 9,924 $ 9,895
Mar-99 $ 9,594 $ 9,979 $ 10,019
Apr-99 $ 9,776 $ 10,011 $ 10,196
May-99 $ 9,621 $ 9,923 $ 9,982
Jun-99 $ 9,701 $ 9,891 $ 9,971
Jul-99 $ 9,716 $ 9,850 $ 9,949
Aug-99 $ 9,719 $ 9,845 $ 9,877
Sep-99 $ 9,792 $ 9,959 $ 9,918
Oct-99 $ 9,858 $ 9,996 $ 9,931
Nov-99 $ 9,937 $ 9,995 $ 9,997
Dec-99 $ 10,075 $ 9,947 $ 10,083
Jan-00 $ 10,027 $ 9,914 $ 9,988
Feb-00 $ 10,190 $ 10,034 $ 10,120
Mar-00 $ 10,155 $ 10,166 $ 10,117
Apr-00 $ 10,075 $ 10,137 $ 9,974
May-00 $ 9,959 $ 10,132 $ 9,849
Jun-00 $ 10,147 $ 10,342 $ 10,101
Jul-00 $ 10,198 $ 10,437 $ 10,133
Aug-00 $ 10,277 $ 10,588 $ 10,216
Sep-00 $ 10,274 $ 10,655 $ 10,125
Oct-00 $ 10,111 $ 10,725 $ 9,913
Nov-00 $ 9,981 $ 10,901 $ 9,796
Dec-00 $ 10,214 $ 11,104 $ 10,045
Jan-01 $ 10,507 $ 11,285 $ 10,392
Feb-01 $ 10,531 $ 11,383 $ 10,415
Mar-01 $ 10,465 $ 11,440 $ 10,236
Apr-01 $ 10,319 $ 11,392 $ 10,148
May-01 $ 10,451 $ 11,460 $ 10,237
Jun-01 $ 10,432 $ 11,504 $ 10,143
Jul-01 $ 10,512 $ 11,761 $ 10,243
Aug-01 $ 10,642 $ 11,896 $ 10,379
Sep-01 $ 10,355 $ 12,034 $ 10,058
Oct-01 $ 10,589 $ 12,286 $ 10,304
Nov-01 $ 10,686 $ 12,116 $ 10,403
Dec-01 $ 10,630 $ 12,039 $ 10,383
Jan-02 $ 10,680 $ 12,136 $ 10,439
Feb-02 $ 10,720 $ 12,254 $ 10,476
Mar-02 $ 10,698 $ 12,051 $ 10,485
Apr-02 $ 10,815 $ 12,284 $ 10,649
May-02 $ 10,816 $ 12,389 $ 10,680
Jun-02 $ 10,594 $ 12,497 $ 10,475
Jul-02 $ 10,479 $ 12,648 $ 10,339
Aug-02 $ 10,706 $ 12,862 $ 10,533
Sep-02 $ 10,702 $ 13,070 $ 10,551
Oct-02 $ 10,754 $ 13,010 $ 10,584
Nov-02 $ 11,008 $ 13,006 $ 10,836
Dec-02 $ 11,153 $ 13,275 $ 11,057
Jan-03 $ 11,234 $ 13,287 $ 11,200
Feb-03 $ 11,373 $ 13,471 $ 11,382
Mar-03 $ 11,439 $ 13,460 $ 11,499
Apr-03 $ 11,736 $ 13,571 $ 11,879
May-03 $ 11,876 $ 13,824 $ 12,147
Jun-03 $ 11,941 $ 13,796 $ 12,238
Jul-03 $ 11,611 $ 13,333 $ 11,947
Aug-03 $ 11,755 $ 13,421 $ 12,043
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 11/30/98.
All Share Classes, except Class M Shares, were introduced on 11/30/98.
Returns for the Class M Shares prior to 10/28/99 (offering date of the Class M
Shares) are calculated using the historical expenses of the Class B Shares,
which are higher than the expenses of the Class M Shares.
The graph illustrates comparative performance for $10,000 invested in Class A
Shares of the JPMorgan Strategic Income Fund, Lehman Aggregate Bond Index, and
Lipper Multi-Sector Income Funds Index from November 30, 1998 to August 31,
2003. The performance of the Fund assumes reinvestment of all dividends and
capital gains and includes a sales charge. The performance of the indices
reflects an initial investment at the end of the month following the Fund's
inception. The performance of the indices does not include a sales charge and
has been adjusted to reflect reinvestment of all dividends and capital gains of
the securities included in the benchmark. The Lehman Aggregate Bond Index is
composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities
Index and includes U.S. treasury issues, agency issues, corporate bond issues
and mortgage-backed securities. The Lipper Multi-Sector Income Funds Index
represents the total returns of the funds in the indicated category, as defined
by Lipper, Inc. Investors cannot invest directly in an index.
Class A Shares have a $2,500 minimum initial deposit and carry a 4.50% sales
charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
17
<Page>
JPMorgan U.S. Treasury Income Fund
AS OF AUGUST 31, 2003 (Unaudited)
FUND FACTS
<Table>
Fund Inception 9/8/1987
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2003
(In Millions) $ 135
Primary Benchmark LEHMAN U.S. GOV'T
BOND INDEX
Average Credit Quality GOVERNMENT
Duration 5.5 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan U.S. Treasury Income Fund, which seeks to provide investors with
monthly dividends while still protecting the value of their investment,
returned 2.00% (Class A Shares, without sales charges) for the one-year
period ending August 31, 2003. This compares to the 2.98% return of its
benchmark index, the Lehman U.S. Gov't Bond Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: Our longer duration positioning was a modest positive for performance through
January, but detracted over the summer months. Our residential mortgage
holdings were strong through the spring but impaired returns during July.
Elsewhere, the Fund's Agency underweight during the reporting was a detractor
from performance.
Q: HOW WAS THE FUND MANAGED?
A: In general, we maintained a long duration position, focusing on the shortest
part of the yield curve, to hedge against unexpected geopolitical shocks and
to benefit from mispricings and an accommodative Fed policy. Throughout the
period, we overweighted prepayment-sensitive Ginnie Mae mortgage-backed
securities because of their attractive yields. We actively managed coupon
selection, focusing on 30-year current coupon mortgages (i.e., 5% and 5.5%).
As mortgage prepayments slowed in July and August, we allowed our duration to
extend. Consistent with the Fund's strategy, we did not hold Agency
debentures throughout the period. Even though they are included in the index,
we do not hold Agency debentures (debt of Freddie Mac or Fannie Mae) because
they are not "full faith and credit" obligations of the U.S. Government.
18
<Page>
ANNUAL REPORT AUGUST 31 2003
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------------------------------
CLASS A SHARES
Without Sales Charge 2.00% 7.07% 5.49% 5.50%
With Sales Charge* (2.61%) 5.43% 4.53% 5.02%
CLASS B SHARES
Without CDSC 1.19% 6.17% 4.55% 4.83%
With CDSC** (3.72%) 5.27% 4.21% 4.83%
SELECT SHARES 2.29% 7.28% 5.61% 5.56%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and 0%
for the ten year period.
[CHART]
TEN-YEAR PERFORMANCE (8/31/93 TO 8/31/03)
<Table>
JPMORGAN U.S. TREASURY LIPPER GENERAL U.S.
INCOME FUND (CLASS A SHARES) LEHMAN U.S. GOV'T BOND INDEX TREASURY FUNDS AVERAGE
Aug-93 $ 9,550 $ 10,000 $ 10,000
Sep-93 $ 9,588 $ 10,038 $ 10,042
Oct-93 $ 9,611 $ 10,076 $ 10,076
Nov-93 $ 9,508 $ 9,965 $ 9,929
Dec-93 $ 9,529 $ 10,004 $ 9,961
Jan-94 $ 9,669 $ 10,141 $ 10,108
Feb-94 $ 9,443 $ 9,926 $ 9,857
Mar-94 $ 9,245 $ 9,703 $ 9,624
Apr-94 $ 9,155 $ 9,626 $ 9,535
May-94 $ 9,133 $ 9,614 $ 9,519
Jun-94 $ 9,102 $ 9,592 $ 9,474
Jul-94 $ 9,272 $ 9,768 $ 9,653
Aug-94 $ 9,270 $ 9,770 $ 9,638
Sep-94 $ 9,099 $ 9,632 $ 9,446
Oct-94 $ 9,074 $ 9,626 $ 9,422
Nov-94 $ 9,048 $ 9,608 $ 9,419
Dec-94 $ 9,103 $ 9,667 $ 9,505
Jan-95 $ 9,278 $ 9,847 $ 9,688
Feb-95 $ 9,476 $ 10,058 $ 9,906
Mar-95 $ 9,529 $ 10,122 $ 9,959
Apr-95 $ 9,641 $ 10,254 $ 10,090
May-95 $ 10,011 $ 10,668 $ 10,592
Jun-95 $ 10,088 $ 10,750 $ 10,680
Jul-95 $ 10,049 $ 10,710 $ 10,599
Aug-95 $ 10,153 $ 10,835 $ 10,741
Sep-95 $ 10,247 $ 10,939 $ 10,864
Oct-95 $ 10,398 $ 11,106 $ 11,059
Nov-95 $ 10,546 $ 11,279 $ 11,244
Dec-95 $ 10,698 $ 11,439 $ 11,435
Jan-96 $ 10,759 $ 11,509 $ 11,473
Feb-96 $ 10,511 $ 11,274 $ 11,153
Mar-96 $ 10,405 $ 11,180 $ 11,028
Apr-96 $ 10,316 $ 11,109 $ 10,916
May-96 $ 10,276 $ 11,090 $ 10,884
Jun-96 $ 10,393 $ 11,233 $ 11,044
Jul-96 $ 10,427 $ 11,261 $ 11,058
Aug-96 $ 10,375 $ 11,236 $ 10,976
Sep-96 $ 10,541 $ 11,423 $ 11,198
Oct-96 $ 10,768 $ 11,674 $ 11,513
Nov-96 $ 10,954 $ 11,877 $ 11,791
Dec-96 $ 10,833 $ 11,756 $ 11,595
Jan-97 $ 10,827 $ 11,769 $ 11,556
Feb-97 $ 10,826 $ 11,786 $ 11,549
Mar-97 $ 10,713 $ 11,661 $ 11,362
Apr-97 $ 10,856 $ 11,828 $ 11,551
May-97 $ 10,942 $ 11,930 $ 11,652
Jun-97 $ 11,058 $ 12,064 $ 11,811
Jul-97 $ 11,376 $ 12,406 $ 12,304
Aug-97 $ 11,232 $ 12,284 $ 12,061
Sep-97 $ 11,390 $ 12,468 $ 12,300
Oct-97 $ 11,559 $ 12,684 $ 12,589
Nov-97 $ 11,622 $ 12,748 $ 12,691
Dec-97 $ 11,737 $ 12,882 $ 12,866
Jan-98 $ 11,885 $ 13,075 $ 13,087
Feb-98 $ 11,833 $ 13,040 $ 13,006
Mar-98 $ 11,867 $ 13,077 $ 13,034
Apr-98 $ 11,890 $ 13,135 $ 13,068
May-98 $ 12,019 $ 13,271 $ 13,264
Jun-98 $ 12,159 $ 13,422 $ 13,470
Jul-98 $ 12,155 $ 13,442 $ 13,448
Aug-98 $ 12,484 $ 13,792 $ 13,935
Sep-98 $ 12,834 $ 14,164 $ 14,369
Oct-98 $ 12,783 $ 14,116 $ 14,239
Nov-98 $ 12,752 $ 14,120 $ 14,265
Dec-98 $ 12,767 $ 14,151 $ 14,275
Jan-99 $ 12,848 $ 14,233 $ 14,366
Feb-99 $ 12,476 $ 13,894 $ 13,858
Mar-99 $ 12,523 $ 13,949 $ 13,879
Apr-99 $ 12,556 $ 13,981 $ 13,913
May-99 $ 12,431 $ 13,858 $ 13,725
Jun-99 $ 12,404 $ 13,830 $ 13,636
Jul-99 $ 12,379 $ 13,809 $ 13,587
Aug-99 $ 12,376 $ 13,809 $ 13,553
Sep-99 $ 12,465 $ 13,921 $ 13,663
Oct-99 $ 12,477 $ 13,943 $ 13,646
Nov-99 $ 12,463 $ 13,924 $ 13,600
Dec-99 $ 12,392 $ 13,833 $ 13,450
Jan-00 $ 12,403 $ 13,853 $ 13,524
Feb-00 $ 12,599 $ 14,049 $ 13,787
Mar-00 $ 12,816 $ 14,297 $ 14,136
Apr-00 $ 12,771 $ 14,257 $ 14,064
May-00 $ 12,780 $ 14,265 $ 14,035
Jun-00 $ 12,993 $ 14,519 $ 14,313
Jul-00 $ 13,111 $ 14,660 $ 14,478
Aug-00 $ 13,291 $ 14,877 $ 14,733
Sep-00 $ 13,323 $ 14,919 $ 14,684
Oct-00 $ 13,431 $ 15,062 $ 14,857
Nov-00 $ 13,698 $ 15,359 $ 15,226
Dec-00 $ 13,956 $ 15,664 $ 15,553
Jan-01 $ 14,111 $ 15,822 $ 15,636
Feb-01 $ 14,245 $ 16,003 $ 15,844
Mar-01 $ 14,304 $ 16,059 $ 15,826
Apr-01 $ 14,094 $ 15,895 $ 15,506
May-01 $ 14,165 $ 15,947 $ 15,550
Jun-01 $ 14,204 $ 16,021 $ 15,639
Jul-01 $ 14,552 $ 16,405 $ 16,109
Aug-01 $ 14,706 $ 16,609 $ 16,341
Sep-01 $ 15,002 $ 16,898 $ 16,505
Oct-01 $ 15,404 $ 17,334 $ 17,124
Nov-01 $ 14,979 $ 16,945 $ 16,516
Dec-01 $ 14,787 $ 16,798 $ 16,286
Jan-02 $ 14,916 $ 16,907 $ 16,441
Feb-02 $ 15,058 $ 17,063 $ 16,592
Mar-02 $ 14,738 $ 16,692 $ 16,129
Apr-02 $ 15,067 $ 17,090 $ 16,581
May-02 $ 15,157 $ 17,192 $ 16,649
Jun-02 $ 15,327 $ 17,433 $ 16,877
Jul-02 $ 15,684 $ 17,816 $ 17,289
Aug-02 $ 15,989 $ 18,169 $ 17,787
Sep-02 $ 16,398 $ 18,594 $ 18,331
Oct-02 $ 16,245 $ 18,446 $ 17,990
Nov-02 $ 16,107 $ 18,287 $ 17,823
Dec-02 $ 16,463 $ 18,730 $ 18,331
Jan-03 $ 16,424 $ 18,683 $ 18,265
Feb-03 $ 16,682 $ 18,983 $ 18,643
Mar-03 $ 16,615 $ 18,928 $ 18,508
Apr-03 $ 16,685 $ 19,015 $ 18,608
May-03 $ 17,087 $ 19,510 $ 19,271
Jun-03 $ 16,998 $ 19,408 $ 19,092
Jul-03 $ 16,213 $ 18,607 $ 18,009
Aug-03 $ 16,312 $ 18,711 $ 18,169
</Table>
Source: Lipper Analytical Services, Inc. Past performance is no guarantee of the
future results. Investment returns and principal value will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost.
The Fund commenced operations on 9/8/87.
Returns for the Class B Shares prior to 11/4/93 (offering date of the Class B
Shares) are calculated using the historical expenses of the Class A Shares,
which are lower than the expenses of the Class B Shares.
Returns for the Select Shares prior to 2/16/01 (offering date of the Select
Shares) are calculated using the historical expenses of the Class A Shares,
which are higher than the expenses of the Select Shares.
The graph illustrates comparative performance for $10,000 invested in Class A
Shares of the JPMorgan U.S. Treasury Income Fund, Lehman U.S. Gov't Bond Index,
and Lipper General U.S. Treasury Funds Average from August 31, 1993 to August
31, 2003. The performance of the Fund assumes reinvestment of all dividends and
capital gains and includes a sales charge. The performance of the indices does
not include a sales charge and has been adjusted to reflect reinvestment of all
dividends and capital gains of the securities included in the benchmark. The
Lehman U.S. Gov't Bond Index is composed of the U.S. Treasury Bond Index and the
Agency Bond Index and includes U.S. treasury and agency issues. The Lipper
General U.S. Treasury Funds Average describes the average total returns for all
the funds in the indicated category as defined by Lipper, Inc. Investors cannot
invest directly in an index.
Class A Shares have a $2,500 minimum initial deposit and carry a 4.50% sales
charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
19
<Page>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<Page>
JPMorgan Bond Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 84.8%
U.S. TREASURY SECURITIES -- 36.4%
U.S. Treasury Notes & Bonds,
$ 70,000 1.50%, 07/31/05 $ 69,491
12,940 3.50%, 11/15/06 @ + 13,283
206,130 2.63%, 05/15/08 + 199,639
21,560 5.00%, 08/15/11 + 22,699
70,490 3.88%, 02/15/13 + 67,533
545 3.63%, 05/15/13 512
15,525 4.25%, 08/15/13 15,273
11,500 7.25%, 05/15/16 + 14,058
840 8.88%, 02/15/19 + 1,178
37,800 8.13%, 08/15/19 + 49,995
29,700 6.88%, 08/15/25 + 35,461
4,135 6.13%, 08/15/29 + 4,576
7,380 5.38%, 02/15/31 + 7,539
------------------------------------------------------------------------------
Total U.S. Treasury Securities 501,237
(Cost $508,816)
==============================================================================
U.S. GOVERNMENT AGENCY SECURITIES -- 1.9%
6,490 Federal Home Loan Mortgage Corp.,
6.25%, 07/15/32 6,803
Federal National Mortgage Association,
2 7.00%, 07/15/05 2
15,895 6.13%, 03/15/12 17,323
985 4.38%, 09/15/12 948
570 7.25%, 05/15/30 673
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 25,749
(Cost $26,423)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 1.0%
Federal Republic of Brazil (Brazil),
359 10.00%, 01/16/07 371
502 11.25%, 07/26/07 532
690 10.25%, 06/17/13 654
413 8.00%, 04/15/14 371
1,025 Region of Lombardy (Italy),
5.80%, 10/25/32 999
1,580 Republic of Colombia (Colombia),
9.75%, 04/09/11 1,773
Russian Federation (Russia),
400 10.00%, 06/26/07 471
480 8.25%, 03/31/10 532
1,630 5.00%, 03/31/30, SUB 1,491
United Mexican States (Mexico),
$ 850 7.50%, 01/14/12 $ 928
1,670 6.38%, 01/16/13, MTN 1,682
480 11.38%, 09/15/16 658
1,520 8.13%, 12/30/19 1,634
1,545 8.30%, 08/15/31, MTN 1,659
------------------------------------------------------------------------------
Total Foreign Government Securities 13,755
(Cost $13,053)
==============================================================================
STATE AND MUNICIPAL OBLIGATION -- 0.2%
ILLINOIS -- 0.2%
3,695 Illinois State, Taxable Pension, GO,
15.10%, 06/01/33 3,233
(Cost $3,695)
CORPORATE NOTES & BONDS -- 18.4%
AEROSPACE -- 0.4%
2,735 General Dynamics Corp., 2.13%, 05/15/06 2,693
650 Northrop Grumman Corp., 7.75%, 02/15/31 758
1,200 Raytheon Co., 6.55%, 03/15/10 1,296
1,000 The Boeing Co., 5.13%, 02/15/13 974
------------------------------------------------------------------------------
5,721
==============================================================================
AUTOMOTIVE -- 1.6%
805 Delphi Corp., 6.50%, 08/15/13 781
Ford Motor Credit Co.,
850 6.50%, 01/25/07 880
8,370 7.88%, 06/15/10 8,756
General Motors Acceptance Corp.,
4,870 5.85%, 01/14/09 4,872
1,300 6.88%, 09/15/11 1,300
General Motors Corp.,
1,410 8.25%, 07/15/23 1,406
2,785 8.38%, 07/15/33 2,753
1,340 Lear Corp., 8.11%, 05/15/09, Ser. B 1,497
------------------------------------------------------------------------------
22,245
==============================================================================
BANKING -- 3.9%
1,330 Abbey National Capital Trust I,
8.96%, 12/31/49, FRN 1,718
2,760 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, 12/29/49, FRN, # 2,914
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
Bank of America Corp.,
$ 3,690 3.25%, 08/15/08 $ 3,560
250 4.88%, 09/15/12 245
1,005 Bank One Corp., 7.88%, 08/01/10 1,185
Barclays Bank PLC (United Kingdom),
1,675 6.86%, 12/31/49, FRN, # 1,754
535 8.55%, 12/31/49, FRN, # 645
1,290 BNP Paribas Capital Trust,
9.00%, 12/31/49, FRN, # 1,571
1,750 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # 1,644
4,305 CBA Capital Trust I, 5.80%, 12/31/49, # 4,249
1,130 Den Norske Bank ASA (Norway),
7.73%, 12/31/49, FRN, # 1,293
1,620 Deutsche Bank Financial LLC,
5.38%, 03/02/15 1,590
1,870 ForeningsSparbanken AB (Sweden),
9.00%, 12/31/49, FRN, # 2,256
3,955 KBC Bank Fund Trust III,
9.86%, 11/29/49, FRN, # 4,891
3,380 KFW International Finance, Inc.,
4.75%, 01/24/07 3,591
1,500 Nordea Bank AB (Sweden),
8.95%, 12/31/49, FRN, # 1,803
1,935 Popular North America, Inc.,
4.25%, 04/01/08 1,937
4,265 RBS Capital Trust I,
4.71%, 12/31/49, FRN 3,923
1,415 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65%, 08/31/49, FRN 1,649
1,755 Scotland International Finance No. 2 BV
(The Netherlands), 4.25%, 05/23/13, # 1,618
1,940 Sovereign Bank, 4.38%, 08/01/13, FRN 1,925
1,230 Standard Chartered Bank
(United Kingdom), 8.00%, 05/30/31, # 1,451
Wells Fargo & Co.,
55 5.13%, 09/01/12 55
1,100 5.00%, 11/15/14 1,068
3,930 Westpac Capital Trust III,
5.82%, 12/31/49, FRN, # 3,918
------------------------------------------------------------------------------
52,453
==============================================================================
BROADCASTING/CABLE -- 0.1%
$ 680 British Sky Broadcasting PLC
(United Kingdom)
(Yankee), 8.20%, 07/15/09 $ 776
350 COX Communications, Inc.,
7.75%, 11/01/10 403
------------------------------------------------------------------------------
1,179
==============================================================================
BUSINESS SERVICES -- 0.2%
1,735 Cendant Corp., 7.13%, 03/15/15 1,869
1,390 Electronic Data Systems Corp.,
6.00%, 08/01/13, # 1,277
------------------------------------------------------------------------------
3,146
==============================================================================
CHEMICALS -- 0.0% ^
430 The Dow Chemical Co., 7.38%, 11/01/29 463
COMPUTER SOFTWARE -- 0.0% ^
475 Unisys Corp., 6.88%, 03/15/10 470
CONSTRUCTION -- 0.1%
D.R. Horton, Inc.,
510 9.75%, 09/15/10 564
150 8.50%, 04/15/12 160
270 Pulte Homes, Inc., 6.25%, 02/15/13 278
745 Standard-Pacific Corp.,
6.88%, 05/15/11, # 703
------------------------------------------------------------------------------
1,705
==============================================================================
DIVERSIFIED -- 0.5%
General Electric Capital Corp.,
3,485 5.88%, 02/15/12, Ser. A, MTN 3,651
2,455 6.75%, 03/15/32, Ser. A, MTN 2,624
------------------------------------------------------------------------------
6,275
==============================================================================
ENVIRONMENTAL SERVICES -- 0.0% ^
525 Allied Waste North America,
10.00%, 08/01/09, Ser. B 568
FINANCIAL SERVICES -- 3.8%
2,525 American Express Credit Corp.,
3.00%, 05/16/08 2,421
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
American General Finance Corp.,
$ 1,065 4.50%, 11/15/07, Ser. H, MTN $ 1,094
1,735 5.38%, 10/01/12, Ser. H, MTN 1,745
315 Arch Western Finance LLC,
6.75%, 07/01/13, # 311
2,155 Capital One Bank, 4.88%, 05/15/08 2,144
1,320 CIT Group, Inc., 7.75%, 04/02/12 1,503
2,500 Citigroup, Inc., 7.25%, 10/01/10 2,863
Credit Suisse First Boston USA, Inc.,
3,405 5.50%, 08/15/13 3,384
305 7.13%, 07/15/32 333
Goldman Sachs Group, Inc.,
3,335 4.75%, 07/15/13 3,154
1,405 6.13%, 02/15/33 1,360
1,800 Household Finance Corp.,
8.00%, 07/15/10 2,108
HSBC Capital Funding LP (Channel Islands),
2,550 4.61%, 12/31/49, FRN, # 2,359
2,665 9.55%, 12/31/49, FRN, # 3,322
1,865 ING Capital Funding Trust III, 8.44%,
12/31/49, FRN 2,185
3,674 Morgan Stanley Tracers (Traded Custody
Receipts), 7.70%, 03/01/32, FRN, # 4,189
Morgan Stanley,
2,885 6.60%, 04/01/12 3,133
825 5.30%, 03/01/13 814
1,490 Pemex Project Funding Master Trust
(Mexico), 8.50%, 02/15/08 1,687
2,415 Principal Life Global Funding I,
5.25%, 01/15/13, # 2,406
1,680 Prudential Holdings LLC,
8.70%, 12/18/23, # 1,988
3,205 SLM Corp., 5.63%, 08/01/33, MTN 2,928
1,850 UBS Preferred Funding Trust I,
8.62%, 12/31/49, FRN 2,226
2,715 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 2,687
------------------------------------------------------------------------------
52,344
==============================================================================
FOOD/BEVERAGE PRODUCTS -- 0.2%
735 Archer-Daniels Midland Co.,
5.94%, 10/01/32 715
$ 1,595 Miller Brewing Co., 5.50%, 08/15/13, # $ 1,593
------------------------------------------------------------------------------
2,308
==============================================================================
HEALTH CARE/HEALTH CARE SERVICES -- 0.1%
2,000 Mariner Health Group, Inc.,
9.50%, 04/01/06, Ser. B (d) (f) * 0^^
820 Tenet Healthcare Corp.,
5.00%, 07/01/07 783
------------------------------------------------------------------------------
783
==============================================================================
INSURANCE -- 0.8%
2,400 Aegon NV (The Netherlands),
4.75%, 06/01/13 2,263
3,435 AXA (France), 8.60%, 12/15/30 4,067
1,540 Fund American Companies, Inc.,
5.88%, 05/15/13 1,508
625 Nationwide Financial Services, Inc.,
5.90%, 07/01/12 643
1,230 New York Life Insurance Co.,
5.88%, 05/15/33, # 1,175
1,475 QBE Insurance Group LTD (Australia),
5.65%, 07/01/23, FRN, # 1,359
------------------------------------------------------------------------------
11,015
==============================================================================
MANUFACTURING -- 0.1%
980 Bombardier, Inc. (Canada),
6.75%, 05/01/12, # 1,009
MULTI-MEDIA -- 0.6%
AOL Time Warner, Inc.,
360 6.88%, 05/01/12 391
2,710 7.63%, 04/15/31 2,935
750 Comcast Corp., 7.05%, 03/15/33 779
2,795 Liberty Media Corp., 5.70%, 05/15/13 2,689
1,625 News America Holdings, Inc.,
7.75%, 12/01/45 1,770
250 News America, Inc., 7.28%, 06/30/28 266
------------------------------------------------------------------------------
8,830
==============================================================================
OFFICE/BUSINESS EQUIPMENT -- 0.0% ^
Xerox Corp.,
270 7.13%, 06/15/10 262
255 7.63%, 06/15/13 249
------------------------------------------------------------------------------
511
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
OIL & GAS -- 1.0%
$ 770 Alberta Energy Co., LTD (Canada)
(Yankee), 7.38%, 11/01/31 $ 881
Amerada Hess Corp.,
865 7.88%, 10/01/29 950
870 7.30%, 08/15/31 901
400 Anadarko Finance Co.,
7.50%, 05/01/31, Ser. B 461
685 Canadian Natural Resources LTD
(Canada) (Yankee), 7.20%, 01/15/32 765
675 Chesapeake Energy Corp., 8.13%, 04/01/11 705
405 Conoco Funding Co. (Canada),
7.25%, 10/15/31 463
955 ConocoPhillips, 5.90%, 10/15/32 925
2,800 Consolidated Natural Gas Co.,
6.25%, 11/01/11, Ser. C 3,002
1,145 Devon Financing Corp. ULC,
7.88%, 09/30/31 1,319
Occidental Petroleum Corp.,
205 7.65%, 02/15/06 226
465 6.75%, 01/15/12 517
1,335 Transocean, Inc. (Cayman Islands),
6.63%, 04/15/11 1,448
480 Valero Energy Corp., 6.88%, 04/15/12 520
------------------------------------------------------------------------------
13,083
==============================================================================
PACKAGING -- 0.2%
475 Crown European Holdings SA (France),
9.50%, 03/01/11, # 506
Owens-Brockway Glass Container, Inc.,
270 8.88%, 02/15/09 284
460 7.75%, 05/15/11, # 460
1,915 Sealed Air Corp., 6.88%, 07/15/33, # 1,856
------------------------------------------------------------------------------
3,106
==============================================================================
PAPER/FOREST PRODUCTS -- 0.2%
740 Abitibi-Consolidated, Inc. (Canada)
(Yankee), 6.00%, 06/20/13 668
115 Georgia-Pacific Corp., 7.38%, 07/15/08, # 114
535 International Paper Co., 5.85%, 10/30/12 545
795 Westvaco Corp., 7.95%, 02/15/31 895
------------------------------------------------------------------------------
2,222
==============================================================================
PIPELINES -- 0.2%
$ 495 Kinder Morgan Energy Partners LP,
7.40%, 03/15/31 $ 547
955 Kinder Morgan, Inc., 6.50%, 09/01/12 1,026
860 TransCanada Pipelines LTD (Canada)
(Yankee), 8.63%, 05/15/12 1,054
------------------------------------------------------------------------------
2,627
==============================================================================
REAL ESTATE -- 0.3%
3,500 Socgen Real Estate Co., LLC,
7.64%, 12/31/49, FRN, # 3,905
RETAILING -- 0.2%
725 Federated Department Stores, Inc.,
7.00%, 02/15/28 763
Kroger Co.,
605 6.80%, 04/01/11 661
345 7.50%, 04/01/31 381
105 Lowe's Companies, Inc.,
6.88%, 02/15/28 113
700 Safeway, Inc., 6.50%, 03/01/11 749
25 Sears Roebuck Acceptance Corp.,
7.00%, 06/01/32 26
425 The May Department Stores Co.,
6.90%, 01/15/32 434
------------------------------------------------------------------------------
3,127
==============================================================================
SHIPPING/TRANSPORTATION -- 0.3%
Burlington Northern Santa Fe Corp.,
1,154 7.33%, 06/23/10, Ser. 96-A 1,272
340 7.08%, 05/13/29 365
885 CSX Corp., 6.75%, 03/15/11 972
1,000 Norfolk Southern Corp., 6.75%, 02/15/11 1,104
435 Union Pacific Corp., 6.63%, 02/01/29 451
------------------------------------------------------------------------------
4,164
==============================================================================
TELECOMMUNICATIONS -- 2.1%
774 AT&T Broadband Corp.,
8.38%, 03/15/13 919
490 AT&T Corp., 8.50%, 11/15/31 553
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- CONTINUED
AT&T Wireless Services, Inc.,
$ 1,585 7.88%, 03/01/11 $ 1,790
535 8.13%, 05/01/12 614
15 8.75%, 03/01/31 18
1,540 Citizens Communications Co.,
9.25%, 05/15/11 1,898
Deutsche Telekom International
Finance BV (The Netherlands),
1,185 8.50%, 06/15/10 1,394
220 5.25%, 07/22/13 212
1,070 8.75%, 06/15/30 1,285
France Telecom (France),
645 9.25%, 03/01/11 770
1,295 10.00%, 03/01/31 1,669
1,050 Koninklijke KPN NV (The Netherlands),
8.00%, 10/01/10 1,235
Sprint Capital Corp.,
2,190 6.00%, 01/15/07 2,301
420 7.63%, 01/30/11 457
1,600 8.75%, 03/15/32 1,818
3,370 TCI Communications, Inc.,
8.75%, 08/01/15 4,083
910 Telefonica Europe BV (The Netherlands),
7.75%, 09/15/10 1,058
1,305 Verizon Global Funding Corp.,
7.75%, 12/01/30 1,498
3,385 Verizon New York, Inc.,
6.88%, 04/01/12, Ser. A 3,728
705 Vodafone Group PLC (United Kingdom),
7.88%, 02/15/30 834
------------------------------------------------------------------------------
28,134
==============================================================================
UTILITIES -- 1.5%
1,045 AEP Texas Central Co., 5.50%, 02/15/13, # 1,029
1,395 Arizona Public Service Co.,
4.65%, 05/15/15 1,281
260 CenterPoint Energy, Inc.,
6.85%, 06/01/15, # 241
625 Columbus Southern Power Co.,
5.50%, 03/01/13, # 622
Constellation Energy Group, Inc.,
890 6.35%, 04/01/07 958
2,140 4.55%, 06/15/15 1,885
$ 310 Dominion Resources, Inc.,
8.13%, 06/15/10, Ser. A $ 362
DTE Energy Co.,
5 7.05%, 06/01/11 5
1,010 6.38%, 04/15/33 922
795 Duke Capital Corp., 6.25%, 02/15/13 777
Duke Energy Corp.,
360 3.75%, 03/05/08, # 354
1,385 6.25%, 01/15/12 1,455
265 FirstEnergy Corp., 7.38%, 11/15/31, Ser. C 251
1,535 MidAmerican Energy Co.,
6.75%, 12/30/31 1,600
2,285 National Rural Utilities Cooperative
Finance Corp., 3.88%, 02/15/08 2,278
1,065 Nisource Finance Corp., 6.15%, 03/01/13 1,084
620 Peabody Energy Corp.,
6.88%, 03/15/13, Ser. B 620
2,240 Pepco Holdings, Inc., 6.45%, 08/15/12 2,324
770 Progress Energy, Inc., 6.85%, 04/15/12 827
2,110 TXU Energy Co., 7.00%, 03/15/13, # 2,168
------------------------------------------------------------------------------
21,043
==============================================================================
Total Corporate Notes & Bonds 252,436
(Cost $246,776)
==============================================================================
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 12.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.9%
9,782 Countrywide Home Loans,
5.50%, 08/25/33, Ser. 2003-29,
Class A1 9,659
5,553 Federal Home Loan Mortgage Corp.,
6.00%, 02/01/33, Ser. 244, IO 1,189
14,636 Federal National Mortgage Association,
6.00%, 03/01/33, Ser. 332-2, IO 3,355
10,478 MASTR Asset Securitization Trust,
5.50%, 09/25/33,
Ser. 2003-8, Class 1A-1 10,134
2,177 SACO I, Inc., 7.00%, 08/25/36,
Ser. 1997-2, Class 1A5, # 2,236
------------------------------------------------------------------------------
26,573
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 10.8%
Federal Home Loan Mortgage Corp.,
$ 15,000 6.90%, 12/01/10, Gold Pool W10004 $ 16,683
5 6.00%, 03/01/11, Gold Pool E63377 6
34 6.00%, 04/01/11, Gold Pool E63836 36
47 6.00%, 04/01/11, Gold Pool E63827 48
44 6.00%, 04/01/11, Gold Pool E00425 45
48 6.00%, 04/01/11, Gold Pool E63883 50
154 6.00%, 04/01/11, Gold Pool E63908 160
Federal National Mortgage Association,
37,500 5.00%, 09/25/18, TBA 37,629
5,500 4.50%, 11/25/18, TBA 5,363
0^^ 8.00%, 08/01/22, Pool 50617 1
21,000 5.50%, 10/25/33, TBA 20,829
Government National Mortgage Association,
36,000 5.50%, 09/15/33, TBA 35,966
30,500 5.50%, 10/15/33, TBA 30,357
------------------------------------------------------------------------------
147,173
==============================================================================
Total Residential Mortgage
Backed Securities 173,746
(Cost $172,004)
==============================================================================
COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.2%
7,000 COMM, 2.41%, 11/15/12,
Ser. 2000-FL3A, Class LWT, FRN, # 6,999
10,000 Commercial Mortgage Acceptance Corp.,
6.92%, 09/15/30, Ser. 1998-C2,
Class D, FRN 10,838
GS Mortgage Securities Corp. II,
4,344 2.86%, 08/15/12, Ser. 2000-GSFL,
Class F, FRN, # 4,342
4,000 6.73%, 02/10/16, Ser. 2001-LIBA,
Class E, # 4,155
3,505 LB-UBS Commercial Mortgage Trust,
4.69%, 07/20/27, Ser. 2003-C5,
Class A4, FRN 3,362
------------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 29,696
(Cost $28,216)
==============================================================================
ASSET BACKED SECURITIES -- 10.5%
Bank One Insurance Trust,
7,620 1.16%, 06/16/08, Ser. 2003-A5,
Class A5, FRN 7,621
7,550 2.25%, 12/15/10, Ser. 2003-C2,
Class C2, FRN 7,606
Capital Auto Receivables Asset Trust,
$ 7,105 1.15%, 02/15/07, Ser. 2003-2,
Class A3B, FRN $ 7,104
4,595 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 4,417
6,480 Capital One Master Trust,
4.60%, 08/17/09, Ser. 2001-8A, Class A 6,741
3,075 Citibank Credit Card Issuance Trust,
5.00%, 06/10/15, Ser. 2003-C4, Class C4 2,793
5,000 Comed Transitional Funding Trust,
5.44%, 03/25/07, Ser. 1998-1, Class A5 5,167
5,000 DaimlerChrysler Auto Trust,
3.53%, 12/06/07, Ser. 2002-B, Class A4 5,112
4,415 Discover Card Master Trust I,
1.16%, 05/16/07, Ser. 2002-5,
Class A, FRN 4,413
First USA Credit Card Master Trust,
5,000 6.42%, 10/19/06, Ser. 1999-1, Class C, # 5,091
6,115 1.47%, 11/20/06, Ser. 2001- 2,
Class B, FRN 6,121
8,155 Honda Auto Receivables Owner Trust,
2.48%, 07/18/08, Ser. 2003-1, Class A4 8,127
15,395 Household Automotive Trust,
4.37%, 12/17/08, Ser. 2001-3, Class A4 15,935
3,285 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1, Class A2 3,250
3,130 Onyx Acceptance Grantor Trust,
2.66%, 05/17/10, Ser. 2003-C, Class A4 3,075
3,173 Option One Mortgage Loan Trust,
1.43%, 07/01/33, Ser. 2003-5,
Class A2, FRN 3,176
5,998 PP&L Transition Bond Co., LLC,
7.15%, 06/25/09, Ser. 1999-1, Class A8 6,835
Residential Asset Securities Corp.,
3,275 1.36%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 3,270
6,446 1.40%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 6,433
57 Sears Credit Account Master Trust,
7.00%, 07/15/08, Ser. 1996-3, Class A 59
850 The Money Store Home Equity Trust,
6.49%, 12/15/38, Ser. 1997-D, Class AF7 871
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 7,000 Volkswagen Auto Loan Enhanced Trust,
1.93%, 01/20/10, Ser. 2003-1, Class A4 $ 6,777
Wachovia Asset Securitization, Inc.,
4,345 1.54%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 4,353
5,700 1.37%, 07/25/33, Ser. 2003-HE2,
Class AII1, FRN 5,701
13,500 World Omni Auto Receivables Trust,
4.05%, 07/15/09, SER. 2002-A, CLASS A4 13,965
------------------------------------------------------------------------------
Total Asset Backed Securities 144,013
(Cost $143,853)
==============================================================================
PRIVATE PLACEMENTS -- 1.5%
CO-OP APARTMENTS -- 1.5%
4,255 180 East End Ave. Note, Secured by First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
6.88%, 01/01/29, # (f) (i) 4,553
742 200 East 57th St. Note, Secured by
Second Mortgage and Agreement on
Co-op Apartment Building in
New York City, 6.72%, 01/01/13, # (f) (i) 811
10,713 200 East St. Note, Secured by First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
6.50%, 01/01/14, # (f) (i) 11,258
3,124 81 Irving Place Note, Secured by First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
6.95%, 01/01/29, # (f) (i) 3,332
------------------------------------------------------------------------------
Total Private Placements 19,954
(Cost $18,835)
==============================================================================
Total Long-Term Investments 1,163,819
(Cost $1,161,671)
==============================================================================
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 15.2%
OPTIONS -- 0.4%
69,000 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.72, expiring
09/08/03, European Style 1
158,500 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.77, expiring
10/08/03, European Style $ 178
49,500 Put Option on Interest Rate Swap,
expiring 09/08/03. If exercised:
JPMorgan pays fixed (3.90%) and
receives 3 month LIBOR. Swap
expires 09/10/13, European Style 4,266
77,000 Put Option on Interest Rate Swap,
expiring 10/08/03. If exercised:
JPMorgan pays fixed (3.65%) and
receives 3 month LIBOR. Swap
expires 10/10/08, European Style 1,551
------------------------------------------------------------------------------
Total Options 5,996
(Cost $3,746)
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY -- 0.0% ^
$ 500 U.S. Treasury Note, 3.00%,
11/30/03 @ 502
(Cost $500)
COMMERCIAL PAPER -- 3.9%
BANKING -- 3.9%
12,950 Macquarie Bank LTD (Australia),
1.06%, 09/05/03 12,948
18,100 Northern Rock PLC (United Kingdom),
1.02%, 09/15/03 18,088
22,200 UBS Finance (Delaware) LLC,
1.03%, 09/12/03 22,193
------------------------------------------------------------------------------
Total Commercial Paper 53,229
(Cost $53,234)
==============================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 10.9%
149,358 JPMorgan Prime Money
Market Fund (a) 149,358
(Cost $149,358)
------------------------------------------------------------------------------
Total Short-Term Investments 209,085
(Cost $206,838)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 1,372,904
(COST $1,368,509)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<Page>
FUTURE CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- ------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
143 Eurodollar March, 2004 $ 35,212 $ (69)
59 Eurodollar June, 2004 14,467 (74)
SHORT FUTURES OUTSTANDING
(441) Treasury Bonds December, 2003 (46,746) (552)
(535) 5 Year Treasury Notes December, 2003 (58,775) (91)
(214) 10 Year Treasury Notes December, 2003 (23,480) (183)
</Table>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ----------------------------------------------------------------------------------------------------------------
(158,500) Call Option on FNMA, 30 Year Fixed, 5.00%, strike price of 101.77, expiring 10/08/03,
European Style $ (84)
(69,000) Call Option on FNMA, 30 Year Fixed, 5.00%, strike price of 101.47, expiring 09/08/03,
European Style (1)
--------------------------------------------------------------------------------------------------
Total Call Options Written $ (85)
==================================================================================================
<Caption>
PUT OPTIONS WRITTEN
- ----------------------------------------------------------------------------------------------------------------
(150,000) Put Option on FNMA, 30 Year Fixed, 5.50%, strike price of 102.56, expiring 09/08/03,
European Style $ (4,477)
(79,250) Put Option on FNMA, 30 Year Fixed, 5.00%, strike price of 99.20, expiring 10/08/03,
European Style (2,476)
--------------------------------------------------------------------------------------------------
Total Put Options Written $ (6,953)
==================================================================================================
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------
Swap - price lock with Lehman Brothers Special Financing on 30 Year
FNMA, 5.50%, price less 98.19, JPMorgan pays negative, receives positive 09/08/03 $ 56,000 $ 805
Swap - price lock with Lehman Brothers Special Financing on 30 Year
FNMA, 5.50%, price less 100.25, JPMorgan receives positive, pays negative 09/08/03 134,000 (838)
Swap - price lock with Credit Suisse First Boston International on U.S.
Treasury Note, 3.86%, 02/15/13, price less 100.96, JPMorgan pays
positive, receives negative 09/12/03 104,325 5,530
Swap - price lock with Lehman Brothers Special Financing on U.S.
