<Page>
-----------------------------
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hours per response....... 5.0
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-05151
---------------------------------------------
J.P. Morgan Mutual Fund Group
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, NY 10036
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Stephen M. Benham, 522 Fifth Avenue, New York, NY 10036
- -------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: 1-800-480-4111
----------------------------
Date of fiscal year end: August 31, 2005
--------------------------
Date of reporting period: September 1, 2004 through February 28, 2005
----------------------------------------------
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>
SEMI-ANNUAL REPORT
SIX MONTHS ENDED FEBRUARY 28, 2005
JPMORGAN FUNDS
INCOME FUNDS
BOND FUND
ENHANCED INCOME FUND
EMERGING MARKETS DEBT FUND
GLOBAL STRATEGIC INCOME FUND
SHORT TERM BOND FUND
SHORT TERM BOND FUND II
[JPMORGAN ASSET MANAGEMENT LOGO]
<Page>
JPMORGAN 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 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
Enhanced Income Fund 6
Emerging Markets Debt Fund 9
Global Strategic Income Fund 12
Short Term Bond Fund 15
Short Term Bond Fund II 18
Portfolio of Investments 21
Financial Statements 74
Notes to Financial Statements 85
Financial Highlights 108
</Table>
HIGHLIGHTS
- - While U.S. economy continued to expand with increased business and consumer
spending and higher GDP, international growth lagged.
- - Inflation remained tame as the Fed raised short-term rates, although higher
commodity prices hinted at an increased inflation rate.
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) 480-4111 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 JPMorgan Distribution Services, Inc.
Affiliates of JPMorgan Chase & Co. receive fees for providing various services
to the funds.
<Page>
JPMORGAN INCOME FUNDS
PRESIDENT'S LETTER MARCH 7, 2005
[PHOTO OF GEORGE C.W. GATCH]
"Economic data released in January and February suggested that economic growth
would remain firm through the end of the first quarter. Businesses appeared
likely to make a strong contribution to the economic expansion despite the
expiration of some tax incentives."
DEAR SHAREHOLDER:
We are pleased to present this semi-annual report for the JPMorgan Fixed Income
Funds for the six-month period ended February 28, 2005. Inside you'll find
in-depth information on some of our fixed income funds along with an update from
the portfolio management team.
DESPITE SOFT SPOT, U.S. ECONOMY CONTINUES TO GROW
The U.S. economy softened early in the period, largely in response to higher oil
prices. However, by the fourth quarter, it had strengthened again. Driven by
increased consumer and capital spending, the U.S. gross domestic product grew at
3.8%. Housing market activity, including sales, new housing starts and permits,
was stronger than expected. Meanwhile, the international growth environment
experienced some deterioration. Inflation was well behaved, trending near 1.5%.
Economic data released in January and February suggested that economic growth
would remain firm through the end of the first quarter. Businesses appeared
likely to make a strong contribution to the economic expansion despite the
expiration of some tax incentives. Core capital goods orders -- an important
forward-looking indicator of business investment -- increased by 4.4% in January
after a gain of 3.4% in December. Although the trade deficit seemed to be acting
as a drag on the economy, domestic demand for goods and services was strong. The
job picture continued to be mixed. While 124,000 new jobs were added to the
payrolls in January, unemployment was 5.2%.
FEDERAL RESERVE MAINTAINS PATTERN OF MEASURED INTEREST-RATE INCREASES
Over the course of the period, the Federal Reserve Board (the Fed) maintained a
steady pattern of interest-rate increases. In November and again in December, it
raised short-term interest rates by a quarter of a percent. The Fed also
reaffirmed its intent to raise rates at a measured pace and to "respond to
changes in economic prospects as needed to fulfill its obligation to maintain
price stability."
In early 2005, investors began to speculate that such a response would come
sooner rather than later. Although inflation grew by a modest 1.6% in 2004,
economic data released in February hinted that it could be on the rise. If
companies began to pass on higher commodity prices to consumers or consumer
expectations changed, the Fed might begin to tighten interest rates more
aggressively.
Adding to concern was the flattening yield curve. Although short-term rates had
risen over the period, longer-term interest rates remained low, which was
counter to the Fed's intended policy actions. However, the Fed did not drop its
"measured pace" rhetoric during the period and, following a quarter-of-a percent
increase in February, the fed funds rate (the rate charged by banks for
overnight loans) stood at 2.50%.
In this challenging environment, rest assured that your portfolio managers will
continue working hard on your behalf. As they look for opportunities to obtain
the highest possible yields, they will also stay focused on the preservation of
your principal.
<Page>
On behalf of all of us here at JPMorgan Asset Management, thank you for the
continued confidence and trust you have placed in us. We look forward to serving
your investment needs for many years to come. Should you have any questions,
please feel free to contact the JPMorgan Funds Service Center at 1-800-480-4111.
Sincerely,
/s/ George C.W. Gatch
George C.W. Gatch
President
JPMorgan Funds
2
<Page>
JPMORGAN BOND FUND
AS OF FEBRUARY 28, 2005 (Unaudited)
FUND FACTS
<Table>
Fund Inception 7/26/1993
Fiscal Year End AUGUST 31
Net Assets as of 2/28/2005
(In Millions) $836
Primary Benchmark LEHMAN AGGREGATE BOND INDEX
Average Credit Quality AA
Duration 5.1 YEARS
</Table>
Q: HOW DID THE PORTFOLIO PERFORM?
A: The JPMorgan Bond Fund, which seeks to provide high total return consistent
with moderate risk of capital and maintenance of liquidity, returned 2.71%
(Institutional Shares) for the six-month period ending February 28, 2005.
This compares to the 1.26% return of its benchmark, the Lehman Aggregate Bond
Index.
Q: WHY DID THE PORTFOLIO PERFORM THIS WAY?
A: Although our residential mortgage security selection enhanced performance,
our mortgage sector weighting was a modest negative. Our duration and
yield-curve positioning was also a positive, as was our positioning in
investment-grade corporate bonds. Also adding to performance were our
international positions and our allocation to securities that were below
investment grade, such as high-yield and emerging markets debt.
Q: HOW WAS THE PORTFOLIO MANAGED?
A: The U.S. economy continued to expand following an oil-induced soft spot
earlier in 2004. Business spending increased while consumer spending and the
housing market remained robust. These positive developments offset
deterioration in the international growth environment and the associated
negative impact on net exports. Fourth-quarter gross domestic product grew at
3.8% versus 4.0% during the third quarter. Data from the first quarter of
2005 suggested that firm growth would continue. Although inflation remained
tame, higher commodity prices hinted that the inflation rate could increase.
In addition, the employment picture remained mixed, while unemployment fell
in January to 5.2%, the lowest level in more than three years, it rose to
5.4% in February.
Pledging to "respond to changes in economic prospects," the Federal Reserve
Board continued to raise short-term rates at a measured pace, tightening by a
quarter of a percent each in November, December, and February. By the end of
the period, the fed funds rate (the rate charged by banks for overnight
loans) stood at 2.50%. Short-term rates rose over the period on expectations
of Fed tightening. However, rates for longer-term maturities moved lower,
contributing to significant flattening of the yield curve between two- and
30-year maturities.
We managed duration based on our belief that the Fed would tighten less
aggressively than market expectations. Because we expected that short-term
rates would rise more quickly than long-term rates, we implemented
curve-flattening trades. After spreads tightened, we actively traded
residential mortgages around a neutral position. Mortgage security selection
focused on coupon selection. We took advantage of opportunities to purchase
both asset-backed and commercial-backed securities at attractive prices.
Despite strong fundamentals, we reduced the Fund's allocation to
investment-grade corporate bonds, maintaining a modest overweight to
attractive BBB names, European Tier 1 and Asian bank paper, telecom,
insurance, and natural gas credits. We also reduced our exposure to the
markets in high-yield and emerging markets debt as spreads in both tightened
substantially. In the emerging markets, we focused on fundamentally strong
countries. We maintained a Eurozone curve-steepener position and added an
outright long Euro/short U.S. dollar position in five-year
maturities.
3
<Page>
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Residential Mortgage Backed Securities 35.9%
Corporate Notes & Bonds 28.1%
Asset Backed Securities 18.6%
Foreign Government Securities 6.8%
Money Market Fund 2.9%
Private Placements 1.9%
Commercial Mortgage Backed Securities 1.7%
Commercial Paper 1.5%
U.S. Treasury Securities 1.4%
U.S. Government Agency Securities 1.0%
Other (Less than 1%) 0.2%
</Table>
4
<Page>
SEMI-ANNUAL REPORT FEBRUARY 28 2005
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
---------------------------------------
CLASS A SHARES
Without Sales Charge 3.70% 5.68% 7.18% 6.86%
With Sales Charge* (1.01%) 4.05% 6.20% 6.37%
CLASS B SHARES
Without CDSC 3.04% 4.64% 6.47% 6.50%
With CDSC** (1.83%) 3.73% 6.15% 6.50%
CLASS C SHARES
Without CDSC 2.93% 4.81% 6.58% 6.55%
With CDSC*** 1.95% 4.81% 6.58% 6.55%
INSTITUTIONAL SHARES 4.08% 5.71% 7.30% 7.01%
SELECT SHARES 3.86% 5.53% 7.10% 6.82%
ULTRA SHARES 4.09% 5.82% 7.41% 7.10%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and
0% for the ten year period.
*** Assumes 1% CDSC for the one year period and 0% thereafter.
[CHART]
TEN-YEAR PERFORMANCE (2/28/95 TO 2/28/05)
<Table>
<Caption>
JPMORGAN BOND FUND LEHMAN AGGREGATE LIPPER INTERMEDIATE INVESTMENT
(INSTITUTIONAL SHARES) BOND INDEX GRADE DEBT FUNDS INDEX
2/28/1995 $ 3,000,000 $ 3,000,000 $ 3,000,000
3/31/1995 $ 3,024,000 $ 3,018,300 $ 3,019,800
4/30/1995 $ 3,067,243 $ 3,060,556 $ 3,059,359
5/31/1995 $ 3,194,534 $ 3,179,000 $ 3,166,743
6/30/1995 $ 3,214,659 $ 3,202,206 $ 3,186,693
7/31/1995 $ 3,202,444 $ 3,195,162 $ 3,179,683
8/31/1995 $ 3,242,474 $ 3,233,823 $ 3,216,885
9/30/1995 $ 3,275,872 $ 3,265,191 $ 3,247,445
10/31/1995 $ 3,323,372 $ 3,307,639 $ 3,289,987
11/30/1995 $ 3,370,231 $ 3,357,253 $ 3,339,008
12/31/1995 $ 3,416,404 $ 3,404,255 $ 3,383,750
1/31/1996 $ 3,439,977 $ 3,426,723 $ 3,406,083
2/29/1996 $ 3,375,305 $ 3,367,098 $ 3,346,817
3/31/1996 $ 3,355,391 $ 3,343,528 $ 3,323,724
4/30/1996 $ 3,331,903 $ 3,324,804 $ 3,304,447
5/31/1996 $ 3,322,574 $ 3,318,155 $ 3,299,490
6/30/1996 $ 3,364,438 $ 3,362,618 $ 3,337,764
7/31/1996 $ 3,368,476 $ 3,371,697 $ 3,347,110
8/31/1996 $ 3,365,107 $ 3,365,965 $ 3,343,763
9/30/1996 $ 3,421,304 $ 3,424,533 $ 3,399,604
10/31/1996 $ 3,496,573 $ 3,500,558 $ 3,471,335
11/30/1996 $ 3,550,420 $ 3,560,417 $ 3,531,389
12/31/1996 $ 3,528,763 $ 3,527,305 $ 3,499,960
1/31/1997 $ 3,544,289 $ 3,538,240 $ 3,510,810
2/28/1997 $ 3,555,985 $ 3,547,086 $ 3,519,587
3/31/1997 $ 3,516,514 $ 3,507,713 $ 3,481,927
4/30/1997 $ 3,565,394 $ 3,560,329 $ 3,529,630
5/31/1997 $ 3,599,978 $ 3,594,152 $ 3,561,043
6/30/1997 $ 3,645,698 $ 3,636,922 $ 3,603,064
7/31/1997 $ 3,740,486 $ 3,735,119 $ 3,698,545
8/31/1997 $ 3,708,692 $ 3,703,371 $ 3,664,888
9/30/1997 $ 3,763,209 $ 3,758,180 $ 3,717,662
10/31/1997 $ 3,803,099 $ 3,812,674 $ 3,762,274
11/30/1997 $ 3,816,791 $ 3,830,212 $ 3,773,185
12/31/1997 $ 3,856,103 $ 3,868,897 $ 3,807,521
1/31/1998 $ 3,900,449 $ 3,918,419 $ 3,858,161
2/28/1998 $ 3,902,009 $ 3,915,285 $ 3,852,760
3/31/1998 $ 3,923,080 $ 3,928,597 $ 3,867,015
4/30/1998 $ 3,940,341 $ 3,949,025 $ 3,885,190
5/31/1998 $ 3,977,380 $ 3,986,541 $ 3,920,156
6/30/1998 $ 4,005,620 $ 4,020,427 $ 3,951,518
7/31/1998 $ 4,013,631 $ 4,028,870 $ 3,959,421
8/31/1998 $ 4,058,182 $ 4,094,540 $ 4,012,873
9/30/1998 $ 4,147,057 $ 4,190,352 $ 4,102,761
10/31/1998 $ 4,114,710 $ 4,168,143 $ 4,069,529
11/30/1998 $ 4,135,283 $ 4,191,902 $ 4,089,877
12/31/1998 $ 4,147,275 $ 4,204,478 $ 4,107,463
1/31/1999 $ 4,171,744 $ 4,234,329 $ 4,132,929
2/28/1999 $ 4,095,401 $ 4,160,229 $ 4,059,363
3/31/1999 $ 4,132,670 $ 4,183,110 $ 4,091,432
4/30/1999 $ 4,153,333 $ 4,196,496 $ 4,105,343
5/31/1999 $ 4,101,832 $ 4,159,567 $ 4,063,469
6/30/1999 $ 4,074,759 $ 4,146,256 $ 4,049,653
7/31/1999 $ 4,060,498 $ 4,128,842 $ 4,035,479
8/31/1999 $ 4,053,595 $ 4,126,777 $ 4,031,040
9/30/1999 $ 4,090,483 $ 4,174,648 $ 4,075,381
10/31/1999 $ 4,115,435 $ 4,190,094 $ 4,081,494
11/30/1999 $ 4,127,781 $ 4,189,675 $ 4,086,392
12/31/1999 $ 4,123,653 $ 4,169,565 $ 4,067,595
1/31/2000 $ 4,106,334 $ 4,155,805 $ 4,052,951
2/29/2000 $ 4,154,789 $ 4,206,090 $ 4,097,129
3/31/2000 $ 4,204,231 $ 4,261,611 $ 4,147,523
4/30/2000 $ 4,176,483 $ 4,249,252 $ 4,121,809
5/31/2000 $ 4,167,294 $ 4,247,127 $ 4,114,389
6/30/2000 $ 4,248,557 $ 4,335,468 $ 4,201,614
7/31/2000 $ 4,271,924 $ 4,374,920 $ 4,237,328
8/31/2000 $ 4,345,828 $ 4,438,357 $ 4,296,227
9/30/2000 $ 4,373,207 $ 4,466,318 $ 4,324,582
10/31/2000 $ 4,396,385 $ 4,495,796 $ 4,339,718
11/30/2000 $ 4,470,684 $ 4,569,527 $ 4,408,720
12/31/2000 $ 4,574,850 $ 4,654,520 $ 4,497,776
1/31/2001 $ 4,661,315 $ 4,730,389 $ 4,576,937
2/28/2001 $ 4,694,877 $ 4,771,544 $ 4,620,875
3/31/2001 $ 4,706,144 $ 4,795,401 $ 4,638,897
4/30/2001 $ 4,663,318 $ 4,775,261 $ 4,613,847
5/31/2001 $ 4,696,894 $ 4,803,912 $ 4,642,453
6/30/2001 $ 4,709,576 $ 4,822,167 $ 4,659,630
7/31/2001 $ 4,800,000 $ 4,930,184 $ 4,772,859
8/31/2001 $ 4,856,160 $ 4,986,881 $ 4,825,360
9/30/2001 $ 4,872,185 $ 5,044,728 $ 4,862,515
10/31/2001 $ 4,987,169 $ 5,150,163 $ 4,961,711
11/30/2001 $ 4,927,821 $ 5,079,091 $ 4,899,193
12/31/2001 $ 4,908,110 $ 5,046,585 $ 4,867,838
1/31/2002 $ 4,956,210 $ 5,087,462 $ 4,902,887
2/28/2002 $ 5,001,807 $ 5,136,811 $ 4,950,445
3/31/2002 $ 4,937,283 $ 5,051,540 $ 4,864,307
4/30/2002 $ 5,015,292 $ 5,149,539 $ 4,951,864
5/31/2002 $ 5,042,877 $ 5,193,310 $ 4,992,470
6/30/2002 $ 5,048,424 $ 5,238,492 $ 4,989,474
7/31/2002 $ 5,074,676 $ 5,301,878 $ 5,009,432
8/31/2002 $ 5,172,617 $ 5,391,480 $ 5,106,114
9/30/2002 $ 5,243,999 $ 5,478,822 $ 5,161,771
10/31/2002 $ 5,217,254 $ 5,453,619 $ 5,142,156
11/30/2002 $ 5,239,167 $ 5,451,983 $ 5,166,838
12/31/2002 $ 5,343,426 $ 5,564,839 $ 5,272,242
1/31/2003 $ 5,357,319 $ 5,569,847 $ 5,288,586
2/28/2003 $ 5,435,000 $ 5,646,711 $ 5,364,213
3/31/2003 $ 5,429,022 $ 5,642,194 $ 5,364,749
4/30/2003 $ 5,496,885 $ 5,689,024 $ 5,427,517
5/31/2003 $ 5,591,431 $ 5,794,840 $ 5,528,469
6/30/2003 $ 5,584,721 $ 5,783,250 $ 5,527,363
7/31/2003 $ 5,337,877 $ 5,588,933 $ 5,341,091
8/31/2003 $ 5,379,512 $ 5,625,820 $ 5,381,683
9/30/2003 $ 5,542,511 $ 5,774,904 $ 5,526,450
10/31/2003 $ 5,479,327 $ 5,721,198 $ 5,485,555
11/30/2003 $ 5,506,175 $ 5,734,929 $ 5,499,817
12/31/2003 $ 5,578,306 $ 5,793,425 $ 5,555,915
1/31/2004 $ 5,627,953 $ 5,839,772 $ 5,600,362
2/29/2004 $ 5,678,042 $ 5,902,842 $ 5,654,686
3/31/2004 $ 5,729,144 $ 5,947,113 $ 5,695,400
4/30/2004 $ 5,580,187 $ 5,792,488 $ 5,558,710
5/31/2004 $ 5,538,893 $ 5,769,318 $ 5,531,472
6/30/2004 $ 5,566,034 $ 5,801,626 $ 5,557,470
7/31/2004 $ 5,622,807 $ 5,859,063 $ 5,609,711
8/31/2004 $ 5,754,381 $ 5,970,971 $ 5,710,685
9/30/2004 $ 5,782,578 $ 5,987,092 $ 5,725,533
10/31/2004 $ 5,839,825 $ 6,037,384 $ 5,770,765
11/30/2004 $ 5,803,618 $ 5,989,085 $ 5,734,409
12/31/2004 $ 5,868,038 $ 6,044,184 $ 5,794,047
1/31/2005 $ 5,903,833 $ 6,082,263 $ 5,825,335
2/28/2005 $ 5,909,394 $ 6,046,377 $ 5,800,868
</Table>
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR
UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111.
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, and
Lipper Intermediate Investment Grade Debt Funds Index from February 28, 1995 to
February 28, 2005. 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 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 investment and carry no
sales charge.
Certain fees and expenses of the Fund are currently being waived and reimbursed
as described in the prospectus. Had the expenses not been subsidized or waived,
returns would have been lower. Also, all performance shown in this section does
not reflect the deduction of taxes that a shareholder would pay on fund
distributions or redemption of fund shares.
5
<Page>
JPMORGAN ENHANCED INCOME FUND
AS OF FEBRUARY 28, 2005 (Unaudited)
FUND FACTS
<Table>
Fund Inception 11/30/2001
Fiscal Year End AUGUST 31
Net Assets as of 2/28/2005
(In Millions) $208
Primary Benchmark 3 MONTH LIBOR INDEX
Average Credit Quality AA-
Duration 0.4 YEARS
</Table>
Q: HOW DID THE PORTFOLIO PERFORM?
A: The JPMorgan Enhanced Income Fund, which seeks high current income consistent
with principal preservation, returned 1.03% (Institutional Shares) for the
six-month period ended February 28, 2005. This compares to the 1.05% return
of its benchmark, the 3 Month LIBOR Index.
Q: WHY DID THE PORTFOLIO PERFORM THIS WAY?
A: Contributing significantly to performance were our allocations to
collateralized mortgage obligations (CMOs) and asset-backed securities (ABS).
Our duration positioning detracted slightly from performance when interest
rates rose sharply during the fourth quarter. Selective purchases of
corporate securities added to performance as spreads continued to tighten.
Q: HOW WAS THE PORTFOLIO MANAGED?
A: The U.S. economy continued to expand following an oil-induced soft spot
earlier in 2004. Business spending increased while consumer spending and the
housing market remained robust. These positive developments offset
deterioration in the international growth environment and the associated
negative impact on net exports. Fourth-quarter gross domestic product grew at
3.8% versus 4.0% during the third quarter. Data from the first quarter of
2005 suggested that firm growth would continue. Although inflation remained
tame, higher commodity prices hinted that the inflation rate could increase.
In addition, the employment picture remained mixed, while unemployment fell
in January to 5.2%, the lowest level in more than three years, it rose to
5.4% in February.
Pledging to "respond to changes in economic prospects," the Federal Reserve
Board continued to raise short-term rates at a measured pace, tightening by a
quarter of a percent each in November, December, and February. By the end of
the period, the fed funds rate (the rate charged by banks for overnight
loans) stood at 2.50%. Short-term rates rose over the period on expectations
of Fed tightening. However, rates for longer-term maturities moved lower,
contributing to significant flattening of the yield curve between two- and
30-year maturities.
We continued to selectively add corporate bonds and ABS. Early in the period,
we sold high-quality, fixed-rate corporate issues in the one- to three-year
area of the curve and purchased lower credit-quality names. As interest rates
declined early in the fourth quarter, we reduced our duration position. We
extended again after the strong October employment report. Since late 2004,
we maintained a neutral position, tactically trading duration as the market
reacted to economic data. Later in the period, we purchased floating-rate
CMOs at attractive prices. We also added floating-rate, home equity loan ABS
because they offered yields that would increase as interest rates increased.
We maintained our allocation to corporate securities, but have swapped out of
more expensive issues into those with higher yields.
6
<Page>
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes & Bonds 45.1%
Asset Backed Securities 28.4%
Residential Mortgage Backed Securities 15.7%
Commercial Mortgage Backed Securities 4.2%
Certificates of Deposit 2.2%
Money Market Fund 1.8%
Other (Less than 1%) 2.6%
</Table>
7
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS (11/30/01)
----------------------------------------------
INSTITUTIONAL SHARES 1.69% 1.52% 1.55%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (11/30/01 TO 2/28/05)
<Table>
<Caption>
JPMORGAN ENHANCED INCOME FUND
(INSTITUTIONAL SHARES) 3 MONTH LIBOR INDEX
11/30/2001 $ 3,014,422 $ 3,014,724
3/31/2002 $ 3,020,451 $ 3,019,547
4/30/2002 $ 3,032,231 $ 3,024,681
5/31/2002 $ 3,037,992 $ 3,029,520
6/30/2002 $ 3,043,764 $ 3,034,367
7/31/2002 $ 3,044,069 $ 3,039,222
8/31/2002 $ 3,047,722 $ 3,044,085
9/30/2002 $ 3,051,684 $ 3,048,651
10/31/2002 $ 3,055,651 $ 3,053,529
11/30/2002 $ 3,061,762 $ 3,058,415
12/31/2002 $ 3,061,150 $ 3,062,391
1/31/2003 $ 3,069,415 $ 3,066,066
2/28/2003 $ 3,071,256 $ 3,069,132
3/31/2003 $ 3,074,635 $ 3,072,815
4/30/2003 $ 3,081,092 $ 3,075,887
5/31/2003 $ 3,090,643 $ 3,079,271
6/30/2003 $ 3,090,334 $ 3,082,966
7/31/2003 $ 3,073,955 $ 3,086,049
8/31/2003 $ 3,082,255 $ 3,088,826
9/30/2003 $ 3,089,960 $ 3,091,606
10/31/2003 $ 3,084,399 $ 3,094,698
11/30/2003 $ 3,087,791 $ 3,097,793
12/31/2003 $ 3,091,497 $ 3,100,890
1/31/2004 $ 3,095,206 $ 3,103,991
2/29/2004 $ 3,101,706 $ 3,106,785
3/31/2004 $ 3,105,118 $ 3,109,892
4/30/2004 $ 3,105,429 $ 3,112,691
5/31/2004 $ 3,106,050 $ 3,115,803
6/30/2004 $ 3,109,777 $ 3,118,607
7/31/2004 $ 3,114,131 $ 3,122,662
8/31/2004 $ 3,121,639 $ 3,126,721
9/30/2004 $ 3,126,599 $ 3,130,786
10/31/2004 $ 3,128,788 $ 3,135,795
11/30/2004 $ 3,134,107 $ 3,140,812
12/31/2004 $ 3,140,375 $ 3,146,780
1/31/2005 $ 3,146,656 $ 3,147,409
2/28/2005 $ 3,153,876 $ 3,148,039
</Table>
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR
UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111.
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 and 3 Month LIBOR
Index from November 30, 2001 to February 28, 2005. 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.
Institutional Shares have a $3,000,000 minimum initial investment 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 EMERGING MARKETS DEBT FUND
AS OF FEBRUARY 28, 2005 (Unaudited)
FUND FACTS
<Table>
Fund Inception 4/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 2/28/2005
(In Millions) $37
Primary Benchmark EMERGING MARKETS BOND INDEX GLOBAL
Average Credit Quality BBB
Duration 5.8 YEARS
</Table>
Q: HOW DID THE PORTFOLIO PERFORM?
A: JPMorgan 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 11.32% (Select Shares) for the six-month period ended
February 28, 2005. This compares to the 8.03% return from the Emerging
Markets Bond Index Global.
Q: WHY DID THE PORTFOLIO PERFORM THIS WAY?
A: The majority of our outperformance came from allocations to Argentina,
Venezuela, Mexico and Russia. In Argentina, we held Bodens, an
interest-bearing bond that rallied strongly as the country's debt
restructuring moved closer to a resolution. Venezuela benefited as oil prices
continued to rise. In Mexico, our position in long-duration bonds enhanced
performance and, in Russia, the Fund benefited from our switch to
higher-yield bonds. Also contributing was the credit upgrade given to both
countries by the rating agencies. Our underperformance was limited to
Ecuador, where we were underweight during a market rally.
The Fund positioned into the local currency debt markets of Mexico, Colombia
and Uruguay. Local yields in these markets have been very high and the
positions also performed well as the U.S. dollar continued to weaken during
the period.
Q: HOW WAS THE PORTFOLIO MANAGED?
A: Strong fundamentals, improved credit quality, and sustained inflows supported
an ongoing rally in emerging markets debt. Economic indicators suggested that
the global economy grew at a medium pace while inflation was well contained.
As investors sought higher-yielding investments, prices moved up in both
high-yield and emerging markets debt. New issuance continued to be ahead of
schedule after several countries pre-financed their 2005 and, in some cases
their 2006, funding needs. The environment became more turbulent in January
on concerns that the U.S. Federal Reserve Board would raise short-term
interest rates more aggressively. Driven by strong demand, the market
recovered in February despite the rise in U.S. interest rates, which was
sparked by growing signs of inflation. Oil prices climbed to above $50 a
barrel with prospects for strong global growth in the future.
