<Page>
-----------------------------
OMB APPROVAL
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hours per response....... 5.0
-----------------------------
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 811-07340
---------------------------------------------
J.P. Morgan 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 August 31, 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>
JPMORGAN FUNDS
[GRAPHIC]
ANNUAL REPORT AUGUST 31 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 professional to help provide you with a
broad array of WEALTH SOLUTIONS.
CONTENTS
<Table>
President's Letter 1
Fund Commentaries:
Bond Fund 3
Bond Fund II 5
Enhanced Income Fund 7
Fleming Emerging Markets Debt Fund 9
Global Strategic Income Fund 11
Short Term Bond Fund 13
Short Term Bond Fund II 15
Strategic Income Fund 17
U.S. Treasury Income Fund 19
Portfolio of Investments 21
Financial Statements 88
Notes to Financial Statements 102
Financial Highlights 136
</Table>
HIGHLIGHTS
- - The economic recovery accelerated during the period and made the transition
from being policy-dependent to becoming self-sustaining.
- - The uptick in inflation and sharply improved economic conditions during the
second quarter altered expectations about the Fed's position on short-term
interest rates.
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 AUGUST 31, 2004
[PHOTO OF GEORGE C.W. GATCH]
"STRONG CORPORATE PROFITS BUOYED THE EQUITY MARKET AND SUPPORTED AN INCREASE IN
CAPITAL SPENDING AND HIRING."
DEAR SHAREHOLDER:
We are pleased to present this annual report for the JPMorgan Income Funds for
the one-year period ending August 31, 2004. Inside you'll find in-depth
information on some of our fixed income funds along with an update from the
portfolio management team.
U.S. ECONOMY CONTINUES TO EXPAND
The economic recovery accelerated during the period and made the transition from
being policy-dependent to becoming self-sustaining. Strong corporate profits
buoyed the equity market and supported an increase in capital spending and
hiring. Consumer price inflation, however, continued to slow despite ongoing
excess capacity and comparatively high unemployment. Under the circumstances,
the Federal Reserve Board indicated that it would keep its monetary policy on
hold until economic conditions warrant a change. Short-term money market rates
remained relatively stable, while longer maturity yields fell in response to
mixed economic data, low inflation, and a persistently weak labor market.
In the early part of 2004, economic data was mixed. Although the corporate
profit picture was brighter, improved earnings did not translate into new job
creation. Consumer sentiment weakened, but consumer spending increased -- fueled
by tax refunds and by the mortgage-refinancing boom.
FEDERAL RESERVE BOARD RAISES SHORT-TERM INTEREST RATES
The uptick in inflation and sharply improved economic conditions during the
second quarter altered expectations about the Fed's position on short-term
interest rates. Stronger labor conditions and an increase in pretax income
indicated that consumer spending growth could continue without support from tax
cuts and without monetary stimulus. In response, the Fed raised short-term
interest rates during June by a quarter-percent to 1.25%.
Consumer spending slowed in July, which was blamed mostly on higher energy
prices. The economic outlook weakened during August. The main source of
disappointment was the July payroll report, which showed an employment gain of
only 32,000 jobs and a downward revision of the June estimate. The Fed
maintained a moderate approach with another quarter-percent increase in August.
At the end of the period, the Federal funds rate (the rate charged by banks for
overnight loans) stood at 1.50%.
As the economic expansion continues, your portfolio managers will continue to
work hard on your behalf. They will look for opportunities to obtain the highest
possible yields while focusing on the preservation of your principal.
<Page>
IMPORTANT MERGER NEWS
As you may know, J.P. Morgan Chase & Co. and Bank One Corp. merged in July 2004,
as approved by both firms' shareholders. The combined company is called JPMorgan
Chase & Co. The merger is compelling both strategically and financially. The new
combined organization has top-tier positions in both wholesale and retail
financial services, an extensive client base and greater scale. And we have an
extraordinarily talented team that shares common values and a strong client
orientation. In the coming months, you will receive proxy information regarding
proposed changes to the JPMorgan Funds. Please refer to Note 1 of the Financial
Statements in this report for more details on these proposals.
On behalf of all of us here at JPMorgan Investment Management, thank you for the
trust you have placed in us. We value your business, and 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
2
<Page>
JPMORGAN BOND FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 7/26/1993
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $893
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality AA-
Duration 7.7 YEARS
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 6.96%
(Institutional Shares) for the one-year period ending August 31, 2004. This
compares to the 6.14% 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 out-performed. Our overweight in the residential mortgage sector was
a strong positive for performance, as was our mortgage coupon selection.
Modest positives were our positions in investment-grade corporate bonds,
notably BBB-rated corporate credits, and commercial mortgage-backed
securities (CMBS). Our duration positioning and conservative asset-backed
securities (ABS) holdings were modest detractors. After European interest
rates outperformed five-year Treasuries, we took profits on the
short-U.S./long-Eurozone trade. Our overweights to high-yield and emerging
markets debt also enhanced returns.
Q: HOW WAS THE FUND MANAGED?
A: We maintained a slightly long duration position during much of the period. We
underweighted Treasury and agency debt, finding more compelling opportunities
in other high-quality sectors with more generous yield spreads. In the first
half of the period, we overweighted residential mortgages, then realized
profits and pared back our position in January ahead of expected strong
supply. We again moved to an overweight position during the second quarter,
mostly in lower coupons, in response to reduced supply and to lower
volatility. We modestly overweighted investment-grade corporate bonds. As the
market in CMBS continued to outperform, we added to our overweight. We
maintained an overweight to ABS. Because we believed that economic activity
would increase more quickly in the U.S. than in the Eurozone, we took a
position in which we were long the Eurozone and short the U.S. Taking a
bottom-up view of company and country fundamentals, we overweighted
high-yield and emerging markets debt.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes and Bonds 30.3%
Residential Mortgage Backed Securities 29.6%
Asset Backed Securities 17.9%
U.S. Treasury Securities 5.4%
Commercial Paper 5.3%
Money Market Fund 3.4%
Commercial Mortgage Backed Securities 2.6%
Foreign Government Securities 2.1%
Private Placements 1.9%
U.S. Government Agency Securities 1.0%
Other (Less than 1%) 0.5%
</Table>
3
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------
CLASS A SHARES
Without Sales Charge 6.61% 5.80% 7.17% 6.89%
With Sales Charge* 1.84% 4.19% 6.20% 6.40%
-----------------------------------------
CLASS B SHARES
Without CDSC 5.89% 4.76% 6.54% 6.58%
With CDSC** 0.89% 3.87% 6.23% 6.58%
-----------------------------------------
CLASS C SHARES
Without CDSC 5.84% 4.93% 6.65% 6.63%
With CDSC*** 4.84% 4.93% 6.65% 6.63%
-----------------------------------------
INSTITUTIONAL SHARES 6.96% 5.81% 7.26% 7.02%
-----------------------------------------
SELECT SHARES 6.88% 5.67% 7.10% 6.86%
-----------------------------------------
ULTRA SHARES 7.05% 5.92% 7.37% 7.11%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and 0%
for the ten year period.
*** Assumes 1% CDSC for the one year period and 0% thereafter.
[CHART]
TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
<Table>
<Caption>
JPMORGAN BOND FUND LEHMAN AGGREGATE CITIGROUP BROAD INVESTMENT LIPPER INTERMEDIATE INVESTMENT
(INSTITUTIONAL SHARES) BOND INDEX GRADE BOND INDEX GRADE DEBT FUNDS INDEX
Aug-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000
Sep-1994 $ 2,964,600 $ 2,955,900 $ 2,956,800 $ 2,966,100
Oct-1994 $ 2,958,671 $ 2,953,240 $ 2,953,843 $ 2,962,541
Nov-1994 $ 2,949,203 $ 2,946,743 $ 2,946,163 $ 2,954,542
Dec-1994 $ 2,965,424 $ 2,967,075 $ 2,968,554 $ 2,969,019
Jan-1995 $ 3,015,243 $ 3,025,823 $ 3,030,003 $ 3,019,196
Feb-1995 $ 3,083,990 $ 3,097,838 $ 3,100,905 $ 3,083,202
Mar-1995 $ 3,108,662 $ 3,116,735 $ 3,118,890 $ 3,103,552
Apr-1995 $ 3,153,116 $ 3,160,369 $ 3,161,619 $ 3,144,208
May-1995 $ 3,283,970 $ 3,282,675 $ 3,287,136 $ 3,254,570
Jun-1995 $ 3,304,659 $ 3,306,639 $ 3,310,145 $ 3,275,074
Jul-1995 $ 3,292,102 $ 3,299,364 $ 3,303,525 $ 3,267,868
Aug-1995 $ 3,333,253 $ 3,339,286 $ 3,341,516 $ 3,306,103
Sep-1995 $ 3,367,586 $ 3,371,677 $ 3,372,926 $ 3,337,510
Oct-1995 $ 3,416,416 $ 3,415,509 $ 3,418,123 $ 3,381,232
Nov-1995 $ 3,464,587 $ 3,466,742 $ 3,471,446 $ 3,431,612
Dec-1995 $ 3,512,052 $ 3,515,276 $ 3,519,352 $ 3,477,596
Jan-1996 $ 3,536,285 $ 3,538,477 $ 3,543,283 $ 3,500,548
Feb-1996 $ 3,469,803 $ 3,476,908 $ 3,483,048 $ 3,439,638
Mar-1996 $ 3,449,331 $ 3,452,569 $ 3,457,970 $ 3,415,905
Apr-1996 $ 3,425,186 $ 3,433,235 $ 3,432,381 $ 3,396,093
May-1996 $ 3,415,595 $ 3,426,368 $ 3,430,321 $ 3,390,999
Jun-1996 $ 3,458,632 $ 3,472,282 $ 3,474,572 $ 3,430,334
Jul-1996 $ 3,462,782 $ 3,481,657 $ 3,483,954 $ 3,439,939
Aug-1996 $ 3,459,319 $ 3,475,738 $ 3,479,076 $ 3,436,499
Sep-1996 $ 3,517,090 $ 3,536,216 $ 3,539,612 $ 3,493,889
Oct-1996 $ 3,594,466 $ 3,614,720 $ 3,619,253 $ 3,567,610
Nov-1996 $ 3,649,821 $ 3,676,532 $ 3,678,971 $ 3,629,329
Dec-1996 $ 3,627,557 $ 3,642,340 $ 3,646,596 $ 3,597,028
Jan-1997 $ 3,643,518 $ 3,653,631 $ 3,660,818 $ 3,608,179
Feb-1997 $ 3,655,542 $ 3,662,765 $ 3,664,845 $ 3,617,200
Mar-1997 $ 3,614,965 $ 3,622,109 $ 3,627,830 $ 3,578,496
Apr-1997 $ 3,665,213 $ 3,676,440 $ 3,679,708 $ 3,627,521
May-1997 $ 3,700,766 $ 3,711,366 $ 3,714,297 $ 3,659,806
Jun-1997 $ 3,747,765 $ 3,755,532 $ 3,758,497 $ 3,702,992
Jul-1997 $ 3,845,207 $ 3,856,931 $ 3,860,352 $ 3,801,121
Aug-1997 $ 3,812,523 $ 3,824,147 $ 3,827,153 $ 3,766,531
Sep-1997 $ 3,868,567 $ 3,880,744 $ 3,883,413 $ 3,820,769
Oct-1997 $ 3,909,574 $ 3,937,015 $ 3,939,334 $ 3,866,618
Nov-1997 $ 3,923,648 $ 3,955,125 $ 3,957,849 $ 3,877,831
Dec-1997 $ 3,964,062 $ 3,995,072 $ 3,998,219 $ 3,913,119
Jan-1998 $ 4,009,649 $ 4,046,209 $ 4,049,796 $ 3,965,164
Feb-1998 $ 4,011,252 $ 4,042,972 $ 4,046,961 $ 3,959,613
Mar-1998 $ 4,032,913 $ 4,056,718 $ 4,062,744 $ 3,974,263
Apr-1998 $ 4,050,658 $ 4,077,813 $ 4,083,870 $ 3,992,942
May-1998 $ 4,088,734 $ 4,116,552 $ 4,123,075 $ 4,028,879
Jun-1998 $ 4,117,764 $ 4,151,543 $ 4,156,885 $ 4,061,110
Jul-1998 $ 4,126,000 $ 4,160,261 $ 4,165,614 $ 4,069,232
Aug-1998 $ 4,171,798 $ 4,228,074 $ 4,229,348 $ 4,124,167
Sep-1998 $ 4,263,161 $ 4,327,011 $ 4,329,161 $ 4,216,548
Oct-1998 $ 4,229,908 $ 4,304,077 $ 4,309,679 $ 4,182,394
Nov-1998 $ 4,251,058 $ 4,328,611 $ 4,333,383 $ 4,203,306
Dec-1998 $ 4,263,386 $ 4,341,596 $ 4,346,816 $ 4,221,380
Jan-1999 $ 4,288,540 $ 4,372,422 $ 4,378,983 $ 4,247,553
Feb-1999 $ 4,210,059 $ 4,295,904 $ 4,302,350 $ 4,171,946
Mar-1999 $ 4,248,371 $ 4,319,532 $ 4,326,874 $ 4,204,905
Apr-1999 $ 4,269,613 $ 4,333,354 $ 4,341,152 $ 4,219,201
May-1999 $ 4,216,670 $ 4,295,221 $ 4,301,214 $ 4,176,165
Jun-1999 $ 4,188,840 $ 4,281,476 $ 4,286,590 $ 4,161,966
Jul-1999 $ 4,174,179 $ 4,263,494 $ 4,269,443 $ 4,147,400
Aug-1999 $ 4,167,083 $ 4,261,362 $ 4,266,455 $ 4,142,837
Sep-1999 $ 4,205,003 $ 4,310,794 $ 4,317,652 $ 4,188,409
Oct-1999 $ 4,230,654 $ 4,326,744 $ 4,330,605 $ 4,194,691
Nov-1999 $ 4,243,346 $ 4,326,311 $ 4,330,172 $ 4,199,725
Dec-1999 $ 4,239,102 $ 4,305,545 $ 4,310,253 $ 4,180,406
Jan-2000 $ 4,221,298 $ 4,291,337 $ 4,298,185 $ 4,165,357
Feb-2000 $ 4,271,109 $ 4,343,262 $ 4,348,473 $ 4,210,759
Mar-2000 $ 4,323,644 $ 4,400,593 $ 4,405,003 $ 4,262,551
Apr-2000 $ 4,293,811 $ 4,387,831 $ 4,391,788 $ 4,236,124
May-2000 $ 4,284,364 $ 4,385,637 $ 4,387,836 $ 4,228,499
Jun-2000 $ 4,367,909 $ 4,476,859 $ 4,479,542 $ 4,318,143
Jul-2000 $ 4,391,933 $ 4,517,598 $ 4,520,305 $ 4,354,847
Aug-2000 $ 4,467,913 $ 4,583,103 $ 4,584,946 $ 4,415,379
Sep-2000 $ 4,496,061 $ 4,611,977 $ 4,616,123 $ 4,444,521
Oct-2000 $ 4,519,890 $ 4,642,416 $ 4,645,667 $ 4,460,077
Nov-2000 $ 4,596,277 $ 4,718,551 $ 4,720,926 $ 4,530,992
Dec-2000 $ 4,703,370 $ 4,806,316 $ 4,810,152 $ 4,622,518
Jan-2001 $ 4,792,263 $ 4,884,659 $ 4,889,519 $ 4,703,874
Feb-2001 $ 4,826,768 $ 4,927,156 $ 4,933,036 $ 4,749,031
Mar-2001 $ 4,838,352 $ 4,951,792 $ 4,958,688 $ 4,767,553
Apr-2001 $ 4,794,323 $ 4,930,994 $ 4,935,382 $ 4,741,808
May-2001 $ 4,828,842 $ 4,960,580 $ 4,967,956 $ 4,771,207
Jun-2001 $ 4,841,880 $ 4,979,430 $ 4,984,350 $ 4,788,860
Jul-2001 $ 4,934,844 $ 5,090,970 $ 5,099,488 $ 4,905,230
Aug-2001 $ 4,992,582 $ 5,149,516 $ 5,155,583 $ 4,959,187
Sep-2001 $ 5,009,057 $ 5,209,250 $ 5,218,996 $ 4,997,373
Oct-2001 $ 5,127,271 $ 5,318,123 $ 5,324,420 $ 5,099,319
Nov-2001 $ 5,066,257 $ 5,244,733 $ 5,250,943 $ 5,035,068
Dec-2001 $ 5,045,991 $ 5,211,167 $ 5,219,963 $ 5,002,844
Jan-2002 $ 5,095,442 $ 5,253,377 $ 5,261,200 $ 5,038,864
Feb-2002 $ 5,142,320 $ 5,304,335 $ 5,311,708 $ 5,087,741
Mar-2002 $ 5,075,984 $ 5,216,283 $ 5,224,065 $ 4,999,214
Apr-2002 $ 5,156,185 $ 5,317,479 $ 5,323,322 $ 5,089,200
May-2002 $ 5,184,544 $ 5,362,678 $ 5,368,570 $ 5,130,932
Jun-2002 $ 5,190,247 $ 5,409,333 $ 5,408,298 $ 5,127,853
Jul-2002 $ 5,217,236 $ 5,474,786 $ 5,472,656 $ 5,148,364
Aug-2002 $ 5,317,929 $ 5,567,310 $ 5,568,428 $ 5,247,728
Sep-2002 $ 5,391,316 $ 5,657,500 $ 5,656,966 $ 5,304,928
Oct-2002 $ 5,363,821 $ 5,631,476 $ 5,631,509 $ 5,284,769
Nov-2002 $ 5,386,349 $ 5,629,786 $ 5,630,383 $ 5,310,136
Dec-2002 $ 5,493,537 $ 5,746,323 $ 5,747,495 $ 5,418,463
Jan-2003 $ 5,507,820 $ 5,751,495 $ 5,752,093 $ 5,435,260
Feb-2003 $ 5,587,684 $ 5,830,865 $ 5,833,773 $ 5,512,985
Mar-2003 $ 5,581,537 $ 5,826,201 $ 5,828,522 $ 5,513,536
Apr-2003 $ 5,651,306 $ 5,874,558 $ 5,879,813 $ 5,578,044
May-2003 $ 5,748,509 $ 5,983,825 $ 5,988,590 $ 5,681,796
Jun-2003 $ 5,741,611 $ 5,971,857 $ 5,977,811 $ 5,680,660
Jul-2003 $ 5,487,831 $ 5,771,203 $ 5,775,761 $ 5,489,221
Aug-2003 $ 5,530,636 $ 5,809,293 $ 5,815,613 $ 5,530,939
Sep-2003 $ 5,698,215 $ 5,963,239 $ 5,967,982 $ 5,679,722
Oct-2003 $ 5,633,255 $ 5,907,781 $ 5,913,077 $ 5,637,692
Nov-2003 $ 5,660,858 $ 5,921,959 $ 5,930,225 $ 5,652,350
Dec-2003 $ 5,735,015 $ 5,982,363 $ 5,989,527 $ 5,710,004
Jan-2004 $ 5,786,057 $ 6,030,222 $ 6,039,240 $ 5,755,684
Feb-2004 $ 5,837,553 $ 6,095,349 $ 6,103,860 $ 5,811,514
Mar-2004 $ 5,890,091 $ 6,141,064 $ 6,150,249 $ 5,853,357
Apr-2004 $ 5,736,948 $ 5,981,396 $ 5,990,343 $ 5,712,876
May-2004 $ 5,694,495 $ 5,957,471 $ 5,964,584 $ 5,684,883
Jun-2004 $ 5,722,398 $ 5,990,832 $ 5,999,775 $ 5,711,602
Jul-2004 $ 5,780,767 $ 6,050,142 $ 6,059,173 $ 5,765,291
Aug-2004 $ 5,914,426 $ 6,165,699 $ 6,179,145 $ 5,869,066
</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 August 31, 1994 to August 31, 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.
4
<Page>
JPMORGAN BOND FUND II
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 1/1/1997
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $901
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality AA+
Duration 6.7 YEARS
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 6.38% (Select Shares) for the
one-year period ending August 31, 2004. This compares to the 6.13% 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 out-performed. Our overweight in the residential mortgage sector was
a strong positive for performance, as was our mortgage coupon selection.
Modest positives were our positions in investment-grade corporate bonds,
notably BBB-rated corporate credits, and commercial mortgage-backed
securities (CMBS). Our duration positioning and conservative asset-backed
securities (ABS) holdings were modest detractors.
Q: HOW WAS THE FUND MANAGED?
A: We maintained a slightly long duration position during much of the period. We
underweighted Treasury and agency debt, finding more compelling opportunities
in other high-quality sectors with more generous yield spreads. In the first
half of the period, we overweighted residential mortgages, then realized
profits and pared back our position in January ahead of expected strong
supply. We again moved to an overweight position during the second quarter,
mostly in lower coupons, in response to reduced supply and to lower
volatility. We modestly overweighted investment-grade corporate bonds. As the
market in CMBS continued to outperform, we added to our overweight. We
maintained an overweight to ABS.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Residential Mortgage Backed Securities 26.6%
Corporate Notes and Bonds 23.1%
Asset Backed Securities 16.3%
U.S. Treasury Securities 11.9%
Money Market Fund 10.5%
Commercial Paper 7.8%
U.S. Government Agency Securities 1.9%
Commercial Mortgage Backed Securities 1.3%
Other (Less than 1%) 0.6%
</Table>
5
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------
CLASS A SHARES
Without Sales Charge 6.45% 5.91% 6.91% 6.80%
With Sales Charge* 1.67% 4.29% 5.93% 6.31%
-----------------------------------------
CLASS B SHARES
Without CDSC 5.41% 4.93% 6.26% 6.47%
With CDSC** 0.41% 4.01% 5.94% 6.47%
-----------------------------------------
SELECT SHARES 6.38% 5.91% 6.94% 6.81%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and 0%
for the ten year period.
[CHART]
TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
<Table>
<Caption>
JPMORGAN BOND FUND II LEHMAN AGGREGATE LIPPER CORPORATE DEBT
(SELECT SHARES) BOND INDEX A-RATED FUNDS INDEX
Aug-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000
Sep-1994 $ 985,000 $ 985,300 $ 983,400
Oct-1994 $ 984,508 $ 984,413 $ 980,056
Nov-1994 $ 985,000 $ 982,248 $ 978,684
Dec-1994 $ 982,340 $ 989,025 $ 986,416
Jan-1995 $ 1,002,576 $ 1,008,608 $ 1,003,974
Feb-1995 $ 1,019,921 $ 1,032,613 $ 1,028,270
Mar-1995 $ 1,029,610 $ 1,038,912 $ 1,035,777
Apr-1995 $ 1,042,274 $ 1,053,456 $ 1,050,588
May-1995 $ 1,085,633 $ 1,094,225 $ 1,097,655
Jun-1995 $ 1,089,976 $ 1,102,213 $ 1,105,448
Jul-1995 $ 1,084,090 $ 1,099,788 $ 1,100,031
Aug-1995 $ 1,101,002 $ 1,113,095 $ 1,115,322
Sep-1995 $ 1,115,645 $ 1,123,892 $ 1,127,367
Oct-1995 $ 1,131,933 $ 1,138,503 $ 1,144,390
Nov-1995 $ 1,148,799 $ 1,155,581 $ 1,163,159
Dec-1995 $ 1,164,078 $ 1,171,759 $ 1,181,885
Jan-1996 $ 1,172,576 $ 1,179,492 $ 1,187,440
Feb-1996 $ 1,153,346 $ 1,158,969 $ 1,160,604
Mar-1996 $ 1,145,157 $ 1,150,856 $ 1,151,203
Apr-1996 $ 1,140,118 $ 1,144,412 $ 1,142,339
May-1996 $ 1,137,610 $ 1,142,123 $ 1,139,826
Jun-1996 $ 1,152,399 $ 1,157,427 $ 1,154,074
Jul-1996 $ 1,154,588 $ 1,160,552 $ 1,156,497
Aug-1996 $ 1,151,587 $ 1,158,579 $ 1,153,259
Sep-1996 $ 1,171,279 $ 1,178,739 $ 1,175,171
Oct-1996 $ 1,195,407 $ 1,204,907 $ 1,203,963
Nov-1996 $ 1,218,000 $ 1,225,511 $ 1,228,523
Dec-1996 $ 1,201,557 $ 1,214,113 $ 1,214,641
Jan-1997 $ 1,204,561 $ 1,217,877 $ 1,216,463
Feb-1997 $ 1,206,609 $ 1,220,922 $ 1,220,721
Mar-1997 $ 1,195,025 $ 1,207,370 $ 1,203,875
Apr-1997 $ 1,212,234 $ 1,225,480 $ 1,220,849
May-1997 $ 1,223,508 $ 1,237,122 $ 1,232,203
Jun-1997 $ 1,238,801 $ 1,251,844 $ 1,248,838
Jul-1997 $ 1,275,965 $ 1,285,644 $ 1,289,051
Aug-1997 $ 1,257,974 $ 1,274,716 $ 1,272,680
Sep-1997 $ 1,275,963 $ 1,293,581 $ 1,294,442
Oct-1997 $ 1,293,316 $ 1,312,338 $ 1,311,141
Nov-1997 $ 1,295,644 $ 1,318,375 $ 1,317,303
Dec-1997 $ 1,307,305 $ 1,331,691 $ 1,331,267
Jan-1998 $ 1,323,385 $ 1,348,736 $ 1,347,109
Feb-1998 $ 1,321,532 $ 1,347,657 $ 1,344,819
Mar-1998 $ 1,326,026 $ 1,352,239 $ 1,349,794
Apr-1998 $ 1,332,788 $ 1,359,271 $ 1,356,003
May-1998 $ 1,345,583 $ 1,372,184 $ 1,370,648
Jun-1998 $ 1,357,424 $ 1,383,848 $ 1,382,847
Jul-1998 $ 1,358,374 $ 1,386,754 $ 1,383,124
Aug-1998 $ 1,378,614 $ 1,409,358 $ 1,395,433
Sep-1998 $ 1,413,217 $ 1,442,337 $ 1,426,552
Oct-1998 $ 1,402,477 $ 1,434,692 $ 1,408,577
Nov-1998 $ 1,405,703 $ 1,442,870 $ 1,423,930
Dec-1998 $ 1,411,185 $ 1,447,199 $ 1,428,487
Jan-1999 $ 1,423,180 $ 1,457,474 $ 1,440,629
Feb-1999 $ 1,397,278 $ 1,431,968 $ 1,408,647
Mar-1999 $ 1,405,103 $ 1,439,844 $ 1,417,944
Apr-1999 $ 1,408,756 $ 1,444,451 $ 1,422,624
May-1999 $ 1,395,091 $ 1,431,740 $ 1,406,406
Jun-1999 $ 1,389,650 $ 1,427,159 $ 1,399,514
Jul-1999 $ 1,383,953 $ 1,421,165 $ 1,393,216
Aug-1999 $ 1,382,015 $ 1,420,454 $ 1,389,455
Sep-1999 $ 1,398,599 $ 1,436,931 $ 1,402,655
Oct-1999 $ 1,402,376 $ 1,442,248 $ 1,404,759
Nov-1999 $ 1,402,235 $ 1,442,104 $ 1,405,742
Dec-1999 $ 1,396,206 $ 1,435,182 $ 1,399,416
Jan-2000 $ 1,393,832 $ 1,430,446 $ 1,396,337
Feb-2000 $ 1,408,189 $ 1,447,754 $ 1,411,138
Mar-2000 $ 1,425,650 $ 1,466,864 $ 1,430,330
Apr-2000 $ 1,408,970 $ 1,462,610 $ 1,418,601
May-2000 $ 1,403,334 $ 1,461,879 $ 1,413,069
Jun-2000 $ 1,430,419 $ 1,492,286 $ 1,444,580
Jul-2000 $ 1,443,006 $ 1,505,866 $ 1,456,859
Aug-2000 $ 1,461,188 $ 1,527,701 $ 1,476,235
Sep-2000 $ 1,472,001 $ 1,537,326 $ 1,484,355
Oct-2000 $ 1,479,214 $ 1,547,472 $ 1,490,589
Nov-2000 $ 1,502,585 $ 1,572,850 $ 1,512,650
Dec-2000 $ 1,536,844 $ 1,602,105 $ 1,543,659
Jan-2001 $ 1,564,046 $ 1,628,220 $ 1,572,371
Feb-2001 $ 1,575,620 $ 1,642,385 $ 1,586,522
Mar-2001 $ 1,581,608 $ 1,650,597 $ 1,592,075
Apr-2001 $ 1,563,735 $ 1,643,665 $ 1,583,000
May-2001 $ 1,571,398 $ 1,653,527 $ 1,593,448
Jun-2001 $ 1,576,898 $ 1,659,810 $ 1,599,822
Jul-2001 $ 1,612,063 $ 1,696,990 $ 1,636,138
Aug-2001 $ 1,626,893 $ 1,716,505 $ 1,654,626
Sep-2001 $ 1,649,995 $ 1,736,417 $ 1,661,079
Oct-2001 $ 1,684,315 $ 1,772,708 $ 1,696,959
Nov-2001 $ 1,661,240 $ 1,748,244 $ 1,676,425
Dec-2001 $ 1,652,602 $ 1,737,056 $ 1,663,852
Jan-2002 $ 1,666,979 $ 1,751,126 $ 1,675,499
Feb-2002 $ 1,680,815 $ 1,768,112 $ 1,687,898
Mar-2002 $ 1,655,939 $ 1,738,761 $ 1,660,891
Apr-2002 $ 1,685,249 $ 1,772,493 $ 1,690,289
May-2002 $ 1,697,889 $ 1,787,559 $ 1,703,135
Jun-2002 $ 1,707,736 $ 1,803,111 $ 1,710,459
Jul-2002 $ 1,726,009 $ 1,824,929 $ 1,720,722
Aug-2002 $ 1,757,250 $ 1,855,770 $ 1,752,211
Sep-2002 $ 1,782,203 $ 1,885,833 $ 1,779,370
Oct-2002 $ 1,774,183 $ 1,877,159 $ 1,761,576
Nov-2002 $ 1,777,731 $ 1,876,595 $ 1,767,918
Dec-2002 $ 1,813,286 $ 1,915,441 $ 1,806,282
Jan-2003 $ 1,816,550 $ 1,917,165 $ 1,810,075
Feb-2003 $ 1,839,983 $ 1,943,622 $ 1,836,502
Mar-2003 $ 1,838,143 $ 1,942,067 $ 1,835,217
Apr-2003 $ 1,860,017 $ 1,958,186 $ 1,855,771
May-2003 $ 1,890,336 $ 1,994,608 $ 1,894,557
Jun-2003 $ 1,887,122 $ 1,990,619 $ 1,890,199
Jul-2003 $ 1,798,993 $ 1,923,734 $ 1,825,365
Aug-2003 $ 1,817,163 $ 1,936,431 $ 1,837,413
Sep-2003 $ 1,871,860 $ 1,987,746 $ 1,887,758
Oct-2003 $ 1,850,895 $ 1,969,260 $ 1,872,090
Nov-2003 $ 1,856,818 $ 1,973,986 $ 1,878,080
Dec-2003 $ 1,879,471 $ 1,994,121 $ 1,896,673
Jan-2004 $ 1,896,198 $ 2,010,074 $ 1,912,605
Feb-2004 $ 1,913,833 $ 2,031,783 $ 1,930,775
Mar-2004 $ 1,929,909 $ 2,047,021 $ 1,945,642
Apr-2004 $ 1,877,995 $ 1,993,799 $ 1,897,974
May-2004 $ 1,866,539 $ 1,985,824 $ 1,888,294
Jun-2004 $ 1,876,245 $ 1,996,944 $ 1,897,924
Jul-2004 $ 1,894,632 $ 2,016,714 $ 1,916,144
Aug-2004 $ 1,932,849 $ 2,055,233 $ 1,952,168
</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 August 31, 1994 to August 31, 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.
6
<Page>
JPMORGAN ENHANCED INCOME FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 11/30/2001
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $294
Primary Benchmark 3 MONTH
LIBOR INDEX
Average Credit Quality AA-
Duration 0.2 YEARS
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Enhanced Income Fund, which seeks high current income consistent
with principal preservation, returned 1.28% for the one-year period ending
August 31, 2004. This compares to the 1.22% return of its benchmark, 3 Month
LIBOR Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: The Fund outperformed the benchmark mainly because of its allocation to
corporate and to asset-backed securities. Our overweight position to these
sectors versus the benchmark was a positive contributor to performance as
spreads continued to narrow during the period. In addition, the Fund's
tactical mortgage positioning was a positive contributor to performance when
the sector performed well during the year. Our duration position neither
contributed nor detracted from performance.
Q: HOW WAS THE FUND MANAGED?
A: Short-term money market rates remained relatively stable because of the Fed's
friendly stance, while longer maturity yields fell in response to mixed
economic data, cooling inflation, a weak labor market, and a declining supply
of long-term mortgage securities.
Early in the period, we maintained a modestly longer duration position in the
short end of the yield curve. However, stronger economic data towards
year-end led us to reduce our duration position. We continued to take
advantage of market volatility by tactically trading our duration position
throughout the remainder of the period. In addition, we increased our
allocation to floating rate notes as interest rates rose. We tactically
traded our mortgage position and added short-dated collateralized mortgage
obligations for their attractive returns. We also increased our exposure to
corporate and to asset-backed securities. Because of a potential change in
federal agency legislation and because of the ensuing headline risk, we
reduced our agency exposure early in 2004. We also sold high-quality
corporate names in the one- to three-year area of the yield curve in favor of
lower-quality names.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes and Bonds 45.0%
Asset Backed Securities 30.6%
Residential Mortgage Backed Securities 8.8%
U.S. Government Agency Securities 4.7%
Commercial Mortgage Backed Securities 3.3%
Other (Less than 1%) 2.4%
Commercial Paper 1.8%
Money Market Fund 1.8%
Certificates of Deposit 1.6%
</Table>
7
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR (11/30/01)
----------------------
INSTITUTIONAL SHARES 1.28% 1.46%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (11/30/01 TO 8/31/04)
<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 $ 3,003,900
Jan-2002 $ 3,008,706 $ 3,010,509 $ 3,007,805
Feb-2002 $ 3,014,422 $ 3,014,724 $ 3,014,121
Mar-2002 $ 3,020,451 $ 3,019,547 $ 3,012,012
Apr-2002 $ 3,032,231 $ 3,024,681 $ 3,024,963
May-2002 $ 3,037,992 $ 3,029,520 $ 3,033,131
Jun-2002 $ 3,043,764 $ 3,034,367 $ 3,038,590
Jul-2002 $ 3,044,069 $ 3,039,222 $ 3,041,021
Aug-2002 $ 3,047,722 $ 3,044,085 $ 3,048,320
Sep-2002 $ 3,051,684 $ 3,048,651 $ 3,056,550
Oct-2002 $ 3,055,651 $ 3,053,529 $ 3,059,301
Nov-2002 $ 3,061,762 $ 3,058,415 $ 3,065,420
Dec-2002 $ 3,061,150 $ 3,062,391 $ 3,075,842
Jan-2003 $ 3,069,415 $ 3,066,066 $ 3,080,763
Feb-2003 $ 3,071,256 $ 3,069,132 $ 3,090,006
Mar-2003 $ 3,074,635 $ 3,072,815 $ 3,093,405
Apr-2003 $ 3,081,092 $ 3,075,887 $ 3,098,045
May-2003 $ 3,090,643 $ 3,079,271 $ 3,103,002
Jun-2003 $ 3,090,334 $ 3,082,966 $ 3,106,725
Jul-2003 $ 3,073,955 $ 3,086,049 $ 3,101,754
Aug-2003 $ 3,082,255 $ 3,088,826 $ 3,106,097
Sep-2003 $ 3,089,960 $ 3,091,606 $ 3,118,211
Oct-2003 $ 3,084,399 $ 3,094,698 $ 3,116,963
Nov-2003 $ 3,087,791 $ 3,097,793 $ 3,118,834
Dec-2003 $ 3,091,497 $ 3,100,890 $ 3,124,759
Jan-2004 $ 3,095,206 $ 3,103,991 $ 3,130,071
Feb-2004 $ 3,101,706 $ 3,106,785 $ 3,137,584
Mar-2004 $ 3,105,118 $ 3,109,892 $ 3,142,290
Apr-2004 $ 3,105,429 $ 3,112,691 $ 3,135,377
May-2004 $ 3,106,050 $ 3,115,803 $ 3,134,436
Jun-2004 $ 3,109,777 $ 3,118,607 $ 3,135,377
Jul-2004 $ 3,114,131 $ 3,122,662 $ 3,141,961
Aug-2004 $ 3,121,639 $ 3,126,721 $ 3,150,444
</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 August
31, 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.
8
<Page>
JPMORGAN FLEMING EMERGING MARKETS DEBT FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 4/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $36
Primary Benchmark EMERGING
MARKETS BOND
INDEX GLOBAL
Average Credit Quality BB
Duration 5.8 YEARS
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Fleming Emerging Markets Debt Fund, which seeks to provide high
total return from a portfolio of fixed-income securities of emerging markets
issuers, had a total return of 14.56% (Select Shares) for the one-year period
ended August 31, 2004. This compares to the 13.58% return from the Emerging
Markets Bond Index Global.
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, while Ecuador was a direct
beneficiary of oil prices. Higher oil prices were also good for Venezuela;
however, our position modestly detracted because of an underweight we adopted
due to ongoing questions about future political leadership. The underweight
added to performance as the political uncertainty resolved itself. High
credit-quality assets closely tracked U.S. Treasuries, and our underweight
benefited the Fund as lower-rated credits outperformed. Detracting was our
overweight to the Dominican Republic, which underperformed as questions about
economic liquidity shifted to potential solvency issues.
Q: HOW WAS THE FUND MANAGED?
A: We overweighted Brazil and other Latin credits early in the period. We
increased our holdings in Russia because of improving credit fundamentals and
in Turkey as its fundamental outlook improved. The main drivers of returns
over the period were Brazil, Ecuador, Turkey and Venezuela. Additionally, as
most Asian credits lagged, the underweight to the region benefited the Fund.
Early in 2004, profit taking followed the Fed's change in language with
Venezuela, Brazil and Colombia suffering the most. The Philippines slipped
while Europe performed most strongly, led by Russia. For most of the second
quarter of 2004, fear of a Fed interest-rate hike drove down prices, with
Latin American and European credits hit the hardest. We were overweight
Brazil, Peru, Colombia and Turkey. However, when the market recovered during
the summer, we reduced our position in Brazil to neutral, scaled back our
allocation to Colombia, and moved to an overweight in Uruguay. We increased
our overweight in Russian debt.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Foreign Government Securities 83.7%
Corporate Notes and Bonds 6.6%
U.S. Treasury Securities 8.6%
Money Market Fund 1.1%
</Table>
9
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (4/17/97)
-----------------------------------------
SELECT SHARES 14.56% 15.15% 16.58% 10.11%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (4/17/97 TO 8/31/04)
<Table>
<Caption>
JPMORGAN FLEMING EMERGING MARKETS EMERGING MARKETS BOND LIPPER EMERGING 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 $ 1,954,701 $ 1,962,232 $ 1,861,540
Mar-2004 $ 2,007,869 $ 2,011,092 $ 1,907,520
Apr-2004 $ 1,863,504 $ 1,901,889 $ 1,810,237
May-2004 $ 1,843,005 $ 1,873,741 $ 1,777,653
Jun-2004 $ 1,873,230 $ 1,901,285 $ 1,806,273
Jul-2004 $ 1,933,361 $ 1,957,753 $ 1,859,558
Aug-2004 $ 2,034,242 $ 2,038,609 $ 1,936,916
</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 August 31, 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.
10
<Page>
JPMORGAN GLOBAL STRATEGIC INCOME FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 3/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $43
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality A-
Duration 4.5 YEARS
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 7.85% (Institutional Shares) for the one-year
period ended August 31, 2004. This compares to the 6.13% return of the Lehman
Aggregate Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our overweight to high-yield debt added to performance at a time when credit
fundamentals and market supply dynamics continued to favor this sector.
Another successful strategy was our overweight to emerging markets debt. The
Fund also benefited as European interest rates outperformed five-year
Treasuries, and as a result we took profits on the short-U.S./long-Eurozone
trade. The Fund benefited from our underweight position to Treasury and
agency debt as other sectors out-performed.
Q: HOW WAS THE FUND MANAGED?
A: As fundamental credit quality continued to improve, we maintained significant
allocations to high-yield and to emerging markets debt, choosing our
individual holdings by taking a bottom-up view of company and country
fundamentals. Because we believed that economic activity would increase more
quickly in the U.S. than in the Eurozone, we took a position in which we were
long the Eurozone and short the U.S. We also favored the commercial
mortgage-backed securities sector, maintaining our overweight. Our
allocations to investment-grade corporate bonds, residential mortgages,
Treasuries and agencies were underweight the benchmark index, which is
consistent with our strategy.
At the end of the period, we took advantage of an opportunity to liquidate a
large private mortgage allocation at a profit. We redeployed the cash in the
residential pass-through mortgage sector, which offers far more liquidity and
did not require us to give up much yield.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes and Bonds 52.7%
Foreign Government Securities 26.5%
Private Placements 8.6%
Commercial Mortgage Backed Securities 4.6%
Money Market Fund 4.3%
U.S. Treasury Securities 3.2%
Other (Less than 1%) 0.1%
</Table>
11
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (3/17/97)
-----------------------------------------
CLASS A SHARES
Without Sales Charge 7.20% 5.09% 6.00% 5.29%
With Sales Charge* 2.50% 3.50% 5.03% 4.65%
-----------------------------------------
INSTITUTIONAL SHARES 7.85% 5.82% 6.60% 5.78%
-----------------------------------------
SELECT SHARES 7.48% 5.41% 6.20% 5.42%
</Table>
* Sales charge for class a shares is 4.50%.
[CHART]
LIFE OF FUND PERFORMANCE (3/17/97 TO 8/31/04)
<Table>
<Caption>
JPMORGAN GLOBAL STRATEGIC LEHMAN AGGREGATE LIPPER MULTI-SECTOR
INCOME 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 $ 4,452,154 $ 5,048,453 $ 4,306,344
Mar-2004 $ 4,489,552 $ 5,086,317 $ 4,340,795
Apr-2004 $ 4,423,555 $ 4,954,073 $ 4,247,034
May-2004 $ 4,387,725 $ 4,934,256 $ 4,204,563
Jun-2004 $ 4,415,806 $ 4,961,888 $ 4,238,620
Jul-2004 $ 4,473,653 $ 5,011,011 $ 4,280,583
Aug-2004 $ 4,562,738 $ 5,106,721 $ 4,364,054
</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 August 31, 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.
12
<Page>
JPMORGAN SHORT TERM BOND FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 9/13/1993
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $739
Primary Benchmark MERRILL LYNCH 1-3
YEAR TREASURY
INDEX
Average Credit Quality A+
Duration 1.7 YEARS
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Short Term Bond Fund, which seeks to provide high total return
consistent with low volatility of principal, returned 2.38% (Institutional
Shares) for the one-year period ending August 31, 2004. This compares to the
2.05% 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 because of its allocation to sectors that
have spreads over Treasuries, such as asset-backed securities (ABS). It also
benefited from its allocation to mortgages, which performed well, and the
additional yield provided from lower-quality corporate, high-yield and from
emerging markets credits. In addition, we realized profits on our
U.S.-European interest rate position. Our duration positioning detracted from
performance.
Q: HOW WAS THE FUND MANAGED?
A: Early in the period, we maintained a modestly longer duration position in the
short end of the yield curve. However, stronger economic data towards
year-end led us to implement a shorter duration position versus the
benchmark. We continued to take advantage of market volatility by tactically
trading our duration position. In addition, we targeted two- and three-year
securities because they offered the most attractive yields. We tactically
traded our mortgage position and added short-dated collateralized mortgage
obligations. A potential change in federal agency legislation and the ensuing
headline risk led us to reduce our agency exposure in early 2004. To capture
attractive yields, we increased our exposure to corporate and to ABS. In
addition, we sold high-quality corporate bonds in the one- to three-year area
of the yield curve in favor of lower-quality names.
Because we expected economic activity to increase more quickly in the U.S.
than in the Eurozone, we took a position in which we were long the Eurozone
and short the U.S. We later removed this position at a gain and entered a
short Japanese position, as we believed Japanese interest rates would
continue to increase. We also purchased select issues in the high-yield and
in the emerging markets sectors.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes and Bonds 47.7%
Asset Backed Securities 20.5%
Residential Mortgage Backed Securities 13.6%
Commercial Mortgage Backed Securities 7.0%
U.S. Government Agency Securities 2.4%
Money Market Fund 1.7%
State and Municipal Obligations 1.6%
Foreign Government Securities 1.4%
Commercial Paper 1.4%
Certificates of Deposit 1.2%
Preferred Stocks 1.0%
Other (Less than 1%) 0.5%
</Table>
13
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------
CLASS A SHARES
Without Sales Charge 1.92% 3.14% 4.68% 5.26%
With Sales Charge* 0.39% 2.62% 4.36% 5.09%
-----------------------------------------
INSTITUTIONAL SHARES 2.38% 3.63% 5.10% 5.57%
-----------------------------------------
SELECT SHARES 1.99% 3.32% 4.79% 5.31%
</Table>
* Sales Charge for Class A Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND LIPPER SHORT-TERM INVESTMENT GRADE
(INSTITUTIONAL SHARES) MERRILL LYNCH 1-3 YEAR TREASURY INDEX DEBT FUNDS INDEX
Aug-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000
Sep-1994 $ 2,992,800 $ 2,993,100 $ 2,995,800
Oct-1994 $ 2,998,486 $ 2,999,685 $ 3,000,593
Nov-1994 $ 2,988,291 $ 2,986,186 $ 2,995,192
Dec-1994 $ 2,994,268 $ 2,993,054 $ 2,988,004
Jan-1995 $ 3,029,002 $ 3,034,658 $ 3,018,481
Feb-1995 $ 3,069,590 $ 3,076,233 $ 3,054,099
Mar-1995 $ 3,088,929 $ 3,093,460 $ 3,070,897
Apr-1995 $ 3,117,965 $ 3,120,991 $ 3,097,307
May-1995 $ 3,176,270 $ 3,175,609 $ 3,153,987
Jun-1995 $ 3,192,469 $ 3,192,757 $ 3,173,542
Jul-1995 $ 3,198,854 $ 3,205,847 $ 3,183,698
Aug-1995 $ 3,221,246 $ 3,225,082 $ 3,205,028
Sep-1995 $ 3,240,252 $ 3,240,885 $ 3,220,412
Oct-1995 $ 3,262,609 $ 3,268,109 $ 3,250,684
Nov-1995 $ 3,291,647 $ 3,296,868 $ 3,277,990
Dec-1995 $ 3,317,651 $ 3,322,254 $ 3,300,608
Jan-1996 $ 3,346,182 $ 3,350,493 $ 3,330,314
Feb-1996 $ 3,323,763 $ 3,336,421 $ 3,317,991
Mar-1996 $ 3,329,081 $ 3,333,418 $ 3,303,392
Apr-1996 $ 3,330,746 $ 3,336,085 $ 3,305,705
May-1996 $ 3,342,070 $ 3,343,091 $ 3,312,316
Jun-1996 $ 3,364,796 $ 3,367,161 $ 3,336,165
Jul-1996 $ 3,373,881 $ 3,380,293 $ 3,349,843
Aug-1996 $ 3,386,702 $ 3,391,786 $ 3,361,568
Sep-1996 $ 3,417,182 $ 3,422,651 $ 3,393,839
Oct-1996 $ 3,458,530 $ 3,461,327 $ 3,430,153
Nov-1996 $ 3,485,853 $ 3,487,979 $ 3,458,623
Dec-1996 $ 3,486,898 $ 3,487,979 $ 3,460,006
Jan-1997 $ 3,504,681 $ 3,504,373 $ 3,477,652
Feb-1997 $ 3,515,196 $ 3,512,433 $ 3,489,476
Mar-1997 $ 3,515,547 $ 3,511,028 $ 3,485,987
Apr-1997 $ 3,540,507 $ 3,539,818 $ 3,513,875
May-1997 $ 3,565,645 $ 3,563,889 $ 3,537,418
Jun-1997 $ 3,587,752 $ 3,588,480 $ 3,562,180
Jul-1997 $ 3,625,065 $ 3,627,953 $ 3,602,789
Aug-1997 $ 3,629,052 $ 3,631,219 $ 3,605,310
Sep-1997 $ 3,659,173 $ 3,658,816 $ 3,633,432
Oct-1997 $ 3,674,542 $ 3,685,891 $ 3,655,596
Nov-1997 $ 3,682,626 $ 3,694,737 $ 3,664,735
Dec-1997 $ 3,709,141 $ 3,719,861 $ 3,686,723
Jan-1998 $ 3,750,683 $ 3,755,944 $ 3,718,798
Feb-1998 $ 3,754,434 $ 3,759,324 $ 3,724,004
Mar-1998 $ 3,769,452 $ 3,774,738 $ 3,739,272
Apr-1998 $ 3,788,676 $ 3,792,479 $ 3,756,847
May-1998 $ 3,811,029 $ 3,812,579 $ 3,777,134
Jun-1998 $ 3,825,892 $ 3,832,404 $ 3,794,131
Jul-1998 $ 3,848,847 $ 3,850,417 $ 3,810,825
Aug-1998 $ 3,875,789 $ 3,898,932 $ 3,836,739
Sep-1998 $ 3,944,778 $ 3,950,398 $ 3,877,408
Oct-1998 $ 3,946,356 $ 3,969,755 $ 3,872,368
Nov-1998 $ 3,951,486 $ 3,966,182 $ 3,882,436
Dec-1998 $ 3,970,454 $ 3,980,064 $ 3,899,130
Jan-1999 $ 3,992,688 $ 3,994,392 $ 3,918,626
Feb-1999 $ 3,974,721 $ 3,976,018 $ 3,905,695
Mar-1999 $ 4,005,724 $ 4,003,452 $ 3,936,159
Apr-1999 $ 4,020,144 $ 4,016,263 $ 3,950,329
May-1999 $ 4,006,074 $ 4,013,854 $ 3,945,194
Jun-1999 $ 3,999,664 $ 4,026,296 $ 3,952,690
Jul-1999 $ 4,005,664 $ 4,039,181 $ 3,957,038
Aug-1999 $ 4,020,084 $ 4,050,894 $ 3,964,952
Sep-1999 $ 4,050,637 $ 4,077,225 $ 3,991,120
Oct-1999 $ 4,065,624 $ 4,088,234 $ 3,999,901
Nov-1999 $ 4,085,546 $ 4,096,001 $ 4,013,100
Dec-1999 $ 4,097,802 $ 4,101,736 $ 4,021,528
Jan-2000 $ 4,101,490 $ 4,100,095 $ 4,023,137
Feb-2000 $ 4,121,998 $ 4,127,566 $ 4,049,287
Mar-2000 $ 4,132,303 $ 4,153,156 $ 4,070,343
Apr-2000 $ 4,152,551 $ 4,163,955 $ 4,071,157
May-2000 $ 4,170,407 $ 4,181,027 $ 4,085,406
Jun-2000 $ 4,192,510 $ 4,224,510 $ 4,130,754
Jul-2000 $ 4,219,762 $ 4,251,124 $ 4,156,365
Aug-2000 $ 4,238,328 $ 4,282,582 $ 4,186,706
Sep-2000 $ 4,273,930 $ 4,313,417 $ 4,222,294
Oct-2000 $ 4,288,462 $ 4,336,709 $ 4,234,960
Nov-2000 $ 4,342,925 $ 4,377,908 $ 4,273,499
Dec-2000 $ 4,393,738 $ 4,430,005 $ 4,318,798
Jan-2001 $ 4,431,084 $ 4,485,380 $ 4,380,125
Feb-2001 $ 4,466,090 $ 4,514,535 $ 4,410,785
Mar-2001 $ 4,497,799 $ 4,552,006 $ 4,442,543
Apr-2001 $ 4,496,450 $ 4,564,296 $ 4,453,205
May-2001 $ 4,522,529 $ 4,589,856 $ 4,480,815
Jun-2001 $ 4,542,881 $ 4,605,462 $ 4,499,186
Jul-2001 $ 4,599,667 $ 4,657,043 $ 4,554,526
Aug-2001 $ 4,632,784 $ 4,684,054 $ 4,584,131
Sep-2001 $ 4,697,643 $ 4,761,341 $ 4,627,680
Oct-2001 $ 4,747,438 $ 4,806,097 $ 4,662,850
Nov-2001 $ 4,724,176 $ 4,795,524 $ 4,640,002
Dec-2001 $ 4,727,955 $ 4,797,442 $ 4,635,362
Jan-2002 $ 4,747,812 $ 4,807,037 $ 4,648,805
Feb-2002 $ 4,767,278 $ 4,830,111 $ 4,662,287
Mar-2002 $ 4,738,675 $ 4,797,266 $ 4,641,306
Apr-2002 $ 4,800,278 $ 4,850,995 $ 4,678,437
May-2002 $ 4,818,039 $ 4,870,399 $ 4,704,636
Jun-2002 $ 4,845,501 $ 4,911,311 $ 4,709,811
Jul-2002 $ 4,897,833 $ 4,971,229 $ 4,723,940
Aug-2002 $ 4,915,955 $ 4,988,131 $ 4,753,701
Sep-2002 $ 4,958,232 $ 5,029,532 $ 4,784,600
Oct-2002 $ 4,975,090 $ 5,041,100 $ 4,787,471
Nov-2002 $ 4,958,672 $ 5,025,977 $ 4,789,386
Dec-2002 $ 4,991,399 $ 5,073,221 $ 4,837,280
Jan-2003 $ 5,012,363 $ 5,072,714 $ 4,845,020
Feb-2003 $ 5,037,926 $ 5,094,019 $ 4,874,090
Mar-2003 $ 5,045,987 $ 5,103,189 $ 4,881,401
Apr-2003 $ 5,063,648 $ 5,112,885 $ 4,902,391
May-2003 $ 5,086,941 $ 5,132,314 $ 4,930,335
Jun-2003 $ 5,088,467 $ 5,140,012 $ 4,939,209
Jul-2003 $ 5,023,843 $ 5,112,256 $ 4,895,744
Aug-2003 $ 5,035,901 $ 5,115,835 $ 4,900,150
Sep-2003 $ 5,087,770 $ 5,162,389 $ 4,951,112
Oct-2003 $ 5,056,735 $ 5,143,288 $ 4,939,229
Nov-2003 $ 5,055,724 $ 5,140,716 $ 4,940,217
Dec-2003 $ 5,086,564 $ 5,170,532 $ 4,964,918
Jan-2004 $ 5,101,823 $ 5,180,873 $ 4,980,806
Feb-2004 $ 5,126,822 $ 5,205,742 $ 5,003,718
Mar-2004 $ 5,142,203 $ 5,221,879 $ 5,020,730
Apr-2004 $ 5,094,380 $ 5,171,749 $ 4,976,046
May-2004 $ 5,088,776 $ 5,167,095 $ 4,966,094
Jun-2004 $ 5,089,285 $ 5,166,578 $ 4,969,570
Jul-2004 $ 5,117,276 $ 5,185,178 $ 4,989,448
Aug-2004 $ 5,157,475 $ 5,220,955 $ 5,024,873
</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 August 31, 1994 to August 31, 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.
