<Page>
-----------------------------
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hours per response....... 5.0
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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, 2004
----------------------------------------------
Date of reporting period: September 1, 2003 through February 29, 2004
---------------------------------------------
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>
[GRAPHIC]
JPMORGAN FUNDS
SEMI-ANNUAL REPORT FEBRUARY 29 2004
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 a worldwide investment presence. 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
marketplace. JPMorgan Fleming Asset Management is an EXPERIENCED PARTNER
dedicated to working with your financial advisor to help provide you with a
broad array of WEALTH SOLUTIONS.
CONTENTS
<Table>
President's Letter 1
Fund Commentaries: 2
Bond Fund 2
Bond Fund II 4
Enhanced Income Fund 6
Fleming Emerging Markets Debt Fund 8
Global Strategic Income Fund 10
Short Term Bond Fund 12
Short Term Bond Fund II 14
Strategic Income Fund 16
U.S. Treasury Income Fund 18
Portfolio of Investments 20
Financial Statements 86
Notes to Financial Statements 100
Financial Highlights 130
</Table>
HIGHLIGHTS
- - US Economy Becomes More Self-Sustaining
- - Monetary Policy Maintained by Federal Reserve Board
- - JPMorgan Chase and Bank One to Combine Forces
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 APRIL 12, 2004
"The economic expansion quickened, beginning the transition from being
policy-dependent to becoming self-sustaining."
[PHOTO OF GEORGE C.W. GATCH]
DEAR SHAREHOLDER:
We are pleased to present this semi-annual report for the JPMorgan Income Funds
for the six month period ending February 29, 2004. Inside you'll find in-depth
information on some of our fixed income funds along with an update from the
portfolio management team.
ECONOMY BECOMES MORE SELF-SUSTAINING
The economic expansion quickened, beginning the transition from being
policy-dependent to becoming self-sustaining. Strong profits supported the
corporate sector's gradual increase in capital spending and hiring. Yet, with
ongoing excess capacity and comparatively high unemployment, consumer price
inflation continued to decelerate.
During the fourth quarter of 2003, the U.S. gross domestic product (GDP) grew at
4.1%, slightly below the market consensus of 4.5% to 5%. January and February
2004 economic data were mixed, suggesting that the recent pattern of strong
growth and stable interest rates would continue. Industrial production rose, and
new orders remained near the two-decade high recorded in December.
FEDERAL RESERVE BOARD MAINTAINED MONETARY POLICY
The Federal Reserve Board (Fed) continued to indicate that it would keep its
monetary policy on hold until economic conditions warrant a change. Short-term
money market rates remained relatively stable during the period because of the
Fed's friendly stance, while longer maturity yields fell in response to mixed
economic data, low inflation, and a persistently weak labor market. Treasury
yields ended the six-month period notably lower than the peak they reached in
early September.
The economic climate shows promise. Whatever happens in the coming months, your
portfolio managers will continue to work hard on your behalf. Their goal: to
obtain the highest possible yields in this low interest rate environment while
focusing on the preservation of your principal.
IMPORTANT MERGER NEWS
As you may know, JPMorgan Chase and Bank One have agreed to combine forces by
mid-2004, subject to approval of the Firms' shareholders and certain regulatory
agencies. We believe that the merger is compelling both strategically and
financially. We believe that the newly combined organization will have top-tier
positions in both wholesale and retail financial services, an extensive client
base and greater scale. And we will have an extraordinarily talented team that
shares common values and a strong client orientation.
On behalf of all of us here at JPMorgan Fleming Asset Management, thank you for
the trust you have placed in us over the years. We look forward to 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
<Page>
JPMORGAN
BOND FUND
AS OF FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 7/26/1993
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 996
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality A
Duration 4.3 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 5.55%
(Institutional Shares) for the six-month period ending February 29, 2004.
This compares to the 4.93% return of its benchmark index, the Lehman
Aggregate Bond Index. Previously, the Fund compared its performance to that
of the Citigroup Broad Investment Grade Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The Fund benefited from our underweight to Treasury and agency debt as other
sectors outperformed. As spreads ground tighter, our sector overweights in
residential mortgages and investment-grade corporate bonds added to
performance. Also a positive was our security selection within those sectors,
particularly our allocation to 5.5% and 6% coupon mortgages and BBB-rated
corporate credits. Our duration overweight was a modest detractor, but
commercial mortgage-backed securities (CMBS) and asset-backed securities
(ABS) holdings helped performance as credit performance stabilized and demand
increased. Our overweights to high-yield and emerging markets debt also
enhanced returns.
Q: HOW WAS THE FUND MANAGED?
A: We generally maintained a slightly long duration position, focusing on the
shortest part of the yield curve to benefit from the accommodative Fed
policy. Throughout the period, we underweighted Treasury and agency debt,
finding more compelling opportunities in other sectors with more generous
yield spreads. As spreads tightened, we overweighted prepayment-sensitive
mortgages, then realized profits and pared back our position in January ahead
of expected strong supply. We increased our sector exposure to
investment-grade corporate bonds, while continuing to sell names that had
appreciated significantly and shifting into those with better value. We added
to our modest overweight in CMBS as that market continued to outperform and
remained positioned in ABS. Taking a bottom-up view of company and country
fundamentals, we increased our high yield allocation and maintained a modest
allocation to emerging markets debt.
2
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
CLASS A SHARES
Without Sales Charge 4.66% 6.54% 6.68% 6.61%
With Sales Charge* (0.09%) 4.91% 5.70% 6.12%
CLASS B SHARES
Without CDSC 3.41% 5.58% 6.10% 6.32%
With CDSC** (1.46%) 4.71% 5.79% 6.32%
CLASS C SHARES
Without CDSC 4.05% 5.80% 6.23% 6.39%
With CDSC*** 3.07% 5.80% 6.23% 6.39%
INSTITUTIONAL SHARES 4.47% 6.54% 6.75% 6.75%
SELECT SHARES 4.29% 6.35% 6.57% 6.56%
ULTRA SHARES 4.66% 6.66% 6.89% 6.84%
</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 (2/28/94 TO 2/29/04)
<Table>
<Caption>
JPMORGAN BOND FUND LEHMAN AGGREGATE CITIGROUP BROAD INVESTMENT LIPPER INTERMEDIATE INVESTMENT
(INSTITUTIONAL SHARES) BOND INDEX GRADE BOND INDEX GRADE DEBT FUNDS INDEX
Feb-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000
Mar-1994 $ 2,940,000 $ 2,925,900 $ 2,925,600 $ 2,935,200
Apr-1994 $ 2,913,540 $ 2,902,493 $ 2,903,658 $ 2,911,131
May-1994 $ 2,918,493 $ 2,902,203 $ 2,903,368 $ 2,905,600
Jun-1994 $ 2,908,570 $ 2,895,818 $ 2,897,271 $ 2,900,370
Jul-1994 $ 2,961,215 $ 2,953,444 $ 2,952,029 $ 2,946,486
Aug-1994 $ 2,964,176 $ 2,956,989 $ 2,955,276 $ 2,951,790
Sep-1994 $ 2,929,199 $ 2,913,521 $ 2,912,720 $ 2,918,434
Oct-1994 $ 2,923,341 $ 2,910,899 $ 2,909,808 $ 2,914,932
Nov-1994 $ 2,913,986 $ 2,904,495 $ 2,902,242 $ 2,907,062
Dec-1994 $ 2,930,013 $ 2,924,536 $ 2,924,299 $ 2,921,307
Jan-1995 $ 2,979,237 $ 2,982,442 $ 2,984,832 $ 2,970,677
Feb-1995 $ 3,047,164 $ 3,053,424 $ 3,054,677 $ 3,033,655
Mar-1995 $ 3,071,541 $ 3,072,050 $ 3,072,394 $ 3,053,677
Apr-1995 $ 3,115,464 $ 3,115,058 $ 3,114,486 $ 3,093,680
May-1995 $ 3,244,756 $ 3,235,611 $ 3,238,131 $ 3,202,269
Jun-1995 $ 3,265,198 $ 3,259,231 $ 3,260,798 $ 3,222,443
Jul-1995 $ 3,252,790 $ 3,252,061 $ 3,254,276 $ 3,215,353
Aug-1995 $ 3,293,450 $ 3,291,411 $ 3,291,701 $ 3,252,973
Sep-1995 $ 3,327,373 $ 3,323,337 $ 3,322,643 $ 3,283,876
Oct-1995 $ 3,375,620 $ 3,366,541 $ 3,367,166 $ 3,326,895
Nov-1995 $ 3,423,216 $ 3,417,039 $ 3,419,694 $ 3,376,466
Dec-1995 $ 3,470,114 $ 3,464,877 $ 3,466,886 $ 3,421,710
Jan-1996 $ 3,494,058 $ 3,487,745 $ 3,490,460 $ 3,444,294
Feb-1996 $ 3,428,369 $ 3,427,059 $ 3,431,123 $ 3,384,363
Mar-1996 $ 3,408,142 $ 3,403,069 $ 3,406,419 $ 3,361,011
Apr-1996 $ 3,384,285 $ 3,384,012 $ 3,381,211 $ 3,341,517
May-1996 $ 3,374,809 $ 3,377,244 $ 3,379,182 $ 3,336,505
Jun-1996 $ 3,417,332 $ 3,422,499 $ 3,422,774 $ 3,375,208
Jul-1996 $ 3,421,432 $ 3,431,740 $ 3,432,015 $ 3,384,659
Aug-1996 $ 3,418,011 $ 3,425,906 $ 3,427,210 $ 3,381,274
Sep-1996 $ 3,475,092 $ 3,485,517 $ 3,486,844 $ 3,437,741
Oct-1996 $ 3,551,544 $ 3,562,895 $ 3,565,298 $ 3,510,278
Nov-1996 $ 3,606,237 $ 3,623,821 $ 3,624,125 $ 3,571,006
Dec-1996 $ 3,584,239 $ 3,590,119 $ 3,592,233 $ 3,539,224
Jan-1997 $ 3,600,010 $ 3,601,249 $ 3,606,243 $ 3,550,195
Feb-1997 $ 3,611,890 $ 3,610,252 $ 3,610,210 $ 3,559,071
Mar-1997 $ 3,571,798 $ 3,570,178 $ 3,573,746 $ 3,520,989
Apr-1997 $ 3,621,446 $ 3,623,731 $ 3,624,851 $ 3,569,226
May-1997 $ 3,656,574 $ 3,658,156 $ 3,658,925 $ 3,600,992
Jun-1997 $ 3,703,013 $ 3,701,688 $ 3,702,466 $ 3,643,484
Jul-1997 $ 3,799,291 $ 3,801,634 $ 3,802,803 $ 3,740,036
Aug-1997 $ 3,766,997 $ 3,769,320 $ 3,770,099 $ 3,706,002
Sep-1997 $ 3,822,372 $ 3,825,106 $ 3,825,519 $ 3,759,369
Oct-1997 $ 3,862,889 $ 3,880,570 $ 3,880,606 $ 3,804,481
Nov-1997 $ 3,876,795 $ 3,898,420 $ 3,898,845 $ 3,815,514
Dec-1997 $ 3,916,726 $ 3,937,794 $ 3,938,614 $ 3,850,235
Jan-1998 $ 3,961,769 $ 3,988,198 $ 3,989,422 $ 3,901,443
Feb-1998 $ 3,963,353 $ 3,985,008 $ 3,986,629 $ 3,895,981
Mar-1998 $ 3,984,756 $ 3,998,557 $ 4,002,177 $ 3,910,396
Apr-1998 $ 4,002,288 $ 4,019,349 $ 4,022,988 $ 3,928,775
May-1998 $ 4,039,910 $ 4,057,533 $ 4,061,609 $ 3,964,134
Jun-1998 $ 4,068,593 $ 4,092,022 $ 4,094,914 $ 3,995,847
Jul-1998 $ 4,076,731 $ 4,100,615 $ 4,103,513 $ 4,003,839
Aug-1998 $ 4,121,982 $ 4,167,455 $ 4,166,297 $ 4,057,891
Sep-1998 $ 4,212,254 $ 4,264,974 $ 4,264,622 $ 4,148,788
Oct-1998 $ 4,179,398 $ 4,242,369 $ 4,245,431 $ 4,115,182
Nov-1998 $ 4,200,295 $ 4,266,551 $ 4,268,781 $ 4,135,758
Dec-1998 $ 4,212,476 $ 4,279,350 $ 4,282,014 $ 4,153,542
Jan-1999 $ 4,237,330 $ 4,309,734 $ 4,313,701 $ 4,179,294
Feb-1999 $ 4,159,786 $ 4,234,313 $ 4,238,211 $ 4,104,903
Mar-1999 $ 4,197,640 $ 4,257,602 $ 4,262,369 $ 4,137,331
Apr-1999 $ 4,218,629 $ 4,271,227 $ 4,276,435 $ 4,151,398
May-1999 $ 4,166,318 $ 4,233,640 $ 4,237,092 $ 4,109,054
Jun-1999 $ 4,138,820 $ 4,220,092 $ 4,222,686 $ 4,095,083
Jul-1999 $ 4,124,334 $ 4,202,368 $ 4,205,795 $ 4,080,750
Aug-1999 $ 4,117,323 $ 4,200,267 $ 4,202,851 $ 4,076,262
Sep-1999 $ 4,154,790 $ 4,248,990 $ 4,253,285 $ 4,121,100
Oct-1999 $ 4,180,135 $ 4,264,711 $ 4,266,045 $ 4,127,282
Nov-1999 $ 4,192,675 $ 4,264,284 $ 4,265,618 $ 4,132,235
Dec-1999 $ 4,188,482 $ 4,243,816 $ 4,245,996 $ 4,113,227
Jan-2000 $ 4,170,891 $ 4,229,811 $ 4,234,108 $ 4,098,419
Feb-2000 $ 4,220,107 $ 4,280,992 $ 4,283,647 $ 4,143,092
Mar-2000 $ 4,272,015 $ 4,337,501 $ 4,339,334 $ 4,194,052
Apr-2000 $ 4,242,538 $ 4,324,922 $ 4,326,316 $ 4,168,049
May-2000 $ 4,233,204 $ 4,322,760 $ 4,322,422 $ 4,160,546
Jun-2000 $ 4,315,751 $ 4,412,673 $ 4,412,761 $ 4,248,750
Jul-2000 $ 4,339,488 $ 4,452,829 $ 4,452,917 $ 4,284,864
Aug-2000 $ 4,414,561 $ 4,517,395 $ 4,516,594 $ 4,344,424
Sep-2000 $ 4,442,373 $ 4,545,854 $ 4,547,307 $ 4,373,097
Oct-2000 $ 4,465,918 $ 4,575,857 $ 4,576,409 $ 4,388,403
Nov-2000 $ 4,541,392 $ 4,650,901 $ 4,650,547 $ 4,458,178
Dec-2000 $ 4,647,206 $ 4,737,408 $ 4,738,443 $ 4,548,233
Jan-2001 $ 4,735,038 $ 4,814,627 $ 4,816,627 $ 4,628,282
Feb-2001 $ 4,769,130 $ 4,856,515 $ 4,859,495 $ 4,672,714
Mar-2001 $ 4,780,576 $ 4,880,797 $ 4,884,764 $ 4,690,938
Apr-2001 $ 4,737,073 $ 4,860,298 $ 4,861,806 $ 4,665,606
May-2001 $ 4,771,180 $ 4,889,460 $ 4,893,894 $ 4,694,533
Jun-2001 $ 4,784,062 $ 4,908,040 $ 4,910,044 $ 4,711,903
Jul-2001 $ 4,875,916 $ 5,017,980 $ 5,023,466 $ 4,826,402
Aug-2001 $ 4,932,964 $ 5,075,686 $ 5,078,724 $ 4,879,493
Sep-2001 $ 4,949,243 $ 5,134,564 $ 5,141,192 $ 4,917,065
Oct-2001 $ 5,066,045 $ 5,241,877 $ 5,245,044 $ 5,017,373
Nov-2001 $ 5,005,759 $ 5,169,539 $ 5,172,662 $ 4,954,154
Dec-2001 $ 4,985,736 $ 5,136,454 $ 5,142,144 $ 4,922,447
Jan-2002 $ 5,034,597 $ 5,178,059 $ 5,182,767 $ 4,957,889
Feb-2002 $ 5,080,915 $ 5,228,286 $ 5,232,521 $ 5,005,981
Mar-2002 $ 5,015,371 $ 5,141,497 $ 5,146,185 $ 4,918,876
Apr-2002 $ 5,094,614 $ 5,241,242 $ 5,243,962 $ 5,007,416
May-2002 $ 5,122,634 $ 5,285,792 $ 5,288,536 $ 5,048,477
Jun-2002 $ 5,128,269 $ 5,331,779 $ 5,327,671 $ 5,045,448
Jul-2002 $ 5,154,936 $ 5,396,293 $ 5,391,070 $ 5,065,630
Aug-2002 $ 5,254,427 $ 5,487,491 $ 5,485,414 $ 5,163,396
Sep-2002 $ 5,326,938 $ 5,576,388 $ 5,572,632 $ 5,219,677
Oct-2002 $ 5,299,770 $ 5,550,737 $ 5,547,555 $ 5,199,843
Nov-2002 $ 5,322,029 $ 5,549,071 $ 5,546,446 $ 5,224,802
Dec-2002 $ 5,427,938 $ 5,663,937 $ 5,661,812 $ 5,331,388
Jan-2003 $ 5,442,050 $ 5,669,035 $ 5,666,341 $ 5,347,915
Feb-2003 $ 5,520,960 $ 5,747,267 $ 5,746,803 $ 5,424,390
Mar-2003 $ 5,514,887 $ 5,742,670 $ 5,741,631 $ 5,424,933
Apr-2003 $ 5,583,823 $ 5,790,334 $ 5,792,158 $ 5,488,404
May-2003 $ 5,679,865 $ 5,898,034 $ 5,899,312 $ 5,590,489
Jun-2003 $ 5,673,049 $ 5,886,238 $ 5,888,694 $ 5,589,371
Jul-2003 $ 5,422,300 $ 5,688,460 $ 5,689,656 $ 5,401,009
Aug-2003 $ 5,464,594 $ 5,726,004 $ 5,728,915 $ 5,442,057
Sep-2003 $ 5,630,171 $ 5,877,743 $ 5,879,012 $ 5,588,448
Oct-2003 $ 5,565,987 $ 5,823,080 $ 5,824,925 $ 5,547,093
Nov-2003 $ 5,593,261 $ 5,837,056 $ 5,841,817 $ 5,561,516
Dec-2003 $ 5,666,532 $ 5,896,594 $ 5,900,236 $ 5,618,243
Jan-2004 $ 5,716,965 $ 5,943,766 $ 5,949,208 $ 5,663,189
Feb-2004 $ 5,766,839 $ 6,007,959 $ 6,012,864 $ 5,718,122
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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, Lehman Aggregate Bond Index,
Citigroup Broad Investment Grade Bond Index, and Lipper Intermediate Investment
Grade Debt Funds Index from February 28, 1994 to February 29, 2004. 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 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 1/1/1997
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 982
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality A+
Duration 4.4 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 5.32% (Select Shares) for the
six-month period ending February 29, 2004. This compares to the 4.93% return
of its benchmark index, the Lehman Aggregate Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The Fund benefited from our underweight to Treasury and agency debt as other
sectors outperformed. As spreads ground tighter, our sector overweights in
residential mortgages and investment-grade corporate bonds added to
performance. Also a positive was our security selection within those sectors,
particularly our allocation to 5.5% and 6% coupon mortgages and BBB-rated
corporate credits. Our duration overweight was a modest detractor, but
commercial mortgage-backed securities (CMBS) and asset-backed securities
(ABS) holdings helped performance as credit performance stabilized and demand
increased.
Q: HOW WAS THE FUND MANAGED?
A: In general, we maintained a slightly long duration position, focusing on the
shortest part of the yield curve to benefit from the accommodative Fed
policy. Throughout the period, we underweighted Treasury and agency debt,
finding more compelling opportunities in other sectors with more generous
yield spreads. As spreads tightened, we overweighted prepayment-sensitive
mortgages, then realized profits and pared back our position in January ahead
of expected strong supply. We increased our sector exposure to
investment-grade corporate bonds, while continuing to sell names that had
appreciated significantly and shifting into those with better value. We added
to our modest overweight in CMBS as that market continued to outperform and
remained positioned in ABS.
4
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
CLASS A SHARES
Without Sales Charge 4.06% 6.67% 6.48% 6.51%
With Sales Charge* (0.64%) 5.05% 5.51% 6.02%
CLASS B SHARES
Without CDSC 3.07% 5.72% 5.91% 6.23%
With CDSC** (1.89%) 4.82% 5.59% 6.23%
SELECT SHARES 4.00% 6.69% 6.50% 6.52%
</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 (2/28/94 TO 2/29/04)
<Table>
<Caption>
JPMORGAN BOND FUND II LEHMAN AGGREGATE LIPPER CORPORATE DEBT
(SELECT SHARES) BOND INDEX A-RATED FUNDS INDEX
Feb-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000
Mar-1994 $ 976,000 $ 975,300 $ 971,200
Apr-1994 $ 967,314 $ 967,498 $ 959,740
May-1994 $ 966,443 $ 967,401 $ 956,381
Jun-1994 $ 964,413 $ 965,273 $ 953,129
Jul-1994 $ 982,159 $ 984,481 $ 971,239
Aug-1994 $ 982,453 $ 985,663 $ 971,530
Sep-1994 $ 967,717 $ 971,174 $ 955,402
Oct-1994 $ 967,233 $ 970,300 $ 952,154
Nov-1994 $ 967,716 $ 968,165 $ 950,821
Dec-1994 $ 965,103 $ 974,845 $ 958,333
Jan-1995 $ 984,985 $ 994,147 $ 975,391
Feb-1995 $ 1,002,025 $ 1,017,808 $ 998,995
Mar-1995 $ 1,011,644 $ 1,024,017 $ 1,006,288
Apr-1995 $ 1,024,088 $ 1,038,353 $ 1,020,678
May-1995 $ 1,066,690 $ 1,078,537 $ 1,066,404
Jun-1995 $ 1,070,956 $ 1,086,410 $ 1,073,976
Jul-1995 $ 1,065,173 $ 1,084,020 $ 1,068,713
Aug-1995 $ 1,081,790 $ 1,097,137 $ 1,083,568
Sep-1995 $ 1,096,178 $ 1,107,779 $ 1,095,271
Oct-1995 $ 1,112,182 $ 1,122,180 $ 1,111,810
Nov-1995 $ 1,128,753 $ 1,139,013 $ 1,130,043
Dec-1995 $ 1,143,766 $ 1,154,959 $ 1,148,237
Jan-1996 $ 1,152,115 $ 1,162,582 $ 1,153,634
Feb-1996 $ 1,133,221 $ 1,142,353 $ 1,127,562
Mar-1996 $ 1,125,175 $ 1,134,356 $ 1,118,428
Apr-1996 $ 1,120,224 $ 1,128,004 $ 1,109,816
May-1996 $ 1,117,759 $ 1,125,748 $ 1,107,375
Jun-1996 $ 1,132,290 $ 1,140,833 $ 1,121,217
Jul-1996 $ 1,134,442 $ 1,143,913 $ 1,123,572
Aug-1996 $ 1,131,492 $ 1,141,969 $ 1,120,426
Sep-1996 $ 1,150,841 $ 1,161,839 $ 1,141,714
Oct-1996 $ 1,174,548 $ 1,187,632 $ 1,169,686
Nov-1996 $ 1,196,747 $ 1,207,940 $ 1,193,547
Dec-1996 $ 1,180,591 $ 1,196,706 $ 1,180,060
Jan-1997 $ 1,183,542 $ 1,200,416 $ 1,181,830
Feb-1997 $ 1,185,554 $ 1,203,417 $ 1,185,967
Mar-1997 $ 1,174,173 $ 1,190,059 $ 1,169,600
Apr-1997 $ 1,191,081 $ 1,207,910 $ 1,186,092
May-1997 $ 1,202,158 $ 1,219,385 $ 1,197,122
Jun-1997 $ 1,217,185 $ 1,233,896 $ 1,213,283
Jul-1997 $ 1,253,701 $ 1,267,211 $ 1,252,351
Aug-1997 $ 1,236,023 $ 1,256,440 $ 1,236,446
Sep-1997 $ 1,253,699 $ 1,275,035 $ 1,257,590
Oct-1997 $ 1,270,749 $ 1,293,523 $ 1,273,812
Nov-1997 $ 1,273,036 $ 1,299,473 $ 1,279,799
Dec-1997 $ 1,284,494 $ 1,312,598 $ 1,293,365
Jan-1998 $ 1,300,293 $ 1,329,399 $ 1,308,756
Feb-1998 $ 1,298,472 $ 1,328,336 $ 1,306,531
Mar-1998 $ 1,302,887 $ 1,332,852 $ 1,311,366
Apr-1998 $ 1,309,532 $ 1,339,783 $ 1,317,398
May-1998 $ 1,322,103 $ 1,352,511 $ 1,331,626
Jun-1998 $ 1,333,738 $ 1,364,007 $ 1,343,477
Jul-1998 $ 1,334,672 $ 1,366,872 $ 1,343,746
Aug-1998 $ 1,354,558 $ 1,389,152 $ 1,355,705
Sep-1998 $ 1,388,558 $ 1,421,658 $ 1,385,937
Oct-1998 $ 1,378,005 $ 1,414,123 $ 1,368,475
Nov-1998 $ 1,381,174 $ 1,422,184 $ 1,383,391
Dec-1998 $ 1,386,561 $ 1,426,450 $ 1,387,818
Jan-1999 $ 1,398,346 $ 1,436,578 $ 1,399,614
Feb-1999 $ 1,372,896 $ 1,411,438 $ 1,368,543
Mar-1999 $ 1,380,585 $ 1,419,201 $ 1,377,575
Apr-1999 $ 1,384,174 $ 1,423,742 $ 1,382,121
May-1999 $ 1,370,748 $ 1,411,213 $ 1,366,365
Jun-1999 $ 1,365,402 $ 1,406,697 $ 1,359,670
Jul-1999 $ 1,359,804 $ 1,400,789 $ 1,353,551
Aug-1999 $ 1,357,900 $ 1,400,089 $ 1,349,897
Sep-1999 $ 1,374,195 $ 1,416,330 $ 1,362,721
Oct-1999 $ 1,377,905 $ 1,421,570 $ 1,364,765
Nov-1999 $ 1,377,767 $ 1,421,428 $ 1,365,720
Dec-1999 $ 1,371,843 $ 1,414,605 $ 1,359,574
Jan-2000 $ 1,369,511 $ 1,409,937 $ 1,356,583
Feb-2000 $ 1,383,617 $ 1,426,997 $ 1,370,963
Mar-2000 $ 1,400,774 $ 1,445,834 $ 1,389,608
Apr-2000 $ 1,384,384 $ 1,441,641 $ 1,378,214
May-2000 $ 1,378,847 $ 1,440,920 $ 1,372,838
Jun-2000 $ 1,405,459 $ 1,470,891 $ 1,403,453
Jul-2000 $ 1,417,827 $ 1,484,276 $ 1,415,382
Aug-2000 $ 1,435,691 $ 1,505,798 $ 1,434,207
Sep-2000 $ 1,446,315 $ 1,515,285 $ 1,442,095
Oct-2000 $ 1,453,402 $ 1,525,286 $ 1,448,152
Nov-2000 $ 1,476,366 $ 1,550,300 $ 1,469,584
Dec-2000 $ 1,510,027 $ 1,579,136 $ 1,499,711
Jan-2001 $ 1,536,755 $ 1,604,876 $ 1,527,605
Feb-2001 $ 1,548,127 $ 1,618,838 $ 1,541,354
Mar-2001 $ 1,554,010 $ 1,626,932 $ 1,546,749
Apr-2001 $ 1,536,449 $ 1,620,099 $ 1,537,932
May-2001 $ 1,543,978 $ 1,629,820 $ 1,548,082
Jun-2001 $ 1,549,382 $ 1,636,013 $ 1,554,275
Jul-2001 $ 1,583,933 $ 1,672,660 $ 1,589,557
Aug-2001 $ 1,598,505 $ 1,691,895 $ 1,607,519
Sep-2001 $ 1,621,204 $ 1,711,521 $ 1,613,788
Oct-2001 $ 1,654,925 $ 1,747,292 $ 1,648,646
Nov-2001 $ 1,632,253 $ 1,723,180 $ 1,628,697
Dec-2001 $ 1,623,765 $ 1,712,151 $ 1,616,482
Jan-2002 $ 1,637,892 $ 1,726,020 $ 1,627,797
Feb-2002 $ 1,651,486 $ 1,742,762 $ 1,639,843
Mar-2002 $ 1,627,044 $ 1,713,832 $ 1,613,606
Apr-2002 $ 1,655,843 $ 1,747,081 $ 1,642,167
May-2002 $ 1,668,262 $ 1,761,931 $ 1,654,647
Jun-2002 $ 1,677,938 $ 1,777,260 $ 1,661,762
Jul-2002 $ 1,695,892 $ 1,798,764 $ 1,671,733
Aug-2002 $ 1,726,587 $ 1,829,164 $ 1,702,325
Sep-2002 $ 1,751,105 $ 1,858,796 $ 1,728,711
Oct-2002 $ 1,743,225 $ 1,850,246 $ 1,711,424
Nov-2002 $ 1,746,711 $ 1,849,690 $ 1,717,585
Dec-2002 $ 1,781,645 $ 1,887,979 $ 1,754,857
Jan-2003 $ 1,784,852 $ 1,889,678 $ 1,758,542
Feb-2003 $ 1,807,877 $ 1,915,756 $ 1,784,217
Mar-2003 $ 1,806,069 $ 1,914,223 $ 1,782,968
Apr-2003 $ 1,827,561 $ 1,930,111 $ 1,802,937
May-2003 $ 1,857,351 $ 1,966,011 $ 1,840,618
Jun-2003 $ 1,854,193 $ 1,962,079 $ 1,836,385
Jul-2003 $ 1,767,602 $ 1,896,153 $ 1,773,397
Aug-2003 $ 1,785,455 $ 1,908,668 $ 1,785,101
Sep-2003 $ 1,839,197 $ 1,959,248 $ 1,834,013
Oct-2003 $ 1,818,598 $ 1,941,027 $ 1,818,791
Nov-2003 $ 1,824,418 $ 1,945,685 $ 1,824,611
Dec-2003 $ 1,846,676 $ 1,965,531 $ 1,842,675
Jan-2004 $ 1,863,111 $ 1,981,255 $ 1,858,153
Feb-2004 $ 1,880,176 $ 2,002,653 $ 1,875,806
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 February 28, 1994 to February 29, 2004.
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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 11/30/2001
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 410
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 0.63% (Institutional Shares) for the
six-month period ending February 29, 2004. This compares to the 0.58% return
of its benchmark index, the 3-month LIBOR Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The Fund outperformed its benchmark during the reporting period mainly
because of its allocation to corporate and asset-backed securities (ABS),
which experienced spread narrowing and added yield. Mortgages also performed
well. Our duration position neither helped nor hurt performance.
Q: HOW WAS THE FUND MANAGED?
A: Early in the period, we targeted three-year securities because they offered
attractive yields. Throughout the first three months, we maintained a longer
duration position in the short end of the curve. Stronger economic data at
year-end led us to reduce duration, but when it became more likely that the
Fed would remain on hold until late 2004, we extended modestly.
As interest rates rose, we increased our allocation to floating rate notes,
which also enabled us to maintain a more neutral yield curve position. We
gradually reduced our significant allocation to mortgage-backed securities
(MBS) as interest rates declined and spreads tightened. Because ABS and
lower-quality investment-grade corporate names offered attractive yield, we
continued to add them selectively.
6
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR (11/30/01)
---------------------------
INSTITUTIONAL SHARES 0.98% 1.49%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (11/30/01 TO 2/29/04)
<Table>
<Caption>
JPMORGAN ENHANCED INCOME FUND LIPPER ULTRA-SHORT
(INSTITUTIONAL SHARES) 3 MONTH LIBOR INDEX OBLIGATIONS AVERAGE
Nov-2001 $ 3,000,000 $ 3,000,000 $ 3,000,000
Dec-2001 $ 3,005,700 $ 3,005,700 $ 3,004,200
Jan-2002 $ 3,008,706 $ 3,010,509 $ 3,007,805
Feb-2002 $ 3,014,422 $ 3,014,724 $ 3,013,821
Mar-2002 $ 3,020,451 $ 3,019,547 $ 3,012,012
Apr-2002 $ 3,032,231 $ 3,024,681 $ 3,024,663
May-2002 $ 3,037,992 $ 3,029,520 $ 3,032,527
Jun-2002 $ 3,043,764 $ 3,034,367 $ 3,037,682
Jul-2002 $ 3,044,069 $ 3,039,222 $ 3,040,112
Aug-2002 $ 3,047,722 $ 3,044,085 $ 3,047,409
Sep-2002 $ 3,051,684 $ 3,048,651 $ 3,055,637
Oct-2002 $ 3,055,651 $ 3,053,529 $ 3,058,387
Nov-2002 $ 3,061,762 $ 3,058,415 $ 3,064,503
Dec-2002 $ 3,061,150 $ 3,062,391 $ 3,074,310
Jan-2003 $ 3,069,415 $ 3,066,066 $ 3,079,229
Feb-2003 $ 3,071,256 $ 3,069,132 $ 3,088,159
Mar-2003 $ 3,074,635 $ 3,072,815 $ 3,091,556
Apr-2003 $ 3,081,092 $ 3,075,887 $ 3,096,502
May-2003 $ 3,090,643 $ 3,079,271 $ 3,101,456
Jun-2003 $ 3,090,334 $ 3,082,966 $ 3,105,178
Jul-2003 $ 3,073,955 $ 3,086,049 $ 3,099,899
Aug-2003 $ 3,082,255 $ 3,088,826 $ 3,103,929
Sep-2003 $ 3,089,960 $ 3,091,606 $ 3,115,414
Oct-2003 $ 3,084,399 $ 3,094,698 $ 3,113,856
Nov-2003 $ 3,087,791 $ 3,097,793 $ 3,115,413
Dec-2003 $ 3,091,497 $ 3,100,890 $ 3,121,021
Jan-2004 $ 3,095,206 $ 3,103,991 $ 3,126,326
Feb-2004 $ 3,101,488 $ 3,106,785 $ 3,133,830
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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
February 29, 2004. 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 4/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 40
Primary Benchmark EMERGING MARKETS
BOND INDEX GLOBAL
Average Credit Quality BB
Duration 5.8 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 10.09% (Select Shares) for the six-month
period ended February 29, 2004. This compares to the 9.33% return from the
Emerging Markets Bond Index Global, the Fund's benchmark.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The Fund benefited from our decision to overweight Brazil and Ecuador.
Brazil's credit story continued to improve as economic reforms moved forward,
and Ecuador was a direct beneficiary of the strength in oil prices. Higher
oil prices were also good for Venezuela but our position modestly detracted
from performance because of an underweight we adopted due to ongoing
questions about future political leadership in the country. However, the
underweight added to performance during the last two months of the period.
High credit-quality assets closely tracked U.S. Treasuries, and our
underweight benefited the Fund as lower-rated credits outperformed.
Detracting was our small overweight to the Dominican Republic, which
underperformed as questions about economic liquidity shifted to potential
solvency issues.
Q: HOW WAS THE FUND MANAGED?
A: Emerging Markets Debt performed well in the final four months of 2003, driven
by improving fundamentals, easy global liquidity and heavy demand for a
relatively undervalued asset class. September was noteworthy for the return
to the market of sovereign and corporate issuers. Markets moved higher in
response to the strong fourth-quarter 4.1% growth of U.S. gross domestic
product (GDP). The Federal Reserve Board announced in December that it would
keep its monetary policy on hold until economic conditions warrant a change.
However, in January, the Fed revised its language, removing "considerable
period" and saying instead it could remain "patient" in regard to an increase
in the Federal Funds Rate. The Fed's verbal switch made investors more risk
averse and led to widespread profit-taking, a pattern that continued into
February. A recovery in the middle of the month was due mostly to the release
of weaker U.S. economic data, which suggested that the Fed might not raise
short-term rates as soon as the market feared. Issuers added roughly $17
billion of new supply of emerging markets debt in January, the largest month
of issuance since 1997, and it was met with strong demand.
We overweighted Brazil and other Latin credits early in the period. Notable
reductions were in Colombia and the Philippines. We increased our holdings in
Russia because of improving credit fundamentals and in Turkey as its
fundamental outlook improved. The main drivers of returns in the fourth
quarter were Brazil, Ecuador, Turkey and Venezuela. Asia lagged as the high
credit quality of this sector allowed for limited spread-tightening versus
lower-rated, cheaper assets. Early in 2004, profit-taking followed the Fed's
change in language with Venezuela, Brazil and the Dominican Republic
suffering the most. The Philippines slipped because of political concerns
while Europe performed most strongly, led by Russia.
8
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (4/17/97)
---------------------------------------------
SELECT SHARES 23.92% 13.61% 17.96% 10.25%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (4/17/97 TO 2/29/04)
<Table>
<Caption>
JPMORGAN FLEMING EMERGING EMERGING MARKETS BOND LIPPER EMERGING MARKETS
MARKETS DEBT FUND (SELECT SHARES) INDEX GLOBAL DEBT FUNDS INDEX
Apr-1997 $ 1,000,000 $ 1,000,000 $ 1,000,000
Apr-1997 $ 1,020,000 $ 1,000,000 $ 1,000,000
May-1997 $ 1,051,008 $ 1,033,900 $ 1,041,100
Jun-1997 $ 1,068,034 $ 1,056,542 $ 1,073,686
Jul-1997 $ 1,090,036 $ 1,100,178 $ 1,119,855
Aug-1997 $ 1,078,917 $ 1,094,787 $ 1,116,047
Sep-1997 $ 1,105,783 $ 1,125,222 $ 1,151,426
Oct-1997 $ 986,026 $ 1,005,948 $ 1,027,878
Nov-1997 $ 1,034,835 $ 1,048,601 $ 1,067,246
Dec-1997 $ 1,053,462 $ 1,074,291 $ 1,099,050
Jan-1998 $ 1,051,144 $ 1,079,448 $ 1,096,742
Feb-1998 $ 1,080,891 $ 1,107,945 $ 1,127,122
Mar-1998 $ 1,107,373 $ 1,133,096 $ 1,156,427
Apr-1998 $ 1,108,481 $ 1,135,702 $ 1,157,121
May-1998 $ 1,072,455 $ 1,101,404 $ 1,110,026
Jun-1998 $ 1,033,310 $ 1,073,538 $ 1,065,070
Jul-1998 $ 1,045,090 $ 1,079,765 $ 1,073,590
Aug-1998 $ 763,229 $ 784,557 $ 701,591
Sep-1998 $ 808,794 $ 852,343 $ 732,952
Oct-1998 $ 862,417 $ 906,807 $ 778,395
Nov-1998 $ 914,162 $ 969,014 $ 849,152
Dec-1998 $ 885,640 $ 950,312 $ 817,478
Jan-1999 $ 846,141 $ 928,645 $ 793,853
Feb-1999 $ 855,702 $ 937,839 $ 807,428
Mar-1999 $ 920,650 $ 1,000,018 $ 860,718
Apr-1999 $ 1,000,286 $ 1,061,519 $ 922,518
May-1999 $ 930,566 $ 1,006,744 $ 872,148
Jun-1999 $ 974,954 $ 1,045,403 $ 907,819
Jul-1999 $ 949,995 $ 1,027,945 $ 894,293
Aug-1999 $ 944,675 $ 1,028,665 $ 893,309
Sep-1999 $ 977,267 $ 1,060,965 $ 915,374
Oct-1999 $ 1,019,582 $ 1,098,523 $ 953,636
Nov-1999 $ 1,050,782 $ 1,127,963 $ 992,259
Dec-1999 $ 1,115,615 $ 1,180,188 $ 1,044,551
Jan-2000 $ 1,104,459 $ 1,162,013 $ 1,035,359
Feb-2000 $ 1,194,803 $ 1,224,413 $ 1,101,829
Mar-2000 $ 1,237,816 $ 1,257,717 $ 1,128,713
Apr-2000 $ 1,206,376 $ 1,234,575 $ 1,099,818
May-2000 $ 1,163,429 $ 1,206,056 $ 1,067,264
Jun-2000 $ 1,229,744 $ 1,262,259 $ 1,124,255
Jul-2000 $ 1,274,015 $ 1,298,233 $ 1,157,421
Aug-2000 $ 1,311,853 $ 1,339,647 $ 1,192,491
Sep-2000 $ 1,281,681 $ 1,325,178 $ 1,171,384
Oct-2000 $ 1,254,381 $ 1,298,277 $ 1,142,099
Nov-2000 $ 1,232,931 $ 1,293,084 $ 1,134,219
Dec-2000 $ 1,285,330 $ 1,350,239 $ 1,179,928
Jan-2001 $ 1,353,324 $ 1,415,320 $ 1,244,588
Feb-2001 $ 1,332,754 $ 1,396,496 $ 1,230,399
Mar-2001 $ 1,305,966 $ 1,380,856 $ 1,209,975
Apr-2001 $ 1,295,257 $ 1,374,227 $ 1,201,989
May-2001 $ 1,333,078 $ 1,407,346 $ 1,234,803
Jun-2001 $ 1,361,073 $ 1,428,879 $ 1,256,536
Jul-2001 $ 1,272,059 $ 1,354,863 $ 1,203,636
Aug-2001 $ 1,332,354 $ 1,415,561 $ 1,245,642
Sep-2001 $ 1,270,933 $ 1,369,272 $ 1,186,101
Oct-2001 $ 1,278,685 $ 1,369,956 $ 1,201,164
Nov-2001 $ 1,307,072 $ 1,352,421 $ 1,239,121
Dec-2001 $ 1,346,807 $ 1,368,515 $ 1,271,834
Jan-2002 $ 1,379,535 $ 1,393,832 $ 1,297,143
Feb-2002 $ 1,436,509 $ 1,446,101 $ 1,343,840
Mar-2002 $ 1,444,554 $ 1,447,692 $ 1,355,801
Apr-2002 $ 1,455,966 $ 1,461,879 $ 1,371,257
May-2002 $ 1,438,640 $ 1,454,277 $ 1,359,875
Jun-2002 $ 1,344,984 $ 1,380,982 $ 1,268,084
Jul-2002 $ 1,263,344 $ 1,318,423 $ 1,192,886
Aug-2002 $ 1,360,495 $ 1,414,932 $ 1,278,178
Sep-2002 $ 1,307,572 $ 1,375,738 $ 1,236,381
Oct-2002 $ 1,404,463 $ 1,460,346 $ 1,322,186
Nov-2002 $ 1,452,355 $ 1,501,820 $ 1,365,686
Dec-2002 $ 1,500,864 $ 1,547,926 $ 1,414,578
Jan-2003 $ 1,523,527 $ 1,573,467 $ 1,445,557
Feb-2003 $ 1,577,459 $ 1,623,818 $ 1,498,320
Mar-2003 $ 1,617,211 $ 1,650,123 $ 1,536,227
Apr-2003 $ 1,725,403 $ 1,744,180 $ 1,636,389
May-2003 $ 1,790,623 $ 1,816,564 $ 1,710,027
Jun-2003 $ 1,778,268 $ 1,816,564 $ 1,710,882
Jul-2003 $ 1,722,252 $ 1,752,258 $ 1,661,095
Aug-2003 $ 1,775,470 $ 1,794,837 $ 1,703,453
Sep-2003 $ 1,832,463 $ 1,857,836 $ 1,756,260
Oct-2003 $ 1,854,086 $ 1,866,940 $ 1,767,851
Nov-2003 $ 1,883,566 $ 1,889,903 $ 1,793,132
Dec-2003 $ 1,944,028 $ 1,945,466 $ 1,852,664
Jan-2004 $ 1,957,442 $ 1,955,388 $ 1,864,150
Feb-2004 $ 1,954,794 $ 1,962,232 $ 1,861,540
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 February 29, 2004. 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 3/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 56
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality BBB+
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 5.49% (Institutional shares) for the six-month
period ended February 29, 2004. This compares to the 4.93% return of the
Lehman Aggregate Bond Index, the Fund's benchmark.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our overweight to high-yield debt added to performance at a time when
investors sought higher yielding securities. Another successful strategy was
our overweight to emerging markets debt. The Fund benefited from successful
security selection and our underweight in the residential mortgage sector.
Our commercial mortgage-backed securities (CMBS) overweight was a positive as
was our underweight to Treasury and agency debt. Conversely, the Fund's
non-dollar international position detracted from performance.
Q: HOW WAS THE FUND MANAGED?
A: As fundamental credit quality continued to improve, we increased our
allocation to high yield and emerging markets debt, choosing our individual
holdings by taking a bottom-up view of company and country fundamentals. We
overweighted CMBS. We underweighted investment-grade corporate bonds and
residential mortgages. Within our mortgage holdings, we actively managed
coupon selection, particularly 30-year current coupons (i.e., Fannie Mae 5.5%
and 6%). Our allocation to Treasuries and agencies was underweight the
benchmark index, which is consistent with our strategy.
10
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (3/17/97)
---------------------------------------------------
CLASS A SHARES
Without Sales Charge 7.73% 4.65% 5.47% 5.37%
With Sales Charge* 2.88% 3.05% 4.50% 4.67%
INSTITUTIONAL SHARES 8.39% 5.33% 6.03% 5.84%
SELECT SHARES 7.89% 4.93% 5.64% 5.49%
</Table>
* Sales charge for class a shares is 4.50%.
[CHART]
LIFE OF FUND PERFORMANCE (3/17/97 TO 2/29/04)
<Table>
<Caption>
JPMORGAN GLOBAL STRATEGIC INCOME LEHMAN AGGREGATE LIPPER MULTI-SECTOR
FUND (INSTITUTIONAL SHARES) BOND INDEX INCOME FUNDS INDEX
Mar-1997 $ 3,000,000 $ 3,000,000 $ 3,000,000
Mar-1997 $ 2,967,900 $ 3,000,000 $ 3,000,000
Apr-1997 $ 3,018,651 $ 3,045,000 $ 3,026,700
May-1997 $ 3,069,968 $ 3,073,928 $ 3,076,943
Jun-1997 $ 3,114,483 $ 3,110,507 $ 3,120,636
Jul-1997 $ 3,200,131 $ 3,194,491 $ 3,192,098
Aug-1997 $ 3,179,010 $ 3,167,338 $ 3,172,946
Sep-1997 $ 3,242,590 $ 3,214,214 $ 3,237,039
Oct-1997 $ 3,184,548 $ 3,260,820 $ 3,222,149
Nov-1997 $ 3,222,444 $ 3,275,820 $ 3,235,360
Dec-1997 $ 3,256,602 $ 3,308,906 $ 3,267,713
Jan-1998 $ 3,296,658 $ 3,351,260 $ 3,309,213
Feb-1998 $ 3,327,976 $ 3,348,579 $ 3,325,098
Mar-1998 $ 3,358,927 $ 3,359,964 $ 3,361,341
Apr-1998 $ 3,365,980 $ 3,377,436 $ 3,371,089
May-1998 $ 3,369,683 $ 3,409,522 $ 3,364,010
Jun-1998 $ 3,365,302 $ 3,438,503 $ 3,355,600
Jul-1998 $ 3,381,456 $ 3,445,723 $ 3,368,686
Aug-1998 $ 3,260,400 $ 3,501,889 $ 3,169,597
Sep-1998 $ 3,316,479 $ 3,583,833 $ 3,224,114
Oct-1998 $ 3,276,681 $ 3,564,839 $ 3,199,289
Nov-1998 $ 3,327,142 $ 3,585,158 $ 3,312,223
Dec-1998 $ 3,341,116 $ 3,595,914 $ 3,304,605
Jan-1999 $ 3,366,508 $ 3,621,445 $ 3,322,120
Feb-1999 $ 3,322,744 $ 3,558,069 $ 3,277,603
Mar-1999 $ 3,368,597 $ 3,577,639 $ 3,318,573
Apr-1999 $ 3,422,495 $ 3,589,087 $ 3,376,980
May-1999 $ 3,351,307 $ 3,557,503 $ 3,306,401
Jun-1999 $ 3,341,253 $ 3,546,119 $ 3,302,764
Jul-1999 $ 3,331,564 $ 3,531,226 $ 3,295,168
Aug-1999 $ 3,315,239 $ 3,529,460 $ 3,271,443
Sep-1999 $ 3,338,446 $ 3,570,402 $ 3,285,183
Oct-1999 $ 3,361,815 $ 3,583,612 $ 3,289,454
Nov-1999 $ 3,392,407 $ 3,583,254 $ 3,311,164
Dec-1999 $ 3,424,296 $ 3,566,054 $ 3,339,640
Jan-2000 $ 3,390,738 $ 3,554,286 $ 3,308,247
Feb-2000 $ 3,448,719 $ 3,597,293 $ 3,351,916
Mar-2000 $ 3,476,654 $ 3,644,777 $ 3,350,911
Apr-2000 $ 3,451,970 $ 3,634,207 $ 3,303,663
May-2000 $ 3,424,699 $ 3,632,390 $ 3,262,367
Jun-2000 $ 3,502,097 $ 3,707,944 $ 3,345,557
Jul-2000 $ 3,535,017 $ 3,741,686 $ 3,356,263
Aug-2000 $ 3,586,982 $ 3,795,941 $ 3,383,784
Sep-2000 $ 3,592,362 $ 3,819,855 $ 3,353,669
Oct-2000 $ 3,594,518 $ 3,845,066 $ 3,283,242
Nov-2000 $ 3,607,817 $ 3,908,125 $ 3,244,499
Dec-2000 $ 3,696,931 $ 3,980,816 $ 3,327,234
Jan-2001 $ 3,804,511 $ 4,045,704 $ 3,442,024
Feb-2001 $ 3,810,979 $ 4,080,901 $ 3,449,596
Mar-2001 $ 3,786,970 $ 4,101,306 $ 3,390,263
Apr-2001 $ 3,761,976 $ 4,084,080 $ 3,361,107
May-2001 $ 3,793,952 $ 4,108,585 $ 3,390,685
Jun-2001 $ 3,776,121 $ 4,124,198 $ 3,359,490
Jul-2001 $ 3,796,890 $ 4,216,580 $ 3,392,749
Aug-2001 $ 3,850,426 $ 4,265,070 $ 3,437,873
Sep-2001 $ 3,722,977 $ 4,314,545 $ 3,331,299
Oct-2001 $ 3,804,882 $ 4,404,719 $ 3,412,916
Nov-2001 $ 3,869,565 $ 4,343,934 $ 3,445,680
Dec-2001 $ 3,844,413 $ 4,316,133 $ 3,439,133
Jan-2002 $ 3,867,095 $ 4,351,093 $ 3,457,704
Feb-2002 $ 3,870,962 $ 4,393,299 $ 3,469,806
Mar-2002 $ 3,862,059 $ 4,320,370 $ 3,472,929
Apr-2002 $ 3,899,135 $ 4,404,185 $ 3,527,107
May-2002 $ 3,901,084 $ 4,441,621 $ 3,537,335
Jun-2002 $ 3,839,057 $ 4,480,263 $ 3,469,418
Jul-2002 $ 3,799,899 $ 4,534,474 $ 3,424,663
Aug-2002 $ 3,877,416 $ 4,611,107 $ 3,488,704
Sep-2002 $ 3,878,580 $ 4,685,807 $ 3,494,635
Oct-2002 $ 3,902,627 $ 4,664,252 $ 3,505,818
Nov-2002 $ 3,975,216 $ 4,662,853 $ 3,589,256
Dec-2002 $ 4,030,074 $ 4,759,374 $ 3,662,477
Jan-2003 $ 4,053,448 $ 4,763,657 $ 3,709,723
Feb-2003 $ 4,107,764 $ 4,829,396 $ 3,769,821
Mar-2003 $ 4,141,448 $ 4,825,532 $ 3,808,650
Apr-2003 $ 4,238,772 $ 4,865,584 $ 3,934,716
May-2003 $ 4,294,300 $ 4,956,084 $ 4,023,247
Jun-2003 $ 4,301,600 $ 4,946,172 $ 4,053,421
Jul-2003 $ 4,178,575 $ 4,779,981 $ 3,956,950
Aug-2003 $ 4,220,778 $ 4,811,528 $ 3,989,001
Sep-2003 $ 4,318,700 $ 4,939,034 $ 4,105,081
Oct-2003 $ 4,308,767 $ 4,893,101 $ 4,123,144
Nov-2003 $ 4,332,035 $ 4,904,844 $ 4,165,200
Dec-2003 $ 4,395,282 $ 4,954,874 $ 4,254,335
Jan-2004 $ 4,430,444 $ 4,994,513 $ 4,295,177
Feb-2004 $ 4,453,177 $ 5,048,453 $ 4,306,344
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 Shares prior to 9/10/01 (offering date of the Class A
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 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 February 29, 2004. 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 9/13/1993
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 870
Primary Benchmark MERRILL LYNCH 1-3
YEAR TREASURY
INDEX
Average Credit Quality AA
Duration 1.6 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 1.80% (Institutional
Shares) for the six-month period ending February 29, 2004. This compares to
the 1.75% return of its benchmark index, the Merrill Lynch 1-3 Year Treasury
Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The Fund outperformed its benchmark during the period mainly due to credit
spreads, which narrowed, and its allocation to asset-backed securities (ABS).