We overweighted Russian debt in the face of strong buyer interest and in
anticipation of a credit upgrade. As the recovery continued in Ukraine, we
added to our exposure. Once prices rose beyond our estimates of fair value,
we reduced our position and shifted our allocations into Peru, where we
expect an upgrade in the near future. We decreased our exposure to Colombia
and eliminated holdings in the Philippines. We took profits in Brazil as
prices rose. We also increased our allocation to Venezuela because it should
continue to benefit from high oil prices, and also remains cheap relative to
its fundamentals. After reducing Ecuador early in the period, we returned to
neutral because of the possibility of a credit upgrade. We invested in more
liquid and short-dated securities to give us the flexibility to exit
positions should the environment deteriorate.
9
<Page>
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Foreign Government Securities 93.9%
U.S. Treasury Securities 4.2%
Corporate Notes & Bonds 1.8%
Other (Less than 1%) 0.1%
</Table>
10
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (4/17/97)
--------------------------------------------------
SELECT SHARES 15.84% 16.38% 13.64% 10.95%
</Table>
[CHART]
LIFE OF FUND PERFORMANCE (4/17/97 TO 2/28/05)
<Table>
<Caption>
JPMORGAN EMERGING MARKETS EMERGING MARKETS BOND LIPPER EMERGING MARKETS
DEBT FUND (SELECT SHARES) INDEX GLOBAL DEBT FUNDS INDEX
4/17/1997 $ 1,000,000 $ 1,000,000 $ 1,000,000
4/30/1997 $ 1,020,000 $ 1,000,000 $ 1,000,000
5/31/1997 $ 1,051,008 $ 1,033,900 $ 1,041,100
6/30/1997 $ 1,068,034 $ 1,056,542 $ 1,073,686
7/31/1997 $ 1,090,036 $ 1,100,178 $ 1,119,855
8/31/1997 $ 1,078,917 $ 1,094,787 $ 1,116,047
9/30/1997 $ 1,105,783 $ 1,125,222 $ 1,151,426
10/31/1997 $ 986,026 $ 1,005,948 $ 1,027,878
11/30/1997 $ 1,034,835 $ 1,048,601 $ 1,067,246
12/31/1997 $ 1,053,462 $ 1,074,291 $ 1,099,050
1/31/1998 $ 1,051,144 $ 1,079,448 $ 1,096,742
2/28/1998 $ 1,080,891 $ 1,107,945 $ 1,127,122
3/31/1998 $ 1,107,373 $ 1,133,096 $ 1,156,427
4/30/1998 $ 1,108,481 $ 1,135,702 $ 1,157,121
5/31/1998 $ 1,072,455 $ 1,101,404 $ 1,110,026
6/30/1998 $ 1,033,310 $ 1,073,538 $ 1,065,070
7/31/1998 $ 1,045,090 $ 1,079,765 $ 1,073,590
8/31/1998 $ 763,229 $ 784,557 $ 701,591
9/30/1998 $ 808,794 $ 852,343 $ 732,952
10/31/1998 $ 862,417 $ 906,807 $ 778,395
11/30/1998 $ 914,162 $ 969,014 $ 849,152
12/31/1998 $ 885,640 $ 950,312 $ 817,478
1/31/1999 $ 846,141 $ 928,645 $ 793,853
2/28/1999 $ 855,702 $ 937,839 $ 807,428
3/31/1999 $ 920,650 $ 1,000,018 $ 860,718
4/30/1999 $ 1,000,286 $ 1,061,519 $ 922,518
5/31/1999 $ 930,566 $ 1,006,744 $ 872,148
6/30/1999 $ 974,954 $ 1,045,403 $ 907,819
7/31/1999 $ 949,995 $ 1,027,945 $ 894,293
8/31/1999 $ 944,675 $ 1,028,665 $ 893,309
9/30/1999 $ 977,267 $ 1,060,965 $ 915,374
10/31/1999 $ 1,019,582 $ 1,098,523 $ 953,636
11/30/1999 $ 1,050,782 $ 1,127,963 $ 992,259
12/31/1999 $ 1,115,615 $ 1,180,188 $ 1,044,551
1/31/2000 $ 1,104,459 $ 1,162,013 $ 1,035,359
2/29/2000 $ 1,194,803 $ 1,224,413 $ 1,101,829
3/31/2000 $ 1,237,816 $ 1,257,717 $ 1,128,713
4/30/2000 $ 1,206,376 $ 1,234,575 $ 1,099,818
5/31/2000 $ 1,163,429 $ 1,206,056 $ 1,067,264
6/30/2000 $ 1,229,744 $ 1,262,259 $ 1,124,255
7/31/2000 $ 1,274,015 $ 1,298,233 $ 1,157,421
8/31/2000 $ 1,311,853 $ 1,339,647 $ 1,192,491
9/30/2000 $ 1,281,681 $ 1,325,178 $ 1,171,384
10/31/2000 $ 1,254,381 $ 1,298,277 $ 1,142,099
11/30/2000 $ 1,232,931 $ 1,293,084 $ 1,134,219
12/31/2000 $ 1,285,330 $ 1,350,239 $ 1,179,928
1/31/2001 $ 1,353,324 $ 1,415,320 $ 1,244,588
2/28/2001 $ 1,332,754 $ 1,396,496 $ 1,230,399
3/31/2001 $ 1,305,966 $ 1,380,856 $ 1,209,975
4/30/2001 $ 1,295,257 $ 1,374,227 $ 1,201,989
5/31/2001 $ 1,333,078 $ 1,407,346 $ 1,234,803
6/30/2001 $ 1,361,073 $ 1,428,879 $ 1,256,536
7/31/2001 $ 1,272,059 $ 1,354,863 $ 1,203,636
8/31/2001 $ 1,332,354 $ 1,415,561 $ 1,245,642
9/30/2001 $ 1,270,933 $ 1,369,272 $ 1,186,101
10/31/2001 $ 1,278,685 $ 1,369,956 $ 1,201,164
11/30/2001 $ 1,307,072 $ 1,352,421 $ 1,239,121
12/31/2001 $ 1,346,807 $ 1,368,515 $ 1,271,834
1/31/2002 $ 1,379,535 $ 1,393,832 $ 1,297,143
2/28/2002 $ 1,436,509 $ 1,446,101 $ 1,343,840
3/31/2002 $ 1,444,554 $ 1,447,692 $ 1,355,801
4/30/2002 $ 1,455,966 $ 1,461,879 $ 1,371,257
5/31/2002 $ 1,438,640 $ 1,454,277 $ 1,359,875
6/30/2002 $ 1,344,984 $ 1,380,982 $ 1,268,084
7/31/2002 $ 1,263,344 $ 1,318,423 $ 1,192,886
8/31/2002 $ 1,360,495 $ 1,414,932 $ 1,278,178
9/30/2002 $ 1,307,572 $ 1,375,738 $ 1,236,381
10/31/2002 $ 1,404,463 $ 1,460,346 $ 1,322,186
11/30/2002 $ 1,452,355 $ 1,501,820 $ 1,365,686
12/31/2002 $ 1,500,864 $ 1,547,926 $ 1,414,578
1/31/2003 $ 1,523,527 $ 1,573,467 $ 1,445,557
2/28/2003 $ 1,577,459 $ 1,623,818 $ 1,498,320
3/31/2003 $ 1,617,211 $ 1,650,123 $ 1,536,227
4/30/2003 $ 1,725,403 $ 1,744,180 $ 1,636,389
5/31/2003 $ 1,790,623 $ 1,816,564 $ 1,710,027
6/30/2003 $ 1,778,268 $ 1,816,564 $ 1,710,882
7/31/2003 $ 1,722,252 $ 1,752,258 $ 1,661,095
8/31/2003 $ 1,775,470 $ 1,794,837 $ 1,703,453
9/30/2003 $ 1,832,463 $ 1,857,836 $ 1,756,260
10/31/2003 $ 1,854,086 $ 1,866,940 $ 1,767,851
11/30/2003 $ 1,883,566 $ 1,889,903 $ 1,793,132
12/31/2003 $ 1,944,028 $ 1,945,466 $ 1,852,664
1/31/2004 $ 1,957,442 $ 1,955,388 $ 1,864,150
2/29/2004 $ 1,954,701 $ 1,962,232 $ 1,861,540
3/31/2004 $ 2,007,869 $ 2,011,092 $ 1,907,520
4/30/2004 $ 1,863,504 $ 1,901,889 $ 1,810,237
5/31/2004 $ 1,843,005 $ 1,873,741 $ 1,777,653
6/30/2004 $ 1,873,230 $ 1,901,285 $ 1,806,273
7/31/2004 $ 1,933,361 $ 1,957,753 $ 1,859,558
8/31/2004 $ 2,034,242 $ 2,038,609 $ 1,936,916
9/30/2004 $ 2,073,341 $ 2,158,071 $ 1,977,784
10/31/2004 $ 2,117,710 $ 2,223,892 $ 2,016,945
11/30/2004 $ 2,149,476 $ 2,406,696 $ 2,048,207
12/31/2004 $ 2,220,838 $ 2,531,363 $ 2,106,786
1/31/2005 $ 2,240,382 $ 2,540,476 $ 2,123,008
2/28/2005 $ 2,264,346 $ 2,752,352 $ 2,145,724
</Table>
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR
UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111.
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 Emerging Markets Debt Fund, Emerging
Markets Bond Index Global and Lipper Emerging Markets Debt Funds Index from
April 17, 1997 to February 28, 2005. 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.
11
<Page>
JPMORGAN GLOBAL STRATEGIC INCOME FUND
AS OF FEBRUARY 28, 2005 (UNAUDITED)
FUND FACTS
<Table>
FUND INCEPTION 3/17/1997
Fiscal Year End AUGUST 31
Net Assets as of 2/28/2005
(In Millions) $46
Primary Benchmark LEHMAN AGGREGATE BOND INDEX
Average Credit Quality A
Duration 4.5 YEARS
</Table>
Q: HOW DID THE PORTFOLIO 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 3.94% (Institutional Shares) for the six-month
period ended February 28, 2005. This compares to the 1.26% return of the
Lehman Aggregate Bond Index.
Q: WHY DID THE PORTFOLIO PERFORM THIS WAY?
A: The strongest contributors to performance were our holdings in high-yield and
emerging markets debt. Although our residential mortgage security selection
enhanced performance, our mortgage sector weighting was a modest negative.
Our international positions and our investment-grade, corporate-bond security
selection were positive.
Q: HOW WAS THE PORTFOLIO MANAGED?
A: The U.S. economy continued to expand following an oil-induced soft spot
earlier in 2004. Business spending increased while consumer spending and the
housing market remained robust. These positive developments offset
deterioration in the international growth environment and the associated
negative impact on net exports. Fourth-quarter gross domestic product grew at
3.8% versus 4.0% during the third quarter. Data from the first quarter of
2005 suggested that firm growth would continue. Although inflation remained
tame, higher commodity prices hinted that the inflation rate could increase.
In addition, the employment picture remained mixed, while unemployment fell
in January to 5.2%, the lowest level in more than three years, it rose to
5.4% in February.
Pledging to "respond to changes in economic prospects," the Federal Reserve
Board continued to raise short-term rates at a measured pace, tightening by a
quarter of a percent each in November, December, and February. By the end of
the period, the fed funds rate (the rate charged by banks for overnight
loans) stood at 2.50%. Short-term rates rose over the period on expectations
of Fed tightening. However, rates for longer-term maturities moved lower,
contributing to significant flattening of the yield curve between two- and
30-year maturities.
Consistent with the Fund's strategy, we maintained a strategic underweight to
the mortgage sector, making purchases based on coupon selection. Despite
strong fundamentals, we took advantage of rich valuations to reduce our
allocation to investment-grade corporate bonds, but continued to focus on
attractive BBB names. We maintained a significant weighting in high-yield and
emerging markets debt, but reduced our exposure as spreads tightened
substantially in both markets. In the emerging markets, we concentrated on
fundamentally strong countries. We maintained a Eurozone curve-steepener
position and added an outright long Euro/short U.S. dollar position in
five-year maturities.
12
<Page>
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes & Bonds 32.6%
Foreign Government Securities 20.5%
Residential Mortgage Backed Securities 19.3%
Money Market Fund 9.5%
Commercial Paper 6.8%
Private Placements 4.8%
U.S. Treasury Securities 2.7%
Asset Backed Securities 1.6%
Other (Less than 1%) 2.2%
</Table>
13
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
<Table>
<Caption>
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (3/17/97)
---------------------------------------------
CLASS A SHARES
Without sales charge 5.76% 6.33% 5.96% 5.41%
With slaes charge* 1.01% 4.70% 4.99% 4.81%
CLASS B SHARES
Without CDSC 5.75% 6.32% 5.95% 5.41%
With CDSC** 0.75% 5.43% 5.64% 5.41%
CLASS C SHARES
Without CDSC 5.75% 6.32% 5.95% 5.41%
With CDSC*** 4.75% 6.32% 5.95% 5.41%
CLASS M SHARES
Without CDSC 5.75% 6.32% 5.95% 5.41%
With CDSC**** 2.61% 5.27% 5.31% 5.01%
INSTITUTIONAL SHARES 6.27% 6.92% 6.53% 5.89%
SELECT SHARES 6.02% 6.55% 6.18% 5.55%
</Table>
* Sales Charge for Class A Shares is 4.50%.
** Assumes 5% CDSC (contingent deferred sales charge) for the one year period,
3% CDSC for the three year period, a 2% CDSC for the five year period and
since inception.
*** Assumes 1% CDSC for the one year and 0% thereafter.
**** Sales charge on Class M shares is 3.0%.
[CHART]
LIFE OF FUND PERFORMANCE (3/17/97 TO 2/28/05)
<Table>
<Caption>
JPMORGAN GLOBAL STRATEGIC LEHMAN AGGREGATE LIPPER MULTI-SECTOR
INCOME FUND (INSTITUTIONAL SHARES) BOND INDEX INCOME FUNDS INDEX
3/17/1997 $ 3,000,000 $ 3,000,000 $ 3,000,000
3/31/1997 $ 2,967,900 $ 3,000,000 $ 3,000,000
4/30/1997 $ 3,018,651 $ 3,045,000 $ 3,026,700
5/31/1997 $ 3,069,968 $ 3,073,928 $ 3,076,943
6/30/1997 $ 3,114,483 $ 3,110,507 $ 3,120,636
7/31/1997 $ 3,200,131 $ 3,194,491 $ 3,192,098
8/31/1997 $ 3,179,010 $ 3,167,338 $ 3,172,946
9/30/1997 $ 3,242,590 $ 3,214,214 $ 3,237,039
10/31/1997 $ 3,184,548 $ 3,260,820 $ 3,222,149
11/30/1997 $ 3,222,444 $ 3,275,820 $ 3,235,360
12/31/1997 $ 3,256,602 $ 3,308,906 $ 3,267,713
1/31/1998 $ 3,296,658 $ 3,351,260 $ 3,309,213
2/28/1998 $ 3,327,976 $ 3,348,579 $ 3,325,098
3/31/1998 $ 3,358,927 $ 3,359,964 $ 3,361,341
4/30/1998 $ 3,365,980 $ 3,377,436 $ 3,371,089
5/31/1998 $ 3,369,683 $ 3,409,522 $ 3,364,010
6/30/1998 $ 3,365,302 $ 3,438,503 $ 3,355,600
7/31/1998 $ 3,381,456 $ 3,445,723 $ 3,368,686
8/31/1998 $ 3,260,400 $ 3,501,889 $ 3,169,597
9/30/1998 $ 3,316,479 $ 3,583,833 $ 3,224,114
10/31/1998 $ 3,276,681 $ 3,564,839 $ 3,199,289
11/30/1998 $ 3,327,142 $ 3,585,158 $ 3,312,223
12/31/1998 $ 3,341,116 $ 3,595,914 $ 3,304,605
1/31/1999 $ 3,366,508 $ 3,621,445 $ 3,322,120
2/28/1999 $ 3,322,744 $ 3,558,069 $ 3,277,603
3/31/1999 $ 3,368,597 $ 3,577,639 $ 3,318,573
4/30/1999 $ 3,422,495 $ 3,589,087 $ 3,376,980
5/31/1999 $ 3,351,307 $ 3,557,503 $ 3,306,401
6/30/1999 $ 3,341,253 $ 3,546,119 $ 3,302,764
7/31/1999 $ 3,331,564 $ 3,531,226 $ 3,295,168
8/31/1999 $ 3,315,239 $ 3,529,460 $ 3,271,443
9/30/1999 $ 3,338,446 $ 3,570,402 $ 3,285,183
10/31/1999 $ 3,361,815 $ 3,583,612 $ 3,289,454
11/30/1999 $ 3,392,407 $ 3,583,254 $ 3,311,164
12/31/1999 $ 3,424,296 $ 3,566,054 $ 3,339,640
1/31/2000 $ 3,390,738 $ 3,554,286 $ 3,308,247
2/29/2000 $ 3,448,719 $ 3,597,293 $ 3,351,916
3/31/2000 $ 3,474,930 $ 3,644,777 $ 3,350,911
4/30/2000 $ 3,451,648 $ 3,634,207 $ 3,303,663
5/31/2000 $ 3,424,380 $ 3,632,390 $ 3,262,367
6/30/2000 $ 3,501,771 $ 3,707,944 $ 3,345,557
7/31/2000 $ 3,534,687 $ 3,741,686 $ 3,356,263
8/31/2000 $ 3,586,647 $ 3,795,941 $ 3,383,784
9/30/2000 $ 3,592,027 $ 3,819,855 $ 3,353,669
10/31/2000 $ 3,594,182 $ 3,845,066 $ 3,283,242
11/30/2000 $ 3,607,481 $ 3,908,125 $ 3,244,499
12/31/2000 $ 3,696,946 $ 3,980,816 $ 3,327,234
1/31/2001 $ 3,804,527 $ 4,045,704 $ 3,442,024
2/28/2001 $ 3,810,995 $ 4,080,901 $ 3,449,596
3/31/2001 $ 3,786,986 $ 4,101,306 $ 3,390,263
4/30/2001 $ 3,761,992 $ 4,084,080 $ 3,361,107
5/31/2001 $ 3,793,969 $ 4,108,585 $ 3,390,685
6/30/2001 $ 3,776,137 $ 4,124,198 $ 3,359,490
7/31/2001 $ 3,796,906 $ 4,216,580 $ 3,392,749
8/31/2001 $ 3,850,442 $ 4,265,070 $ 3,437,873
9/30/2001 $ 3,722,992 $ 4,314,545 $ 3,331,299
10/31/2001 $ 3,804,898 $ 4,404,719 $ 3,412,916
11/30/2001 $ 3,869,582 $ 4,343,934 $ 3,445,680
12/31/2001 $ 3,844,429 $ 4,316,133 $ 3,439,133
1/31/2002 $ 3,867,111 $ 4,351,093 $ 3,457,704
2/28/2002 $ 3,870,979 $ 4,393,299 $ 3,469,806
3/31/2002 $ 3,862,075 $ 4,320,370 $ 3,472,929
4/30/2002 $ 3,899,151 $ 4,404,185 $ 3,527,107
5/31/2002 $ 3,901,101 $ 4,441,621 $ 3,537,335
6/30/2002 $ 3,839,073 $ 4,480,263 $ 3,469,418
7/31/2002 $ 3,799,915 $ 4,534,474 $ 3,424,663
8/31/2002 $ 3,877,433 $ 4,611,107 $ 3,488,704
9/30/2002 $ 3,878,596 $ 4,685,807 $ 3,494,635
10/31/2002 $ 3,902,644 $ 4,664,252 $ 3,505,818
11/30/2002 $ 3,975,233 $ 4,662,853 $ 3,589,256
12/31/2002 $ 4,030,091 $ 4,759,374 $ 3,662,477
1/31/2003 $ 4,053,465 $ 4,763,657 $ 3,709,723
2/28/2003 $ 4,107,782 $ 4,829,396 $ 3,769,821
3/31/2003 $ 4,141,466 $ 4,825,532 $ 3,808,650
4/30/2003 $ 4,238,790 $ 4,865,584 $ 3,934,716
5/31/2003 $ 4,294,318 $ 4,956,084 $ 4,023,247
6/30/2003 $ 4,301,619 $ 4,946,172 $ 4,053,421
7/31/2003 $ 4,178,592 $ 4,779,981 $ 3,956,950
8/31/2003 $ 4,220,796 $ 4,811,528 $ 3,989,001
9/30/2003 $ 4,318,719 $ 4,939,034 $ 4,105,081
10/31/2003 $ 4,308,786 $ 4,893,101 $ 4,123,144
11/30/2003 $ 4,332,053 $ 4,904,844 $ 4,165,200
12/31/2003 $ 4,395,301 $ 4,954,874 $ 4,254,335
1/31/2004 $ 4,430,463 $ 4,994,513 $ 4,295,177
2/29/2004 $ 4,452,173 $ 5,048,453 $ 4,306,344
3/31/2004 $ 4,489,571 $ 5,086,317 $ 4,340,795
4/30/2004 $ 4,423,574 $ 4,954,073 $ 4,247,034
5/31/2004 $ 4,387,743 $ 4,934,256 $ 4,204,563
6/30/2004 $ 4,415,825 $ 4,961,888 $ 4,238,620
7/31/2004 $ 4,473,672 $ 5,011,011 $ 4,280,583
8/31/2004 $ 4,551,514 $ 5,106,721 $ 4,364,054
9/30/2004 $ 4,588,381 $ 5,120,509 $ 4,419,914
10/31/2004 $ 4,642,524 $ 5,163,522 $ 4,505,660
11/30/2004 $ 4,649,488 $ 5,122,213 $ 4,558,827
12/31/2004 $ 4,696,448 $ 5,169,338 $ 4,621,739
1/31/2005 $ 4,726,975 $ 5,201,905 $ 4,618,966
2/28/2005 $ 4,732,594 $ 5,171,213 $ 4,646,679
</Table>
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR
UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111.
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.
Returns for Class B, Class C and M Class Shares prior to 2/19/05 (offering date
of Class B, Class C and M Class shares) are calculated using the historical
expenses of Class A shares, which are lower than Class B, Class C and M Class
shares.
The graph illustrates comparative performance for $3,000,000 invested in
Institutional Shares of the JPMorgan Global Strategic Income Fund, Lehman
Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from March 17,
1997 to February 28, 2005. 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 investment 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
AS OF FEBRUARY 28, 2005 (Unaudited)
FUND FACTS
<Table>
Fund Inception 9/13/1993
Fiscal Year End AUGUST 31
Net Assets as of 2/28/2005
(In Millions) $717
Primary Benchmark MERRILL LYNCH 1-3 YEAR TREASURY INDEX
Average Credit Quality A+
Duration 1.9 YEARS
</Table>
Q: HOW DID THE PORTFOLIO PERFORM?
A: The JPMorgan Short Term Bond Fund, which seeks to provide high total return
consistent with low volatility of principal, returned 0.39% (Institutional
Shares) for the six-month period ended February 28, 2005. This compares to
the (0.33%) return of its benchmark, the Merrill Lynch 1-3 Year Treasury
Index.
Q: WHY DID THE PORTFOLIO PERFORM THIS WAY?
A: Contributing to performance were our allocations to collateralized mortgage
obligations (CMOs) and asset-backed securities. Our duration positioning
detracted slightly when interest rates rose during the fourth quarter.
Purchases of corporate securities added to performance as spreads tightened.
Our 10-year U.S. Treasury Inflation-Protected Securities (TIPS) trade
contributed to performance. However, the TIPS curve steepener detracted as
did our short position in Japan as yields remained low. Also detracting was
our Eurozone curve-steepener position. However, both our five-year Eurozone
versus U.S. spread trade and curve-flattener position contributed.
Q: HOW WAS THE PORTFOLIO MANAGED?
A: The U.S. economy continued to expand following an oil-induced soft spot.
Business spending increased while consumer spending and the housing market
remained robust. These positive developments offset deterioration in the
international growth environment and the associated negative impact on net
exports. Fourth-quarter gross domestic product grew at 3.8% versus 4.0%
during the third quarter. Data from the first quarter of 2005 suggested that
firm growth would continue. Although inflation remained tame, higher
commodity prices hinted that the inflation rate could increase. In addition,
the employment picture remained mixed, while unemployment fell in January to
5.2%, the lowest level in more than three years, it rose to 5.4% in February.
Pledging to "respond to changes in economic prospects," the Federal Reserve
Board continued to raise short-term rates at a measured pace, tightening by a
quarter of a percent each in November, December, and February. By the end of
the period, the fed funds rate (the rate charged by banks for overnight
loans) stood at 2.50%. Short-term rates rose over the period on expectations
of Fed tightening. However, rates for longer-term maturities moved lower,
contributing to significant flattening of the yield curve between two- and
30-year maturities.
Throughout the period, we traded duration as the market reacted to economic
data. We selectively increased our exposure to corporate and asset-backed
securities. Early in the period, we sold high-quality, fixed-rate corporate
issues in the one- to three-year area of the curve and bought lower
credit-quality names. We reduced our allocations to sovereigns and
supranationals, and added agencies and CMOs. Because their yields will
increase as interest rates increase, we added floating-rate home equity loan
asset-backed securities. We purchased two- and four-year CMOs at attractive
prices. We swapped out of more expensive corporate issues into those with
higher yields. We purchased 10-year TIPS, and implemented a curve-steepener
position in two- and 10-year TIPS.
We removed our long 10-year Canada/short U.S position, and the
curve-steepener position in the Eurozone. Because of disappointing economic
data, we removed our short-duration position in Japanese government bonds. We
implemented a long five-year Eurozone/short U.S. spread trade and then
removed it as spreads reached our target.
15
<Page>
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes & Bonds 44.1%
Asset Backed Securities 12.8%
Residential Mortgage Backed Securities 12.5%
Commercial Mortgage Backed Securities 10.1%
Money Market Fund 8.1%
Foreign Government Securities 6.2%
Certificates of Deposit 2.0%
Preferred Stocks 1.0%
Other (Less than 1%) 3.2%
</Table>
16
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------------------------------------------------
CLASS A SHARES
Without Sales Charge 0.51% 2.35% 4.25% 5.04%
With Sales Charge* (2.54%) 1.30% 3.61% 4.72%
INSTITUTIONAL SHARES 0.96% 2.78% 4.66% 5.37%
SELECT SHARES 0.70% 2.51% 4.38% 5.11%
</Table>
* Sales Charge for Class A Shares is 3.00%.