14
<Page>
JPMORGAN SHORT TERM BOND FUND II
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 11/30/1990
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $1,191
Primary Benchmark LEHMAN 1-3
YEAR U.S. GOV'T
BOND INDEX
Average Credit Quality AA-
Duration 1.8 YEARS
Q: HOW DID THE FUND PERFORM?
A: JPMorgan Short Term Bond Fund II, which seeks a high level of income
consistent with preservation of capital, returned 2.01% (Select Shares) for
the one-year period ending August 31, 2004. This compares to the 2.27% 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 and due to its
inability to invest in high-yield, emerging markets, and international
sectors. Contributing to performance was the Fund's allocation to corporate
and to asset-backed securities (ABS).
Q: HOW WAS THE FUND MANAGED?
A: Early in the period, we maintained a modestly longer duration position in the
short end of the yield curve. However, stronger economic data towards
year-end led us to implement a shorter duration position versus the
benchmark. We continued to take advantage of market volatility by tactically
trading our duration position throughout the remainder of the period. In
addition, we targeted two- and three-year securities because they offered the
most attractive yields. We tactically traded our mortgage position and added
short-dated collateralized mortgage obligations. Because of the potential
change in federal agency legislation and because of the ensuing headline
risk, we reduced our agency exposure early in 2004. To capture attractive
yields, we increased our exposure to corporate and to ABS. In addition, we
sold high-quality corporate names in the one- to three-year area of the yield
curve in favor of lower-quality names.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes and Bonds 44.6%
U.S. Government Agency Securities 18.8%
Asset Backed Securities 16.0%
Residential Mortgage Backed Securities 9.2%
Commercial Mortgage Backed Securities 6.4%
Foreign Government Securities 1.5%
Certificates of Deposit 1.2%
Other (Less than 1%) 2.3%
</Table>
15
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------
CLASS A SHARES
Without Sales Charge 1.85% 3.06% 4.56% 4.94%
With Sales Charge* 0.28% 2.52% 4.24% 4.79%
-----------------------------------------
CLASS M SHARES
Without Sales Charge 1.58% 2.79% 4.31% 4.81%
With Sales Charge** 0.02% 2.26% 4.00% 4.65%
-----------------------------------------
SELECT SHARES 2.01% 3.29% 4.84% 5.22%
</Table>
* Sales Charge for Class A Shares is 1.50%.
** Sales Charge for Class M Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND II LIPPER SHORT-TERM INVESTMENT GRADE
(SELECT SHARES) LEHMAN 1-3 YEAR U.S. GOV'T BOND INDEX DEBT FUNDS INDEX
Aug-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000
Sep-1994 $ 1,001,100 $ 997,700 $ 998,600
Oct-1994 $ 1,004,203 $ 999,995 $ 1,000,198
Nov-1994 $ 1,004,304 $ 995,795 $ 998,397
Dec-1994 $ 1,008,823 $ 997,687 $ 996,001
Jan-1995 $ 1,017,297 $ 1,011,255 $ 1,006,160
Feb-1995 $ 1,026,758 $ 1,025,008 $ 1,018,033
Mar-1995 $ 1,032,508 $ 1,030,748 $ 1,023,632
Apr-1995 $ 1,038,290 $ 1,039,922 $ 1,032,436
May-1995 $ 1,050,438 $ 1,057,705 $ 1,051,329
Jun-1995 $ 1,056,321 $ 1,063,416 $ 1,057,847
Jul-1995 $ 1,061,285 $ 1,067,670 $ 1,061,233
Aug-1995 $ 1,066,273 $ 1,074,076 $ 1,068,343
Sep-1995 $ 1,071,178 $ 1,079,339 $ 1,073,471
Oct-1995 $ 1,078,355 $ 1,088,298 $ 1,083,561
Nov-1995 $ 1,085,364 $ 1,097,548 $ 1,092,663
Dec-1995 $ 1,091,768 $ 1,105,889 $ 1,100,203
Jan-1996 $ 1,099,301 $ 1,115,289 $ 1,110,105
Feb-1996 $ 1,098,861 $ 1,110,940 $ 1,105,997
Mar-1996 $ 1,101,499 $ 1,110,051 $ 1,101,131
Apr-1996 $ 1,104,252 $ 1,111,161 $ 1,101,902
May-1996 $ 1,107,234 $ 1,113,606 $ 1,104,105
Jun-1996 $ 1,113,988 $ 1,121,735 $ 1,112,055
Jul-1996 $ 1,119,001 $ 1,126,110 $ 1,116,614
Aug-1996 $ 1,122,246 $ 1,130,276 $ 1,120,523
Sep-1996 $ 1,132,122 $ 1,140,562 $ 1,131,280
Oct-1996 $ 1,144,122 $ 1,153,450 $ 1,143,384
Nov-1996 $ 1,153,161 $ 1,161,986 $ 1,152,874
Dec-1996 $ 1,153,161 $ 1,162,218 $ 1,153,335
Jan-1997 $ 1,157,658 $ 1,167,797 $ 1,159,217
Feb-1997 $ 1,160,668 $ 1,170,600 $ 1,163,159
Mar-1997 $ 1,159,972 $ 1,169,663 $ 1,161,996
Apr-1997 $ 1,170,644 $ 1,179,254 $ 1,171,292
May-1997 $ 1,177,199 $ 1,187,509 $ 1,179,139
Jun-1997 $ 1,186,028 $ 1,195,703 $ 1,187,393
Jul-1997 $ 1,199,430 $ 1,208,736 $ 1,200,930
Aug-1997 $ 1,198,471 $ 1,209,945 $ 1,201,770
Sep-1997 $ 1,208,178 $ 1,219,140 $ 1,211,144
Oct-1997 $ 1,215,307 $ 1,228,162 $ 1,218,532
Nov-1997 $ 1,216,643 $ 1,231,232 $ 1,221,578
Dec-1997 $ 1,223,822 $ 1,239,482 $ 1,228,908
Jan-1998 $ 1,235,815 $ 1,251,257 $ 1,239,599
Feb-1998 $ 1,236,062 $ 1,252,383 $ 1,241,335
Mar-1998 $ 1,239,647 $ 1,257,142 $ 1,246,424
Apr-1998 $ 1,245,473 $ 1,263,176 $ 1,252,282
May-1998 $ 1,252,448 $ 1,269,871 $ 1,259,045
Jun-1998 $ 1,259,211 $ 1,276,347 $ 1,264,710
Jul-1998 $ 1,265,003 $ 1,282,346 $ 1,270,275
Aug-1998 $ 1,273,226 $ 1,297,991 $ 1,278,913
Sep-1998 $ 1,291,178 $ 1,315,514 $ 1,292,469
Oct-1998 $ 1,288,725 $ 1,321,960 $ 1,290,789
Nov-1998 $ 1,288,339 $ 1,320,638 $ 1,294,145
Dec-1998 $ 1,292,332 $ 1,325,656 $ 1,299,710
Jan-1999 $ 1,298,665 $ 1,330,694 $ 1,306,209
Feb-1999 $ 1,294,249 $ 1,324,706 $ 1,301,898
Mar-1999 $ 1,303,439 $ 1,333,714 $ 1,312,053
Apr-1999 $ 1,307,349 $ 1,337,848 $ 1,316,776
May-1999 $ 1,306,434 $ 1,336,912 $ 1,315,065
Jun-1999 $ 1,307,871 $ 1,340,789 $ 1,317,563
Jul-1999 $ 1,310,879 $ 1,344,945 $ 1,319,013
Aug-1999 $ 1,312,714 $ 1,348,711 $ 1,321,651
Sep-1999 $ 1,322,428 $ 1,357,478 $ 1,330,373
Oct-1999 $ 1,327,057 $ 1,361,143 $ 1,333,300
Nov-1999 $ 1,329,047 $ 1,363,729 $ 1,337,700
Dec-1999 $ 1,332,503 $ 1,364,956 $ 1,340,509
Jan-2000 $ 1,333,036 $ 1,364,683 $ 1,341,046
Feb-2000 $ 1,340,634 $ 1,373,963 $ 1,349,762
Mar-2000 $ 1,347,471 $ 1,382,207 $ 1,356,781
Apr-2000 $ 1,343,159 $ 1,385,662 $ 1,357,052
May-2000 $ 1,347,458 $ 1,390,789 $ 1,361,802
Jun-2000 $ 1,362,684 $ 1,405,949 $ 1,376,918
Jul-2000 $ 1,372,495 $ 1,414,947 $ 1,385,455
Aug-2000 $ 1,382,514 $ 1,425,701 $ 1,395,569
Sep-2000 $ 1,396,478 $ 1,436,821 $ 1,407,431
Oct-2000 $ 1,400,946 $ 1,444,580 $ 1,411,653
Nov-2000 $ 1,416,497 $ 1,458,592 $ 1,424,500
Dec-2000 $ 1,432,787 $ 1,476,533 $ 1,439,599
Jan-2001 $ 1,448,261 $ 1,496,023 $ 1,460,042
Feb-2001 $ 1,458,688 $ 1,505,747 $ 1,470,262
Mar-2001 $ 1,470,358 $ 1,517,944 $ 1,480,848
Apr-2001 $ 1,471,828 $ 1,522,346 $ 1,484,402
May-2001 $ 1,478,157 $ 1,530,719 $ 1,493,605
Jun-2001 $ 1,483,331 $ 1,536,230 $ 1,499,729
Jul-2001 $ 1,499,499 $ 1,554,203 $ 1,518,175
Aug-2001 $ 1,509,396 $ 1,563,995 $ 1,528,044
Sep-2001 $ 1,529,018 $ 1,590,114 $ 1,542,560
Oct-2001 $ 1,545,225 $ 1,606,015 $ 1,554,283
Nov-2001 $ 1,538,735 $ 1,601,518 $ 1,546,667
Dec-2001 $ 1,536,735 $ 1,602,479 $ 1,545,121
Jan-2002 $ 1,541,960 $ 1,606,325 $ 1,549,602
Feb-2002 $ 1,550,132 $ 1,614,356 $ 1,554,096
Mar-2002 $ 1,541,141 $ 1,602,733 $ 1,547,102
Apr-2002 $ 1,560,098 $ 1,622,126 $ 1,559,479
May-2002 $ 1,565,870 $ 1,628,452 $ 1,568,212
Jun-2002 $ 1,574,012 $ 1,642,946 $ 1,569,937
Jul-2002 $ 1,589,910 $ 1,662,825 $ 1,574,647
Aug-2002 $ 1,596,270 $ 1,669,643 $ 1,584,567
Sep-2002 $ 1,607,922 $ 1,683,167 $ 1,594,867
Oct-2002 $ 1,613,389 $ 1,687,375 $ 1,595,824
Nov-2002 $ 1,609,033 $ 1,682,650 $ 1,596,462
Dec-2002 $ 1,619,975 $ 1,698,804 $ 1,612,427
Jan-2003 $ 1,626,292 $ 1,699,143 $ 1,615,007
Feb-2003 $ 1,632,310 $ 1,706,959 $ 1,624,697
Mar-2003 $ 1,634,595 $ 1,710,373 $ 1,627,134
Apr-2003 $ 1,639,989 $ 1,713,794 $ 1,634,130
May-2003 $ 1,646,877 $ 1,720,821 $ 1,643,445
Jun-2003 $ 1,649,018 $ 1,723,574 $ 1,646,403
Jul-2003 $ 1,627,086 $ 1,712,371 $ 1,631,915
Aug-2003 $ 1,630,503 $ 1,713,056 $ 1,633,383
Sep-2003 $ 1,648,438 $ 1,730,358 $ 1,650,371
Oct-2003 $ 1,637,229 $ 1,723,263 $ 1,646,410
Nov-2003 $ 1,636,574 $ 1,722,918 $ 1,646,739
Dec-2003 $ 1,644,593 $ 1,733,084 $ 1,654,973
Jan-2004 $ 1,649,034 $ 1,737,243 $ 1,660,269
Feb-2004 $ 1,656,619 $ 1,746,277 $ 1,667,906
Mar-2004 $ 1,662,915 $ 1,752,039 $ 1,673,577
Apr-2004 $ 1,646,452 $ 1,734,169 $ 1,658,682
May-2004 $ 1,642,665 $ 1,732,088 $ 1,655,365
Jun-2004 $ 1,642,993 $ 1,732,261 $ 1,656,523
Jul-2004 $ 1,649,730 $ 1,739,190 $ 1,663,149
Aug-2004 $ 1,662,884 $ 1,752,060 $ 1,674,958
</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 August 31,
1994 to August 31, 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.
16
<Page>
JPMORGAN STRATEGIC INCOME FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 11/30/1998
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $21
Primary Benchmark LEHMAN AGGREGATE
BOND INDEX
Average Credit Quality BBB+
Duration 4.5 YEARS
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 8.56% (Class A shares, without sales charges) for the
one-year period ended August 31, 2004. This compares to the 6.13% return of
the Lehman Aggregate Bond Index.
Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK?
A: Our overweight to high-yield debt added to performance at a time when credit
fundamentals and market supply dynamics continued to favor this sector.
Another successful strategy was our overweight to emerging markets debt. The
Fund also benefited as European interest rates outperformed five-year
Treasuries, and as a result we took profits on the short-U.S./long-Eurozone
trade. The Fund benefited from our underweight position to Treasury and
agency debt as other sectors out-performed.
Q: HOW WAS THE FUND MANAGED?
A: As fundamental credit quality continued to improve, we maintained significant
allocations to high-yield and to emerging markets debt, choosing our
individual holdings by taking a bottom-up view of company and country
fundamentals. Because we believed that economic activity would increase more
quickly in the U.S. than in the Eurozone, we took a position in which we were
long the Eurozone and short the U.S. Our allocations to investment-grade
corporate bonds, residential mortgages, Treasuries and agencies were
underweight the benchmark index, which is consistent with our
strategy.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes and Bonds 38.9%
Foreign Government Securities 28.1%
Residential Mortgage Backed Securities 13.4%
U.S. Treasury Securities 5.9%
Money Market Fund 5.0%
Asset Backed Securities 4.2%
Commercial Mortgage Backed Securities 2.6%
Supranational Notes & Bonds 1.1%
Other (Less than 1%) 0.8%
</Table>
17
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (11/30/98)
-----------------------------------------
CLASS A SHARES
Without Sales Charge 8.56% 6.23% 5.60% 5.17%
With Sales Charge* 3.67% 4.63% 4.63% 4.33%
-----------------------------------------
CLASS B SHARES
Without CDSC 8.01% 5.69% 5.10% 4.72%
With CDSC** 3.01% 4.79% 4.78% 4.59%
-----------------------------------------
CLASS C SHARES
Without CDSC 8.11% 5.73% 5.11% 4.73%
With CDSC*** 7.11% 5.73% 5.11% 4.73%
-----------------------------------------
CLASS M SHARES
Without Sales Charge 8.36% 5.99% 5.33% 4.93%
With Sales Charge**** 5.16% 4.91% 4.69% 4.37%
</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 8/31/04)
<Table>
<Caption>
JPMORGAN STRATEGIC INCOME FUND
(CLASS A SHARES) LEHMAN AGGREGATE BOND INDEX LIPPER MULTI-SECTOR 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 $ 12,473 $ 14,082 $ 13,001
Mar-2004 $ 12,634 $ 14,187 $ 13,105
Apr-2004 $ 12,343 $ 13,818 $ 12,822
May-2004 $ 12,200 $ 13,763 $ 12,694
Jun-2004 $ 12,311 $ 13,840 $ 12,797
Jul-2004 $ 12,471 $ 13,977 $ 12,924
Aug-2004 $ 12,763 $ 14,244 $ 13,176
</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 August 31,
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.
18
<Page>
JPMORGAN U.S. TREASURY INCOME FUND
AS OF AUGUST 31, 2004 (Unaudited)
FUND FACTS
Fund Inception 9/8/1987
Fiscal Year End AUGUST 31
Net Assets as of 8/31/2004
(In Millions) $134
Primary Benchmark LEHMAN U.S. GOV'T
BOND INDEX
Average Credit Quality GOVERNMENT
Duration 4.9 YEARS
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 investments
returned 5.05% (Class A Shares, without sales charges) for the one-year
period ending August 31, 2004. This compares to the 5.30% return of its
benchmark index, the Lehman U.S. Government Bond Index.
Q: WHY DID THE FUND PERFORM THIS WAY?
A: We overweighted short-term holdings, which underperformed as interest rates
rose. Our positioning in Government National Mortgage Association (GNMA)
mortgage-backed securities was positive when these issues outperformed
Treasury and agency debt in the Index. Within our GNMA holdings, the
portfolio benefited from our security selection, which focused on 5.5% and
on 6.0% coupons. We did not hold Agency debentures (debt of Freddie Mac or
Fannie Mae), which added to performance relative to the Index.
Q: HOW WAS THE FUND MANAGED?
A: We maintained a slightly long duration position during much of the period.
Because of their attractive yields, we overweighted mortgages issued by the
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. We again moved to an overweight position
during the second quarter, mostly in lower coupons, in response to reduced
supply and lower volatility. 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.
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
U.S. Treasury Securities 89.8%
Money Market Fund 6.4%
Residential Mortgage Backed Securities 3.8%
</Table>
19
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
-----------------------------------------
CLASS A SHARES
Without Sales Charge 5.05% 5.22% 6.72% 6.34%
With Sales Charge* 0.30% 3.63% 5.75% 5.84%
-----------------------------------------
CLASS B SHARES
Without CDSC 4.13% 4.33% 5.77% 5.63%
With CDSC** (0.87%) 3.41% 5.45% 5.63%
-----------------------------------------
SELECT SHARES 5.26% 5.46% 6.89% 6.42%
</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, 2% CDSC for the five year period and 0%
CDSC for the ten year period.
[CHART]
TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
<Table>
<Caption>
JPMORGAN U.S. TREASURY INCOME LIPPER GENERAL U.S.
FUND (CLASS A SHARES) LEHMAN U.S. GOV'T BOND INDEX TREASURY FUNDS AVERAGE
Aug-1994 $ 9,550 $ 10,000 $ 10,000
Sep-1994 $ 9,374 $ 9,859 $ 9,817
Oct-1994 $ 9,349 $ 9,852 $ 9,793
Nov-1994 $ 9,322 $ 9,834 $ 9,780
Dec-1994 $ 9,379 $ 9,894 $ 9,858
Jan-1995 $ 9,559 $ 10,078 $ 10,045
Feb-1995 $ 9,762 $ 10,295 $ 10,271
Mar-1995 $ 9,817 $ 10,360 $ 10,326
Apr-1995 $ 9,933 $ 10,496 $ 10,462
May-1995 $ 10,314 $ 10,919 $ 10,956
Jun-1995 $ 10,393 $ 11,003 $ 11,045
Jul-1995 $ 10,353 $ 10,962 $ 10,971
Aug-1995 $ 10,460 $ 11,090 $ 11,111
Sep-1995 $ 10,557 $ 11,197 $ 11,229
Oct-1995 $ 10,712 $ 11,367 $ 11,422
Nov-1995 $ 10,866 $ 11,544 $ 11,609
Dec-1995 $ 11,022 $ 11,708 $ 11,794
Jan-1996 $ 11,085 $ 11,780 $ 11,846
Feb-1996 $ 10,829 $ 11,539 $ 11,542
Mar-1996 $ 10,719 $ 11,443 $ 11,418
Apr-1996 $ 10,628 $ 11,370 $ 11,313
May-1996 $ 10,587 $ 11,351 $ 11,279
Jun-1996 $ 10,708 $ 11,497 $ 11,437
Jul-1996 $ 10,743 $ 11,526 $ 11,453
Aug-1996 $ 10,689 $ 11,501 $ 11,383
Sep-1996 $ 10,860 $ 11,692 $ 11,601
Oct-1996 $ 11,094 $ 11,949 $ 11,904
Nov-1996 $ 11,286 $ 12,157 $ 12,173
Dec-1996 $ 11,160 $ 12,033 $ 11,988
Jan-1997 $ 11,155 $ 12,046 $ 11,962
Feb-1997 $ 11,154 $ 12,063 $ 11,955
Mar-1997 $ 11,038 $ 11,935 $ 11,778
Apr-1997 $ 11,184 $ 12,107 $ 11,961
May-1997 $ 11,273 $ 12,211 $ 12,064
Jun-1997 $ 11,392 $ 12,348 $ 12,216
Jul-1997 $ 11,720 $ 12,698 $ 12,683
Aug-1997 $ 11,571 $ 12,573 $ 12,459
Sep-1997 $ 11,735 $ 12,761 $ 12,692
Oct-1997 $ 11,908 $ 12,982 $ 12,971
Nov-1997 $ 11,974 $ 13,048 $ 13,060
Dec-1997 $ 12,092 $ 13,185 $ 13,231
Jan-1998 $ 12,245 $ 13,383 $ 13,459
Feb-1998 $ 12,191 $ 13,347 $ 13,379
Mar-1998 $ 12,226 $ 13,384 $ 13,404
Apr-1998 $ 12,249 $ 13,445 $ 13,442
May-1998 $ 12,383 $ 13,583 $ 13,628
Jun-1998 $ 12,527 $ 13,738 $ 13,817
Jul-1998 $ 12,523 $ 13,758 $ 13,806
Aug-1998 $ 12,862 $ 14,116 $ 14,281
Sep-1998 $ 13,222 $ 14,497 $ 14,735
Oct-1998 $ 13,169 $ 14,448 $ 14,613
Nov-1998 $ 13,138 $ 14,452 $ 14,619
Dec-1998 $ 13,154 $ 14,484 $ 14,636
Jan-1999 $ 13,236 $ 14,568 $ 14,732
Feb-1999 $ 12,854 $ 14,221 $ 14,229
Mar-1999 $ 12,902 $ 14,277 $ 14,262
Apr-1999 $ 12,936 $ 14,310 $ 14,301
May-1999 $ 12,807 $ 14,184 $ 14,107
Jun-1999 $ 12,779 $ 14,155 $ 14,021
Jul-1999 $ 12,753 $ 14,134 $ 13,972
Aug-1999 $ 12,751 $ 14,134 $ 13,943
Sep-1999 $ 12,843 $ 14,249 $ 14,063
Oct-1999 $ 12,854 $ 14,272 $ 14,050
Nov-1999 $ 12,840 $ 14,252 $ 14,012
Dec-1999 $ 12,767 $ 14,159 $ 13,862
Jan-2000 $ 12,778 $ 14,179 $ 13,914
Feb-2000 $ 12,980 $ 14,380 $ 14,156
Mar-2000 $ 13,203 $ 14,633 $ 14,501
Apr-2000 $ 13,157 $ 14,592 $ 14,434
May-2000 $ 13,166 $ 14,601 $ 14,416
Jun-2000 $ 13,386 $ 14,861 $ 14,701
Jul-2000 $ 13,508 $ 15,005 $ 14,854
Aug-2000 $ 13,693 $ 15,227 $ 15,105
Sep-2000 $ 13,726 $ 15,270 $ 15,090
Oct-2000 $ 13,837 $ 15,416 $ 15,256
Nov-2000 $ 14,113 $ 15,720 $ 15,624
Dec-2000 $ 14,378 $ 16,033 $ 15,956
Jan-2001 $ 14,537 $ 16,195 $ 16,062
Feb-2001 $ 14,676 $ 16,379 $ 16,269
Mar-2001 $ 14,737 $ 16,437 $ 16,274
Apr-2001 $ 14,521 $ 16,269 $ 15,976
May-2001 $ 14,593 $ 16,323 $ 16,017
Jun-2001 $ 14,634 $ 16,398 $ 16,104
Jul-2001 $ 14,993 $ 16,791 $ 16,576
Aug-2001 $ 15,151 $ 17,000 $ 16,801
Sep-2001 $ 15,456 $ 17,295 $ 17,023
Oct-2001 $ 15,870 $ 17,742 $ 17,604
Nov-2001 $ 15,432 $ 17,344 $ 17,030
Dec-2001 $ 15,235 $ 17,193 $ 16,808
Jan-2002 $ 15,367 $ 17,305 $ 16,949
Feb-2002 $ 15,513 $ 17,464 $ 17,110
Mar-2002 $ 15,184 $ 17,085 $ 16,659
Apr-2002 $ 15,523 $ 17,492 $ 17,115
May-2002 $ 15,616 $ 17,597 $ 17,202
Jun-2002 $ 15,791 $ 17,843 $ 17,448
Jul-2002 $ 16,159 $ 18,236 $ 17,869
Aug-2002 $ 16,472 $ 18,597 $ 18,343
Sep-2002 $ 16,894 $ 19,032 $ 18,896
Oct-2002 $ 16,737 $ 18,880 $ 18,588
Nov-2002 $ 16,595 $ 18,717 $ 18,393
Dec-2002 $ 16,961 $ 19,170 $ 18,906
Jan-2003 $ 16,921 $ 19,122 $ 18,831
Feb-2003 $ 17,186 $ 19,430 $ 19,213
Mar-2003 $ 17,118 $ 19,374 $ 19,100
Apr-2003 $ 17,190 $ 19,463 $ 19,184
May-2003 $ 17,604 $ 19,969 $ 19,844
Jun-2003 $ 17,512 $ 19,865 $ 19,679
Jul-2003 $ 16,703 $ 19,045 $ 18,650
Aug-2003 $ 16,800 $ 19,151 $ 18,795
Sep-2003 $ 17,311 $ 19,709 $ 19,442
Oct-2003 $ 17,082 $ 19,429 $ 19,117
Nov-2003 $ 17,084 $ 19,452 $ 19,123
Dec-2003 $ 17,248 $ 19,625 $ 19,283
Jan-2004 $ 17,379 $ 19,788 $ 19,444
Feb-2004 $ 17,581 $ 20,026 $ 19,696
Mar-2004 $ 17,739 $ 20,202 $ 19,881
Apr-2004 $ 17,175 $ 19,594 $ 19,134
May-2004 $ 17,099 $ 19,521 $ 19,057
Jun-2004 $ 17,173 $ 19,601 $ 19,147
Jul-2004 $ 17,308 $ 19,784 $ 19,342
Aug-2004 $ 17,647 $ 20,169 $ 19,799
</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 August 31, 1994 to August
31, 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.
20
<Page>
JPMORGAN BOND FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 90.8%
U.S. TREASURY SECURITIES -- 5.4%
U.S. Treasury Notes & Bonds,
$ 1,720 3.50%, 11/15/06 @ + $ 1,757
5,075 3.88%, 05/15/09 + 5,210
18,160 4.00%, 06/15/09 + 18,730
1,230 3.63%, 07/15/09 + 1,248
1,640 3.50%, 08/15/09 + 1,654
3,710 4.00%, 02/15/14 + 3,678
10,700 4.75%, 05/15/14 + 11,230
11,115 4.25%, 08/15/14 + 11,226
1,425 7.25%, 05/15/16 @ + 1,792
2,035 5.38%, 02/15/31 + 2,167
-------------------------------------------------------------------------
Total U.S. Treasury Securities 58,692
(Cost $57,323)
-------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 1.0%
8,090 Federal Home Loan Mortgage Corp.,
6.25%, 07/15/32 9,011
Federal National Mortgage Association,
2 7.00%, 07/15/05 + 2
985 4.38%, 09/15/12 986
570 7.25%, 05/15/30 711
-------------------------------------------------------------------------
Total U.S. Government Agency Securities 10,710
(Cost $10,323)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 2.1%
Federal Republic of Brazil (Brazil),
190 9.25%, 10/22/10 198
495 10.00%, 08/07/11 + 522
500 11.00%, 01/11/12 554
969 2.13%, 04/15/12, FRN 874
490 12.75%, 01/15/20 592
2,464 Republic of Colombia (Colombia),
9.75%, 04/09/11 2,796
1,830 Republic of Peru (Peru), 8.38%,
05/03/16 1,848
Republic of Ukraine (Ukraine),
990 6.88%, 03/04/11, # 980
1,615 7.65%, 06/11/13, Regulation S 1,631
Russian Federation (Russia),
2,720 8.75%, 07/24/05, Regulation S 2,856
625 10.00%, 06/26/07, Regulation S 709
4,300 5.00%, 03/31/30, Regulation S, SUB 4,118
United Mexican States (Mexico),
$ 850 7.50%, 01/14/12 $ 961
1,730 5.88%, 01/15/14, Ser. A, MTN 1,751
205 11.50%, 05/15/26 308
2,160 8.30%, 08/15/31, MTN 2,476
-------------------------------------------------------------------------
Total Foreign Government Securities 23,174
(Cost $22,356)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 30.3%
AEROSPACE -- 0.2%
2,735 General Dynamics Corp., 2.13%,
05/15/06 2,708
AUTOMOTIVE -- 2.5%
DaimlerChrysler N.A. Holding Corp.,
2,800 2.34%, 05/24/06, MTN, FRN + 2,811
870 7.20%, 09/01/09 + 977
Ford Motor Credit Co.,
850 7.38%, 10/28/09 930
8,370 7.88%, 06/15/10 9,306
150 7.00%, 10/01/13 157
General Motors Acceptance Corp.,
1,550 2.60%, 05/18/06, MTN, FRN 1,554
4,790 2.51%, 01/16/07, MTN, FRN 4,795
General Motors Corp.,
3,600 7.20%, 01/15/11 3,823
1,410 8.25%, 07/15/23 1,486
1,160 8.38%, 07/15/33 1,233
549 TRW Automotive, Inc., 9.38%,
02/15/13 633
-------------------------------------------------------------------------
27,705
-------------------------------------------------------------------------
BANKING -- 6.1%
365 Abbey National Capital Trust I, 8.96%,
to 6/30; thereafter FRN, 12/31/49 + 489
1,735 ABN-Amro North American Holding Preferred Capital
Repackage Trust I, 6.52%, to 11/12; thereafter FRN,
12/31/49, # + 1,907
4,405 ANZ Capital Trust I, 5.36%, 12/15/53, # + 4,422
2,000 BBVA Bancomer Capital Trust I
(Mexico), 10.50%, 02/16/11, # + 2,202
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 1,750 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # + $ 1,698
2,060 HBOS PLC (United Kingdom), 5.38%,
to 11/13; thereafter FRN, 12/31/49, # 2,082
1,720 Industrial Bank of Korea (South Korea),
4.00%, to 05/09; thereafter FRN,
05/19/14, # 1,686
3,955 KBC Bank Fund Trust III, 9.86%, to
11/09; thereafter FRN, 11/29/49, # 4,917
2,100 KeyCorp, 1.83%, 07/23/07, Ser. G,
MTN, FRN 2,098
1,230 Korea First Bank (South Korea), 7.27%,
to 03/14; thereafter FRN, 03/03/34, # 1,281
1,655 Mizuho Finance Group LTD
(Cayman Islands), 5.79%, 04/15/14, # 1,704
1,500 Nordea Bank AB (Sweden), 8.95%, to
11/09; thereafter FRN, 12/31/49, # 1,816
2,630 Northern Rock PLC (United Kingdom),
5.60% to 04/14; thereafter FRN,
12/31/49, MTN, # 2,668
3,040 Popular North America, Inc., 4.70%,
06/30/09 3,120
1,665 RBS Capital Trust I, 5.51%, to 9/14;
thereafter FRN, 12/31/49 1,688
1,415 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65%, to 09/31;
thereafter FRN, 12/31/49 1,665
2,320 Skandinaviska Enskilda Banken AB
(Sweden), 4.96%, to 03/14; thereafter
FRN, 12/31/49, # 2,258
1,630 Standard Chartered Bank (United
Kingdom), 8.00%, 05/30/31, # 2,031
3,665 SunTrust Bank, 2.50%, 11/01/06 3,635
1,870 Swedbank (Sweden), 9.00%, to 03/10;
thereafter FRN, 12/31/49, # 2,263
2,430 United Overseas Bank LTD (Singapore),
5.38%, to 9/14; thereafter FRN,
12/31/49, # 2,460
4,885 U.S. Bank N.A., 2.85%, 11/15/06 4,884
2,500 Wachovia Corp., 1.71%, 07/20/07, FRN 2,498
1,500 Wells Fargo & Co, 1.62%, 03/23/07, FRN 1,500
$ 2,800 Westpac Banking Corp. (Australia),
1.81%, 05/25/07, FRN, # $ 2,800
2,025 Westpac Capital Trust III, 5.82%, to
09/13; thereafter FRN, 12/31/49, # 2,107
905 Westpac Capital Trust IV, 5.26%,
12/31/49, # 886
3,160 Woori Bank (South Korea), 5.75%, to
03/09; thereafter FRN, 03/13/14, # 3,277
-------------------------------------------------------------------------
66,042
-------------------------------------------------------------------------
BROADCASTING/CABLE -- 0.2%
2,180 Cox Communications, Inc., 4.63%,
06/01/13 + 1,995
495 Echostar DBS Corp., 6.38%, 10/01/11 496
-------------------------------------------------------------------------
2,491
-------------------------------------------------------------------------
BUSINESS SERVICES -- 0.1%
1,290 Cendant Corp., 7.13%, 03/15/15 + 1,476
CHEMICALS -- 0.5%
490 Huntsman International LLC, 9.88%,
03/01/09 529
2,355 ICI Wilmington, Inc., 5.63%, 12/01/13 2,405
810 Lyondell Chemical Co., 10.88%, 05/01/09 852
775 PolyOne Corp., 10.63%, 05/15/10 843
925 The Dow Chemical Co., 7.38%, 11/01/29 1,069
-------------------------------------------------------------------------
5,698
-------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.1%
765 Electronic Data Systems Corp., 6.50%,
08/01/13, Ser. B 757
CONSTRUCTION -- 0.7%
1,460 Centex Corp., 5.70%, 05/15/14 + 1,490
2,540 KB Home, 5.75%, 02/01/14 2,471
1,520 Pulte Homes, Inc., 5.25%, 01/15/14 1,498
745 Standard-Pacific Corp., 6.88%, 05/15/11 773
950 Toll Brothers, Inc., 5.95%, 09/15/13 989
-------------------------------------------------------------------------
7,221
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
CONSUMER SERVICES -- 0.0%^
$ 490 Iron Mountain, Inc., 6.63%, 01/01/16 $ 461
DIVERSIFIED -- 0.3%
1,810 General Electric Capital Corp., 6.75%,
03/15/32, Ser. A, MTN 2,056
1,260 Hutchison Whampoa International LTD
(Hong Kong), 6.25%, 01/24/14, # 1,301
-------------------------------------------------------------------------
3,357
-------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.1%
545 Celestica, Inc. (Canada), 7.88%,
07/01/11 + 570
ENVIRONMENTAL SERVICES -- 0.2%
2,205 Allied Waste North America, Inc.,
6.13%, 02/15/14 + 2,056
FINANCIAL SERVICES -- 8.4%
American General Finance Corp.,
4,195 3.00%, 11/15/06, Ser. H, MTN + 4,183
1,065 4.50%, 11/15/07, Ser. H, MTN + 1,099
600 Arch Western Finance LLC, 7.50%,
07/01/13, # + 621
1,000 Aries Vermoegensverwaltungs
(Russia), 9.60%, 10/25/14, # 1,120
4,790 The Bear Stearns Co., Inc., 1.77%,
01/16/07, Ser. B, MTN, FRN + 4,791
2,910 Capital One Financial Corp., 8.75%,
02/01/07 + 3,254
CIT Group, Inc.,
2,650 1.72%, 04/19/06, MTN, FRN + 2,649
2,500 1.77%, 06/19/06, MTN, FRN + 2,505
2,900 Citigroup, Inc., 1.68%, 03/20/06, FRN + 2,905
3,100 Countrywide Home Loans, Inc., 1.87%,
02/17/06, Ser. L, MTN, FRN + 3,100
Goldman Sachs Group, Inc.,
1,750 1.94%, 02/21/06, Ser. B, MTN, FRN 1,754
2,220 6.35%, 02/15/34 2,221
3,590 Household Finance Corp., 1.86%,
02/09/07, MTN, FRN 3,593
HSBC Capital Funding LP (Channel Islands),
$ 1,980 4.61%, to 06/13; thereafter FRN,
12/31/49, # $ 1,899
2,665 9.55%, to 06/10; thereafter FRN,
12/31/49, # 3,360
1,865 ING Capital Funding Trust III, 8.44%, to
12/10; thereafter FRN, 12/31/49 2,253
2,000 John Deere Capital Corp., 1.61%,
03/16/06, Ser. D, MTN, FRN 2,000
Merrill Lynch & Co., Inc.,
1,750 1.87%, 06/13/05, Ser. B, MTN, FRN 1,754
1,900 1.95%, 02/06/09, Ser. C, MTN, FRN 1,899
1,815 Mizuho JGB Investment LLC, 9.87%, to
06/08; thereafter FRN, 12/31/49, # 2,132
2,185 Mizuho Preferred Capital Co., LLC,
8.79%, to 06/08; thereafter FRN,
12/31/49, # 2,476
Morgan Stanley,
4,810 1.73%, 01/12/07, FRN 4,815
225 3.63%, 04/01/08 225
1,400 4.75%, 04/01/14 1,354
Pricoa Global Funding I,
4,225 1.73%, 12/22/06, FRN, # 4,232
2,595 3.90%, 12/15/08, # 2,604
4,000 SLM Corp., 5.63%, 04/10/07,
Ser. A, MTN 4,234
15,990 Special Purpose Accounts Receivable
Cooperative Corp. Trust, 2.06%,
05/23/05, Ser. 2003-6, FRN, # 15,989
5,013 Targeted Return Index (TRAINS),
8.21% to 08/06; thereafter FRN,
08/01/15, Ser. HY-2004-1, # 5,346
1,120 UFJ Finance AEC (Aruba), 6.75%,
07/15/13 1,239
-------------------------------------------------------------------------
91,606
-------------------------------------------------------------------------
HEALTH CARE/HEALTH CARE SERVICES -- 0.5%
615 Fresenius Medical Care Capital Trust II,
7.88%, 02/01/08 658
3,205 HCA, Inc., 5.25%, 11/06/08 3,269
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
HEALTH CARE/HEALTH CARE SERVICES -- CONTINUED
$ 2,000 Mariner Health Group, Inc., 9.50%,
04/01/06, Ser. B* (d) (f) $ 0^^
245 Medex, Inc., 8.88%, 05/15/13 267
820 Tenet Healthcare Corp., 5.00%,
07/01/07 818
-------------------------------------------------------------------------
5,012
-------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 0.0%^
420 ITT Corp., 7.38%, 11/15/15 445
INSURANCE -- 1.2%
1,515 Arch Capital Group LTD (Bermuda),
7.35%, 05/01/34 + 1,596
2,320 Aspen Insurance Holdings LTD
(Bermuda), 6.00%, 08/15/14, # + 2,341
1,430 AXA (France), 8.60%,
12/15/30 + 1,838
555 Fund American Companies, Inc.,
5.88%, 05/15/13 566
3,010 Liberty Mutual Group, 5.75%,
03/15/14, # 2,986
845 Odyssey Re Holdings Corp., 7.65%,
11/01/13 936
1,680 Prudential Holdings LLC, 8.70%,
12/18/23, # 2,148
805 QBE Insurance Group LTD (Australia),
5.65%, to 07/13; thereafter FRN,
07/01/23, # 792
-------------------------------------------------------------------------
13,203
-------------------------------------------------------------------------
MANUFACTURING -- 0.3%
3,255 Caterpillar Financial Services Corp.,
1.83%, 02/26/07, Ser. F, MTN, FRN + 3,255
METALS/MINING -- 0.1%
620 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B 654
MULTI-MEDIA -- 0.6%
420 Comcast Corp., 7.05%, 03/15/33 + 458
600 Medianews Group, Inc., 6.88%, 10/01/13 605
720 News America Holdings, Inc., 7.75%,
12/01/45 852
$ 625 Time Warner Companies, Inc., 9.15%,
02/01/23 $ 800
930 Time Warner Entertainment Co., LP,
8.38%, 03/15/23 1,109
2,040 Time Warner, Inc., 7.63%, 04/15/31 + 2,327
-------------------------------------------------------------------------
6,151
-------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.0%^
325 Xerox Corp., 7.63%, 06/15/13 345
OIL & GAS -- 0.8%
Amerada Hess Corp.,
1,255 6.65%, 08/15/11 + 1,377
240 7.30%, 08/15/31 + 258
2,660 BP Capital Markets PLC (United Kingdom),
2.75%, 12/29/06 + 2,661
1,135 Husky Energy, Inc. (Canada), 6.15%,
06/15/19 1,196
1,205 Kerr-McGee Corp., 6.95%, 07/01/24 1,268
1,508 PEMEX Project Funding Master Trust
(Mexico), 8.63%, 02/01/22 1,719
-------------------------------------------------------------------------
8,479
-------------------------------------------------------------------------
PACKAGING -- 0.2%
565 Crown European Holdings SA (France),
9.50%, 03/01/11 + 627
Owens-Brockway Glass Container, Inc.,
1,045 8.88%, 02/15/09 1,136
460 7.75%, 05/15/11 488
-------------------------------------------------------------------------
2,251
-------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.1%
95 Abitibi-Consolidated, Inc. (Canada)
(Yankee), 6.00%, 06/20/13 + 87
115 Georgia-Pacific Corp., 7.38%, 07/15/08 126
1,060 Tembec Industries, Inc. (Canada), 8.50%,
02/01/11 1,115
-------------------------------------------------------------------------
1,328
-------------------------------------------------------------------------
PHARMACEUTICALS -- 0.1%
550 Wyeth, 6.45%, 02/01/24 551
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PIPELINES -- 0.9%
Duke Capital Corp.,
$ 3,745 6.25%, 02/15/13 $ 3,991
800 8.00%, 10/01/19 943
Kinder Morgan Energy Partners LP,
1,245 7.40%, 03/15/31 1,386
575 7.75%, 03/15/32 667
490 7.30%, 08/15/33 542
1,150 Plains All American Pipeline LP/PAA
Finance Corp., 5.63%, 12/15/13, # 1,164
245 Transcontinental Gas Pipeline Corp.,
8.88%, 07/15/12, Ser. B 297
245 Williams Companies, Inc., 8.13%,
03/15/12 282
-------------------------------------------------------------------------
9,272
-------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.3%
2,085 Quebecor World Capital Corp. (Canada),
6.13%, 11/15/13 2,056
630 Von Hoffman Corp., 10.25%, 03/15/09 701
-------------------------------------------------------------------------
2,757
-------------------------------------------------------------------------
REAL ESTATE -- 0.4%
3,500 Socgen Real Estate Co., LLC, 7.64%, to
09/07; thereafter FRN, 12/31/49, # 3,907
REAL ESTATE INVESTMENT TRUST -- 0.1%
1,535 iStar Financial, Inc., 6.00%, 12/15/10 1,585
RETAILING -- 0.3%
525 Ingles Markets, Inc., 8.88%, 12/01/11 557
3,245 Safeway, Inc., 4.13%, 11/01/08 3,246
-------------------------------------------------------------------------
3,803
-------------------------------------------------------------------------
SEMI-CONDUCTORS -- 0.0%^
340 Freescale Semiconductor, Inc., 7.13%,
07/15/14, # 346
SHIPPING/TRANSPORTATION -- 0.2%
Norfolk Southern Corp.,
885 7.80%, 05/15/27 1,070
620 7.25%, 02/15/31 714
$ 615 Teekay Shipping Corp. (Bahamas),
8.88%, 07/15/11 $ 690
-------------------------------------------------------------------------
2,474
-------------------------------------------------------------------------
STEEL -- 0.1%
643 United States Steel Corp., 9.75%,
05/15/10 723
TELECOMMUNICATIONS -- 2.5%
AT&T Wireless Services, Inc.,
1,585 7.88%, 03/01/11 + 1,868
535 8.13%, 05/01/12 + 644
950 8.75%, 03/01/31 + 1,230
Deutsche Telekom International
Finance BV (The Netherlands),
1,185 8.50%, 06/15/10 1,421
855 8.75%, 06/15/30 1,096
France Telecom (France),
645 8.50%, 03/01/11 769
1,295 9.25%, 03/01/31 1,705
495 Nextel Communications, Inc., 7.38%,
08/01/15 517
805 Qwest Corp., 9.13%, 03/15/12, # 863
2,700 Rogers Wireless Communications, Inc.