Treasury Note, 2.63%, 05/15/08, price less 96.54,
JPMorgan receives negative, pays positive 09/15/03 78,935 (203)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<Page>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------
Swap - price lock with Goldman Sachs Capital Markets on U.S. Treasury
Note, 1.98%, 08/31/05, price less 99.94,
JPMorgan receives positive, pays negative 09/25/03 $ 128,210 $ 38
Swap - price lock with Morgan Stanley Capital Services on U.S. Treasury
Note, 2.63%, 05/15/08, price less 96.69,
JPMorgan pays positive, receives negative 10/01/03 168,740 (23)
Swap - price lock with UBS Warburg on 30 Year FNMA, 5.50%,
price less 97.50, JPMorgan receives positive, pays negative 10/08/03 79,000 1,357
Swap - price lock with Deutsche Bank AG, New York,
on U.S. Treasury Note, 3.63%, 05/15/13, price less 93.49,
JPMorgan receives negative, pays positive 10/14/03 10,500 (95)
Swap - price lock with Deutsche Bank AG, New York,
on U.S. Treasury Note, 2.63%, 05/15/08, price less 96.54,
JPMorgan pays positive, receives negative 10/14/03 18,500 (30)
Swap -price lock with Deutsche Bank AG, New York,
on U.S. Treasury Note, 5.75%, 08/15/10, price less 109.89,
JPMorgan pays negative, receives positive 10/14/03 24,750 19
Total Return Swap with Goldman Sachs Capital Markets on
Goldman Sachs InvestTop Corp. Bond Fund I Shares with
payment of 1 month LIBOR plus 12.50 bps 11/30/03 26,388 (1,515)
Swap - FRA with Merrill Lynch Capital Services, JPMorgan
pays 3 month LIBOR, receives 1.08% 12/17/03 696,000 (127)
Total Return Swap with Citibank N.A. on Lehman AAA 8.5 CMBS
Index with payment of 1 month LIBOR minus 50.00 bps 02/27/04 24,000 219
Swap - FRA with Merrill Lynch Capital Services, JPMorgan
pays 3 month LIBOR, receives 1.30% 03/17/04 696,000 96
Swap - FRA with Lehman Brothers Special Financing,
JPMorgan pays 3 month LIBOR, receives 1.39% 06/16/04 537,690 (161)
Swap - FRA with Merrill Lynch Capital Services, JPMorgan
receives 1.23%, pays 3 month LIBOR 06/16/04 719,645 (493)
Swap- FRA with Merrill Lynch Capital Services, JPMorgan
pays 3 month LIBOR, receives 1.05% 06/16/04 1,845,000 (2,096)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<Page>
JPMorgan Bond Fund II
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 81.3%
U.S. TREASURY SECURITIES -- 29.1%
U.S. Treasury Notes & Bonds,
$ 75,000 1.50%, 07/31/05 + $ 74,455
18,585 3.50%, 11/15/06 + 19,077
80,925 2.63%, 05/15/08 + 78,377
1,815 5.00%, 08/15/11 + 1,911
2,540 4.00%, 11/15/12 @ + 2,463
26,970 3.88%, 02/15/13 + 25,839
370 3.63%, 05/15/13 + 348
8,915 4.25%, 08/15/13 + 8,770
4,565 7.25%, 05/15/16 + 5,580
24,490 7.25%, 08/15/22 @ + 30,180
34,500 6.88%, 08/15/25 + 41,192
51,845 6.38%, 08/15/27 + 58,800
9,860 5.38%, 02/15/31 + 10,072
------------------------------------------------------------------------------
Total U.S. Treasury Securities 357,064
(Cost $365,607)
==============================================================================
U.S. GOVERNMENT AGENCY SECURITIES -- 2.2%
10,400 Federal Home Loan Mortgage Corp.,
4.25%, 06/15/05 10,801
13,590 Federal National Mortgage Association,
7.13%, 01/15/30 15,820
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 26,621
(Cost $25,612)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 0.5%
810 Region of Lombardy (Italy),
5.80%, 10/25/32 790
United Mexican States (Mexico),
1,500 6.38%, 01/16/13, MTN 1,511
1,500 11.38%, 09/15/16 2,054
1,000 8.13%, 12/30/19 1,075
1,000 8.30%, 08/15/31, MTN 1,074
------------------------------------------------------------------------------
Total Foreign Government Securities 6,504
(Cost $6,198)
==============================================================================
STATE AND MUNICIPAL OBLIGATION -- 0.2%
ILLINOIS -- 0.2%
2,985 Illinois State, Taxable Pension, GO,
5.10%, 06/01/33 2,612
(Cost $2,985)
==============================================================================
CORPORATE NOTES & BONDS -- 20.3%
AEROSPACE -- 0.5%
$ 2,220 General Dynamics Corp.,
2.13%, 05/15/06 $ 2,187
1,300 Northrop Grumman Corp.,
7.75%, 02/15/31 1,515
1,000 Raytheon Co., 6.55%, 03/15/10 1,080
1,275 The Boeing Co., 5.13%, 02/15/13 1,242
5 United Technologies Corp., 6.10%, 05/15/12 5
------------------------------------------------------------------------------
6,029
==============================================================================
AUTOMOTIVE -- 1.7%
760 DaimlerChrysler N.A. Holding Corp.,
7.75%, 01/18/11 848
700 Delphi Corp., 6.50%, 08/15/13 679
Ford Motor Credit Co.,
940 6.50%, 01/25/07 973
8,140 7.38%, 10/28/09 8,405
3,700 General Motors Acceptance Corp.,
7.25%, 03/02/11 3,793
General Motors Corp.,
1,625 7.20%, 01/15/11 1,656
1,200 8.25%, 07/15/23 1,196
2,990 8.38%, 07/15/33 2,955
------------------------------------------------------------------------------
20,505
==============================================================================
BANKING -- 4.1%
1,155 Abbey National Capital Trust I,
8.96%, 12/31/49, FRN 1,492
3,380 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, 12/29/49, FRN, # 3,568
Bank of America Corp.,
6,195 3.25%, 08/15/08 5,976
660 7.40%, 01/15/11 762
1,475 Bank One Corp., 5.25%, 01/30/13 1,475
Barclays Bank PLC (United Kingdom),
1,265 6.86%, 12/31/49, FRN, # 1,324
2,080 8.55%, 12/31/49, FRN, # 2,509
1,500 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # 1,409
3,750 CBA Capital Trust I, 5.80%, 12/31/49, # 3,702
920 Den Norske Bank ASA (Norway),
7.73%, 12/31/49, FRN, # 1,053
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 1,405 Deutsche Bank Financial LLC,
5.38%, 03/02/15 $ 1,379
1,445 ForeningsSparbanken AB (Sweden),
9.00%, 12/31/49, FRN, # 1,743
1,745 KBC Bank Fund Trust III,
9.86%, 11/29/49, FRN, # 2,158
2,730 KFW International Finance, Inc.,
4.75%, 01/24/07 2,900
935 National City Bank, 6.20%, 12/15/11 994
2,300 Nordea Bank AB (Sweden),
8.95%, 12/31/49, FRN, # 2,764
1,590 Popular North America, Inc.,
4.25%, 04/01/08 1,592
3,350 RBS Capital Trust I, 4.71%, 12/31/49, FRN 3,081
1,145 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65%, 08/31/49, FRN 1,334
1,435 Scotland International Finance No. 2 BV
(The Netherlands), 4.25%, 05/23/13, # 1,323
1,700 Sovereign Bank, 4.38%, 08/01/13, FRN 1,687
795 Standard Chartered Bank
(United Kingdom), 8.00%, 05/30/31, # 938
690 U.S. Bank N.A., 6.38%, 08/01/11 756
845 Wells Fargo & Co., 5.00%, 11/15/14 821
190 Wells Fargo Bank N.A., 6.45%, 02/01/11 209
3,475 Westpac Capital Trust III,
5.82%, 12/31/49, FRN, # 3,464
------------------------------------------------------------------------------
50,413
==============================================================================
BROADCASTING/CABLE -- 0.1%
585 Comcast Cable Communications, Inc.,
6.75%, 01/30/11 635
715 COX Communications, Inc.,
6.75%, 03/15/11 784
------------------------------------------------------------------------------
1,419
==============================================================================
BUSINESS SERVICES -- 0.1%
1,350 Cendant Corp., 7.13%, 03/15/15 1,454
CHEMICALS -- 0.0% ^
520 The Dow Chemical Co., 7.38%, 11/01/29 560
CONSTRUCTION -- 0.0% ^
Pulte Homes, Inc.,
$ 230 6.25%, 02/15/13 $ 237
65 6.38%, 05/15/33 58
------------------------------------------------------------------------------
295
==============================================================================
DIVERSIFIED -- 0.8%
General Electric Capital Corp.,
6,020 5.88%, 02/15/12, Ser. A, MTN 6,306
1,135 5.45%, 01/15/13, Ser. A, MTN 1,147
1,560 6.75%, 03/15/32, Ser. A, MTN 1,668
525 General Electric Co., 5.00%, 02/01/13 517
------------------------------------------------------------------------------
9,638
==============================================================================
FINANCIAL SERVICES -- 4.5%
2,095 American Express Co., 4.88%, 07/15/13 2,042
2,310 American Express Credit Corp.,
3.00%, 05/16/08 2,214
American General Finance Corp.,
685 4.50%, 11/15/07, Ser. H, MTN 704
1,600 5.38%, 10/01/12, Ser. H, MTN 1,609
1,720 Capital One Bank, 4.88%, 05/15/08 1,712
2,625 CIT Group, Inc., 5.50%, 11/30/07 2,770
4,350 Citigroup, Inc., 7.25%, 10/01/10 4,980
Credit Suisse First Boston USA, Inc.,
575 6.50%, 01/15/12 619
2,770 5.50%, 08/15/13 2,752
195 7.13%, 07/15/32 213
610 FleetBoston Financial Corp.,
7.25%, 09/15/05 669
Goldman Sachs Group, Inc.,
10 5.70%, 09/01/12 10
2,885 4.75%, 07/15/13 2,728
1,240 6.13%, 02/15/33 1,201
Household Finance Corp.,
1,145 7.88%, 03/01/07 1,308
470 6.38%, 11/27/12 500
HSBC Capital Funding LP
(Channel Islands),
1,270 4.61%, 12/31/49, FRN, # 1,175
5,745 9.55%, 12/31/49, FRN, # 7,161
1,515 ING Capital Funding Trust III,
8.44%, 12/31/49, FRN 1,775
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Morgan Stanley,
$ 2,420 5.80%, 04/01/07 $ 2,598
880 6.75%, 04/15/11 970
1,515 5.30%, 03/01/13 1,495
1,750 Pemex Project Funding Master Trust
(Mexico), 8.50%, 02/15/08 1,982
2,035 Principal Life Global Funding I,
5.25%, 01/15/13, # 2,027
1,220 Prudential Holdings LLC,
8.70%, 12/18/23, # 1,444
2,750 SLM Corp., 5.63%, 08/01/33, MTN 2,512
1,680 UBS Preferred Funding Trust I,
8.62%, 12/31/49, FRN 2,022
2,300 UFJ Finance AEC (Aruba),
6.75%, 07/15/13 2,277
------------------------------------------------------------------------------
53,469
==============================================================================
FOOD/BEVERAGE PRODUCTS -- 0.2%
580 Archer-Daniels Midland Co.,
5.94%, 10/01/32 564
1,410 Miller Brewing Co., 5.50%, 08/15/13, # 1,409
------------------------------------------------------------------------------
1,973
==============================================================================
INSURANCE -- 0.8%
2,000 Aegon NV (The Netherlands),
4.75%, 06/01/13 1,886
2,685 AXA (France), 8.60%, 12/15/30 3,179
1,095 Fund American Companies, Inc.,
5.88%, 05/15/13 1,072
Nationwide Financial Services, Inc.,
510 6.25%, 11/15/11 536
1,130 5.90%, 07/01/12 1,162
940 New York Life Insurance Co.,
5.88%, 05/15/33, # 898
1,190 QBE Insurance Group LTD (Australia),
5.65%, 07/01/23, SUB, # 1,096
------------------------------------------------------------------------------
9,829
==============================================================================
MACHINERY & ENGINEERING EQUIPMENT -- 0.1%
835 Deere & Co., 6.95%, 04/25/14 947
MULTI-MEDIA -- 0.6%
1,215 AOL Time Warner, Inc., 7.63%, 04/15/31 1,315
2,195 Liberty Media Corp., 5.70%, 05/15/13 2,111
$ 315 News America Holdings, Inc.,
8.25%, 08/10/18 $ 374
News America, Inc.,
1,060 7.25%, 05/18/18 1,160
510 7.28%, 06/30/28 544
1,390 Time Warner Entertainment Co., LP,
8.38%, 03/15/23 1,651
370 Walt Disney Co., 6.38%, 03/01/12 397
------------------------------------------------------------------------------
7,552
==============================================================================
OIL & GAS -- 0.9%
505 Alberta Energy Co., LTD (Canada) (Yankee),
7.38%, 11/01/31 578
Amerada Hess Corp.,
745 7.88%, 10/01/29 818
735 7.30%, 08/15/31 761
735 Anadarko Finance Co.,
6.75%, 05/01/11, Ser. B 819
1,470 Anadarko Petroleum Corp.,
6.13%, 03/15/12 1,571
535 Canadian Natural Resources LTD
(Canada) (Yankee), 7.20%, 01/15/32 598
1,065 Conoco Funding Co. (Canada),
7.25%, 10/15/31 1,218
750 ConocoPhillips, 5.90%, 10/15/32 727
2,040 Devon Financing Corp. ULC,
7.88%, 09/30/31 2,349
105 Lasmo USA, Inc., 7.30%, 11/15/27 121
600 Occidental Petroleum Corp.,
4.25%, 03/15/10, MTN 586
960 Transocean, Inc., 7.50%, 04/15/31 1,061
Valero Energy Corp.,
35 8.38%, 06/15/05 38
345 6.88%, 04/15/12 374
------------------------------------------------------------------------------
11,619
==============================================================================
PACKAGING -- 0.1%
1,785 Sealed Air Corp., 6.88%, 07/15/33, # 1,731
PAPER/FOREST PRODUCTS -- 0.3%
885 International Paper Co., 5.85%, 10/30/12 902
195 MeadWestvaco Corp., 6.85%, 04/01/12 211
Westvaco Corp.,
235 8.20%, 01/15/30 266
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PAPER/FOREST PRODUCTS -- CONTINUED
$ 850 7.95%, 02/15/31 $ 956
955 Weyerhaeuser Co., 6.75%, 03/15/12 1,019
------------------------------------------------------------------------------
3,354
==============================================================================
PIPELINES -- 0.2%
460 Kinder Morgan Energy Partners LP,
7.40%, 03/15/31 508
1,485 Kinder Morgan, Inc., 6.50%, 09/01/12 1,596
705 TransCanada Pipelines LTD
(Canada) (Yankee), 8.63%, 05/15/12 864
------------------------------------------------------------------------------
2,968
==============================================================================
RETAILING -- 0.4%
465 Federated Department Stores, Inc.,
6.63%, 04/01/11 509
1,080 Kroger Co., 6.80%, 04/01/11 1,181
525 Lowe's Companies, Inc.,
6.88%, 02/15/28 567
1,600 Safeway, Inc., 6.50%, 03/01/11 1,713
250 Sears Roebuck Acceptance Corp.,
7.00%, 06/01/32 259
365 The May Department Stores Co.,
6.90%, 01/15/32 373
------------------------------------------------------------------------------
4,602
==============================================================================
SHIPPING/TRANSPORTATION -- 0.3%
1,075 Burlington Northern Santa Fe Corp.,
6.75%, 07/15/11 1,195
680 CSX Corp., 6.30%, 03/15/12 725
685 Norfolk Southern Corp.,
7.25%, 02/15/31 752
730 Union Pacific Corp., 6.65%, 01/15/11 802
------------------------------------------------------------------------------
3,474
==============================================================================
TELECOMMUNICATIONS -- 2.5%
2,303 AT&T Broadband Corp.,
8.38%, 03/15/13 2,735
AT&T Corp.,
46 6.00%, 03/15/09 48
1,475 7.80%, 11/15/11 1,651
545 8.50%, 11/15/31 615
$ 1,675 AT&T Wireless Services, Inc.,
7.88%, 03/01/11 $ 1,892
1,190 British Telecom PLC (United Kingdom),
8.88%, 12/15/30, SUB 1,490
1,240 Citizens Communications Co.,
9.25%, 05/15/11 1,528
Deutsche Telekom International Finance
BV (The Netherlands),
1,025 8.50%, 06/15/10 1,206
1,150 8.75%, 06/15/30 1,381
France Telecom SA (France),
1,125 9.25%, 03/01/11 1,343
1,000 10.00%, 03/01/31 1,289
750 Koninklijke KPN NV (The Netherlands),
8.00%, 10/01/10 882
Sprint Capital Corp.,
2,690 7.63%, 01/30/11 2,927
1,430 8.75%, 03/15/32 1,625
1,337 TCI Communications, Inc.,
7.13%, 02/15/28 1,372
750 Telefonica Europe BV (The Netherlands),
7.75%, 09/15/10 872
Verizon Global Funding Corp.,
320 7.38%, 09/01/12 364
650 7.75%, 12/01/30 746
4,235 Verizon New York, Inc.,
6.88%, 04/01/12, Ser. A 4,665
2,195 Vodafone Group PLC (United Kingdom),
7.75%, 02/15/10 2,560
------------------------------------------------------------------------------
31,191
==============================================================================
UTILITIES -- 2.1%
890 AEP Texas Central Co.,
5.50%, 02/15/13, # 876
1,110 Arizona Public Service Co.,
4.65%, 05/15/15 1,019
955 Columbus Southern Power Co.,
5.50%, 03/01/13, # 951
2,150 Consolidated Edison Company of
New York, 5.63%, 07/01/12, Ser. 2002-A 2,229
Constellation Energy Group, Inc.,
755 6.35%, 04/01/07 813
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
UTILITIES -- CONTINUED
$ 1,710 4.55%, 06/15/15 $ 1,507
3,000 Dominion Resources, Inc.,
8.13%, 06/15/10, Ser. A 3,509
850 DTE Energy Co., 6.38%, 04/15/33 776
1,355 Duke Capital Corp., 6.25%, 02/15/13 1,324
Duke Energy Corp.,
215 3.75%, 03/05/08, # 212
460 6.25%, 01/15/12 483
675 FirstEnergy Corp.,
7.38%, 11/15/31, Ser. C 638
1,685 Florida Power & Light Co.,
4.85%, 02/01/13 1,665
1,055 MidAmerican Energy Co.,
6.75%, 12/30/31 1,100
National Rural Utilities Cooperative
Finance Corp.,
500 6.13%, 05/15/05 531
1,985 3.88%, 02/15/08 1,978
930 7.25%, 03/01/12, Ser. C, MTN 1,050
930 Nisource Finance Corp., 6.15%, 03/01/13 946
1,545 Pepco Holdings, Inc., 6.45%, 08/15/12 1,602
Progress Energy, Inc.,
25 7.10%, 03/01/11 27
395 6.85%, 04/15/12 424
1,715 TXU Energy Co., 7.00%, 03/15/13, # 1,762
------------------------------------------------------------------------------
25,422
==============================================================================
Total Corporate Notes & Bonds 248,444
(Cost $240,643)
==============================================================================
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.5%
7,826 Countrywide Home Loans,
5.50%, 08/25/33, Ser. 2003-29, Class A1 7,727
4,131 Federal Home Loan Mortgage Corp.,
6.00%, 02/01/33, Ser. 244, IO 884
11,296 Federal National Mortgage Association,
6.00%, 03/01/33, Ser. 332-2, IO 2,589
8,000 MASTR Asset Securitization Trust,
5.50%, 09/25/33, Ser. 2003-8,
Class 1A-1 7,739
------------------------------------------------------------------------------
18,939
==============================================================================
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 11.6%
$ 48,755 Federal Home Loan Mortgage Corp.,
5.50%, 09/15/33 $ 48,526
Federal National Mortgage Association,
334 6.00%, 09/01/13, Pool 442508 347
19,000 4.50%, 11/25/18, TBA 18,525
1 7.50%, 11/01/29, Pool 523193 1
0^^ 7.50%, 07/01/30, Pool 529276 1
18,000 5.50%, 10/25/33, TBA 17,854
Government National Mortgage
Association,
40,500 5.50%, 09/15/33, TBA 40,462
16,000 5.50%, 10/15/33, TBA 15,925
------------------------------------------------------------------------------
141,641
==============================================================================
Total Residential Mortgage Backed
Securities 160,580
(Cost $160,684)
==============================================================================
COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.9%
4,630 Bear Stearns Commercial Mortgage
Securities, 6.48%, 02/15/35,
Ser. 2001-TOP2, Class A2 5,062
Credit Suisse First Boston Mortgage
Securities Corp.,
8,255 6.13%, 04/15/37, Ser. 2002-CKN2,
Class A3 8,822
13,060 3.94%, 05/15/38, Ser. 2003-C3,
Class A5 11,824
7,350 LB-UBS Commercial Mortgage Trust,
6.65%, 11/15/27, Ser. 2001-C2, Class A2 8,091
Morgan Stanley Dean Witter Capital I,
13,290 6.39%, 07/15/33, Ser. 2001-TOP3,
Class A4 14,443
25 5.98%, 01/15/39, Ser. 2002-TOP7,
Class A2 26
------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 48,268
(Cost $46,838)
==============================================================================
ASSET BACKED SECURITIES -- 12.0%
9,905 AmeriCredit Automobile Receivables
Trust, 5.37%, 06/12/08, Ser. 2001-B,
Class A4 10,252
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 6,000 Bank One Issuance Trust,
2.25%, 12/15/10, Ser. 2003-C2,
Class C2, FRN $ 6,044
Capital Auto Receivables Asset Trust,
5,740 1.15%, 02/15/07, Ser. 2003-2,
Class A3B, FRN 5,740
3,710 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 3,566
Citibank Credit Card Issuance Trust,
11,250 6.88%, 11/16/09, Ser. 2000-A3, Class A3 12,689
2,480 5.00%, 06/10/15, Ser. 2003-C4, Class C4 2,253
Discover Card Master Trust I,
23,000 5.30%, 11/16/06, Ser. 2001-5, Class A 23,638
3,580 1.16%, 05/16/07, Ser. 2002-5,
Class A, FRN 3,578
5,270 First USA Credit Card Master Trust,
1.47%, 11/20/06, Ser. 2001- 2,
Class B, FRN 5,275
6,465 Ford Credit Auto Owner Trust,
5.25%, 09/15/05, Ser. 2001-C, Class A5 6,593
7,165 Honda Auto Receivables Owner Trust,
2.48%, 07/18/08, Ser. 2003-1, Class A4 7,141
6,467 Long Beach Mortgage Loan Trust,
1.43%, 07/25/33, Ser. 2003-3,
Class A, FRN 6,464
MBNA Master Credit Card Trust USA,
9,980 5.75%, 10/15/08, Ser. 2001-A1, Class A1 10,775
9,900 6.80%, 04/16/07, Ser. 1999-M, Class B 10,478
2,775 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1, Class A2 2,746
2,670 Onyx Acceptance Grantor Trust,
2.66%, 05/17/10, Ser. 2003-C, Class A4 2,623
Residential Asset Securities Corp.,
2,644 1.36%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 2,639
4,735 1.40%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 4,726
3,500 Sears Credit Account Master Trust,
5.25%, 10/16/08, Ser. 1998-2, Class A 3,581
7,590 Standard Credit Card Master Trust,
5.95%, 10/07/04, Ser. A 7,605
$ 5,000 Volkswagen Auto Loan Enhanced Trust,
1.49%, 05/21/07, Ser. 2003-1, Class A3 $ 4,942
3,520 Wachovia Asset Securitization, Inc., 1.54%,
12/25/32, Ser. 2002-HE2, Class A, FRN 3,527
------------------------------------------------------------------------------
Total Asset Backed Securities 146,875
(Cost $143,452)
==============================================================================
Total Long-Term Investments 996,968
(Cost $992,019)
==============================================================================
<Caption>
UNITS
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 18.7%
OPTIONS -- 0.4%
58,000 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.72, expiring
09/08/03, European Style 1
131,000 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.77,
expiring 10/08/03, European Style 147
39,500 Put Option on Interest Rate Swap,
expiring 09/06/03. If exercised:
JPMorgan pays fixed (3.90%) and
receives 3 month LIBOR. Swap
expires 09/10/13, European Style 3,404
63,000 Put Option on Interest Rate Swap,
expiring 10/08/03. If exercised:
JPMorgan pays fixed (3.65%) and receives
3 month LIBOR. Swap expires 10/10/08,
European Style 1,269
------------------------------------------------------------------------------
Total Options 4,821
(Cost $3,063)
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 7.0%
ASSET BACKED SECURITIES -- 3.4%
$ 18,200 Galaxy Funding, Inc.,
1.05%, 09/04/03 + 18,198
23,000 Liberty Street Funding Corp.,
1.04%, 09/24/03 + 22,984
------------------------------------------------------------------------------
41,182
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
BANKING -- 3.6%
$ 11,100 Macquarie Bank LTD (Australia), 1.06%,
09/05/03 + $ 11,098
15,300 Northern Rock PLC (United Kingdom),
1.03%, 09/15/03 15,290
18,800 UBS Finance (Delaware) LLC, 1.03%,
09/12/03 18,794
------------------------------------------------------------------------------
45,182
==============================================================================
Total Commercial Paper 86,364
(Cost $86,370)
==============================================================================
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 11.3%
138,337 JPMorgan Prime Money Market
Fund (a) + $ 138,337
(Cost $138,337)
------------------------------------------------------------------------------
Total Short-Term Investments 229,522
(Cost $227,770)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 1,226,490
(COST $1,219,789)
==============================================================================
</Table>
FUTURE CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- ------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
1,134 5 Year Treasury Notes December, 2003 $ 124,581 $ 309
184 Eurodollar March, 2004 45,308 (88)
48 Eurodollar June, 2004 11,770 (60)
SHORT FUTURES OUTSTANDING
(968) Treasury Bonds December, 2003 (102,608) (1,210)
(784) 10 Year Treasury Notes December, 2003 (86,020) (672)
</Table>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- -----------------------------------------------------------------------------------------------------------------
(131,000) Call Option on FNMA, 30 Year Fixed, 5.00%, strike price of 101.77, expiring 10/08/03,
European Style $ (69)
(58,000) Call Option on FNMA, 30 Year Fixed, 5.00%, strike price of 101.47, expiring 09/08/03,
European Style (1)
--------------------------------------------------------------------------------------------------
Total Call Options Written $ (70)
==================================================================================================
<Caption>
PUT OPTIONS WRITTEN
- -----------------------------------------------------------------------------------------------------------------
(119,000) Put Option on FNMA, 30 Year Fixed, 5.50%, strike price of 102.56, expiring 09/08/03,
European Style $ (3,551)
(65,500) Put Option on FNMA, 30 Year Fixed, 5.00%, strike price of 99.20, expiring 10/08/03,
European Style (2,047)
--------------------------------------------------------------------------------------------------
Total Put Options Written $ (5,598)
==================================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<Page>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------------
Swap - price lock with UBS Warburg on 30 Year FNMA, 5.50%,
price less 97.93, JPMorgan receives positive, pays negative 09/08/03 $ 51,000 $ 857
Swap - price lock with Lehman Brothers Special Financing
on 30 Year FNMA, 5.50%, price less 100.25, JPMorgan pays
negative, receives positive 09/08/03 79,000 (494)
Swap - price lock with Deutsche Bank AG, New York on 30
Year FNMA, 5.50%, price less 98.94, JPMorgan pays negative,
receives positive 09/08/03 85,000 558
Swap - price lock with Deutsche Bank AG, New York, on U.S.
Treasury Note, 2.63%, 05/15/08, price less 96.59, JPMorgan
pays positive, receives negative 09/15/03 65,185 (128)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 2.63%, price less 96.54, JPMorgan pays
positive, receives negative 09/15/03 74,035 (191)
Swap - price lock with Goldman Sachs Capital Markets, on U.S.
Treasury Note, 2.63%, 05/15/08, price less 96.42, JPMorgan
receives negative, pays positive 09/25/03 135,200 (474)
Swap - price lock with Deutsche Bank AG, New York, on U.S.
Treasury Note, 3.63%, 05/15/13, price less 93.49, JPMorgan
receives negative, pays positive 10/14/03 9,250 (84)
Swap - price lock with Deutsche Bank AG, New York,
on U.S. Treasury Note, 2.63%, 05/15/08, price less 96.54,
JPMorgan pays positive, receives negative 10/14/03 16,000 (26)
Swap - price lock with Deutsche Bank AG, New York, on U.S.
Treasury Note, 5.75%, 08/15/10, price less 109.87, JPMorgan
receives positive, pays negative 10/14/03 21,500 17
Swap - FRA with Merrill Lynch Capital Services, JPMorgan
pays 3 month LIBOR, receives 1.08% 12/17/03 594,000 (109)
Total Return Swap with Citibank N.A. on Lehman AAA 8.5 CMBS
Index with payment of 1 month LIBOR minus 50.00 bps 02/27/04 21,000 191
Swap - FRA with Merrill Lynch Capital Services, JPMorgan pays
3 month LIBOR, receives 1.30% 03/17/04 594,000 82
Swap - FRA with Merrill Lynch Capital Services, JPMorgan pays
3 month LIBOR, receives 1.23% 06/16/04 594,255 (407)
Swap - FRA with Merrill Lynch Capital Services, JPMorgan pays
3 month LIBOR, receives 1.05% 06/16/04 1,487,000 (1,689)
Swap - FRA with Lehman Brothers Special Financing, JPMorgan
pays 3 month LIBOR, receives 1.39% 06/16/04 525,160 (157)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<Page>
JPMorgan Enhanced Income Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 82.7%
U.S. TREASURY SECURITY -- 0.6%
$ 2,050 U.S. Treasury Note, 1.75%, 12/31/04 @ + $ 2,057
(Cost $2,048)
------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 12.0%
3,650 Federal Home Loan Mortgage Corp.,
1.63%, 05/19/06, MTN, FRN + 3,649
Federal National Mortgage Association,
1,706 0.91%, 01/01/04, MTN, FRN + 1,706
11,400 1.88%, 09/15/05 + 11,345
65 2.75%, 11/14/05 + 65
1,700 1.61%, 04/07/06, FRN + 1,700
800 2.13%, 04/15/06 + 791
15,800 2.75%, 08/11/06 + 15,759
2,000 4.38%, 10/15/06 + 2,087
6,200 4.75%, 01/02/07 + 6,485
40 3.50%, 10/15/07 + 40
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 43,627
(Cost $43,892)
==============================================================================
FOREIGN GOVERNMENT SECURITY -- 0.9%
3,000 Province of Ontario (Canada)
(Yankee), 4.20%, 06/30/05 3,113
(Cost $3,106)
STATE AND MUNICIPAL OBLIGATION -- 0.2%
ILLINOIS -- 0.2%
1,000 Illinois State, 2.50%, 06/01/08 943
(Cost $999)
CORPORATE NOTES & BONDS -- 32.5%
AUTOMOTIVE -- 2.2%
2,900 Ford Motor Credit Co.,
1.39%, 11/24/03, MTN, FRN + 2,898
General Motors Acceptance Corp.,
1,195 4.75%, 10/15/03, MTN, FRN + 1,196
3,250 6.38%, 01/30/04, MTN + 3,311
420 6.75%, 01/15/06 + 443
------------------------------------------------------------------------------
7,848
==============================================================================
BANKING -- 8.2%
4,425 American Express Credit Corp.,
1.21%, 04/18/05, Ser. B, MTN, FRN + 4,424
Bank of America Corp.,
$ 1,000 1.43%, 12/23/04, Ser. F, MTN, FRN $ 1,001
3,000 1.38%, 08/26/05, MTN, FRN + 3,008
1,300 6.63%, 08/01/07 + 1,432
20 Bank One Corp., 1.41%, 02/20/04,
Ser. A, MTN, FRN + 20
1,800 Bank One N.A. Illinois,
1.23%, 01/13/06, FRN + 1,802
Bayerische Landesbank Girozentrale
(Germany) (Yankee),
3,000 5.00%, 07/20/04 + 3,091
2,000 1.06%, 01/31/05, MTN, FRN (f) 1,999
2,900 Canadian Imperial Bank of Commerce
(Canada) (Yankee), 2,895
1.21%, 06/13/05, FRN +
500 Capital One Bank,
6.88%, 02/01/06, MTN + 536
3,700 HBOS Treasury Services PLC
(United Kingdom), 1.17%, 03/14/05,
MTN, FRN, # + 3,700
1,500 National City Bank, 1.15%,
11/14/03, FRN 1,500
1,100 Wachovia Corp., 3.50%, 08/15/08 1,073
Wells Fargo & Co.,
2,000 1.38%, 03/03/06, FRN 2,002
1,300 5.13%, 02/15/07 1,376
------------------------------------------------------------------------------
29,859
==============================================================================
COMPUTERS/COMPUTER HARDWARE -- 0.8%
2,950 International Business Machines Corp.,
1.33%, 09/10/04, FRN 2,953
DIVERSIFIED -- 2.6%
General Electric Capital Corp.,
2,000 6.81%, 11/03/03, Ser. A, MTN + 2,019
7,450 1.24%, 03/15/05, Ser. A, MTN, FRN + 7,459
------------------------------------------------------------------------------
9,478
==============================================================================
FINANCIAL SERVICES -- 15.6%
1,900 Associates Corp. of North America,
5.75%, 11/01/03 + 1,914
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
CIT Group, Inc.,
$ 500 2.37%, 09/20/04, MTN, FRN + $ 506
4,075 2.61%, 01/31/05, MTN, FRN + 4,145
100 Citigroup, Inc., 1.34%, 03/09/04, FRN + 100
1,150 Countrywide Home Loans, Inc.,
1.68%, 05/20/05, Ser. K, MTN, FRN + 1,154
Counts Trusts,
1,400 1.91%, 08/15/07, Ser. 2002-10, FRN, # + 1,400
1,400 1.96%, 08/15/07, Ser. 2002-11, FRN, # + 1,400
4,200 Credit Suisse First Boston USA, Inc.,
1.56%, 01/14/05, MTN, FRN + 4,218
1,550 Household Finance Corp.,
1.16%, 06/16/05, MTN, FRN + 1,551
500 Household Netherlands BV
(The Netherlands) (Yankee),
6.20%, 12/01/03 + 506
1,030 International Lease Finance Corp.,
4.00%, 01/17/06, Ser. O, MTN 1,051
3,450 John Hancock Global Funding II,
1.22%, 05/27/05, MTN, FRN, # + 3,449
3,000 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 2,913
1,550 Merrill Lynch & Co., Inc.,
1.54%, 06/13/05, Ser. B, MTN, FRN 1,553
Monumental Global Funding II,
400 1.26%, 09/26/03, FRN, # 400
1,000 5.20%, 01/30/07, # 1,066
3,600 Morgan Stanley Group, Inc., 1.28%,
03/27/06, Ser. E, MTN, FRN 3,607
4,100 Nationwide Building Society
(United Kingdom), 1.16%, 07/22/05,
MTN, FRN, # 4,098
800 Nationwide Life Global Funding I,
1.37%, 02/15/05, FRN, # 801
Restructured Asset Securities with
Enhanced Returns (RACERS),
2,400 0.98%, 04/15/04, Ser. 2002-35,
Class C, FRN, # 2,386
2,400 0.98%, 04/15/04, Ser. 2002-40,
Class C, FRN, # 2,394
1,300 Salomon Smith Barney Holdings, Inc.,
1.28%, 11/18/04, Ser. K, MTN, FRN 1,302
$ 2,350 SLM Corp., 1.28%, 04/25/06, MTN, FRN $ 2,351