[CHART]
TEN-YEAR PERFORMANCE (2/28/95 TO 2/28/05)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND MERRILL LYNCH 1-3 YEAR LIPPER SHORT-TERM INVESTMENT
(INSTITUTIONAL SHARES) TREASURY INDEX GRADE DEBT FUNDS INDEX
2/28/1995 $ 3,000,000 $ 3,000,000 $ 3,000,000
3/31/1995 $ 3,018,900 $ 3,016,800 $ 3,016,500
4/30/1995 $ 3,047,278 $ 3,043,650 $ 3,042,442
5/31/1995 $ 3,104,262 $ 3,096,913 $ 3,098,119
6/30/1995 $ 3,120,093 $ 3,113,637 $ 3,117,327
7/31/1995 $ 3,126,334 $ 3,126,403 $ 3,127,302
8/31/1995 $ 3,148,218 $ 3,145,161 $ 3,148,255
9/30/1995 $ 3,166,793 $ 3,160,572 $ 3,163,367
10/31/1995 $ 3,188,643 $ 3,187,121 $ 3,193,103
11/30/1995 $ 3,217,022 $ 3,215,168 $ 3,219,925
12/31/1995 $ 3,242,437 $ 3,239,925 $ 3,242,142
1/31/1996 $ 3,270,322 $ 3,267,464 $ 3,271,321
2/29/1996 $ 3,248,411 $ 3,253,741 $ 3,259,218
3/31/1996 $ 3,253,608 $ 3,250,812 $ 3,244,877
4/30/1996 $ 3,255,235 $ 3,253,413 $ 3,247,148
5/31/1996 $ 3,266,303 $ 3,260,245 $ 3,253,643
6/30/1996 $ 3,288,513 $ 3,283,719 $ 3,277,069
7/31/1996 $ 3,297,392 $ 3,296,525 $ 3,290,505
8/31/1996 $ 3,309,923 $ 3,307,734 $ 3,302,022
9/30/1996 $ 3,339,712 $ 3,337,834 $ 3,333,721
10/31/1996 $ 3,380,122 $ 3,375,551 $ 3,369,392
11/30/1996 $ 3,406,825 $ 3,401,543 $ 3,397,358
12/31/1996 $ 3,407,847 $ 3,401,543 $ 3,398,717
1/31/1997 $ 3,425,227 $ 3,417,530 $ 3,416,050
2/28/1997 $ 3,435,503 $ 3,425,391 $ 3,427,665
3/31/1997 $ 3,435,847 $ 3,424,021 $ 3,424,237
4/30/1997 $ 3,460,241 $ 3,452,098 $ 3,451,631
5/31/1997 $ 3,485,155 $ 3,475,572 $ 3,474,757
6/30/1997 $ 3,506,763 $ 3,499,553 $ 3,499,080
7/31/1997 $ 3,543,233 $ 3,538,048 $ 3,538,970
8/31/1997 $ 3,547,131 $ 3,541,233 $ 3,541,447
9/30/1997 $ 3,576,572 $ 3,568,146 $ 3,569,070
10/31/1997 $ 3,591,594 $ 3,594,550 $ 3,590,842
11/30/1997 $ 3,599,495 $ 3,603,177 $ 3,599,819
12/31/1997 $ 3,625,411 $ 3,627,679 $ 3,621,418
1/31/1998 $ 3,666,016 $ 3,662,867 $ 3,652,924
2/28/1998 $ 3,669,682 $ 3,666,164 $ 3,658,038
3/31/1998 $ 3,684,361 $ 3,681,195 $ 3,673,036
4/30/1998 $ 3,703,151 $ 3,698,497 $ 3,690,299
5/31/1998 $ 3,725,000 $ 3,718,099 $ 3,710,227
6/30/1998 $ 3,739,527 $ 3,737,433 $ 3,726,923
7/31/1998 $ 3,761,964 $ 3,754,999 $ 3,743,321
8/31/1998 $ 3,788,298 $ 3,802,312 $ 3,768,776
9/30/1998 $ 3,855,730 $ 3,852,502 $ 3,808,725
10/31/1998 $ 3,857,272 $ 3,871,380 $ 3,803,774
11/30/1998 $ 3,862,286 $ 3,867,895 $ 3,813,663
12/31/1998 $ 3,880,825 $ 3,881,433 $ 3,830,062
1/31/1999 $ 3,902,558 $ 3,895,406 $ 3,849,213
2/28/1999 $ 3,884,997 $ 3,877,487 $ 3,836,510
3/31/1999 $ 3,915,300 $ 3,904,242 $ 3,866,435
4/30/1999 $ 3,929,395 $ 3,916,735 $ 3,880,354
5/31/1999 $ 3,915,642 $ 3,914,385 $ 3,875,310
6/30/1999 $ 3,909,377 $ 3,926,520 $ 3,882,673
7/31/1999 $ 3,915,241 $ 3,939,085 $ 3,886,944
8/31/1999 $ 3,929,336 $ 3,950,508 $ 3,894,718
9/30/1999 $ 3,959,199 $ 3,976,187 $ 3,920,423
10/31/1999 $ 3,973,848 $ 3,986,922 $ 3,929,048
11/30/1999 $ 3,993,319 $ 3,994,497 $ 3,942,013
12/31/1999 $ 4,005,299 $ 4,000,090 $ 3,950,292
1/31/2000 $ 4,008,904 $ 3,998,490 $ 3,951,872
2/29/2000 $ 4,028,949 $ 4,025,280 $ 3,977,559
3/31/2000 $ 4,037,409 $ 4,050,236 $ 3,998,242
4/30/2000 $ 4,058,404 $ 4,060,767 $ 3,999,042
5/31/2000 $ 4,075,855 $ 4,077,416 $ 4,013,039
6/30/2000 $ 4,097,457 $ 4,119,821 $ 4,057,583
7/31/2000 $ 4,124,091 $ 4,145,776 $ 4,082,740
8/31/2000 $ 4,142,237 $ 4,176,455 $ 4,112,544
9/30/2000 $ 4,177,031 $ 4,206,525 $ 4,147,501
10/31/2000 $ 4,191,233 $ 4,229,240 $ 4,159,943
11/30/2000 $ 4,244,462 $ 4,269,418 $ 4,197,799
12/31/2000 $ 4,294,122 $ 4,320,224 $ 4,242,296
1/31/2001 $ 4,330,622 $ 4,374,227 $ 4,302,536
2/28/2001 $ 4,364,834 $ 4,402,660 $ 4,332,654
3/31/2001 $ 4,395,825 $ 4,439,202 $ 4,363,849
4/30/2001 $ 4,394,506 $ 4,451,188 $ 4,374,322
5/31/2001 $ 4,419,994 $ 4,476,114 $ 4,401,443
6/30/2001 $ 4,439,884 $ 4,491,333 $ 4,419,489
7/31/2001 $ 4,495,382 $ 4,541,636 $ 4,473,849
8/31/2001 $ 4,527,749 $ 4,567,977 $ 4,502,929
9/30/2001 $ 4,591,138 $ 4,643,349 $ 4,545,707
10/31/2001 $ 4,639,804 $ 4,686,997 $ 4,580,254
11/30/2001 $ 4,617,069 $ 4,676,685 $ 4,557,811
12/31/2001 $ 4,620,762 $ 4,678,556 $ 4,553,253
1/31/2002 $ 4,640,170 $ 4,687,913 $ 4,566,457
2/28/2002 $ 4,659,194 $ 4,710,415 $ 4,579,700
3/31/2002 $ 4,631,239 $ 4,678,384 $ 4,559,091
4/30/2002 $ 4,691,445 $ 4,730,782 $ 4,595,564
5/31/2002 $ 4,708,804 $ 4,749,705 $ 4,621,299
6/30/2002 $ 4,736,115 $ 4,789,603 $ 4,626,383
7/31/2002 $ 4,787,265 $ 4,848,036 $ 4,640,262
8/31/2002 $ 4,804,977 $ 4,864,519 $ 4,669,496
9/30/2002 $ 4,846,300 $ 4,904,895 $ 4,699,847
10/31/2002 $ 4,862,778 $ 4,916,176 $ 4,702,667
11/30/2002 $ 4,846,731 $ 4,901,427 $ 4,704,548
12/31/2002 $ 4,878,719 $ 4,947,501 $ 4,751,594
1/31/2003 $ 4,899,210 $ 4,947,006 $ 4,759,196
2/28/2003 $ 4,924,196 $ 4,967,783 $ 4,787,751
3/31/2003 $ 4,932,074 $ 4,976,725 $ 4,794,933
4/30/2003 $ 4,949,337 $ 4,986,181 $ 4,815,551
5/31/2003 $ 4,972,103 $ 5,005,129 $ 4,843,000
6/30/2003 $ 4,973,595 $ 5,012,636 $ 4,851,717
7/31/2003 $ 4,910,430 $ 4,985,568 $ 4,809,022
8/31/2003 $ 4,922,215 $ 4,989,058 $ 4,813,350
9/30/2003 $ 4,972,914 $ 5,034,458 $ 4,863,409
10/31/2003 $ 4,942,580 $ 5,015,831 $ 4,851,737
11/30/2003 $ 4,941,591 $ 5,013,323 $ 4,852,707
12/31/2003 $ 4,971,735 $ 5,042,400 $ 4,876,971
1/31/2004 $ 4,986,650 $ 5,052,485 $ 4,892,577
2/29/2004 $ 5,011,085 $ 5,076,737 $ 4,915,083
3/31/2004 $ 5,026,118 $ 5,092,475 $ 4,931,794
4/30/2004 $ 4,979,375 $ 5,043,587 $ 4,887,901
5/31/2004 $ 4,973,898 $ 5,039,048 $ 4,878,126
6/30/2004 $ 4,974,395 $ 5,038,544 $ 4,881,540
7/31/2004 $ 5,001,754 $ 5,056,683 $ 4,901,066
8/31/2004 $ 5,039,767 $ 5,091,574 $ 4,935,864
9/30/2004 $ 5,041,783 $ 5,086,992 $ 4,937,345
10/31/2004 $ 5,064,976 $ 5,102,252 $ 4,953,638
11/30/2004 $ 5,047,248 $ 5,076,741 $ 4,939,768
12/31/2004 $ 5,059,362 $ 5,087,402 $ 4,955,081
1/31/2005 $ 5,060,373 $ 5,085,367 $ 4,955,577
2/28/2005 $ 5,060,274 $ 5,073,671 $ 4,950,621
</Table>
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR
UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111.
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.
Returns for the Select Shares prior to 9/10/01 (offering date of the Select
Shares) are calculated using the historical expenses of the J.P. Morgan Short
Term Bond Fund, which are similar to the expenses of the Select Shares.
Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A
Shares) are calculated using the historical expenses of the J.P. Morgan Short
Term Bond Fund, which are lower than the expenses of the Class A Shares.
The graph illustrates comparative performance for $3,000,000 invested in
Institutional Shares of the JPMorgan Short Term Bond Fund, Merrill Lynch 1-3
Year Treasury Index, and Lipper Short-Term Investment Grade Debt Funds Index
from February 28, 1995 to February 28, 2005. 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 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 investment 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.
17
<Page>
JPMORGAN SHORT TERM BOND FUND II
AS OF FEBRUARY 28, 2005 (Unaudited)
FUND FACTS
<Table>
Fund Inception 11/30/1990
Fiscal Year End AUGUST 31
Net Assets as of 2/28/2005
(In Millions) $1,008
Primary Benchmark LEHMAN 1-3 YEAR U.S. GOV'T BOND INDEX
Average Credit Quality A+
Duration 1.9 YEARS
</Table>
Q: HOW DID THE PORTFOLIO PERFORM?
A: The JPMorgan Short Term Bond Fund II, which seeks a high level of income
consistent with preservation of capital, returned 0.17% (Select Shares) for
the six-month period ended February 28, 2005. This compares to the (0.25%)
return of its benchmark, the Lehman 1-3 Year U.S. Government Bond Index.
Q: WHY DID THE PORTFOLIO PERFORM THIS WAY?
A: Contributing significantly to performance were our allocations to
collateralized mortgage obligations (CMOs) and asset-backed securities. Our
duration positioning detracted slightly from performance when interest rates
rose sharply during the fourth quarter. Selective purchases of corporate
securities added to performance as spreads continued to tighten. Our 10-year
U.S. Treasury Inflation-Protected Securities (TIPS) trade contributed to
performance; however, the TIPS curve-steepener position detracted.
Q: HOW WAS THE PORTFOLIO MANAGED?
A: The U.S. economy continued to expand following an oil-induced soft spot
earlier in 2004. Business spending increased while consumer spending and the
housing market remained robust. These positive developments offset
deterioration in the international growth environment and the associated
negative impact on net exports. Fourth-quarter gross domestic product grew at
3.8% versus 4.0% during the third quarter. Data from the first quarter of
2005 suggested that firm growth would continue. Although inflation remained
tame, higher commodity prices hinted that the inflation rate could increase.
In addition, the employment picture remained mixed, while unemployment fell
in January to 5.2%, the lowest level in more than three years, it rose to
5.4% in February.
Pledging to "respond to changes in economic prospects," the Federal Reserve
Board continued to raise short-term rates at a measured pace, tightening by a
quarter of a percent each in November, December, and February. By the end of
the period, the fed funds rate (the rate charged by banks for overnight
loans) stood at 2.50%. Short-term rates rose over the period on expectations
of Fed tightening. However, rates for longer-term maturities moved lower,
contributing to significant flattening of the yield curve between two- and
30-year maturities.
Throughout the period, we tactically traded duration as the market reacted to
economic data. We continued to selectively increase our exposure to corporate
and asset-backed securities. Early in the period, we sold high-quality,
fixed-rate corporate issues in the one- to three-year area of the curve and
bought lower credit-quality names. We reduced our allocations to sovereigns
and supranationals, and added agencies and CMOs. Because their yields will
increase as interest rates increase, we added floating-rate home equity loan
asset-backed securities. We purchased two- and four-year CMOs at attractive
prices. Although we maintain our allocation to corporate securities, we have
swapped out of more expensive issues into those with higher yields. We
purchased 10-year TIPS and implemented a curve-steepener position in two- and
10-year TIPS.
18
<Page>
[CHART]
PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS
<Table>
Corporate Notes & Bonds 41.5%
Asset Backed Securities 15.2%
Residential Mortgage Backed Securities 13.4%
U.S. Government Agency Securities 12.7%
Commercial Mortgage Backed Securities 10.8%
Certificates of Deposit 2.1%
Foreign Government Securities 1.1%
Other (Less than 1%) 3.2%
</Table>
19
<Page>
AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 28, 2005
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
----------------------------------------------
CLASS A SHARES
Without Sales Charge 0.21% 2.16% 4.16% 4.66%
With Sales Charge* (2.81%) 1.12% 3.53% 4.34%
CLASS M SHARES
Without Sales Charge 0.05% 1.93% 3.90% 4.52%
With Sales Charge** (1.48%) 1.40% 3.59% 4.36%
SELECT SHARES 0.57% 2.44% 4.44% 4.96%
</Table>
* Sales Charge for Class A Shares is 3.00%.
** Sales Charge for Class M Shares is 1.50%.
[CHART]
TEN-YEAR PERFORMANCE (02/28/95 TO 02/28/05)
<Table>
<Caption>
JPMORGAN SHORT TERM BOND FUND II LEHMAN 1-3 YEAR LIPPER SHORT-TERM INVESTMENT
(SELECT SHARES) U.S. GOV'T BOND INDEX GRADE DEBT FUNDS INDEX
2/28/1995 $ 1,000,000 $ 1,000,000 $ 1,000,000
3/31/1995 $ 1,005,600 $ 1,005,600 $ 1,005,500
4/30/1995 $ 1,011,231 $ 1,014,550 $ 1,014,147
5/31/1995 $ 1,023,063 $ 1,031,899 $ 1,032,706
6/30/1995 $ 1,028,792 $ 1,037,471 $ 1,039,109
7/31/1995 $ 1,033,627 $ 1,041,621 $ 1,042,434
8/31/1995 $ 1,038,485 $ 1,047,871 $ 1,049,418
9/30/1995 $ 1,043,262 $ 1,053,005 $ 1,054,456
10/31/1995 $ 1,050,252 $ 1,061,745 $ 1,064,368
11/30/1995 $ 1,057,079 $ 1,070,770 $ 1,073,308
12/31/1995 $ 1,063,316 $ 1,078,908 $ 1,080,714
1/31/1996 $ 1,070,652 $ 1,088,078 $ 1,090,440
2/29/1996 $ 1,070,224 $ 1,083,835 $ 1,086,406
3/31/1996 $ 1,072,793 $ 1,082,968 $ 1,081,626
4/30/1996 $ 1,075,475 $ 1,084,051 $ 1,082,383
5/31/1996 $ 1,078,379 $ 1,086,436 $ 1,084,548
6/30/1996 $ 1,084,957 $ 1,094,367 $ 1,092,356
7/31/1996 $ 1,089,839 $ 1,098,635 $ 1,096,835
8/31/1996 $ 1,092,999 $ 1,102,700 $ 1,100,674
9/30/1996 $ 1,102,618 $ 1,112,734 $ 1,111,240
10/31/1996 $ 1,114,306 $ 1,125,308 $ 1,123,131
11/30/1996 $ 1,123,109 $ 1,133,635 $ 1,132,453
12/31/1996 $ 1,123,109 $ 1,133,862 $ 1,132,906
1/31/1997 $ 1,127,489 $ 1,139,305 $ 1,138,683
2/28/1997 $ 1,130,420 $ 1,142,039 $ 1,142,555
3/31/1997 $ 1,129,742 $ 1,141,125 $ 1,141,412
4/30/1997 $ 1,140,136 $ 1,150,483 $ 1,150,544
5/31/1997 $ 1,146,520 $ 1,158,536 $ 1,158,252
6/30/1997 $ 1,155,119 $ 1,166,530 $ 1,166,360
7/31/1997 $ 1,168,172 $ 1,179,245 $ 1,179,657
8/31/1997 $ 1,167,238 $ 1,180,424 $ 1,180,482
9/30/1997 $ 1,176,692 $ 1,189,396 $ 1,189,690
10/31/1997 $ 1,183,635 $ 1,198,197 $ 1,196,947
11/30/1997 $ 1,184,937 $ 1,201,193 $ 1,199,940
12/31/1997 $ 1,191,928 $ 1,209,241 $ 1,207,139
1/31/1998 $ 1,203,609 $ 1,220,728 $ 1,217,641
2/28/1998 $ 1,203,849 $ 1,221,827 $ 1,219,346
3/31/1998 $ 1,207,341 $ 1,226,470 $ 1,224,345
4/30/1998 $ 1,213,015 $ 1,232,357 $ 1,230,100
5/31/1998 $ 1,219,808 $ 1,238,888 $ 1,236,742
6/30/1998 $ 1,226,395 $ 1,245,207 $ 1,242,308
7/31/1998 $ 1,232,036 $ 1,251,059 $ 1,247,774
8/31/1998 $ 1,240,045 $ 1,266,322 $ 1,256,259
9/30/1998 $ 1,257,529 $ 1,283,418 $ 1,269,575
10/31/1998 $ 1,255,140 $ 1,289,706 $ 1,267,925
11/30/1998 $ 1,254,763 $ 1,288,417 $ 1,271,221
12/31/1998 $ 1,258,653 $ 1,293,313 $ 1,276,687
1/31/1999 $ 1,264,821 $ 1,298,227 $ 1,283,071
2/28/1999 $ 1,260,520 $ 1,292,385 $ 1,278,837
3/31/1999 $ 1,269,470 $ 1,301,173 $ 1,288,812
4/30/1999 $ 1,273,278 $ 1,305,207 $ 1,293,451
5/31/1999 $ 1,272,387 $ 1,304,293 $ 1,291,770
6/30/1999 $ 1,273,787 $ 1,308,076 $ 1,294,224
7/31/1999 $ 1,276,716 $ 1,312,131 $ 1,295,648
8/31/1999 $ 1,278,504 $ 1,315,805 $ 1,298,239
9/30/1999 $ 1,287,965 $ 1,324,358 $ 1,306,808
10/31/1999 $ 1,292,472 $ 1,327,933 $ 1,309,683
11/30/1999 $ 1,294,411 $ 1,330,456 $ 1,314,004
12/31/1999 $ 1,297,777 $ 1,331,654 $ 1,316,764
1/31/2000 $ 1,298,296 $ 1,331,387 $ 1,317,291
2/29/2000 $ 1,305,696 $ 1,340,441 $ 1,325,853
3/31/2000 $ 1,312,355 $ 1,348,484 $ 1,332,747
4/30/2000 $ 1,308,156 $ 1,351,855 $ 1,333,014
5/31/2000 $ 1,312,342 $ 1,356,857 $ 1,337,680
6/30/2000 $ 1,327,171 $ 1,371,646 $ 1,352,528
7/31/2000 $ 1,336,727 $ 1,380,425 $ 1,360,913
8/31/2000 $ 1,346,485 $ 1,390,916 $ 1,370,848
9/30/2000 $ 1,360,084 $ 1,401,765 $ 1,382,500
10/31/2000 $ 1,364,437 $ 1,409,335 $ 1,386,648
11/30/2000 $ 1,379,582 $ 1,423,005 $ 1,399,266
12/31/2000 $ 1,395,447 $ 1,440,508 $ 1,414,099
1/31/2001 $ 1,410,518 $ 1,459,523 $ 1,434,179
2/28/2001 $ 1,420,674 $ 1,469,010 $ 1,444,218
3/31/2001 $ 1,432,039 $ 1,480,909 $ 1,454,616
4/30/2001 $ 1,433,471 $ 1,485,204 $ 1,458,107
5/31/2001 $ 1,439,635 $ 1,493,372 $ 1,467,148
6/30/2001 $ 1,444,674 $ 1,498,748 $ 1,473,163
7/31/2001 $ 1,460,421 $ 1,516,284 $ 1,491,283
8/31/2001 $ 1,470,059 $ 1,525,836 $ 1,500,976
9/30/2001 $ 1,489,170 $ 1,551,318 $ 1,515,236
10/31/2001 $ 1,504,955 $ 1,566,831 $ 1,526,751
11/30/2001 $ 1,498,635 $ 1,562,444 $ 1,519,270
12/31/2001 $ 1,496,686 $ 1,563,381 $ 1,517,751
1/31/2002 $ 1,501,775 $ 1,567,133 $ 1,522,152
2/28/2002 $ 1,509,734 $ 1,574,969 $ 1,526,567
3/31/2002 $ 1,500,978 $ 1,563,629 $ 1,519,697
4/30/2002 $ 1,519,440 $ 1,582,549 $ 1,531,855
5/31/2002 $ 1,525,062 $ 1,588,721 $ 1,540,433
6/30/2002 $ 1,532,992 $ 1,602,861 $ 1,542,128
7/31/2002 $ 1,548,476 $ 1,622,255 $ 1,546,754
8/31/2002 $ 1,554,669 $ 1,628,907 $ 1,556,499
9/30/2002 $ 1,566,019 $ 1,642,101 $ 1,566,616
10/31/2002 $ 1,571,343 $ 1,646,206 $ 1,567,556
11/30/2002 $ 1,567,100 $ 1,641,597 $ 1,568,183
12/31/2002 $ 1,577,757 $ 1,657,356 $ 1,583,865
1/31/2003 $ 1,583,910 $ 1,657,687 $ 1,586,399
2/28/2003 $ 1,589,770 $ 1,665,313 $ 1,595,917
3/31/2003 $ 1,591,996 $ 1,668,643 $ 1,598,311
4/30/2003 $ 1,597,250 $ 1,671,981 $ 1,605,184
5/31/2003 $ 1,603,958 $ 1,678,836 $ 1,614,333
6/30/2003 $ 1,606,043 $ 1,681,522 $ 1,617,239
7/31/2003 $ 1,584,683 $ 1,670,592 $ 1,603,007
8/31/2003 $ 1,588,011 $ 1,671,260 $ 1,604,450
9/30/2003 $ 1,605,479 $ 1,688,140 $ 1,621,136
10/31/2003 $ 1,594,562 $ 1,681,219 $ 1,617,246
11/30/2003 $ 1,593,924 $ 1,680,882 $ 1,617,569
12/31/2003 $ 1,601,734 $ 1,690,800 $ 1,625,657
1/31/2004 $ 1,606,059 $ 1,694,857 $ 1,630,859
2/29/2004 $ 1,613,446 $ 1,703,671 $ 1,638,361
3/31/2004 $ 1,619,578 $ 1,709,293 $ 1,643,931
4/30/2004 $ 1,603,544 $ 1,691,858 $ 1,629,300
5/31/2004 $ 1,599,856 $ 1,689,828 $ 1,626,042
6/30/2004 $ 1,600,176 $ 1,689,997 $ 1,627,180
7/31/2004 $ 1,606,736 $ 1,696,757 $ 1,633,689
8/31/2004 $ 1,619,912 $ 1,709,313 $ 1,645,288
9/30/2004 $ 1,620,236 $ 1,707,945 $ 1,645,782
10/31/2004 $ 1,626,878 $ 1,713,752 $ 1,651,213
11/30/2004 $ 1,621,347 $ 1,705,355 $ 1,646,589
12/31/2004 $ 1,623,941 $ 1,708,936 $ 1,651,694
1/31/2005 $ 1,623,454 $ 1,708,594 $ 1,651,859
2/28/2005 $ 1,622,380 $ 1,705,006 $ 1,650,207
</Table>
SOURCE: LIPPER, INC. THE PERFORMANCE QUOTED IS PAST PERFORMANCE AND IS NOT A
GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. FOR
UP-TO-DATE MONTH-END PERFORMANCE INFORMATION PLEASE CALL 1-800-480-4111.
The Fund commenced operations on 11/30/90.
Returns for the Class A Shares prior to 5/6/96 (offering date of the Class A
Shares) are calculated using the historical expenses of the Select Shares, which
are lower than the expenses of the Class A Shares.
Returns for the Class M Shares prior to 7/1/99 (offering date of the Class M
Shares) are calculated using the historical expenses of the Class A Shares,
which are lower than the expenses of the Class M Shares.
The graph illustrates comparative performance for $1,000,000 invested in Select
Shares of the JPMorgan Short Term Bond Fund II, Lehman 1-3 Year U.S. Gov't Bond
Index, and Lipper Short-Term Investment Grade Debt Funds Index from February 28,
1995 to February 28, 2005. 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 investment 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.
20
<Page>
JPMORGAN BOND FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 121.3%
U.S. TREASURY SECURITIES -- 1.7%
U.S. Treasury Notes & Bonds,
$ 1,720 3.50%, 11/15/06 + @ $ 1,719
1,075 3.88%, 05/15/09 + @ 1,074
365 3.38%, 10/15/09 + 356
7,903 1.62%, 01/15/15 7,852
350 7.25%, 05/15/16 + @ 434
2,790 5.38%, 02/15/31 + @ 3,068
----------------------------------------------------------------------------
Total U.S. Treasury Securities 14,503
(Cost $14,509)
----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 1.3%
8,090 Federal Home Loan Mortgage
Corp., 6.25%, 07/15/32 + 9,454
Federal National Mortgage
Association,
2 7.00%, 07/15/05 + 2
985 4.38%, 09/15/12 + 975
570 7.25%, 05/15/30 + 742
----------------------------------------------------------------------------
Total U.S. Government Agency
Securities 11,173
(Cost $10,318)
----------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 8.6%
3,500 Aries Vermoegensverwaltungs
(Russia), 9.60%, 10/25/14, # 4,337
Federal Republic of Brazil (Brazil),
705 11.00%, 01/11/12 846
1,738 3.13%, 04/15/12, FRN 1,680
1,030 11.00%, 08/17/40 + 1,192
EUR 9,363 Federal Republic of Germany
(Germany), 4.75%,
07/04/34, Ser. 03 13,614
4,690 Republic of Colombia (Colombia),
9.75%, 04/09/11 5,324
10,500 Republic of Italy (Italy),
4.50%, 01/21/15 10,336
1,905 Republic of Peru (Peru),
8.75%, 11/21/33 2,072
1,900 Republic of Turkey (Turkey),
7.38%, 02/05/25 1,914
Republic of Ukraine (Ukraine),
$ 1,387 6.88%, 03/04/11, # $ 1,460
3,185 7.65%, 06/11/13, Regulation S 3,504
Russian Federation (Russia),
2,720 8.75%, 07/24/05, Regulation S 2,774
8,670 8.75%, 07/24/05, # + 8,843
760 12.75%, 06/24/28, Regulation S 1,296
5,170 5.00%, 03/31/30,
Regulation S, SUB 5,425
United Mexican States (Mexico),
850 7.50%, 01/14/12 955
1,730 5.88%, 01/15/14, Ser. A, MTN 1,767
1,280 11.50%, 05/15/26 2,010
2,160 8.30%, 08/15/31, MTN 2,603
----------------------------------------------------------------------------
Total Foreign Government
Securities 71,952
(Cost $65,856)
----------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 35.7%
AEROSPACE -- 0.3%
2,735 General Dynamics Corp., 2.13%,
05/15/06 + 2,685
AUTOMOTIVE -- 3.6%
1,765 American Honda Finance Corp.,
2.87%, 05/11/07, MTN, FRN, # + 1,766
2,800 DaimlerChrysler N.A. Holding Corp.,
3.47%, 05/24/06, MTN, FRN + 2,814
8,370 Ford Motor Credit Co., 7.88%,
06/15/10 + 8,935
General Motors Acceptance Corp.,
1,550 3.70%, 05/18/06, MTN, FRN + 1,550
4,790 3.56%, 01/16/07, MTN, FRN + 4,753
2,245 6.75%, 12/01/14 + 2,160
General Motors Corp.,
3,600 7.20%, 01/15/11 + 3,575
1,410 8.25%, 07/15/23 + 1,386
2,140 8.38%, 07/15/33 + 2,102
549 TRW Automotive, Inc., 9.38%,
02/15/13 + 620
----------------------------------------------------------------------------
29,661
----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
21
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- 6.1%
$ 1,040 ABN-Amro North American Holding
Preferred Capital Repackage
Trust I, 6.52%, to 11/12;
thereafter FRN, 12/31/49, # + $ 1,142
2,000 BBVA Bancomer Capital Trust I
(Mexico), 10.50%, 02/16/11, # + 2,123
1,750 Cadets Trust, 4.80%, 07/15/13,
Ser. 2003-1, # + 1,708
1,720 Industrial Bank of Korea
(South Korea), 4.00%, to 05/09;
thereafter FRN, 05/19/14, # + 1,665
3,955 KBC Bank Fund Trust III,
9.86%, to 11/09; thereafter
FRN, 11/29/49, # + 4,757
2,100 KeyCorp, 2.89%, 07/23/07,
Ser. G, MTN, FRN + 2,101
1,545 Korea First Bank (South Korea),
7.27%, to 03/14; thereafter FRN,
03/03/34, # + 1,744
390 Mizuho Finance Group LTD
(Cayman Islands), 5.79%,
04/15/14, # + 407
1,500 Nordea Bank AB (Sweden),
8.95%, to 11/09; thereafter
FRN, 12/31/49, # + 1,759
755 Northern Rock PLC
(United Kingdom), 5.60%, to 04/14;
thereafter FRN, 12/31/49, MTN, # + 772
1,595 Popular North America, Inc.,
4.70%, 06/30/09 + 1,602
5,300 RBS Capital Trust I, 5.51%, to 9/14;
thereafter FRN, 12/31/49 + 5,411
1,750 Royal Bank of Scotland Group PLC
(United Kingdom), 2.88%,
11/24/06, FRN, # + 1,750
3,665 SunTrust Bank, 2.50%, 11/01/06 + 3,582
1,870 Swedbank (Sweden), 9.00%, to
03/10; thereafter FRN, 12/31/49, # + 2,206
1,800 The Chuo Mitsui Trust & Banking
Co., LTD (Japan), 5.51% to 4/15;
thereafter FRN, 12/31/49, # + 1,765
$ 4,885 U.S. Bank N.A., 2.85%, 11/15/06 $ 4,807
2,620 United Overseas Bank LTD
(Singapore), 5.38%, to 9/14;
thereafter FRN, 09/03/19, # 2,644
2,500 Wachovia Corp., 2.77%,
07/20/07, FRN 2,501
1,500 Wells Fargo & Co., 2.59%,
03/23/07, FRN 1,501
2,800 Westpac Banking Corp.