(Canada), 6.38%, 03/01/14 2,586
2,270 SBC Communications, Inc., 5.63%,
06/15/16 2,297
Sprint Capital Corp.,
2,190 6.00%, 01/15/07 2,326
1,460 8.75%, 03/15/32 1,848
3,370 TCI Communications, Inc., 8.75%,
08/01/15 4,204
1,370 Telecom Italia Capital SA (Luxembourg),
4.00%, 11/15/08, # 1,376
Verizon Global Funding Corp.,
1,230 7.38%, 09/01/12 1,431
1,305 7.75%, 12/01/30 1,545
-------------------------------------------------------------------------
27,726
-------------------------------------------------------------------------
TRANSPORTATION -- 0.4%
4,000 CSX Corp., 1.99%, 08/03/06, FRN + 3,998
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
UTILITIES -- 1.8%
$ 1,725 Alabama Power Co., 2.80%, 12/01/06,
Ser. Y + $ 1,721
1,395 Arizona Public Service Co., 4.65%,
05/15/15 + 1,330
615 Calpine Corp., 8.75%, 07/15/13, # + 480
1,220 Dominion Resources, Inc., 5.00%,
03/15/13 1,212
1,275 DTE Energy Co., 6.38%, 04/15/33 + 1,277
2,495 Nisource Finance Corp., 6.15%, 03/01/13 2,680
Pacific Gas & Electric Co.,
2,470 2.30%, 04/03/06, FRN 2,473
1,360 4.20%, 03/01/11 1,343
1,475 4.80%, 03/01/14 1,459
Pepco Holdings, Inc.,
1,430 6.45%, 08/15/12 1,538
435 7.45%, 08/15/32 489
PSEG Power LLC,
2,145 5.50%, 12/01/15 2,128
460 8.63%, 04/15/31 582
775 Reliant Resources, Inc., 9.50%, 07/15/13 856
-------------------------------------------------------------------------
19,568
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 329,981
(Cost $322,092)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 29.6%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.7%
Countrywide Home Loans, Inc.,
15,115 6.25%, 10/25/32, Ser. 2002-22,
Class A20 + 15,796
7,691 5.50%, 08/25/33, Ser. 2003-29,
Class A1 + 7,740
Federal Home Loan Mortgage Corp.,
5,290 4.50%, 02/15/11, Ser. 2760, Class GI, IO 370
6,868 5.00%, 10/15/23, Ser. 2781, Class PI, IO 693
11,533 5.00%, 02/15/34, Ser. 2743, Class OZ 11,580
37,873 5.45%, 02/15/34, Ser. 2813,
Class SB, IO, FRN 3,726
Federal National Mortgage Association,
3,008 5.75%, 06/25/29, Ser. 2002-57, Class DM 3,021
15,183 5.49%, 10/25/31, Ser. 2004-61,
Class TS, IO, FRN 1,382
Government National Mortgage Association,
$ 3,216 5.50%, 04/20/25, Ser. 2004-46,
Class IH, IO $ 268
4,465 5.50%, 01/20/27, Ser. 2004-39,
Class IM, IO 454
7,400 5.50%, 10/20/27, Ser. 2004-44,
Class PK, IO 843
5,242 10.10%, 12/16/33, Ser. 2004-7,
Class SB, FRN 5,116
5,400 Impac Secured Assets Corp., 2.00%,
12/25/34, Ser. 2004-3, Class 1A4, FRN 5,400
5,900 Indymac Index Mortgage Loan Trust,
2.08%, 09/25/34, Ser. 2004-AR7,
Class A1, FRN 5,900
6,344 MASTR Asset Securitization Trust,
6.25%, 09/25/32, Ser. 2002-5,
Class 5A27 6,334
2,722 Medallion Trust (Australia), 1.88%,
05/25/35, Ser. 2004-1G, Class A1, FRN 2,722
2,500 Permanent Financing PLC
(United Kingdom), 1.48%, 03/10/09,
Ser. 4, Class 2A, FRN 2,499
RESI Finance LP (Cayman Islands),
3,927 3.12%, 07/10/35, Ser. 2003-B,
Class B3, FRN, # 3,997
6,707 2.97%, 09/10/35, Ser. 2003-C,
Class B3, FRN, # 6,824
1,284 3.17%, 09/10/35, Ser. 2003-C,
Class B4, FRN, # 1,300
6,390 2.87%, 12/10/35, Ser. 2003-D,
Class B3, FRN, # 6,416
2,089 3.07%, 12/10/35, Ser. 2003-D,
Class B4, FRN, # 2,097
4,971 Residential Funding Mortgage
Securities I, 6.25%, 01/25/32,
Ser. 2002-S1, Class A4 5,013
2,970 RMAC (United Kingdom), 1.58%,
12/12/20, Ser. 2004-NS1A,
Class A1B, FRN, # 2,970
1,215 SACO I, Inc., 7.00%, 08/25/36,
Ser. 1997-2, Class 1A5, # + 1,230
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED
$ 7,063 Washington Mutual, 2.06%, 07/25/44,
Ser. 2004-AR10, Class A1A, FRN $ 7,063
6,116 Wells Fargo Mortgage Backed
Securities Trust, 6.00%, 03/25/32,
Ser. 2002-7, Class 2A6 6,154
-------------------------------------------------------------------------
116,908
-------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 18.9%
Federal National Mortgage Association,
33,600 4.50%, 09/25/19, TBA 33,568
33,600 5.50%, 10/25/19, TBA 34,692
0^^ 8.00%, 08/01/22, Pool 50617 0^^
51,500 5.50%, 09/25/34, TBA 52,289
19,000 5.00%, 10/25/34, TBA 18,792
47,500 5.50%, 10/25/34, TBA 48,079
5,700 6.00%, 10/25/34, TBA 5,882
12,050 6.00%, 11/25/34, TBA 12,389
-------------------------------------------------------------------------
205,691
-------------------------------------------------------------------------
Total Residential Mortgage Backed Securities 322,599
(Cost $321,409)
-------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.6%
2,500 Calwest Industrial Trust, 1.98%,
02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # + 2,502
9,580 Capital One Multi-Asset Execution
Trust, 2.85%, 12/15/10,
Ser. 2003-A, FRN, # + 9,903
4,000 GS Mortgage Securities Corp. II, 6.73%,
02/10/16, Ser. 2001-LIBA, Class E, # 4,409
11,400 Wachovia Bank Commercial Mortgage
Trust, 3.96%, 12/15/35, Ser. 2003-C9,
Class A2 11,468
-------------------------------------------------------------------------
Total Commercial Mortgage Backed Securities 28,282
(Cost $27,717)
-------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 17.9%
$ 8,100 American Express Credit Account
Master Trust, 2.10%, 02/15/12,
Ser. 2004-C, Class C, FRN, # + $ 8,100
AmeriCredit Automobile Receivables Trust,
2,065 2.75%, 10/09/07, Ser. 2003-CF,
Class A3 + 2,074
5,175 1.76%, 12/06/07, Ser. 2003-DM,
Class A3B, FRN + 5,187
3,300 3.48%, 05/06/10, Ser. 2003-CF,
Class A4 + 3,339
2,790 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 2,785
4,595 Capital Auto Receivables Asset Trust,
1.96%, 01/15/09, Ser. 2003-2,
Class A4A + 4,504
Capital One Auto Finance Trust,
1,140 3.18%, 09/15/10, Ser. 2003-B,
Class A4 + 1,140
3,250 1.70%, 03/15/11, Ser. 2004-A,
Class A4, FRN + 3,250
Capital One Master Trust,
3,930 2.40%, 08/15/08, Ser. 2000-4,
Class C, FRN, # + 3,941
6,480 4.60%, 08/17/09, Ser. 2001-8A,
Class A + 6,710
7,340 Capital One Multi-Asset Execution Trust,
3.65%, 07/15/11, Ser. 2003-A4,
Class A4 + 7,341
CARSS Finance LP,
900 1.88%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # + 900
1,500 2.55%, 01/15/11, Ser. 2004-A,
Class B2, FRN, # + 1,500
4,660 Citibank Credit Card Issuance Trust,
2.55%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 4,702
3,628 Citigroup Mortgage Loan Trust, Inc.,
2.00%, 12/25/33, Ser. 2003-HE3,
Class A, FRN + 3,639
Countrywide Asset-Backed Certificates,
1,975 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 + 1,989
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 1,785 5.41%, 01/25/34, Ser. 2003-5,
Class MF1 + $ 1,837
1,320 2.12%, 03/25/34, Ser. 2004-1,
Class M1, FRN + 1,324
1,080 2.17%, 03/25/34, Ser. 2004-1,
Class M2, FRN + 1,080
1,652 1.85%, 04/25/34, Ser. 2004-BC1,
Class A1, FRN + 1,652
2,494 1.90%, 04/25/34, Ser. 2004-1,
Class 3A, FRN + 2,497
DaimlerChrysler Auto Trust,
5,000 3.53%, 12/06/07, Ser. 2002-B, Class A4 5,058
1,385 2.88%, 10/08/09, Ser. 2003-A, Class A4 1,388
4,415 Discover Card Master Trust I, 1.65%,
05/16/07, Ser. 2002-5, Class A, FRN 4,416
8,155 Honda Auto Receivables Owner Trust,
2.48%, 07/18/08, Ser. 2003-1, Class A4 8,142
15,395 Household Automotive Trust, 4.37%,
12/17/08, Ser. 2001-3, Class A4 15,617
2,000 Household Mortgage Loan Trust, 1.98%,
01/20/34, Ser. 2004-HC1, Class A, FRN 2,000
Long Beach Mortgage Loan Trust,
4,987 1.94%, 07/25/33, Ser. 2003-3,
Class A, FRN 4,991
2,000 2.30%, 08/25/33, Ser. 2003-4,
Class M1, FRN 2,014
6,488 1.92%, 02/25/34, Ser. 2004-1,
Class A3, FRN 6,491
2,030 2.12%, 02/25/34, Ser. 2004-1,
Class M1, FRN 2,035
1,360 2.17%, 02/25/34, Ser. 2004-1,
Class M2, FRN 1,361
1,500 1.88%, 07/25/34, Ser. 2004-3,
Class A3, FRN 1,500
1,500 2.19%, 07/25/34, Ser. 2004-3,
Class M1, FRN 1,499
1,905 M&I Auto Loan Trust, 2.97%, 04/20/09,
Ser. 2003-1, Class A4 1,902
3,000 MBNA Credit Card Master Note Trust,
2.75%, 12/15/13, Ser. 2001-C2,
Class C2, FRN, # 3,071
$ 3,285 Morgan Stanley Auto Loan Trust, 2.17%,
04/15/11, Ser. 2003-HB1, Class A2 $ 3,241
3,130 Onyx Acceptance Grantor Trust, 2.66%,
05/17/10, Ser. 2003-C, Class A4 3,110
Option One Mortgage Loan Trust,
3,260 2.04%, 02/25/33, Ser. 2003-1,
Class A2, FRN 3,270
2,251 1.94%, 08/25/33, Ser. 2003-5,
Class A2, FRN 2,253
5,998 PP&L Transition Bond Co., LLC, 7.15%,
06/25/09, Ser. 1999-1, Class A8 6,756
Residential Asset Securities Corp.,
1,650 1.87%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 1,649
4,374 1.91%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 4,377
3,337 1.94%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN 3,339
SLM Student Loan Trust,
8,410 1.57%, 12/15/12, Ser. 2003-12,
Class A2, FRN 8,415
4,975 2.99%, 12/15/22, Ser. 2003-11,
Class A5, # 4,974
2,580 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B, Class A4 2,580
7,000 Volkswagen Auto Loan Enhanced Trust,
1.93%, 01/20/10, Ser. 2003-1, Class A4 6,868
Wachovia Asset Securitization, Inc.,
3,137 2.05%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 3,147
4,604 1.88%, 07/25/33, Ser. 2003-HE2,
Class AII1, FRN 4,609
2,516 1.87%, 11/25/33, Ser. 2003-HE3,
Class A, FRN 2,513
2,455 WFS Financial Owner Trust, 3.15%,
05/20/11, Ser. 2003-4, Class A4 2,460
-------------------------------------------------------------------------
Total Asset Backed Securities 194,537
(Cost $194,589)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PRIVATE PLACEMENTS -- 1.9%
CO-OP APARTMENTS -- 1.9%
$ 4,191 180 East End Ave. Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building in New York
City, 6.88%, 12/01/28, # (f) (i) $ 4,691
737 200 East 57th St. Note, Secured by
Second Mortgage and Agreement on
Co-op Apartment Building in New York
City, 6.72%, 01/01/14, # (f) (i) 808
10,638 200 East 57th St. Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building in New York
City, 6.50%, 01/01/40, # (f) (i) 11,508
3,077 81 Irving Place Note, Secured by First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
6.95%, 01/01/29, # (f) (i) 3,450
-------------------------------------------------------------------------
Total Private Placements 20,457
(Cost $18,644)
-------------------------------------------------------------------------
Total Long-Term Investments 988,432
(Cost $974,453)
-------------------------------------------------------------------------
<Caption>
UNITS
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 9.2%
OPTIONS -- 0.5%
1 Call Option on 10 Year Treasury Notes,
strike price of 113.00, expiring
09/24/04 449
1 Call Option on Eurodollar Future, strike
price of 98.13, expiring 09/13/04,
European Style 48
75,000 Call Option on FNMA, 30 Year Fixed,
6.00%, TBA, strike price of 101.41,
expiring 11/08/04, European Style 1,231
21,000 Call Option on Interest Rate Swap,
expiring 02/02/15, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 5.08%, European Style 791
19,253 Call Option on Interest Rate Swap,
expiring 09/10/09, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 4.00%, European Style $ 194
55,470 Call Option on Interest Rate Swap,
expiring 09/10/09, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 4.02%, European Style 665
32,625 Call Option on Interest Rate Swap,
expiring 09/10/09, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 4.05%, European Style 432
22,125 Call Option on Interest Rate Swap,
expiring 09/10/14, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 4.81%, European Style 435
44,400 Call Option on Interest Rate Swap,
expiring 09/10/14, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 4.57%, European Style 255
13,200 Call Option on Interest Rate Swap,
expiring 09/10/14, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 4.75%, European Style 187
152,190 Call Option on Interest Rate Swap,
expiring 09/16/05, if exercised the
Fund pays floating 3 month LIBOR and
receives fixed 3.03%, European Style 1,075
0^^ Put Option on Eurodollar Future, strike
price of 97.88, expiring 09/13/04,
European Style 1
21,000 Put Option on Interest Rate Swap,
expiring 01/31/05, if exercised the
Fund pays fixed 5.58% and receives
floating 3 month LIBOR, European Style 76
39,560 Put Option on Interest Rate Swap,
expiring 09/02/04, if exercised the
Fund pays fixed 4.94% and receives
floating 3 month LIBOR, European Style 0^^
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<Page>
<Table>
<Caption>
UNITS ISSUER VALUE
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
OPTIONS -- CONTINUED
39,560 Put Option on Interest Rate Swap,
expiring 09/02/04, if exercised the
Fund pays fixed 4.94% and receives
floating 3 month LIBOR, European Style $ 0^^
56,040 Put Option U.S. Treasury Note, 4.75%,
05/15/14, strike price of 102.47,
expiring 09/07/04, European Style 2
-------------------------------------------------------------------------
Total Options 5,841
(Cost $3,561)
-------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ------------------------------------------------------------------------------------------
COMMERCIAL PAPER -- 5.3%
ASSET BACKED SECURITIES -- 2.1%
Compass Securitization LLC,
$ 7,150 1.50%, 09/15/04 + 7,146
6,000 1.82%, 11/26/04 + 5,975
5,000 Hatteras Funding Corp., 1.66%,
11/08/04 + 4,983
4,500 K2 (USA) LLC, 1.52%, 10/04/04 + 4,493
-------------------------------------------------------------------------
22,597
-------------------------------------------------------------------------
BANKING -- 2.0%
9,600 Natexis Banques Populaires (France),
1.68%, 11/22/04 + 9,562
13,500 Spintab AB (Sweden), 1.51%, 09/15/04 + 13,492
-------------------------------------------------------------------------
23,054
-------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.5%
$ 4,920 Altria Group, Inc., 1.97%, 10/15/04 + $ 4,909
FINANCIAL SERVICES -- 0.5%
5,000 Govco, Inc., 1.35%, 09/08/04 + 4,999
UTILITIES -- 0.2%
2,000 Public Service Enterprise Group, Inc.,
2.00%, 02/14/05 + 2,000
-------------------------------------------------------------------------
Total Commercial Paper 57,559
(Cost $57,560)
-------------------------------------------------------------------------
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 3.4%
37,330 JPMorgan Prime Money Market
Fund (a) + 37,330
(Cost $37,330)
-------------------------------------------------------------------------
Total Short-Term Investments 100,730
(Cost $98,451)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,089,162
(COST $1,072,904)
-------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
150 Treasury Bonds December, 2004 $ 16,697 $ 235
218 2 Year Treasury Notes December, 2004 46,144 87
43 5 Year Treasury Notes December, 2004 4,759 23
SHORT FUTURES OUTSTANDING
(7) 10 Year Japanese Government Bonds September, 2004 (8,780) (35)
(217) 10 Year Treasury Notes December, 2004 (24,372) (170)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<Page>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- ----------------------------------------------------------------------------------------------------------------------
(18,905) Call Option on Interest Rate Swap, expiring 09/16/14, if exercised the Fund pays
fixed 5.50% and receives floating 3 Month LIBOR, European Style. $ (1,391)
(50,000) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 98.12, expiring
09/08/04, European Style. (535)
(48,750) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 96.50, expiring
11/08/04, European Style. (1,219)
(21,000) Call Option on Interest Rate Swap, expiring 09/29/04, if exercised the Fund pays
fixed 4.67% and receives floating 3 Month LIBOR, European Style. (254)
(37,500) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 98.44, expiring
09/08/04, European Style. (346)
(100,000) Call Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 101.63, expiring
09/08/04, European Style. (273)
(75,000) Call Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 100.71, expiring
09/08/04, European Style. (710)
- ----------------------------------------------------------------------------------------------------------------------
Total Call Options Written $ (4,728)
<Caption>
PUT OPTIONS WRITTEN
- ----------------------------------------------------------------------------------------------------------------------
(39,560) Put Option on Interest Rate Swap, expiring 09/02/04, if exercised the Fund pays
floating 3 month LIBOR and receives fixed 4.87%, European Style. $ (2)
(39,560) Put Option on Interest Rate Swap, expiring 09/02/04, if exercised the Fund pays
floating 3 month LIBOR and receives fixed 4.87%, European Style. (1)
(21,000) Put Option on Interest Rate Swap, expiring 09/29/04, if exercised the Fund pays
floating 3 month LIBOR and receives fixed 5.69%, European Style. (-)^^
(56,040) Put Option on U.S. Treasury Note, 4.75%, 05/15/14, strike price of 101.68,
expiring 09/07/04, European Style. (-)^^
(1) Put Option on Eurodollar Future, strike price of 98.38, expiring 09/13/04,
European Style. (4)
(1) Put Option on Eurodollar Future, strike price of 98.25, expiring 09/13/04,
European Style. (11)
(-)^^ Put Option on Eurodollar Future, strike price of 97.75 expiring 09/13/04,
European Style. (1)
(-)^^ Put Option on Eurodollar Future, strike price of 97.63, expiring 09/13/04,
European Style. (1)
(1) Put Option on Treasury Notes, strike price of 114.00, expiring 09/24/04,
European Style. (225)
Total Put Options Written $ (245)
(Total premiums received on written options $2,803)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------
Swap - rate lock with Barclays Bank PLC. on 10 Year Forward Interest
Rate Swap less 4.73%, the Fund pays positive, receives negative. 09/01/04 $ 17,065 $ 205
Swap - rate lock with Barclays Bank PLC. on 2 Year Forward Interest Rate
Swap less 2.89%, the Fund pays positive, receives negative. 09/01/04 65,715 145
Swap - rate lock with Barclays Bank PLC, New York on 5 Year Forward
Interest Rate Swap less 3.93%, the Fund pays negative, receives positive. 09/01/04 52,050 (369)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------
Swap - price lock with Citibank N.A., on 30 Year FNMA, 4.50%, TBA,
price less 95.34, the Fund pays negative, receives positive. 09/08/04 $ 50,000 $ 523
Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.50%, TBA,
price less 100.85, the Fund pays negative, receives positive. 09/08/04 50,000 332
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
5.50%, TBA, price less 101.03, the Fund pays negative, receives positive. 09/08/04 25,000 129
Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.00%, TBA,
price less 98.34, the Fund pays positive, receives negative. 09/08/04 92,000 (791)
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
6.50%, TBA, price less 104.83, the Fund pays positive, receives negative. 09/08/04 67,000 (115)
Swap - price lock with Bank of America N.A., on U.S. Treasury Note,
4.38%, 8/15/12, price less 99.75, the Fund pays positive,
receives negative. 09/09/04 39,770 (1,301)
Swap - price lock with Lehman Brothers Special Financing on U.S.
Treasury Note, 4.75%, 05/15/14, price less 103.93, the Fund receives
negative, pays positive. 09/10/04 56,395 (490)
Swap - price lock with UBS AG on 15 Year FNMA, 5.00%, TBA, price
less 101.31, the Fund pays negative, receives positive. 09/13/04 14,000 219
Swap - spread lock with Morgan Stanley Capital Services on 5 Year
Mid Market Swap Spread, price less 51.18, the Fund pays negative,
receives positive. 09/13/04 38,340 (83)
Swap - spread lock with Morgan Stanley Capital Services on 10 Year
Mid Market Swap Spread, price less 49.29, the Fund pays negative,
receives positive. 09/13/04 21,695 (119)
Swap - price lock with Deutsche Bank AG, New York on
U.S. Treasury Note, 4.25%, 8/15/14, price less 101.02, the Fund
receives negative, pays positive. 09/14/04 9,290 --
Swap - price lock with UBS AG, on 30 Year GNMA, 6.00%, TBA,
price less 103.19, the Fund pays negative, receives positive. 09/15/04 32,000 180
Swap - price lock with Citibank N.A., on U.S. Treasury Note, 3.63%,
7/15/09, price less 100.63, the Fund pays negative, receives positive. 09/27/04 19,900 119
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
5.50%, TBA, price less 100.41, the Fund pays negative, receives positive. 10/07/04 33,000 278
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
4.50%, TBA, price less 94.95, the Fund pays positive, receives negative. 10/07/04 26,000 (303)
Swap - price lock with Citibank N.A. on 30 Year GNMA, 6.00%, TBA,
price less 102.38, the Fund pays negative, receives positive. 10/14/04 52,000 569
Swap - price lock with Citibank N.A., on 30 Year GNMA, 6.00%, TBA,
price less 103.08, the Fund pays negative, receives positive. 10/14/04 34,000 133
Swap - price lock with Citibank N.A., on 30 Year GNMA, 5.00%, TBA,
price less 97.73, the Fund pays positive, receives negative. 10/14/04 31,000 (489)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------
Swap - price lock with Citibank N.A., on 30 Year GNMA, 5.00%, TBA,
price less 98.69, the Fund pays positive, receives negative. 10/14/04 $ 20,000 $ (125)
Total Return Swap with Bank of America N.A. on Bank of America AAA
10 Year CMBS Index, the fund receives total return of Index, and pays
1 month LIBOR, less 73.00 bps. 11/01/04 14,200 614
Swap - price lock with UBS AG, on 30 Year FNMA, 6.00%, TBA,
price less 102.22, the Fund pays negative, receives positive. 11/08/04 240,000 1,425
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
5.50%, TBA, price less 100.53, the Fund pays negative, receives positive. 11/08/04 67,000 272
Swap - price lock with UBS AG, on 30 Year FNMA, 6.50%, TBA,
price less 104.05, the Fund receives negative, pays positive. 11/08/04 120,000 (525)
Swap - price lock with UBS AG, on 30 Year FNMA, 5.50%, TBA,
price less 100.11, the Fund receives negative, pays positive. 11/08/04 120,000 (956)
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
4.50%, TBA, price less 95.22, the Fund receives negative, pays positive. 11/08/04 52,000 (325)
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
5.5%, TBA, price less 101.02, the Fund receives negative, pays positive. 11/08/04 46,000 -
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
4.5%, TBA, price less 95.94, the Fund receives negative, pays positive. 11/08/04 27,000 -
Swap - Forward Rate Agreement with Citibank N.A., the Fund pays
3 month LIBOR, receives 1.97%. 12/15/04 586,710 170
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund pays 3 month LIBOR, receives 1.95%. 12/15/04 111,015 23
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund pays 3 month LIBOR, receives 1.91%. 12/15/04 913,560 98
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund pays 3 Month LIBOR, receives 1.88%. 12/15/04 611,140 19
Total Return Swap with Lehman AAA 8.5 Year CMBS Index, the fund
receives total return of Index, and pays 1 Month LIBOR, less 45.00 bps. 01/01/05 25,000 -
Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS Index,
the fund receives total return of Index, and pays 1 Month LIBOR,
less 77.00 bps. 01/01/05 24,000 901
Total Return Swap with Bank of America N.A. on Bank of America AAA
10 Year CMBS Index, the fund receives total return of Index, and pays
1 Month LIBOR, less 70.00 bps. 01/01/05 40,390 1,366
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund pays 2.32%, receives 3 Month LIBOR. 03/16/05 702,740 (246)
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund pays 3 month LIBOR, receives 3.65%. 12/21/05 879,920 1,591
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund pays 4.24%, receives 3 Month LIBOR. 06/21/06 879,920 (1,899)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<Page>
JPMORGAN BOND FUND II
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 81.7%
U.S. TREASURY SECURITIES -- 11.9%
U.S. Treasury Notes & Bonds,
$ 18,280 1.50%, 07/31/05 + $ 18,208
4,600 3.88%, 05/15/09 + 4,722
26,215 4.00%, 06/15/09 + 27,039
1,225 3.63%, 07/15/09 + 1,242
1,425 3.50%, 08/15/09 + 1,437
2,540 4.00%, 11/15/12 + @ 2,551
3,645 4.00%, 02/15/14 + 3,614
2,805 4.75%, 05/15/14 + 2,944
28,125 4.25%, 08/15/14 + 28,406
24,490 7.25%, 08/15/22 + @ 31,400
4,685 6.13%, 11/15/27 + 5,402
7,420 5.38%, 02/15/31 + 7,900
-------------------------------------------------------------------------
Total U.S. Treasury Securities 134,865
(Cost $132,221)
-------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 1.9%
10,400 Federal Home Loan Bank, 1.63%,
06/15/05 + 10,368
9,060 Federal National Mortgage Association,
7.13%, 01/15/30 11,132
-------------------------------------------------------------------------
Total U.S. Government Agency Securities 21,500
(Cost $20,385)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 0.6%
United Mexican States (Mexico),
1,500 6.38%, 01/16/13, MTN 1,575
2,035 5.88%, 01/15/14, Ser. A, MTN 2,059
2,925 8.30%, 08/15/31, MTN 3,354
-------------------------------------------------------------------------
Total Foreign Government Securities 6,988
(Cost $6,764)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 23.1%
AEROSPACE -- 0.2%
2,220 General Dynamics Corp., 2.13%,
05/15/06 2,198
5 United Technologies Corp., 6.10%,
05/15/12 6
-------------------------------------------------------------------------
2,204
-------------------------------------------------------------------------
AUTOMOTIVE -- 2.4%
DaimlerChrysler N.A. Holding Corp.,
$ 2,950 2.34%, 05/24/06, MTN, FRN $ 2,961
1,220 7.20%, 09/01/09 1,370
Ford Motor Credit Co.,
9,080 7.38%, 10/28/09 9,939
1,040 7.00%, 10/01/13 1,092
General Motors Acceptance Corp.,
1,525 2.60%, 05/18/06, MTN, FRN 1,529
4,650 2.51%, 01/16/07, MTN, FRN 4,655
1,210 6.88%, 09/15/11 1,267
General Motors Corp.,
1,625 7.20%, 01/15/11 1,725
1,200 8.25%, 07/15/23 1,265
1,775 8.38%, 07/15/33 1,887
-------------------------------------------------------------------------
27,690
-------------------------------------------------------------------------
BANKING -- 4.6%
465 Abbey National Capital Trust I, 8.96%
to 6/30; thereafter FRN, 12/31/49 + 623
1,790 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52% to 11/12; thereafter FRN,
12/31/49, # + 1,968
3,975 ANZ Capital Trust I, 5.36%,
12/15/53, # + 3,989
1,500 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # 1,455
920 Den Norske Bank ASA (Norway),
7.73% to 6/11; thereafter FRN,
12/31/49, # 1,077
2,130 HBOS PLC (United Kingdom), 5.38% to
11/13; thereafter FRN, 12/31/49, # 2,153
1,740 Industrial Bank of Korea (South Korea),
4.00% to 05/09; thereafter FRN,
05/19/14, # 1,706
1,745 KBC Bank Fund Trust III, 9.86% to
11/09; thereafter FRN, 11/29/49, # 2,169
1,705 Mizuho Finance Group LTD (Cayman
Islands), 5.79%, 04/15/14, # 1,755
2,300 Nordea Bank AB (Sweden), 8.95% to
11/09; thereafter FRN, 12/31/49, # 2,785
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 2,685 Northern Rock PLC (United Kingdom),
5.60%, 12/31/49, MTN, # $ 2,724
3,105 Popular North America, Inc., 4.70%,
06/30/09 3,185
RBS Capital Trust I,
535 6.43% to 1/34; thereafter FRN,
12/31/49 540
1,370 5.51% to 9/14; thereafter FRN,
12/31/49 1,389
1,145 Royal Bank of Scotland Group PLC
(United Kingdom), 7.65% to 09/31;
thereafter FRN, 12/31/49 1,347
2,305 Skandinaviska Enskilda Banken AB
(Sweden), 4.96% to 03/14; thereafter
FRN, 12/31/49, # 2,244
1,420 Standard Chartered Bank (United
Kingdom), 8.00%, 05/30/31, # 1,769
3,180 SunTrust Bank, 2.50%, 11/01/06 3,154
1,445 Swedbank (Sweden), 9.00% to 03/10;
thereafter FRN, 12/31/49, # 1,749
2,460 United Overseas Bank LTD (Singapore),
5.38% to 9/14; thereafter FRN,
12/31/49, # 2,490
US Bank N.A.,
2,430 2.85%, 11/15/06 2,430
690 6.38%, 08/01/11 771
3,000 Wells Fargo & Co, 1.62%, 03/23/07, FRN 3,001
2,950 Westpac Banking Corp. (Australia),
1.81%, 05/25/07, FRN, # 2,950
1,970 Westpac Capital Trust III, 5.82% to
09/13; thereafter FRN, 12/31/49, # 2,050
985 Westpac Capital Trust IV, 5.26%,
12/29/49, # 965
-------------------------------------------------------------------------
52,438
-------------------------------------------------------------------------
BUSINESS SERVICES -- 0.1%
1,315 Cendant Corp., 7.13%, 03/15/15 1,504
CHEMICALS -- 0.3%
2,035 ICI Wilmington, Inc., 5.63%, 12/01/13 2,078
945 The Dow Chemical Co., 7.38%, 11/01/29 1,092
-------------------------------------------------------------------------
3,170
-------------------------------------------------------------------------
CONSTRUCTION -- 0.3%
$ 1,485 Centex Corp., 5.70%, 05/15/14 $ 1,516
1,465 Pulte Homes, Inc., 5.25%, 01/15/14 1,444
960 Toll Brothers, Inc., 5.95%, 09/15/13 999
-------------------------------------------------------------------------
3,959
-------------------------------------------------------------------------
DIVERSIFIED -- 0.4%
General Electric Capital Corp.,
1,620 5.88%, 02/15/12, Ser. A, MTN 1,759
1,560 6.75%, 03/15/32, Ser. A, MTN 1,772
1,300 Hutchison Whampoa International LTD
(Hong Kong), 6.25%, 01/24/14, # 1,342
-------------------------------------------------------------------------
4,873
-------------------------------------------------------------------------
FINANCIAL SERVICES -- 6.3%
American General Finance Corp.,
3,650 3.00%, 11/15/06, Ser. H, MTN + 3,639
685 4.50%, 11/15/07, Ser. H, MTN + 707
4,650 The Bear Stearns Co., Inc., 1.77%,
01/16/07, Ser. B, MTN, FRN 4,651
CIT Group, Inc.,
2,100 1.72%, 04/19/06, MTN, FRN 2,099
2,750 1.77%, 06/19/06, MTN, FRN 2,756
3,885 1.94%, 05/18/07, MTN, FRN 3,885
3,900 Citigroup Global Markets Holdings, Inc.,
1.58%, 12/12/06, Series A, MTN, FRN 3,899
1,500 Citigroup, Inc., 1.68%, 03/20/06, FRN 1,502
3,050 Countrywide Home Loans, Inc., 1.87%,
02/17/06, Ser. L, MTN, FRN 3,050
610 FleetBoston Financial Corp., 7.25%,
09/15/05 640
Goldman Sachs Group, Inc.,
1,500 1.94%, 02/21/06, Ser. B, MTN, FRN 1,503
10 5.70%, 09/01/12 11
2,095 6.35%, 02/15/34 2,096
1,450 Household Finance Corp., 1.86%,
02/09/07, MTN, FRN 1,451
5,745 HSBC Capital Funding LP (Channel
Islands), 9.55% to 06/10; thereafter
FRN, 12/31/49, # 7,244
1,515 ING Capital Funding Trust III, 8.44% to
12/10; thereafter FRN, 12/31/49 1,830
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 2,700 John Deere Capital Corp., 1.61%,
03/16/06, Ser. D, MTN, FRN $ 2,701
Merrill Lynch & Co., Inc.,
1,500 1.87%, 06/13/05, Ser. B, MTN, FRN 1,503
2,100 1.95%, 02/06/09, Ser. C, MTN, FRN 2,099
Morgan Stanley,
4,665 1.73%, 01/12/07, FRN 4,670
2,420 5.80%, 04/01/07 2,581
2,100 Pricoa Global Funding I, 3.90%,
12/15/08, # 2,107
14,010 Special Purpose Accounts Receivable
Cooperative Corp. Trust, 2.06%,
05/23/05, Ser. 2003-6, FRN, # 14,011
1,140 UFJ Finance AEC (Aruba), 6.75%,
07/15/13 1,261
-------------------------------------------------------------------------
71,896
-------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.1%
775 SABMiller PLC (United Kingdom),
6.63%, 08/15/33, # 855
HEALTH CARE/HEALTH CARE SERVICES -- 0.2%
2,035 UnitedHealth Group, Inc., 3.30%,
01/30/08 2,024
INSURANCE -- 1.2%
1,045 Arch Capital Group LTD (Bermuda),
7.35%, 05/01/34 + 1,101
2,350 Aspen Insurance Holdings LTD
(Bermuda), 6.00%, 08/15/14, # + 2,372
1,460 AXA (France), 8.60%, 12/15/30 + 1,876
530 Fund American Companies, Inc., 5.88%,
05/15/13 541
2,980 Liberty Mutual Group, 5.75%,
03/15/14, # 2,955
Nationwide Financial Services, Inc.,
510 6.25%, 11/15/11 560
1,130 5.90%, 07/01/12 1,215
855 Odyssey Re Holdings Corp., 7.65%,
11/01/13 947
1,220 Prudential Holdings LLC, 8.70%,
12/18/23, # 1,560
$ 830 QBE Insurance Group LTD (Australia),
5.65% to 07/13; thereafter FRN,
07/01/23, # $ 817
-------------------------------------------------------------------------
13,944
-------------------------------------------------------------------------
MULTI-MEDIA -- 0.8%
2,813 Comcast Cable Communications
Holdings, Inc., 8.38%, 03/15/13 + 3,401
900 News America, Inc., 7.25%, 05/18/18 1,035
665 Time Warner Companies, Inc., 9.15%,
02/01/23 851
1,920 Time Warner Entertainment Co., LP,
8.38%, 03/15/23 2,290
1,165 Time Warner, Inc., 7.63%, 04/15/31 + 1,329
-------------------------------------------------------------------------
8,906
-------------------------------------------------------------------------
OIL & GAS -- 0.6%
455 Alberta Energy Co., LTD (Canada)
(Yankee), 7.38%, 11/01/31 + 534
2,350 BP Capital Markets PLC (United
Kingdom), 2.75%, 12/29/06 + 2,351
1,155 Husky Energy, Inc. (Canada), 6.15%,
06/15/19 1,217
1,230 Kerr-McGee Corp., 6.95%, 07/01/24 1,294
992 PEMEX Project Funding Master Trust
(Mexico), 8.63%, 02/01/22 1,131
-------------------------------------------------------------------------
6,527
-------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.1%
885 International Paper Co., 5.85%,
10/30/12 933
PHARMACEUTICALS -- 0.1%
790 Wyeth, 6.45%, 02/01/24 792
PIPELINES -- 0.7%
Duke Capital Corp.,
3,645 6.25%, 02/15/13 3,885
980 8.00%, 10/01/19 1,155
Kinder Morgan Energy Partners LP,
935 7.40%, 03/15/31 1,041
635 7.75%, 03/15/32 736
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PIPELINES -- CONTINUED
$ 760 7.30%, 08/15/33 $ 841
505 Plains All American Pipeline LP/PAA
Finance Corp., 5.63%, 12/15/13, # 511
-------------------------------------------------------------------------
8,169
-------------------------------------------------------------------------
RETAILING -- 0.3%
2,930 Safeway, Inc., 4.13%, 11/01/08 2,931
SHIPPING/TRANSPORTATION -- 0.2%
Norfolk Southern Corp.,
905 7.80%, 05/15/27 1,094
625 7.25%, 02/15/31 720
-------------------------------------------------------------------------
1,814
-------------------------------------------------------------------------
TELECOMMUNICATIONS -- 2.0%
AT&T Wireless Services, Inc.,
1,675 7.88%, 03/01/11 + 1,974
1,215 8.75%, 03/01/31 + 1,573
Deutsche Telekom International
Finance BV (The Netherlands),
1,025 8.50%, 06/15/10 1,230
950 8.75%, 06/15/30 1,218
France Telecom (France),
1,895 8.75%, 03/01/11 2,260
1,000 9.50%, 03/01/31 1,316
2,295 SBC Communications, Inc., 5.63%,
06/15/16 2,322
Sprint Capital Corp.,
1,665 6.90%, 05/01/19 1,807
750 8.75%, 03/15/32 950
1,337 TCI Communications, Inc., 7.13%,
02/15/28 1,437
1,415 Telecom Italia Capital SA (Luxembourg),
4.00%, 11/15/08, # 1,421
Verizon Global Funding Corp.,
1,540 7.38%, 09/01/12 1,792
820 7.75%, 12/01/30 971
2,695 Verizon New York, Inc., 6.88%,
04/01/12, Ser. A 2,984
-------------------------------------------------------------------------
23,255
-------------------------------------------------------------------------
UTILITIES -- 2.2%
$ 1,515 Alabama Power Co., 2.80%,
12/01/06, Ser. Y + $ 1,512
1,110 Arizona Public Service Co., 4.65%,
05/15/15 + 1,058
Dominion Resources, Inc.,
3,000 8.13%, 06/15/10, Ser. A 3,556
520 6.30%, 03/15/33 521
1,405 DTE Energy Co., 6.38%, 04/15/33 1,407
500 National Rural Utilities Cooperative
Finance Corp., 6.13%, 05/15/05 514
2,560 Nisource Finance Corp., 6.15%, 03/01/13 2,751
Pacific Gas & Electric Co.,
2,465 2.30%, 04/03/06, FRN 2,468
1,345 4.20%, 03/01/11 1,328
1,460 4.80%, 03/01/14 1,444
1,600 PacifiCorp, 4.30%, 09/15/08 1,627
Pepco Holdings, Inc.,
675 6.45%, 08/15/12 726
865 7.45%, 08/15/32 972
PSEG Power LLC,
2,190 5.50%, 12/01/15 2,172
460 8.63%, 04/15/31 582
1,840 TXU Energy Co., 7.00%, 03/15/13 2,062
-------------------------------------------------------------------------
24,700
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 262,584
(Cost $252,764)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 26.6%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.9%
Countrywide Home Loans, Inc.,
15,440 6.25%, 10/25/32, Ser. 2002-22,
Class A20 16,136
6,153 5.50%, 08/25/33, Ser. 2003-29,
Class A1 6,192
Federal Home Loan Mortgage Corp.,
7,029 5.00%, 10/15/23, Ser. 2781, Class PI, IO 709
38,610 5.45%, 02/15/34, Ser. 2813,
Class SB, IO, FRN 3,798
Federal National Mortgage Association,
3,079 5.75%, 06/25/29, Ser. 2002-57,
Class DM 3,093
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
$ 15,492 5.49%, 10/25/31, Ser. 2004-61,
Class TS, IO, FRN $ 1,411
Government National Mortgage
Association,
3,280 5.50%, 04/20/25, Ser. 2004-46,
Class IH, IO 273
4,555 5.50%, 01/20/27, Ser. 2004-39,
Class IM, IO 463
7,544 5.50%, 10/20/27, Ser. 2004-44,
Class PK, IO 860
4,765 10.10%, 12/16/33, Ser. 2004-7,
Class SB, FRN 4,650
3,000 Impac Secured Assets Corp., 2.00%,
12/25/34, Ser. 2004-3, Class 1A4, FRN 3,000
2,705 Medallion Trust (Australia), 1.88%,
05/25/35, Ser. 2004-1G, Class A1, FRN 2,705
2,500 Permanent Financing PLC (United
Kingdom), 1.48%, 03/10/09, Ser. 4,
Class 2A, FRN 2,499
RESI Finance LP (Cayman Islands),
3,436 3.12%, 07/10/35, Ser. 2003-B,
Class B3, FRN, # 3,497
5,838 2.97%, 09/10/35, Ser. 2003-C,
Class B3, FRN, # 5,940
1,185 3.17%, 09/10/35, Ser. 2003-C,
Class B4, FRN, # 1,200
5,519 2.87%, 12/10/35, Ser. 2003-D,
Class B3, FRN, # 5,542
1,815 3.07%, 12/10/35, Ser. 2003-D,
Class B4, FRN, # 1,822
5,089 Residential Funding Mortgage
Securities I, 6.25%, 01/25/32,
Ser. 2002-S1, Class A4 5,132
2,927 RMAC (United Kingdom), 1.58%,
12/12/20, Ser. 2004-NS1A,
Class A1B, FRN, # 2,927
6,245 Wells Fargo Mortgage Backed
Securities Trust, 6.00%, 03/25/32,
Ser. 2002-7, Class 2A6 6,285
-------------------------------------------------------------------------
78,134
-------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 19.7%
Federal National Mortgage Association,
$ 39,100 4.50%, 09/25/19, TBA $ 39,063
3,250 5.00%, 09/25/19, TBA 3,310
1,050 5.00%, 10/25/19, TBA 1,067
39,100 5.50%, 10/25/19, TBA 40,371
0^^ 7.50%, 07/01/30, Pool 529276 0^^
83,500 5.50%, 09/25/34, TBA 84,779
17,500 5.00%, 10/25/34, TBA 17,309
28,900 6.00%, 11/25/34, TBA 29,713
8,500 Government National Mortgage
Association, 6.00%, 09/15/34, TBA 8,819
-------------------------------------------------------------------------
224,431
-------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 302,565
(Cost $301,395)
-------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 1.3%
815 Calwest Industrial Trust, 1.98%,
02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # 816
9,300 Capital One Multi-Asset Execution Trust,
2.85%, 12/15/10, Ser. 2003-A, FRN, # 9,614
4,394 Goldman Sachs Mortgage Securities II,
1.75%, 11/15/15, Ser. 2003-FL6A,
Class A1, FRN, # 4,395
25 Morgan Stanley Dean Witter Capital I,
5.98%, 01/15/39, Ser. 2002-TOP7,
Class A2 27
-------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 14,852
(Cost $14,813)
-------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 16.3%
American Express Credit Account
Master Trust,
3,500 1.95%, 12/15/08, Ser. 2001-6,