Special Purpose Accounts Receivable
Cooperative Corp. (SPARCS),
1,600 1.98%, 05/23/04, Ser. 2002-6, FRN, # 1,602
6,700 1.71%, 05/15/06, Ser. 2003-4 6,709
3,250 The Bear Stearns Co., Inc.,
1.25%, 04/29/05, MTN, FRN + 3,248
1,000 Washington Mutual Bank FA,
1.43%, 05/17/04, FRN 1,002
------------------------------------------------------------------------------
56,826
==============================================================================
INSURANCE -- 1.7%
2,400 ASIF Global Financing,
1.37%, 03/14/06, FRN, # + 2,399
3,650 Metropolitan Life Global Funding I,
1.29%, 08/28/06, MTN, FRN, # 3,647
------------------------------------------------------------------------------
6,046
==============================================================================
OIL & GAS -- 0.5%
1,800 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 1,798
PAPER/FOREST PRODUCTS -- 0.2%
700 Weyerhaeuser Co., 2.24%, 09/15/03, FRN + 700
PHARMACEUTICALS -- 0.0% ^
30 Abbott Laboratories, 5.13%, 07/01/04 + 31
SHIPPING/TRANSPORTATION -- 0.3%
1,150 FedEx Corp., 6.63%, 02/12/04 + 1,175
TELECOMMUNICATIONS -- 0.2%
870 Sprint Capital Corp., 5.70%, 11/15/03 875
UTILITIES -- 0.2%
600 AEP Texas Central Co.,
3.00%, 02/15/05, # + 606
------------------------------------------------------------------------------
Total Corporate Notes & Bonds 118,195
(Cost $117,891)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 7.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.7%
Federal National Mortgage Association,
$ 1,003 3.09%, 12/25/28, Ser. 2002-W6,
Class 1A1 + $ 1,005
651 6.00%, 10/01/31, Ser. 2001-59,
Class QA + 656
1,630 1.61%, 06/25/32, Ser. 2002-36,
Class FT, FRN + 1,627
1,094 1.61%, 06/25/32, Ser. 2002-36,
Class FS, FRN + 1,092
414 4.50%, 05/25/42, Ser. 2002-W4,
Class A1 + 418
2,879 2.50%, 07/25/42, Ser. 2003-W2,
Class 2A3 + 2,883
2,250 1.95%, 09/25/43, Ser. 2003-W14,
Class 1A-1 + (f) 2,247
Government National Mortgage Association,
314 6.38%, 12/20/27, Ser. 2001-39,
Class AD + 315
840 1.61%, 03/16/32, Ser. 2002-21,
Class FD, FRN + 844
850 1.61%, 04/16/32, Ser. 2002-24,
Class FA, FRN + 854
1,299 1.61%, 05/16/32, Ser. 2002-27,
Class FA, FRN + 1,309
1,717 GSR Mortgage Loan Trust, 2.26%,
08/25/32, Ser. 2003-5F, Class 1A3, FRN + 1,718
1,850 Mound Financing PLC (United Kingdom),
1.28%, 02/08/08, Ser. 3A,
Class A1-1, FRN, # 1,850
304 Washington Mutual, 2.26%, 02/25/32,
Ser. 2003-SA, Class A3, FRN 304
------------------------------------------------------------------------------
17,122
==============================================================================
MORTGAGE BACKED PASS-THROUGH SECURITY -- 2.6%
9,500 Federal National Mortgage Association,
5.50%, 09/25/33, TBA 9,458
------------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 26,580
(Cost $26,429)
==============================================================================
COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.0%
$ 2,931 CalSTRS Trust, 1.41%, 11/20/12,
Ser. 2002-C6, Class A1, FRN, # + $ 2,926
Calwest Industrial Trust,
2,400 1.49%, 02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # + 2,403
1,400 1.38%, 06/15/15, Ser. 2003-CALA,
Class A, FRN, # + 1,400
750 LB-UBS Commercial Mortgage Trust,
3.48%, 07/15/27, Ser. 2003-C5, Class A2 726
3,000 Morgan Stanley Capital I, 6.48%,
11/15/30, Ser. 1998-HF2, Class A2 3,301
------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 10,756
(Cost $10,850)
==============================================================================
ASSET BACKED SECURITIES -- 26.2%
American Express Credit Account
Master Trust,
1,800 5.60%, 11/15/06, Ser. 1999-1, Class A + 1,848
1,050 1.25%, 09/15/08, Ser. 2001-1,
Class A, FRN + 1,053
1,550 1.22%, 09/15/09, Ser. 2002-1,
Class A, FRN + 1,553
1,000 1.22%, 11/16/09, Ser. 2002-2,
Class A, FRN + 1,002
1,245 American Express Master Trust, 1.18%,
12/15/05, Ser. 2002-1, Class A, FRN + 1,245
AmeriCredit Automobile Receivables Trust,
2,205 1.31%, 10/12/06, Ser. 2002-A,
Class A3, FRN + 2,205
3,600 1.29%, 04/12/07, Ser. 2002-C,
Class A3, FRN + 3,601
8,000 Bank One Issuance Trust, 1.23%,
06/15/10, Ser. 2002-A5, Class A5, FRN + 8,014
6 BMW Vehicle Owner Trust, 4.70%,
03/25/05, Ser. 2001-A, Class A3 + 6
45 Capital Auto Receivables Asset Trust,
5.00%, 12/15/06, Ser. 2001-2, Class A-4 + 46
1,725 Capital One Master Trust, 1.21%,
08/15/06, Ser. 2000-5, Class A, FRN + 1,725
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
Capital One Multi-Asset Execution Trust,
$ 800 1.22%, 05/15/08, Ser. 2003-A2,
Class A2, FRN + $ 800
1,350 1.50%, 01/15/09, Ser. 2003-A1,
Class A1, FRN + 1,356
2,250 Carco Auto Loan Master Trust, 1.18%,
11/15/06, Ser. 2001-A, Class A, FRN + 2,251
Citibank Credit Card Issuance Trust,
200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 + 201
2,050 2.07%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 2,062
Countrywide Asset-Backed Certificates,
544 1.39%, 08/25/32, Ser. 2002-1,
Class A, FRN + 545
1,252 1.51%, 03/25/33, Ser. 2003-BC1,
Class A1, FRN + 1,253
2,638 Countrywide Home Equity Loan Trust,
1.35%, 08/15/28, Ser. 2002-D,
Class A, FRN + 2,626
50 DaimlerChrysler Auto Trust, 3.85%,
04/06/06, Ser. 2002-A, Class A3 + 51
Discover Card Master Trust I,
50 5.30%, 11/16/06, Ser. 2001-5, Class A + 51
4,337 1.29%, 11/15/07, Ser. 2000-5,
Class A, FRN + 4,347
2,685 1.17%, 04/15/08, Ser. 2002-4,
Class A, FRN + 2,686
750 EQCC Trust, 1.46%, 11/25/31, Ser. 2002-1,
Class 2A, FRN + 751
First USA Credit Card Master Trust,
1,000 1.23%, 09/10/06, Ser. 1996-8,
Class A, FRN + 1,000
1,100 1.20%, 11/20/06, Ser. 2001-2,
Class A, FRN + 1,100
1,900 1.47%, 11/20/06, Ser. 2001-2,
Class B, FRN + 1,902
35 Fleet Credit Card Master Trust II, 1.16%,
10/15/07, Ser. 2002-A, Class A, FRN + 35
2,745 Fleet Home Equity Loan Trust, 1.36%,
01/20/33 Ser. 2003-1, Class A, FRN + 2,743
Ford Credit Auto Owner Trust,
34 2.48%, 12/15/04, Ser. 2002-C,
Class A2A + 34
$ 1,482 1.23%, 01/15/06, Ser. 2002-A,
Class A3B, FRN + $ 1,482
1,110 GMAC Mortgage Corp. Loan Trust,
1.25%, 08/25/32, Ser. 2002-HE4,
Class A1, FRN + 1,110
1,050 Greenpoint Home Equity Loan Trust,
1.38%, 04/15/29, Ser. 2003-1,
Class A, FRN + 1,050
957 HFC Home Equity Loan Asset Backed
Certificates, 1.41%, 04/20/32, Ser. 2002-2,
Class A, FRN + 957
Honda Auto Receivables Owner Trust,
1,900 1.92%, 11/20/06, Ser. 2003-1, Class A3 + 1,902
1,000 3.96%, 02/19/07, Ser. 2001-3, Class A4 + 1,023
200 Household Automotive Trust,
1.45%, 05/18/09, Ser. 2002-3,
Class A4B, FRN + 200
3,142 Household Mortgage Loan Trust,
1.46%, 02/20/33, Ser. 2003-HC1,
Class A, FRN + 3,142
1,200 LB-UBS Commercial Mortgage Trust,
3.32%, 03/15/27, Ser. 2003-C1, Class A2 1,168
Long Beach Mortgage Loan Trust,
1,519 1.43%, 07/25/33, Ser. 2003-3,
Class A, FRN 1,518
3,550 1.45%, 08/25/33, Ser. 2003-4,
Class AV3, FRN 3,548
50 MBNA Credit Card Master Note Trust,
1.24%, 02/15/07, Ser. 2001-A4,
Class A, FRN 50
MBNA Master Credit Card Trust USA,
1,000 1.91%, 12/15/06, Ser. 1999-G,
Class C, FRN, # 999
3,500 1.24%, 02/17/09, Ser. 1998-G,
Class A, FRN 3,509
Option One Mortgage Loan Trust,
1,168 1.40%, 02/25/32, Ser. 2002-1,
Class A, FRN 1,169
421 1.38%, 06/25/32, Ser. 2002-2,
Class A, FRN 421
465 1.38%, 08/25/32, Ser. 2002-3,
Class A2, FRN 464
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,974 Residential Asset Securities Corp.,
1.36%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN $ 2,969
Sears Credit Account Master Trust,
1,600 1.22%, 06/16/08, Ser. 2001-2,
Class A, FRN 1,599
1,250 1.21%, 02/18/09, Ser. 2002-1,
Class A, FRN 1,248
10 1.24%, 08/18/09, Ser. 2002-4, Class A, FRN 10
SLM Student Loan Trust,
1,460 1.16%, 06/15/10, Ser. 2002-8,
Class A2, FRN 1,460
3,521 1.14%, 10/25/10, Ser. 2002-1,
Class A1, FRN 3,521
2,200 Standard Credit Card Master Trust,
5.95%, 10/07/04, Ser. A 2,204
1,450 Superior Wholesale Inventory Financing
Trust, 1.19%, 06/15/06, Ser. 2001-C7,
Class A, FRN 1,450
489 Toyota Auto Receivables Owner Trust,
2.79%, 12/15/04, Ser. 2002-B, Class A2 489
Wachovia Asset Securitization, Inc.,
1,550 1.54%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 1,553
2,992 1.40%, 03/25/33, Ser. 2003-HE1,
Class A1, FRN 2,991
WFS Financial Owner Trust,
1,462 1.21%, 03/20/06, Ser. 2001-C,
Class A3, FRN 1,462
2,500 1.27%, 05/20/08, Ser. 2003-A3,
Class B, FRN 2,500
30 World Omni Auto Receivables Trust,
5.51%, 07/20/07, Ser. 2001-A, Class A4 31
------------------------------------------------------------------------------
Total Asset Backed Securities 95,291
(Cost $95,370)
==============================================================================
Total Long-Term Investments 300,562
(Cost $300,585)
==============================================================================
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 17.3%
OPTION -- 0.0% ^
23,700 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.22, expiring
10/08/03, European Style $ 35
(Cost $237)
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY -- 0.1%
$ 510 U.S. Treasury Note, 3.00%, 11/30/03 @ + 512
(Cost $510)
U.S. GOVERNMENT AGENCY SECURITIES -- 6.7%
9,250 Federal Home Loan Bank,
0.98%, 09/05/03, DN + 9,249
Federal National Mortgage Association,
6,600 0.99%, 09/10/03, DN + 6,598
8,500 0.95%, 11/14/03, DN + 8,482
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 24,329
(Cost $24,331)
==============================================================================
MUNICIPAL SECURITIES -- 1.7%
DISTRICT OF COLUMBIA -- 0.9%
3,450 George Washington University, Ser. A,
Rev., FRDO, MBIA, 1.12%, 09/04/03 + 3,450
NORTH CAROLINA -- 0.2%
600 North Carolina Municipal Power Agency
No. 1, Catawba, Taxable, Ser. B, Rev.,
2.95%, 01/01/04 601
SOUTH CAROLINA -- 0.6%
2,050 South Carolina Student Loan Corp.,
Education Loans, Ser. A-1, Rev., FRDO,
1.25%, 06/01/33 2,050
------------------------------------------------------------------------------
Total Municipal Securities 6,101
(Cost $6,100)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
COMMERCIAL PAPER -- 2.7%
AUTOMOTIVE -- 1.0%
$ 3,600 Daimler Chrysler N.A. Holdings Corp.,
1.23%, 09/23/03 + $ 3,597
BANKING -- 0.9%
3,450 Commerzbank U.S. Finance,
1.11%, 10/01/03 + 3,447
FINANCIAL SERVICES -- 0.8%
2,750 Cadbury Schwepps Finance PLC
(United Kingdom), 1.22%, 09/02/03 + 2,750
------------------------------------------------------------------------------
Total Commercial Paper 9,794
(Cost $9,794)
==============================================================================
CERTIFICATES OF DEPOSIT -- 5.2%
3,388 Abbey National Treasury Services PLC
(United Kingdom) (Yankee),
1.05%, 04/02/04, Floating Rate + 3,388
1,000 Bank One N.A. Illinois, 1.17%, 09/17/03,
Floating Rate + 1,000
2,030 Bayerische Landesbank Girozentrale/
New York (Yankee), 1.09%, 12/17/04,
Floating Rate + 2,030
$ 7,160 Deutsche Bank AG/New York (Yankee),
1.18%, 02/18/05, Floating Rate + $ 7,159
2,500 Landesbank-Baden-Wurttemberg/
New York (Yankee), 1.01%, 09/22/03,
Floating Rate + 2,500
2,900 Nordea Bank Finland PLC/New York
(Yankee), 1.08%, 11/24/03,
Floating Rate + 2,900
------------------------------------------------------------------------------
Total Certificates of Deposit 18,977
(Cost $18,966)
==============================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 0.9%
3,134 JPMorgan Prime Money Market Fund (a) + 3,134
(Cost $3,134)
------------------------------------------------------------------------------
Total Short-Term Investments 62,882
(Cost $63,072)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 363,444
(COST $363,657)
==============================================================================
</Table>
FUTURE CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
91 Eurodollar December, 2003 $ 22,468 $ 27
504 Eurodollar March, 2004 124,104 156
143 Eurodollar June, 2004 35,064 (209)
SHORT FUTURES OUTSTANDING
(22) 2 Year Treasury Notes December, 2003 (4,687) (5)
(187) 5 Year Treasury Notes December, 2003 (20,544) (32)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<Page>
OPTION
<Table>
<Caption>
UNITS CALL OPTION WRITTEN VALUE
- ----------------------------------------------------------------------------------------------------------
(23,700) Call Option on FNMA, 30 Year Fixed, 5.00%, strike price of 101.22,
expiring 10/08/03, European Style $ (18)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- -----------------------------------------------------------------------------------------------------------
Swap - price lock with Citibank N.A. on U.S. Treasury Note,
1.63%, 04/30/05, price less 99.74, JPMorgan receives
positive, pays negative 09/15/03 $ 27,650 $ (32)
Swap - price lock with Lehman Brothers Special Financing,
on U.S. Treasury Note, 1.63%, 04/30/05, price less 99.97,
JPMorgan receives negative, pays positive 09/29/03 13,500 24
Swap - price lock with Citibank N.A. on U.S. Treasury Note,
2.63%, 05/15/08, price less 96.74, JPMorgan receives
negative, pays positive 10/01/03 31,400 --
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<Page>
JPMorgan Fleming Emerging Markets Debt Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 95.9%
U.S. TREASURY SECURITIES -- 5.1%
U.S. Treasury Notes & Bonds,
$ 75 6.88%, 05/15/06 @ $ 84
2,150 4.25%, 08/15/13 2,115
50 6.13%, 08/15/29 + 55
700 5.38%, 02/15/31 + 715
------------------------------------------------------------------------------
Total U.S. Treasury Securities 2,969
(Cost $2,944)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 84.3%
ARGENTINA -- 0.9%
Republic of Argentina,
600 7.00%, 12/19/08, Ser. 2008 (d) * 182
525 12.25%, 06/19/18, Ser. 2018 (d) * 147
345 2.06%, 03/31/23, Ser. L-GL, FRN (d) * 178
------------------------------------------------------------------------------
507
==============================================================================
BRAZIL -- 23.0%
300 Banco Nacional de Desenvolvimiento
Economico e Social, 8.75%, 06/16/08,
Regulation S, FRN 289
Federal Republic of Brazil,
250 11.25%, 07/26/07 265
870 11.50%, 03/12/08 927
1,793 2.19%, 04/15/09, FRN 1,582
2,190 12.00%, 04/15/10 2,289
230 11.00%, 01/11/12 229
2,720 2.19%, 04/15/12, FRN 2,186
542 8.00%, 04/15/14 487
825 8.00%, 04/15/14, # 744
215 8.00%, 04/15/14, Ser. L 195
240 12.75%, 01/15/20 247
3,335 8.88%, 04/15/24 2,568
190 10.13%, 05/15/27 163
1,332 11.00%, 08/17/40 1,212
------------------------------------------------------------------------------
13,383
==============================================================================
BULGARIA -- 2.1%
National Republic of Bulgaria,
371 1.94%, 07/28/11, FRN, # 353
386 1.94%, 07/28/12, Ser. A, FRN 370
451 8.25%, 01/15/15, # 496
------------------------------------------------------------------------------
1,219
==============================================================================
COLOMBIA -- 4.9%
Republic of Colombia,
$ 70 7.63%, 02/15/07 $ 74
560 9.75%, 04/23/09, Ser. NOV 623
343 9.75%, 04/09/11 385
213 10.00%, 01/23/12 230
260 10.75%, 01/15/13 291
735 11.75%, 02/25/20, MTN 864
365 10.38%, 01/28/33 384
------------------------------------------------------------------------------
2,851
==============================================================================
DOMINICAN REPUBLIC -- 0.9%
Dominican Republic,
290 9.50%, 09/27/06 294
270 9.04%, 01/23/13, # 255
------------------------------------------------------------------------------
549
==============================================================================
ECUADOR -- 2.9%
Republic of Ecuador,
1,399 12.00%, 11/15/12 1,095
772 7.00%, 08/15/30, SUB 457
275 7.00%, 08/15/30, SUB, # 163
------------------------------------------------------------------------------
1,715
==============================================================================
EGYPT -- 0.5%
250 Arab Republic of Egypt, 8.75%, 07/11/11, # 297
EL SALVADOR -- 2.0%
Republic of El Salvador,
535 8.50%, 07/25/11, # 568
305 7.75%, 01/24/23, # 314
285 8.25%, 04/10/32, # 265
------------------------------------------------------------------------------
1,147
==============================================================================
MEXICO -- 8.8%
260 Bancomext Trust Division,
11.25%, 05/30/06, # 315
United Mexican States,
150 10.38%, 02/17/09, Ser. XW 188
970 8.38%, 01/14/11 1,118
650 7.50%, 01/14/12 709
950 11.38%, 09/15/16 1,302
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MEXICO -- CONTINUED
$ 485 8.13%, 12/30/19 $ 521
685 8.00%, 09/24/22, Ser. A, MTN 718
175 11.50%, 05/15/26 244
------------------------------------------------------------------------------
5,115
==============================================================================
PANAMA -- 2.4%
Republic of Panama,
210 9.63%, 02/08/11 236
325 9.38%, 07/23/12 366
310 1.94%, 07/17/14, FRN 294
309 1.94%, 07/17/16, FRN 266
220 10.75%, 05/15/20 260
------------------------------------------------------------------------------
1,422
==============================================================================
PERU -- 3.5%
Republic of Peru,
487 9.13%, 02/21/12 521
366 9.13%, 02/21/12, Regulation S 392
65 9.88%, 02/06/15 72
545 4.50%, 03/07/17, FRN 458
701 5.00%, 03/07/17, FRN 617
------------------------------------------------------------------------------
2,060
==============================================================================
PHILIPPINES -- 3.7%
Republic of Philippines,
320 8.88%, 04/15/08 347
344 8.38%, 03/12/09 359
158 9.88%, 03/16/10 176
445 9.00%, 02/15/13 461
170 6.50%, 12/01/17, Ser. B, FRN 166
345 9.88%, 01/15/19 361
265 10.63%, 03/16/25 292
------------------------------------------------------------------------------
2,162
==============================================================================
RUSSIA -- 19.4%
Russian Federation,
705 10.00%, 06/26/07 829
570 8.25%, 03/31/10 631
444 8.25%, 03/31/10, # 491
1,180 11.00%, 07/24/18 1,565
$ 500 12.75%, 06/24/28 $ 777
4,198 5.00%, 03/31/30, SUB, # 3,836
3,470 5.00%, 03/31/30, SUB 3,175
------------------------------------------------------------------------------
11,304
==============================================================================
SOUTH AFRICA -- 0.9%
445 Republic of South Africa (Yankee),
8.50%, 06/23/17 507
TRINIDAD/TOBAGO -- 0.5%
250 Republic of Trinidad & Tobago,
9.75%, 07/01/20 313
TUNISIA -- 0.2%
125 Banque Centrale de Tunisie,
7.38%, 04/25/12 136
TURKEY -- 4.2%
Republic of Turkey,
180 11.38%, 11/27/06 203
435 9.88%, 03/19/08 455
725 12.38%, 06/15/09 819
705 11.75%, 06/15/10 776
185 11.88%, 01/15/30 201
------------------------------------------------------------------------------
2,454
==============================================================================
UKRAINE -- 0.9%
Republic of Ukraine,
205 11.00%, 03/15/07, Regulation S 225
320 7.65%, 06/11/13, # 314
------------------------------------------------------------------------------
539
==============================================================================
VENEZUELA -- 2.6%
Republic of Venezuela,
1,071 1.88%, 12/18/07, Ser. DL, FRN 956
710 9.25%, 09/15/27 538
------------------------------------------------------------------------------
1,494
==============================================================================
Total Foreign Government Securities 49,174
(Cost $41,943)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
CORPORATE NOTES & BONDS -- 6.5%
BRAZIL -- 0.8%
$ 550 Trikem SA, 10.63%, 07/24/07, # $ 479
MALAYSIA -- 1.9%
575 Petronas Capital LTD, 7.88%, 05/22/22, # 628
400 Petroliam Nasional BHD,
7.75%, 08/15/15, # 456
------------------------------------------------------------------------------
1,084
==============================================================================
MEXICO -- 3.2%
200 BBVA Bancomer Capital Trust I,
10.50%, 02/16/11, # 225
Pemex Project Funding Master Trust,
160 7.88%, 02/01/09 177
340 7.38%, 12/15/14 348
620 Petroleos Mexicanos (Yankee),
9.25%, 03/30/18 701
400 Telefonos de Mexico SA de CV,
8.25%, 01/26/06 444
------------------------------------------------------------------------------
1,895
==============================================================================
SOUTH KOREA -- 0.6%
290 Woori Financial Group,
12.75%, 03/01/10, Regulation S, SUB 327
------------------------------------------------------------------------------
Total Corporate Notes & Bonds 3,785
(Cost $3,716)
==============================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
WARRANTS -- 0.0%
NIGERIA -- 0.0%
1 Central Bank of Nigeria, expires
11/15/20, FRN * (f) 0
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SINGAPORE -- 0.0%
0^^ Asia Pulp & Paper Co., LTD, ADR, expires
3/15/05, # * (f) $ 0
VENEZUELA -- 0.0%
1 Republic of Venezuela (Oil Obligation),
expires 4/15/20, FRN * (f) 0
------------------------------------------------------------------------------
Total Warrants 0
(Cost $0)
==============================================================================
Total Long-Term Investments 55,928
(Cost $48,603)
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.1%
U.S. TREASURY SECURITY -- 2.1%
$ 1,200 U.S. Treasury Bill, 0.98%, 11/28/03 1,197
(Cost $1,197)
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 2.0%
1,137 JPMorgan Prime Money Market Fund (a) 1,137
(Cost $1,137)
------------------------------------------------------------------------------
Total Short-Term Investments 2,334
(Cost $2,334)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 58,262
(COST $50,937)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<Page>
SUMMARY OF INVESTMENTS BY INDUSTRY, AUGUST 31, 2003
<Table>
<Caption>
INDUSTRY % OF INVESTMENT SECURITIES
- --------------------------------------------------------------------------------------------
Foreign Government Securities 84.3%
U.S. Treasury Securities 7.2
Oil & Gas 3.0
Money Market Fund 2.0
Banking 1.1
Financial Services 0.9
Chemicals 0.8
Telecommunications 0.7
- --------------------------------------------------------------------------------------------
TOTAL 100.0%
============================================================================================
</Table>
FUTURES CONTRACT
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION/
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
1 10 Year Treasury Notes December, 2003 $ 110 $ 1
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<Page>
JPMorgan Global Strategic Income Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 85.5%
U.S. TREASURY SECURITIES -- 0.6%
U.S. Treasury Notes & Bonds,
$ 100 3.25%, 12/31/03 @ + $ 101
100 3.25%, 05/31/04 + 102
100 6.63%, 05/15/07 @ + 113
375 3.63%, 05/15/13 + 352
125 5.50%, 08/15/28 @ + 127
------------------------------------------------------------------------------
Total U.S. Treasury Securities 795
(Cost $798)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 22.8%
Dominican Republic (Dominican Republic),
545 9.50%, 09/27/06 553
675 9.04%, 01/23/13, # 638
Federal Republic of Brazil (Brazil),
67 10.00%, 01/16/07 + 69
250 11.25%, 07/26/07 + 265
205 2.19%, 04/15/09, FRN 181
110 10.25%, 06/17/13 + 104
371 8.00%, 04/15/14 333
260 8.88%, 04/15/24 200
310 11.00%, 08/17/40 282
Federal Republic of Germany (Germany),
EUR 440 3.25%, 02/17/04, Ser. 130 + 485
EUR 550 5.00%, 05/20/05, Ser. 135 + 628
EUR 500 5.00%, 08/19/05, Ser. 136 + 573
EUR 1,100 4.00%, 02/16/07, Ser. 139 + 1,241
EUR 2,080 5.25%, 01/04/08, Ser. 98 + 2,448
EUR 880 5.25%, 01/04/11, Ser. 00 + 1,046
EUR 1,140 4.75%, 07/04/34, Ser. 0301 + 1,227
155 Government of Barbados (Barbados),
8.75%, 06/15/10, # + 179
Government of Canada (Canada),
CAD 20 7.00%, 12/01/06 + 16
CAD 360 5.25%, 06/01/12 + 268
CAD 100 8.00%, 06/01/27, Ser. VW17 + 97
Government of France (France),
EUR 500 5.50%, 04/25/07 + 591
EUR 1,320 5.25%, 04/25/08 + 1,557
EUR 630 5.00%, 04/25/12 + 737
EUR 120 5.00%, 10/25/16 + 138
Malaysia Government International Bond
(Malaysia),
$ 385 8.75%, 06/01/09 $ 467
250 7.50%, 07/15/11 289
National Republic of Bulgaria (Bulgaria),
191 1.94%, 07/28/11, Ser. IAB, FRN 182
270 1.94%, 07/28/12, Ser. A, FRN 259
593 8.25%, 01/15/15, # 652
Republic of Colombia (Colombia),
65 7.63%, 02/15/07 69
180 9.75%, 04/23/09 200
543 9.75%, 04/09/11 + 609
244 10.00%, 01/23/12 + 264
190 11.75%, 02/25/20, MTN 223
70 10.38%, 01/28/33 + 74
Republic of El Salvador (El Salvador),
138 8.50%, 07/25/11 146
335 7.75%, 01/24/23, # 342
280 8.25%, 04/10/32, # + 260
45 Republic of Korea (South Korea),
8.88%, 04/15/08 54
Republic of Panama (Panama),
270 9.63%, 02/08/11 304
550 1.94%, 07/17/16, FRN 473
100 10.75%, 05/15/20 118
160 9.38%, 01/16/23 170
Republic of Peru (Peru),
365 9.13%, 02/21/12 391
582 4.50%, 03/07/17, FRN 489
206 5.00%, 03/07/17, FRN 182
Republic of Philippines (Philippines),
110 8.88%, 04/15/08 119
159 8.38%, 03/12/09 166
53 9.88%, 03/16/10 59
175 9.00%, 02/15/13 181
115 9.88%, 01/15/19 120
110 10.63%, 03/16/25 121
Republic of South Africa (South Africa),
275 9.13%, 05/19/09 326
335 8.50%, 06/23/17 382
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FOREIGN GOVERNMENT SECURITIES -- CONTINUED
$ 200 Republic of Trinidad & Tobago
(Trinidad & Tobago),
9.75%, 07/01/20 $ 250
Republic of Turkey (Turkey),
80 11.38%, 11/27/06 90
250 9.88%, 03/19/08 261
220 12.00%, 12/15/08 249
260 11.75%, 06/15/10 286
Republic of Ukraine (Ukraine),
485 11.00%, 03/15/07, Regulation S 531
360 7.65%, 06/11/13 352
Republic of Venezuela (Venezuela),
429 1.88%, 12/18/07, Ser. DL, FRN 382
330 9.25%, 09/15/27 250
Russian Federation (Russia),
100 11.00%, 07/24/18 133
1,550 5.00%, 03/31/30, SUB 1,418
90 State of Qatar (Qatar),
9.75%, 06/15/30, # 119
U.K. Treasury Gilt (United Kingdom),
GBP 330 6.50%, 12/07/03 + 526
GBP 300 8.50%, 12/07/05 + 519
GBP 170 8.00%, 09/27/13 + 341
United Mexican States (Mexico),
60 10.38%, 02/17/09, Ser. XW 75
180 9.88%, 02/01/10 223
60 6.38%, 01/16/13, MTN 60
30 11.38%, 09/15/16 41
105 8.13%, 12/30/19 113
110 8.00%, 09/24/22, Ser. A, MTN 115
55 11.50%, 05/15/26 77
------------------------------------------------------------------------------
Total Foreign Government Securities 27,958
(Cost $24,981)
==============================================================================
CORPORATE NOTES & BONDS -- 29.8%
ADVERTISING -- 0.1%
130 RH Donnelley Finance Corp. I,
10.88%, 12/15/12, # 151
AEROSPACE -- 0.1%
100 L-3 Communications Corp.,
7.63%, 06/15/12 104
AGRICULTURAL PRODUCTION/SERVICES -- 0.0% ^
$ 30 RJ Reynolds Tobacco Holdings, Inc.,
7.88%, 05/15/09, Ser. B $ 27
AIRLINES -- 0.6%
646 Northwest Airlines Corp.,
8.07%, 10/01/19, Ser. 2000-1 695
AUTOMOTIVE-- 1.5%
45 Dana Corp., 9.00%, 08/15/11 + 47
Ford Motor Credit Co.,
575 7.38%, 10/28/09 + 593
250 7.88%, 06/15/10 + 262
200 General Motors Acceptance Corp.,
6.88%, 09/15/11 + 200
General Motors Corp.,
240 8.25%, 07/15/23 + 239
450 8.38%, 07/15/33 + 445
100 TRW Automotive, Inc.,
11.00%, 02/15/13, # 115
------------------------------------------------------------------------------
1,901
==============================================================================
BANKING -- 1.5%
175 Abbey National Capital Trust I,
8.96%, 12/31/49, FRN + 226
300 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, 12/29/49, FRN, # + 317
250 First Union National Bank,
7.80%, 08/18/10 + 295
Korea Development Bank (South Korea),
160 7.13%, 04/22/04 165
110 7.38%, 09/17/04 116
425 RBS Capital Trust I,
4.71%, 12/31/49, FRN 391
425 Scotland International Finance No. 2 BV
(The Netherlands), 4.25%, 05/23/13, # 392
------------------------------------------------------------------------------
1,902
==============================================================================
BROADCASTING/CABLE -- 0.5%
80 British Sky Broadcasting PLC
(United Kingdom) (Yankee),
6.88%, 02/23/09 + 86
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BROADCASTING/CABLE -- CONTINUED
$ 200 DirecTV Holdings LLC,
8.38%, 03/15/13, # + $ 218
150 EchoStar DBS Corp.,
9.38%, 02/01/09 + 160
120 Mediacom LLC/Mediacom Capital Corp.,
9.50%, 01/15/13 121
------------------------------------------------------------------------------
585
==============================================================================
BUSINESS SERVICES -- 0.3%
150 American Color Graphics, Inc.,
10.00%, 06/15/10, MTN, # + 156
120 Electronic Data Systems Corp.,
6.00%, 08/01/13, # + 110
150 Iron Mountain, Inc., 8.63%, 04/01/13 157
------------------------------------------------------------------------------
423
==============================================================================
CHEMICALS -- 0.5%
Equistar Chemicals LP/Equistar
Funding Corp.,
80 10.13%, 09/01/08 + 80
100 10.63%, 05/01/11, # + 100
100 Huntsman ICI Chemicals LLC,
10.13%, 07/01/09 95
150 Lyondell Chemical Co.,
10.88%, 05/01/09 143
75 Noveon, Inc., 11.00%, 02/28/11, Ser. B 83
65 PolyOne Corp., 10.63%, 05/15/10 55
70 The Scotts Co., 8.63%, 01/15/09 73
------------------------------------------------------------------------------
629
==============================================================================
COMPUTER SOFTWARE -- 0.1%
150 Unisys Corp., 6.88%, 03/15/10 149
CONSTRUCTION -- 0.7%
210 D.R. Horton, Inc., 9.38%, 03/15/11 + 223
175 Pulte Homes, Inc., 6.38%, 05/15/33 157
200 Standard-Pacific Corp.,
9.50%, 09/15/10 215
200 Terex Corp., 10.38%, 04/01/11, Ser. B 222
------------------------------------------------------------------------------
817
==============================================================================
CONSUMER PRODUCTS -- 0.1%
$ 100 Moore North America Finance, Inc.,
7.88%, 01/15/11, # $ 104
CONSUMER SERVICES -- 0.3%
150 Corrections Corp. of America,
7.50%, 05/01/11 + 152
250 Service Corp. International,
6.00%, 12/15/05 250
------------------------------------------------------------------------------
402
==============================================================================
DISTRIBUTION -- 0.1%
75 Aviall, Inc., 7.63%, 07/01/11, # + 74
DIVERSIFIED -- 0.9%
750 General Electric Capital Corp.,
5.45%, 01/15/13, Ser. A, MTN + 759
365 Tyco International Group SA
(Luxembourg) (Yankee),
6.38%, 10/15/11 365
------------------------------------------------------------------------------
1,124
==============================================================================
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.1%
100 Sanmina-SCI Corp., 10.38%, 01/15/10 114
ENTERTAINMENT/LEISURE -- 0.3%
150 Park Place Entertainment Corp.,
7.00%, 04/15/13 155
110 Six Flags, Inc., 8.88%, 02/01/10 101
75 Worldspan LP/WS Financing Corp.,
9.63%, 06/15/11, # 78
------------------------------------------------------------------------------
334
==============================================================================
ENVIRONMENTAL SERVICES -- 0.2%
250 Allied Waste North America,
10.00%, 08/01/09, Ser. B + 271
FINANCIAL SERVICES -- 7.9%
65 Arch Western Finance LLC,
6.75%, 07/01/13, # + 64
350 Capital One Bank, 4.88%, 05/15/08 + 348
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 200 Capital One Financial Corp.,