(Australia), 2.93%,
05/25/07, FRN, # 2,802
1,475 Woori Bank (South Korea),
5.75%, to 03/09; thereafter FRN,
03/13/14, # 1,529
----------------------------------------------------------------------------
50,278
----------------------------------------------------------------------------
BROADCASTING/CABLE -- 0.3%
2,180 Cox Communications, Inc.,
4.63%, 06/01/13 + 2,082
495 Echostar DBS Corp., 6.38%,
10/01/11 + 510
----------------------------------------------------------------------------
2,592
----------------------------------------------------------------------------
BUSINESS SERVICES -- 0.1%
490 Iron Mountain, Inc., 6.63%,
01/01/16 + 458
CHEMICALS -- 0.6%
490 Huntsman International LLC,
9.88%, 03/01/09 + 540
2,355 ICI Wilmington, Inc., 5.63%,
12/01/13 + 2,427
20 IMC Global, Inc., 10.88%,
06/01/08, Ser. B + 23
810 Lyondell Chemical Co., 10.88%,
05/01/09 + 846
20 Millennium America, Inc., 9.25%,
06/15/08 + 22
775 PolyOne Corp., 10.63%, 05/15/10 + 884
----------------------------------------------------------------------------
4,742
----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
22
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COMPUTER SOFTWARE -- 0.1%
$ 1,095 Computer Associates International,
Inc., 5.63%, 12/01/14, # + $ 1,110
CONSTRUCTION -- 0.3%
1,520 Pulte Homes, Inc., 5.25%,
01/15/14 + 1,507
745 Standard-Pacific Corp., 6.88%,
05/15/11 + 792
----------------------------------------------------------------------------
2,299
----------------------------------------------------------------------------
CONSTRUCTION MATERIALS -- 0.3%
2,540 KB Home, 5.75%, 02/01/14 + 2,578
CONSUMER SERVICES -- 0.0% ^
355 Service Corp. International,
7.70%, 04/15/09 + 382
DIVERSIFIED -- 0.2%
1,260 Hutchison Whampoa International
LTD (Hong Kong), 6.25%,
01/24/14, # + 1,336
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.1%
545 Celestica, Inc. (Canada), 7.88%,
07/01/11 + 574
ENVIRONMENTAL SERVICES -- 0.2%
2,205 Allied Waste North America, Inc.,
6.13%, 02/15/14 + 2,084
FINANCIAL SERVICES -- 10.6%
940 Aiful Corp. (Japan), 4.45%,
02/16/10, # + 925
American General Finance Corp.,
4,195 3.00%, 11/15/06, Ser. H, MTN + 4,118
1,065 4.50%, 11/15/07, Ser. H, MTN + 1,072
600 Arch Western Finance LLC,
6.75%, 07/01/13 + 624
4,790 The Bear Stearns Companies, Inc.,
2.82%, 01/16/07, Ser. B, MTN,
FRN + 4,795
$ 1,325 Capital One Bank, 8.25%,
06/15/05 + $ 1,343
Capital One Financial Corp.,
2,910 8.75%, 02/01/07 + 3,151
420 5.25%, 02/21/17 + 409
3,255 Caterpillar Financial Services
Corp., 2.96%, 02/26/07, Ser. F,
MTN, FRN + 3,258
CIT Group, Inc.,
2,650 2.77%, 04/19/06, MTN, FRN + 2,651
2,500 2.73%, 06/19/06, MTN, FRN + 2,504
2,900 Citigroup, Inc., 2.64%, 03/20/06,
FRN + 2,904
3,100 Countrywide Home Loans, Inc.,
2.96%, 02/17/06, Ser. L, MTN,
FRN + 3,101
1,810 General Electric Capital Corp.,
6.75%, 03/15/32, Ser. A, MTN + 2,132
Goldman Sachs Group, Inc.,
1,750 3.05%, 02/21/06, Ser. B, MTN,
FRN + 1,753
2,125 5.13%, 01/15/15 + 2,127
2,020 6.35%, 02/15/34 + 2,141
3,590 Household Finance Corp., 2.92%,
02/09/07, MTN, FRN + 3,595
HSBC Capital Funding LP
(Channel Islands),
1,980 4.61%, to 06/13; thereafter FRN,
12/31/49, # + 1,911
2,665 9.55%, to 06/10; thereafter FRN,
12/31/49, # + (i) 3,265
1,865 ING Capital Funding Trust III,
8.44%, to 12/10; thereafter FRN,
12/31/49 + 2,207
2,000 John Deere Capital Corp., 2.57%,
03/16/06, Ser. D, MTN, FRN + 2,001
1,570 Mantis Reef LTD (Australia),
4.80%, 11/03/09, # + 1,555
Merrill Lynch & Co., Inc.,
1,750 2.87%, 06/13/05, Ser. B, MTN,
FRN + 1,751
1,900 3.02%, 02/06/09, Ser. C, MTN,
FRN + 1,905
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
23
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 1,815 Mizuho JGB Investment LLC,
9.87%, to 06/08; thereafter FRN,
12/31/49, # + $ 2,093
2,185 Mizuho Preferred Capital Co.,
LLC, 8.79%, to 06/08; thereafter
FRN, 12/31/49, # + 2,446
Morgan Stanley,
4,810 2.76%, 01/12/07, FRN + 4,818
1,000 2.90%, 11/09/07, FRN + 1,000
OMX Timber Finance Investments LLC
1,480 5.42%, 01/29/20, Ser. 1, # + 1,460
2,195 5.54%, 01/29/20, Ser. 2, # + 2,166
Pricoa Global Funding I,
4,225 2.70%, 12/22/06, FRN, # + 4,235
2,595 3.90%, 12/15/08, # + 2,556
1,680 Prudential Holdings LLC, 8.70%,
12/18/23, # + 2,144
SLM Corp.,
4,000 5.63%, 04/10/07, Ser. A, MTN 4,120
1,900 2.82%, 01/25/08, Ser. A, MTN,
FRN + 1,898
1,428 Targeted Return Index (TRAINS),
8.21%, 08/01/15,
Ser. HY-2004-1, # + 1,537
1,120 UFJ Finance AEC (Aruba), 6.75%,
07/15/13 1,242
----------------------------------------------------------------------------
88,913
----------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.5%
3,100 Delhaize America, Inc., 9.00%,
04/15/31 + 4,098
HEALTH CARE/HEALTH CARE SERVICES -- 0.5%
615 Fresenius Medical Care Capital
Trust II, 7.88%, 02/01/08 + 660
3,205 HCA, Inc., 5.25%, 11/06/08 + 3,217
2,000 Mariner Health Group, Inc.,
9.50%, 04/01/06, Ser. B + (d) (f) * 0^^
245 Medex, Inc., 8.88%, 05/15/13 + 281
----------------------------------------------------------------------------
4,158
----------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 0.1%
$ 420 ITT Corp., 7.38%, 11/15/15 + $ 481
INSURANCE -- 1.5%
1,515 Arch Capital Group LTD (Bermuda),
7.35%, 05/01/34 + 1,707
2,320 Aspen Insurance Holdings LTD
(Bermuda), 6.00%, 08/15/14, # + 2,326
275 AXA (France), 8.60%, 12/15/30 + 370
1,160 CNA Financial Corp., 5.85%,
12/15/14 + 1,178
1,040 Liberty Mutual Group, 7.00%,
03/15/34, # + 1,110
2,220 North Front Pass-Through Trust,
5.81%, to 12/14; thereafter FRN,
12/15/24, FRN, # + 2,237
845 Odyssey Re Holdings Corp.,
7.65%, 11/01/13 + 942
1,250 Protective Life Secured Trust,
2.72%, 01/14/08, MTN, FRN + 1,249
1,700 Stingray Pass-Through Trust
(Cayman Islands), 5.90%,
01/12/15, MTN, # + 1,703
----------------------------------------------------------------------------
12,822
----------------------------------------------------------------------------
METALS/MINING -- 0.3%
1,465 Noranda, Inc., (Canada) (Yankee),
6.00%, 10/15/15 + 1,528
620 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B + 671
----------------------------------------------------------------------------
2,199
----------------------------------------------------------------------------
MULTI-MEDIA -- 0.9%
1,420 Clear Channel Communications,
Inc., 5.50%, 09/15/14 + 1,402
420 Comcast Corp., 7.05%, 03/15/33 + 489
600 MediaNews Group, Inc., 6.88%,
10/01/13 + 611
720 News America Holdings, Inc.,
7.75%, 12/01/45 + 884
930 Time Warner Entertainment Co.,
LP, 8.38%, 03/15/23 + 1,172
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
24
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MULTI-MEDIA -- CONTINUED
Time Warner, Inc.,
$ 625 9.15%, 02/01/23 + $ 841
2,040 7.63%, 04/15/31 + 2,487
----------------------------------------------------------------------------
7,886
----------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.0% ^
325 Xerox Corp., 7.63%, 06/15/13 352
OIL & GAS -- 1.0%
2,660 BP Capital Markets PLC (United
Kingdom), 2.75%, 12/29/06 + 2,612
1,155 Enterprise Products Operating LP,
6.65%, 10/15/34, # + 1,248
1,205 Kerr-McGee Corp., 6.95%,
07/01/24 + 1,336
1,950 Pioneer Natural Resources Co.,
5.88%, 07/15/16 + 2,033
1,095 Valero Energy Corp., 7.50%,
04/15/32 1,353
----------------------------------------------------------------------------
8,582
----------------------------------------------------------------------------
PACKAGING -- 0.3%
565 Crown European Holdings SA
(France), 9.50%, 03/01/11 + 636
Owens-Brockway Glass Container, Inc.,
1,045 8.88%, 02/15/09 + 1,128
460 7.75%, 05/15/11 + 497
----------------------------------------------------------------------------
2,261
----------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.0% ^
95 Abitibi-Consolidated, Inc. (Canada)
(Yankee), 6.00%, 06/20/13 + 89
260 Georgia Pacific Corp., 7.70%,
06/15/15 + 302
----------------------------------------------------------------------------
391
----------------------------------------------------------------------------
PHARMACEUTICALS -- 0.1%
550 Wyeth, 6.45%, 02/01/24 603
PIPELINES -- 0.6%
Kinder Morgan Energy Partners LP,
1,245 7.40%, 03/15/31 + 1,492
$ 575 7.75%, 03/15/32 + $ 717
490 7.30%, 08/15/33 + 585
1,840 Magellan Midstream Partners LP,
5.65%, 10/15/16 + 1,865
245 Transcontinental Gas Pipeline
Corp., 8.88%, 07/15/12, Ser. B + 300
245 Williams Companies, Inc., 8.13%,
03/15/12 285
----------------------------------------------------------------------------
5,244
----------------------------------------------------------------------------
REAL ESTATE -- 0.5%
3,500 Socgen Real Estate Co., LLC,
7.64%, to 09/07; thereafter FRN,
12/31/49, # + 3,774
535 Westfield Capital Corp., LTD
(Australia), 5.13%, 11/15/14, # 532
----------------------------------------------------------------------------
4,306
----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST -- 0.5%
1,400 Hospitality Properties Trust,
5.13%, 02/15/15 + 1,375
iStar Financial, Inc.,
1,535 6.00%, 12/15/10 + 1,597
1,620 5.15%, 03/01/12 + 1,611
----------------------------------------------------------------------------
4,583
----------------------------------------------------------------------------
RETAILING -- 0.4%
3,245 Safeway, Inc., 4.13%, 11/01/08 + 3,198
SEMI-CONDUCTORS -- 0.0% ^
340 Freescale Semiconductor, Inc.,
7.13%, 07/15/14 + 371
TELECOMMUNICATIONS -- 3.0%
1,325 America Movil SA de CV (Mexico),
6.38%, 03/01/35 + 1,291
2,125 BellSouth Corp., 6.00%, 11/15/34 + 2,173
Deutsche Telekom International
Finance BV (The Netherlands),
910 5.25%, 07/22/13 + 930
855 8.75%, 06/15/30 + 1,152
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- CONTINUED
$ 495 Nextel Communications, Inc.,
7.38%, 08/01/15 + $ 542
805 Qwest Corp., 9.13%, 03/15/12, # + 932
2,700 Rogers Wireless Communications,
Inc. (Canada), 6.38%, 03/01/14 + 2,771
Sprint Capital Corp.,
2,190 6.00%, 01/15/07 + 2,263
1,460 8.75%, 03/15/32 + 1,960
3,370 TCI Communications, Inc., 8.75%,
08/01/15 + 4,283
Telecom Italia Capital SA
(Luxembourg),
1,370 4.00%, 11/15/08 + 1,347
2,365 4.00%, 01/15/10, # + 2,293
1,230 Verizon Global Funding Corp.,
7.38%, 09/01/12 1,422
1,405 Verizon New York, Inc., 7.38%,
04/01/32, Ser. B 1,623
----------------------------------------------------------------------------
24,982
----------------------------------------------------------------------------
TRANSPORTATION -- 0.5%
4,000 CSX Corp., 3.05%, 08/03/06,
FRN + 4,002
UTILITIES -- 2.2%
1,725 Alabama Power Co., 2.80%,
12/01/06, Ser. Y + 1,693
1,395 Arizona Public Service Co.,
4.65%, 05/15/15 + 1,352
Dominion Resources, Inc.,
1,220 5.00%, 03/15/13 + 1,223
1,740 7.20%, 09/15/14, Ser. A + 2,003
1,990 Nisource Finance Corp., 6.15%,
03/01/13 + 2,131
1,235 Pacific Gas & Electric Co., 3.26%,
04/03/06, FRN + 1,236
Pepco Holdings, Inc.,
1,430 6.45%, 08/15/12 + 1,566
435 7.45%, 08/15/32 + 527
Progress Energy, Inc.,
3,120 6.85%, 04/15/12 + 3,470
785 7.00%, 10/30/31 + 891
PSEG Power LLC,
$ 649 5.50%, 12/01/15 + $ 662
870 8.63%, 04/15/31 + 1,180
775 Reliant Resources, Inc., 9.50%,
07/15/13 + 872
----------------------------------------------------------------------------
18,806
----------------------------------------------------------------------------
Total Corporate Notes & Bonds 299,017
(Cost $297,862)
----------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED
SECURITIES -- 45.7%
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 20.1%
20,820 ABN Amro Mortgage Corp.,
4.75%, 04/25/33, Ser. 2003-5,
Class A11 + 20,774
6,115 Countrywide Alternative Loan Trust,
6.00%, 01/25/35, Ser. 2004-28CB,
Class 3A1 + 6,265
16,314 Countrywide Home Loan
Mortgage Pass Through Trust,
5.50%, 08/25/33, Ser. 2004-28R,
Class A1 + 16,314
15,115 Countrywide Home Loans, 6.25%,
10/25/32, Ser. 2002-22,
Class A20 + 15,384
7,970 CS First Boston Mortgage
Securities Corp., 6.00%,
09/25/34, Ser. 2004-5, Class 1A8 + 8,040
Federal Home Loan Mortgage Corp.,
5,562 4.50%, 02/15/11, Ser. 2760,
Class GI, IO + 288
5,940 5.00%, 04/15/17, Ser. 2857,
Class NI, IO + 431
11,248 4.56%, 10/15/18, Ser. 2779,
Class SM, IO, FRN + 972
38,933 4.61%, 01/15/21, Ser. 2861,
Class GS, IO, FRN + 2,093
7,895 5.00%, 04/15/22, Ser. 2751,
Class AI, IO + 707
6,431 5.00%, 10/15/23, Ser. 2781,
Class PI, IO + 601
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
26
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
$ 7,344 5.00%, 06/15/24, Ser. 2891,
Class LI, IO + $ 805
34,100 4.46%, 02/15/34, Ser. 2813,
Class SB, IO, FRN + 2,883
3,721 5.00%, 02/15/34, Ser. 2743,
Class OZ + 3,721
3,454 5.00%, 12/01/34, Ser. 227,
Class IO, IO + 893
Federal National Mortgage
Association,
2,500 4.50%, 09/25/22, Ser. 2003-18,
Class DB + 2,505
1,470 4.50%, 11/25/22, Ser. 2003-19,
Class JP + 1,471
8,908 5.00%, 11/25/30, Ser. 2004-87,
Class JI, IO + 1,146
13,249 4.45%, 10/25/31, Ser. 2004-61,
Class TS, IO, FRN + 886
21,154 5.00%, 01/01/34, Ser. 347,
Class 2, IO + 5,150
67,257 5.00%, 07/25/34, Ser. 353,
Class 2, IO + 17,067
9,737 5.50%, 11/01/34, Ser. 354,
Class 2, IO + 2,299
Government National Mortgage
Association,
2,931 5.50%, 04/20/25, Ser. 2004-46,
Class IH, IO + 207
4,465 5.50%, 01/20/27, Ser. 2004-39,
Class IM, IO + 383
7,007 5.50%, 10/20/27, Ser. 2004-44,
Class PK, IO + 747
3,000 Granite Mortgages PLC (United
Kingdom), 2.61%, 09/20/44,
Ser. 2004-3, Class 1A3, FRN + 3,001
8,415 GSMPS Mortgage Loan Trust,
2.94%, 01/25/35, Ser. 2005-RP1,
Class 1AF, FRN, # + 8,408
1,393 Impac CMB Trust, 2.97%,
03/25/35, Ser. 2004-10,
Class 2A, FRN + 1,392
$ 4,847 Impac Secured Assets Corp.,
3.05%, 12/25/34, Ser. 2004-3,
Class 1A4, FRN + $ 4,849
5,632 Indymac Index Mortgage Loan
Trust, 3.09%, 09/25/34,
Ser. 2004-AR7, Class A1, FRN + 5,632
2,325 Medallion Trust (Australia),
3.00%, 05/25/35, Ser. 2004-1G,
Class A1, FRN + 2,327
2,500 Permanent Financing PLC (United
Kingdom), 2.53%, 03/10/09,
Ser. 4, Class 2A, FRN + 2,501
RESI Finance LP (Cayman Islands),
3,892 4.14%, 07/10/35, Ser. 2003-B,
Class B3, FRN, # + 3,962
6,659 3.99%, 09/10/35, Ser. 2003-C,
Class B3, FRN, # + 6,775
1,275 4.19%, 09/10/35, Ser. 2003-C,
Class B4, FRN, # + 1,297
6,334 3.89%, 12/10/35, Ser. 2003-D,
Class B3, FRN, # + 6,358
2,071 4.09%, 12/10/35, Ser. 2003-D,
Class B4, FRN, # + 2,079
2,369 RMAC (United Kingdom), 2.58%,
12/12/20, Ser. 2004-NS1A,
Class A1B, FRN, # + 2,369
879 SACO I, Inc., 7.00%, 08/25/36,
Ser. 1997-2, Class 1A5, # + 880
Washington Mutual, Inc.,
1,032 5.75%, 01/25/33, Ser. 2002-S8,
Class 1A1 1,031
2,812 2.98%, 01/25/45, Ser. 2005-AR2,
Class 2A21, FRN 2,815
----------------------------------------------------------------------------
167,708
----------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 25.6%
31,585 Federal Home Loan Mortgage
Corp., 5.00%, 03/15/35, TBA 31,161
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
27
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- CONTINUED
Federal National Mortgage
Association,
$ 8,300 6.00%, 03/25/34, TBA $ 8,513
37,800 5.00%, 04/25/34, TBA 37,162
737 6.00%, 01/01/35, Pool 808949 + 756
113,000 5.00%, 03/25/35, TBA 111,340
25,000 Government National Mortgage
Association, 5.50%, 03/15/35, TBA 25,391
----------------------------------------------------------------------------
214,323
----------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 382,031
(Cost $383,025)
----------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 2.2%
2,500 Calwest Industrial Trust, 2.97%,
02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # + 2,506
4,000 GS Mortgage Securities Corp. II,
6.73%, 02/10/16, Ser. 2001-LIBA,
Class E, # + (i) 4,333
11,400 Wachovia Bank Commercial
Mortgage Trust, 3.96%, 12/15/35,
Ser. 2003-C9, Class A2 11,251
----------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 18,090
(Cost $17,853)
----------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 23.7%
7,829 American Express Credit Account
Master Trust, 3.09%, 02/15/12,
Ser. 2004-C, Class C, FRN, # + 7,853
AmeriCredit Automobile
Receivables Trust,
2,065 2.75%, 10/06/07, Ser. 2003-CF,
Class A3 + 2,059
5,175 2.81%, 12/06/07, Ser. 2003-DM,
Class A3B, FRN + 5,182
980 2.98%, 07/06/09, Ser. 2004-DF,
Class A3 + 963
3,300 3.48%, 05/06/10, Ser. 2003-CF,
Class A4 + 3,282
$ 2,790 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + $ 2,744
4,595 Capital Auto Receivables Asset
Trust, 1.96%, 01/15/09,
Ser. 2003-2, Class A4A + 4,453
Capital One Auto Finance Trust,
1,140 3.18%, 09/15/10, Ser. 2003-B,
Class A4 + 1,120
3,250 2.69%, 03/15/11, Ser. 2004-A,
Class A4, FRN + 3,255
Capital One Master Trust,
3,930 3.39%, 08/15/08, Ser. 2000-4,
Class C, FRN, # + 3,943
6,480 4.60%, 08/17/09, Ser. 2001-8A,
Class A + 6,554
Capital One Multi-Asset Execution Trust,
9,580 3.84%, 12/15/10, Ser. 2003-A,
FRN, + 9,884
7,340 3.65%, 07/15/11, Ser. 2003-A4,
Class A4 + 7,209
CARSS Finance LP (Cayman Islands),
726 2.87%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # + 726
1,209 3.54%, 01/15/11, Ser. 2004-A,
Class B2, FRN, # + 1,215
4,660 Citibank Credit Card Issuance
Trust, 3.51%, 03/20/08,
Ser. 2003-C2, Class C2, FRN + 4,694
Citigroup Mortgage Loan Trust, Inc.,
2,989 3.03%, 12/25/33, Ser. 2003-HE3,
Class A, FRN + 3,001
3,230 2.80%, 02/25/35, Ser. 2005-OPT1,
Class A1B, FRN + 3,230
Countrywide Asset-Backed Certificates,
1,975 3.61%, 04/25/30, Ser. 2003-5,
Class AF3 + 1,968
1,785 5.41%, 01/25/34, Ser. 2003-5,
Class MF1 + 1,802
5,950 2.88%, 02/15/34, Ser. 2004-I,
Class A, FRN + 5,968
2,759 2.70%, 02/15/34, Ser. 2004-K,
Class A2, FRN + 2,764
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
28
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 1,320 3.15%, 03/25/34, Ser. 2004-1,
Class M1, FRN + $ 1,328
1,080 3.20%, 03/25/34, Ser. 2004-1,
Class M2, FRN + 1,084
1,072 2.88%, 04/25/34, Ser. 2004-BC1,
Class A1, FRN + 1,072
1,584 2.93%, 04/25/34, Ser. 2004-1,
Class 3A, FRN + 1,586
1,385 Daimler Chrysler Auto Trust,
2.88%, 10/08/09, Ser. 2003-A,
Class A4 + 1,368
2,350 Discover Card Master Trust I,
2.61%, 05/15/10, Ser. 2004-2,
Class A1, FRN + 2,350
1,000 GMAC Mortgage Corp. Loan Trust,
2.75%, 06/25/34,
Ser. 2004-HE1, Class A2, FRN + 1,001
3,325 Gracechurch Card Funding PLC
(United Kingdom), 2.61%,
11/16/09, Ser. 7, Class A, FRN + 3,326
2,240 GSAMP Trust, 2.99%, 11/25/34,
Ser. 2004-OPT, Class A1, FRN + 2,245
8,155 Honda Auto Receivables Owner
Trust, 2.48%, 07/18/08,
Ser. 2003-1, Class A4 + 8,064
951 Household Automotive Trust,
4.37%, 12/17/08, Ser. 2001-3,
Class A4 + 955
1,493 Household Mortgage Loan Trust,
2.95%, 01/20/34, Ser. 2004-HC1,
Class A, FRN + 1,496
Long Beach Mortgage Loan Trust,
3,069 2.97%, 07/25/33, Ser. 2003-3,
Class A, FRN + 3,075
2,000 3.33%, 08/25/33, Ser. 2003-4,
Class M1, FRN + 2,015
3,996 2.95%, 02/25/34, Ser. 2004-1,
Class A3, FRN + 4,003
2,030 3.15%, 02/25/34, Ser. 2004-1,
Class M1, FRN + 2,042
1,360 3.20%, 02/25/34, Ser. 2004-1,
Class M2, FRN + 1,366
$ 1,500 2.91%, 07/25/34, Ser. 2004-3,
Class A3, FRN + $ 1,500
1,500 3.22%, 07/25/34, Ser. 2004-3,
Class M1, FRN + 1,505
1,905 M&I Auto Loan Trust, 2.97%,
04/20/09, Ser. 2003-1, Class A4 + 1,870
2,000 MASTR Asset Backed Securities
Trust, 2.88%, 12/25/34,
Ser. 2005-NC1, Class A4, FRN + 2,001
3,000 MBNA Credit Card Master Note
Trust, 3.74%, 12/15/13,
Ser. 2001-C2, Class C2, FRN, # + 3,077
3,285 Morgan Stanley Auto Loan Trust,
2.17%, 04/15/11, Ser. 2003-HB1,
Class A2 + 3,205
New Century Home Equity Loan Trust,
1,350 3.04%, 03/25/35, Ser. 2005-1,
Class M1, FRN + 1,350
1,215 4.59%, 03/25/35, Ser. 2005-1,
Class A2B, FRN + 1,215
Onyx Acceptance Grantor Trust,
3,130 2.66%, 05/17/10, Ser. 2003-C,
Class A4 + 3,063
4,350 3.85%, 09/15/11, Ser. 2005-A,
Class A4 + 4,307
Option One Mortgage Loan Trust,
1,846 3.07%, 02/25/33, Ser. 2003-1,
Class A2, FRN + 1,852
1,531 2.97%, 07/01/33, Ser. 2003-5,
Class A2, FRN + 1,534
5,998 PP&L Transition Bond Co., LLC,
7.15%, 06/25/09, Ser. 1999-1,
Class A8 + 6,518
Residential Asset Securities Corp.,
1,213 2.90%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN + 1,214
3,413 2.94%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN + 3,419
2,475 2.97%, 11/25/33, Ser. 2003-KS9,
Class A2B, FRN + 2,481
1,500 2.87%, 05/25/34, Ser. 2005-KS2,
Class AI2, FRN + 1,500
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
29
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
SLM Student Loan Trust,
$ 8,410 2.54%, 12/15/12, Ser. 2003-12,
Class A2, FRN + $ 8,416
4,975 2.99%, 12/15/22, Ser. 2003-11,
Class A5, # + 4,894
2,580 Triad Auto Receivables Owner
Trust, 3.20%, 12/13/10,
Ser. 2003-B, Class A4 + 2,534
7,000 Volkswagen Auto Loan Enhanced
Trust, 1.93%, 01/20/10,
Ser. 2003-1, Class A4 6,791
Wachovia Asset Securitization, Inc.,
2,691 3.08%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 2,704
4,010 2.91%, 07/25/33, Ser. 2003-HE2,
Class AII1, FRN 4,020
2,189 2.90%, 11/25/33, Ser. 2003-HE3,
Class A, FRN 2,191
2,455 WFS Financial Owner Trust,
3.15%, 05/20/11, Ser. 2003-4,
Class A4 2,428
----------------------------------------------------------------------------
Total Asset Backed Securities 197,834
(Cost $198,944)
----------------------------------------------------------------------------
PRIVATE PLACEMENTS -- 2.4%
CO-OP APARTMENTS -- 2.4%
4,158 180 East End Ave. Note, Secured
by First Mortgage and Agreement
on Co-op Apartment Building in
New York City, 6.88%,
12/28/28, # + (f) (i) 4,646
734 200 East 57th St. Note, Secured
by Second Mortgage and
Agreement on Co-op Apartment
Building in New York City, 6.72%,
01/01/13, # (f) (i) 783
10,599 200 East 57th St. Note, Secured
by First Mortgage and Agreement
on Co-op Apartment Building in
New York City, 6.50%,
01/01/14, # + (f) (i) 11,358
$ 3,053 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) $ 3,418
----------------------------------------------------------------------------
Total Private Placements 20,205
(Cost $18,544)
----------------------------------------------------------------------------
Total Long-Term Investments 1,014,805
(Cost $1,006,911)
----------------------------------------------------------------------------
<Caption>
UNITS
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 5.9%
OPTIONS -- 0.2%
0^^ Call Option on 10 Year Treasury
Note, strike price of 110.00,
expiring 03/24/05 184
0^^ Call Option on Treasury Bonds,
strike price of 114.00,
expiring 03/24/05 19
0^^ Call Option on 10 Year Treasury
Note, strike price of 114.00,
expiring 05/20/05 17
9,400 Call Option on Interest Rate Swap,
expiring on 05/10/05. If exercised
the Fund pays floating 3 month
LIBOR and receives fixed 4.21%,
expiring 05/12/15, European Style 7
0^^ Put Option on 10 Year Treasury
Note, strike price of 109.00,
expiring 05/20/05 60
0^^ Put Option on 5 Year Treasury
Note, strike price of 108.50,
expiring 05/20/05 238
0^^ Put Option on 5 Year Treasury
Note, strike price of 108.50,
expiring 03/24/05 285
0^^ Put Option on 10 Year Treasury
Note, strike price of 108.00,
expiring 05/20/05 64
0^^ Put Option on Treasury Bonds,
strike price of 112.00, expiring
03/24/05 35
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
30
<Page>
<Table>
<Caption>
UNITS ISSUER VALUE
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- CONTINUED
OPTIONS -- CONTINUED
0^^ Put Option on Treasury Bonds,
strike price of 112.00, expiring
05/20/05 $ 62
0^^ Put Option on Eurodollar Future,
strike price of 96.63, expiring
04/15/05 107
50,000 Put Option on FNMA, 30 Year Fixed,
5.50%, TBA, strike price
100.44, expiring 05/05/05,
European Style 0
60,000 Put Option on FNMA, 30 Year Fixed,
6.00%, TBA, strike price of 100.78,
expiring 05/05/05, European Style 421
60,000 Put Option on Interest Rate Swap,
expiring 04/28/05. If exercised
the Fund pays 4.89% and receives
floating 3 month LIBOR,
expiring 05/03/10, European Style 0
23,700 Put Option on Interest Rate Swap,
expiring on 06/06/05. If exercised
the Fund pays fixed 4.35% and
receives floating 3 month LIBOR,
expiring 06/08/10, European Style 296
----------------------------------------------------------------------------
Total Options 1,795
(Cost $1,726)
----------------------------------------------------------------------------
COMMERCIAL PAPER -- 2.0%
ASSET BACKED SECURITIES -- 2.0%
$ 6,000 Compass Securitization LLC,
2.53%, 03/16/05 + $ 5,993
10,500 Scaldis Capital LLC, 2.43%,
03/15/05 + 10,489
----------------------------------------------------------------------------
Total Commercial Paper 16,482
(Cost $16,484)
----------------------------------------------------------------------------
<Caption>
SHARES
- ----------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 3.7%
31,127 JPMorgan Prime Money Market
Fund (a) + 31,127
(Cost $31,127)
----------------------------------------------------------------------------
Total Short-Term Investments 49,404
(Cost $49,337)
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 127.2% $ 1,064,209
(COST $1,056,248)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (27.2)% (227,924)
----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 836,285
----------------------------------------------------------------------------
</Table>
Percentages indicated are based on net assets.