Class B, FRN + 3,511
3,380 1.71%, 09/15/09, Ser. 2002-1,
Class A, FRN + 3,387
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
AmeriCredit Automobile Receivables
Trust,
$ 1,245 2.75%, 10/06/07, Ser. 2003-CF,
Class A3 + $ 1,250
4,475 1.76%, 12/06/07, Ser. 2003-DM,
Class A3B, FRN + 4,485
1,985 3.48%, 05/06/10, Ser. 2003-CF,
Class A4 + 2,009
2,400 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 2,395
Capital Auto Receivables Asset Trust,
5,651 1.64%, 02/15/07, Ser. 2003-2,
Class A3B, FRN 5,652
3,710 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 3,636
Capital One Auto Finance Trust,
1,340 3.18%, 09/15/10, Ser. 2003-B, Class A4 1,340
3,450 1.70%, 03/15/11, Ser. 2004-A,
Class A4, FRN 3,450
3,400 Capital One Master Trust, 2.40%,
08/15/08, Ser. 2000-4, Class C, FRN, # 3,410
6,355 Capital One Multi-Asset Execution
Trust, 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 6,356
CARSS Finance LP,
920 1.88%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # 920
1,540 2.55%, 01/15/11, Ser. 2004-A,
Class B2, FRN, # 1,540
Citibank Credit Card Issuance Trust,
4,900 2.55%, 03/20/08, Ser. 2003-C2,
Class C2, FRN 4,944
11,250 6.88%, 11/16/09, Ser. 2000-A3,
Class A3 12,476
3,248 Citigroup Mortgage Loan Trust, Inc.,
2.00%, 12/25/33, Ser. 2003-HE3,
Class A, FRN 3,257
Countrywide Asset-Backed Certificates,
2,285 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 2,301
2,070 5.41%, 01/25/34, Ser. 2003-5,
Class MF1 2,131
$ 1,290 2.12%, 03/25/34, Ser. 2004-1,
Class M1, FRN $ 1,294
1,060 2.17%, 03/25/34, Ser. 2004-1,
Class M2, FRN 1,060
2,544 1.90%, 04/25/34, Ser. 2004-1,
Class 3A, FRN 2,547
1,205 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 1,207
3,580 Discover Card Master Trust I, 1.65%,
05/16/07, Ser. 2002-5, Class A, FRN 3,581
7,165 Honda Auto Receivables Owner Trust,
2.48%, 07/18/08, Ser. 2003-1, Class A4 7,154
Long Beach Mortgage Loan Trust,
8,028 1.94%, 07/25/33, Ser. 2003-3,
Class A, FRN 8,035
2,200 2.30%, 08/25/33, Ser. 2003-4,
Class M1, FRN 2,215
6,333 1.92%, 02/25/34, Ser. 2004-1,
Class A3, FRN 6,336
1,980 2.12%, 02/25/34, Ser. 2004-1,
Class M1, FRN 1,985
1,340 2.17%, 02/25/34, Ser. 2004-1,
Class M2, FRN 1,341
1,500 1.88%, 07/25/34, Ser. 2004-3,
Class A3, FRN 1,500
1,500 2.19%, 07/25/34, Ser. 2004-3,
Class M1, FRN 1,499
1,655 M&I Auto Loan Trust, 2.97%, 04/20/09,
Ser. 2003-1, Class A4 1,653
MBNA Credit Card Master Note Trust,
9,980 5.75%, 10/15/08, Ser. 2001-A1, Class A1 10,499
3,000 3.30%, 07/15/10, Ser. 2003-A1, Class A1 2,998
3,000 2.75%, 12/15/13, Ser. 2001-C2,
Class C2, FRN, # 3,071
9,900 MBNA Master Credit Card Trust USA,
6.80%, 04/16/07, Ser. 1999-M, Class B 9,996
2,775 Morgan Stanley Auto Loan Trust, 2.17%,
04/15/11, Ser. 2003-HB1, Class A2 2,738
2,670 Onyx Acceptance Grantor Trust, 2.66%,
05/17/10, Ser. 2003-C, Class A4 2,653
2,863 Option One Mortgage Loan Trust, 2.04%,
02/25/33, Ser. 2003-1, Class A2, FRN 2,873
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
Residential Asset Securities Corp.,
$ 1,331 1.87%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN $ 1,331
3,214 1.91%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 3,215
2,842 1.94%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN 2,844
250 Sears Credit Account Master Trust,
5.25%, 10/16/08, Ser. 1998-2, Class A 251
SLM Student Loan Trust,
7,290 1.57%, 12/15/12, Ser. 2003-12,
Class A2, FRN 7,295
5,605 2.99%, 12/15/22, Ser. 2003-11,
Class A5, # 5,604
2,215 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B, Class A4 2,215
Volkswagon Auto Loan Enhanced Trust,
5,000 1.49%, 05/21/07, Ser. 2003-1, Class A3 4,965
2,615 2.94%, 03/22/10, Ser. 2003-2, Class A4 2,609
Wachovia Asset Securitization, Inc.,
2,541 2.05%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 2,550
5,869 1.87%, 11/25/33, Ser. 2003-HE3,
Class A, FRN 5,864
2,110 WFS Financial Owner Trust, 3.15%,
05/20/11, Ser. 2003-4, Class A4 2,114
-------------------------------------------------------------------------
Total Asset Backed Securities 185,542
(Cost $183,723)
-------------------------------------------------------------------------
Total Long-Term Investments 928,896
(Cost $912,065)
-------------------------------------------------------------------------
SHORT-TERM INVESTMENTS - 18.3%
COMMERCIAL PAPER -- 7.8%
ASSET BACKED SECURITIES -- 1.6%
Compass Securitization LLC,
10,000 1.50%, 09/15/04 + 9,995
4,000 1.82%, 11/26/04 + 3,983
4,400 Hatteras Funding Corp., 1.66%,
11/08/04 + 4,385
-------------------------------------------------------------------------
18,363
-------------------------------------------------------------------------
BANKING -- 5.2%
$ 11,250 Credit Lyonnais N.A., 1.16%,
11/03/04 + $ 11,217
18,215 Natexis Banques Populaires (France),
1.68%, 11/22/04 + 18,144
2,700 Santander Central Hispano SA (Spain),
1.48%, 09/22/04 + 2,698
7,500 Spintab AB (Sweden), 1.51%,
09/15/04 + 7,496
20,000 Westdeutsche Landesbank Girozentrale
(Germany), 1.83%, 01/20/05 + 19,858
-------------------------------------------------------------------------
59,413
-------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.4%
4,790 Altria Group, Inc., 1.97%, 10/15/04 + 4,779
FINANCIAL SERVICES -- 0.6%
6,400 Govco, Inc., 1.72%, 11/26/04 + 6,373
-------------------------------------------------------------------------
Total Commercial Paper 88,928
(Cost $88,938)
-------------------------------------------------------------------------
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 10.5%
118,963 JPMorgan Prime Money Market
Fund (a) + 118,963
(Cost $118,963)
-------------------------------------------------------------------------
Total Short-Term Investments 207,891
(Cost $207,901)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,136,787
(COST $1,119,966)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
359 2 Year Treasury Notes December, 2004 $ 75,990 $ 140
263 5 Year Treasury Notes December, 2004 29,107 100
98 10 Year Treasury Notes December, 2004 11,007 3
SHORT FUTURES OUTSTANDING
(194) Treasury Bonds December, 2004 (21,595) (301)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------
Swap - price lock with Bank of America N.A., on U.S. Treasury Note,
4.38%, 8/15/12, price less 99.75, the Fund pays positive,
receives negative. 09/09/04 $ 32,685 $ (1,069)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 4.75%, 5/15/14, price less 103.93, the Fund pays
positive, receives negative. 09/10/04 49,695 (432)
Swap - spread lock with Morgan Stanley Capital Services on 10-year
Swap Spread, price less 49.29, the Fund pays negative, receives
positive. 09/13/04 22,135 (122)
Swap - spread lock with Morgan Stanley Capital Services on 5-year
Swap Spread, price less 51.18, the Fund pays negative, receives
positive. 09/13/04 39,120 (85)
Swap - price lock with Citibank N.A., on U.S. Treasury Note, 3.63%,
7/15/09, price less 100.63, the Fund pays negative, receives positive. 09/27/04 19,550 117
Total Return Swap with Bank of America N.A. on Bank of America AAA
10 Year CMBS Index, the fund receives total return of Index, and pays
1 Month LIBOR, less 73.00 bps. 11/01/04 44,100 1,909
Total Return Swap with Bank of America N.A. on Bank of America AAA
10 Year CMBS Index, the fund receives total return of Index, and pays
1 Month LIBOR, less 70.00 bps. 01/01/05 35,600 1,204
Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS Index,
the fund receives total return of Index, and pays 1 Month LIBOR,
less 77.00 bps. 01/01/05 20,500 770
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<Page>
JPMORGAN ENHANCED INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 95.5%
PREFERRED STOCKS -- 0.5%
FINANCIAL SERVICES -- 0.5%
0^^ Lehman CR-ABN Amro VIX, 0.00%* $ 1,500
(Cost $1,500)
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ------------------------------------------------------------------------------------------
U.S. TREASURY SECURITIES -- 0.1%
$ 400 U.S. Treasury Notes, 1.75%, 12/31/04 @ 400
(Cost $400)
U.S. GOVERNMENT AGENCY SECURITIES -- 4.7%
Federal Home Loan Mortgage Corp.,
550 1.91%, 01/27/06, MTN, FRN 550
2,300 2.40%, 03/29/07 2,274
Federal National Mortgage Association,
1,900 3.35%, 12/01/06 1,900
2,232 2.02%, 02/25/28, Ser. 2003-121,
Class FC, FRN 2,231
Overseas Private Investment Corp.,
1,653 1.50%, 12/16/06, Ser. A, FRN 1,649
1,051 1.50%, 12/16/06, Ser. B, FRN 1,049
276 1.50%, 12/16/06, Ser. C, FRN 275
114 1.50%, 12/16/06, Ser. D, FRN 114
1,114 1.50%, 12/16/06, Ser. E, FRN 1,111
552 1.50%, 12/16/06, Ser. F, FRN 551
504 1.50%, 12/16/06, Ser. G, FRN 503
363 1.50%, 12/16/06, Ser. H, FRN 362
838 1.50%, 12/16/06, Ser. I, FRN 836
363 1.50%, 12/16/06, Ser. J, FRN 362
160 1.50%, 12/16/06, Ser. K, FRN 160
-------------------------------------------------------------------------
Total U.S. Government Agency Securities 13,927
(Cost $13,905)
-------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 0.9%
ILLINOIS - 0.4%
1,000 Illinois State, Taxable Pension, GO, 2.50%,
06/01/08 966
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
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 1,250
-------------------------------------------------------------------------
Total State and Municipal Obligations 2,566
(Cost $2,600)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 45.0%
AUTOMOTIVE -- 4.7%
1,500 American Honda Finance Corp., 1.60%,
09/11/06, MTN, FRN, # 1,503
DaimlerChrysler N.A. Holding Corp.,
300 7.40%, 01/20/05 306
1,850 2.39%, 09/26/05, Ser. D, MTN, FRN 1,860
600 6.40%, 05/15/06 634
1,850 2.34%, 05/24/06, MTN, FRN 1,857
1,000 Ford Motor Credit Co., 7.60%, 08/01/05 1,043
General Motors Acceptance Corp.,
2,000 4.15%, 02/07/05, MTN 2,019
420 6.75%, 01/15/06 440
1,650 2.51%, 01/16/07, MTN, FRN 1,652
2,450 2.56%, 07/16/07, FRN 2,451
-------------------------------------------------------------------------
13,765
-------------------------------------------------------------------------
BANKING -- 5.4%
950 ABN Amro Bank NV (The Netherlands)
(Yankee), 1.73%, 05/11/07, FRN 951
Bank of America Corp.,
1,000 1.96%, 12/23/04, Ser. F, MTN, FRN 1,000
1,300 6.63%, 08/01/07 1,418
500 Capital One Bank, 6.88%, 02/01/06 529
1,550 KeyCorp, 1.83%, 07/23/07,
Ser. G, MTN, FRN 1,549
1,150 Sovereign Bancorp, Inc., 2.10%,
08/25/06, FRN 1,149
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
42
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 5,000 TD North America LP, 1.95%,
04/23/09, FRN, # $ 4,995
1,850 Washington Mutual, Inc., 1.97%,
11/03/05, FRN 1,853
2,400 Westpac Banking Corp. (Australia), 1.81%,
05/25/07, FRN, # 2,400
-------------------------------------------------------------------------
15,844
-------------------------------------------------------------------------
DIVERSIFIED -- 1.1%
3,300 General Electric Capital Corp., 1.84%,
02/02/09, Ser. A, MTN, FRN 3,306
FINANCIAL SERVICES -- 23.8%
Bear Stearns Companies, Inc.,
2,800 1.77%, 01/16/07, Ser. B, MTN, FRN 2,801
2,650 1.98%, 01/30/09, Ser. B, MTN, FRN 2,656
CIT Group, Inc.,
3,000 1.72%, 04/19/06, MTN, FRN 2,999
4,300 1.91%, 02/15/07, MTN, FRN 4,300
3,700 Citigroup Global Markets Holdings, Inc.,
1.61%, 03/16/07, Ser. A, MTN, FRN 3,698
Countrywide Home Loans, Inc.,
1,150 2.29%, 05/20/05, Ser. K, MTN, FRN 1,154
3,650 1.87%, 02/17/06, Ser. L, MTN, FRN 3,650
600 1.70%, 03/29/06, Ser. L, MTN, FRN 600
500 1.80%, 06/02/06, Ser. L, MTN, FRN 503
Counts Trusts,
1,400 2.49%, 08/15/07, Ser. 2002-10, FRN, # 1,412
1,400 2.54%, 08/15/07, Ser. 2002-11, FRN, # 1,414
2,700 Credit Suisse First Boston/New York
(Yankee), 1.61%, 12/29/05, Ser. YCD, FRN 2,700
5,900 Goldman Sachs Group, Inc., 1.69%,
03/30/07, MTN, FRN 5,898
Household Finance Corp.,
1,550 1.64%, 06/16/05, MTN, FRN 1,551
3,100 1.82%, 07/27/07, MTN, FRN 3,097
International Lease Finance Corp.,
1,500 2.84%, 01/13/05, FRN 1,506
1,030 4.00%, 01/17/06, Ser. O, MTN 1,050
4,150 John Deere Capital Corp., 1.61%,
03/16/06, Ser. D, MTN, FRN 4,151
$ 600 John Hancock Global Funding II, 1.75%,
12/15/06, MTN, FRN, # $ 600
Merrill Lynch & Co., Inc.,
2,000 1.79%, 01/26/07, Ser. C, MTN, FRN 2,000
2,200 1.66%, 03/19/07, Ser. C, MTN, FRN 2,200
1,400 1.79%, 07/27/07, Ser. C, MTN, FRN 1,399
Morgan Stanley Group, Inc.,
5,100 1.87%, 03/27/06, FRN 5,114
600 1.89%, 11/24/06, FRN 600
1,200 1.84%, 02/15/07, FRN 1,201
500 1.79%, 07/27/07, FRN 500
Pricoa Global Funding I,
750 1.86%, 04/25/05, MTN, FRN, # 751
1,300 1.42%, 03/02/07, MTN, FRN, # 1,300
Principal Life Global,
2,900 1.85%, 11/13/06, MTN, FRN, # 2,904
1,000 1.71%, 01/12/07, MTN, FRN, # 1,000
SLM Corp.,
2,700 1.78%, 01/25/07, Ser. A, MTN, FRN 2,701
1,100 1.87%, 07/25/08, Ser. A, MTN, FRN 1,099
2,000 Special Purpose Accounts Receivable
Cooperative Corp. Trust, 2.07%,
05/23/05, Ser. 2003-6, FRN, # 2,000
-------------------------------------------------------------------------
70,509
-------------------------------------------------------------------------
INSURANCE -- 2.5%
ASIF Global Financing,
2,400 1.72%, 03/14/07, FRN, # 2,402
700 1.91%, 05/30/06, FRN, # 701
2,350 Genworth Financial, Inc., 1.67%,
06/15/07, FRN 2,352
1,950 Oil Insurance LTD (Bermuda), 1.71%,
04/08/09, FRN, # 1,950
-------------------------------------------------------------------------
7,405
-------------------------------------------------------------------------
MULTI-MEDIA -- 0.2%
500 TCI Communications, Inc., 8.65%,
09/15/04 501
OIL & GAS -- 0.4%
1,245 Texas Municipal Gas Corp., 2.60%,
07/01/07, # 1,246
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PIPELINES -- 0.6%
$ 1,800 Duke Energy Field Services LLC, 7.50%,
08/16/05 $ 1,881
RETAILING -- 0.3%
750 Safeway, Inc., 2.16%, 11/01/05, FRN 751
TELECOMMUNICATIONS -- 0.3%
750 Deutsche Telekom International Finance
BV (The Netherlands), 8.25%, 06/15/05 784
TRANSPORTATION -- 0.4%
1,100 CSX Corp., 1.99%, 08/03/06, FRN 1,099
UTILITIES -- 5.3%
600 AEP Texas Central Co., 3.00%,
02/15/05, Ser. F 602
900 Appalachian Power Co., 1.93%,
06/29/07, FRN 900
850 Commonwealth Edison Co., 6.40%,
10/15/05 885
Dominion Resources, Inc.,
1,100 2.80%, 02/15/05 1,102
1,000 2.01%, 05/15/06, Ser. B, FRN 1,002
1,800 Duke Energy Corp., 1.95%, 01/15/05, FRN 1,801
1,000 FPL Group Capital, Inc., 1.89%,
03/30/05, FRN 1,001
National Rural Utilities Cooperative
Finance Corp.,
1,700 2.11%, 02/07/05, FRN 1,703
950 1.82%, 02/17/06, MTN, FRN 950
2,400 Pacific Gas & Electric Co., 2.30%,
04/03/06, FRN 2,403
1,950 Public Service Electric & Gas, 1.70%,
06/23/06, FRN 1,950
1,350 Southern California Edison Co., 1.89%,
01/13/06, FRN 1,355
-------------------------------------------------------------------------
15,654
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 132,745
(Cost $132,560)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 8.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.8%
Federal National Mortgage Association,
$ 673 3.50%, 07/25/14, Ser. 2003-62,
Class OB $ 676
603 2.12%, 06/25/32, Ser. 2002-36,
Class FS, FRN 608
898 2.12%, 06/25/32, Ser. 2002-36,
Class FT, FRN 905
595 1.95%, 09/25/43, Ser. 2003-W14,
Class 1A-1 593
1,900 Impac Secured Assets Corp., 2.04%,
11/25/34, Ser. 2004-3, Class 1A4, FRN 1,900
2,200 Indymac Index Mortgage Loan Trust,
2.08%, 09/25/34, Ser. 2004-AR7,
Class A1, FRN 2,200
4,154 Medallion Trust (Australia), 1.88%,
05/25/35, Ser. 2004-1G, Class A1, FRN 4,155
1,850 Mound Financing PLC (United Kingdom),
1.85%, 02/08/08, Ser. 3A,
Class A1-1, FRN, # 1,850
5,400 Permanent Financing PLC (United Kingdom),
1.48%, 03/10/09, Ser. 4, Class 2A 5,398
538 Residential Asset Securitization Trust,
5.15%, 01/25/33, Ser. 2002-A14J, Class A2 539
1,705 RMAC (United Kingdom), 1.58%, 12/12/20,
Ser. 2004-NS1A, Class A1B, FRN, # 1,705
Thornburg Mortgage Securities Trust,
1,517 1.96%, 04/25/43, Ser. 2003-2,
Class A1, FRN 1,522
1,079 1.93%, 06/25/44, Ser. 2004-2,
Class A1, FRN 1,077
1,343 Washington Mutual, 2.06%, 07/25/44,
Ser. 2004-AR10, Class A1A, FRN 1,343
1,400 Wells Fargo Mortgage Backed Securities
Trust, 3.54%, 09/25/34, Ser. 2004-S,
Class A4, FRN 1,369
-------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 25,840
(Cost $25,855)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.3%
$ 1,870 Calstrs Trust, 1.90%, 11/20/12,
Ser. 2002-C6, Class A1, FRN, # $ 1,870
Calwest Industrial Trust,
2,700 1.98%, 02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # 2,702
1,353 1.87%, 06/15/15, Ser. 2003-CALA,
Class A, FRN, # 1,355
1,650 Capital One Multi-Asset Execution Trust,
2.85%, 12/15/10, Ser. 2003-A, FRN, # 1,706
2,050 Goldman Sachs Mortgage Securities II,
1.75%, 11/15/15, Ser. 2003-FL6A,
Class A1, FRN, # 2,051
-------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 9,684
(Cost $9,674)
-------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 30.6%
1,500 American Express Credit Account Master
Trust, 2.10%, 02/15/12, Ser. 2004-C,
Class C, FRN, # 1,500
AmeriCredit Automobile Receivables Trust,
568 1.74%, 10/12/06, Ser. 2002-A,
Class A3, FRN 568
1,903 1.72%, 04/12/07, Ser. 2002-C,
Class A3, FRN 1,904
Capital One Auto Finance Trust,
700 1.71%, 01/15/08, Ser. 2003-B,
Class A3, FRN 701
4,000 1.70%, 03/15/11, Ser. 2004-A,
Class A4, FRN 4,000
1,600 Capital One Master Trust, 2.40%,
08/15/08, Ser. 2000-4, Class C, FRN, # 1,604
Capital One Multi-Asset Execution Trust,
800 1.71%, 05/15/08, Ser. 2003-A2,
Class A2, FRN 801
1,350 1.99%, 01/15/09, Ser. 2003-A1,
Class A1, FRN 1,357
1,700 2.77%, 02/17/09, Ser. 2003-B1,
Class B1, FRN 1,725
1,000 CARSS Finance LP(Cayman Islands), 1.88%,
01/15/11, Ser. 2004-A, Class B1, FRN, # 1,000
Centex Home Equity,
$ 1,337 1.90%, 01/25/34, Ser. 2004-A,
Class AV2, FRN $ 1,339
1,402 1.82%, 03/25/34, Ser. 2004-B,
Class AV1, FRN 1,402
1,543 1.87%, 06/25/34, Ser. 2004-C,
Class AV2, FRN 1,543
Citibank Credit Card Issuance Trust,
1,400 7.45%, 09/15/07, Ser. 2000-C1, Class C1 1,470
200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 201
2,050 2.55%, 03/20/08, Ser. 2003-C2,
Class C2, FRN 2,069
2,900 1.82%, 05/20/11, Ser. 2004-B1,
Class B1, FRN 2,900
1,350 Citifinancial Mortgage Securities, Inc.,
1.91%, 08/25/33, Ser. 2003-3,
Class AV1, FRN 1,351
1,940 Citigroup Mortgage Loan Trust, Inc., 2.00%,
12/25/33, Ser. 2003-HE3, Class A, FRN 1,945
2,130 CNH Equipment Trust, 1.74%, 01/15/08,
Ser. 2003-B, Class A3A, FRN 2,134
Countrywide Asset-Backed Certificates,
900 2.12%, 02/25/34, Ser. 2004-BC1,
Class M1, FRN 900
500 2.07%, 11/25/34, Ser. 2004-6,
Class 2A4, FRN 500
3,434 Countrywide Home Equity Loan Trust,
1.87%, 05/15/29, Ser. 2003-C, Class A, FRN 3,432
2,750 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 2,755
360 EQCC Trust, 1.92%, 11/25/31, Ser. 2002-1,
Class 2A, FRN 361
1,642 Fifth Third Home Equity Loan Trust, 1.85%,
09/20/23, Ser. 2003-1, Class A, FRN 1,640
35 Fleet Credit Card Master Trust II, 1.65%,
10/15/07, Ser. 2002-A, Class A, FRN 35
1,854 Fleet Home Equity Loan Trust, 1.85%,
01/20/33, Ser. 2003-1, Class A, FRN 1,854
287 Ford Credit Auto Owner Trust, 1.72%,
01/15/06, Ser. 2002-A, Class A3B, FRN 287
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,450 Ford Credit Floorplan Master Owner
Trust, 1.74%, 07/15/08, Ser. 2001-2,
Class A, FRN $ 2,456
756 GE Corp. Aircraft Financing, 1.79%,
06/25/10, Ser. 2003-A, Class A1, FRN, # 756
3,400 GMAC Mortgage Corp Loan Trust, 1.70%,
06/25/34, Ser. 2004-HE1, Class A1, FRN 3,400
481 Greenpoint Home Equity Loan Trust, 1.87%,
04/15/29, Ser. 2003-1, Class A, FRN 482
400 Household Home Equity Loan Trust 1.90%,
04/20/32, Ser. 2002-2, Class A, FRN 400
Honda Auto Receivables Owner Trust,
1,250 1.57%, 06/19/06, Ser. 2003-5, Class A2 1,248
569 3.96%, 02/19/07, Ser. 2001-3, Class A4 572
200 Household Automotive Trust, 1.94%,
05/18/09, Ser. 2002-3, Class A4B, FRN 201
Household Mortgage Loan Trust,
1,683 1.95%, 02/20/33, Ser. 2003-HC1,
Class A, FRN 1,686
550 1.98%, 01/20/34, Ser. 2004-HC1,
Class A, FRN 550
Long Beach Mortgage Loan Trust,
405 2.08%, 11/26/32, Ser. 2002-4,
Class 2A, FRN 407
2,737 1.96%, 08/25/33, Ser. 2003-4,
Class AV3, FRN 2,741
2,050 2.30%, 08/25/33, Ser. 2003-4,
Class M1, FRN 2,064
50 MBNA Master Credit Card Trust USA, 1.73%,
02/15/07, Ser. 2001-A4, Class A, FRN 50
1,204 Metris Master Trust, 1.88%, 04/20/11,
Ser. 2004-1, Class A, FRN 1,204
Option One Mortgage Loan Trust,
380 1.91%, 02/25/32, Ser. 2002-1,
Class A, FRN 380
100 1.89%, 06/25/32, Ser. 2002-2,
Class A, FRN 101
1,630 2.04%, 02/25/33, Ser. 2003-1,
Class A2, FRN 1,635
6,482 Orchid Structured Finance CDO LTD
(Cayman Islands), 1.82%, 11/18/38,
Ser. 2003-1A, Class A1-MM, FRN, # 6,481
Residential Asset Securities Corp.,
$ 1,498 1.87%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN $ 1,497
2,044 1.94%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN 2,045
1,187 Residential Funding Mortgage Securities II,
1.88%, 01/29/29, Ser. 2003-HS4,
Class AIB, FRN 1,187
1,250 Sears Credit Account Master Trust, 1.70%,
02/18/09, Ser. 2002-1, Class A, FRN 1,250
SLM Student Loan Trust,
538 1.56%, 06/15/10, Ser. 2002-8,
Class A2, FRN 538
1,093 1.69%, 10/25/10, Ser. 2002-1,
Class A1, FRN 1,093
1,300 1.68%, 12/16/19, Ser. 2003-10A,
Class A2, FRN, # 1,304
2,900 Volkswagen Auto Loan Enhanced Trust,
2.94%, 03/22/10, Ser. 2003-2, Class A4 2,893
Wachovia Asset Securitization, Inc.,
3,285 2.05%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 3,296
2,450 1.84%, 06/25/34, Ser. 2004-HE1,
Class A, FRN 2,450
2,500 WFS Financial Owner Trust, 1.86%,
05/20/08, Ser. 2003-A3, Class B, FRN 2,503
-------------------------------------------------------------------------
Total Asset Backed Securities 90,148
(Cost $90,157)
-------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 1.6%
4,600 Deutsche Bank AG/New York (Yankee),
1.94%, 05/15/07, Floating Rate 4,593
(Cost $4,600)
-------------------------------------------------------------------------
Total Long-Term Investments 281,403
(Cost $281,251)
-------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 4.5%
U.S. TREASURY SECURITY -- 0.0% ^
100 United States Treasury Bill, 1.19%,
09/30/04 @ 100
(Cost $100)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
MUNICIPAL SECURITIES -- 0.9%
NORTH CAROLINA - 0.2%
$ 500 Wake Forest University, Ser. 1997,
Rev., FRDO, 1.62%, 09/01/04 $ 500
SOUTH CAROLINA - 0.7%
2,050 South Carolina Student Loan Corp.,
Education Loans, Ser. A-1, Rev.,
FRDO, 1.68%, 09/14/04 2,050
-------------------------------------------------------------------------
Total Municipal Securities 2,550
(Cost $2,550)
-------------------------------------------------------------------------
COMMERCIAL PAPER -- 1.8%
AUTOMOTIVE -- 1.2%
3,700 Ford Motor Credit Co., 1.77%, 09/03/04 + 3,700
CONSUMER PRODUCTS -- 0.6%
$ 1,650 Altria Group, Inc., 1.97%, 10/15/04 + $ 1,646
-------------------------------------------------------------------------
Total Commercial Paper 5,346
(Cost $5,346)
-------------------------------------------------------------------------
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 1.8%
5,393 JPMorgan Prime Money Market Fund (a) 5,393
(Cost $5,393)
-------------------------------------------------------------------------
Total Short-Term Investments 13,389
(Cost $13,389)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 294,792
(COST $294,640)
-------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
SHORT FUTURES OUTSTANDING
(7) 2 Year Treasury Notes December, 2004 $ (1,482) $ (2)
(22) 5 Year Treasury Notes December, 2004 (2,435) (10)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<Page>
JPMORGAN FLEMING EMERGING MARKETS DEBT FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 96.3%
U.S. TREASURY SECURITIES -- 6.0%
U.S. Treasury Notes & Bonds,
$ 135 6.88%, 05/15/06 + @ $ 145
1,515 4.25%, 08/15/14 + 1,530
350 5.38%, 02/15/31 373
Total U.S. Treasury Securities 2,048
(Cost $2,034)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 83.7%
ARGENTINA -- 3.1%
1,500 Republic of Argentina,
1.98%, 08/03/12, FRN 1,071
BRAZIL -- 21.7%
300 Banco Nacional de
Desenvolvimiento Economico e
Social, 9.62%, 06/16/08,
Regulation S, FRN 308
Federal Republic of Brazil,
350 7.34%, 06/29/09, FRN 375
625 12.00%, 04/15/10 720
525 10.00%, 08/07/11 554
700 11.00%, 01/11/12 775
2,504 2.13%, 04/15/12, FRN 2,257
651 8.00%, 04/15/14 637
665 12.75%, 01/15/20 803
585 8.88%, 04/15/24, Ser. B 532
50 10.13%, 05/15/27 51
425 11.00%, 08/17/40 454
-------------------------------------------------------------------------
7,466
-------------------------------------------------------------------------
COLOMBIA -- 2.8%
Republic of Colombia,
250 9.75%, 04/23/09, Ser. NOV 279
428 9.75%, 04/09/11 486
170 11.75%, 02/25/20, MTN 207
-------------------------------------------------------------------------
972
-------------------------------------------------------------------------
DOMINICAN REPUBLIC -- 0.6%
267 Dominican Republic, 9.50%,
09/27/06, Regulation S 203
ECUADOR -- 0.5%
$ 179 Republic of Ecuador, 12.00%, 11/15/12,
Regulation S $ 174
EL SALVADOR -- 0.8%
285 Republic of El Salvador, 8.25%,
04/10/32, # 278
MEXICO -- 8.6%
United Mexican States,
220 11.50%, 05/15/26 330
650 8.00%, 09/24/22, Ser. A, MTN 733
490 8.30%, 08/15/31, MTN 562
1,253 7.50%, 04/08/33, Ser. A, MTN 1,326
-------------------------------------------------------------------------
2,951
-------------------------------------------------------------------------
PANAMA -- 1.9%
Republic of Panama,
210 9.63%, 02/08/11 239
20 10.75%, 05/15/20 24
345 9.38%, 01/16/23 374
-------------------------------------------------------------------------
637
-------------------------------------------------------------------------
PERU -- 4.8%
Republic of Peru,
240 9.88%, 02/06/15 270
425 8.38%, 05/03/16 429
830 4.50%, 03/07/17, FRN 718
264 5.00%, 03/07/17, FRN 239
-------------------------------------------------------------------------
1,656
-------------------------------------------------------------------------
PHILIPPINES -- 2.1%
Republic of Philippines,
83 9.88%, 03/16/10 92
409 8.38%, 02/15/11 415
195 9.88%, 01/15/19 204
-------------------------------------------------------------------------
711
-------------------------------------------------------------------------
RUSSIA -- 19.1%
1,250 Aries Vermoegensverwaltungs, 9.60%,
10/25/14, # 1,400
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
RUSSIA -- CONTINUED
Russian Federation,
$ 430 11.00%, 07/24/18, Regulation S $ 561
250 12.75%, 06/24/28, Regulation S 379
870 5.00%, 03/31/30,
Regulation S, SUB 833
3,548 5.00%, 03/31/30, SUB, # 3,398
-------------------------------------------------------------------------
6,571
-------------------------------------------------------------------------
TRINIDAD/TOBAGO -- 0.6%
155 Republic of Trinidad & Tobago,
9.75%, 07/01/20, Regulation S 205
TURKEY -- 4.8%
Republic of Turkey,
275 11.75%, 06/15/10 338
373 11.50%, 01/23/12 459
265 11.00%, 01/14/13 322
475 9.50%, 01/15/14 536
-------------------------------------------------------------------------
1,655
-------------------------------------------------------------------------
UKRAINE -- 3.9%
Republic of Ukraine,
154 11.00%, 03/15/07, Regulation S 166
595 6.88%, 03/04/11, # 589
585 7.65%, 06/11/13, # 591
-------------------------------------------------------------------------
1,346
-------------------------------------------------------------------------
URUGUAY -- 3.6%
Republic of Uruguay,
290 7.50%, 03/15/15 241
120 7.88%, 01/15/33 89
UYU 24,500 Republic Orient Uruguay,
17.75%, 02/04/06 910
-------------------------------------------------------------------------
1,240
-------------------------------------------------------------------------
VENEZUELA -- 4.8%
Republic of Venezuela,
125 5.38%, 08/07/10 109
500 10.75%, 09/19/13 544
$ 400 7.00%, 12/01/18, Regulation S $ 327
725 9.25%, 09/15/27 676
-------------------------------------------------------------------------
1,656
-------------------------------------------------------------------------
Total Foreign Government Securities 28,792
(Cost $24,110)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 6.6%
BRAZIL -- 1.1%
380 Trikem SA, 10.63%, 07/24/07, # 394
LUXEMBOURG -- 1.3%
440 Gazprom International SA, 7.20%,
02/01/20, # 442
MEXICO -- 4.2%
400 BBVA Bancomer Capital Trust I,
10.50%, 02/16/11, # 440
580 PEMEX Project Funding
Master Trust (Mexico),
7.38%, 12/15/14 636
330 Petroleos Mexicanos, 8.63%,
12/01/23, Regulation S 370
-------------------------------------------------------------------------
1,446
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 2,282
(Cost $2,236)
-------------------------------------------------------------------------
<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 3/15/05, # * (f) 0
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<Page>
<Table>
<Caption>
SHARES ISSUER VALUE
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.7%
VENEZUELA -- 0.0%
1 Republic of Venezuela (Oil Obligation),
expires 4/15/20 * 0
Total Warrants 0
(Cost $0^^)
-------------------------------------------------------------------------
Total Long-Term Investments 33,122
(Cost $28,380)
-------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT ~
- ------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY -- 2.6%
$ 900 United States Treasury Bill,
1.54%, 11/26/04 + $ 897
(Cost $897)
<Caption>
SHARES ISSUER VALUE
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 1.1%
371 JPMorgan Prime Money
Market Fund (a) + 371
(Cost $371)
Total Short-Term Investments
(Cost $1,268) 1,268
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 34,390
(COST $29,648)
-------------------------------------------------------------------------
</Table>
SUMMARY OF INVESTMENTS BY INDUSTRY, AUGUST 31, 2004
<Table>
<Caption>
INDUSTRY
- -------------------------------------------------------------------------------
Foreign Government Securities 79.6%
U.S. Treasury Securities 8.6
Financial Services 5.9
Oil & Gas 2.4
Banking 1.3
Chemicals 1.1
Money Market Fund 1.1
100.0%
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
17 10 Year Treasury Notes December, 2004 $ 1,909 $ 11
SHORT FUTURES OUTSTANDING
(3) Treasury Bonds December, 2004 (334) (5)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<Page>
JPMORGAN GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 93.5%
U.S. TREASURY SECURITIES -- 3.1%
U.S. Treasury Notes & Bonds,
$ 110 1.88%, 11/30/05 @ + $ 110
80 6.63%, 05/15/07 @ + 88
145 4.75%, 05/15/14 + 152
125 5.50%, 08/15/28 @ + 133
405 5.38%, 02/15/31 + 432
-------------------------------------------------------------------------
Total U.S. Treasury Securities 915
(Cost $896)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 24.4%
Dominican Republic (Dominican Republic),
387 9.50%, 09/27/06, Regulation S 293
18 9.04%, 01/23/13, # 13
-------------------------------------------------------------------------
306
-------------------------------------------------------------------------
Federal Republic of Brazil (Brazil),
65 7.72%, 06/29/09, FRN 70
20 10.00%, 08/07/11 21
25 11.00%, 01/11/12 28
160 2.13%, 04/15/12, FRN 144
72 8.00%, 04/15/14 70
75 8.88%, 04/15/24, Ser. B 68
40 11.00%, 08/17/40 43
-------------------------------------------------------------------------
444
-------------------------------------------------------------------------
Federal Republic of Germany (Germany),
EUR 30 5.00%, 05/20/05, Ser. 135 37
EUR 60 5.00%, 08/19/05, Ser. 136 75
EUR 200 4.00%, 02/16/07, Ser. 139 251
EUR 120 5.25%, 01/04/08, Ser. 98 157
EUR 10 5.25%, 01/04/11, Ser. 00 13
EUR 60 6.25%, 01/04/24, Ser. 94 89
EUR 130 4.75%, 07/04/34, Ser. 03 160
-------------------------------------------------------------------------
782
-------------------------------------------------------------------------
Government of Canada (Canada),
CAD 20 7.00%, 12/01/06 16
CAD 40 5.50%, 06/01/10 32
CAD 40 5.25%, 06/01/12 32
CAD 20 8.00%, 06/01/27, Ser. VW17 21
-------------------------------------------------------------------------
101
-------------------------------------------------------------------------
Government of France (France),
EUR 50 4.50%, 07/12/06 $ 63
EUR 145 5.50%, 04/25/07 189
EUR 90 4.00%, 04/25/13 110
EUR 40 4.00%, 04/25/14 48
EUR 190 5.00%, 10/25/16 248
EUR 35 5.75%, 10/25/32 49
-------------------------------------------------------------------------
707
-------------------------------------------------------------------------
Kingdom of Belgium (Belgium),
EUR 60 3.75%, 03/28/09, Ser. 32 74
EUR 80 4.25%, 09/28/13, Ser. 41 99
-------------------------------------------------------------------------
173
-------------------------------------------------------------------------
Malaysia Government International Bond (Malaysia),
30 8.75%, 06/01/09 36
190 7.50%, 07/15/11 223
-------------------------------------------------------------------------
259
-------------------------------------------------------------------------
National Republic of Bulgaria (Bulgaria),
50 2.75%, 07/28/11, Ser. IAB, FRN 50
46 2.75%, 07/28/11, Ser. RIAB, FRN 45
42 2.75%, 07/28/12, Ser. A, FRN 42
124 8.25%, 01/15/15, # 152
-------------------------------------------------------------------------
289
-------------------------------------------------------------------------
EUR 135 Netherlands Government Bond
(The Netherlands),
3.00%, 07/15/07 165
Republic of Colombia (Colombia),
15 9.75%, 04/23/09, Ser. NOV 17
190 9.75%, 04/09/11 216
70 11.75%, 02/25/20, MTN 85
-------------------------------------------------------------------------
318
-------------------------------------------------------------------------
60 Republic of Costa Rica (Costa Rica),
6.55%, 03/20/14, # 54
Republic of El Salvador (El Salvador),
38 8.50%, 07/25/11, Regulation S 42
170 8.25%, 04/10/32, # 166
-------------------------------------------------------------------------
208
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
Republic of Panama (Panama),
$ 75 9.63%, 02/08/11 $ 86
100 10.75%, 05/15/20 120
125 9.38%, 01/16/23 136
15 9.38%, 04/01/29 17
-------------------------------------------------------------------------
359
-------------------------------------------------------------------------
Republic of Peru (Peru),
40 9.88%, 02/06/15 45
85 8.38%, 05/03/16 86
227 4.50%, 03/07/17, FRN 196
137 5.00%, 03/07/17, FRN 124
-------------------------------------------------------------------------
451
-------------------------------------------------------------------------
Republic of Philippines (Philippines),
103 8.38%, 02/15/11 104
85 9.88%, 01/15/19 89
-------------------------------------------------------------------------
193
-------------------------------------------------------------------------
Republic of South Africa (South Africa),
40 9.13%, 05/19/09 48
115 8.50%, 06/23/17 138
-------------------------------------------------------------------------
186
-------------------------------------------------------------------------
40 Republic of Trinidad & Tobago
(Trinidad & Tobago),
9.75%, 07/01/20, Regulation S 53
Republic of Turkey (Turkey),
25 9.88%, 03/19/08 28
55 12.00%, 12/15/08 67
65 11.75%, 06/15/10 80
19 11.50%, 01/23/12 23
90 11.00%, 01/14/13 109
25 9.50%, 01/15/14 28
-------------------------------------------------------------------------
335
-------------------------------------------------------------------------
Republic of Ukraine (Ukraine),
148 11.00%, 03/15/07, Regulation S 160
100 6.88%, 03/04/11, # 99
130 7.65%, 06/11/13, Regulation S 131
-------------------------------------------------------------------------
390
-------------------------------------------------------------------------
Republic of Venezuela (Venezuela),
$ 83 2.75%, 12/18/07, Ser. DL, FRN $ 82
215 5.38%, 08/07/10 188
165 7.00%, 12/01/18, Regulation S 135
145 9.25%, 09/15/27 135
-------------------------------------------------------------------------
540
-------------------------------------------------------------------------
600 Russian Federation (Russia),
5.00%, 03/31/30,
Regulation S, SUB 574
U.K. Treasury Gilt (United Kingdom),
GBP 10 8.50%, 12/07/05 19
GBP 20 5.75%, 12/07/09 37
GBP 10 8.00%, 09/27/13 22
GBP 30 5.00%, 09/07/14 54
GBP 15 4.75%, 09/07/15 27
-------------------------------------------------------------------------
159
-------------------------------------------------------------------------
United Mexican States (Mexico),
25 6.38%, 01/16/13, MTN 26
40 6.63%, 03/03/15 42
60 11.50%, 05/15/26 90
55 8.30%, 08/15/31, MTN 63
53 7.50%, 04/08/33, Ser. A, MTN 56
-------------------------------------------------------------------------
277
-------------------------------------------------------------------------
Total Foreign Government Securities 7,323
(Cost $6,479)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 52.7%
ADVERTISING -- 0.5%
130 RH Donnelley Finance Corp. I,
10.88%, 12/15/12, # 154
AEROSPACE -- 0.4%
100 L-3 Communications Corp.,
7.63%, 06/15/12 108
AGRICULTURAL PRODUCTION/SERVICES -- 0.3%
30 RJ Reynolds Tobacco Holdings, Inc.,
7.88%, 05/15/09, Ser. B 31
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
AGRICULTURAL PRODUCTION/SERVICES -- CONTINUED
$ 65 Seminis Vegetable Seeds, Inc.,
10.25%, 10/01/13 $ 72
-------------------------------------------------------------------------
103
-------------------------------------------------------------------------
AIRLINES -- 0.6%
60 Delta Air Lines, Inc., 7.90%,
12/15/09* (d) 19
134 Northwest Airlines Corp., 8.07%,
10/01/19, Ser. 2000-1 147
-------------------------------------------------------------------------
166
-------------------------------------------------------------------------
AUTOMOTIVE -- 5.1%
300 DaimlerChrysler N.A. Holding Corp.,
6.50%, 11/15/13 324
45 Dana Corp., 9.00%, 08/15/11 54
Ford Motor Credit Co.,
300 7.38%, 10/28/09 328
250 7.88%, 06/15/10 278
300 General Motors Corp., 8.38%, 07/15/33 319
23 HLI Operating Co., Inc., 10.50%, 06/15/10 26
100 Tenneco Automotive, Inc., 10.25%,
07/15/13, Ser. B 116
TRW Automotive, Inc.,
22 9.38%, 02/15/13 25
65 11.00%, 02/15/13 79
-------------------------------------------------------------------------
1,549
-------------------------------------------------------------------------
BANKING -- 1.9%
175 Abbey National Capital Trust I,
8.96%, to 6/30; thereafter FRN,
12/31/49 234
300 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52% to 11/12; thereafter FRN,