It also benefited from its allocation to mortgages, which performed well, and
the additional yield provided from lower quality corporate and emerging
markets credits. The duration positioning slightly detracted from
performance.
Q: HOW WAS THE FUND MANAGED?
A: At the beginning of the reporting period, we maintained a neutral yield curve
stance and a modestly longer duration position in the short end of the curve.
Stronger economic data at year-end led us to implement a shorter duration
position, which was brought back to neutral toward the end of the period as
it became more likely that the Fed would remain on hold until late 2004. We
took advantage of market volatility to tactically trade our duration
position, targeting three-year securities because they offered the most
attractive yields. We reduced our significant allocation to mortgage-backed
securities (MBS) as interest rates declined and spreads tightened. However,
when rates rose, we tactically traded our position. Because they offered
attractive yield, we added high-yield and emerging markets debt.
12
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------
CLASS A SHARES
Without Sales Charge 1.40% 4.27% 4.82% 5.24%
With Sales Charge* (0.10%) 3.74% 4.50% 5.08%
INSTITUTIONAL SHARES 1.75% 4.70% 5.22% 5.55%
SELECT SHARES 1.48% 4.42% 4.91% 5.28%
</Table>
* Sales Charge for Class A Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND MERRILL LYNCH 1-3 YEAR LIPPER SHORT-TERM INVESTMENT GRADE
(INSTITUTIONAL SHARES) TREASURY INDEX DEBT FUNDS INDEX
Feb-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000
Mar-1994 $ 2,981,400 $ 2,985,000 $ 2,977,200
Apr-1994 $ 2,968,282 $ 2,974,553 $ 2,965,589
May-1994 $ 2,970,953 $ 2,978,717 $ 2,968,851
Jun-1994 $ 2,980,757 $ 2,987,653 $ 2,971,226
Jul-1994 $ 3,000,729 $ 3,013,347 $ 2,988,459
Aug-1994 $ 3,012,131 $ 3,023,894 $ 3,004,298
Sep-1994 $ 3,004,902 $ 3,016,939 $ 3,000,092
Oct-1994 $ 3,010,611 $ 3,023,576 $ 3,004,892
Nov-1994 $ 3,000,375 $ 3,009,970 $ 2,999,483
Dec-1994 $ 3,006,376 $ 3,016,893 $ 2,992,285
Jan-1995 $ 3,041,250 $ 3,058,828 $ 3,022,806
Feb-1995 $ 3,082,003 $ 3,100,733 $ 3,058,475
Mar-1995 $ 3,101,419 $ 3,118,098 $ 3,075,297
Apr-1995 $ 3,130,573 $ 3,145,849 $ 3,101,744
May-1995 $ 3,189,115 $ 3,200,901 $ 3,158,506
Jun-1995 $ 3,205,379 $ 3,218,186 $ 3,178,089
Jul-1995 $ 3,211,790 $ 3,231,380 $ 3,188,259
Aug-1995 $ 3,234,272 $ 3,250,769 $ 3,209,620
Sep-1995 $ 3,253,355 $ 3,266,697 $ 3,225,026
Oct-1995 $ 3,275,803 $ 3,294,138 $ 3,255,342
Nov-1995 $ 3,304,957 $ 3,323,126 $ 3,282,686
Dec-1995 $ 3,331,066 $ 3,348,714 $ 3,305,337
Jan-1996 $ 3,359,714 $ 3,377,178 $ 3,335,085
Feb-1996 $ 3,337,204 $ 3,362,994 $ 3,322,745
Mar-1996 $ 3,342,543 $ 3,359,967 $ 3,308,125
Apr-1996 $ 3,344,214 $ 3,362,655 $ 3,310,441
May-1996 $ 3,355,585 $ 3,369,717 $ 3,317,062
Jun-1996 $ 3,378,403 $ 3,393,979 $ 3,340,944
Jul-1996 $ 3,387,524 $ 3,407,215 $ 3,354,642
Aug-1996 $ 3,400,397 $ 3,418,800 $ 3,366,384
Sep-1996 $ 3,431,001 $ 3,449,911 $ 3,398,701
Oct-1996 $ 3,472,516 $ 3,488,895 $ 3,435,067
Nov-1996 $ 3,499,949 $ 3,515,760 $ 3,463,578
Dec-1996 $ 3,500,998 $ 3,515,760 $ 3,464,963
Jan-1997 $ 3,518,854 $ 3,532,284 $ 3,482,635
Feb-1997 $ 3,529,410 $ 3,540,408 $ 3,494,476
Mar-1997 $ 3,529,763 $ 3,538,992 $ 3,490,981
Apr-1997 $ 3,554,824 $ 3,568,011 $ 3,518,909
May-1997 $ 3,580,064 $ 3,592,274 $ 3,542,486
Jun-1997 $ 3,602,260 $ 3,617,061 $ 3,567,283
Jul-1997 $ 3,639,724 $ 3,656,848 $ 3,607,950
Aug-1997 $ 3,643,727 $ 3,660,139 $ 3,610,476
Sep-1997 $ 3,673,970 $ 3,687,957 $ 3,638,638
Oct-1997 $ 3,689,401 $ 3,715,247 $ 3,660,833
Nov-1997 $ 3,697,518 $ 3,724,164 $ 3,669,985
Dec-1997 $ 3,724,140 $ 3,749,488 $ 3,692,005
Jan-1998 $ 3,765,850 $ 3,785,858 $ 3,724,126
Feb-1998 $ 3,769,616 $ 3,789,266 $ 3,729,339
Mar-1998 $ 3,784,694 $ 3,804,802 $ 3,744,630
Apr-1998 $ 3,803,996 $ 3,822,684 $ 3,762,229
May-1998 $ 3,826,440 $ 3,842,944 $ 3,782,546
Jun-1998 $ 3,841,363 $ 3,862,928 $ 3,799,567
Jul-1998 $ 3,864,411 $ 3,881,083 $ 3,816,285
Aug-1998 $ 3,891,462 $ 3,929,985 $ 3,842,236
Sep-1998 $ 3,960,730 $ 3,981,861 $ 3,882,964
Oct-1998 $ 3,962,314 $ 4,001,372 $ 3,877,916
Nov-1998 $ 3,967,465 $ 3,997,771 $ 3,887,998
Dec-1998 $ 3,986,509 $ 4,011,763 $ 3,904,717
Jan-1999 $ 4,008,834 $ 4,026,205 $ 3,924,240
Feb-1999 $ 3,990,794 $ 4,007,685 $ 3,911,290
Mar-1999 $ 4,021,922 $ 4,035,338 $ 3,941,798
Apr-1999 $ 4,036,401 $ 4,048,251 $ 3,955,989
May-1999 $ 4,022,274 $ 4,045,822 $ 3,950,846
Jun-1999 $ 4,015,838 $ 4,058,364 $ 3,958,353
Jul-1999 $ 4,021,862 $ 4,071,351 $ 3,962,707
Aug-1999 $ 4,036,340 $ 4,083,158 $ 3,970,632
Sep-1999 $ 4,067,017 $ 4,109,698 $ 3,996,838
Oct-1999 $ 4,082,065 $ 4,120,794 $ 4,005,631
Nov-1999 $ 4,102,067 $ 4,128,624 $ 4,018,850
Dec-1999 $ 4,114,373 $ 4,134,404 $ 4,027,290
Jan-2000 $ 4,118,076 $ 4,132,750 $ 4,028,900
Feb-2000 $ 4,138,666 $ 4,160,440 $ 4,055,088
Mar-2000 $ 4,149,013 $ 4,186,234 $ 4,076,175
Apr-2000 $ 4,169,343 $ 4,197,119 $ 4,076,990
May-2000 $ 4,187,271 $ 4,214,327 $ 4,091,260
Jun-2000 $ 4,209,464 $ 4,258,156 $ 4,136,672
Jul-2000 $ 4,236,825 $ 4,284,982 $ 4,162,320
Aug-2000 $ 4,255,467 $ 4,316,691 $ 4,192,705
Sep-2000 $ 4,291,213 $ 4,347,771 $ 4,228,343
Oct-2000 $ 4,305,803 $ 4,371,249 $ 4,241,028
Nov-2000 $ 4,360,487 $ 4,412,776 $ 4,279,621
Dec-2000 $ 4,411,505 $ 4,465,288 $ 4,324,985
Jan-2001 $ 4,449,003 $ 4,521,104 $ 4,386,400
Feb-2001 $ 4,484,150 $ 4,550,491 $ 4,417,105
Mar-2001 $ 4,515,987 $ 4,588,260 $ 4,448,908
Apr-2001 $ 4,514,632 $ 4,600,649 $ 4,459,585
May-2001 $ 4,540,817 $ 4,626,412 $ 4,487,235
Jun-2001 $ 4,561,251 $ 4,642,142 $ 4,505,632
Jul-2001 $ 4,618,266 $ 4,694,134 $ 4,561,052
Aug-2001 $ 4,651,518 $ 4,721,360 $ 4,590,698
Sep-2001 $ 4,716,639 $ 4,799,263 $ 4,634,310
Oct-2001 $ 4,766,636 $ 4,844,376 $ 4,669,531
Nov-2001 $ 4,743,279 $ 4,833,718 $ 4,646,650
Dec-2001 $ 4,747,074 $ 4,835,651 $ 4,642,004
Jan-2002 $ 4,767,011 $ 4,845,323 $ 4,655,465
Feb-2002 $ 4,786,556 $ 4,868,580 $ 4,668,966
Mar-2002 $ 4,757,837 $ 4,835,474 $ 4,647,956
Apr-2002 $ 4,819,689 $ 4,889,631 $ 4,685,139
May-2002 $ 4,837,522 $ 4,909,190 $ 4,711,376
Jun-2002 $ 4,865,095 $ 4,950,427 $ 4,716,559
Jul-2002 $ 4,917,639 $ 5,010,822 $ 4,730,708
Aug-2002 $ 4,935,834 $ 5,027,859 $ 4,760,512
Sep-2002 $ 4,978,282 $ 5,069,590 $ 4,791,455
Oct-2002 $ 4,995,208 $ 5,081,250 $ 4,794,330
Nov-2002 $ 4,978,724 $ 5,066,007 $ 4,796,248
Dec-2002 $ 5,011,583 $ 5,113,627 $ 4,844,210
Jan-2003 $ 5,032,632 $ 5,113,116 $ 4,851,961
Feb-2003 $ 5,058,299 $ 5,134,591 $ 4,881,073
Mar-2003 $ 5,066,392 $ 5,143,833 $ 4,888,394
Apr-2003 $ 5,084,124 $ 5,153,606 $ 4,909,415
May-2003 $ 5,107,511 $ 5,173,190 $ 4,937,398
Jun-2003 $ 5,109,043 $ 5,180,950 $ 4,946,285
Jul-2003 $ 5,044,159 $ 5,152,973 $ 4,902,758
Aug-2003 $ 5,056,265 $ 5,156,580 $ 4,907,171
Sep-2003 $ 5,108,344 $ 5,203,505 $ 4,958,205
Oct-2003 $ 5,077,183 $ 5,184,252 $ 4,946,306
Nov-2003 $ 5,076,168 $ 5,181,660 $ 4,947,295
Dec-2003 $ 5,107,132 $ 5,211,713 $ 4,972,031
Jan-2004 $ 5,122,454 $ 5,222,137 $ 4,987,942
Feb-2004 $ 5,148,922 $ 5,247,203 $ 5,010,886
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 February 28, 1994 to February 29, 2004. 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 11/30/1990
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 1,491
Primary Benchmark LEHMAN 1-3 YEAR
U.S. GOV'T
BOND INDEX
Average Credit Quality AA
Duration 1.6 YEARS
</Table>
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Short Term Bond Fund II, which seeks a high level of income
consistent with reasonable risk, returned 1.60% (Select Shares) for the
six-month period ending February 29, 2004. This compares to the 1.94% return
of its benchmark index, the Lehman 1-3 Year U.S. Government Bond Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: The Fund underperformed mainly due to its duration positioning, which was
shorter than the benchmark as rates declined through year-end. Adding to
performance were credit spreads, which narrowed, and the Fund's allocation to
asset-backed securities (ABS). Mortgages also performed well, and the
additional yield provided by lower quality corporate securities was a
positive contributor.
Q: HOW WAS THE FUND MANAGED?
A: Early in the period, we maintained a neutral yield curve stance and a
modestly longer duration position in the short end of the curve. Stronger
economic data at year-end led us to implement a shorter duration position,
which was brought back to neutral as it became more likely that the Fed would
remain on hold until late 2004. We took advantage of market volatility to
tactically trade our duration position, targeting three-year securities
because they offered the most attractive yields. We reduced our significant
allocation to mortgage-backed securities (MBS) as interest rates declined and
spreads tightened. However, when rates rose, we tactically traded our
position. Because they offered attractive yield, we continued to selectively
add ABS and lower-quality investment-grade corporate names.
14
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------------
CLASS A SHARES
Without Sales Charge 1.32% 4.07% 4.78% 5.05%
With Sales Charge* (0.22%) 3.56% 4.47% 4.89%
CLASS M SHARES
Without Sales Charge 0.98% 3.77% 4.52% 4.92%
With Sales Charge** (0.56%) 3.27% 4.21% 4.76%
SELECT SHARES 1.49% 4.33% 5.06% 5.31%
</Table>
* Sales Charge for Class A Shares is 1.50%.
** Sales Charge for Class M Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
<Table>
<Caption>
JPMORGAN SHORT-TERM BOND FUND II LEHMAN 1-3 YEAR U.S. LIPPER SHORT-TERM INVESTMENT GRADE
(SELECT SHARES) GOV'T BOND INDEX DEBT FUNDS INDEX
Feb-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000
Mar-1994 $ 998,700 $ 994,900 $ 992,400
Apr-1994 $ 997,502 $ 991,119 $ 988,530
May-1994 $ 1,000,295 $ 992,408 $ 989,617
Jun-1994 $ 1,004,196 $ 994,889 $ 990,409
Jul-1994 $ 1,009,317 $ 1,003,843 $ 996,153
Aug-1994 $ 1,012,446 $ 1,007,156 $ 1,001,433
Sep-1994 $ 1,013,560 $ 1,004,839 $ 1,000,031
Oct-1994 $ 1,016,702 $ 1,007,150 $ 1,001,631
Nov-1994 $ 1,016,803 $ 1,002,920 $ 999,828
Dec-1994 $ 1,021,379 $ 1,004,826 $ 997,428
Jan-1995 $ 1,029,959 $ 1,018,491 $ 1,007,602
Feb-1995 $ 1,039,537 $ 1,032,343 $ 1,019,492
Mar-1995 $ 1,045,359 $ 1,038,124 $ 1,025,099
Apr-1995 $ 1,051,213 $ 1,047,363 $ 1,033,915
May-1995 $ 1,063,512 $ 1,065,273 $ 1,052,835
Jun-1995 $ 1,069,467 $ 1,071,026 $ 1,059,363
Jul-1995 $ 1,074,494 $ 1,075,310 $ 1,062,753
Aug-1995 $ 1,079,544 $ 1,081,762 $ 1,069,873
Sep-1995 $ 1,084,510 $ 1,087,062 $ 1,075,009
Oct-1995 $ 1,091,776 $ 1,096,085 $ 1,085,114
Nov-1995 $ 1,098,873 $ 1,105,402 $ 1,094,229
Dec-1995 $ 1,105,356 $ 1,113,803 $ 1,101,779
Jan-1996 $ 1,112,983 $ 1,123,270 $ 1,111,695
Feb-1996 $ 1,112,538 $ 1,118,889 $ 1,107,582
Mar-1996 $ 1,115,208 $ 1,117,994 $ 1,102,708
Apr-1996 $ 1,117,996 $ 1,119,112 $ 1,103,480
May-1996 $ 1,121,015 $ 1,121,574 $ 1,105,687
Jun-1996 $ 1,127,853 $ 1,129,762 $ 1,113,648
Jul-1996 $ 1,132,928 $ 1,134,168 $ 1,118,214
Aug-1996 $ 1,136,214 $ 1,138,364 $ 1,122,128
Sep-1996 $ 1,146,212 $ 1,148,723 $ 1,132,900
Oct-1996 $ 1,158,362 $ 1,161,704 $ 1,145,022
Nov-1996 $ 1,167,513 $ 1,170,300 $ 1,154,526
Dec-1996 $ 1,167,513 $ 1,170,534 $ 1,154,988
Jan-1997 $ 1,172,066 $ 1,176,153 $ 1,160,878
Feb-1997 $ 1,175,114 $ 1,178,976 $ 1,164,825
Mar-1997 $ 1,174,409 $ 1,178,033 $ 1,163,660
Apr-1997 $ 1,185,213 $ 1,187,692 $ 1,172,970
May-1997 $ 1,191,851 $ 1,196,006 $ 1,180,829
Jun-1997 $ 1,200,789 $ 1,204,259 $ 1,189,094
Jul-1997 $ 1,214,358 $ 1,217,385 $ 1,202,650
Aug-1997 $ 1,213,387 $ 1,218,603 $ 1,203,492
Sep-1997 $ 1,223,215 $ 1,227,864 $ 1,212,879
Oct-1997 $ 1,230,432 $ 1,236,950 $ 1,220,278
Nov-1997 $ 1,231,786 $ 1,240,043 $ 1,223,328
Dec-1997 $ 1,239,053 $ 1,248,351 $ 1,230,668
Jan-1998 $ 1,251,196 $ 1,260,210 $ 1,241,375
Feb-1998 $ 1,251,446 $ 1,261,344 $ 1,243,113
Mar-1998 $ 1,255,075 $ 1,266,137 $ 1,248,210
Apr-1998 $ 1,260,974 $ 1,272,215 $ 1,254,076
May-1998 $ 1,268,036 $ 1,278,958 $ 1,260,849
Jun-1998 $ 1,274,883 $ 1,285,480 $ 1,266,522
Jul-1998 $ 1,280,748 $ 1,291,522 $ 1,272,095
Aug-1998 $ 1,289,072 $ 1,307,279 $ 1,280,745
Sep-1998 $ 1,307,248 $ 1,324,927 $ 1,294,321
Oct-1998 $ 1,304,765 $ 1,331,419 $ 1,292,639
Nov-1998 $ 1,304,373 $ 1,330,088 $ 1,295,999
Dec-1998 $ 1,308,417 $ 1,335,142 $ 1,301,572
Jan-1999 $ 1,314,828 $ 1,340,216 $ 1,308,080
Feb-1999 $ 1,310,358 $ 1,334,185 $ 1,303,763
Mar-1999 $ 1,319,661 $ 1,343,257 $ 1,313,933
Apr-1999 $ 1,323,620 $ 1,347,421 $ 1,318,663
May-1999 $ 1,322,694 $ 1,346,478 $ 1,316,949
Jun-1999 $ 1,324,149 $ 1,350,383 $ 1,319,451
Jul-1999 $ 1,327,194 $ 1,354,569 $ 1,320,902
Aug-1999 $ 1,329,052 $ 1,358,362 $ 1,323,544
Sep-1999 $ 1,338,887 $ 1,367,191 $ 1,332,279
Oct-1999 $ 1,343,573 $ 1,370,882 $ 1,335,210
Nov-1999 $ 1,345,589 $ 1,373,487 $ 1,339,617
Dec-1999 $ 1,349,087 $ 1,374,723 $ 1,342,430
Jan-2000 $ 1,349,627 $ 1,374,448 $ 1,342,967
Feb-2000 $ 1,357,320 $ 1,383,795 $ 1,351,696
Mar-2000 $ 1,364,242 $ 1,392,097 $ 1,358,725
Apr-2000 $ 1,359,876 $ 1,395,578 $ 1,358,997
May-2000 $ 1,364,228 $ 1,400,741 $ 1,363,753
Jun-2000 $ 1,379,644 $ 1,416,009 $ 1,378,891
Jul-2000 $ 1,389,577 $ 1,425,072 $ 1,387,440
Aug-2000 $ 1,399,721 $ 1,435,902 $ 1,397,568
Sep-2000 $ 1,413,858 $ 1,447,102 $ 1,409,448
Oct-2000 $ 1,418,383 $ 1,454,917 $ 1,413,676
Nov-2000 $ 1,434,127 $ 1,469,029 $ 1,426,540
Dec-2000 $ 1,450,619 $ 1,487,098 $ 1,441,662
Jan-2001 $ 1,466,286 $ 1,506,728 $ 1,462,133
Feb-2001 $ 1,476,843 $ 1,516,522 $ 1,472,368
Mar-2001 $ 1,488,658 $ 1,528,806 $ 1,482,969
Apr-2001 $ 1,490,146 $ 1,533,239 $ 1,486,528
May-2001 $ 1,496,554 $ 1,541,672 $ 1,495,745
Jun-2001 $ 1,501,792 $ 1,547,222 $ 1,501,877
Jul-2001 $ 1,518,162 $ 1,565,325 $ 1,520,351
Aug-2001 $ 1,528,181 $ 1,575,186 $ 1,530,233
Sep-2001 $ 1,548,048 $ 1,601,492 $ 1,544,770
Oct-2001 $ 1,564,457 $ 1,617,507 $ 1,556,510
Nov-2001 $ 1,557,886 $ 1,612,978 $ 1,548,883
Dec-2001 $ 1,555,861 $ 1,613,945 $ 1,547,335
Jan-2002 $ 1,561,151 $ 1,617,819 $ 1,551,822
Feb-2002 $ 1,569,425 $ 1,625,908 $ 1,556,322
Mar-2002 $ 1,560,322 $ 1,614,201 $ 1,549,319
Apr-2002 $ 1,579,514 $ 1,633,733 $ 1,561,713
May-2002 $ 1,585,359 $ 1,640,105 $ 1,570,459
Jun-2002 $ 1,593,603 $ 1,654,702 $ 1,572,186
Jul-2002 $ 1,609,698 $ 1,674,724 $ 1,576,903
Aug-2002 $ 1,616,137 $ 1,681,590 $ 1,586,837
Sep-2002 $ 1,627,935 $ 1,695,211 $ 1,597,152
Oct-2002 $ 1,633,469 $ 1,699,449 $ 1,598,110
Nov-2002 $ 1,629,059 $ 1,694,690 $ 1,598,749
Dec-2002 $ 1,640,137 $ 1,710,959 $ 1,614,737
Jan-2003 $ 1,646,533 $ 1,711,302 $ 1,617,320
Feb-2003 $ 1,652,625 $ 1,719,174 $ 1,627,024
Mar-2003 $ 1,654,939 $ 1,722,612 $ 1,629,465
Apr-2003 $ 1,660,400 $ 1,726,057 $ 1,636,472
May-2003 $ 1,667,374 $ 1,733,134 $ 1,645,799
Jun-2003 $ 1,669,542 $ 1,735,907 $ 1,648,762
Jul-2003 $ 1,647,337 $ 1,724,624 $ 1,634,253
Aug-2003 $ 1,650,796 $ 1,725,314 $ 1,635,724
Sep-2003 $ 1,668,955 $ 1,742,739 $ 1,652,735
Oct-2003 $ 1,657,606 $ 1,735,594 $ 1,648,769
Nov-2003 $ 1,656,943 $ 1,735,247 $ 1,649,098
Dec-2003 $ 1,665,062 $ 1,745,485 $ 1,657,344
Jan-2004 $ 1,669,558 $ 1,749,674 $ 1,662,647
Feb-2004 $ 1,676,987 $ 1,758,772 $ 1,670,295
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 February 28,
1994 to February 29, 2004. 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 11/30/1998
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 23
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality BBB
Duration 4.6 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 6.13% (Class A Shares, without sales charges)
for the six-month period ended February 29, 2004. This compares to the 4.93%
return of the Lehman Aggregate Bond Index, the Fund's benchmark.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our overweight to high-yield securities added to performance at a time when
investors sought higher yielding securities. Another successful strategy was
our overweight to emerging markets debt. The Fund benefited from successful
security selection and our underweight in the residential mortgage sector.
Our underweight to Treasury and agency debt enhanced returns. Our non-dollar
international position detracted.
Q: HOW WAS THE FUND MANAGED?
A: As fundamental credit quality continued to improve, we increased our
allocation to high yield and emerging markets debt, choosing our individual
holdings by taking a bottom-up view of company and country fundamentals. We
underweighted investment-grade corporate bonds and residential mortgages.
Within our mortgage holdings, we actively managed coupon selection,
particularly 30-year current coupons (i.e., Fannie Mae 5.5% and 6%). Our
allocation to Treasuries and agencies was underweight the benchmark index,
which is consistent with our strategy.
16
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (11/30/98)
---------------------------------------------
CLASS A SHARES
Without Sales Charge 9.67% 5.81% 5.76% 5.23%
With Sales Charge* 4.69% 4.21% 4.78% 4.31%
CLASS B SHARES
Without CDSC 9.24% 5.30% 5.33% 4.80%
With CDSC** 4.24% 4.39% 5.02% 4.66%
CLASS C SHARES
Without CDSC 9.13% 5.31% 5.33% 4.80%
With CDSC*** 8.13% 5.31% 5.33% 4.80%
CLASS M SHARES
Without Sales Charge 9.46% 5.63% 5.54% 5.00%
With Sales Charge**** 6.21% 4.58% 4.90% 4.39%
</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
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 2/29/04)
<Table>
<Caption>
JPMORGAN STRATEGIC INCOME LIPPER MULTI-SECTOR
FUND (CLASS A SHARES) LEHMAN AGGREGATE BOND INDEX INCOME FUNDS INDEX
Nov-1998 $ 9,550 $ 10,000 $ 10,000
Dec-1998 $ 9,471 $ 10,030 $ 9,977
Jan-1999 $ 9,445 $ 10,101 $ 10,030
Feb-1999 $ 9,430 $ 9,924 $ 9,895
Mar-1999 $ 9,594 $ 9,979 $ 10,019
Apr-1999 $ 9,776 $ 10,011 $ 10,196
May-1999 $ 9,621 $ 9,923 $ 9,982
Jun-1999 $ 9,701 $ 9,891 $ 9,971
Jul-1999 $ 9,716 $ 9,850 $ 9,949
Aug-1999 $ 9,719 $ 9,845 $ 9,877
Sep-1999 $ 9,792 $ 9,959 $ 9,918
Oct-1999 $ 9,858 $ 9,996 $ 9,931
Nov-1999 $ 9,937 $ 9,995 $ 9,997
Dec-1999 $ 10,075 $ 9,947 $ 10,083
Jan-2000 $ 10,027 $ 9,914 $ 9,988
Feb-2000 $ 10,190 $ 10,034 $ 10,120
Mar-2000 $ 10,155 $ 10,166 $ 10,117
Apr-2000 $ 10,075 $ 10,137 $ 9,974
May-2000 $ 9,959 $ 10,132 $ 9,849
Jun-2000 $ 10,147 $ 10,342 $ 10,101
Jul-2000 $ 10,198 $ 10,437 $ 10,133
Aug-2000 $ 10,277 $ 10,588 $ 10,216
Sep-2000 $ 10,274 $ 10,655 $ 10,125
Oct-2000 $ 10,111 $ 10,725 $ 9,913
Nov-2000 $ 9,981 $ 10,901 $ 9,796
Dec-2000 $ 10,214 $ 11,104 $ 10,045
Jan-2001 $ 10,507 $ 11,285 $ 10,392
Feb-2001 $ 10,531 $ 11,383 $ 10,415
Mar-2001 $ 10,465 $ 11,440 $ 10,236
Apr-2001 $ 10,319 $ 11,392 $ 10,148
May-2001 $ 10,451 $ 11,460 $ 10,237
Jun-2001 $ 10,432 $ 11,504 $ 10,143
Jul-2001 $ 10,512 $ 11,761 $ 10,243
Aug-2001 $ 10,642 $ 11,896 $ 10,379
Sep-2001 $ 10,355 $ 12,034 $ 10,058
Oct-2001 $ 10,589 $ 12,286 $ 10,304
Nov-2001 $ 10,686 $ 12,116 $ 10,403
Dec-2001 $ 10,630 $ 12,039 $ 10,383
Jan-2002 $ 10,680 $ 12,136 $ 10,439
Feb-2002 $ 10,720 $ 12,254 $ 10,476
Mar-2002 $ 10,698 $ 12,051 $ 10,485
Apr-2002 $ 10,815 $ 12,284 $ 10,649
May-2002 $ 10,816 $ 12,389 $ 10,680
Jun-2002 $ 10,594 $ 12,497 $ 10,475
Jul-2002 $ 10,479 $ 12,648 $ 10,339
Aug-2002 $ 10,706 $ 12,862 $ 10,533
Sep-2002 $ 10,702 $ 13,070 $ 10,551
Oct-2002 $ 10,754 $ 13,010 $ 10,584
Nov-2002 $ 11,008 $ 13,006 $ 10,836
Dec-2002 $ 11,153 $ 13,275 $ 11,057
Jan-2003 $ 11,234 $ 13,287 $ 11,200
Feb-2003 $ 11,373 $ 13,471 $ 11,382
Mar-2003 $ 11,439 $ 13,460 $ 11,499
Apr-2003 $ 11,736 $ 13,571 $ 11,879
May-2003 $ 11,876 $ 13,824 $ 12,147
Jun-2003 $ 11,941 $ 13,796 $ 12,238
Jul-2003 $ 11,611 $ 13,333 $ 11,947
Aug-2003 $ 11,751 $ 13,421 $ 12,043
Sep-2003 $ 12,043 $ 13,776 $ 12,394
Oct-2003 $ 12,068 $ 13,648 $ 12,448
Nov-2003 $ 12,126 $ 13,681 $ 12,575
Dec-2003 $ 12,314 $ 13,821 $ 12,844
Jan-2004 $ 12,402 $ 13,931 $ 12,968
Feb-2004 $ 12,476 $ 14,082 $ 13,001
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 February 29,
2004. 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 FEBRUARY 29, 2004 (Unaudited)
<Table>
FUND FACTS
Fund Inception 9/8/1987
Fiscal Year End AUGUST 31
Net Assets as of 2/29/2004
(In Millions) $ 158
Primary Benchmark LEHMAN U.S. GOV'T
BOND INDEX
Average Credit Quality GOVERNMENT
Duration 5.2 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 4.66% (Class A Shares, without sales charges) for the six-month
period ending February 29, 2004. This compares to the 4.56% return of its
benchmark index, the Lehman U.S. Gov't Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our Treasury overweight was a positive as falling interest rates benefited
that sector. Our position in Government National Mortgage Association (GNMA)
mortgage-backed securities was a relative detractor as other sectors in the
index (Treasury and agency debt) outperformed. Within our GNMA holdings, the
Portfolio benefited from our security selection, which focused on 5.5% and
6.0% coupons.
Q: HOW WAS THE FUND MANAGED?
A: In general, we maintained a slightly long duration position to benefit from
the accommodative Fed policy. Because of their attractive yields, we
overweighted mortgages issued by GNMA. We actively managed coupon selection,
focusing on 30-year current coupon mortgages (i.e., 5.5% and 6%). Ahead of
expected strong supply, we realized profits, paring back our GNMA position in
January and exiting the position completely in February. Consistent with the
Fund's strategy, we did not hold Agency debentures (debt of Freddie Mac or
Fannie Mae) throughout the period. Even though they are included in the
index, we do not hold them because they are not "full faith and credit"
obligations of the U.S. government.
18
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
--------------------------------------------
CLASS A SHARES
Without Sales Charge 2.33% 6.22% 6.47% 6.10%
With Sales Charge* (2.27%) 4.60% 5.50% 5.61%
CLASS B SHARES
Without CDSC 1.59% 5.35% 5.53% 5.41%
With CDSC** (3.36%) 4.44% 5.21% 5.41%
SELECT SHARES 2.70% 6.46% 6.63% 6.18%
</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 (2/28/94 TO 2/29/04)
<Table>
<Caption>
JPMORGAN U.S. TREASURY INCOME FUND LIPPER GENERAL U.S. TREASURY
(CLASS A SHARES) LEHMAN U.S. GOV'T BOND INDEX FUNDS AVERAGE
Feb-1994 $ 9,550 $ 10,000 $ 10,000
Mar-1994 $ 9,349 $ 9,775 $ 9,764
Apr-1994 $ 9,259 $ 9,698 $ 9,674
May-1994 $ 9,237 $ 9,685 $ 9,658
Jun-1994 $ 9,205 $ 9,663 $ 9,612
Jul-1994 $ 9,377 $ 9,841 $ 9,794
Aug-1994 $ 9,374 $ 9,843 $ 9,778
Sep-1994 $ 9,202 $ 9,704 $ 9,584
Oct-1994 $ 9,177 $ 9,697 $ 9,559
Nov-1994 $ 9,151 $ 9,680 $ 9,556
Dec-1994 $ 9,206 $ 9,739 $ 9,643
Jan-1995 $ 9,383 $ 9,920 $ 9,829
Feb-1995 $ 9,583 $ 10,133 $ 10,050
Mar-1995 $ 9,637 $ 10,197 $ 10,104
Apr-1995 $ 9,750 $ 10,331 $ 10,237
May-1995 $ 10,125 $ 10,747 $ 10,747
Jun-1995 $ 10,202 $ 10,830 $ 10,836
Jul-1995 $ 10,163 $ 10,790 $ 10,753
Aug-1995 $ 10,268 $ 10,916 $ 10,898
Sep-1995 $ 10,363 $ 11,021 $ 11,022
Oct-1995 $ 10,515 $ 11,188 $ 11,220
Nov-1995 $ 10,666 $ 11,363 $ 11,408
Dec-1995 $ 10,819 $ 11,524 $ 11,601
Jan-1996 $ 10,881 $ 11,594 $ 11,640
Feb-1996 $ 10,630 $ 11,358 $ 11,315
Mar-1996 $ 10,522 $ 11,263 $ 11,188
Apr-1996 $ 10,433 $ 11,191 $ 11,075
May-1996 $ 10,392 $ 11,172 $ 11,042
Jun-1996 $ 10,511 $ 11,316 $ 11,204
Jul-1996 $ 10,545 $ 11,345 $ 11,219
Aug-1996 $ 10,493 $ 11,320 $ 11,136
Sep-1996 $ 10,661 $ 11,508 $ 11,361
Oct-1996 $ 10,890 $ 11,761 $ 11,680
Nov-1996 $ 11,078 $ 11,966 $ 11,963
Dec-1996 $ 10,955 $ 11,843 $ 11,764
Jan-1997 $ 10,950 $ 11,856 $ 11,724
Feb-1997 $ 10,949 $ 11,873 $ 11,717
Mar-1997 $ 10,835 $ 11,747 $ 11,527
Apr-1997 $ 10,979 $ 11,916 $ 11,719
May-1997 $ 11,066 $ 12,019 $ 11,822
Jun-1997 $ 11,183 $ 12,153 $ 11,983
Jul-1997 $ 11,505 $ 12,499 $ 12,483
Aug-1997 $ 11,359 $ 12,375 $ 12,236
Sep-1997 $ 11,519 $ 12,561 $ 12,479
Oct-1997 $ 11,689 $ 12,778 $ 12,772
Nov-1997 $ 11,754 $ 12,843 $ 12,875
Dec-1997 $ 11,870 $ 12,978 $ 13,053
Jan-1998 $ 12,020 $ 13,173 $ 13,277
Feb-1998 $ 11,967 $ 13,137 $ 13,195
Mar-1998 $ 12,001 $ 13,174 $ 13,224
Apr-1998 $ 12,024 $ 13,233 $ 13,259
May-1998 $ 12,155 $ 13,369 $ 13,457
Jun-1998 $ 12,296 $ 13,522 $ 13,666
Jul-1998 $ 12,293 $ 13,542 $ 13,644
Aug-1998 $ 12,626 $ 13,894 $ 14,138
Sep-1998 $ 12,979 $ 14,269 $ 14,578
Oct-1998 $ 12,927 $ 14,221 $ 14,447
Nov-1998 $ 12,896 $ 14,225 $ 14,473
Dec-1998 $ 12,912 $ 14,256 $ 14,483
Jan-1999 $ 12,993 $ 14,339 $ 14,575
Feb-1999 $ 12,618 $ 13,998 $ 14,059
Mar-1999 $ 12,664 $ 14,052 $ 14,081
Apr-1999 $ 12,699 $ 14,085 $ 14,116
May-1999 $ 12,572 $ 13,961 $ 13,925
Jun-1999 $ 12,544 $ 13,933 $ 13,835
Jul-1999 $ 12,519 $ 13,912 $ 13,785
Aug-1999 $ 12,516 $ 13,912 $ 13,750
Sep-1999 $ 12,606 $ 14,025 $ 13,862
Oct-1999 $ 12,618 $ 14,047 $ 13,845
Nov-1999 $ 12,604 $ 14,027 $ 13,798
Dec-1999 $ 12,532 $ 13,936 $ 13,646
Jan-2000 $ 12,543 $ 13,956 $ 13,721
Feb-2000 $ 12,742 $ 14,154 $ 13,988
Mar-2000 $ 12,961 $ 14,403 $ 14,341
Apr-2000 $ 12,915 $ 14,363 $ 14,268
May-2000 $ 12,924 $ 14,371 $ 14,240
Jun-2000 $ 13,140 $ 14,627 $ 14,522
Jul-2000 $ 13,260 $ 14,769 $ 14,689
Aug-2000 $ 13,441 $ 14,987 $ 14,947
Sep-2000 $ 13,474 $ 15,029 $ 14,898
Oct-2000 $ 13,583 $ 15,174 $ 15,074
Nov-2000 $ 13,853 $ 15,473 $ 15,447
Dec-2000 $ 14,114 $ 15,781 $ 15,780
Jan-2001 $ 14,270 $ 15,940 $ 15,863
Feb-2001 $ 14,406 $ 16,122 $ 16,074
Mar-2001 $ 14,466 $ 16,178 $ 16,057
Apr-2001 $ 14,254 $ 16,013 $ 15,732
May-2001 $ 14,325 $ 16,066 $ 15,776
Jun-2001 $ 14,365 $ 16,140 $ 15,866
Jul-2001 $ 14,717 $ 16,527 $ 16,344
Aug-2001 $ 14,873 $ 16,732 $ 16,579
Sep-2001 $ 15,172 $ 17,023 $ 16,745
Oct-2001 $ 15,579 $ 17,462 $ 17,373
Nov-2001 $ 15,149 $ 17,071 $ 16,756
Dec-2001 $ 14,955 $ 16,923 $ 16,523
Jan-2002 $ 15,085 $ 17,033 $ 16,680
Feb-2002 $ 15,228 $ 17,189 $ 16,834
Mar-2002 $ 14,905 $ 16,816 $ 16,364
Apr-2002 $ 15,238 $ 17,217 $ 16,822
May-2002 $ 15,329 $ 17,320 $ 16,891
Jun-2002 $ 15,501 $ 17,562 $ 17,123
Jul-2002 $ 15,862 $ 17,949 $ 17,540
Aug-2002 $ 16,170 $ 18,304 $ 18,045
Sep-2002 $ 16,584 $ 18,733 $ 18,598
Oct-2002 $ 16,429 $ 18,583 $ 18,252
Nov-2002 $ 16,290 $ 18,423 $ 18,082
Dec-2002 $ 16,650 $ 18,869 $ 18,597
Jan-2003 $ 16,610 $ 18,822 $ 18,530
Feb-2003 $ 16,870 $ 19,125 $ 18,914
Mar-2003 $ 16,803 $ 19,069 $ 18,782
Apr-2003 $ 16,874 $ 19,157 $ 18,883
May-2003 $ 17,280 $ 19,655 $ 19,561
Jun-2003 $ 17,190 $ 19,553 $ 19,379
Jul-2003 $ 16,396 $ 18,745 $ 18,284
Aug-2003 $ 16,491 $ 18,850 $ 18,447
Sep-2003 $ 16,993 $ 19,399 $ 19,107
Oct-2003 $ 16,768 $ 19,123 $ 18,765
Nov-2003 $ 16,770 $ 19,146 $ 18,780
Dec-2003 $ 16,931 $ 19,317 $ 18,947
Jan-2004 $ 17,060 $ 19,477 $ 19,118
Feb-2004 $ 17,265 $ 19,711 $ 19,374
</Table>
Source: Lipper Analytical Services, Inc. Past performance is not indicative of
future returns. Investment returns will fluctuate so that an investor's shares
when redeemed may be worth more or less than original cost. Please note, current
performance may be higher or lower than the performance data shown. Investors
should carefully read the fund prospectus which includes information on the
fund's investment objectives, risk, as well as charges and expenses along with
other information. Investors should review the information in the prospectus
carefully before investing. For up to date month-end performance information, or
to receive a fund prospectus please call 800 348-4782. Please read carefully
before investing or sending money.