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
- -------------------------------------------------------------------------------------------------------------------
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
285 Treasury Bonds March, 2005 $ 32,232 $ 38
221 30 Day Federal Funds April, 2005 89,535 (27)
267 30 Day Federal Funds June, 2005 107,849 (78)
49 Treasury Bonds June, 2005 5,505 (41)
242 2 Year Treasury Notes June, 2005 50,189 (88)
133 5 Year Treasury Notes June, 2005 14,308 (3)
963 10 Year Treasury Notes June, 2005 105,810 (612)
SHORT FUTURES OUTSTANDING
(189) Euro-BUND March, 2005 (29,639) 65
(171) Eurodollar December, 2006 (40,871) 237
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
31
<Page>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD)
- ---------------------------------------------------------------------------------------------------------
10,468 EUR 3/22/05 $ 13,651 $ 13,866 $ (215)
- ---------------------------------------------------------------------------------------------------------
</Table>
OPTIONS
<Table>
<Caption>
UNITS CALL OPTIONS WRITTEN VALUE
- -----------------------------------------------------------------------------------------------------------------------------
(4,700) Call Option on Interest Rate Swap, expiring 05/10/05. If exercised the Fund pays 4.46%
and receives floating 3 Month LIBOR, expiring 05/12/15, European Style. $ (13)
(1) Call Option on 10 Year Treasury Notes, strike price of 111.00, expiring 03/24/05. (147)
(3,750) Call Option on Credit default contract, expiring 03/21/05. If exercised the Fund pays quarterly
payment of 53.75 (215 per annum) BPS times notional amount of General Motors Acceptance Corp.,
6.875%, 08/28/12. Upon a defined credit event, Fund receives notional amount and delivers a defined
deliverable obligation, expiring 03/20/10, European Style. (5)
(-)^^ Call Option on 10 Year Treasury Notes, strike price of 111.00, expiring 08/26/05. (237)
(-)^^ Call Option on Treasury Bonds, strike price of 115.00, expiring 03/24/05. (19)
Total Call Options Written $ (421)
<Caption>
PUT OPTIONS WRITTEN
- ------------------------------------------------------------------------------------------------------------------------------
(120,000) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price at 99.78, expiring 05/05/2005,
European Style. $ (417)
(100,000) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price at 99.50, expiring 05/05/2005,
European Style. (-)^^
(60,000) Put Option on FNMA, 30 Year Fixed, 6.00%, TBA, strike price at 102.44, expiring 06/06/2005,
European Style. (328)
(-)^^ Put Option on 5 Year Treasury Notes, strike price of 107.50, expiring 03/24/05. (119)
(-)^^ Put Option on 5 Year Treasury Notes, strike price of 108.00, expiring 03/24/05. (191)
(-)^^ Put Option on 5 Year Treasury Notes, strike price of 107.50, expiring 05/20/05. (131)
(-)^^ Put Option on 10 Year Treasury Notes, strike price of 111.00, expiring 08/26/05. (525)
(-)^^ Put Option on Treasury Bonds, strike price of 115.00, expiring 05/20/05. (250)
Total Put Options Written $ (1,961)
(Total premiums received on written options $2,275)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Bond, 5.38%, 02/15/31, price less 110.68, the
Fund receives positive, pays negative. 03/04/05 $ 4,253 $ (31)
Swap - price lock with UBS AG on 30 Year FNMA, 5.00%, TBA,
price less 99.83, the Fund receives positive, pays negative. 03/14/05 21,000 (269)
Swap - price lock with UBS AG on 30 Year FNMA, 5.00%, TBA,
price less 99.34, the Fund receives positive, pays negative. 03/14/05 19,000 (151)
Swap - price lock with Lehman Brothers Special Financing on
30 Year FHLMC Gold, 5.00%, TBA, price less 99.5, the Fund
receives negative, pays positive. 03/14/05 32,585 275
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
32
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
Swap - price lock with UBS AG on 30 Year FNMA, 4.50%, TBA, price less
97.22, the Fund receives negative, pays positive. 03/14/05 $ 100,000 $ 1,000
Swap - rate lock with Deutsche Bank AG, New York on 10 Year
Forward Interest Rate Swap less 4.79%, the Fund receives positive
pays negative. 03/16/15 11,065 -
Swap - rate lock with Deutsche Bank AG, New York on 30 Year Forward
Interest Rate Swap less 5.15%, the Fund pays positive, receives negative. 03/16/35 7,215 -
Swap - price lock with Deutsche Bank AG, New York, on U.S. Treasury
Bond, 8.75%, 05/15/20, price less 144.69, the Fund receives negative,
pays positive. 03/15/05 22,450 191
Swap - price lock with Citibank, N.A., on U.S. Treasury Note,
3.50%, 12/15/09, price less 98.39, the Fund receives positive,
pays negative. 03/22/05 18,400 (109)
Swap - rate lock with Goldman Sachs on 30 Year Forward Interest Rate
Swap less 5.07%, the Fund receives negative, pays positive. 03/31/35 7,150 (94)
Swap - rate lock with Goldman Sachs on 10 Year Forward Interest Rate
Swap less 4.65%, the Fund receives positive, pays negative. 03/31/15 10,750 94
Swap - rate lock with Lehman Brothers Special Financing on 10 Year
Forward Interest Rate Swap less 4.79%, the Fund receives positive,
pays negative. 04/01/15 10,335 -
Swap - price lock with Deutsche Bank AG, New York on
U.S. Treasury Bond, 8.75%, 08/15/20, price less 147.60, the
Fund receives positive, pays negative. 03/31/05 29,075 (1,065)
Swap - rate lock with Lehman Brothers Special Financing on
30 Year Forward Interest Rate Swap less 5.15%, the Fund
receives negative, pays positive. 04/01/35 7,295 -
Swap - price lock with Barclays Bank PLC on U.S. Treasury Note, 4.25%,
08/15/14, price less 99.54, the Fund receives negative, pays positive. 03/30/05 8,975 -
Swap - price lock with Barclays Bank PLC on U.S. Treasury
Inflation Instrument, 3.38%, 01/15/07, price less 127.02, the
Fund receives negative, pays positive. 03/30/05 24,365 -
Swap - price lock with Barclays Bank PLC on U.S. Treasury Note, 2.25%,
02/15/07, price less 97.62, the Fund receives positive, pays negative. 03/30/05 29,865 -
Swap - price lock with Deutsche Bank AG, New York on
U.S. Treasury Bond, 8.50%, 02/15/20, price less 144.00, the
Fund receives negative, pays positive. 03/31/05 30,270 1,071
Total Return/Spread Swap with Bank of America, N.A., on Bank of
America LLC 10 Year AAA CMBS Index. The Fund receives positive
when spread tightens, pays negative when spread widens. 03/31/05 51,000 65
Total Return/Spread Swap with Lehman Brothers Special
Financing, N.A., on Lehman Brothers 8.5 Year AAA CMBS Index. The
Fund receives positive when spread tightens, pays negative when
spread widens. 04/01/05 39,000 19
Swap - price lock with Deutsche Bank AG, New York on FHMLC,
4.50%, 01/15/14, price less 100.45, the Fund receives positive,
pays negative. 04/05/05 10,495 (78)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
33
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
Swap - price lock with with Citibank N.A., on 30 Year FNMA, 5.50%,
TBA, price less 101.63, the Fund receives positive, pays negative. 04/13/05 $ 90,000 $ (731)
Swap - price lock with UBS AG on 30 Year FNMA, 6.00%, TBA, price
less 102.69, the Fund receives positive, pays negative. 04/13/05 146,000 (411)
Swap - price lock with UBS AG on 30 Year FNMA, 5.50%, TBA, price
less 100.91, the Fund receives negative, pays positive. 04/13/05 73,000 -
Swap - price lock with with Deutsche Bank AG, New York on 30 Year
FNMA, 5.50%, TBA, price less 100.88, the Fund receives positive,
pays negative. 04/06/05 100,000 -
Swap - price lock with UBS AG on 30 Year FNMA, 5.50%, TBA, price
less 100.91, the Fund pays negative, receives positive. 04/13/05 100,000 -
Swap - price lock with UBS AG on 30 Year FNMA, 6.50%, TBA, price
less 104.22, the Fund receives negative, pays positive. 04/13/05 73,000 148
Swap - price lock with with Deutsche Bank AG, New York on 30 Year
FNMA, 6.50%, TBA, price less 104.30, the Fund receives negative,
pays positive. 04/06/05 100,000 296
Swap - price lock with with Citibank N.A., on 30 Year FNMA, 4.50%,
TBA, price less 97.63, the Fund receives negative, pays positive. 04/13/05 58,000 825
Swap - rate lock with Merrill Lynch Capital Services, on 30 Year
Forward Interest Rate Swap less 5.14%, the Fund receives negative,
pays positive. 04/11/35 9,005 (33)
Swap - rate lock with Citibank N.A., on 5 Year Forward Interest Rate
Swap less 4.25%, the Fund pays negative, receives positive. 04/11/10 30,910 264
Swap - rate lock with Citibank N.A., on 30 Year Forward Interest Rate
Swap less 5.28%, the Fund pays positive, receives negative. 04/11/35 9,105 161
Swap - rate lock with Merrill Lynch Capital Services, on 5 Year Forward
Interest Rate Swap less 4.20%, the Fund receives positive, pays negative. 04/11/10 31,025 345
Swap - price lock with with Morgan Stanley Capital Services, on 30
Year FNMA, 6.00%, 04/15/05, price less 102.89, the Fund receives
positive, pays negative. 04/11/05 280,000 (1,367)
Swap - price lock with with Morgan Stanley Capital Services, on 30
Year FNMA, 6.50%, 04/15/05, price less 104.38, the Fund receives
negative, pays positive. 04/11/05 140,000 547
Swap - price lock with Morgan Stanley Capital Services, on 30 Year
FNMA, 5.50%, 04/15/05, price less 101.27, the Fund receives negative,
pays positive. 04/11/05 140,000 919
Swap - price lock with Lehman Brothers Special Financing, on 30 Year
FHLMC, 6.25%, 07/15/32, price less 116.19, the Fund receives positive,
pays negative. 04/15/05 6,815 16
Swap - rate lock with Goldman Sachs, on 2 Year Forward
Interest Rate Swap less 3.84%, the Fund receives negative,
pays positive. 04/20/07 108,955 (456)
Swap - rate lock with Goldman Sachs, on 20 Year Forward Interest Rate
Swap less 4.94%, the Fund receives negative, pays positive. 04/20/25 16,257 (345)
Swap - rate lock with Goldman Sachs, on 7 Year Forward Interest Rate
Swap less 4.40%, the Fund receives positive, pays negative. 04/20/12 69,178 884
Swap - rate lock with Credit Suisse First Boston, on 30 Year Forward
Interest Rate Swap less 4.93%, the Fund receives negative, pays positive. 05/03/35 8,905 (326)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
34
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ---------------------------------------------------------------------------------------------------------------------------------
Swap - rate lock with Credit Suisse First Boston, on 5 Year Forward
Interest Rate Swap less 4.17%, the Fund receives positive, pays negative. 05/03/10 $ 31,105 $ 410
Swap - Forward Rate Agreement with Citibank N.A., the Fund pays
1 month LIBOR, receives 2.83%. 05/03/05 1,248,580 (214)
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund receives 2.83%, pays 1 month LIBOR. 05/03/05 1,659,320 (207)
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund receives 3.11%, pays 1 month LIBOR. 07/01/05 2,595,845 (555)
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund receives 3.42%, pays 3 Month LIBOR. 03/15/06 347,000 (469)
Credit default contract with Lehman Brothers Special Financing. Fund
receives quarterly payment of 25.7925 (103.17 per annum) BPS times
notional amount of General Motors Acceptance Corp., 6.875%, 08/28/12.
Upon a defined credit event, Fund pays notional amount and takes
receipt of a defined deliverable obligation. 03/20/06 4,200 9
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund receives 3 Month LIBOR, pays 4.24%. 06/21/06 620,885 151
Swap - Forward Rate Agreement with Merrill Lynch Capital Services,
the Fund receives 3 Month LIBOR, pays 3.96%. 03/21/07 347,000 346
Credit default contract with Morgan Stanley Capital Services. Fund
pays semi-annual payment of 47.5 (95 per annum) BPS times notional
amount of Russian Federation, 5.00%, 03/31/30, SUB. Upon a defined
credit event, Fund receives notional amount and delivers a defined
deliverable obligation. 12/20/06 31,000 (226)
Credit default contract with Morgan Stanley Capital Services. Fund
receives semi-annual payment of 87.50 (175 per annum) BPS times notional
amount of Gazprom, 7.201%-10.500%, 04/25/07-04/28/34. Upon a defined
credit event, Fund pays notional amount and takes receipt of defined
deliverable obligation. 12/20/06 31,000 469
Credit default contract with Lehman Brothers Special Financing. Fund
receives quarterly payment of 36.575 (146.30 per annum) BPS times
notional amount of General Motors Acceptance Corp., 6.875%, 08/28/12.
Upon a defined credit event, Fund pays notional amount and takes
receipt of a defined deliverable obligation. 03/20/07 4,200 12
Credit default contract with Deutsche Bank AG, New York. Fund pays
semi-annual payment of 61.5 (123 per annum) BPS times notional amount
of Russian Federation, 5.00%, 03/31/30, SUB. Upon a defined
credit event, Fund receives notional amount and delivers a defined
deliverable obligation. 02/20/10 30,000 (129)
Credit default contract with Deutsche Bank AG, New York. Fund receives
semi-annual payment of 63 (126 per annum) BPS times notional amount
of Aries Vermoegensverwaltungs, 7.75%-9.60%, 10/25/07-10/25/14.