12/31/49, # 330
-------------------------------------------------------------------------
564
-------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.2%
45 Bio-Rad Laboratories, Inc.,
7.50%, 08/15/13 48
BROADCASTING/CABLE -- 0.6%
$ 30 Cablevision Systems Corp., 8.00%,
04/15/12, # $ 31
150 Echostar DBS Corp., 6.38%, 10/01/11 150
-------------------------------------------------------------------------
181
-------------------------------------------------------------------------
BUSINESS SERVICES -- 0.2%
50 Iron Mountain, Inc., 8.63%, 04/01/13 54
CHEMICALS -- 1.8%
35 Crompton Corp., 9.88%, 08/01/12, # 36
30 Huntsman International LLC, 9.88%,
03/01/09 32
55 Huntsman LLC, 11.63%, 10/15/10 62
210 Lyondell Chemical Co., 10.88%, 05/01/09 220
100 Nalco Co., 7.75%, 11/15/11, # 107
65 PolyOne Corp., 10.63%, 05/15/10 71
-------------------------------------------------------------------------
528
-------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.4%
120 Electronic Data Systems Corp.,
6.50%, 08/01/13, Ser. B 119
CONSTRUCTION -- 1.1%
45 Beazer Homes USA, Inc., 8.38%, 04/15/12 49
175 Pulte Homes, Inc., 6.38%, 05/15/33 169
100 Terex Corp., 10.38%, 04/01/11, Ser. B 113
-------------------------------------------------------------------------
331
-------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.1%
20 THL Buildco, Inc., 8.50%, 09/01/14, # 21
CONSUMER PRODUCTS -- 0.4%
60 Elizabeth Arden, Inc., 7.75%, 01/15/14 62
45 Rayovac Corp., 8.50%, 10/01/13 48
-------------------------------------------------------------------------
110
-------------------------------------------------------------------------
CONSUMER SERVICES -- 1.1%
20 Alderwoods Group, Inc.,
7.75%, 09/15/12, # 21
150 Corrections Corp. of America,
7.50%, 05/01/11 157
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
CONSUMER SERVICES -- CONTINUED
$ 110 Service Corp. International, 6.75%,
04/01/16, # $ 106
50 United Rentals North America, Inc.,
6.50%, 02/15/12 48
-------------------------------------------------------------------------
332
-------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.4%
40 Celestica, Inc. (Canada), 7.88%, 07/01/11 42
85 Legrand SA (France), 8.50%, 02/15/25 92
-------------------------------------------------------------------------
134
-------------------------------------------------------------------------
ENTERTAINMENT/LEISURE -- 0.6%
125 Argosy Gaming Co., 7.00%, 01/15/14 127
20 Six Flags, Inc., 9.75%, 04/15/13 19
50 Vail Resorts, Inc., 6.75%, 02/15/14 49
-------------------------------------------------------------------------
195
-------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.5%
150 Allied Waste North America, Inc., 7.38%,
04/15/14, Ser. B 146
FINANCIAL SERVICES -- 7.7%
30 Arch Western Finance LLC, 7.50%,
07/01/13, # 31
1,000 Core Investment Grade Bond Trust I,
4.73%, 11/30/07 1,044
100 Eircom Funding (Ireland), 8.25%,
08/15/13 108
325 Erac USA Finance Co., 9.13%, 12/15/04,
MTN, # 331
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, 12/31/49 242
50 Nexstar Finance LLC/Nexstar Finance, Inc.,
12.00%, 04/01/08 55
35 PEMEX Project Funding Master Trust
(Mexico), 7.38%, 12/15/14 38
250 UBS Preferred Funding Trust I, 8.62%,
to 10/10; thereafter FRN, 12/31/49 303
45 UGS Corp., 10.00%, 06/01/12, # 49
-------------------------------------------------------------------------
2,321
-------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.5%
$ 25 Del Monte Corp., 9.25%,
05/15/11, Ser. B $ 28
105 Delhaize America, Inc., 8.13%, 04/15/11 119
-------------------------------------------------------------------------
147
-------------------------------------------------------------------------
HEALTH CARE/HEALTH CARE SERVICES -- 3.0%
25 Alliance Imaging, Inc., 10.38%, 04/15/11 27
90 Ardent Health Services, Inc., 10.00%,
08/15/13 97
55 Extendicare Health Services, Inc.,
6.88%, 05/01/14 54
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%, 11/06/08 117
40 6.75%, 07/15/13 42
700 Mariner Health Group, Inc., 9.50%,
04/01/06, Ser. B (d) (f) * 0^^
100 Medex, Inc., 8.88%, 05/15/13 109
Tenet Healthcare Corp.,
135 7.38%, 02/01/13 125
20 9.88%, 07/01/14, # 21
100 Triad Hospitals, Inc., 7.00%, 11/15/13 101
-------------------------------------------------------------------------
893
-------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 1.5%
100 Ameristar Casinos, Inc., 10.75%,
02/15/09 112
20 ITT Corp., 7.38%, 11/15/15 21
100 Mandalay Resort Group, 10.25%,
08/01/07, Ser. B 112
MGM Mirage,
100 8.38%, 02/01/11 109
45 6.75%, 09/01/12, # 46
40 Starwood Hotels & Resorts
Worldwide, Inc., 7.88%, 05/01/12 45
-------------------------------------------------------------------------
445
-------------------------------------------------------------------------
INSURANCE -- 0.9%
200 AXA (France), 8.60%, 12/15/30 257
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
METALS/MINING -- 0.2%
$ 50 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B $ 53
MULTI-MEDIA -- 2.1%
50 Charter Communications Operating LLC,
8.00%, 04/30/12, # 50
100 Lodgenet Entertainment Corp., 9.50%,
06/15/13 109
150 Primedia, Inc., 8.88%, 05/15/11 147
50 Radio One, Inc., 8.88%, 07/01/11, Ser. B 55
45 Sinclair Broadcast Group, Inc.,
8.00%, 03/15/12 46
200 Time Warner, Inc., 7.63%, 04/15/31 229
-------------------------------------------------------------------------
636
-------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.4%
110 Xerox Corp., 7.63%, 06/15/13 117
OIL & GAS -- 3.3%
175 Amerada Hess Corp., 7.30%, 08/15/31 188
68 Chesapeake Energy Corp.,
6.88%, 01/15/16 69
175 Devon Financing Corp. ULC, 7.88%,
09/30/31 211
165 Gazprom International SA (Luxembourg),
7.20%, 02/01/20, # 166
20 Giant Industries, Inc., 8.00%, 05/15/14 20
50 Newfield Exploration Co., 6.63%,
09/01/14, # 51
90 Swift Energy Co., 9.38%, 05/01/12 99
175 Valero Energy Corp., 7.50%, 04/15/32 203
-------------------------------------------------------------------------
1,007
-------------------------------------------------------------------------
PACKAGING -- 1.6%
150 Crown European Holdings SA (France),
9.50%, 03/01/11 167
Owens-Brockway Glass Container, Inc.,
75 8.75%, 11/15/12 83
75 8.25%, 05/15/13 79
45 Silgan Holdings, Inc., 6.75%, 11/15/13 45
100 Stone Container Corp., 9.75%, 02/01/11 112
-------------------------------------------------------------------------
486
-------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 1.5%
Boise Cascade Corp.,
$ 45 6.50%, 11/01/10 $ 50
23 7.00%, 11/01/13 26
60 Bowater, Inc., 6.50%, 06/15/13 59
Georgia-Pacific Corp.,
125 8.88%, 02/01/10 146
100 9.50%, 12/01/11 122
50 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 53
-------------------------------------------------------------------------
456
-------------------------------------------------------------------------
PIPELINES -- 1.8%
60 Dynegy Holdings, Inc.,
10.13%, 07/15/13, # 68
170 El Paso Corp., 7.88%, 06/15/12 164
Williams Companies, Inc.,
100 8.63%, 06/01/10 116
155 8.13%, 03/15/12 177
-------------------------------------------------------------------------
525
-------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.5%
35 Sun Media Corp. (Canada),
7.63%, 02/15/13 37
100 Von Hoffman Corp., 10.25%, 03/15/09 112
-------------------------------------------------------------------------
149
-------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.3%
80 Host Marriott LP, 9.25%, 10/01/07, Ser. G 89
RETAILING -- 0.8%
90 Dillard's, Inc., 7.85%, 10/01/12 95
30 Ferrellgas Escrow LLC/Ferrellgas
Finance Escrow Corp., 6.75%, 05/01/14 30
110 Ingles Markets, Inc., 8.88%, 12/01/11 116
-------------------------------------------------------------------------
241
-------------------------------------------------------------------------
SEMI-CONDUCTORS -- 0.4%
62 AMI Semiconductor, Inc., 10.75%,
02/01/13 72
50 Freescale Semiconductor, Inc.,
7.13%, 07/15/14, # 51
-------------------------------------------------------------------------
123
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
STEEL -- 0.2%
$ 50 Euramax International, Inc., 8.50%,
08/15/11 $ 53
TELECOMMUNICATIONS -- 5.7%
100 AT&T Corp., 8.05%, 11/15/11 109
175 AT&T Wireless Services, Inc., 8.13%,
05/01/12 210
65 Cincinnati Bell, Inc., 8.38%, 01/15/14 58
100 Deutsche Telekom International Finance BV
(The Netherlands), 8.75%, 06/15/30 128
100 France Telecom SA (France), 9.25%,
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 89
Nextel Communications, Inc.,
5 9.38%, 11/15/09 5
170 7.38%, 08/01/15 178
70 Nortel Networks LTD (Canada), 6.13%,
02/15/06 71
55 PanAmSat Corp., 9.00%, 08/15/14, # 57
40 Qwest Communications International,
7.25%, 02/15/11, # 37
15 Qwest Corp., 9.13%, 03/15/12, # 16
50 Rogers Wireless Communications, Inc.
(Canada), 9.63%, 05/01/11 57
Sprint Capital Corp.,
100 6.90%, 05/01/19 109
100 8.75%, 03/15/32 127
50 Triton PCS, Inc., 8.50%, 06/01/13 45
175 Verizon Global Funding Corp.,
7.38%, 09/01/12 204
-------------------------------------------------------------------------
1,729
-------------------------------------------------------------------------
UTILITIES -- 3.8%
100 Calpine Corp., 8.75%, 07/15/13, # 78
130 CMS Energy Corp., 7.75%, 08/01/10, # 137
175 Dominion Resources, Inc., 6.30%,
03/15/33 175
55 DPL, Inc., 6.88%, 09/01/11 57
130 Reliant Resources, Inc., 9.50%, 07/15/13 144
$ 65 Sierra Pacific Resources, 8.63%,
03/15/14, # $ 68
TECO Energy, Inc.,
80 7.20%, 05/01/11 84
110 7.00%, 05/01/12 114
275 TXU Energy Co., 7.00%, 03/15/13 309
-------------------------------------------------------------------------
1,166
-------------------------------------------------------------------------
WHOLESALING -- 0.3%
75 Aviall, Inc., 7.63%, 07/01/11 80
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 15,816
(Cost $15,907)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED
SECURITIES -- 0.1%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1%
3,121 Credit Suisse First Boston Mortgage
Securities Corp., 0.99%, 06/25/20,
Ser. 1997-2X, FRN, IO, # 31
2 DLJ Mortgage Acceptance Corp.,
70.73%, 07/28/27, Ser. 1997-D, FRN, # 2
-------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 33
(Cost $203)
-------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 4.6%
Credit Suisse First Boston Mortgage
Securities Corp.,
150 6.38%, 12/16/35, Ser. 2001-CK1, Class A3 166
200 4.30%, 07/15/36, Ser. 2004-C3, Class A3 203
Morgan Stanley Capital I,
300 8.20%, 12/03/05, Ser. 2000-HG,
Class E, FRN, # 313
1,000 7.70%, 10/03/30, Ser. 1997-XL1,
Class G, # 682
-------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 1,364
(Cost $1,632)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PRIVATE PLACEMENTS -- 8.6%
CO-OP APARTMENTS -- 8.6%
$ 0^^ 127-129-131 West 96th Street Note,
Secured by First Mortgage and
Agreement on Co-op Apartment
Building In New York City, 6.85%,
12/01/18, #, (f) (i) $ 0^^
0^^ 127-129-131 West 96th Street Note,
Secured by Second Mortgage and
Agreement on Co-op Apartment
Building In New York City, 6.85%,
11/01/27, #, (f) (i) 0^^
0^^ 14-16 East 17th St., Secured By First
Mortgage and Agreement on Co-op
Apartment Building in Brooklyn,
New York, 7.00%, 03/01/12, #, (f) (i) 0^^
1,329 270 5th Ave., Secured by First
Mortgage and Agreement on Co-op
Apartment Building in Brooklyn,
New York, 6.93%, 08/01/18, #, (f) (i) 1,454
527 3512 Oxford Ave., Secured By First
Mortgage and Agreement on Co-op
Apartment Building in Riverdale,
New York, 8.45%, 06/01/17, #, (f) (i) 623
464 42 155th Street, Secured by First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
7.00%, 01/01/14, #, (f) (i) 510
0^^ 421 West 57th St. Note, Secured by
First Mortgage and Agreement on
Co-op Apartment Building In
New York City, 8.98%,
07/01/22, #, (f) (i) 0^^
0^^ 482 East 9th St., Kensington
Gardens Corp., Secured By First
Mortgage and Agreement on Co-op
Apartment Building in New York City,
6.85%,12/01/18, #, (f) (i) 0^^
CONVENTIONAL MULTI-FAMILY -- 0.0%^
0^^ PC Shangri La MHC Co., 6.40%,
10/01/08, #, (f) (i) 0^^
-------------------------------------------------------------------------
Total Private Placements 2,587
(Cost $2,320)
-------------------------------------------------------------------------
<Caption>
SHARES ISSUER VALUE
- ------------------------------------------------------------------------------------------
WARRANTS -- 0.0%
FOREIGN GOVERNMENT SECURITIES -- 0.0%
1 Republic of Venezuela (Oil Obligation)
(Venezuela), expires 4/15/20 * $ 0
(Cost $0^^)
-------------------------------------------------------------------------
Total Long - Term Investments 28,038
(Cost $27,437)
-------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT ~
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 6.5%
U.S. TREASURY SECURITY -- 0.1%
$ 15 United States Treasury Bill,
1.24%, 10/07/04 + @ 15
(Cost $15)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 2.1%
EUR 350 French Treasury Bill (France), 0.00%,
09/23/04 + 425
EUR 160 German Treasury Bill (Germany),
0.00%, 09/15/04 194
-------------------------------------------------------------------------
Total Foreign Government Securities 619
(Cost $617)
-------------------------------------------------------------------------
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 4.3%
1,301 JPMorgan Prime Money Market
Fund (a) + 1,301
(Cost $1,301)
-------------------------------------------------------------------------
Total Short-Term Investments 1,935
(Cost $1,933)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 29,973
(COST $29,370)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<Page>
SUMMARY OF INVESTMENTS BY COUNTRY, AUGUST 31, 2004
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- -------------------------------------------------------------------------------------------
United States 68.6%
France 5.9
Germany 3.3
Russia 1.9
Venezuela 1.8
Brazil 1.5
Peru 1.5
The Netherlands 1.3
Ukraine 1.3
Panama 1.2
Colombia 1.1
Turkey 1.1
Bulgaria 1.0
Dominican Republic 1.0
Mexico 1.0
Canada 0.9
Malaysia 0.9
El Salvador 0.7
Belgium 0.6
Luxembourg 0.6
Philippines 0.6
South Africa 0.6
United Kingdom 0.5
Other (below 0.5%) 1.1
TOTAL 100.0%
- -------------------------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
3 Euro-BOBL September, 2004 $ 409 $ 8
16 Treasury Bonds December, 2004 1,781 25
16 2 Year Treasury Notes December, 2004 3,387 6
38 5 Year Treasury Notes December, 2004 4,206 21
32 10 Year Treasury Notes December, 2004 3,594 20
SHORT FUTURES OUTSTANDING
(1) Euro-BUND September, 2004 (141) (5)
(22) Treasury Bonds December, 2004 (2,449) (34)
(18) 10 Year Treasury Notes December, 2004 (2,022) (13)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO BUY DATE VALUE (USD) 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
10 EUR 9/21/04 $ 12 $ 12 $ --^^
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 8/31/04 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
124 CAD 9/21/04 $ 93 $ 94 $ (1)
2,057 EUR 9/21/04 2,512 2,499 13
84 GBP 9/21/04 154 151 3
- -----------------------------------------------------------------------------------------------------------------
$ 2,759 $ 2,744 $ 15
- -----------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<Page>
JPMORGAN SHORT TERM BOND FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 96.2%
PREFERRED STOCKS -- 1.0%
FINANCIAL SERVICES -- 1.0%
7 Pinto Totta International
Finance, 7.77%, # $ 7,298
(Cost $7,577)
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ------------------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 2.4%
$ 2,100 Federal Home Loan
Mortgage Corp., 2.40%, 03/29/07 2,077
2,000 Federal National Mortgage Association,
3.25%, 06/04/08, SUB 1,995
Overseas Private Investment Corp.,
3,306 1.50%, 12/16/06, Ser. A, FRN 3,299
2,102 1.50%, 12/16/06, Ser. B, FRN 2,098
552 1.50%, 12/16/06, Ser. C, FRN 550
228 1.50%, 12/16/06, Ser. D, FRN 227
2,228 1.50%, 12/16/06, Ser. E, FRN 2,223
1,105 1.50%, 12/16/06, Ser. F, FRN 1,102
1,008 1.50%, 12/16/06, Ser. G, FRN 1,005
726 1.50%, 12/16/06, Ser. H, FRN 724
1,676 1.50%, 12/16/06, Ser. I, FRN 1,672
726 1.50%, 12/16/06, Ser. J, FRN 724
320 1.50%, 12/16/06, Ser. K, FRN 319
-------------------------------------------------------------------------
Total U.S. Government Agency Securities 18,015
(Cost $18,018)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 1.4%
4,250 Republic of Chile (Chile), 2.06%,
01/28/08, FRN 4,278
3,600 Russian Federation (Russia), 10.00%,
06/26/07, # 4,086
1,800 United Mexican States (Mexico),
2.29%, 01/13/09, FRN 1,826
-------------------------------------------------------------------------
Total Foreign Government Securities 10,190
(Cost $10,175)
-------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 1.0%
ILLINOIS -- 0.3%
2,350 Illinois State, Taxable Pension,
GO, 2.50%, 06/01/08 2,270
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
NORTH CAROLINA -- 0.2%
$ 1,285 North Carolina Municipal Power
Agency No. 1, Catawba, Taxable,
Ser. B, Rev., 3.26%, 01/01/05 $ 1,287
OHIO -- 0.1%
550 Ohio State Air Quality Development
Authority, Toledo, Ser. A, Rev.,
Adj., 2.20%, 04/01/24 550
TEXAS -- 0.4%
3,150 Texas Public Finance Authority,
Unemployment Compensation,
Ser. B, Rev., 2.63%, 06/15/06 3,151
-------------------------------------------------------------------------
Total State and Municipal Obligations 7,258
(Cost $7,327)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 47.7%
AUTOMOTIVE -- 5.0%
8,950 DaimlerChrysler N.A. Holding Corp.,
2.34%, 05/24/06, MTN, FRN 8,983
Ford Motor Credit Co.,
3,900 3.54%, 10/25/04, FRN 3,908
1,000 7.60%, 08/01/05 1,043
7,300 6.50%, 01/25/07 7,759
650 5.80%, 01/12/09 671
General Motors Acceptance Corp.,
2,300 4.15%, 02/07/05, MTN 2,322
900 6.75%, 01/15/06 944
2,300 2.51%, 01/16/07, MTN, FRN 2,303
3,500 2.56%, 07/16/07, FRN 3,501
5,150 6.13%, 08/28/07 5,449
-------------------------------------------------------------------------
36,883
-------------------------------------------------------------------------
BANKING -- 8.9%
1,764 Abbey National PLC (United Kingdom)
(Yankee), 7.35%, to 10/06; thereafter
FRN, 12/31/49 + 1,908
2,050 Bacob Bank SC (Belgium), 7.25%, to
09/07; thereafter FRN, 12/31/49, # + 2,243
2,800 BBVA Bancomer Capital Trust I (Mexico),
10.50%, 02/16/11, # + 3,083
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<Page>
<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, # $ 3,801
2,000 Industrial Bank of Korea (South Korea),
4.00%, to 05/09; thereafter FRN,
05/19/14, # 1,961
2,000 KBC Bank Fund Trust III, 9.86%,
to 11/09; thereafter FRN, 11/29/49, # 2,486
KorAm Bank (South Korea),
2,800 6.95%, 12/06/11 3,025
3,350 4.68%, 06/18/13, Ser. E, FRN, MTN 3,350
Popular North America, Inc.,
200 6.13%, 10/15/06, Ser. E, MTN 212
1,950 4.25%, 04/01/08 1,988
7,195 Royal Bank of Scotland Group PLC
(United Kingdom), 7.82%,
11/30/49, Ser. 3 7,644
5,150 Skandinaviska Enskilda Banken AB
(Sweden), 8.13%, to 09/06; thereafter
FRN, 09/06/49, # 5,641
6,750 Spintab AB (Sweden), 7.50%, to 08/06;
thereafter FRN, 12/31/49, # 7,297
2,050 Svenska Handelsbanken (Sweden),
7.13%, to 03/07; thereafter FRN,
12/31/49, # 2,226
2,000 Unicredito Italiano Capital Trust II,
9.20%, to 10/10; thereafter FRN,
12/31/49, # 2,477
US Bancorp,
2,700 6.75%, 10/15/05 2,824
4,750 2.75%, 03/30/06, MTN 4,765
2,500 Washington Mutual, Inc.,
7.50%, 08/15/06 2,715
1,430 Woori Bank (South Korea), 5.75%,
to 03/09; thereafter FRN, 03/13/14, # 1,483
4,650 Zions Bancorporation, 2.70%, 05/01/06 4,646
-------------------------------------------------------------------------
65,775
-------------------------------------------------------------------------
BROADCASTING/CABLE -- 1.0%
4,200 Comcast Cable Communications, Inc.,
6.38%, 01/30/06 4,397
2,650 Echostar DBS Corp., 9.13%, 01/15/09 2,915
-------------------------------------------------------------------------
7,312
-------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.8%
$ 3,800 Compaq Computer Corp.,
7.65%, 08/01/05 $ 3,980
2,000 Unisys Corp., 8.13%, 06/01/06 2,120
-------------------------------------------------------------------------
6,100
-------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.5%
3,900 Diageo Finance BV (The Netherlands),
3.00%, 12/15/06 3,905
DIVERSIFIED -- 0.4%
3,000 Tyco International Group SA (Luxembourg)
(Yankee), 6.38%, 02/15/06 3,152
FINANCIAL SERVICES -- 13.1%
4,600 BNP US Funding LLC, 7.74%, to 12/07;
thereafter FRN, 12/31/49, # + 5,176
1,800 Capital One Bank, 4.25%, 12/01/08 + 1,817
6,650 Capital One Financial Corp., 8.75%,
02/01/07 + 7,434
4,350 Caterpillar Financial Services Corp.,
2.59%, 07/15/06, MTN 4,340
3,150 CIT Group, Inc., 6.50%, 02/07/06 + 3,319
6,150 Countrywide Home Loans, Inc.,
2.88%, 02/15/07, Ser. L, MTN 6,101
Counts Trusts,
3,450 2.49%, 08/15/07, Ser. 2002-10, FRN, # + 3,479
3,450 2.54%, 08/15/07, Ser. 2002-11, FRN, # + 3,485
3,250 Household Finance Corp., 3.38%,
02/21/06, MTN 3,279
2,000 HSBC Capital Funding LP
(Channel Islands), 9.55%, to 06/10;
thereafter FRN, 12/31/49, # 2,522
International Lease Finance Corp.,
1,400 3.13%, 05/03/07, Ser. P, MTN 1,395
2,100 4.35%, 09/15/08 2,143
6,100 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 6,059
1,650 Mantis Reef LTD (Australia),
4.69%, 11/14/08, # 1,670
1,650 MBNA America Bank N.A.,
4.63%, 08/03/09 1,683
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 5,050 Merrill Lynch & Co., Inc., 5.36%,
02/01/07, Ser. B, MTN $ 5,352
700 Mizuho JGB Investment LLC, 9.87%,
to 06/08; thereafter FRN, 12/31/49, # 822
2,000 Mizuho Preferred Capital Co., LLC, 8.79%,
to 06/08; thereafter FRN, 12/31/49, # 2,266
2,800 Morgan Stanley, 5.80%, 04/01/07 2,986
5,905 Natexis AMBS Co., LLC, 8.44%,
to 06/08, thereafter FRN, 12/31/49, # 6,842
1,800 Pricoa Global Funding I, 3.90%,
12/15/08, # 1,806
5,500 SLM Corp., 2.75%, 12/01/05 5,500
1,575 Sovereign Bancorp., Inc.,
10.50%, 11/15/06 1,829
Special Purpose Accounts Receivable
Cooperative Corp. (SPARCS),
2,900 2.04%, 05/23/05, Ser. 2003-3, FRN, # 2,900
6,300 2.07%, 05/23/05, Ser. 2003-6, FRN, # 6,300
2,000 1.98%, 05/23/06, Ser. 2004-2, FRN, # 2,000
5,050 The Bear Stearns Co., Inc.,
6.50%, 05/01/06 + 5,355
-------------------------------------------------------------------------
97,860
-------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.9%
3,900 Conagra Foods, Inc., 6.00%, 09/15/06 4,122
2,100 Kraft Foods, Inc., 5.25%, 06/01/07 2,208
-------------------------------------------------------------------------
6,330
-------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 0.8%
2,650 Caesars Entertainment, Inc.,
7.88%, 12/15/05 2,792
2,650 Starwood Hotels & Resorts Worldwide,
Inc., 7.38%, 05/01/07 2,836
-------------------------------------------------------------------------
5,628
-------------------------------------------------------------------------
INSURANCE -- 2.0%
5,350 ASIF Global Financing, 1.72%,
03/14/07, FRN, # + 5,355
3,650 Oil Insurance LTD (Bermuda), 1.71%,
04/08/09, FRN, # + 3,650
3,100 Prudential Financial, Inc.,
4.10%, 11/15/06 3,161
$ 2,600 Prudential Insurance Co. of America,
6.38%, 07/23/06, # $ 2,774
-------------------------------------------------------------------------
14,940
-------------------------------------------------------------------------
MULTI-MEDIA -- 0.9%
6,000 Time Warner, Inc., 6.13%, 04/15/06 + 6,307
OIL & GAS -- 1.3%
1,800 PEMEX Project Funding Master Trust
(Mexico), 2.82%, 06/15/10, FRN, # 1,835
4,000 Salomon Brothers AG for OAO Gazprom
(Russia), 9.13%, 04/25/07 4,335
3,195 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 3,197
-------------------------------------------------------------------------
9,367
-------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.3%
2,000 Georgia-Pacific Corp., 7.38%, 07/15/08 2,185
PHARMACEUTICALS -- 0.1%
950 Hospira, Inc., 4.95%, 06/15/09 976
PIPELINES -- 0.5%
Duke Capital LLC,
2,250 4.30%, 05/18/06 2,292
1,400 4.33%, 11/16/06 1,429
-------------------------------------------------------------------------
3,721
-------------------------------------------------------------------------
REAL ESTATE -- 1.2%
7,960 Socgen Real Estate Co., LLC, 7.64%,
to 09/07; thereafter FRN, 12/31/49, # 8,887
REAL ESTATE INVESTMENT TRUST -- 0.3%
2,000 iStar Financial, Inc., 4.88%,
01/15/09, Ser. B 1,998
RETAILING -- 0.1%
800 The May Department Stores Co.,
3.95%, 07/15/07, # 809
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
62
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- 5.5%
$ 3,700 British Telecom PLC (United Kingdom),
7.88%, 12/15/05 + $ 3,945
3,165 Crown Castle International Corp.,
10.75%, 08/01/11 3,553
3,100 Deutsche Telekom International
Finance BV (The Netherlands),
8.25%, 06/15/05 3,239
3,050 France Telecom (France),
7.20%, 03/01/06 3,273
3,450 Motorola, Inc., 4.61%, 11/16/07 3,545
2,000 Nextel Communications, Inc.,
9.38%, 11/15/09 2,120
7,150 SBC Communications, Inc.,
4.21%, 06/05/05, # 7,254
3,230 Sprint Capital Corp., 6.00%, 01/15/07 3,431
1,500 Telecom Italia Capital SA (Luxembourg),
4.00%, 11/15/08, # 1,506
8,300 Verizon Wireless Capital LLC,
5.38%, 12/15/06 8,728
-------------------------------------------------------------------------
40,594
-------------------------------------------------------------------------
UTILITIES -- 4.1%
1,500 AEP Texas Central Co., 3.00%,
02/15/05, Ser. F + 1,505
4,850 Alabama Power Co., 2.80%,
12/01/06, Ser. Y + 4,838
4,050 Commonwealth Edison Co.,
6.40%, 10/15/05 4,219
2,250 Consolidated Edison Co. of New York,
6.63%, 12/15/05, Ser. C 2,367
2,700 FPL Group Capital, Inc.,
1.88%, 03/30/05 2,695
National Rural Utilities Cooperative
Finance Corp.,
1,700 3.00%, 02/15/06 1,713
3,100 6.00%, 05/15/06 3,268
3,800 Niagara Mohawk Power Corp.,
7.75%, 05/15/06 4,103
525 Pacific Gas & Electric Co.,
3.60%, 03/01/09 519
1,500 Pacificorp, 5.65%, 11/01/06 1,580
$ 3,700 Progress Energy, Inc., 6.75%,
03/01/06 $ 3,907
-------------------------------------------------------------------------
30,714
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 353,443
(Cost $353,515)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.6%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.2%
3,879 Bank of America Alternative Loan Trust,
5.50%, 09/25/33, Ser. 2003-7,
Class 1A1 + 4,020
3,934 Countrywide Home Loans, 6.50%,
01/25/32, Ser. 2001-28, Class 2A4 + 4,001
240 Credit Suisse First Boston Mortgage
Securities Corp., 2.27%, 11/25/31,
Ser. 2001-26, Class 3A2, FRN 240
Federal Home Loan Mortgage Corp.,
4,795 6.00%, 08/15/08, Ser. 1565, Class P 4,982
12,440 4.50%, 05/15/11, Ser. 2780, Class IE, IO 806
3,043 Federal National Mortgage Association,
5.00%, 08/25/33, Ser. 2004-29, Class ZB 3,015
Government National Mortgage
Association,
63,047 5.60%, 02/20/24, Ser. 2003-85,
Class CS, IO, FRN 5,423
14,900 5.50%, 10/20/27, Ser. 2004-44,
Class PK, IO 1,698
5,008 MASTR Adjustable Rate Mortgages
Trust, 2.46%, 12/25/33, Ser. 2003-6,
Class 1A1, FRN 4,996
78 Residential Accredit Loans, Inc.,
2.17%, 08/25/31, Ser. 2001-QS11,
Class A5, FRN 78
4,347 Residential Asset Securitization Trust,
6.00%, 01/25/33, Ser. 2002-A15, Class A1 4,369
Structured Adjustable Rate
Mortgage Loan Trust.,
9,580 5.02%, 06/25/34, Ser. 2004-6,
Class 5A1, FRN 9,688
7,750 4.74%, 07/25/34, Ser. 2004-8,
Class 5A2, FRN 7,835
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED
Washington Mutual,
$ 15,648 3.87%, 06/25/34, Ser. 2004-AR5,
Class A3, FRN $ 15,661
600 3.96%, 07/25/34, Ser. 2004-AR7,
Class A2B, FRN 600
Wells Fargo Mortgage Backed
Securities Trust,
5,358 4.64%, 12/25/33, Ser. 2003-N,
Class 1A4, FRN 5,397
9,697 4.74%, 08/25/34, Ser. 2004-M,
Class A3, FRN 9,761
5,550 3.54%, 09/25/34, Ser. 2004-S,
Class A4, FRN 5,429
10,100 3.54%, 09/25/34, Ser. 2004-S,
Class A3, FRN 10,105
-------------------------------------------------------------------------
98,104
-------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.4%
3,000 Federal National Mortgage
Association, 5.50%, 10/25/34, TBA 3,037
-------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 101,141
(Cost $101,295)
-------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 7.0%
10,363 Calstrs Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # + 10,517
3,141 Calwest Industrial Trust, 1.87%, 06/15/15,
Ser. 2003-CALA, Class A, FRN, # + 3,146
3,700 Credit Suisse First Boston Mortgage
Securities Corp., 4.30%, 07/15/36,
Ser. 2004-C3, Class A3 3,756
4,414 First Union - Lehman Brothers
Commercial Mortgage Securities, Inc.,
7.38%, 04/18/29, Ser. 1997-C1, Class A3 4,786
5,550 GS Mortgage Securities Corp. II, 4.60%,
08/10/38, Ser. 2004-GG2, Class A3 5,709
LB-UBS Commercial Mortgage Trust,
2,950 3.32%, 03/15/27, Ser. 2003-C1, Class A2 2,927
5,750 3.48%, 07/15/27, Ser. 2003-C5, Class A2 5,717
3,000 Mall of America Capital Co., LLC, 1.88%,
03/12/10, Ser. 2000-1, Class A, FRN, # 3,002
Morgan Stanley Capital I,
$ 2,943 6.22%, 06/03/30, Ser. 1998-XL1,
Class A1 $ 2,996
7,400 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 8,101
989 Mortgage Capital Funding, Inc., 6.00%,
11/18/31, Ser. 1998-MC3, Class A1 1,023
-------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 51,680
(Cost $51,620)
-------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 20.5%
American Express Credit Account
Master Trust,
4,000 1.95%, 12/15/08, Ser. 2001-6,
Class B, FRN + 4,013
3,300 2.10%, 02/15/12, Ser. 2004-C,
Class C, FRN, # + 3,300
AmeriCredit Automobile
Receivables Trust,
9,200 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 9,182
2,800 2.67%, 03/07/11, Ser. 2004-BM,
Class A4 + 2,756
550 Capital One Auto Finance Trust, 3.18%,
09/15/10, Ser. 2003-B, Class A4 + 550
3,700 Capital One Master Trust, 2.40%,
08/15/08, Ser. 2000-4, Class C, FRN, # + 3,710
Capital One Multi-Asset Execution Trust,
4,400 3.70%, 05/17/10, Ser. 2004-B5,
Class B5 + 4,438
2,200 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 + 2,200
3,650 Carmax Auto Owner Trust, 3.07%,
10/15/10, Ser. 2003-2, Class A4 + 3,642
CARSS Finance LP,
600 1.88%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # 600
1,400 2.55%, 01/15/11, Ser. 2004-A,
Class B2, FRN, # 1,400
Citibank Credit Card Issuance Trust,
5,050 2.55%, 03/20/08, Ser. 2003-C2,
Class C2, FRN 5,096
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 4,375 6.65%, 05/15/08, Ser. 2001-C3,
Class C3 $ 4,633
4,990 2.55%, 01/20/09, Ser. 2004-A1,
Class A1 4,948
1,188 Comed Transitional Funding Trust,
5.44%, 03/25/07, Ser. 1998-1, Class A5 1,201
5,400 Countrywide Asset-Backed Certificates,
3.61%, 04/25/30, Ser. 2003-5,
Class AF3 + 5,437
1,100 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 1,102
1,589 EQCC Trust, 1.92%, 11/25/31,
Ser. 2002-1, Class 2A, FRN 1,592
14,205 Honda Auto Receivables Owner Trust,
2.48%, 07/18/08, Ser. 2003-1, Class A4 14,182
Household Automotive Trust,
12,000 3.44%, 05/18/09, Ser. 2002-3, Class A4A 12,095
1,700 3.02%, 12/17/10, Ser. 2003-2, Class A4 1,697
4,000 Long Beach Mortgage Loan Trust, 2.19%,
07/25/34, Ser. 2004-3, Class M1, FRN 3,996
2,200 MBNA Credit Card Master Note Trust,
2.00%, 01/15/08, Ser. 2002-B3,
Class B3, FRN 2,206
2,727 Onyx Acceptance Grantor Trust, 5.23%,
05/15/08, Ser. 2001-C, Class A4 2,759
950 Option One Mortgage Loan Trust, 1.91%,
02/25/32, Ser. 2002-1, Class A, FRN 951
12,452 Orchid Structured Finance CDO LTD
(Cayman Islands), 1.82%, 11/18/38,
Ser. 2003-1A, Class A1-MM, FRN, # 12,451
2,190 Peco Energy Transition Trust, 5.80%,
03/01/07, Ser. 1999-A, Class A4 2,217
386 Providian Home Equity Loan Trust,
1.91%, 06/25/25, Ser. 1999-1,
Class A, FRN 387
4,100 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # 4,099
6,800 Volkswagen Auto Loan Enhanced Trust,
2.94%, 03/22/10, Ser. 2003-2, Class A4 6,785
Wachovia Asset Securitization, Inc.,
3,104 2.05%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 3,115
$ 7,800 1.84%, 06/25/34, Ser. 2004-HE1,
Class A, FRN $ 7,800
WFS Financial Owner Trust,
7,400 4.50%, 02/20/10, Ser. 2002-2,
Class A4, SUB 7,557
6,400 3.25%, 05/20/11, Ser. 2003-3, Class A4 6,438
3,500 World Omni Auto Receivables Trust,
2.87%, 11/15/10, Ser. 2003-B, Class A4 3,472
-------------------------------------------------------------------------
Total Asset Backed Securities 152,007
(Cost $151,829)
-------------------------------------------------------------------------
PARTICIPATORY NOTE -- 0.4%
DIVERSIFIED -- 0.4%
3,150 Tyco International Group SA
Participation Certificate Trust, 4.44%,
06/15/07, # 3,223
(Cost $3,150)
CERTIFICATES OF DEPOSIT -- 1.2%
8,800 Deutsche Bank AG/New York (Yankee),
1.94%, 05/15/07, Floating Rate 8,787
(Cost $8,800)
-------------------------------------------------------------------------
Total Long-Term Investments 713,042
(Cost $713,306)
-------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.8%
U.S. TREASURY SECURITY -- 0.1%
1,025 United States Treasury Bill, 1.19%,
09/30/04 @ + 1,024
(Cost $1,024)
MUNICIPAL SECURITIES -- 0.6%
SOUTH CAROLINA - 0.6%
4,700 South Carolina Student Loan Corp.,
Education Loans, Ser. A-1, Rev., FRDO,
1.68%, 09/14/04 4,700
(Cost $4,700)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
COMMERCIAL PAPER -- 1.4%
AUTOMOTIVE -- 0.1%
$ 500 Ford Motor Credit Co., 1.78%, 09/03/04 + $ 500
CONSUMER PRODUCTS -- 0.4%
2,700 Altria Group, Inc., 1.97%, 10/15/04 + 2,694
OIL & GAS -- 0.4%
3,750 Kerr-McGee Credit LLC, 2.05%,
09/30/04 + 3,744
UTILITIES -- 0.5%
3,650 Public Service Enterprise Group, Inc.,
2.00%, 02/14/05 + 3,649
-------------------------------------------------------------------------
Total Commercial Paper 10,587
(Cost $10,587)
-------------------------------------------------------------------------
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 1.7%
12,666 JPMorgan Prime Money Market Fund (a) + 12,666
(Cost $12,666)
-------------------------------------------------------------------------
Total Short-Term Investments 28,977
(Cost $28,977)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 742,019
(COST $742,283)
-------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION/
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
320 2 Year Treasury Notes December, 2004 $ 67,735 $ (1)
SHORT FUTURES OUTSTANDING
(24) 10 Year Japanese Government Bonds September, 2004 (30,103) (300)
(311) 5 Year Treasury Notes December, 2004 (34,419) (122)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<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, 2.63%, 05/18/08, price less 96.85, JPMorgan
receives negative, pays positive 09/01/04 $ 80,800 $ (1,539)
Swap - price lock with Credit Suisse First Boston International,
on U.S. Treasury Note, 2.75%, 06/30/06, price less 100.05, the Fund
receives positive, pays negative 09/08/04 180,600 1,167
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
6.50%, price less 104.83, the Fund receives negative, pays positive 09/08/04 27,000 (47)
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA,
5.50%, price less 101.03, the Fund receives positive, pays negative 09/08/04 10,000 52
Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA,
5.00%, price less 98.67, the Fund receives negative, pays positive 09/08/04 40,000 (213)
Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA,
4.50%, price less 95.70, the Fund receives positive, pays negative 09/08/04 22,000 138
Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA,
5.50%, price less 101.13, the Fund receives positive, pays negative 09/08/04 22,000 93
Swap - spread lock with Citibank N.A., on 3 Year Swap Spread, price less 58.25,
the Fund receives positive, pays negative 09/13/04 109,000 (139)
Swap - price lock with Citibank N.A., on 30 Year GNMA, 5.00%, price less 97.73,
the Fund receives negative, pays positive 10/14/04 21,000 (331)
Swap - price lock with Citibank N.A., on 30 Year GNMA, 6.00%, price less 102.38,
the Fund receives positive, pays negative 10/14/04 34,500 377
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%,
price less 100.53, the Fund receives positive, pays negative 11/08/04 27,000 110
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%,
price less 95.22, the Fund receives negative, pays positive 11/08/04 20,500 (128)
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%,
price less 101.02, the Fund receives positive, pays negative 11/08/04 14,000 --
Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%,
price less 95.94, the Fund receives negative, pays positive 11/08/04 7,500 --
Swap - price lock with UBS AG, on 30 Year FNMA, 6.00%, price less 102.22,
the Fund receives positive, pays negative 11/08/04 96,000 570
Swap - price lock with UBS AG, on 30 Year FNMA, 6.50%, price less 104.05,
the Fund receives negative, pays positive. 11/08/04 48,000 (210)
Swap - price lock with UBS AG, on 30 Year FNMA, 5.50%, price less 100.11,
the Fund receives negative, pays positive. 11/08/04 48,000 (383)
Swap - price lock with UBS AG, on 30 Year FNMA, 5.50%, price less 100.50,
the Fund receives positive, pays negative 11/08/04 16,000 65
Swap - price lock with UBS AG, on 30 Year FNMA, 4.50%, price less 95.06,
the Fund receives negative, pays positive. 11/08/04 14,000 (101)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ----------------------------------------------------------------------------------------------------------------------------
Swap - credit default with Deutsche Bank AG, New York on 10Mil Wachovia Corp.,
3.63%, 2/17/09, 14 bps per annum paid quarterly, if default the Fund receives
an obligation of the underlying entity. 12/20/05 $ 10,000 4
Swap - credit default with Deutsche Bank AG, New York on 7.6Mil Prudential,
6.38%, 6/23/06, 19 bps per annum paid quarterly, if default the Fund receives
an obligation of the underlying entity. 09/20/06 7,600 5
Swap - credit default with Deutsche Bank AG, New York on 5.3Mil
Coca-Cola Co., 5.75%, 3/15/11, 16 bps per annum paid quarterly,
if default the Fund receives an obligation of the underlying entity. 12/31/06 5,300 (3)
Swap - credit default with Deutsche Bank AG, New York on 7.6Mil
Sun Trust Capital, 2.48%, 3/15/28, 48 bps per annum paid
quarterly, if default the Fund receives an obligation of the
underlying entity. 06/30/07 7,600 2
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<Page>
JPMORGAN SHORT TERM BOND FUND II
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 98.9%
U.S. GOVERNMENT AGENCY SECURITIES -- 18.8%
$ 16,360 Federal Farm Credit Bank, 2.63%,
09/17/07 $ 16,156
43,900 Federal Home Loan Bank, 2.50%,
02/24/06 43,975
Federal Home Loan Mortgage Corp.,
19,000 1.88%, 02/15/06 18,875
39,350 4.88%, 03/15/07 41,302
2,750 2.40%, 03/29/07 2,719
18,950 3.63%, 09/15/08 19,093
4,600 2.05%, 11/28/08, MTN 4,590
Federal National Mortgage Association,
42,070 2.50%, 06/15/06 42,051
35,300 3.13%, 07/15/06 35,655
-------------------------------------------------------------------------
Total U.S. Government Agency Securities 224,416
(Cost $224,254)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 1.5%
6,750 Province of Quebec (Canada), 5.50%,
04/11/06 7,065
7,550 Republic of Chile (Chile), 2.06%,
01/28/08, FRN 7,599
3,300 United Mexican States (Mexico),
2.29%, 01/13/09, FRN 3,348
-------------------------------------------------------------------------
Total Foreign Government Securities 18,012
(Cost $17,932)
-------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 0.7%
NORTH CAROLINA -- 0.2%
2,140 North Carolina Municipal Power Agency
No. 1, Catawba, Taxable, Ser. B, Rev.,
3.26%, 01/01/05 2,143
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 $ 5,152
-------------------------------------------------------------------------
Total State and Municipal Obligations 8,645
(Cost $8,631)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 44.6%
AUTOMOTIVE -- 4.5%
14,000 DaimlerChrysler N.A. Holding Corp.,
2.34%, 05/24/06, MTN, FRN 14,054
Ford Motor Credit Co.,
500 7.60%, 08/01/05 522
13,000 6.50%, 01/25/07 13,818
1,100 5.80%, 01/12/09 1,136
General Motors Acceptance Corp.,
2,100 4.15%, 02/07/05, MTN 2,120
1,500 6.75%, 01/15/06 1,573
4,450 2.51%, 01/16/07, MTN, FRN 4,455
6,750 2.56%, 07/16/07, FRN 6,751
9,250 6.13%, 08/28/07 9,786
-------------------------------------------------------------------------
54,215
-------------------------------------------------------------------------
BANKING -- 7.9%
2,900 Abbey National PLC (United Kingdom)
(Yankee), 7.35% to 10/06; thereafter
FRN, 12/31/49 + 3,136
3,450 Bacob Bank SC (Belgium), 7.25% to
09/07; thereafter FRN, 12/31/49, # 3,775
Capital One Bank,
2,100 6.88%, 02/01/06 2,223
7,700 4.25%, 12/01/08 7,772
6,200 ForeningsSparbanken AB (Sweden),
7.50% to 11/06; thereafter FRN,
12/31/49, # 6,734
2,000 Industrial Bank of Korea (South Korea),
4.00% to 05/09; thereafter
FRN, 05/19/14, # 1,961
Popular North America, Inc.,
500 6.13%, 10/15/06, Ser. E, MTN 531
3,250 4.25%, 04/01/08 3,314
12,440 Royal Bank of Scotland Group PLC
(United Kingdom), 7.82%, 11/30/49,
Ser. 3 13,215
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 9,050 Skandinaviska Enskilda Banken AB
(Sweden), 8.13% to 09/06; thereafter
FRN, 12/31/49, # $ 9,913
7,500 Spintab AB (Sweden), 7.50% to
08/06; thereafter FRN, 12/31/49, # 8,108
3,400 Svenska Handelsbanken (Sweden),
7.13% to 03/07; thereafter FRN,
12/31/49, # 3,692
5,800 US Bancorp, 6.75%, 10/15/05 6,067
10,100 U.S. Bank N.A., 2.85%, 11/15/06 10,099
4,350 Washington Mutual, Inc., 7.50%,
08/15/06 4,724
8,000 Zions Bancorporation, 2.70%,
05/01/06 7,993
-------------------------------------------------------------------------
93,257
-------------------------------------------------------------------------
BROADCASTING/CABLE -- 0.6%
7,195 Comcast Cable Communications, Inc.,
6.38%, 01/30/06 7,532
COMPUTERS/COMPUTER HARDWARE -- 0.6%
6,600 Compaq Computer Corp., 7.65%,
08/01/05 6,913
CONSUMER PRODUCTS -- 0.6%
7,225 Diageo Finance BV (The Netherlands),
3.00%, 12/15/06 7,234
FINANCIAL SERVICES -- 12.3%
7,900 BNP US Funding LLC, 7.74% to 12/07;
thereafter FRN, 12/31/49, # 8,889
7,400 Caterpillar Financial Services Corp.,
2.59%, 07/15/06, MTN 7,383
6,950 CIT Group, Inc., 4.13%, 02/21/06 7,097
Countrywide Home Loans, Inc.,
750 5.50%, 08/01/06, Ser. J, MTN 785
10,750 2.88%, 02/15/07, Ser. L, MTN 10,664
Counts Trusts,
6,050 2.49%, 08/15/07, Ser. 2002-10, FRN, # 6,100
6,050 2.54%, 08/15/07, Ser. 2002-11, FRN, # 6,111
$ 5,300 Household Finance Corp., 3.38%,
02/21/06, MTN $ 5,348
3,400 International Lease Finance Corp.,
4.35%, 09/15/08 3,469
11,800 Lehman Brothers Holdings, Inc.,
3.50%, 08/07/08 11,723
2,700 Mantis Reef LTD (Australia), 4.69%,
11/14/08, # 2,733
2,700 MBNA America Bank N.A., 4.63%,
08/03/09 2,754
8,895 Merrill Lynch & Co., Inc., 5.36%,
02/01/07, Ser. B, MTN 9,426
4,800 Morgan Stanley, 5.80%, 04/01/07 5,119
10,100 Natexis AMBS Co., LLC, 8.44%,
to 06/08, thereafter FRN, 12/31/49, # 11,704
3,150 Pricoa Global Funding I, 3.90%,
12/15/08, # 3,160
2,000 Principal Life Global, 5.13%,
06/28/07, # 2,103
9,100 SLM Corp., 2.75%, 12/01/05 9,099
2,697 Sovereign Bancorp., Inc., 10.50%,
11/15/06 3,132
Special Purpose Accounts Receivable
Cooperative Corp. (SPARCS),
5,100 2.04%, 05/23/05, Ser. 2003-3, FRN, # 5,100
10,100 2.13%, 05/23/05, Ser. 2003-6, FRN, # 10,100
3,100 1.98%, 05/23/06, Ser. 2004-2, FRN, # 3,100
8,700 The Bear Stearns Co., Inc., 6.50%,
05/01/06 9,226
-------------------------------------------------------------------------
144,325
-------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.3%
3,400 Kraft Foods, Inc., 5.25%, 06/01/07 3,574
INSURANCE -- 3.7%
ASIF Global Financing,
9,100 1.72%, 03/14/06, FRN, # 9,106
11,900 2.50%, 01/30/07, # + 11,758
5,900 Metropolitan Life Global Funding I,
4.75%, 06/20/07, # 6,146
6,150 Oil Insurance LTD (Bermuda), 1.71%,
04/08/09, FRN, # + 6,150
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
70
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
INSURANCE -- CONTINUED
$ 5,800 Prudential Financial, Inc., 4.10%,
11/15/06 $ 5,915
4,600 Prudential Insurance Co. of America,
6.38%, 07/23/06, # 4,909
-------------------------------------------------------------------------
43,984
-------------------------------------------------------------------------
MULTI-MEDIA -- 1.2%
4,048 TCI Communications, Inc., 6.88%,
02/15/06 4,270
9,875 Time Warner, Inc., 6.13%, 04/15/06 + 10,379
-------------------------------------------------------------------------
14,649
-------------------------------------------------------------------------
OIL & GAS -- 0.7%
3,300 PEMEX Project Funding Master Trust
(Mexico), 2.82%, 06/15/10, FRN, # 3,364
5,350 Texas Municipal Gas Corp., 2.60%,
07/01/07, # 5,353
-------------------------------------------------------------------------
8,717
-------------------------------------------------------------------------
PHARMACEUTICALS -- 0.1%
1,550 Hospira, Inc., 4.95%, 06/15/09 1,592
PIPELINES -- 0.5%
Duke Capital LLC,
3,650 4.30%, 05/18/06 3,719
2,400 4.33%, 11/16/06 2,450
-------------------------------------------------------------------------
6,169
-------------------------------------------------------------------------
REAL ESTATE -- 1.3%
14,100 Socgen Real Estate Co., LLC, 7.64%, to
09/07; thereafter FRN, 12/31/49, # 15,742
RETAILING -- 0.1%
1,350 The May Department Stores Co.,
3.95%, 07/15/07, # 1,365
TELECOMMUNICATIONS -- 4.5%
7,950 BellSouth Corp., 5.00%, 10/15/06 8,278
1,800 BellSouth Telecommunications, Inc.,
6.50%, 06/15/05 1,857
6,200 British Telecom PLC (United Kingdom),
7.88%, 12/15/05 $ 6,610
5,500 Deutsche Telekom International
Finance BV (The Netherlands), 7.75%,
06/15/05 5,747
5,150 France Telecom (France), 7.20%,
03/01/06 5,527
5,850 Motorola, Inc., 4.61%, 11/16/07 6,011
1,550 SBC Communications, Inc., 4.21%,
06/05/05, # 1,573
5,500 Sprint Capital Corp., 6.00%, 01/15/07 5,842
2,500 Telecom Italia Capital SA (Luxembourg),
4.00%, 11/15/08, # 2,511
8,945 Verizon Wireless Capital LLC, 5.38%,
12/15/06 9,405
-------------------------------------------------------------------------
53,361
-------------------------------------------------------------------------
TRANSPORTATION -- 0.8%
9,450 CSX Corp., 2.75%, 02/15/06 9,406
UTILITIES -- 4.9%
2,550 AEP Texas Central Co., 3.00%, 02/15/05,
Ser. F + 2,558
8,600 Alabama Power Co., 2.80%, 12/01/06,
Ser. Y + 8,582
7,100 Commonwealth Edison Co., 6.40%,
10/15/05 7,396
3,900 Consolidated Edison Co. of New York,
6.63%, 12/15/05, Ser. C 4,102
National Rural Utilities Cooperative
Finance Corp.,
2,900 3.00%, 02/15/06 2,922
5,300 6.00%, 05/15/06 5,588
4,800 Niagara Mohawk Power Corp., 7.75%,
05/15/06 5,183
900 Pacific Gas & Electric Co., 3.60%,
03/01/09 890
2,600 Pacificorp, 5.65%, 11/01/06 2,738
4,700 Pepco Holdings, Inc., 5.50%,
08/15/07 4,912
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
UTILITIES -- CONTINUED
$ 6,000 Progress Energy, Inc., 6.75%,
03/01/06 $ 6,335
6,950 Virginia Electric & Power Co., 5.38%,
02/01/07, Ser. A 7,305
-------------------------------------------------------------------------
58,511
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 530,546
(Cost $530,077)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 9.2%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.0%
6,352 Bank of America Alternative Loan Trust,
5.50%, 09/25/33, Ser. 2003-7,
Class 1A1 6,582
6,688 Countrywide Home Loans, 6.50%,
01/25/32, Ser. 2001-28, Class 2A4 6,801
286 Credit Suisse First Boston Mortgage
Securities Corp., 2.27%, 11/25/31,
Ser. 2001-26, Class 3A2, FRN 286
159 Fifth Third Mortgage Loan Trust,
4.69%, 10/18/30, Ser. 2000-FTB1,
Class A2, FRN 159
30 Government National Mortgage
Association, 2.10%, 04/16/32,
Ser. 2002-24, Class FA, FRN 30
8,411 MASTR Adjustable Rate Mortgages
Trust, 2.46%, 12/25/33, Ser. 2003-6,
Class 1A1, FRN 8,390
78 Residential Accredit Loans, Inc., 2.17%,
08/25/31, Ser. 2001-QS11, Class A5, FRN 78
7,227 Residential Asset Securitization Trust,
6.00%, 01/25/33, Ser. 2002-A15,
Class A1 7,263
Structured Adjustable Rate Mortgage
Loan Trust.,
15,882 5.02%, 06/25/34, Ser. 2004-6,
Class 5A1, FRN 16,061
7,050 4.74%, 07/25/34, Ser. 2004-8,
Class 5A2, FRN 7,127
Washington Mutual,
11,957 3.87%, 06/25/34, Ser. 2004-AR5,
Class A3, FRN 11,968
$ 900 3.96%, 07/25/34, Ser. 2004-AR7,
Class A2B, FRN $ 900
Wells Fargo Mortgage Backed
Securities Trust,
9,206 4.64%, 12/25/33, Ser. 2003-N,
Class 1A4, FRN 9,273
16,988 3.54%, 09/25/34, Ser. 2004-S,
Class A3, FRN 16,999
6,942 3.54%, 09/25/34, Ser. 2004-S,
Class A5, FRN 6,891
9,100 3.54%, 09/25/34, Ser. 2004-S,
Class A4, FRN 8,901
-------------------------------------------------------------------------
107,709
-------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.2%
2,000 Federal National Mortgage Association,
5.50%, 10/25/34, TBA 2,024
Government National Mortgage Association,
47 8.50%, 08/15/30, Pool 531310 52
7 8.50%, 09/15/30, Pool 526096 8
-------------------------------------------------------------------------
2,084
-------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 109,793
(Cost $109,688)
-------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 6.4%
18,941 Calstrs Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # 19,226
5,316 Calwest Industrial Trust, 1.87%,
06/15/15, Ser.2003-CALA, Class A,
FRN, # 5,323
6,200 Credit Suisse First Boston Mortgage
Securities Corp., 4.30%, 07/15/36,
Ser. 2004-C3, Class A3 6,293
7,562 First Union-Lehman Brothers
Commercial Mortgage Securities, Inc.,
7.38%, 04/18/29, Ser. 1997-C1,
Class A3 8,198
9,300 GS Mortgage Securities Corp. II, 4.60%,
08/10/38, Ser. 2004-GG2, Class A3 9,566
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COMMERCIAL MORTGAGE
BACKED SECURITIES -- CONTINUED
LB-UBS Commercial Mortgage Trust,
$ 5,100 3.32%, 03/15/27, Ser. 2003-C1,
Class A2 $ 5,060
3,300 3.48%, 07/15/27, Ser. 2003-C5,
Class A2 3,281
5,700 3.25%, 03/15/29, Ser. 2004-C2,
Class A2 5,570
12,600 Morgan Stanley Capital I, 6.48%,
11/15/30, Ser. 1998-HF2, Class A2 13,794
-------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 76,311
(Cost $76,767)
-------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 16.0%
American Express Credit Account Master Trust,
7,000 1.95%, 12/15/08, Ser. 2001-6, Class B,
FRN 7,022
5,450 2.10%, 02/15/12, Ser. 2004-C, Class C,
FRN, # 5,450
AmeriCredit Automobile Receivables
Trust,
12,450 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 12,425
3,650 2.67%, 03/07/11, Ser. 2004-BM,
Class A4 3,592
3,000 Capital Auto Receivables Asset Trust,
1.96%, 01/15/09, Ser. 2003-2,
Class A4A 2,940
1,800 Capital One Auto Finance Trust, 3.18%,
09/15/10, Ser. 2003-B, Class A4 1,800
6,500 Capital One Master Trust, 2.40%,
08/15/08, Ser. 2000-4, Class C, FRN, # 6,518
3,600 Capital One Multi-Asset Execution
Trust, 3.70%, 05/17/10, Ser. 2004-B5,
Class B5 3,631
6,200 Carmax Auto Owner Trust, 3.07%,
10/15/10, Ser. 2003-2, Class A4 6,187
3,300 CARSS Finance LP (Cayman Islands),
1.88%, 01/15/11, Ser. 2004-A, Class B1,
FRN, # 3,301
Citibank Credit Card Issuance Trust,
$ 8,500 2.55%, 03/20/08, Ser. 2003-C2,
Class C2, FRN $ 8,577
7,250 6.65%, 05/15/08, Ser. 2001-C3, Class C3 7,677
5,975 2.55%, 01/20/09, Ser. 2004-A1, Class A1 5,924
10,300 Countrywide Asset-Backed Certificates,
3.61%, 04/25/30, Ser. 2003-5, Class AF3 10,370
8,400 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 8,415
Ford Credit Auto Owner Trust,
175 1.64%, 06/15/05, Ser. 2003-B,
Class A2B, FRN 175
600 3.79%, 09/15/06, Ser. 2002-C, Class A4 607
15,000 Gracechurch Card Funding PLC
(United Kingdom), 2.70%, 08/15/08,
Ser. 5, Class A2 14,982
7,300 Onyx Acceptance Grantor Trust, 3.20%,
03/15/10, Ser. 2003-D, Class A4 7,319
20,893 Orchid Structured Finance CDO LTD
(Cayman Islands), 1.82%, 11/18/38,
Ser. 2003-1A, Class A1-MM, FRN, # 20,894
4,000 Residential Asset Securities Corp.,
3.37%, 12/25/28, Ser. 2003-KS7,
Class AI3 4,020
440 Sears Credit Account Master Trust,
5.25%, 10/16/08, Ser. 1998-2, Class A 442
6,900 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # 6,898
7,900 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B, Class A4 7,900
Volkswagon Auto Loan Enhanced Trust,
7,300 1.93%, 01/20/10, Ser. 2003-1,
Class A4 7,162
4,300 2.94%, 03/22/10, Ser. 2003-2,
Class A4 4,290
15,600 WFS Financial Owner Trust, 3.25%,
05/20/11, Ser. 2003-3, Class A4 15,692
7,200 World Omni Auto Receivables Trust,
2.87%, 11/15/10, Ser. 2003-B, Class A4 7,142
-------------------------------------------------------------------------
Total Asset Backed Securities 191,352
(Cost $191,602)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
73
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PARTICIPATORY NOTE -- 0.5%
DIVERSIFIED -- 0.5%
$ 5,350 Tyco International Group SA
Participation Certificate Trust, 4.44%,
06/15/07, # $ 5,475
-------------------------------------------------------------------------
Total Participatory Note 5,475
(Cost $5,350)
-------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 1.2%
14,700 Deutsche Bank AG/New York (Yankee),
1.94%, 05/15/07, Floating Rate 14,678
(Cost $14,700)
-------------------------------------------------------------------------
Total Long-Term Investments 1,179,228
(Cost $1,179,001)
-------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.1%
U.S. TREASURY SECURITY-- 0.1%
$ 675 United States Treasury Bill, 1.20%,
09/30/04 + @ $ 674
(Cost $674)
COMMERCIAL PAPER -- 0.1%
CONSUMER PRODUCTS -- 0.1%
1,600 Altria Group, Inc., 1.97%, 10/15/04 + 1,596
(Cost $1,596)
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 0.9%
11,188 JPMorgan Prime Money Market
Fund (a) + 11,188
(Cost $11,188)
Total Short-Term Investments 13,458
(Cost $13,458)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 1,192,686
(COST $1,192,459)
-------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION/
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
100 2 Year Treasury Notes December, 2004 $ 21,167 $ 31
SHORT FUTURES OUTSTANDING
(219) 5 Year Treasury Notes December, 2004 (24,237) (97)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
74
<Page>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
EXPIRATION NOTIONAL APPRECIATION
DESCRIPTIONS DATE VALUE (DEPRECIATION)
- -------------------------------------------------------------------------------------------------------------------
Swap-price lock with Deutsche Bank AG, New York on 30 Year
FNMA, 5.50%, price less 101.03, the Fund pays negative,
receives positive. 09/08/04 $ 6,000 $ 31
Swap-price lock with Deutsche Bank AG, New York on 30 Year
FNMA, 6.50%, price less 104.83, the Fund pays positive,
receives negative. 09/08/04 16,000 (28)
Swap-spread lock with Citibank N.A., on 3 Year Mid Market
Swap Spread, price less 58.25, the Fund pays negative,
receives positive. 09/13/04 53,300 (68)
Swap-price lock with Citibank N.A.on U.S. Treasury Note,
2.75%, 7/31/06, price less 100.44, the Fund pays negative,
receives positive. 09/20/04 267,800 500
Swap-price lock with Citibank N.A.on U.S. Treasury Note,
3.00%, 2/15/08, price less 99.69, the Fund pays positive,
receives negative. 09/27/04 154,850 (812)
Swap-price lock with Citibank N.A., on 30 Year GNMA, 6.00%,
price less 103.08, the Fund pays negative, receives
positive. 10/14/04 20,500 80
Swap-price lock with Citibank N.A., on 30 Year GNMA, 5.00%,
price less 98.69, the Fund pays positive, receives negative. 10/14/04 12,500 (78)
Swap-price lock with Deutsche Bank AG, New York on 30 Year
FNMA, 5.50%, price less 100.53, the Fund pays negative,
receives positive. 11/08/04 25,500 104
Swap-price lock with Deutsche Bank AG, New York on 30 Year
FNMA, 4.50%, price less 95.22, the Fund pays positive,
receives negative. 11/08/04 20,500 (128)
Swap-price lock with Deutsche Bank AG, New York on 30 Year
FNMA , 5.50% TBA, price less 101.02, the Fund pays negative,
receives positive. 11/08/04 45,500 --
Swap-price lock with Deutsche Bank AG, New York on 30 Year
FNMA , 4.50% TBA, price less 95.94, the Fund pays positive,
receives negative. 11/08/04 30,500 --
Swap (Credit Default) with Deutsche Bank AG, New York on
$12.4Mil Sun Trust Capital, 2.48%, 3/15/28, 48 bps per annum
paid quarterly, if default, the fund receives an obligation
of the underlying entity. 06/30/07 12,400 3
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
75
<Page>
JPMORGAN STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 95.0%
U.S. TREASURY SECURITIES -- 5.9%
U.S. Treasury Notes & Bonds,
$ 35 2.13%, 10/31/04 @ + $ 35
25 1.75%, 12/31/04 + 25
50 1.63%, 04/30/05 + 50
50 1.63%, 02/28/06 + 50
285 2.63%, 11/15/06 + 286
20 2.25%, 02/15/07 + 20
145 4.00%, 06/15/09 + 150
5 3.63%, 07/15/09 + 5
10 3.50%, 08/15/09 + 10
330 4.75%, 05/15/14 + 346
145 4.25%, 08/15/14 + 146
50 6.25%, 05/15/30 + 59
30 5.38%, 02/15/31 + 32
-------------------------------------------------------------------------
Total U.S. Treasury Securities 1,214
(Cost $1,200)
-------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 0.8%
75 Federal Home Loan Bank,
1.63%, 06/15/05 + 75
80 Federal National Mortgage Association,
7.13%, 01/15/30 98
-------------------------------------------------------------------------
Total U.S. Government Agency Securities 173
(Cost $163)
-------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 28.1%