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 February 28, 1994 to
February 29, 2004. 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>
JPMORGAN BOND FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 89.3%
U.S. TREASURY SECURITIES -- 7.4%
U.S. Treasury Notes & Bonds,
$ 11,060 1.50%, 07/31/05 + $ 11,088
1,420 1.88%, 01/31/06 + 1,427
1,720 3.50%, 11/15/06 + 1,788
3,415 2.25%, 02/15/07 + 3,428
3,385 3.38%, 11/15/08 + 3,460
11,000 5.75%, 08/15/10 + 12,530
11,500 7.25%, 05/15/16 @ + 14,682
17,800 8.13%, 08/15/19 + 24,717
12,580 5.38%, 02/15/31 + 13,556
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 86,676
(Cost $84,730)
--------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 1.2%
8,090 Federal Home Loan Mortgage Corp.,
6.25%, 07/15/32 + 9,095
Federal National Mortgage Association,
2 7.00%, 07/15/05 + 2
3,370 6.40%, 05/14/09 + 3,403
985 4.38%, 09/15/12 + 996
570 7.25%, 05/15/30 + 718
--------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 14,214
(Cost $13,731)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 1.8%
Federal Republic of Brazil (Brazil),
190 9.25%, 10/22/10 193
1,015 10.00%, 08/07/11 + 1,045
1,484 8.00%, 04/15/14 1,420
490 12.75%, 01/15/20 583
1,974 11.00%, 08/17/40 2,069
1,513 Republic of Colombia (Colombia),
9.75%, 04/09/11 1,732
Russian Federation (Russia),
2,720 8.75%, 07/24/05, Regulation S 2,931
5,150 5.00%, 03/31/30, Regulation S, SUB 5,066
990 Ukraine Government (Ukraine),
6.88%, 03/04/11, # 991
United Mexican States (Mexico),
$ 850 7.50%, 01/14/12 $ 975
1,730 5.88%, 01/15/14 1,765
480 11.38%, 09/15/16 712
1,545 8.30%, 08/15/31, MTN 1,796
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 21,278
(Cost $20,263)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 33.0%
AEROSPACE -- 0.2%
2,735 General Dynamics Corp., 2.13%,
05/15/06 + 2,737
AUTOMOTIVE -- 3.5%
DaimlerChrysler N.A. Holding Corp.,
2,155 4.05%, 06/04/08 + 2,166
2,720 6.50%, 11/15/13 + 2,907
Ford Motor Credit Co.,
850 6.50%, 01/25/07 + 909
8,370 7.88%, 06/15/10 + 9,363
3,855 7.00%, 10/01/13 + 4,063
General Motors Acceptance Corp.,
1,550 2.00%, 05/18/06, MTN, FRN + 1,548
4,790 2.02%, 01/16/07, MTN, FRN + 4,773
4,870 5.85%, 01/14/09 + 5,139
1,300 6.88%, 09/15/11 + 1,402
General Motors Corp.,
1,410 8.25%, 07/15/23 + 1,577
2,785 8.38%, 07/15/33 + 3,156
3,120 Hyundai Motor Manufacturing
Alabama LLC, 5.30%, 12/19/08, # 3,211
615 TRW Automotive, Inc., 9.38%, 02/15/13 701
--------------------------------------------------------------------------------------------------
40,915
--------------------------------------------------------------------------------------------------
BANKING -- 6.1%
365 Abbey National Capital Trust I, 8.96%,
to 6/30; thereafter FRN, 12/31/49 + 495
2,760 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, to 11/12; thereafter
FRN, 12/29/49, # + 3,073
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
20
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 4,405 ANZ Capital Trust I,
5.36%, 12/15/53, # + $ 4,497
250 Bank of America Corp., 4.88%,
09/15/12 + 256
2,000 BBVA Bancomer Capital Trust I
(Mexico), 10.50%, 02/16/11, # 2,273
1,290 BNP Paribas Capital Trust,
9.00%, to 10/10; thereafter
FRN, 12/31/49, # + 1,658
1,750 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # + 1,707
6,880 HBOS PLC (United Kingdom), 5.38%,
to 11/13; thereafter FRN, 12/31/49, # + 7,079
3,955 KBC Bank Fund Trust III, 9.86%,
to 11/9; thereafter FRN, 11/29/49, # 5,096
1,590 Korea First Bank (South Korea), 7.27%,
to 3/14; thereafter FRN, 03/02/34, # 1,607
1,995 Mizuho Finance Group LTD
(Cayman Islands), 5.79%, to 10/15;
thereafter FRN, 04/15/14, # 1,994
1,500 Nordea Bank AB (Sweden), 8.95%,
to 11/12; thereafter FRN, 12/31/49, # 1,870
1,935 Popular North America, Inc., 4.25%,
04/01/08 1,985
4,905 Rabobank Capital Funding II, 5.26%,
12/31/49, # 5,036
RBS Capital Trust I,
180 6.43%, to 01/34; thereafter
FRN, 12/29/49 189
4,265 4.71%, to 07/13; thereafter
FRN, 12/29/49 4,172
1,415 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65%, to 09/31;
thereafter FRN, 12/31/49 1,709
1,940 Sovereign Bank, 4.38%, to 08/08;
thereafter FRN, 08/01/13 1,984
1,630 Standard Chartered Bank
(United Kingdom), 8.00%, 05/30/31, # 2,044
3,665 SunTrust Bank, 2.50%, 11/01/06 3,704
1,870 Swedbank (Sweden), 9.00%, to 03/17;
thereafter FRN, 12/29/49, # 2,348
4,885 U.S. Bank N.A., 2.85%, 11/15/06 4,957
2,735 Washington Mutual, Inc., 4.00%,
01/15/09 2,776
3,930 Westpac Capital Trust III, 5.82%,
to 09/30; thereafter FRN, 12/31/49, # 4,166
$ 3,160 Woori Bank (South Korea), 5.75%,
to 03/09; thereafter FRN, 03/13/14, # $ 3,235
1,755 Zions Bancorp, 6.00%, 09/15/15 1,894
--------------------------------------------------------------------------------------------------
71,804
--------------------------------------------------------------------------------------------------
BROADCASTING/CABLE -- 0.1%
680 British Sky Broadcasting PLC
(United Kingdom) (Yankee),
8.20%, 07/15/09 + 817
490 Mediacom LLC/Mediacom Capital Corp.,
9.50%, 01/15/13 497
--------------------------------------------------------------------------------------------------
1,314
--------------------------------------------------------------------------------------------------
CHEMICALS -- 0.6%
490 Huntsman International LLC, 9.88%,
03/01/09 539
2,355 ICI Wilmington, Inc., 5.63%, 12/01/13 2,436
810 Lyondell Chemical Co., 10.88%,
05/01/09 812
2,300 Nova Chemicals LTD (Canada), 6.50%,
01/15/12, # 2,372
775 PolyOne Corp., 10.63%, 05/15/10 798
430 The Dow Chemical Co., 7.38%, 11/01/29 + 500
--------------------------------------------------------------------------------------------------
7,457
--------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.1%
595 Unisys Corp., 6.88%, 03/15/10 644
COMPUTERS/COMPUTER HARDWARE -- 0.1%
765 Electronic Data Systems Corp., 6.00%,
08/01/13, Ser. B + 738
CONSTRUCTION -- 0.4%
D.R. Horton, Inc.,
510 9.75%, 09/15/10 + 616
150 8.50%, 04/15/12 + 171
2,540 KB Home, 5.75%, 02/01/14, # 2,450
170 Pulte Homes, Inc., 6.38%, 05/15/33 168
745 Standard-Pacific Corp., 6.88%, 05/15/11 777
--------------------------------------------------------------------------------------------------
4,182
--------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.1%
1,280 Altria Group, Inc., 7.00%, 11/04/13 + 1,404
CONSUMER SERVICES-- 0.0% ^
490 Iron Mountain, Inc., 6.63%, 01/01/16 475
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
DIVERSIFIED -- 0.5%
$ 2,455 General Electric Capital Corp., 6.75%,
03/15/32, Ser. A, MTN + $ 2,814
Hutchison Whampoa International LTD
(Hong Kong),
2,320 6.25%, 01/24/14, # 2,386
830 7.45%, 11/24/33, # 872
--------------------------------------------------------------------------------------------------
6,072
--------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.3%
Allied Waste North America, Inc.,
275 10.00%, 08/01/09, Ser. B + 295
3,205 6.13%, 02/15/14, # + 3,101
--------------------------------------------------------------------------------------------------
3,396
--------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 9.5%
American General Finance Corp.,
4,195 3.00%, 11/15/06, Ser. H, MTN + 4,236
1,065 4.50%, 11/15/07, Ser. H, MTN + 1,117
600 Arch Western Finance LLC, 6.75%,
07/01/13, # + 633
4,790 The Bear Stearns Co., Inc., 1.28%,
01/16/07, Ser. B, MTN, FRN + 4,787
2,155 Capital One Bank, 4.88%, 05/15/08 + 2,260
CIT Group, Inc.,
2,500 1.39%, 02/14/05, MTN, FRN + 2,505
5,000 1.39%, 06/19/06, MTN, FRN + 5,007
810 4.75%, 12/15/10, MTN + 833
2,900 Citigroup, Inc., 1.30%, 03/20/06, FRN + 2,906
3,100 Countrywide Home Loans, Inc., 1.27%,
02/17/06, Ser. L, MTN, FRN + 3,098
5,095 Credit Suisse First Boston USA, Inc.,
5.13%, 01/15/14 + 5,187
Goldman Sachs Group, Inc.,
1,750 1.32%, 02/21/06, Ser. B, MTN, FRN + 1,753
1,820 6.60%, 01/15/12 + 2,066
1,020 4.75%, 07/15/13 + 1,011
2,220 6.35%, 02/15/34 + 2,255
1,475 Household Finance Corp., 1.28%,
02/09/07, MTN, FRN 1,477
HSBC Capital Funding LP (Channel Islands),
4,650 4.61%, to 06/13; thereafter FRN,
12/31/49, # + 4,479
$ 2,665 9.55%, to 06/10; thereafter FRN,
12/31/49, # + $ 3,446
1,865 ING Capital Funding Trust III, 8.44%,
to 12/10; thereafter FRN, 12/31/49 2,307
2,770 Mantis Reef LTD (Australia), 4.69%,
11/14/08, # 2,816
Merrill Lynch & Co., Inc.,
1,750 1.57%, 06/13/05, Ser. B, MTN, FRN 1,756
1,660 4.13%, 01/15/09, Ser. C, MTN 1,702
1,900 1.38%, 02/06/09, Ser. C, MTN, FRN 1,897
2,185 Mizuho Preferred Capital Co., LLC,
8.79%, to 06/30; thereafter
FRN, 12/31/49, # 2,393
Morgan Stanley,
4,810 1.28%, 01/12/07, FRN 4,813
1,260 3.63%, 04/01/08 1,279
5,510 3.88%, 01/15/09 5,585
2,595 Pricoa Global Funding I, 3.90%,
12/15/08, # 2,636
4,000 SLM Corp., 5.63%, 04/10/07,
Ser. A, MTN 4,352
15,990 Special Purpose Accounts
Receivable Cooperative Corp. Trust,
1.44%, 05/23/05, Ser. 2003-6, FRN, # 15,989
10,416 Targeted Return Index (TRAINS),
8.67%, to 08/06; thereafter FRN,
08/15/08, Ser. 2003-1, # 11,509
1,820 UFJ Finance AEC (Aruba), 6.75%,
07/15/13 1,958
--------------------------------------------------------------------------------------------------
110,048
--------------------------------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS-- 0.0% ^
525 Ingles Markets, Inc., 8.88%, 12/01/11 545
HEALTH CARE/HEALTH CARE SERVICES -- 0.4%
615 Fresenius Medical Care Capital Trust II,
7.88%, 02/01/08 + 667
3,205 HCA, Inc., 5.25%, 11/06/08 + 3,321
2,000 Mariner Health Group, Inc., 9.50%,
04/01/06, Ser. B (d) (f) * 0^^
245 Medex, Inc., 8.88%, 05/15/13, # 265
820 Tenet Healthcare Corp., 5.00%, 07/01/07 761
--------------------------------------------------------------------------------------------------
5,014
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
INSURANCE -- 1.3%
Assurant, Inc.,
$ 1,665 5.63%, 02/15/14, # + $ 1,705
1,150 6.75%, 02/15/34, # + 1,191
2,685 AXA (France), 8.60%, 12/15/30 + 3,497
2,220 Commerce Group, Inc., 5.95%,
12/09/13 + 2,313
1,400 Fund American Companies, Inc.,
5.88%, 05/15/13 + 1,455
1,360 Infinity Property & Casualty Corp.,
5.50%, 02/18/14, # 1,361
1,680 Prudential Holdings LLC, 8.70%,
12/18/23, # 2,235
1,475 QBE Insurance Group LTD (Australia),
5.65%, to 07/13; thereafter FRN,
07/01/23, SUB # 1,466
--------------------------------------------------------------------------------------------------
15,223
--------------------------------------------------------------------------------------------------
MANUFACTURING -- 0.1%
980 Bombardier, Inc. (Canada), 6.75%,
05/01/12, # + 1,081
METALS/MINING -- 0.1%
620 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B 662
MULTI-MEDIA -- 0.8%
1,544 Comcast Cable Communications
Holdings, Inc., 8.38%, 03/15/13 + 1,906
750 Comcast Corp., 7.05%, 03/15/33 + 826
495 Echostar DBS Corp., 6.38%,
10/01/11, # + 523
655 Liberty Media Corp., 5.70%, 05/15/13 668
600 Medianews Group, Inc., 6.88%,
10/01/13, # 618
720 News America Holdings, Inc., 7.75%,
12/01/45 869
Time Warner, Inc.,
3,245 7.63%, 04/15/31 + 3,774
185 7.70%, 05/01/32 + 218
--------------------------------------------------------------------------------------------------
9,402
--------------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.1%
Xerox Corp.,
$ 270 7.13%, 06/15/10 $ 286
325 7.63%, 06/15/13 346
--------------------------------------------------------------------------------------------------
632
--------------------------------------------------------------------------------------------------
OIL & GAS -- 1.1%
Amerada Hess Corp.,
1,255 6.65%, 08/15/11 + 1,388
240 7.30%, 08/15/31 + 261
2,660 BP Capital Markets PLC
(United Kingdom), 2.75%, 12/29/06 + 2,698
756 Chesapeake Energy Corp., 6.88%,
01/15/16 + 782
1,300 Consolidated Natural Gas Co., 6.25%,
11/01/11, Ser. C + 1,452
30 Devon Financing Corp. ULC, 7.88%,
09/30/31 + 37
2,565 Enterprise Products Partners LP, 7.50%,
02/01/11 + 2,966
1,740 Halliburton Co., 5.50%, 10/15/10, # 1,848
1,508 PEMEX Project Funding Master Trust,
8.63%, 02/01/22 1,713
--------------------------------------------------------------------------------------------------
13,145
--------------------------------------------------------------------------------------------------
PACKAGING -- 0.2%
565 Crown European Holdings SA (France),
9.50%, 03/01/11 + 636
Owens-Brockway Glass Container, Inc.,
1,045 8.88%, 02/15/09 1,136
460 7.75%, 05/15/11 488
--------------------------------------------------------------------------------------------------
2,260
--------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.4%
1,325 Abitibi-Consolidated, Inc. (Canada)
(Yankee), 6.00%, 06/20/13 + 1,272
2,520 Domtar, Inc. (Canada) (Yankee),
5.38%, 12/01/13 + 2,541
115 Georgia-Pacific Corp., 7.38%,
07/15/08 + 124
1,060 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 1,039
--------------------------------------------------------------------------------------------------
4,976
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PHARMACEUTICALS -- 0.3%
Wyeth,
$ 1,905 5.50%, 02/01/14 $ 1,982
1,180 6.45%, 02/01/24 1,247
--------------------------------------------------------------------------------------------------
3,229
--------------------------------------------------------------------------------------------------
PIPELINES -- 0.7%
3,745 Duke Capital Corp., 6.25%,
02/15/13 + 3,996
Kinder Morgan Energy Partners LP
495 7.40%, 03/15/31 583
490 7.30%, 08/15/33 572
2,295 Plains All American Pipeline LP/PAA
Finance Corp., 5.63%, 12/15/13, # 2,350
245 Transcontinental Gas Pipeline Corp.,
8.88%, 07/15/12, Ser. B 290
245 Williams Companies, Inc., 8.13%,
03/15/12 267
--------------------------------------------------------------------------------------------------
8,058
--------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.3%
2,485 Quebecor World, Inc. (Canada),
6.13%, 11/15/13, # 2,492
Von Hoffmann Corp.,
315 10.25%, 03/15/09, # 330
315 10.25%, 03/15/09 330
--------------------------------------------------------------------------------------------------
3,152
--------------------------------------------------------------------------------------------------
REAL ESTATE -- 0.3%
3,500 Socgen Real Estate Co., LLC, 7.64%,
to 09/30; thereafter FRN, 12/31/49, # 4,007
REAL ESTATE INVESTMENT TRUST -- 0.1%
1,535 Istar Financial, Inc., 6.00%, 12/15/10 1,589
RETAILING -- 0.4%
3,245 Safeway, Inc., 4.13%, 11/01/08 3,283
1,740 Toys R US, Inc., 7.38%, 10/15/18 1,769
--------------------------------------------------------------------------------------------------
5,052
--------------------------------------------------------------------------------------------------
SHIPPING/TRANSPORTATION -- 0.1%
615 Teekay Shipping Corp. (Bahamas),
8.88%, 07/15/11 701
STEEL -- 0.1%
$ 765 United States Steel Corp., 9.75%,
05/15/10 $ 863
TELECOMMUNICATIONS -- 3.0%
1,255 AT&T Corp., 8.75%, 11/15/31 + 1,479
AT&T Wireless Services, Inc.,
1,585 7.88%, 03/01/11 + 1,865
535 8.13%, 05/01/12 + 643
15 8.75%, 03/01/31 + 19
1,665 Citizens Communications Co., 9.25%,
05/15/11 + 1,875
Deutsche Telekom International
Finance BV (The Netherlands),
1,185 8.50%, 06/15/10 + 1,441
220 5.25%, 07/22/13 + 225
1,210 8.75%, 06/15/30 + 1,559
France Telecom (France),
645 9.00%, 03/01/11 + 778
1,295 9.75%, 03/01/31 + 1,712
495 Nextel Communications, Inc., 7.38%,
08/01/15 533
2,700 Rogers Wireless Communications, Inc.
(Canada), 6.38%, 03/01/14, # 2,720
Sprint Capital Corp.,
2,190 6.00%, 01/15/07 2,364
420 7.63%, 01/30/11 484
2,675 8.75%, 03/15/32 3,318
3,370 TCI Communications, Inc., 8.75%,
08/01/15 4,340
4,205 Telecom Italia Capital SA
(Luxembourg), 4.00%, 11/15/08, # 4,251
Verizon Global Funding Corp.,
1,230 7.38%, 09/01/12 1,449
1,305 7.75%, 12/01/30 1,564
2,155 Verizon New York, Inc., 6.88%,
04/01/12, Ser. A 2,428
--------------------------------------------------------------------------------------------------
35,047
--------------------------------------------------------------------------------------------------
UTILITIES -- 1.7%
1,000 AEP Texas Central Co., 5.50%,
02/15/13, Ser. D + 1,047
1,725 Alabama Power Co., 2.80%,
12/01/06 + 1,740
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
UTILITIES -- CONTINUED
$ 1,395 Arizona Public Service Co., 4.65%,
05/15/15 + $ 1,349
615 Calpine Corp., 8.75%, 07/15/13, # + 566
1,460 DPL, Inc., 6.88%, 09/01/11 + 1,544
DTE Energy Co.,
5 7.05%, 06/01/11 + 6
1,225 6.38%, 04/15/33 + 1,228
755 FirstEnergy Corp., 7.38%,
11/15/31, Ser. C + 834
2,285 National Rural Utilities Cooperative
Finance Corp., 3.88%, 02/15/08 2,347
Pepco Holdings, Inc.,
2,240 6.45%, 08/15/12 2,489
195 7.45%, 08/15/32 228
770 Progress Energy, Inc., 6.85%,
04/15/12 876
775 Reliant Resources, Inc., 9.50%,
07/15/13 841
1,080 Southern California Edison Co.,
5.00%, 01/15/14 1,098
3,195 TXU Energy Co., 7.00%, 03/15/13 3,631
--------------------------------------------------------------------------------------------------
19,824
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 385,648
(Cost $371,254)
--------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 23.9%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.0%
9,110 Countrywide Home Loans, 5.50%,
08/25/33, Ser. 2003-29, Class A1 + 9,279
Federal Home Loan Mortgage Corp.,
599 2.44%, 08/15/31, Ser. 2570,
Class FQ, FRN + 600
7,189 6.00%, 02/01/33, Ser. 244, IO + 1,258
3,087 Federal National Mortgage
Association, 6.00%, 02/01/33,
Ser. 332, Class 2, IO + 560
9,951 MASTR Asset Securitization Trust,
5.50%, 09/25/33, Ser. 2003-8, Class 1A1 10,081
RESI Finance LP (Cayman Islands),
3,959 2.65%, 07/10/35, Ser. 2003-B,
Class B3, FRN, # 4,039
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
$ 6,753 2.50%, 09/10/35, Ser. 2003-C,
Class B3, FRN, # $ 6,763
1,293 2.70%, 09/10/35, Ser. 2003-C,
Class B4, FRN, # 1,295
6,443 2.40%, 12/10/35, Ser. 2003-D,
Class B3, FRN, # 6,459
2,106 2.60%, 12/10/35, Ser. 2003-D,
Class B4, FRN, # 2,112
3,135 RMAC (United Kingdom), 1.23%,
12/12/20, Ser. 2004-NS1A,
Class A1B, FRN, # 3,136
1,649 SACO I, Inc., 7.00%, 08/25/36,
Ser. 1997-2, Class 1A5, # + 1,691
--------------------------------------------------------------------------------------------------
47,273
--------------------------------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 19.9%
25,500 Federal Home Loan Mortgage Corp.,
5.50%, 03/15/34, Gold Pool, TBA 26,098
Federal National Mortgage Association,
59,000 5.00%, 03/25/19, TBA 60,567
0^^ 8.00%, 08/01/22, Pool 50617 + 0^^
50,098 5.50%, 11/01/33, TBA + 51,292
55,500 5.50%, 03/25/34, TBA 56,766
36,500 Government National Mortgage
Association, 5.50%, 03/15/34, TBA 37,470
--------------------------------------------------------------------------------------------------
232,193
--------------------------------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 279,466
(Cost $279,175)
COMMERCIAL MORTGAGE BACKED SECURITIES -- 4.0%
9,580 Capital One Multi-Asset Execution
Trust, 2.34%, 12/15/10, Ser. 2003-A,
FRN, # + 9,894
10,000 Commercial Mortgage Acceptance
Corp., 6.92%, 09/15/30, Ser. 1998-C2,
Class D, FRN + 11,248
8,625 Credit Suisse First Boston Mortgage
Securities Corp., 4.90%, 12/15/36,
Ser. 2003-C5, Class A4 + 8,834
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- CONTINUED
$ 4,000 GS Mortgage Securities Corp. II,
6.73%, 02/10/16, Ser. 2001-LIBA,
Class E, # + $ 4,355
LB-UBS Commercial Mortgage Trust,
3,505 4.69%, 07/16/32, Ser. 2003-C5,
Class A4, FRN 3,546
8,780 4.93%, 09/15/35, Ser. 2003-C7,
Class A4, FRN 9,028
--------------------------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 46,905
(Cost $44,237)
--------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 16.2%
AmeriCredit Automobile
Receivables Trust,
2,065 2.75%, 10/09/07, Ser. 2003-CF,
Class A3 + 2,098
5,175 1.32%, 12/06/07, Ser. 2003-DM,
Class A3B, FRN + 5,193
3,300 3.48%, 05/06/10, Ser. 2003-CF,
Class A4 + 3,390
2,790 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 2,809
7,550 Bank One Issuance Trust, 2.23%,
12/15/10, Ser. 2003-C2,
Class C2, FRN + 7,577
4,595 Capital Auto Receivables Asset Trust,
1.96%, 01/15/09, Ser. 2003-2,
Class A4A + 4,529
1,140 Capital One Auto Finance Trust,
3.18%, 09/15/10, Ser. 2003-B,
Class A4 + 1,140
Capital One Master Trust,
3,930 1.89%, 08/15/08, Ser. 2000-4,
Class C, FRN, # + 3,943
6,480 4.60%, 08/17/09, Ser. 2001-8A,
Class A + 6,853
7,340 Capital One Multi-Asset Execution
Trust, 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 + 7,434
$ 3,075 Citibank Credit Card Issuance Trust,
5.00%, 06/10/15, Ser. 2003-C4,
Class C4 + $ 3,072
4,418 Citigroup Mortgage Loan Trust, Inc.,
1.47%, 12/25/33, Ser. 2003-HE3,
Class A, FRN + 4,418
Countrywide Asset-Backed Certificates,
1,975 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 + 2,016
1,785 5.41%, 01/25/34, Ser. 2003-5,
Class MF1 + 1,846
1,320 1.59%, 03/25/34, Ser. 2004-1,
Class M1, FRN + 1,320
1,080 1.64%, 03/25/34, Ser. 2004-1,
Class M2, FRN + 1,080
2,000 1.32%, 04/25/34, Ser. 2004-BC1,
Class A1, FRN 2,000
DaimlerChrysler Auto Trust,
5,000 3.53%, 12/06/07, Ser. 2002-B,
Class A4 + 5,133
1,385 2.88%, 10/08/09, Ser. 2003-A,
Class A4 + 1,406
4,415 Discover Card Master Trust I, 1.14%,
05/16/07, Ser. 2002-5, Class A, FRN + 4,416
6,115 First USA Credit Card Master Trust,
1.45%, 11/20/06, Ser. 2001- 2,
Class B, FRN + 6,116
8,155 Honda Auto Receivables Owner
Trust, 2.48%, 07/18/08, Ser. 2003-1,
Class A4 8,238
15,395 Household Automotive Trust, 4.37%,
12/17/08, Ser. 2001-3, Class A4 15,885
Long Beach Mortgage Loan Trust,
7,960 1.40%, 02/25/34, Ser. 2004-1,
Class A3, FRN 7,971
2,030 1.60%, 03/25/34, Ser. 2004-1,
Class M1, FRN 2,036
1,360 1.65%, 03/25/34, Ser. 2004-1,
Class M2, FRN 1,361
1,905 M&I Auto Loan Trust, 2.97%,
04/20/09, Ser. 2003-1, Class A4 1,930
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- CONTINUED
$ 3,000 MBNA Credit Card Master Note Trust,
2.24%, 12/15/13, Ser. 2001-C2,
Class C2, FRN, # $ 3,055
3,285 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1,
Class A2 3,273
3,130 Onyx Acceptance Grantor Trust,
2.66%, 05/17/10, Ser. 2003-C,
Class A4 3,144
Option One Mortgage Loan Trust,
4,752 1.51%, 02/25/33, Ser. 2003-1,
Class A2, FRN 4,777
2,911 1.41%, 08/25/33, Ser. 2003-5,
Class A2, FRN 2,916
5,998 PP&L Transition Bond Co., LLC,
7.15%, 06/25/09, Ser. 1999-1,
Class A8 6,944
4,080 Residential Asset Securities Corp.,
1.41%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN 4,080
Residential Asset Securities Corp.,
2,554 1.34%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 2,553
5,765 1.38%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 5,758
26 Sears Credit Account Master Trust,
7.00%, 07/15/08, Ser. 1996-3, Class A 26
SLM Student Loan Trust,
8,410 1.23%, 12/17/12, Ser. 2003-12,
Class A2, FRN 8,410
4,975 2.99%, 12/15/22, Ser. 2003-11,
Class A5, # 5,017
720 The Money Store Home Equity Trust,
6.49%, 12/15/38, Ser. 1997-D,
Class AF7 725
2,580 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B,
Class A4 2,620
7,000 Volkswagen Auto Loan Enhanced Trust,
1.93%, 01/20/10, Ser. 2003-1,
Class A4 6,927
Wachovia Asset Securitization, Inc.,
3,000 1.34%, 11/25/33, Ser. 2003-HE3,
Class A, FRN 2,998
$ 3,627 1.52%, 12/25/32, Ser. 2002-HE2,
Class A, FRN $ 3,643
5,306 1.35%, 06/25/33, Ser. 2003-HE2,
Class AII1, FRN 5,315
2,455 WFS Financial Owner Trust, 3.15%,
05/20/11, Ser. 2003-4, Class A4 2,494
--------------------------------------------------------------------------------------------------
Total Asset Backed Securities 189,885
(Cost $188,753)
--------------------------------------------------------------------------------------------------
PRIVATE PLACEMENTS -- 1.8%
CO-OP APARTMENTS -- 1.8%
4,224 180 East End Ave. Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building in
New York City, 6.88%,
12/01/28, # (i) (f) 4,785
740 200 East 57th St. Note, Secured by
Second Mortgage and Agreement on
Co-op Apartment Building in
New York City, 6.72%,
01/01/14, # (i) (f) 827
10,676 200 East 57th St. Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building in
New York City, 6.50%,
01/01/40, # (i) (f) 11,703
3,101 81 Irving Place Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building in
New York City, 6.95%, 01/01/29, # (i) (f) 3,503
--------------------------------------------------------------------------------------------------
Total Private Placements 20,818
(Cost $18,741)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments 1,044,890
(Cost $1,020,884)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<Page>
<Table>
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 10.7%
OPTIONS -- 0.1%
34,045 Call Option on Interest Rate Swap, expiring 03/18/04, if
exercised the Fund pays floating 3 month LIBOR and receives
fixed 4.31%, European Style $ 131
32,270 Call Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays floating 3 month LIBOR and receives
fixed 3.33%, European Style 83
56,000 Call Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays floating 3 month LIBOR and receives
fixed 3.47%, European Style 356
29,445 Call Option on Interest Rate Swap, expiring 03/29/04, if
exercised the Fund pays floating 3 month LIBOR and receives
fixed 4.29%, European Style 147
166,980 Call Option on Interest Rate Swap, expiring 05/11/04, if
exercised the Fund pays floating 3 month LIBOR and receives
fixed 1.70%, European Style 383
166,895 Call Option on Interest Rate Swap, expiring 05/13/04, if
exercised the Fund pays floating 3 month LIBOR and receives
fixed 1.70%, European Style 355
74,000 Put Option on FNMA, 30 year Fixed, 5.50%, TBA, strike price
of 99.71, expiring 03/08/04, European Style 0^^
36,043 Put Option on Interest Rate Swap, expiring 03/10/04, if
exercised the Fund pays fixed 4.65% and receives floating 3
month LIBOR, European Style 10
36,043 Put Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays fixed 4.85% and receives floating 3
month LIBOR, European Style 2
12,470 Put Option on Interest Rate Swap, expiring 04/22/04, if
exercised the Fund pays fixed 4.49% and receives floating 3
month LIBOR, European Style 147
--------------------------------------------------------------------------------------------------
Total Options 1,614
(Cost $2,468)
--------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 6.7%
ASSET BACKED SECURITIES -- 4.7%
$ 33,000 Grampian Funding LLC, 1.13%,
07/02/04 + $ 32,877
21,000 Sheffield Receivables Corp., 1.03%,
03/05/04 + 20,997
--------------------------------------------------------------------------------------------------
53,874
--------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 0.2%
2,600 General Motors Acceptance Corp.,
1.24%, 03/26/04 + 2,598
BANKING -- 1.4%
10,500 CBA (Delaware) Finance, Inc., 1.09%,
07/20/04 + 10,457
6,000 Natexis Banques Populaires (France),
1.12%, 08/04/04 + 5,971
--------------------------------------------------------------------------------------------------
16,428
--------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.4%
4,920 Altria Group, Inc., 1.97%, 10/15/04 + 4,875
--------------------------------------------------------------------------------------------------
Total Commercial Paper 77,775
(Cost $77,753)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 3.9%
45,041 JPMorgan Prime Money Market
Fund (a) + 45,041
(Cost $45,041)
--------------------------------------------------------------------------------------------------
Total Short-Term Investments 124,430
(Cost $125,262)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,169,320
(COST $1,146,146)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
200 Euro-BOBL March, 2004 $ 22,554 $ 83
122 Euro-BUND March, 2004 14,128 373
98 Treasury Bonds June, 2004 11,019 49
236 2 Year Treasury Notes June, 2004 50,629 82
699 Eurodollar December, 2004 171,727 133
SHORT FUTURES OUTSTANDING
(340) 5 Year Treasury Notes June, 2004 (38,218) (123)
(512) 10 Year Treasury Notes June, 2004 (58,304) (362)
</Table>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ---------------------------------------------------------------------------------------------------------------------
(56,000) Call Option on FNMA, 30 Year Fixed, TBA, 5.00%, strike price
of 99.70, expiring 03/08/04, European Style. $ (314)
(35,000) Call Option on FNMA, 30 Year Fixed, TBA, 5.00%, strike price
of 100.30, expiring 03/08/04, European Style. (74)
(55,000) Call Option on FNMA, 30 Year Fixed, TBA, 5.00%, strike price
of 100.18, expiring 03/18/04, European Style. (131)
(53,535) Call Option on Interest Rate Swap, expiring 03/29/04. If
exercised the Fund pays fixed 3.25% and receives 3 month
LIBOR, European Style. (147)
(333,960) Call Option on Interest Rate Swap, expiring 05/11/04. If
exercised the Fund pays fixed 1.50% and receives 3 month
LIBOR, European Style. (334)
(333,790) Call Option on Interest Rate Swap, expiring 05/13/04. If
exercised the Fund pays fixed 1.50% and receives 3 month
LIBOR, European Style. (328)
Total Call Options Written $ (1,328)
PUT OPTIONS WRITTEN
(74,000) Put Option on FNMA, 30 Year Fixed, TBA, 5.50%, strike price
of 100.84, expiring 03/08/04, European Style. $ (2)
(60,834) Put Option on Interest Rate Swap, expiring 03/08/04. If
exercised the Fund pays 3 month LIBOR and receives 3.97%,
European Style. (1)
(36,043) Put Option on Interest Rate Swap, expiring 03/08/04. If
exercised the Fund pays 3 month LIBOR and receives fixed
4.65%, European Style. (18)
(52,305) Put Option on Interest Rate Swap, expiring 04/22/04. If
exercised the Fund pays 3 month LIBOR and receives fixed
2.22%, European Style. (110)
(1) Put Option on Sept. 04 Euro Dollar Future, strike price of
98.50, expiring 09/13/04, European Style. (188)
Total Put Options Written $ (319)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<Page>
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%, TBA 03/04, price less 101.45, the Fund
pays negative, receives positive 03/08/04 $ 30,000 $ 246
Swap - price lock with Citibank N.A. on 30 Year FNMA, 5.50%,
TBA 03/04, price less 101.56, the Fund pays negative,
receives positive 03/08/04 5,500 68
Swap - price lock with Morgan Stanley Capital Services on
U.S. Treasury Note, 4.25%, 08/15/13, price less 101.10, the
Fund pays positive, receives negative 03/12/04 18,670 (254)
Swap - price lock with Credit Suisse First Boston
International on U.S. Treasury Note, 4.25%, 11/15/13, price
less 101.47, the Fund pays positive, receives negative 03/16/04 47,750 (306)
Swap - rate lock with Credit Suisse First Boston
International on 5 Year Forward Contract, rate less 3.90,
the Fund pays positive, receives negative 03/22/04 16,900 390
Swap - rate lock with Credit Suisse First Boston
International on 10 Year Forward Contract, rate less 4.78,
the Fund pays negative, receives positive 03/22/04 9,540 (291)
Swap - price lock with Deutsche Bank AG, New York on U.S.
Treasury Note, 2.00%, 01/15/14, price less 102.41, the Fund
pays positive, receives negative 03/30/04 29,750 (395)
Swap - price lock with Citibank N.A. on U.S. Treasury Note,
4.25%, 11/15/13, price less 101.50, the Fund pays positive,
receives negative 04/01/04 12,470 (60)
Swap - price lock with Citibank N.A. on U.S. Treasury Note,
3.25%, 01/15/09, price less 101.02, the Fund pays negative,
receives positive 04/01/04 21,945 270
Swap - price lock with Bank of America N.A. on U.S. Treasury
Note, 4.38%, 08/15/12, price less 103.56, the Fund pays
positive, receives negative 04/01/04 39,770 (215)
Total Return Swap with Bank of America N.A. on Bank of
America AAA 10 Year CMBS Index, the Fund pays 1 month LIBOR,
receives 65.00 bps. 06/30/04 40,390 834
Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS
Index, the Fund pays 1 month LIBOR, receives 65.00 bps. 07/01/04 24,000 638
Total Return Swap with Citibank N.A. on Lehman AAA 8.5 Year
CMBS Index, the Fund pays 1 month LIBOR, receives 65.00 bps. 08/31/04 24,000 --
Swap - Forward Rate Agreement with Merrill Lynch Capital
Services, the Fund pays 3 month LIBOR, receives 1.30% 09/15/04 257,210 45
Swap - Forward Rate Agreement with Merrill Lynch Capital
Services, the Fund pays 1.90%, receives 3 month LIBOR 03/16/05 514,420 (187)
Swap - Forward Rate Agreement with Merrill Lynch Capital
Services, the Fund pays 3 month LIBOR, receives 2.69% 09/21/05 257,210 161
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<Page>
JPMORGAN BOND FUND II
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 89.4%
U.S. TREASURY SECURITIES -- 14.2%
U.S. Treasury Notes & Bonds,
$ 38,605 1.50%, 07/31/05 + $ 38,704
3,015 1.88%, 01/31/06 + 3,030
23,730 2.63%, 11/15/06 + 24,117
2,410 2.25%, 02/15/07 + 2,419
5,845 3.38%, 11/15/08 + 5,974
2,725 3.25%, 01/15/09 + 2,765
2,540 4.00%, 11/15/12 + @ 2,576
2,140 4.25%, 11/15/13 + 2,189
4,565 7.25%, 05/15/16 + 5,828
24,490 7.25%, 08/15/22 + @ 31,849
26,000 6.88%, 08/15/25 + 32,867
11,565 5.38%, 02/15/31 + 12,462
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 164,780
(Cost $162,114)
--------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 2.6%
10,400 Federal Home Loan Bank, 1.63%,
06/15/05 10,435
Federal National Mortgage Association,
2,940 6.40%, 05/14/09 2,969
13,590 7.13%, 01/15/30 16,859
--------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 30,263
(Cost $28,358)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 0.6%
United Mexican States (Mexico),
1,500 6.38%, 01/16/13, MTN 1,604
2,035 5.88%, 01/15/14 2,076
1,500 11.38%, 09/15/16 2,223
1,000 8.30%, 08/15/31, MTN 1,163
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 7,066
(Cost $6,399)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 26.3%
AEROSPACE -- 0.2%
2,220 General Dynamics Corp.,
2.13%, 05/15/06 2,222
5 United Technologies Corp.,
6.10%, 05/15/12 6
--------------------------------------------------------------------------------------------------
2,228
--------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 3.0%
DaimlerChrysler N.A. Holding Corp.,
$ 1,595 4.05%, 06/04/08 $ 1,603
760 7.75%, 01/18/11 881
2,555 6.50%, 11/15/13 2,731
Ford Motor Credit Co.,
940 6.50%, 01/25/07 1,005
8,140 7.38%, 10/28/09 8,954
3,185 7.00%, 10/01/13 3,357
General Motors Acceptance Corp.,
1,525 2.00%, 05/18/06, MTN, FRN 1,523
4,650 2.02%, 01/16/07, MTN, FRN 4,634
3,700 7.25%, 03/02/11 4,063
General Motors Corp.,
1,625 7.20%, 01/15/11 1,774
1,200 8.25%, 07/15/23 1,343
2,990 8.38%, 07/15/33 3,388
--------------------------------------------------------------------------------------------------
35,256
--------------------------------------------------------------------------------------------------
BANKING -- 4.8%
465 Abbey National Capital Trust I, 8.96%,
to 06/30; thereafter FRN, 12/31/49 + 631
3,380 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, to 11/12; thereafter
FRN, 12/29/49, # + 3,763
3,975 ANZ Capital Trust I, 5.36%,
12/15/53, # + 4,058
1,500 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # 1,463
920 Den Norske Bank ASA (Norway),
7.73%, to 06/11; thereafter
FRN, 12/31/49, SUB # 1,095
5,790 HBOS PLC (United Kingdom), 5.38%,
to 11/13; thereafter FRN, 12/31/49, # 5,958
1,745 KBC Bank Fund Trust III, 9.86%,
to 11/02; thereafter FRN, 11/29/49, # 2,248
1,970 Mizuho Finance Group LTD
(Cayman Islands), 5.79%, to 10/15;
thereafter FRN, 04/15/14, # 1,969
935 National City Bank, 6.20%, 12/15/11 1,046
2,300 Nordea Bank AB (Sweden), 8.95%,
to 11/12; thereafter FRN, 12/31/49, # 2,868
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 1,590 Popular North America, Inc.,
4.25%, 04/01/08 $ 1,631
4,250 Rabobank Capital Funding II, 5.26%,
12/31/49, # 4,364
RBS Capital Trust I,
535 6.43%, to 01/34; thereafter
FRN, 12/31/49 560
3,350 4.71%, to 07/13; thereafter
FRN, 12/29/49 3,277
1,145 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65%, to 09/31;
thereafter FRN, 12/31/49 1,383
1,700 Sovereign Bank, 4.38%,
to 08/08; thereafter FRN, 08/01/13 1,738
1,420 Standard Chartered Bank
(United Kingdom), 8.00%,
05/30/31, # 1,780
3,180 SunTrust Bank, 2.50%, 11/01/06 3,214
1,445 Swedbank (Sweden), 9.00%,
to 03/17; thereafter FRN, 12/29/49, # 1,814
US Bank N.A.,
2,430 2.85%, 11/15/06 2,466
690 6.38%, 08/01/11 783
2,795 Washington Mutual, Inc., 4.00%,
01/15/09 2,837
3,475 Westpac Capital Trust III, 5.82%,
to 09/30; thereafter FRN, 12/31/49, # 3,684
1,505 Zions Bancorp, 6.00%, 09/15/15 1,624
--------------------------------------------------------------------------------------------------
56,254
--------------------------------------------------------------------------------------------------
CHEMICALS -- 0.2%
2,035 ICI Wilmington, Inc., 5.63%, 12/01/13 2,105
520 The Dow Chemical Co., 7.38%, 11/01/29 605
--------------------------------------------------------------------------------------------------
2,710
--------------------------------------------------------------------------------------------------
CONSTRUCTION -- 0.0% ^
210 Pulte Homes, Inc., 6.38%, 05/15/33 208
CONSUMER PRODUCTS -- 0.1%
1,110 Altria Group, Inc., 7.00%, 11/04/13 + 1,218
DIVERSIFIED -- 0.6%
General Electric Capital Corp.,
1,620 5.88%, 02/15/12, Ser. A, MTN 1,775
$ 1,560 6.75%, 03/15/32, Ser. A, MTN $ 1,788
Hutchison Whampoa
International LTD (Hong Kong)
2,030 6.25%, 01/24/14, # 2,088
940 7.45%, 11/24/33, # 987
--------------------------------------------------------------------------------------------------
6,638
--------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 7.6%
American General Finance Corp.,
3,650 3.00%, 11/15/06, Ser. H, MTN + 3,686
685 4.50%, 11/15/07, Ser. H, MTN + 718
4,650 The Bear Stearns Co., Inc., 1.28%,
01/16/07, Ser. B, MTN, FRN + 4,647
1,720 Capital One Bank, 4.88%, 05/15/08 1,804
CIT Group, Inc.,
2,100 1.39%, 02/14/05, MTN, FRN 2,104
2,750 1.39%, 06/19/06, MTN, FRN 2,754
835 4.75%, 12/15/10, MTN 859
3,900 Citigroup Global Markets
Holdings, Inc., 1.28%, 12/12/06,
Series A, MTN, FRN 3,898
1,500 Citigroup, Inc., 1.30%, 03/20/06, FRN 1,503
3,050 Countrywide Home Loans, Inc.,
1.27%, 02/17/06, Ser. L, MTN, FRN 3,048
4,965 Credit Suisse First Boston USA, Inc.,
5.13%, 01/15/14 5,054
610 FleetBoston Financial Corp., 7.25%,
09/15/05 661
Goldman Sachs Group, Inc.,
1,500 1.32%, 02/21/06, Ser. B, MTN, FRN 1,503
10 5.70%, 09/01/12 11
2,885 4.75%, 07/15/13 2,859
2,095 6.35%, 02/15/34 2,128
1,450 Household Finance Corp., 1.28%,
02/09/07, MTN, FRN 1,452
HSBC Capital Funding LP
(Channel Islands),
2,380 4.61%, to 06/13; thereafter
FRN, 12/31/49, # 2,292
5,745 9.55%, to 06/10; thereafter
FRN, 12/31/49, # 7,428
1,515 ING Capital Funding Trust III, 8.44%,
to 12/10; thereafter FRN, 12/31/49 1,874
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 2,465 Mantis Reef LTD (Australia), 4.69%,
11/14/08, # $ 2,506
Merrill Lynch & Co., Inc.,
1,500 1.57%, 06/13/05, Ser. B, MTN, FRN 1,505
1,340 4.13%, 01/15/09, Ser. C, MTN 1,374
2,100 1.38%, 02/06/09, Ser. C, MTN, FRN 2,097
Morgan Stanley
4,665 1.28%, 01/12/07, FRN 4,667
2,420 5.80%, 04/01/07 2,651
4,705 3.88%, 01/15/09 4,769
2,100 Pricoa Global Funding I, 3.90%,
12/15/08, # 2,133
14,010 Special Purpose Accounts
Receivable Cooperative Corp. Trust,
1.44%, 05/23/05, Ser. 2003-6, FRN, # 14,009
1,785 UFJ Finance AEC (Aruba), 6.75%,
07/15/13 1,921
--------------------------------------------------------------------------------------------------
87,915
--------------------------------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.1%
775 SABMiller PLC (United Kingdom),
6.63%, 08/15/33, # 852
HEALTH CARE/HEALTH CARE SERVICES -- 0.2%
2,035 UnitedHealth Group, Inc., 3.30%,
01/30/08 2,050
HOTELS/OTHER LODGING -- 0.1%
910 Harrah's Operating Co., Inc., 5.38%,
12/15/13, # 919
INSURANCE -- 1.3%
Assurant, Inc.,
1,555 5.63%, 02/15/14, # + 1,592
605 6.75%, 02/15/34, # + 627
2,880 AXA (France), 8.60%, 12/15/30 + 3,752
1,950 Commerce Group, Inc., 5.95%,
12/09/13 2,032
1,385 Fund American Companies, Inc.,
5.88%, 05/15/13 1,439
1,340 Infinity Property & Casualty Corp.,
5.50%, 02/18/14, # 1,341
Nationwide Financial Services, Inc.,
$ 510 6.25%, 11/15/11 $ 563
1,130 5.90%, 07/01/12 1,225
1,220 Prudential Holdings LLC, 8.70%,
12/18/23, # 1,623
1,190 QBE Insurance Group LTD (Australia),
5.65%, to 07/13; thereafter
FRN, 07/01/23, SUB # 1,182
--------------------------------------------------------------------------------------------------
15,376
--------------------------------------------------------------------------------------------------
MULTI-MEDIA -- 0.9%
3,413 Comcast Cable Communications
Holdings, Inc., 8.38%, 03/15/13 + 4,213
585 Comcast Cable Communications, Inc.,
6.75%, 01/30/11 663
545 Liberty Media Corp., 5.70%, 05/15/13 556
900 News America, Inc., 7.25%, 05/18/18 1,050
1,390 Time Warner Entertainment Co., LP,
8.38%, 03/15/23 1,738
Time Warner, Inc.,
1,620 7.63%, 04/15/31 + 1,884
225 7.70%, 05/01/32 + 265
--------------------------------------------------------------------------------------------------
10,369
--------------------------------------------------------------------------------------------------
OIL & GAS -- 1.0%
505 Alberta Energy Co., LTD (Canada)
(Yankee), 7.38%, 11/01/31 + 616
735 Anadarko Finance Co. (Canada),
6.75%, 05/01/11, Ser. B + 848
1,470 Anadarko Petroleum Corp., 6.13%,
03/15/12 + 1,620
2,350 BP Capital Markets PLC
(United Kingdom), 2.75%, 12/29/06 + 2,383
445 Devon Financing Corp. ULC, 7.88%,
09/30/31 548
1,715 Halliburton Co., 5.50%, 10/15/10, # 1,822
992 PEMEX Project Funding Master
Trust (Mexico), #8.63%, 02/01/22 1,127
960 Transocean, Inc., 7.50%, 04/15/31 1,156
1,480 Weatherford International LTD
(Bermuda), 4.95%, 10/15/13 1,487
--------------------------------------------------------------------------------------------------
11,607
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PAPER/FOREST PRODUCTS -- 0.3%
$ 2,180 Domtar, Inc. (Canada) (Yankee),
5.38%, 12/01/13 $ 2,198
885 International Paper Co., 5.85%,
10/30/12 945
235 Westvaco Corp., 8.20%, 01/15/30 282
--------------------------------------------------------------------------------------------------
3,425
--------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.4%
1,250 Schering-Plough Corp., 5.30%,
12/01/13 1,300
Wyeth,
1,685 5.50%, 02/01/14 1,754
1,045 6.45%, 02/01/24 1,104
--------------------------------------------------------------------------------------------------
4,158
--------------------------------------------------------------------------------------------------
PIPELINES -- 0.6%
3,645 Duke Capital Corp., 6.25%, 02/15/13 3,891
Kinder Morgan Energy Partners LP
460 7.40%, 03/15/31 541
760 7.30%, 08/15/33 887
2,055 Plains All American Pipeline LP/PAA
Finance Corp., 5.63%, 12/15/13, # 2,104
--------------------------------------------------------------------------------------------------
7,423
--------------------------------------------------------------------------------------------------
RETAILING -- 0.3%
465 Federated Department Stores, Inc.,
6.63%, 04/01/11 530
2,930 Safeway, Inc., 4.13%, 11/01/08 2,965
365 The May Department Stores Co.,
6.90%, 01/15/32 407
--------------------------------------------------------------------------------------------------
3,902
--------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.5%
AT&T Corp.,
1,475 8.05%, 11/15/11 + 1,718
545 8.75%, 11/15/31 + 642
1,675 AT&T Wireless Services, Inc., 7.88%,
03/01/11 + 1,971
1,515 Citizens Communications Co., 9.25%,
05/15/11 1,706
Deutsche Telekom International
Finance BV (The Netherlands),
1,025 8.50%, 06/15/10 1,247
1,310 8.75%, 06/15/30 1,688
France Telecom (France),
$ 1,125 9.00%, 03/01/11 $ 1,357
1,000 9.75%, 03/01/31 1,322
750 Koninklijke KPN NV (The Netherlands),
8.00%, 10/01/10 900
Sprint Capital Corp.,
2,690 7.63%, 01/30/11 3,102
1,815 8.75%, 03/15/32 2,251
1,337 TCI Communications, Inc., 7.13%,
02/15/28 1,485
3,540 Telecom Italia Capital SA
(Luxembourg), 4.00%, 11/15/08, # 3,578
Verizon Global Funding Corp.,
1,540 7.38%, 09/01/12 1,815
820 7.75%, 12/01/30 983
2,695 Verizon New York, Inc., 6.88%,
04/01/12, Ser. A 3,036
--------------------------------------------------------------------------------------------------
28,801
--------------------------------------------------------------------------------------------------
UTILITIES -- 2.1%
1,420 AEP Texas Central Co., 5.50%,
02/15/13, Ser. D + 1,487
1,515 Alabama Power Co., 2.80%,
12/01/06 + 1,528
1,110 Arizona Public Service Co., 4.65%,
05/15/15 + 1,073
955 Columbus Southern Power Co.,
5.50%, 03/01/13, Ser. C 1,008
3,000 Dominion Resources, Inc., 8.13%,
06/15/10, Ser. A 3,623
1,210 DTE Energy Co., 6.38%, 04/15/33 1,213
1,055 MidAmerican Energy Holdings Co.,
6.75%, 12/30/31 1,199
National Rural Utilities Cooperative
Finance Corp.,
500 6.13%, 05/15/05 527
1,985 3.88%, 02/15/08 2,039
930 7.25%, 03/01/12, Ser. C, MTN 1,105
1,600 PacifiCorp, 4.30%, 09/15/08 1,652
Pepco Holdings, Inc.,
1,545 6.45%, 08/15/12 1,716
395 7.45%, 08/15/32 461
Progress Energy, Inc.,
25 7.10%, 03/01/11 29
395 6.85%, 04/15/12 449
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
UTILITIES -- CONTINUED
Southern California Edison Co.