Upon a defined credit event, Fund pays notional amount and takes
receipt of a defined deliverable obligation. 02/20/10 30,000 143
Swap - Interest Rate Swap with Merrill Lynch Capital Services, the
Fund pays 4.60% semi-annually, receives 3 Month LIBOR. 01/21/15 10,305 101
Swap - Interest Rate Swap with Lehman Brothers Special
Financing, the Fund pays 5.14% semi-annually, receives 3 Month LIBOR. 07/15/32 7,365 (50)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
35
<Page>
JPMORGAN ENHANCED INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 97.0%
PREFERRED STOCKS -- 0.8%
FINANCIAL SERVICES -- 0.8%
0^^ Lehman CR-ABN Amro VIX, 0.00%,
Ser. MM-14 $ 900
1 Zurich RegCaps Funding Trust,
3.33%, AR, # 679
----------------------------------------------------------------------------
Total Preferred Stocks 1,579
(cost $1,576)
----------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ----------------------------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 0.5%
ILLINOIS -- 0.5%
$ 1,000 Illinois State, Taxable Pension, GO,
2.50%, 06/01/08 949
(Cost $999)
CORPORATE NOTES & BONDS -- 45.2%
AUTOMOTIVE -- 5.2%
1,100 American Honda Finance Corp., 2.80%,
10/22/07, MTN, FRN, # + 1,100
DaimlerChrysler N.A. Holding Corp.,
600 6.40%, 05/15/06 618
1,850 3.47%, 05/24/06, MTN, FRN 1,859
2,200 3.15%, 11/17/06, Ser. D, MTN, FRN 2,202
600 Ford Motor Credit Co., 6.88%, 02/01/06 614
General Motors Acceptance Corp.,
420 6.75%, 01/15/06 429
1,650 3.56%, 01/16/07, MTN, FRN 1,637
2,450 3.61%, 07/16/07, FRN 2,423
----------------------------------------------------------------------------
10,882
----------------------------------------------------------------------------
BANKING -- 10.1%
1,750 Allied Irish Banks PLC (Ireland), 3.54%,
to 07/08; thereafter FRN, 12/31/49, # 1,778
3,300 Banco Santander Chile (Chile), 2.80%,
12/09/09, FRN, # + 3,274
500 Capital One Bank, 6.88%, 02/01/06 514
700 Hana Bank (South Korea), 3.35%,
09/29/06, Ser. E, MTN, FRN 706
1,300 ING Bank NV (The Netherlands), 2.89%,
10/14/14, MTN, FRN 1,296
$ 1,550 KeyCorp, 2.89%, 07/23/07, Ser. G,
MTN, FRN $ 1,551
National Australia Bank LTD. (Australia),
1,600 2.97%, 03/12/13, MTN, FRN 1,610
700 3.24%, 08/29/13, MTN, FRN 703
1,000 2.83%, 06/23/14, MTN, FRN 1,002
1,150 Sovereign Bancorp, Inc., 3.20%,
08/25/06, FRN 1,150
5,000 TD North America LP, 3.00%,
04/23/09, FRN, # 4,995
2,400 Westpac Banking Corp. (Australia),
2.93%, 05/25/07, FRN, # 2,402
----------------------------------------------------------------------------
20,981
----------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.8%
1,650 Clorox Co., 2.54%, 12/14/07, FRN, # 1,650
FINANCIAL SERVICES -- 18.8%
4,300 CIT Group, Inc., 2.99%, 02/15/07,
MTN, FRN + 4,304
Countrywide Home Loans, Inc.,
500 2.89%, 06/02/06, Ser. L, MTN, FRN 502
3,900 3.05%, 11/16/07, Ser. M, MTN, FRN 3,907
Counts Trusts,
1,400 3.57%, 08/15/07, Ser. 2002-10, FRN, # + (i) 1,409
1,400 3.62%, 08/15/07, Ser. 2002-11, FRN, # + (i) 1,411
5,900 Goldman Sachs Group, Inc., 2.65%,
03/30/07, Ser. B, MTN, FRN 5,901
3,100 Household Finance Corp., 2.85%,
07/27/07, MTN, FRN 3,107
1,030 International Lease Finance Corp.,
4.00%, 01/17/06, Ser. O, MTN 1,033
2,950 Lehman Brothers Holdings, Inc., 2.79%,
04/20/07, Ser. G, MTN, FRN 2,952
Morgan Stanley Group, Inc.,
1,200 2.92%, 02/15/07, MTN, FRN 1,201
500 2.83%, 07/27/07, FRN 500
600 2.80%, 01/18/08, Ser. F, MTN, FRN 601
1,250 Morgan Stanley, 2.90%, 11/09/07, FRN 1,251
2,900 Sigma Finance, Inc., 2.36%, 09/15/06,
MTN, FRN, # 2,898
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
36
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 5,500 Special Purpose Accounts Receivable
Cooperative Corp., 3.06%, 11/21/07,
Ser. 2004-4, FRN, # (i) $ 5,499
1,200 Twin Reefs Pass-Through Trust,
3.59%, to 12/09; thereafter FRN,
12/31/49, # 1,204
1,550 Two-Rock Pass-Through (Bermuda),
3.71%, to 02/10; thereafter FRN,
12/31/49, # 1,560
----------------------------------------------------------------------------
39,240
----------------------------------------------------------------------------
INSURANCE -- 3.2%
2,400 ASIF Global Financing, 2.73%,
03/14/08, FRN, # + 2,400
2,350 Genworth Financial, Inc., 2.64%,
06/15/07, FRN 2,351
1,950 Oil Insurance LTD (Bermuda), 2.74%,
04/07/06, FRN, # + (i) 1,950
----------------------------------------------------------------------------
6,701
----------------------------------------------------------------------------
OIL & GAS -- 0.5%
970 Texas Municipal Gas Corp., 2.60%,
07/01/07, # 961
REAL ESTATE -- 1.3%
2,700 Westfield Capital Corp., LTD (Australia),
3.05%, 11/02/07, FRN, # 2,703
REAL ESTATE INVESTMENT TRUST -- 0.6%
300 Duke Realty LP, 2.78%, 12/22/06, FRN 300
850 iStar Financial, Inc., 1.00%,
03/03/08, FRN 851
----------------------------------------------------------------------------
1,151
----------------------------------------------------------------------------
RETAILING -- 0.4%
750 Safeway, Inc., 3.21%, 11/01/05, FRN 751
TELECOMMUNICATIONS -- 0.9%
1,900 BellSouth Corp., 2.92%, 11/15/07, FRN + 1,900
TRANSPORTATION -- 0.5%
1,100 CSX Corp., 3.05%, 08/03/06, FRN + 1,101
UTILITIES -- 2.9%
$ 900 Appalachian Power Co., 2.88%,
06/29/07, FRN + $ 901
1,000 Dominion Resources, Inc., 3.09%,
05/15/06, Ser. B, FRN 1,002
950 National Rural Utilities Cooperative
Finance Corp., 2.91%, 02/17/06, MTN, FRN 951
1,199 Pacific Gas & Electric Co., 3.26%,
04/03/06, FRN 1,200
1,950 Public Service Electric & Gas, 2.66%,
06/23/06, FRN 1,950
----------------------------------------------------------------------------
6,004
----------------------------------------------------------------------------
Total Corporate Notes & Bonds 94,025
(Cost $94,016)
----------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 15.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 15.7%
Adjustable Rate Mortgage Trust,
2,542 3.03%, 04/25/35, Ser. 2004-5,
Class 7A2, FRN + 2,545
2,748 2.98%, 05/25/35, Ser. 2005-1,
Class 5A2, FRN + 2,749
1,500 Countrywide Alternative Loan Trust,
0.00%, 09/25/35, Ser. 2005-9CB,
Class 1A1, FRN 1,500
248 Countrywide Home Loan Mortgage Pass
Through Trust, 5.75%, 01/25/33,
Ser. 2002-31, Class A3 + 251
70 Deutsche Mortgage Securities, Inc.,
2.86%, 04/25/34, Ser. 2004-4,
Class 1A1, FRN 70
1,079 Federal Home Loan Mortgage Corp.,
4.00%, 08/15/19, Ser. 2836, Class HZ 1,074
Federal National Mortgage Association,
443 3.50%, 07/25/14, Ser. 2003-62, Class OB 443
1,782 3.05%, 02/25/28, Ser. 2003-121,
Class FC, FRN 1,786
492 3.15%, 06/25/32, Ser. 2002-36,
Class FS, FRN 496
733 3.15%, 06/25/32, Ser. 2002-36,
Class FT, FRN 739
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
37
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED
$ 4,350 Granite Mortgages PLC (United Kingdom),
2.61%, 09/20/44, Ser. 2004-3,
Class 1A3, FRN $ 4,350
3,900 GSMPS Mortgage Loan Trust, 2.94%,
01/25/35, Ser. 2005-RP1, Class 1AF, FRN, # 3,896
1,705 Impac Secured Assets Corp., 3.05%,
11/25/34, Ser. 2004-3, Class 1A4, FRN 1,706
Indymac Index Mortgage Loan Trust,
2,100 3.09%, 09/25/34, Ser. 2004-AR7,
Class A1, FRN 2,100
677 3.06%, 11/25/34, Ser. 2004-AR8,
Class 2A1, FRN 680
3,548 Medallion Trust (Australia), 3.00%,
05/25/35, Ser. 2004-1G, Class A1, FRN 3,551
1,850 Mound Financing PLC (United Kingdom),
2.91%, 02/08/08, Ser. 3A, Class A1-1,
FRN, # 1,850
283 Residential Asset Securitization Trust,
5.15%, 01/25/33, Ser. 2002-A14J, Class A2 283
1,360 RMAC (United Kingdom), 2.58%, 12/12/20,
Ser. 2004-NS1A, Class A1B, FRN, # 1,360
1,298 Thornburg Mortgage Securities Trust,
2.99%, 04/25/43, Ser. 2003-2,
Class A1, FRN 1,300
----------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities 32,729
(Cost $32,718)
----------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 4.2%
1,554 Calstrs Trust, 2.90%, 11/20/12,
Ser. 2002-C6, Class A1, FRN, # 1,563
Calwest Industrial Trust,
2,700 2.97%, 02/15/12, Ser. 2002-CALW,
Class AFL, FRN, # 2,706
859 2.86%, 06/15/15, Ser. 2003-CALA,
Class A, FRN, # 861
998 CR, 6.70%, 08/10/14, Ser. 2000-ZC2,
Class A4A, # + (i) 1,061
1,138 Goldman Sachs Mortgage Securities II,
2.74%, 11/15/15, Ser. 2003-FL6A,
Class A1, FRN, # 1,137
$ 1,450 LB-UBS Commercial Mortgage Trust,
3.48%, 07/15/27, Ser. 2003-C5,
Class A2 $ 1,412
----------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities 8,740
(Cost $8,779)
----------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 28.4%
1,450 American Express Credit Account Master
Trust, 3.09%, 02/15/12, Ser. 2004-C,
Class C, FRN, # + 1,454
Ameriquest Mortgage Securities, Inc.,
550 3.31%, 11/25/34, Ser. 2004-R11,
Class M1, FRN + 552
500 3.08%, 04/25/35, Ser. 2005-R2,
Class M2, FRN 500
1,600 Capital One Master Trust, 3.39%,
08/15/08, Ser. 2000-4, Class C, FRN, # 1,605
Capital One Multi-Asset Execution Trust,
1,700 3.76%, 02/17/09, Ser. 2003-B1,
Class B1, FRN 1,718
1,650 3.84%, 12/15/10, Ser. 2003-A, FRN, (i) 1,703
806 CARSS Finance LP (Cayman Islands),
2.87%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # 807
Centex Home Equity,
709 2.93%, 01/25/34, Ser. 2004-A,
Class AV2, FRN 709
956 2.85%, 03/25/34, Ser. 2004-B,
Class AV1, FRN 956
1,189 2.90%, 06/25/34, Ser. 2004-C,
Class AV2, FRN 1,190
Citibank Credit Card Issuance Trust,
1,400 7.45%, 09/15/07, Ser. 2000-C1, Class C1 1,430
200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 199
2,050 3.51%, 03/20/08, Ser. 2003-C2, Class C2,
FRN 2,065
2,900 2.86%, 05/20/11, Ser. 2004-B1, Class B1,
FRN 2,906
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
38
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 617 Citifinancial Mortgage Securities, Inc.,
2.94%, 08/25/33, Ser. 2003-3,
Class AV1, FRN $ 618
Citigroup Mortgage Loan Trust, Inc.,
1,598 3.03%, 12/25/33, Ser. 2003-HE3,
Class A, FRN 1,604
1,250 2.80%, 02/25/35, Ser. 2005-OPT1,
Class A1B, FRN 1,250
CNH Equipment Trust,
2,130 2.73%, 01/15/08, Ser. 2003-B,
Class A3A, FRN + 2,131
2,000 2.66%, 10/15/08, Ser. 2004-A,
Class A3A, FRN + 2,001
Countrywide Asset-Backed Certificates,
900 3.15%, 02/25/34, Ser. 2004-BC1,
Class M1, FRN + 900
500 3.10%, 11/25/34, Ser. 2004-6, Class 2A4,
FRN + 500
2,738 Countrywide Home Equity Loan Trust,
2.86%, 05/15/29, Ser. 2003-C, Class A,
FRN + 2,741
254 EQCC Trust, 2.95%, 11/25/31, Ser. 2002-1,
Class 2A, FRN 254
1,518 Fifth Third Home Equity Loan Trust,
2.85%, 09/20/23, Ser. 2003-1,
Class A, FRN 1,519
35 Fleet Credit Card Master Trust II, 2.64%,
10/15/07, Ser. 2002-A, Class A, FRN 35
1,603 Fleet Home Equity Loan Trust, 2.85%,
01/20/33, Ser. 2003-1, Class A, FRN 1,604
GE Corporate Aircraft Financing LLC,
608 2.82%, 06/25/10, Ser. 2003-1A,
Class A1, FRN, # 608
3,052 2.74%, 08/25/11, Ser. 2004-1A,
Class A1, FRN, # 3,052
GMAC Mortgage Corp. Loan Trust,
3,400 2.73%, 06/25/34, Ser. 2004-HE1,
Class A1, FRN 3,402
950 2.84%, 03/25/35, Ser. 2004-HE4,
Class A2, FRN 952
$ 333 Greenpoint Home Equity Loan Trust,
2.86%, 04/15/29, Ser. 2003-1,
Class A, FRN $ 334
307 HFC Home Equity Loan Asset Backed
Certificates, 2.90%, 04/20/32,
Ser. 2002-2, Class A, FRN 308
200 Household Automotive Trust, 2.93%,
05/18/09, Ser. 2002-3, Class A4B, FRN 201
Household Mortgage Loan Trust,
1,060 2.95%, 02/21/33, Ser. 2003-HC1,
Class A, FRN 1,063
411 2.95%, 02/20/34, Ser. 2004-HC1,
Class A, FRN 411
Long Beach Mortgage Loan Trust,
208 3.11%, 11/25/32, Ser. 2002-4, Class 2A,
FRN 208
2,050 3.33%, 08/25/33, Ser. 2003-4,
Class M1, FRN 2,065
450 2.90%, 02/25/35, Ser. 2005-1,
Class 2A2, FRN 451
1,204 Metris Master Trust, 2.88%, 04/20/11,
Ser. 2004-1, Class A, FRN 1,204
550 New Century Home Equity Loan Trust,
3.27%, 11/25/34, Ser. 2004-3,
Class M1, FRN 553
Option One Mortgage Loan Trust,
228 2.94%, 02/25/32, Ser. 2002-1,
Class A, FRN 228
48 2.92%, 06/25/32, Ser. 2002-2,
Class A, FRN 48
1,226 3.07%, 02/25/33, Ser. 2003-1,
Class A2, FRN 1,230
2,300 2.89%, 02/25/35, Ser. 2005-1, Class A3,
FRN 2,303
550 Park Place Securities, Inc., 3.28%,
02/25/35, Ser. 2004-WHQ2, Class M2, FRN 551
246 Residential Asset Securities Corp.,
2.95%, 01/25/34, Ser. 2003-KS11,
Class AIIB, FRN 246
850 Residential Funding Mortgage
Securities II, 2.91%, 01/25/29,
Ser. 2003-HS4, Class AIB, FRN 851
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
39
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 2,900 Volkswagen Auto Loan Enhanced Trust,
2.94%, 03/22/10, Ser. 2003-2, Class A4 $ 2,844
2,073 Wachovia Asset Securitization, Inc.,
2.87%, 06/25/34, Ser. 2004-HE1,
Class A, FRN 2,073
1,000 William Street Funding Corp., 3.04%,
01/23/11, Ser. 2005-1, Class A, FRN, # 1,000
----------------------------------------------------------------------------
Total Asset Backed Securities 59,137
(Cost $59,176)
----------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT -- 2.2%
4,600 Deutsche Bank AG/New York (Yankee),
3.02%, 05/15/07, Floating Rate 4,598
(Cost $4,600)
----------------------------------------------------------------------------
Total Long-Term Investments 201,757
(Cost $201,864)
----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 3.1%
U.S. TREASURY SECURITY -- 0.1%
150 U.S. Treasury Bill, 2.26%, 04/14/05, @ + 150
(Cost $150)
MUNICIPAL SECURITIES -- 0.7%
NORTH CAROLINA -- 0.1%
200 Wake Forest University, Ser. 1997, Rev.,
FRDO, 2.62%, 03/02/05 200
TEXAS -- 0.6%
$1,250 Texas Public Finance Authority, Taxable,
Unemployment Compensation, Ser. B,
Rev., 2.00%, 06/15/05 $ 1,246
----------------------------------------------------------------------------
Total Short Term -- Municipal Securities 1,446
(Cost $1,450)
----------------------------------------------------------------------------
COMMERCIAL PAPER -- 0.5%
CONSUMER PRODUCTS -- 0.5%
1,100 Altria Group, Inc., 3.00%, 05/02/05 + 1,094
(Cost $1,094)
<Caption>
SHARES
- ----------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 1.8%
3,814 JPMorgan Prime Money Market Fund (a) + 3,814
(Cost $3,814)
----------------------------------------------------------------------------
Total Short-Term Investments 6,504
(Cost $6,508)
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.1% $ 208,261
(COST $208,372)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.1)% (285)
----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 207,976
----------------------------------------------------------------------------
</Table>
Percentages indicated are based on net assets.
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
1 30 Day Federal Funds March, 2005 $ 406 $ 0^^
82 30 Day Federal Funds April, 2005 33,221 (5)
6 2 Year Treasury Notes June, 2005 1,244 (3)
3 5 Year Treasury Notes June, 2005 323 (2)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
40
<Page>
JPMORGAN EMERGING MARKETS DEBT FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 78.4%
U.S. TREASURY SECURITY -- 0.4%
UNITED STATES -- 0.4%
$ 135 U.S. Treasury Note, 6.88%,
05/15/06, @ + $ 141
(Cost $143)
FOREIGN GOVERNMENT SECURITIES -- 76.6%
ARGENTINA -- 7.3%
Republic of Argentina,
1,890 3.01%, 08/03/12, FRN 1,690
3,216 12.25%, 06/19/18, Ser. 2018 1,045
----------------------------------------------------------------------------
2,735
----------------------------------------------------------------------------
BRAZIL -- 18.7%
300 Banco Nacional de
Desenvolvimiento Economico e
Social, 5.83%, 06/16/08,
Regulation S, FRN 306
Federal Republic of Brazil,
700 11.00%, 01/11/12 840
1,298 3.13%, 04/15/12, FRN 1,254
1,245 10.25%, 06/17/13 1,444
2 8.00%, 04/15/14 2
350 12.25%, 03/06/30 455
300 11.00%, 08/17/40 347
1,985 11.00%, 08/17/40 2,298
----------------------------------------------------------------------------
6,946
----------------------------------------------------------------------------
COLOMBIA -- 2.5%
Republic of Colombia,
COP 1,465,000 11.75%, 03/01/10 651
255 9.75%, 04/09/11 290
----------------------------------------------------------------------------
941
----------------------------------------------------------------------------
ECUADOR -- 1.0%
Republic of Ecuador,
69 12.00%, 11/15/12, Regulation S 70
320 8.00%, 08/15/30, Regulation S,
SUB 298
----------------------------------------------------------------------------
368
----------------------------------------------------------------------------
EL SALVADOR -- 0.7%
Republic of El Salvador,
$ 135 8.25%, 04/10/32, # $ 142
120 7.63%, 09/21/34, # 127
----------------------------------------------------------------------------
269
----------------------------------------------------------------------------
MEXICO -- 4.7%
United Mexican States,
MXN 17,000 8.00%, 12/19/13 1,387
205 8.13%, 12/30/19 245
105 8.00%, 09/24/22, Ser. A, MTN 124
----------------------------------------------------------------------------
1,756
----------------------------------------------------------------------------
PANAMA -- 1.2%
Republic of Panama,
20 10.75%, 05/15/20 26
345 9.38%, 01/16/23 412
----------------------------------------------------------------------------
438
----------------------------------------------------------------------------
PERU -- 4.7%
Republic of Peru,
130 8.38%, 05/03/16 144
1,285 5.00%, 03/07/17, FRN 1,207
360 8.75%, 11/21/33 392
----------------------------------------------------------------------------
1,743
----------------------------------------------------------------------------
RUSSIA -- 12.1%
1,750 Aries Vermoegensverwaltungs,
9.60%, 10/25/14, # 2,167
Russian Federation,
505 11.00%, 07/24/18, Regulation S 727
530 12.75%, 06/24/28, Regulation S 904
210 5.00%, 03/31/30, Regulation S,
SUB, # 220
488 5.00%, 03/31/30, SUB, # 512
----------------------------------------------------------------------------
4,530
----------------------------------------------------------------------------
TRINIDAD/TOBAGO -- 0.6%
155 Republic of Trinidad & Tobago,
9.75%, 07/01/20, Regulation S 215
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
41
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TURKEY -- 4.0%
Republic of Turkey,
$ 456 11.50%, 01/23/12 $ 589
440 11.00%, 01/14/13 564
240 11.88%, 01/15/30 347
----------------------------------------------------------------------------
1,500
----------------------------------------------------------------------------
UKRAINE -- 4.6%
Republic of Ukraine,
525 6.88%, 03/04/11, # 553
335 6.88%, 03/04/11, Regulation S 353
420 7.65%, 06/11/13, # 462
320 7.65%, 06/11/13, Regulation S 352
----------------------------------------------------------------------------
1,720
----------------------------------------------------------------------------
URUGUAY -- 2.8%
UYU 24,500 Republic of Uruguay, 17.75%,
02/04/06 1,039
----------------------------------------------------------------------------
VENEZUELA -- 11.7%
Republic of Venezuela,
2,790 10.75%, 09/19/13 3,223
1,105 9.25%, 09/15/27 1,138
----------------------------------------------------------------------------
4,361
----------------------------------------------------------------------------
Total Foreign Government
Securities 28,561
(Cost $25,720)
----------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 1.4%
BRAZIL -- 1.0%
380 Trikem SA, 10.63%, 07/24/07, # 388
RUSSIA -- 0.4%
140 Gazprom International SA,
7.20%, 02/01/20, # 149
----------------------------------------------------------------------------
Total Corporate Notes & Bonds 537
(Cost $509)
----------------------------------------------------------------------------
<Caption>
SHARES ISSUER VALUE
- ----------------------------------------------------------------------------------------------
WARRANTS -- 0.0% ^
NIGERIA -- 0.0% ^
1 Central Bank of Nigeria,
expires 11/15/20* $ 0
SINGAPORE -- 0.0% ^
0^^ Asia Pulp & Paper Co., LTD,
ADR, expires 03/15/05, # * (i) (f) 0
VENEZUELA -- 0.0% ^
1 Republic of Venezuela
(Oil Obligation) (Venezuela),
expires 04/15/20 * 18
----------------------------------------------------------------------------
Total Warrants 18
(Cost $0 ^^)
----------------------------------------------------------------------------
Total Long-Term Investments 29,257
(Cost $26,372)
----------------------------------------------------------------------------
<Caption>
PRINCIPAL
AMOUNT
(USD)
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENT -- 3.0%
U.S. TREASURY SECURITY -- 3.0%
$ 1,150 U.S. Treasury Bill, 2.90%,
08/25/05 @ + 1,134
(Cost $1,134)
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 81.4% $ 30,391
(COST $27,506)
OTHER ASSETS IN EXCESS OF
LIABILITIES -- 18.6% 6,925
----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 37,316
----------------------------------------------------------------------------
</Table>
Percentages indicated are based on net assets.
SEE NOTES TO FINANCIAL STATEMENTS.
42
<Page>
SUMMARY OF INVESTMENTS BY INDUSTRY, FEBRUARY 28, 2005
(percentages based on Net Assets)
<Table>
INDUSTRY
Foreign Government Securities 76.6%
U.S. Treasury Securities 3.4
Chemicals 1.0
Oil & Gas 0.4
- --------------------------------------------------------------------------------
81.4%
- --------------------------------------------------------------------------------
</Table>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD)
- -------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
10 10 Year Treasury Notes June, 2005 $ 1,099 $ (7)
SHORT FUTURES OUTSTANDING
(3) Treasury Bonds June, 2005 (337) 3
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
43
<Page>
JPMORGAN GLOBAL STRATEGIC INCOME FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 92.4%
U.S. TREASURY SECURITIES -- 2.5%
U.S. Treasury Notes & Bonds,
$ 50 1.63%, 04/30/05 + $ 50
50 1.63%, 02/28/06 + 49
30 2.50%, 09/30/06 + 30
100 3.00%, 12/31/06 + 99
110 3.13%, 01/31/07 + 109
110 6.63%, 05/15/07 @ + 117
65 3.63%, 01/15/10 + 64
90 3.50%, 02/15/10 + 88
178 4.25%, 11/15/14 + 176
85 4.00%, 02/15/15 + 83
125 5.50%, 08/15/28 @ + 137
140 5.38%, 02/15/31 + 154
----------------------------------------------------------------------------
Total U.S. Treasury Securities 1,156
(Cost $1,151)
----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES -- 0.6%
Federal Home Loan Mortgage Corp.,
15 5.75%, 01/15/12 16
110 6.75%, 03/15/31 136
80 Federal National Mortgage Association,
7.13%, 01/15/30 103
----------------------------------------------------------------------------
Total U.S. Government Agency Securities 255
(Cost $238)
----------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 22.5%
Dominican Republic (Dominican Republic),
113 9.50%, 09/27/06, Regulation S 108
Federal Republic of Brazil (Brazil),
70 11.25%, 07/26/07 80
60 11.50%, 03/12/08 + 70
25 11.00%, 01/11/12 30
150 3.13%, 04/15/12, FRN 145
250 10.25%, 06/17/13 290
190 11.00%, 08/17/40 220
Federal Republic of Germany (Germany),
EUR 270 5.25%, 01/04/08, Ser. 98 + 382
EUR 120 3.50%, 10/10/08, Ser. 143 + 162
EUR 100 3.25%, 04/17/09, Ser. 144 + 134
EUR 100 4.50%, 01/04/13, Ser. 03 + 141
EUR 50 6.25%, 01/04/24, Ser. 94 + 85
EUR 330 4.75%, 07/04/34, Ser. 03 + 481
Government of Canada (Canada),
CAD 20 7.00%, 12/01/06 + $ 17
CAD 40 5.50%, 06/01/10 + 35
CAD 25 8.00%, 06/01/27, Ser. VW17 + 29
Government of France (France),
EUR 35 5.50%, 04/25/07 + 49
EUR 20 4.00%, 04/25/13 + 27
EUR 40 4.00%, 04/25/14 + 54
EUR 70 5.00%, 10/25/16 + 103
EUR 15 5.75%, 10/25/32 25
EUR 105 Kingdom of Belgium (Belgium), 4.25%,
09/28/13, Ser. 41 + 145
240 Malaysia Government International Bond
(Malaysia), 7.50%, 07/15/11 274
EUR 105 Netherlands Government Bond
(The Netherlands), 3.00%, 07/15/07 + 140
250 Province of Ontario (Canada), 6.00%,
02/21/06 256
Province of Quebec (Canada),
100 6.13%, 01/22/11, Ser. PJ 108
50 7.50%, 09/15/29 66
Republic of Colombia (Colombia),
250 9.75%, 04/23/09, Ser. NOV 280
82 9.75%, 04/09/11 94
50 10.75%, 01/15/13 58
50 8.25%, 12/22/14 51
135 11.75%, 02/25/20, MTN 170
25 Republic of Egypt (Egypt), 8.75%,
07/11/11, Regulation S 30
Republic of El Salvador (El Salvador),
38 8.50%, 07/25/11, Regulation S 43
230 8.25%, 04/10/32, # 242
20 7.63%, 09/21/34, # 21
Republic of Italy (Italy),
250 2.50%, 03/31/06, MTN 248
150 3.63%, 09/14/07 148
Republic of Panama (Panama),
140 9.63%, 02/08/11 166
165 10.75%, 05/15/20 215
115 9.38%, 01/16/23 137
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
44
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FOREIGN GOVERNMENT SECURITIES -- CONTINUED
Republic of Peru (Peru),
$ 25 9.88%, 02/06/15 $ 30
360 8.38%, 05/03/16 397
337 4.50%, 03/07/17, FRN 315
51 5.00%, 03/07/17, FRN 48
30 8.75%, 11/21/33 33
Republic of South Africa (South Africa)
(Yankee),
40 9.13%, 05/19/09 47
205 8.50%, 06/23/17 257
20 Republic of Trinidad & Tobago
(Trinidad & Tobago),
9.75%, 07/01/20, Regulation S 28
Republic of Turkey (Turkey),
120 11.50%, 01/23/12 155
55 11.00%, 01/14/13 71
50 11.88%, 01/15/30 72
Republic of Ukraine (Ukraine),
250 6.88%, 03/04/11, # 263
360 7.65%, 06/11/13, Regulation S 397
Republic of Venezuela (Venezuela),
625 10.75%, 09/19/13 723
65 7.00%, 12/01/18, Regulation S 59
160 9.25%, 09/15/27 165
Russian Federation (Russia),
100 10.00%, 06/26/07, Regulation S 112
5 11.00%, 07/24/18, Regulation S 7
145 12.75%, 06/24/28, Regulation S 247
547 5.00%, 03/31/30, Regulation S, SUB 574
U.K. Treasury Gilt (United Kingdom),
GBP 10 8.50%, 12/07/05 20
GBP 30 5.00%, 03/07/08 58
GBP 40 5.75%, 12/07/09 80
GBP 10 8.00%, 09/27/13 23
GBP 15 4.75%, 09/07/15 29
GBP 15 6.00%, 12/07/28 35
United Mexican States (Mexico),
125 6.38%, 01/16/13, MTN 132
120 6.63%, 03/03/15 129
35 8.13%, 12/30/19 42
20 11.50%, 05/15/26 31
155 8.30%, 08/15/31, MTN 187
53 7.50%, 04/08/33, Ser. A, MTN 58
----------------------------------------------------------------------------
Total Foreign Government Securities 10,383
(Cost $9,371)
----------------------------------------------------------------------------
SUPRANATIONAL NOTES & BONDS -- 0.5%
$ 200 Inter-American Development Bank,
7.38%, 01/15/10 $ 228
(Cost $203)
CORPORATE NOTES & BONDS -- 36.5%
ADVERTISING -- 0.3%
50 RH Donnelley Corp., 6.88%, 01/15/13, # 51
30 RH Donnelley Finance Corp. I, 10.88%,