Federal Republic of Brazil (Brazil),
70 11.25%, 07/26/07 79
60 11.50%, 03/12/08 + 68
42 2.13%, 04/15/12, FRN 38
199 8.00%, 04/15/14 195
100 Malaysia Government International Bond
(Malaysia), 7.50%, 07/15/11 117
National Republic of Bulgaria (Bulgaria),
68 2.75%, 07/28/11, Ser. IAB, FRN 68
107 2.75%, 07/28/12, Ser. A, FRN 106
100 8.25%, 01/15/15, # 122
EUR 500 Netherlands Government Bond
(The Netherlands), 5.50%, 07/15/10 670
250 Province of Ontario (Canada),
6.00%, 02/21/06 263
$ 100 Province of Quebec (Canada),
6.13%, 01/22/11, Ser. PJ $ 111
250 Republic of Chile (Chile), 5.63%,
07/23/07 + 266
Republic of Colombia (Colombia),
235 9.75%, 04/23/09, Ser. NOV 262
135 11.75%, 02/25/20, MTN 164
250 Republic of Costa Rica (Costa Rica),
8.11%, 02/01/12, # + 254
25 Republic of Egypt (Egypt),
8.75%, 07/11/11, Regulation S 30
100 Republic of El Salvador (El Salvador),
8.25%, 04/10/32, # 98
250 Republic of Italy (Italy),
2.50%, 03/31/06, MTN 250
Republic of Panama (Panama),
90 9.63%, 02/08/11 103
100 10.75%, 05/15/20 120
Republic of Peru (Peru),
25 9.88%, 02/06/15 28
210 8.38%, 05/03/16 212
135 4.50%, 03/07/17, FRN 117
46 5.00%, 03/07/17, FRN 41
Republic of Philippines (Philippines),
82 9.88%, 03/16/10 91
40 8.38%, 02/15/11 41
145 9.88%, 01/15/19 152
200 Republic of South Africa (South Africa),
8.50%, 06/23/17 240
Republic of Turkey (Turkey),
91 12.38%, 06/15/09 112
72 11.50%, 01/23/12 89
92 9.50%, 01/15/14 104
100 Republic of Ukraine (Ukraine),
7.65%, 06/11/13, Regulation S 101
Republic of Venezuela (Venezuela),
83 2.75%, 12/18/07, Ser. DL, FRN 82
100 9.25%, 09/15/27 93
Russian Federation (Russia),
100 10.00%, 06/26/07, Regulation S 114
69 8.25%, 03/31/10, Regulation S 75
5 11.00%, 07/24/18, Regulation S 7
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
76
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FOREIGN GOVERNMENT SECURITIES -- CONTINUED
$ 307 5.00%, 03/31/30, Regulation S, SUB $ 293
100 State of Qatar (Qatar),
9.50%, 05/21/09, Regulation S 123
United Mexican States (Mexico),
100 6.38%, 01/16/13, MTN 105
80 6.63%, 03/03/15 84
100 8.30%, 08/15/31, MTN 115
-------------------------------------------------------------------------
Total Foreign Government Securities 5,803
(Cost $5,100)
-------------------------------------------------------------------------
SUPRANATIONAL NOTES & BONDS -- 1.1%
200 Inter-American Development Bank,
7.38%, 01/15/10 236
(Cost $203)
-------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 38.9%
AEROSPACE -- 0.6%
15 General Dynamics Corp., 2.13%,
05/15/06 15
100 L-3 Communications Corp., 7.63%,
06/15/12 108
-------------------------------------------------------------------------
123
-------------------------------------------------------------------------
AGRICULTURAL PRODUCTION/SERVICES -- 0.2%
30 Seminis Vegetable Seeds, Inc., 10.25%,
10/01/13 33
AIRLINES -- 0.0%^
25 Delta Air Lines, Inc., 7.90%, 12/15/09* + (d) 8
AUTOMOTIVE -- 1.0%
10 DaimlerChrysler N.A. Holding Corp.,
7.20%, 09/01/09 + 11
Ford Motor Credit Co.,
30 7.38%, 10/28/09 32
20 7.88%, 06/15/10 22
20 7.00%, 10/01/13 21
General Motors Corp.,
25 7.20%, 01/15/11 27
10 8.25%, 07/15/23 11
10 8.38%, 07/15/33 11
$ 25 Goodyear Tire & Rubber Co., 7.86%,
08/15/11 $ 24
32 TRW Automotive, Inc., 11.00%, 02/15/13 38
-------------------------------------------------------------------------
197
-------------------------------------------------------------------------
BANKING -- 2.5%
5 Abbey National Capital Trust I,
8.96%, to 6/30; thereafter FRN,
12/31/49 + 7
15 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, to 11/12; thereafter FRN,
12/31/49, # + 16
40 ANZ Capital Trust I, 5.36%,
12/15/53, # + 40
250 Banque Centrale de Tunisie (Tunisia),
7.38%, 04/25/12 + 280
10 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # + 10
10 HBOS PLC (United Kingdom),
5.38%, to 11/13; thereafter FRN,
12/31/49, # 10
15 HBOS Treasury Services PLC
(United Kingdom), 3.60%,
08/15/07, MTN, # 15
15 Industrial Bank of Korea (South Korea),
4.00%, to 05/09; thereafter FRN,
05/19/14, # 15
10 KBC Bank Fund Trust III,
9.86%, to 11/09; thereafter FRN,
11/29/49, # 12
25 Popular North America, Inc.,
4.70%, 06/30/09 26
RBS Capital Trust I,
5 6.43%, to 1/34; thereafter FRN,
12/31/49 5
15 5.51%, to 9/14; thereafter FRN, 12/31/49 15
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, 12/31/49, # 6
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
77
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 15 Westpac Capital Trust III, 5.82%,
to 09/13; thereafter FRN, 12/31/49, # $ 16
10 Westpac Capital Trust IV, 5.26%,
12/31/49, # 10
-------------------------------------------------------------------------
515
-------------------------------------------------------------------------
BROADCASTING/CABLE -- 1.6%
120 British Sky Broadcasting PLC
(United Kingdom) (Yankee), 6.88%,
02/23/09 + 132
15 Cablevision Systems Corp.,
8.00%, 04/15/12 + 15
175 Echostar DBS Corp., 10.38%, 10/01/07 + 185
-------------------------------------------------------------------------
332
-------------------------------------------------------------------------
BUSINESS SERVICES -- 0.6%
10 Cendant Corp., 7.13%, 03/15/15 + 11
100 Iron Mountain, Inc., 8.63%, 04/01/13 108
-------------------------------------------------------------------------
119
-------------------------------------------------------------------------
CHEMICALS -- 1.8%
25 Crompton Corp., 9.88%, 08/01/12, # + 26
60 Huntsman LLC, 11.63%, 10/15/10 67
15 ICI Wilmington, Inc., 5.63%,
12/01/13 15
Lyondell Chemical Co.,
10 9.63%, 05/01/07, Ser. A 11
125 10.88%, 05/01/09 131
75 Nalco Co., 7.75%, 11/15/11, # 80
25 PolyOne Corp., 10.63%, 05/15/10 27
5 The Dow Chemical Co., 7.38%, 11/01/29 + 6
-------------------------------------------------------------------------
363
-------------------------------------------------------------------------
COMPUTERS/COMPUTER HARDWARE -- 0.0%^
5 Electronic Data Systems Corp.,
6.50%, 08/01/13, Ser. B 5
CONSTRUCTION -- 1.7%
10 Centex Corp., 5.70%, 05/15/14 + 10
80 D.R. Horton, Inc., 9.38%, 03/15/11 + 90
100 KB Home, 8.63%, 12/15/08 112
10 Pulte Homes, Inc., 5.25%, 01/15/14 10
$ 100 Terex Corp., 10.38%, 04/01/11, Ser. B $ 113
10 Toll Brothers, Inc., 5.95%, 09/15/13 10
-------------------------------------------------------------------------
345
-------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.1%
15 THL Buildco, Inc., 8.50%, 09/01/14, # 16
CONSUMER PRODUCTS -- 0.2%
313 Drypers Corp., 10.25%, 06/15/07,
Ser. B + (f) (d) * 3
20 Elizabeth Arden, Inc., 7.75%, 01/15/14 21
25 Rayovac Corp., 8.50%, 10/01/13 26
-------------------------------------------------------------------------
50
-------------------------------------------------------------------------
CONSUMER SERVICES -- 1.0%
15 Alderwoods Group, Inc., 7.75%,
09/15/12, # 16
100 Corrections Corp. of America,
7.50%, 05/01/11 + 105
Service Corporation International,
9 6.00%, 12/15/05 9
80 6.75%, 04/01/16, # 77
-------------------------------------------------------------------------
207
-------------------------------------------------------------------------
DIVERSIFIED -- 0.3%
50 Tyco International Group SA
(Luxembourg) (Yankee), 6.38%,
10/15/11 55
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.3%
30 Celestica, Inc. (Canada), 7.88%,
07/01/11 + 31
35 Legrand SA (France), 8.50%, 02/15/25 38
-------------------------------------------------------------------------
69
-------------------------------------------------------------------------
ENTERTAINMENT/LEISURE -- 0.6%
100 Caesars Entertainment Inc.,
7.00%, 04/15/13 107
Six Flags, Inc.,
3 8.88%, 02/01/10 3
15 9.75%, 04/15/13 14
-------------------------------------------------------------------------
124
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ENVIRONMENTAL SERVICES -- 0.2%
$ 40 Allied Waste North America, Inc.,
7.38%, 04/15/14, Ser. B $ 39
FINANCIAL SERVICES -- 3.5%
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, 7.25%,
07/01/13, # + 26
10 FleetBoston Financial Corp., 7.25%,
09/15/05 10
20 Goldman Sachs Group, Inc., 6.35%,
02/15/34 20
HSBC Capital Funding LP
(Channel Islands),
5 4.61%, to 06/13; thereafter FRN,
12/31/49, # 5
30 9.55%, to 06/10; thereafter FRN,
12/31/49, # 38
10 ING Capital Funding Trust III, 8.44%,
to 12/10; thereafter FRN, 12/31/49 12
25 Morgan Stanley, 5.80%, 04/01/07 27
100 Nexstar Finance LLC/Nexstar Finance,
Inc., 12.00%, 04/01/08 111
35 SLM Corp., 5.63%, 04/10/07,
Ser. A, MTN 37
282 Targeted Return Index (TRAINS),
8.21%, to 08/06; thereafter FRN,
08/01/15, Ser. HY-2004-1, # 301
10 UFJ Finance AEC (Aruba), 6.75%,
07/15/13 11
35 UGS Corp., 10.00%, 06/01/12, # 38
65 Yell Finance BV (The Netherlands),
10.75%, 08/01/11 76
-------------------------------------------------------------------------
742
-------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 1.0%
100 Del Monte Corp., 9.25%, 05/15/11,
Ser. B + 110
45 Delhaize America, Inc., 8.13%, 04/15/11 + 51
5 SABMiller PLC (United Kingdom),
6.63%, 08/15/33, # 6
35 Swift & Co., 10.13%, 10/01/09 39
-------------------------------------------------------------------------
206
-------------------------------------------------------------------------
HEALTH CARE/HEALTH CARE SERVICES -- 1.8%
$ 20 Alliance Imaging, Inc., 10.38%,
04/15/11 $ 21
40 Ardent Health Services, Inc., 10.00%,
08/15/13 + 43
40 Extendicare Health Services, Inc.,
6.88%, 05/01/14 40
35 Genesis HealthCare Corp., 8.00%,
10/15/13 37
HCA, Inc.,
15 5.25%, 11/06/08 15
110 6.75%, 07/15/13 118
30 Mariner Health Care, Inc., 8.25%,
12/15/13, # 32
Tenet Healthcare Corp.,
35 7.38%, 02/01/13 32
15 9.88%, 07/01/14, # 16
15 UnitedHealth Group, Inc., 3.30%,
01/30/08 15
-------------------------------------------------------------------------
369
-------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 1.7%
100 Ameristar Casinos, Inc., 10.75%,
02/15/09 + 113
20 ITT Corp., 7.38%, 11/15/15 21
50 Mandalay Resort Group, 10.25%,
08/01/07, Ser. B 56
MGM Mirage,
90 9.75%, 06/01/07 100
35 6.75%, 09/01/12, # 36
20 Starwood Hotels & Resorts Worldwide,
Inc., 7.88%, 05/01/12 22
-------------------------------------------------------------------------
348
-------------------------------------------------------------------------
INSURANCE -- 0.6%
10 Arch Capital Group LTD (Bermuda),
7.35%, 05/01/34 + 11
20 Aspen Insurance Holdings LTD (Bermuda),
6.00%, 08/15/14, # + 20
10 AXA (France), 8.60%, 12/15/30 + 13
5 Fund American Companies, Inc., 5.88%,
05/15/13 5
25 Liberty Mutual Group, 5.75%,
03/15/14, # 25
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
79
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
INSURANCE -- CONTINUED
$ 20 Monumental Global Funding II,
3.90%, 06/15/09, # $ 20
Nationwide Financial Services, Inc.,
5 6.25%, 11/15/11 5
5 5.90%, 07/01/12 5
5 Odyssey Re Holdings Corp., 7.65%,
11/01/13 6
5 Prudential Holdings LLC, 8.70%,
12/18/23, # 6
5 QBE Insurance Group LTD (Australia),
5.65%, to 07/13; thereafter FRN,
07/01/23, # 5
-------------------------------------------------------------------------
121
-------------------------------------------------------------------------
METALS/MINING -- 0.8%
150 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B 158
MULTI-MEDIA -- 1.6%
40 Charter Communications Operating LLC,
8.00%, 04/30/12, # + 40
25 Comcast Cable Communications
Holdings, Inc., 8.38%, 03/15/13 30
5 Dex Media, Inc., 8.00%, 11/15/13, # + 5
60 DirecTV Holdings LLC, 8.38%, 03/15/13 + 69
50 Lodgenet Entertainment Corp., 9.50%,
06/15/13 55
5 News America Holdings, Inc., 7.75%,
01/20/24 6
50 Radio One, Inc., 8.88%, 07/01/11, Ser. B 55
35 Sinclair Broadcast Group, Inc., 8.00%,
03/15/12 36
10 Time Warner Entertainment Co., LP,
8.38%, 03/15/23 12
15 Time Warner, Inc., 7.63%, 04/15/31 17
10 Viacom, Inc., 7.88%, 07/30/30 12
-------------------------------------------------------------------------
337
-------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.5%
90 Xerox Corp., 7.63%, 06/15/13 96
OIL & GAS -- 1.5%
$ 5 Alberta Energy Co., LTD
(Canada) (Yankee), 7.38%, 11/01/31 $ 6
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
47 Chesapeake Energy Corp., 6.88%,
01/15/16 + 47
100 Denbury Resources, Inc., 7.50%,
04/01/13 + 104
15 Devon Financing Corp. ULC, 7.88%,
09/30/31 + 18
15 Giant Industries, Inc., 8.00%, 05/15/14 15
10 Husky Energy, Inc. (Canada), 6.15%,
06/15/19 11
10 Kerr-McGee Corp., 6.95%, 07/01/24 11
35 Newfield Exploration Co., 6.63%,
09/01/14, # 36
30 The Premcor Refining Group, Inc., 7.50%,
06/15/15 32
5 Transocean, Inc., 7.50%, 04/15/31 6
-------------------------------------------------------------------------
307
-------------------------------------------------------------------------
PACKAGING -- 1.5%
60 Crown European Holdings SA (France),
9.50%, 03/01/11 + 67
Owens-Brockway Glass Container, Inc.,
50 8.75%, 11/15/12 56
50 8.25%, 05/15/13 53
20 Silgan Holdings, Inc., 6.75%, 11/15/13 20
100 Stone Container Corp., 9.75%, 02/01/11 111
-------------------------------------------------------------------------
307
-------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 1.2%
Boise Cascade Corp.,
20 6.50%, 11/01/10 + 22
10 7.00%, 11/01/13 + 11
50 Bowater, Inc., 6.50%, 06/15/13 + 49
100 Georgia-Pacific Corp., 8.88%, 02/01/10 117
5 International Paper Co., 5.85%, 10/30/12 5
50 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 53
-------------------------------------------------------------------------
257
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PHARMACEUTICALS -- 0.1%
$ 10 Hospira, Inc., 4.95%, 06/15/09 $ 10
5 Wyeth, 6.45%, 02/01/24 5
-------------------------------------------------------------------------
15
-------------------------------------------------------------------------
PIPELINES -- 1.7%
Duke Capital Corp.,
35 4.37%, 03/01/09 + 35
20 6.25%, 02/15/13 + 21
30 Dynegy Holdings, Inc., 10.13%,
07/15/13, # + 34
130 El Paso Corp., 7.88%, 06/15/12 124
Kinder Morgan Energy Partners LP,
10 7.40%, 03/15/31 11
5 7.75%, 03/15/32 6
5 7.30%, 08/15/33 6
100 Northwest Pipeline Corp., 8.13%,
03/01/10 113
-------------------------------------------------------------------------
350
-------------------------------------------------------------------------
PRINTING & PUBLISHING -- 0.2%
30 Sun Media Corp. (Canada), 7.63%,
02/15/13 32
REAL ESTATE INVESTMENT TRUST -- 0.8%
22 FelCor Lodging LP, 9.50%, 09/15/08 23
100 Host Marriott LP, 9.25%, 10/01/07, Ser. G 112
35 Ventas Realty LP/Ventas Capital Corp.,
9.00%, 05/01/12 39
-------------------------------------------------------------------------
174
-------------------------------------------------------------------------
RESTAURANTS/FOOD SERVICES -- 0.3%
60 NE Restaurant Co., Inc., 10.75%, 07/15/08 59
RETAILING -- 1.6%
40 Dillard's, Inc., 7.85%, 10/01/12 + 42
20 Ferrellgas Escrow LLC/Ferrellgas Finance
Escrow Corp., 6.75%, 05/01/14 20
45 Ingles Markets, Inc., 8.88%,
12/01/11 48
J.C. Penney Co., Inc.,
25 7.60%, 04/01/07 27
40 8.00%, 03/01/10 45
$ 10 7.13%, 11/15/23 $ 10
100 Rite Aid Corp., 9.50%, 02/15/11 110
20 Safeway, Inc., 4.13%, 11/01/08 20
-------------------------------------------------------------------------
322
-------------------------------------------------------------------------
SEMI-CONDUCTORS -- 0.1%
30 Freescale Semiconductor, Inc., 7.13%,
07/15/14, # 30
SHIPPING/TRANSPORTATION -- 0.1%
Norfolk Southern Corp.,
5 7.80%, 05/15/27 6
5 7.25%, 02/15/31 6
5 Union Pacific Corp., 6.65%, 01/15/11 5
-------------------------------------------------------------------------
17
-------------------------------------------------------------------------
STEEL -- 0.4%
70 Euramax International, Inc., 8.50%,
08/15/11 74
TELECOMMUNICATIONS -- 3.1%
75 AT&T Corp., 8.05%, 11/15/11 82
AT&T Wireless Services, Inc.,
10 7.88%, 03/01/11 12
10 8.75%, 03/01/31 13
15 British Telecom PLC (United Kingdom),
8.88%, 12/15/30, + 19
45 Cincinnati Bell, Inc., 8.38%, 01/15/14 + 40
Deutsche Telekom International Finance BV
(The Netherlands),
30 8.50%, 06/15/10 + 36
5 5.25%, 07/22/13 + 5
5 8.75%, 06/15/30 + 6
France Telecom (France),
15 7.75%, 03/01/11 18
10 8.50%, 03/01/31 13
40 Insight Midwest LP/Insight Capital, Inc.,
9.75%, 10/01/09 42
85 Nextel Communications, Inc., 9.38%,
11/15/09 90
30 Nortel Networks LTD (Canada), 6.13%,
02/15/06 30
40 PanAmSat Corp., 9.00%, 08/15/14, # 42
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
81
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- CONTINUED
$ 30 Qwest Communications International,
7.25%, 02/15/11, # $ 28
80 Qwest Corp., 9.13%, 03/15/12, # 86
20 SBC Communications, Inc., 5.63%,
06/15/16 20
Sprint Capital Corp.,
10 6.90%, 05/01/19 11
5 8.75%, 03/15/32 6
10 TCI Communications, Inc., 7.88%,
02/15/26 12
10 Telecom Italia Capital SA (Luxembourg),
4.00%, 11/15/08, # 10
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
-------------------------------------------------------------------------
659
-------------------------------------------------------------------------
UTILITIES -- 2.1%
10 AEP Texas Central Co., 5.50%, 02/15/13,
Ser. D 10
10 Alabama Power Co., 2.80%, 12/01/06,
Ser. Y 10
5 Arizona Public Service Co., 4.65%,
05/15/15 + 5
75 Calpine Corp., 9.88%, 12/01/11, # + 62
50 CMS Energy Corp., 7.75%, 08/01/10, # + 53
5 Columbus Southern Power Co., 5.50%,
03/01/13, Ser. C + 5
Dominion Resources, Inc.,
15 8.13%, 06/15/10, Ser. A + 18
10 6.30%, 03/15/33 + 10
40 DPL, Inc., 6.88%, 09/01/11 + 42
10 DTE Energy Co., 6.38%, 04/15/33 + 10
15 FPL Group Capital, Inc., 7.63%, 09/15/06 16
5 National Rural Utilities Cooperative
Finance Corp., 6.50%, 03/01/07,
Ser. C, MTN 5
20 Nisource Finance Corp., 6.15%,
03/01/13 21
Pacific Gas & Electric Co.,
$ 10 4.20%, 03/01/11 $ 10
10 4.80%, 03/01/14 10
10 PacifiCorp, 4.30%, 09/15/08 10
10 Pepco Holdings, Inc., 7.45%,
08/15/32 11
PSEG Power LLC,
5 5.00%, 04/01/14 5
15 5.50%, 12/01/15 15
30 Reliant Resources, Inc., 9.50%, 07/15/13 33
45 Sierra Pacific Resources, 8.63%,
03/15/14, # 47
15 TXU Energy Co., 7.00%, 03/15/13 17
-------------------------------------------------------------------------
425
-------------------------------------------------------------------------
Total Corporate Notes & Bonds 8,005
(Cost $7,798)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.4%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4%
75 Wells Fargo Mortgage Backed Securities
Trust, 3.54%, 09/25/34, Ser. 2004-S,
Class A4, FRN 73
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 13.0%
21 Federal Home Loan Mortgage Corp.,
6.00%, 05/01/17, Gold Pool E89420 22
Federal National Mortgage Association,
413 5.00%, 07/01/19, Pool 785934 421
97 5.50%, 11/01/32, Pool 254594 99
85 5.50%, 01/01/34, Pool 357472 86
47 5.50%, 02/01/34, Pool 759855 48
71 5.50%, 05/01/34, Pool 781078 72
100 5.50%, 08/01/34, Pool 792526 102
Government National Mortgage Association,
373 6.00%, 03/15/33, Pool 781607 388
398 6.00%, 06/20/34, Pool 3570 413
997 6.00%, 07/20/34, Pool 3584 1,036
-------------------------------------------------------------------------
2,687
-------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 2,760
(Cost $2,718)
-------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.6%
$ 45 Banc of America Commercial Mortgage,
Inc., 5.06%, 03/11/41, Ser. 2003-2,
Class A4 + $ 46
Credit Suisse First Boston Mortgage
Securities Corp.,
25 6.38%, 12/16/35, Ser. 2001-CK1,
Class A3 + 28
30 4.30%, 07/15/36, Ser. 2004-C3,
Class A3 + 30
55 4.90%, 12/15/36, Ser. 2003-C5,
Class A4 + 56
45 Greenwich Capital Commercial
Funding Corp., 4.11%, 07/05/35,
Ser. 2003-C1, Class A4 43
45 GS Mortgage Securities Corp. II, 5.40%,
08/10/38, Ser. 2004-GG2, Class A6, FRN 47
LB-UBS Commercial Mortgage Trust,
60 6.65%, 11/15/27, Ser. 2001-C2, Class A2 68
5 3.25%, 03/15/29, Ser. 2004-C2, Class A2 5
Morgan Stanley Capital I,
30 4.05%, 01/13/41, Ser. 2004-HQ3, Class A2 30
110 4.66%, 09/13/45, Ser. 2004-T13, Class A4 110
20 Morgan Stanley Dean Witter Capital I,
4.92%, 03/12/35, Ser. 2003-HQ2, Class A2 20
60 Wachovia Bank Commercial Mortgage Trust,
3.96%, 12/15/35, Ser. 2003-C9, Class A2 60
-------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 543
(Cost $530)
-------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 4.2%
35 American Express Credit Account
Master Trust, 1.69%, 01/15/09,
Ser. 2003-4, Class A + 34
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
Capital Auto Receivables Asset Trust,
39 1.64%, 02/15/07, Ser. 2003-2,
Class A3B, FRN + 39
$ 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 + 45
15 Citibank Credit Card Issuance Trust,
5.65%, 06/16/08, Ser. 2001-A6,
Class A6 + 16
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 + 15
10 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 + 10
75 Ford Credit Auto Owner Trust, 3.54%,
11/15/08, Ser. 2004-A, Class A4 76
75 Household Automotive Trust, 2.22%,
11/17/09, Ser. 2003-1, Class A4 74
50 Long Beach Mortgage Loan Trust,
1.94%, 07/25/33, Ser. 2003-3,
Class A, FRN 50
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 3.89%, 02/15/11, Ser. 2004-B, Class A4 75
14 Option One Mortgage Loan Trust, 1.94%,
07/01/33, Ser. 2003-5, Class A2, FRN 14
20 PSE&G Transition Funding LLC, 6.61%,
06/15/15, Ser. 2001-1, Class A6 23
Residential Asset Securities Corp.,
7 1.87%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 7
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 20 1.91%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN $ 20
65 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # 65
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
18 Wachovia Asset Securitization, Inc.,
2.05%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 18
15 WFS Financial Owner Trust, 3.15%,
05/20/11, Ser. 2003-4, Class A4 15
-------------------------------------------------------------------------
Total Asset Backed Securities 866
(Cost $868)
-------------------------------------------------------------------------
WARRANTS -- 0.0%^
TELECOMMUNICATIONS -- 0.0%^
0^^ Startec Global Communications Corp.,
0.00%, 05/15/08
(Cost $0^^) $ 0^^
-------------------------------------------------------------------------
Total Long-Term Investments 19,600
(Cost $18,580)
SHORT-TERM INVESTMENTS -- 5.0%
MONEY MARKET FUND -- 5.0%
1,028 JPMorgan Prime Money Market
Fund (a) + $ 1,028
(Cost $1,028)
-------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0% $ 20,628
(COST $19,608)
-------------------------------------------------------------------------
</Table>
SUMMARY OF INVESTMENTS BY COUNTRY, AUGUST 31, 2004
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- ----------------------------------------------------------------------------------------
United States 66.7%
The Netherlands 3.9
Canada 2.5
Russia 2.4
Colombia 2.1
Peru 1.9
Brazil 1.9
Turkey 1.5
Mexico 1.5
Bulgaria 1.4
Philippines 1.4
Tunisia 1.4
Chile 1.3
Costa Rica 1.2
Italy 1.2
South Africa 1.2
Panama 1.1
United Kingdom 1.0
Venezuela 0.9
France 0.7
Qatar 0.6
Malaysia 0.6
Ukraine 0.5
El Salvador 0.5
Other (below 0.5%) 0.6
- -----------------------------------------------------------------------------
TOTAL 100.0%
- -----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
84
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION/
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
10 Treasury Bonds December, 2004 $ 1,113 $ 16
1 2 Year Treasury Notes December, 2004 212 --^^
14 5 Year Treasury Notes December, 2004 1,549 7
SHORT FUTURES OUTSTANDING
(22) 10 Year Treasury Notes December, 2004 (2,471) (17)
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 8/31/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------------
555 EUR 9/30/04 $ 670 $ 674 $ (4)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
85
<Page>
JPMORGAN U.S. TREASURY INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 93.6%
U.S. TREASURY SECURITIES -- 89.8%
U.S. Treasury Notes & Bonds,
$ 13,430 1.13%, 06/30/05 $ 13,347
24,020 2.38%, 08/31/06 24,019
13,000 2.63%, 11/15/06 13,040
2,700 3.00%, 02/15/08 2,710
10,030 2.63%, 05/15/08 9,908
1,555 3.88%, 05/15/09 1,596
8,890 3.63%, 07/15/09 9,017
4,045 5.75%, 08/15/10 4,517
2,085 3.88%, 02/15/13 2,070
6,430 4.25%, 08/15/13 6,521
1,350 4.75%, 05/15/14 1,417
3,140 7.25%, 05/15/16 + 3,949
1,020 9.00%, 11/15/18 + 1,483
5,525 8.13%, 08/15/19 + @ 7,550
3,635 8.00%, 11/15/21 + 4,977
4,220 7.25%, 08/15/22 + 5,411
8,000 5.38%, 02/15/31 + 8,518
-------------------------------------------------------------------------
Total U.S. Treasury Securities 120,050
(Cost $117,123)
-------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 3.8%
MORTGAGE BACKED PASS-THROUGH SECURITIES -- 3.8%
$ 0^^ Federal Home Loan Mortgage Corp.,
7.00%, 12/01/14, Gold Pool E00766 $ 0^^
-------------------------------------------------------------------------
4,838 Government National Mortgage Association,
6.00%, 10/15/33, Pool 604714 5,030
-------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 5,030
(Cost $4,941)
-------------------------------------------------------------------------
Total Long-Term Investments 125,080
(Cost $122,064)
-------------------------------------------------------------------------
<Caption>
SHARES
- ------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 6.4%
MONEY MARKET FUND -- 6.4%
8,491 JPMorgan 100% U.S. Treasury Securities
Money Market Fund (a) 8,491
(Cost $8,491)
TOTAL INVESTMENTS -- 100.0% $ 133,571
(COST $130,555)
-------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
12 2 Year Treasury Notes December, 2004 $ 2,540 $ 5
111 5 Year Treasury Notes December, 2004 12,285 53
21 10 Year Treasury Notes December, 2004 2,359 7
SHORT FUTURES OUTSTANDING
(46) Treasury Bonds December, 2004 (5,120) (71)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
86
<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
August 31, 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 $ 20,457 1.88%
JPMorgan Global Strategic Income Fund $ 2,587 8.63%
JPMorgan Strategic Income Fund $ 3 0.00%^
</Table>
(i) -- Security is considered illiquid and may be difficult to sell.
CAD -- Canadian Dollar.
CMBS -- Commercial Mortgage Backed Security.
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 August 31, 2004.
FRN -- Floating Rate Note. The rate shown is the rate in effect as
of August 31, 2004.
GBP -- Great Britain Pound.
GNMA -- Government National Mortgage Association.
GO -- General Obligation Bond.
IO -- Interest Only.
LIBOR -- London Interbank Offered Rate.
MTN -- Medium Term Note.
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
August 31, 2004.
TBA -- To Be Announced.
USD -- United States Dollar.
UYU -- Uruguay Peso
SEE NOTES TO FINANCIAL STATEMENTS.
87
<Page>
JPMORGAN FUNDS
STATEMENT OF ASSETS AND LIABILITIES AS OF AUGUST 31, 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
Investments in non-affiliates, at value $ 1,051,832 $ 1,017,824 $ 289,399 $ 34,019 $ 28,672
Investments in affiliates at value 37,330 118,963 5,393 371 1,301
- ----------------------------------------------------------------------------------------------------------------------------------
Total Investment securities, at value 1,089,162 1,136,787 294,792 34,390 29,973
- ----------------------------------------------------------------------------------------------------------------------------------
Cash 1,911 -- -- 1 12,332
Foreign currency, at value 11 -- -- 16 21
Receivables:
Investment securities sold 282,371 375,146 -- 3,043 181
Fund shares sold 630 3 -- 75 2
Interest and dividends 7,172 5,223 706 606 489
Variation margin 85 33 -- 4 18
Unrealized appreciation on
forward foreign currency
exchange contracts -- -- -- -- 16
Unrealized appreciation on open
swap contracts 9,311 4,000 -- -- --
Expense reimbursements 5 -- -- -- 18
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets 1,390,658 1,521,192 295,498 38,135 43,050
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Due to custodian -- 1,616 -- -- --
Dividends 570 2,043 112 6 185
Investment securities purchased 483,225 613,806 1,518 1,873 125
Fund shares redeemed 376 529 -- 13 5
Unrealized depreciation on forward
foreign currency exchange contracts -- -- -- -- 1
Variation margin 36 -- 9 -- --
Outstanding options written,
at fair value 4,973 -- -- -- --
Unrealized depreciation on open
swap contracts 8,136 1,708 -- -- --
Accrued liabilities:
Investment advisory fees 225 228 36 9 --
Administration fees 15 85 -- -- --
Shareholder servicing fees 61 99 -- -- --^
Distribution fees 2 8 -- -- --^
Custodian fees 46 37 10 15 27
Trustees' fees -- -- -- -- --^
Professional fees -- -- -- -- 142
Trustees' fees - deferred
compensation plan 2 56 1 --^ --
Other 135 102 60 74 21
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 497,802 620,317 1,746 1,990 506
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 892,856 $ 900,875 $ 293,752 $ 36,145 $ 42,544
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
88
<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 $ 856,588 $ 871,433 $ 300,162 $ 27,512 $ 69,099
Accumulated undistributed
(overdistributed) net investment income (361) (961) (105) 129 (148)
Accumulated net realized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps 21,226 11,347 (6,445) 3,794 (27,053)
Net unrealized appreciation
(depreciation) of investments, futures,
foreign exchange translations,
written options and swaps 15,403 19,056 140 4,710 646
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 892,856 $ 900,875 $ 293,752 $ 36,145 $ 42,544
- ----------------------------------------------------------------------------------------------------------------------------------
Class A $ 3,004 $ 20,201 $ -- $ -- $ 802
Class B $ 1,972 $ 11,975 $ -- $ -- $ --
Class C $ 211 $ -- $ -- $ -- $ --
Institutional $ 318,100 $ -- $ 293,752 $ -- $ 39,378
Select $ 188,775 $ 868,699 $ -- $ 36,145 $ 2,364
Ultra $ 380,794 $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 892,856 $ 900,875 $ 293,752 $ 36,145 $ 42,544
- ----------------------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
($0.001 par value; unlimited number
of shares authorized):
Class A 299 484 -- -- 88
Class B 198 289 -- -- --
Class C 21 -- -- -- --
Institutional 31,924 -- 29,864 -- 4,336
Select 18,941 20,928 -- 3,773 260
Ultra 38,194 -- -- -- --
Net Asset Value:
Class A (and redemption price) $ 10.05 $ 41.69 $ -- $ -- $ 9.08
Class B* $ 9.97 $ 41.48 $ -- $ -- $ --
Class C* $ 10.03 $ -- $ -- $ -- $ --
Institutional (and redemption price) $ 9.96 $ -- $ 9.84 $ -- $ 9.08
Select (and redemption price) $ 9.97 $ 41.51 $ -- $ 9.58 $ 9.08
Ultra (and redemption price) $ 9.97 $ -- $ -- $ -- $ --
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 10.52 $ 43.65 $ -- $ -- $ 9.51
Cost of investments $ 1,072,904 $ 1,119,966 $ 294,640 $ 29,648 $ 29,370
Cost of foreign currency $ 11 $ -- $ -- $ 54 $ 20
- ----------------------------------------------------------------------------------------------------------------------------------
Premiums received from options written $ 2,803 $ -- $ -- $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
89
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY
BOND BOND INCOME INCOME
FUND FUND II FUND FUND
ASSETS
Investments in non-affiliates, at value $ 729,353 $ 1,181,498 $ 19,600 $ 125,080
Investments in affiliates, at value 12,666 11,188 1,028 8,491
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment securities, at value 742,019 1,192,686 20,628 133,571
- ----------------------------------------------------------------------------------------------------------------------------------
Cash 54 7,262 -- --
Foreign currency, at value -- -- 1 --
Receivables:
Investment securities sold 27,243 11,905 66 --
Fund shares sold 74 587 3 1
Interest and dividends 5,927 8,611 288 584
Variation margin -- 51 -- 6
Unrealized appreciation on open
swap contracts 2,583 718 -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Expense reimbursements -- -- 10 --
- ----------------------------------------------------------------------------------------------------------------------------------
Total Assets 777,900 1,221,820 20,996 134,162
- ----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Due to custodian -- -- 45 1
Dividends 604 2,242 52 116
Investment securities purchased 33,284 24,930 63 --
Fund shares redeemed 1,219 1,669 2 7
Variation margin 174 -- 2 --
Unrealized depreciation on open
swap contracts 3,094 1,114 -- --
Unrealized loss on forward foreign
currency exchange contracts -- -- 4 --
Accrued liabilities:
Investment advisory fees 138 258 -- 29
Administration fees 19 106 -- 5
Shareholder servicing fees 21 201 1 10
Distribution fees --^ 207 10 9
Custodian fees 23 37 17 11
Professional Fees -- -- 53 52
Transfer Agent Fees -- -- -- 15
Trustees' fees - deferred
compensation plan 3 9 --^ 10
Other 99 103 14 8
- ----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 38,678 30,876 263 273
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $ 739,222 $ 1,190,944 $ 20,733 $ 133,889
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
90
<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 $ 740,102 $ 1,195,040 $ 22,152 $ 133,090
Accumulated undistributed
(overdistributed) net investment income 2,034 (2,251) (47) 8
Accumulated net realized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps (1,717) (1,610) (2,394) (2,219)
Net unrealized appreciation
(depreciation) of investments, futures
foreign exchange translations
and swaps (1,197) (235) 1,022 3,010
- ----------------------------------------------------------------------------------------------------------------------------------
Total Net Assets $ 739,222 $ 1,190,944 $ 20,733 $ 133,889
- ----------------------------------------------------------------------------------------------------------------------------------
Class A $ 2,672 $ 55,488 $ 2,816 $ 44,694
Class B -- -- $ 7,753 $ 13,486
Class C -- -- $ 2,931 $ --
Institutional $ 641,869 $ -- -- --
Class M $ -- $ 643,278 $ 7,233 $ --
Select $ 94,681 $ 492,178 $ -- $ 75,709
- ----------------------------------------------------------------------------------------------------------------------------------
Total $ 739,222 $ 1,190,944 $ 20,733 $ 133,889
- ----------------------------------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding
($0.001 par value; unlimited
number of shares authorized):
Class A 272 5,437 306 3,779
Class B -- -- 843 1,141
Class C -- -- 319 --
Institutional 65,160 -- -- --
Class M -- 63,028 789 --
Select 9,620 48,141 -- 6,394
Net Asset Value:
Class A (and redemption price) $ 9.84 $ 10.21 $ 9.19 $ 11.83
Class B* $ -- $ -- $ 9.19 $ 11.82
Class C* $ -- $ -- $ 9.20 $ --
Institutional (and redemption price) $ 9.85 $ -- $ -- $ --
Class M (and redemption price) $ -- $ 10.21 $ 9.17 $ --
Select (and redemption price) $ 9.84 $ 10.22 $ -- $ 11.84
Class A Maximum Public Offering
Price Per Share (net asset value per
share/98.5%) $ 9.99 $ 10.37 $ 9.62 $ 12.39
Class M Maximum Public Offering
Price Per Share (net asset value per
share/98.5%) $ -- $ 10.37 $ -- $ --
Class M Maximum Public Offering
Price Per Share (net asset value per
share/97.0%) $ -- $ -- $ 9.45 $ --
Cost of investments $ 742,283 $ 1,192,459 $ 19,608 $ 130,555
- ----------------------------------------------------------------------------------------------------------------------------------
Cost of foreign currency $ -- $ -- $ --^ $ --
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
91
<Page>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 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 $ 40,017 $ 35,724 $ 6,020 $ 3,796 $ 4,270
Dividend -- -- 18 -- --
Dividend income from affiliated
investments* 847 1,182 280 11 77
Foreign taxes withheld (23) (4) -- -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 40,841 36,902 6,318 3,807 4,347
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 3,070 2,926 946 323 312
Administration fees 1,535 1,463 568 69 104
Shareholder servicing fees 1,176 2,438 378 115 74
Distribution fees 26 165 -- -- 1
Custodian fees 238 199 54 91 157
Interest expense 2 -- --^ 2 6
Printing and postage 35 44 10 1 2
Professional fees 152 123 93 111 112
Registration expenses 100 98 12 7 48
Transfer agent fees 131 120 21 29 45
Trustees' fees 15 15 6 1 1
Other 75 57 18 8 13
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 6,555 7,648 2,106 757 875
- ----------------------------------------------------------------------------------------------------------------------------------
Less amounts waived 1,429 1,634 1,346 178 335
Less earnings credits 8 2 3 --^ 1
Less expense reimbursements 42 -- -- -- 70
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 5,076 6,012 757 579 469
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 35,765 $ 30,890 $ 5,561 $ 3,228 $ 3,878
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
92
<Page>
<Table>
<Caption>
FLEMING
ENHANCED EMERGING GLOBAL 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 $ 8,220 $ 13,472 $ 63 $ 6,238 $ 7,576
Futures (5,147) (6,101) (1,619) 258 (685)
Foreign exchange contracts (3) -- -- 1 (448)
Written options 8,898 3,346 (132) -- --
Swaps 11,081 (719) 160 -- --
Change in net unrealized
appreciation(depreciation) of:
Investments 11,863 10,120 365 (2,583) (3,850)
Futures 1,109 1,664 51 5 38
Foreign currency translations -- -- -- -- (400)
Written options 2,519 3,759 (94) -- --
Swaps (1,308) 4,346 8 -- --
Net realized and unrealized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps 37,232 29,887 (1,198) 3,919 2,231
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 72,997 $ 60,777 $ 4,363 $ 7,147 $ 6,109
- ----------------------------------------------------------------------------------------------------------------------------------
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 139 $ 189 $ 46 $ 2 $ 13
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
93
<Page>
<Table>
<Caption>
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY
BOND BOND INCOME INCOME
FUND FUND II FUND FUND
INVESTMENT INCOME
Interest $ 22,483 $ 39,101 $ 1,342 $ 5,367
Dividend 260 -- -- --
Dividend income from affiliated
investments* 917 845 18 83
Foreign taxes withheld (17) (7) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
Total investment income 23,643 39,939 1,360 5,450
- ----------------------------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 2,122 3,627 111 430
Administration fees 1,273 2,176 33 215
Shareholder servicing fees 1,021 3,627 59 359
Distribution fees 17 3,330 135 250
Custodian fees 125 233 101 61
Interest expense -- 1 --^ --^
Printing and postage 30 59 10 20
Professional fees 113 128 105 95
Registration expenses 59 73 38 38
Transfer agent fees 76 105 64 146
Trustees' fees 13 22 --^ 2
Other 51 75 8 15
- ----------------------------------------------------------------------------------------------------------------------------------
Total expenses 4,900 13,456 664 1,631
- ----------------------------------------------------------------------------------------------------------------------------------
Less amounts waived 2,019 1,487 196 559
Less earnings credits 7 7 --^ 1
Less expense reimbursements -- -- 115 --
- ----------------------------------------------------------------------------------------------------------------------------------
Net expenses 2,874 11,962 353 1,071
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 20,769 $ 27,977 $ 1,007 $ 4,379
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
94
<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 $ 6,540 $ 9,688 $ 535 $ 507
Futures (4,588) (3,919) 37 (541)
Foreign exchange contracts (20) (2) (118) --
Written options (1,243) (1,207) -- --
Swaps 2,427 (3,316) -- --
Change in net unrealized
appreciation (depreciation) of:
Investments (4,230) (4,904) 212 2,108
Futures 250 155 10 271
Foreign currency translations -- -- 12 --
Written options (211) (352) -- --
Swaps (1,316) (500) -- --
Net realized and unrealized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps (2,391) (4,357) 688 2,345
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 18,378 $ 23,620 $ 1,695 $ 6,724
- ----------------------------------------------------------------------------------------------------------------------------------
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 150 $ 139 $ 3 $ 16
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
95
<Page>
STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED
(Amounts in thousands)
<Table>
<Caption>
BOND FUND BOND FUND II
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/04 8/31/03 8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 35,765 $ 62,273 $ 30,890 $ 38,411
Net realized gain (loss) on
investments, futures, foreign exchange
transactions, written options and swaps 23,049 45,619 9,998 11,293
Change in net unrealized appreciation
(depreciation) of investments, futures,
foreign currency translations,
written options and swaps 14,183 (40,167) 19,889 (23,834)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 72,997 67,725 60,777 25,870
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (35,799) (62,540) (31,034) (38,594)
Net realized gain on
investment transactions (34,209) (12,241) (5,792) (8,146)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (70,008) (74,781) (36,826) (46,740)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (344,128) (429,181) (192,507) 386,134
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (341,139) (436,237) (168,556) 365,264
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 1,233,995 1,670,232 1,069,431 704,167
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 892,856 $ 1,233,995 $ 900,875 $ 1,069,431
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (361) $ (573) $ (961) $ (737)
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
96
<Page>
<Table>
<Caption>
ENHANCED INCOME FLEMING EMERGING MARKETS
FUND DEBT FUND
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/04 8/31/03 8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 5,561 $ 8,508 $ 3,228 $ 4,778
Net realized gain (loss) on
investments, futures, foreign exchange
transactions, written options and swaps (1,528) (3,952) 6,497 3,573
Change in net unrealized appreciation
(depreciation) of investments, futures,
written options and swaps 330 (572) (2,578) 6,981
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 4,363 3,984 7,147 15,332
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (5,541) (8,519) (3,506) (4,996)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (59,478) 58,849 (27,807) 8,503
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (60,656) 54,314 (24,166) 18,839
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 354,408 300,094 60,311 41,472
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 293,752 $ 354,408 $ 36,145 $ 60,311
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (105) $ (131) $ 129 $ 292
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
97
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME
FUND
--------------------------------
YEAR ENDED YEAR ENDED
8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 3,878 $ 7,042
Net realized gain (loss) on
investments, futures and
foreign exchange transactions 6,443 178
Change in net unrealized appreciation
(depreciation) of investments, futures
and foreign currency translations (4,212) 4,192
- ------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 6,109 11,412
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (3,871) (7,077)
- ------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (70,427) (33,539)
- ------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (68,189) (29,204)
- ------------------------------------------------------------------------------------------
Beginning of period 110,733 139,937
- ------------------------------------------------------------------------------------------
End of period $ 42,544 $ 110,733
- ------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (148) $ (1,273)
- ------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
98
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND SHORT TERM BOND FUND II
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/04 8/31/03 8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 20,769 $ 24,860 $ 27,977 $ 32,784
Net realized gain (loss) on
investments, futures,
foreign exchange transactions,
written options and swaps 3,116 1,350 1,244 3,428
Change in net unrealized appreciation
(depreciation) of investments, futures,
written options and swaps (5,507) (6,030) (5,601) (10,667)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 18,378 20,180 23,620 25,545
- ----------------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) -- -- (357) 1,123
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (20,381) (25,414) (27,690) (33,316)
Return of Capital -- -- (149) (587)
Net realized gain on
investment transactions -- (11,813) -- (7,040)
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (20,381) (37,227) (27,839) (40,943)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (195,985) 204,640 (358,251) 227,176
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (197,988) 187,593 (362,827) 212,901
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 937,210 749,617 1,553,771 1,340,870
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 739,222 $ 937,210 $ 1,190,944 $ 1,553,771
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ 2,034 $ 996 $ (2,251) $ (2,896)
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
99
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND
------------------------------- -------------------------------
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
8/31/04 8/31/03 8/31/04 8/31/03
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
Net investment income $ 1,007 $ 1,116 $ 4,379 $ 5,681
Net realized gain (loss) on
investments, futures and
foreign exchange transactions 454 (335) (34) 3,804
Change in net unrealized appreciation
(depreciation) of investments, futures
and foreign currency translations 234 1,092 2,379 (6,183)
- ----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 1,695 1,873 6,724 3,302
- ----------------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) (7) (9) -- --
- ----------------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (1,008) (1,103) (4,379) (5,719)
- ----------------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Increase (decrease) (2,304) 794 (3,139) (5,521)
- ----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS
Total increase (decrease) in net assets (1,624) 1,555 (794) (7,938)
- ----------------------------------------------------------------------------------------------------------------------------------
Beginning of period 22,357 20,802 134,683 142,621
- ----------------------------------------------------------------------------------------------------------------------------------
End of period $ 20,733 $ 22,357 $ 133,889 $ 134,683
- ----------------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (47) $ (195) $ 8 $ 9
- ----------------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
100
<Page>
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 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 $40) $ 5,230
Operating expenses paid (432)
Expense reimbursements received 52
Purchases of long-term investments (116,905)
Net (purchases)/sales of
short-term investments 15,962
Proceeds from disposition of
long-term investments and
principal paydowns 184,165
Net cash used for futures transactions (641)
Net cash used for foreign
exchange transactions (443)
- -------------------------------------------------------------------------------
Net cash provided by
operating activities 86,988
- -------------------------------------------------------------------------------
Cash flows used by
financing activities:
Proceeds from shares sold 1,994
Payment from shares redeemed (73,256)
Cash distributions paid (3,665)
- -------------------------------------------------------------------------------
Net cash used in financing activities (74,927)
- -------------------------------------------------------------------------------
Net increase (decrease) in cash 12,061
- -------------------------------------------------------------------------------
Cash, beginning of year 292
- -------------------------------------------------------------------------------
Cash, end of year $ 12,353
- -------------------------------------------------------------------------------
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 6,109
Decrease in market value of investments 92,910
Decrease in receivable for
investment securities sold 3,226
Decrease in dividend and
interest receivable 903
Increase in expense
reimbursement receivable (18)
Decreased in unrealized appreciation
on foreign exchange contracts 405
Decrease in net variation
margin receivable 6
Decrease in payable for investment
securities purchased (16,660)
Increase in accrued expenses and
other payables 107
- -------------------------------------------------------------------------------
Total adjustments 80,879
- -------------------------------------------------------------------------------
Net cash provided by
operating activities 86,988
- -------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
101
<Page>
JPMORGAN FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
J.P. Morgan Mutual Fund Group ("MFG"), J.P. Morgan Institutional Funds
("JPMIF"), J.P. Morgan Mutual Fund Select Group ("MFSG"), J.P. Morgan Series
Trust ("JPMST) and J.P. Morgan Funds ("JPMF") (the "Trusts") were organized as
Massachusetts business trusts. The Trusts are registered under the Investment
Company Act of 1940, 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 convert to Class A shares after eight years. No sales
charges are assessed with respect to Institutional, Ultra and Select classes.
All classes of shares have equal rights as to earnings, assets and voting
privileges except that each class may bear different transfer agent,
distribution and shareholder servicing fees and each class has exclusive voting
rights with respect to its distribution plan and shareholder servicing
agreements. Class A shares, for which front-end sales charges have been waived,
may be subject to redemption charges as described in the Funds' prospectus.
102
<Page>
On August 19, 2004, the Board of Trustees of the Trust approved
management's proposal to merge the Target Funds listed below with and into the
Acquiring Funds listed below:
<Table>
<Caption>
TARGET FUND ACQUIRING FUND
JPMorgan Bond Fund II merges with and into One Group Bond Fund
JPMorgan Strategic Income Fund merges with and into JPMorgan Global Strategic Income Fund
JPMorgan U.S. Treasury Income Fund merges with and into One Group Government Bond Fund
</Table>
Each proposed merger is contingent upon, among other things, approval by the
respective Target Fund's shareholders and regulatory review and receipt of an
opinion of counsel to the effect that the merger will qualify as a tax-free
reorganization for Federal income tax purposes. If approved, the mergers are
expected to occur on February 18, 2005, or such later date as the parties to
each such merger transaction may agree.
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 "Acquiring 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>
103
<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 -- Purchased options and futures contracts are
valued at the last sale price on the exchange on which they are primarily
traded. Fixed income securities, other than convertible bonds, with a maturity
of 61 days or more held by the Funds will be valued each day based on readily
available market quotations received from independent or affiliated commercial
pricing services. Such pricing services will generally provide bidside
quotations. Convertible bonds are valued at the last sale price on the primary
exchange on which the bond is principally traded. 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 may invest in exchange-traded interest rate futures for hedging
purposes, to either modify the duration of the portfolio, modify the yield curve
exposure of the portfolio, or in anticipation of buying or selling a specific
security.
Use of long futures contracts subjects the Funds to risk of loss in excess of
amounts shown on the Statement of Assets and Liabilities up to the notional
value of the futures contracts. Use of short futures contracts subjects the
Funds to unlimited risk of loss. The Funds may enter into futures contracts only
on exchanges or boards of trade. The exchange or board of trade acts as the
counterparty to each futures transaction; therefore, the Fund's credit risk is
limited to failure of the exchange or board of trade.
As of August 31, 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
104
<Page>
the U.S. dollar as quoted by a major bank, on the following basis:
1. Market value of investment securities and other assets and
liabilities: at the rate of exchange at the valuation date.
2. Purchases and sales of investment securities, income and expenses: at
the rates of exchange prevailing on the respective dates of such
transactions.
Although the net assets of the Funds are presented at the foreign exchange rates
and market values at the close of the periods, the Funds do not isolate that
portion of the results of operations arising as a result of changes in the
foreign exchange rates from the fluctuations arising from changes in the market
prices of securities held or sold during the year. Accordingly, such realized
foreign currency gains (losses) are included in the reported net realized gains
(losses) on investment transactions.
Reported realized foreign currency gains or losses arise from disposition of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions, and the difference between the
amounts of dividends, interest and foreign withholding taxes recorded on each
Fund's books on the transaction date and the U.S. dollar equivalent of the
amounts actually received or paid. Unrealized foreign exchange gains and losses
arise from changes (due to the changes in the exchange rate) in the value of
foreign currency and other assets and liabilities denominated in foreign
currencies, which are held at period end.
D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into
forward foreign currency exchange contracts (obligations to purchase or sell
foreign currency in the future on a date and price fixed at the time the
contracts are entered into) to manage the Fund's exposure to foreign currency
exchange fluctuations. Each day the forward contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by "marking
to market". When the forward contract is closed, or the delivery of the currency
is made or taken, each Fund records a realized gain or loss equal to the
difference between the proceeds from (or cost of) the closing transaction and
the Fund's basis in the contract. The Funds are subject to off-balance sheet
risk to the extent of the value of the contracts for purchases of foreign
currency and in an unlimited amount for sales of foreign currency.
As of August 31, 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 August 31, 2004, the Funds had written options contracts outstanding as
listed on the Funds' Portfolio of Investments.
105
<Page>
Transactions in options written during the year ended August 31, 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 (3,402,363) 19,006 (1,672,925) 8,098 -- --
Options expired or terminated in
closing purchase transactions 3,351,795 (18,552) 2,046,425 (10,007) 23,700 (112)
Options exercised -- -- -- -- -- --
Options outstanding at
August 31, 2004 (507,318) $ 2,803 -- $ -- -- $ --
</Table>
<Table>
<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 (654,553) 2,263 (1,149,133) 3,778
Options expired or terminated in
closing purchase transactions 708,103 (2,514) 1,238,383 (4,196)
Options exercised -- -- -- --
Options outstanding at
August 31, 2004 -- $ -- -- $ --
</Table>
F. SWAPS -- The Funds may engage in various swap transactions, including forward
rate agreements, interest rate, currency, fixed income, index, credit default
and total return swaps, primarily to manage duration and yield 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 value of 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.
As of August 31, 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 and
Liabilities.
106
<Page>
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 To Be
Announced (TBA) securities, 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, BFII, STB and STBII had TBA Dollar Rolls outstanding as of August 31, 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. The Funds engage in dollar rolls for the purpose of enhancing their
yields, principally by earning a negotiated fee. BFII had Fee-based Dollar Rolls
outstanding as of August 31, 2004.