$ 1,055 5.00%, 01/15/14 $ 1,073
620 6.00%, 01/15/34 634
2,890 TXU Energy Co., 7.00%, 03/15/13 3,285
--------------------------------------------------------------------------------------------------
24,101
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 305,410
(Cost $289,370)
--------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 23.4%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.3%
7,288 Countrywide Home Loans, 5.50%,
08/25/33, Ser. 2003-29, Class A1 7,423
Federal Home Loan Mortgage Corp.,
561 2.44%, 08/15/31, Ser. 2570,
Class FQ, FRN 562
5,733 6.00%, 02/01/33, Ser. 244, IO 1,003
2,286 Federal National Mortgage
Association, 6.00%, 02/01/33,
Ser. 332, Class 2, IO 415
7,598 MASTR Asset Securitization Trust,
5.50%, 09/25/33, Ser. 2003-8,
Class 1A1 7,697
RESI Finance LP (Cayman Islands),
3,464 2.65%, 07/10/35, Ser. 2003-B,
Class B3, FRN, # 3,534
5,878 2.50%, 09/10/35, Ser. 2003-C,
Class B3, FRN, # 5,887
1,193 2.70%, 09/10/35, Ser. 2003-C,
Class B4, FRN, # 1,195
5,565 2.40%, 12/10/35, Ser. 2003-D,
Class B3, FRN, # 5,579
1,830 2.60%, 12/10/35, Ser. 2003-D,
Class B4, FRN, # 1,835
3,090 RMAC (United Kingdom), 1.23%,
12/12/20, Ser. 2004-NS1A,
Class A1B, FRN, # 3,091
--------------------------------------------------------------------------------------------------
38,221
--------------------------------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 20.1%
27,500 Federal Home Loan Mortgage Corp.,
5.50%, 03/15/34, Gold Pool, TBA 28,145
Federal National Mortgage Association,
$ 57,500 5.00%, 03/25/19, TBA $ 59,027
0^^ 7.50%, 07/01/30, Pool 529276 0^^
48,996 5.50%, 11/01/33, TBA 50,163
59,500 5.50%, 03/25/34, TBA 60,858
35,500 Government National Mortgage
Association, 5.50%, 03/15/34, TBA 36,443
--------------------------------------------------------------------------------------------------
234,636
--------------------------------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 272,857
(Cost $272,424)
--------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 6.2%
4,630 Bear Stearns Commercial
Mortgage Securities, 6.48%,
02/15/35, Ser. 2001-TOP2, Class A2 + 5,269
9,300 Capital One Multi-Asset Execution
Trust, 2.34%, 12/15/10,
Ser. 2003-A, FRN, # 9,605
Credit Suisse First Boston
Mortgage Securities Corp.,
8,255 6.13%, 04/15/37, Ser. 2002-CKN2,
Class A3 9,207
13,060 3.94%, 05/15/38, Ser. 2003-C3,
Class A5 12,541
4,499 Goldman Sachs Mortgage Securities II,
1.24%, 11/15/15, Ser. 2003-FL6A,
Class A1, FRN 4,499
LB-UBS Commercial Mortgage Trust,
7,350 6.65%, 11/15/27, Ser. 2001-C2,
Class A2 8,438
7,617 4.93%, 09/15/35, Ser. 2003-C7,
Class A4, FRN 7,832
Morgan Stanley Dean Witter Capital I,
13,290 6.39%, 07/15/33, Ser. 2001-TOP3,
Class A4 15,085
25 5.98%, 01/15/39, Ser. 2002-TOP7,
Class A2 28
--------------------------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 72,504
(Cost $68,567)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- 16.1%
American Express Credit
Account Master Trust,
$ 3,500 1.44%, 12/15/08, Ser. 2001-6,
Class B, FRN + $ 3,509
3,380 1.20%, 09/15/09, Ser. 2002-1,
Class A, FRN + 3,387
AmeriCredit Automobile
Receivables Trust,
1,245 2.75%, 10/09/07, Ser. 2003-CF,
Class A3 + 1,265
4,475 1.32%, 12/06/07, Ser. 2003-DM,
Class A3B, FRN + 4,490
1,985 3.48%, 05/06/10, Ser. 2003-CF,
Class A4 + 2,039
2,400 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 2,416
6,000 Bank One Issuance Trust, 2.23%,
12/15/10, Ser. 2003-C2,
Class C2, FRN + 6,021
Capital Auto Receivables Asset Trust,
5,740 1.13%, 02/15/07, Ser. 2003-2,
Class A3B, FRN 5,740
3,710 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 3,657
1,340 Capital One Auto Finance Trust, 3.18%,
09/15/10, Ser. 2003-B, Class A4 1,340
3,400 Capital One Master Trust, 1.89%,
08/15/08, Ser. 2000-4,
Class C, FRN, # 3,412
6,355 Capital One Multi-Asset Execution
Trust, 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 6,436
Citibank Credit Card Issuance Trust,
11,250 6.88%, 11/16/09, Ser. 2000-A3,
Class A3 12,801
2,480 5.00%, 06/10/15, Ser. 2003-C4,
Class C4 2,477
3,954 Citigroup Mortgage Loan Trust, Inc.,
1.47%, 12/25/33, Ser. 2003-HE3,
Class A, FRN 3,954
Countrywide Asset-Backed Certificates,
$ 2,285 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 $ 2,333
2,070 5.41%, 01/25/34, Ser. 2003-5,
Class MF1 2,140
1,290 1.59%, 03/25/34, Ser. 2004-1,
Class M1, FRN 1,290
1,060 1.64%, 03/25/34, Ser. 2004-1,
Class M2, FRN 1,060
1,205 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 1,223
3,580 Discover Card Master Trust I, 1.14%,
05/16/07, Ser. 2002-5, Class A, FRN 3,580
5,270 First USA Credit Card Master Trust,
1.45%, 11/20/06, Ser. 2001- 2,
Class B, FRN 5,271
7,165 Honda Auto Receivables Owner Trust,
2.48%, 07/18/08, Ser. 2003-1,
Class A4 7,238
Long Beach Mortgage Loan Trust,
5,327 1.41%, 07/25/33, Ser. 2003-3,
Class A, FRN 5,337
7,770 1.40%, 02/25/34, Ser. 2004-1,
Class A3, FRN 7,780
1,980 1.60%, 03/25/34, Ser. 2004-1,
Class M1, FRN 1,986
1,340 1.65%, 03/25/34, Ser. 2004-1,
Class M2, FRN 1,341
1,655 M&I Auto Loan Trust, 2.97%,
04/20/09, Ser. 2003-1, Class A4 1,677
MBNA Master Credit Card Trust USA,
9,900 6.80%, 04/16/07, Ser. 1999-M,
Class B 10,270
9,980 5.75%, 10/15/08, Ser. 2001-A1,
Class A1 10,765
3,000 3.30%, 07/15/10, Ser. 2003 - A1,
Class A1 3,034
3,000 2.24%, 12/15/13, Ser. 2001-C2,
Class C2, FRN, # 3,055
2,775 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1,
Class A2 2,765
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,670 Onyx Acceptance Grantor Trust,
2.66%, 05/17/10, Ser. 2003-C,
Class A4 $ 2,682
4,174 Option One Mortgage Loan Trust,
1.51%, 02/25/33, Ser. 2003-1,
Class A2, FRN 4,196
3,475 Residential Asset Securities Corp.,
1.41%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN 3,475
Residential Asset Securities Corp.,
2,062 1.34%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 2,061
4,235 1.38%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 4,230
1,000 Sears Credit Account Master Trust,
5.25%, 10/16/08, Ser. 1998-2, Class A 1,014
SLM Student Loan Trust,
7,290 1.23%, 12/17/12, Ser. 2003-12,
Class A2, FRN 7,290
5,605 2.99%, 12/15/22, Ser. 2003-11,
Class A5, # 5,652
2,215 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B,
Class A4 2,249
Volkswagon Auto Loan Enhanced Trust,
5,000 1.49%, 05/21/07, Ser. 2003-1,
Class A3 4,991
2,615 2.94%, 03/22/10, Ser. 2003-2,
Class A4 2,644
Wachovia Asset Securitization, Inc.,
7,000 1.34%, 11/25/33, Ser. 2003-HE3,
Class A, FRN 6,995
2,938 1.52%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 2,952
2,110 WFS Financial Owner Trust, 3.15%,
05/20/11, Ser. 2003-4, Class A4 2,143
--------------------------------------------------------------------------------------------------
Total Asset Backed Securities 187,663
(Cost $184,384)
--------------------------------------------------------------------------------------------------
Total Long-Term Investment 1,040,543
(Cost $1,011,616)
--------------------------------------------------------------------------------------------------
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 10.6%
OPTIONS -- 0.1%
54,500 Call Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays 3 Month LIBOR and receives Fixed
3.47%, European Style. $ 345
34,114 Call Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays 3 Month LIBOR and receives Fixed
3.33%, European Style. 88
33,736 Call Option on Interest Rate Swap, expiring 03/18/04, if
exercised the Fund pays 3 Month LIBOR and receives Fixed
4.31%, European Style. 130
29,110 Call Option on Interest Rate Swap, expiring 03/29/04, if
exercised the Fund pays 3 Month LIBOR and receives Fixed
4.29%, European Style. 146
82,510 Call Option on Interest Rate Swap, expiring 05/11/04, if
exercised the Fund pays 3 Month LIBOR and receives Fixed
1.70%, European Style. 190
82,495 Call Option on Interest Rate Swap, expiring 05/13/04, if
exercised the Fund pays 3 Month LIBOR and receives Fixed
1.70%, European Style. 175
66,000 Put Option on FNMA, 30 year Fixed, 5.50%, TBA, strike price
of 99.72, expiring 03/08/04, European Style. 0^^
32,146 Put Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays Fixed 4.65% and receives 3 Month
LIBOR, European Style. 9
32,146 Put Option on Interest Rate Swap, expiring 03/08/04, if
exercised the Fund pays Fixed 4.85% and receives 3 Month
LIBOR, European Style. 2
12,150 Put Option on Interest Rate Swap, expiring 04/22/04, if
exercised the Fund pays Fixed 4.49% and receives 3 Month
LIBOR, European Style. 143
--------------------------------------------------------------------------------------------------
Total Options 1,228
(Cost $2,006)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 6.3%
ASSET BACKED SECURITIES -- 2.4%
$ 24,000 Atlantis One Funding Corp., 1.09%,
07/19/04 + $ 23,899
4,500 Surrey Funding Corp., 1.05%,
04/07/04 + 4,495
--------------------------------------------------------------------------------------------------
28,394
--------------------------------------------------------------------------------------------------
BANKING -- 2.3%
12,500 Bradford & Bingley PLC
(United Kingdom), 1.12%, 03/16/04 + 12,493
7,000 Danske Bank AS (Denmark), 1.03%,
07/30/04 + 6,969
7,000 Natexis Banques Populaires (France),
1.12%, 08/04/04 + 6,967
--------------------------------------------------------------------------------------------------
26,429
--------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.4%
4,790 Altria Group, Inc., 1.97%, 10/15/04 + 4,746
FINANCIAL SERVICES -- 1.2%
$ 13,500 Statens Bostadsfinansier
(Luxembourg), 1.04%, 04/13/04 + $ 13,484
--------------------------------------------------------------------------------------------------
Total Commercial Paper 73,053
(Cost $73,035)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 4.2%
49,412 JPMorgan Prime Money Market
Fund (a) + 49,412
(Cost $49,412)
--------------------------------------------------------------------------------------------------
Total Short-Term Investment 123,693
(Cost $124,453)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,164,236
(COST $1,136,069)
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
302 5 Year Treasury Notes June, 2004 $ 33,947 $ 145
343 Eurodollar December, 2004 84,267 65
SHORT FUTURES OUTSTANDING
(292) Treasury Bonds June, 2004 (32,832) (227)
(8) 10 Year Treasury Notes June, 2004 (911) (4)
(25) 2 Year Treasury Notes June, 2004 (5,363) (11)
</Table>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ------------------------------------------------------------------------------------------------------------------------
(165,020) Call Option on Interest Rate Swap, expiring 05/11/04. if
exercised the Fund pays Fixed 1.50% and receives 3 Month
LIBOR, European Style. $ (165)
(164,990) Call Option on Interest Rate Swap, expiring 05/13/04, if
exercised the Fund pays Fixed 1.50% and receives 3 Month
LIBOR, European Style. (162)
(54,500) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price
of 99.70, expiring 03/08/04, European Style (306)
(54,500) Call Option on FNMA, 30 Year Fixed, 5.00%,TBA, strike price
of 100.18, expiring 03/18/04, European Style (130)
(52,925) Call Option on Interest Rate Swap, expiring 03/29/04, if
exercised the Fund pays Fixed 3.25% and receives 3 Month
LIBOR, European Style. (145)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<Page>
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ---------------------------------------------------------------------------------------------------------------------
(37,000) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 100.30,
expiring 03/08/04, European Style $ (78)
Total Call Options Written $ (986)
PUT OPTIONS WRITTEN
(66,000) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 100.84,
expiring 03/08/04, European Style $ (1)
(54,257) Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund
pays 3 Month LIBOR and receives Fixed 3.97%, European Style. (1)
(50,960) Put Option on Interest Rate Swap, expiring 04/22/04, if exercised the Fund
pays 3 Month LIBOR and receives Fixed 2.22%, European Style. (108)
(32,146) Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund
pays 3 Month LIBOR and receives Fixed 4.65%, European Style. (16)
(--)^^ Put Option on Sept. 04 Euro Dollar Future, strike price of 98.50,
expiring 09/13/04, European Style. (93)
Total Put Options Written $ (219)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------
Swap - price lock with Citibank N.A., on 30 Year FNMA,
5.50%, TBA 03/04, price less 101.39, the Fund pays negative,
receives positive. 03/08/04 $ 24,500 $ 222
Swap - price lock with Lehman Brothers Special Financing, on
30 Year FNMA, 5.50%, TBA 03/04, price less 101.45, the Fund
pays positive, receives negative. 03/08/04 4,000 33
Swap - price lock with Morgan Stanley Capital Services, on
U.S. Treasury Note, 4.25%, 08/15/13, price less 101.10, the
Fund pays positive and recieves negative. 03/12/04 16,535 (225)
Swap - price lock with Credit Suisse First Boston
International, on U.S. Treasury Note, 4.25%, 11/15/13, price
less 101.47, the Fund pays positive, receives negative. 03/16/04 40,400 (259)
Swap Rate Lock with Credit Suisse First Boston International
on 5 Year Forward Contract, rate less 3.90, the Fund pays
positive, receives negative. 03/22/04 13,470 311
Swap Rate Lock with Credit Suisse First Boston International
on 10 Year Forward Contract, rate less 4.78, the Fund pays
negative, receives positive. 03/22/04 7,860 (240)
Swap - price lock with Deutsche Bank AG, New York, on U.S.
Treasury Note, 2.00%, 01/15/14, price less 102.41, the Fund
pays positive, receives negative. 03/30/04 14,540 (193)
Swap - price lock with Citibank N.A., on U.S. Treasury Note,
4.25%, 11/15/13, price less 101.50, the Fund pays positive,
receives negative. 04/01/04 12,245 (59)
Swap - price lock with Citibank N.A., on U.S. Treasury Note,
3.25%, 01/15/09, price less 101.02, the Fund pays negative,
receives positive. 04/01/04 21,545 265
Swap - price lock with Bank of America N.A., on U.S.
Treasury Note, 4.38%, 08/15/12, price less 103.56, the Fund
pays positive, receives negative. 04/01/04 32,685 (177)
Total Return Swap with Bank of America N.A. on Bank of
America AAA 10 Year CMBS Index, the Fund pays 1 Month LIBOR,
receives 65.00 bps. 06/30/04 35,600 735
Total Return Swap with Citibank on Lehman AAA 8.5 Year CMBS
Index, the Fund pays 1 Month LIBOR, receives 65.00 bps. 08/31/04 21,000 --
Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS
Index, the Fund pays 1 Month LIBOR, receives 65.00 bps. 07/01/04 20,500 537
Swap - Forward Rate Agreement with Merrill Lynch Capital
Services, the Fund pays 3 Month LIBOR, receives 1.30% 09/15/04 249,005 44
Swap - Forward Rate Agreement with Merrill Lynch Capital
Services, the Fund pays 1.90% and receives 3 Month LIBOR. 03/16/05 498,010 (181)
Swap - Forward Rate Agreement with Merrill Lynch Capital
Services, the Fund pays 3 Month LIBOR, receives 2.69%. 09/21/05 249,005 156
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<Page>
JPMORGAN ENHANCED INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 95.8%
PREFERRED STOCKS -- 0.7%
FINANCIAL SERVICES -- 0.7%
0^^ Lehman CR-ABN Amro VIX $ 1,500
0^^ Smithkline Beecham Holdings Corp. 900
--------------------------------------------------------------------------------------------------
Total Preferred Stocks 2,400
(Cost $2,400)
--------------------------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 0.1%
$ 400 U.S. Treasury Notes & Bonds,
1.75%, 12/31/04 @ + 402
(Cost $400)
U.S. GOVERNMENT AGENCY SECURITIES -- 5.4%
Federal Home Loan Mortgage Corp.,
1,600 1.88%, 02/15/06 + 1,602
3,650 1.62%, 05/19/06, MTN, FRN + 3,650
Federal National Mortgage Association,
1,700 1.65%, 04/07/06, FRN + 1,700
3,700 2.59%, 05/05/06 + 3,710
1,900 3.35%, 12/01/06 + 1,906
3,500 2.38%, 02/15/07 + 3,501
40 3.50%, 10/15/07 + 40
2,697 1.49%, 02/25/28, Ser. 2003-121,
Class FC, FRN + 2,693
--------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 18,802
(Cost $18,789)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 2.6%
1,900 Government of Canada (Canada),
6.38%, 07/21/05 2,027
Province of Ontario (Canada),
3,000 4.20%, 06/30/05, (Yankee) 3,104
700 6.00%, 02/21/06 754
1,000 Province of Quebec (Canada),
7.00%, 01/30/07 1,123
1,750 Republic of Finland (Finland),
5.88%, 02/27/06 + 1,886
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 8,894
(Cost $8,858)
--------------------------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
SUPRANATIONAL NOTES & BONDS -- 0.7%
$ 2,200 Inter-American Development Bank,
6.13%, 03/08/06 $ 2,387
(Cost $2,381)
STATE AND MUNICIPAL OBLIGATIONS -- 0.9%
ILLINOIS -- 0.3%
1,000 Illinois State, Taxable Pension, GO,
2.50%, 06/01/08 976
NORTH CAROLINA -- 0.1%
500 Wake Forest University, Ser. 1997, FRDO,
1.09%, 07/01/17 500
OHIO -- 0.1%
350 Ohio State Air Quality Development
Authority, Toledo, Ser. A, Rev., Adj.,
2.20%, 04/01/24 350
TEXAS -- 0.4%
1,250 Texas Public Finance Authority, Taxable,
Unemployment Compensation, Ser. B,
Rev., 2.00%, 06/15/05 1,258
--------------------------------------------------------------------------------------------------
Total State and Municipal Obligations 3,084
(Cost $3,100)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 45.5%
AUTOMOTIVE -- 2.5%
American Honda Finance Corp.,
700 1.29%, 03/07/05, MTN, FRN, # + 701
1,500 1.34%, 09/11/06, MTN, FRN, # + 1,502
DaimlerChrysler N.A. Holdings Corp.,
300 7.40%, 01/20/05 314
600 7.75%, 06/15/05 643
1,850 1.97%, 09/26/05, Ser. D, MTN, FRN + 1,861
200 Ford Motor Credit Co., 6.70%, 07/16/04 204
General Motors Acceptance Corp.,
420 6.75%, 01/15/06 + 450
600 2.00%, 05/18/06, MTN, FRN + 599
2,400 2.02%, 01/16/07, MTN, FRN + 2,391
--------------------------------------------------------------------------------------------------
8,665
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- 9.1%
$ 3,200 Abbey National Treasury Services PLC
(United Kingdom),
1.21%, 01/16/07, FRN, # + $ 3,201
4,425 American Express Credit Corp.,
1.19%, 04/18/05, Ser. B, MTN, FRN + 4,429
Bank of America Corp.,
1,000 1.57%, 12/23/04, Ser. F, MTN, FRN 1,001
3,000 1.37%, 08/26/05, Ser. H, MTN, FRN + 3,009
1,300 6.63%, 08/01/07 + 1,456
2,000 Bank One Corp., 1.28%, 09/15/06,
Ser. C, MTN, FRN + 2,001
1,800 Bank One N.A. Illinois,
1.24%, 01/13/06, FRN + 1,803
2,000 Bayerische Landesbank Girozentrale
(Germany)
(Yankee), 1.04%, 01/31/05, MTN, FRN + 2,000
2,900 Canadian Imperial Bank of Commerce
(Canada)
(Yankee), 1.24%, 06/13/05, FRN + 2,899
500 Capital One Bank, 6.88%, 02/01/06 + 541
3,500 HBOS Treasury Services PLC
(United Kingdom),
1.22%, 01/12/07, FRN, # + 3,501
1,850 Washington Mutual, Inc.,
1.40%, 11/03/05, FRN 1,852
Wells Fargo & Co.,
2,000 1.28%, 03/03/06, FRN 2,003
1,300 5.13%, 02/15/07 1,397
--------------------------------------------------------------------------------------------------
31,093
--------------------------------------------------------------------------------------------------
DIVERSIFIED -- 2.1%
General Electric Capital Corp.,
1,937 1.30%, 09/18/06, MTN, FRN + 1,943
3,300 1.28%, 02/02/09, Ser. A, MTN, FRN + 3,295
2,100 General Electric Co.,
1.17%, 10/24/05, FRN + 2,102
--------------------------------------------------------------------------------------------------
7,340
--------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 24.3%
Bear Stearns Companies, Inc.
2,800 1.28%, 01/16/07, Ser. B, MTN, FRN + 2,798
2,650 1.42%, 01/30/09, Ser. B, MTN, FRN + 2,647
CIT Group, Inc.,
$ 2,150 1.39%, 06/19/06, MTN, FRN + $ 2,153
4,300 1.32%, 02/15/07, MTN, FRN + 4,298
4,300 Citigroup Global Markets Holdings, Inc.,
1.28%, 12/12/06, Series A, MTN, FRN + 4,297
Countrywide Home Loans, Inc.,
1,150 1.67%, 05/20/05, Ser. K, MTN, FRN + 1,156
3,650 1.27%, 02/17/06, Ser. L, MTN, FRN + 3,648
500 1.65%, 06/02/06, Ser. L, MTN, FRN + 504
Counts Trusts,
1,400 1.90%, 08/15/07, Ser. 2002-10, FRN, # + 1,400
1,400 1.95%, 08/15/07, Ser. 2002-11, FRN, # + 1,400
4,200 Credit Suisse First Boston USA, Inc.,
1.57%, 01/14/05, MTN, FRN + 4,217
4,050 Goldman Sachs Group, Inc., 1.29%,
10/27/06, Ser. B, MTN, FRN + 4,056
2,099 Goldman Sachs Mortgage Securities II,
1.24%, 11/15/15, Ser. 2003-FL6A,
Class A1, FRN + 2,099
1,550 Household Finance Corp.,
1.27%, 06/16/05, MTN, FRN 1,552
International Lease Finance Corp.,
1,500 2.39%, 01/13/05, FRN 1,515
1,030 4.00%, 01/17/06, Ser. O, MTN 1,067
John Hancock Global Funding II
600 1.24%, 12/15/06, MTN, FRN, # 600
4,700 1.20%, 02/23/07, MTN, FRN, # 4,696
Merrill Lynch & Co., Inc.,
900 1.49%, 03/07/06, Ser. B, MTN, FRN 903
2,000 1.25%, 01/26/07, Ser. C, MTN, FRN 1,998
2,200 1.38%, 02/06/09, Ser. C, MTN, FRN 2,197
Morgan Stanley Group, Inc.,
5,100 1.45%, 03/27/06, Ser. E, MTN, FRN 5,116
600 1.27%, 11/24/06, FRN 600
1,200 1.25%, 02/15/07, MTN, FRN 1,199
4,100 Nationwide Building Society
(United Kingdom),
1.17%, 07/22/05, MTN, FRN, # 4,101
Pricoa Global Funding I
750 1.32%, 04/25/05, MTN, FRN, # 751
1,300 1.22%, 03/02/07, FRN, # (f) 1,300
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
Principal Life Global,
$ 2,900 1.27%, 11/13/06, MTN, FRN, # $ 2,899
1,000 1.23%, 06/12/07, MTN, FRN, # 999
Restructured Asset Securities with
Enhanced Returns (RACERS),
2,400 0.95%, 04/15/04, Ser. 2002-35,
Class C, FRN, # 2,399
2,400 0.96%, 04/15/04, Ser. 2002-40,
Class C, FRN, # 2,399
SLM Corp.
850 1.29%, 04/25/06, MTN, FRN 852
2,450 1.24%, 01/25/07, Ser. A, MTN, FRN 2,449
1,100 1.34%, 07/25/07, Ser. 1, MTN, FRN 1,102
Special Purpose Accounts Receivable
Cooperative Corp.,
2,000 1.44%, 05/23/05, Ser. 2003-6, FRN, # 2,000
6,700 1.72%, 05/15/06, Ser. 2003-4, FRN, # 6,699
--------------------------------------------------------------------------------------------------
84,066
--------------------------------------------------------------------------------------------------
INSURANCE -- 3.7%
ASIF Global Financing,
2,400 1.42%, 03/14/06, FRN, # + 2,407
700 1.27%, 05/30/06, FRN, # + 701
3,650 Metropolitan Life Global Funding I,
1.27%, 08/28/06, MTN, FRN, # 3,655
1,600 Monumental Global Funding II,
1.17%, 07/06/05, FRN, # 1,600
4,600 Nationwide Life Global Funding I,
1.21%, 05/15/07, FRN, # 4,596
--------------------------------------------------------------------------------------------------
12,959
--------------------------------------------------------------------------------------------------
OIL & GAS -- 0.7%
700 Halliburton Co., 1.87%, 01/26/07, FRN, # 702
1,595 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 1,614
--------------------------------------------------------------------------------------------------
2,316
--------------------------------------------------------------------------------------------------
RETAILING -- 0.2%
750 Safeway, Inc., 1.60%, 11/01/05, FRN 751
TELECOMMUNICATIONS -- 0.2%
750 Deutsche Telekom International Finance
(Germany), 8.25%, 06/15/05 + 810
UTILITIES -- 2.7%
$ 600 AEP Texas Central Co.,
3.00%, 02/15/05, Ser. F + $ 607
850 Commonwealth Edison Co.,
6.40%, 10/15/05 + 910
Dominion Resources, Inc.,
100 2.80%, 02/15/05 101
1,000 1.39%, 05/15/06, Ser. B, FRN + 1,001
100 DTE Energy Co., 6.00%, 06/01/04 101
1,800 Duke Energy Corp., 1.47%, 01/15/05, FRN + 1,802
1,000 FPL Group Capital, Inc.,
1.47%, 03/30/05, FRN + 1,000
National Rural Utilities Cooperative
Finance Corp.,
1,700 1.53%, 02/07/05, FRN 1,706
950 1.22%, 02/17/06, MTN, FRN 950
1,350 Southern California Edison Co.,
1.42%, 01/13/06, FRN 1,352
--------------------------------------------------------------------------------------------------
9,530
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 157,530
(Cost $157,204)
--------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 3.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5%
2,129 Federal Home Loan Mortgage Corp.,
5.50%, 01/15/26, Ser. 2471, Class ES + 2,137
Federal National Mortgage Association,
783 1.59%, 06/25/32, Ser. 2002-36,
Class FS, FRN + 788
1,167 1.59%, 06/25/32, Ser. 2002-36,
Class FT, FRN + 1,174
774 2.50%, 07/25/42, Ser. 2003-W2,
Class 2A3 + 774
1,534 1.95%, 09/25/43, Ser. 2003-W14,
Class 1A-1 + 1,530
Government National Mortgage Association,
588 1.59%, 03/16/32, Ser. 2002-21,
Class FD, FRN + 592
554 1.59%, 04/16/32, Ser. 2002-24,
Class FA, FRN + 557
839 1.59%, 05/16/32, Ser. 2002-27,
Class FA, FRN + 843
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED
$ 232 GSR Mortgage Loan Trust,
2.24%, 08/25/32, Ser. 2003-5F,
Class 1A3, FRN + $ 232
1,850 Mound Financing PLC (United Kingdom),
1.27%, 02/08/08, Ser. 3A, Class A1-1, FRN, # 1,850
1,800 RMAC (United Kingdom), 1.23%,
12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 1,800
--------------------------------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 12,277
(Cost $12,257)
--------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.9%
1,719 CalSTRS Trust, 1.39%, 11/20/12,
Ser. 2002-C6, Class A1, FRN, # + 1,717
Calwest Industrial Trust,
2,400 1.47%, 02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # + 2,395
1,367 1.36%, 06/15/15, Ser. 2003-CALA,
Class A, FRN, # + 1,367
1,650 Capital One Multi-Asset Execution Trust,
2.34%, 12/15/10, Ser. 2003-A, FRN, # + 1,704
6,218 Federal National Mortgage Association,
5.00%, 07/25/12, Ser. 2003-3, Class PB 6,419
--------------------------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 13,602
(Cost $13,654)
--------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 31.7%
American Express Credit Account
Master Trust,
1,050 1.23%, 09/15/08, Ser. 2001-1, Class A, FRN + 1,052
1,550 1.20%, 09/15/09, Ser. 2002-1, Class A, FRN + 1,553
1,000 1.20%, 11/16/09, Ser. 2002-2, Class A, FRN + 1,002
AmeriCredit Automobile Receivables Trust,
1,327 1.30%, 10/12/06, Ser. 2002-A,
Class A3, FRN + 1,327
3,051 1.28%, 04/12/07, Ser. 2002-C,
Class A3, FRN + 3,051
3,300 Bank One Issuance Trust, 1.47%,
12/15/09, Ser. 2002-B1, Class B1, FRN + 3,313
45 Capital Auto Receivables Asset Trust,
5.00%, 12/15/06, Ser. 2001-2, Class A-4 + 46
$ 700 Capital One Auto Finance Trust, 1.20%,
01/15/08, Ser. 2003-B, Class A3, FRN + $ 701
1,600 Capital One Master Trust, 1.89%,
08/15/08, Ser. 2000-4, Class C, FRN, # + 1,605
Capital One Multi-Asset Execution Trust,
800 1.20%, 05/15/08, Ser. 2003-A2,
Class A2, FRN + 801
1,350 1.48%, 01/15/09, Ser. 2003-A1,
Class A1, FRN + 1,356
2,250 Carco Auto Loan Master Trust, 1.16%,
11/15/06, Ser. 2001-A, Class A, FRN + 2,250
Centex Home Equity,
1,777 1.37%, 01/25/05, Ser. 2004-A,
Class AV2, FRN + 1,778
1,600 1.29%, 03/25/34, Ser. 2004-B,
Class AVI, FRN 1,600
Citibank Credit Card Issuance Trust,
200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 + 203
2,050 2.17%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 2,069
1,826 Citifinancial Mortgage Securities, Inc.,
1.38%, 08/25/33, Ser. 2003-3,
Class AV1, FRN + 1,828
2,362 Citigroup Mortgage Loan Trust, Inc.,
1.47%, 12/25/33, Ser. 2003-HE3,
Class A, FRN + 2,362
2,130 CNH Equipment Trust, 1.23%,
01/15/08, Ser. 2003-B, Class A3A, FRN + 2,134
Countrywide Asset-Backed Certificates,
348 1.37%, 08/25/32, Ser. 2002-1,
Class A, FRN + 349
2,509 1.49%, 03/25/33, Ser. 2003-BC1,
Class A1, FRN + 2,519
900 1.59%, 02/25/34, Ser. 2004-BC1,
Class M1, FRN 900
1,300 1.32%, 04/25/34, Ser. 2004-BC1,
Class A1, FRN 1,300
1,975 Countrywide Home Equity Loan Trust,
1.33%, 08/15/28, Ser. 2002-D,
Class A, FRN + 1,972
2,750 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 + 2,791
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
Discover Card Master Trust I,
$ 50 5.30%, 11/16/06, Ser. 2001-5, Class A + $ 50
2,685 1.15%, 04/15/08, Ser. 2002-4,
Class A, FRN + 2,686
527 EQCC Trust, 1.39%, 11/25/31, Ser. 2002-1,
Class 2A, FRN + 528
1,793 Fifth Third Home Equity Loan Trust, 1.34%,
09/20/23, Ser. 2003-1, Class A , FRN + 1,793
First USA Credit Card Master Trust,
1,100 1.18%, 11/20/06, Ser. 2001-2, Class A, FRN + 1,100
1,900 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN + 1,900
35 Fleet Credit Card Master Trust II, 1.14%,
10/15/07, Ser. 2002-A, Class A, FRN + 35
2,267 Fleet Home Equity Loan Trust, 1.34%,
01/20/33, Ser. 2003-1, Class A, FRN + 2,267
Ford Credit Auto Owner Trust,
6 2.48%, 12/15/04, Ser. 2002-C, Class A2A + 6
832 1.21%, 01/15/06, Ser. 2002-A,
Class A3B, FRN + 832
2,450 Ford Credit Floorplan Master Owner Trust,
1.23%, 07/15/08, Ser. 2001-2, Class A, FRN + 2,456
843 GE Corp. Aircraft Financing, 1.26%,
06/25/10, Ser. 2003-1A, Class 1A, FRN + 843
747 Greenpoint Home Equity Loan Trust, 1.36%,
04/15/29, Ser. 2003-1, Class A, FRN # + 748
641 HFC Home Equity Loan Asset Backed
Certificates, 1.39%, 04/20/32,
Ser. 2002-2, Class A, FRN 642
Honda Auto Receivables Owner Trust,
1,250 1.57%, 06/19/06, Ser. 2003-5, Class A2 1,253
1,900 1.92%, 11/20/06, Ser. 2003-1, Class A3 1,910
959 3.96%, 02/19/07, Ser. 2001-3, Class A4 972
200 Household Automotive Trust, 1.43%,
05/18/09, Ser. 2002-3, Class A4B, FRN 201
2,289 Household Mortgage Loan Trust, 1.44%,
02/20/33, Ser. 2003-HC1, Class A, FRN 2,295
Long Beach Mortgage Loan Trust,
571 1.55%, 11/26/32, FRN 574
1,251 1.41%, 07/25/33, Ser. 2003-3, Class A, FRN 1,253
3,550 1.43%, 08/25/33, Ser. 2003-4,
Class AV3, FRN 3,559
MBNA Credit Card Master Note Trust
$ 1,000 1.89%, 12/15/06, Ser. 1999-G,
Class C, FRN, # $ 1,000
50 1.22%, 02/15/07, Ser. 2001-A4,
Class A, FRN 50
5,000 1.20%, 08/17/09, Ser. 2002-A4,
Class A4, FRN 5,010
2,000 1.47%, 10/15/09, Ser. 2002-B2,
Class B2, FRN 2,008
Option One Mortgage Loan Trust,
730 1.38%, 02/25/32, Ser. 2002-1, Class A, FRN 732
301 1.36%, 06/25/32, Ser. 2002-2, Class A, FRN 301
335 1.36%, 08/25/32, Ser. 2002-3, Class A2, FRN 335
2,376 1.51%, 02/25/33, Ser. 2003-1, Class A2, FRN 2,388
3,425 Orchid Structured Finance CDO LTD,
1.22%, 11/18/38, Ser. 2003-1A,
Class A1-MM, FRN, # + 3,425
Residential Asset Securities Corp.,
2,499 1.41%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN 2,499
2,319 1.34%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 2,319
1,598 Residential Funding Mortgage Securities II,
1.35%, 01/29/29, Ser. 2003-HS4,
Class AIB, FRN 1,598
Sears Credit Account Master Trust,
1,600 1.20%, 06/16/08, Ser. 2001-2, Class A, FRN 1,600
1,250 1.19%, 02/18/09, Ser. 2002-1, Class A, FRN 1,248
1,010 1.22%, 08/18/09, Ser. 2002-4, Class A, FRN 1,011
SLM Student Loan Trust,
1,011 1.21%, 06/15/10, Ser. 2002-8, Class A2, FRN 1,012
1,821 1.15%, 10/25/10, Ser. 2002-1, Class A1, FRN 1,822
1,450 Superior Wholesale Inventory Financing
Trust, 1.17%, 06/15/06, Ser. 2001-C7,
Class A, FRN 1,450
2,900 Volkswagen Auto Loan Enhanced Trust,
2.94%, 03/22/10, Ser. 2003-2, Class A4 2,932
Wachovia Asset Securitization, Inc.,
3,798 1.52%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 3,815
2,643 1.38%, 03/25/33, Ser. 2003-HE1,
Class A1, FRN 2,646
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
WFS Financial Owner Trust,
$ 568 1.31%, 03/20/06, Ser. 2001-C,
Class A3, FRN $ 568
2,500 1.25%, 05/20/08, Ser. 2003-A3,
Class B, FRN 2,504
22 World Omni Auto Receivables Trust, 5.51%,
07/20/07, Ser. 2001-A, Class A4 22
--------------------------------------------------------------------------------------------------
Total Asset Backed Securities 110,060
(Cost $109,920)
--------------------------------------------------------------------------------------------------
CERTIFICATE OF DEPOSIT -- 0.8%
FINANCIAL SERVICES -- 0.8%
2,900 M&I Marshall & Ilsley Bank,
1.57%, 03/10/05 2,904
(Cost $2,897)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments $ 332,342
(Cost $331,860)
--------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.2%
MUNICIPAL SECURITIES -- 0.9%
PENNSYLVANIA -- 0.3%
1,100 Beaver County Industrial Development
Authority, Ser. A, Rev., FRDO,
4.85%, 04/24/04 1,106
SOUTH CAROLINA -- 0.6%
2,050 South Carolina Student Loan Corp.,
Education Loans,
Ser. A-1, Rev., FRDO, 1.25%, 06/22/04 2,050
Total Municipal Securities 3,156
(Cost $3,157)
--------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.5%
CONSUMER PRODUCTS -- 0.5%
$ 1,650 Altria Group, Inc., 1.97%, 10/15/04 + $ 1,635
(Cost $1,629)
CERTIFICATES OF DEPOSIT -- 2.3%
FINANCIAL SERVICES -- 2.3%
2,030 Bayerische Landesbank
Girozentrale (Germany)
(Yankee), 1.17%, 12/17/04, Floating Rate + 2,030
1,300 Credit Suisse First Boston New York
(Yankee), 1.18%, 07/08/05, Floating Rate + 1,300
1,900 Manufacturers & Traders Trust Co.,
1.12%, 06/15/05, FRN 1,900
2,650 Suntrust Bank, 1.15%,
10/03/05, FRN 2,650
--------------------------------------------------------------------------------------------------
Total Certificates of Deposit 7,880
(Cost $7,876)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 0.5%
1,896 JPMorgan Prime Money Market Fund (a) + 1,896
(Cost $1,896)
--------------------------------------------------------------------------------------------------
Total Short-Term Investments 14,567
(Cost $14,558)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 346,909
(COST $346,418)
--------------------------------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION/
CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
10 2 Year Treasury Notes June, 2004 $ 2,145 $ 4
32 5 Year Treasury Notes June, 2004 3,597 --^^
357 Eurodollar September, 2004 87,978 17
SHORT FUTURES OUTSTANDING
(358) Eurodollar December, 2004 (87,952) (42)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<Page>
JPMORGAN FLEMING EMERGING
MARKETS DEBT FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 98.4%
U.S. TREASURY SECURITIES -- 5.7%
UNITED STATES -- 5.7%
U.S. Treasury Notes & Bonds,
$ 135 6.88%, 05/15/06 @ + $ 150
1,375 4.00%, 02/15/14 + 1,376
665 5.38%, 02/15/31 + 717
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 2,243
(Cost $2,238)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 83.5%
ARGENTINA -- 1.0%
Republic of Argentina,
350 7.00%, 12/19/08, Ser. 2008 + (d) * 96
525 12.25%, 06/19/18, Ser. 2018 + (d) * 144
345 2.06%, 03/31/23, Ser. L-GL, FRN (d) * 170
--------------------------------------------------------------------------------------------------
410
--------------------------------------------------------------------------------------------------
BRAZIL -- 23.8%
300 Banco Nacional de Desenvolvimiento
Economico e Social, 6.97%, 06/16/08,
Regulation S, FRN 296
Federal Republic of Brazil,
190 11.50%, 03/12/08 + 212
395 12.00%, 04/15/10 450
130 9.25%, 10/22/10 132
430 10.00%, 08/07/11 443
2,260 2.06%, 04/15/12, FRN 1,939
1,108 8.00%, 04/15/14 1,060
825 8.00%, 04/15/14, # 792
515 12.75%, 01/15/20 613
3,187 11.00%, 08/17/40 3,341
--------------------------------------------------------------------------------------------------
9,278
--------------------------------------------------------------------------------------------------
BULGARIA -- 0.9%
National Republic of Bulgaria,
202 2.00%, 07/28/11, Ser. IAB, FRN, # 198
162 2.00%, 07/28/12, Ser. A, FRN 159
--------------------------------------------------------------------------------------------------
357
--------------------------------------------------------------------------------------------------
COLOMBIA -- 4.9%
Republic of Colombia,
250 9.75%, 04/23/09 283
569 9.75%, 04/09/11 652
283 10.00%, 01/23/12 316
$ 460 10.75%, 01/15/13 $ 530
105 11.75%, 02/25/20 129
--------------------------------------------------------------------------------------------------
1,910
--------------------------------------------------------------------------------------------------
DOMINICAN REPUBLIC -- 0.5%
Dominican Republic,
247 9.50%, 09/27/06 178
10 9.04%, 01/23/13, # 7
--------------------------------------------------------------------------------------------------
185
--------------------------------------------------------------------------------------------------
ECUADOR -- 4.8%
Republic of Ecuador,
574 12.00%, 11/15/12 571
1,567 7.00%, 08/15/30, SUB 1,297
--------------------------------------------------------------------------------------------------
1,868
--------------------------------------------------------------------------------------------------
EGYPT -- 0.3%
100 Arab Republic of Egypt,
8.75%, 07/11/11, # 123
EL SALVADOR -- 0.9%
Republic of El Salvador,
65 7.75%, 01/24/23, # 70
285 8.25%, 04/10/32, # 285
--------------------------------------------------------------------------------------------------
355
--------------------------------------------------------------------------------------------------
MEXICO -- 7.8%
260 Bancomext Trust Division, 11.25%,
05/30/06, # + 309
United Mexican States,
250 10.38%, 02/17/09, Ser. XW 320
650 7.50%, 01/14/12 746
450 8.00%, 09/24/22, Ser. A, MTN 510
570 11.50%, 05/15/26 861
200 8.30%, 08/15/31, MTN 233
70 8.30%, 08/15/31 81
--------------------------------------------------------------------------------------------------
3,060
--------------------------------------------------------------------------------------------------
PANAMA -- 2.1%
Republic of Panama,
210 9.63%, 02/08/11 243
20 10.75%, 05/15/20 25
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<Page>
SEMI-ANNUAL REPORT FEBRUARY 29 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PANAMA -- CONTINUED
$ 515 9.38%, 01/16/23 $ 561
--------------------------------------------------------------------------------------------------
829
--------------------------------------------------------------------------------------------------
PERU -- 4.0%
Republic of Peru,
37 9.13%, 02/21/12 41
366 9.13%, 02/21/12, Regulation S 408
65 9.88%, 02/06/15 74
930 4.50%, 03/07/17, FRN, SUB 804
273 5.00%, 03/07/17, FRN, SUB 249
--------------------------------------------------------------------------------------------------
1,576
--------------------------------------------------------------------------------------------------
PHILIPPINES -- 2.9%
Republic of Philippines,
229 8.38%, 03/12/09 238
158 9.88%, 03/16/10 172
170 6.50%, to 12/04; thereafter
FRN, 12/01/17, Ser. B 162
290 9.88%, 01/15/19 295
245 10.63%, 03/16/25 261
--------------------------------------------------------------------------------------------------
1,128
--------------------------------------------------------------------------------------------------
RUSSIA -- 17.9%
Russian Federation,
705 10.00%, 06/26/07, Regulation S 827
52 8.25%, 03/31/10, # 58
402 8.25%, 03/31/10, Regulation S 451
725 11.00%, 07/24/18, Regulation S 993
350 12.75%, 06/24/28, Regulation S 564
3,548 5.00%, 03/31/30, SUB, # 3,490
655 5.00%, 03/31/30, Regulation S, SUB 644
--------------------------------------------------------------------------------------------------
7,027
--------------------------------------------------------------------------------------------------
SOUTH AFRICA -- 0.9%
295 Republic of South Africa (Yankee), 8.50%,
06/23/17 360
TRINIDAD/TOBAGO -- 0.5%
155 Republic of Trinidad & Tobago,
9.75%, 07/01/20 205
TUNISIA -- 0.4%
$ 125 Banque Centrale de Tunisie, 7.38%,
04/25/12 $ 143
TURKEY -- 4.0%
Republic of Turkey,
15 9.88%, 03/19/08 17
500 12.38%, 06/15/09 634
465 11.75%, 06/15/10 584
125 11.88%, 01/15/30 176
165 8.00%, 02/14/34 171
--------------------------------------------------------------------------------------------------
1,582
--------------------------------------------------------------------------------------------------
UKRAINE -- 2.4%
180 Republic of Ukraine, 11.00%, 03/15/07,
Regulation S 197
730 Ukraine Government, 6.88%,
03/04/11, # (f) 731
--------------------------------------------------------------------------------------------------
928
--------------------------------------------------------------------------------------------------
URUGUAY -- 0.7%
118 Republic of Uruguay, 7.88%, 01/15/33 81
215 Uruguay Government International Bond,
7.50%, 03/15/15 174
--------------------------------------------------------------------------------------------------
255
--------------------------------------------------------------------------------------------------
VENEZUELA -- 2.8%
Republic of Venezuela,
95 2.13%, 12/18/07, Ser. DL, FRN 86
600 7.00%, 12/01/18 424
695 9.25%, 09/15/27 583
--------------------------------------------------------------------------------------------------
1,093
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 32,672
(Cost $26,208)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 9.2%
BRAZIL -- 1.4%
550 Trikem SA, 10.63%, 07/24/07, # 545
COTE D'IVOIRE -- 1.5%
615 CSN Islands VIII Corp 9.75% 12/16/13, # + 583
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
MALAYSIA -- 1.7%
$ 575 Petroliam Nasional BHD, 7.88%,
05/22/22, # $ 678
MEXICO -- 4.6%
400 BBVA Bancomer Capital Trust I, 10.50%,
02/16/11, # + 455
Pemex Project Funding Master Trust,
160 7.88%, 02/01/09 183
370 9.13%, 10/13/10 449
340 7.38%, 12/15/14 372
285 Petroleos Mexicanos (Yankee), 9.25%,
03/30/18 342
--------------------------------------------------------------------------------------------------
1,801
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 3,607
(Cost $3,478)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
WARRANTS -- 0.0%
NIGERIA -- 0.0%
1 Central Bank of Nigeria, expires 11/15/20* 0
SINGAPORE -- 0.0%
0^^ Asia Pulp & Paper Co., LTD, ADR, expires
03/15/05, # (f) * $ 0
--------------------------------------------------------------------------------------------------
VENEZUELA -- 0.0%
1 Republic of Venezuela (Oil Obligation),
expires 04/15/20 * 0
--------------------------------------------------------------------------------------------------
Total Warrants 0
(Cost $0^^)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments 38,522
(Cost $31,924)
--------------------------------------------------------------------------------------------------
<Caption>
SHORT-TERM INVESTMENTS -- 1.6%
MONEY MARKET FUND -- 1.6%
633 JPMorgan Prime Money Market Fund (a) + 633
(Cost $633)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 39,155
(COST $32,557)
--------------------------------------------------------------------------------------------------
</Table>
SUMMARY OF INVESTMENTS BY INDUSTRY, FEBRUARY 29, 2004
<Table>
<Caption>
INDUSTRY % OF INVESTMENT SECURITIES
- ---------------------------------------------------------------------------------------------------------------------
Foreign Government Securities 83.5%
U.S. Treasury Securities 5.7
Oil & Gas 2.6
Financial Services 2.5
Money Market Fund 1.6
Steel 1.5
Chemicals 1.4
Banking 1.2
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 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------
SHORT FUTURES OUTSTANDING
(32) 10 Year Treasury Notes June, 2004 $ (3,644) $ (22)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<Page>
JPMORGAN GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT~
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 96.3%
U.S. TREASURY SECURITIES -- 0.7%
U.S. Treasury Notes & Bonds,
$ 100 3.25%, 05/31/04 @ + $ 101
100 1.88%, 11/30/05 @ + 101
80 6.63%, 05/15/07 @ + 91
125 5.50%, 08/15/28 @ + 134
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 427
(Cost $406)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 21.2%
Dominican Republic (Dominican Republic),
327 9.50%, 09/27/06 235
325 9.04%, 01/23/13 218
Federal Republic of Brazil (Brazil),
97 2.06%, 04/15/09, FRN 89
90 10.00%, 08/07/11 93
130 2.06%, 04/15/12, FRN 111
180 8.00%, 04/15/14 172
25 12.75%, 01/15/20 30
135 8.88%, 04/15/24 122
418 11.00%, 08/17/40 438
Federal Republic of Germany (Germany),
EUR 130 5.00%, 05/20/05, Ser. 135 167
EUR 170 5.00%, 08/19/05, Ser. 136 220
EUR 200 4.00%, 02/16/07, Ser. 139 258
EUR 370 5.25%, 01/04/08, Ser. 98 497
EUR 10 4.50%, 07/04/09, Ser. 99 13
EUR 20 5.25%, 01/04/11, Ser. 00 27
EUR 10 6.25%, 01/04/24, Ser. 94 15
EUR 75 4.75%, 07/04/34, Ser. 0301 92
Government of Canada (Canada),
CAD 20 7.00%, 12/01/06 17
CAD 70 5.50%, 06/01/10 57
CAD 40 5.25%, 06/01/12 32
CAD 30 8.00%, 06/01/27, Ser. VW17 + 31
Government of France (France),
EUR 145 5.50%, 04/25/07 195
EUR 450 4.00%, 04/25/13 557
EUR 200 5.00%, 10/25/16 265
EUR 60 5.75%, 10/25/32 85
EUR 140 Kingdom of Belgium (Belgium),
4.25%, 09/28/13, Ser. 41 + 176
Malaysia Government International Bond
(Malaysia),
$ 140 8.75%, 06/01/09 + $ 173
190 7.50%, 07/15/11 226
National Republic of Bulgaria (Bulgaria),
141 2.00%, 07/28/11, Ser. IAB, FRN 138
166 2.00%, 07/28/12, Ser. A, FRN 163
198 8.25%, 01/15/15, # 237
Republic of Colombia (Colombia),
15 9.75%, 04/23/09 17
290 9.75%, 04/09/11 + 333
89 10.00%, 01/23/12 + 99
220 11.75%, 02/25/20, MTN 270
55 10.38%, 01/28/33 + 60
140 Republic of Costa Rica (Costa Rica),
6.55%, 03/20/14, + 141
Republic of El Salvador (El Salvador),
138 8.50%, 07/25/11 157
255 7.75%, 01/24/23 275
215 8.25%, 04/10/32 215
85 Republic of Korea (South Korea),
8.88%, 04/15/08 103
Republic of Panama (Panama),
100 9.63%, 02/08/11 116
145 10.75%, 05/15/20 + 178
240 9.38%, 01/16/23 262
Republic of Peru (Peru),
245 9.13%, 02/21/12 273
342 4.50%, 03/07/17, FRN 296
155 5.00%, 03/07/17, FRN 142
Republic of Philippines (Philippines),
110 8.88%, 04/15/08 119
159 8.38%, 03/12/09 165
85 9.88%, 01/15/19 + 87
Republic of South Africa (South Africa),
210 9.13%, 05/19/09 256
205 8.50%, 06/23/17 250
95 Republic of Trinidad & Tobago
(Trinidad & Tobago), 9.75%, 07/01/20 125
Republic of Turkey (Turkey),
25 9.88%, 03/19/08 29
55 12.00%, 12/15/08 68
100 11.75%, 06/15/10 126
90 11.00%, 01/14/13 112
30 11.88%, 01/15/30 42
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- CONTINUED
Republic of Ukraine (Ukraine),
$ 369 11.00%, 03/15/07, Regulation S $ 405
100 6.88%, 03/04/11 100
160 7.65%, 06/11/13, Regulation S 164
Republic of Venezuela (Venezuela),
95 2.13%, 12/18/07, Ser. DL, FRN 86
165 7.00%, 12/01/18 117
230 9.25%, 09/15/27 193
Russian Federation (Russia),
70 8.25%, 03/31/10, Regulation S 79
75 11.00%, 07/24/18, Regulation S 103
850 5.00%, 03/31/30, Regulation S, SUB 835
U.K. Treasury Gilt (United Kingdom),
GBP 10 8.50%, 12/07/05 20
GBP 40 5.75%, 12/07/09 78
GBP 20 8.00%, 09/27/13 46
GBP 30 5.00%, 09/07/14 57
United Mexican States (Mexico),
85 8.13%, 12/30/19 99
85 8.00%, 09/24/22, Ser. A, MTN 96
105 11.50%, 05/15/26 159
10 8.30%, 08/15/31, MTN 12
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 12,114
(Cost $10,501)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 38.0%
ADVERTISING -- 0.3%
130 RH Donnelley Finance Corp. I,
10.88%, 12/15/12, # 155
AEROSPACE -- 0.2%
100 L-3 Communications Corp.,
7.63%, 06/15/12 + 111
AGRICULTURAL PRODUCTION/SERVICES -- 0.2%
30 RJ Reynolds Tobacco
Holdings, Inc.,
7.88%, 05/15/09, Ser. B + 32
65 Seminis Vegetable Seeds, Inc.,
10.25%, 10/01/13, # 69
--------------------------------------------------------------------------------------------------
101
--------------------------------------------------------------------------------------------------
AIRLINES -- 1.4%
Delta Air Lines, Inc.,
$ 40 7.70%, 12/15/05 + $ 36
60 7.90%, 12/15/09 + 44
636 Northwest Airlines Corp.,
8.07%, 10/01/19, Ser. 2000-1 + 712
--------------------------------------------------------------------------------------------------
792
--------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 4.6%
300 DaimlerChrysler N.A. Holding Corp.,
6.50%, 11/15/13 + 320
45 Dana Corp., 9.00%, 08/15/11 + 54
Ford Motor Credit Co.,
575 7.38%, 10/28/09 + 632
250 7.88%, 06/15/10 + 279
200 General Motors Acceptance Corp.,
6.88%, 09/15/11 + 216
General Motors Corp.,
240 8.25%, 07/15/23 + 269
450 8.38%, 07/15/33 + 509
35 HLI Operating Co., Inc.,
10.50%, 06/15/10 + 40
100 Tenneco Automotive, Inc.,
10.25%, 07/15/13, Ser. B 117
TRW Automotive, Inc.,
25 9.38%, 02/15/13 29
100 11.00%, 02/15/13 118
--------------------------------------------------------------------------------------------------
2,583
--------------------------------------------------------------------------------------------------
BANKING -- 1.2%
175 Abbey National Capital Trust I, 8.96%,
to 06/30; thereafter FRN, 12/31/49 + 237
300 ABN-Amro North American
Holding Preferred Capital
Repackage Trust I, 6.52%, to 11/12;
thereafter FRN, 12/29/49 # + 335
Korea Development Bank
(South Korea),
40 7.13%, 04/22/04 40
85 7.38%, 09/17/04 87
--------------------------------------------------------------------------------------------------
699
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BIOTECHNOLOGY -- 0.1%
$ 45 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13 + $ 50
BROADCASTING/CABLE -- 0.2%
120 Mediacom LLC Capital Corp.,
9.50%, 01/15/13 + 122
BUSINESS SERVICES -- 0.3%
150 Iron Mountain, Inc., 8.63%, 04/01/13 + 163
CHEMICALS -- 1.6%
Equistar Chemicals LP/Equistar
Funding Corp.,
80 10.13%, 09/01/08 + 86
100 10.63%, 05/01/11 + 109
155 Huntsman ICI Chemicals, LLC,
10.13%, 07/01/09 + 158
45 Huntsman LLC, 11.63%, 10/15/10, # + 47
140 IMC Global, Inc., 10.88%,
06/01/08, Ser. B + 168
210 Lyondell Chemical Co., 10.88%,
05/01/09 + 210
75 Noveon, Inc., 11.00%, 02/28/11, Ser. B + 86
65 PolyOne Corp., 10.63%, 05/15/10 + 67
--------------------------------------------------------------------------------------------------
931
--------------------------------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.2%
120 Electronic Data Systems Corp.,
6.00%, 08/01/13, Ser. B + 116
CONSTRUCTION -- 0.8%
45 Beazer Homes USA, Inc., 8.38%,
04/15/12 + 50
175 Pulte Homes, Inc., 6.38%, 05/15/33 + 173
200 Terex Corp., 10.38%, 04/01/11, Ser. B 226
--------------------------------------------------------------------------------------------------
449
--------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.1%
60 Elizabeth Arden, Inc., 7.75%,
01/15/14, # + 62
CONSUMER SERVICES -- 0.5%
150 Corrections Corp. of America, 7.50%,
05/01/11 + 157
$ 100 United Rentals North America, Inc.,
6.50%, 02/15/12, # $ 100
257
DIVERSIFIED -- 0.0% ^
15 Tyco International Group SA
(Luxembourg) (Yankee),
6.38%, 10/15/11 16
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.4%
85 Legrand SA (France), 8.50%,
02/15/25 + 92
110 Sanmina-SCI Corp., 10.38%, 01/15/10 128
--------------------------------------------------------------------------------------------------
220
--------------------------------------------------------------------------------------------------
ENTERTAINMENT/LEISURE -- 0.4%
125 Argosy Gaming Co., 7.00%,
01/15/14, # + 128
110 Six Flags, Inc., 8.88%, 02/01/10 113
--------------------------------------------------------------------------------------------------
241
--------------------------------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.2%
125 Allied Waste North America,
10.00%, 08/01/09, Ser. B + 134
FINANCIAL SERVICES -- 4.2%
65 Arch Western Finance LLC,
6.75%, 07/01/13, # + 69
350 Capital One Bank, 4.88%, 05/15/08 + 367
100 Eircom Funding (Ireland), 8.25%,
08/15/13 + 111
325 Erac USA Finance Co.,
9.13%, 12/15/04, MTN, # + 343
150 H&E Equipment Services LLC/H&E
Finance Corp., 11.13%, 06/15/12 + 155
125 HSBC Capital Funding LP
(Channel Islands), 4.61%,
to 06/13; thereafter FRN, 12/31/49, # + 120
200 ING Capital Funding Trust III, 8.44%,
to 12/10; thereafter FRN, 12/31/49, + 247
150 IOS Capital LLC, 7.25%, 06/30/08 + 158
50 Nexstar Finance LLC/Nexstar
Finance, Inc., 12.00%, 04/01/08 + 56
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- CONTINUED
Pemex Project Funding
Master Trust (Mexico),
$ 90 8.00%, 11/15/11, MTN, # $ 101
70 7.38%, 12/15/14 77
235 Targeted Return Index (TRAINS),
6.54%, to 08/06; thereafter
FRN, 08/15/08, Ser. 2002-5 255
250 UBS Preferred Funding Trust I,
8.62%, to 10/10; thereafter
FRN, 12/31/49 314
--------------------------------------------------------------------------------------------------
2,373
--------------------------------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.7%
25 Del Monte Corp., 9.25%,
05/15/11, Ser. B + 28
105 Delhaize America, Inc., 8.13%,
04/15/11 + 121
110 Ingles Markets, Inc., 8.88%, 12/01/11 + 114
150 Swift & Co., 10.13%, 10/01/09 157
--------------------------------------------------------------------------------------------------
420
--------------------------------------------------------------------------------------------------
HEALTH CARE/HEALTH CARE SERVICES -- 1.6%
90 Ardent Health Services, 10.00%,
08/15/13, # + 100
100 Fresenius Medical Care Capital
Trust IV, 7.88%, 06/15/11 + 109
85 Genesis HealthCare Corp., 8.00%,
10/15/13, # + 91
HCA, Inc.,
115 5.25%, 11/06/08 + 119
165 6.75%, 07/15/13 + 179
700 Mariner Health Group, Inc., 9.50%,
04/01/06, Ser. B (d) (f) + * 0^^
100 Medex, Inc., 8.88%, 05/15/13, # + 108
135 Tenet Healthcare Corp., 7.38%,
02/01/13 125
100 Triad Hospitals, Inc., 7.00%, 11/15/13, # 104
--------------------------------------------------------------------------------------------------
935
--------------------------------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 0.6%
100 Ameristar Casinos, Inc., 10.75%,
02/15/09 + 115
100 Mandalay Resort Group, 10.25%,
08/01/07, Ser. B + 117
$ 100 MGM Mirage, Inc., 8.38%, 02/01/11 + $ 115
--------------------------------------------------------------------------------------------------
347
--------------------------------------------------------------------------------------------------
INSURANCE -- 0.9%
225 Aegon NV (The Netherlands),
4.75%, 06/01/13 + 226
200 AXA (France), 8.60%, 12/15/30 + 260
--------------------------------------------------------------------------------------------------
486
--------------------------------------------------------------------------------------------------
METALS/MINING -- 0.1%
50 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B + 53
MULTI-MEDIA -- 2.3%
230 Dex Media, Inc., 8.00%, 11/15/13, # + 230
100 DirecTV Holdings LLC, 8.38%,
03/15/13 + 114
150 Echostar DBS Corp., 6.38%,
10/01/11, # + 158
100 Lodgenet Entertainment Corp.,
9.50%, 06/15/13 + 112
150 Primedia, Inc., 8.88%, 05/15/11 + 155
200 Radio One, Inc., 8.88%,
07/01/11, Ser. B + 221
300 Time Warner, Inc., 7.63%, 04/15/31 + 349
--------------------------------------------------------------------------------------------------
1,339
--------------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.4%
100 Moore North America Finance, Inc.,
7.88%, 01/15/11 + 114
Xerox Corp.,
5 7.13%, 06/15/10 5
110 7.63%, 06/15/13 117
--------------------------------------------------------------------------------------------------
236
--------------------------------------------------------------------------------------------------
OIL & GAS -- 2.5%
175 Amerada Hess Corp., 7.30%,
08/15/31 + 190
168 Chesapeake Energy Corp., 6.88%,
01/15/16 + 174
175 Devon Financing Corp. ULC, 7.88%,
09/30/31 + 215
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
OIL & GAS -- CONTINUED
$ 60 Petroleos Mexicanos (Mexico)
(Yankee), 9.25%, 03/30/18 $ 72
55 Plains Exploration & Production Co.,
8.75%, 07/01/12, Ser. B + 61
100 Pogo Producing Co., 8.25%,
04/15/11, Ser. B + 112
90 Swift Energy Co., 9.38%, 05/01/12 100
100 The Premcor Refining Group, Inc.,
7.50%, 06/15/15 + 110
175 Valero Energy Corp., 7.50%, 04/15/32 206
150 Westport Resources Corp., 8.25%,
11/01/11 166
--------------------------------------------------------------------------------------------------
1,406
--------------------------------------------------------------------------------------------------
PACKAGING -- 1.0%
150 Crown European Holdings SA (France),
9.50%, 03/01/11 + 169
200 Owens-Brockway Glass Container, Inc.,
8.88%, 02/15/09 + 217
45 Silgan Holdings, Inc., 6.75%, 11/15/13, # 46
100 Stone Container Corp., 9.75%, 02/01/11 112
--------------------------------------------------------------------------------------------------
544
--------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.8%
Boise Cascade Corp.,
45 6.50%, 11/01/10 + 47
23 7.00%, 11/01/13 + 24
Georgia-Pacific Corp.,
125 8.88%, 02/01/10 + 143
100 9.50%, 12/01/11 + 116
100 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 98
--------------------------------------------------------------------------------------------------
428
--------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.2%
100 Omnicare, Inc., 6.13%, 06/01/13 + 103
PIPELINES -- 1.2%
70 Aquila, Inc., 14.88%, 07/01/12 + 95
50 Dynegy Holdings, Inc.,
10.13%, 07/15/13, # + 56
270 El Paso Corp., 7.88%, 06/15/12 + 244
Williams Companies, Inc.,
$ 100 8.63%, 06/01/10 $ 109
155 8.13%, 03/15/12 169
--------------------------------------------------------------------------------------------------
673
--------------------------------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.2%
100 Von Hoffman Press, Inc.,
10.25%, 03/15/09 105
REAL ESTATE INVESTMENT TRUST -- 0.7%
180 Host Marriott LP, 9.25%, 10/01/07,
Ser. G + 200
200 MeriStar Hospitality Operating
Partnership LP/MeriStar Hospitality
Finance Corp., 10.50%, 06/15/09 + 211
--------------------------------------------------------------------------------------------------
411
--------------------------------------------------------------------------------------------------
RETAILING -- 0.6%
90 Dillard's, Inc., 7.85%, 10/01/12 + 94
185 JC Penney Co., Inc., 7.60%, 04/01/07 + 204
60 The Gap, Inc., 6.90%, 09/15/07 + 66
--------------------------------------------------------------------------------------------------
364
--------------------------------------------------------------------------------------------------
SEMI-CONDUCTORS -- 0.1%
62 AMI Semiconductor, Inc.,
10.75%, 02/01/13 + 72
STEEL -- 0.5%
170 AK Steel Corp., 7.88%, 02/15/09 + 150
50 Euramax International LTD,
8.50%, 08/15/11, # + 52
75 IPSCO, Inc. (Canada), 8.75%, 06/01/13 + 85
--------------------------------------------------------------------------------------------------