8.75%, 02/01/07 + $ 218
350 Credit Suisse First Boston USA, Inc.,
6.50%, 01/15/12 + 377
750 Destination Film Funding Corp.,
6.25%, 10/15/03, # 733
100 Eircom Funding (Ireland),
8.25%, 08/15/13, # + 105
325 Erac USA Finance Co.,
9.13%, 12/15/04, MTN, # + 352
250 H&E Equipment Services LLC/H&E
Finance Corp., 11.13%, 06/15/12 + 210
125 HSBC Capital Funding LP
(Channel Islands),
4.61%, 12/31/49, FRN, # + 116
200 ING Capital Funding Trust III,
8.44%, 12/31/49, FRN 234
150 IOS Capital LLC, 7.25%, 06/30/08 142
Morgan Stanley Tracers
(Traded Custody Receipts),
1,943 5.88%, 03/01/07, FRN, # 2,103
1,500 6.80%, 06/15/12, # 1,659
220 7.70%, 03/01/32, FRN, # 251
600 Morgan Stanley, 6.75%, 04/15/11 661
200 Nexstar Finance LLC/Nexstar
Finance, Inc., 12.00%, 04/01/08 224
Pemex Project Funding Master
Trust (Mexico),
175 8.50%, 02/15/08 198
120 8.00%, 11/15/11, MTN, # 131
90 7.38%, 12/15/14 92
1,007 Targeted Return Index (TRAINS),
6.96%, 01/15/12, Ser. 2002-10, FRN, # 1,106
250 UBS Preferred Funding Trust I,
8.62%, 12/31/49, FRN 301
------------------------------------------------------------------------------
9,625
==============================================================================
FOOD/BEVERAGE PRODUCTS -- 0.3%
200 Del Monte Corp.,
9.25%, 05/15/11, Ser. B + 212
150 Swift & Co., 10.13%, 10/01/09 161
------------------------------------------------------------------------------
373
==============================================================================
HEALTH CARE/HEALTH CARE SERVICES -- 0.9%
$ 150 Alliance Imaging, Inc.,
10.38%, 04/15/11 + $ 156
90 Ardent Health Services,
10.00%, 08/15/13, # + 91
100 Fresenius Medical Care Capital Trust IV,
7.88%, 06/15/11 + 104
265 HCA, Inc., 6.75%, 07/15/13 + 264
700 Mariner Health Group, Inc.,
9.50%, 04/01/06, Ser. B (d) (f) * 0^^
100 Medex, Inc., 8.88%, 05/15/13, # 104
135 Tenet Healthcare Corp.,
7.38%, 02/01/13 133
200 Triad Hospitals, Inc.,
8.75%, 05/01/09, Ser. B 213
------------------------------------------------------------------------------
1,065
==============================================================================
HOTELS/OTHER LODGING -- 0.5%
100 Ameristar Casinos, Inc.,
10.75%, 02/15/09 + 112
100 Mandalay Resort Group,
10.25%, 08/01/07, Ser. B 112
200 MGM Mirage, Inc., 8.38%, 02/01/11 219
100 Station Casinos, Inc., 9.88%, 07/01/10 110
------------------------------------------------------------------------------
553
==============================================================================
INSURANCE -- 0.4%
225 Aegon NV (The Netherlands),
4.75%, 06/01/13 + 212
200 AXA (France), 8.60%, 12/15/30 + 237
------------------------------------------------------------------------------
449
==============================================================================
MACHINERY & ENGINEERING EQUIPMENT -- 0.1%
150 Case New Holland, Inc.,
9.25%, 08/01/11, # + 158
MULTI-MEDIA -- 1.2%
200 American Media Operation, Inc.,
10.25%, 05/01/09, Ser. B + 214
300 AOL Time Warner, Inc.,
7.63%, 04/15/31 + 324
90 CSC Holdings, Inc.,
7.63%, 04/01/11, Ser. B + 90
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MULTI-MEDIA -- CONTINUED
$ 100 Lodgenet Entertainment Corp.,
9.50%, 06/15/13 $ 103
200 Nextmedia Operating, Inc.,
10.75%, 07/01/11 222
150 Primedia, Inc., 8.88%, 05/15/11 157
200 Radio One, Inc.,
8.88%, 07/01/11, Ser. B 219
100 Vivendi Universal SA (France),
6.25%, 07/15/08, # 100
------------------------------------------------------------------------------
1,429
==============================================================================
OFFICE/BUSINESS EQUIPMENT -- 0.2%
Xerox Corp.,
5 7.13%, 06/15/10 5
210 7.63%, 06/15/13 205
------------------------------------------------------------------------------
210
==============================================================================
OIL & GAS -- 2.5%
175 Amerada Hess Corp., 7.30%, 08/15/31 + 181
150 Chesapeake Energy Corp.,
8.13%, 04/01/11 + 157
300 Denbury Resources, Inc.,
7.50%, 04/01/13 + 298
175 Devon Financing Corp. ULC,
7.88%, 09/30/31 + 202
100 Frontier Oil Corp., 11.75%, 11/15/09 + 110
Key Energy Services, Inc.,
145 8.38%, 03/01/08, Ser. C 152
155 6.38%, 05/01/13 147
500 Lasmo USA, Inc., 7.50%, 06/30/06 559
80 Petroleos Mexicanos (Mexico) (Yankee),
9.25%, 03/30/18 91
200 Pogo Producing Co.,
8.25%, 04/15/11, Ser. B 213
80 Tesoro Petroleum Corp.,
8.00%, 04/15/08 83
100 The Premcor Refining Group, Inc.,
7.50%, 06/15/15, # 97
175 Valero Energy Corp., 7.50%, 04/15/32 188
500 Westport Resources Corp.,
8.25%, 11/01/11 534
------------------------------------------------------------------------------
3,012
==============================================================================
PACKAGING -- 0.5%
$ 100 Constar International, Inc.,
11.00%, 12/01/12 + $ 90
Crown European Holdings SA (France),
150 9.50%, 03/01/11, # + 160
50 10.88%, 03/01/13, # + 55
200 Owens-Brockway Glass Container, Inc.,
8.88%, 02/15/09 210
100 Stone Container Corp.,
9.75%, 02/01/11 109
------------------------------------------------------------------------------
624
==============================================================================
PAPER/FOREST PRODUCTS -- 0.5%
200 Abitibi-Consolidated, Inc. (Canada)
(Yankee), 6.00%, 06/20/13 + 180
125 Buckeye Technologies, Inc.,
8.50%, 12/15/05 + 123
Georgia-Pacific Corp.,
125 8.88%, 02/01/10, # + 132
100 9.50%, 12/01/11 + 106
50 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 49
------------------------------------------------------------------------------
590
==============================================================================
PHARMACEUTICALS -- 0.1%
100 Omnicare, Inc., 6.13%, 06/01/13 96
PIPELINES -- 0.5%
70 Aquila, Inc., 14.88%, 07/01/12 + 78
50 Dynegy Holdings, Inc.,
10.13%, 07/15/13, # + 52
El Paso Corp.,
280 6.75%, 05/15/09 + 239
45 7.88%, 06/15/12, # + 40
Williams Companies, Inc.,
100 8.63%, 06/01/10 104
110 8.13%, 03/15/12 111
------------------------------------------------------------------------------
624
==============================================================================
PRINTING & PUBLISHING -- 0.1%
100 Von Hoffmann Press, Inc.,
10.25%, 03/15/09 107
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
REAL ESTATE INVESTMENT TRUST -- 0.5%
$ 180 Host Marriott LP,
9.25%, 10/01/07, Ser. G $ 190
200 MeriStar Hospitality Operating
Partnership LP/MeriStar Hospitality
Finance Corp., 10.50%, 06/15/09 204
250 Ventas Realty LP/Ventas Capital Corp.,
9.00%, 05/01/12 267
------------------------------------------------------------------------------
661
==============================================================================
RESTAURANTS/FOOD SERVICES -- 0.2%
250 Yum! Brands, Inc., 8.88%, 04/15/11 282
RETAILING -- 0.3%
150 JC Penney Co., Inc., 7.60%, 04/01/07 156
150 Sears Roebuck Acceptance Corp.,
7.00%, 02/01/11 167
30 Sonic Automotive, Inc.,
8.63%, 08/15/13, # 30
60 The Gap, Inc., 6.90%, 09/15/07 + 63
------------------------------------------------------------------------------
416
==============================================================================
SEMI-CONDUCTORS -- 0.1%
95 AMI Semiconductor, Inc.,
10.75%, 02/01/13 + 106
SHIPPING/TRANSPORTATION -- 0.4%
200 Teekay Shipping Corp. (Bahamas),
8.88%, 07/15/11 217
300 Union Pacific Corp., 6.65%, 01/15/11 330
------------------------------------------------------------------------------
547
==============================================================================
STEEL -- 0.3%
40 AK Steel Corp., 7.88%, 02/15/09 + 32
200 Euramax International LTD,
8.50%, 08/15/11, # + 202
75 IPSCO, Inc. (Canada),
8.75%, 06/01/13, # 77
------------------------------------------------------------------------------
311
==============================================================================
TELECOMMUNICATIONS -- 2.8%
175 AT&T Wireless Services, Inc.,
8.13%, 05/01/12 + 201
55 Avaya, Inc., 11.13%, 04/01/09 + 62
Deutsche Telekom International
Finance BV (The Netherlands),
$ 255 8.50%, 06/15/10 + $ 300
100 8.75%, 06/15/30 + 120
100 France Telecom SA (France),
10.00%, 03/01/31 + 129
90 Insight Midwest LP/Insight Capital, Inc.,
10.50%, 11/01/10 95
75 Koninklijke KPN NV (The Netherlands),
8.00%, 10/01/10 88
300 Nextel Communications, Inc.,
9.38%, 11/15/09 323
70 Nortel Networks LTD,
6.13%, 02/15/06 68
195 Qwest Corp., 8.88%, 03/15/12, # 209
200 Rogers Wireless Communications, Inc.
(Canada), 9.63%, 05/01/11 220
Sprint Capital Corp.,
200 6.90%, 05/01/19 197
225 8.75%, 03/15/32 256
600 TCI Communications, Inc.,
8.75%, 08/01/15 726
45 Triton PCS, Inc., 8.50%, 06/01/13, # 48
200 TSI Telecommunication Services, Inc.,
12.75%, 02/01/09, Ser. B 198
175 Verizon Global Funding Corp.,
7.38%, 09/01/12 199
------------------------------------------------------------------------------
3,439
==============================================================================
TELECOMMUNICATIONS EQUIPMENT -- 0.0% ^
55 ACC Escrow Corp., 10.00%, 08/01/11, # + 59
TRANSPORTATION -- 0.1%
135 CP Ships LTD (Canada),
10.38%, 07/15/12 + 149
UTILITIES -- 1.5%
300 AEP Texas Central Co.,
5.50%, 02/15/13, # + 295
70 Allegheny Energy Supply,
8.75%, 04/15/12, # + 58
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
UTILITIES -- CONTINUED
Calpine Corp.,
$ 225 7.88%, 04/01/08 + $ 167
100 8.50%, 02/15/11 + 75
100 8.75%, 07/15/13, # + 94
190 CenterPoint Energy Resources Corp.,
7.88%, 04/01/13, # + 204
130 CMS Energy Corp.,
7.75%, 08/01/10, # + 123
175 Dominion Resources, Inc.,
6.30%, 03/15/33 + 168
70 Edison Mission Energy,
9.88%, 04/15/11, # + 57
45 Reliant Resources, Inc.,
9.50%, 07/15/13, # 41
80 TECO Energy, Inc., 7.20%, 05/01/11 76
The AES Corp.,
45 8.75%, 06/15/08 + 42
218 8.88%, 02/15/11 + 203
275 TXU Energy Co., 7.00%, 03/15/13, # 283
------------------------------------------------------------------------------
1,886
==============================================================================
Total Corporate Notes & Bonds 36,577
(Cost $36,389)
==============================================================================
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 11.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
4,623 Credit Suisse First Boston Mortgage
Securities Corp., 1.01%, 06/25/20,
Ser. 1997-2X, FRN, IO, # + 113
12 DLJ Mortgage Acceptance Corp.,
39.45%, 07/28/27,
Ser. 1997-D, FRN, # + 12
------------------------------------------------------------------------------
125
==============================================================================
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 11.0%
Federal National Mortgage Association,
7,500 5.50%, 09/25/33, TBA 7,467
6,000 6.00%, 09/25/33, TBA 6,099
------------------------------------------------------------------------------
13,566
==============================================================================
Total Residential Mortgage
Backed Securities 13,691
(Cost $13,825)
==============================================================================
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 8.1%
$ 315 COMM, 2.39%, 12/16/11,
Ser. 2000-FL1A, Class H, FRN, # + $ 315
Credit Suisse First Boston Mortgage
Securities Corp.,
1,155 7.29%, 09/15/09,
Ser. 1999-C1, Class A2 + 1,304
300 6.38%, 12/16/35,
Ser. 2001-CK1, Class A3 + 322
968 First Union Commercial Mortgage
Trust, 5.73%, 10/15/35, Ser. 1999-C1,
Class A + 1,013
1,520 Greenwich Capital Commercial
Funding Corp., 3.86%, 07/05/12,
Ser. 2003-C1, Class A3 + 1,404
1,200 Heller Financial Commercial Mortgage
Asset Corp., 6.85%, 05/15/31,
Ser. 1999-PH1, Class A2 1,337
Morgan Stanley Capital I,
300 8.20%, 12/03/05, Ser. 2000-HG,
Class E, FRN, # 321
1,000 7.70%, 10/03/30, Ser. 1997-XL1 G, # 910
1,330 Morgan Stanley Dean Witter Capital I,
6.09%, 04/15/34, Ser. 2002-HQ,
Class A2 1,440
1,440 Nomura Asset Securities Corp., 6.59%,
03/15/30, Ser. 1998-D6, Class A1B 1,592
------------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 9,958
(Cost $9,480)
==============================================================================
PRIVATE PLACEMENTS -- 13.1%
CO-OP APARTMENTS -- 8.5%
2,614 127-129-131 West 96th Street Note,
Secured by First Mortgage and
Agreement on Co-op Apartment
Building In New York City,
6.85%, 12/01/18, #, (f) (i) 2,755
1,483 127-129-131 West 96th Street Note,
Secured by Second Mortgage and
Agreement on Co-op Apartment
Building In New York City,
6.85%, 11/01/27, (f) (i) 1,562
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
CO-OP APARTMENTS -- CONTINUED
$ 991 14-16 East 17th St., Secured by
First Mortgage and Agreement on
Co-op Apartment Building in Brooklyn,
New York,
7.00%, 03/01/12, #, (f) (i) $ 995
1,383 270 5th Ave., Secured by First
Mortgage and Agreement on
Co-op Apartment Building in Brooklyn,
New York,
6.93%, 08/01/18, #, (f) (i) 1,464
549 3512 Oxford Ave., Secured by First
Mortgage and Agreement on
Co-op Apartment Building in Riverdale,
New York, 8.45%, 06/01/17, #, (f) (i) 628
498 42 155th St., 7.00%,
01/01/14, #, (f) (i) 543
754 421 West 57th St. Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building
In New York City,
8.98%, 07/01/22, #, (f) (i) 874
436 482 East 9th St., Kensington
Gardens Corp., Secured by First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
6.85%, 12/01/18, #, (f) (i) 457
550 Greystone Tenants,
8.50%, 06/01/17, #, (f) (i) 612
454 Our House Mercer,
7.49%, 04/01/23, #, (f) (i) 504
------------------------------------------------------------------------------
10,394
==============================================================================
CONVENTIONAL MULTI-FAMILY -- 4.6%
1,426 PC Bel Clare Estates,
6.81%, 08/01/18, #, (f) 1,533
1,211 PC Northstar Terrace,
6.63%, 10/01/18, #, (f) (i) 1,258
1,551 PC Shangri La MHC Co.,
6.40%, 10/01/08, #, (f) (i) 1,649
1,200 Three Lakes Estate,
6.06%, 10/01/13, #, (f) (i) 1,221
------------------------------------------------------------------------------
5,661
==============================================================================
Total Private Placements 16,055
(Cost $15,108)
==============================================================================
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------
WARRANT -- 0.0%
FOREIGN GOVERNMENT SECURITIES -- 0.0%
1 Republic of Venezuela
(Oil Obligation) (Venezuela),
expires 4/15/20, FRN * (f)
(Cost $0) $ 0
------------------------------------------------------------------------------
Total Long-Term Investments 105,034
(Cost $100,581)
==============================================================================
<Caption>
PRINCIPAL
AMOUNT~
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 14.5%
U.S. TREASURY SECURITY -- 0.0% ^
$ 20 U.S. Treasury Bill, 0.93%, 11/20/03 @ + 20
(Cost $20)
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 14.5%
17,829 JPMorgan Prime Money
Market Fund (a) + 17,829
(Cost $17,829)
------------------------------------------------------------------------------
Total Short-Term Investments 17,849
(Cost $17,849)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 122,883
(COST $118,430)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<Page>
SUMMARY OF INVESTMENTS BY COUNTRY, AUGUST 31, 2003
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- ----------------------------------------------------------------------------------------------------
United States 73.9%
Germany 6.2
France 3.0
Russia 1.3
Brazil 1.2
Colombia 1.2
United Kingdom 1.2
Dominican Republic 1.0
Mexico 1.0
Bulgaria 0.9
Panama 0.9
The Netherlands 0.9
Canada 0.8
Peru 0.8
Turkey 0.7
Ukraine 0.7
El Salvador 0.6
Malaysia 0.6
Philippines 0.6
South Africa 0.6
Venezuela 0.5
Other (below 0.5%) 1.4
- ----------------------------------------------------------------------------------------------------
TOTAL 100.0%
====================================================================================================
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- --------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
9 Euro-SHATZ September, 2003 $ 1,047 $ (8)
5 Euro-BOBL September, 2003 610 (14)
49 Treasury Bonds December, 2003 5,194 81
SHORT FUTURES OUTSTANDING
(8) Euro-BUND September, 2003 (1,004) 22
(5) Treasury Bonds December, 2003 (530) (6)
(96) 5 Year Treasury Notes December, 2003 (8,668) (16)
(79) 10 Year Treasury Notes December, 2003 (10,547) (69)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO BUY DATE VALUE (USD) 8/31/03 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------
290 EUR 9/22/03 $ 327 $ 318 $ (9)
434 NZD 9/22/03 252 250 (2)
- -----------------------------------------------------------------------------------------------
$ 579 $ 568 $ (11)
===============================================================================================
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 8/31/03 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------
10,291 EUR 9/22/03 $ 11,710 $ 11,292 $ 418
875 GBP 9/22/03 1,398 1,382 16
434 NZD 9/22/03 249 250 (1)
506 CAD 9/22/03 362 364 (2)
- -----------------------------------------------------------------------------------------------
$ 13,719 $ 13,288 $ 431
===============================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<Page>
JPMorgan Short Term Bond Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 68.5%
U.S. GOVERNMENT AGENCY SECURITIES -- 12.7%
$ 5,250 Federal Home Loan Bank,
2.39%, 12/29/05 + $ 5,253
Federal Home Loan Mortgage Corp.,
1,800 1.50%, 08/15/05 + 1,777
38,100 2.50%, 12/04/06, MTN + 37,628
Federal National Mortgage Association,
4,247 0.91%, 01/01/04, MTN, FRN + 4,247
1,975 2.55%, 05/19/05, MTN + 1,980
29,550 1.88%, 09/15/05 + 29,407
11,200 2.65%, 02/13/06 + 11,190
46,000 2.75%, 08/11/06 + 45,884
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 137,366
(Cost $138,070)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 2.9%
Province of Ontario (Canada),
7,200 4.20%, 06/30/05, (Yankee) + 7,470
8,100 2.63%, 12/15/05 + 8,146
Republic of Italy (Italy),
13,850 4.62%, 06/15/05, MTN + 14,448
1,000 2.50%, 03/31/06, MTN + 999
------------------------------------------------------------------------------
Total Foreign Government Securities 31,063
(Cost $30,336)
==============================================================================
SUPRANATIONAL NOTES & BONDS -- 0.5%
3,800 European Investment Bank,
4.00%, 08/30/05 + 3,949
1,800 Inter-American Development Bank,
3.88%, 09/27/04 + 1,855
------------------------------------------------------------------------------
Total Supranational Notes & Bonds 5,804
(Cost $5,594)
==============================================================================
STATE AND MUNICIPAL OBLIGATIONS -- 0.3%
ILLINOIS -- 0.2%
2,350 Illinois State, 2.50%, 06/01/08 + 2,217
NORTH CAROLINA -- 0.1%
1,285 North Carolina Municipal
Power Agency No. 1,
Catawba, Taxable, Ser. B, Rev.,
3.26%, 01/01/05 1,287
------------------------------------------------------------------------------
Total State and Municipal Obligations 3,504
(Cost $3,633)
==============================================================================
CORPORATE NOTES & BONDS -- 17.9%
AUTOMOTIVE -- 1.0%
General Motors Acceptance Corp.,
$ 1,000 4.75%, 10/15/03, MTN, FRN + $ 1,000
8,250 6.38%, 01/30/04, MTN + 8,407
900 6.75%, 01/15/06 + 949
------------------------------------------------------------------------------
10,356
==============================================================================
BANKING -- 1.9%
1,200 Capital One Bank,
6.88%, 02/01/06, MTN + 1,287
10,500 Northern Rock PLC (United Kingdom),
1.16%, 03/18/04, MTN, FRN, # + 10,501
1,950 Popular North America, Inc.,
4.25%, 04/01/08 + 1,952
4,750 US Bancorp, 2.75%, 03/30/06, MTN 4,768
2,650 Wachovia Corp., 3.50%, 08/15/08 2,584
------------------------------------------------------------------------------
21,092
==============================================================================
FINANCIAL SERVICES -- 11.3%
4,350 Caterpillar Financial Services Corp.,
2.59%, 07/15/06, MTN + 4,330
11,750 CIT Group, Inc.,
1.40%, 02/14/05, MTN, FRN + 11,741
4,250 Citigroup, Inc., 5.75%, 05/10/06 + 4,567
4,750 Countrywide Home Loans, Inc.,
3.50%, 12/19/05, Ser. K, MTN 4,841
Counts Trusts,
3,450 1.91%, 08/15/07, Ser. 2002-10, FRN, # + 3,450
3,450 1.96%, 08/15/07, Ser. 2002-11, FRN, # + 3,450
13,900 General Electric Capital Corp.,
2.85%, 01/30/06, Ser. A, MTN + 14,037
Household Finance Corp.,
3,050 1.49%, 05/28/04, MTN, FRN + 3,057
3,250 3.38%, 02/21/06, MTN + 3,305
1,150 Household Netherlands BV
(The Netherlands) (Yankee),
6.20%, 12/01/03 + 1,163
2,555 International Lease Finance Corp.,
4.00%, 01/17/06, Ser. O, MTN + 2,606
6,100 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 + 5,923
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 8,300 Principal Life Global,
5.13%, 06/28/07, # + $ 8,691
Restructured Asset Securities with
Enhanced Returns (RACERS),
6,300 0.98%, 04/15/04,
Ser. 2002-35, Class C, FRN, # + 6,263
6,200 0.98%, 04/15/04,
Ser. 2002-40, Class C, FRN, # + 6,185
3,950 SLM Corp., 3.95%, 08/15/08,
Ser. A, MTN 3,915
Special Purpose Accounts Receivable
Cooperative Corp. (SPARCS),
5,800 1.98%, 05/23/04, Ser. 2002-6, FRN, # 5,809
2,900 1.43%, 05/23/05, Ser. 2003-3, FRN, # 2,899
15,000 1.71%, 05/15/06, Ser. 2003-4 CL 15,023
5,050 The Bear Stearns Co., Inc.,
6.50%, 05/01/06 + 5,508
6,280 Washington Mutual Bank FA,
1.45%, 05/14/04, FRN 6,294
------------------------------------------------------------------------------
123,057
==============================================================================
INSURANCE -- 0.9%
5,350 ASIF Global Financing,
1.37%, 03/14/06, FRN, # + 5,347
3,800 Metropolitan Life Global Funding I,
4.75%, 06/20/07, # + 3,984
------------------------------------------------------------------------------
9,331
==============================================================================
OIL & GAS -- 1.1%
2,500 BP Capital Markets PLC
(United Kingdom),
2.35%, 06/15/06 + 2,485
Chrevron Texaco Capital Co.,
550 3.50%, 09/17/07 + 553
3,750 3.38%, 02/15/08 + 3,712
4,600 Texas Municipal Gas Corp.,
2.60%, 07/01/07, + 4,595
------------------------------------------------------------------------------
11,345
==============================================================================
PAPER/FOREST PRODUCTS -- 0.3%
3,200 Weyerhaeuser Co.,
2.24%, 09/15/03, FRN + 3,200
PHARMACEUTICALS -- 0.9%
$ 9,150 Abbott Laboratories,
5.13%, 07/01/04 + $ 9,428
SHIPPING/TRANSPORTATION -- 0.2%
2,600 FedEx Corp., 6.63%, 02/12/04 + 2,658
UTILITIES -- 0.3%
1,500 AEP Texas Central Co.,
3.00%, 02/15/05, # + 1,516
1,700 National Rural Utilities
Cooperative Finance Corp.,
3.00%, 02/15/06 + 1,712
------------------------------------------------------------------------------
3,228
==============================================================================
Total Corporate Notes & Bonds 193,695
(Cost $192,697)
==============================================================================
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 11.9%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.1%
529 Countrywide Home Loans, Inc.,
5.19%, 05/19/32,
Ser. 2002-7, Class 3A2, FRN + 529
1,864 Credit Suisse First Boston
Mortgage Securities Corp.,
1.76%, 11/25/31,
Ser. 2001-26, Class 3A2, FRN + 1,871
Federal Home Loan Mortgage Corp.,
7,622 6.00%, 08/15/08, Ser. 1565, Class P + 8,023
9,000 6.50%, 11/15/27, Ser 2413, Class ME + 9,073
Federal National Mortgage Association,
1,900 5.50%, 10/25/11,
Ser. 2002-57, Class PC + 1,936
1,900 5.50%, 03/25/12,
Ser. 2002-70, Class PC + 1,932
Government National
Mortgage Association,
3,760 1.61%, 04/16/32,
Ser. 2002-24, Class FA, FRN + 3,776
5,263 1.61%, 05/16/32,
Ser. 2002-27, Class FA, FRN + 5,301
487 Residential Accredit Loans, Inc.,
1.66%, 08/25/31, Ser. 2001-QS11,
Class A5, FRN + 488
------------------------------------------------------------------------------
32,929
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MORTGAGE BACKED PASS-THROUGH SECURITY -- 8.8%
$ 96,300 Federal National Mortgage Association,
5.50%, 09/25/33, TBA $ 95,879
------------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 128,808
(Cost $127,351)
==============================================================================
COMMERCIAL MORTGAGE BACKED SECURITIES -- 5.2%
10,580 CalSTRS Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # + 10,638
3,250 Calwest Industrial Trust,
1.38%, 06/15/15, Ser. 2003-CALA,
Class A, FRN, # + 3,250
COMM,
1,889 2.39%, 12/16/11, Ser. 2000-FL1A,
Class H, FRN, # + 1,889
2,315 2.26%, 11/15/12, Ser. 2000-FL3A,
Class KWT, FRN, # + 2,314
2,720 Credit Suisse First Boston
Mortgage Securities Corp.,
7.15%, 06/20/29, Ser. 1997-C1,
Class A1B + 2,757
5,190 First Union-Lehman Brothers
Commercial Mortgage Securities, Inc.,
7.38%, 04/18/29, Ser. 1997-C1,
Class A3 + 5,806
5,750 LB-UBS Commercial Mortgage Trust,
3.48%, 07/15/27, Ser. 2003-C5,
Class A2 + 5,567
Lehman Large Loan,
3,451 6.79%, 10/12/34,
Ser. 1997-LL1, Class A1 3,560
2,300 6.84%, 10/12/34,
Ser. 1997-LL1, Class A2 2,418
3,000 Mall of America Capital Co. LLC,
1.41%, 03/12/10, Ser. 2000-1,
Class A, FRN, # + 3,004
Morgan Stanley Capital I,
3,655 6.22%, 06/03/30, Ser. 1998-XL1,
Class A1 + 3,848
7,400 6.48%, 11/15/30, Ser. 1998-HF2,
Class A2 + 8,143
$ 2,514 Mortgage Capital Funding, Inc.,
6.00%, 11/18/31, Ser. 1998-MC3,
Class A1 + $ 2,666
------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 55,860
(Cost $55,339)
==============================================================================
ASSET BACKED SECURITIES -- 17.1%
6,000 American Express Credit Account
Master Trust,
1.25%, 09/15/08, Ser. 2001-1,
Class A, FRN + 6,016
4,900 American Express Master Trust,
1.18%, 12/15/05, Ser. 2002-1,
Class A, FRN + 4,900
AmeriCredit Automobile
Receivables Trust,
6,903 1.31%, 10/12/06, Ser. 2002-A,
Class A3, FRN + 6,902
3,600 4.41%, 11/12/08, Ser. 2001-D,
Class A4 + 3,703
11,400 Bank One Issuance Trust,
4.16%, 01/15/08, Ser. 2002-A2,
Class A2 + 11,806
3,000 Capital Auto Receivables Asset Trust,
1.20%, 04/17/06, Ser. 2002-5,
Class A3A, FRN + 3,000
6,400 Capital One Multi-Asset Execution Trust,
1.22%, 05/15/08, Ser. 2003-A2,
Class A2, FRN + 6,400
Citibank Credit Card Issuance Trust,
5,600 2.70%, 01/15/08, Ser. 2003-A2,
Class A2 + 5,617
5,050 2.07%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 5,079
1,125 Citibank Credit Card Master Trust I,
0.00%, 08/15/06, Ser. 1997-6,
Class A, PO + 1,109
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,750 Comed Transitional Funding Trust,
5.44%, 03/25/07, Ser. 1998-1,
Class A5 + $ 2,842
899 Countrywide Asset-Backed Certificates,
1.45%, 04/25/32, Ser. 2001-4,
Class A, FRN + 899
Daimler Chrysler Auto Trust,
952 6.66%, 01/08/05, Ser. 2000-D,
Class A3 + 956
2,650 3.85%, 04/06/06, Ser. 2002-A,
Class A3 + 2,702
Discover Card Master Trust I,
4,750 1.18%, 07/15/07, Ser. 2002-1,
Class A, FRN + 4,750
6,520 1.29%, 11/15/07, Ser. 2000-5,
Class A, FRN + 6,535
5,735 1.17%, 04/15/08, Ser. 2002-4,
Class A, FRN + 5,738
1,400 1.26%, 09/15/08, Ser. 2001-3,
Class A, FRN + 1,404
93 EQCC Home Equity Loan Trust,
6.41%, 12/15/04, Ser. 1997-3, Class A8 + 94
3,308 EQCC Trust,
1.46%, 11/25/31, Ser. 2002-1,
Class 2A, FRN + 3,312
4,800 First USA Credit Card Master Trust,
1.47%, 11/20/06, Ser. 2001- 2,
Class B, FRN + 4,804
758 Ford Credit Auto Owner Trust,
4.83%, 02/15/05, Ser. 2001-C, Class A4 + 764
8,450 Ford Credit Floorplan Master
Owner Trust,
1.25%, 07/15/08, Ser. 2001-2,
Class A, FRN + 8,473
Honda Auto Receivables Owner Trust,
4,500 1.92%, 11/20/06, Ser. 2003-1, Class A3 + 4,504
14,205 2.48%, 07/18/08, Ser. 2003-1, Class A4 + 14,158
12,000 Household Automotive Trust,
3.44%, 05/18/09, Ser. 2002-3,
Class A4A + 12,118
$ 2,950 LB-UBS Commercial Mortgage Trust,
3.32%, 03/15/27, Ser. 2003-C1,
Class A2 + $ 2,871
Onyx Acceptance Grantor Trust,
4,100 5.49%, 11/15/07, Ser. 2001-B, Class A4 + 4,236
5,000 5.23%, 05/15/08, Ser. 2001-C, Class A4 + 5,155
2,920 Option One Mortgage Loan Trust,
1.40%, 02/25/32, Ser. 2002-1,
Class A, FRN + 2,921
3,500 Peco Energy Transition Trust,
5.80%, 03/01/07, Ser. 1999-A,
Class A4 + 3,635
715 Providian Home Equity Loan Trust,
1.40%, 06/25/25, Ser. 1999-1,
Class A, FRN + 716
3,344 Residential Asset Securities Corp.,
2.47%, 08/25/22, Ser. 2002-KS5,
Class AIB2 + 3,349
2,383 Sears Credit Account Master Trust,
7.00%, 07/15/08, Ser. 1996-3, Class A 2,444
4,250 SLM Student Loan Trust,
2.16%, 03/15/33, Ser. 2003-4,
Class A5A, # 4,238
Wachovia Asset Securitization, Inc.,
4,300 1.54%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 4,308
6,982 1.40%, 03/25/33, Ser. 2003-HE1,
Class A1, FRN 6,978
WFS Financial Owner Trust,
7,400 4.50%, 02/20/10, Ser. 2002-2,
Class A4, SUB 7,683
6,400 3.25%, 05/20/11, Ser. 2003-3, Class A4 6,351
404 World Omni Auto Receivables Trust,
5.30%, 02/20/05, Ser. 2001-A, Class A3 406
------------------------------------------------------------------------------
Total Asset Backed Securities 183,876
(Cost $182,540)
==============================================================================
Total Long-Term Investments 739,976
(Cost $735,560)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
62
<Page>
<Table>
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 31.5%
OPTION -- 0.0% ^
53,550 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.22,
expiring 10/08/03, European Style $ 79
(Cost $536)
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 0.2%
U.S. Treasury Bills,
$ 2,000 1.09%, 10/30/03 @ + 1,997
350 0.99%, 01/22/04 @ + 349
------------------------------------------------------------------------------
Total U.S. Treasury Securities 2,346
(Cost $2,345)
==============================================================================
U.S. GOVERNMENT AGENCY SECURITIES -- 7.7%
Federal Home Loan Mortgage Corp.,
23,000 1.07%, 01/07/04, DN 22,913
23,000 1.09%, 02/26/04, DN 22,877
Federal National Mortgage Association,
17,500 0.99%, 09/10/03, DN + 17,496
19,400 0.95%, 11/14/03, DN + 19,359
------------------------------------------------------------------------------
Total U.S. Government Agency
Securities 82,645
(Cost $82,646)
==============================================================================
MUNICIPAL SECURITIES -- 2.0%
DISTRICT OF COLUMBIA -- 0.8%
8,550 George Washington University,
Ser. A, Rev., FRDO, MBIA,
1.12%, 09/04/03 + 8,550
FLORIDA -- 0.2%
1,800 Florida Educational Loan Marketing
Corp., RAMS, Ser. A-2, Rev., FRDO,
1.12%, 09/26/03 + 1,800
NEW YORK -- 0.6%
6,200 New York State Dormitory Authority,
City University System, Fifth
Generation, Ser. C, Rev., CONS,
1.59%, 01/01/04 + 6,198
SOUTH CAROLINA -- 0.4%
$ 4,700 South Carolina Student Loan Corp.,
Education Loans, Ser. A-1, Rev., FRDO,
1.25%, 06/22/04 $ 4,700
------------------------------------------------------------------------------
Total Municipal Securities 21,248
(Cost $21,250)
==============================================================================
COMMERCIAL PAPER -- 5.7%
AUTOMOTIVE -- 1.5%
9,400 Daimler Chrysler N.A. Holdings Corp.,
1.23%, 09/23/03 + 9,393
6,495 General Motors Co., 1.35%, 10/02/03 6,487
------------------------------------------------------------------------------
15,880
==============================================================================
BANKING -- 2.6%
8,900 Commerzbank U.S. Finance,
1.11%, 10/01/03 + 8,892
5,700 Danske Bank AB (Denmark),
0.91%, 09/19/03 + 5,697
5,700 Swedbank (Sweden),
0.92%, 09/10/03 + 5,698
5,700 Westdeutsche Landesbank
Girozentrale (Germany),
0.91%, 09/12/03 + 5,698
1,300 Westpac Trust Securitization
(New Zealand), 1.04%, 11/13/03 + 1,297
------------------------------------------------------------------------------
27,282
==============================================================================
FINANCIAL SERVICES -- 0.6%
6,900 Cadbury Schwepps Finance PLC
(United Kingdom), 1.22%, 09/02/03 + 6,900
RETAILING -- 0.7%
7,600 Sears Roebuck Acceptance Corp.,
1.25%, 09/30/03 + 7,592
SHIPPING/TRANSPORTATION -- 0.3%
3,600 Union Pacific Corp., 1.50%, 09/05/03 + 3,599
------------------------------------------------------------------------------
Total Commercial Paper 61,253
(Cost $61,255)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
CERTIFICATES OF DEPOSIT -- 1.1%
$ 11,400 Nordea Bank
Finland PLC/New York (Yankee),
1.08%, 11/24/03, Floating Rate + $ 11,401
(Cost $11,390)
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 14.8%
159,388 JPMorgan Prime Money
Market Fund (a) + $ 159,388
(Cost $159,388)
------------------------------------------------------------------------------
Total Short-Term Investments 338,360
(Cost $338,810)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 1,078,336
(COST $1,074,370)
==============================================================================
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
230 Eurodollar December, 2003 $ 56,787 $ 68
1,763 Eurodollar March, 2004 434,117 430
388 Eurodollar June, 2004 95,138 (461)
SHORT FUTURES OUTSTANDING
(176) 2 Year Treasury Notes December, 2003 (37,496) (89)
(1,126) 5 Year Treasury Notes December, 2003 (123,702) (620)
</Table>
OPTION
<Table>
<Caption>
UNITS CALL OPTION WRITTEN VALUE
- -------------------------------------------------------------------------------------------------------
(53,550) Call Option on FNMA, 30 Year Fixed, 5.00%,
strike price of 101.22, expiring 10/08/03,
European Style $ (40)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------
Swap - price lock with UBS Warburg on U.S. Treasury Note,
2.63%, 05/15/08, price less 97.44, JPMorgan receives
negative, pays positive 09/03/03 $ 33,500 $ 192
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 2.63%, 05/15/08, price less 96.54,
JPMorgan receives negative, pays positive 09/15/03 51,703 (133)
Swap - price lock with Credit Suisse First Boston
International on U.S. Treasury Note, 1.13%, 06/30/05, price
less 98.54, JPMorgan receives positive, pays negative 09/26/03 347,050 685
Swap - price lock with Lehman Brothers Special Financing
on U.S. Treasury Note, 1.63%, 04/30/05, price less 99.97,
JPMorgan receives negative, pays positive 09/29/03 35,050 61
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<Page>
JPMorgan Short Term Bond Fund II
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 77.4%
U.S. TREASURY SECURITY -- 4.8%
$ 83,150 U.S. Treasury Note, 1.50%, 07/31/05 + $ 82,546
(Cost $82,712)
U.S. GOVERNMENT AGENCY SECURITIES -- 20.6%
Federal Home Loan Bank,
8,300 3.75%, 04/15/04 + 8,426
8,750 2.39%, 12/29/05 + 8,755
47,600 2.25%, 05/15/06 + 47,165
Federal Home Loan Mortgage Corp.,
3,100 1.50%, 08/15/05 + 3,061
67,200 2.50%, 12/04/06, MTN + 66,369
Federal National Mortgage Association,
49,750 1.88%, 09/15/05 + 49,509
18,800 2.65%, 02/13/06 + 18,783
42,265 2.25%, 05/15/06 + 41,860
59,900 2.75%, 08/11/06 + 59,747
8,700 4.75%, 01/02/07 + 9,100
40,667 Student Loan Marketing Association,
3.38%, 07/15/04 + 41,372
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 354,147
(Cost $356,145)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 2.4%
11,950 Province of Ontario (Canada) (Yankee),
4.20%, 06/30/05 12,398
Republic of Italy (Italy),
15,500 4.63%, 06/15/05, MTN + 16,170
13,200 2.50%, 03/31/06, MTN + 13,189
------------------------------------------------------------------------------
Total Foreign Government Securities 41,757
(Cost $41,011)
==============================================================================
SUPRANATIONAL NOTES & BONDS -- 0.8%
European Investment Bank,
1,000 4.00%, 03/15/05 + 1,031
8,900 4.00%, 08/30/05 + 9,248
2,600 Inter-American Development Bank,
3.88%, 09/27/04 + 2,680
------------------------------------------------------------------------------
Total Supranational Notes & Bonds 12,959
(Cost $12,523)
==============================================================================
STATE AND MUNICIPAL OBLIGATION -- 0.1%
NORTH CAROLINA -- 0.1%
$ 2,140 North Carolina Municipal Power
Agency No. 1, Catawba, Taxable,
Ser. B, Rev., 3.26%, 01/01/05 $ 2,143
(Cost $2,140)
CORPORATE NOTES & BONDS -- 18.3%
AUTOMOTIVE -- 0.2%
General Motors Acceptance Corp.,
1,600 4.75%, 10/15/03, MTN, FRN + 1,601
1,500 6.75%, 01/15/06 + 1,582
------------------------------------------------------------------------------
3,183
==============================================================================
BANKING -- 3.9%
250 Bank of America N.A.,
1.25%, 06/03/04, FRN + 250
2,100 Capital One Bank,
6.88%, 02/01/06, MTN + 2,252
32,100 KFW International Finance, Inc.,
4.25%, 04/18/05 + 33,311
15,800 Northern Rock PLC (United Kingdom),
1.16%, 03/18/04, MTN, FRN, # 15,803
3,250 Popular North America, Inc.,
4.25%, 04/01/08 3,253
7,900 US Bancorp, 2.75%, 03/30/06, MTN 7,930
4,350 Wachovia Corp., 3.50%, 08/15/08 4,242
------------------------------------------------------------------------------
67,041
==============================================================================
DIVERSIFIED -- 0.1%
2,250 General Electric Capital Corp.,
6.75%, 09/11/03, Ser. A, MTN + 2,253
FINANCIAL SERVICES -- 10.6%
7,400 Caterpillar Financial Services Corp.,
2.59%, 07/15/06, MTN + 7,367
700 CIT Group, Inc., 7.50%, 11/14/03 + 708
Citigroup, Inc.,
3,150 6.75%, 12/01/05 + 3,441
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 7,100 5.75%, 05/10/06 + $ 7,630
8,250 Countrywide Home Loans, Inc.,
3.50%, 12/19/05, Ser. K, MTN + 8,408
Counts Trusts,
6,050 1.91%, 08/15/07, Ser. 2002-10, FRN, # + 6,050
6,050 1.96%, 08/15/07, Ser. 2002-11, FRN, # + 6,050
12,600 General Electric Capital Corp.,
2.85%, 01/30/06, Ser. A, MTN + 12,724
Household Finance Corp.,
4,969 1.49%, 05/28/04, MTN, FRN + 4,981
5,300 3.38%, 02/21/06, MTN + 5,390
2,100 Household Netherlands BV
(The Netherlands) (Yankee),
6.20%, 12/01/03 + 2,123
4,270 International Lease Finance Corp.,
4.00%, 01/17/06, Ser. O, MTN + 4,355
11,800 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 + 11,458
12,900 Principal Life Global, 5.13%, 06/28/07, # 13,509
Restructured Asset Securities with
Enhanced Returns (RACERS),
11,000 0.98%, 04/15/04, Ser. 2002-35,
Class C, FRN, # 10,936
10,800 0.98%, 04/15/04, Ser. 2002-40,
Class C, FRN, # 10,773
6,400 SLM Corp.,
3.95%, 08/15/08, Ser. A, MTN 6,343
Special Purpose Accounts Receivable
Cooperative Corp. (SPARCS),
9,400 1.98%, 05/23/04, Ser. 2002-6, FRN, # 9,414
5,100 1.43%, 05/23/05, Ser. 2003-3, FRN, # 5,098
25,176 1.71%, 05/15/06, Ser. 2003-4 CL 25,215
8,700 The Bear Stearns Co., Inc.,
6.50%, 05/01/06 + 9,489
10,100 Washington Mutual Bank FA,
1.45%, 05/14/04, FRN 10,122
------------------------------------------------------------------------------
181,584
==============================================================================
INSURANCE -- 0.9%
9,100 ASIF Global Financing,
1.37%, 03/14/06, FRN, # + 9,096
$ 5,900 Metropolitan Life Global Funding
I,4.75%, 06/20/07, # + $ 6,185
------------------------------------------------------------------------------
15,281
==============================================================================
OIL & GAS -- 1.2%
5,800 BP Capital Markets PLC
(United Kingdom), 2.35%, 06/15/06 + 5,765
Chrevron Texaco Capital Co.,
930 3.50%, 09/17/07 + 935
6,700 3.38%, 02/15/08 + 6,632
7,700 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 7,692
------------------------------------------------------------------------------
21,024
==============================================================================
PAPER/FOREST PRODUCTS -- 0.3%
5,200 Weyerhaeuser Co.,
2.24%, 09/15/03, FRN + 5,200
PHARMACEUTICALS -- 0.4%
6,270 Abbott Laboratories,
5.13%, 07/01/04 + 6,461
SHIPPING/TRANSPORTATION -- 0.3%
4,350 FedEx Corp., 6.63%, 02/12/04 + 4,446
TELECOMMUNICATIONS -- 0.1%
1,800 BellSouth Telecommunications, Inc.,
6.50%, 06/15/05 + 1,933
UTILITIES -- 0.3%
2,550 AEP Texas Central Co.,
3.00%, 02/15/05, # + 2,577
2,900 National Rural Utilities Cooperative
Finance Corp., 3.00%, 02/15/06 2,921
------------------------------------------------------------------------------
5,498
==============================================================================
Total Corporate Notes & Bonds 313,904
(Cost $311,519)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 11.0%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 1.7%
$ 2,220 Credit Suisse First Boston Mortgage
Securities Corp.,
1.76%, 11/25/31, Ser. 2001-26,
Class 3A2, FRN + $ 2,228
14,990 Federal Home Loan Mortgage Corp.,
6.50%, 11/15/27, Ser 2413, Class ME + 15,112
Federal National Mortgage Association,
3,100 5.50%, 10/25/11, Ser. 2002-57,
Class PC + 3,158
3,100 5.50%, 03/25/12, Ser. 2002-70,
Class PC + 3,153
81 Fifth Third Mortgage Loan Trust,
5.33%, 10/18/30, Ser. 2000-FTB1,
Class A2, FRN + 82
5,525 Government National Mortgage
Association,
1.61%, 04/16/32, Ser. 2002-24,
Class FA, FRN + 5,548
487 Residential Accredit Loans, Inc.,
1.66%, 08/25/31, Ser. 2001-QS11,
Class A5, FRN 488
------------------------------------------------------------------------------
29,769
==============================================================================
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 9.3%
160,400 Federal National Mortgage Association,
5.50%, 09/25/33, TBA 159,698
Government National Mortgage
Association,
88 8.50%, 08/15/30, Pool 531310 + 95
56 8.50%, 09/15/30, Pool 526096 + 61
------------------------------------------------------------------------------
159,854
==============================================================================
Total Residential Mortgage Backed
Securities 189,623
(Cost $187,400)
==============================================================================
COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.0%
19,337 CalSTRS Trust,
3.99%, 11/20/12, Ser. 2002-C6,
Class A2, # + 19,446
$ 5,500 Calwest Industrial Trust,
1.38%, 06/15/15, Ser. 2003-CALA,
Class A, FRN, # + $ 5,500
8,890 First Union-Lehman Brothers
Commercial Mortgage Securities, Inc.,
7.38%, 04/18/29, Ser. 1997-C1,
Class A3 + 9,944
3,300 LB-UBS Commercial Mortgage Trust,
3.48%, 07/15/27, Ser. 2003-C5,
Class A2 + 3,195
12,600 Morgan Stanley Capital I,
6.48%, 11/15/30, Ser. 1998-HF2,
Class A2 + 13,864
------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 51,949
(Cost $52,480)
==============================================================================
ASSET BACKED SECURITIES -- 16.4%
AmeriCredit Automobile
Receivables Trust,
11,026 1.31%, 10/12/06, Ser. 2002-A,
Class A3, FRN + 11,024
10,215 4.41%, 11/12/08, Ser. 2001-D,
Class A4 + 10,507
22,000 Bank One Issuance Trust,
4.16%, 01/15/08, Ser. 2002-A2,
Class A2 + 22,783
3,000 Capital Auto Receivables Asset Trust,
1.96%, 01/15/09, Ser. 2003-2,
Class A4A + 2,884
15,750 Capital One Master Trust,
1.21%, 08/15/06, Ser. 2000-5,
Class A, FRN + 15,750
Citibank Credit Card Issuance Trust,
3,050 2.70%, 01/15/08, Ser. 2003-A2,
Class A2 + 3,059
8,500 2.07%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 8,549
5,000 Citibank Credit Card Master Trust
I, 5.50%, 02/15/06, Ser. 1999-1 + 5,098
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 12,057 Countrywide Home Equity Loan Trust,
1.35%, 08/15/28, Ser. 2002-D,
Class A, FRN + $ 12,003
4,550 DaimlerChrysler Auto Trust,
3.85%, 04/06/06, Ser. 2002-A,
Class A3 + 4,639
Discover Card Master Trust I,
7,550 1.18%, 07/15/07, Ser. 2002-1,
Class A, FRN + 7,551
21,000 1.26%, 09/15/08, Ser. 2001-3,
Class A, FRN + 21,056
4,632 EQCC Trust,
1.46%, 11/25/31, Ser. 2002-1,
Class 2A, FRN + 4,636
7,800 First USA Credit Card Master Trust,
1.47%, 11/20/06, Ser. 2001- 2,
Class B, FRN + 7,807
Ford Credit Auto Owner Trust,
132 4.83%, 02/15/05, Ser. 2001-C,
Class A4 + 133
2,200 1.15%, 06/15/05, Ser. 2003-B,
Class A2B, FRN + 2,199
2,473 4.31%, 06/15/05, Ser. 2001-D,
Class A3 + 2,499
2,200 5.25%, 09/15/05, Ser. 2001-C,
Class A5 + 2,244
600 3.79%, 09/15/06, Ser. 2002-C,
Class A4 + 618
9,900 Honda Auto Receivables Owner Trust,
1.92%, 11/20/06, Ser. 2003-1,
Class A3 + 9,909
25,500 Household Automotive Trust,
4.39%, 05/18/09, Ser. 2002-1,
Class A4 + 26,401
5,100 LB-UBS Commercial Mortgage Trust,
3.32%, 03/15/27, Ser. 2003-C1,
Class A2 + 4,964
3,700 MBNA Master Credit Card Trust USA,
1.91%, 12/15/06, Ser. 1999-G,
Class C, FRN, # + 3,695
$ 1,500 Nationsbank Credit Card Master Trust,
6.00%, 12/15/05, Ser. 1993-2, Class A $ 1,521
Onyx Acceptance Grantor Trust,
1,200 5.49%, 11/15/07, Ser. 2001-B, Class A4 1,240
7,500 4.71%, 03/15/09, Ser. 2002-B, Class A4 7,800
Option One Mortgage Loan Trust,
4,672 1.40%, 02/25/32, Ser. 2002-1,
Class A, FRN 4,674
4,498 1.36%, 10/25/32, Ser. 2002-05,
Class A2, FRN 4,491
216 PP&L Transition Bond Co., LLC,
6.72%, 12/26/05, Ser. 1999-1, Class A4 218
5,620 Residential Asset Securities Corp.,
2.47%, 08/25/22, Ser. 2002-KS5,
Class AIB2 5,629
3,082 Sears Credit Account Master Trust,
5.25%, 10/16/08, Ser. 1998-2, Class A 3,154
7,050 SLM Student Loan Trust,
2.16%, 03/15/33, Ser. 2003-4,
Class A5A, # 7,030
1,700 Standard Credit Card Master Trust,
5.95%, 10/07/04, Ser. A 1,703
101 The Money Store Home Equity Trust,
7.91%, 05/15/24, Ser. 1996-B,
Class A8 + 101
7,300 Volkswagen Auto Loan Enhanced Trust,
1.93%, 01/20/10, Ser. 2003-1, Class A4 7,067
Wachovia Asset Securitization, Inc.,
7,300 1.54%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 7,314
12,059 1.40%, 03/25/33, Ser. 2003-HE1,
Class A1, FRN 12,053
709 Wells Fargo Auto Trust,
4.68%, 02/15/05, Ser. 2001-A, Class A3 713
WFS Financial Owner Trust,
11,900 4.50%, 02/20/10, Ser. 2002-2,
Class A4, SUB 12,355
15,600 3.25%, 05/20/11, Ser. 2003-3, Class A4 15,480
------------------------------------------------------------------------------
Total Asset Backed Securities 282,551
(Cost $280,347)
==============================================================================
Total Long-Term Investments 1,331,579
(Cost $1,326,277)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<Page>
<Table>
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 22.6%
OPTION -- 0.0% ^
89,250 Call Option on FNMA, 30 Year Fixed,
5.00%, strike price of 100.22,
expiring 10/08/03, European Style $ 132
(Cost $893)
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY -- 2.7%
$ 46,515 U.S. Treasury Note,
3.00%, 02/29/04 @ + 46,958
(Cost $46,362)
U.S. GOVERNMENT AGENCY SECURITIES -- 3.5%
Federal National Mortgage Association,
25,900 0.99%, 09/10/03, DN + 25,894
33,700 0.95%, 11/14/03, DN + 33,628
------------------------------------------------------------------------------
Total U.S. Government Agency Securities 59,522
(Cost $59,528)
==============================================================================
MUNICIPAL SECURITIES -- 1.5%
DISTRICT OF COLUMBIA -- 0.9%
15,200 George Washington University,
Ser. A, Rev., FRDO, MBIA,
1.12%, 09/04/03 + 15,200
NEW YORK -- 0.6%
10,340 New York State Dormitory Authority,
City University System, Fifth Generation,
Ser. C, Rev., CONS, 1.59%, 01/01/04 10,338
------------------------------------------------------------------------------
Total Municipal Securities 25,538
(Cost $25,540)
==============================================================================
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.1%
AUTOMOTIVE -- 1.5%
$ 15,750 Daimler Chrysler N.A. Holdings Corp.,
1.23%, 09/23/03 + $ 15,738
10,700 General Motors Co., 1.35%, 10/02/03 10,687
------------------------------------------------------------------------------
26,425
==============================================================================
BANKING -- 0.9%
14,900 Commerzbank U.S. Finance,
1.11%, 10/01/03 + 14,886
FINANCIAL SERVICES -- 0.7%
11,250 Cadbury Schwepps Finance PLC
(United Kingdom),
1.22%, 09/02/03 + 11,249
------------------------------------------------------------------------------
Total Commercial Paper 52,560
(Cost $52,562)
==============================================================================
CERTIFICATES OF DEPOSIT -- 1.0%
17,200 Nordea Bank Finland PLC/New York
(Yankee), 1.08%, 11/24/03,
Floating Rate + 17,202
(Cost $17,198)
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 10.8%
185,464 JPMorgan Prime Money Market Fund (a) + 185,464
(Cost $185,464)
------------------------------------------------------------------------------
Total Short-Term Investments 387,376
(Cost $387,547)
==============================================================================
TOTAL INVESTMENTS -- 100.0% $ 1,718,955
(COST $1,713,824)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
3,147 Eurodollar March, 2004 $ 774,909 $ 723
624 Eurodollar June, 2004 153,005 (620)
SHORT FUTURES OUTSTANDING
(110) 2 Year Treasury Notes December, 2003 (23,435) (24)
(1,764) 5 Year Treasury Notes December, 2003 (193,792) (300)
</Table>
OPTION
<Table>
<Caption>
UNITS CALL OPTION WRITTEN VALUE
- ---------------------------------------------------------------------------------------------------
(89,250) Call Option on FNMA, 30 Year Fixed, 5.00%,
strike price of 101.22, expiring 10/08/03,
European Style $ (66)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- --------------------------------------------------------------------------------------------------------------------
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 1.63%, 04/30/05, price less 99.97,
JPMorgan receives negative, pays positive 09/29/03 $ 59,000 $ 104
Swap - price lock with Citibank N.A. on U.S. Treasury Note,
2.63%, 05/15/08, price less 96.74, JPMorgan pays positive,
receives negative 10/01/03 142,500 --
Swap - price lock with Citibank N.A. on U.S. Treasury Note,
2.00%, 08/31/05, price less 99.93, JPMorgan pays negative,
receives positive 10/28/03 327,500 --
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<Page>
JPMorgan Strategic Income Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 94.5%
U.S. TREASURY SECURITIES -- 4.9%
U.S. Treasury Notes & Bonds,
$ 35 2.13%, 10/31/04 @ + $ 35
25 1.75%, 12/31/04 @ + 25
50 1.63%, 04/30/05 + 50
640 1.13%, 06/30/05 + 633
180 2.63%, 05/15/08 + 174
5 5.00%, 08/15/11 + 5
55 4.25%, 08/15/13 + 54
55 6.25%, 05/15/30 + 62
55 5.38%, 02/15/31 + 56
------------------------------------------------------------------------------
Total U.S. Treasury Securities 1,094
(Cost $1,108)
==============================================================================
U.S. GOVERNMENT AGENCY SECURITIES -- 2.9%
75 Federal Home Loan Mortgage Corp.,
4.25%, 06/15/05 78
Federal National Mortgage Association,
80 7.13%, 01/15/30 93
492 5.00%, 05/01/33, Pool 254766 476
------------------------------------------------------------------------------
Total U.S. Government Agency
Securities 647
(Cost $668)
==============================================================================
FOREIGN GOVERNMENT SECURITIES -- 26.6%
Federal Republic of Brazil (Brazil),
29 10.00%, 01/16/07 + 30
43 11.25%, 07/26/07 46
60 11.50%, 03/12/08 + 64
45 2.19%, 04/15/09, FRN 40
209 8.00%, 04/15/14 188
120 11.00%, 08/17/40 109
Federal Republic of Germany
(Germany),
EUR 500 5.00%, 08/19/05, Ser. 136 572
EUR 250 5.00%, 02/17/06, Ser. 137 289
100 Malaysia Government International
Bond (Malaysia), 7.50%, 07/15/11 115
National Republic of Bulgaria (Bulgaria),
71 1.94%, 07/28/11, Ser. IAB, FRN 68
120 1.94%, 07/28/12, Ser. A, FRN 115
100 8.25%, 01/15/15, # 110
EUR 500 Netherlands Government Bond
(The Netherlands), 5.50%, 07/15/10 601
$ 100 Province of Quebec (Canada),
6.13%, 01/22/11, Ser. PJ $ 109
5 Region of Lombardy (Italy),
5.80%, 10/25/32 5
250 Republic of Chile (Chile),
5.63%, 07/23/07 265
Republic of Colombia (Colombia),
235 9.75%, 04/23/09, Ser. NOV 261
135 11.75%, 02/25/20, MTN 159
250 Republic of Costa Rica (Costa Rica),
8.11%, 02/01/12, # 270
25 Republic of Egypt (Egypt),
8.75%, 07/11/11 30
100 Republic of El Salvador (El Salvador),
8.25%, 04/10/32, # 93
Republic of Panama (Panama),
90 9.63%, 02/08/11 101
100 10.75%, 05/15/20 118
Republic of Peru (Peru),
193 9.13%, 02/21/12 207
25 9.88%, 02/06/15 28
135 4.50%, 03/07/17, FRN 113
48 5.00%, 03/07/17, FRN 42
Republic of Philippines (Philippines),
38 8.38%, 03/12/09 40
82 9.88%, 03/16/10 91
145 9.88%, 01/15/19 152
200 Republic of South Africa
(South Africa) (Yankee),
8.50%, 06/23/17 228
Republic of Turkey (Turkey),
91 12.38%, 06/15/09 103
195 11.88%, 01/15/30 212
Russian Federation (Russia),
100 10.00%, 06/26/07 118
69 8.25%, 03/31/10 76
5 11.00%, 07/24/18 7
177 5.00%, 03/31/30, SUB 161
50 5.00%, 03/31/30, SUB, # 46
100 State of Qatar (Qatar),
9.50%, 05/21/09 125
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FOREIGN GOVERNMENT SECURITIES -- CONTINUED
United Mexican States (Mexico),
$ 80 9.88%, 02/01/10 $ 99
35 8.38%, 01/14/11 40
100 6.38%, 01/16/13, MTN 101
35 11.38%, 09/15/16 48
50 8.13%, 12/30/19 54
100 8.30%, 08/15/31, MTN 107
------------------------------------------------------------------------------
Total Foreign Government Securities 5,956
(Cost $5,195)
==============================================================================
SUPRANATIONAL NOTES & BONDS -- 2.0%
200 Inter-American Development Bank,
7.38%, 01/15/10 238
200 International Bank for
Reconstruction & Development,
7.00%, 01/27/05, MTN 214
------------------------------------------------------------------------------
Total Supranational Notes & Bonds 452
(Cost $403)
==============================================================================
STATE AND MUNICIPAL OBLIGATION -- 0.1%
ILLINOIS -- 0.1%
20 Illinois State, Taxable Pension, GO,
5.10%, 06/01/33 18
(Cost $20)
CORPORATE NOTES & BONDS -- 40.7%
ADVERTISING -- 0.2%
50 Advanstar Communications, Inc.,
12.00%, 02/15/11, Ser. B + 44
AEROSPACE -- 0.7%
15 General Dynamics Corp.,
2.13%, 05/15/06 15
100 L-3 Communications Corp.,
7.63%, 06/15/12 104
10 Northrop Grumman Corp.,
7.75%, 02/15/31 12
5 Raytheon Co.,
6.55%, 03/15/10 5
10 The Boeing Co.,
5.13%, 02/15/13 + 10
------------------------------------------------------------------------------
146
==============================================================================
AUTOMOTIVE -- 0.9%
$ 5 DaimlerChrysler N.A. Holding Corp.,
7.75%, 01/18/11 $ 6
20 Dana Corp.,
9.00%, 08/15/11 21
5 Delphi Corp.,
6.50%, 08/15/13 5
Ford Motor Credit Co.,
30 7.38%, 10/28/09 31
20 7.25%, 10/25/11 20
10 General Motors Acceptance Corp.,
6.88%, 09/15/11 10
General Motors Corp.,
30 7.20%, 01/15/11 31