I. RESTRICTED AND ILLIQUID SECURITIES -- The Funds are permitted to invest in
securities that are subject to legal or contractual restrictions on resale or
are illiquid. Restricted securities generally may be resold in transactions
exempt from registration. A security may be considered illiquid if it lacks a
readily available market or if its valuation has not changed for a certain
period of time. Disposal of these securities may involve time-consuming
negotiations and expense, and prompt sale at the current valuation may be
difficult. The following is the market value and percentage of net assets of
restricted and illiquid securities (amounts in thousands):
<Table>
<Caption>
ILLIQUID RESTRICTED *
FUND
BF $ 20,457 2.29% $ 20,457 2.29%
GSIF 2,587 6.08% 2,587 6.08%
</Table>
* Includes Illiquid Securities
107
<Page>
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 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 Funds' policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of their distributable net investment income and
net realized gain on investments. In addition, the Funds intend to make
distributions as required to avoid excise taxes. Accordingly, no provision for
Federal income or excise tax is necessary.
M. FOREIGN TAXES -- 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 they invest.
N. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions paid to
shareholders are recorded on the ex-dividend date. The amount of dividends and
distributions from net investment income and net realized capital gains is
determined in accordance with Federal income tax regulations, which may differ
from accounting principles generally accepted in the United States of America.
To the extent these "book/tax" differences are permanent in nature, (i.e., that
they result from other than timing of recognition -- "temporary differences")
such amounts are reclassified within the capital accounts based on their Federal
tax-basis treatment.
The following amounts were reclassified within the capital accounts (amounts in
thousands):
<Table>
<Caption>
ACCUMULATED ACCUMULATED
UNDISTRIBUTED/ NET REALIZED
PAID-IN (OVERDISTRIBUTED) GAIN (LOSS)
CAPITAL NET INVESTMENT INCOME ON INVESTMENTS
FUND
BF $ -- $ 246 $ (246)
BFII -- (80) 80
EIF -- 6 (6)
EMDF (3) 115 (112)
GSIF (15) 1,118 (1,103)
STBF -- 650 (650)
STBFII (505) 864 (359)
SIF (85) 156 (71)
USTI -- (1) 1
</Table>
108
<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.
4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES
A. INVESTMENT ADVISORY FEE -- Pursuant to the Investment Advisory Agreement,
J.P. Morgan Investment Management, Inc. ("JPMIM") acts as the investment advisor
to the Funds. JPMIM, a wholly owned subsidiary of JPMorgan Fleming Asset
Management Holdings, Inc., which is a wholly owned subsidiary of JPMorgan Chase
& Co. ("JPMorgan"), is the advisor for the Funds. 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.
109
<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.
On August 19, 2004, the Board of Trustees approved management's proposal to
enter into a Distribution Agreement with One Group Dealer Services, Inc., an
indirect wholly-owned subsidiary of JPMorgan Chase & Co. The foregoing change in
the service provider is expected to occur effective February 19, 2005.
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>
110
<Page>
On August 19, 2004, the Board of Trustees approved management's proposal to
replace JPMCB with One Group Dealer Services, Inc. as Shareholder Servicing
Agent. The foregoing change in the service provider is expected to occur
effective February 19, 2005.
JPMCB may enter into service contracts with certain entities under which it will
pay all or a portion of the annual fee to such entities for performing
shareholding 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.
JPMCB waived fees as outlined in Note 4.F.
D. CUSTODIAN AND ACCOUNTING FEES -- JPMCB provides portfolio custody and
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 an Administration Agreement, JPMCB (the
"Administrator") provides certain administration services to the Funds. In
consideration of these services, the Administrator receives a fee computed daily
and paid monthly at an annual rate equal to 0.15% of the first $25 billion of
the average daily net assets of all non-money market funds in the JPMorgan Fund
Complex and 0.075% of the 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, Advisor and Distributor have 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>
111
<Page>
The contractual expense limitation agreements were in effect for the year ended
August 31, 2004. The expense limitation percentages in the table above are due
to expire December 31, 2006.
On August 19, 2004, the Board of Trustees approved management's proposal to
enter into an Administration Agreement with One Group Administrative Services,
Inc., (OGA) an indirect wholly-owned subsidiary of JPMorgan Chase & Co. The
foregoing change in the service provider is expected to occur effective February
19, 2005.
The Administrative fees charged to the Funds will be subject to the same fee
structure as those paid to the current Administrator.
JPMCB will begin to provide sub-administrative services to the Funds in 2005.
For such services, JPMCB will receive a portion of the fees payable to OGA as
Administrator.
The Administrator waived fees and reimbursed expenses as outlined in Note 4.F.
F. WAIVERS AND REIMBURSEMENTS -- For the year ended August 31, 2004, the Funds'
service providers waived fees and the Administrator contractually reimbursed
expenses for each of the Funds as follows (amounts in thousands). Neither the
Funds' service providers nor the Administrator expect the Funds to repay any
such waived fees and reimbursed expenses in future years.
<Table>
<Caption>
CONTRACTUAL WAIVERS
---------------------------------------------------------------
INVESTMENT SHAREHOLDER CONTRACTUAL
ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL REIMBURSEMENTS
FUND
BF $ -- $ 1,080 $ 279 $ -- $ 1,359 $ 42
BFII -- 389 1,184 61 1,634 --
EIF 400 442 378 -- 1,220 --
EMDF 44 41 93 -- 178 --
GSIF 199 101 35 -- 335 70
STBF 255 983 751 2 1,991 --
STBFII -- 597 823 67 1,487 --
SIF 111 33 52 -- 196 115
USTI 57 130 247 125 559 --
Total $ 1,066 $ 3,796 $ 3,842 $ 255 $ 8,959 $ 227
</Table>
<Table>
<Caption>
VOLUNTARY WAIVERS
------------------------------------------------------------------------------
INVESTMENT SHAREHOLDER
ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL
YEAR ENDED AUGUST 31, 2004
BF $ -- $ 70 $ -- $ -- $ 70
EIF $ -- $ 126 $ -- $ -- $ 126
STBF $ -- $ 28 $ -- $ -- $ 28
Total $ -- $ 224 $ -- $ -- $ 224
</Table>
G. OTHER-- Certain officers of the Trusts are officers of J.P. Morgan Chase &
Co. or of BISYS or their subsidiaries. During the period, certain Funds may have
purchased securities from an underwriting syndicate in which the principal
underwriter or members of the syndicate are affiliated with the Advisors.
112
<Page>
The Funds may use related party broker/dealers. For the year ended August 31,
2004, STBF incurred approximately (in thousands) $236 as brokerage commissions
with brokers/dealers affiliated with JPMorgan.
The SEC has granted an exemptive order permitting the Funds to engage in
principal transactions with J.P. Morgan Securities, Inc., an affiliated broker,
involving taxable money market instruments subject to certain conditions.
5. CLASS SPECIFIC EXPENSES
The Funds' class specific expenses for the year ended August 31, 2004 are as
follows (amounts in thousands):
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT
BF
Class A $ 6 $ 6 $ 21
Class B 6 18 20
Class C 1 2 2
Institutional 373 -- 27
Select 584 -- 45
Ultra 206 -- 16
- ------------------------------------------------------------------------------
$ 1,176 $ 26 $ 131
BFII
Class A $ 61 $ 61 $ 61
Class B 34 104 35
Select 2,343 -- 24
- ------------------------------------------------------------------------------
$ 2,438 $ 165 $ 120
EIF
Institutional $ 378 $ -- $ 21
EMDF
Select $ 115 $ -- $ 29
GSIF
Class A $ 1 $ 1 $ 13
Institutional 66 -- 17
Select 7 -- 15
- ------------------------------------------------------------------------------
$ 74 $ 1 $ 45
STBF
Class A $ 17 $ 17 $ 15
Institutional 733 -- 29
Select 271 -- 32
- ------------------------------------------------------------------------------
$ 1,021 $ 17 $ 76
- ------------------------------------------------------------------------------
</Table>
113
<Page>
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT
STBFII
Class A $ 116 $ 116 $ 76
Class M 2,296 3,214 9
Select 1,215 -- 20
- ------------------------------------------------------------------------------
$ 3,627 $ 3,330 $ 105
SIF
Class A $ 7 $ 7 $ 10
Class B 21 63 31
Class C 9 28 13
Class M 22 37 10
- ------------------------------------------------------------------------------
$ 59 $ 135 $ 64
USTI
Class A $ 125 $ 125 $ 98
Class B 42 125 33
Select 192 -- 15
- ------------------------------------------------------------------------------
$ 359 $ 250 $ 146
- ------------------------------------------------------------------------------
</Table>
6. CLASS SPECIFIC DISTRIBUTIONS
The Funds' class specific distributions from net investment income and realized
gain on investment transactions for the year ended August 31, 2004 and the year
ended August 31, 2003 are as follows (amounts in thousands):
<Table>
<Caption>
YEAR ENDED 8/31/04 YEAR ENDED 8/31/03
---------------------------------- ---------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
BF
Class A $ 78 $ 71 $ 62 $ 8
Class B 58 76 70 13
Class C 7 9 1 --
Institutional 13,088 11,950 26,560 5,442
Select 7,804 8,959 13,353 2,562
Ultra 14,764 13,144 22,494 4,216
- -------------------------------------------------------------------------------------------------------------
$ 35,799 $ 34,209 $ 62,540 $ 12,241
BFII
Class A $ 752 $ 141 $ 1,413 $ 389
Class B 318 83 492 170
Select 29,964 5,568 36,689 7,587
- -------------------------------------------------------------------------------------------------------------
$ 31,034 $ 5,792 $ 38,594 $ 8,146
- -------------------------------------------------------------------------------------------------------------
</Table>
114
<Page>
<Table>
<Caption>
YEAR ENDED 8/31/04 YEAR ENDED 8/31/03
---------------------------------- ---------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
EIF
Institutional $ 5,541 $ -- $ 8,519 $ --
EMDF
Select $ 3,506 $ -- $ 4,996 $ --
GSIF
Class A $ 28 $ -- $ 9 $ --
Class B** -- -- 12 --
Institutional 3,689 -- 6,870 --
Select 154 -- 186 --
- -------------------------------------------------------------------------------------------------------------
$ 3,871 $ -- $ 7,077 $ --
STBF
Class A $ 131 $ -- $ 255 $ 155
Institutional 17,897 -- 21,501 9,747
Select 2,353 -- 3,658 1,911
- -------------------------------------------------------------------------------------------------------------
$ 20,381 $ -- $ 25,414 $ 11,813
STBFII
Class A $ 955(a) $ -- $ 1,997* $ 510
Class M 15,711(a) -- 26,550* 5,842
Select 11,173(a) -- 5,356* 688
- -------------------------------------------------------------------------------------------------------------
$ 27,839 $ -- $ 33,903 $ 7,040
SIF
Class A $ 133 $ -- $ 158 $ --
Class B 366 -- 384 --
Class C 158 -- 140 --
Class M 351 -- 421 --
- -------------------------------------------------------------------------------------------------------------
$ 1,008 $ -- $ 1,103 $ --
USTI
Class A $ 1,532 $ -- $ 1,913 $ --
Class B 366 -- 670 --
Select 2,481 -- 3,136 --
- -------------------------------------------------------------------------------------------------------------
$ 4,379 $ -- $ 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.
(a) Includes return of capital of $7, $80 and $62 for Class A, M and Select,
respectively (amounts in thousands).
115
<Page>
7. INVESTMENT TRANSACTIONS
For the year ended August 31, 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 $ 941,374 $ 754,807 $ 5,131,810 $ 5,518,217
BFII 685,218 624,080 5,298,753 5,452,819
EIF 483,580 511,844 43,964 54,950
EMDF 2,547 2,955 70,058 96,491
GSIF 7,559 52,364 92,686 128,575
STBF 936,222 877,280 1,046,102 1,155,246
STBFII 1,863,755 1,783,566 1,694,872 1,998,877
SIF 7,852 9,383 18,921 19,678
USTI -- 1,887 225,439 229,373
</Table>
8. FEDERAL INCOME TAX MATTERS
For Federal income tax purposes, the cost and unrealized appreciation
(depreciation) in value of the investment securities at August 31, 2004 are as
follows (amounts in thousands):
<Table>
<Caption>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
BF $ 1,073,423 $ 20,749 $ (5,010) $ 15,739
BFII 1,120,988 16,894 (1,115) 15,779
EIF 294,640 352 (200) 152
EMDF 29,772 4,342 (95) 4,247
GSIF 29,428 1,997 (1,452) 545
STBF 742,319 2,606 (2,906) (300)
STBFII 1,192,459 4,033 (3,806) 227
SIF 19,611 1,289 (272) 1,017
USTI 130,689 2,973 (91) 2,882
</Table>
116
<Page>
The tax character of distributions paid during the year ended August 31, 2004
and year ended August 31, 2003, were as follows (amounts in thousands):
<Table>
<Caption>
ORDINARY LONG-TERM RETURN OF TOTAL
INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS
YEAR ENDED
AUGUST 31, 2004
BF $ 50,592 $ 19,416 $ -- $ 70,008
BFII 31,533 5,293 -- 36,826
EIF 5,541 -- -- 5,541
EMDF 3,506 -- -- 3,506
GSIF 3,871 -- -- 3,871
STBF 20,381 -- -- 20,381
STBFII 27,690 -- 149 27,839
SIF 1,008 -- -- 1,008
USTI 4,379 -- -- 4,379
</Table>
<Table>
<Caption>
ORDINARY LONG-TERM RETURN OF TOTAL
INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS
YEAR ENDED
AUGUST 31, 2003
BF $ 71,135 $ 3,646 $ -- $ 74,781
BFII 42,125 4,615 -- 46,740
EIF 8,519 -- -- 8,519
EMDF 4,996 -- -- 4,996
GSIF 7,077 -- -- 7,077
STBF 29,709 7,518 -- 37,227
STBFII 36,036 4,320 587 40,943
SIF 1,103 -- -- 1,103
USTI 5,719 -- -- 5,719
</Table>
At August 31, 2004, the components of net assets (excluding paid in capital) on
a tax basis were as follows (amounts in thousands):
<Table>
<Caption>
BF BFII EIF
Current distributable ordinary income $ 12,123 $ 5,929 $ 7
Plus/Less: cumulative timing differences (575) (2,098) (113)
Undistributed ordinary income or
overdistribution of ordinary income $ 11,548 $ 3,831 $ (106)
Current distributable long-term capital
gain or tax basis capital loss carryover 11,226 8,465 (5,913)
Plus/Less: cumulative timing differences -- -- (542)
Undistributed long-term gains/
accumulated capital loss 11,226 8,465 (6,455)
Unrealized appreciation (depreciation) $ 13,494 $ 17,146 $ 150
</Table>
117
<Page>
<Table>
<Caption>
EMDF GSIF STBF
Current distributable ordinary income $ 134 $ 53 $ 2,641
Plus/Less: cumulative timing differences (7) (185) (606)
Undistributed ordinary income or
overdistribution of ordinary income $ 127 $ (132) $ 2,035
Current distributable long-term capital
gain or tax basis capital loss carryover 3,925 (26,955) (1,803)
Plus/Less: cumulative timing differences -- -- --
Undistributed long-term gains/
accumulated capital loss 3,925 (26,955) (1,803)
Unrealized appreciation (depreciation) $ 4,581 $ 532 $ (1,112)
<Caption>
STBFII SIF USTI
Current distributable ordinary income $ 0 $ -- $ 133
Plus/Less: cumulative timing differences (2,251) (52) (126)
Undistributed ordinary income or
overdistribution of ordinary income $ (2,251) $ (52) $ 7
Current distributable long-term capital
gain or tax basis capital loss carryover (1,675) (2,368) (1,306)
Plus/Less: cumulative timing differences -- -- (783)
Undistributed long-term gains/
accumulated capital loss (1,675) (2,368) (2,089)
Unrealized appreciation (depreciation) $ 170 $ 1,001 $ 2,881
</Table>
For BFII and USTI, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, the mark to
market of futures and straddle loss deferrals. For EIF, the difference between
book and tax basis unrealized appreciation/(depreciation) is primarily
attributed to the mark to market of futures and straddle loss deferrals. For
EMDF, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, the mark to
market of futures and allocation of tax basis on "master/feeder" takedown. For
BF, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, the mark to
market of futures and options and straddle loss deferrals. For STBF, the
difference between book and tax basis unrealized appreciation/(depreciation) is
primarily attributed to wash sales and the mark to market of futures. For
STBFII, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to the mark to market of
futures. For SIF and GSIF, the difference between book and tax basis unrealized
appreciation/(depreciation) is primarily attributed to wash sales, the mark to
market of futures, forward foreign currency contracts and straddle loss
deferrals. For BFII, EMDF, STBF, STBFII and SIF, the cumulative timing
difference account primarily consists of dividends payable and deferred
compensation. For BF, EIF and USTI, the cumulative timing difference account
primarily consists of post-October loss deferrals, dividends
118
<Page>
payable and deferred compensation. For GSIF, the cumulative timing difference
account primarily consists of dividends payable.
At August 31, 2004, the following Funds have capital loss carryovers, which will
be available to offset capital gains. To the extent that any net capital loss
carryovers are used to offset future capital gains, it is probable that the
gains so offset will not be distributed to shareholders (amounts in thousands).
<Table>
<Caption>
EXPIRATION
AMOUNT DATE
EIF $ (792) August 31, 2010
(1,180) August 31, 2011
(3,941) August 31, 2012
- ----------------------------------------------------------------------------------
TOTAL (5,913)
- ----------------------------------------------------------------------------------
GSIF $ (2,681) August 31, 2006
(4,926) August 31, 2007
(6,628) August 31, 2008
(4,320) August 31, 2009
(8,400) August 31, 2010
- ----------------------------------------------------------------------------------
TOTAL $ (26,955)*
- ----------------------------------------------------------------------------------
STBF $ (1,803) August 31, 2012
- ----------------------------------------------------------------------------------
STBF II $ (1,675) August 31, 2012
- ----------------------------------------------------------------------------------
SIF $ (1,404) August 31, 2009
(917) August 31, 2010
(46) August 31, 2011
- ----------------------------------------------------------------------------------
TOTAL $ (2,367)
- ----------------------------------------------------------------------------------
USTI $ (1,306) August 31, 2008
- ----------------------------------------------------------------------------------
</Table>
* The above capital loss carryover includes $383 (amount in thousands) of
losses acquired from J.P. Morgan Global Strategic Income Fund. Utilization
of these losses will be subject to an annual limitation as prescribed by
the Internal Revenue Code.
119
<Page>
During the year ended August 31, 2004, EMDF, GSIF, SIF and USTI utilized capital
loss carryovers of $2,324, $5,335, $248 and $281, respectively (amounts in
thousands).
Capital losses incurred after October 31, within a Fund's fiscal year are deemed
to arise on the first business day of the following fiscal year for tax
purposes. The following Funds have incurred the following post-October realized
losses (amounts in thousands):
<Table>
<Caption>
CURRENCY CAPITAL
FUND
BF $ 3 $ --
EIF -- 540
USTI -- 784
</Table>
9. BANK BORROWINGS
Pursuant to a Line of Credit Agreement, dated April 17, 2003, the Funds may
borrow money for temporary or emergency purposes. The Funds have entered into
the agreement, enabling them to participate with other JPMorgan Funds in a line
of credit with JPMCB, as administrative agent, and with a syndicate of banks,
which permits borrowings up to $250 million, collectively. Interest is charged
to each Fund based on its borrowings at an annual rate equal to the sum of the
Federal Funds Rate plus 0.50%. The Funds also pay a commitment fee of 0.09% per
annum on the average daily amount of the available commitment, which is
allocated on a pro-rata basis to the Funds. The commitment fee is included in
Other expenses on the Statement of Operations. This agreement has been extended
to April 14, 2005.
During the year ended August 31, 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
FUND AMOUNT OUTSTANDING* INTEREST RATE
FUND
EMDF $ 20 1.63%
GSIF 150 1.61%
</Table>
* The average amount outstanding was calculated based on the daily balances
during the period from September 1, 2003, through August 31, 2004.
120
<Page>
10. CONCENTRATIONS AND INDEMNIFICATIONS
The Funds may have elements of risk not typically associated with investments in
the United States of America due to concentrated investments in a limited number
of countries or regions, which may vary throughout the year. Such concentrations
may subject the Funds to additional risks resulting from political or economic
conditions in such countries or regions and the possible imposition of adverse
governmental laws or currency exchange restrictions could cause the securities
and their markets to be less liquid and their prices more volatile than those of
comparable U.S. securities.
The ability of the issuers of debt, asset-backed and mortgage-backed securities,
along with counterparties to 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.
As of August 31, 2004, EMDF invested approximately 22.8% of its total
investments in Brazil.
From time to time, the Funds may have a concentration of several shareholders
which may be a related party, holding a significant percentage of shares
outstanding. Investment activities of these shareholders could have a material
impact on the Funds.
In the normal course of business, the Funds may 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 May 25, 2004, J.P.Morgan Chase & Co. and Bank One Corp. announced that, at
separate meetings, their respective shareholders had approved the merger of the
two companies. The companies completed the merger of their holding companies on
July 1, 2004. Effective July 20, 2004, the name of the holding company changed
to JPMorgan Chase & Co. Effective November 15, 2004, the bank name will be
JPMorgan Chase Bank, National Association.
121
<Page>
12. CAPITAL SHARE TRANSACTIONS
Capital share transactions were as follows for the periods presented (amounts in
thousands):
<Table>
<Caption>
BOND FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 1,767 $ 5,626
Shares issued in reinvestment
of distributions 143 59
Shares redeemed (907) (4,362)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 1,003 $ 1,323
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 177 550
Shares issued in reinvestment
of distributions 14 6
Shares redeemed (91) (430)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 100 126
- -----------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 237 $ 1,762
Shares issued in reinvestment
of distributions 67 50
Shares redeemed (836) (623)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (532) $ 1,189
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 24 172
Shares issued in reinvestment
of distributions 7 5
Shares redeemed (86) (61)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (55) 116
- -----------------------------------------------------------------------------------------------
</Table>
122
<Page>
<Table>
<Caption>
BOND FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS C SHARES**
AMOUNT
Shares sold $ 127 $ 277
Shares issued in reinvestment
of distributions 14 1
Shares redeemed (199) --
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (58) $ 278
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 13 27
Shares issued in reinvestment
of distributions 1 --^
Shares redeemed (20) --
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (6) 27
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 75,515 $ 100,824
Shares issued in reinvestment
of distributions 15,282 18,575
Shares redeemed (252,219) (387,582)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (161,422) $ (268,183)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 7,584 9,955
Shares issued in reinvestment
of distributions 1,545 1,827
Shares redeemed (25,296) (38,087)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (16,167) (26,305)
- -----------------------------------------------------------------------------------------------
</Table>
** From commencement of offering class shares on March 31, 2003.
^ Amount rounds to less than one thousand.
123
<Page>
<Table>
<Caption>
BOND FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
SELECT SHARES
AMOUNT
Shares sold $ 45,098 $ 164,875
Shares issued in reinvestment
of distributions 15,587 14,339
Shares redeemed (179,415) (179,758)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (118,730) $ (544)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 4,528 16,205
Shares issued in reinvestment
of distributions 1,575 1,410
Shares redeemed (18,118) (17,684)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (12,015) (69)
- -----------------------------------------------------------------------------------------------
ULTRA SHARES
AMOUNT
Shares sold $ 69,894 $ 83,572
Shares issued in reinvestment
of distributions 24,753 21,583
Shares redeemed (159,036) (268,399)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (64,389) $ (163,244)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 7,078 8,169
Shares issued in reinvestment
of distributions 2,501 2,122
Shares redeemed (16,016) (26,279)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (6,437) (15,988)
- -----------------------------------------------------------------------------------------------
</Table>
124
<Page>
<Table>
<Caption>
BOND FUND II
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 3,951 $ 19,019
Shares issued in connection with
Fund Reorganization (Note 2) -- 4,321
Shares issued in reinvestment
of distributions 666 1,250
Shares redeemed (16,855) (21,390)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (12,238) $ 3,200
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 95 456
Shares issued in connection with
Fund Reorganization (Note 2) -- 104
Shares issued in reinvestment
of distributions 16 30
Shares redeemed (411) (514)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (300) 76
- -----------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 966 $ 5,212
Shares issued in reinvestment
of distributions 320 535
Shares redeemed (4,739) (3,864)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (3,453) $ 1,883
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 23 125
Shares issued in reinvestment
of distributions 8 13
Shares redeemed (116) (93)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (85) 45
- -----------------------------------------------------------------------------------------------
</Table>
125
<Page>
<Table>
<Caption>
BOND FUND II
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
SELECT SHARES
AMOUNT
Shares sold $ 64,877 $ 101,070
Shares issued in connection with
Fund Reorganization (Note 2) -- 530,889
Shares issued in reinvestment
of distributions 6,484 9,918
Shares redeemed (248,177) (260,826)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (176,816) $ 381,051
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 1,576 2,423
Shares issued in connection with
Fund Reorganization (Note 2) -- 12,846
Shares issued in reinvestment
of distributions 158 239
Shares redeemed (6,047) (6,274)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (4,313) 9,234
- -----------------------------------------------------------------------------------------------
<Caption>
ENHANCED INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 263,773 $ 447,159
Shares issued in reinvestment
of distributions 3,814 6,334
Shares redeemed (327,065) (394,644)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (59,478) $ 58,849
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 26,783 44,983
Shares issued in reinvestment of
distributions 388 638
Shares redeemed (33,263) (39,744)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (6,092) 5,877
- -----------------------------------------------------------------------------------------------
</Table>
126
<Page>
<Table>
<Caption>
FLEMING EMERGING MARKETS DEBT FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
SELECT
AMOUNT
Shares sold $ 14,341 $ 48,541
Shares issued in reinvestment
of distributions 3,085 4,368
Shares redeemed (45,233) (44,406)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (27,807) $ 8,503
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 1,542 5,767
Shares issued in reinvestment
of distributions 330 517
Shares redeemed (4,787) (5,103)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,915) 1,181
- -----------------------------------------------------------------------------------------------
</Table>
127
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 838 $ 563
Shares issued in reinvestment
of distributions 26 2
Shares redeemed (466) (233)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 398 $ 332
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 93 62
Shares issued in reinvestment
of distributions 3 --^
Shares redeemed (52) (26)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 44 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
128
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 861 $ 19,855
Shares issued in reinvestment
of distributions 263 1,670
Shares redeemed (70,986) (53,142)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (69,862) $ (31,617)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 94 2,212
Shares issued in reinvestment
of distributions 29 189
Shares redeemed (7,786) (5,948)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (7,663) (3,547)
- -----------------------------------------------------------------------------------------------
SELECT SHARES
AMOUNT
Shares sold $ 271 $ 813
Shares issued in reinvestment
of distributions 141 173
Shares redeemed (1,058) (3,325)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (646) $ (2,339)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 30 90
Shares issued in reinvestment
of distributions 15 19
Shares redeemed (116) (377)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (71) (268)
- -----------------------------------------------------------------------------------------------
</Table>
129
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 1,777 $ 10,476
Shares issued in reinvestment
of distributions 60 234
Shares redeemed (7,872) (11,597)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (6,035) $ (887)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 180 1,047
Shares issued in reinvestment
of distributions 6 23
Shares redeemed (800) (1,161)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (614) (91)
- -----------------------------------------------------------------------------------------------
INSTITUTIONAL SHARES
AMOUNT
Shares sold $ 232,147 $ 577,952
Shares issued in reinvestment
of distributions 12,345 22,428
Shares redeemed (406,830) (397,855)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (162,338) $ 202,525
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 23,525 57,811
Shares issued in reinvestment
of distributions 1,252 2,246
Shares redeemed (41,331) (39,844)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (16,554) 20,213
- -----------------------------------------------------------------------------------------------
SELECT SHARES
AMOUNT
Shares sold $ 46,594 $ 114,380
Shares issued in reinvestment
of distributions 1,497 4,787
Shares redeemed (75,703) (116,165)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (27,612) $ 3,002
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 4,723 11,457
Shares issued in reinvestment
of distributions 152 479
Shares redeemed (7,682) (11,649)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (2,807) 287
- -----------------------------------------------------------------------------------------------
</Table>
130
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND II
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 45,840 $ 113,310
Shares issued in reinvestment
of distributions 815 2,068
Shares redeemed (35,304) (141,585)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 11,351 $ (26,207)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 4,499 10,975
Shares issued in reinvestment
of distributions 80 200
Shares redeemed (3,449) (13,686)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 1,130 (2,511)
- -----------------------------------------------------------------------------------------------
CLASS M SHARES
AMOUNT
Shares sold $ 62,729 $ 396,087
Shares issued in reinvestment
of distributions 20 166
Shares redeemed (584,516) (344,293)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (521,767) $ 51,960
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 6,131 38,320
Shares issued in reinvestment
of distributions 2 16
Shares redeemed (57,237) (33,291)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (51,104) 5,045
- -----------------------------------------------------------------------------------------------
SELECT
AMOUNT
Shares sold $ 354,225 $ 265,146
Shares issued in reinvestment
of distributions 1,103 1,917
Shares redeemed (203,163) (65,640)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 152,165 $ 201,423
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 34,518 25,618
Shares issued in reinvestment
of distributions 108 185
Shares redeemed (19,866) (6,337)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 14,760 19,466
- -----------------------------------------------------------------------------------------------
</Table>
131
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 1,141 $ 1,934
Shares issued in reinvestment
of distributions 79 99
Shares redeemed (1,548) (1,596)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (328) $ 437
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 126 219
Shares issued in reinvestment
of distributions 9 11
Shares redeemed (172) (183)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (37) 47
- -----------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 1,013 $ 2,084
Shares issued in reinvestment
of distributions 177 159
Shares redeemed (2,027) (1,486)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (837) $ 757
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 111 236
Shares issued in reinvestment
of distributions 19 18
Shares redeemed (224) (170)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (94) 84
- -----------------------------------------------------------------------------------------------
</Table>
132
<Page>
<Table>
<Caption>
STRATEGIC INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS C SHARES
AMOUNT
Shares sold $ 1,238 $ 2,257
Shares issued in reinvestment
of distributions 101 75
Shares redeemed (2,164) (1,271)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (825) $ 1,061
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 137 254
Shares issued in reinvestment
of distributions 12 8
Shares redeemed (242) (147)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (93) 115
- -----------------------------------------------------------------------------------------------
CLASS M SHARES
AMOUNT
Shares sold $ 431 $ 499
Shares issued in reinvestment
of distributions -- --^
Shares redeemed (745) (1,960)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (314) $ (1,461)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 47 57
Shares issued in reinvestment
of distributions -- --^
Shares redeemed (83) (221)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (36) (164)
- -----------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
133
<Page>
<Table>
<Caption>
U.S. TREASURY INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
CLASS A SHARES
AMOUNT
Shares sold $ 18,542 $ 20,583
Shares issued in reinvestment
of distributions 1,136 1,450
Shares redeemed (22,287) (19,203)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (2,609) $ 2,830
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 1,592 1,726
Shares issued in reinvestment
of distributions 96 121
Shares redeemed (1,898) (1,611)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (210) 236
- -----------------------------------------------------------------------------------------------
CLASS B SHARES
AMOUNT
Shares sold $ 1,039 $ 6,965
Shares issued in reinvestment
of distributions 270 488
Shares redeemed (7,811) (8,907)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ (6,502) $ (1,454)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 88 581
Shares issued in reinvestment
of distributions 23 41
Shares redeemed (665) (747)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding (554) (125)
- -----------------------------------------------------------------------------------------------
</Table>
134
<Page>
<Table>
<Caption>
U.S. TREASURY INCOME FUND
--------------------------------------
YEAR ENDED YEAR ENDED
AUGUST 31, 2004 AUGUST 31, 2003
SELECT
AMOUNT
Shares sold $ 38,641 $ 47,402
Shares issued in reinvestment
of distributions 1,395 1,857
Shares redeemed (34,064) (56,156)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 5,972 $ (6,897)
- -----------------------------------------------------------------------------------------------
SHARES
Shares sold 3,255 3,957
Shares issued in reinvestment
of distributions 118 155
Shares redeemed (2,893) (4,685)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding 480 (573)
- -----------------------------------------------------------------------------------------------
</Table>
135
<Page>
JPMORGAN FUNDS
FINANCIAL HIGHLIGHTS
CLASS A 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
Year Ended 8/31/04 $ 10.03 0.32 0.32 0.64
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
Year Ended 8/31/04 $ 40.59 1.26^ 1.33 2.59
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
Year Ended 8/31/04 $ 8.92 0.48^ 0.15 0.63
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
Year Ended 8/31/04 $ 9.85 0.20 (0.01) 0.19
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 TOTAL
INCOME GAINS DISTRIBUTIONS
BOND FUND
Year Ended 8/31/04 0.32 0.30 0.62
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
Year Ended 8/31/04 1.25 0.24 1.49
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
Year Ended 8/31/04 0.47 -- 0.47
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
Year Ended 8/31/04 0.20 -- 0.20
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>
^^ The fund changed its fiscal year end from October 31 to August 31.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
136
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND
Year Ended 8/31/04 $ 10.05 6.61%
Year Ended 8/31/03 $ 10.03 4.32%
11/1/01 Through 8/31/02^^ $ 10.07 3.72%
9/10/01** Through 10/31/01 $ 10.08 2.63%
BOND FUND II
Year Ended 8/31/04 $ 41.69 6.45%
Year Ended 8/31/03 $ 40.59 3.26%
11/1/01 Through 8/31/02^^ $ 41.39 4.26%
3/2/01** Through 10/31/01 $ 41.01 7.23%
GLOBAL STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 9.08 7.20%
Year Ended 8/31/03 $ 8.92 8.33%
11/1/01 Through 8/31/02^^ $ 8.64 2.54%
9/10/01** Through 10/31/01 $ 8.91 (2.30%)
SHORT TERM BOND FUND
Year Ended 8/31/04 $ 9.84 1.92%
Year Ended 8/31/03 $ 9.85 2.08%
11/1/01 Through 8/31/02^^ $ 10.03 3.18%
9/10/01** Through 10/31/01 $ 10.01 2.01%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-------------------------
NET ASSETS,
END OF
PERIOD
(MILLIONS)
BOND FUND
Year Ended 8/31/04 $ 3
Year Ended 8/31/03 $ 2
11/1/01 Through 8/31/02^^ $ 1
9/10/01** Through 10/31/01 $ --~~
BOND FUND II
Year Ended 8/31/04 $ 20
Year Ended 8/31/03 $ 32
11/1/01 Through 8/31/02^^ $ 29
3/2/01** Through 10/31/01 $ 63
GLOBAL STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 1
Year Ended 8/31/03 $ --~~
11/1/01 Through 8/31/02^^ $ --~~
9/10/01** Through 10/31/01 $ --~~
SHORT TERM BOND FUND
Year Ended 8/31/04 $ 3
Year Ended 8/31/03 $ 9
11/1/01 Through 8/31/02^^ $ 10
9/10/01** Through 10/31/01 $ 2
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
----------------------------------------------------------------------
NET INVESTMENT
NET EXPENSES INCOME (LOSS)
INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND
Year Ended 8/31/04 0.75% 3.19% 1.88% 2.06% 571%
Year Ended 8/31/03 0.75% 3.86% 1.59% 3.02% 679%
11/1/01 Through 8/31/02^^ 0.75% 3.59% 5.64% (1.30%) 572%
9/10/01** Through 10/31/01 0.75% 3.93% 10.75% (6.07%) 423%
BOND FUND II
Year Ended 8/31/04 0.75% 3.06% 1.26% 2.55% 590%
Year Ended 8/31/03 0.75% 3.96% 1.16% 3.55% 806%
11/1/01 Through 8/31/02^^ 0.75% 4.02% 1.10% 3.67% 496%
3/2/01** Through 10/31/01 0.75% 4.90% 1.25% 4.40% 319%
GLOBAL STRATEGIC INCOME FUND
Year Ended 8/31/04 1.27%(o) 5.31% 4.23% 2.35% 152%
Year Ended 8/31/03 1.25% 4.45% 7.26% (1.56%) 248%
11/1/01 Through 8/31/02^^ 1.25% 6.20% 35.90%!! (28.45%)!! 178%
9/10/01** Through 10/31/01 1.25% 6.99% 11.01% (2.77%) 107%
SHORT TERM BOND FUND
Year Ended 8/31/04 0.75% 2.00% 1.17% 1.58% 261%
Year Ended 8/31/03 0.75% 2.39% 1.10% 2.04% 386%
11/1/01 Through 8/31/02^^ 0.75% 3.01% 1.00% 2.76% 215%
9/10/01** Through 10/31/01 0.75% 3.62% 10.76% (6.39%) 160%
</Table>
~~ Amount rounds to less than one million.
# Short periods have been annualized.
!! Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
(o) Includes interest expense for custody overdraft of 1 basis point.
SEE NOTES TO FINANCIAL STATEMENTS.
137
<Page>
<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
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 10.23 0.21^ (0.02) 0.19
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
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 8.89 0.44^ 0.31 0.75
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
Year Ended 8/31/04 $ 11.61 0.35 0.23 0.58
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)
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------------
LESS DISTRIBUTIONS:
----------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN
INCOME GAINS OF CAPITAL
SHORT TERM BOND FUND II
Year Ended 8/31/04 0.21 -- --~~
Year Ended 8/31/03 0.24 0.05 --~~
11/1/01 Through 8/31/02^^ 0.25 0.11 --
Year Ended 10/31/01 0.47 -- --
Year Ended 10/31/00 0.56 -- --
Year Ended 10/31/99 0.46 -- --
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.45 -- --
Year Ended 8/31/03 0.48 -- --
11/1/01 Through 8/31/02^^ 0.38 -- 0.02
Year Ended 10/31/01 0.60 -- 0.02
Year Ended 10/31/00 0.78 -- 0.01
11/30/98* Through 10/31/99 0.72 -- --
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 0.36 -- --
Year Ended 8/31/03 0.46 -- --
11/1/01 Through 8/31/02^^ 0.37 -- --
Year Ended 10/31/01 0.54 -- --
Year Ended 10/31/00 0.68 -- --
Year Ended 10/31/99 0.71 -- --
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
* Commencement of operations.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
138
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
LESS DISTRIBUTIONS:
---------------------------------
TOTAL
DISTRIBUTIONS
SHORT TERM BOND FUND II
Year Ended 8/31/04 0.21
Year Ended 8/31/03 0.29
11/1/01 Through 8/31/02^^ 0.36
Year Ended 10/31/01 0.47
Year Ended 10/31/00 0.56
Year Ended 10/31/99 0.46
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.45
Year Ended 8/31/03 0.48
11/1/01 Through 8/31/02^^ 0.40
Year Ended 10/31/01 0.62
Year Ended 10/31/00 0.79
11/30/98* Through 10/31/99 0.72
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 0.36
Year Ended 8/31/03 0.46
11/1/01 Through 8/31/02^^ 0.37
Year Ended 10/31/01 0.54
Year Ended 10/31/00 0.68
Year Ended 10/31/99 0.71
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 10.21 1.85%
Year Ended 8/31/03 $ 10.23 1.88%
11/1/01 Through 8/31/02^^ $ 10.33 3.06%
Year Ended 10/31/01 $ 10.38 9.95%
Year Ended 10/31/00 $ 9.89 5.27%
Year Ended 10/31/99 $ 9.94 2.64%
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 9.19 8.56%
Year Ended 8/31/03 $ 8.89 9.77%
11/1/01 Through 8/31/02^^ $ 8.55 1.10%
Year Ended 10/31/01 $ 8.85 4.73%
Year Ended 10/31/00 $ 9.05 2.59%
11/30/98* Through 10/31/99 $ 9.59 3.23%
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 $ 11.83 5.05%
Year Ended 8/31/03 $ 11.61 2.00%
11/1/01 Through 8/31/02^^ $ 11.83 3.80%
Year Ended 10/31/01 $ 11.77 14.72%
Year Ended 10/31/00 $ 10.77 7.63%
Year Ended 10/31/99 $ 10.67 (2.41%)
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 55 0.75% 2.03% 1.10% 1.68% 253%
Year Ended 8/31/03 $ 44 0.75% 2.31% 0.96% 2.10% 319%
11/1/01 Through 8/31/02^^ $ 70 0.75% 2.66% 1.00% 2.41% 192%
Year Ended 10/31/01 $ 52 0.75% 4.25% 1.15% 3.85% 315%
Year Ended 10/31/00 $ 19 0.75% 5.68% 1.37% 5.06% 139%
Year Ended 10/31/99 $ 22 0.75% 4.58% 1.37% 3.96% 302%
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 3 1.25% 4.87% 2.69% 3.43% 130%
Year Ended 8/31/03 $ 3 1.25% 5.44% 2.69% 4.00% 116%
11/1/01 Through 8/31/02^^ $ 3 1.25% 5.74% 3.13% 3.86% 176%
Year Ended 10/31/01 $ 2 1.25% 6.81% 2.75% 5.31% 174%
Year Ended 10/31/00 $ 2 1.11% 7.84% 2.43% 6.52% 113%
11/30/98* Through 10/31/99 $ 3 0.15% 8.38% 3.59% 4.94% 136%
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 $ 45 0.75% 3.07% 1.31% 2.51% 169%
Year Ended 8/31/03 $ 46 0.75% 3.85% 1.31% 3.29% 106%
11/1/01 Through 8/31/02^^ $ 44 0.75% 3.87% 1.32% 3.30% 228%
Year Ended 10/31/01 $ 46 0.75% 4.74%+ 1.35% 4.14%+ 134%
Year Ended 10/31/00 $ 41 0.75% 6.45% 1.30% 5.90% 29%
Year Ended 10/31/99 $ 69 0.75% 6.40% 1.32% 5.83% 59%
</Table>
~~ Amount rounds to less than $0.005.
+ Restated.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
139
<Page>
CLASS B 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
Year Ended 8/31/04 $ 9.95 0.25 0.32 0.57
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
Year Ended 8/31/04 $ 40.49 0.94^ 1.23 2.17
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
Year Ended 8/31/04 $ 8.89 0.40^ 0.30 0.70
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
Year Ended 8/31/04 $ 11.60 0.22 0.26 0.48
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)
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------------
LESS DISTRIBUTIONS:
----------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN
INCOME GAINS OF CAPITAL
BOND FUND
Year Ended 8/31/04 0.25 0.30 --
Year Ended 8/31/03 0.32 0.08 --
11/1/01 Through 8/31/02^^ 0.24 0.06 --
9/10/01** Through 10/31/01 0.06 -- --
BOND FUND II
Year Ended 8/31/04 0.94 0.24 --
Year Ended 8/31/03 1.35 0.49 --
11/1/01 Through 8/31/02^^ 1.06 -- --
3/2/01** Through 10/31/01 1.12 -- --
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.40 -- --
Year Ended 8/31/03 0.44 -- --
11/1/01 Through 8/31/02^^ 0.34 -- 0.02
Year Ended 10/31/01 0.55 -- 0.02
Year Ended 10/31/00 0.74 -- 0.01
11/30/98* Through 10/31/99 0.71 -- --
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 0.26 -- --
Year Ended 8/31/03 0.36 -- --
11/1/01 Through 8/31/02^^ 0.28 -- --
Year Ended 10/31/01 0.44 -- --
Year Ended 10/31/00 0.59 -- --
Year Ended 10/31/99 0.61 -- --
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
* Commencement of operations.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
140
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
LESS DISTRIBUTIONS:
---------------------------------
TOTAL
DISTRIBUTIONS
BOND FUND
Year Ended 8/31/04 0.55
Year Ended 8/31/03 0.40
11/1/01 Through 8/31/02^^ 0.30
9/10/01** Through 10/31/01 0.06
BOND FUND II
Year Ended 8/31/04 1.18
Year Ended 8/31/03 1.84
11/1/01 Through 8/31/02^^ 1.06
3/2/01** Through 10/31/01 1.12
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.40
Year Ended 8/31/03 0.44
11/1/01 Through 8/31/02^^ 0.36
Year Ended 10/31/01 0.57
Year Ended 10/31/00 0.75
11/30/98* Through 10/31/99 0.71
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 0.26
Year Ended 8/31/03 0.36
11/1/01 Through 8/31/02^^ 0.28
Year Ended 10/31/01 0.44
Year Ended 10/31/00 0.59
Year Ended 10/31/99 0.61
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END
OF PERIOD
BOND FUND
Year Ended 8/31/04 $ 9.97
Year Ended 8/31/03 $ 9.95
11/1/01 Through 8/31/02^^ $ 10.05
9/10/01** Through 10/31/01 $ 10.08
BOND FUND II
Year Ended 8/31/04 $ 41.48
Year Ended 8/31/03 $ 40.49
11/1/01 Through 8/31/02^^ $ 41.30
3/2/01** Through 10/31/01 $ 40.96
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 9.19
Year Ended 8/31/03 $ 8.89
11/1/01 Through 8/31/02^^ $ 8.56
Year Ended 10/31/01 $ 8.85
Year Ended 10/31/00 $ 9.05
11/30/98* Through 10/31/99 $ 9.59
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 $ 11.82
Year Ended 8/31/03 $ 11.60
11/1/01 Through 8/31/02^^ $ 11.81
Year Ended 10/31/01 $ 11.75
Year Ended 10/31/00 $ 10.75
Year Ended 10/31/99 $ 10.67
<Caption>
RATIOS/SUPPLEMENTAL DATA:
---------------------------------
NET ASSETS,
END OF
TOTAL PERIOD
RETURN (1)(b) (MILLIONS)
BOND FUND
Year Ended 8/31/04 5.89% $ 2
Year Ended 8/31/03 2.94% $ 2
11/1/01 Through 8/31/02^^ 2.83% $ 1
9/10/01** Through 10/31/01 2.53% $ --~~
BOND FUND II
Year Ended 8/31/04 5.41% $ 12
Year Ended 8/31/03 2.47% $ 15
11/1/01 Through 8/31/02^^ 3.52% $ 14
3/2/01** Through 10/31/01 6.58% $ 8
STRATEGIC INCOME FUND
Year Ended 8/31/04 8.01% $ 8
Year Ended 8/31/03 9.11% $ 8
11/1/01 Through 8/31/02^^ 0.76% $ 7
Year Ended 10/31/01 4.20% $ 8
Year Ended 10/31/00 2.17% $ 8
11/30/98* Through 10/31/99 3.13% $ 5
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 4.13% $ 13
Year Ended 8/31/03 1.19% $ 20
11/1/01 Through 8/31/02^^ 3.04% $ 21
Year Ended 10/31/01 13.74% $ 20
Year Ended 10/31/00 6.49% $ 16
Year Ended 10/31/99 (3.27%) $ 16
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
------------------------------------------------------------------
NET INVESTMENT
NET EXPENSES INCOME (LOSS)
INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND
Year Ended 8/31/04 1.50% 2.48% 2.36% 1.62% 571%
Year Ended 8/31/03 1.50% 3.19% 2.14% 2.55% 679%
11/1/01 Through 8/31/02^^ 1.50% 2.80% 6.02% (1.72%) 572%
9/10/01** Through 10/31/01 1.48% 4.07% 11.25% (5.70%) 423%
BOND FUND II
Year Ended 8/31/04 1.50% 2.29% 1.76% 2.03% 590%
Year Ended 8/31/03 1.50% 3.24% 1.67% 3.07% 806%
11/1/01 Through 8/31/02^^ 1.50% 3.09% 1.56% 3.03% 496%
3/2/01** Through 10/31/01 1.50% 4.22% 1.75% 3.97% 319%
STRATEGIC INCOME FUND
Year Ended 8/31/04 1.75% 4.37% 3.19% 2.93% 130%
Year Ended 8/31/03 1.75% 4.98% 3.21% 3.52% 116%
11/1/01 Through 8/31/02^^ 1.75% 5.28% 3.63% 3.40% 176%
Year Ended 10/31/01 1.75% 6.35% 3.25% 4.85% 174%
Year Ended 10/31/00 1.53% 7.42% 3.06% 5.89% 113%
11/30/98* Through 10/31/99 0.17% 8.40% 3.98% 4.59% 136%
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 1.64% 2.19% 1.81% 2.02% 169%
Year Ended 8/31/03 1.64% 2.96% 1.80% 2.80% 106%
11/1/01 Through 8/31/02^^ 1.64% 2.99% 1.82% 2.81% 228%
Year Ended 10/31/01 1.64% 3.84%+ 1.85% 3.63%+ 134%
Year Ended 10/31/00 1.64% 5.56% 1.80% 5.40% 29%
Year Ended 10/31/99 1.64% 5.51% 1.82% 5.33% 59%
</Table>
(b) Not annualized for periods less than one year.
~~ Amount rounds to less than one million.
+ Restated.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
141
<Page>
CLASS C 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
Year Ended 8/31/04 $ 10.01 0.24 0.33 0.57
3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07)
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 8.89 0.40^ 0.31 0.71
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
INCOME GAINS OF CAPITAL
BOND FUND
Year Ended 8/31/04 0.25 0.30 --
3/31/03** Through 8/31/03 0.14 -- --
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.40 -- --
Year Ended 8/31/03 0.44 -- --
11/1/01 Through 8/31/02^^ 0.34 -- 0.02
Year Ended 10/31/01 0.55 -- 0.02
Year Ended 10/31/00 0.74 -- 0.01
11/30/98* Through 10/31/99 0.71 -- --
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
* Commencement of operations.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
142
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
LESS DISTRIBUTIONS:
---------------------------------
TOTAL
DISTRIBUTIONS
BOND FUND
Year Ended 8/31/04 0.55
3/31/03** Through 8/31/03 0.14
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.40
Year Ended 8/31/03 0.44
11/1/01 Through 8/31/02^^ 0.36
Year Ended 10/31/01 0.57
Year Ended 10/31/00 0.75
11/30/98* Through 10/31/99 0.71
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END
OF PERIOD
BOND FUND
Year Ended 8/31/04 $ 10.03
3/31/03** Through 8/31/03 $ 10.01
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 9.20
Year Ended 8/31/03 $ 8.89
11/1/01 Through 8/31/02^^ $ 8.56
Year Ended 10/31/01 $ 8.85
Year Ended 10/31/00 $ 9.05
11/30/98* Through 10/31/99 $ 9.59
<Caption>
RATIOS/SUPPLEMENTAL DATA:
---------------------------------
NET ASSETS,
END OF
TOTAL PERIOD
RETURN (1)(b) (MILLIONS)
BOND FUND
Year Ended 8/31/04 5.84% $ --~~
3/31/03** Through 8/31/03 (0.69%) $ --~~
STRATEGIC INCOME FUND
Year Ended 8/31/04 8.11% $ 3
Year Ended 8/31/03 9.10% $ 4
11/1/01 Through 8/31/02^^ 0.78% $ 3
Year Ended 10/31/01 4.21% $ 3
Year Ended 10/31/00 2.15% $ 2
11/30/98* Through 10/31/99 3.12% $ 4
<Caption>
RATIOS/SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-----------------------------------------------------------------------
NET INVESTMENT
NET EXPENSES INCOME (LOSS)
INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND
Year Ended 8/31/04 1.50% 2.45% 2.36% 1.59% 571%
3/31/03** Through 8/31/03 1.50% 3.02% 1.78% 2.74% 679%
STRATEGIC INCOME FUND
Year Ended 8/31/04 1.75% 4.36% 3.19% 2.92% 130%
Year Ended 8/31/03 1.75% 4.93% 3.20% 3.48% 116%
11/1/01 Through 8/31/02^^ 1.75% 5.24% 3.63% 3.36% 176%
Year Ended 10/31/01 1.75% 6.33% 3.25% 4.83% 174%
Year Ended 10/31/00 1.49% 7.46% 2.89% 6.06% 113%
11/30/98* Through 10/31/99 0.17% 8.40% 3.98% 4.59% 136%
</Table>
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
(b) Not annualized for periods less than one year.