287
--------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 4.3%
175 AT&T Wireless Services, Inc.,
8.13%, 05/01/12 + 210
35 Cincinnati Bell, Inc., 8.38%, 01/15/14 + 37
Deutsche Telekom International
Finance BV (The Netherlands),
255 8.50%, 06/15/10 + 311
100 8.75%, 06/15/30 + 129
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- CONTINUED
$ 100 France Telecom SA (France),
9.75%, 03/01/31 + $ 132
90 Insight Midwest LP/Insight
Capital, Inc., 10.50%, 11/01/10 + 97
75 Koninklijke KPN NV (The Netherlands),
8.00%, 10/01/10 + 90
Nextel Communications, Inc.,
5 9.38%, 11/15/09 + 5
295 7.38%, 08/01/15 + 319
70 Nortel Networks LTD (Canada),
6.13%, 02/15/06 + 72
15 Qwest Corp., 9.13%, 03/15/12, # + 17
200 Rogers Wireless Communications, Inc.
(Canada), 9.63%, 05/01/11 + 244
Sprint Capital Corp.,
200 6.90%, 05/01/19 213
225 8.75%, 03/15/32 279
75 Syniverse Technologies, Inc.,
12.75%, 02/01/09, Ser. B 83
175 Verizon Global Funding Corp.,
7.38%, 09/01/12 206
--------------------------------------------------------------------------------------------------
2,444
--------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.3%
135 CP Ships LTD (Canada),
10.38%, 07/15/12 + 159
UTILITIES -- 2.0%
Calpine Corp.,
35 9.88%, 12/01/11, # + 34
100 8.75%, 07/15/13, # + 92
130 CMS Energy Corp., 7.75%, 08/01/10, # + 135
175 Dominion Resources, Inc.,
6.30%, 03/15/33 + 180
130 Reliant Resources, Inc.,
9.50%, 07/15/13 + 141
TECO Energy, Inc.,
80 7.20%, 05/01/11 84
110 7.00%, 05/01/12 114
45 The AES Corp., 8.75%, 06/15/08 + 47
275 TXU Energy Co., 7.00%, 03/15/13 314
--------------------------------------------------------------------------------------------------
1,141
--------------------------------------------------------------------------------------------------
WHOLESALING -- 0.1%
$ 75 Aviall, Inc., 7.63%, 07/01/11 + $ 80
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 21,608
(Cost $20,886)
--------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 2.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
3,825 Credit Suisse First Boston Mortgage
Securities Corp., 1.02%, 06/25/20,
Ser. 1997-2X, FRN, # + IO 63
6 DLJ Mortgage Acceptance Corp.,
36.42%, 07/25/27, Ser. 1997-D, FRN, # + 6
--------------------------------------------------------------------------------------------------
69
--------------------------------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 2.4%
1,300 Federal National Mortgage Association,
5.50%, 03/25/34, TBA 1,330
--------------------------------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 1,399
(Cost $1,544)
--------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 7.5%
315 COMM, 2.37%, 12/16/11,
Ser. 2000-FL1A, Class H, FRN, # + 315
300 Credit Suisse First Boston Mortgage
Securities Corp., 6.38%, 12/16/35,
Ser. 2001-CK1, Class A3, + 338
876 First Union Commercial Mortgage Trust,
5.73%, 10/15/35, Ser. 1999-C1, Class A + 920
770 Greenwich Capital Commercial
Funding Corp., 3.86%, 07/05/12,
Ser. 2003-C1, Class A3 + 751
Morgan Stanley Capital I,
300 7.93%, 12/03/05, Ser. 2000-HG,
Class E, FRN, # + 321
1,000 7.70%, 10/03/30, Ser. 1997-XL1 G, # + 873
690 Nomura Asset Securities Corp.,
6.59%, 03/15/30,
Ser. 1998-D6, Class A1B + 779
Total Commercial Mortgage
Backed Securities 4,297
(Cost $4,184)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
PRIVATE PLACEMENTS -- 26.4%
CO-OP APARTMENTS -- 18.5%
$ 2,565 127-129-131 West 96th Street Note,
Secured by First Mortgage and
Agreement on Co-op Apartment
Building In New York City,
6.85%, 12/01/18, #, (i) (f) $ 2,814
1,470 127-129-131 West 96th Street Note,
Secured by Second Mortgage and
Agreement on Co-op Apartment
Building In New York City,
6.85%, 11/01/27, #, (i) (f) 1,619
976 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, #, (i) (f) 980
1,356 270 5th Ave., Secured by
First Mortgage and Agreement on
Co-op Apartment Building in
Brooklyn, New York,
6.93%, 08/01/18, #, (i) (f) 1,493
538 3512 Oxford Ave., Secured By
First Mortgage and Agreement on
Co-op Apartment Building in Riverdale,
New York, 8.45%, 06/01/17, #, (i) (f) 632
481 86-06/86-42 155th Street,
7.00%, 01/01/14, #, (i) (f) 538
746 421 West 57th St. Note, Secured
by First Mortgage and Agreement
on Co-op Apartment Building In
New York City, 8.98%,
07/01/22, #, (i) (f) 866
428 482 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, #, (i) (f) 465
539 3810 Greystone Avenue,
8.50%, 06/01/17, #, (i) (f) 597
449 31-33 Mercer St., 7.49%,
04/01/23, #, (i) (f) 525
--------------------------------------------------------------------------------------------------
10,529
--------------------------------------------------------------------------------------------------
CONVENTIONAL MULTI-FAMILY -- 7.9%
$ 1,399 Bel Clare Estates MHC, MN,
6.81%, 08/01/18, # (f) (i) + $ 1,562
1,187 Northstar Terrace MN,
6.63%, 10/01/18, #, (i) (f) 1,289
1,539 Shangri La MHC Co.,
6.40%, 10/01/08, #, (i) (f) 1,681
--------------------------------------------------------------------------------------------------
4,532
--------------------------------------------------------------------------------------------------
Total Private Placements 15,061
(Cost $13,674)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
WARRANT -- 0.0%
FOREIGN GOVERNMENT SECURITIES -- 0.0%
1 Republic of Venezuela
(Oil Obligation) (Venezuela),
expires 04/15/20, 0
(Cost $0)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments 54,906
(Cost $51,195)
--------------------------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.7%
U.S. TREASURY SECURITY -- 0.3%
$ 150 U.S. Treasury Bills, 0.92%, 05/20/04 + 150
(Cost $150)
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 3.4%
1,953 JPMorgan Prime Money Market
Fund (a) + 1,953
(Cost $1,953)
--------------------------------------------------------------------------------------------------
Total Short-Term Investments 2,103
(Cost $2,103)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 57,009
(COST $53,298)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<Page>
SUMMARY OF INVESTMENTS BY COUNTRY, FEBRUARY 29, 2004
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- ---------------------------------------------------------------------------------------------------------------------
United States 74.2%
France 3.1
Germany 2.3
Brazil 1.8
Russia 1.8
Colombia 1.4
Canada 1.3
The Netherlands 1.3
Peru 1.2
Ukraine 1.2
El Salvador 1.1
Mexico 1.1
Panama 1.0
Bulgaria 0.9
South Africa 0.9
Dominican Republic 0.8
Malaysia 0.7
Philippines 0.7
Turkey 0.7
Venezuela 0.7
Other (below 0.5%) 1.8
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 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
3 Euro-BOBL March, 2004 $ 420 $ 12
22 Euro-BUND March, 2004 3,165 58
30 Treasury Bonds June, 2004 3,373 15
SHORT FUTURES OUTSTANDING
(9) Treasury Bonds June, 2004 (1,012) (8)
(30) 5 Year Treasury Notes June, 2004 (3,372) (15)
(136) 10 Year Treasury Notes June, 2004 (15,487) (75)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO BUY DATE VALUE (USD) 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------
811 EUR 03/04/04 $ 1,024 $ 1,008 $ (16)
13 GBP 03/04/04 23 23 --^^
- ---------------------------------------------------------------------------------------------------------------------
$ 1,047 $ 1,031 $ (16)
- ---------------------------------------------------------------------------------------------------------------------
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------
175 CAD 03/04/04 $ 134 $ 130 $ 4
119 GBP 03/04/04 218 220 (2)
3,010 EUR 03/04/04 3,817 3,739 78
- ---------------------------------------------------------------------------------------------------------------------
$ 4,169 $ 4,089 $ 80
- ---------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<Page>
JPMORGAN SHORT TERM BOND FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 84.0%
PREFERRED STOCKS -- 0.2%
FINANCIAL SERVICES -- 0.2%
0^^ Smithkline Beecham Holdings Corp. + $ 2,100
(Cost $2,100)
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 6.0%
U.S. Treasury Notes & Bonds,
$ 35,150 2.25%, 02/15/07 35,284
17,850 4.38%, 05/15/07 + 19,025
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 54,309
(Cost $54,145)
--------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 5.8%
12,600 Federal Home Loan Mortgage Corp.,
2.50%, 12/04/06, MTN + 12,630
Federal National Mortgage Association,
26,900 2.38%, 02/15/07 + 26,911
1,650 4.10%, 08/27/08 + 1,674
11,270 6.40%, 05/14/09 + 11,381
--------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 52,596
(Cost $52,507)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 2.9%
Province of Ontario (Canada),
3,900 4.20%, 06/30/05, (Yankee) + 4,034
8,100 2.63%, 12/15/05 + 8,202
4,250 Republic of Chile (Chile),
1.52%, 01/28/08, FRN + 4,245
Russian Federation (Russia),
5,750 8.75%, 07/24/05, # + 6,196
1,800 10.00%, 06/26/07, # + 2,106
1,800 United Mexican States (Mexico),
1.84%, 01/13/09, FRN 1,806
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 26,589
(Cost $26,449)
--------------------------------------------------------------------------------------------------
SUPRANATIONAL NOTES & BONDS -- 0.6%
Inter-American Development Bank,
1,800 3.88%, 09/27/04 + 1,828
3,400 6.13%, 03/08/06 + 3,689
--------------------------------------------------------------------------------------------------
Total Supranational Notes & Bonds 5,517
(Cost $5,481)
--------------------------------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 0.8%
ILLINOIS -- 0.3%
$ 2,350 Illinois State, Taxable Pension, GO,
2.50%, 06/01/08 + $ 2,292
NORTH CAROLINA -- 0.1%
1,285 North Carolina Municipal
Power Agency No. 1, Catawba, Taxable,
Ser. B, Rev., 3.26%, 01/01/05 + 1,293
OHIO -- 0.1%
550 Ohio State Air Quality
Development Authority, Toledo,
Ser. A, Rev., Adj., 2.20%, 04/01/24 + 550
TEXAS -- 0.3%
3,150 Texas Public Finance Authority,
Unemployment Compensation,
Ser. B, Rev., 2.63%, 06/15/06 3,178
--------------------------------------------------------------------------------------------------
Total State and Municipal Obligations 7,313
(Cost $7,326)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 34.8%
AGRICULTURAL PRODUCTION/SERVICES -- 0.1%
1,200 Altria Group, Inc., 5.63%, 11/04/08 + 1,256
AUTOMOTIVE -- 2.6%
7,300 Ford Motor Credit Co.,
6.50%, 01/25/07 + 7,807
General Motors Acceptance Corp.,
900 6.75%, 01/15/06 + 964
5,800 2.02%, 01/16/07, MTN, FRN + 5,779
6,300 6.13%, 02/01/07 + 6,764
2,000 Hyundai Motor Manufacturing
Alabama LLC, 5.30%, 12/19/08, # + 2,058
--------------------------------------------------------------------------------------------------
23,372
--------------------------------------------------------------------------------------------------
BANKING -- 7.3%
2,800 BBVA Bancomer Capital Trust I
(Mexico), 10.50%, 02/16/11, # 3,182
1,200 Capital One Bank, 6.88%, 02/01/06 + 1,299
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<Page>
SEMI-ANNUAL REPORT FEBRUARY 29 2004
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 3,500 ForeningsSparbanken AB (Sweden),
7.50%, to 11/06; thereafter
FRN, 12/31/49, # $ 3,903
2,000 KBC Bank Fund Trust III,
9.86%, to 11/09; thereafter
FRN, 11/29/49, # + 2,577
10,500 Northern Rock PLC (United Kingdom),
1.27%, 03/18/04, MTN, FRN, # + 10,501
Popular North America, Inc.,
200 6.13%, 10/15/06, MTN + 218
1,950 4.25%, 04/01/08 + 2,001
4,100 Skandinaviska Enskilda Banken AB
(Sweden), 8.13%, to 9/06;
thereafter FRN, 12/31/49, # + 4,620
5,000 Spintab AB (Sweden),
7.50%, to 08/06; thereafter
FRN, 12/31/49, # + 5,556
2,000 Unicredito Italiano Capital Trust II,
9.20%, to 10/10; thereafter
FRN, 10/05/49, # 2,528
US Bancorp,
2,700 6.75%, 10/15/05 2,920
4,750 2.75%, 03/30/06, MTN 4,843
5,850 U.S. Bank N.A., 2.85%, 11/15/06 5,937
6,280 Washington Mutual Bank FA,
1.44%, 05/14/04, FRN 6,285
2,500 Washington Mutual, Inc.,
7.50%, 08/15/06 2,803
1,430 Woori Bank (South Korea),
5.75%, to 03/09; thereafter
FRN, 03/13/14, # 1,464
4,650 Zions Bancorporation,
2.70%, 05/01/06 4,696
--------------------------------------------------------------------------------------------------
65,333
--------------------------------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.7%
3,800 Compaq Computer Corp.,
7.65%, 08/01/05 + 4,081
2,000 Unisys Corp., 8.13%, 06/01/06 2,170
--------------------------------------------------------------------------------------------------
6,251
--------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.4%
$ 3,900 Diageo Finance BV (The Netherlands),
3.00%, 12/15/06 + $ 3,956
FINANCIAL SERVICES -- 14.9%
4,600 BNP US Funding LLC, 7.74%,
to 12/07; thereafter FRN, 12/29/49, # 5,339
4,300 Capital One Bank, 4.25%, 12/01/08 + 4,381
4,350 Caterpillar Financial Services Corp.,
2.59%, 07/15/06, MTN + 4,389
4,545 CIT Group, Inc., 4.13%, 02/21/06 + 4,717
4,250 Citigroup, Inc., 5.75%, 05/10/06 + 4,580
6,150 Countrywide Home Loans, Inc.,
2.88%, 02/15/07, Ser. L, MTN + 6,177
3,450 Counts Trusts, 1.90%, 08/15/07,
Ser. 2002-10, FRN, # + 3,450
3,450 1.95%, 08/15/07, Ser. 2002-11, FRN, # + 3,450
4,250 FleetBoston Financial Corp.,
7.25%, 09/15/05 + 4,603
4,600 General Electric Capital Corp.,
2.85%, 01/30/06, Ser. A, MTN + 4,673
Household Finance Corp.,
3,050 1.47%, 05/28/04, MTN, FRN + 3,053
3,250 3.38%, 02/21/06, MTN + 3,329
2,000 HSBC Capital Funding LP
(Channel Islands), 9.55%, 12/31/49,
FRN, # + 2,586
2,100 International Lease Finance Corp.,
4.35%, 09/15/08 + 2,178
6,100 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 + 6,159
1,650 Mantis Reef LTD (Australia),
4.69%, 11/14/08, # + 1,677
2,300 MBNA Corp., 4.63%, 09/15/08 + 2,393
5,050 Merrill Lynch & Co., Inc.,
5.36%, 02/01/07, Ser. B, MTN + 5,474
2,000 Mizuho Preferred Capital Co., LLC,
8.79%, to 06/08; thereafter
FRN, 12/31/49, # + 2,190
4,050 Natexis AMBS Co., LLC, 8.44%,
to 06/08; thereafter FRN, 12/29/49, # 4,775
1,800 Pricoa Global Funding I,
3.90%, 12/15/08, # + 1,828
</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, # + $ 8,991
Restructured Asset Securities with
Enhanced Returns (RACERS),
6,300 0.95%, 04/15/04, Ser. 2002-35, Class C,
FRN, # + 6,297
6,200 0.96%, 04/15/04, Ser. 2002-40, Class C,
FRN, # + 6,197
1,475 Sovereign BanCorp., Inc., 10.50%,
11/15/06 + 1,763
Special Purpose Accounts
Receivable Cooperative Corp.,
2,900 1.42%, 05/23/05, Ser. 2003-3, FRN, # 2,900
6,300 1.44%, 05/23/05, Ser. 2003-6, FRN, # 6,300
15,000 1.72%, 05/15/06, Ser. 2003-4, FRN, # 15,001
5,050 The Bear Stearns Co., Inc.,
6.50%, 05/01/06 + 5,501
--------------------------------------------------------------------------------------------------
134,351
--------------------------------------------------------------------------------------------------
INSURANCE -- 2.1%
ASIF Global Financing,
5,350 1.42%, 03/15/07, FRN, # + 5,365
6,700 2.50%, 01/30/07, # + 6,678
3,800 Metropolitan Life Global Funding I,
4.75%, 06/20/07, # + 4,028
2,600 Prudential Insurance Co. of America,
6.38%, 07/23/06, # + 2,844
--------------------------------------------------------------------------------------------------
18,915
--------------------------------------------------------------------------------------------------
MULTI-MEDIA -- 0.3%
2,600 Time Warner, Inc., 6.13%, 04/15/06 + 2,801
OIL & GAS -- 0.8%
1,600 Halliburton Co.,
1.87%, 01/26/07, FRN, # + 1,604
1,800 Pemex Project Funding Master
Trust (Mexico),
2.92%, 10/15/09, FRN, # + 1,859
4,075 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 4,124
--------------------------------------------------------------------------------------------------
7,587
--------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.2%
$ 2,000 Georgia-Pacific Corp.,
7.38%, 07/15/08 + $ 2,160
REAL ESTATE -- 1.0%
7,960 Socgen Real Estate Co., LLC, 7.64%,
to 09/07; thereafter
FRN, 12/31/49, # + 9,113
REAL ESTATE INVESTMENT TRUST -- 0.2%
2,000 iStar Financial, Inc.,
4.88%, 01/15/09, # + 2,000
TELECOMMUNICATIONS -- 1.7%
3,100 Deutsche Telekom International
Finance (Germany), 8.25%, 06/15/05 + 3,348
3,050 France Telecom (France),
8.45%, 03/01/06 + 3,377
2,400 Sprint Capital Corp., 7.13%, 01/30/06 + 2,610
1,500 Telecom Italia Capital (Luxembourg),
4.00%, 11/15/08, # 1,516
3,900 Verizon Wireless, Inc., 5.38%, 12/15/06 4,190
--------------------------------------------------------------------------------------------------
15,041
--------------------------------------------------------------------------------------------------
UTILITIES -- 2.5%
1,500 AEP Texas Central Co., 3.00%, 02/15/05,
Ser. F + 1,518
4,850 Alabama Power Co., 2.80%, 12/01/06 + 4,891
4,050 Commonwealth Edison Co.,
6.40%, 10/15/05 + 4,334
2,250 Consolidated Edison Co. of New York,
Series C, 6.63%, 12/15/05 + 2,435
2,700 FPL Group Capital, Inc.,
1.88%, 03/30/05 + 2,713
National Rural Utilities Cooperative
Finance Corp.,
1,700 3.00%, 02/15/06 + 1,731
3,100 6.00%, 05/15/06 + 3,352
1,500 Pacificorp, 5.65%, 11/01/06 + 1,619
--------------------------------------------------------------------------------------------------
22,593
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 314,729
(Cost $312,105)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 3.3%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.3%
$ 727 Credit Suisse First Boston Mortgage
Securities Corp., 1.74%, 11/25/31,
Ser. 2001-26, Class 3A2, FRN + $ 728
6,161 Federal Home Loan Mortgage
Corp., 6.00%, 08/15/08, Ser. 1565,
Class P + 6,469
Federal National Mortgage Association,
724 5.50%, 10/25/11, Ser. 2002-57,
Class PC + 725
769 5.50%, 03/25/12, Ser. 2002-70,
Class PC + 771
Government National Mortgage
Association,
2,450 1.59%, 04/16/32, Ser. 2002-24,
Class FA, FRN + 2,462
3,396 1.59%, 05/16/32, Ser. 2002-27,
Class FA, FRN + 3,414
8,515 Mastr Adjustable Rate Mortgages Trust,
2.51%, 12/25/33, Ser. 2003-6,
Class 1A1, FRN + 8,576
256 Residential Accredit Loans, Inc.,
1.64%, 08/25/31, Ser. 2001-QS11,
Class A5, FRN + 256
6,903 Wells Fargo Mortgage Backed
Securities Trust, 4.69%, 12/25/33,
Ser. 2003-N, Class 1A4, FRN 7,015
--------------------------------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 30,416
(Cost $30,242)
--------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 5.6%
10,472 CalSTRS Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # + 10,806
3,174 Calwest Industrial Trust, 1.36%,
06/15/15, Ser. 2003-CALA,
Class A, FRN, # + 3,174
1,889 COMM, 2.37%, 12/16/11, Ser.
2000-FL1A, Class H, FRN, # + 1,889
754 Credit Suisse First Boston Mortgage
Securities Corp., 7.15%, 06/20/29,
Ser. 1997-C1, Class A1B + 752
$ 5,190 First Union - Lehman Brothers
Commercial Mortgage Securities, Inc.,
7.38%, 04/18/29, Ser. 1997-C1,
Class A3 + $ 5,782
LB-UBS Commercial Mortgage Trust,
2,950 3.32%, 03/15/27, Ser. 2003-C1,
Class A2 + 2,969
5,750 3.48%, 07/15/27, Ser. 2003-C5,
Class A2 + 5,781
3,261 Lehman Large Loan, 6.79%, 10/12/34,
Ser. 1997-LL1, Class A1 3,301
3,000 Mall of America Capital Co. LLC,
1.30%, 03/12/10, Ser. 2000-1,
Class A, FRN, # + 2,995
3,311 Morgan Stanley Capital I,
6.22%, 06/03/30, Ser. 1998-XL1,
Class A1 + 3,444
7,400 6.48%, 11/15/30, Ser. 1998-HF2,
Class A2 + 8,310
1,943 Mortgage Capital Funding, Inc.,
6.00%, 11/18/31, Ser. 1998-MC3,
Class A1 + 2,072
--------------------------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 51,275
(Cost $50,415)
--------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 24.0%
American Express Credit
Account Master Trust,
6,000 1.23%, 09/15/08, Ser. 2001-1,
Class A, FRN + 6,014
4,000 1.44%, 12/15/08, Ser. 2001-6,
Class B, FRN + 4,010
4,900 American Express Master Trust,
1.16%, 12/15/05, Ser. 2002-1,
Class A, FRN + 4,902
AmeriCredit Automobile
Receivables Trust,
3,600 4.41%, 11/12/08, Ser. 2001-D,
Class A4 + 3,713
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 9,200 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + $ 9,263
11,400 Bank One Issuance Trust, 4.16%,
01/15/08, Ser. 2002-A2, Class A2 + 11,761
3,000 Capital Auto Receivables Asset Trust,
1.18%, 04/17/06, Ser. 2002-5,
Class A3A, FRN + 3,001
550 Capital One Auto Finance Trust, 3.18%,
09/15/10, Ser. 2003-B, Class A4 + 550
3,700 Capital One Master Trust,
1.89%, 08/15/08, Ser. 2000-4,
Class C, FRN, # + 3,713
Capital One Multi-Asset Execution Trust,
6,400 1.20%, 05/15/08, Ser. 2003-A2,
Class A2, FRN + 6,404
3,000 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 + 3,038
3,650 Carmax Auto Owner Trust, 3.07%,
10/15/10, Ser. 2003-2, Class A4 + 3,679
Citibank Credit Card Issuance Trust,
5,600 2.70%, 01/15/08, Ser. 2003-A2,
Class A2 + 5,680
5,050 2.17%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 5,096
1,125 Citibank Credit Card Master Trust I,
0.00%, 08/15/06, Ser. 1997-6,
Class A, PO + 1,120
1,969 Comed Transitional Funding Trust,
5.44%, 03/25/07, Ser. 1998-1,
Class A5 + 2,017
Countrywide Asset-Backed Certificates,
5,400 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 + 5,513
448 1.43%, 04/25/32, Ser. 2001-4,
Class A, FRN + 449
DaimlerChrysler Auto Trust,
0^^ 3.85%, 04/06/06, Ser. 2002-A, Class A3 0^^
700 3.53%, 12/06/07, Ser. 2002-B,
Class A4 + 719
1,100 2.88%, 10/08/09, Ser. 2003-A,
Class A4 + 1,116
Discover Card Master Trust I,
$ 4,750 1.16%, 07/15/07, Ser. 2002-1,
Class A, FRN + $ 4,750
6,520 1.27%, 11/15/07, Ser. 2000-5,
Class A, FRN + 6,529
5,735 1.15%, 04/15/08, Ser. 2002-4,
Class A, FRN + 5,737
1,400 1.24%, 09/15/08, Ser. 2001-3,
Class A, FRN + 1,404
2,324 EQCC Trust, 1.39%, 11/25/31,
Ser. 2002-1, Class 2A, FRN + 2,329
First USA Credit Card Master Trust,
4,800 1.45%, 11/20/06, Ser. 2001- 2,
Class B, FRN + 4,801
2,430 2.04%, 11/20/06, Ser. 2001-2,
Class C, FRN, # + 2,431
120 Ford Credit Auto Owner Trust, 4.83%,
02/15/05, Ser. 2001-C, Class A4 + 120
8,450 Ford Credit Floorplan Master Owner
Trust, 1.23%, 07/15/08, Ser. 2001-2,
Class A, FRN + 8,472
Honda Auto Receivables Owner Trust,
4,500 1.92%, 11/20/06, Ser. 2003-1, Class A3 + 4,524
14,205 2.48%, 07/18/08, Ser. 2003-1, Class A4 + 14,348
Household Automotive Trust,
12,000 3.44%, 05/18/09, Ser. 2002-3,
Class A4A + 12,263
1,700 3.02%, 12/17/10, Ser. 2003-2,
Class A4 + 1,713
2,200 MBNA Credit Card Master Note
Trust, 1.49%, 01/15/08, Ser. 2002-B3,
Class B3 + 2,204
Onyx Acceptance Grantor Trust,
3,552 5.49%, 11/15/07, Ser. 2001-B, Class A4 + 3,626
4,146 5.23%, 05/15/08, Ser. 2001-C, Class A4 + 4,252
1,825 Option One Mortgage Loan Trust,
1.38%, 02/25/32, Ser. 2002-1,
Class A, FRN + 1,829
4,617 Orchid Structured Finance CDO LTD,
1.22%, 11/18/38, Ser. 2003-1A,
Class A1-MM, FRN, # + 4,617
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
62
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,954 Peco Energy Transition Trust, 5.80%,
03/01/07, Ser. 1999-A, Class A4 + $ 3,038
534 Providian Home Equity Loan Trust,
1.38%, 06/25/25, Ser. 1999-1,
Class A, FRN + 535
1,083 Sears Credit Account Master Trust,
7.00%, 07/15/08, Ser. 1996-3, Class A + 1,097
4,100 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # + 4,135
6,800 Volkswagen Auto Loan Enhanced
Trust, 2.94%, 03/22/10, Ser. 2003-2,
Class A4 6,875
Wachovia Asset Securitization, Inc.,
3,589 1.52%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 3,606
6,166 1.38%, 03/25/33, Ser. 2003-HE1,
Class A1, FRN 6,174
WFS Financial Owner Trust,
7,400 4.50%, 02/20/10, Ser. 2002-2,
Class A4, SUB 7,702
6,400 3.25%, 05/20/11, Ser. 2003-3,
Class A4 6,501
10,400 World Omni Auto Receivables
Trust, 2.87%, 11/15/10, Ser. 2003-B,
Class A4 10,475
--------------------------------------------------------------------------------------------------
Total Asset Backed Securities 217,845
(Cost $215,603)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments 762,689
(Cost $756,373)
--------------------------------------------------------------------------------------------------
<Caption>
UNITS
- ---------------------------------------------------------------------------------------------------------------------
SHORT - TERM INVESTMENTS -- 16.0%
OPTIONS -- 0.1%
45,792 Call Option on Interest Rate Swap,
expiring 3/8/04, if exercised the
Fund receives fixed 3.47% and pays
3 month USD-LIBOR, European Style 285
106,850 Call Option on Interest Rate Swap,
expiring 5/11/04, if exercised the
Fund receives fixed 1.70% and pays
3 month USD-LIBOR, European Style 229
<Caption>
UNITS ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
54,350 Put Option on FNMA, 30yr, 5.50%
strike price of 99.72, expires 3/8/04,
European Style $ 0^^
26,472 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the
Fund pays fixed 4.65% and receives 3 month USD-LIBOR, European Style 7
26,472 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the
Fund pays fixed 4.85% and receives 3 month USD-LIBOR, European Style 1
--------------------------------------------------------------------------------------------------
Total Options 522
(Cost $1,100)
--------------------------------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY -- 0.1%
$ 1,300 U.S. Treasury Bills, 0.92%, 07/08/04 + 1,296
(Cost $1,296)
MUNICIPAL SECURITIES -- 1.0%
FLORIDA -- 0.2%
1,800 Florida Educational Loan Marketing
Corp., RAMS, Ser. A-2, Rev., FRDO,
1.07%, 03/12/04 + 1,800
PENNSYLVANIA -- 0.3%
2,800 Beaver County Industrial Development
Authority, Ser. A, Rev., FRDO,
4.85%, 06/01/04 + 2,816
SOUTH CAROLINA -- 0.5%
4,700 South Carolina Student Loan Corp.,
Education Loans, Ser. A-1, Rev., FRDO,
1.25%, 06/22/04 + 4,700
--------------------------------------------------------------------------------------------------
Total Municipal Securities 9,316
(Cost $9,319)
--------------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.3%
CONSUMER PRODUCTS -- 0.3%
2,700 Altria Group, Inc., 1.97%, 10/15/04 + 2,675
(Cost $2,666)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<Page>
<Table>
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
MONEY MARKET FUND -- 14.5%
131,559 JPMorgan Prime Money Market
Fund (a) + $ 131,559
(Cost $131,559)
--------------------------------------------------------------------------------------------------
Total Short- Term Investments 145,368
(Cost $145,940)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 908,057
(COST $902,313)
--------------------------------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION/
CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
90 Euro-BOBL March, 2004 $ 12,610 $ 31
101 Euro-Bund March, 2004 14,532 309
1,321 Eurodollar September, 2004 325,544 63
SHORT FUTURES OUTSTANDING
(1,325) Eurodollar December, 2004 (325,519) (156)
(8) 2 Year Treasury Notes June, 2004 (1,716) (2)
(267) 5 Year Treasury Notes June, 2004 (30,012) (116)
(133) 10 Year Treasury Notes June, 2004 (15,145) (92)
</Table>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ---------------------------------------------------------------------------------------------------------------------
(47,700) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 99.72, expiring 3/8/04,
European Style $ (291)
(213,700) Call Option on Interest Rate Swap, expiring 5/13/05, if exercised the Fund pays
fixed 1.50% and receives 3 month LIBOR, European Style (215)
Total Call Options Written $ (506)
PUT OPTIONS WRITTEN
(54,350) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 100.84, expiring 3/8/04,
European Style $ (1)
(1) Put Option on Sept 04 Euro Dollar Future, strike price of 98.25, expiring 9/13/04,
European Style (177)
(44,680) Put Option on Interest Rate Swap, expiring 3/10/09, if exercised the Fund receives
fixed 3.97% and pays 3 month LIBOR, European Style ( - )^^
(26,472) Put Option on Interest Rate Swap, expiring 3/10/14, if exercised the Fund receives
fixed 4.65% and pays 3 month LIBOR, European Style (13)
Total Put Options Written $ (191)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<Page>
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, 2.25%, 02/15/07, price less 100.16,
the Fund receives positive, pays negative 03/24/04 $ 33,400 $ 46
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 3.00%, 02/15/08, price less 104.39,
the Fund receives negative, pays positive 03/24/04 77,150 (113)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 3.13%, 10/15/08, price less 100.94,
the Fund receives negative, pays positive 03/24/04 29,690 (49)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 3.88%, 01/15/09, price less 114.49,
the Fund receives negative, pays positive 03/30/04 18,400 (79)
Swap - price lock with Credit Suisse First Boston International, on
U.S. Treasury Note, 1.88%, 01/31/06, price less 100.39,
the Fund receives positive, pays negative 04/06/04 280,900 -
Swap - credit default with Deutsche Bank AG, New York on
5.3Mil Coca-Cola Co., 5.75%, 3/15/11, the Fund receives 16 bps,
if default, the Fund takes on underlying security 12/31/06 5,300 (8)
Swap - credit default with Lehman Brothers Special Financing, protection
of 10 million IBOXX SERIES BB2, quarterly receipt of 290 BPS on
notional subject to terms of agreement 03/20/09 10,000 20
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<Page>
JPMORGAN SHORT TERM BOND FUND II
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 93.0%
PREFERRED STOCKS -- 0.3%
FINANCIAL SERVICES -- 0.3%
0^^ Smithkline Beecham Holdings Corp.