12/15/12, # 35
50 Vertis, Inc., 9.75%, 04/01/09 54
----------------------------------------------------------------------------
140
----------------------------------------------------------------------------
AEROSPACE -- 0.4%
15 General Dynamics Corp., 2.13%,
05/15/06 15
140 L-3 Communications Corp., 7.63%,
06/15/12 153
----------------------------------------------------------------------------
168
----------------------------------------------------------------------------
AGRICULTURAL PRODUCTION/SERVICES -- 0.1%
30 RJ Reynolds Tobacco Holdings, Inc.,
7.88%, 05/15/09, Ser. B 33
AIRLINES -- 0.3%
132 Northwest Airlines Corp., 8.07%,
10/01/19, Ser. 2000-1 146
APPAREL -- 0.1%
60 Russell Corp., 9.25%, 05/01/10 65
APPLIANCES & HOUSEHOLD DURABLES -- 0.1%
45 Gregg Appliances, Inc., 9.00%,
02/01/13, # 44
AUTOMOTIVE -- 2.1%
10 DaimlerChrysler N.A. Holding Corp.,
7.20%, 09/01/09 11
Ford Motor Credit Co.,
330 7.38%, 10/28/09 345
65 4.05%, 01/15/10, FRN 65
70 7.88%, 06/15/10 75
15 7.00%, 10/01/13 15
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
45
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
AUTOMOTIVE -- CONTINUED
General Motors Acceptance Corp.,
$ 35 6.13%, 09/15/06 $ 36
35 6.75%, 12/01/14 34
General Motors Corp.,
25 7.20%, 01/15/11 25
10 8.25%, 07/15/23 10
160 8.38%, 07/15/33 157
Tenneco Automotive, Inc.,
30 10.25%, 07/15/13, Ser. B 35
35 8.63%, 11/15/14, # 37
TRW Automotive, Inc.,
22 9.38%, 02/15/13 25
97 11.00%, 02/15/13 114
----------------------------------------------------------------------------
984
----------------------------------------------------------------------------
BANKING -- 1.5%
75 Abbey National Capital Trust I, 8.96%,
to 6/30; thereafter FRN, 12/31/49 + 107
165 ABN-Amro North American Holding
Preferred Capital Repackage Trust I,
6.52%, to 11/12; thereafter FRN,
12/31/49, # + 181
20 ANZ Capital Trust II, 5.36%,
12/31/49, # + 20
10 Cadets Trust, 4.80%,
07/15/13, Ser. 2003-1, # 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
15 Popular North America, Inc., 4.70%,
06/30/09 15
RBS Capital Trust I,
5 6.43%, to 1/34; thereafter FRN,
12/29/49 5
285 5.51%, to 9/14; thereafter FRN,
12/31/49 291
20 SunTrust Bank, 2.50%, 11/01/06 20
5 Swedbank (Sweden), 9.00%, to 03/10;
thereafter FRN, 12/31/49, # 6
----------------------------------------------------------------------------
697
----------------------------------------------------------------------------
BIOTECHNOLOGY -- 0.1%
$ 45 Bio-Rad Laboratories, Inc., 7.50%,
08/15/13 $ 49
BROADCASTING/CABLE -- 0.6%
145 Cablevision Systems Corp., 8.00%,
04/15/12, # + 164
Echostar DBS Corp.,
110 6.38%, 10/01/11 113
15 6.63%, 10/01/14, # 15
----------------------------------------------------------------------------
292
----------------------------------------------------------------------------
BUSINESS SERVICES -- 0.1%
10 Cendant Corp., 7.13%, 03/15/15 11
50 Iron Mountain, Inc., 8.63%, 04/01/13 53
----------------------------------------------------------------------------
64
----------------------------------------------------------------------------
CHEMICALS -- 1.3%
10 Albemarle Corp., 5.10%, 02/01/15 + 10
80 Crompton Corp., 9.88%, 08/01/12 90
30 Huntsman International LLC, 9.88%,
03/01/09 33
Huntsman LLC,
55 11.63%, 10/15/10 66
25 11.50%, 07/15/12, # 30
15 ICI Wilmington, Inc., 5.63%, 12/01/13 15
3 IMC Global, Inc., 10.88%, 06/01/08, Ser. B 4
Lyondell Chemical Co.,
10 9.63%, 05/01/07, Ser. A 11
115 10.88%, 05/01/09 120
3 Millennium America, Inc., 9.25%,
06/15/08 3
120 Nalco Co., 7.75%, 11/15/11 129
75 PolyOne Corp., 10.63%, 05/15/10 86
5 The Dow Chemical Co., 7.38%, 11/01/29 6
----------------------------------------------------------------------------
603
----------------------------------------------------------------------------
CONSTRUCTION -- 1.0%
Ainsworth Lumber Co. LTD (Canada),
65 7.25%, 10/01/12, # + 67
20 6.75%, 03/15/14 + 20
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
46
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
CONSTRUCTION -- CONTINUED
Beazer Homes USA, Inc.,
$ 45 8.38%, 04/15/12 + $ 49
35 6.50%, 11/15/13 + 36
80 D.R. Horton, Inc., 9.38%, 03/15/11 87
100 KB Home, 8.63%, 12/15/08 113
20 Meritage Homes Corp., 6.25%,
03/15/15, # 20
Pulte Homes, Inc.,
10 5.25%, 01/15/14 10
75 6.38%, 05/15/33 76
----------------------------------------------------------------------------
478
----------------------------------------------------------------------------
CONSUMER PRODUCTS -- 0.4%
25 ALH Finance LLC / ALH Finance Corp.,
8.50%, 01/15/13, # 26
311 Drypers Corp., 10.25%, 06/15/07,
Ser. B (d) (f) * 3
55 Elizabeth Arden, Inc., 7.75%, 01/15/14 59
70 Playtex Products, Inc., 8.00%, 03/01/11 76
5 Sealy Mattress, Co., 8.25%, 06/15/14 5
----------------------------------------------------------------------------
169
----------------------------------------------------------------------------
CONSUMER SERVICES -- 1.0%
25 Alderwoods Group, Inc., 7.75%,
09/15/12, # + 27
100 Corrections Corp. of America, 7.50%,
05/01/11 106
Service Corp. International,
9 6.00%, 12/15/05 9
70 7.70%, 04/15/09 75
130 6.75%, 04/01/16 133
55 Stewart Enterprises, Inc., 6.25%,
02/15/13, # 55
50 United Rentals North America, Inc.,
6.50%, 02/15/12 50
----------------------------------------------------------------------------
455
----------------------------------------------------------------------------
ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.7%
80 Celestica, Inc. (Canada), 7.88%,
07/01/11 84
45 Flextronics International LTD
(Singapore), 6.50%, 05/15/13 47
Rayovac Corp.,
$ 110 8.50%, 10/01/13 $ 120
45 7.38%, 02/01/15, # 46
20 Sanmina-SCI Corp., 6.75%, 03/01/13, # 20
----------------------------------------------------------------------------
317
----------------------------------------------------------------------------
ENTERTAINMENT/LEISURE -- 0.5%
25 Argosy Gaming Co., 7.00%, 01/15/14 + 28
Six Flags, Inc.,
3 8.88%, 02/01/10 3
35 9.75%, 04/15/13 33
100 Vail Resorts, Inc., 6.75%, 02/15/14 102
50 Warner Music Group, 7.38%,
04/15/14, # 53
----------------------------------------------------------------------------
219
----------------------------------------------------------------------------
ENVIRONMENTAL SERVICES -- 0.4%
Allied Waste North America, Inc.,
50 6.13%, 02/15/14 + 47
120 7.38%, 04/15/14, Ser. B + 115
----------------------------------------------------------------------------
162
----------------------------------------------------------------------------
FINANCIAL SERVICES -- 5.8%
American General Finance Corp.,
25 3.00%, 11/15/06, Ser. H, MTN + 25
5 4.50%, 11/15/07, Ser. H, MTN + 5
120 Arch Western Finance LLC, 6.75%,
07/01/13, # + 125
1,097 Core Investment Grade Bond Trust I,
4.73%, 11/30/07 1,107
10 FleetBoston Financial Corp., 7.25%,
09/15/05 10
Goldman Sachs Group, Inc.,
360 5.13%, 01/15/15 360
20 6.35%, 02/15/34 21
HSBC Capital Funding LP (Channel Islands),
130 4.61%, to 06/13; thereafter FRN,
12/31/49 # 125
30 9.55%, to 06/10; thereafter FRN,
12/31/49, # (i) 37
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
47
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 210 ING Capital Funding Trust III, 8.44%,
to 12/10; thereafter FRN, 12/31/49 $ 248
95 Jostens IH Corp., 7.63%, 10/01/12, # 98
25 Morgan Stanley, 5.80%, 04/01/07 26
25 Nexstar Finance LLC/Nexstar Finance,
Inc., 12.00%, 04/01/08 27
5 Prudential Holdings LLC, 8.70%,
12/18/23, # 6
35 SLM Corp., 5.63%, 04/10/07,
Ser. A, MTN 36
224 Targeted Return Index (TRAINS), 8.21%,
08/01/15, Ser. HY-2004-1, # 241
80 UGS Corp., 10.00%, 06/01/12, # 90
65 Yell Finance BV (The Netherlands),
10.75%, 08/01/11 74
----------------------------------------------------------------------------
2,661
----------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.4%
10 Del Monte Corp., 6.75%, 02/15/15, # 10
45 Delhaize America, Inc., 8.13%, 04/15/11 52
Dole Food Co., Inc.,
25 7.25%, 06/15/10 26
25 8.88%, 03/15/11 27
55 Swift & Co., 10.13%, 10/01/09 61
----------------------------------------------------------------------------
176
----------------------------------------------------------------------------
HEALTH CARE/HEALTH CARE SERVICES -- 2.5%
130 Ardent Health Services, Inc., 10.00%,
08/15/13 + 137
95 Extendicare Health Services, Inc.,
6.88%, 05/01/14 97
100 Fresenius Medical Care Capital Trust IV,
7.88%, 06/15/11 111
120 Genesis HealthCare Corp., 8.00%,
10/15/13 132
200 HCA, Inc., 6.75%, 07/15/13 208
700 Mariner Health Group, Inc., 9.50%,
04/01/06, Ser. B (d) (f) * 0^^
100 Medex, Inc., 8.88%, 05/15/13 115
45 Select Medical Corp., 7.63%,
02/01/15, # 47
Tenet Healthcare Corp.,
$ 60 6.50%, 06/01/12 $ 55
50 7.38%, 02/01/13 47
65 9.25%, 02/01/15, # 67
100 Triad Hospitals, Inc., 7.00%, 11/15/13 103
15 UnitedHealth Group, Inc., 3.30%,
01/30/08 15
----------------------------------------------------------------------------
1,134
----------------------------------------------------------------------------
HOTELS/OTHER LODGING -- 0.7%
50 Ameristar Casinos, Inc., 10.75%,
02/15/09 + 56
30 Caesars Entertainment, Inc., 7.00%,
04/15/13 33
40 ITT Corp., 7.38%, 11/15/15 46
50 Mandalay Resort Group, 10.25%,
08/01/07, Ser. B 56
80 MGM Mirage, 6.75%, 09/01/12 85
60 Starwood Hotels & Resorts Worldwide,
Inc., 7.88%, 05/01/12 69
----------------------------------------------------------------------------
345
----------------------------------------------------------------------------
INSURANCE -- 0.2%
10 Arch Capital Group LTD (Bermuda),
7.35%, 05/01/34 + 11
20 Aspen Insurance Holdings LTD
(Bermuda), 6.00%, 08/15/14, # + 21
15 CNA Financial Corp., 5.85%, 12/15/14 + 15
10 Liberty Mutual Group, 7.00%,
03/15/34, # 11
20 Monumental Global Funding II, 3.90%,
06/15/09, # 19
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
----------------------------------------------------------------------------
93
----------------------------------------------------------------------------
MACHINERY & ENGINEERING EQUIPMENT -- 0.3%
125 Terex Corp., 7.38%, 01/15/14 132
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
48
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
METALS/MINING -- 0.6%
$ 45 Novelis, Inc. (Canada), 7.25%,
02/15/15, # $ 47
200 Peabody Energy Corp., 6.88%,
03/15/13, Ser. B 216
----------------------------------------------------------------------------
263
----------------------------------------------------------------------------
MULTI-MEDIA -- 2.0%
70 CanWest Media Inc. (Canada), 8.00%,
09/15/12, # 75
115 Charter Communications Operating LLC,
8.00%, 04/30/12, # 118
10 Clear Channel Communications, Inc.,
5.50%, 09/15/14 10
25 Comcast Cable Communications
Holdings, Inc., 8.38%, 03/15/13 + 30
Dex Media, Inc.,
5 8.00%, 11/15/13, Ser. B 5
125 0% to 11/08; thereafter 9.00%,
11/15/13, SUB 98
80 DirecTV Holdings LLC, 8.38%, 03/15/13 90
25 Houghton Mifflin Co., 9.88%, 02/01/13 26
75 Lodgenet Entertainment Corp., 9.50%,
06/15/13 83
5 News America, Inc., 6.20%, 12/15/34, # 5
80 Sinclair Broadcast Group, Inc., 8.00%,
03/15/12 85
65 Sun Media Corp. (Canada), 7.63%,
02/15/13 70
10 Time Warner Entertainment Co., LP,
8.38%, 03/15/23 13
115 Time Warner, Inc., 7.63%, 04/15/31 + 141
10 Viacom, Inc., 7.88%, 07/30/30 13
60 Videotron Ltee (Canada),
6.88%, 01/15/14, # 63
----------------------------------------------------------------------------
925
----------------------------------------------------------------------------
OFFICE/BUSINESS EQUIPMENT -- 0.2%
90 Xerox Corp., 7.63%, 06/15/13 98
OIL & GAS -- 2.0%
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
115 Chesapeake Energy Corp., 6.88%,
01/15/16 124
140 Denbury Resources, Inc., 7.50%,
04/01/13 151
90 Devon Financing Corp. ULC, 7.88%,
09/30/31 115
165 Gazprom International SA (Luxembourg),
7.20%, 02/01/20, # 175
35 Hanover Compressor Co., 9.00%,
06/01/14 39
10 Kerr-McGee Corp., 6.95%, 07/01/24 11
85 Newfield Exploration Co., 6.63%,
09/01/14, # 92
20 Pioneer Natural Resources Co., 5.88%,
07/15/16 21
35 Swift Energy Co., 9.38%, 05/01/12 39
15 The Premcor Refining Group, Inc.,
7.50%, 06/15/15 16
5 Transocean, Inc. (Cayman Islands),
7.50%, 04/15/31 6
85 Valero Energy Corp., 7.50%, 04/15/32 105
----------------------------------------------------------------------------
921
----------------------------------------------------------------------------
PACKAGING -- 1.2%
110 Crown European Holdings SA (France),
9.50%, 03/01/11 124
20 Graphic Packaging International Corp.,
9.50%, 08/15/13 23
25 Jefferson Smurfit Corp., 7.50%,
06/01/13 26
Owens-Brockway Glass Container, Inc.,
50 8.75%, 11/15/12 56
125 8.25%, 05/15/13 137
65 Silgan Holdings, Inc., 6.75%, 11/15/13 67
100 Smurfit - Stone Container Enterprises,
Inc., 9.75%, 02/01/11 109
----------------------------------------------------------------------------
542
----------------------------------------------------------------------------
PAPER/FOREST PRODUCTS -- 0.9%
110 Bowater, Inc., 6.50%, 06/15/13 + 112
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
49
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PAPER/FOREST PRODUCTS -- CONTINUED
Georgia-Pacific Corp.,
$ 100 8.88%, 02/01/10 $ 117
100 9.50%, 12/01/11 124
5 International Paper Co., 5.85%,
10/30/12 5
30 Millar Western Forest Products LTD
(Canada), 7.75%, 11/15/13 32
10 Neenah Paper, Inc., 7.38%, 11/15/14, # 10
25 Tembec Industries, Inc. (Canada),
8.50%, 02/01/11 25
----------------------------------------------------------------------------
425
----------------------------------------------------------------------------
PHARMACEUTICALS -- 0.0% ^
10 Hospira, Inc., 4.95%, 06/15/09 11
5 Wyeth, 6.45%, 02/01/24 5
----------------------------------------------------------------------------
16
----------------------------------------------------------------------------
PIPELINES -- 0.6%
100 Dynegy Holdings, Inc., 10.13%,
07/15/13, # 114
Kinder Morgan Energy Partners LP,
5 5.13%, 11/15/14 5
10 7.40%, 03/15/31 12
5 7.75%, 03/15/32 6
5 7.30%, 08/15/33 6
100 Northwest Pipeline Corp., 8.13%,
03/01/10 110
20 Williams Companies, Inc., 8.13%,
03/15/12 23
----------------------------------------------------------------------------
276
----------------------------------------------------------------------------
REAL ESTATE -- 0.0% ^
10 Westfield Capital Corp., LTD (Australia),
5.13%, 11/15/14, # 10
REAL ESTATE INVESTMENT TRUST -- 0.2%
30 Host Marriott LP, 9.25%, 10/01/07,
Ser. G 33
35 Ventas Realty LP/Ventas Capital Corp.,
9.00%, 05/01/12 41
----------------------------------------------------------------------------
74
----------------------------------------------------------------------------
RETAILING -- 0.8%
$ 130 Dillard's, Inc., 7.85%, 10/01/12 $ 143
50 Ferrellgas Escrow LLC/Ferrellgas
Finance Escrow Corp., 6.75%,
05/01/14 50
J.C. Penney Co., Inc.,
30 8.00%, 03/01/10 34
60 6.88%, 10/15/15, Ser. A, MTN 67
20 Safeway, Inc., 4.13%, 11/01/08 20
45 Saks, Inc., 7.50%, 12/01/10 48
----------------------------------------------------------------------------
362
----------------------------------------------------------------------------
SEMI-CONDUCTORS -- 0.2%
100 Freescale Semiconductor, Inc., 7.13%,
07/15/14 109
SHIPPING/TRANSPORTATION -- 0.0% ^
Norfolk Southern Corp.,
5 7.80%, 05/15/27 7
5 7.25%, 02/15/31 6
5 Union Pacific Corp., 6.65%, 01/15/11 5
----------------------------------------------------------------------------
18
----------------------------------------------------------------------------
STEEL -- 0.2%
70 EURamax International, Inc., 8.50%,
08/15/11 75
TELECOMMUNICATIONS -- 5.4%
175 AT&T Corp., 9.05%, 11/15/11 + 202
AT&T Wireless Services, Inc.,
10 7.88%, 03/01/11 + 12
175 8.13%, 05/01/12 + 208
10 8.75%, 03/01/31 + 14
Bellsouth Corp.,
450 4.20%, 09/15/09 + 444
20 6.00%, 11/15/34 + 20
15 British Telecom PLC (United Kingdom),
8.88%, 12/15/30 + 21
110 Cincinnati Bell, Inc., 8.38%, 01/15/14 113
45 Consolidated Communications Illinois/
Texas Holdings, Inc., 9.75%, 04/01/12, # 49
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
50
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
TELECOMMUNICATIONS -- CONTINUED
Deutsche Telekom International
Finance BV (The Netherlands),
$ 30 5.25%, 07/22/13 $ 31
5 8.75%, 06/15/30 7
France Telecom (France),
15 7.75%, 03/01/11 18
10 8.50%, 03/01/31 14
40 Insight Midwest LP/Insight Capital, Inc.,
9.75%, 10/01/09 42
Intelsat Bermuda LTD (Bermuda),
20 7.81%, 01/15/12, FRN, # 21
20 8.63%, 01/15/15, # 21
75 Koninklijke KPN NV (The Netherlands),
8.00%, 10/01/10 87
45 MCI Inc., 8.74%, 05/01/14 51
Nextel Communications, Inc.,
85 6.88%, 10/31/13 92
100 7.38%, 08/01/15 110
30 Nortel Networks LTD (Canada), 6.13%,
02/15/06 30
95 PanAmSat Corp., 9.00%, 08/15/14 105
50 Qwest Communications International,
6.29%, 02/15/09, FRN, # 51
95 Qwest Corp., 9.13%, 03/15/12, # 110
ROGERS Wireless Communications, Inc.
(Canada),
50 9.63%, 05/01/11 59
105 6.38%, 03/01/14 108
20 Rural Cellular Corp., 8.25%, 03/15/12 21
SBC Communications, Inc.,
10 5.10%, 09/15/14 10
20 5.63%, 06/15/16 21
Sprint Capital Corp.,
110 6.90%, 05/01/19 122
5 8.75%, 03/15/32 7
10 TCI Communications, Inc., 7.88%,
02/15/26 12
Telecom Italia Capital SA (Luxembourg),
10 4.00%, 11/15/08 10
20 4.00%, 01/15/10, # 19
180 Verizon Global Funding Corp., 7.38%,
09/01/12 207
$ 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
----------------------------------------------------------------------------
2,501
----------------------------------------------------------------------------
UTILITIES -- 1.3%
10 Alabama Power Co., 2.80%, 12/01/06,
Ser. Y + 10
5 Arizona Public Service Co., 4.65%,
05/15/15 + 5
20 Calpine Corp., 9.63%, 09/30/14, # 21
50 CMS Energy Corp., 7.75%, 08/01/10 + 55
Dominion Resources, Inc.,
15 8.13%, 06/15/10, Ser. A 17
85 6.30%, 03/15/33 90
65 DPL, Inc., 6.88%, 09/01/11 71
5 DTE Energy Co., 6.38%, 04/15/33 5
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
15 Nisource Finance Corp., 6.15%,
03/01/13 16
10 Pacificorp, 4.30%, 09/15/08 10
10 Pepco Holdings, Inc., 7.45%, 08/15/32 12
Progress Energy, Inc.,
25 6.85%, 04/15/12 28
5 7.00%, 10/30/31 6
10 PSEG Power LLC, 8.63%, 04/15/31 14
110 Sierra Pacific Resources, 8.63%,
03/15/14 121
15 Southern California Edison Co., 5.00%,
01/15/16 15
30 TECO Energy, Inc., 7.20%, 05/01/11 33
40 Texas Genco LLC/Texas Genco
Financing Corp., 6.88%, 12/15/14, # 43
25 The AES Corp., 7.75%, 03/01/14 + 28
----------------------------------------------------------------------------
621
----------------------------------------------------------------------------
Total Corporate Notes & Bonds 16,862
(Cost $17,076)
----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
51
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 21.7%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.5%
$ 2,692 Credit Suisse First Boston Mortgage
Securities Corp., 0.97%, 06/25/20,
Ser. 1997-2X, FRN, IO, # + $ 27
1 DLJ Mortgage Acceptance Corp.,
126.50%, 07/28/27, Ser. 1997-D, FRN, # 1
650 Federal National Mortgage Association,
5.00%, 07/01/34, Ser. 353, Class 2, IO 165
34 MASTR Alternative Loans Trust, 8.00%,
01/25/35, Ser. 2004-13, Class 10A1 36
----------------------------------------------------------------------------
229
----------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 21.2%
Federal Home Loan Mortgage Corp.,
20 6.00%, 05/01/17, Gold Pool E89420 21
790 6.00%, 03/15/34, Gold Pool, TBA 811
210 6.00%, 04/15/34, Gold Pool, TBA 215
100 6.00%, 01/01/35, Gold Pool A29420 103
Federal National Morgage Association,
469 6.00%, 03/01/33, Pool 686332 482
500 5.50%, 03/25/34, TBA 504
800 6.00%, 03/25/34, TBA 821
2,200 5.00%, 04/25/34, TBA 2,163
400 5.50%, 04/25/34, TBA 402
96 5.50%, 06/01/34, Pool 780921 96
400 5.50%, 11/01/34, Pool 802089 404
497 5.50%, 12/01/34, Pool 781823 501
517 6.00%, 01/01/35, Pool 787546 530
423 6.00%, 01/01/35, Pool 808932 434
295 6.00%, 01/01/35, Pool 806206 303
448 6.50%, 01/01/35, Pool 787547 468
230 7.00%, 01/01/35, Pool 787548 242
50 6.50%, 02/01/35, Pool 787555 52
15 7.00%, 02/01/35, Pool 787556 16
400 5.00%, 03/25/35, TBA 394
800 Government National Mortgage
Association, 5.50%, 03/15/35, TBA 813
----------------------------------------------------------------------------
9,775
----------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 10,004
(Cost $10,213)
----------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 0.9%
$ 25 Bear Stearns Commercial Mortgage
Securities, Inc., 4.52%, 11/11/41,
Ser. 2004-PWR6, Class A4 + $ 25
150 Credit Suisse First Boston Mortgage
Securities Corp., 6.38%, 12/16/35,
Ser. 2001-CK1, Class A3 163
Greenwich Capital Commercial Funding Corp.,
45 4.11%, 07/05/35, Ser. 2003-C1, Class A4 43
40 4.80%, 08/10/42, Ser. 2005-GG3,
Class A4, FRN 40
40 4.86%, 08/10/42, Ser. 2005-GG3,
Class AJ, FRN 39
60 LB-UBS Commercial Mortgage Trust,
6.65%, 11/15/27, Ser. 2001-C2, Class A2 66
20 Morgan Stanley Dean Witter Capital I,
4.92%, 03/12/35, Ser. 2003-HQ2,
Class A2 20
40 Wachovia Bank Commercial Mortgage
Trust, 4.85%, 10/15/41, Ser. 2005, - C16,
Class A4, FRN 40
----------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 436
(Cost $419)
----------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 1.8%
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 2.98%, 07/06/09, Ser. 2004-DF,
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,
23 2.63%, 02/15/07, Ser. 2003-2,
Class A3B, FRN 23
25 1.96%, 01/15/09, Ser. 2003-2,
Class A4A 24
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
52
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 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 44
15 Citibank Credit Card Issuance Trust,
5.65%, 06/16/08, Ser. 2001-A6, Class A6 15
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 73
75 Household Automotive Trust, 2.22%,
11/17/09, Ser. 2003-1, Class A4 73
31 Long Beach Mortgage Loan Trust,
2.97%, 07/25/33, Ser. 2003-3,
Class A, FRN 31
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 39
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 73
10 Option One Mortgage Loan Trust,
2.97%, 08/25/33, Ser. 2003-5,
Class A2, FRN 10
20 PSE&G Transition Funding LLC, 6.61%,
06/15/15, Ser. 2001-1, Class A6 22
Residential Asset Securities Corp.,
5 2.90%, 07/25/32, Ser. 2002-KS4,
Class AIIB, FRN 5
16 2.94%, 07/25/33, Ser. 2003-KS5,
Class AIIB, FRN 16
65 SLM Student Loan Trust, 2.99%,
12/15/22, Ser.2003-11, Class A5, # 64
$ 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 39
25 Volkswagen Auto Loan Enhanced Trust,
2.94%, 03/22/10, Ser. 2003-2, Class A4 25
15 Wachovia Asset Securitization, Inc.,
3.08%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 16
15 WFS Financial Owner Trust, 3.15%,
05/20/11, Ser. 2003-4, Class A4 15
----------------------------------------------------------------------------
Total Asset Backed Securities 816
(Cost $829)
----------------------------------------------------------------------------
PRIVATE PLACEMENTS -- 5.4%
CO-OP APARTMENTS -- 5.4%
1,301 270 5th Ave., Secured by First
Mortgage and Agreement on Co-op
Apartment Building in Brooklyn,
New York, 6.93%, 08/01/18, # (f) (i) 1,416
516 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) 591
446 42 155th St., Secured by
First Mortgage and Agreement
on Co-op Apartment Building in
New York City, New York, 7.00%,
01/01/14, # (f) (i) 478
----------------------------------------------------------------------------
Total Private Placements 2,485
(Cost $2,263)
----------------------------------------------------------------------------
<Caption>
SHARES
- ----------------------------------------------------------------------------------------------
WARRANTS -- 0.0% ^
FOREIGN GOVERNMENT SECURITIES -- 0.0% ^
1 Republic of Venezuela (Oil Obligation)
(Venezuela), expires 4/15/20* 18
(Cost $0 ^^)
----------------------------------------------------------------------------
Total Long-Term Investments 42,643
(Cost $41,763)
----------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
53
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS 19.7%
U.S. TREASURY SECURITIES -- 0.5%
United States Treasury Bills,
$ 125 2.36%, 04/28/05 + @ $ 124
110 1.88%, 11/30/05 + @ 109
----------------------------------------------------------------------------
Total U.S. Treasury Securities 233
(Cost $235)
----------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITY -- 0.4%
EUR 150 French Treasury Bill (France), 0.00%,
04/14/05, DN + 198
(Cost $193)
U.S. GOVERNMENT AGENCY SECURITIES -- 0.5%
Federal National Mortgage Association,
115 2.95%, 12/09/05, DN + 112
90 3.00%, 12/12/05, DN + 88
30 2.97%, 12/19/05, DN + 29
----------------------------------------------------------------------------
U.S. Government Agency Securities 229
(Cost $229)
----------------------------------------------------------------------------
COMMERCIAL PAPER -- 7.7%
ASSET BACKED SECURITIES -- 7.7%
850 Aquinas Funding LLC, 2.37%,
05/09/05 + 845
$ 850 Atlantis One Funding Corp., 2.35%,
04/20/05 + $ 847
850 Fairway Finance Corp., 2.36%,
05/03/05 + 846
1,000 Grampian Funding LLC, 2.30%,
03/24/05 + 999
----------------------------------------------------------------------------
Total Commercial Paper 3,537
(Cost $3,538)
----------------------------------------------------------------------------
<Caption>
SHARES
- ----------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 10.6%
4,911 JPMorgan Prime Money Market
Fund (a) + 4,911
(Cost $4,911)
----------------------------------------------------------------------------
Total Short-Term Investments 9,108
(Cost $9,106)
----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 112.1% $ 51,751
(COST $50,869)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (12.1)% (5,593)
----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 46,158
----------------------------------------------------------------------------
</Table>
Percentages indicated are based on net assets.