~~ Amount rounds to less than one million.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
143
<Page>
CLASS M 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
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 10.23 0.18^ (0.02) 0.16
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
Year Ended 8/31/04 $ 8.87 0.42^ 0.31 0.73
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
INCOME GAINS OF CAPITAL
SHORT TERM BOND FUND II
Year Ended 8/31/04 0.18 -- --~~
Year Ended 8/31/03 0.22 0.05 --~~
11/1/01 Through 8/31/02^^ 0.22 0.11 --
Year Ended 10/31/01 0.45 -- --
Year Ended 10/31/00 0.54 -- --
7/1/99** Through 10/31/99 0.16 -- --
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.43 -- --
Year Ended 8/31/03 0.46 -- --
11/1/01 Through 8/31/02^^ 0.36 -- 0.02
Year Ended 10/31/01 0.58 -- 0.02
Year Ended 10/31/00 0.75 -- 0.01
10/28/99** Through 10/31/99 0.07 -- --
</Table>
(1) Total return figures do not include the effect of any front-end sales load.
^^ The fund changed its fiscal year end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
** Commencement of offering of class of shares.
SEE NOTES TO FINANCIAL STATEMENTS.
144
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
LESS DISTRIBUTIONS:
---------------------------------
TOTAL
DISTRIBUTIONS
SHORT TERM BOND FUND II
Year Ended 8/31/04 0.18
Year Ended 8/31/03 0.27
11/1/01 Through 8/31/02^^ 0.33
Year Ended 10/31/01 0.45
Year Ended 10/31/00 0.54
7/1/99** Through 10/31/99 0.16
STRATEGIC INCOME FUND
Year Ended 8/31/04 0.43
Year Ended 8/31/03 0.46
11/1/01 Through 8/31/02^^ 0.38
Year Ended 10/31/01 0.60
Year Ended 10/31/00 0.76
10/28/99** Through 10/31/99 0.07
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 10.21 1.58%
Year Ended 8/31/03 $ 10.23 1.64%
11/1/01 Through 8/31/02^^ $ 10.33 2.92%
Year Ended 10/31/01 $ 10.37 9.63%
Year Ended 10/31/00 $ 9.89 5.04%
7/1/99** Through 10/31/99 $ 9.94 1.26%
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 9.17 8.36%
Year Ended 8/31/03 $ 8.87 9.44%
11/1/01 Through 8/31/02^^ $ 8.54 1.03%
Year Ended 10/31/01 $ 8.83 4.50%
Year Ended 10/31/00 $ 9.03 2.10%
10/28/99** Through 10/31/99 $ 9.59 0.16%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 643 1.00% 1.75% 1.04% 1.71% 253%
Year Ended 8/31/03 $ 1,168 1.00% 2.07% 1.04% 2.03% 319%
11/1/01 Through 8/31/02^^ $ 1,127 1.00% 2.41% 1.03% 2.38% 192%
Year Ended 10/31/01 $ 689 1.00% 3.45% 1.11% 3.34% 315%
Year Ended 10/31/00 $ 13 0.99% 5.51% 1.73% 4.77% 139%
7/1/99** Through 10/31/99 $ 3 0.97% 4.72% 1.41% 4.28% 302%
STRATEGIC INCOME FUND
Year Ended 8/31/04 $ 7 1.45% 4.67% 2.77% 3.35% 130%
Year Ended 8/31/03 $ 7 1.45% 5.31% 2.77% 3.99% 116%
11/1/01 Through 8/31/02^^ $ 8 1.45% 5.52% 3.05% 3.92% 176%
Year Ended 10/31/01 $ 10 1.45% 6.69% 2.55% 5.59% 174%
Year Ended 10/31/00 $ 16 1.43% 7.52% 2.54% 6.41% 113%
10/28/99** Through 10/31/99 $ 12 0.17% 4.56% 3.73% 1.00% 136%
</Table>
~~ Rounds to less than .005 per share amount.
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
145
<Page>
INSTITUTIONAL 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
Year Ended 8/31/04 $ 9.94 0.35 0.32 0.67
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) --
ENHANCED INCOME FUND
Year Ended 8/31/04 $ 9.86 0.14 (0.02) 0.12
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^^
Year Ended 8/31/04 $ 8.92 0.51^ 0.17 0.68
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
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------------
LESS DISTRIBUTIONS:
----------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TAX RETURN
INCOME GAINS OF CAPITAL
BOND FUND
Year Ended 8/31/04 0.35 0.30 --
Year Ended 8/31/03 0.42 0.08 --
11/1/01 Through 8/31/02^^ 0.34 0.06 --
Year Ended 10/31/01 0.58 -- --
Year Ended 10/31/00 0.60 --(a) --
Year Ended 10/31/99 0.57 0.12 --
ENHANCED INCOME FUND
Year Ended 8/31/04 0.14 -- --
Year Ended 8/31/03 0.23 -- --
11/30/01* Through 8/31/02 0.18 -- --
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/04 0.52 -- --
Year Ended 8/31/03 0.48 -- --
11/1/01 Through 8/31/02 0.45 -- 0.02
Year Ended 10/31/01 0.87 -- --
Year Ended 10/31/00 0.69 -- --
Year Ended 10/31/99 0.62 -- --
</Table>
^^ The fund changed its fiscal year 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.
146
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------
LESS DISTRIBUTIONS:
---------------------------------
TOTAL
DISTRIBUTIONS
BOND FUND
Year Ended 8/31/04 0.65
Year Ended 8/31/03 0.50
11/1/01 Through 8/31/02^^ 0.40
Year Ended 10/31/01 0.58
Year Ended 10/31/00 0.60
Year Ended 10/31/99 0.69
ENHANCED INCOME FUND
Year Ended 8/31/04 0.14
Year Ended 8/31/03 0.23
11/30/01* Through 8/31/02 0.18
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/04 0.52
Year Ended 8/31/03 0.48
11/1/01 Through 8/31/02 0.47
Year Ended 10/31/01 0.87
Year Ended 10/31/00 0.69
Year Ended 10/31/99 0.62
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND
Year Ended 8/31/04 $ 9.96 6.96%
Year Ended 8/31/03 $ 9.94 3.99%
11/1/01 Through 8/31/02^^ $ 10.04 3.71%
Year Ended 10/31/01 $ 10.08 13.46%
Year Ended 10/31/00 $ 9.43 6.83%
Year Ended 10/31/99 $ 9.41 0.03%
ENHANCED INCOME FUND
Year Ended 8/31/04 $ 9.84 1.28%
Year Ended 8/31/03 $ 9.86 1.14%
11/30/01* Through 8/31/02 $ 9.98 1.58%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/04 $ 9.08 7.85%
Year Ended 8/31/03 $ 8.92 8.86%
11/1/01 Through 8/31/02 $ 8.65 1.92%
Year Ended 10/31/01 $ 8.95 5.86%
Year Ended 10/31/00 $ 9.29 6.93%
Year Ended 10/31/99 $ 9.35 2.62%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
------------------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND
Year Ended 8/31/04 $ 318 0.49% 3.51% 0.62% 3.38% 571%
Year Ended 8/31/03 $ 478 0.49% 4.10% 0.60% 3.99% 679%
11/1/01 Through 8/31/02^^ $ 747 0.49% 4.14% 0.58% 4.05% 572%
Year Ended 10/31/01 $ 1,016 0.49% 5.98% 0.51% 5.96% 423%(x)
Year Ended 10/31/00 $ 907 0.49% 6.37% 0.49% 6.37% 531%(x)
Year Ended 10/31/99 $ 1,041 0.50% 5.92% 0.51% 5.91% 465%(x)
ENHANCED INCOME FUND
Year Ended 8/31/04 $ 294 0.20% 1.47% 0.56% 1.12% 156%
Year Ended 8/31/03 $ 354 0.20% 2.33% 0.56% 1.97% 328%
11/30/01* Through 8/31/02 $ 300 0.20% 2.40% 0.68% 1.92% 120%
GLOBAL STRATEGIC INCOME FUND^^
Year Ended 8/31/04 $ 40 0.66%(o) 5.63% 1.22% 5.07% 152%
Year Ended 8/31/03 $ 108 0.65% 5.42% 0.97% 5.10% 248%
11/1/01 Through 8/31/02 $ 135 0.65% 6.44% 0.98% 6.11% 178%
Year Ended 10/31/01 $ 143 0.65% 7.50% 0.80% 7.35% 107%(y)
Year Ended 10/31/00 $ 163 0.65% 7.36% 0.80% 7.21% 266%(y)
Year Ended 10/31/99 $ 183 0.65% 6.70% 0.78% 5.29% 318%(y)
</Table>
# Short periods have been annualized.
(x) 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.
(y) 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.
(o) Includes interest expense for custody overdraft of 1 basis point.
SEE NOTES TO FINANCIAL STATEMENTS.
147
<Page>
<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
SHORT TERM BOND FUND
Year Ended 8/31/04 $ 9.86 0.25 (0.02) 0.23
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
<Caption>
PER SHARE OPERATING PERFORMANCE:
-------------------------------------------
LESS DISTRIBUTIONS:
-------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TOTAL
INCOME GAINS DISTRIBUTIONS
SHORT TERM BOND FUND
Year Ended 8/31/04 0.24 -- 0.24
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
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
^ Calculated based upon average shares outstanding.
(b) Not annualized for periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
148
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
SHORT TERM BOND FUND
Year Ended 8/31/04 $ 9.85 2.38%
Year Ended 8/31/03 $ 9.86 2.44%
11/1/01 Through 8/31/02^^ $ 10.05 3.55%
Year Ended 10/31/01 $ 10.03 10.70%
Year Ended 10/31/00 $ 9.58 5.49%
Year Ended 10/31/99 $ 9.67 3.03%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
--------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
-------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
SHORT TERM BOND FUND
Year Ended 8/31/04 $ 642 0.30% 2.49% 0.55% 2.24% 261%
Year Ended 8/31/03 $ 806 0.30% 2.85% 0.55% 2.60% 386%
11/1/01 Through 8/31/02^^ $ 618 0.30% 3.53% 0.54% 3.29% 215%
Year Ended 10/31/01 $ 697 0.30% 5.52% 0.48% 5.34% 160%(z)
Year Ended 10/31/00 $ 415 0.30% 6.30% 0.47% 6.13% 271%(z)
Year Ended 10/31/99 $ 354 0.29% 5.51% 0.51% 5.29% 398%(z)
</Table>
# Short periods have been annualized.
(z) 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.
149
<Page>
SELECT 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@
Year Ended 8/31/04 $ 9.94 0.33 0.33 0.66
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)
BOND FUND II
Year Ended 8/31/04 $ 40.51 1.31^ 1.24 2.55
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)
FLEMING EMERGING MARKETS
DEBT FUND
Year Ended 8/31/04 $ 9.02 0.67 0.60 1.27
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
<Caption>
PER SHARE OPERATING PERFORMANCE:
----------------------------------------------
LESS DISTRIBUTIONS:
----------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS
INVESTMENT FROM CAPITAL TOTAL
INCOME GAINS DISTRIBUTIONS
BOND FUND@
Year Ended 8/31/04 0.33 0.30 0.63
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
BOND FUND II
Year Ended 8/31/04 1.31 0.24 1.55
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
FLEMING EMERGING MARKETS
DEBT FUND
Year Ended 8/31/04 0.71 -- 0.71
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
</Table>
@ 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 from October 31 to August 31.
^ Calculated based upon average shares outstanding.
(b) Not annualized for periods less than one year.
^^^ The Fund changed its fiscal year end from July 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
150
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND@
Year Ended 8/31/04 $ 9.97 6.88%
Year Ended 8/31/03 $ 9.94 3.82%
11/1/01 Through 8/31/02^^ $ 10.04 3.57%
Year Ended 10/31/01 $ 10.08 13.32%
Year Ended 10/31/00 $ 9.43 6.61%
Year Ended 10/31/99 $ 9.41 (0.23%)
BOND FUND II
Year Ended 8/31/04 $ 41.51 6.38%
Year Ended 8/31/03 $ 40.51 3.39%
11/1/01 Through 8/31/02^^ $ 41.32 4.33%
Year Ended 10/31/01 $ 40.97 13.87%
Year Ended 10/31/00 $ 38.02 5.50%
Year Ended 10/31/99 $ 38.38 (0.01%)
FLEMING EMERGING MARKETS
DEBT FUND
Year Ended 8/31/04 $ 9.58 14.56%
Year Ended 8/31/03 $ 9.02 30.49%
8/1/02 Through 8/31/02^^^ $ 7.53 7.69%
Year Ended 7/31/02 $ 7.05 (0.67%)
Year Ended 7/31/01 $ 7.82 (0.17%)
Year Ended 7/31/00 $ 8.77 34.12%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
------------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND@
Year Ended 8/31/04 $ 189 0.66% 3.33% 0.78% 3.21% 571%
Year Ended 8/31/03 $ 308 0.66% 3.97% 0.76% 3.87% 679%
11/1/01 Through 8/31/02^^ $ 312 0.66% 3.95% 0.74% 3.87% 572%
Year Ended 10/31/01 $ 315 0.69% 5.77% 0.70% 5.76% 423%(x)
Year Ended 10/31/00 $ 240 0.69% 6.19% 0.69% 6.19% 531%(x)
Year Ended 10/31/99 $ 235 0.69% 5.72% 0.69% 5.72% 465%(x)
BOND FUND II
Year Ended 8/31/04 $ 869 0.60% 3.19% 0.76% 3.03% 590%
Year Ended 8/31/03 $ 1,022 0.60% 4.27% 0.75% 4.12% 806%
11/1/01 Through 8/31/02^^ $ 661 0.60% 4.08% 0.74% 3.94% 496%
Year Ended 10/31/01 $ 683 0.63% 5.52% 0.75% 5.40% 319%
Year Ended 10/31/00 $ 587 0.69% 6.30% 0.71% 6.28% 157%
Year Ended 10/31/99 $ 620 0.03% 5.97% 0.49% 5.51% 300%
FLEMING EMERGING MARKETS
DEBT FUND
Year Ended 8/31/04 $ 36 1.26%(o) 7.01% 1.65% 6.62% 166%
Year Ended 8/31/03 $ 60 1.25% 8.11% 1.52% 7.84% 157%
8/1/02 Through 8/31/02^^^ $ 41 1.25% 9.86% 1.30% 9.81% 12%
Year Ended 7/31/02 $ 35 1.25% 9.59% 1.54% 9.30% 110%(v)
Year Ended 7/31/01 $ 35 1.25% 11.20% 1.92% 10.53% 141%(v)
Year Ended 7/31/00 $ 20 1.25% 11.01% 1.95% 10.31% 295%(v)
</Table>
# Short periods have been annualized.
(x) 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.
(o) Includes interest expense for custody overdraft of 1 basis point.
(v) Percentages prior to 9/10/01 reflect the portfolio turnover of Emerging
Markets Debt Portfolio, in which the Fund invested all of its investable
assets.
SEE NOTES TO FINANCIAL STATEMENTS.
151
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------- -------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TAX RETURN
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL
GLOBAL STRATEGIC INCOME
FUND^^@
Year Ended 8/31/04 $ 8.92 0.49^ 0.16 0.65 0.49 -- --
Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72 0.45 -- --
11/1/01 Through 8/31/02 $ 8.95 0.45 (0.31) 0.14 0.42 -- 0.02
Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29 0.76 -- --
Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61 0.66 -- --
Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22 0.59 -- --
SHORT TERM BOND FUND@
Year Ended 8/31/04 $ 9.86 0.22 (0.02) 0.20 0.22 -- --
Year Ended 8/31/03 $ 10.04 0.26 (0.03) 0.23 0.27 0.14 --
11/1/01 Through 8/31/02^^ $ 10.03 0.28 0.04 0.32 0.27 0.04 --
Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97 0.55 -- --
Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49 0.58 -- --
Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26 0.51 0.05 --
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 10.25 0.23^ (0.03) 0.20 0.23 -- --~~
Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22 0.27 0.05 --~~
11/1/01 Through 8/31/02^^ $ 10.40 0.26 0.07 0.33 0.27 0.11 --
Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99 0.49 -- --
Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54 0.59 -- --
Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29 0.49 -- --
</Table>
@ 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 from October 31 to August 31.
^ Calculated based upon average shares outstanding.
~~ Amount rounds to less than $0.005.
(b) Not annualized for periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
152
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
LESS DISTRIBUTIONS:
--------------------------------
TOTAL
DISTRIBUTIONS
GLOBAL STRATEGIC INCOME
FUND^^@
Year Ended 8/31/04 0.49
Year Ended 8/31/03 0.45
11/1/01 Through 8/31/02 0.44
Year Ended 10/31/01 0.76
Year Ended 10/31/00 0.66
Year Ended 10/31/99 0.59
SHORT TERM BOND FUND@
Year Ended 8/31/04 0.22
Year Ended 8/31/03 0.41
11/1/01 Through 8/31/02^^ 0.31
Year Ended 10/31/01 0.55
Year Ended 10/31/00 0.58
Year Ended 10/31/99 0.56
SHORT TERM BOND FUND II
Year Ended 8/31/04 0.23
Year Ended 8/31/03 0.32
11/1/01 Through 8/31/02^^ 0.38
Year Ended 10/31/01 0.49
Year Ended 10/31/00 0.59
Year Ended 10/31/99 0.49
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
GLOBAL STRATEGIC INCOME
FUND^^@
Year Ended 8/31/04 $ 9.08 7.48%
Year Ended 8/31/03 $ 8.92 8.48%
11/1/01 Through 8/31/02 $ 8.65 1.61%
Year Ended 10/31/01 $ 8.95 5.46%
Year Ended 10/31/00 $ 9.42 6.57%
Year Ended 10/31/99 $ 9.47 2.26%
SHORT TERM BOND FUND@
Year Ended 8/31/04 $ 9.84 1.99%
Year Ended 8/31/03 $ 9.86 2.28%
11/1/01 Through 8/31/02^^ $ 10.04 3.21%
Year Ended 10/31/01 $ 10.03 10.39%
Year Ended 10/31/00 $ 9.61 5.19%
Year Ended 10/31/99 $ 9.70 2.70%
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 10.22 2.01%
Year Ended 8/31/03 $ 10.25 2.15%
11/1/01 Through 8/31/02^^ $ 10.35 3.30%
Year Ended 10/31/01 $ 10.40 10.29%
Year Ended 10/31/00 $ 9.90 5.56%
Year Ended 10/31/99 $ 9.95 2.97%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
---------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
----------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
GLOBAL STRATEGIC INCOME
FUND^^@
Year Ended 8/31/04 $ 2 1.01%(o) 5.44% 1.95% 4.50% 152%
Year Ended 8/31/03 $ 3 1.00% 5.10% 1.48% 4.62% 248%
11/1/01 Through 8/31/02 $ 5 1.00% 6.08% 1.48% 5.60% 178%
Year Ended 10/31/01 $ 5 1.00% 7.32% 2.63% 5.69% 107%(y)
Year Ended 10/31/00 $ 7 1.00% 7.05% 2.50% 5.55% 266%(y)
Year Ended 10/31/99 $ 9 1.00% 6.35% 1.54% 5.81% 318%(y)
SHORT TERM BOND FUND@
Year Ended 8/31/04 $ 94 0.58% 2.22% 0.73% 2.07% 261%
Year Ended 8/31/03 $ 122 0.56% 2.59% 0.71% 2.44% 386%
11/1/01 Through 8/31/02^^ $ 122 0.57% 3.22% 0.72% 3.07% 215%
Year Ended 10/31/01 $ 67 0.60% 5.22% 0.82% 5.00% 160%(w)
Year Ended 10/31/00 $ 38 0.60% 6.00% 0.82% 5.78% 271%(w)
Year Ended 10/31/99 $ 39 0.57% 5.24% 0.80% 5.01% 398%(w)
SHORT TERM BOND FUND II
Year Ended 8/31/04 $ 492 0.50% 2.26% 0.70% 2.06% 253%
Year Ended 8/31/03 $ 342 0.50% 2.58% 0.70% 2.38% 319%
11/1/01 Through 8/31/02^^ $ 144 0.50% 2.91% 0.70% 2.71% 192%
Year Ended 10/31/01 $ 144 0.50% 4.15% 0.77% 3.88% 315%
Year Ended 10/31/00 $ 21 0.45% 5.99% 1.02% 5.42% 139%
Year Ended 10/31/99 $ 28 0.42% 4.89% 1.02% 4.29% 302%
</Table>
# Short periods have been annualized.
(y) 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.
(o) Includes interest expense for custody overdraft of 1 basis point.
(w) 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.
153
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
--------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 $ 11.62 0.37 0.23 0.60 0.38 -- 0.38
Year Ended 8/31/03 $ 11.83 0.49 (0.21) 0.28 0.49 -- 0.49
11/1/01 Through 8/31/02^^ $ 11.77 0.39 0.06 0.45 0.39 -- 0.39
2/16/01* Through 10/31/01 $ 11.10 0.37 0.66 1.03 0.36 -- 0.36
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
* Commencement of offering of class of shares.
SEE NOTES TO FINANCIAL STATEMENTS.
154
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 $ 11.84 5.26%
Year Ended 8/31/03 $ 11.62 2.29%
11/1/01 Through 8/31/02^^ $ 11.83 3.97%
2/16/01* Through 10/31/01 $ 11.77 9.52%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
----------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
U.S. TREASURY INCOME FUND
Year Ended 8/31/04 $ 76 0.55% 3.23% 0.88% 2.90% 169%
Year Ended 8/31/03 $ 69 0.55% 4.04% 0.87% 3.72% 106%
11/1/01 Through 8/31/02^^ $ 78 0.55% 4.07% 0.86% 3.76% 228%
2/16/01* Through 10/31/01 $ 76 0.55% 4.73% 0.98% 4.30% 134%
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
SEE NOTES TO FINANCIAL STATEMENTS.
155
<Page>
ULTRA SHARES@
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
--------------------------------------- ------------------------------------------
NET GAINS
(LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS
BOND FUND
Year Ended 8/31/04 $ 9.95 0.36 0.32 0.68 0.36 0.30 0.66
Year Ended 8/31/03 $ 10.05 0.43 (0.02) 0.41 0.43 0.08 0.51
11/1/01 Through 8/31/02^^ $ 10.09 0.34 0.02 0.36 0.34 0.06 0.40
Year Ended 10/31/01 $ 9.47 0.54^ 0.72 1.26 0.62 0.02 0.64
Year Ended 10/31/00 $ 9.46 0.64 (0.02) 0.62 0.61 -- 0.61
Year Ended 10/31/99 $ 10.02 0.60 (0.57) 0.03 0.59 -- 0.59
</Table>
@ 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 from October 31 to August 31.
^ Calculated based upon average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
156
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND
Year Ended 8/31/04 $ 9.97 7.05%
Year Ended 8/31/03 $ 9.95 4.08%
11/1/01 Through 8/31/02^^ $ 10.05 3.80%
Year Ended 10/31/01 $ 10.09 13.63%
Year Ended 10/31/00 $ 9.47 6.92%
Year Ended 10/31/99 $ 9.46 0.28%
<Caption>
RATIOS/SUPPLEMENTAL DATA:
-----------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS: #
----------------------------------------------------------------------
NET INVESTMENT
NET ASSETS, NET EXPENSES INCOME (LOSS)
END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO
PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER
(MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b)
BOND FUND
Year Ended 8/31/04 $ 381 0.40% 3.59% 0.56% 3.43% 571%
Year Ended 8/31/03 $ 444 0.40% 4.19% 0.55% 4.04% 679%
11/1/01 Through 8/31/02^^ $ 609 0.40% 4.20% 0.53% 4.07% 572%
Year Ended 10/31/01 $ 598 0.37% 6.08% 0.47% 5.98% 423%(x)
Year Ended 10/31/00 $ 466 0.35% 6.49% 0.42% 6.42% 531%(x)
Year Ended 10/31/99 $ 299 0.36% 6.08% 0.49% 5.95% 465%(x)
</Table>
(b) Not annualized for periods less than one year.
# Short periods have been annualized.
(x) 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.
157
<Page>
JPMORGAN FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of
J.P. Morgan Mutual Fund Group, J.P. Morgan Institutional Funds,
J.P. Morgan Mutual Fund Select Group, J.P. Morgan Series Trust and
J.P. Morgan Funds
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations, of
changes in net assets and of cash flows and the financial highlights present
fairly, in all material respects, the financial position of JPMorgan Bond Fund,
JPMorgan Global Strategic Income Fund, JPMorgan Short Term Bond Fund (separate
portfolios of J.P. Morgan Institutional Funds), JPMorgan Short Term Bond Fund
II, JPMorgan Strategic Income Fund, JPMorgan U.S. Treasury Income Fund (separate
portfolios of J.P. Morgan Mutual Fund Group), JPMorgan Bond Fund II (a separate
portfolio of the J.P. Morgan Mutual Fund Select Group), JPMorgan Enhanced Income
Fund (a separate portfolio of J.P. Morgan Series Trust) and JPMorgan Fleming
Emerging Markets Debt Fund (a separate portfolio of J.P. Morgan Funds),
(hereafter referred to as the "Funds") at August 31, 2004, the results of each
of their operations and the cash flows of the JPMorgan Global Strategic Income
Fund for the year then ended, the changes in each of their net assets for each
of the two years in the period then ended 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 the standards of the
Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at August 31, 2004 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 19, 2004
158
<Page>
SCHEDULE OF SHAREHOLDER EXPENSES
Hypothetical $1,000 Investment at Beginning of Period
August 31, 2004
(Unaudited)
As a shareholder of the Funds, you incur two types of costs: (1) transaction
costs, including sales charges (loads) on purchase payments and redemption fees:
and (2) ongoing costs, including investment advisory, administration fees,
distribution fees and other Fund expenses. The examples below are intended to
help you understand your ongoing costs (in dollars) of investing in the Funds
and to compare these costs with the ongoing costs of investing in other mutual
funds. The examples assume that you had a $1,000 investment in the Class at the
beginning of the reporting period, March 1, 2004, and continued to hold your
shares at the end of the reporting period, August 31, 2004.
ACTUAL EXPENSES
For each Class of each Fund in the table below, the first line provides
information about actual account values and actual expenses. You may use the
information in this line, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the first line of each Class under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line of each Class in the table below provides information about
hypothetical account values and hypothetical expenses based on the Class' actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Class' actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare the
ongoing costs of investing in the Class of the Fund and other funds. To do so,
compare this 5% hypothetical example with the 5% hypothetical examples that
appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transaction costs, such as sales
charges (loads) or redemption fees. Therefore, the second line for each Class in
the table is useful in comparing ongoing costs only, and will not help you
determine the relative total costs of owning different funds. In addition, if
these transaction costs were included, your costs would have been higher. The
examples also assume all dividends and distributions have been reinvested.
159
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE, ACCOUNT VALUE, MARCH 1 TO ANNUALIZED
MARCH 1, 2004 AUGUST 31, 2004 AUGUST 31, 2004* EXPENSE RATIO
BOND FUND
CLASS A
Actual period return $ 1,000 $ 1,012 $ 3.79 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75%
CLASS B
Actual period return $ 1,000 $ 1,009 $ 7.58 1.50%
Hypothetical $ 1,000 $ 1,017 $ 7.61 1.50%
CLASS C
Actual period return $ 1,000 $ 1,008 $ 7.57 1.50%
Hypothetical $ 1,000 $ 1,017 $ 7.61 1.50%
INSTITUTIONAL
Actual period return $ 1,000 $ 1,013 $ 2.48 0.49%
Hypothetical $ 1,000 $ 1,023 $ 2.49 0.49%
SELECT
Actual period return $ 1,000 $ 1,014 $ 3.34 0.66%
Hypothetical $ 1,000 $ 1,022 $ 3.35 0.66%
ULTRA
Actual period return $ 1,000 $ 1,014 $ 2.02 0.40%
Hypothetical $ 1,000 $ 1,023 $ 2.03 0.40%
BOND FUND II
CLASS A
Actual period return $ 1,000 $ 1,009 $ 3.79 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75%
CLASS B
Actual period return $ 1,000 $ 1,005 $ 7.56 1.50%
Hypothetical $ 1,000 $ 1,017 $ 7.61 1.50%
SELECT
Actual period return $ 1,000 $ 1,010 $ 3.03 0.60%
Hypothetical $ 1,000 $ 1,022 $ 3.05 0.60%
</Table>
* Expenses are equal to the Class' annualized expense ratio in the table above,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the one-half year period).
160
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE, ACCOUNT VALUE, MARCH 1 TO ANNUALIZED
MARCH 1, 2004 AUGUST 31, 2004 AUGUST 31, 2004* EXPENSE RATIO
ENHANCED INCOME FUND
INSTITUTIONAL
Actual period return $ 1,000 $ 1,007 $ 1.01 0.20%
Hypothetical $ 1,000 $ 1,024 $ 1.02 0.20%
FLEMING EMERGING MARKETS DEBT FUND
SELECT
Actual period return $ 1,000 $ 1,041 $ 6.41 1.25%
Hypothetical $ 1,000 $ 1,019 $ 6.34 1.25%
GLOBAL STRATEGIC INCOME FUND
CLASS A
Actual period return $ 1,000 $ 1,022 $ 6.35 1.25%
Hypothetical $ 1,000 $ 1,019 $ 6.34 1.25%
INSTITUTIONAL
Actual period return $ 1,000 $ 1,025 $ 3.31 0.65%
Hypothetical $ 1,000 $ 1,022 $ 3.30 0.65%
SELECT
Actual period return $ 1,000 $ 1,023 $ 5.08 1.00%
Hypothetical $ 1,000 $ 1,020 $ 5.08 1.00%
SHORT TERM BOND FUND
CLASS A
Actual period return $ 1,000 $ 1,003 $ 3.78 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75%
INSTITUTIONAL
Actual period return $ 1,000 $ 1,006 $ 1.51 0.30%
Hypothetical $ 1,000 $ 1,023 $ 1.53 0.30%
SELECT
Actual period return $ 1,000 $ 1,004 $ 2.87 0.57%
Hypothetical $ 1,000 $ 1,022 $ 2.90 0.57%
</Table>
* Expenses are equal to the Class' annualized expense ratio in the table above,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the one-half year period).
161
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE, ACCOUNT VALUE, MARCH 1 TO ANNUALIZED
MARCH 1, 2004 AUGUST 31, 2004 AUGUST 31, 2004* EXPENSE RATIO
SHORT TERM BOND FUND II
CLASS A
Actual period return $ 1,000 $ 1,003 $ 3.78 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75%
CLASS M
Actual period return $ 1,000 $ 1,002 $ 5.03 1.00%
Hypothetical $ 1,000 $ 1,020 $ 5.08 1.00%
SELECT
Actual period return $ 1,000 $ 1,004 $ 2.52 0.50%
Hypothetical $ 1,000 $ 1,022 $ 2.54 0.50%
STRATEGIC INCOME FUND
CLASS A
Actual period return $ 1,000 $ 1,023 $ 6.36 1.25%
Hypothetical $ 1,000 $ 1,019 $ 6.34 1.25%
CLASS B
Actual period return $ 1,000 $ 1,019 $ 8.88 1.75%
Hypothetical $ 1,000 $ 1,016 $ 8.87 1.75%
CLASS C
Actual period return $ 1,000 $ 1,020 $ 8.89 1.75%
Hypothetical $ 1,000 $ 1,016 $ 8.87 1.75%
CLASS M
Actual period return $ 1,000 $ 1,021 $ 7.37 1.45%
Hypothetical $ 1,000 $ 1,018 $ 7.35 1.45%
U.S. TREASURY INCOME FUND
CLASS A
Actual period return $ 1,000 $ 1,004 $ 3.78 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75%
CLASS B
Actual period return $ 1,000 $ 998 $ 8.24 1.64%
Hypothetical $ 1,000 $ 1,017 $ 8.31 1.64%
SELECT
Actual period return $ 1,000 $ 1,004 $ 2.77 0.55%
Hypothetical $ 1,000 $ 1,022 $ 2.80 0.55%
</Table>
* Expenses are equal to the Class' annualized expense ratio in the table above,
multiplied by the average account value over the period, multiplied by 184/366
(to reflect the one-half year period).
162
<Page>
TRUSTEE AND OFFICER INFORMATION (UNAUDITED)
The following tables contain basic information regarding the Trustees and
Officers, respectively, that oversee operations of the Trusts and other
investment companies within the JPMorgan Funds complex.
<Table>
<Caption>
NUMBER OF
POSITIONS PORTFOLIOS IN OTHER
HELD WITH PRINCIPAL JPMORGAN FUND DIRECTORSHIPS
EACH TERM OF OFFICE OCCUPATIONS COMPLEX(1) HELD OUTSIDE
NAME, CONTACT ADDRESS JP MORGAN AND LENGTH OF DURING PAST OVERSEEN JPMORGAN FUND
AND YEAR OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEE(S)
William J. Armstrong; Trustee Trustee of Funds that Retired; Vice 70 None
522 Fifth Avenue, are series of JPMIF President and
New York, NY 10036; since 2001, Funds that Treasurer of
1941 are series of MFSG Ingersoll-Rand Company
since 1996 and Funds (manufacturer of
that are series of MFG industrial equipment)
since 1987. (1972 - 2000)
Roland R. Eppley, Jr.; Trustee Trustee of Funds that are Retired 70 Director, Janel Hydro,
522 Fifth Avenue, series of JPMIF since 2001, Inc. (Automotive)
New York, NY 10036; Funds that are series of (1993-Present)
1932 MFSG since 1996 and Funds
that are series of MFG
since 1989.
Ann Maynard Gray; Trustee Since 2001 Vice President 70 Director of Duke
522 Fifth Avenue, of Capital Energy Corporation
New York, NY 10036; Cities/ABC, Inc. (1997-Present);
1945** (communications) Director of Elan
(1986-1998) Corporation, Plc
(pharmaceuticals)
(2001-Present);
Director of The
Phoenix Companies
(wealth management)
(2002-Present)
Matthew Healey; Trustee Trustee of Funds that are Retired; Chief 70 None
522 Fifth Avenue, series of of JPMIF since Executive Officer of
New York, NY 10036; 1992 and Funds that are certain J.P. Morgan
1937 series of MFG since 2001 Fund Trusts
and MFSG since 2001. (1982-2001)
Fergus Reid, III; Trustee and Trustee of Funds that are Chairman of Lumelite 70 Trustee Morgan Stanley
522 Fifth Avenue, Chairman of series of JPMIF since 2001, Corporation (plastics Funds (209 portfolios)
New York, NY 10036; the Board Funds that are series of manufacturing) (1995-Present)
1932 of Trustees MFSG since 1996 and Funds (2003-Present);
that are series of MFG Chairman and CEO of
since 1987. Lumelite Corporation
(1985-2002)
</Table>
163
<Page>
<Table>
<Caption>
NUMBER OF
POSITIONS PORTFOLIOS IN OTHER
HELD WITH PRINCIPAL JPMORGAN FUND DIRECTORSHIPS
EACH TERM OF OFFICE OCCUPATIONS COMPLEX(1) HELD OUTSIDE
NAME, CONTACT ADDRESS JP MORGAN AND LENGTH OF DURING PAST OVERSEEN JPMORGAN FUND
AND YEAR OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEE(S) (CONTINUED)
James J. Schonbachler; Trustee Since 2001 Retired; Managing 70 None
522 Fifth Avenue, Director of Bankers
New York, NY 10036; Trust Company,
1943 (financial services)
(1968-1998)
Robert J. Higgins; Trustee Since 2002 Retired; Director of 70 Director of Providian
522 Fifth Avenue, Administration of the Financial Corp.
New York, NY 10036; State of Rhode Island (banking) (2002-
1945 (2003-Present); Present)
President - Consumer
Banking and Investment
Services Fleet Boston
Financial (1971-2002)
Dr. Matthew Goldstein; Trustee Since 2003 Chancellor of the City 70 Director of National
522 Fifth Avenue, University of New Financial Partners
New York, NY 10036; York, since September (financial services
1941 1, 1999; President, distributor) (2003-
Adelphi University Present); Trustee of
(New York) Bronx-Lebanon Hospital
(1998-1999). Center (1992-Present);
Director of New Plan
Excel Realty Trust,
Inc. (real estate
investment trust)
(2000-Present);
Director of Lincoln
Center Institute for
the Arts in Education
(1999-Present).
</Table>
164
<Page>
<Table>
<Caption>
NUMBER OF
POSITIONS PORTFOLIOS IN OTHER
HELD WITH PRINCIPAL JPMORGAN FUND DIRECTORSHIPS
EACH TERM OF OFFICE OCCUPATIONS COMPLEX(1) HELD OUTSIDE
NAME, CONTACT ADDRESS JP MORGAN AND LENGTH OF DURING PAST OVERSEEN JPMORGAN FUND
AND YEAR OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX
- -----------------------------------------------------------------------------------------------------------------------------------
NON-INTERESTED TRUSTEE(s) (CONTINUED)
William G. Morton, Jr.; Trustee Since 2003 Chairman Emeritus 70 Director of Radio
522 Fifth Avenue, (2001 - 2002), and Shack Corporation
New York, NY 10036; Chairman and (electronics)
1937 Chief Executive (1987-Present);
Officer, Boston Director of the
Stock Exchange Griswold Company
(1985 - 2001). (securities brokerage)
(2002-2004); Director
of The National
Football Foundation
and College Hall of
Fame (1994-Present);
Trustee of the Berklee
College of Music
(1998-Present);
Trustee of the
Stratton Mountain
School (2001-Present).
INTERESTED TRUSTEE(S)
Leonard M. Spalding Trustee Trustee of Funds that Retired; Chief 70 None
522 Fifth Avenue, are series of JPMIF Executive Officer of
New York, NY 10036; since 2001, Funds that Chase Mutual Funds
1935 are series of MFSG (investment company)
since 1996 and Funds (1989-1998);
that are series of MFG President and Chief
since 1998. Executive Officer of
Vista Capital
Management
(Investment
Management)
(1990-1998); Chief
Investment Executive
of Chase Manhattan
Private Bank
(investment
management)(1990-1998)
</Table>
* Mr. Spalding is deemed to be an "interested person" due to his ownership of
equity securities of J.P. Morgan Chase & Co.
** Dana Maynard Gray, the daughter of Ann Maynard Gray, became employed with
JPMorgan Securities, Inc., as an Associate Analyst, on May 3, 2004.
(1) A Fund Complex means two or more investment companies that hold themselves
out to investors as related companies for purposes of investment and
investment services or have a common investment advisor or have an
investment advisor that is an affiliated person of the investment advisor of
any of the other investment companies. The JPMorgan Fund Complex for which
the Trustees serve includes 13 investment companies.
165
<Page>
<Table>
<Caption>
POSITIONS HELD TERM OF OFFICE
NAME, CONTACT ADDRESS WITH EACH AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH JPMORGAN TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
George Gatch; President Since 2001 Managing Director, JPMIM; Head of J.P. Morgan Fleming's U.S.
522 Fifth Avenue, Mutual Funds and Financial Intermediaries Business ("FFI").
New York, NY 10036; He has also held numerous positions throughout the firm in
1962 business management, marketing and sales.
Robert L. Young; Senior Vice President Since 2004 Mr. Young joined Banc One Investment Advisors Corporation in
522 Fifth Avenue, 1996 and in 1999, he became Vice President and Treasurer of
New York, NY 10036; One Group Administrative Services, Inc. and One Group Dealer
1963 Services, Inc. and in 2001, Mr. Young became COO of the One
Group Mutual Funds.
Patricia A. Maleski; Vice President and Chief Since 2003 Vice President, JPMIM, head of FFI and US Institutional
522 Fifth Avenue, Administrative Officer Funds Administration and Board Liaison. Prior to joining
New York, NY 10036; JPMorgan in 2001, she was the Vice President of Finance for
1960 the Pierpont Group, Inc., a service provider to the board of
trustees of the heritage JPMorgan Funds.
Wayne H. Chan; Vice President and Assistant Since 2003 Vice President and Assistant General Counsel, JPMIM,
522 Fifth Avenue, Secretary since September 2002; Mr. Chan was an associate at the
New York, NY 10036; law firm of Shearman and Sterling from May 2001 through
1965 September 2002; Swidler Berlin Shereff Friedman LLP from June
1999 through May 2001 and Whitman Breed Abbott & Morgan LLP
from September 1997 through May 1999.
Stephanie J. Dorsey Treasurer Since 2004 Director of Mutual Fund Administration, One Group
522 Fifth Avenue, Administrative Services, since January 2004; Ms. Dorsey
New York, NY 10036; worked for Bank One Corporation from January 2003 to January
1969 2004; Prior to joining Bank One Corporation, she held
various positions at PricewaterhouseCoopers LLP from
September 1992.
Jessica K. Ditullio Assistant Secretary Since 2004 From August 1990 to present, various attorney positions
522 Fifth Avenue, for Bank One Corporation (now known as JPMorgan Chase & Co.)
New York, NY 10036;
1963
Nancy E. Fields Assistant Secretary Since 2004 From October 1999 to present, Director, Mutual Fund
522 Fifth Avenue, Administration, One Group Administrative Services, Inc.
New York, NY 10036; and Senior Project Manager, Mutual Funds, One Group
1949 Dealer Services, Inc. From July 1999 to October 1999, Project
Manager, One Group, Banc One Investment Advisors Corporation.
</Table>
166
<Page>
<Table>
<Caption>
POSITIONS HELD TERM OF OFFICE
NAME, CONTACT ADDRESS WITH EACH AND LENGTH OF PRINCIPAL OCCUPATIONS
AND YEAR OF BIRTH JPMORGAN TRUST TIME SERVED DURING PAST 5 YEARS
- ------------------------------------------------------------------------------------------------------------------------------------
Alaina Metz Assistant Secretary Since 2001 Chief Administrative Officer of BISYS Fund Services, Inc.;
3435 Stelzer Rd. formerly, Supervisor of the Blue Sky Department of
Columbus, OH 43219 Alliance Capital Management, L.P.
1967
Martin R. Dean Assistant Treasurer Since 2001 Vice President of Regulatory Services of BISYS Fund
3435 Stelzer Rd. Services, Inc.
Columbus, OH 43219
1963
Arthur A. Jensen Assistant Treasurer Since 2001 Vice President of Financial Services of BISYS Fund
3435 Stelzer Rd. Services, Inc. since June 2001; formerly Section Manager
Columbus, OH 43219 of Northern Trust Company and Accounting Supervisor at
1966 Allstate Insurance Company.
Christopher D. Walsh Assistant Treasurer Since 2004 Vice President, JPMIM; Mr. Walsh manages all aspects of
522 Fifth Avenue, institutional and retail mutual fund administration and
New York, NY 10036; vendor relationships within the mutual funds,
1965 commingled/Erisa funds, 3C-7 funds, hedge funds and LLC
products. Prior to joining JPMorgan in 2000, he was a
director from 1996 to 2000 of Mutual Fund Administration at
Prudential Investments.
Paul M. DeRusso Assistant Treasurer Since 2001 Vice President, JPMIM; Manager of the Budgeting and
522 Fifth Avenue, Expense Group of Funds Administration Group.
New York, NY 10036;
1954
Mary D. Squires Assistant Treasurer Since 2001 Vice President, JPMIM; Ms. Squires has held numerous
522 Fifth Avenue, financial and operations positions supporting the J.P.
New York, NY 10036; Morgan Chase organization complex.
1955
Stephen M. Ungerman Chief Compliance Officer Since 2004 Vice President, JPMIM; Fund Administration - Pooled
522 Fifth Avenue, Vehicles; prior to joining J.P. Morgan Chase in 2000, he
New York, NY 10036; held a number of positions in Prudential Financial's asset
1953 management business, including Assistant General Counsel,
Tax Director and Co-head of Fund Administration; Mr.
Ungerman also served as Assistant Treasurer for all mutual
funds managed by Prudential.
</Table>
Additional information concerning the Trustees is contained in the Statement of
Additional Information and is available without charge by calling
1-800-348-4782.
167
<Page>
TAX LETTER (UNAUDITED)
JPMorgan Bond Fund ("BF")
JPMorgan Bond Fund II ("BFII")
JPMorgan Enhanced Income Fund ("EIF")
JPMorgan Fleming Emerging Markets Debt Fund ("EMDF")
JPMorgan Global Strategic Income Fund ("GSIF")
JPMorgan Short Term Bond Fund ("STBF")
JPMorgan Short Term Bond Fund II ("STBFII")
JPMorgan Strategic Income Fund ("SIF")
JPMorgan U.S. Treasury Income Fund ("USTI")
Certain tax information for the JPMorgan Funds is required to be provided to
shareholders based upon the Funds' income and distributions for the taxable year
end August 31, 2004. The information and distributions reported in this letter
may differ from the information and taxable distributions reported to the
shareholders for the calendar year ending December 31, 2004. The information
necessary to complete your income tax returns for the calendar year ending
December 31, 2004 will be received under separate cover.
During the period ended August 31, 2004, the following long-term capital gains
were distributed by the following Funds:
<Table>
<Caption>
LONG-TERM
CAPITAL GAINS
DISTRIBUTION
FUND
BF $ 19,415,785
BF II 5,293,048
</Table>
168
<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 Intrepid 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.
169
<Page>
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<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 FUNDS' PROSPECTUS WHICH INCLUDES INFORMATION
ON THE FUNDS' 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'S PROSPECTUS PLEASE CALL 800 348-4782. PLEASE
READ CAREFULLY BEFORE INVESTING OR SENDING MONEY.
No sooner than 30 days after the end of each month, the Fund will make available
upon request a complete uncertified schedule of its portfolio holdings as of the
last day of that month. Not later than 60 days after the end of each fiscal
quarter, the Fund will make available a complete schedule of its portfolio
holdings as of the last day of that quarter, as filed in a certified filing with
the SEC. In addition to providing hard copies upon request, the Fund will post
these quarterly schedules on the Fund's website at www.jpmorganfunds.com and on
the SEC's website at www.sec.gov.
Shareholders may request portfolio holdings schedules at no charge by calling
1-800-480-4111.
A description of the Fund's policies and procedures with respect to the
disclosure of the Fund's portfolio holdings is available in the Statement of
Additional 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
www.sec.gov. The Trustees have delegated the authority to vote proxies for
securities owned by the Fund to JPMIM. A copy of the Fund's voting record for
the 12-month period ended June 30, 2004 is available on the SEC's website at
www.sec.gov or at the Fund's website at www.jpmorgan.com. The Fund's proxy
voting record will include, among other things, a brief description of the
matter voted on for each portfolio security, and will state how each vote was
cast, for example, for or against the proposal.
<Page>
JPMorgan Funds Fulfillment Center PRSRT STD
6112 W. 73rd Street U.S. POSTAGE
Bedford Park, IL 60638 PAID
PERMIT 2891
KANSAS CITY, MO
(C) J.P. Morgan Chase & Co., 2004 All rights reserved. August 2004. AN-INC-804
<Page>
ITEM 2. CODE OF ETHICS.
Disclose whether, as of the end of the period covered by the report, the
registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, principal
accounting officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant or a
third party. If the registrant has not adopted such a code of ethics,
explain why it has not done so.
THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO THE REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING
OFFICER OR CONTROLLER, OR PERSONS PERFORMING SIMILAR FUNCTIONS.
THE REGISTRANT WILL PROVIDE TO ANY PERSON WITHOUT CHARGE, UPON REQUEST, A COPY
OF THE CODE OF ETHICS. A REQUEST MAY BE MADE BY CALLING 1-800-348-4782.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of directors has determined
that the registrant either:
(i) Has at least one audit committee financial expert serving on
its audit committee; or
(ii) Does not have an audit committee financial expert serving on
its audit committee.
THE REGISTRANT'S BOARD OF DIRECTORS HAS DETERMINED THAT THE REGISTRANT HAS AT
LEAST ONE AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT COMMITTEE.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is
"independent." In order to be considered "independent" for purposes
of this Item, a member of an audit committee may not, other than in
his or her capacity as a member of the audit committee, the board
of directors, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)).
THE AUDIT COMMITTEE FINANCIAL EXPERT IS WILLIAM ARMSTRONG. HE IS A
"NON-INTERESTED" TRUSTEE AND IS ALSO "INDEPENDENT" AS DEFINED BY THE SECURITIES
AND EXCHANGE COMMISSION FOR PURPOSES OF AUDIT COMMITTEE FINANCIAL EXPERT
DETERMINATIONS.
(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.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The aggregate fees billed for each of the last two fiscal years
(the "Reporting Periods") for professional services rendered by the Registrant's
principal accountant (the "Auditor") for the audit of the Registrant's annual
financial statements, or services that are normally provided by the Auditor in
connection with the statutory and regulatory filings or engagements for the
Reporting Periods, were $93,186 in 2003 and $91,631 in 2004.
(b) AUDIT-RELATED FEES. There were no audit-related fees for the Registrant
during the Reporting Periods.
The aggregate fees billed in the Reporting Periods for assurance and related
services by the Auditor 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 investment adviser
that provides ongoing services to the Registrant ("Service Affiliates"), that
were reasonably related to the performance of the annual audit of the Service
Affiliates, which required pre-approval by the Audit Committee were $8,277,000
from May 6, 2003 to December 31, 2003 (prior to May 6, 2003 services provided by
the Auditor were not required to be pre-approved).
<Page>
(c) TAX FEES. The aggregate fees billed to the Registrant in the Reporting
Periods for professional services rendered by the Auditor for tax compliance,
tax advice and tax planning ("Tax Services") were $8,200 in 2003 and $8,400 in
2004. These services consisted of review or preparation of U.S. federal, state,
local and excise tax returns.
There were no fees billed for Tax Services by the Auditor to Service Affiliates
which required pre-approval by the Audit Committee for the period May 6, 2003
through December 31, 2003.
(d) ALL OTHER FEES. There were no other fees billed in the Reporting Periods
for products and services provided by the Auditor to the Registrant, or services
provided to Service Affiliates which were required to be pre-approved on or
after May 6, 2003 until December 31, 2003, other than the services reported
above.
(e) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. In addition to
pre-approving any services to be provided by the Auditor to the Registrant, the
Audit Committee considers and approves any non-audit services to be provided to
the Service Affiliates by the Auditor and the fees to be charged for such
non-audit services. Pre-approval considerations include whether the proposed
services are compatible with maintaining the Auditor's independence. The
Chairman of the Audit Committee has been given the authority to pre-approve
permissible non-audit services.
(g) NON-AUDIT FEES. The aggregate non-audit fees billed by the Auditor for
services rendered to the Registrant, and rendered to Service Affiliates, for the
last two calendar year ends were $46.4 million in 2002 and $28.3 million in
2003.
(h) AUDITOR INDEPENDENCE. The Registrant's Audit Committee has considered
whether the provision of non-audit services that were rendered to Service
Affiliates that were not pre-approved (not requiring pre-approval) is compatible
with maintaining the Auditor's independence. All services provided by the
Auditor to the Registrant or to Service Affiliates that were required to be
pre-approved were pre-approved as required.
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. SCHEDULE OF INVESTMENTS.
File Schedule I - Investments in securities of unaffiliated issuers as of
the close of the reporting period as set forth in Section 210.12-12 of
Regulation S-X, unless the schedule is included as part of the report to
shareholders filed under Item 1 of this Form.
NOT APPLICABLE.
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.
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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.
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 - SEE ITEM 2 ABOVE.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(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.
<Page>
(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 Funds
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By (Signature and Title)* /s/ Stephanie J. Dorsey
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Stephanie J. Dorsey, Treasurer
Date November 5, 2004
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ Stephanie J. Dorsey
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Stephanie J. Dorsey, Treasurer
Date November 5, 2004
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By (Signature and Title)* /s/ George C.W. Gatch
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George C.W. Gatch, President
Date November 9, 2004
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* Print the name and title of each signing officer under his or her signature.