(Cost $3,800) $ 3,800
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ---------------------------------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 4.3%
$ 64,950 U.S. Treasury Notes & Bonds,
2.25%, 02/15/07 +
(Cost $65,151) 65,199
U.S. GOVERNMENT AGENCY SECURITIES -- 24.6%
Federal Home Loan Bank,
8,300 3.75%, 04/15/04 + 8,327
11,100 1.50%, 08/26/05 + 11,092
Federal Home Loan Mortgage Corp.,
80,600 1.88%, 02/15/06 + 80,711
40,200 2.50%, 12/04/06, MTN + 40,296
61,800 4.88%, 03/15/07 + 66,257
30,750 3.63%, 09/15/08, MTN + 31,420
4,600 2.05%, 11/28/08, MTN + 4,610
Federal National Mortgage Association,
17,600 1.88%, 09/15/05 + 17,693
34,350 2.75%, 08/11/06 + 34,512
13,300 2.38%, 02/15/07 + 13,305
2,830 4.10%, 08/27/08 + 2,871
18,507 6.40%, 05/14/09 + 18,690
40,667 Student Loan Marketing Association,
3.38%, 07/15/04, MTN + 41,023
--------------------------------------------------------------------------------------------------
Total U.S. Government Agency
Securities 370,807
(Cost $369,089)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 1.8%
Province of Ontario (Canada),
4,850 4.20%, 06/30/05, (Yankee) 5,017
3,000 6.00%, 02/21/06 3,233
6,750 Province of Quebec (Canada),
5.50%, 04/11/06 7,243
7,550 Republic of Chile (Chile),
1.52%, 01/28/08, FRN + 7,541
$ 3,300 United Mexican States (Mexico),
1.84%, 01/13/09, FRN $ 3,312
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 26,346
(Cost $26,234)
--------------------------------------------------------------------------------------------------
SUPRANATIONAL NOTES & BONDS -- 0.2%
2,600 Inter-American Development Bank,
3.88%, 09/27/04
(Cost $2,601) 2,641
STATE AND MUNICIPAL OBLIGATIONS -- 0.6%
NORTH CAROLINA -- 0.1%
2,140 North Carolina Municipal Power
Agency No. 1, Catawba, Taxable, Ser. B,
Rev., 3.26%, 01/01/05 2,154
OHIO -- 0.1%
1,350 Ohio State Air Quality Development
Authority, Toledo, Ser. A, Rev., Adj.,
2.20%, 04/01/24 1,350
TEXAS-- 0.4%
5,150 Texas Public Finance Authority,
Unemployment Compensation, Ser. B, Rev.,
2.63%, 06/15/06 5,194
--------------------------------------------------------------------------------------------------
Total State and Municipal Obligations 8,698
(Cost $8,628)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 32.5%
AGRICULTURAL PRODUCTION/SERVICES -- 0.1%
2,100 Altria Group, Inc., 5.63%, 11/04/08 + 2,198
AUTOMOTIVE -- 2.7%
Ford Motor Credit Co.,
13,000 6.50%, 01/25/07 + 13,902
1,100 5.63%, 10/01/08 + 1,132
General Motors Acceptance Corp.,
1,500 6.75%, 01/15/06 + 1,607
11,200 2.02%, 01/16/07, MTN, FRN + 11,160
11,250 6.13%, 02/01/07 + 12,078
--------------------------------------------------------------------------------------------------
39,879
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- 5.6%
$ 250 Bank of America NA,
1.26%, 06/03/04, FRN + $ 250
2,100 Capital One Bank, 6.88%, 02/01/06 + 2,274
6,200 ForeningsSparbanken AB (Sweden),
7.50%, to 11/06;
thereafter FRN, 12/31/49, # 6,914
15,800 Northern Rock PLC (United Kingdom),
1.27%, 03/18/04, MTN, FRN, # 15,800
Popular North America, Inc.,
500 6.13%, 10/15/06, MTN 546
3,250 4.25%, 04/01/08 3,335
7,300 Skandinaviska Enskilda Banken AB
(Sweden), 8.13%, to 09/06;
thereafter FRN, 12/31/49, # 8,227
U.S. Bancorp,
5,800 6.75%, 10/15/05 6,272
7,900 2.75%, 03/30/06, MTN 8,054
10,100 U.S. Bank N.A., 2.85%, 11/15/06 10,249
10,100 Washington Mutual Bank FA,
1.44%, 05/14/04, FRN 10,107
4,350 Washington Mutual, Inc.,
7.50%, 08/15/06 4,877
8,000 Zions Bancorporation, 2.70%, 05/01/06 8,079
--------------------------------------------------------------------------------------------------
84,984
--------------------------------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.5%
6,600 Compaq Computer Corp.,
7.65%, 08/01/05 + 7,089
CONSUMER PRODUCTS -- 0.5%
7,225 Diageo Finance BV (The Netherlands),
3.00%, 12/15/06 + 7,329
FINANCIAL SERVICES -- 14.5%
7,900 BNP US Funding LLC, 7.74%,
to 12/07; thereafter FRN, 12/31/49, # 9,169
7,700 Capital One Bank, 4.25%, 12/01/08 + 7,845
7,400 Caterpillar Financial Services Corp.,
2.59%, 07/15/06, MTN + 7,467
6,950 CIT Group, Inc., 4.13%, 02/21/06 + 7,214
Citigroup, Inc.,
3,150 6.75%, 12/01/05 + 3,414
$ 7,100 5.75%, 05/10/06 + $ 7,651
10,750 Countrywide Home Loans, Inc., 2.88%,
02/15/07, Ser. L, MTN + 10,796
Counts Trusts,
6,050 1.90%, 08/15/07, Ser. 2002-10,
FRN, # + 6,050
6,050 1.95%, 08/15/07, Ser. 2002-11,
FRN, # + 6,050
7,500 FleetBoston Financial Corp.,
7.25%, 09/15/05 + 8,122
4,200 General Electric Capital Corp.,
2.85%, 01/30/06, Ser. A, MTN + 4,267
Household Finance Corp.,
4,969 1.52%, 05/29/04, MTN, FRN 4,974
5,300 3.38%, 02/21/06, MTN 5,428
3,400 International Lease Finance Corp.,
4.35%, 09/15/08 3,527
11,800 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 11,914
2,700 Mantis Reef LTD (Australia),
4.69%, 11/14/08, # 2,745
3,900 MBNA Corp., 4.63%, 09/15/08 4,058
8,895 Merrill Lynch & Co., Inc., 5.36%,
02/01/07, Ser. B, MTN 9,643
6,950 Natexis AMBS Co., LLC, 8.44%,
to 06/08; thereafter FRN, 12/29/49, # 8,194
3,150 Pricoa Global Funding I,
3.90%, 12/15/08, # 3,199
10,600 Principal Life Global, 5.13%, 06/28/07, # 11,482
Restructured Asset Securities with
Enhanced Returns (RACERS),
11,000 0.98%, 04/15/04, Ser. 2002-35,
Class C, FRN, # 10,994
10,800 0.96%, 04/15/04, Ser. 2002-40,
Class C, FRN, # 10,794
2,647 Sovereign BanCorp., Inc.,
10.50%, 11/15/06 3,164
Special Purpose Accounts
Receivable Cooperative Corp.,
5,100 1.42%, 05/23/05, Ser. 2003-3, FRN, # 5,100
10,100 1.44%, 05/23/05, Ser. 2003-6, FRN, # 10,100
25,176 1.72%, 05/15/06, Ser. 2003-4, FRN, # 25,176
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 8,700 The Bear Stearns Co., Inc.,
6.50%, 05/01/06 + $ 9,477
--------------------------------------------------------------------------------------------------
218,014
--------------------------------------------------------------------------------------------------
INSURANCE -- 2.1%
ASIF Global Financing,
9,100 1.42%, 03/15/07, FRN, # + 9,125
11,900 2.50%, 01/30/07, # + 11,860
5,900 Metropolitan Life Global Funding I,
4.75%, 06/20/07, # 6,255
4,600 Prudential Insurance Co. of America,
6.38%, 07/23/06, # 5,032
--------------------------------------------------------------------------------------------------
32,272
--------------------------------------------------------------------------------------------------
MULTI-MEDIA -- 0.3%
4,450 Time Warner, Inc., 6.13%, 04/15/06 + 4,794
OIL & GAS -- 0.9%
2,900 Halliburton Co., 1.87%, 01/26/07, FRN, # 2,907
3,300 Pemex Project Funding Master Trust,
2.92%, 10/15/09, FRN, # 3,407
6,825 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 6,908
--------------------------------------------------------------------------------------------------
13,222
--------------------------------------------------------------------------------------------------
REAL ESTATE-- 1.1%
14,100 Socgen Real Estate Co., LLC,
7.64%, to 09/07;
thereafter FRN, 12/31/49, # 16,143
TELECOMMUNICATIONS -- 1.6%
1,800 BellSouth Telecommunications, Inc.,
6.50%, 06/15/05 + 1,910
5,500 Deutsche Telekom International Finance
(Germany), 8.25%, 06/15/05 + 5,940
5,150 France Telecom (France),
8.45%, 03/01/06 + 5,702
4,000 Sprint Capital Corp., 7.13%, 01/30/06 4,349
2,500 Telecom Italia Capital (Luxembourg),
4.00%, 11/15/08, # 2,527
3,445 Verizon Wireless, Inc., 5.38%, 12/15/06 3,702
--------------------------------------------------------------------------------------------------
24,130
--------------------------------------------------------------------------------------------------
UTILITIES -- 2.6%
$ 2,550 AEP Texas Central Co., 3.00%,
02/15/05, Ser. F + $ 2,580
8,600 Alabama Power Co., 2.80%, 12/01/06 + 8,675
7,100 Commonwealth Edison Co.,
6.40%, 10/15/05 + 7,598
3,900 Consolidated Edison Co. of New York,
Series C, 6.63%, 12/15/05 + 4,221
4,400 FPL Group Capital, Inc.,
1.88%, 03/30/05 + 4,421
National Rural Utilities Cooperative
Finance Corp.,
2,900 3.00%, 02/15/06 2,952
5,300 6.00%, 05/15/06 5,731
2,600 Pacificorp, 5.65%, 11/01/06 2,806
--------------------------------------------------------------------------------------------------
38,984
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 489,038
(Cost $484,885)
--------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 2.2%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.2%
865 Credit Suisse First Boston Mortgage
Securities Corp., 1.74%, 11/25/31,
Ser. 2001-26, Class 3A2, FRN + 867
Federal National Mortgage Association,
1,181 5.50%, 10/25/11, Ser. 2002-57, Class PC + 1,183
1,255 5.50%, 03/25/12, Ser. 2002-70, Class PC + 1,258
64 Fifth Third Mortgage Loan Trust,
4.90%, 10/18/30,
Ser. 2000-FTB1, Class A2, FRN + 65
3,601 Government National Mortgage
Association, 1.59%, 04/16/32,
Ser. 2002-24, Class FA, FRN + 3,618
14,300 Mastr Adjustable Rate Mortgages Trust,
2.51%, 12/25/33, Ser. 2003-6,
Class 1A1, FRN 14,403
256 Residential Accredit Loans, Inc.,
1.64%, 08/25/31,
Ser. 2001-QS11, Class A5, FRN 256
11,888 Wells Fargo Mortgage Backed Securities
Trust, 4.69%, 12/25/33,
Ser. 2003-N, Class 1A4, FRN 12,081
--------------------------------------------------------------------------------------------------
33,731
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 0.0% ^
Government National Mortgage Association,
$ 78 8.50%, 08/15/30, Pool 531310 + $ 84
7 8.50%, 09/15/30, Pool 526096 + 8
--------------------------------------------------------------------------------------------------
92
--------------------------------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 33,823
(Cost $33,691)
--------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.8%
19,141 CalSTRS Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # + 19,749
5,372 Calwest Industrial Trust,
1.36%, 06/15/15, Ser.
2003-CALA, Class A, FRN, # + 5,372
8,890 First Union - Lehman Brothers
Commercial Mortgage
Securities, Inc., 7.38%, 04/18/29,
Ser. 1997-C1, Class A3 + 9,904
LB-UBS Commercial Mortgage Trust,
5,100 3.32%, 03/15/27, Ser. 2003-C1, Class A2 5,133
3,300 3.48%, 07/15/27, Ser. 2003-C5, Class A2 3,318
12,600 Morgan Stanley Capital I, 6.48%,
11/15/30, Ser. 1998-HF2, Class A2 14,150
--------------------------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 57,626
(Cost $57,253)
--------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 22.7%
7,000 American Express Credit Account
Master Trust, 1.44%, 12/15/08,
Ser. 2001-6, Class B, FRN + 7,018
AmeriCredit Automobile Receivables Trust,
10,215 4.41%, 11/12/08, Ser. 2001-D, Class A4 + 10,536
12,450 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 12,535
22,000 Bank One Issuance Trust, 4.16%,
01/15/08, Ser. 2002-A2, Class A2 + 22,697
3,000 Capital Auto Receivables Asset Trust,
1.96%, 01/15/09, Ser. 2003-2,
Class A4A + 2,957
$ 1,800 Capital One Auto Finance Trust, 3.18%,
09/15/10, Ser. 2003-B, Class A4 + $ 1,799
6,500 Capital One Master Trust, 1.89%,
08/15/08, Ser. 2000-4, Class C, FRN, # + 6,522
6,200 Carmax Auto Owner Trust, 3.07%,
10/15/10, Ser. 2003-2, Class A4 + 6,249
Citibank Credit Card Issuance Trust,
3,050 2.70%, 01/15/08, Ser. 2003-A2,
Class A2 + 3,094
8,500 2.17%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 8,577
10,300 Countrywide Asset-Backed
Certificates, 3.61%, 04/25/30,
Ser. 2003-5, Class AF3 + 10,515
9,030 Countrywide Home Equity
Loan Trust, 1.33%, 08/15/28,
Ser. 2002-D, Class A, FRN + 9,015
DaimlerChrysler Auto Trust,
1,070 3.53%, 12/06/07, Ser. 2002-B,
Class A4 + 1,099
8,400 2.88%, 10/08/09, Ser. 2003-A,
Class A4 + 8,525
Discover Card Master Trust I,
7,550 1.16%, 07/15/07, Ser. 2002-1,
Class A, FRN + 7,549
21,000 1.24%, 09/15/08, Ser. 2001-3,
Class A, FRN + 21,055
3,254 EQCC Trust, 1.39%, 11/25/31,
Ser. 2002-1, Class 2A, FRN + 3,261
First USA Credit Card Master Trust,
7,800 1.45%, 11/20/06, Ser. 2001- 2,
Class B, FRN + 7,801
4,200 2.04%, 11/20/06, Ser. 2001-2,
Class C, FRN, # + 4,201
Ford Credit Auto Owner Trust,
21 4.83%, 02/15/05, Ser. 2001-C,
Class A4 + 21
1,168 1.13%, 06/15/05, Ser. 2003-B,
Class A2B, FRN + 1,168
1,056 4.31%, 06/15/05, Ser. 2001-D,
Class A3 + 1,063
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,200 5.25%, 09/15/05, Ser. 2001-C,
Class A5 + $ 2,228
600 3.79%, 09/15/06, Ser. 2002-C,
Class A4 + 615
15,000 Gracechurch Card Funding PLC
(United Kingdom),
2.70%, 08/15/08, Ser. 5, Class A2 + 15,002
9,900 Honda Auto Receivables Owner Trust,
1.92%, 11/20/06, Ser. 2003-1, Class A3 9,953
25,500 Household Automotive Trust, 4.39%,
05/18/09, Ser. 2002-1, Class A4 26,461
3,700 MBNA Master Credit Card Trust USA,
1.89%, 12/15/06, Ser. 1999-G, Class C,
FRN, # 3,700
Onyx Acceptance Grantor Trust,
1,040 5.49%, 11/15/07, Ser. 2001-B,
Class A4 1,061
7,500 4.71%, 03/15/09, Ser. 2002-B,
Class A4 7,786
7,300 3.20%, 03/15/10, Ser. 2003-D,
Class A4 7,398
Option One Mortgage Loan Trust,
2,920 1.38%, 02/25/32, Ser. 2002-1,
Class A, FRN 2,927
2,830 1.34%, 10/25/32, Ser. 2002-05,
Class A2, FRN 2,831
8,142 Orchid Structured Finance
CDO LTD, 1.22%, 11/18/38,
Ser. 2003-1A, Class A1-MM, FRN, # + 8,142
4,000 Residential Asset Securities Corp.,
3.37%, 12/25/28,
Ser. 2003-KS7, Class AI3 4,067
1,761 Sears Credit Account Master Trust,
5.25%, 10/16/08, Ser. 1998-2, Class A 1,786
6,900 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # 6,958
7,900 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B, Class A4 8,022
Volkswagen Auto Loan Enhanced Trust,
7,300 1.93%, 01/20/10, Ser. 2003-1, Class A4 7,224
4,300 2.94%, 03/22/10, Ser. 2003-2, Class A4 4,347
Wachovia Asset Securitization, Inc.,
$ 6,094 1.52%, 12/25/32, Ser. 2002-HE2,
Class A, FRN $ 6,121
10,650 1.38%, 03/25/33, Ser. 2003-HE1,
Class A1, FRN 10,665
WFS Financial Owner Trust,
11,900 4.50%, 02/20/10, Ser. 2002-2,
Class A4, SUB 12,386
15,600 3.25%, 05/20/11, Ser. 2003-3,
Class A4 15,847
18,800 World Omni Auto Receivables
Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 18,936
--------------------------------------------------------------------------------------------------
Total Asset Backed Securities 341,720
(Cost $337,640)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments 1,399,698
(Cost $1,388,972)
--------------------------------------------------------------------------------------------------
<Caption>
UNITS
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 7.0%
OPTIONS -- 0.1%
95,200 Put Option on FNMA, 30 Year, 5.5%,
strike price of 99.72, expiring
3/8/04, European Style 0^^
46,369 Put Option on Interest Rate Swap,
expiring 3/8/04, if exercised the Fund
pays fixed 4.85% and receives 3
month USD-LIBOR, European Style 2
80,304 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the
Fund receives fixed 3.47% and pays 3 month USD-LIBOR, European Style
499
46,369 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the
Fund pays fixed 4.65% and receives 3 month USD-LIBOR, European Style
13
189,550 Put Option on Interest Rate Swap, expiring 5/11/04, if exercised,
the Fund receives fixed 1.70% and pays 3 month USD-LIBOR, European
Style 406
--------------------------------------------------------------------------------------------------
Total Options 920
(Cost $1,932)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
U.S. TREASURY SECURITY -- 0.1%
$ 1,500 U.S. Treasury Bills, 0.92%,
07/08/04 + @ $ 1,495
(Cost $1,495)
MUNICIPAL SECURITIES -- 0.3%
PENNSYLVANIA -- 0.3%
4,550 Beaver County Industrial Development
Authority, Ser. A, Rev., FRDO, 4.85%,
06/01/04 +
(Cost $4,580) 4,576
COMMERCIAL PAPER -- 0.1%
CONSUMER PRODUCTS -- 0.1%
1,600 Altria Group, Inc., 1.97%, 10/15/04 + 1,585
(Cost $1,580)
<Caption>
SHARES ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 6.4%
96,379 JPMorgan Prime Money Market
Fund (a) + $ 96,379
(Cost $96,379)
--------------------------------------------------------------------------------------------------
Total Short- Term Investments 104,955
(Cost $105,966)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,504,653
(COST $1,494,938)
--------------------------------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
838 2 Year Treasury Notes June, 2004 $ 179,777 $ 292
154 5 Year Treasury Notes June, 2004 17,311 63
1,527 Eurodollar September, 2004 376,310 73
SHORT FUTURES OUTSTANDING
(1,532) Eurodollar December, 2004 (376,374) (181)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<Page>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ----------------------------------------------------------------------------------------------------------------------------------
(83,650) Call Option on FNMA, 30 Year, 5.00%, strike price of 99.72, expiring 3/8/04,
European Style $ (510)
(379,100) Call Option on Interest Rate Swap, expiring 5/11/04, if exercised the Fund pays
fixed 1.50% and receives 3 month LIBOR, European Style (381)
Total Call Options Written $ (891)
PUT OPTIONS WRITTEN
(95,200) Put Option on FNMA, 30 Year Fixed, 5.50%, strike price of 100.84, expiring 3/8/04,
European Style $ (2)
(78,263) Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund receives
fixed 3.97% and pays 3 month LIBOR, European Style (1)
(46,369) Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund receives
fixed 4.65% and pays 3 month LIBOR, European Style (23)
(1) Put Option on Sept. 04 Euro Dollar Future, strike price of 98.25, expiring 9/13/04, European Style (121)
Total Put Options Written $ (147)
</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%,
10/31/05, price less 100.08, the Fund receives positive, pays negative 03/01/04 $ 253,000 $ 497
Swap - price lock with Citibank N.A. on U.S. Treasury Note, 2.63%,
11/15/06, price less 101.23, the Fund receives positive, pays negative 03/29/04 50,200 126
Swap - price lock with Citibank N.A.on U.S. Treasury Note, 3.00%,
2/15/08, price less 101.06, the Fund receives positive, pays negative 03/29/04 120,700 (545)
Swap - price lock with Citibank N.A. on U.S. Treasury Note, 2.63%,
5/15/08, price less 99.29, the Fund receives negative, pays positive 03/29/04 102,900 (488)
Swap - price lock with Lehman Brothers Special Financing on U.S.
Treasury Note, 3.88%, 01/15/09, price less 114.49, the Fund receives
negative, pays positive 03/30/04 32,450 (140)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<Page>
JPMORGAN STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 88.5%
U.S. TREASURY SECURITIES -- 7.6%
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
130 1.13%, 06/30/05 + 130
100 2.38%, 08/15/06 + 101
420 2.63%, 11/15/06 + 427
20 2.25%, 02/15/07 + 20
455 3.38%, 11/15/08 + 466
210 3.25%, 01/15/09 + 213
70 3.00%, 02/15/09 + 70
185 4.25%, 08/15/13 + 190
5 4.25%, 11/15/13 + 5
5 4.00%, 02/15/14 5
55 6.25%, 05/15/30 + 66
70 5.38%, 02/15/31 + 75
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 1,878
(Cost $1,868)
--------------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 0.7%
75 Federal Home Loan Bank,
1.63%, 06/15/05 75
80 Federal National Mortgage Association,
7.13%, 01/15/30 99
--------------------------------------------------------------------------------------------------
Total U.S. Government Agency Securities 174
(Cost $163)
--------------------------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 26.4%
Federal Republic of Brazil (Brazil),
70 11.25%, 07/26/07 78
60 11.50%, 03/12/08 67
41 2.06%, 04/15/09, FRN 38
209 8.00%, 04/15/14 200
145 11.00%, 08/17/40 152
EUR 95 Federal Republic of Germany (Germany),
4.25%, 01/04/14 120
EUR 155 Government of France (France),
4.00%, 04/25/09 199
100 Malaysia Government International
Bond (Malaysia), 7.50%, 07/15/11 119
National Republic of Bulgaria (Bulgaria),
$ 71 2.00%, 07/28/11, Ser. IAB, FRN $ 69
113 2.00%, 07/28/12, Ser. A, FRN 111
100 8.25%, 01/15/15, # 120
EUR 500 Netherlands Government Bond
(The Netherlands), 5.50%, 07/15/10 690
250 Province of Ontario (Canada),
6.00%, 02/21/06 269
100 Province of Quebec (Canada),
6.13%, 01/22/11, Ser. PJ 113
250 Republic of Chile (Chile),
5.63%, 07/23/07 270
Republic of Colombia (Colombia),
235 9.75%, 04/23/09 266
135 11.75%, 02/25/20 166
250 Republic of Costa Rica (Costa Rica),
8.11%, 02/01/12, # 279
25 Arab Republic of Egypt (Egypt),
8.75%, 07/11/11, Regulation S 30
Republic of El Salvador (El Salvador),
100 7.75%, 01/24/23, # 108
100 8.25%, 04/10/32, # 100
250 Republic of Italy (Italy),
2.50%, 03/31/06 254
Republic of Panama (Panama),
90 9.63%, 02/08/11 104
100 10.75%, 05/15/20 123
Republic of Peru (Peru),
193 9.13%, 02/21/12 215
25 9.88%, 02/06/15 29
135 4.50%, 03/07/17, FRN 117
47 5.00%, 03/07/17, FRN 43
Republic of Philippines (Philippines),
38 8.38%, 03/12/09 40
82 9.88%, 03/16/10 89
145 9.88%, 01/15/19 148
200 Republic of South Africa (South Africa)
(Yankee), 8.50%, 06/23/17 244
Republic of Turkey (Turkey),
91 12.38%, 06/15/09 115
95 11.88%, 01/15/30 134
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FOREIGN GOVERNMENT SECURITIES -- CONTINUED
$ 100 Republic of Ukraine (Ukraine),
7.65%, 06/11/13, Regulation S $ 103
Republic of Venezuela (Venezuela),
95 2.13%, 12/18/07, Ser. DL, FRN 86
100 9.25%, 09/15/27 84
Russian Federation (Russia),
100 10.00%, 06/26/07, Regulation S 117
69 8.25%, 03/31/10, Regulation S 77
5 11.00%, 07/24/18, Regulation S 7
50 5.00%, 03/31/30, SUB, # 49
257 5.00%, 03/31/30, Regulation S 252
100 State of Qatar (Qatar),
9.50%, 05/21/09, Regulations S 127
United Mexican States (Mexico),
80 9.88%, 02/01/10 102
35 8.38%, 01/14/11 42
100 6.38%, 01/16/13, MTN 107
100 8.30%, 08/15/31, MTN 116
--------------------------------------------------------------------------------------------------
Total Foreign Government Securities 6,488
(Cost $5,630)
--------------------------------------------------------------------------------------------------
SUPRANATIONAL NOTES & BONDS -- 1.8%
200 Inter-American Development Bank,
7.38%, 01/15/10 243
200 International Bank for Reconstruction &
Development, 7.00%, 01/27/05 210
--------------------------------------------------------------------------------------------------
Total Supranational Notes & Bonds 453
(Cost $403)
--------------------------------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 39.3%
AEROSPACE -- 0.5%
15 General Dynamics Corp.,
2.13%, 05/15/06 15
100 L-3 Communications Corp.,
7.63%, 06/15/12 111
--------------------------------------------------------------------------------------------------
126
--------------------------------------------------------------------------------------------------
AGRICULTURAL PRODUCTION/SERVICES -- 0.1%
30 Seminis Vegetable Seeds, Inc.,
10.25%, 10/01/13, # 32
AIRLINES -- 0.1%
Delta Air Lines, Inc.,
$ 15 7.70%, 12/15/05 $ 13
25 7.90%, 12/15/09 19
--------------------------------------------------------------------------------------------------
32
--------------------------------------------------------------------------------------------------
AUTOMOTIVE -- 1.2%
DaimlerChrysler N.A. Holding Corp.,
15 4.05%, 06/04/08 15
5 7.75%, 01/18/11 6
30 6.50%, 11/15/13 32
Ford Motor Credit Co.,
30 7.38%, 10/28/09 33
20 7.38%, 02/01/11 22
40 7.00%, 10/01/13 42
10 General Motors Acceptance Corp.,
6.88%, 09/15/11 11
General Motors Corp.,
30 7.20%, 01/15/11 33
10 8.25%, 07/15/23 11
20 8.38%, 07/15/33 23
25 Goodyear Tire & Rubber Co.,
7.86%, 08/15/11 21
50 TRW Automotive, Inc.,
11.00%, 02/15/13 58
--------------------------------------------------------------------------------------------------
307
--------------------------------------------------------------------------------------------------
BANKING -- 2.3%
5 Abbey National Capital Trust I,
8.96%, to 06/30;
thereafter FRN, 12/31/49 7
20 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, to 11/12;
thereafter FRN, 12/29/49, # 22
30 ANZ Capital Trust I, 5.36%, 12/15/53, # 31
250 Banque Centrale de Tunisie (Tunisia),
7.38%, 04/25/12 285
10 Barclays Bank PLC (United Kingdom),
8.55%, to 06/11;
thereafter FRN, 12/31/49, # 13
10 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # 10
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
74
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 40 HBOS PLC (United Kingdom),
5.38%, to 11/13;
thereafter FRN, 12/31/49, # $ 41
10 KBC Bank Fund Trust III,
9.86%, to 11/09;
thereafter FRN, 11/29/49, # 13
5 National City Bank, 6.20%, 12/15/11 6
10 Popular North America, Inc.,
4.25%, 04/01/08 10
RBS Capital Trust I,
5 6.43%, to 01/31;
thereafter FRN, 12/29/49 5
20 4.71%, to 07/13;
thereafter FRN, 12/29/49 20
10 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65%,
to 09/31; thereafter FRN, 12/31/49 12
20 SunTrust Bank, 2.50%, 11/01/06 20
5 Swedbank (Sweden), 9.00%,
to 03/10; thereafter FRN, 12/29/49, # 6
20 Washington Mutual, Inc.,
4.00%, 01/15/09 20
25 Westpac Capital Trust III,
5.82%, to 09/30;
thereafter FRN, 12/31/49, # 27
10 Zions Bancorp, 6.00%, 09/15/15 11
--------------------------------------------------------------------------------------------------
559
--------------------------------------------------------------------------------------------------
BROADCASTING/CABLE -- 1.5%
120 British Sky Broadcasting PLC
(United Kingdom) (Yankee),
6.88%, 02/23/09 136
175 Echostar DBS Corp., 10.38%, 10/01/07 192
50 Mediacom LLC/ Capital Corp.,
9.50%, 01/15/13 51
--------------------------------------------------------------------------------------------------
379
--------------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 0.4%
100 Iron Mountain, Inc., 8.63%, 04/01/13 109
CHEMICALS -- 1.4%
$ 60 Huntsman LLC, 11.63%, 10/15/10, # $ 62
15 ICI Wilmington, Inc., 5.63%, 12/01/13 16
50 IMC Global, Inc.,
10.88%, 06/01/08, Ser. B 60
Lyondell Chemical Co.,
10 9.63%, 05/01/07, Ser. A, 11
125 10.88%, 05/01/09 124
25 Noveon, Inc., 11.00%, 02/28/11, Ser. B 29
25 PolyOne Corp., 10.63%, 05/15/10 26
5 The Dow Chemical Co.,
7.38%, 11/01/29 6
--------------------------------------------------------------------------------------------------
334
--------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE -- 0.4%
100 Unisys Corp., 6.88%, 03/15/10 108
COMPUTERS/COMPUTER HARDWARE -- 0.0% ^
5 Electronic Data Systems Corp.,
6.00%, 08/01/13, Ser. B 5
CONSTRUCTION -- 1.3%
80 D.R. Horton, Inc., 9.38%, 03/15/11 91
100 KB Home, 8.63%, 12/15/08 112
100 Terex Corp., 10.38%, 04/01/11, Ser. B 113
--------------------------------------------------------------------------------------------------
316
--------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.1%
10 Altria Group, Inc., 7.00%, 11/04/13 11
313 Drypers Corp., 10.25%, 06/15/07,
Ser. B (d) (f) * 3
20 Elizabeth Arden, Inc.,
7.75%, 01/15/14, # 20
--------------------------------------------------------------------------------------------------
34
--------------------------------------------------------------------------------------------------
CONSUMER SERVICES -- 0.8%
100 Corrections Corp. of America,
7.50%, 05/01/11 105
100 Service Corp. International,
6.00%, 12/15/05 103
--------------------------------------------------------------------------------------------------
208
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
75
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
DIVERSIFIED -- 0.6%
$ 140 Tyco International Group SA
(Luxembourg) (Yankee),
6.38%, 10/15/11 $ 151
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.2%
35 Legrand SA (France),
8.50%, 02/15/25 38
ENTERTAINMENT/LEISURE -- 0.4%
100 Caesars Entertainment Inc.,
7.00%, 04/15/13 109
FINANCIAL SERVICES -- 5.7%
American General Finance Corp.,
25 3.00%, 11/15/06, Ser. H, MTN 25
5 4.50%, 11/15/07, Ser. H, MTN 5
25 Arch Western Finance LLC,
6.75%, 07/01/13, # 26
10 Capital One Bank, 4.88%, 05/15/08 10
10 CIT Group, Inc., 4.75%, 12/15/10, MTN 10
Credit Suisse First Boston USA, Inc.,
5 6.50%, 01/15/12 6
35 5.13%, 01/15/14 36
10 FleetBoston Financial Corp.,
7.25%, 09/15/05 11
Goldman Sachs Group, Inc.,
10 6.60%, 01/15/12 11
10 4.75%, 07/15/13 10
20 6.35%, 02/15/34 20
50 H&E Equipment Services LLC/H&E
Finance Corp., 11.13%, 06/15/12 52
HSBC Capital Funding LP
(Channel Islands),
25 4.61%, to 06/13;
thereafter FRN, 12/31/49, # 24
30 9.55%, to 06/10;
thereafter FRN, 12/31/49, # 39
10 ING Capital Funding Trust III,
8.44%, to 12/10;
thereafter FRN, 12/31/49 12
Morgan Stanley,
$ 25 5.80%, 04/01/07 $ 27
10 3.63%, 04/01/08 10
20 3.88%, 01/15/09 20
100 Nexstar Finance LLC/Nexstar
Finance, Inc., 12.00%, 04/01/08 113
35 SLM Corp., 5.63%, 04/10/07,
Ser. A, MTN 38
696 TRAINS, 8.67%, 05/15/13,
Ser. 2003-1, SUB, # 771
15 UFJ Finance AEC (Aruba),
6.75%, 07/15/13 16
65 Yell Finance BV (The Netherlands),
10.75%, 08/01/11 76
--------------------------------------------------------------------------------------------------
1,368
--------------------------------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 1.3%
100 Del Monte Corp.,
9.25%, 05/15/11, Ser. B 111
45 Delhaize America, Inc.,
8.13%, 04/15/11 52
45 Ingles Markets, Inc., 8.88%, 12/01/11 47
5 SABMiller PLC (United Kingdom),
6.63%, 08/15/33, # 5
100 Swift & Co., 10.13%, 10/01/09 105
--------------------------------------------------------------------------------------------------
320
--------------------------------------------------------------------------------------------------
HEALTH CARE/HEALTH CARE SERVICES -- 1.2%
40 Ardent Health Services,
10.00%, 08/15/13, # 44
35 Genesis HealthCare Corp.,
8.00%, 10/15/13, # 37
HCA, Inc.,
15 5.25%, 11/06/08 16
110 6.75%, 07/15/13 120
30 Mariner Health Care, Inc.,
8.25%, 12/15/13, # 31
35 Tenet Healthcare Corp.,
7.38%, 02/01/13 32
15 UnitedHealth Group, Inc.,
3.30%, 01/30/08 15
--------------------------------------------------------------------------------------------------
295
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
76
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
HOTELS/OTHER LODGING -- 1.6%
$ 100 Ameristar Casinos, Inc.,
10.75%, 02/15/09 $ 114
100 Extended Stay America, Inc.,
9.88%, 06/15/11 111
5 Harrah's Operating Co., Inc.,
5.38%, 12/15/13, # 5
50 Mandalay Resort Group,
10.25%, 08/01/07, Ser. B 58
90 MGM Mirage, Inc., 9.75%, 06/01/07 104
--------------------------------------------------------------------------------------------------
392
--------------------------------------------------------------------------------------------------
INSURANCE -- 0.5%
Assurant, Inc.,
10 5.63%, 02/15/14, # 10
10 6.75%, 02/15/34, # 10
20 AXA (France), 8.60%, 12/15/30 27
15 Commerce Group, Inc.,
5.95%, 12/09/13 16
10 Fund American Companies, Inc.,
5.88%, 05/15/13 10
10 Infinity Property & Casualty Corp.,
5.50%, 02/18/14, # 10
20 Monumental Global Funding II,
3.90%, 06/15/09, # 20
Nationwide Financial Services, Inc.,
5 6.25%, 11/15/11 6
5 5.90%, 07/01/12 5
5 Prudential Holdings LLC,
8.70%, 12/18/23, # 7
10 QBE Insurance Group LTD (Australia),
5.65%, to 07/01;
thereafter FRN, 07/01/23, # 10
--------------------------------------------------------------------------------------------------
131
--------------------------------------------------------------------------------------------------
METALS/MINING -- 0.7%
150 Peabody Energy Corp.,
6.88%, 03/15/13, Ser. B 160
MULTI-MEDIA -- 1.5%
25 Comcast Cable Communications
Holdings, Inc., 8.38%, 03/15/13 31
5 Dex Media, Inc., 8.00%, 11/15/13, # 5
$ 60 DirecTV Holdings LLC, 8.38%,
03/15/13 $ 68
100 Emmis Communications Corp.,
8.13%, 03/15/09, Ser. B 104
5 Liberty Media Corp., 5.70%, 05/15/13 5
50 Lodgenet Entertainment Corp.,
9.50%, 06/15/13 56
5 News America, Inc., 7.28%, 06/30/28 6
50 Radio One, Inc., 8.88%, 07/01/11, Ser. B 55
Time Warner, Inc.,
20 7.63%, 04/15/31 23
5 7.70%, 05/01/32 6
--------------------------------------------------------------------------------------------------
359
--------------------------------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.4%
90 Xerox Corp., 7.63%, 06/15/13 96
OIL & GAS -- 2.5%
5 Alberta Energy Co., LTD (Canada)
(Yankee), 7.38%, 11/01/31 6
10 Anadarko Finance Co. (Canada),
6.75%, 05/01/11, Ser. B 12
15 BP Capital Markets PLC
(United Kingdom), 2.75%, 12/29/06 15
5 Canadian Natural Resources LTD
(Canada) (Yankee), 7.20%, 01/15/32 6
112 Chesapeake Energy Corp.,
6.88%, 01/15/16 116
100 Denbury Resources, Inc.,
7.50%, 04/01/13 105
5 Devon Financing Corp. ULC,
7.88%, 09/30/31 6
15 Halliburton Co., 5.50%, 10/15/10, # 16
100 Plains Exploration & Production Co.,
8.75%, 07/01/12, Ser. B 112
30 The Premcor Refining Group, Inc.,
7.50%, 06/15/15 33
5 Transocean, Inc., 7.50%, 04/15/31 6
10 Weatherford International LTD
(Bermuda), 4.95%, 10/15/13 10
125 XTO Energy, Inc., 6.25%, 04/15/13 136
--------------------------------------------------------------------------------------------------
579
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
77
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PACKAGING -- 1.3%
$ 60 Crown European Holdings SA (France),
9.50%, 03/01/11 $ 68
100 Owens-Brockway Glass Container, Inc.,
8.88%, 02/15/09 109
20 Silgan Holdings, Inc., 6.75%, 11/15/13, # 20
100 Stone Container Corp., 9.75%, 02/01/11 111
--------------------------------------------------------------------------------------------------
308
--------------------------------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 1.2%
Boise Cascade Corp.,
20 6.50%, 11/01/10 21
10 7.00%, 11/01/13 11
15 Domtar, Inc. (Canada) (Yankee),
5.38%, 12/01/13 15
Georgia-Pacific Corp.,
100 8.88%, 02/01/10 114
65 9.50%, 12/01/11 75
5 International Paper Co.,
5.85%, 10/30/12 5
50 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 49
--------------------------------------------------------------------------------------------------
290
--------------------------------------------------------------------------------------------------
PHARMACEUTICALS -- 0.2%
10 Schering-Plough Corp.,
5.30%, 12/01/13 10
Wyeth,
15 5.50%, 02/01/14 16
10 6.45%, 02/01/24 11
--------------------------------------------------------------------------------------------------
37
--------------------------------------------------------------------------------------------------
PIPELINES -- 1.2%
15 Aquila, Inc., 14.88%, 07/01/12 20
20 Duke Capital Corp., 6.25%, 02/15/13 21
25 Dynegy Holdings, Inc.,
10.13%, 07/15/13, # 28
130 El Paso Corp., 7.88%, 06/15/12 118
5 Kinder Morgan Energy Partners LP,
7.30%, 08/15/33 6
100 Northwest Pipeline Corp.,
8.13%, 03/01/10 109
--------------------------------------------------------------------------------------------------
302
--------------------------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 1.8%
$ 100 FelCor Lodging LP, 10.00%, 09/15/08 $ 106
100 Host Marriott LP,
9.25%, 10/01/07, Ser. G 111
100 MeriStar Hospitality Operating
Partnership LP/MeriStar Hospitality
Finance Corp., 10.50%, 06/15/09 106
100 Ventas Realty LP/Ventas Capital Corp.,
9.00%, 05/01/12 114
--------------------------------------------------------------------------------------------------
437
--------------------------------------------------------------------------------------------------
RESTAURANTS/FOOD SERVICES -- 1.2%
60 NE Restaurant Co., Inc.,
10.75%, 07/15/08 52
200 Yum! Brands, Inc., 8.88%, 04/15/11 247
--------------------------------------------------------------------------------------------------
299
--------------------------------------------------------------------------------------------------
RETAILING -- 1.2%
40 Dillard's, Inc., 7.85%, 10/01/12 42
5 Federated Department Stores, Inc.,
6.63%, 04/01/11 6
J.C. Penney Co., Inc.,
25 7.60%, 04/01/07 28
40 8.00%, 03/01/10 45
10 7.13%, 11/15/23 11
100 Rite Aid Corp., 9.50%, 02/15/11 111
20 Safeway, Inc., 4.13%, 11/01/08 20
25 The Gap, Inc., 6.90%, 09/15/07 28
--------------------------------------------------------------------------------------------------
291
--------------------------------------------------------------------------------------------------
SHIPPING/TRANSPORTATION -- 0.0% ^
5 Union Pacific Corp., 6.65%, 01/15/11 6
STEEL -- 0.5%
65 AK Steel Corp., 7.88%, 02/15/09 58
70 Euramax International LTD,
8.50%, 08/15/11, # 72
--------------------------------------------------------------------------------------------------
130
--------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.4%
5 AT&T Corp., 8.75%, 11/15/31 6
10 AT&T Wireless Services, Inc.,
7.88%, 03/01/11 12
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- CONTINUED
$ 15 Cincinnati Bell, Inc., 8.38%, 01/15/14 $ 16
10 Citizens Communications Co.,
9.25%, 05/15/11 11
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),
15 9.00%, 03/01/11 18
10 9.75%, 03/01/31 13
40 Insight Midwest LP/Insight Capital,
Inc., 9.75%, 10/01/09 42
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 (Canada),
6.13%, 02/15/06 31
80 Qwest Corp., 9.13%, 03/15/12, # 91
Sprint Capital Corp.,
15 7.63%, 01/30/11 17
15 8.75%, 03/15/32 19
100 Syniverse Technologies, Inc.,
12.75%, 02/01/09, Ser. B 112
10 TCI Communications, Inc.,
7.88%, 02/15/26 12
25 Telecom Italia Capital (Luxembourg),
4.00%, 11/15/08, # 25
5 Verizon Global Funding Corp.,
7.38%, 09/01/12 6
15 Verizon New England, Inc.,
4.75%, 10/01/13, Ser. C 15
15 Verizon New York, Inc.,
6.88%, 04/01/12, Ser. A 17
--------------------------------------------------------------------------------------------------
578
--------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.2%
35 CP Ships LTD (Canada),
10.38%, 07/15/12 41
UTILITIES -- 1.4%
$ 10 AEP Texas Central Co.,
5.50%, 02/15/13, Ser. D $ 10
10 Alabama Power Co., 2.80%, 12/01/06 10
5 Arizona Public Service Co.,
4.65%, 05/15/15 5
60 Calpine Corp., 9.88%, 12/01/11, # 59
50 CMS Energy Corp., 7.75%, 08/01/10, # 52
5 Columbus Southern Power Co.,
5.50%, 03/01/13, Ser. C 5
15 Consolidated Edison Company of
New York, 5.63%, 07/01/12,
Ser. 2002-A 16
15 Dominion Resources, Inc.,
8.13%, 06/15/10, Ser. A 18
10 DTE Energy Co., 6.38%, 04/15/33 10
5 MidAmerican Energy Holdings Co.,
6.75%, 12/30/31 6
National Rural Utilities Cooperative
Finance Corp.,
5 6.50%, 03/01/07, Ser. C, MTN 6
15 3.88%, 02/15/08 15
10 PacifiCorp, 4.30%, 09/15/08 10
Pepco Holdings, Inc.,
10 6.45%, 08/15/12 11
5 7.45%, 08/15/32 6
5 Progress Energy, Inc., 7.10%, 03/01/11 6
30 Reliant Resources, Inc.,
9.50%, 07/15/13 33
Southern California Edison Co.
10 5.00%, 01/15/14 10
5 6.00%, 01/15/34 5
35 TXU Energy Co., 7.00%, 03/15/13 40
20 Virginia Electric and Power Co.,
4.50%, 12/15/10 20
--------------------------------------------------------------------------------------------------
353
--------------------------------------------------------------------------------------------------
Total Corporate Notes & Bonds 9,619
(Cost $9,154)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
79
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
RESIDENTIAL MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 6.4%
Federal Home Loan Mortgage Corp.,
$ 21 6.00%, 05/01/17, Gold Pool E89420 $ 22
307 6.00%, 04/01/32, Gold Pool C66183 321
47 5.50%, 04/01/33, Gold Pool C01527 48
Federal National Mortgage Association,
195 5.50%, 11/01/32, Pool 254594 199
473 5.00%, 05/01/33, Pool 254766 474
500 5.50%, 01/01/34, Pool 357472 513
--------------------------------------------------------------------------------------------------
Total Residential Mortgage Backed
Pass-Through Securities 1,577
(Cost $1,560)
--------------------------------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 2.6%
45 Banc of America Commercial
Mortgage, Inc., 5.06%, 03/11/41,
Ser. 2003-2, Class A4 47
Credit Suisse First Boston Mortgage
Securities Corp.,
15 4.60%, 03/15/35, Ser. 2003-CPN1,
Class A2 15
45 6.38%, 12/16/35, Ser. 2001-CK1,
Class A3 51
55 4.90%, 12/15/36, Ser. 2003-C5,
Class A4 56
225 3.94%, 05/15/38, Ser. 2003-C3,
Class A5 216
45 Greenwich Capital Commercial
Funding Corp., 4.11%, 07/05/35,
Ser. 2003-C1, Class A4 44
60 LB-UBS Commercial Mortgage Trust,
6.65%, 11/15/27, Ser. 2001-C2,
Class A2 69
Morgan Stanley Capital I,
30 4.05%, 01/31/41, Ser. 2004-HQ3,
Class A2 30
40 4.66%, 09/13/45, Ser. 2004-T13,
Class A4 40
$ 20 Morgan Stanley Dean Witter Capital I,
4.92%, 03/12/35, Ser. 2003-HQ2,
Class A2 $ 21
60 Wachovia Bank Commercial Mortgage
Trust, 3.96%, 12/15/35, Ser. 2003-C9,
Class A2 60
--------------------------------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 649
(Cost $645)
--------------------------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 3.7%
35 American Express Credit Account
Master Trust, 1.69%, 01/15/09,
Ser. 2003-4, Class A 35
AmeriCredit Automobile Receivables Trust,
10 2.75%, 10/09/07, Ser. 2003-CF,
Class A3 10
10 3.48%, 05/06/10, Ser. 2003-CF,
Class A4 10
15 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 15
20 Bank One Issuance Trust,
4.77%, 02/16/16, Ser. 2003-C3,
Class C3 20
Capital Auto Receivables Asset Trust,
40 1.13%, 02/15/07, Ser. 2003-2,
Class A3B, FRN 40
25 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 25
10 Capital One Auto Finance Trust,
3.18%, 09/15/10, Ser. 2003-B, Class A4 10
45 Capital One Multi-Asset Execution
Trust, 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 46
Citibank Credit Card Issuance Trust,
15 5.65%, 06/16/08, Ser. 2001-A6,
Class A6 16
15 5.00%, 06/10/15, Ser. 2003-C4,
Class C4 15
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT~ ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
Countrywide Asset-Backed Certificates,
$ 20 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 $ 20
15 5.41%, 01/25/34, Ser. 2003-5,
Class MF1 16
10 Daimler Chrysler Auto Trust,
2.88%, 10/08/09, Ser. 2003-A, Class A4 10
35 First USA Credit Card Master Trust,
1.45%, 11/20/06, Ser. 2001- 2,
Class B, FRN 35
75 Household Automotive Trust,
2.22%, 11/17/09, Ser. 2003-1, Class A4 74
81 Long Beach Mortgage Loan Trust,
1.41%, 07/25/33, Ser. 2003-3,
Class A, FRN 82
10 M&I Auto Loan Trust, 2.97%, 04/20/09,
Ser. 2003-1, Class A4 10
20 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1,
Class A2 20
40 National City Auto Receivables Trust,
2.88%, 05/15/11, Ser. 2004-A, Class A4 40
Onyx Acceptance Grantor Trust,
10 3.20%, 03/15/10, Ser. 2003-D, Class A4 10
15 2.66%, 05/17/10, Ser. 2003-C, Class A4 15
75 2.94%, 12/15/10, Ser. 2004-A, Class A4 75
18 Option One Mortgage Loan Trust,
1.41%, 07/01/33, Ser. 2003-5,
Class A2, FRN 18
20 PSE&G Transition Funding Funding LLC,
6.61%, 06/15/15, Ser. 2001-1, Class A6 23
Residential Asset Securities Corp.,
11 1.34%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 11
27 1.38%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 27
65 SLM Student Loan Trust,
2.99%, 12/15/22, Ser. 2003-11,
Class A5, # 66
20 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B, Class A4 20
$ 40 USAA Auto Owner Trust,
2.04%, 02/16/10, Ser. 2003-1, Class A4 $ 40
25 Volkswagen Auto Loan Enhanced Trust,
2.94%, 03/22/10, Ser. 2003-2, Class A4 25
21 Wachovia Asset Securitization, Inc.,
1.52%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 21
15 WFS Financial Owner Trust,
3.15%, 05/20/11, Ser. 2003-4, Class A4 15
--------------------------------------------------------------------------------------------------
Total Asset Backed Securities 915
(Cost $912)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
WARRANTS -- 0.0% ^
TELECOMMUNICATIONS -- 0.0% ^
0^^ Startec Global Communications Corp.,
0.00%, 05/15/08 0^^
(Cost $0) ^^
--------------------------------------------------------------------------------------------------
Total Long- Term Investments 21,753
(Cost $20,335)
--------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 11.5%
MONEY MARKET FUND -- 11.5%
2,813 JPMorgan Prime Money Market Fund (a) 2,813
(Cost $2,813)
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 24,566
(COST $23,148)
--------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<Page>
SUMMARY OF INVESTMENTS BY COUNTRY, FEBRUARY 29, 2004
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- -----------------------------------------------------------------------------------------------------------------
United States 68.6%
The Netherlands 3.2
Brazil 2.2
Canada 2.2
Russia 2.1
Colombia 1.8
Peru 1.7
Mexico 1.5
France 1.5
Bulgaria 1.2
Tunisia 1.2
Philippines 1.1
Chile 1.1
Costa Rica 1.1
Italy 1.0
Turkey 1.0
South Africa 1.0
United Kingdom 0.9
Panama 0.9
El Salvador 0.9
Venezuela 0.7
Luxembourg 0.7
Germany 0.5
Qatar 0.5
Malaysia 0.5
Other (below 0.5%) 0.9
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 2/29/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
2 Treasury Bonds June, 2004 $ 225 $ 1
2 2 Year Treasury Notes June, 2004 429 1
SHORT FUTURES OUTSTANDING
(5) 5 Year Treasury Notes June, 2004 (562) (2)
(5) 10 Year Treasury Notes June, 2004 (569) (4)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 2/29/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------
166 EUR 3/31/04 $ 210 $ 205 $ 5
99 EUR 6/30/04 125 123 2
554 EUR 3/31/04 697 688 9
- ---------------------------------------------------------------------------------------------------------------
$ 1,032 $ 1,016 $ 16
- ---------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<Page>
JPMORGAN U.S. TREASURY INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT~
(USD) ISSUER VALUE
- ---------------------------------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 93.3%
U.S. TREASURY SECURITIES -- 93.3%
U.S. Treasury Notes & Bonds,
$ 13,910 1.13%, 06/30/05 $ 13,883
21,520 2.38%, 08/15/06 21,777
8,765 3.00%, 02/15/08 8,912
11,985 2.63%, 05/15/08 11,973
4,365 3.25%, 01/15/09 4,429
6,145 5.75%, 08/15/10 + 7,000
2,315 3.88%, 02/15/13 2,319
8,165 4.25%, 08/15/13 8,369
6,685 7.25%, 05/15/16 + 8,535
13,000 9.00%, 11/15/18 + 19,228
5,700 8.13%, 08/15/19 @ + 7,915
3,540 8.00%, 11/15/21 + 4,921
17,020 7.25%, 08/15/22 + 22,136
4,800 6.38%, 08/15/27 5,765
--------------------------------------------------------------------------------------------------
Total U.S. Treasury Securities 147,162
(Cost $144,118)
--------------------------------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED
PASS-THROUGH SECURITIES -- 0.0% ^
$ 0^^ Federal Home Loan
Mortgage Corp., 7.00%,
12/01/14, Gold Pool E00766 $ 0^^
(Cost $0)
--------------------------------------------------------------------------------------------------
Total Long-Term Investments 147,162
(Cost $144,118)
--------------------------------------------------------------------------------------------------
<Caption>
SHARES
- ---------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.7%
MONEY MARKET FUND -- 6.7%
10,534 JPMorgan 100% U.S. Treasury
Securities Money Market Fund (a) 10,534
(Cost $10,534 )
--------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 157,696
(COST $154,652)
--------------------------------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
91 2 Year Treasury Notes June, 2004 $ 19,522 $ 31
104 5 Year Treasury Notes June, 2004 11,690 43
82 10 Year Treasury Notes June, 2004 9,338 15
SHORT FUTURES OUTSTANDING
(253) Treasury Bonds June, 2004 (28,447) (197)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
84
<Page>
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 or swaps.