10 8.25%, 07/15/23 10
15 8.38%, 07/15/33 15
50 TRW Automotive, Inc.,
11.00%, 02/15/13, # 56
------------------------------------------------------------------------------
205
==============================================================================
BANKING -- 2.5%
5 Abbey National Capital Trust I,
8.96%, 12/31/49, FRN + 6
20 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, 12/29/49, FRN, # + 21
Bank of America Corp.,
45 3.25%, 08/15/08 + 44
5 7.40%, 01/15/11 + 6
250 Banque Centrale de Tunisie (Tunisia),
7.38%, 04/25/12 + 272
Barclays Bank PLC (United Kingdom),
10 6.86%, 12/31/49, FRN, # + 10
10 8.55%, 12/31/49, FRN, # + 12
10 Cadets Trust,
4.80%, 07/15/13, Ser. 2003-1, # 9
30 CBA Capital Trust I,
5.80%, 12/31/49, # 30
10 Deutsche Bank Financial LLC,
5.38%, 03/02/15 10
5 ForeningsSparbanken AB (Sweden),
9.00%, 12/31/49, FRN, # 6
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 10 KBC Bank Fund Trust III,
9.86%, 11/29/49, FRN, # $ 12
20 KFW International Finance, Inc.,
4.75%, 01/24/07 21
5 National City Bank,
6.20%, 12/15/11 5
10 Popular North America, Inc.,
4.25%, 04/01/08 10
15 RBS Capital Trust I,
4.71%, 12/31/49, FRN 14
10 Royal Bank of Scotland Group PLC
(United Kingdom),
7.65%, 08/31/49, FRN 12
10 Scotland International
Finance No. 2 BV (The Netherlands),
4.25%, 05/23/13, # 9
20 Wachovia Bank NA,
5.00%, 08/15/15 19
5 Wells Fargo & Co.,
5.00%, 11/15/14 5
25 Westpac Capital Trust III,
5.82%, 12/31/49, FRN, # 25
------------------------------------------------------------------------------
558
==============================================================================
BROADCASTING/CABLE -- 2.0%
120 British Sky Broadcasting PLC
(United Kingdom) (Yankee),
6.88%, 02/23/09 + 129
5 COX Communications, Inc.,
6.75%, 03/15/11 5
60 DirecTV Holdings LLC,
8.38%, 03/15/13, # 66
175 Echostar DBS Corp.,
10.38%, 10/01/07 193
50 Mediacom LLC/Mediacom
Capital Corp.,
9.50%, 01/15/13 51
------------------------------------------------------------------------------
444
==============================================================================
BUSINESS SERVICES -- 0.6%
10 Cendant Corp.,
7.13%, 03/15/15 11
$ 25 Electronic Data Systems Corp.,
6.00%, 08/01/13, # $ 23
100 Iron Mountain, Inc.,
8.63%, 04/01/13 104
------------------------------------------------------------------------------
138
==============================================================================
CHEMICALS -- 1.1%
50 IMC Global, Inc.,
10.88%, 06/01/08, Ser. B 52
Lyondell Chemical Co.,
10 9.63%, 05/01/07, Ser. A, 10
100 10.88%, 05/01/09 96
25 Noveon, Inc.,
11.00%, 02/28/11, Ser. B 28
25 PolyOne Corp.,
10.63%, 05/15/10 21
5 The Dow Chemical Co.,
7.38%, 11/01/29 5
30 The Scotts Co.,
8.63%, 01/15/09 31
------------------------------------------------------------------------------
243
==============================================================================
COMPUTER SOFTWARE -- 0.4%
100 Unisys Corp.,
6.88%, 03/15/10 99
CONSTRUCTION -- 1.8%
80 D.R. Horton, Inc.,
9.38%, 03/15/11 85
100 KB Home,
8.63%, 12/15/08 105
100 Standard-Pacific Corp.,
9.50%, 09/15/10 108
100 Terex Corp.,
10.38%, 04/01/11, Ser. B 110
------------------------------------------------------------------------------
408
==============================================================================
CONSUMER PRODUCTS -- 0.0%^
315 Drypers Corp.,
10.25%, 06/15/07, Ser. B (d) (f) * 3
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
CONSUMER SERVICES -- 1.4%
$ 100 Corrections Corp. of America,
7.50%, 05/01/11 $ 102
100 Service Corp. International,
6.00%, 12/15/05 100
100 United Rentals, Inc.,
10.75%, 04/15/08, Ser. B 110
------------------------------------------------------------------------------
312
==============================================================================
DIVERSIFIED -- 1.1%
General Electric Capital Corp.,
105 4.25%, 01/15/08, Ser. A, MTN 107
10 5.45%, 01/15/13, Ser. A, MTN 10
140 Tyco International Group SA
(Luxembourg) (Yankee),
6.38%, 10/15/11 140
------------------------------------------------------------------------------
257
==============================================================================
ENTERTAINMENT/LEISURE -- 0.9%
80 Argosy Gaming Co.,
10.75%, 06/01/09 + 87
100 Park Place Entertainment Corp.,
7.00%, 04/15/13 104
------------------------------------------------------------------------------
191
==============================================================================
ENVIRONMENTAL SERVICES -- 0.8%
175 Allied Waste North America,
10.00%, 08/01/09, Ser. B + 189
FINANCIAL SERVICES -- 2.6%
15 American Express Co.,
4.88%, 07/15/13 + 15
15 American Express Credit Corp.,
3.00%, 05/16/08 + 14
American General Finance Corp.,
5 4.50%, 11/15/07, Ser. H, MTN + 5
10 5.38%, 10/01/12, Ser. H, MTN + 10
25 Arch Western Finance LLC,
6.75%, 07/01/13, # + 25
10 Capital One Bank,
4.88%, 05/15/08 10
5 CIT Group, Inc.,
7.75%, 04/02/12 6
$ 25 Citigroup, Inc., 7.25%, 10/01/10 $ 29
Credit Suisse First Boston USA, Inc.,
5 6.50%, 01/15/12 5
20 5.50%, 08/15/13 20
10 FleetBoston Financial Corp.,
7.25%, 09/15/05 11
Goldman Sachs Group, Inc.,
5 6.60%, 01/15/12 5
20 4.75%, 07/15/13 19
5 6.13%, 02/15/33 5
50 H&E Equipment Services LLC/
H&E Finance Corp.,
11.13%, 06/15/12 42
Household Finance Corp.,
5 6.40%, 06/17/08, MTN 5
5 8.00%, 07/15/10 6
5 6.38%, 11/27/12 5
HSBC Capital Funding LP
(Channel Islands),
10 4.61%, 12/31/49, FRN, # 9
30 9.55%, 12/31/49, FRN, # 37
10 ING Capital Funding Trust III,
8.44%, 12/31/49, FRN 12
Morgan Stanley,
25 5.80%, 04/01/07 27
10 5.30%, 03/01/13 10
100 Nexstar Finance LLC/
Nexstar Finance, Inc.,
12.00%, 04/01/08 111
10 Principal Life Global Funding I,
5.25%, 01/15/13, # 10
5 Prudential Holdings LLC,
8.70%, 12/18/23, # 6
20 SLM Corp.,
5.63%, 08/01/33, MTN 18
10 UBS Preferred Funding Trust I,
8.62%, 12/31/49, FRN 12
15 UFJ Finance AEC (Aruba),
6.75%, 07/15/13 15
65 Yell Finance BV
(The Netherlands),
10.75%, 08/01/11 74
------------------------------------------------------------------------------
578
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
74
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FOOD/BEVERAGE PRODUCTS -- 1.2%
$ 5 Archer-Daniels Midland Co.,
5.94%, 10/01/32 + $ 5
100 Del Monte Corp.,
9.25%, 05/15/11, Ser. B 106
50 Dole Food Co., Inc.,
7.25%, 06/15/10, # 49
10 Miller Brewing Co.,
5.50%, 08/15/13, # 10
100 Swift & Co.,
10.13%, 10/01/09 106
------------------------------------------------------------------------------
276
==============================================================================
HEALTH CARE/HEALTH CARE SERVICES -- 1.4%
100 Alliance Imaging, Inc.,
10.38%, 04/15/11 + 104
40 Ardent Health Services,
10.00%, 08/15/13, # + 41
110 HCA, Inc.,
6.75%, 07/15/13 110
35 Tenet Healthcare Corp.,
7.38%, 02/01/13 34
15 Triad Hospitals, Inc.,
11.00%, 05/15/09, Ser. B 16
------------------------------------------------------------------------------
305
==============================================================================
HOTELS/OTHER LODGING -- 2.2%
100 Ameristar Casinos, Inc.,
10.75%, 02/15/09 + 112
100 Extended Stay America, Inc.,
9.88%, 06/15/11 106
50 Mandalay Resort Group,
10.25%, 08/01/07, Ser. B 56
90 MGM Mirage, Inc.,
9.75%, 06/01/07 100
100 Station Casinos, Inc.,
9.88%, 07/01/10 110
------------------------------------------------------------------------------
484
==============================================================================
INSURANCE -- 0.3%
10 Aegon NV (The Netherlands),
4.75%, 06/01/13 + 9
$ 15 AXA (France),
8.60%, 12/15/30 + $ 18
5 Fund American Companies, Inc.,
5.88%, 05/15/13 5
20 Monumental Global Funding II,
3.85%, 03/03/08, # 20
Nationwide Financial Services, Inc.,
5 6.25%, 11/15/11 5
5 5.90%, 07/01/12 5
5 New York Life Insurance Co.,
5.88%, 05/15/33, # 5
10 QBE Insurance Group LTD (Australia),
5.65%, 07/01/23, FRN, # 9
------------------------------------------------------------------------------
76
==============================================================================
MACHINERY & ENGINEERING EQUIPMENT -- 0.0%^
5 Deere & Co., 6.95%, 04/25/14 6
MULTI-MEDIA -- 1.3%
15 AOL Time Warner, Inc.,
7.63%, 04/15/31 + 16
40 CSC Holdings, Inc.,
7.63%, 04/01/11, Ser. B 40
100 Emmis Communications Corp.,
8.13%, 03/15/09, Ser. B 103
15 Liberty Media Corp.,
5.70%, 05/15/13 14
50 Lodgenet Entertainment Corp.,
9.50%, 06/15/13 52
10 News America, Inc.,
7.28%, 06/30/28 11
50 Radio One, Inc.,
8.88%, 07/01/11, Ser. B 55
5 Walt Disney Co.,
6.38%, 03/01/12 5
------------------------------------------------------------------------------
296
==============================================================================
OFFICE/BUSINESS EQUIPMENT -- 0.4%
90 Xerox Corp.,
7.63%, 06/15/13 88
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
75
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
OIL & GAS -- 2.5%
$ 5 Alberta Energy Co., LTD
(Canada) (Yankee),
7.38%, 11/01/31 + $ 6
Amerada Hess Corp.,
5 7.88%, 10/01/29 + 5
5 7.30%, 08/15/31 + 5
10 Anadarko Finance Co.,
6.75%, 05/01/11, Ser. B + 11
5 Canadian Natural Resources LTD
(Canada) (Yankee),
7.20%, 01/15/32 6
100 Chesapeake Energy Corp.,
8.13%, 04/01/11 104
10 Conoco Funding Co. (Canada),
7.25%, 10/15/31 11
100 Denbury Resources, Inc.,
7.50%, 04/01/13 100
10 Devon Financing Corp. ULC,
7.88%, 09/30/31 12
5 Occidental Petroleum Corp.,
6.75%, 01/15/12 6
100 Plains Exploration & Production Co.,
8.75%, 07/01/12, Ser. B 104
25 Tesoro Petroleum Corp.,
8.00%, 04/15/08 26
30 The Premcor Refining Group, Inc.,
7.50%, 06/15/15, # 29
5 Transocean, Inc.,
7.50%, 04/15/31 6
125 XTO Energy, Inc.,
6.25%, 04/15/13 124
------------------------------------------------------------------------------
555
==============================================================================
PACKAGING -- 1.6%
Crown European Holdings SA (France),
60 9.50%, 03/01/11, # 64
60 10.88%, 03/01/13, # 66
100 Owens-Brockway Glass
Container, Inc., 8.88%, 02/15/09 105
10 Sealed Air Corp.,
6.88%, 07/15/33, # 10
$ 100 Stone Container Corp.,
9.75%, 02/01/11 $ 108
------------------------------------------------------------------------------
353
==============================================================================
PAPER/FOREST PRODUCTS -- 0.9%
Georgia-Pacific Corp.,
100 8.88%, 02/01/10, # 106
65 9.50%, 12/01/11 69
5 International Paper Co.,
5.85%, 10/30/12 5
5 MeadWestvaco Corp.,
6.85%, 04/01/12 5
20 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 20
5 Weyerhaeuser Co.,
6.75%, 03/15/12 5
------------------------------------------------------------------------------
210
==============================================================================
PIPELINES -- 1.2%
15 Aquila, Inc.,
14.88%, 07/01/12 + 17
25 Dynegy Holdings, Inc.,
10.13%, 07/15/13, # 26
130 El Paso Corp.,
7.88%, 06/15/12, # 114
10 Kinder Morgan, Inc.,
6.50%, 09/01/12 11
100 Northwest Pipeline Corp.,
8.13%, 03/01/10 104
5 TransCanada Pipelines LTD
(Canada) (Yankee),
8.63%, 05/15/12 6
------------------------------------------------------------------------------
278
==============================================================================
REAL ESTATE INVESTMENT TRUST -- 1.9%
100 FelCor Lodging LP,
10.00%, 09/15/08 105
100 Host Marriott LP,
9.25%, 10/01/07, Ser. G 106
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
76
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
REAL ESTATE INVESTMENT TRUST -- CONTINUED
$ 100 MeriStar Hospitality
Operating Partnership
LP/MeriStar Hospitality
Finance Corp.,
10.50%, 06/15/09 $ 102
100 Ventas Realty LP/Ventas
Capital Corp.,
9.00%, 05/01/12 106
------------------------------------------------------------------------------
419
==============================================================================
RESTAURANTS/FOOD SERVICES -- 1.3%
60 NE Restaurant Co., Inc.,
10.75%, 07/15/08 55
200 Yum! Brands, Inc.,
8.88%, 04/15/11 226
------------------------------------------------------------------------------
281
==============================================================================
RETAILING -- 1.4%
5 Federated Department Stores, Inc.,
6.63%, 04/01/11 5
100 Great Atlantic & Pacific Tea Co.,
9.13%, 12/15/11 91
40 JC Penney Co., Inc.,
8.00%, 03/01/10 42
5 Kroger Co.,
6.80%, 04/01/11 5
100 Rite Aid Corp.,
9.50%, 02/15/11, # 108
10 Safeway, Inc.,
6.50%, 03/01/11 11
5 Sears Roebuck Acceptance Corp.,
7.00%, 06/01/32 5
20 Sonic Automotive, Inc.,
8.63%, 08/15/13, # 20
25 The Gap, Inc.,
6.90%, 09/15/07 26
------------------------------------------------------------------------------
313
==============================================================================
SEMI-CONDUCTORS -- 0.1%
25 Fairchild Semiconductor
International, Inc.,
10.50%, 02/01/09 28
SHIPPING/TRANSPORTATION -- 0.1%
$ 5 Burlington Northern
Santa Fe Corp.,
6.75%, 07/15/11 $ 6
5 CSX Corp.,
6.30%, 03/15/12 5
10 Norfolk Southern Corp.,
6.75%, 02/15/11 11
5 Union Pacific Corp.,
6.65%, 01/15/11 5
------------------------------------------------------------------------------
27
==============================================================================
STEEL -- 0.4%
15 AK Steel Corp.,
7.88%, 02/15/09 + 12
70 Euramax International LTD,
8.50%, 08/15/11, # 71
------------------------------------------------------------------------------
83
==============================================================================
TELECOMMUNICATIONS -- 2.7%
15 AT&T Broadband Corp.,
8.38%, 03/15/13 + 18
5 AT&T Corp.,
8.50%, 11/15/31 + 6
10 AT&T Wireless Services, Inc.,
7.88%, 03/01/11 + 11
30 Avaya, Inc.,
11.13%, 04/01/09 + 34
5 British Telecom PLC
(United Kingdom),
8.88%, 12/15/30, SUB 6
5 Citizens Communications Co.,
9.25%, 05/15/11 6
Deutsche Telekom International
Finance BV (The Netherlands),
5 8.50%, 06/15/10 6
5 5.25%, 07/22/13 5
5 8.75%, 06/15/30 6
France Telecom (France),
5 9.25%, 03/01/11 6
10 10.00%, 03/01/31 13
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
77
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- CONTINUED
$ 40 Insight Midwest LP/Insight
Capital, Inc.,
9.75%, 10/01/09 $ 41
5 Koninklijke KPN NV
(The Netherlands),
8.00%, 10/01/10 6
85 Nextel Communications, Inc.,
9.38%, 11/15/09 92
30 Nortel Networks LTD,
6.13%, 02/15/06 29
80 Qwest Corp.,
8.88%, 03/15/12, # 86
Sprint Capital Corp.,
15 7.63%, 01/30/11 16
10 8.75%, 03/15/32 11
10 TCI Communications, Inc.,
7.88%, 02/15/26 11
5 Telefonica Europe BV
(The Netherlands),
7.75%, 09/15/10 6
20 Triton PCS, Inc.,
8.50%, 06/01/13, # 21
100 TSI Telecommunication Services, Inc.,
12.75%, 02/01/09, Ser. B 98
15 Verizon New Jersey, Inc.,
5.88%, 01/17/12, Ser. A 16
20 Verizon New York, Inc.,
6.88%, 04/01/12, Ser. A 22
15 Vodafone Group PLC
(United Kingdom),
7.75%, 02/15/10 17
------------------------------------------------------------------------------
589
==============================================================================
TELECOMMUNICATIONS EQUIPMENT -- 0.1%
25 ACC Escrow Corp.,
10.00%, 08/01/11, # + 27
TRANSPORTATION -- 0.2%
35 CP Ships LTD (Canada),
10.38%, 07/15/12 39
UTILITIES -- 2.5%
$ 5 AEP Texas Central Co.,
5.50%, 02/15/13, # + $ 5
30 Allegheny Energy Supply,
8.75%, 04/15/12, # + 25
5 Arizona Public Service Co.,
4.65%, 05/15/15 + 5
125 Calpine Corp.,
8.50%, 02/15/11 93
50 CenterPoint Energy Resources Corp.,
7.88%, 04/01/13, # 54
50 CMS Energy Corp.,
7.75%, 08/01/10, # 47
5 Columbus Southern Power Co.,
5.50%, 03/01/13, # 5
15 Consolidated Edison
Company of New York,
5.63%, 07/01/12, Ser. 2002-A 16
15 Constellation Energy Group, Inc.,
4.55%, 06/15/15 13
15 Dominion Resources, Inc.,
8.13%, 06/15/10, Ser. A 18
5 DTE Energy Co.,
6.38%, 04/15/33 5
5 Duke Capital Corp.,
6.25%, 02/15/13 5
10 Duke Energy Corp.,
3.75%, 03/05/08, # 10
30 Edison Mission Energy,
9.88%, 04/15/11, # 25
5 FirstEnergy Corp.,
7.38%, 11/15/31, Ser. C 5
10 Florida Power & Light Co.,
4.85%, 02/01/13 10
5 MidAmerican Energy Co.,
6.75%, 12/30/31 5
National Rural Utilities Cooperative
Finance Corp.,
5 6.50%, 03/01/07, Ser. C, MTN 5
15 3.88%, 02/15/08 15
5 Nisource Finance Corp.,
6.15%, 03/01/13 5
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
UTILITIES -- CONTINUED
$ 150 Peabody Energy Corp.,
6.88%, 03/15/13, Ser. B $ 149
10 Pepco Holdings, Inc.,
6.45%, 08/15/12 10
5 Progress Energy, Inc.,
7.10%, 03/01/11 5
20 Reliant Resources, Inc.,
9.50%, 07/15/13, # 18
10 TXU Energy Co.,
7.00%, 03/15/13, # 10
------------------------------------------------------------------------------
563
==============================================================================
Total Corporate Notes & Bonds 9,111
(Cost $9,015)
==============================================================================
RESIDENTIAL MORTGAGE BACKED
SECURITIES -- 11.6%
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 11.6%
Federal Home Loan Mortgage Corp.,
35 6.00%, 05/01/17, Gold Pool E89420 36
329 6.00%, 04/01/32, Gold Pool C66183 334
461 5.50%, 04/01/33, Gold Pool C01527 460
483 5.50%, 05/01/33, Gold Pool C79349 481
Federal National Mortgage Association,
411 5.50%, 11/01/32, Pool 254594 410
406 5.50%, 12/01/32, Pool 687398 405
497 5.00%, 07/01/33, Pool 357407 481
------------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 2,607
(Cost $2,653)
==============================================================================
COMMERCIAL MORTGAGE BACKED SECURITIES -- 1.2%
225 Credit Suisse First Boston
Mortgage Securities Corp.,
3.94%, 05/15/38, Ser. 2003-C3,
Class A5 204
60 LB-UBS Commercial Mortgage Trust,
6.65%, 11/15/27, Ser. 2001-C2, Class A2 66
------------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 270
(Cost $286)
==============================================================================
ASSET BACKED SECURITIES -- 4.5%
$ 35 American Express Credit
Account Master Trust,
1.69%, 01/15/09, Ser. 2003-4,
Class A + $ 34
75 AmeriCredit Automobile
Receivables Trust,
5.37%, 06/12/08, Ser. 2001-B,
Class A4 + 78
20 Bank One Issuance Trust,
4.77%, 02/16/16, Ser. 2003-C3,
Class C3 + 18
Capital Auto Receivables Asset Trust,
40 1.15%, 02/15/07, Ser. 2003-2,
Class A3B, FRN 40
25 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 24
15 Citibank Credit Card Issuance Trust,
5.00%, 06/10/15, Ser. 2003-C4,
Class C4 14
Discover Card Master Trust I,
190 5.30%, 11/16/06, Ser. 2001-5,
Class A 194
25 1.16%, 05/16/07, Ser. 2002-5,
Class A, FRN 25
35 First USA Credit Card Master Trust,
1.47%, 11/20/06, Ser. 2001- 2,
Class B, FRN 35
Ford Credit Auto Owner Trust,
55 5.25%, 09/15/05, Ser. 2001-C,
Class A5 56
150 4.01%, 03/15/06, Ser. 2001-E,
Class A4 153
75 Household Automotive Trust,
2.22%, 11/17/09, Ser. 2003-1,
Class A4 73
98 Long Beach Mortgage Loan Trust,
1.43%, 07/25/33, Ser. 2003-3,
Class A, FRN 98
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
79
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 20 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1,
Class A2 $ 20
15 Onyx Acceptance Grantor Trust,
2.66%, 05/17/10, Ser. 2003-C,
Class A4 15
20 Option One Mortgage Loan Trust,
1.43%, 07/01/33, Ser. 2003-5,
Class A2, FRN 20
Residential Asset Securities Corp.,
15 1.36%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 15
30 1.40%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 30
40 USAA Auto Owner Trust,
2.04%, 02/16/10, Ser. 2003-1,
Class A4 39
25 Wachovia Asset Securitization, Inc.,
1.54%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 25
------------------------------------------------------------------------------
Total Asset Backed Securities 1,006
(Cost $1,005)
==============================================================================
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------
WARRANT -- 0.0%^
TELECOMMUNICATIONS -- 0.0%^
0^^ Startec Global Communications Corp.,
0.00%, 05/15/08 + $ 0^^
(Cost $0)^^
------------------------------------------------------------------------------
Total Long-Term Investments 21,161
(Cost $20,353)
==============================================================================
SHORT-TERM INVESTMENT -- 5.5%
MONEY MARKET FUND -- 5.5%
1,238 JPMorgan Prime Money
Market Fund (a) + 1,238
(Cost $1,238)
------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 22,399
(COST $21,591)
==============================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<Page>
SUMMARY OF INVESTMENTS BY COUNTRY, AUGUST 31, 2003
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- ---------------------------------------------------------------------
United States 68.6%
Germany 3.9
The Netherlands 3.2
Brazil 2.1
Mexico 2.0
Colombia 1.9
Peru 1.8
Russia 1.8
Turkey 1.4
Bulgaria 1.3
Philippines 1.3
Chile 1.2
Costa Rica 1.2
Tunisia 1.2
Panama 1.0
South Africa 1.0
Canada 0.9
United Kingdom 0.8
France 0.7
Luxembourg 0.6
Qatar 0.6
Malaysia 0.5
Other (below 0.5%) 1.0
- ---------------------------------------------------------------------
TOTAL 100.0%
=====================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
2 Treasury Bonds December, 2003 $ 212 $ 3
6 2 Year Treasury Notes December, 2003 1,278 2
2 Eurodollar March, 2004 492 (1)
SHORT FUTURES OUTSTANDING
(9) 5 Year Treasury Notes December, 2003 (989) (2)
(7) 10 Year Treasury Notes December, 2003 (768) (6)
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 8/31/03 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------
1,400 EUR 9/30/03 $ 1,523 $ 1,536 $ (13)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<Page>
JPMorgan U.S. Treasury Income Fund
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 94.0%
U.S. TREASURY SECURITIES -- 78.8%
U.S. Treasury Notes & Bonds,
$ 13,960 1.13%, 06/30/05 + $ 13,786
2,480 3.25%, 08/15/07 + 2,502
2,000 5.75%, 08/15/10 + 2,212
9,865 5.00%, 02/15/11 + 10,419
2,315 3.88%, 02/15/13 + 2,218
2,430 4.25%, 08/15/13 2,391
1,285 7.25%, 05/15/16 + 1,571
13,000 9.00%, 11/15/18 + 18,384
5,700 8.13%, 08/15/19 @ + 7,539
8,600 8.50%, 02/15/20 + 11,773
3,540 8.00%, 11/15/21 + 4,679
15,000 7.25%, 08/15/22 + 18,484
10,625 6.38%, 08/15/27 + 12,050
------------------------------------------------------------------------------
Total U.S. Treasury Securities 108,008
(Cost $106,957)
==============================================================================
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.8%
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 13.8%
0^^ Federal Home Loan
Mortgage Corp.,
7.00%, 12/01/14, Gold Pool E00766 0^^
Government National Mortgage
Association,
5,655 6.00%, 10/15/32, Pool 552829 5,778
7,580 6.00%, 12/15/32, Pool 596765 7,745
5,451 5.50%, 01/15/33, Pool 603915 5,455
------------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 18,978
(Cost $19,114)
==============================================================================
ASSET BACKED SECURITIES -- 1.4%
$ 465 Discover Card Master Trust I,
1.16%, 05/16/07, Ser. 2002-5,
Class A, FRN $ 465
355 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1,
Class A2 351
615 Residential Asset Securities Corp.,
1.40%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 613
455 Wachovia Asset Securitization, Inc.,
1.54%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 456
------------------------------------------------------------------------------
Total Asset Backed Securities 1,885
(Cost $1,892)
==============================================================================
Total Long-Term Investments 128,871
(Cost $127,963)
==============================================================================
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 6.0%
MONEY MARKET FUND -- 6.0%
8,176 JPMorgan 100% U.S. Treasury
Securities Money Market Fund (a) 8,176
(Cost $8,176)
------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 137,047
(COST $136,139)
==============================================================================
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/03 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
223 2 Year Treasury Notes December, 2003 $ 47,509 69
69 5 Year Treasury Notes December, 2003 7,580 19
80 10 Year Treasury Notes December, 2003 8,778 97
6 Eurodollar June, 2004 1,471 (11)
SHORT FUTURES OUTSTANDING
(361) Treasury Bonds December, 2003 (38,266) (451)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<Page>
JPMorgan Funds
Abbreviations
* -- Non-income producing security.
# -- All or a portion of this security is a 144A or private placement
security and can only be sold to qualified institutional buyers.
~ -- Denominated in United States Dollars unless otherwise noted.
^^ -- Amount rounds to less than one thousand.
^ -- Amount rounds to less than 0.1%.
+ -- All or a portion of this security is segregated with the custodian for
futures contracts, TBA, when issued, delayed delivery securities, swaps
or written options.
@ -- Security is fully or partially segregated with brokers as intitial
margin for futures contracts.
(a) -- Affiliated. Money market fund registered under the Investment Company
Act of 1940, as amended and advised by JPMorgan Fleming Asset
Management, Inc.
(d) -- Defaulted security.
(f) -- Fair Valued Investment. The following are approximately the market
value and percentage of the investments that are fair valued
(amounts in thousands):
<Table>
<Caption>
FUND MARKET VALUE PERCENTAGE
---- ------------ ----------
JPMorgan Bond Fund $ 19,954 1.45%
JPMorgan Enhanced Income Fund $ 4,246 1.17%
JPMorgan Fleming Emerging Markets Debt Fund $ 0 0.00%
JPMorgan Global Strategic Income Fund $ 16,055 13.06%
JPMorgan Strategic Income Fund $ 3 0.01%
</Table>
(i) -- Security is considered illiquid and may be difficult to sell.
CAD -- Canadian Dollar.
CONS -- Consolidated Bonds.
DN -- Discount Note. The rate shown is the effective yield at the date of
purchase.
EUR -- Euro.
FNMA -- Federal National Mortgage Association.
FRA -- Forward Rate Agreement.
FRDO -- Floating Rate Demand Obligation. The maturity date shown is the next
interest reset date. The interest rate shown is the rate in effect at
August 31, 2003.
FRN -- Floating Rate Note. The rate shown is the rate in effect as of
August 31, 2003.
GBP -- Great Britain Pound.
GO -- General Obligation Bond.
IO -- Interest Only.
LIBOR -- London Interbank Offered Rate.
MBIA -- Municipal Bond Insurance Association.
MTN -- Medium Term Note.
NZD -- New Zealand Dollar.
PO -- Principal Only.
RAMS -- Reverse Annuity Mortgage Security.
Rev. -- Revenue Bond.
Ser. -- Series.
SUB -- Step-up Bond. The rate shown is the rate in effect as of August
31, 2003.
TBA -- To Be Announced.
USD -- United States Dollar.
SEE NOTES TO FINANCIAL STATEMENTS.
84
<Page>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<Page>
JPMorgan Funds
STATEMENT OF ASSETS
AND LIABILITIES AS OF AUGUST 31, 2003
(Amounts in thousands, except per share amounts)
<Table>
<Caption>
BOND BOND
FUND FUND II
ASSETS
Investment securities, at value $ 1,372,904 $ 1,226,490
Foreign currency, at value 9 --
Receivables:
Investment securities sold 239,624 244,174
Fund shares sold 624 538
Interest and dividends 9,841 7,654
Variation Margin 214 112
Unrealized appreciation on open
swap contracts 8,064 1,705
Expense reimbursements 1 --
- ---------------------------------------------------------------------------------
Total Assets 1,631,281 1,480,673
=================================================================================
LIABILITIES
Payables:
Due to custodian 485 --
Dividends 1,138 4,007
Investment securities purchased 380,074 395,987
Fund shares redeemed 2,402 1,129
Outstanding options written,
at fair value 7,038 5,668
Unrealized depreciation on open
swap contracts 5,581 3,759
Accrued liabilities:
Investment advisory fees 316 275
Administration fees 21 101
Shareholder servicing fees 103 78
Distribution fees 2 10
Custodian fees 47 32
Trustees' fees - deferred
compensation plan --^ 169
Other 79 27
- ---------------------------------------------------------------------------------
Total Liabilities 397,286 411,242
=================================================================================
Net Assets $ 1,233,995 $ 1,069,431
=================================================================================
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
86
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
BOND BOND
FUND FUND II
NET ASSETS
Paid in capital $ 1,200,716 $ 1,063,940
Accumulated undistributed
(overdistributed) net investment income (573) (737)
Accumulated net realized gain (loss)
on investments, futures, foreign
exchange transactions, written
options and swaps 32,632 7,061
Net unrealized appreciation
(depreciation) of investments,
futures, foreign exchange translations,
written options and swaps 1,220 (833)
- ---------------------------------------------------------------------------------
Total Net Assets $ 1,233,995 $ 1,069,431
=================================================================================
Shares of beneficial interest outstanding
($0.001 par value; unlimited
number of shares authorized):
Class A 199 784
Class B 253 374
Class C 27 --
Institutional 48,091 --
Select 30,956 25,241
Ultra 44,631 --
Net Asset Value:
Class A (and redemption price) $ 10.03 $ 40.59
Class B* $ 9.95 $ 40.49
Class C* $ 10.01 $ --
Institutional (and redemption price) $ 9.94 $ --
Select (and redemption price) $ 9.94 $ 40.51
Ultra (and redemption price) $ 9.95 $ --
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 10.50 $ 42.50
Cost of investments $ 1,368,509 $ 1,219,789
Cost of foreign currency $ 9 $ --
- ---------------------------------------------------------------------------------
Premiums received from options written $ 2,349 $ 1,909
=================================================================================
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
87
<Page>
<Table>
<Caption>
FLEMING
ENHANCED EMERGING
INCOME MARKETS DEBT
FUND FUND
ASSETS
Investment securities, at value $ 363,444 $ 58,262
Cash -- 88
Foreign currency, at value -- 16
Receivables:
Investment securities sold 16,761 792
Fund shares sold --^ 179
Interest and dividends 895 1,164
Variation margin 2 --
Unrealized appreciation on open
swap contracts 24 --
- ---------------------------------------------------------------------------------
Total Assets 381,126 60,501
=================================================================================
LIABILITIES
Payables:
Due to custodian 36 --
Dividends 172 40
Investment securities purchased 26,209 --
Fund shares redeemed 134 27
Outstanding options written,
at fair value 18 --
Unrealized depreciation on open
swap contracts 32 --
Accrued liabilities:
Investment advisory fees 43 35
Administration fees -- 1
Shareholder servicing fees -- 3
Custodian fees 12 9
Other 62 75
- ---------------------------------------------------------------------------------
Total Liabilities 26,718 190
=================================================================================
Net Assets $ 354,408 $ 60,311
=================================================================================
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
88
<Page>
<Table>
<Caption>
FLEMING
ENHANCED EMERGING
INCOME MARKETS DEBT
FUND FUND
NET ASSETS
Paid in capital $ 359,640 $ 55,322
Accumulated undistributed
(overdistributed) net investment income (131) 292
Accumulated net realized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps (4,911) (2,591)
Net unrealized appreciation
(depreciation) of investments, futures,
foreign exchange translations,
written options and swaps (190) 7,288
- ---------------------------------------------------------------------------------
Total Net Assets $ 354,408 $ 60,311
=================================================================================
Shares of beneficial interest outstanding
($0.001 par value; unlimited
number of shares authorized):
Institutional 35,956 --
Select -- 6,688
Net Asset Value:
Institutional (and redemption price) $ 9.86 $ --
Select (and redemption price) $ -- $ 9.02
Cost of investments $ 363,657 $ 50,937
Cost of foreign currency $ -- $ 54
- ---------------------------------------------------------------------------------
Premiums received from options written $ 112 $ --
=================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
89
<Page>
<Table>
<Caption>
GLOBAL
STRATEGIC
INCOME
FUND
ASSETS
Investment securities, at value $ 122,883
Cash 119
Foreign currency, at value 173
Receivables:
Investment securities sold 3,407
Fund shares sold 25
Interest and dividends 1,392
Variation margin 24
Unrealized appreciation on forward
foreign currency exchange contracts 434
- --------------------------------------------------------------------
Total Assets 128,457
====================================================================
LIABILITIES
Payables:
Dividends 409
Investment securities purchased 16,785
Fund shares redeemed 434
Unrealized depreciation on forward
foreign currency exchange contracts 14
Accrued liabilities:
Investment advisory fees 5
Administration fees 1
Shareholder servicing fees 7
Distribution fees --^
Custodian fees 18
Other 51
- --------------------------------------------------------------------
Total Liabilities 17,724
====================================================================
Net Assets $ 110,733
====================================================================
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
90
<Page>
<Table>
<Caption>
GLOBAL
STRATEGIC
INCOME
FUND
NET ASSETS
Paid in capital $ 139,541
Accumulated undistributed
(overdistributed) net investment income (1,273)
Accumulated net realized gain (loss)
on investments, futures and foreign
exchange transactions (32,393)
Net unrealized appreciation
(depreciation) of investments, futures
and foreign exchange translations 4,858
- --------------------------------------------------------------------
Total Net Assets $ 110,733
====================================================================
Shares of beneficial interest outstanding
($0.001 par value; unlimited
number of shares authorized):
Class A 44
Class B 36
Institutional 11,999
Select 331
Net Asset Value:
Class A (and redemption price) $ 8.92
Class B* $ 8.86
Institutional (and redemption price) $ 8.92
Select (and redemption price) $ 8.92
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 9.34
Cost of investments $ 118,430
Cost of foreign currency $ 171
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
91
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM
BOND BOND
FUND FUND II
ASSETS
Investment securities, at value $ 1,078,336 $ 1,718,955
Receivables:
Investment securities sold 70,706 108,004
Fund shares sold 5,032 2,773
Interest and dividends 3,038 5,965
Variation margin 239 --
Unrealized appreciation on
open swap contracts 938 104
- ---------------------------------------------------------------------------------
Total Assets 1,158,289 1,835,801
=================================================================================
LIABILITIES
Payables:
Due to custodian 6,409 8,939
Dividends 631 2,596
Investment securities purchased 212,448 267,869
Fund shares redeemed 911 1,316
Variation margin 206 5
Outstanding options written,
at fair value 40 66
Unrealized depreciation on open
swap contracts 133 --
Accrued liabilities:
Investment advisory fees 175 333
Administration fees -- 113
Shareholder servicing fees 26 319
Distribution fees 2 356
Custodian fees 28 34
Trustees' fees - deferred
compensation plan --^ 21
Other 70 63
- ---------------------------------------------------------------------------------
Total Liabilities 221,079 282,030
=================================================================================
Net Assets $ 937,210 $ 1,553,771
=================================================================================
</Table>
^ Amounts rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
92
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM
BOND BOND
FUND FUND II
NET ASSETS
Paid in capital $ 936,087 $ 1,553,796
Accumulated undistributed
(overdistributed) net investment income 996 (2,896)
Accumulated net realized gain (loss) on
investments, futures, foreign exchange
transactions, written options and swaps (4,183) (2,495)
Net unrealized appreciation
(depreciation) of investments, futures,
written options and swaps 4,310 5,366
- ---------------------------------------------------------------------------------
Total Net Assets $ 937,210 $ 1,553,771
=================================================================================
Shares of beneficial interest outstanding
($0.001 par value; unlimited
number of shares authorized):
Class A 886 4,307
Institutional 81,714 --
Class M -- 114,132
Select 12,427 33,381
Net Asset Value:
Class A (and redemption price) $ 9.85 $ 10.23
Institutional (and redemption price) $ 9.86 $ --
Class M (and redemption price) $ -- $ 10.23
Select (and redemption price) $ 9.86 $ 10.25
Class A Maximum Public Offering
Price Per Share (net asset value
per share/98.5%) $ 10.00 $ 10.39
Class M Maximum Public Offering
Price Per Share (net asset value
per share/98.5%) $ -- $ 10.39
Cost of investments $ 1,074,370 $ 1,713,824
Premiums received from options written $ 251 $ 418
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
93
<Page>
<Table>
<Caption>
STRATEGIC U.S. TREASURY
INCOME INCOME
FUND FUND
ASSETS
Investment securities, at value $ 22,399 $ 137,047
Foreign currency, at value 58 --
Receivables:
Investment securities sold 25 --
Fund shares sold 15 270
Interest and dividends 318 759
Variation margin 1 17
Expense reimbursements 5 --
- ---------------------------------------------------------------------------------
Total Assets 22,821 138,093
=================================================================================
LIABILITIES
Payables:
Dividends 58 155
Investment securities purchased 219 2,393
Fund shares redeemed 103 711
Unrealized loss on forward foreign
currency exchange contracts 13 --
Accrued liabilities:
Investment advisory fees -- 30
Shareholder servicing fees 1 10
Distribution fees 11 13
Custodian fees 15 11
Trustees' fees - deferred
compensation plan 1 32
Other 43 55
- ---------------------------------------------------------------------------------
Total Liabilities 464 3,410
=================================================================================
Net Assets $ 22,357 $ 134,683
=================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
94
<Page>
<Table>
<Caption>
STRATEGIC U.S. TREASURY
INCOME INCOME
FUND FUND
NET ASSETS
Paid in capital $ 24,541 $ 136,229
Accumulated undistributed
(overdistributed) net investment income (195) 9
Accumulated net realized gain (loss)
on investments, futures and foreign
exchange transactions (2,777) (2,186)
Net unrealized appreciation
(depreciation) of investments, futures
and foreign exchange translations 788 631
- ---------------------------------------------------------------------------------
Total Net Assets $ 22,357 $ 134,683
=================================================================================
Shares of beneficial interest outstanding
($0.001 par value; unlimited number of
shares authorized):
Class A 343 3,989
Class B 937 1,695
Class C 412 --
Class M 825 --
Select -- 5,914
Net Asset Value:
Class A (and redemption price) $ 8.89 $ 11.61
Class B* $ 8.89 $ 11.60
Class C* $ 8.89 $ --
Class M (and redemption price) $ 8.87 $ --
Select (and redemption price) $ -- $ 11.62
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 9.31 $ 12.16
Class M Maximum Public Offering
Price Per Share (net asset value per
share/97.0%) $ 9.14 $ --
Cost of investments $ 21,591 $ 136,139
Cost of foreign currency $ 59 $ --
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
95
<Page>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2003
(Amounts in thousands)
<Table>
<Caption>
BOND BOND
FUND FUND II
INVESTMENT INCOME
Interest $ 67,186 $ 42,314
Dividend income from affiliated
investments* 2,640 1,709
- ---------------------------------------------------------------------------------
Total investment income 69,826 44,023
=================================================================================
EXPENSES
Investment advisory fees 4,554 2,712
Administration fees 2,277 1,356
Shareholder servicing fees 1,758 2,260
Distribution fees 21 201
Custodian fees 339 207
Printing and postage 78 12
Professional fees 179 128
Registration expenses 64 35
Transfer agent fees 110 110
Trustees' fees 16 9
Other 76 55
- ---------------------------------------------------------------------------------
Total expenses 9,472 7,085
=================================================================================
Less amounts waived 1,896 1,470
Less earnings credits 3 3
Less expense reimbursements 20 --
- ---------------------------------------------------------------------------------
Net expenses 7,553 5,612
=================================================================================
Net investment income 62,273 38,411
=================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
96
<Page>
<Table>
<Caption>
BOND BOND
FUND FUND II
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments $ 48,820 $ 8,168
Futures (355) 3,542
Foreign exchange contracts 2,512 37
Written options (4,216) (1,720)
Swaps (1,142) 1,266
Change in net unrealized
appreciation/depreciation of:
Investments (37,068) (16,423)
Futures (7,827) (1,598)
Foreign currency translations (1) --
Written options (3,498) (3,759)
Swaps 8,227 (2,054)
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments, futures, foreign exchange
transactions, written options and swaps 5,452 (12,541)
=================================================================================
Net increase (decrease) in net assets
from operations $ 67,725 $ 25,870
=================================================================================
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 346 $ 230
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
97
<Page>
<Table>
<Caption>
ENHANCED FLEMING EMERGING
INCOME MARKETS DEBT
FUND FUND
INVESTMENT INCOME
Interest $ 8,473 $ 5,487
Dividend income from affiliated
investments* 766 26
- ----------------------------------------------------------------------------------
Total investment income 9,239 5,513
==================================================================================
EXPENSES
Investment advisory fees 914 412
Administration fees 548 88
Shareholder servicing fees 366 147
Custodian fees 59 83
Printing and postage 13 2
Professional fees 88 120
Registration expenses 34 14
Transfer agent fees 17 22
Trustees' fees 4 1
Other 7 6
- ----------------------------------------------------------------------------------
Total expenses 2,050 895
==================================================================================
Less amounts waived 1,313 160
Less earnings credits 6 --^
- ----------------------------------------------------------------------------------
Net expenses 731 735
==================================================================================
Net investment income 8,508 4,778
==================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
98
<Page>
<Table>
<Caption>
ENHANCED FLEMING EMERGING
INCOME MARKETS DEBT
FUND FUND
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments $ (1,458) $ 3,481
Futures (2,571) 92
Foreign exchange contracts 7 --
Written options (174) --
Swaps 244 --
Change in net unrealized
appreciation/depreciation of:
Investments (746) 6,985
Futures 88 (6)
Foreign currency translations -- 2
Written options 94 --
Swaps (8) --
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on
investments, futures, foreign exchange
transactions, written options
and swaps (4,524) 10,554
==================================================================================
Net increase (decrease) in net assets
from operations $ 3,984 $ 15,332
==================================================================================
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 99 $ 3
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
99
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC
INCOME
FUND
INVESTMENT INCOME
Interest $ 7,539
Dividend income from affiliated
investments* 367
- ----------------------------------------------------------------------------------
Total investment income 7,906
==================================================================================
EXPENSES
Investment advisory fees 586
Administration fees 195
Shareholder servicing fees 137
Distribution fees 4
Custodian fees 150
Printing and postage 2
Professional fees 113
Registration expenses 42
Transfer agent fees 69
Trustees' fees 1
Other 18
- ----------------------------------------------------------------------------------
Total expenses 1,317
==================================================================================
Less amounts waived 422
Less earnings credits 1
Less expense reimbursements 30
- ----------------------------------------------------------------------------------
Net expenses 864
==================================================================================
Net investment income 7,042
==================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
100
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC
INCOME
FUND
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments $ 2,964
Futures (598)
Foreign exchange contracts (2,188)
Change in net unrealized
appreciation/depreciation of:
Investments 3,672
Futures 78
Foreign currency translations 442
- ----------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments, futures and foreign
exchange transactions 4,370
==================================================================================
Net increase (decrease) in net assets
from operations $ 11,412
==================================================================================
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 47
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
101
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM
BOND BOND
FUND FUND II
INVESTMENT INCOME
Interest $ 25,359 $ 44,393
Dividend income from affiliated
investments* 2,565 2,463
- ---------------------------------------------------------------------------------
Total investment income 27,924 46,856
=================================================================================
EXPENSES
Investment advisory fees 2,218 3,818
Administration fees 1,331 2,291
Shareholder servicing fees 1,109 3,818
Distribution fees 26 4,570
Custodian fees 148 248
Printing and postage 28 27
Professional fees 131 142
Registration expenses 39 50
Transfer agent fees 70 60
Trustees' fees 9 16
Other 43 62
- ---------------------------------------------------------------------------------
Total expenses 5,152 15,102
=================================================================================
Less amounts waived 2,079 1,020
Less earnings credits 9 10
- ---------------------------------------------------------------------------------
Net expenses 3,064 14,072
=================================================================================
Net investment income 24,860 32,784
=================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
102
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM
BOND BOND
FUND FUND II
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments $ (3,026) $ 3,026
Futures (1,741) (597)
Foreign exchange contracts 57 67
Written options (307) (462)
Swaps 6,367 1,394
Change in net unrealized
appreciation/depreciation of:
Investments (5,688) (10,208)
Futures (1,284) (915)
Written options 137 352
Swaps 805 104
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps (4,680) (7,239)
=================================================================================
Net increase (decrease) in net assets
from operations $ 20,180 $ 25,545
=================================================================================
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 339 $ 334
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
103
<Page>
<Table>
<Caption>
STRATEGIC U.S. TREASURY
INCOME INCOME
FUND FUND
INVESTMENT INCOME
Interest $ 1,438 $ 6,720
Dividend income from affiliated
investments* 18 124
- ---------------------------------------------------------------------------------
Total investment income 1,456 6,844
=================================================================================
EXPENSES
Investment advisory fees 108 447
Administration fees 32 224
Shareholder servicing fees 59 372
Distribution fees 127 292
Custodian fees 90 62
Printing and postage 7 11
Professional fees 119 107
Registration expenses 20 43
Transfer agent fees 76 149
Trustees' fees --^ 2
Other 8 15
- ---------------------------------------------------------------------------------
Total expenses 646 1,724
=================================================================================
Less amounts waived 195 560
Less earnings credits -- 1
Less expense reimbursements 111 --
- ---------------------------------------------------------------------------------
Net expenses 340 1,163
=================================================================================
Net investment income 1,116 5,681
=================================================================================
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
104
<Page>
<Table>
<Caption>
STRATEGIC U.S. TREASURY
INCOME INCOME
FUND FUND
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments $ (224) $ 3,267
Futures 43 537
Foreign exchange contracts (154) --
Change in net unrealized
appreciation/depreciation of:
Investments 1,116 (5,563)
Futures (10) (620)
Foreign currency translations (14) --
- ---------------------------------------------------------------------------------
Net realized and unrealized gain (loss)
on investments, futures and foreign
exchange transactions 757 (2,379)
=================================================================================
Net increase (decrease) in net assets
from operations $ 1,873 $ 3,302
=================================================================================
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 2 $ 15
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
105
<Page>
STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED
(Amounts in thousands)
<Table>
<Caption>
BOND FUND BOND FUND II
------------------------------------------- ------------------------------------------
YEAR ENDED 11/1/01 THROUGH YEAR ENDED YEAR ENDED 11/1/01 THROUGH YEAR ENDED
8/31/03 8/31/02* 10/31/01 8/31/03 8/31/02* 10/31/01
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 62,273 $ 59,314 $ 62,728 $ 38,411 $ 24,090 $ 36,843
Net realized gain (loss) on
investments, futures, foreign
exchange transactions,
written options and swaps 45,619 2,699 49,859 11,293 19,085 22,133
Change in net unrealized appreciation/
depreciation of investments, futures,
foreign currency translations, written
options and swaps (40,167) (2,897) 31,504 (23,834) (14,513) 29,861
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 67,725 59,116 144,091 25,870 28,662 88,837
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (62,540) (58,906) (63,045) (38,594) (24,089) (36,858)
Net realized gain on
investment transactions (12,241) (12,048) -- (8,146) -- --
==================================================================================================================================
Total distributions to shareholders (74,781) (70,954) (63,045) (46,740) (24,089) (36,858)
==================================================================================================================================
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (429,181) (247,093) 940,706 386,134 (54,412) 114,658
==================================================================================================================================
NET ASSETS
Total increase (decrease) in net assets (436,237) (258,931) 1,021,752 365,264 (49,839) 166,637
==================================================================================================================================
Beginning of period 1,670,232 1,929,163 907,411 704,167 754,006 587,369
End of period $ 1,233,995 $ 1,670,232 $ 1,929,163 $ 1,069,431 $ 704,167 $ 754,006
Accumulated undistributed
(overdistributed) net
investment income $ (201) $ 66 $ 1,157 $ 175 $ 358 $ 346
</Table>
* The fund changed its fiscal year end from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
106
<Page>
<Table>
<Caption>
ENHANCED INCOME FUND FLEMING EMERGING MARKETS DEBT FUND
------------------------------ -----------------------------------------
YEAR ENDED 11/30/01* THROUGH YEAR ENDED 8/1/02 ENDED YEAR ENDED
8/31/03 8/31/02 8/31/03 8/31/02^ 7/31/02
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS
Net investment income $ 8,508 $ 3,085 $ 4,778 $ 308 $ 3,515
Net realized gain (loss) on investments,
futures, foreign exchange transactions,
written options and swaps (3,952) (1,080) 3,573 (112) (2,680)
Change in net unrealized appreciation/
depreciation of investments, futures,
foreign currency translations, written
options and swaps (572) 382 6,981 2,503 (1,313)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 3,984 2,387 15,332 2,699 (478)
- ----------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (8,519) (3,084) (4,996) (311) (3,512)
======================================================================================================================
CAPITAL SHARE TRANSACTIONS
Increase (decrease) 58,849 300,791 8,503 3,883 3,713
======================================================================================================================
NET ASSETS
Total increase (decrease) in net assets 54,314 300,094 18,839 6,271 (277)
======================================================================================================================
Beginning of period 300,094 -- 41,472 35,201 35,478
End of period $ 354,408 $ 300,094 $ 60,311 $ 41,472 $ 35,201
Accumulated undistributed
(overdistributed) net
investment income $ (9) $ 2 $ 160 $ 378 $ 381
</Table>
* Commencement of operations.
^ The fund changed its fiscal year end from July 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
107
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
--------------------------------------------
YEAR ENDED 11/1/01 THROUGH YEAR ENDED
8/31/03 8/31/02* 10/31/01
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 7,042 $ 7,684 $ 11,954
Net realized gain (loss) on
investments, futures and foreign
exchange transactions 178 (9,510) (5,323)
Change in net unrealized appreciation/
depreciation of investments, futures
and foreign currency translations 4,192 4,461 2,282
- ------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 11,412 2,635 8,913
- ------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (7,077) (7,217) (15,047)
Return of capital -- (378) --
- ------------------------------------------------------------------------------------------------
Total distributions to shareholders (7,077) (7,595) (15,047)
================================================================================================
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (33,539) (3,090) (9,333)
================================================================================================
NET ASSETS
Total increase (decrease) in net assets (29,204) (8,050) (15,467)
================================================================================================
Beginning of period 139,937 147,987 163,454
End of period $ 110,733 $ 139,937 $ 147,987
Accumulated undistributed
(overdistributed) net
investment income $ (536) $ (501) $ (609)
</Table>
* The fund changed its fiscal year end from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
108
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND SHORT TERM BOND FUND II
------------------------------------------- ------------------------------------------
YEAR ENDED 11/1/01 THROUGH YEAR ENDED YEAR ENDED 11/1/01 THROUGH YEAR ENDED
8/31/03 8/31/02* 10/31/01 8/31/03 8/31/02* 10/31/01
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 24,860 $ 20,540 $ 27,811 $ 32,784 $ 22,708 $ 11,384
Net realized gain (loss) on
investments, futures,
foreign exchange transactions,
written options and swaps 1,350 12,596 7,040 3,428 10,424 6,553
Change in net unrealized appreciation/
depreciation of investments, futures,
written options and swaps (6,030) (8,289) 17,991 (10,667) 1,719 13,303
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations 20,180 24,847 52,842 25,545 34,851 31,240
- ----------------------------------------------------------------------------------------------------------------------------------
NET EQUALIZATION CREDITS/(DEBITS) -- -- -- 1,123 2,690 2,626
==================================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (25,414) (20,463) (27,772) (33,316) (25,314) (13,960)
Return of capital -- -- -- (587) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on
investment transactions (11,813) (2,732) -- (7,040) (10,428) --
==================================================================================================================================
Total distributions to shareholders (37,227) (23,195) (27,772) (40,943) (35,742) (13,960)
==================================================================================================================================
CAPITAL SHARE TRANSACTIONS
Increase (decrease) 204,640 (17,879) 325,357 227,176 454,301 812,112
==================================================================================================================================
NET ASSETS
Total increase (decrease) in net assets 187,593 (16,227) 350,427 212,901 456,100 832,018
==================================================================================================================================
Beginning of period 749,617 765,844 415,417 1,340,870 884,770 52,752
End of period $ 937,210 $ 749,617 $ 765,844 $ 1,553,771 $ 1,340,870 $ 884,770
Accumulated undistributed
(overdistributed) net
investment income $ 721 $ 1,275 $ 795 $ (3,286) $ (3,290) $ (2,003)
</Table>
* The fund changed its fiscal year end from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
109
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND
------------------------------------------- ------------------------------------------
YEAR ENDED 11/1/01 THROUGH YEAR ENDED YEAR ENDED 11/1/01 THROUGH YEAR ENDED
8/31/03 8/31/02* 10/31/01 8/31/03 8/31/02* 10/31/01
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 1,116 $ 992 $ 1,713 $ 5,681 $ 4,318 $ 4,666
Net realized gain (loss) on
investments, futures and foreign
exchange transactions (335) (1,007) (1,667) 3,804 1,344 3,153
Change in net unrealized appreciation/
depreciation of investments, futures
and foreign currency translations 1,092 201 1,126 (6,183) (683) 6,359
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 1,873 186 1,172 3,302 4,979 14,178
- ----------------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) (9) (21) (9) -- -- --
==================================================================================================================================
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (1,103) (867) (1,649) (5,719) (4,320) (4,660)
Return of capital -- (57) (50) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (1,103) (924) (1,699) (5,719) (4,320) (4,660)
==================================================================================================================================
CAPITAL SHARE TRANSACTIONS
Increase (decrease) 794 (1,406) (4,002) (5,521) 234 75,480
==================================================================================================================================
NET ASSETS
Total increase (decrease) in net assets 1,555 (2,165) (4,538) (7,938) 893 84,998
==================================================================================================================================
Beginning of period 20,802 22,967 27,505 142,621 141,728 56,730
End of period $ 22,357 $ 20,802 $ 22,967 $ 134,683 $ 142,621 $ 141,728
Accumulated undistributed
(overdistributed) net investment income $ (68) $ (72) $ (94) $ 3 $ 41 $ 1
</Table>
* The fund changed its fiscal year end from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
110
<Page>
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
J.P. Morgan Mutual Fund Group ("MFG"), J.P. Morgan Institutional Funds
("JPMIF"), J.P. Morgan Mutual Fund Select Group ("MFSG"), J.P. Morgan Series
Trust ("JPMST) and J.P. Morgan Funds ("JPMF") (the "Trusts") were organized as
Massachusetts business trusts. The Trusts are registered under the Investment
Company Act of 1940 (the "1940 Act"), as amended, as open-end management
investment companies. MFG and MFSG were formally named Mutual Fund Group and
Mutual Fund Select Group, respectively. The name change went into effect on May
1, 2003. The Trusts were organized on the following dates:
<Table>
<Caption>
TRUST DATE
MFG May 11, 1987
JPMIF November 4, 1992
MFSG October 1, 1996
JPMST August 15, 1996
JPMF November 4, 1992
</Table>
The following are nine separate portfolios of the Trusts (collectively, the
"Funds").
<Table>
<Caption>
FUND CLASSES OFFERED
JPMorgan Bond Fund ("BF") Class A, Class B, Class C, Institutional, Select and Ultra
JPMorgan Bond Fund II ("BFII") Class A, Class B and Select
JPMorgan Enhanced Income Fund ("EIF") Institutional
JPMorgan Fleming Emerging Markets Debt Fund ("EMDF") Select
JPMorgan Global Strategic Income Fund ("GSIF") Class A, Class B, Institutional and Select
JPMorgan Short Term Bond Fund ("STBF") Class A, Institutional and Select
JPMorgan Short Term Bond Fund II ("STBFII") Class A, Class M and Select
JPMorgan Strategic Income Fund ("SIF") Class A, Class B, Class C and Class M
JPMorgan U.S. Treasury Income Fund ("USTI") Class A, Class B and Select
</Table>
In 2002, BF, BFII, GSIF, STBF, STBFII, SIF, and USTI changed their fiscal year
end from October 31 to August 31 and EMDF changed its fiscal year end from July
31 to August 31. On March 31, 2003, BF commenced offerings of Class C shares. On
September 12, 2003, GSIF Class B shares merged into Class A shares and GSIF
Class B shares closed.
STBFII, SIF and USTI are separate series of MFG. BFII is a separate series of
MFSG. BF, GSIF and STBF are separate series of JPMIF. EIF is a separate series
of JPMST. EMDF is a separate series of JPMF.
Class A and Class M shares generally provide for a front-end sales charge while
Class B and Class C shares provide for a contingent deferred sales charge. Class
B shares automatically convert to Class A shares after eight years. No sales
charges are assessed with respect to Institutional, Ultra and Select classes.
All classes of shares have equal rights as to earnings, assets and voting
privileges except that each class may bear different transfer agent,
distribution and shareholder servicing fees and each class has exclusive voting
rights with respect to its distribution plan and shareholder servicing
agreements. Class A shares, for which front-end sales charges have been waived,
may be subject to redemption charges as described in the Funds' prospectus.
111
<Page>
2. REORGANIZATIONS
On October 23, 2002, the Board of Trustees approved management's proposal to
merge the JPMorgan Intermediate Bond Fund (the "Target Fund") into the JPMorgan
Bond Fund II (the "Aquiring Fund"). The proposed merger was approved by the
Target Fund's shareholders on February 13, 2003. The merger occurred on March
21, 2003.
Prior to the open of business on March 24, 2003, the Acquiring Fund acquired all
the assets and liabilities of the Target Fund as shown in the table below,
pursuant to the Reorganization Plan approved by the Target Fund's shareholders
on February 13, 2003. The transaction was structured for tax purposes to qualify
as a tax-free reorganization under the Internal Revenue Code. Under the
Reorganization Plan, shareholders of the Target Fund receive a number of shares
of the corresponding class in the Acquiring Fund with a value equal to their
holdings in the Target Fund on the date of the exchange.
The following is a summary of Shares Outstanding, Net Assets, Net Asset Values
Per Share and Net Unrealized Appreciation immediately before and after the
Reorganization (amounts in thousands, except per share amounts):
JPMORGAN BOND FUND II REORGANIZATION
<Table>
<Caption>
NET ASSET NET
SHARES VALUE UNREALIZED
OUTSTANDING NET ASSETS PER SHARE APPRECIATION
TARGET FUND
JPMorgan Intermediate Bond Fund $ 7,076
Class A 423 $ 4,321 $ 10.22
Select 51,938 $ 530,889 $ 10.22
ACQUIRING FUND
JPMorgan Bond Fund II $ 11,525
Class A 846 $ 35,026 $ 41.41
Class B 364 $ 15,025 $ 41.31
Select 15,317 $ 632,912 $ 41.32
POST REORGANIZATION
JPMorgan Bond Fund II $ 18,601
Class A 950 $ 39,347 $ 41.41
Class B 364 $ 15,025 $ 41.31
Select 28,163 $ 1,163,801 $ 41.32
</Table>
112
<Page>
Prior to September 10, 2001, BF, STBF, GSIF and EMDF utilized a Master Feeder
Fund Structure where all the Funds sought to achieve their investment objectives
by investing all of their investable assets in the U.S. Fixed Income Portfolio,
Short Term Bond Portfolio, Global Strategic Income Portfolio and the Emerging
Markets Debt Portfolio, respectively. BF, STBF, GSIF and EMDF now invest
directly in portfolio securities.
Prior to the open of business on September 10, 2001, the J.P. Morgan
Institutional Bond Fund, J.P. Morgan Institutional Short Term Bond Fund, and
J.P. Morgan Institutional Global Strategic Income Fund (collectively, the
"Acquiring Funds") acquired all the net assets of J.P. Morgan Bond Fund, J.P.
Morgan Institutional Bond Fund-Ultra, J.P. Morgan Short Term Bond Fund, and J.P.
Morgan Global Strategic Income Fund (collectively, the "Target Funds"), as shown
in the tables below, pursuant to Reorganization Plans approved by the Target
Funds' shareholders on July 3, 2001 and July 25, 2001. The transactions were
structured for tax purposes to qualify as tax-free reorganizations under the
Internal Revenue Code. Under each Reorganization Plan, shareholders of the
Target Funds received shares in the Acquiring Funds with a value equal to their
holdings in the Target Funds.
In conjunction with the merger of the Chase and J.P. Morgan mutual fund
complexes on September 10, 2001, Institutional Shares for BFII, STBFII, SIF and
USTI were renamed Select Shares.
The following is a summary of Shares Outstanding, Beneficial Interest
Outstanding, Net Assets, Net Asset Values Per Share and Net Unrealized
Appreciation (Depreciation) immediately before and after the Reorganizations
(amounts in thousands, except per share amounts):
JPMORGAN BOND FUND REORGANIZATION
<Table>
<Caption>
BENEFICIAL NET ASSET NET
INTEREST SHARES VALUE UNREALIZED
OUTSTANDING OUTSTANDING NET ASSETS PER SHARE APPRECIATION
TARGET FUND
J.P. Morgan Bond Fund 28,828 $ 299,497 $ 10.39 $ 4,708
J.P. Morgan Institutional
Bond Fund - Ultra 55,296 $ 555,990 $ 10.05 $ 8,326
ACQUIRING FUND
J.P. Morgan Institutional Bond Fund 101,149 $ 1,000,493 $ 9.89 $ 16,329
AFTER REORGANIZATION
JPMorgan Bond Fund $ 29,363
Ultra 56,210 $ 555,990 $ 9.89
Select 30,279 $ 299,497 $ 9.89
Institutional 101,149 $ 1,000,493 $ 9.89
</Table>
113
<Page>
JPMORGAN SHORT TERM BOND FUND REORGANIZATION
<Table>
<Caption>
BENEFICIAL NET ASSET NET
INTEREST SHARES VALUE UNREALIZED
OUTSTANDING OUTSTANDING NET ASSETS PER SHARE APPRECIATION
TARGET FUNDS
J.P. Morgan Short Term Bond Fund 5,382 $ 53,000 $ 9.85 $ 753
ACQUIRING FUND
J.P. Morgan Institutional
Short Term Bond Fund 58,275 $ 575,178 $ 9.87 $ 8,789
AFTER REORGANIZATION
JPMorgan Short Term Bond Fund $ 9,542
Select 5,372 $ 53,000 $ 9.87
Institutional 58,275 $ 575,178 $ 9.87
</Table>
JPMORGAN GLOBAL STRATEGIC INCOME FUND REORGANIZATION
<Table>
<Caption>
NET
BENEFICIAL NET ASSET UNREALIZED
INTEREST SHARES VALUE APPRECIATION
OUTSTANDING OUTSTANDING NET ASSETS PER SHARE (DEPRECIATION)
TARGET FUNDS
J.P. Morgan Global
Strategic Income Fund 602 $ 5,459 $ 9.07 $ 9
ACQUIRING FUND
J.P. Morgan Institutional Global
Strategic Income Fund 15,786 $ 144,187 $ 9.13 $ (747)
AFTER REORGANIZATION
JPMorgan Global
Strategic Income Fund $ (738)
Select 598 $ 5,459 $ 9.13
Institutional 15,786 $ 144,187 $ 9.13
</Table>
114
<Page>
On February 16, 2001, USTI acquired all the net assets of Chase Vista U.S.
Government Securities Fund ("CVUSGSF") and Chase U.S. Government Securities Fund
("CUSGSF"). On March 2, 2001, BFII acquired all the net assets of Chase Vista
Bond Fund ("CVBF") and Chase Income Fund ("CIF"), and STBFII acquired all the
net assets of Chase Vista Select Short-Term Bond Fund ("CVSSTBF") and Chase
Short-Intermediate Term U.S. Government Securities Fund ("CSITUSGSF"). USTI,
BFII and STBFII are hereafter collectively referred to as the "Acquiring Funds".
CVUSGSF, CUSGSF, CITBF, CVBF, CIF, CVSSTBF and CSITUGSF are hereafter
collectively referred to as the "Target Funds". These reorganizations were
pursuant to Reorganization Plans approved by the Target Funds shareholders on
January 26, 2001. The transactions were structured for tax purposes to qualify
as tax-free reorganizations under the Internal Revenue Code. Under each
Reorganization Plan, shareholders of the Target Funds received shares in the
Acquiring Funds with a value equal to their holdings in the Target Funds.
Holders of Class A Shares and Investor Class Shares in the Target Funds received
Class A Shares in the Acquired Funds, holders of Class B Shares in the Target
Funds received Class B Shares in the Acquired Funds and holders of Institutional
Class Shares and Premier Class Shares in the Target Funds received Institutional
Class Shares in the Acquired Funds.
The following is a summary of Shares Outstanding, Net Assets, Net Asset Values
Per Share and Net Unrealized Appreciation immediately before and after the
reorganization on February 16, 2001 (amounts in thousands, except per share
amounts):
<Table>
<Caption>
BEFORE AFTER
REORGANIZATION REORGANIZATION
-------------------------- ---------------------------
USTI CUSGSF CVUSGSF USTI
CLASS A
Shares 3,596 259 3,832
Net Assets $ 39,915 $ 2,585 $ 42,536
Net Asset Value, per share $ 11.10 $ 10.00 $ 11.10
CLASS B
Shares 1,397 1,397
Net Assets $ 15,483 $ 15,483
Net Asset Value, per share $ 11.08 $ 11.08
INSTITUTIONAL
Shares 4,192 4,175
Net Assets $ 41,799 $ 46,349
Net Asset Value, per share $ 9.97 $ 11.10
PREMIER SHARES
Shares 338
Net Assets $ 4,550
Net Asset Value, per share $ 13.47
INVESTOR SHARES
Shares 3
Net Assets $ 36
Net Asset Value, per share $ 13.47
Net Unrealized Appreciation $ 1,034 $ 161 $ 1,159 $ 2,354
</Table>
115
<Page>
The following is a summary of Shares Outstanding, Net Assets, Net Asset Values
Per Share and Net Unrealized Appreciation immediately before and after the
reorganization on March 2, 2001 (amounts in thousands, except per share
amounts):
<Table>
<Caption>
BEFORE AFTER
REORGANIZATION REORGANIZATION
-------------------------- ---------------------------
BFII CVBF CIF BFII
CLASS A
Shares 3,210 872
Net Assets $ 33,725 $ 34,496
Net Asset Value, per share $ 10.51 $ 39.55
CLASS B
Shares 431 115
Net Assets $ 4,552 $ 4,552
Net Asset Value, per share $ 10.55 $ 39.55
INSTITUTIONAL
Shares 15,089 2,000 16,807
Net Assets $ 596,783 $ 20,997 $ 664,724
Net Asset Value, per share $ 39.55 $ 10.50 $ 39.55
PREMIER SHARES
Shares 2,390
Net Assets $ 46,944
Net Asset Value, per share $ 19.65
INVESTOR SHARES
Shares 39
Net Assets $ 771
Net Asset Value, per share $ 19.67
Net Unrealized Appreciation $ 15,370 $ 1,252 $ 1,389 $ 18,011
</Table>
116
<Page>
<Table>
<Caption>
BEFORE AFTER
REORGANIZATION REORGANIZATION
-------------------------- ---------------------------
STBFII CVSSTBF CSITUSGSF STBFII
CLASS A
Shares 1,726 1,751
Net Assets $ 17,437 $ 17,689
Net Asset Value, per share $ 10.10 $ 10.10
INSTITUTIONAL
Shares 1,655 2,548 6,287
Net Assets $ 16,743 $ 27,012 $ 63,622
Net Asset Value, per share $ 10.12 $ 10.60 $ 10.12
CLASS M
Shares 7,996 7,996
Net Assets $ 80,764 $ 80,764
Net Asset Value, per share $ 10.10 $ 10.10
PREMIER SHARES
Shares 1,582
Net Assets $ 19,867
Net Asset Value, per share $ 12.56
INVESTOR SHARES
Shares 20
Net Assets $ 252
Net Asset Value, per share $ 12.56
Net Unrealized Appreciation $ 1,407 $ 479 $ 471 $ 2,357
</Table>
117
<Page>
3. SIGNIFICANT ACCOUNTING POLICIES
THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE
FUNDS:
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. VALUATION OF INVESTMENTS -- Fixed income securities, other than convertible
bonds, with a maturity of 61 days or more held by the Funds will be valued each
day based on readily available market quotations received from independent or
affiliated commercial pricing services. Such pricing services will generally
provide bidside quotations. Convertible bonds are valued at the last sale price
on the primary exchange on which the bond is principally traded. When valuations
are not readily available, securities are valued at fair value as determined in
accordance with procedures adopted by the Trustees. Valuations may be based upon
current market prices of securities, which are comparable in coupon, rating,
maturity and industry. It is possible that the estimated values may differ
significantly from the values that would have been used had a ready market for
the investments existed, and such differences could have been material.
Short-term investments with 60 days or less to maturity at time of purchase are
valued at amortized cost, which approximates market value.
Trading in securities on most foreign exchanges and over-the-counter markets is
normally completed before the close of the domestic market and may also take
place on days when the domestic market is closed. If events materially affecting
the value of foreign securities occur between the time when the exchange on
which they are traded closes and the time when the Funds' net assets are
calculated, such securities may be valued at fair value in accordance with
procedures adopted by the Trustees.
B. FUTURES CONTRACTS -- When a Fund enters into a futures contract, it makes an
initial margin deposit in a segregated account, either in cash or liquid
securities. Thereafter, the futures contract is marked to market and the Fund
makes (or receives) additional cash payments daily to (or from) the broker.
Changes in the value of the contract are recorded as unrealized appreciation
(depreciation) until the contract is closed or settled.
The Funds invest in exchange-traded interest rate futures for hedging purposes,
to either modify the duration of the portfolio, modify the yield curve exposure
of the portfolio, or in anticipation of buying or selling a specific security.
Use of long futures contracts subjects the Funds to risk of loss in excess of
amounts shown on the Statement of Assets and Liabilities, up to the notional
value of the futures contracts. Use of short futures contracts subjects the
Funds to unlimited risk of loss. The Funds may enter into futures contracts only
on exchanges or boards of trade. The exchange or board of trade acts as the
counterparty to each futures transaction; therefore, the Fund's credit risk is
limited to failure of the exchange or board of trade.
As of August 31, 2003, the Funds had outstanding futures contracts as listed on
the Funds' Portfolio of Investments.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the prevailing exchange rates, or at the mean of the current bid and
asked prices, of such currencies against the U.S. dollar as quoted by a major
bank, on the following basis:
1. Market value of investment securities and other assets and liabilities: at
the rate of exchange at the valuation date.
2. Purchases and sales of investment securities, income and expenses: at the
rates of exchange prevailing on the respective dates of such transactions.
118
<Page>
Although the net assets of the Funds are presented at the foreign exchange rates
and market values at the close of the periods, the Funds do not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held or sold during the year. Accordingly, such realized
foreign currency gains (losses) are included in the reported net realized gains
(losses) on investment transactions.
Reported realized foreign currency gains or losses arise from disposition of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on each
Fund's books on the transaction date and the U.S. dollar equivalent of the
amounts actually received or paid. Unrealized foreign exchange gains and losses
arise from changes (due to the changes in the exchange rate) in the value of
foreign currency and other assets and liabilities denominated in foreign
currencies, which are held at period end.
D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into
forward foreign currency contracts (obligations to purchase or sell foreign
currency in the future on a date and price fixed at the time the contracts are
entered into) to manage the Fund's exposure to foreign currency exchange
fluctuations. Each day the forward contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to market".
When the forward contract is closed, or the delivery of the currency is made or
taken, each Fund records a realized gain or loss equal to the difference between
the proceeds from (or cost of) the closing transaction and the Fund's basis in
the contract. The Funds are subject to off-balance sheet risk to the extent of
the value of the contracts for purchases of foreign currency and in an unlimited
amount for sales of foreign currency.
As of August 31, 2003, the Funds had outstanding forward foreign currency
exchange contracts as listed on the Funds' Portfolio of Investments.
E. WRITTEN OPTIONS -- When a Fund writes an option, an amount equal to the
premium received by the Fund is included in the Fund's Statement of Assets and
Liabilities as an asset and corresponding liability. The amount of the liability
is adjusted daily to reflect the current market value of the written option and
the change is recorded in a corresponding unrealized gain or loss account. When
a written option expires on its stipulated expiration date, or when a closing
transaction is entered into, the related liability is extinguished and the fund
realizes a gain or loss contingent on whether the cost of the closing
transaction exceeds the premium received when the option was written.
The Funds write options on securities, futures and interest rate swaps
("swaptions"). These options are settled for cash and subject the Funds to
unlimited risk of loss. The Funds, however, are not subject to credit risk on
written options as the counterparty has already performed its obligation by
paying the premium at the inception of the contract.
As of August 31, 2003, the Funds had written options contracts outstanding as
listed on the Funds' Portfolio of Investments.
119
<Page>
Transactions in options written during the period ended August 31, 2003, were as
follows (amounts in thousands):
<Table>
<Caption>
BF BFII EIF
---------------------------- ---------------------------- ----------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS NUMBER OF PREMIUMS
UNITS RECEIVED UNITS RECEIVED UNITS RECEIVED
Options outstanding at
August 31, 2002 (290,000) $ 6,392 -- $ -- -- $ --
Options written (2,748,900) 17,208 (1,515,300) 7,945 (131,401) 1,036
Options terminated in closing
purchase transactions 2,582,150 (21,251) 1,141,800 (6,036) 107,701 (924)
Options exercised -- -- -- -- -- --
Options outstanding at
August 31, 2003 (456,750) $ 2,349 (373,500) $ 1,909 (23,700) $ 112
<Caption>
STBF STBFII
---------------------------- ----------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
UNITS RECEIVED UNITS RECEIVED
Options outstanding at
August 31, 2002 (30,600) $ 304 -- $ --
Options written (720,801) 5,143 (529,503) 4,181
Options terminated in closing
purchase transactions 697,851 (5,196) 440,253 (3,763)
Options exercised -- -- -- --
Options outstanding at
August 31, 2003 (53,550) $ 251 (89,250) $ 418
</Table>
120
<Page>
F. SWAPS -- The Funds engage in various swap transactions, including forward
rate agreements, interest rate and total return swaps, primarily to manage
duration and curve risk, or as alternatives to direct investments. Unrealized
gains are reported as an asset and unrealized losses are reported as a liability
on the Statement of Assets and Liabilities. The interest to be paid or received
on swaps is reported as unrealized gains or losses in the Statement of
Operations. A realized gain or loss is recorded upon termination of swap
agreements. Swap agreements are stated at fair value. Notional principal amounts
are used to express the extent of involvement in these transactions, but the
amounts potentially subject to credit risk are much smaller.
As of August 31, 2003, the Funds had outstanding swap agreements as listed on
the Funds' Portfolio of Investments.
G. COMMITMENTS -- The Funds may enter into commitments to buy and sell
investments to settle on future dates as part of their normal investment
activities. These commitments are reported at market value in the financial
statements. Credit risk exists on these commitments to the extent of any
unrealized gains on the underlying securities purchased and to the extent of the
difference between the sale price and current market value of the underlying
securities sold. Market risk exists on commitments to buy to the same extent as
if the securities were owned on a settled basis and gains and losses are
recorded and reported in the same manner. However, during the commitment period,
these investments earn no interest or dividends.
H. DOLLAR ROLLS -- The Funds may enter into dollar rolls (principally using
TBA's) in which the Funds sell mortgage securities for delivery in the current
month and simultaneously contract to repurchase similar, but not identical,
securities at an agreed-upon price on a fixed date. The Funds account for such
dollar rolls as purchases and sales and receive compensation as consideration
for entering into the commitment to repurchase. Each Fund must maintain liquid
securities having a value not less than the repurchase price (including accrued
interest) for such dollar rolls. The market value of the securities that a Fund
is required to purchase may decline below the agreed upon repurchase price of
those securities.
BF, BFII, EIF, STBF, and STBFII had TBA Dollar Rolls outstanding as of August
31, 2003, which are included in Receivable for Investment securities sold and
Payable for Investment securities purchased on the Statement of Assets and
Liabilities. The Funds segregate assets with a current value at least equal to
the amount of their TBA Dollar Rolls.
In a "fee" roll, the compensation is recorded as deferred income and amortized
to income over the roll period. The counterparty receives all principal and
interest payments, including prepayments, made in respect of a security subject
to such a contract while it is the holder. Mortgage dollar rolls may be renewed
with a new purchase and repurchase price and a cash settlement made on
settlement date without physical delivery of the securities subject to the
contract. The Funds engage in dollar rolls for the purpose of enhancing their
yields, principally by earning a negotiated fee.
121
<Page>
I. RESTRICTED AND ILLIQUID SECURITIES -- The Funds are permitted to invest in
securities that are subject to legal or contractual restrictions on resale or
are illiquid. Restricted securities generally may be resold in transactions
exempt from registration. A security may be considered illiquid if it lacks a
readily available market or if its valuation has not changed for a certain
period of time. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at the current valuation may be
difficult. The following is the market value and percentage of net assets of
restricted and illiquid securities (amounts in thousands).
<Table>
<Caption>
ILLIQUID RESTRICTED
FUND
BF $ 19,954 1.62% $ 105,730 8.57%
BFII -- -- 46,697 4.37%
EIF -- -- 40,724 11.49%
EMDF -- -- 9,902 16.42%
GSIF 14,522 13.11% 29,558 26.69%
STBF -- -- 88,023 9.39%
STBFII -- -- 138,854 8.94%
SIF -- -- 1,966 8.79%
</Table>
J. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are
accounted for on the trade date (the date the order to buy or sell is executed).
Securities gains and losses are calculated on the identified cost basis.
Interest income is determined on the basis of coupon interest accrued using the
interest method adjusted for amortization of premiums and accretion of
discounts. Dividend income is recorded on the ex-dividend date or when the Funds
first learn of the dividend.
Purchases of To Be Announced (TBA), when-issued or delayed delivery securities
may be settled a month or more after the trade date; interest income is not
accrued until settlement date. It is each Fund's policy to segregate assets with
a current value at least equal to the amount of its TBA, when-issued or delayed
delivery purchase commitments.
K. ALLOCATION OF INCOME AND EXPENSES -- Expenses directly attributable to a Fund
are charged to that Fund; other expenses of the Trusts are allocated
proportionately among each of the Funds within the Trusts in relation to the net
assets of each Fund or on another reasonable basis. Expenses directly
attributable to a particular class are charged directly to such class. In
calculating the net asset value per share of each class, investment income,
realized and unrealized gains and losses and expenses other than class specific
expenses are allocated daily to each class of shares based upon the proportion
of net assets of each class at the beginning of each day.
L. FEDERAL INCOME TAXES -- Each Fund is treated as a separate taxable entity for
Federal income tax purposes. The policy of the Funds is to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute to shareholders all of their distributable net
investment income and net realized gain on investments. In addition, the Funds
intend to make distributions as required to avoid excise taxes. Accordingly, no
provision for Federal income or excise tax is necessary.
M. FOREIGN TAXES -- Certain Funds may be subject to foreign taxes on income,
gains on investments or currency repatriation, a portion of which may be
recoverable. The Funds will accrue such taxes and recoveries as applicable,
based upon their current interpretation of tax rules and regulations that exist
in the markets in which they invest.
122
<Page>
N. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions paid to
shareholders are recorded on the ex-dividend date. The amount of dividends and
distributions from net investment income and net realized capital gains is
determined in accordance with Federal income tax regulations, which may differ
from accounting principles generally accepted in the United States of America.
To the extent these "book/tax" differences are permanent in nature, (i.e., that
they result from other than timing of recognition -- "temporary differences")
such amounts are reclassified within the capital accounts based on their Federal
tax-basis treatment.
The following amounts were reclassified within the capital accounts (amounts in
thousands):
<Table>
<Caption>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED/ NET REALIZED
(OVERDISTRIBUTED) GAIN (LOSS)
PAID-IN CAPITAL NET INVESTMENT INCOME ON INVESTMENTS
FUND
BF $ -- $ (372) $ 372
BFII 345 (912) 567
EIF -- (122) 122
EMDF (16) 132 (116)
GSIF (299) (737) 1,036
STBF -- 275 (275)
STBFII 536 390 (926)
SIF (9) (127) 136
USTI -- 6 (6)
</Table>
The reclassifications for BF relate primarily to the character for tax purposes
of foreign currency gains and losses and paydowns. The reclassifications for
BFII relate primarily to the character for tax purposes of temporary differences
from the acquired fund, foreign currency gains and losses and paydowns. The
reclassifications for EIF relate primarily to the character for tax purposes of
foreign currency gains and losses and paydowns. The reclassifications for EMDF
relate primarily to the character for tax purposes of paydowns and the sale of
defaulted securities. The reclassifications for GSIF relate primarily to the
character for tax purposes of foreign currency gains and losses,
overdistribution of income and paydowns. The reclassifications for STBF relate
primarily to the character for tax purposes of foreign currency gains and losses
and paydowns. The reclassifications for STBFII relate primarily to the character
for tax purposes of current year dividends, equalization, foreign currency gains
and losses, return of capital and paydowns. The reclassifications for SIF relate
primarily to the character for the tax purposes of paydowns, foreign currency
gains and losses and equalization. The reclassifications for USTI relate
primarily to the character for tax purposes of paydowns.
O. EQUALIZATION -- STBFII and SIF use the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
redemptions of Trust shares of beneficial interest equivalent, on a per-share
basis, to the amount of undistributed net investment income on the date of the
transaction, is credited or charged to undistributed net investment income. As a
result, undistributed net investment income per share is unaffected by sales or
redemptions of Trust shares.
123
<Page>
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY FEE -- Pursuant to separate Investment Advisory
Agreements, J.P. Morgan Fleming Asset Management (USA), Inc. ("JPMFAM") and J.P.
Morgan Investment Management, Inc. ("JPMIM" and, together with JPMFAM, the
"Advisors") act as the investment advisors to the Funds. JPMFAM, a direct wholly
owned subsidiary of JPMorgan Chase Bank ("JPMCB") and an indirect wholly owned
subsidiary of J.P. Morgan Chase & Co. ("JPMorgan"), is the advisor for BFII,
STBFII, SIF and USTI. JPMIM, a wholly owned subsidiary of JPMorgan, is the
advisor for BF, EIF, EMDF, GSIF and STBF. The Advisors supervise the investments
of each respective Fund and for such services are paid a fee. The fee is accrued
daily and paid monthly based on each Fund's respective average daily net assets.
The annual fee for each Fund is as follows:
<Table>
<Caption>
INVESTMENT
ADVISORY FEE (%)
FUND
BF 0.30%
BFII 0.30%
EIF 0.25%
EMDF 0.70%
GSIF 0.45%
STBF 0.25%
STBFII 0.25%
SIF 0.50%
USTI 0.30%
</Table>
The Advisors waived fees as outlined in Note 4.F.
The Funds may invest in one or more of the affiliated JPMorgan Money Market
Funds. The Adviser has agreed to waive and/or reimburse its advisory fee from
the Funds in an amount sufficient to offset any doubling up of investment
advisory, administration and shareholder servicing fees related to each Fund's
investment in an affiliated money market fund.
B. DISTRIBUTION FEES -- Pursuant to a Distribution Agreement, J.P. Morgan Fund
Distributors, Inc. ("JPMFD" or "Distributor"), a wholly-owned subsidiary of The
BISYS Group, Inc., serves as the Trusts' exclusive underwriter and promotes and
arranges for the sale of each Fund's shares. JPMFD receives no compensation in
its capacity as the Funds' underwriter.
124
<Page>
The Trustees have adopted Distribution Plans (the "Distribution Plans") for
Class A, B, C and M Shares of the Funds in accordance with Rule 12b-1 under the
1940 Act. The Distribution Plans provide that each Fund shall pay distribution
fees, including payments to the Distributor, at annual rates of the average
daily net assets as shown in the table below (%):
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS M
FUND
BF 0.25 0.75 0.75 n/a
BFII 0.25 0.75 n/a n/a
GSIF 0.25 0.75 n/a n/a
STBF 0.25 n/a n/a n/a
STBFII 0.25 n/a n/a 0.35
SIF 0.25 0.75 0.75 0.50
USTI 0.25 0.75 n/a n/a
</Table>
In addition, JPMFD receives any contingent deferred sales charges ("CDSC") from
redemptions of Class B and Class C shares.
The Distributor waived fees and reimbursed expenses as outlined in Note 4.F.
C. SHAREHOLDER SERVICING FEES -- The Trusts have entered into Shareholder
Servicing Agreements on behalf of the Funds with JPMCB under which JPMCB
provides account administration and personal account maintenance services to the
shareholders. JPMCB may obtain the services of one or more shareholder servicing
agents. For these services JPMCB or the Shareholder Servicing Agent will receive
a fee that is computed daily and paid monthly equal to a percentage of the
average daily net assets as shown in the table below (%):
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA
FUND
BF 0.25 0.25 0.25 n/a 0.10 0.25 0.05
BFII 0.25 0.25 n/a n/a n/a 0.25 n/a
EIF n/a n/a n/a n/a 0.10 n/a n/a
EMDF n/a n/a n/a n/a n/a 0.25 n/a
GSIF 0.25 0.25 n/a n/a 0.10 0.25 n/a
STBF 0.25 n/a n/a n/a 0.10 0.25 n/a
STBFII 0.25 n/a n/a 0.25 n/a 0.25 n/a
SIF 0.25 0.25 0.25 0.30 n/a n/a n/a
USTI 0.25 0.25 n/a n/a n/a 0.25 n/a
</Table>
125
<Page>
In addition, JPMCB, Charles Schwab & Co. ("Schwab") and JPMF, JPMIF and JPMST
are parties to separate servicing and operating agreements (the "Schwab
Agreements") whereby Schwab makes shares of BF, EIF, EMDF, GSIF and STBF
available to customers of investment advisers and other financial intermediaries
who are Schwab's clients. BF, EIF, EMDF, GSIF and STBF are not responsible for
payments to Schwab under the Schwab Agreements; however, in the event the
servicing agreement with Schwab is terminated for reasons other than a breach by
Schwab and the relationship between JPMF, JPMIF, JPMST and JPMCB is terminated,
BF, EIF, EMDF, GSIF and STBF would be responsible for the ongoing payments to
Schwab with respect to pre-termination shares.
The Shareholder Servicing Agent waived fees as outlined in Note 4.F.
D. CUSTODIAN AND ACCOUNTING FEES -- JPMCB provides portfolio accounting and
custody services for the Funds. Compensation for such services is presented in
the Statement of Operations as custodian fees. The custodian fees may be reduced
by credits earned by each Fund, based on uninvested cash balances held by the
custodian. Such earnings credits are presented separately in the Statement of
Operations.
E. ADMINISTRATION FEE -- Pursuant to an Administration Agreement, JPMCB (the
"Administrator") provides certain administration services to the Funds. In
consideration of these services, the Administrator receives a fee computed daily
and paid monthly at an annual rate equal to 0.15% of the first $25 billion of
the average daily net assets of all non-money market funds in the JPMorgan Fund
Complex and 0.075% of such average daily net assets in excess of $25 billion.
BISYS Fund Services, L.P. ("BISYS") serves as the Funds' sub-administrator. For
its services as sub-administrator, BISYS receives a portion of the fees payable
to JPMCB as Administrator.
The Administrator has contractually agreed to reimburse the Funds to the extent
that total operating expenses (excluding interest, taxes, extraordinary expenses
and expenses related to the deferred compensation plan) exceed the percentages
of their respective average daily net assets as shown in the table below (%):
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA
FUND
BF 0.75 1.50 1.50 n/a 0.49 0.69 0.40
BFII 0.75 1.50 n/a n/a n/a 0.60 n/a
EIF n/a n/a n/a n/a 0.20 n/a n/a
EMDF n/a n/a n/a n/a n/a 1.25 n/a
GSIF 1.25 1.75 n/a n/a 0.65 1.00 n/a
STBF 0.75 n/a n/a n/a 0.30 0.60 n/a
STBFII 0.75 n/a n/a 1.00 n/a 0.50 n/a
SIF 1.25 1.75 1.75 1.45 n/a n/a n/a
USTI 0.75 1.64 n/a n/a n/a 0.55 n/a
</Table>
126
<Page>
The contractual expense limitation agreements were in effect for the year ended
August 31, 2003. The expense limitation percentages in the table above are due
to expire as follows:
<Table>
<Caption>
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA
BF 12/31/03 12/31/03 3/31/04 n/a 12/31/04 12/31/04 12/31/05
BFII 03/31/04 12/31/03 n/a n/a n/a 03/31/04 n/a
EIF n/a n/a n/a n/a 12/31/03 n/a n/a
EMDF n/a n/a n/a n/a n/a 12/31/04 n/a
GSIF 12/31/03 12/31/03 n/a n/a 12/31/04 12/31/04 n/a
STBF 12/31/03 n/a n/a n/a 12/31/04 12/31/04 n/a
STBFII 12/31/03 n/a n/a 12/31/03 n/a 12/31/03 n/a
SIF 12/31/03 12/31/03 12/31/03 12/31/03 n/a n/a n/a
USTI 12/31/03 12/31/03 n/a n/a n/a 12/31/03 n/a
</Table>
The Administrator waived fees and reimbursed expenses as outlined in Note 4.F.
F. WAIVERS AND REIMBURSEMENTS -- For the year ended August 31, 2003, the Funds'
vendors waived fees and the Administrator contractually reimbursed expenses for
each of the Funds as follows (amounts in thousands):
<Table>
<Caption>
CONTRACTUAL WAIVERS
-----------------------------------------------------------------
INVESTMENT SHAREHOLDER CONTRACTUAL
ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL REIMBURSEMENTS
BF $ -- $ 1,469 $ 343 $ -- $ 1,812 $ 20
BFII -- 36 1,346 88 1,470 --
EIF 399 548 366 -- 1,313 --
EMDF 2 31 127 -- 160 --
GSIF 327 62 33 -- 422 30
STBF 29 1,252 752 -- 2,033 --
STBFII -- 549 342 129 1,020 --
SIF 108 33 54 -- 195 111
USTI 119 120 197 124 560 --
- ------------------------------------------------------------------------------------------------------------
Total $ 984 $ 4,100 $ 3,560 $ 341 $ 8,985 $ 161
============================================================================================================
<Caption>
VOLUNTARY WAIVERS
---------------------------------------------------------------------
INVESTMENT SHAREHOLDER
ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL
BF $ -- $ 84 $ -- $ -- $ 84
STBF -- 46 -- -- 46
- --------------------------------------------------------------------------------------------------------------
Total $ -- $ 130 $ -- $ -- $ 130
==============================================================================================================
</Table>
127
<Page>
G. OTHER -- Certain officers of the Trusts are officers of J.P. Morgan Chase &
Co. or of BISYS or their subsidiaries.
During the period certain of the Funds may have purchased securities from an
underwriting syndicate in which the principal underwriter or members of the
syndicate are affiliated with the Advisors.
The Funds may use related party broker dealers. For the year ended August 31,
2003, BF and STBF incurred approximately (in thousands) $10 and $15,
respectively, as brokerage commissions with brokers/dealers affiliated with
JPMorgan. STBF incurred approximately (in thousands) $29 as clearing fees for
JPMorgan Chase Futures.
5. CLASS SPECIFIC EXPENSES
The Funds' class specific expenses for the year ended August 31, 2003 are as
follows (amounts in thousands):
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT
BF
Class A $ 4 $ 4 $ 10
Class B 6 17 14
Class C --^ --^ --^
Institutional 645 -- 26
Select 836 -- 44
Ultra 267 -- 16
- ----------------------------------------------------------------------
$ 1,758 $ 21 $ 110
======================================================================
BFII
Class A $ 88 $ 88 $ 61
Class B 38 113 26
Select 2,134 -- 23
- ----------------------------------------------------------------------
$ 2,260 $ 201 $ 110
======================================================================
EIF
Institutional $ 366 $ -- $ 17
======================================================================
EMDF
Select $ 147 $ -- $ 22
======================================================================
GSIF
Class A $ 1 $ 2 $ 12
Class B 1 2 20
Institutional 126 -- 23
Select 9 -- 14
- ----------------------------------------------------------------------
$ 137 $ 4 $ 69
======================================================================
STBF
Class A $ 26 $ 26 $ 17
Institutional 739 -- 29
Select 344 -- 24
- ----------------------------------------------------------------------
$ 1,109 $ 26 $ 70
======================================================================
</Table>
128
<Page>
5. CLASS SPECIFIC EXPENSES
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT
STBFII
Class A $ 215 $ 214 $ 24
Class M 3,111 4,356 12
Select 492 -- 24
- -----------------------------------------------------------------------
$ 3,818 $ 4,570 $ 60
=======================================================================
SIF
Class A $ 7 $ 7 $ 12
Class B 20 58 35
Class C 7 22 12
Class M 25 40 17
- -----------------------------------------------------------------------
$ 59 $ 127 $ 76
=======================================================================
USTI
Class A $ 124 $ 124 $ 95
Class B 56 168 43
Select 192 -- 11
- -----------------------------------------------------------------------
$ 372 $ 292 $ 149
=======================================================================
</Table>
^ Amount rounds to less than one thousand.