@ -- 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.
Adj. -- Adjustable. The interest rate shown is the rate in effect at
February 29, 2004.
(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 $ 20,818 1.78%
JPMorgan Enhanced Income Fund 1,300 0.37%
JPMorgan Fleming Emerging Markets Debt Fund 731 1.86%
JPMorgan Global Strategic Income Fund 15,061 26.42%
JPMorgan Strategic Income Fund 3 0.00%^
</Table>
(i) -- Security is considered illiquid and may be difficult to sell.
ADR -- American Depository Receipt.
CAD -- Canadian Dollar.
EUR -- Euro.
FNMA -- Federal National Mortgage Association.
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 February 29, 2004.
FRN -- Floating Rate Note. The rate shown is the rate in effect as of
February 29, 2004.
GBP -- Great Britain Pound.
GO -- General Obligation Bond.
IO -- Interest Only.
LIBOR -- London Interbank Offered Rate.
MTN -- Medium Term Note.
PO -- Principal Only.
RAMS -- Reverse Annuity Mortgage Security.
Regulation S -- Securities registered under the Securities Act of 1933
Rev. -- Revenue Bond.
Ser. -- Series.
SUB -- Step-up Bond. The rate shown is the rate in effect as of
February 29, 2004.
TBA -- To Be Announced.
USD -- United States Dollar.
SEE NOTES TO FINANCIAL STATEMENTS.
85
<Page>
JPMORGAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES AS OF FEBRUARY 29, 2004
(Amounts in thousands, except per share amounts)
<Table>
<Caption>
FLEMING GLOBAL
ENHANCED EMERGING STRATEGIC
BOND BOND INCOME MARKETS DEBT INCOME
FUND FUND II FUND FUND FUND
ASSETS
Investment securities, at value $ 1,169,320 $ 1,164,236 $ 346,909 $ 39,155 $ 57,009
Cash -- -- 1,871 -- 117
Foreign currency, at value 11 -- -- 16 154
Receivables:
Investment securities sold 94,498 83,137 7,028 985 7,877
Fund shares sold 3,893 95 75,075 7 1
Interest and dividends 6,775 6,151 619 643 759
Variation margin 443 -- -- -- --
Unrealized appreciation on forward
foreign currency exchange contracts -- -- -- -- 82
Unrealized appreciation on open
swap contracts 2,652 2,303 -- -- --
Expense reimbursements 4 -- -- -- 2
- ------------------------------------------------------------------------------------------------------------------
Total Assets 1,277,596 1,255,922 431,502 40,806 66,001
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Due to custodian 771 84 -- -- --
Dividends 643 2,280 97 32 282
Investment securities purchased 274,701 268,081 20,909 962 9,146
Fund shares redeemed 1,124 415 618 8 9
Variation margin 145 201 11 14 32
Unrealized depreciation on forward
foreign currency exchange contracts -- -- -- -- 18
Outstanding options written,
at fair value 1,647 1,205 -- -- --
Unrealized depreciation on open
swap contracts 1,708 1,334 -- -- --
Accrued liabilities:
Investment advisory fees 237 233 38 22 10
Administration fees 35 82 -- 2 --
Shareholder servicing fees 65 99 -- 2 4
Distribution fees 2 8 -- -- --^
Custodian fees 79 66 23 24 33
Trustees' fees - deferred
compensation plan 1 148 --^ --^ --^
Other 93 87 66 59 69
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities 281,251 274,323 21,762 1,125 9,603
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 996,345 $ 981,599 $ 409,740 $ 39,681 $ 56,398
- ------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
86
<Page>
<Table>
<Caption>
FLEMING GLOBAL
ENHANCED EMERGING STRATEGIC
BOND BOND INCOME MARKETS DEBT INCOME
FUND FUND II FUND FUND FUND
NET ASSETS
Paid in capital $ 955,472 $ 945,885 $ 415,413 $ 30,836 $ 82,548
Accumulated undistributed
(overdistributed) net investment income (410) (893) (128) 39 (1,269)
Accumulated net realized gain (loss)
on investments, futures, foreign
exchange transactions, written
options and swaps 15,908 6,589 (6,015) 2,268 (28,642)
Net unrealized appreciation
(depreciation) of investments, futures,
foreign exchange translations, written
options and swaps 25,375 30,018 470 6,538 3,761
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 996,345 $ 981,599 $ 409,740 $ 39,681 $ 56,398
- ------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest
outstanding ($0.001 par value;
unlimited number
of shares authorized):
Class A 252 570 -- -- 47
Class B 246 337 -- -- --
Class C 33 -- -- -- --
Institutional 36,144 -- 41,608 -- 5,777
Select 20,437 22,620 -- 4,151 335
Ultra 42,474 -- -- -- --
Net Asset Value:
Class A (and redemption price) $ 10.09 $ 41.89 $ -- $ -- $ 9.15
Class B* $ 10.00 $ 41.69 $ -- $ -- $ --
Class C* $ 10.07 $ -- $ -- $ -- $ --
Institutional (and redemption price) $ 10.00 $ -- $ 9.85 $ -- $ 9.16
Select (and redemption price) $ 10.00 $ 41.71 $ -- $ 9.56 $ 9.15
Ultra (and redemption price) $ 10.01 $ -- $ -- $ -- $ --
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 10.57 $ 43.86 $ -- $ -- $ 9.58
Cost of investments $ 1,146,146 $ 1,136,069 $ 346,418 $ 32,557 $ 53,298
Cost of foreign currency $ 353 $ -- $ -- $ 54 $ 155
- ------------------------------------------------------------------------------------------------------------------
Premiums received from options written $ 2,672 $ 2,119 $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
87
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY
BOND BOND INCOME INCOME
FUND FUND II FUND FUND
ASSETS
Investment securities, at value $ 908,057 $ 1,504,653 $ 24,566 $ 157,696
Cash -- 16,988 -- 113
Foreign currency, at value -- -- --^ --
Receivables:
Investment securities sold 40,486 64,721 47 12,384
Fund shares sold 896 2,434 38 37
Interest and dividends 4,604 8,898 333 866
Variation margin 330 135 -- --
Unrealized appreciation on forward
foreign currency exchange contracts -- -- 16 --
Unrealized appreciation on open
swap contracts 66 623 -- --
Expense reimbursements -- -- 8 --
- ------------------------------------------------------------------------------------------------------------------
Total Assets 954,439 1,598,452 25,008 171,096
- ------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Due to custodian 730 -- 806 --
Dividends 472 1,953 48 123
Investment securities purchased 79,073 99,035 867 12,809
Fund shares redeemed 2,527 2,662 30 134
Variation margin 193 -- 2 169
Outstanding options written,
at fair value 697 1,038 -- --
Unrealized depreciation on open
swap contracts 249 1,173 -- --
Accrued liabilities:
Investment advisory fees 150 298 -- 32
Administration fees 20 131 -- 7
Shareholder servicing fees 20 259 1 8
Distribution fees 1 268 11 10
Custodian fees 50 76 35 23
Trustees' fees - deferred
compensation plan 1 20 1 28
Other 92 68 63 82
- ------------------------------------------------------------------------------------------------------------------
Total Liabilities 84,275 106,981 1,864 13,425
- ------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 870,164 $ 1,491,471 $ 23,144 $ 157,671
- ------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
88
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY
BOND BOND INCOME INCOME
FUND FUND II FUND FUND
NET ASSETS
Paid in capital $ 864,474 $ 1,483,373 $ 24,505 $ 154,850
Accumulated undistributed
(overdistributed) net investment income 1,031 (2,963) (198) 10
Accumulated net realized gain (loss)
on investments, futures,
foreign exchange transactions,
written options and swaps (1,510) 631 (2,593) (125)
Net unrealized appreciation
(depreciation) of investments,
futures, foreign exchange transactions,
written options and swaps 6,169 10,430 1,430 2,936
- ------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 870,164 $ 1,491,471 $ 23,144 $ 157,671
- ------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
($0.001 par value; unlimited
number of shares authorized):
Class A 768 4,156 303 4,034
Class B -- -- 942 1,447
Class C -- -- 424 --
Institutional 76,575 -- -- --
Class M -- 90,917 843 --
Select 10,422 49,853 -- 7,693
Net Asset Value:
Class A (and redemption price) $ 9.91 $ 10.29 $ 9.21 $ 11.96
Class B* $ -- $ -- $ 9.22 $ 11.96
Class C* $ -- $ -- $ 9.22 $ --
Institutional (and redemption price) $ 9.92 $ -- $ -- $ --
Class M (and redemption price) $ -- $ 10.28 $ 9.20 $ --
Select (and redemption price) $ 9.91 $ 10.30 $ -- $ 11.98
Class A Maximum Public Offering
Price Per Share (net asset value per
share/98.5%) $ 10.06 $ 10.45 $ -- $ --
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ -- $ -- $ 9.64 $ 12.52
Class M Maximum Public Offering
Price Per Share (net asset value per
share/98.5%) $ -- $ 10.44 $ -- $ --
Class M Maximum Public Offering
Price Per Share (net asset value per
share/97.0%) $ -- $ -- $ 9.48 $ --
Cost of investments $ 902,313 $ 1,494,938 $ 23,148 $ 154,652
Cost of foreign currency $ -- $ -- $ -- $ --
- ------------------------------------------------------------------------------------------------------------------
Premiums received from options written $ 1,273 $ 2,056 $ -- $ --
- ------------------------------------------------------------------------------------------------------------------
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
89
<Page>
STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
FLEMING GLOBAL
ENHANCED EMERGING STRATEGIC
BOND BOND INCOME MARKETS DEBT INCOME
FUND FUND II FUND FUND FUND
INVESTMENT INCOME
Interest $ 22,487 $ 19,777 $ 2,907 $ 2,272 $ 2,737
Dividend -- -- 3 -- --
Dividend income from affiliated
investments* 497 568 133 5 69
Foreign taxes withheld (7) (5) -- --^ --
- ------------------------------------------------------------------------------------------------------------------
Total investment income 22,977 20,340 3,043 2,277 2,806
- ------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 1,694 1,528 457 199 210
Administration fees 847 764 274 43 70
Shareholder servicing fees 664 1,273 183 71 49
Distribution fees 13 88 -- -- 1
Custodian fees 118 106 34 45 67
Printing and postage 21 23 2 -- 2
Professional fees 69 57 49 48 47
Registration expenses 51 71 7 1 25
Transfer agent fees 61 61 9 12 24
Trustees' fees 8 8 3 --^ 1
Other 31 21 6 4 6
- ------------------------------------------------------------------------------------------------------------------
Total expenses 3,577 4,000 1,024 423 502
- ------------------------------------------------------------------------------------------------------------------
Less amounts waived 737 857 658 68 184
Less earnings credits 3 1 1 --^ --^
Less expense reimbursements 17 -- -- -- 8
- ------------------------------------------------------------------------------------------------------------------
Net expenses 2,820 3,142 365 355 310
- ------------------------------------------------------------------------------------------------------------------
Net investment income 20,157 17,198 2,678 1,922 2,496
- ------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
90
<Page>
<Table>
<Caption>
FLEMING GLOBAL
ENHANCED EMERGING STRATEGIC
BOND BOND INCOME MARKETS DEBT INCOME
FUND FUND II FUND FUND FUND
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments 14,283 10,560 297 4,777 5,173
Futures (7,502) (5,965) (658) 82 (866)
Foreign exchange contracts (9) -- -- -- (556)
Written options 3,020 2,375 (126) -- --
Swaps 7,693 (1,649) (617) -- --
Change in net unrealized
appreciation/depreciation of:
Investments 18,779 21,466 704 (727) (742)
Futures 1,204 1,689 42 (23) (3)
Foreign currency translations (3) -- -- -- (352)
Written options 5,714 4,673 (94) -- --
Swaps (1,539) 3,023 8 -- --
Net realized and unrealized gain (loss)
on investments, futures, foreign
exchange transactions, written
options and swaps 41,640 36,172 (444) 4,109 2,654
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 61,797 $ 53,370 $ 2,234 $ 6,031 $ 5,150
- ------------------------------------------------------------------------------------------------------------------
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 84 $ 95 $ 22 $ 1 $ 12
- ------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
91
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY
BOND BOND INCOME INCOME
FUND FUND II FUND FUND
INVESTMENT INCOME
Interest $ 11,348 $ 20,124 $ 684 $ 2,778
Dividend income from affiliated
investments* 470 576 10 49
Foreign taxes withheld (3) (4) --^ --
- ------------------------------------------------------------------------------------------------------------------
Total investment income 11,815 20,696 694 2,827
- ------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 1,105 1,912 57 215
Administration fees 663 1,147 17 108
Shareholder servicing fees 534 1,912 30 179
Distribution fees 10 1,883 69 134
Custodian fees 73 125 54 34
Printing and postage 13 20 4 8
Professional fees 55 57 48 48
Registration expenses 31 42 21 22
Transfer agent fees 38 39 33 78
Trustees' fees 7 12 --^ 1
Other 26 33 4 8
- ------------------------------------------------------------------------------------------------------------------
Total expenses 2,555 7,182 337 835
- ------------------------------------------------------------------------------------------------------------------
Less amounts waived 1,054 689 101 288
Less earnings credits 2 3 --^ --^
Less expense reimbursements -- -- 54 --
- ------------------------------------------------------------------------------------------------------------------
Net expenses 1,499 6,490 182 547
- ------------------------------------------------------------------------------------------------------------------
Net investment income 10,316 14,206 512 2,280
- ------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
92
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY
BOND BOND INCOME INCOME
FUND FUND II FUND FUND
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on
transactions from:
Investments 5,547 10,564 390 2,870
Futures (3,489) (2,444) (43) (809)
Foreign exchange contracts (6) (2) (163) --
Written options (284) (474) -- --
Swaps 905 (4,518) -- --
Change in net unrealized
appreciation/depreciation of:
Investments 1,778 4,584 610 2,136
Futures 709 468 -- 169
Foreign currency translations (5) -- 32 --
Written options 365 666 -- --
Swaps (988) (654) -- --
Net realized and unrealized gain (loss)
on investments, futures, foreign
exchange transactions, written
options and swaps 4,532 8,190 826 4,366
- ------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 14,848 $ 22,396 $ 1,338 $ 6,646
- ------------------------------------------------------------------------------------------------------------------
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 78 $ 95 $ 2 $ 9
- ------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
93
<Page>
STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED
(Amounts in thousands)
<Table>
<Caption>
BOND FUND BOND FUND II
---------------------------------- ----------------------------------
9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED
2/29/04 8/31/03 2/29/04 8/31/03
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 20,157 $ 62,273 $ 17,198 $ 38,411
Net realized gain (loss) on
investments, futures, foreign exchange
transactions, written options and swaps 17,485 45,619 5,321 11,293
Change in net unrealized appreciation
(depreciation) of investments, futures,
foreign currency translations, written
options and swaps 24,155 (40,167) 30,851 (23,834)
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 61,797 67,725 53,370 25,870
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (19,994) (62,540) (17,354) (38,594)
Net realized gain on investment
transactions (34,209) (12,241) (5,793) (8,146)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (54,203) (74,781) (23,147) (46,740)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (245,244) (429,181) (118,055) 386,134
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (237,650) (436,237) (87,832) 365,264
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,233,995 1,670,232 1,069,431 704,167
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 996,345 $ 1,233,995 $ 981,599 $ 1,069,431
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (410) $ (573) $ (893) $ (737)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
94
<Page>
<Table>
<Caption>
FLEMING EMERGING MARKETS
ENHANCED INCOME FUND DEBT FUND
---------------------------------- ----------------------------------
9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED
2/29/04 8/31/03 2/29/04 8/31/03
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 2,678 $ 8,508 $ 1,922 $ 4,778
Net realized gain (loss) on investments,
futures, foreign exchange transactions,
written options and swaps (1,104) (3,952) 4,859 3,573
Change in net unrealized appreciation
(depreciation) of investments, futures,
foreign currency translations, written
options and swaps 660 (572) (750) 6,981
- ---------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 2,234 3,984 6,031 15,332
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (2,675) (8,519) (2,175) (4,996)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) 55,773 58,849 (24,486) 8,503
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets 55,332 54,314 (20,630) 18,839
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning of period 354,408 300,094 60,311 41,472
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 409,740 $ 354,408 $ 39,681 $ 60,311
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (128) $ (131) $ 39 $ 292
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
95
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
----------------------------------
9/1/03 THROUGH YEAR ENDED
2/29/04 8/31/03
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 2,496 $ 7,042
Net realized gain (loss) on investments,
futures and foreign exchange
transactions 3,751 178
Change in net unrealized appreciation
(depreciation) of investments, futures
and foreign currency translations (1,097) 4,192
- --------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net
assets from operations 5,150 11,412
- --------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (2,492) (7,077)
- --------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (56,993) (33,539)
- --------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (54,335) (29,204)
- --------------------------------------------------------------------------------------------------------------------------------
Beginning of period 110,733 139,937
- --------------------------------------------------------------------------------------------------------------------------------
End of period $ 56,398 $ 110,733
- --------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (1,269) $ (1,273)
- --------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
96
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND SHORT TERM BOND FUND II
---------------------------------- ----------------------------------
9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED
2/29/04 8/31/03 2/29/04 8/31/03
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 10,316 $ 24,860 $ 14,206 $ 32,784
Net realized gain (loss) on investments,
futures, foreign exchange transactions,
written options and swaps 2,673 1,350 3,126 3,428
Change in net unrealized appreciation/
depreciation of investments, futures,
foreign currency translations,
written options and swaps 1,859 (6,030) 5,064 (10,667)
Increase (decrease) in net
assets from operations 14,848 20,180 22,396 25,545
- ---------------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) -- -- (66) 1,123
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (10,281) (25,414) (14,207) (33,316)
Return of capital -- -- -- (587)
Net realized gain on investment
transactions -- (11,813) -- (7,040)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (10,281) (37,227) (14,207) (40,943)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (71,613) 204,640 (70,423) 227,176
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (67,046) 187,593 (62,300) 212,901
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning of period 937,210 749,617 1,553,771 1,340,870
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 870,164 $ 937,210 $ 1,491,471 $ 1,553,771
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ 1,031 $ 996 $ (2,963) $ (2,896)
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
97
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND
---------------------------------- ----------------------------------
9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED
2/29/04 8/31/03 2/29/04 8/31/03
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS
Net investment income $ 512 $ 1,116 $ 2,280 $ 5,681
Net realized gain (loss) on investments,
futures and foreign exchange
transactions 184 (335) 2,061 3,804
Change in net unrealized appreciation/
depreciation of investments, futures
and foreign currency translations 642 1,092 2,305 (6,183)
Increase (decrease) in net
assets from operations 1,338 1,873 6,646 3,302
- ---------------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) --^ (9) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net investment income (515) (1,103) (2,279) (5,719)
- ---------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (36) 794 18,621 (5,521)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets 787 1,555 22,988 (7,938)
- ---------------------------------------------------------------------------------------------------------------------------------
Beginning of period 22,357 20,802 134,683 142,621
- ---------------------------------------------------------------------------------------------------------------------------------
End of period $ 23,144 $ 22,357 $ 157,671 $ 134,683
- ---------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (198) $ (195) $ 10 $ 9
- ---------------------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
98
<Page>
STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004
(Amounts in thousands)
<Table>
<Caption>
GLOBAL
STRATEGIC
INCOME FUND
INCREASE (DECREASE) IN CASH*
CASH FLOWS PROVIDED BY
OPERATING ACTIVITIES:
Net interest and dividend income received
(excluding premium/discount amortization of $35) $ 3,474
Operating expenses paid (284)
Expense reimbursements received 6
Purchases of long-term investments (97,379)
Net (purchases)/sales of short-term investments 15,793
Proceeds from disposition of long-term
investments and principal paydowns 139,747
Net cash used for futures transactions (813)
Net cash used for foreign exchange transactions (552)
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities 59,992
- ------------------------------------------------------------------------------------------
CASH FLOWS USED BY FINANCING ACTIVITIES:
Proceeds from shares sold 1,196
Payment from shares redeemed (58,847)
Cash distributions paid (2,362)
- ------------------------------------------------------------------------------------------
Net cash used in financing activities (60,013)
- ------------------------------------------------------------------------------------------
Net increase (decrease) in cash (21)
- ------------------------------------------------------------------------------------------
Cash, beginning of period 292
- ------------------------------------------------------------------------------------------
Cash, end of period $ 271
- ------------------------------------------------------------------------------------------
RECONCILIATION OF NET INCREASE
(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS TO
NET CASH PROVIDED BY
OPERATING ACTIVITIES:
Net increase (decrease) in net assets
resulting from operations $ 5,150
- ------------------------------------------------------------------------------------------
Decrease in market value of investments 65,874
Increase in receivable for investment
securities sold (4,470)
Decrease in dividend and interest receivable 633
Increase in expense reimbursement receivable (2)
Decrease in unrealized appreciation on
foreign exchange contracts 356
Decrease in net variation margin receivable 56
Decrease in payable for investment
securities purchased (7,639)
Increase in accrued expenses and other payables 34
- ------------------------------------------------------------------------------------------
Total adjustments 54,842
- ------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 59,992
- ------------------------------------------------------------------------------------------
</Table>
* Includes cash and foreign currency, at value.
SEE NOTES TO FINANCIAL STATEMENTS.
99
<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 and are registered under the Investment Company
Act of 1940, as amended, (the "1940 Act"), as open-end management investment
companies. 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, 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>
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 converts to Class A shares after eight years. No sales
charges are assessed with respect to Institutional, Select and Ultra 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.
100
<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 received 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>
101
<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 at the purchase date 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. All short-term securities with a remaining maturity of sixty days or
less are valued using the amortized cost method, which approximates market
value. 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. 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, at which time a realized
gain or loss is recognized.
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 Funds' credit risk is
limited to failure of the exchange or board of trade.
As of February 29, 2004, 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.
102
<Page>
2. Purchases and sales of investment securities, income and expenses: at the
rates of exchange prevailing on the respective dates of such transactions.
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 the
Funds' 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 Funds' 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 exchange 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 February 29, 2004, 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 February 29, 2004, the Funds had written options contracts outstanding as
listed on the Funds' Portfolio of Investments.
103
<Page>
Transactions in options written during the six months ended February 29, 2004,
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, 2003 (456,750) $ 2,349 (373,500) $ 1,909 (23,700) $ 112
Options written (1,868,018) 7,084 (1,411,498) 5,859 -- --
Options terminated in closing
purchase transactions 1,234,300 (6,761) 1,052,700 (5,649) 23,700 (112)
Options exercised -- -- -- -- -- --
Options outstanding at
February 29, 2004 (1,090,468) $ 2,672 (732,298) $ 2,119 -- $ --
<Caption>
STBF STBFII
------------------------- -------------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS
UNITS RECEIVED UNITS RECEIVED
Options outstanding at
August 31, 2003 (53,550) $ 251 (89,250) $ 418
Options written (559,853) 1,665 (986,583) 2,748
Options terminated in closing
purchase transactions 226,500 (643) 393,250 (1,110)
Options exercised -- -- -- --
Options outstanding at
February 29, 2004 (386,903) $ 1,273 (682,583) $ 2,056
</Table>
F. SWAPS -- The Funds may engage in various swap transactions, including forward
rate agreements, interest rate, currency, fixed income, index 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 change
in the value of the swaps, including the periodic amounts of 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 payment or receipt of a
periodic payment or 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.
104
<Page>
As of February 29, 2004, the Funds had outstanding swap agreements as listed on
the Funds' Portfolio of Investments. Swap transactions present risk of loss in
excess of the related amounts included in the Statement of Assets & Liabilities.
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 any realized gains
on 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. The Funds 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 and BFII had TBA Dollar Rolls outstanding as of February 29, 2004, 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.
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.
105
<Page>
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 $ 20,818 2.09% $ 20,818 2.09%
GSIF 15,061 26.70% 15,061 26.70%
</Table>
* Includes Illiquid Securities
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 less foreign taxes withheld (if any) 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 Fund's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its 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 -- The 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 it invests.
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.
106
<Page>
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.
P. OTHER EXPENSES -- Other expenses in the Statement of Operations include fees
related to line of credit, insurance, pricing and reporting services.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY FEE -- Pursuant to the Investment Advisory Agreement,
JPMIM acts as the investment advisor to the Funds. Prior to September 1, 2003,
J.P. Morgan Fleming Asset Management (USA) Inc. ("JPMFAM"), served as the
Advisor to BF II, STBFII, SIF and USTI. On September 1, 2003, JPMFAM and Robert
Fleming Inc. merged into JPMIM. Prior to October 1, 2003, JPMIM was a wholly
owned subsidiary of J.P. Morgan Chase & Co. On October 1, 2003, JPMIM became a
wholly owned subsidiary of J.P. Morgan Fleming Asset Management Holdings, Inc.,
which is a wholly owned subsidiary of J.P. Morgan Chase & Co. The investment
advisory services and personnel providing investment advice have not changed as
a result of the merger and ownership change. Neither the merger nor the
ownership change constituted an assignment under the 1940 Act or the Investment
Advisers Act of 1940. The Advisor supervises the investments of each respective
Fund and for such services is 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 Advisor 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.
107
<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 n/a 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 is entitled to receive the 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 JPMorgan Chase Bank ("JPMCB")
under which JPMCB provides account administration and personal account
maintenance services to the shareholders. For performing these services, JPMCB
receives 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 n/a 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>
108
<Page>
JPMCB may enter into services contracts with certain entities under which it
will pay all or a portion of the annual fee to such entities for performing
shareholdings and administrative services.
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 advisors 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 custody and Fund
accounting 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 the 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 0.25 n/a n/a
EMDF n/a n/a n/a n/a n/a 1.25 n/a
GSIF 1.25 n/a 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>
109
<Page>
The contractual expense limitation agreements were in effect for the six months
ended February 29, 2004. 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
FUND
BF 12/31/04 12/31/04 12/31/04 n/a 12/31/04 12/31/04 12/31/05
BFII 12/31/04 12/31/04 n/a n/a n/a 12/31/04 n/a
EIF n/a n/a n/a n/a 12/31/04 n/a n/a
EMDF n/a n/a n/a n/a n/a 12/31/04 n/a
GSIF 12/31/04 n/a n/a n/a 12/31/04 12/31/04 n/a
STBF 12/31/04 n/a n/a n/a 12/31/04 12/31/04 n/a
STBFII 12/31/04 n/a n/a 12/31/04 n/a 12/31/04 n/a
SIF 12/31/04 12/31/04 12/31/04 12/31/04 n/a n/a n/a
USTI 12/31/04 12/31/04 n/a n/a n/a 12/31/04 n/a
</Table>
The Administrator waived fees and reimbursed expenses as outlined in Note 4.F.
F. WAIVERS AND REIMBURSEMENTS -- For the six months ended February 29, 2004, 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 $ -- $ 553 $ 143 $ -- $ 696 $ 17
BFII -- 208 616 33 857 --
EIF 201 246 183 -- 630 --
EMDF -- 17 51 -- 68 --
GSIF 103 67 14 -- 184 8
STBF 133 513 391 -- 1,037 --
STBFII -- 293 362 34 689 --
SIF 57 17 27 -- 101 54
USTI 29 62 130 67 288 --
Total $ 523 $ 1,976 $ 1,917 $ 134 $ 4,550 $ 79
</Table>
110
<Page>
<Table>
<Caption>
VOLUNTARY WAIVERS
--------------------------------------------------------------------
INVESTMENT SHAREHOLDER
ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL
BF $ -- $ 41 $ -- $ -- $ 41
EIF -- 28 -- -- 28
STBF -- 17 -- -- 17
Total $ -- $ 86 $ -- $ -- $ 86
</Table>
G. OTHER -- Certain officers of the Trust(s) are officers of J.P. Morgan Chase &
Co. or of BISYS or their subsidiaries.
During the period, certain Funds may have purchased securities from an
underwriting syndicate in which the principal underwriter or members of the
syndicate were affiliated with the Advisor.
The Funds may use related party broker dealers. For the six months ended
February 29, 2004, STBF incurred approximately (in thousands) $104, as brokerage
commissions with brokers/dealers affiliated with JPMorgan.
The SEC has granted an exemptive order permitting each fund to engage in
principal transactions with J.P. Morgan Securities Inc., an affiliated broker,
involving taxable money market instruments subject to certain conditions.
111
<Page>
5. CLASS SPECIFIC EXPENSES
The Funds' class specific expenses for the six months ended February 29, 2004
are as follows (amounts in thousands):
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT
BF
Class A $ 3 $ 3 $ 9
Class B 3 9 9
Class C --^ 1 1
Institutional 208 -- 13
Select 341 -- 22
Ultra 109 -- 7
Total $ 664 $ 13 $ 61
BFII
Class A $ 33 $ 34 $ 31
Class B 18 54 17
Select 1,222 -- 13
Total $ 1,273 $ 88 $ 61
EIF
Institutional $ 183 $ -- $ 9
EMDF
Select $ 71 $ -- $ 12
GSIF
Class A $ 1 $ 1 $ 8
Class B** --^ --^ --^
Institutional 44 -- 8
Select 4 -- 8
Total $ 49 $ 1 $ 24
STBF
Class A $ 10 $ 10 $ 8
Institutional 380 -- 15
Select 144 -- 15
Total $ 534 $ 10 $ 38
STBFII
Class A $ 56 $ 56 $ 24
Class M 1,305 1,827 5
Select 551 -- 10
Total $ 1,912 $ 1,883 $ 39
</Table>
112
<Page>
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT
SIF
Class A $ 3 $ 3 $ 5
Class B 11 32 16
Class C 5 15 7
Class M 11 19 5
Total $ 30 $ 69 $ 33
USTI
Class A $ 66 $ 66 $ 52
Class B 23 68 18
Select 90 -- 8
Total $ 179 $ 134 $ 78
</Table>
^ Amount rounds to less than one thousand.
** Class ceased operations as of September 12, 2003.
6. CLASS SPECIFIC DISTRIBUTIONS
The Funds' class specific distributions from net investment income and realized
gain on investment transactions for the six months ended February 29, 2004 and
the year ended August 31, 2003 are as follows (amounts in thousands):
<Table>
<Caption>
SIX MONTHS ENDED 2/29/04 YEAR ENDED 8/31/03
--------------------------------- ---------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
BF
Class A $ 37 $ 71 $ 62 $ 8
Class B 32 76 70 13
Class C 3 9 1 --
Institutional 7,395 11,950 26,560 5,442
Select 4,607 8,959 13,353 2,562
Ultra 7,920 13,144 22,494 4,216
- ---------------------------------------------------------------------------------------------------------------------
Total $ 19,994 $ 34,209 $ 62,540 $ 12,241
BFII
Class A $ 442 $ 142 $ 1,413 $ 389
Class B 183 83 492 170
Select 16,729 5,568 36,689 7,587
- ---------------------------------------------------------------------------------------------------------------------
Total $ 17,354 $ 5,793 $ 38,594 $ 8,146
EIF
Institutional $ 2,675 $ -- $ 8,519 $ --
EMDF
Select $ 2,175 $ -- $ 4,996 $ --
</Table>
113
<Page>
<Table>
<Caption>
SIX MONTHS ENDED 2/29/04 YEAR ENDED 8/31/03
--------------------------------- ---------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
GSIF
Class A $ 10 $ -- $ 9 $ --
Class B** 1 -- 12 --
Institutional 2,403 -- 6,870 --
Select 78 -- 186 --
- ---------------------------------------------------------------------------------------------------------------------
Total $ 2,492 $ -- $ 7,077 $ --
STBF
Class A $ 77 $ -- $ 255 $ 155
Institutional 9,000 -- 21,501 9,747
Select 1,204 -- 3,658 1,911
- ---------------------------------------------------------------------------------------------------------------------
Total $ 10,281 $ -- $ 25,414 $ 11,813
STBFII
Class A $ 439 $ -- $ 1,997* $ 510
Class M 8,793 -- 26,550* 5,842
Select 4,975 -- 5,356* 688
- ---------------------------------------------------------------------------------------------------------------------
Total $ 14,207 $ -- $ 33,903 $ 7,040
SIF
Class A $ 65 $ -- $ 158 $ --
Class B 187 -- 384 --
Class C 87 -- 140 --
Class M 176 -- 421 --
- ---------------------------------------------------------------------------------------------------------------------
Total $ 515 $ -- $ 1,103 $ --
USTI
Class A $ 853 $ -- $ 1,913 $ --
Class B 210 -- 670 --
Select 1,216 -- 3,136 --
- ---------------------------------------------------------------------------------------------------------------------
Total $ 2,279 $ -- $ 5,719 $ --
- ---------------------------------------------------------------------------------------------------------------------
</Table>
* Includes return of capital $33, $478 and $76 for Class A, M and Select,
respectively (amounts in thousands).
** Class ceased operations as of September 12, 2003.
114
<Page>
7. INVESTMENT TRANSACTIONS
For the six months ended February 29, 2004, 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 $ 571,583 $ 388,579 $ 2,600,532 $ 2,937,945
BFII 445,291 321,292 2,473,955 2,588,509
EIF 253,633 232,093 50,290 49,265
EMDF 1,685 2,324 39,064 60,124
GSIF 4,325 29,895 85,415 114,322
STBF 441,458 390,786 711,488 753,436
STBFII 968,667 742,303 1,296,901 1,534,499
SIF 4,138 3,874 5,856 6,519
USTI -- 1,886 105,968 90,479
</Table>
8. FEDERAL INCOME TAX MATTERS
For Federal income tax purposes, the cost and unrealized appreciation
(depreciation) in value of the investment securities at February 29, 2004 are as
follows (amounts in thousands):
<Table>
<Caption>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
BF $ 1,146,146 $ 28,332 $ (5,158) $ 23,174
BFII 1,136,069 30,748 (2,581) 28,167
EIF 346,418 642 (151) 491
EMDF 32,557 6,845 (247) 6,598
GSIF 53,298 5,050 (1,339) 3,711
STBF 902,313 6,928 (1,184) 5,744
STBFII 1,494,938 11,537 (1,822) 9,715
SIF 23,148 1,680 (262) 1,418
USTI 154,652 3,092 (48) 3,044
</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
115
<Page>
Other expenses on the Statement of Operations. This agreement will expire on
April 15, 2004.
Prior to April 17, 2003, the Funds could borrow money for temporary or emergency
purposes. 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 six months ended February 29, 2004, 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 $ 40 1.63%
GSI 301 1.61%
</Table>
* The average amount outstanding was calculated based on the daily balances
during the period from September 1, 2003, through February 29, 2004.
Effective April 15, 2004, the Line of Credit Agreement has been extended to
April 14, 2005.
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 swap 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.
As of February 29, 2004 there was one shareholder who owned 18.3% of EIF.
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. CORPORATE EVENT
On January 14, 2004, J.P. Morgan Chase & Co. and Bank One Corp. announced they
have entered into an agreement and plan of merger. The merger is subject to the
approval of the shareholders of both institutions as well as U.S. federal and
state and foreign regulatory authorities. Completion of the transaction is
expected to occur in mid-2004.
116
<Page>
12. CAPITAL SHARE TRANSACTIONS
Capital share transactions were as follows for the periods presented (amounts in
thousands):
<Table>
<Caption>
BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 1,016 $ 5,626
Shares issued in reinvestment
of distributions 104 59
Shares redeemed (576) (4,362)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 544 $ 1,323
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 100 550
Shares issued in reinvestment
of distributions 10 6
Shares redeemed (57) (430)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 53 126
- ---------------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 68 $ 1,762
Shares issued in reinvestment
of distributions 55 50
Shares redeemed (189) (623)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (66) $ 1,189
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 6 172
Shares issued in reinvestment
of distributions 6 5
Shares redeemed (19) (61)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (7) 116
- ---------------------------------------------------------------------------------------------------
</Table>
117
<Page>
<Table>
<Caption>
BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS C SHARES**
AMOUNT
Shares sold $ 100 $ 277
Shares issued in reinvestment
of distributions 11 1
Shares redeemed (51) --
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 60 $ 278
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 10 27
Shares issued in reinvestment
of distributions 1 --^
Shares redeemed (5) --
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 6 27
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 52,099 $ 100,824
Shares issued in reinvestment
of distributions 12,188 18,575
Shares redeemed (184,377) (387,582)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (120,090) $ (268,183)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 5,199 9,955
Shares issued in reinvestment
of distributions 1,230 1,827
Shares redeemed (18,376) (38,087)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (11,947) (26,305)
- ---------------------------------------------------------------------------------------------------
</Table>
** From commencement of offering class shares on March 31, 2003.
^ Amount rounds to less than one thousand.
118
<Page>
<Table>
<Caption>
BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
SELECT SHARES
AMOUNT
Shares sold $ 29,405 $ 164,875
Shares issued in reinvestment
of distributions 12,697 14,339
Shares redeemed (146,119) (179,758)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (104,017) $ (544)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 2,931 16,205
Shares issued in reinvestment
of distributions 1,281 1,410
Shares redeemed (14,731) (17,684)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (10,519) (69)
- ---------------------------------------------------------------------------------------------------
ULTRA SHARES
AMOUNT
Shares sold $ 34,582 $ 83,572
Shares issued in reinvestment
of distributions 18,681 21,583
Shares redeemed (74,938) (268,399)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (21,675) $ (163,244)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 3,455 8,169
Shares issued in reinvestment
of distributions 1,883 2,122
Shares redeemed (7,495) (26,279)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,157) (15,988)
- ---------------------------------------------------------------------------------------------------
</Table>
119
<Page>
<Table>
<Caption>
BOND FUND II
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 2,203 $ 19,019
Shares issued in connection with
Fund Reorganization (Note 2) -- 4,321
Shares issued in reinvestment
of distributions 438 1,250
Shares redeemed (11,381) (21,390)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (8,740) $ 3,200
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 53 456
Shares issued in connection with
Fund Reorganization (Note 2) -- 104
Shares issued in reinvestment
of distributions 11 30
Shares redeemed (278) (514)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (214) 76
- ---------------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 578 $ 5,212
Shares issued in reinvestment
of distributions 213 535
Shares redeemed (2,293) (3,864)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (1,502) $ 1,883
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 14 125
Shares issued in reinvestment
of distributions 5 13
Shares redeemed (56) (93)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (37) 45
- ---------------------------------------------------------------------------------------------------
</Table>
120
<Page>
<Table>
<Caption>
BOND FUND II
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
SELECT SHARES
AMOUNT
Shares sold $ 31,519 $ 101,070
Shares issued in connection with
Fund Reorganization (Note 2) -- 530,889
Shares issued in reinvestment
of distributions 5,695 9,918
Shares redeemed (145,027) (260,826)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (107,813) $ 381,051
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 765 2,423
Shares issued in connection with
Fund Reorganization (Note 2) -- 12,846
Shares issued in reinvestment
of distributions 138 239
Shares redeemed (3,524) (6,274)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,621) 9,234
- ---------------------------------------------------------------------------------------------------
<Caption>
ENHANCED INCOME FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 167,069 $ 447,159
Shares issued in reinvestment
of distributions 1,974 6,334
Shares redeemed (113,270) (394,644)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 55,773 $ 58,849
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 16,958 44,983
Shares issued in reinvestment
of distributions 200 638
Shares redeemed (11,506) (39,744)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 5,652 5,877
- ---------------------------------------------------------------------------------------------------
</Table>
121
<Page>
<Table>
<Caption>
FLEMING EMERGING MARKETS DEBT FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
SELECT SHARES
AMOUNT
Shares sold $ 5,436 $ 48,541
Shares issued in reinvestment
of distributions 1,854 4,368
Shares redeemed (31,776) (44,406)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (24,486) $ 8,503
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 575 5,767
Shares issued in reinvestment
of distributions 197 517
Shares redeemed (3,309) (5,103)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,537) 1,181
- ---------------------------------------------------------------------------------------------------
</Table>
122
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004* AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 422 $ 563
Shares issued in reinvestment
of distributions 8 2
Shares redeemed (409) (233)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 21 $ 332
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 47 62
Shares issued in reinvestment
of distributions 1 --^
Shares redeemed (45) (26)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 3 36
- ---------------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ -- $ 103
Shares issued in reinvestment
of distributions -- 11
Shares redeemed (317) (29)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (317) $ 85
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold -- 12
Shares issued in reinvestment
of distributions -- 1
Shares redeemed (36) (3)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (36) 10
- ---------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
* For Class B Shares, activity through September 12, 2003
123
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 506 $ 19,855
Shares issued in reinvestment
of distributions 175 1,670
Shares redeemed (57,409) (53,142)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (56,728) $ (31,617)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 56 2,212
Shares issued in reinvestment
of distributions 19 189
Shares redeemed (6,297) (5,948)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (6,222) (3,547)
- ---------------------------------------------------------------------------------------------------
SELECT SHARES
AMOUNT
Shares sold $ 244 $ 813
Shares issued in reinvestment
of distributions 74 173
Shares redeemed (287) (3,325)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 31 $ (2,339)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 27 90
Shares issued in reinvestment
of distributions 8 19
Shares redeemed (31) (377)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 4 (268)
- ---------------------------------------------------------------------------------------------------
</Table>
124
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 1,233 $ 10,476
Shares issued in reinvestment
of distributions 34 234
Shares redeemed (2,431) (11,597)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (1,164) $ (887)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 125 1,047
Shares issued in reinvestment
of distributions 3 23
Shares redeemed (246) (1,161)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (118) (91)
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 166,155 $ 577,952
Shares issued in reinvestment
of distributions 6,435 22,428
Shares redeemed (223,295) (397,855)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (50,705) $ 202,525
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 16,811 57,811
Shares issued in reinvestment
of distributions 651 2,246
Shares redeemed (22,601) (39,844)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (5,139) 20,213
- ---------------------------------------------------------------------------------------------------
SELECT SHARES
AMOUNT
Shares sold $ 28,480 $ 114,380
Shares issued in reinvestment
of distributions 798 4,787
Shares redeemed (49,022) (116,165)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (19,744) $ 3,002
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 2,882 11,457
Shares issued in reinvestment
of distributions 80 479
Shares redeemed (4,967) (11,649)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,005) 287
- ---------------------------------------------------------------------------------------------------
</Table>
125
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND II
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 15,111 $ 113,310
Shares issued in reinvestment
of distributions 359 2,068
Shares redeemed (17,002) (141,585)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (1,532) $ (26,207)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 1,473 10,975
Shares issued in reinvestment
of distributions 35 200
Shares redeemed (1,659) (13,686)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (151) (2,511)
- ---------------------------------------------------------------------------------------------------
CLASS M SHARES
AMOUNT
Shares sold $ 48,675 $ 396,087
Shares issued in reinvestment
of distributions 15 166
Shares redeemed (286,676) (344,293)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (237,986) $ 51,960
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 4,749 38,320
Shares issued in reinvestment
of distributions 2 16
Shares redeemed (27,966) (33,291)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (23,215) 5,045
- ---------------------------------------------------------------------------------------------------
SELECT SHARES
AMOUNT
Shares sold $ 240,468 $ 265,146
Shares issued in reinvestment
of distributions 545 1,917
Shares redeemed (71,918) (65,640)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 169,095 $ 201,423
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 23,422 25,618
Shares issued in reinvestment
of distributions 53 185
Shares redeemed (7,003) (6,337)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 16,472 19,466
- ---------------------------------------------------------------------------------------------------
</Table>
126
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 772 $ 1,934
Shares issued in reinvestment
of distributions 38 99
Shares redeemed (1,168) (1,596)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (358) $ 437
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 86 219
Shares issued in reinvestment
of distributions 4 11
Shares redeemed (130) (183)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in
Fund shares outstanding (40) 47
- ---------------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 711 $ 2,084
Shares issued in reinvestment
of distributions 89 159
Shares redeemed (751) (1,486)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 49 $ 757
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 78 236
Shares issued in reinvestment
of distributions 9 18
Shares redeemed (82) (170)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in
Fund shares outstanding 5 84
- ---------------------------------------------------------------------------------------------------
</Table>
127
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS C SHARES
AMOUNT
Shares sold $ 735 $ 2,257
Shares issued in reinvestment
of distributions 58 75
Shares redeemed (688) (1,271)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 105 $ 1,061
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 81 254
Shares issued in reinvestment
of distributions 6 8
Shares redeemed (75) (147)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in
Fund shares outstanding 12 115
- ---------------------------------------------------------------------------------------------------
CLASS M SHARES
AMOUNT
Shares sold $ 404 $ 499
Shares issued in reinvestment
of distributions -- --^
Shares redeemed (236) (1,960)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 168 $ (1,461)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 44 57
Shares issued in reinvestment
of distributions -- --^
Shares redeemed (26) (221)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in
Fund shares outstanding 18 (164)
- ---------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
128
<Page>
<Table>
<Caption>
U.S. TREASURY INCOME FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 29, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 15,079 $ 20,583
Shares issued in reinvestment
of distributions 654 1,450
Shares redeemed (15,427) (19,203)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 306 $ 2,830
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 1,301 1,726
Shares issued in reinvestment
of distributions 55 121
Shares redeemed (1,311) (1,611)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in
Fund shares outstanding 45 236
- ---------------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 704 $ 6,965
Shares issued in reinvestment
of distributions 156 488
Shares redeemed (3,768) (8,907)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (2,908) $ (1,454)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 60 581
Shares issued in reinvestment
of distributions 13 41
Shares redeemed (321) (747)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (248) (125)
- ---------------------------------------------------------------------------------------------------
SELECT SHARES
AMOUNT
Shares sold $ 34,386 $ 47,402
Shares issued in reinvestment
of distributions 640 1,857
Shares redeemed (13,803) (56,156)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 21,223 $ (6,897)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 2,894 3,957
Shares issued in reinvestment
of distributions 54 155
Shares redeemed (1,169) (4,685)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 1,779 (573)
- ---------------------------------------------------------------------------------------------------
</Table>
129
<Page>
FINANCIAL HIGHLIGHTS
CLASS A SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.03 0.17 0.35 0.52
Year Ended 8/31/03 $ 10.07 0.40 0.04 0.44
11/1/01 Through 8/31/02 $ 10.08 0.31 0.05 0.36
9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.20 0.26
BOND FUND II^^
9/1/03 Through 2/29/04 $ 40.59 0.68^ 1.53 2.21
Year Ended 8/31/03 $ 41.39 1.66^ (0.31) 1.35
11/1/01 Through 8/31/02 $ 41.01 1.35^ 0.34 1.69
3/2/01** Through 10/31/01 $ 39.55 1.32 1.46 2.78
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.92 0.22^ 0.23 0.45
Year Ended 8/31/03 $ 8.64 0.40^ 0.31 0.71
11/1/01 Through 8/31/02 $ 8.91 0.55 (0.33) 0.22
9/10/01** Through 10/31/01 $ 9.13 0.09^ (0.22) (0.13)
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 $ 9.85 0.09 0.06 0.15
Year ended 8/31/03 $ 10.03 0.24 (0.03) 0.21
11/1/01 Through 8/31/02 $ 10.01 0.27 0.05 0.32
9/10/01** Through 10/31/01 $ 9.87 0.05^ 0.15 0.20
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
BOND FUND^^
9/1/03 Through 2/29/04 0.16 0.30 -- 0.46
Year Ended 8/31/03 0.40 0.08 -- 0.48
11/1/01 Through 8/31/02 0.31 0.06 -- 0.37
9/10/01** Through 10/31/01 0.07 -- -- 0.07
BOND FUND II^^
9/1/03 Through 2/29/04 0.67 0.24 -- 0.91
Year Ended 8/31/03 1.66 0.49 -- 2.15
11/1/01 Through 8/31/02 1.31 -- -- 1.31
3/2/01** Through 10/31/01 1.32 -- -- 1.32
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.22 -- -- 0.22
Year Ended 8/31/03 0.43 -- -- 0.43
11/1/01 Through 8/31/02 0.47 -- 0.02 0.49
9/10/01** Through 10/31/01 0.09 -- -- 0.09
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 0.09 -- -- 0.09
Year ended 8/31/03 0.25 0.14 -- 0.39
11/1/01 Through 8/31/02 0.26 0.04 -- 0.30
9/10/01** Through 10/31/01 0.06 -- -- 0.06
</Table>
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
^^ The fund changed its fiscal year end from October 31 to August 31.
(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.
SEE NOTES TO FINANCIAL STATEMENTS.
130
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS)
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.09 5.36% $ 3 0.75% 3.26%
Year Ended 8/31/03 $ 10.03 4.32% $ 2 0.75% 3.86%
11/1/01 Through 8/31/02 $ 10.07 3.72% $ 1 0.75% 3.59%
9/10/01** Through 10/31/01 $ 10.08 2.63% $ --+ 0.75% 3.93%
BOND FUND II^^
9/1/03 Through 2/29/04 $ 41.89 5.48% $ 24 0.75% 3.29%
Year Ended 8/31/03 $ 40.59 3.26% $ 32 0.75% 3.96%
11/1/01 Through 8/31/02 $ 41.39 4.26% $ 29 0.75% 4.02%
3/2/01** Through 10/31/01 $ 41.01 7.23% $ 63 0.75% 4.90%
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.15 5.06% $ --+ 1.25% 4.93%
Year Ended 8/31/03 $ 8.92 8.33% $ --+ 1.25% 4.45%
11/1/01 Through 8/31/02 $ 8.64 2.54% $ --+ 1.25% 6.20%
9/10/01** Through 10/31/01 $ 8.91 (2.30%) $ --+ 1.25% 6.99%
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 $ 9.91 1.57% $ 8 0.75% 1.94%
Year ended 8/31/03 $ 9.85 2.08% $ 9 0.75% 2.39%
11/1/01 Through 8/31/02 $ 10.03 3.18% $ 10 0.75% 3.01%
9/10/01** Through 10/31/01 $ 10.01 2.01% $ 2 0.75% 3.62%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND^^
9/1/03 Through 2/29/04 1.77% 2.24% 285%
Year Ended 8/31/03 1.59% 3.02% 679%
11/1/01 Through 8/31/02 5.64% (1.30%) 572%
9/10/01** Through 10/31/01 10.75% (6.07%) 423%
BOND FUND II^^
9/1/03 Through 2/29/04 1.24% 2.80% 286%
Year Ended 8/31/03 1.16% 3.55% 806%
11/1/01 Through 8/31/02 1.10% 3.67% 496%
3/2/01** Through 10/31/01 1.25% 4.40% 319%
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 5.00% 1.18% 101%
Year Ended 8/31/03 7.26% (1.56%) 248%
11/1/01 Through 8/31/02 35.90%!! (28.45%)!! 178%
9/10/01** Through 10/31/01 11.01% (2.77%) 107%
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 1.15% 1.54% 145%
Year ended 8/31/03 1.10% 2.04% 386%
11/1/01 Through 8/31/02 1.00% 2.76% 215%
9/10/01** Through 10/31/01 10.76% (6.39%) 160%
</Table>
# Short periods have been annualized.
+ Amount rounds to less than one million.
!! Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
SEE NOTES TO FINANCIAL STATEMENTS.
131
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 $ 10.23 0.10^ 0.06 0.16
Year ended 8/31/03 $ 10.33 0.23^ (0.04) 0.19
11/1/01 Through 8/31/02 $ 10.38 0.25 0.06 0.31
Year Ended 10/31/01 $ 9.89 0.43^ 0.53 0.96
Year Ended 10/31/00 $ 9.94 0.56 (0.05) 0.51
Year Ended 10/31/99 $ 10.14 0.46 (0.20) 0.26
Year Ended 10/31/98 $ 10.10 0.53 0.02 0.55
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.89 0.22^ 0.32 0.54
Year Ended 8/31/03 $ 8.55 0.48^ 0.34 0.82
11/1/01 Through 8/31/02 $ 8.85 0.41 (0.31) 0.10
Year Ended 10/31/01 $ 9.05 0.62 (0.20) 0.42
Year Ended 10/31/00 $ 9.59 0.78 (0.53) 0.25
11/30/98* Through 10/31/99 $ 10.00 0.72 (0.41) 0.31
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 $ 11.61 0.19^ 0.35 0.54
Year Ended 8/31/03 $ 11.83 0.45 (0.21) 0.24
11/1/01 Through 8/31/02 $ 11.77 0.38 0.05 0.43
Year Ended 10/31/01 $ 10.77 0.53 1.01 1.54
Year Ended 10/31/00 $ 10.67 0.68 0.10 0.78
Year Ended 10/31/99 $ 11.66 0.71 (0.99) (0.28)
Year Ended 10/31/98 $ 11.26 0.75 0.40 1.15
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 0.10 -- -- 0.10
Year ended 8/31/03 0.24 0.05 --+ 0.29
11/1/01 Through 8/31/02 0.25 0.11 -- 0.36
Year Ended 10/31/01 0.47 -- -- 0.47
Year Ended 10/31/00 0.56 -- -- 0.56
Year Ended 10/31/99 0.46 -- -- 0.46
Year Ended 10/31/98 0.51 -- -- 0.51
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.22 -- -- 0.22
Year Ended 8/31/03 0.48 -- -- 0.48
11/1/01 Through 8/31/02 0.38 -- 0.02 0.40
Year Ended 10/31/01 0.60 -- 0.02 0.62
Year Ended 10/31/00 0.78 -- 0.01 0.79
11/30/98* Through 10/31/99 0.72 -- -- 0.72
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 0.19 -- -- 0.19
Year Ended 8/31/03 0.46 -- -- 0.46
11/1/01 Through 8/31/02 0.37 -- -- 0.37
Year Ended 10/31/01 0.54 -- -- 0.54
Year Ended 10/31/00 0.68 -- -- 0.68
Year Ended 10/31/99 0.71 -- -- 0.71
Year Ended 10/31/98 0.75 -- -- 0.75
</Table>
* Commencement of operations.
^ Calculated based upon average shares outstanding.
^^ The fund changed its fiscal year end from October 31 to August 31.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
132
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS)
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 $ 10.29 1.57% $ 43 0.75% 1.96%
Year ended 8/31/03 $ 10.23 1.88% $ 44 0.75% 2.31%
11/1/01 Through 8/31/02 $ 10.33 3.06% $ 70 0.75% 2.66%
Year Ended 10/31/01 $ 10.38 9.95% $ 52 0.75% 4.25%
Year Ended 10/31/00 $ 9.89 5.27% $ 19 0.75% 5.68%
Year Ended 10/31/99 $ 9.94 2.64% $ 22 0.75% 4.58%
Year Ended 10/31/98 $ 10.14 5.58% $ 19 0.76% 5.28%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.21 6.13% $ 3 1.25% 4.85%
Year Ended 8/31/03 $ 8.89 9.77% $ 3 1.25% 5.44%
11/1/01 Through 8/31/02 $ 8.55 1.10% $ 3 1.25% 5.74%
Year Ended 10/31/01 $ 8.85 4.73% $ 2 1.25% 6.81%
Year Ended 10/31/00 $ 9.05 2.59% $ 2 1.11% 7.84%
11/30/98* Through 10/31/99 $ 9.59 3.23% $ 3 0.15% 8.38%
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 $ 11.96 4.66% $ 48 0.75% 3.21%
Year Ended 8/31/03 $ 11.61 2.00% $ 46 0.75% 3.85%
11/1/01 Through 8/31/02 $ 11.83 3.80% $ 44 0.75% 3.87%
Year Ended 10/31/01 $ 11.77 14.72% $ 46 0.75% 4.74%+
Year Ended 10/31/00 $ 10.77 7.63% $ 41 0.75% 6.45%
Year Ended 10/31/99 $ 10.67 (2.41%) $ 69 0.75% 6.40%
Year Ended 10/31/98 $ 11.66 10.59% $ 63 0.79% 6.53%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 1.05% 1.66% 153%
Year ended 8/31/03 0.96% 2.10% 319%
11/1/01 Through 8/31/02 1.00% 2.41% 192%
Year Ended 10/31/01 1.15% 3.85% 315%
Year Ended 10/31/00 1.37% 5.06% 139%
Year Ended 10/31/99 1.37% 3.96% 302%
Year Ended 10/31/98 1.44% 4.60% 439%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 2.65% 3.45% 47%
Year Ended 8/31/03 2.69% 4.00% 116%
11/1/01 Through 8/31/02 3.13% 3.86% 176%
Year Ended 10/31/01 2.75% 5.31% 174%
Year Ended 10/31/00 2.43% 6.52% 113%
11/30/98* Through 10/31/99 3.59% 4.94% 136%
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 1.31% 2.65% 69%
Year Ended 8/31/03 1.31% 3.29% 106%
11/1/01 Through 8/31/02 1.32% 3.30% 228%
Year Ended 10/31/01 1.35% 4.14%+ 134%
Year Ended 10/31/00 1.30% 5.90% 29%
Year Ended 10/31/99 1.32% 5.83% 59%
Year Ended 10/31/98 1.30% 6.02% 75%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
## Amount rounds to less than .005 per share amount.
+ Restated.
SEE NOTES TO FINANCIAL STATEMENTS.
133
<Page>
CLASS B SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND^^
9/1/03 Through 2/29/04 $ 9.95 0.13 0.35 0.48
Year Ended 8/31/03 $ 10.05 0.33 (0.03) 0.30
11/1/01 Through 8/31/02 $ 10.08 0.24 0.03 0.27
9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.19 0.25
BOND FUND II^^
9/1/03 Through 2/29/04 $ 40.49 0.51^ 1.45 1.96
Year Ended 8/31/03 $ 41.30 1.35^ (0.32) 1.03
11/1/01 Through 8/31/02 $ 40.96 1.04^ 0.36 1.40
3/2/01** Through 10/31/01 $ 39.55 1.12 1.41 2.53
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.89 0.20^ 0.33 0.53
Year Ended 8/31/03 $ 8.56 0.44^ 0.33 0.77
11/1/01 Through 8/31/02 $ 8.85 0.38 (0.31) 0.07
Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37
Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21
11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 $ 11.60 0.14^ 0.36 0.50
Year Ended 8/31/03 $ 11.81 0.37 (0.22) 0.15
11/1/01 Through 8/31/02 $ 11.75 0.28 0.06 0.34
Year Ended 10/31/01 $ 10.75 0.43+ 1.01+ 1.44
Year Ended 10/31/00 $ 10.67 0.59 0.08 0.67
Year Ended 10/31/99 $ 11.66 0.61 (0.99) (0.38)
Year Ended 10/31/98 $ 11.25 0.65 0.41 1.06
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
BOND FUND^^
9/1/03 Through 2/29/04 0.13 0.30 -- 0.43
Year Ended 8/31/03 0.32 0.08 -- 0.40
11/1/01 Through 8/31/02 0.24 0.06 -- 0.30
9/10/01** Through 10/31/01 0.06 -- -- 0.06
BOND FUND II^^
9/1/03 Through 2/29/04 0.52 0.24 -- 0.76
Year Ended 8/31/03 1.35 0.49 -- 1.84
11/1/01 Through 8/31/02 1.06 -- -- 1.06
3/2/01** Through 10/31/01 1.12 -- -- 1.12
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.20 -- -- 0.20
Year Ended 8/31/03 0.44 -- -- 0.44
11/1/01 Through 8/31/02 0.34 -- 0.02 0.36
Year Ended 10/31/01 0.55 -- 0.02 0.57
Year Ended 10/31/00 0.74 -- 0.01 0.75
11/30/98* Through 10/31/99 0.71 -- -- 0.71
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 0.14 -- -- 0.14
Year Ended 8/31/03 0.36 -- -- 0.36
11/1/01 Through 8/31/02 0.28 -- -- 0.28
Year Ended 10/31/01 0.44 -- -- 0.44
Year Ended 10/31/00 0.59 -- -- 0.59
Year Ended 10/31/99 0.61 -- -- 0.61
Year Ended 10/31/98 0.65 -- -- 0.65
</Table>
^ Calculated based upon average shares outstanding.
^^ The fund changed its fiscal year end from October 31 to August 31.
** Commencement of offering of class of shares.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
134
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS)
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.00 4.91% $ 2 1.50% 2.54%
Year Ended 8/31/03 $ 9.95 2.94% $ 2 1.50% 3.19%
11/1/01 Through 8/31/02 $ 10.05 2.83% $ 1 1.50% 2.80%
9/10/01** Through 10/31/01 $ 10.08 2.53% $ --+ 1.48% 4.07%
BOND FUND II^^
9/1/03 Through 2/29/04 $ 41.69 4.85% $ 14 1.50% 2.50%
Year Ended 8/31/03 $ 40.49 2.47% $ 15 1.50% 3.24%
11/1/01 Through 8/31/02 $ 41.30 3.52% $ 14 1.50% 3.09%
3/2/01** Through 10/31/01 $ 40.96 6.58% $ 8 1.50% 4.22%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.22 5.98% $ 8 1.75% 4.35%
Year Ended 8/31/03 $ 8.89 9.11% $ 8 1.75% 4.98%
11/1/01 Through 8/31/02 $ 8.56 0.76% $ 7 1.75% 5.28%
Year Ended 10/31/01 $ 8.85 4.20% $ 8 1.75% 6.35%
Year Ended 10/31/00 $ 9.05 2.17% $ 8 1.53% 7.42%
11/30/98* Through 10/31/99 $ 9.59 3.13% $ 5 0.17% 8.40%
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 $ 11.96 4.29% $ 18 1.64% 2.33%
Year Ended 8/31/03 $ 11.60 1.19% $ 20 1.64% 2.96%
11/1/01 Through 8/31/02 $ 11.81 3.04% $ 21 1.64% 2.99%
Year Ended 10/31/01 $ 11.75 13.74% $ 20 1.64% 3.84%+
Year Ended 10/31/00 $ 10.75 6.49% $ 16 1.64% 5.56%
Year Ended 10/31/99 $ 10.67 (3.27%) $ 16 1.64% 5.51%
Year Ended 10/31/98 $ 11.66 9.68% $ 14 1.64% 5.69%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND^^
9/1/03 Through 2/29/04 2.26% 1.78% 285%
Year Ended 8/31/03 2.14% 2.55% 679%
11/1/01 Through 8/31/02 6.02% (1.72%) 572%
9/10/01** Through 10/31/01 11.25% (5.70%) 423%
BOND FUND II^^
9/1/03 Through 2/29/04 1.74% 2.26% 286%
Year Ended 8/31/03 1.67% 3.07% 806%
11/1/01 Through 8/31/02 1.56% 3.03% 496%
3/2/01** Through 10/31/01 1.75% 3.97% 319%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 3.16% 2.94% 47%
Year Ended 8/31/03 3.21% 3.52% 116%
11/1/01 Through 8/31/02 3.63% 3.40% 176%
Year Ended 10/31/01 3.25% 4.85% 174%
Year Ended 10/31/00 3.06% 5.89% 113%
11/30/98* Through 10/31/99 3.98% 4.59% 136%
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 1.82% 2.15% 69%
Year Ended 8/31/03 1.80% 2.80% 106%
11/1/01 Through 8/31/02 1.82% 2.81% 228%
Year Ended 10/31/01 1.85% 3.63%## 134%
Year Ended 10/31/00 1.80% 5.40% 29%
Year Ended 10/31/99 1.82% 5.33% 59%
Year Ended 10/31/98 1.79% 5.54% 75%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
+ Amount rounds to less than one million.
## Restated.
SEE NOTES TO FINANCIAL STATEMENTS.
135
<Page>
CLASS C SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.01 0.13 0.36 0.49
3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07)
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.89 0.20^ 0.33 0.53
Year ended 8/31/03 $ 8.56 0.44^ 0.33 0.77
11/1/01 Through 8/31/02 $ 8.85 0.38 (0.31) 0.07
Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37
Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21
11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
BOND FUND^^
9/1/03 Through 2/29/04 0.13 0.30 -- 0.43
3/31/03** Through 8/31/03 0.14 -- -- 0.14
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.20 -- -- 0.20
Year ended 8/31/03 0.44 -- -- 0.44
11/1/01 Through 8/31/02 0.34 -- 0.02 0.36
Year Ended 10/31/01 0.55 -- 0.02 0.57
Year Ended 10/31/00 0.74 -- 0.01 0.75
11/30/98* Through 10/31/99 0.71 -- -- 0.71
</Table>
* Commencement of operations.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
^^ The fund changed its fiscal year end from October 31 to August 31.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
136
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS)
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.07 4.98% $ --+ 1.50% 2.50%
3/31/03** Through 8/31/03 $ 10.01 (0.69%) $ --+ 1.50% 3.02%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.22 5.99% $ 4 1.75% 4.34%
Year ended 8/31/03 $ 8.89 9.10% $ 4 1.75% 4.93%
11/1/01 Through 8/31/02 $ 8.56 0.78% $ 3 1.75% 5.24%
Year Ended 10/31/01 $ 8.85 4.21% $ 3 1.75% 6.33%
Year Ended 10/31/00 $ 9.05 2.15% $ 2 1.49% 7.46%
11/30/98* Through 10/31/99 $ 9.59 3.12% $ 4 0.17% 8.40%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND^^
9/1/03 Through 2/29/04 2.26% 1.74% 285%
3/31/03** Through 8/31/03 1.78% 2.74% 679%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 3.15% 2.94% 47%
Year ended 8/31/03 3.20% 3.48% 116%
11/1/01 Through 8/31/02 3.63% 3.36% 176%
Year Ended 10/31/01 3.25% 4.83% 174%
Year Ended 10/31/00 2.89% 6.06% 113%
11/30/98* Through 10/31/99 3.98% 4.59% 136%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
+ Amount rounds to less than one million.
SEE NOTES TO FINANCIAL STATEMENTS.
137
<Page>
CLASS M SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 $ 10.23 0.09^ 0.05 0.14
Year ended 8/31/03 $ 10.33 0.21^ (0.04) 0.17
11/1/01 Through 8/31/02 $ 10.37 0.23 0.06 0.29
Year Ended 10/31/01 $ 9.89 0.35^ 0.58 0.93
Year Ended 10/31/00 $ 9.94 0.54 (0.05) 0.49
7/1/99** Through 10/31/99 $ 9.98 0.16 (0.04) 0.12
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.87 0.21^ 0.33 0.54
Year ended 8/31/03 $ 8.54 0.47^ 0.32 0.79
11/1/01 Through 8/31/02 $ 8.83 0.40 (0.31) 0.09
Year Ended 10/31/01 $ 9.03 0.60 (0.20) 0.40
Year Ended 10/31/00 $ 9.59 0.75 (0.55) 0.20
10/28/99** Through 10/31/99 $ 9.64 0.07 (0.05) 0.02
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 0.09 -- -- 0.09
Year ended 8/31/03 0.22 0.05 --~~ 0.27
11/1/01 Through 8/31/02 0.22 0.11 -- 0.33
Year Ended 10/31/01 0.45 -- -- 0.45
Year Ended 10/31/00 0.54 -- -- 0.54
7/1/99** Through 10/31/99 0.16 -- -- 0.16
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.21 -- -- 0.21
Year ended 8/31/03 0.46 -- -- 0.46
11/1/01 Through 8/31/02 0.36 -- 0.02 0.38
Year Ended 10/31/01 0.58 -- 0.02 0.60
Year Ended 10/31/00 0.75 -- 0.01 0.76
10/28/99** Through 10/31/99 0.07 -- -- 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.
SEE NOTES TO FINANCIAL STATEMENTS.
138
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS)
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 $ 10.28 1.34% $ 935 1.00% 1.72%
Year ended 8/31/03 $ 10.23 1.64% $ 1,168 1.00% 2.07%
11/1/01 Through 8/31/02 $ 10.33 2.92% $ 1,127 1.00% 2.41%
Year Ended 10/31/01 $ 10.37 9.63% $ 689 1.00% 3.45%
Year Ended 10/31/00 $ 9.89 5.04% $ 13 0.99% 5.51%
7/1/99** Through 10/31/99 $ 9.94 1.26% $ 3 0.97% 4.72%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.20 6.16% $ 8 1.45% 4.65%
Year ended 8/31/03 $ 8.87 9.44% $ 7 1.45% 5.31%
11/1/01 Through 8/31/02 $ 8.54 1.03% $ 8 1.45% 5.52%
Year Ended 10/31/01 $ 8.83 4.50% $ 10 1.45% 6.69%
Year Ended 10/31/00 $ 9.03 2.10% $ 16 1.43% 7.52%
10/28/99** Through 10/31/99 $ 9.59 0.16% $ 12 0.17% 4.56%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 1.04% 1.68% 153%
Year ended 8/31/03 1.04% 2.03% 319%
11/1/01 Through 8/31/02 1.03% 2.38% 192%
Year Ended 10/31/01 1.11% 3.34% 315%
Year Ended 10/31/00 1.73% 4.77% 139%
7/1/99** Through 10/31/99 1.41% 4.28% 302%
STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 2.74% 3.36% 47%
Year ended 8/31/03 2.77% 3.99% 116%
11/1/01 Through 8/31/02 3.05% 3.92% 176%
Year Ended 10/31/01 2.55% 5.59% 174%
Year Ended 10/31/00 2.54% 6.41% 113%
10/28/99** Through 10/31/99 3.73% 1.00% 136%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
~~ Amount rounds to less than .005 per share amount.
SEE NOTES TO FINANCIAL STATEMENTS.
139
<Page>
INSTITUTIONAL CLASS SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND^^
9/1/03 Through 2/29/04 $ 9.94 0.18 0.36 0.54
Year Ended 8/31/03 $ 10.04 0.42 (0.02) 0.40
11/1/01 Through 8/31/02 $ 10.08 0.34 0.02 0.36
Year Ended 10/31/01 $ 9.43 0.58^ 0.65 1.23
Year Ended 10/31/00 $ 9.41 0.60 0.02 0.62
Year Ended 10/31/99 $ 10.10 0.57 (0.57) --
Year Ended 10/31/98 $ 10.01 0.64 0.15 0.79
ENHANCED INCOME FUND
9/1/03 Through 2/29/04 $ 9.86 0.07 (0.01) 0.06
Year Ended 8/31/03 $ 9.98 0.23 (0.12) 0.11
11/30/01* Through 8/31/02 $ 10.00 0.18 (0.02) 0.16
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.92 0.24^ 0.25 0.49
Year Ended 8/31/03 $ 8.65 0.48^ 0.27 0.75
11/1/01 Through 8/31/02 $ 8.95 0.47 (0.30) 0.17
Year Ended 10/31/01 $ 9.29 0.69^ (0.16) 0.53
Year Ended 10/31/00 $ 9.35 0.88 (0.25) 0.63
Year Ended 10/31/99 $ 9.72 0.62 (0.37) 0.25
Year Ended 10/31/98 $ 10.16 0.75 (0.45) 0.30
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
BOND FUND^^
9/1/03 Through 2/29/04 0.18 0.30 -- 0.48
Year Ended 8/31/03 0.42 0.08 -- 0.50
11/1/01 Through 8/31/02 0.34 0.06 -- 0.40
Year Ended 10/31/01 0.58 -- -- 0.58
Year Ended 10/31/00 0.60 --(a) -- 0.60
Year Ended 10/31/99 0.57 0.12 -- 0.69
Year Ended 10/31/98 0.63 0.07 -- 0.70
ENHANCED INCOME FUND
9/1/03 Through 2/29/04 0.07 -- -- 0.07
Year Ended 8/31/03 0.23 -- -- 0.23
11/30/01* Through 8/31/02 0.18 -- -- 0.18
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.25 -- -- 0.25
Year Ended 8/31/03 0.48 -- -- 0.48
11/1/01 Through 8/31/02 0.45 -- 0.02 0.47
Year Ended 10/31/01 0.87 -- -- 0.87
Year Ended 10/31/00 0.69 -- -- 0.69
Year Ended 10/31/99 0.62 -- -- 0.62
Year Ended 10/31/98 0.70 0.02 0.02 0.74
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
* Commencement of operations.
(a) Amount is less than $0.005.
(b) Not annualized for periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
140
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS)
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.00 5.55% $ 362 0.49% 3.59%
Year Ended 8/31/03 $ 9.94 3.99% $ 478 0.49% 4.10%
11/1/01 Through 8/31/02 $ 10.04 3.71% $ 747 0.49% 4.14%
Year Ended 10/31/01 $ 10.08 13.46% $ 1,016 0.49% 5.98%
Year Ended 10/31/00 $ 9.43 6.83% $ 907 0.49% 6.37%
Year Ended 10/31/99 $ 9.41 0.03% $ 1,041 0.50% 5.92%
Year Ended 10/31/98 $ 10.10 8.18% $ 1,001 0.49% 6.32%
ENHANCED INCOME FUND
9/1/03 Through 2/29/04 $ 9.85 0.63% $ 410 0.20% 1.47%
Year Ended 8/31/03 $ 9.86 1.14% $ 354 0.20% 2.33%
11/30/01* Through 8/31/02 $ 9.98 1.58% $ 300 0.20% 2.40%
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.16 5.49% $ 53 0.65% 5.37%
Year Ended 8/31/03 $ 8.92 8.86% $ 108 0.65% 5.42%
11/1/01 Through 8/31/02 $ 8.65 1.92% $ 135 0.65% 6.44%
Year Ended 10/31/01 $ 8.95 5.86% $ 143 0.65% 7.50%
Year Ended 10/31/00 $ 9.29 6.93% $ 163 0.65% 7.36%
Year Ended 10/31/99 $ 9.35 2.62% $ 183 0.65% 6.70%
Year Ended 10/31/98 $ 9.72 2.91% $ 224 0.65% 6.59%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND^^
9/1/03 Through 2/29/04 0.61% 3.47% 285%
Year Ended 8/31/03 0.60% 3.99% 679%
11/1/01 Through 8/31/02 0.58% 4.05% 572%
Year Ended 10/31/01 0.51% 5.96% 423%@
Year Ended 10/31/00 0.49% 6.37% 531%@
Year Ended 10/31/99 0.51% 5.91% 465%@
Year Ended 10/31/98 0.50% 6.31% 115%@
ENHANCED INCOME FUND
9/1/03 Through 2/29/04 0.56% 1.11% 85%
Year Ended 8/31/03 0.56% 1.97% 328%
11/30/01* Through 8/31/02 0.68% 1.92% 120%
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 1.04% 4.98% 101%
Year Ended 8/31/03 0.97% 5.10% 248%
11/1/01 Through 8/31/02 0.98% 6.11% 178%
Year Ended 10/31/01 0.80% 7.35% 107%
Year Ended 10/31/00 0.80% 7.21% 266%~
Year Ended 10/31/99 0.78% 5.29% 318%~
Year Ended 10/31/98 0.83% 6.41% 368%~
</Table>
# 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 U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
141
<Page>
INSTITUTIONAL CLASS SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 $ 9.86 0.12 0.06 0.18
Year ended 8/31/03 $ 10.05 0.28 (0.04) 0.24
11/1/01 Through 8/31/02 $ 10.03 0.29 0.06 0.35
Year Ended 10/31/01 $ 9.58 0.54^ 0.46 1.00
Year Ended 10/31/00 $ 9.67 0.60 (0.08) 0.52
Year Ended 10/31/99 $ 9.96 0.58 (0.29) 0.29
Year Ended 10/31/98 $ 9.84 0.59 0.12 0.71
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------
LESS DISTRIBUTIONS:
---------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TOTAL
INCOME GAINS DISTRIBUTIONS
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 0.12 -- 0.12
Year ended 8/31/03 0.29 0.14 0.43
11/1/01 Through 8/31/02 0.29 0.04 0.33
Year Ended 10/31/01 0.55 -- 0.55
Year Ended 10/31/00 0.61 -- 0.61
Year Ended 10/31/99 0.54 0.04 0.58
Year Ended 10/31/98 0.59 -- 0.59
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
142
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS)
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 $ 9.92 1.80% $ 759 0.30% 2.38%
Year ended 8/31/03 $ 9.86 2.44% $ 806 0.30% 2.85%
11/1/01 Through 8/31/02 $ 10.05 3.55% $ 618 0.30% 3.53%
Year Ended 10/31/01 $ 10.03 10.70% $ 697 0.30% 5.52%
Year Ended 10/31/00 $ 9.58 5.49% $ 415 0.30% 6.30%
Year Ended 10/31/99 $ 9.67 3.03% $ 354 0.29% 5.51%
Year Ended 10/31/98 $ 9.96 7.40% $ 233 0.25% 5.84%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND^^
9/1/03 Through 2/28/04 0.55% 2.13% 145%
Year ended 8/31/03 0.55% 2.60% 386%
11/1/01 Through 8/31/02 0.54% 3.29% 215%
Year Ended 10/31/01 0.48% 5.34% 160%
Year Ended 10/31/00 0.47% 6.13% 271%~
Year Ended 10/31/99 0.51% 5.29% 398%~
Year Ended 10/31/98 0.62% 5.47% 381%~
</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 Short
Term Bond Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
143
<Page>
SELECT CLASS SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND^^@
9/1/03 Through 2/29/04 $ 9.94 0.16 0.37 0.53
Year Ended 8/31/03 $ 10.04 0.40 (0.01) 0.39
11/1/01 Through 8/31/02 $ 10.08 0.32 0.02 0.34
Year Ended 10/31/01 $ 9.43 0.52^ 0.70 1.22
Year Ended 10/31/00 $ 9.41 0.58 0.02 0.60
Year Ended 10/31/99 $ 10.09 0.55 (0.57) (0.02)
Year Ended 10/31/98 $ 9.93 0.62 0.16 0.78
BOND FUND II^^
9/1/03 Through 2/29/04 $ 40.51 0.70^ 1.44 2.14
Year Ended 8/31/03 $ 41.32 1.79^ (0.38) 1.41
11/1/01 Through 8/31/02 $ 40.97 1.36^ 0.35 1.71
Year Ended 10/31/01 $ 38.02 2.18 2.95 5.13
Year Ended 10/31/00 $ 38.38 2.38 (0.36) 2.02
Year Ended 10/31/99 $ 41.29 2.36 (2.37) (0.01)
Year Ended 10/31/98 $ 41.01 2.56 0.76 3.32
FLEMING EMERGING MARKETS DEBT FUND ^^^
9/1/03 Through 2/29/04 $ 9.02 0.32 0.58 0.90
Year Ended 8/31/03 $ 7.53 0.68 1.53 2.21
8/1/02 Through 8/31/02 $ 7.05 0.05 0.49 0.54
Year Ended 7/31/02 $ 7.82 0.77 (0.77) --
Year Ended 7/31/01 $ 8.77 0.88 (0.87) 0.01
Year Ended 7/31/00 $ 7.29 0.95 1.42 2.37
1/1/99 Through 7/31/99 $ 7.30 0.49 0.02 0.51
Year Ended 12/31/98 $ 9.76 1.15 (2.64) (1.49)
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------
LESS DISTRIBUTIONS:
---------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TOTAL
INCOME GAINS DISTRIBUTIONS
BOND FUND^^@
9/1/03 Through 2/29/04 0.17 0.30 0.47
Year Ended 8/31/03 0.41 0.08 0.49
11/1/01 Through 8/31/02 0.32 0.06 0.38
Year Ended 10/31/01 0.57 -- 0.57
Year Ended 10/31/00 0.58 -- 0.58
Year Ended 10/31/99 0.56 0.10 0.66
Year Ended 10/31/98 0.62 -- 0.62
BOND FUND II^^
9/1/03 Through 2/29/04 0.70 0.24 0.94
Year Ended 8/31/03 1.73 0.49 2.22
11/1/01 Through 8/31/02 1.36 -- 1.36
Year Ended 10/31/01 2.18 -- 2.18
Year Ended 10/31/00 2.38 -- 2.38
Year Ended 10/31/99 2.36 0.54 2.90
Year Ended 10/31/98 2.55 0.49 3.04
FLEMING EMERGING MARKETS DEBT FUND ^^^
9/1/03 Through 2/29/04 0.36 -- 0.36
Year Ended 8/31/03 0.72 -- 0.72
8/1/02 Through 8/31/02 0.06 -- 0.06
Year Ended 7/31/02 0.77 -- 0.77
Year Ended 7/31/01 0.96 -- 0.96
Year Ended 7/31/00 0.89 -- 0.89
1/1/99 Through 7/31/99 0.52 -- 0.52
Year Ended 12/31/98 0.97 -- 0.97
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
@ Prior to the open of business on September 10, 2001, the class underwent a
split of shares. Prior periods have been restated to reflect the split.
^^^ The fund changed its fiscal year end from July 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
144
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS)
BOND FUND^^@
9/1/03 Through 2/29/04 $ 10.00 5.46% $ 204 0.66% 3.41%
Year Ended 8/31/03 $ 9.94 3.82% $ 308 0.66% 3.97%
11/1/01 Through 8/31/02 $ 10.04 3.57% $ 312 0.66% 3.95%
Year Ended 10/31/01 $ 10.08 13.32% $ 315 0.69% 5.77%
Year Ended 10/31/00 $ 9.43 6.61% $ 240 0.69% 6.19%
Year Ended 10/31/99 $ 9.41 (0.23%) $ 235 0.69% 5.72%
Year Ended 10/31/98 $ 10.09 8.06% $ 216 0.66% 6.14%
BOND FUND II^^
9/1/03 Through 2/29/04 $ 41.71 5.32% $ 944 0.60% 3.40%
Year Ended 8/31/03 $ 40.51 3.39% $ 1,022 0.60% 4.27%
11/1/01 Through 8/31/02 $ 41.32 4.33% $ 661 0.60% 4.08%
Year Ended 10/31/01 $ 40.97 13.87% $ 683 0.63% 5.52%
Year Ended 10/31/00 $ 38.02 5.50% $ 587 0.69% 6.30%
Year Ended 10/31/99 $ 38.38 (0.01%) $ 620 0.03% 5.97%
Year Ended 10/31/98 $ 41.29 8.44% $ 590 0.03% 6.27%
FLEMING EMERGING MARKETS DEBT FUND ^^^
9/1/03 Through 2/29/04 $ 9.56 10.09% $ 40 1.25% 6.79%
Year Ended 8/31/03 $ 9.02 30.49% $ 60 1.25% 8.11%
8/1/02 Through 8/31/02 $ 7.53 7.69% $ 41 1.25% 9.86%
Year Ended 7/31/02 $ 7.05 (0.67%) $ 35 1.25% 9.59%
Year Ended 7/31/01 $ 7.82 (0.17%) $ 35 1.25% 11.20%
Year Ended 7/31/00 $ 8.77 34.12% $ 20 1.25% 11.01%
1/1/99 Through 7/31/99 $ 7.29 7.27% $ 26 1.25% 12.28%
Year Ended 12/31/98 $ 7.30 (15.93%) $ 19 1.25% 10.05%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND^^@
9/1/03 Through 2/29/04 0.77% 3.30% 285%
Year Ended 8/31/03 0.76% 3.87% 679%
11/1/01 Through 8/31/02 0.74% 3.87% 572%
Year Ended 10/31/01 0.70% 5.76% 423%~
Year Ended 10/31/00 0.69% 6.19% 531%~
Year Ended 10/31/99 0.69% 5.72% 465%~
Year Ended 10/31/98 0.66% 6.14% 115%~
BOND FUND II^^
9/1/03 Through 2/29/04 0.76% 3.24% 286%
Year Ended 8/31/03 0.75% 4.12% 806%
11/1/01 Through 8/31/02 0.74% 3.94% 496%
Year Ended 10/31/01 0.75% 5.40% 319%
Year Ended 10/31/00 0.71% 6.28% 157%
Year Ended 10/31/99 0.49% 5.51% 300%
Year Ended 10/31/98 0.51% 5.79% 306%
FLEMING EMERGING MARKETS DEBT FUND ^^^
9/1/03 Through 2/29/04 1.49% 6.55% 77%
Year Ended 8/31/03 1.52% 7.84% 157%
8/1/02 Through 8/31/02 1.30% 9.81% 12%
Year Ended 7/31/02 1.54% 9.30% 110%
Year Ended 7/31/01 1.92% 10.53% 141%
Year Ended 7/31/00 1.95% 10.31% 295%
1/1/99 Through 7/31/99 2.51% 11.02% 555%
Year Ended 12/31/98 2.09% 9.21% 791%
</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 U.S.
Fixed Income Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
145
<Page>
SELECT CLASS SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 8.92 0.23^ 0.23 0.46
Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72
11/1/01 Through 8/31/02 $ 8.95 0.45 (0.31) 0.14
Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29
Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61
Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22
11/5/97** Through 10/31/98 $ 10.28 0.70 (0.49) 0.21
SHORT TERM BOND FUND@
9/1/03 Through 2/28/04 $ 9.86 0.10 0.05 0.15
Year ended 8/31/03 $ 10.04 0.26 (0.03) 0.23
11/1/01 Through 8/31/02 $ 10.03 0.28 0.04 0.32
Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97
Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49
Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26
Year Ended 10/31/98 $ 9.87 0.56 0.13 0.69
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 $ 10.25 0.11^ 0.05 0.16
Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22
11/1/01 Through 8/31/02 $ 10.40 0.26 0.07 0.33
Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99
Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54
Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29
Year Ended 10/31/98 $ 10.11 0.57 0.02 0.59
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 0.23 -- -- 0.23
Year Ended 8/31/03 0.45 -- -- 0.45
11/1/01 Through 8/31/02 0.42 -- 0.02 0.44
Year Ended 10/31/01 0.76 -- -- 0.76
Year Ended 10/31/00 0.66 -- -- 0.66
Year Ended 10/31/99 0.59 -- -- 0.59
11/5/97** Through 10/31/98 0.63 0.02 -- 0.65
SHORT TERM BOND FUND@
9/1/03 Through 2/28/04 0.10 -- -- 0.10
Year ended 8/31/03 0.27 0.14 -- 0.41
11/1/01 Through 8/31/02 0.27 0.04 -- 0.31
Year Ended 10/31/01 0.55 -- -- 0.55
Year Ended 10/31/00 0.58 -- -- 0.58
Year Ended 10/31/99 0.51 0.05 -- 0.56
Year Ended 10/31/98 0.56 -- -- 0.56
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 0.11 -- -- 0.11
Year Ended 8/31/03 0.27 0.05 --~~ 0.32
11/1/01 Through 8/31/02 0.27 0.11 -- 0.38
Year Ended 10/31/01 0.49 -- -- 0.49
Year Ended 10/31/00 0.59 -- -- 0.59
Year Ended 10/31/99 0.49 -- -- 0.49
Year Ended 10/31/98 0.55 -- -- 0.55
</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.
@ 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.
~ 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.
SEE NOTES TO FINANCIAL STATEMENTS.
146
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS)
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 $ 9.15 5.19% $ 3 1.00% 5.09%
Year Ended 8/31/03 $ 8.92 8.48% $ 3 1.00% 5.10%
11/1/01 Through 8/31/02 $ 8.65 1.61% $ 5 1.00% 6.08%
Year Ended 10/31/01 $ 8.95 5.46% $ 5 1.00% 7.32%
Year Ended 10/31/00 $ 9.42 6.57% $ 7 1.00% 7.05%
Year Ended 10/31/99 $ 9.47 2.26% $ 9 1.00% 6.35%
11/5/97** Through 10/31/98 $ 9.84 1.97% $ 10 1.00% 6.24%
SHORT TERM BOND FUND@
9/1/03 Through 2/28/04 $ 9.91 1.56% $ 103 0.57% 2.11%
Year ended 8/31/03 $ 9.86 2.28% $ 122 0.56% 2.59%
11/1/01 Through 8/31/02 $ 10.04 3.21% $ 122 0.57% 3.22%
Year Ended 10/31/01 $ 10.03 10.39% $ 67 0.60% 5.22%
Year Ended 10/31/00 $ 9.61 5.19% $ 38 0.60% 6.00%
Year Ended 10/31/99 $ 9.70 2.70% $ 39 0.57% 5.24%
Year Ended 10/31/98 $ 10.00 7.24% $ 31 0.50% 5.66%
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 $ 10.30 1.60% $ 513 0.50% 2.19%
Year Ended 8/31/03 $ 10.25 2.15% $ 342 0.50% 2.58%
11/1/01 Through 8/31/02 $ 10.35 3.30% $ 144 0.50% 2.91%
Year Ended 10/31/01 $ 10.40 10.29% $ 144 0.50% 4.15%
Year Ended 10/31/00 $ 9.90 5.56% $ 21 0.45% 5.99%
Year Ended 10/31/99 $ 9.95 2.97% $ 28 0.42% 4.89%
Year Ended 10/31/98 $ 10.15 6.03% $ 31 0.42% 5.68%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
GLOBAL STRATEGIC INCOME FUND^^
9/1/03 Through 2/29/04 1.70% 4.39% 101%
Year Ended 8/31/03 1.48% 4.62% 248%
11/1/01 Through 8/31/02 1.48% 5.60% 178%
Year Ended 10/31/01 2.63% 5.69% 107%~
Year Ended 10/31/00 2.50% 5.55% 266%~
Year Ended 10/31/99 1.54% 5.81% 318%~
11/5/97** Through 10/31/98 1.89% 5.35% 368%~
SHORT TERM BOND FUND@
9/1/03 Through 2/28/04 0.72% 1.96% 145%
Year ended 8/31/03 0.71% 2.44% 386%
11/1/01 Through 8/31/02 0.72% 3.07% 215%
Year Ended 10/31/01 0.82% 5.00% 160%^^^
Year Ended 10/31/00 0.82% 5.78% 271%^^^
Year Ended 10/31/99 0.80% 5.01% 398%^^^
Year Ended 10/31/98 0.98% 5.18% 381%^^^
SHORT TERM BOND FUND II^^
9/1/03 Through 2/29/04 0.69% 2.00% 153%
Year Ended 8/31/03 0.70% 2.38% 319%
11/1/01 Through 8/31/02 0.70% 2.71% 192%
Year Ended 10/31/01 0.77% 3.88% 315%
Year Ended 10/31/00 1.02% 5.42% 139%
Year Ended 10/31/99 1.02% 4.29% 302%
Year Ended 10/31/98 1.04% 5.06% 439%
</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.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
~~ Amount rounds to less than .005 per share amount.
SEE NOTES TO FINANCIAL STATEMENTS.
147
<Page>
SELECT CLASS SHARES
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 $ 11.62 0.20^ 0.36 0.56
Year Ended 8/31/03 $ 11.83 0.49 (0.21) 0.28
11/1/01 Through 8/31/02 $ 11.77 0.39 0.06 0.45
2/16/01* Through 8/31/01 $ 11.10 0.37 0.66 1.03
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN TOTAL
INCOME GAINS OF CAPITAL DISTRIBUTIONS
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 0.20 -- -- 0.20
Year Ended 8/31/03 0.49 -- -- 0.49
11/1/01 Through 8/31/02 0.39 -- -- 0.39
2/16/01* Through 8/31/01 0.36 -- -- 0.36
</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.
SEE NOTES TO FINANCIAL STATEMENTS.
148
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS)
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 $ 11.98 4.85% $ 92 0.55% 3.37%
Year Ended 8/31/03 $ 11.62 2.29% $ 69 0.55% 4.04%
11/1/01 Through 8/31/02 $ 11.83 3.97% $ 78 0.55% 4.07%
2/16/01* Through 8/31/01 $ 11.77 9.52% $ 76 0.55% 4.73%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
U.S. TREASURY INCOME FUND^^
9/1/03 Through 2/29/04 0.89% 3.03% 69%
Year Ended 8/31/03 0.87% 3.72% 106%
11/1/01 Through 8/31/02 0.86% 3.76% 228%
2/16/01* Through 8/31/01 0.98% 4.30% 134%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
149
<Page>
ULTRA CLASS SHARES@
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
---------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND^^
9/1/03 Through 2/29/04 $ 9.95 0.18 0.36 0.54
Year Ended 8/31/03 $ 10.05 0.43 (0.02) 0.41
11/1/01 Through 8/31/02 $ 10.09 0.34 0.02 0.36
Year Ended 10/31/01 $ 9.47 0.54^ 0.72 1.26
Year Ended 10/31/00 $ 9.46 0.64 (0.02) 0.62
Year Ended 10/31/99 $ 10.02 0.60 (0.57) 0.03
12/15/97** Through 10/31/98 $ 9.88 0.53 0.16 0.69
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------
LESS DISTRIBUTIONS:
---------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TOTAL
INCOME GAINS DISTRIBUTIONS
BOND FUND^^
9/1/03 Through 2/29/04 0.18 0.30 0.48
Year Ended 8/31/03 0.43 0.08 0.51
11/1/01 Through 8/31/02 0.34 0.06 0.40
Year Ended 10/31/01 0.62 0.02 0.64
Year Ended 10/31/00 0.61 -- 0.61
Year Ended 10/31/99 0.59 -- 0.59
12/15/97** Through 10/31/98 0.55 -- 0.55
</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.
@ Prior to the open of business on September 10, 2001, the class underwent a
split of shares. Prior periods have been restated to reflect the split.
SEE NOTES TO FINANCIAL STATEMENTS.
150
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA:
-------------------------------- ---------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------
NET ASSETS, NET
NET ASSET END OF INVESTMENT
VALUE, END TOTAL PERIOD NET INCOME
OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS)
BOND FUND^^
9/1/03 Through 2/29/04 $ 10.01 5.59% $ 425 0.40% 3.67%
Year Ended 8/31/03 $ 9.95 4.08% $ 444 0.40% 4.19%
11/1/01 Through 8/31/02 $ 10.05 3.80% $ 609 0.40% 4.20%
Year Ended 10/31/01 $ 10.09 13.63% $ 598 0.37% 6.08%
Year Ended 10/31/00 $ 9.47 6.92% $ 466 0.35% 6.49%
Year Ended 10/31/99 $ 9.46 0.28% $ 299 0.36% 6.08%
12/15/97** Through 10/31/98 $ 10.02 7.17% $ 128 0.37% 6.28%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------
NET INVESTMENT
EXPENSES INCOME (LOSS)
WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
REIMBURSEMENTS REIMBURSEMENTS TURNOVER
AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b)
BOND FUND^^
9/1/03 Through 2/29/04 0.56% 3.51% 285%
Year Ended 8/31/03 0.55% 4.04% 679%
11/1/01 Through 8/31/02 0.53% 4.07% 572%
Year Ended 10/31/01 0.47% 5.98% 423%
Year Ended 10/31/00 0.42% 6.42% 531%
Year Ended 10/31/99 0.49% 5.95% 465%
12/15/97** Through 10/31/98 0.60% 6.05% 115%
</Table>
~ 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.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
151
<Page>
JPMORGAN FUNDS
REPORT OF INDEPENDENT AUDITORS
To the Trustees and Shareholders of
J.P. Morgan Mutual Fund Group, J.P. Morgan Mutual Fund Select Group
J.P. Morgan Institutional Funds, 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, of
changes in net assets and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of JPMorgan Short Term
Bond Fund II, JPMorgan Strategic Income Fund, JPMorgan U.S. Treasury Income Fund
(separate series of J.P. Morgan Mutual Fund Group), JPMorgan Bond Fund II (a
separate series of J.P. Morgan Mutual Fund Select Group), JPMorgan Bond Fund,
JPMorgan Global Strategic Income Fund, JPMorgan Short Term Bond Fund (separate
series of J.P. Morgan Institutional Funds), JPMorgan Enhanced Income Fund, (a
separate series of J.P. Morgan Series Trust) and JPMorgan Fleming Emerging
Markets Debt Fund (a separate series of J.P. Morgan Funds), (hereafter
collectively referred to as the "Funds"), at February 29, 2004, the results of
each of their operations, the cash flows of JPMorgan Global Strategic Income
Fund, 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
February 29, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
April 23, 2004
152
<Page>
JPMORGAN FAMILY OF FUNDS
U.S. EQUITY FUNDS
Capital Growth Fund
Disciplined Equity 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
Trust Small Cap Equity Fund
U.S. Equity Fund
U.S. Small Company Fund
U.S. Small Company Opportunities Fund
Value Opportunities Fund
INTERNATIONAL EQUITY FUNDS
Fleming Asia Equity Fund
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
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
TAX FREE 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
UNDISCOVERED MANAGERS FUNDS
Behavioral Growth Fund
Behavioral Value Fund
REIT Fund
Small Cap Growth Fund
Funds may be registered under separate registrants.
153
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THIS PAGE IS INTENTIONALLY LEFT BLANK
<Page>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<Page>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<Page>
[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.
Investors should carefully read the fund prospectus which includes information
on the Fund's investment objectives, risk, as well as charges and expenses along
with other information. Investors should review the information in the
prospectus carefully before investing. For up to date month-end performance
information, or to receive a fund prospectus please call 800 348-4782. Please
read carefully before investing or sending 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.
A copy of proxy policies and procedures are available without charge upon
request by calling 1-800-348-4782 and on the Commission's website at
http://www.sec.gov.
<Page>
JPMorgan Funds Fulfillment Center PRSRT STD
600 North Bedford Street U.S. POSTAGE
East Bridgewater, MA 02333 PAID
PERMIT 2891
KANSAS CITY, MO
(C) J.P. Morgan Chase & Co., 2004 All rights reserved. April 2004. SAN-INC-204
<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.
NOT APPLICABLE.
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.
(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)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an audit
committee financial expert.
NOT APPLICABLE - ONLY FOR ANNUAL REPORTS.
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.
(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
<Page>
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.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
(a) If the registrant is a listed issuer as defined in Rule 10A-3 under
the Exchange Act (17CFR 240.10A-3), state whether or not the
registrant has a separately-designated standing audit committee
established in accordance with Section 3(a)(58)(A) of the Exchange Act
(15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee,
however designated, identify each committee member. If the entire
board of directors is acting as the registrant's audit committee as
specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C.
78c(a)(58)(B)), so state.
(b) If applicable, provide the disclosure required by Rule 10A-3(d) under
the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the
listing standards for all audit committees.
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. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
(a) If the registrant is a closed-end management investment company,
provide the information specified in paragraph (b) of this Item with
respect to any purchase made by or on behalf of the registrant or any
"affiliated purchaser," as defined in Rule 10b-18(a)(3) under the
Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of
any class of the registrant's equity securities that is registered by
the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C.
781).
NOT APPLICABLE.
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
<Page>
Describe any material changes to the procedures by which shareholders
may recommend nominees to the registrant's board of directors, where
those changes were implemented after the registrant last provided
disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of
Schedule 14A (17 CFR 240.14a-101), or this Item.
NOT APPLICABLE.
ITEM 10. CONTROLS AND PROCEDURES.
(a) Disclose the conclusions of the registrant's principal executive
and principal financial officers, or persons performing similar functions,
regarding the effectiveness of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as
of a date within 90 days of the filing date of the report that includes the
disclosure required by this paragraph, based on the evaluation of these controls
and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or
240.15d-15(b)).
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.
(b) Disclose any change in the registrant's internal control over
financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the
registrant's second fiscal half-year in the case of an annual report) that has
materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
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 11. 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.
(a)(2) A separate certification for each principal executive officer
and principal financial officer of the registrant as required by Rule 30a-2(a)
under the Act (17 CFR 270.30a-2).
CERTIFICATIONS PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF
1940 ARE ATTACHED HERETO.
(a)(3) Any written solicitation to purchase securities under Rule
23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered
by the report by or on behalf of the registrant to 10 or more persons.
NOT APPLICABLE.
(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 RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF
1940 ARE ATTACHED HERETO.
<Page>
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
-------------------------------------------------------------------
By (Signature and Title)* /s/ Patricia A. Maleski
------------------------------------------------------
Patricia A. Maleski, Treasurer
Date April 29, 2004
--------------------------------------------------------------------------
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/ Patricia A. Maleski
------------------------------------------------------
Patricia A. Maleski, Treasurer
Date April 29, 2004
--------------------------------------------------------------------------
By (Signature and Title)* /s/ George C.W. Gatch
------------------------------------------------------
George C.W. Gatch, President
Date April 29, 2004
--------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.