6. CLASS SPECIFIC DISTRIBUTIONS
The Funds' class specific distributions from net investment income and realized
gain on investment transactions for the year ended August 31, 2003 and the
period ended August 31, 2002 are as follows (amounts in thousands):
<Table>
<Caption>
9/1/02 THROUGH 8/31/03 11/1/01 THROUGH 8/31/02
-------------------------------- --------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
BF
Class A $ 62 $ 8 $ 9 $ 1
Class B 70 13 12 --^
Class C 1 -- -- --
Institutional 26,560 5,442 29,582 6,409
Select 13,353 2,562 9,856 1,892
Ultra 22,494 4,216 19,447 3,746
- -----------------------------------------------------------------------------------------
$ 62,540 $ 12,241 $ 58,906 $ 12,048
=========================================================================================
</Table>
129
<Page>
<Table>
<Caption>
9/1/02 THROUGH 8/31/03 11/1/01 THROUGH 8/31/02
-------------------------------- ---------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
BFII
Class A $ 1,413 $ 389 $ 1,509 $ --
Class B 492 170 264 --
Select 36,689 7,587 22,316 --
- -------------------------------------------------------------------------------------------
$ 38,594 $ 8,146 $ 24,089 $ --
===========================================================================================
EIF
Institutional $ 8,519 $ -- $ 3,084 $ --
===========================================================================================
EMDF
Select $ 4,996 $ -- $ 311 $ --
===========================================================================================
GSIF
Class A $ 9 $ -- $ 1 $ --
Class B 12 -- 4 --
Institutional 6,870 -- 7,372 --
Select 186 -- 218 --
- -------------------------------------------------------------------------------------------
$ 7,077 $ -- $ 7,595 $ --
===========================================================================================
STBF
Class A $ 255 $ 155 $ 176 $ 10
Institutional 21,501 9,747 17,687 2,460
Select 3,658 1,911 2,600 262
- -------------------------------------------------------------------------------------------
$ 25,414 $ 11,813 $ 20,463 $ 2,732
===========================================================================================
STBFII
Class A $ 1,997* $ 510 $ 1,317 $ 561
Class M 26,550* 5,842 20,500 8,423
Select 5,356* 688 3,497 1,444
- -------------------------------------------------------------------------------------------
$ 33,903 $ 7,040 $ 25,314 $ 10,428
===========================================================================================
SIF
Class A $ 158 $ -- $ 120 $ --
Class B 384 -- 312 --
Class C 140 -- 101 --
Class M 421 -- 391 --
- -------------------------------------------------------------------------------------------
$ 1,103 $ -- $ 924 $ --
===========================================================================================
USTI
Class A $ 1,913 $ -- $ 1,387 $ --
Class B 670 -- 476 --
Select 3,136 -- 2,457 --
- -------------------------------------------------------------------------------------------
$ 5,719 $ -- $ 4,320 $ --
===========================================================================================
</Table>
^ Amount rounds to less than one thousand
* Includes return of capital $33, $478 and $76 for Class A, M and Select,
respectively.
130
<Page>
7. INVESTMENT TRANSACTIONS
For the year ended August 31, 2003, purchases and sales of investments
(excluding short-term investments) were as follows (amounts in thousands):
<Table>
<Caption>
PURCHASES SALES PURCHASES SALES
(EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S.
GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT
BF $ 545,172 $ 685,397 $ 9,252,964 $ 9,509,822
BFII 608,892 318,977 6,727,484 6,753,031
EIF 482,079 359,142 589,469 613,285
EMDF 4,416 3,174 86,449 82,072
GSIF 22,986 35,391 282,730 303,959
STBF 805,603 678,192 1,943,291 1,862,788
STBFII 1,874,339 1,574,452 2,785,870 2,736,930
SIF 7,376 6,244 17,609 17,329
USTI 2,517 808 163,728 148,811
</Table>
8. FEDERAL INCOME TAX MATTERS
For Federal income tax purposes, the cost and unrealized appreciation
(depreciation) in value of the investment securities at August 31, 2003 are as
follows (amounts in thousands):
<Table>
<Caption>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
BF $ 1,371,021 $ 22,920 $ (21,037) $ 1,883
BFII 1,220,242 22,783 (16,535) 6,248
EIF 363,799 704 (1,059) (355)
EMDF 51,202 7,739 (679) 7,060
GSIF 118,531 6,423 (2,071) 4,352
STBF 1,075,283 6,577 (3,524) 3,053
STBFII 1,715,197 10,726 (6,968) 3,758
SIF 21,648 1,282 (531) 751
USTI 136,165 3,178 (2,296) 882
</Table>
131
<Page>
The tax character of distributions paid during the year ended August 31, 2003,
and the period ended August 31, 2002 were as follows (amounts in thousands):
YEAR ENDED 8/31/03
<Table>
<Caption>
ORDINARY LONG-TERM RETURN OF TOTAL
INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS
BF $ 71,135 $ 3,646 $ -- $ 74,781
BFII 42,125 4,615 -- 46,740
EIF 8,519 -- -- 8,519
EMDF 4,996 -- -- 4,996
GSIF 7,077 -- -- 7,077
STBF 29,709 7,518 -- 37,227
STBFII 36,036 4,320 587 40,943
SIF 1,103 -- -- 1,103
USTI 5,719 -- -- 5,719
</Table>
11/1/01 THROUGH 8/31/02
<Table>
<Caption>
ORDINARY LONG-TERM RETURN OF TOTAL
INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS
BF $ 58,906 $ 12,048 $ -- $ 70,954
BFII 24,089 -- -- 24,089
EIF 3,084 -- -- 3,084
EMDF 311 -- -- 311
GSIF 7,217 -- 378 7,595
STBF 20,457 2,738 -- 23,195
STBFII 30,242 5,500 -- 35,742
SIF 867 -- 57 924
USTI 4,320 -- -- 4,320
</Table>
132
<Page>
At August 31, 2003, the components of net assets (excluding paid in capital) on
a tax basis were as follows (amounts in thousands):
<Table>
<Caption>
BF BFII EIF
Current distributable ordinary income $ 13,204 $ 4,787 $ 173
Plus/Less: cumulative timing differences (1,524) (5,024) (304)
Undistributed ordinary income or
overdistribution of ordinary income $ 11,680 $ (237) $ (131)
Current distributable long-term capital
gain or tax basis capital loss carryover 15,604 154 (1,972)
Plus/Less: cumulative timing differences -- -- (2,959)
Undistributed long-term gains/
accumulated capital loss 15,604 154 (4,931)
Unrealized appreciation (depreciation) $ 5,995 $ 5,574 $ (170)
<Caption>
EMDF GSIF STBF
Current distributable ordinary income $ 334 $ -- $ 1,627
Plus/Less: cumulative timing differences (43) (854) (2,230)
Undistributed ordinary income or
overdistribution of ordinary income $ 291 $ (854) $ (603)
Current distributable long-term capital
gain or tax basis capital loss carryover (2,324) (32,290) --
Plus/Less: cumulative timing differences -- -- (2,587)
Undistributed long-term gains/
accumulated capital loss (2,324) (32,290) (2,587)
Unrealized appreciation (depreciation) $ 7,022 $ 4,336 $ 4,313
<Caption>
STBFII SIF USTI
Current distributable ordinary income $ -- $ --^ $ 194
Plus/Less: cumulative timing differences (2,892) (208) (186)
Undistributed ordinary income or
overdistribution of ordinary income $ (2,892) $ (208) $ 8
Current distributable long-term capital
gain or tax basis capital loss carryover -- (2,615) (1,587)
Plus/Less: cumulative timing differences (1,731) (109) (849)
Undistributed long-term gains/
accumulated capital loss (1,731) (2,724) (2,436)
Unrealized appreciation (depreciation) $ 4,598 $ 748 $ 882
</Table>
133
<Page>
For BF, EIF and STBFII, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, straddle loss
deferrals and the mark to market of futures and options. For BFII and STBF, the
difference between book and tax basis unrealized appreciation/(depreciation) is
primarily attributed to wash sales and the mark to market of futures and
options. For EMDF, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, mark to
market of futures, and allocation of tax basis on "Master/Feeder" takedown. For
GSIF, the differences between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, straddle loss
deferrals, the mark to market of futures, and forward foreign currency
contracts. For SIF, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales and the mark
to market of futures, forward foreign currency contracts. For USTI, the
difference between book and tax basis unrealized appreciation/(depreciation) is
primarily attributed to wash sales and the mark to market of futures. For BF and
EIF, the cumulative timing difference account primarily consists of dividends
payable and post October loss deferrals. For BFII, STBF, STBFII and USTI, the
cumulative timing difference account primarily consists of deferred
compensation, dividends payable and post October loss deferrals. For EMDF, the
cumulative timing difference account primarily consists of deferred
compensation, dividends payable and interest write off for book not tax
purposes. For GSIF and SIF, the cumulative timing difference account primarily
consists of dividends payable, post October loss deferrals and interest write
off for book not tax purposes.
At August 31, 2003, the following Funds have capital loss carryovers, which will
be available to offset capital gains. To the extent that any net capital loss
carryovers are used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders (amounts in thousands).
<Table>
<Caption>
EXPIRATION
AMOUNT DATE
EIF $ (1,180) August 31, 2010
(792) August 31, 2011
- ------------------------------------------------------------------------------------------------------------------------
(1,972)
========================================================================================================================
EMDF $ (2,324) August 31, 2010
========================================================================================================================
GSIF $ (8,194) August 31, 2006
(5,023) August 31, 2007
(6,462) August 31, 2008
(4,211) August 31, 2009
(8,400) August 31, 2010
- ------------------------------------------------------------------------------------------------------------------------
(32,290)*
========================================================================================================================
SIF $ (1,652) August 31, 2009
(917) August 31, 2010
(46) August 31, 2011
- ------------------------------------------------------------------------------------------------------------------------
(2,615)
========================================================================================================================
USTI $ (1,587) August 31, 2008
========================================================================================================================
</Table>
* The above capital loss carryover includes $426 (amount in thousands) of
losses acquired from J.P. Morgan Global Strategic Income Fund. Utilization
of these losses will be subject to an annual limitation as prescribed by
the Internal Revenue Code.
134
<Page>
During the year ended August 31, 2003, EMDF, GSIF and USTI utilized capital loss
carryovers of $3,652, $1,321 and $4,029, respectively (amounts in thousands).
Capital losses incurred after October 31, within a Fund's fiscal year are deemed
to aris on the first business day of the following fiscal year for tax purposes.
The following Funds have incurred the following post-October realized losses
(amounts in thousands):
<Table>
<Caption>
CURRENCY CAPITAL
FUND
BF $ 386 $ --
BFII 848 --
EIF 132 2,959
GSIF 429 --
STBF -- 4,186
STBFII 280 1,727
SIF 150 109
USTI -- 850
</Table>
9. BANK BORROWINGS
Pursuant to a Line of Credit Agreement, dated April 17, 2003, the Funds may
borrow money for temporary or emergency purposes. The Funds have entered into
the agreement, enabling them to participate with other JPMorgan Funds in a line
of credit with JPMCB, as administrative agent, and with a syndicate of banks,
which permits borrowings up to $250 million, collectively. Interest is charged
to each Fund based on its borrowings at an annual rate equal to the sum of the
Federal Funds Rate plus 0.50%. The Funds also pay a commitment fee of 0.09% per
annum on the average daily amount of the available commitment, which is
allocated on a pro-rata basis to the Funds. The commitment fee is included in
Other expenses on the Statement of Operations. This agreement will expire on
April 16, 2004.
Prior to April 17, 2003, the Funds had entered into an agreement, enabling them
to participate with other JPMorgan Funds in an unsecured line of credit with a
syndicate of banks, which permitted borrowings up to $400 million, collectively.
Interest was charged to the Fund based on its borrowings at an annual rate equal
to the sum of the Federal Funds Rate plus 0.50%. The Funds also paid a
commitment fee of 0.09% per annum on the average daily amount of the available
commitment, which was allocated on a pro-rata basis to the Fund. This agreement
expired on April 16, 2003. The commitment fee is included in Other expenses on
the Statement of Operations.
During the period ended August 31, 2003, EMDF and GSI had borrowed against the
Line of Credit Agreement. The details of the borrowing were as follows (amounts
in thousands):
<Table>
<Caption>
AVERAGE AVERAGE
AMOUNT OUTSTANDING* INTEREST RATE
FUND
EMDF $ 51 1.62%
GSI 96 1.76%
</Table>
* The average amount outstanding was calculated based on the daily balances
during the period from September 1, 2002, through August 31, 2003.
135
<Page>
10. CONCENTRATIONS AND INDEMNIFICATIONS
The Funds may have elements of risk not typically associated with investments in
the United States of America due to concentrated investments in a limited number
of countries or regions, which may vary throughout the year. Such concentrations
may subject the Funds to additional risks resulting from political or economic
conditions in such countries or regions and the possible imposition of adverse
governmental laws or currency exchange restrictions could cause the securities
and their markets to be less liquid and their prices more volatile than those of
comparable U.S. securities.
The ability of the issuers of debt, asset-backed and mortgage-backed securities,
along with counterparties to swaps, forward foreign currency exchange contracts
and option agreements, to meet their obligations may be affected by the economic
and political developments in a specific industry or region. The value of
asset-backed and mortgage-backed securities can be significantly affected by
changes in interest rates or rapid principal payments including prepayments.
As to illiquid investments, a Fund is subject to the 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.
From time to time, the Funds may have a concentration of several shareholders
which may be a related party, holding a significant percentage of shares
outstanding. Investment activities of these shareholders could have a material
impact on the Funds.
In the normal course of business the Funds enter into contracts that contain a
variety of representations which provide general indemnifications. Each Funds'
maximum exposure under these arrangements is unknown as this would involve
future claims that may be made against each Fund that have not yet occurred.
However, based on experience, the Funds expect the risk of loss to be remote.
11. SUBSEQUENT EVENTS
On September 1, 2003, Robert Fleming, Inc. and J.P. Morgan Fleming Asset
Management (USA), Inc. merged into J.P. Morgan Investment Management, Inc.
("JPMIM"). The investment advisory services and personnel providing investment
advice have not changed as a result of the merger. Effective September 1, 2003,
JPMIM, the surviving entity, will serve as adviser to all the funds.
On October 1, 2003, JPMIM changed from being a wholly owned subsidiary of
JPMorgan ("Parent") to being an indirectly wholly owned subsidiary of the
Parent, with the intermediary being J.P. Morgan Fleming Asset Management
Holdings, Inc.
136
<Page>
12. CAPITAL SHARE TRANSACTIONS
<Table>
<Caption>
BOND FUND
--------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
CLASS A
AMOUNT
Shares sold $ 5,626 $ 1,239 $ 70
Shares issued in reinvestment of
distributions 59 9 --^
Shares redeemed (4,362) (602) (1)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 1,323 $ 646 $ 69
============================================================================================================================
SHARES
Shares sold 550 126 7
Shares issued in reinvestment of
distributions 6 1 --^
Shares redeemed (430) (61) --^
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 126 66 7
============================================================================================================================
CLASS B SHARES
AMOUNT
Shares sold $ 1,762 $ 1,577 $ 63
Shares issued in reinvestment of
distributions 50 9 --^
Shares redeemed (623) (298) --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 1,189 $ 1,288 $ 63
============================================================================================================================
SHARES
Shares sold 172 160 6
Shares issued in reinvestment of
distributions 5 1 --^
Shares redeemed (61) (30) --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 116 131 6
============================================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
* For Class A Shares, Class B Shares and Select Shares, from commencement of
operations on September 10, 2001.
^ Amount rounds to less than one thousand.
137
<Page>
<Table>
<Caption>
BOND FUND
--------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
CLASS C**
AMOUNT
Shares sold $ 277 $ -- $ --
Shares issued in reinvestment of
distributions 1 -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 278 $ -- $ --
============================================================================================================================
SHARES
Shares sold 27 -- --
Shares issued in reinvestment of
distributions --^ -- --
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 27 -- --
============================================================================================================================
INSTITUTIONAL
AMOUNT
Shares sold $ 100,824 $ 161,877 $ 388,434
Shares issued in reinvestment of
distributions 18,575 20,198 30,849
Shares redeemed (387,582) (441,909) (375,266)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (268,183) $ (259,834) $ 44,017
============================================================================================================================
SHARES
Shares sold 9,955 16,434 39,773
Shares issued in reinvestment of
distributions 1,827 2,056 3,149
Shares redeemed (38,087) (44,903) (38,384)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (26,305) (26,413) 4,538
============================================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
* For Class A Shares, Class B Shares and Select Shares, from commencement of
operations on September 10, 2001.
** From commencement of offering class shares on March 31, 2003.
^ Amount rounds to less than one thousand.
138
<Page>
<Table>
<Caption>
BOND FUND
--------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
SELECT
AMOUNT
Shares sold $ 164,875 $ 96,862 $ 32,570
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 299,497
Shares issued in reinvestment of
distributions 14,339 10,484 1,920
Shares redeemed (179,758) (109,981) (24,697)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (544) $ (2,635) $ 309,290
============================================================================================================================
SHARES
Shares sold 16,205 9,809 3,295
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 30,279
Shares issued in reinvestment of
distributions 1,410 1,065 192
Shares redeemed (17,684) (11,124) (2,491)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (69) (250) 31,275
============================================================================================================================
ULTRA
AMOUNT
Shares sold $ 83,572 $ 280,395 $ 49,357
In-kind contributions -- 559 --
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 555,990
Shares issued in reinvestment of
distributions 21,583 16,681 3,120
Shares redeemed (268,399) (284,193) (21,200)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (163,244) $ 13,442 $ 587,267
============================================================================================================================
SHARES
Shares sold 8,169 28,380 4,944
In-kind contributions -- 57 --
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 56,210
Shares issued in reinvestment of
distributions 2,122 1,694 312
Shares redeemed (26,279) (28,843) (2,135)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (15,988) 1,288 59,331
============================================================================================================================
</Table>
* For Class A Shares, Class B Shares, Select Shares and Ultra Shares, from
commencement of operations on September 10, 2001.
+ The Fund changed its fiscal year end from October 31 to August 31.
139
<Page>
<Table>
<Caption>
BOND FUND II
--------------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
CLASS A
AMOUNT
Shares sold $ 19,019 $ 13,295 $ 75,231
Shares issued in connection with
Fund Reorganization (Note 2) 4,321 34,496
Shares issued in reinvestment of
distributions 1,250 1,102 987
Shares redeemed (21,390) (47,915) (49,101)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 3,200 $ (33,518) $ 61,613
============================================================================================================================
SHARES
Shares sold 456 330 1,898
Shares issued in connection with
Fund Reorganization (Note 2) 104 872
Shares issued in reinvestment of
distributions 30 27 25
Shares redeemed (514) (1,193) (1,251)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 76 (836) 1,544
============================================================================================================================
CLASS B
AMOUNT
Shares sold $ 5,212 $ 7,545 $ 4,481
Shares issued in connection with
Fund Reorganization (Note 2) -- 4,552
Shares issued in reinvestment of
distributions 535 216 141
Shares redeemed (3,864) (2,397) (1,419)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 1,883 $ 5,364 $ 7,755
============================================================================================================================
SHARES
Shares sold 125 188 113
Shares issued in connection with
Fund Reorganization (Note 2) -- 115
Shares issued in reinvestment of
distributions 13 5 3
Shares redeemed (93) (59) (36)
- ----------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 45 134 195
============================================================================================================================
</Table>
* For Class A and B Shares, from commencement of operations on March 2, 2001.
+ The Fund changed its fiscal year end from October 31 to August 31.
140
<Page>
<Table>
<Caption>
BOND FUND II
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
SELECT
AMOUNT
Shares sold $ 101,070 $ 46,695 $ 69,494
Shares issued in connection with
Fund Reorganization (Note 2) 530,889 -- 67,941
Shares issued in reinvestment of
distributions 9,918 1,949 2,446
Shares redeemed (260,826) (74,902) (94,591)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 381,051 $ (26,258) $ 45,290
======================================================================================================
SHARES
Shares sold 2,423 1,154 1,837
Shares issued in connection with
Fund Reorganization (Note 2) 12,846 -- 1,718
Shares issued in reinvestment of
distributions 239 48 61
Shares redeemed (6,274) (1,858) (2,402)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 9,234 (656) 1,214
======================================================================================================
</Table>
* For Class A and B Shares, from commencement of operations on March 2, 2001.
+ The Fund changed its fiscal year end from October 31 to August 31.
141
<Page>
<Table>
<Caption>
ENHANCED INCOME FUND
------------------------------------
YEAR ENDED PERIOD ENDED
AUGUST 31, 2003 AUGUST 31, 2002*
INSTITUTIONAL
AMOUNT
Shares sold $ 447,159 $ 354,974
Shares issued in reinvestment of
distributions 6,334 2,447
Shares redeemed (394,644) (56,630)
- ---------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 58,849 $ 300,791
=================================================================================
SHARES
Shares sold 44,983 35,496
Shares issued in reinvestment of
distributions 638 245
Shares redeemed (39,744) (5,662)
- ---------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 5,877 30,079
=================================================================================
</Table>
* From commencement of operations on November 30, 2001.
142
<Page>
<Table>
<Caption>
FLEMING EMERGING MARKETS DEBT FUND
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ JULY 31, 2002
SELECT
AMOUNT
Shares sold $ 48,541 $ 5,845 $ 14,395
Shares issued in reinvestment of
distributions 4,368 285 3,207
Shares redeemed (44,406) (2,247) (13,889)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 8,503 $ 3,883 $ 3,713
======================================================================================================
SHARES
Shares sold 5,767 790 1,783
Shares issued in reinvestment of
distributions 517 39 408
Shares redeemed (5,103) (313) (1,738)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 1,181 516 453
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from July 31 to August 31.
143
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
CLASS A
AMOUNT
Shares sold $ 563 $ 64 $ 10
Shares issued in reinvestment of
distributions 2 1 --^
Shares redeemed (233) (1) --
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 332 $ 64 $ 10
======================================================================================================
SHARES
Shares sold 62 7 1
Shares issued in reinvestment of
distributions --^ --^ --^
Shares redeemed (26) --^ --
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 36 7 1
======================================================================================================
CLASS B
AMOUNT
Shares sold $ 103 $ 240 $ 10
Shares issued in reinvestment of
distributions 11 4 --^
Shares redeemed (29) (29) --
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 85 $ 215 $ 10
======================================================================================================
SHARES
Shares sold 12 28 1
Shares issued in reinvestment of
distributions 1 --^ --^
Shares redeemed (3) (3) --
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 10 25 1
======================================================================================================
</Table>
* For Class A Shares, Class B Shares and Select Shares, from commencement of
operations on September 10, 2001.
^ Amount rounds to less than one thousand.
+ The Fund changed its fiscal year end from October 31 to August 31.
144
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
INSTITUTIONAL
AMOUNT
Shares sold $ 19,855 $ 32,337 $ 64,428
Shares issued in reinvestment of
distributions 1,670 2,299 7,184
Shares redeemed (53,142) (38,770) (85,638)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (31,617) $ (4,134) $ (14,026)
======================================================================================================
SHARES
Shares sold 2,212 3,644 6,949
Shares issued in reinvestment of
distributions 189 260 779
Shares redeemed (5,948) (4,384) (9,291)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (3,547) (480) (1,563)
======================================================================================================
SELECT
AMOUNT
Shares sold $ 813 $ 1,885 $ 122
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 5,459
Shares issued in reinvestment of
distributions 173 199 45
Shares redeemed (3,325) (1,319) (953)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (2,339) $ 765 $ 4,673
======================================================================================================
SHARES
Shares sold 90 215 14
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 598
Shares issued in reinvestment of
distributions 19 23 5
Shares redeemed (377) (148) (108)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (268) 90 509
======================================================================================================
</Table>
* For Class A Shares, Class B Shares and Select Shares, from commencement of
operations on September 10, 2001.
+ The Fund changed its fiscal year end from October 31 to August 31.
145
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
CLASS A
AMOUNT
Shares sold $ 10,476 $ 10,168 $ 2,334
Shares issued in reinvestment
of distributions 234 93 3
Shares redeemed (11,597) (2,821) (100)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (887) $ 7,440 $ 2,237
======================================================================================================
SHARES
Shares sold 1,047 1,026 236
Shares issued in reinvestment
of distributions 23 9 1
Shares redeemed (1,161) (285) (10)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (91) 750 227
======================================================================================================
INSTITUTIONAL
AMOUNT
Shares sold $ 577,952 $ 351,240 $ 497,579
Shares issued in reinvestment
of distributions 22,428 14,610 13,274
Shares redeemed (397,855) (445,356) (253,463)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 202,525 $ (79,506) $ 257,390
======================================================================================================
SHARES
Shares sold 57,811 35,453 50,690
Shares issued in reinvestment
of distributions 2,246 1,472 1,361
Shares redeemed (39,844) (44,923) (25,913)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 20,213 (7,998) 26,138
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
* For Class A Shares, from commencement of operations on February 16, 2001.
146
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND (CONTINUED)
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001
SELECT
AMOUNT
Shares sold $ 114,380 $ 81,057 $ 14,443
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 53,000
Shares issued in reinvestment
of distributions 4,787 2,554 306
Shares redeemed (116,165) (29,424) (2,019)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 3,002 $ 54,187 $ 65,730
======================================================================================================
SHARES
Shares sold 11,457 8,200 1,451
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 5,372
Shares issued in reinvestment
of distributions 479 257 31
Shares redeemed (11,649) (2,968) (203)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 287 5,489 6,651
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
147
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND II
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001
CLASS A
AMOUNT
Shares sold $ 113,310 $ 65,617 $ 74,289
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 252
Shares issued in reinvestment
of distributions 2,068 1,495 706
Shares redeemed (141,585) (48,876) (43,358)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (26,207) $ 18,236 $ 31,889
======================================================================================================
SHARES
Shares sold 10,975 6,448 7,303
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 25
Shares issued in reinvestment
of distributions 200 147 69
Shares redeemed (13,686) (4,813) (4,291)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,511) 1,782 3,106
======================================================================================================
CLASS M
AMOUNT
Shares sold $ 396,087 $ 600,270 $ 688,863
Shares issued in reinvestment
of distributions 166 365 488
Shares redeemed (344,293) (165,849) (27,828)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 51,960 $ 434,786 $ 661,523
======================================================================================================
SHARES
Shares sold 38,320 61,291 67,836
Shares issued in reinvestment
of distributions 16 36 48
Shares redeemed (33,291) (18,653) (2,732)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 5,045 42,674 65,152
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
148
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND II (CONTINUED)
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001
SELECT
AMOUNT
Shares sold $ 265,146 $ 48,766 $ 127,882
In-kind contributions -- 10,711 --
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 46,879
Shares issued in reinvestment
of distributions 1,917 1,894 1,156
Shares redeemed (65,640) (60,092) (57,217)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 201,423 $ 1,279 $ 118,700
======================================================================================================
SHARES
Shares sold 25,618 4,784 12,484
In-kind contributions -- 1,032 --
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 4,632
Shares issued in reinvestment
of distributions 185 186 114
Shares redeemed (6,337) (5,889) (5,567)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 19,466 113 11,663
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
149
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001
CLASS A
AMOUNT
Shares sold $ 1,934 $ 1,289 $ 2,115
Shares issued in reinvestment
of distributions 99 64 77
Shares redeemed (1,596) (1,021) (2,049)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 437 $ 332 $ 143
======================================================================================================
SHARES
Shares sold 219 148 236
Shares issued in reinvestment
of distributions 11 7 9
Shares redeemed (183) (118) (231)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 47 37 14
======================================================================================================
CLASS B
AMOUNT
Shares sold $ 2,084 $ 1,190 $ 1,911
Shares issued in reinvestment
of distributions 159 117 158
Shares redeemed (1,486) (1,522) (1,557)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 757 $ (215) $ 512
======================================================================================================
SHARES
Shares sold 236 138 214
Shares issued in reinvestment
of distributions 18 13 18
Shares redeemed (170) (177) (173)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 84 (26) 59
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
150
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND (CONTINUED)
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001
CLASS C
AMOUNT
Shares sold $ 2,257 $ 697 $ 1,161
Shares issued in reinvestment
of distributions 75 42 50
Shares redeemed (1,271) (843) (795)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 1,061 $ (104) $ 416
======================================================================================================
SHARES
Shares sold 254 82 129
Shares issued in reinvestment
of distributions 8 5 6
Shares redeemed (147) (98) (88)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 115 (11) 47
======================================================================================================
CLASS M
AMOUNT
Shares sold $ 499 $ 24 $ 890
Shares issued in reinvestment
of distributions --^ -- --
Shares redeemed (1,960) (1,443) (5,963)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (1,461) $ (1,419) $ (5,073)
======================================================================================================
SHARES
Shares sold 57 3 98
Shares issued in reinvestment
of distributions --^ -- --
Shares redeemed (221) (165) (663)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (164) (162) (565)
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
^ Amount rounds to less than one thousand.
151
<Page>
<Table>
<Caption>
U.S. TREASURY INCOME FUND
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
CLASS A
AMOUNT
Shares sold $ 20,583 $ 19,741 $ 87,754
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 2,621
Shares issued in reinvestment
of distributions 1,450 1,112 1,630
Shares redeemed (19,203) (22,721) (90,916)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 2,830 $ (1,868) $ 1,089
======================================================================================================
SHARES
Shares sold 1,726 1,730 7,897
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 236
Shares issued in reinvestment
of distributions 121 100 146
Shares redeemed (1,611) (1,997) (8,193)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 236 (167) 86
======================================================================================================
CLASS B
AMOUNT
Shares sold $ 6,965 $ 6,217 $ 7,273
Shares issued in reinvestment
of distributions 488 344 471
Shares redeemed (8,907) (5,382) (4,516)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (1,454) $ 1,179 $ 3,228
======================================================================================================
SHARES
Shares sold 581 543 649
Shares issued in reinvestment
of distributions 41 30 42
Shares redeemed (747) (474) (407)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (125) 99 284
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
* For Select Shares, from commencement of operations on February 16, 2001.
152
<Page>
<Table>
<Caption>
U.S. TREASURY INCOME FUND (CONTINUED)
---------------------------------------------------------
YEAR ENDED PERIOD ENDED YEAR ENDED
AUGUST 31, 2003 AUGUST 31, 2002+ OCTOBER 31, 2001*
SELECT
AMOUNT
Shares sold $ 47,402 $ 9,580 $ 26,007
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 46,349
Shares issued in reinvestment
of distributions 1,857 2,307 1,844
Shares redeemed (56,156) (10,964) (3,037)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (6,897) $ 923 $ 71,163
======================================================================================================
SHARES
Shares sold 3,957 841 2,335
Shares issued in connection with
Fund Reorganization (Note 2) -- -- 4,175
Shares issued in reinvestment
of distributions 155 203 164
Shares redeemed (4,685) (960) (271)
- ------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (573) 84 6,403
======================================================================================================
</Table>
+ The Fund changed its fiscal year end from October 31 to August 31.
* For Select Shares, from commencement of operations on February 16, 2001.
153
<Page>
JPMorgan Funds
FINANCIAL HIGHLIGHTS
CLASS A SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
BOND FUND^^
Year Ended 8/31/03 $ 10.07 0.40 0.04 0.44 0.40 0.08 0.48
11/1/01 Through 8/31/02 $ 10.08 0.31 0.05 0.36 0.31 0.06 0.37
9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.20 0.26 0.07 -- 0.07
BOND FUND II^^
Year Ended 8/31/03 $ 41.39 1.66^ (0.31) 1.35 1.66 0.49 2.15
11/1/01 Through 8/31/02 $ 41.01 1.35^ 0.34 1.69 1.31 -- 1.31
3/2/01** Through 10/31/01 $ 39.55 1.32 1.46 2.78 1.32 -- 1.32
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.64 0.40^ 0.31 0.71 0.43 -- 0.43
11/1/01 Through 8/31/02 $ 8.91 0.55 (0.33) 0.22 0.47 0.02 0.49
9/10/01** Through 10/31/01 $ 9.13 0.09^ (0.22) (0.13) 0.09 -- 0.09
SHORT TERM BOND FUND^^
Year Ended 8/31/03 $ 10.03 0.24 (0.03) 0.21 0.25 0.14 0.39
11/1/01 Through 8/31/02 $ 10.01 0.27 0.05 0.32 0.26 0.04 0.30
9/10/01** Through 10/31/01 $ 9.87 0.05^ 0.15 0.20 0.06 -- 0.06
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
+ Amount rounds to less than one million.
# Short periods have been annualized.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Short
Term Bond Portfolio, in which the Fund invested all of its investable
assets.
!! Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
SEE NOTES TO FINANCIAL STATEMENTS.
154
<Page>
ANNUAL REPORT AUGUST 31 2003
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND^^
Year Ended 8/31/03 $ 10.03 4.32%
11/1/01 Through 8/31/02 $ 10.07 3.72%
9/10/01** Through 10/31/01 $ 10.08 2.63%
BOND FUND II^^
Year Ended 8/31/03 $ 40.59 3.26%
11/1/01 Through 8/31/02 $ 41.39 4.26%
3/2/01** Through 10/31/01 $ 41.01 7.23%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.92 8.33%
11/1/01 Through 8/31/02 $ 8.64 2.54%
9/10/01** Through 10/31/01 $ 8.91 (2.30%)
SHORT TERM BOND FUND^^
Year Ended 8/31/03 $ 9.85 2.08%
11/1/01 Through 8/31/02 $ 10.03 3.18%
9/10/01** Through 10/31/01 $ 10.01 2.01%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^
Year Ended 8/31/03 $ 2 0.75% 3.86% 1.59% 3.02% 679%
11/1/01 Through 8/31/02 $ 1 0.75% 3.59% 5.64% (1.30%) 572%
9/10/01** Through 10/31/01 $ --+ 0.75% 3.93% 10.75% (6.07%) 423%
BOND FUND II^^
Year Ended 8/31/03 $ 32 0.75% 3.96% 1.16% 3.55% 806%
11/1/01 Through 8/31/02 $ 29 0.75% 4.02% 1.10% 3.67% 496%
3/2/01** Through 10/31/01 $ 63 0.75% 4.90% 1.25% 4.40% 319%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ --+ 1.25% 4.45% 7.26% (1.56%) 248%
11/1/01 Through 8/31/02 $ --+ 1.25% 6.20% 35.90%!! (28.45%)!! 178%
9/10/01** Through 10/31/01 $ --+ 1.25% 6.99% 11.01% (2.77%) 107%
SHORT TERM BOND FUND^^
Year Ended 8/31/03 $ 9 0.75% 2.39% 1.10% 2.04% 386%
11/1/01 Through 8/31/02 $ 10 0.75% 3.01% 1.00% 2.76% 215%
9/10/01** Through 10/31/01 $ 2 0.75% 3.62% 10.76% (6.39%) 160%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
155
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ---------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TAX RETURN
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 $ 10.33 0.23^ (0.04) 0.19 0.24 0.05 --+
11/1/01 Through 8/31/02 $ 10.38 0.25 0.06 0.31 0.25 0.11 --
Year Ended 10/31/01 $ 9.89 0.43^ 0.53 0.96 0.47 -- --
Year Ended 10/31/00 $ 9.94 0.56 (0.05) 0.51 0.56 -- --
Year Ended 10/31/99 $ 10.14 0.46 (0.20) 0.26 0.46 -- --
Year Ended 10/31/98 $ 10.10 0.53 0.02 0.55 0.51 -- --
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.55 0.48^ 0.34 0.82 0.48 -- --
11/1/01 Through 8/31/02 $ 8.85 0.41 (0.31) 0.10 0.38 -- 0.02
Year Ended 10/31/01 $ 9.05 0.62 (0.20) 0.42 0.60 -- 0.02
Year Ended 10/31/00 $ 9.59 0.78 (0.53) 0.25 0.78 -- 0.01
11/30/98* Through 10/31/99 $ 10.00 0.72 (0.41) 0.31 0.72 -- --
U.S TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 11.83 0.45 (0.21) 0.24 0.46 -- --
11/1/01 Through 8/31/02 $ 11.77 0.38 0.05 0.43 0.37 -- --
Year Ended 10/31/01 $ 10.77 0.53 1.01 1.54 0.54 -- --
Year Ended 10/31/00 $ 10.67 0.68 0.10 0.78 0.68 -- --
Year Ended 10/31/99 $ 11.66 0.71 (0.99) (0.28) 0.71 -- --
Year Ended 10/31/98 $ 11.26 0.75 0.40 1.15 0.75 -- --
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
* Commencement of operations.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
+ Amount rounds to less than .005%
SEE NOTES TO FINANCIAL STATEMENTS.
156
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------
NET ASSET
TOTAL VALUE, END TOTAL
DISTRIBUTIONS OF PERIOD RETURN (1)(b)
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 0.29 $ 10.23 1.88%
11/1/01 Through 8/31/02 0.36 $ 10.33 3.06%
Year Ended 10/31/01 0.47 $ 10.38 9.95%
Year Ended 10/31/00 0.56 $ 9.89 5.27%
Year Ended 10/31/99 0.46 $ 9.94 2.64%
Year Ended 10/31/98 0.51 $ 10.14 5.58%
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 0.48 $ 8.89 9.77%
11/1/01 Through 8/31/02 0.40 $ 8.55 1.10%
Year Ended 10/31/01 0.62 $ 8.85 4.73%
Year Ended 10/31/00 0.79 $ 9.05 2.59%
11/30/98* Through 10/31/99 0.72 $ 9.59 3.23%
U.S TREASURY INCOME FUND^^
Year Ended 8/31/03 0.46 $ 11.61 2.00%
11/1/01 Through 8/31/02 0.37 $ 11.83 3.80%
Year Ended 10/31/01 0.54 $ 11.77 14.72%
Year Ended 10/31/00 0.68 $ 10.77 7.63%
Year Ended 10/31/99 0.71 $ 10.67 (2.41%)
Year Ended 10/31/98 0.75 $ 11.66 10.59%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 $ 44 0.75% 2.31% 0.96% 2.10% 319%
11/1/01 Through 8/31/02 $ 70 0.75% 2.66% 1.00% 2.41% 192%
Year Ended 10/31/01 $ 52 0.75% 4.25% 1.15% 3.85% 315%
Year Ended 10/31/00 $ 19 0.75% 5.68% 1.37% 5.06% 139%
Year Ended 10/31/99 $ 22 0.75% 4.58% 1.37% 3.96% 302%
Year Ended 10/31/98 $ 19 0.76% 5.28% 1.44% 4.60% 439%
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 3 1.25% 5.44% 2.69% 4.00% 116%
11/1/01 Through 8/31/02 $ 3 1.25% 5.74% 3.13% 3.86% 176%
Year Ended 10/31/01 $ 2 1.25% 6.81% 2.75% 5.31% 174%
Year Ended 10/31/00 $ 2 1.11% 7.84% 2.43% 6.52% 113%
11/30/98* Through 10/31/99 $ 3 0.15% 8.38% 3.59% 4.94% 136%
U.S TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 46 0.75% 3.85% 1.31% 3.29% 106%
11/1/01 Through 8/31/02 $ 44 0.75% 3.87% 1.32% 3.30% 228%
Year Ended 10/31/01 $ 46 0.75% 4.74%+ 1.35% 4.14%+ 134%
Year Ended 10/31/00 $ 41 0.75% 6.45% 1.30% 5.90% 29%
Year Ended 10/31/99 $ 69 0.75% 6.40% 1.32% 5.83% 59%
Year Ended 10/31/98 $ 63 0.79% 6.53% 1.30% 6.02% 75%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
157
<Page>
CLASS B SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
BOND FUND^^
Year Ended 8/31/03 $ 10.05 0.33 (0.03) 0.30 0.32 0.08 0.40
11/1/01 Through 8/31/02 $ 10.08 0.24 0.03 0.27 0.24 0.06 0.30
9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.19 0.25 0.06 -- 0.06
BOND FUND II^^
Year Ended 8/31/03 $ 41.30 1.35^ (0.32) 1.03 1.35 0.49 1.84
11/1/01 Through 8/31/02 $ 40.96 1.04^ 0.36 1.40 1.06 -- 1.06
3/2/01** Through 10/31/01 $ 39.55 1.12 1.41 2.53 1.12 -- 1.12
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.59 0.38^ 0.28 0.66 0.39 -- 0.39
11/1/01 Through 8/31/02 $ 8.91 0.48 (0.46) 0.02 0.32 0.02 0.34
9/10/01** Through 10/31/01 $ 9.13 0.08^ (0.22) (0.14) 0.08 -- 0.08
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.56 0.44^ 0.33 0.77 0.44 -- 0.44
11/1/01 Through 8/31/02 $ 8.85 0.38 (0.31) 0.07 0.34 0.02 0.36
Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37 0.55 0.02 0.57
Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21 0.74 0.01 0.75
11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30 0.71 -- 0.71
U.S TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 11.81 0.37 (0.22) 0.15 0.36 -- 0.36
11/1/01 Through 8/31/02 $ 11.75 0.28 0.06 0.34 0.28 -- 0.28
Year Ended 10/31/01 $ 10.75 0.43+ 1.01+ 1.44 0.44 -- 0.44
Year Ended 10/31/00 $ 10.67 0.59 0.08 0.67 0.59 -- 0.59
Year Ended 10/31/99 $ 11.66 0.61 (0.99) (0.38) 0.61 -- 0.61
Year Ended 10/31/98 $ 11.25 0.65 0.41 1.06 0.65 -- 0.65
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
158
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND^^
Year Ended 8/31/03 $ 9.95 2.94%
11/1/01 Through 8/31/02 $ 10.05 2.83%
9/10/01** Through 10/31/01 $ 10.08 2.53%
BOND FUND II^^
Year Ended 8/31/03 $ 40.49 2.47%
11/1/01 Through 8/31/02 $ 41.30 3.52%
3/2/01** Through 10/31/01 $ 40.96 6.58%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.86 7.74%
11/1/01 Through 8/31/02 $ 8.59 0.27%
9/10/01** Through 10/31/01 $ 8.91 (2.41%)
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.89 9.11%
11/1/01 Through 8/31/02 $ 8.56 0.76%
Year Ended 10/31/01 $ 8.85 4.20%
Year Ended 10/31/00 $ 9.05 2.17%
11/30/98* Through 10/31/99 $ 9.59 3.13%
U.S TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 11.60 1.19%
11/1/01 Through 8/31/02 $ 11.81 3.04%
Year Ended 10/31/01 $ 11.75 13.74%
Year Ended 10/31/00 $ 10.75 6.49%
Year Ended 10/31/99 $ 10.67 (3.27%)
Year Ended 10/31/98 $ 11.66 9.68%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^
Year Ended 8/31/03 $ 2 1.50% 3.19% 2.14% 2.55% 679%
11/1/01 Through 8/31/02 $ 1 1.50% 2.80% 6.02% (1.72%) 572%
9/10/01** Through 10/31/01 $ --+ 1.48% 4.07% 11.25% (5.70%) 423%
BOND FUND II^^
Year Ended 8/31/03 $ 15 1.50% 3.24% 1.67% 3.07% 806%
11/1/01 Through 8/31/02 $ 14 1.50% 3.09% 1.56% 3.03% 496%
3/2/01** Through 10/31/01 $ 8 1.50% 4.22% 1.75% 3.97% 319%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ --+ 1.75% 4.30% 9.47% (3.42%) 248%
11/1/01 Through 8/31/02 $ --+ 1.75% 5.19% 23.23%!! (16.29%)!! 178%
9/10/01** Through 10/31/01 $ --+ 1.75% 6.50% 11.51% (3.26%) 107%
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8 1.75% 4.98% 3.21% 3.52% 116%
11/1/01 Through 8/31/02 $ 7 1.75% 5.28% 3.63% 3.40% 176%
Year Ended 10/31/01 $ 8 1.75% 6.35% 3.25% 4.85% 174%
Year Ended 10/31/00 $ 8 1.53% 7.42% 3.06% 5.89% 113%
11/30/98* Through 10/31/99 $ 5 0.17% 8.40% 3.98% 4.59% 136%
U.S TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 20 1.64% 2.96% 1.80% 2.80% 106%
11/1/01 Through 8/31/02 $ 21 1.64% 2.99% 1.82% 2.81% 228%
Year Ended 10/31/01 $ 20 1.64% 3.84%+ 1.85% 3.63%+ 134%
Year Ended 10/31/00 $ 16 1.64% 5.56% 1.80% 5.40% 29%
Year Ended 10/31/99 $ 16 1.64% 5.51% 1.82% 5.33% 59%
Year Ended 10/31/98 $ 14 1.64% 5.69% 1.79% 5.54% 75%
</Table>
+ Amount rounds to less than one million.
# Short periods have been annualized.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
!! Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
+ Restated.
SEE NOTES TO FINANCIAL STATEMENTS.
159
<Page>
CLASS C SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
BOND FUND^^
3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07) 0.14 -- 0.14
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.56 0.44^ 0.33 0.77 0.44 -- 0.44
11/1/01 Through 8/31/02 $ 8.85 0.38 (0.31) 0.07 0.34 0.02 0.36
Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37 0.55 0.02 0.57
Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21 0.74 0.01 0.75
11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30 0.71 -- 0.71
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
* Commencement of operations.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
+ Amount rounds to less than one million.
# Short periods have been annualized.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
160
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND^^
3/31/03** Through 8/31/03 $ 10.01 (0.69%)
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.89 9.10%
11/1/01 Through 8/31/02 $ 8.56 0.78%
Year Ended 10/31/01 $ 8.85 4.21%
Year Ended 10/31/00 $ 9.05 2.15%
11/30/98* Through 10/31/99 $ 9.59 3.12%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^
3/31/03** Through 8/31/03 $ --+ 1.50% 3.02% 1.78% 2.74% 679%
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 4 1.75% 4.93% 3.20% 3.48% 116%
11/1/01 Through 8/31/02 $ 3 1.75% 5.24% 3.63% 3.36% 176%
Year Ended 10/31/01 $ 3 1.75% 6.33% 3.25% 4.83% 174%
Year Ended 10/31/00 $ 2 1.49% 7.46% 2.89% 6.06% 113%
11/30/98* Through 10/31/99 $ 4 0.17% 8.40% 3.98% 4.59% 136%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
161
<Page>
CLASS M SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ---------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TAX RETURN
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 $ 10.33 0.21^ (0.04) 0.17 0.22 0.05 --+
11/1/01 Through 8/31/02 $ 10.37 0.23 0.06 0.29 0.22 0.11 --
Year Ended 10/31/01 $ 9.89 0.35^ 0.58 0.93 0.45 -- --
Year Ended 10/31/00 $ 9.94 0.54 (0.05) 0.49 0.54 -- --
7/1/99** Through 10/31/99 $ 9.98 0.16 (0.04) 0.12 0.16 -- --
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.54 0.47^ 0.32 0.79 0.46 -- --
11/1/01 Through 8/31/02 $ 8.83 0.40 (0.31) 0.09 0.36 -- 0.02
Year Ended 10/31/01 $ 9.03 0.60 (0.20) 0.40 0.58 -- 0.02
Year Ended 10/31/00 $ 9.59 0.75 (0.55) 0.20 0.75 -- 0.01
10/28/99** Through 10/31/99 $ 9.64 0.07 (0.05) 0.02 0.07 -- --
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
+ Amount rounds to less than .005%
SEE NOTES TO FINANCIAL STATEMENTS.
162
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------
NET ASSET
TOTAL VALUE, END TOTAL
DISTRIBUTIONS OF PERIOD RETURN (1)(b)
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 0.27 $ 10.23 1.64%
11/1/01 Through 8/31/02 0.33 $ 10.33 2.92%
Year Ended 10/31/01 0.45 $ 10.37 9.63%
Year Ended 10/31/00 0.54 $ 9.89 5.04%
7/1/99** Through 10/31/99 0.16 $ 9.94 1.26%
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 0.46 $ 8.87 9.44%
11/1/01 Through 8/31/02 0.38 $ 8.54 1.03%
Year Ended 10/31/01 0.60 $ 8.83 4.50%
Year Ended 10/31/00 0.76 $ 9.03 2.10%
10/28/99** Through 10/31/99 0.07 $ 9.59 0.16%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 $ 1,168 1.00% 2.07% 1.04% 2.03% 319%
11/1/01 Through 8/31/02 $ 1,127 1.00% 2.41% 1.03% 2.38% 192%
Year Ended 10/31/01 $ 689 1.00% 3.45% 1.11% 3.34% 315%
Year Ended 10/31/00 $ 13 0.99% 5.51% 1.73% 4.77% 139%
7/1/99** Through 10/31/99 $ 3 0.97% 4.72% 1.41% 4.28% 302%
STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 7 1.45% 5.31% 2.77% 3.99% 116%
11/1/01 Through 8/31/02 $ 8 1.45% 5.52% 3.05% 3.92% 176%
Year Ended 10/31/01 $ 10 1.45% 6.69% 2.55% 5.59% 174%
Year Ended 10/31/00 $ 16 1.43% 7.52% 2.54% 6.41% 113%
10/28/99** Through 10/31/99 $ 12 0.17% 4.56% 3.73% 1.00% 136%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
163
<Page>
INSTITUTIONAL SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ---------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TAX RETURN
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL
BOND FUND^^
Year Ended 8/31/03 $ 10.04 0.42 (0.02) 0.40 0.42 0.08 --
11/1/01 Through 8/31/02 $ 10.08 0.34 0.02 0.36 0.34 0.06 --
Year Ended 10/31/01 $ 9.43 0.58^ 0.65 1.23 0.58 -- --
Year Ended 10/31/00 $ 9.41 0.60 0.02 0.62 0.60 --(a) --
Year Ended 10/31/99 $ 10.10 0.57 (0.57) -- 0.57 0.12 --
Year Ended 10/31/98 $ 10.01 0.64 0.15 0.79 0.63 0.07 --
ENHANCED INCOME FUND
Year Ended 8/31/03 $ 9.98 0.23 (0.12) 0.11 0.23 -- --
11/30/01* Through 8/31/02 $ 10.00 0.18 (0.02) 0.16 0.18 -- --
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 8.65 0.48^ 0.27 0.75 0.48 -- --
11/1/01 Through 8/31/02 $ 8.95 0.47 (0.30) 0.17 0.45 -- 0.02
Year Ended 10/31/01 $ 9.29 0.69^ (0.16) 0.53 0.87 -- --
Year Ended 10/31/00 $ 9.35 0.88 (0.25) 0.63 0.69 -- --
Year Ended 10/31/99 $ 9.72 0.62 (0.37) 0.25 0.62 -- --
Year Ended 10/31/98 $ 10.16 0.75 (0.45) 0.30 0.70 0.02 0.02
SHORT TERM BOND FUND^^
Year Ended 8/31/03 $ 10.05 0.28 (0.04) 0.24 0.29 0.14 --
11/1/01 Through 8/31/02 $ 10.03 0.29 0.06 0.35 0.29 0.04 --
Year Ended 10/31/01 $ 9.58 0.54^ 0.46 1.00 0.55 -- --
Year Ended 10/31/00 $ 9.67 0.60 (0.08) 0.52 0.61 -- --
Year Ended 10/31/99 $ 9.96 0.58 (0.29) 0.29 0.54 0.04 --
Year Ended 10/31/98 $ 9.84 0.59 0.12 0.71 0.59 -- --
</Table>
^ Calculated based upon average shares outstanding.
^^ The fund changed its fiscal year end from October 31 to August 31.
* Commencement of operations.
(1) Total return figures do not include the effect of any front-end sales load.
(a) Amount is less than $0.005.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
164
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------
NET ASSET
TOTAL VALUE, END TOTAL
DISTRIBUTIONS OF PERIOD RETURN (b)
BOND FUND^^
Year Ended 8/31/03 0.50 $ 9.94 3.99%
11/1/01 Through 8/31/02 0.40 $ 10.04 3.71%
Year Ended 10/31/01 0.58 $ 10.08 13.46%
Year Ended 10/31/00 0.60 $ 9.43 6.83%
Year Ended 10/31/99 0.69 $ 9.41 0.03%
Year Ended 10/31/98 0.70 $ 10.10 8.18%
ENHANCED INCOME FUND
Year Ended 8/31/03 0.23 $ 9.86 1.14%
11/30/01* Through 8/31/02 0.18 $ 9.98 1.58%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 0.48 $ 8.92 8.86%
11/1/01 Through 8/31/02 0.47 $ 8.65 1.92%
Year Ended 10/31/01 0.87 $ 8.95 5.86%
Year Ended 10/31/00 0.69 $ 9.29 6.93%
Year Ended 10/31/99 0.62 $ 9.35 2.62%
Year Ended 10/31/98 0.74 $ 9.72 2.91%
SHORT TERM BOND FUND^^
Year Ended 8/31/03 0.43 $ 9.86 2.44%
11/1/01 Through 8/31/02 0.33 $ 10.05 3.55%
Year Ended 10/31/01 0.55 $ 10.03 10.70%
Year Ended 10/31/00 0.61 $ 9.58 5.49%
Year Ended 10/31/99 0.58 $ 9.67 3.03%
Year Ended 10/31/98 0.59 $ 9.96 7.40%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^
Year Ended 8/31/03 $ 478 0.49% 4.10% 0.60% 3.99% 679%
11/1/01 Through 8/31/02 $ 747 0.49% 4.14% 0.58% 4.05% 572%
Year Ended 10/31/01 $ 1,016 0.49% 5.98% 0.51% 5.96% 423%
Year Ended 10/31/00 $ 907 0.49% 6.37% 0.49% 6.37% 531%
Year Ended 10/31/99 $ 1,041 0.50% 5.92% 0.51% 5.91% 465%
Year Ended 10/31/98 $ 1,001 0.49% 6.32% 0.50% 6.31% 115%
ENHANCED INCOME FUND
Year Ended 8/31/03 $ 354 0.20% 2.33% 0.56% 1.97% 328%
11/30/01* Through 8/31/02 $ 300 0.20% 2.40% 0.68% 1.92% 120%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/03 $ 108 0.65% 5.42% 0.97% 5.10% 248%
11/1/01 Through 8/31/02 $ 135 0.65% 6.44% 0.98% 6.11% 178%
Year Ended 10/31/01 $ 143 0.65% 7.50% 0.80% 7.35% 107%
Year Ended 10/31/00 $ 163 0.65% 7.36% 0.80% 7.21% 266%
Year Ended 10/31/99 $ 183 0.65% 6.70% 0.78% 5.29% 318%
Year Ended 10/31/98 $ 224 0.65% 6.59% 0.83% 6.41% 368%
SHORT TERM BOND FUND^^
Year Ended 8/31/03 $ 806 0.30% 2.85% 0.55% 2.60% 386%
11/1/01 Through 8/31/02 $ 618 0.30% 3.53% 0.54% 3.29% 215%
Year Ended 10/31/01 $ 697 0.30% 5.52% 0.48% 5.34% 160%
Year Ended 10/31/00 $ 415 0.30% 6.30% 0.47% 6.13% 271%
Year Ended 10/31/99 $ 354 0.29% 5.51% 0.51% 5.29% 398%
Year Ended 10/31/98 $ 233 0.25% 5.84% 0.62% 5.47% 381%
</Table>
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Short
Term Bond Portfolio, in which the Fund invested all of its investable
assets.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Global
Strategic Income Portfolio, in which the Fund invested all of its investable
assets.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of Emerging
Markets Debt Portfolio, in which the fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
165
<Page>
SELECT SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
BOND FUND^^@
Year Ended 8/31/03 $ 10.04 0.40 (0.01) 0.39 0.41 0.08 0.49
11/1/01 Through 8/31/02 $ 10.08 0.32 0.02 0.34 0.32 0.06 0.38
Year Ended 10/31/01 $ 9.43 0.52^ 0.70 1.22 0.57 -- 0.57
Year Ended 10/31/00 $ 9.41 0.58 0.02 0.60 0.58 -- 0.58
Year Ended 10/31/99 $ 10.09 0.55 (0.57) (0.02) 0.56 0.10 0.66
Year Ended 10/31/98 $ 9.93 0.62 0.16 0.78 0.62 -- 0.62
BOND FUND II^^
Year Ended 8/31/03 $ 41.32 1.79^ (0.38) 1.41 1.73 0.49 2.22
11/1/01 Through 8/31/02 $ 40.97 1.36^ 0.35 1.71 1.36 -- 1.36
Year Ended 10/31/01 $ 38.02 2.18 2.95 5.13 2.18 -- 2.18
Year Ended 10/31/00 $ 38.38 2.38 (0.36) 2.02 2.38 -- 2.38
Year Ended 10/31/99 $ 41.29 2.36 (2.37) (0.01) 2.36 0.54 2.90
Year Ended 10/31/98 $ 41.01 2.56 0.76 3.32 2.55 0.49 3.04
FLEMING EMERGING MARKETS
DEBT FUND^^^
Year Ended 8/31/03 $ 7.53 0.68 1.53 2.21 0.72 -- 0.72
8/1/02 Through 8/31/02 $ 7.05 0.05 0.49 0.54 0.06 -- 0.06
Year Ended 7/31/02 $ 7.82 0.77 (0.77) -- 0.77 -- 0.77
Year Ended 7/31/01 $ 8.77 0.88 (0.87) 0.01 0.96 -- 0.96
Year Ended 7/31/00 $ 7.29 0.95 1.42 2.37 0.89 -- 0.89
1/1/99 Through 7/31/99 $ 7.30 0.49 0.02 0.51 0.52 -- 0.52
Year Ended 12/31/98 $ 9.76 1.15 (2.64) (1.49) 0.97 -- 0.97
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
@ Prior to the open of business on September 10, 2001, the class underwent a
split of shares in connection with the fund reorganization described in Note
2. Prior periods have been restated to reflect the split.
^ Calculated based upon average shares outstanding.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
^^^ The fund changed its fiscal year end from July 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
166
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND^^@
Year Ended 8/31/03 $ 9.94 3.82%
11/1/01 Through 8/31/02 $ 10.04 3.57%
Year Ended 10/31/01 $ 10.08 13.32%
Year Ended 10/31/00 $ 9.43 6.61%
Year Ended 10/31/99 $ 9.41 (0.23%)
Year Ended 10/31/98 $ 10.09 8.06%
BOND FUND II^^
Year Ended 8/31/03 $ 40.51 3.39%
11/1/01 Through 8/31/02 $ 41.32 4.33%
Year Ended 10/31/01 $ 40.97 13.87%
Year Ended 10/31/00 $ 38.02 5.50%
Year Ended 10/31/99 $ 38.38 (0.01%)
Year Ended 10/31/98 $ 41.29 8.44%
FLEMING EMERGING MARKETS
DEBT FUND^^^
Year Ended 8/31/03 $ 9.02 30.49%
8/1/02 Through 8/31/02 $ 7.53 7.69%
Year Ended 7/31/02 $ 7.05 (0.67%)
Year Ended 7/31/01 $ 7.82 (0.17%)
Year Ended 7/31/00 $ 8.77 34.12%
1/1/99 Through 7/31/99 $ 7.29 7.27%
Year Ended 12/31/98 $ 7.30 (15.93%)
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^@
Year Ended 8/31/03 $ 308 0.66% 3.97% 0.76% 3.87% 679%
11/1/01 Through 8/31/02 $ 312 0.66% 3.95% 0.74% 3.87% 572%
Year Ended 10/31/01 $ 315 0.69% 5.77% 0.70% 5.76% 423%
Year Ended 10/31/00 $ 240 0.69% 6.19% 0.69% 6.19% 531%
Year Ended 10/31/99 $ 235 0.69% 5.72% 0.69% 5.72% 465%
Year Ended 10/31/98 $ 216 0.66% 6.14% 0.66% 6.14% 115%
BOND FUND II^^
Year Ended 8/31/03 $ 1,022 0.60% 4.27% 0.75% 4.12% 806%
11/1/01 Through 8/31/02 $ 661 0.60% 4.08% 0.74% 3.94% 496%
Year Ended 10/31/01 $ 683 0.63% 5.52% 0.75% 5.40% 319%
Year Ended 10/31/00 $ 587 0.69% 6.30% 0.71% 6.28% 157%
Year Ended 10/31/99 $ 620 0.03% 5.97% 0.49% 5.51% 300%
Year Ended 10/31/98 $ 590 0.03% 6.27% 0.51% 5.79% 306%
FLEMING EMERGING MARKETS
DEBT FUND^^^
Year Ended 8/31/03 $ 60 1.25% 8.11% 1.52% 7.84% 157%
8/1/02 Through 8/31/02 $ 41 1.25% 9.86% 1.30% 9.81% 12%
Year Ended 7/31/02 $ 35 1.25% 9.59% 1.54% 9.30% 110%
Year Ended 7/31/01 $ 35 1.25% 11.20% 1.92% 10.53% 141%
Year Ended 7/31/00 $ 20 1.25% 11.01% 1.95% 10.31% 295%
1/1/99 Through 7/31/99 $ 26 1.25% 12.28% 2.51% 11.02% 555%
Year Ended 12/31/98 $ 19 1.25% 10.05% 2.09% 9.21% 791%
</Table>
~ Percentages prior to 9/10/01 reflect the portfolio turnover of Emerging
Markets Debt Portfolio, in which the fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
167
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ---------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TAX RETURN
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL
GLOBAL STRATEGIC INCOME FUND^^@
Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72 0.45 -- --
11/1/01 Through 8/31/02 $ 8.95 0.45 (0.31) 0.14 0.42 -- 0.02
Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29 0.76 -- --
Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61 0.66 -- --
Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22 0.59 -- --
11/5/97** Through 10/31/98 $ 10.28 0.70 (0.49) 0.21 0.63 0.02 --
SHORT TERM BOND FUND^^@
Year Ended 8/31/03 $ 10.04 0.26 (0.03) 0.23 0.27 0.14 --
11/1/01 Through 8/31/02 $ 10.03 0.28 0.04 0.32 0.27 0.04 --
Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97 0.55 -- --
Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49 0.58 -- --
Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26 0.51 0.05 --
Year Ended 10/31/98 $ 9.87 0.56 0.13 0.69 0.56 -- --
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22 0.27 0.05 --+
11/1/01 Through 8/31/02 $ 10.40 0.26 0.07 0.33 0.27 0.11 --
Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99 0.49 -- --
Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54 0.59 -- --
Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29 0.49 -- --
Year Ended 10/31/98 $ 10.11 0.57 0.02 0.59 0.55 -- --
U.S. TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 11.83 0.49 (0.21) 0.28 0.49 -- --
11/1/01 Through 8/31/02 $ 11.77 0.39 0.06 0.45 0.39 -- --
2/16/01** Through 10/31/01 $ 11.10 0.37 0.66 1.03 0.36 -- --
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
@ Prior to the open of business on September 10, 2001, the class underwent a
split of shares in connection with the Fund reorganization described in Note
2. Prior periods have been restated to reflect the split.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
+ Amount rounds to less than 0.005
SEE NOTES TO FINANCIAL STATEMENTS.
168
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------
NET ASSET
TOTAL VALUE, END TOTAL
DISTRIBUTIONS OF PERIOD RETURN (b)
GLOBAL STRATEGIC INCOME FUND^^@
Year Ended 8/31/03 0.45 $ 8.92 8.48%
11/1/01 Through 8/31/02 0.44 $ 8.65 1.61%
Year Ended 10/31/01 0.76 $ 8.95 5.46%
Year Ended 10/31/00 0.66 $ 9.42 6.57%
Year Ended 10/31/99 0.59 $ 9.47 2.26%
11/5/97** Through 10/31/98 0.65 $ 9.84 1.97%
SHORT TERM BOND FUND^^@
Year Ended 8/31/03 0.41 $ 9.86 2.28%
11/1/01 Through 8/31/02 0.31 $ 10.04 3.21%
Year Ended 10/31/01 0.55 $ 10.03 10.39%
Year Ended 10/31/00 0.58 $ 9.61 5.19%
Year Ended 10/31/99 0.56 $ 9.70 2.70%
Year Ended 10/31/98 0.56 $ 10.00 7.24%
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 0.32 $ 10.25 2.15%
11/1/01 Through 8/31/02 0.38 $ 10.35 3.30%
Year Ended 10/31/01 0.49 $ 10.40 10.29%
Year Ended 10/31/00 0.59 $ 9.90 5.56%
Year Ended 10/31/99 0.49 $ 9.95 2.97%
Year Ended 10/31/98 0.55 $ 10.15 6.03%
U.S. TREASURY INCOME FUND^^
Year Ended 8/31/03 0.49 $ 11.62 2.29%
11/1/01 Through 8/31/02 0.39 $ 11.83 3.97%
2/16/01** Through 10/31/01 0.36 $ 11.77 9.52%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
--------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
GLOBAL STRATEGIC INCOME FUND^^@
Year Ended 8/31/03 $ 3 1.00% 5.10% 1.48% 4.62% 248%
11/1/01 Through 8/31/02 $ 5 1.00% 6.08% 1.48% 5.60% 178%
Year Ended 10/31/01 $ 5 1.00% 7.32% 2.63% 5.69% 107%
Year Ended 10/31/00 $ 7 1.00% 7.05% 2.50% 5.55% 266%
Year Ended 10/31/99 $ 9 1.00% 6.35% 1.54% 5.81% 318%
11/5/97** Through 10/31/98 $ 10 1.00% 6.24% 1.89% 5.35% 368%
SHORT TERM BOND FUND^^@
Year Ended 8/31/03 $ 122 0.56% 2.59% 0.71% 2.44% 386%
11/1/01 Through 8/31/02 $ 122 0.57% 3.22% 0.72% 3.07% 215%
Year Ended 10/31/01 $ 67 0.60% 5.22% 0.82% 5.00% 160%
Year Ended 10/31/00 $ 38 0.60% 6.00% 0.82% 5.78% 271%
Year Ended 10/31/99 $ 39 0.57% 5.24% 0.80% 5.01% 398%
Year Ended 10/31/98 $ 31 0.50% 5.66% 0.98% 5.18% 381%
SHORT TERM BOND FUND II^^
Year Ended 8/31/03 $ 342 0.50% 2.58% 0.70% 2.38% 319%
11/1/01 Through 8/31/02 $ 144 0.50% 2.91% 0.70% 2.71% 192%
Year Ended 10/31/01 $ 144 0.50% 4.15% 0.77% 3.88% 315%
Year Ended 10/31/00 $ 21 0.45% 5.99% 1.02% 5.42% 139%
Year Ended 10/31/99 $ 28 0.42% 4.89% 1.02% 4.29% 302%
Year Ended 10/31/98 $ 31 0.42% 5.68% 1.04% 5.06% 439%
U.S. TREASURY INCOME FUND^^
Year Ended 8/31/03 $ 69 0.55% 4.04% 0.87% 3.72% 106%
11/1/01 Through 8/31/02 $ 78 0.55% 4.07% 0.86% 3.76% 228%
2/16/01** Through 10/31/01 $ 76 0.55% 4.73% 0.98% 4.30% 134%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Global
Strategic Income Portfolio, in which the Fund invested all of its investable
assets.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of the Short
Term Bond Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
169
<Page>
ULTRA SHARES @
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
BOND FUND^^
Year Ended 8/31/03 $ 10.05 0.43 (0.02) 0.41 0.43 0.08 0.51
11/1/01 Through 8/31/02 $ 10.09 0.34 0.02 0.36 0.34 0.06 0.40
Year Ended 10/31/01 $ 9.47 0.54^ 0.72 1.26 0.62 0.02 0.64
Year Ended 10/31/00 $ 9.46 0.64 (0.02) 0.62 0.61 -- 0.61
Year Ended 10/31/99 $ 10.02 0.60 (0.57) 0.03 0.59 -- 0.59
12/15/97** Through 10/31/98 $ 9.88 0.53 0.16 0.69 0.55 -- 0.55
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
@ Prior to the open of business on September 10, 2001, the class underwent a
split of shares in connection with the fund reorganization described in
Note 2. Prior periods have been restated to reflect the split.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
170
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND^^
Year Ended 8/31/03 $ 9.95 4.08%
11/1/01 Through 8/31/02 $ 10.05 3.80%
Year Ended 10/31/01 $ 10.09 13.63%
Year Ended 10/31/00 $ 9.47 6.92%
Year Ended 10/31/99 $ 9.46 0.28%
12/15/97** Through 10/31/98 $ 10.02 7.17%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
----------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^
Year Ended 8/31/03 $ 444 0.40% 4.19% 0.55% 4.04% 679%
11/1/01 Through 8/31/02 $ 609 0.40% 4.20% 0.53% 4.07% 572%
Year Ended 10/31/01 $ 598 0.37% 6.08% 0.47% 5.98% 423%
Year Ended 10/31/00 $ 466 0.35% 6.49% 0.42% 6.42% 531%
Year Ended 10/31/99 $ 299 0.36% 6.08% 0.49% 5.95% 465%
12/15/97** Through 10/31/98 $ 128 0.37% 6.28% 0.60% 6.05% 115%
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
171
<Page>
JPMorgan Funds
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of
J.P. Morgan Mutual Fund Group, J.P. Morgan Institutional Funds,
J.P. Morgan Mutual Fund Select Group, J.P. Morgan Series Trust and
J.P. Morgan Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights, present fairly, in all
material respects, the financial position of JPMorgan Bond Fund, JPMorgan Bond
Fund II, JPMorgan Enhanced Income Fund, JPMorgan Fleming Emerging Markets Debt
Fund, JPMorgan Global Strategic Income Fund, JPMorgan Short Term Bond Fund,
JPMorgan Short Term Bond Fund II, JPMorgan Strategic Income Fund and JPMorgan
U.S. Treasury Income Fund (the "Funds") at August 31, 2003, the results of each
of their operations for the year then ended, and the changes in each of their
net assets, and the financial highlights for each of the periods presented, in
conformity with accounting principles generally accepted in the United States of
America. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Funds' management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at August 31, 2003 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 20, 2003
172
<Page>
JPMorgan Funds
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
The following tables contain basic information regarding the Trustees and
Officers, respectively, that oversee operations of the Trusts and other
investment companies within the JPMorgan Funds complex.
<Table>
<Caption>
POSITIONS NUMBER OF OTHER
HELD WITH PRINCIPAL PORTFOLIOS IN DIRECTORSHIPS
EACH TERM OF OFFICE OCCUPATIONS JPMORGAN FUND HELD OUTSIDE
NAME, CONTACT ADDRESS JPMORGAN AND LENGTH OF DURING PAST COMPLEX(1) OVERSEEN JPMORGAN FUND
AND DATE OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEE(S)
William J. Armstrong; Trustee Trustee of Funds that Retired; Vice 71 None
522 Fifth Avenue, are series of JPMF, President and
New York, NY 10036; JPMIF, JPMST since Treasurer of
12/4/1941 2001, Funds that are Ingersoll-Rand
series of MFSG since Company
1996 and Funds that (manufacturer of
are series of MFG industrial
since 1987. equipment)
(1972-2000)
Roland R. Eppley, Jr.; Trustee Trustee of Funds that Retired 71 Director, Janel Hydro
522 Fifth Avenue, are series of JPMF, Inc. (1993-Present)
New York, NY 10036; JPMIF and JPMST since
4/1/1932 2001, Funds that are
series of MFSG since
1996 and Funds that
are series of MFG
since 1989.
Ann Maynard Gray; Trustee Since 2001 Vice President of 71 Director of Duke Energy
522 Fifth Avenue, Capital Cities/ABC, Corporation (1997-
New York, NY 10036; Inc. (1986-1998); Present) Director of
8/22/1945 President of Elan Corporation, Plc
Diversified (pharmaceuticals)
Publishing Group (2001-Present); Director
(1991-1997) of The Phoenix Companies
(wealth management
services) (2002-Present)
Matthew Healey; Trustee and Trustee of Funds that Retired; Chief 71 None
522 Fifth Avenue, President of are series of JPMF Executive Officer of
New York, NY 10036; the Board of since 1982, Funds that certain J.P. Morgan
8/23/1937 Trustees are series of JPMIF Fund Trusts
since 1992, Funds that (1982-2001)
are series of JPMST
since 1996 and Funds
that are series of MFG
and MFSG since 2001.
Fergus Reid, III; Trustee and Trustee of Funds that Chairman of Lumelite 71 Trustee of 16 Morgan
522 Fifth Avenue, Chairman of are series of JPMF, Corporation Stanley Funds
New York, NY 10036; the Board of JPMIF and JPMST since (plastics (1995-Present)
8/12/1932 Trustees 2001, Funds that are manufacturing)
series of MFSG since
1996 and funds that
are series of MFG
since 1987.
</Table>
173
<Page>
<Table>
<Caption>
POSITIONS NUMBER OF OTHER
HELD WITH PRINCIPAL PORTFOLIOS IN DIRECTORSHIPS
EACH TERM OF OFFICE OCCUPATIONS JPMORGAN FUND HELD OUTSIDE
NAME, CONTACT ADDRESS JPMORGAN AND LENGTH OF DURING PAST COMPLEX OVERSEEN JPMORGAN FUND
AND DATE OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEE(S)
James J. Schonbachler; Trustee Since 2001 Retired; Managing 71 None
522 Fifth Avenue, Director of Bankers
New York, NY 10036; Trust Company,
1/26/1943 (financial services)
(1968-1998); Group
Head and Director of
Bankers Trust, A.G.,
Zurich and BT
Brokerage Corp.
(financial services)
Robert J. Higgins; Trustee Since 2002 Director of 71 Director of Providian
522 Fifth Avenue, Administration of Financial Corp.
New York, NY 10036; the State of Rhode (banking) (2002-Present)
10/9/1945 Island
(2003-Present);
President - Consumer
Banking and
Investment Services
Fleet Boston
Financial
(1971-2002)
Dr. Matthew Goldstein; Trustee Since 2003 Chancellor of the 71 Trustee of the Albert
522 Fifth Avenue, City University of Einstein School of
New York, NY 10036; New York, since Medicine (1998-present);
11/10/1941 September 1, 1999; Trustee of Bronx
President, Adelphi University (New York)
University (New Lebanon Hospital Center
York) (1998-1999). (1992-present); Director
of New Plan Excel Realty
Trust, Inc (real estate
investment company)
(2000-present); Director
of Lincoln Center
Institute for the Arts
in Education
(1999-present); Director
of Jewish Community
Relations Counsel of New
York, Inc
(2000-present); Director
of United Way of New
York City
(2002-present).
</Table>
174
<Page>
<Table>
<Caption>
POSITIONS NUMBER OF OTHER
HELD WITH PRINCIPAL PORTFOLIOS IN DIRECTORSHIPS
EACH TERM OF OFFICE OCCUPATIONS JPMORGAN FUND HELD OUTSIDE
NAME, CONTACT ADDRESS JPMORGAN AND LENGTH OF DURING PAST COMPLEX OVERSEEN JPMORGAN FUND
AND DATE OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEE(S)
William G. Morton, Jr.; Trustee Since 2003 Formerly Chairman 71 Director of Radio Shack
522 Fifth Avenue, Emeritus (March Corporation
New York, NY 10036; 2001-October 2002), (electronics)
03/13/1937 and Chairman and (1987-present); Director
Chief Executive of the Griswold Company
Officer, Boston (securities brokerage)
Stock Exchange (June (2002-present); Director
1985-March 2001). of The National Football
Foundation and College
Hall of Fame
(1994-present); Trustee
of the Berklee College
of Music (1998-present);
Trustee of the Stratton
Mountain School
(2001-present).
INTERESTED TRUSTEE(S)
Leonard M. Spalding* Trustee Since 1998 Retired; Chief 71 Trustee of St. Catherine
522 Fifth Avenue, Executive Officer of College; Trustee of
New York, NY 10036; Chase Mutual Funds Bellarmine University;
7/20/1935 (investment company) Director of Marion
(1989-1998) and Washington Airport
Chief Investment Board; Director of
Executive of Chase Springfield Washington
Manhattan Private Economic Development
Bank (investment Board; Director of
management) Glenview Trust; Director
(1990-1995) of Pizza Magia
</Table>
(1) A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and investment
services or have a common investment adviser or have an investment adviser that
is an affiliated person of the investment adviser of any of the other investment
companies. The JPMorgan Fund Complex for which the Trustees serve includes 11
investment companies.
* Mr. Spalding is deemed to be an "interested person" due to his ownership of
equity securities of J.P. Morgan Chase & Co.
175
<Page>
<Table>
<Caption>
POSITIONS HELD TERM OF OFFICE
NAME, CONTACT ADDRESS WITH EACH AND LENGTH OF PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH JPMORGAN TRUST TIME SERVED DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------------
George Gatch; President Since 2001 Managing Director, J.P. Morgan Investment Management
522 Fifth Avenue, Inc. and J.P. Morgan Fleming Asset Management (USA)
New York, NY 10036; Inc.; Head of J.P. Morgan Fleming's U.S. Mutual Funds
12/21/1962 and Financial Intermediaries Business ("FFI"); he has
held numberous positions throughout the firm in
business management, marketing and sales.
David Wezdenko; Treasurer Since 2001 Managing Director, J.P. Morgan Investment Management
522 Fifth Avenue, Inc. and J.P. Morgan Fleming Asset Management (USA)
New York, NY 10036; Inc.; Chief Operating Officer for FFI; since joining
10/2/1963 J.P. Morgan Chase in 1996, he has held numerous
financial and operation related positions supoorting
the J.P. Morgan pooling funds business.
Sharon Weinberg; Secretary Since 2001 Managing Director, J.P. Morgan Investment Management
522 Fifth Avenue, Inc. and J.P. Morgan Fleming Asset Management (USA)
New York, NY 10036; Inc.; Head of Business and Product Strategy for FFI;
6/15/1959 since joining J.P. Morgan Chase in 1996, she has held
numerous positions throughout the asset management
business in mutual funds marketing, legal and product
development.
Stephen Ungerman; Vice President and Assistant Since 2001 Vice President, J.P. Morgan Investment Management
522 Fifth Avenue, Treasurer Inc. and J.P. Morgan Fleming Asset Management (USA)
New York, NY 10036; Inc.; Business Head for Vehicle Services Group within
6/2/1953 Fund Administration; prior to joining J.P. Morgan
Chase in 2000, he held a number of senior management
positions in Prudential Insurance Co. of America's
asset management business, including Associate
General Counsel, Tax Director and Co-head of Fund
Administration Department; Mr. Ungerman was also the
Assistant Treasurer of all mutual funds managed by
Prudential.
Judy R. Bartlett; Vice President and Assistant Since 2001 Vice President and Assitant General Counsel, J.P.
522 Fifth Avenue, Secretary Morgan Investment Management Inc. and J.P. Morgan
New York, NY 10036; Fleming Asset Management (USA) Inc., since September
5/29/1965 2000; from August 1998 through August 2000, she was
an attorney at New York Life Insurance Company where
she served as Assistant Secretary for the Mainstay
Funds; from October 1995 through July 1998, Ms.
Bartlett was an associate at the law firm of Willkie
Far and Gallagher.
Joseph J. Bertini; Vice President and Assistant Since 2001 Vice President and Assistant General Counsel, J.P.
522 Fifth Avenue, Secretary Morgan Investment Management Inc. and J.P. Morgan
New York, NY 10036; Fleming Asset Management (USA) Inc.
11/4/1965
Thomas J. Smith; Vice President and Assistant Since 2002 Managing Director, Head of Compliance for J.P. Morgan
522 Fifth Avenue, Secretary Chase & Co.'s asset management business in the
New York, NY 10036; Americas. An employee since 1996, he previously
6/24/1955 worked in the Investment Management - Risk
Management/Compliance group for the Chase Manhattan
Corporation.
</Table>
176
<Page>
<Table>
<Caption>
POSITIONS HELD TERM OF OFFICE
NAME, CONTACT ADDRESS WITH EACH AND LENGTH OF PRINCIPAL OCCUPATIONS
AND DATE OF BIRTH JPMORGAN TRUST TIME SERVED DURING PAST 5 YEARS
- -----------------------------------------------------------------------------------------------------------------------------
Wayne H. Chan; Vice President Since 2003 Vice President and Assistant General Counsel, J.P.
522 Fifth Avenue, and Assistant Secretary Morgan Investment Management, Inc. and J.P. Morgan
New York, NY 10036; Fleming Asset Management (USA), Inc., since September
6/27/1965 2002; prior to joining J.P. Morgan Chase &Co., Mr.
Chan was an associate at the law firm of Shearman &
Sterling LLP from June 1999 through May 2001 and
Whitman Breed Abbott & Morgan LLP from September 1997
through May 1999.
Ryan M. Louvar; Assistant Secretary Since 2003 Counsel of Legal Services, BISYS Investment Services
60 State Street, since 2000; formerly Attorney at Hill, Farrer &
Suite 1300, Burrill LLP from 1999 to 2000 and Knapp Petersen
Boston, MA 02109; Clarke, PC from 1997 to 1999.
2/18/1972
</Table>
Additional information concerning the Trustees is contained in the Statement of
Additional Information and is available without charge by calling
1-800-348-4782.
177
<Page>
TAX LETTER (UNAUDITED)
JPMorgan Bond Fund ("BF")
JPMorgan Bond Fund II ("BFII")
JPMorgan Enhanced Income Fund ("EIF")
JPMorgan Fleming Emerging Markets Debt Fund ("EMDF")
JPMorgan Global Strategic Income Fund ("GSIF")
JPMorgan Short Term Bond Fund ("STBF")
JPMorgan Short Term Bond Fund II ("STBFII")
JPMorgan Strategic Income Fund ("SIF")
JPMorgan U.S. Treasury Income Fund ("USTI")
Certain tax information for the JPMorgan Funds is required to be provided to
shareholders based upon the Funds' income and distributions for the taxable year
end August 31, 2003. The information and distributions reported in this letter
may differ from the information and taxable distributions reported to the
shareholders for the calendar year ending December 31, 2003. The information
necessary to complete your income tax returns for the calendar year ending
December 31, 2003 will be received under separate cover.
During the period ended August 31, 2003, the following long-term capital gains
were distributed by the following Funds:
<Table>
<Caption>
LONG-TERM
CAPITAL GAINS
DISTRIBUTION
FUND
BF $ 3,646,701
BF II 4,615,036
STBF 7,517,818
STBF II 4,320,985
</Table>
178
<Page>
JPMORGAN FAMILY OF FUNDS
U.S. EQUITY FUNDS
CAPITAL GROWTH FUND
DISCIPLINED EQUITY FUND
DISCIPLINED EQUITY VALUE FUND
DIVERSIFIED FUND
DYNAMIC SMALL CAP FUND
EQUITY GROWTH FUND
EQUITY INCOME FUND
GROWTH AND INCOME FUND
MID CAP EQUITY FUND
MID CAP GROWTH FUND
MID CAP VALUE FUND
SMALL CAP EQUITY FUND
SMALL CAP GROWTH FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
VALUE OPPORTUNITIES FUND
INTERNATIONAL EQUITY FUNDS
FLEMING EMERGING MARKETS EQUITY FUND
FLEMING EUROPEAN FUND
FLEMING INTERNATIONAL EQUITY FUND
FLEMING INTERNATIONAL GROWTH FUND
FLEMING INTERNATIONAL OPPORTUNITIES FUND
FLEMING INTERNATIONAL VALUE FUND
FLEMING JAPAN FUND
FLEMING ASIA EQUITY FUND
SPECIALTY FUNDS
GLOBAL 50 FUND
GLOBAL HEALTHCARE FUND
MARKET NEUTRAL FUND
TAX AWARE FUNDS
FLEMING TAX AWARE INTERNATIONAL
OPPORTUNITIES FUND
TAX AWARE DISCIPLINED EQUITY FUND
TAX AWARE ENHANCED INCOME FUND
TAX AWARE LARGE CAP GROWTH FUND
TAX AWARE LARGE CAP VALUE FUND
TAX AWARE SHORT-INTERMEDIATE INCOME FUND
TAX AWARE U.S. EQUITY FUND
INCOME FUNDS
BOND FUND
BOND FUND II
ENHANCED INCOME FUND
FLEMING EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
SHORT TERM BOND FUND
SHORT TERM BOND FUND II
STRATEGIC INCOME FUND
U.S. TREASURY INCOME FUND
TAXFREE FUNDS
CALIFORNIA BOND FUND
INTERMEDIATE TAX FREE INCOME FUND
NEW JERSEY TAX FREE INCOME FUND
NEW YORK INTERMEDIATE TAX FREE
INCOME FUND
TAX FREE INCOME FUND
MONEY MARKET FUNDS
100% U.S. TREASURY SECURITIES
MONEY MARKET FUND
CALIFORNIA TAX FREE MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
LIQUID ASSETS MONEY MARKET FUND
NEW YORK TAX FREE MONEY MARKET FUND
PRIME MONEY MARKET FUND
TAX FREE MONEY MARKET FUND
TREASURY PLUS MONEY MARKET FUND
U.S. GOVERNMENT MONEY MARKET FUND
FUNDS MAY BE REGISTERED UNDER SEPARATE REGISTRANTS.
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[JPMORGAN FLEMING ASSET MANAGEMENT LOGO]
JPMorgan Funds are distributed by J.P. Morgan Fund Distributors, Inc., which is
unaffiliated with the JPMorgan Chase Bank. JPMorgan Chase and its respective
affiliates receive compensation from JPMorgan Funds for providing services to
the Funds.
This report is submitted for the general information of the shareholders of the
funds. It is not authorized for distribution to prospective investors in the
funds unless preceded or accompanied by a prospectus.
To obtain a prospectus for any of the JPMorgan Funds, call 1-800-348-4782. The
prospectus contains more complete information, including charges and expenses.
Please read it carefully before you invest or send money.
A list of portfolio holdings is available fifteen days after month end upon
request. Please contact your JPMorgan Fleming representative or call
1-800-766-7722 to obtain further information.
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JPMorgan Funds Fulfillment Center PRSAT STD
393 Manley Street U.S. POSTAGE
West Bridgewater, MA 02379-1039 PAID
PERMIT 2891
KANSAS CITY, MO
(C) J.P. Morgan Chase & Co., 2003 All Rights Reserved. October 2003 AN-INC-803
<Page>
ITEM 2. CODE OF ETHICS.
(a) Disclose whether, as of the end of the period covered by the report,
the registrant has adopted a code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing similar
functions, regardless of whether these individuals are employed by the
registrant or a third party. If the registrant has not adopted such a code
of ethics, explain why it has not done so.
THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO THE REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING
OFFICER OR CONTROLLER, OR PERSONS PERFORMING SIMILAR FUNCTIONS.
THE REGISTRANT WILL PROVIDE ANY PERSON WITHOUT CHARGE, UPON REQUEST, A COPY OF
THE CODE OF ETHICS. A REQUEST MAY BE MADE BY CALLING 1-800-348-4782.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of directors has determined
that the registrant either:
(i) Has at least one audit committee financial expert serving
on its audit committee; or
(ii) Does not have an audit committee financial expert serving
on its audit committee.
THE REGISTRANT'S BOARD OF DIRECTORS HAS DETERMINED THAT THE REGISTRANT HAS AT
LEAST ONE AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT COMMITTEE.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is
"independent." In order to be considered "independent" for purposes
of this Item, a member of an audit committee may not, other than in
his or her capacity as a member of the audit committee, the board
of directors, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-
2(a)(19)).
THE AUDIT COMMITTEE FINANCIAL EXPERT IS WILLIAM ARMSTRONG. HE IS A
"NON-INTERESTED" TRUSTEE AND IS ALSO "INDEPENDENT" AS DEFINED BY THE SECURITIES
AND EXCHANGE COMMISSION FOR PURPOSES AUDIT COMMITTEE FINANCIAL EXPERT
DETERMINATIONS.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each
of the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed
in each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
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(2) Disclose the percentage of services described in each of
paragraphs (b) through (d) of this Item that were approved by the audit
committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
NOT APPLICABLE - ONLY EFFECTIVE FOR ANNUAL REPORTS FOR FISCAL YEARS ENDING ON OR
AFTER DECEMBER 15, 2003.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
NOT APPLICABLE.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
A closed-end management investment company that is filing an annual report
on this Form N-CSR must, unless it invests exclusively in non-voting securities,
describe the policies and procedures that it uses to determine how to vote
proxies relating to portfolio securities, including the procedures that the
company uses when a vote presents a conflict between the interests of its
shareholders, on the one hand, and those of the company's investment adviser;
principal underwriter; or any affiliated person (as defined in Section 2(a)(3)
of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules
thereunder) of the company, its investment adviser, or its principal
underwriter, on the other. Include any policies and procedures of the company's
investment adviser, or any other third party, that the company uses, or that are
used on the company's behalf, to determine how to vote proxies relating to
portfolio securities.
NOT APPLICABLE
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive
officer or officers and principal financial officer or officers, or persons
performing similar functions, about the effectiveness of the registrant's
disclosure controls and procedures (as defined in Rule 30a-2(c) under the Act
(17 CFR 270.30a-2(c))) based on their evaluation of these controls and
procedures as of a date within 90 days of the filing date of the report that
includes the disclosure required by this paragraph.
THE REGISTRANT'S PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS HAVE
CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND
PROCEDURES AS OF A DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT
THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE REASONABLY DESIGNED TO
ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR
IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE REQUIRED TIME PERIODS
AND THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT IN THE REPORTS
THAT IT FILES OR SUBMITS ON FORM N-CSR IS ACCUMULATED AND COMMUNICATED TO THE
REGISTRANT'S MANAGEMENT, INCLUDING ITS PRINCIPAL EXECUTIVE AND PRINCIPAL
FINANCIAL OFFICERS, AS APPROPRIATE TO ALLOW TIMELY DECISIONS REGARDING REQUIRED
DISCLOSURE.
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(b) Disclose whether or not there were significant changes in the
registrant's internal controls or in other factors that could significantly
affect these controls subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL
REPORTING THAT OCCURRED DURING THE REGISTRANT'S MOST RECENT FISCAL HALF-YEAR
(THE REGISTRANT'S SECOND FISCAL HALF-YEAR IN THE CASE OF AN ANNUAL REPORT)
THAT HAVE MATERIALLY AFFECTED, OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT,
THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING.
ITEM 10. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject
of the disclosure required by Item 2, to the extent that the registrant intends
to satisfy the Item 2 requirements through filing of an exhibit.
NOT APPLICABLE - SEE ITEM 2 ABOVE.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2
under the Act (17 CFR 270.30a-2).
CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 ARE
ATTACHED HERETO.
(b) A separate or combined certification for each principal executive
officer and principal officer of the registrant as required by Rule 30a-2(b)
under the Act of 1940.
CERTIFICATIONS PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 ARE
ATTACHED HERETO.
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SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) J.P. Morgan Institutional Funds
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By (Signature and Title)* /s/ David Wezdenko
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David Wezdenko, Treasurer
Date October 21, 2003
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ David Wezdenko
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David Wezdenko, Treasurer
Date October 21, 2003
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By (Signature and Title)* /s/ George C.W. Gatch
-------------------------------------------------------
George C.W. Gatch, President
Date October 21, 2003
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* Print the name and title of each signing officer under his or her signature.
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