SUMMARY OF INVESTMENTS BY COUNTRY, FEBRUARY 28, 2005
<Table>
<Caption>
COUNTRY % OF INVESTMENT SECURITIES
- ----------------------------------------------------------------------------------------------
United States 76.4%
Germany 2.7
Canada 2.3
Venezuela 1.8
Russia 1.8
Brazil 1.6
Peru 1.6
Colombia 1.3
Ukraine 1.3
France 1.2
Mexico 1.1
Panama 1.0
Italy 0.8
The Netherlands 0.6
El Salvador 0.6
South Africa 0.6
Turkey 0.6
United Kingdom 0.6
Malaysia 0.5
Other (below 0.5%) 1.6
- ----------------------------------------------------------------------------------------------
TOTAL 100.0%
- ----------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
54
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD)
- ----------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
4 Euro-BOBL March, 2005 $ 597 $ (2)
3 Euro-Schatz March, 2005 421 (1)
14 Treasury Bonds June, 2005 1,573 (15)
12 2 Year Treasury Notes June, 2005 2,489 (6)
9 5 Year Treasury Notes June, 2005 968 (6)
1 10 Year Treasury Notes June, 2005 110 -^^
SHORT FUTURES OUTSTANDING
(7) Euro-BUND March, 2005 (1,098) -^^
(8) Treasury Bonds June, 2005 (899) 9
(4) 5 Year Treasury Notes June, 2005 (430) 3
(22) 10 Year Treasury Notes June, 2005 (2,417) 15
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO BUY DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
273 CAD 3/29/05 $ 218 $ 221 $ 3
270 EUR 3/29/05 349 357 8
4 EUR for
3 GBP 3/29/05 5 5 -^^
- -----------------------------------------------------------------------------------------------------------------
572 583 11
- -----------------------------------------------------------------------------------------------------------------
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO BUY DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
369 CAD 3/29/05 $ 297 $ 299 $ (2)
1,938 EUR 3/29/05 2,526 2,567 (41)
125 GBP 3/29/05 233 240 (7)
- -----------------------------------------------------------------------------------------------------------------
3,056 3,106 (50)
- -----------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
55
<Page>
JPMORGAN SHORT TERM BOND FUND
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
SHARES ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 92.1%
PREFERRED STOCK -- 1.0%
FINANCIAL SERVICES -- 1.0%
7 Pinto Totta International Finance,
7.77%, to 08/07; thereafter AR, # + $ 7,095
(Cost $7,577)
<Caption>
PRINCIPAL
AMOUNT ~
- ----------------------------------------------------------------------------------------------
U.S. TREASURY SECURITY -- 0.7%
$ 4,784 U.S. Treasury Bond, 1.62%,
01/15/15, 4,754
(Cost $4,718)
FOREIGN GOVERNMENT SECURITIES -- 6.3%
EUR 4,050 Federal Republic of Germany
(Germany), 4.75%, 07/04/34,
Ser. 03 5,889
EUR 3,950 Government of France (France),
5.75%, 10/25/32 6,580
4,250 Republic of Chile (Chile), 3.11%,
01/28/08, FRN + 4,280
3,757 Republic of Colombia (Colombia),
9.75%, 04/09/11 + 4,264
2,250 Republic of Ukraine (Ukraine),
7.65%, 06/11/13, Regulation S 2,475
Russian Federation (Russia),
14,250 8.75%, 07/24/05, # + 14,536
5,500 8.75%, 07/24/05, Regulation S 5,610
1,800 United Mexican States (Mexico),
3.33%, 01/13/09, FRN 1,824
-----------------------------------------------------------------------------
Total Foreign Government Securities 45,458
(Cost $44,908)
-----------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 0.7%
ILLINOIS -- 0.3%
2,350 Illinois State, Taxable Pension, GO,
2.50%, 06/01/08 + 2,230
TEXAS -- 0.4%
3,150 Texas Public Finance Authority,
Unemployment Compensation,
Ser. B, Rev., 2.63%, 06/15/06 3,104
-----------------------------------------------------------------------------
Total State and Municipal Obligations 5,334
(Cost $5,494)
-----------------------------------------------------------------------------
CORPORATE NOTES & BONDS -- 44.9%
ADVERTISING -- 0.5%
$ 3,500 R.H. Donnelley, Inc., 8.88%,
12/15/10 + $ 3,868
AGRICULTURAL PRODUCTION/SERVICES -- 0.5%
3,170 National Agricultural Cooperative
Federation (South Korea), 5.75%,
06/18/14, FRN 3,293
AUTOMOTIVE -- 2.8%
8,950 DaimlerChrysler N.A. Holding Corp.,
3.47%, 05/24/06, MTN, FRN + 8,997
Ford Motor Credit Co.,
4,500 4.95%, 01/15/08 + 4,454
650 5.80%, 01/12/09 + 649
General Motors Acceptance Corp.,
900 6.75%, 01/15/06 + 918
5,150 6.13%, 08/28/07 + 5,244
-----------------------------------------------------------------------------
20,262
-----------------------------------------------------------------------------
BANKING -- 10.6%
1,764 Abbey National PLC (United
Kingdom) (Yankee), 7.35%, to
10/06; thereafter FRN, 12/31/49 + 1,845
2,050 Bacob Bank SC (Belgium), 7.25%,
to 09/07; thereafter FRN,
12/31/49, # + 2,186
2,800 BBVA Bancomer Capital Trust I
(Mexico), 10.50%, 02/16/11, # + 2,972
420 BCI US Funding Trust, 8.01%,
to 07/08; thereafter FRN,
12/31/49, # + 463
1,200 Chohung Bank (South Korea),
4.63%, 11/03/14, FRN, # + 1,162
Citibank Korea, Inc. (South Korea),
2,800 6.95%, 12/06/11 2,944
3,350 4.68%, 06/18/13, Ser. E, FRN, MTN 3,363
1,300 Deutsche Bank Capital Funding
Trust I, 7.87%, to 06/09; thereafter
FRN, 12/31/49, # + 1,460
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
56
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 3,500 ForeningsSparbanken AB
(Sweden), 7.50%, to 11/06;
thereafter FRN,12/31/49, # $ 3,687
4,050 Industrial Bank of Korea
(South Korea), 4.00%, to 05/09;
thereafter FRN, 05/19/14, # + 3,921
2,000 KBC Bank Fund Trust III, 9.86%, to
11/09; thereafter FRN, 11/29/49, # + 2,406
5,000 Korea First Bank (South Korea),
6.25%, to 10/08; thereafter FRN,
10/02/13, Regulation S 5,221
2,300 National Westminster Bank PLC
(United Kingdom) (Yankee), 7.75%,
to 10/07; thereafter FRN, 12/31/49 + 2,476
1,700 Nordea Bank Finland PLC/New York,
7.50%, to 01/07; thereafter
12/31/49, FRN, # + 1,788
Popular North America, Inc.,
1,150 6.13%, 10/15/06, Ser. E, MTN + 1,185
1,950 4.25%, 04/01/08 + 1,945
7,195 Royal Bank of Scotland Group PLC
(United Kingdom), 7.82%,
12/31/49, Ser. 3 + 7,403
5,150 Skandinaviska Enskilda Banken AB
(Sweden), 8.13%, to 09/06;
thereafter FRN, 09/06/49, # 5,451
6,750 Spintab AB (Sweden), 7.50%, to
08/06; thereafter FRN, 12/31/49, # 7,081
2,950 Svenska Handelsbanken (Sweden),
7.13%, to 03/07; thereafter FRN,
12/31/49, # 3,115
2,000 Unicredito Italiano Capital Trust II,
9.20%, to 10/10; thereafter FRN,
12/31/49, # 2,403
2,500 Washington Mutual, Inc., 7.50%,
08/15/06 2,623
Woori Bank (South Korea),
2,150 4.50%, 12/08/09, # 2,126
1,430 5.75%, to 03/09; thereafter FRN,
03/13/14, # 1,482
4,650 Zions Bancorporation, 2.70%,
05/01/06 4,587
-----------------------------------------------------------------------------
75,295
-----------------------------------------------------------------------------
BROADCASTING/CABLE -- 0.4%
$ 2,650 Echostar DBS Corp., 9.13%,
01/15/09 + $ 2,872
BUSINESS SERVICES -- 0.5%
3,500 Cendant Corp., 6.88%, 08/15/06 + 3,641
CHEMICALS -- 0.5%
3,500 Huntsman International LLC,
9.88%, 03/01/09 + 3,859
CONSUMER PRODUCTS -- 0.8%
2,300 Deluxe Corp., 3.50%, 10/01/07,
Ser. B + 2,251
3,900 Diageo Finance BV
(The Netherlands),
3.00%, 12/15/06 + 3,833
-----------------------------------------------------------------------------
6,084
-----------------------------------------------------------------------------
DIVERSIFIED -- 0.4%
3,000 Tyco International Group SA
(Luxembourg) (Yankee), 6.38%,
02/15/06, # 3,066
FINANCIAL SERVICES -- 10.7%
4,600 BNP U.S. Funding LLC, 7.74%, to
12/07; thereafter FRN,
12/31/49, # + 4,997
1,800 Capital One Bank, 4.25%,
12/01/08 + 1,784
Capital One Financial Corp.,
6,650 8.75%, 02/01/07 + 7,202
1,300 4.74%, 05/17/07 + 1,313
6,150 Countrywide Home Loans, Inc.,
2.88%, 02/15/07, Ser. L, MTN + 6,008
Counts Trusts,
3,450 3.57%, 08/15/07, Ser. 2002-10,
FRN, #, + (i) 3,473
3,450 3.62%, 08/15/07, Ser. 2002-11,
FRN, #, + (i) 3,476
4,000 Credit Suisse First Boston USA,
Inc., 4.63%, 01/15/08 + 4,048
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
57
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
FINANCIAL SERVICES -- CONTINUED
$ 2,000 HSBC Capital Funding LP
(Channel Islands), 9.55%, to 06/10;
thereafter FRN, 12/31/49, # + $ 2,450
International Lease Finance Corp.,
1,400 3.13%, 05/03/07, Ser. P, MTN + 1,372
2,100 4.35%, 09/15/08 + 2,091
1,650 Mantis Reef LTD (Australia), 4.69%,
11/14/08, # + 1,640
1,650 MBNA America Bank N.A., 4.63%,
08/03/09 + 1,655
700 Mizuho JGB Investment LLC, 9.87%,
to 06/08; thereafter FRN,
12/31/49, # + 807
2,000 Mizuho Preferred Capital Co., LLC,
8.79%, to 06/08; thereafter FRN,
12/31/49, # + 2,239
5,905 Natexis AMBS Co., LLC, 8.44%, to
06/08; thereafter FRN,
12/31/49, # + 6,629
11,000 Sigma Finance, Inc., 2.36%,
09/15/06, MTN, FRN + (i) 10,994
4,400 Special Purpose Accounts
Receivable Cooperative Corp.,
3.06%, 11/21/07, Ser. 2004-4,
FRN, # (i) 4,399
1,700 Tokai Preferred Capital Co., LLC,
9.98%, to 06/08; thereafter FRN,
12/31/49, # 1,959
3,100 Twin Reefs Pass-Through Trust,
3.59%, to 12/09; thereafter FRN,
12/31/49, # 3,110
4,150 Two-Rock Pass Through (Bermuda),
3.71%, to 02/10; thereafter FRN,
12/31/49, # 4,176
-----------------------------------------------------------------------------
75,822
-----------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.3%
2,100 Kraft Foods, Inc., 5.25%, 06/01/07 + 2,152
HOTELS/OTHER LODGING -- 0.8%
2,650 Caesars Entertainment, Inc., 7.88%,
12/15/05 + 2,730
$ 2,650 Starwood Hotels & Resorts
Worldwide, Inc., 7.38%,
05/01/07 $ 2,815
-----------------------------------------------------------------------------
5,545
-----------------------------------------------------------------------------
INSURANCE -- 1.3%
5,350 ASIF Global Financing, 2.73%,
03/14/08, FRN, # + 5,350
3,650 Oil Insurance LTD (Bermuda),
2.74%, 04/07/06, FRN, # + (i) 3,650
-----------------------------------------------------------------------------
9,000
-----------------------------------------------------------------------------
MULTI-MEDIA -- 0.9%
1,700 Clear Channel Communications,
Inc., 4.63%, 01/15/08 + 1,704
850 Dex Media East LLC/Dex Media
East Finance Co., 12.13%,
11/15/12 + 1,029
3,600 Time Warner, Inc., 6.15%,
05/01/07 + 3,751
-----------------------------------------------------------------------------
6,484
-----------------------------------------------------------------------------
OIL & GAS -- 1.2%
1,800 PEMEX Project Funding Master
Trust, 3.79%, 06/15/10,
FRN, # + 1,863
4,000 Salomon Brothers AG for OAO
Gazprom (Germany), 9.13%,
04/25/07 4,345
2,480 Texas Municipal Gas Corp.,
2.60%, 07/01/07, # 2,456
-----------------------------------------------------------------------------
8,664
-----------------------------------------------------------------------------
PACKAGING -- 0.5%
3,500 Smurfit - Stone Container
Enterprises, Inc., 9.75%,
02/01/11 3,811
PAPER/FOREST PRODUCTS -- 0.3%
2,000 Georgia-Pacific Corp., 7.38%,
07/15/08 + 2,170
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
58
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
PHARMACEUTICALS -- 0.1%
$ 950 Hospira, Inc., 4.95%, 06/15/09 + $ 958
PIPELINES -- 0.5%
Duke Capital LLC,
2,250 4.30%, 05/18/06 + 2,262
1,400 4.33%, 11/16/06 + 1,407
-----------------------------------------------------------------------------
3,669
-----------------------------------------------------------------------------
REAL ESTATE -- 1.2%
7,960 Socgen Real Estate Co., LLC,
7.64%, to 09/07; thereafter FRN,
12/31/49, SUB, # 8,582
REAL ESTATE INVESTMENT TRUST -- 0.8%
3,500 Host Marriott LP, 9.25%, 10/01/07,
Ser. G + 3,854
2,000 iStar Financial, Inc., 4.88%,
01/15/09, Ser. B + 2,006
-----------------------------------------------------------------------------
5,860
-----------------------------------------------------------------------------
RETAILING -- 0.1%
800 The May Department Stores Co.,
3.95%, 07/15/07 + 792
TELECOMMUNICATIONS -- 5.7%
3,300 Alltel Corp., 4.66%, 05/17/07 + 3,334
3,700 British Telecom PLC
(United Kingdom), 7.79%,
12/15/05 + 3,819
3,165 Crown Castle International Corp.,
10.75%, 08/01/11 + 3,410
3,050 France Telecom (France), 7.95%,
03/01/06 + 3,155
3,450 Motorola, Inc., 4.61%, 11/16/07 + 3,474
7,150 SBC Communications, Inc., 4.21%,
06/05/05, # + 7,171
Sprint Capital Corp.,
2,000 4.78%, 08/17/06, SUB 2,021
3,230 6.00%, 01/15/07 3,338
Telecom Italia Capital SA (Luxembourg),
1,500 4.00%, 11/15/08 1,474
1,450 4.00%, 01/15/10, # 1,406
$ 8,300 Verizon Wireless Capital LLC,
5.38%, 12/15/06 $ 8,504
-----------------------------------------------------------------------------
41,106
-----------------------------------------------------------------------------
UTILITIES -- 3.5%
4,850 Alabama Power Co., 2.80%,
12/01/06, Ser. Y + 4,759
1,600 CC Funding Trust I, 6.90%,
02/16/07 + 1,682
1,450 Dominion Resources, Inc., 3.66%,
11/15/06, Ser. A, SUB + 1,442
2,700 FPL Group Capital, Inc., 1.88%,
03/30/05 + 2,698
3,100 National Rural Utilities Cooperative
Finance Corp., 6.00%, 05/15/06 + 3,182
3,800 Niagara Mohawk Power Corp.,
7.75%, 05/15/06 + 3,977
525 Pacific Gas & Electric Co., 3.60 %,
03/01/09 + 510
1,500 Pacificorp, 5.65%, 11/01/06 + 1,540
3,700 Progress Energy, Inc., 6.75%,
03/01/06 + 3,805
1,450 Sempra Energy, 4.62%, 05/17/07 + 1,463
-----------------------------------------------------------------------------
25,058
-----------------------------------------------------------------------------
Total Corporate Notes & Bonds 321,913
(Cost $325,374)
-----------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED
SECURITIES -- 12.8%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 12.8%
2,499 ABN Amro Mortgage Corp, 4.00%,
01/25/33, Ser. 2002-10, Class 1A1 + 2,498
3,353 Bank of America Alternative Loan
Trust, 5.50%, 09/25/33,
Ser. 2003-7, Class 1A1 + 3,399
3,131 Countrywide Home Loan Mortgage
Pass Through Trust, 6.50%,
01/25/32, Ser. 2001-28,
Class 2A4 + 3,124
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
59
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
Federal Home Loan Mortgage Corp.,
$ 3,746 6.00%, 08/15/08, Ser. 1565,
Class P + $ 3,842
12,029 4.50%, 05/15/11, Ser. 2780,
Class IE, IO + 560
10,286 5.00%, 10/15/21, Ser. 2750,
Class IQ, IO + 981
6,500 5.00%, 09/15/24, Ser. 2929,
Class PB + 6,585
8,217 5.00%, 04/15/28, Ser. 2939,
Class HP + 8,335
21,704 4.51%, 10/15/30, Ser. 2814,
Class S, IO, FRN + 1,487
8,389 5.00%, 12/01/34, Ser. 227,
Class IO, IO + 2,168
Federal National Mortgage Association,
16,887 4.45%, 10/25/31, Ser. 2004-61,
Class TS, IO, FRN + 1,129
140 5.00%, 08/25/33, Ser. 2004-29,
Class ZB + 140
22,741 5.00%, 01/01/34, Ser. 347,
Class 2, IO + 5,536
30,055 5.00%, 07/01/34, Ser. 353,
Class 2, IO 7,627
Government National Mortgage Association,
52,076 4.60%, 02/20/24, Ser. 2003-85,
Class CS, FRN, IO + 3,536
14,108 5.50%, 10/20/27, Ser. 2004-44,
Class PK, IO + 1,504
2,037 MASTR Adjustable Rate Mortgages
Trust, 2.41%, 12/25/33,
Ser. 2003-6, Class 1A1, FRN + 2,028
475 Residential Asset Securitization
Trust, 6.00%, 01/25/33,
Ser. 2002-A15, Class A1 + 475
9,142 Structured Adjustable Rate
Mortgage Loan Trust, 5.02%,
06/25/34, Ser. 2004-6,
Class 5A1, FRN 9,193
12,794 Washington Mutual, Inc., 5.50%,
07/25/34, Ser. 2004-S3, Class 2A1 12,900
Wells Fargo Mortgage Backed
Securities Trust,
$ 4,462 4.64%, 12/25/33, Ser. 2003-N,
Class 1A4, FRN $ 4,507
10,100 3.54%, 09/25/34, Ser. 2004-S,
Class A3, FRN 10,029
-----------------------------------------------------------------------------
Total Residential Mortgage Backed
Securities (Cost $92,028) 91,583
-----------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED
SECURITIES -- 10.3%
1,250 Banc of America Commercial
Mortgage, Inc., 4.18%, 11/10/41,
Ser. 2004-5, Class A2 + 1,248
10,251 CalSTRS Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # + 10,233
1,993 Calwest Industrial Trust, 2.86%,
06/15/15, Ser. 2003-CALA,
Class A, FRN, # + 1,998
2,594 CR, 6.70%, 08/10/14,
Ser. 2000-ZC2, Class A4A, # + (i) 2,757
3,700 Credit Suisse First Boston
Mortgage Securities Corp., 4.30%,
07/15/36, Ser. 2004-C3, Class A3 + 3,669
3,683 First Union Commercial Mortgage
Securities, Inc., 7.38%, 04/18/29,
Ser. 1997-C1, Class A3 + 3,878
4,100 Greenwich Capital Commercial
Funding Corp., 4.31%, 08/10/42,
Ser. 2005-GG3, Class A2, FRN + 4,066
5,550 GS Mortgage Securities Corp. II,
4.60%, 08/10/38, Ser. 2004-GG2,
Class A3 + 5,587
LB-UBS Commercial Mortgage Trust,
2,950 3.32%, 03/15/27, Ser. 2003-C1,
Class A2 + 2,874
7,300 3.48%, 07/15/27, Ser. 2003-C5,
Class A2 + 7,110
8,300 3.99%, 10/15/29, Ser. 2004-C7,
Class A2 + 8,143
3,000 Mall of America Capital Co., LLC,
2.89%, 03/12/10, Ser. 2000-1,
Class A, FRN, + 3,000
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
60
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COMMERCIAL MORTGAGE BACKED
SECURITIES -- CONTINUED
Morgan Stanley Capital I,
$ 2,573 6.22%, 06/03/30, Ser. 1998-XL1,
Class A1 + $ 2,574
7,400 6.48%, 11/15/30, Ser. 1998-HF2,
Class A2 + 7,859
367 Mortgage Capital Funding, Inc.,
6.00%, 11/18/31, Ser. 1998-MC3,
Class A1 + 369
8,200 Wachovia Bank Commercial
Mortgage Trust, 4.38%, 10/15/41,
Ser. 2005-C16, Class A2 8,165
-----------------------------------------------------------------------------
Total Commercial Mortgage Backed
Securities (Cost $74,910) 73,530
-----------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 13.0%
3,190 American Express Credit Account
Master Trust, 3.09%, 02/15/12,
Ser. 2004-C, Class C, FRN, # + 3,200
AmeriCredit Automobile Receivables
Trust,
9,200 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 9,047
2,800 2.67%, 03/07/11, Ser. 2004-BM,
Class A4 + 2,710
550 Capital One Auto Finance Trust,
3.18%, 09/15/10, Ser. 2003-B,
Class A4 + 540
3,700 Capital One Master Trust, 3.39%,
08/15/08, Ser. 2000-4, Class C,
FRN, # + 3,712
4,400 Capital One Multi-Asset Execution
Trust, 3.70%, 05/17/10,
Ser. 2004-B5, Class B5 + 4,360
3,650 Carmax Auto Owner Trust, 3.07%,
10/15/10, Ser. 2003-2, Class A4 + 3,588
CARSS Finance LP (Cayman Islands),
484 2.87%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # + 484
1,129 3.54%, 01/15/11, Ser. 2004-A,
Class B2, FRN, # + 1,134
Citibank Credit Card Issuance Trust,
$ 5,050 3.51%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + $ 5,087
4,375 6.65%, 05/15/08, Ser. 2001-C3,
Class C3 + 4,520
4,000 2.88%, 06/25/09, Ser. 2002-B1,
Class B1, FRN + 4,016
407 Comed Transitional Funding Trust,
5.44%, 03/25/07, Ser. 1998-1,
Class A5 + 408
5,400 Countrywide Asset-Backed
Certificates, 3.61%, 04/25/30,
Ser. 2003-5, Class AF3 + 5,381
1,120 EQCC Trust, 2.95%, 11/25/31,
Ser. 2002-1, Class 2A, FRN + 1,122
Household Automotive Trust,
12,000 3.44%, 05/18/09, Ser. 2002-3,
Class A4A + 11,996
1,700 3.02%, 12/17/10, Ser. 2003-2,
Class A4 + 1,668
4,000 Long Beach Mortgage Loan Trust,
3.22%, 07/25/34, Ser. 2004-3,
Class M1, FRN + 4,015
2,200 MBNA Credit Card Master Note
Trust, 2.99%, 01/15/08,
Ser. 2002-B3, Class B3, FRN + 2,202
1,428 Peco Energy Transition Trust,
5.80%, 03/01/07, Ser. 1999-A,
Class A4 + 1,429
291 Providian Home Equity Loan Trust,
2.94%, 06/25/25, Ser. 1999-1,
Class A, FRN + 292
4,100 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # + 4,033
2,663 Wachovia Asset Securitization, Inc.,
3.08%, 12/25/32, Ser. 2002-HE2,
Class A, FRN 2,676
WFS Financial Owner Trust,
6,100 4.50%, 02/20/10, Ser. 2002-2,
Class A4, SUB 6,150
6,400 3.25%, 05/20/11, Ser. 2003-3,
Class A4 6,322
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
61
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT ~ ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 3,500 World Omni Auto Receivables
Trust, 2.87%, 11/15/10, Ser. 2003-B,
Class A4 $ 3,413
-----------------------------------------------------------------------------
Total Asset Backed Securities 93,505
(Cost $94,094)
-----------------------------------------------------------------------------
PARTICIPATORY NOTE -- 0.4%
DIVERSIFIED -- 0.4%
3,150 Tyco International Group SA
Participation Certificate Trust, 4.44%,
06/15/07, # 3,163
(Cost $3,150)
CERTIFICATES OF DEPOSIT -- 2.0%
11,450 Deutsche Bank AG/New York
(Yankee), 3.02%, 05/15/07,
Floating Rate + 11,444
2,900 Sovereign Bank, 4.00%, 02/01/08 2,890
-----------------------------------------------------------------------------
Total Certificates of Deposit 14,334
(Cost $14,348)
-----------------------------------------------------------------------------
Total Long-Term Investments 660,669
(Cost $666,601)
-----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 9.8%
U.S. TREASURY SECURITY -- 0.3%
1,985 United States Treasury Bill, 2.33%,
04/14/05, @ + 1,979
(Cost $1,979)
MUNICIPAL SECURITY -- 0.7%
SOUTH CAROLINA -- 0.7%
$ 4,700 South Carolina Student Loan Corp.,
Education Loans, Ser. A-1, Rev.,
FRDO, 2.52%, 03/29/05 $ 4,700
(Cost $4,700)
COMMERCIAL PAPER -- 0.5%
CONSUMER PRODUCTS -- 0.5%
3,700 Altria Group, Inc., 3.00%,
05/02/05 + 3,681
(Cost $3,681)
<Caption>
SHARES
- ----------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 8.3%
59,374 JPMorgan Prime Money Market
Fund (a) + 59,374
(Cost $59,374)
Total Short-Term Investments 69,734
(Cost $69,734)
-----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 101.9% $ 730,403
(COST $736,335)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (1.9)% (13,526)
-----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 716,877
-----------------------------------------------------------------------------
</Table>
Percentages indicated are based on net assets.
SEE NOTES TO FINANCIAL STATEMENTS.
62
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD)
- ----------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
209 30 Day Federal Funds April, 2005 $ 84,674 $ (14)
426 2 Year Treasury Notes June, 2005 88,348 (87)
669 10 Year Treasury Notes June, 2005 73,506 (492)
361 Eurodollar December, 2005 86,617 (783)
SHORT FUTURES OUTSTANDING
(179) Euro-BUND March, 2005 (28,071) 65
(1) 30 Day Federal Funds March, 2005 (406) -^^
(403) 5 Year Treasury Notes June, 2005 (43,354) 258
(80) 10 Year Treasury Notes June, 2005 (8,790) 54
(552) Eurodollar December, 2006 (131,935) 772
</Table>
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT SETTLEMENT VALUE AT APPRECIATION
CONTRACTS TO SELL DATE VALUE (USD) 2/28/05 (USD) (DEPRECIATION) (USD)
- -----------------------------------------------------------------------------------------------------------------
9,725 EUR 5/26/05 $ 12,870 $ 12,900 $ (30)
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
Swap - price lock with Credit Suisse First Boston International on
U.S. Treasury Note, 2.50%, 09/30/06, price less 98.90,
the Fund receives positive, pays negative. 03/03/05 $ 157,800 $ (679)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Inflation Index, 1.63%, 01/15/15, price less 99.74,
the Fund receives positive, pays negative. 03/31/05 4,700 (25)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 4.00%, 02/15/15, price less 97.56,
the Fund receives negative, pays positive. 03/31/05 5,300 30
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Inflation Index, 3.38%, 01/15/07, price less 104.82,
the Fund receives negative, pays positive. 03/31/05 18,100 2
Swap - price lock with Lehman Brothers Special Financing
U.S. Treasury Note, 3.13%, 01/31/07, price less 99.21,
the Fund receives positive, pays negative. 03/31/05 22,800 (21)
Swap - price lock with Credit Suisse First Boston International on
U.S. Treasury Note, 3.13%, 01/31/07, price less 99.08,
the Fund receives positive, pays negative. 03/31/05 37,400 -
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
63
<Page>
JPMORGAN SHORT TERM BOND FUND
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
Swap - price lock with Credit Suisse First Boston International on
U.S. Treasury Note 2.63%, 03/15/09, price less 95.21,
the Fund receives negative, pays positive. 03/31/05 $ 38,600 $ -
Swap - price lock with Citibank, N.A., on 30 Year FNMA, 4.50%,
TBA, price less 97.62, the Fund receives negative, pays positive. 04/13/05 38,000 540
Swap - price lock with Citibank, N.A., on 30 Year FNMA, 5.50%,
TBA, price less 101.63, the Fund receives positive, pays negative. 04/13/05 60,000 (488)
Swap - price lock with Morgan Stanley Capital Services on 30 Year
FNMA, 6.00%, 04/15/05, price less 102.89, the Fund receives
positive, pays negative. 04/11/05 150,000 (732)
Swap - price lock with Morgan Stanley Capital Services on 30 Year
FNMA, 5.50%, 04/15/05, price less 101.27, the Fund receives
negative, pays positive. 04/11/05 75,000 492
Swap - price lock with Morgan Stanley Capital Services on 30 Year
FNMA, 6.50%, 04/15/05, price less 104.38, the Fund receives
negative, pays positive. 04/11/05 75,000 293
Swap - spread lock with Citibank N.A., on 3 Year Swap Spread,
price less 43.05, the Fund receives positive, pays negative. 05/02/05 109,000 58
Credit Default Contract with Deutsche Bank AG, New York. Fund
receives quarterly payment of 1.5 (6 per annum) BPS times notional
amount of General Electric Capital Corp., 6.00%, 06/15/12. Upon a
defined credit event, Fund pays notional amount and takes receipt
of a defined deliverable obligation. 06/20/05 7,000 2
Credit Default Contract with Deutsche Bank AG, New York. Fund
receives quarterly payment of 3.5 (14 per annum) BPS times
notional amount of Wachovia Corp., 3.63%, 02/17/09. Upon a defined
credit event, Fund pays notional amount and takes receipt of a
defined deliverable obligation. 12/20/05 10,000 12
Credit Default Contract with Deutsche Bank AG, New York. Fund
receives quarterly payment of 4.75 (19 per annum) BPS times
notional amount of Prudential, 6.38%, 06/23/06. Upon a defined
credit event, Fund pays notional amount and takes receipt of a
defined deliverable obligation. 09/20/06 7,600 11
Credit Default Contract with Deutsche Bank AG, New York. Fund
receives quarterly payment of 4 (16 per annum) BPS times notional
amount of Coca-Cola Co., 5.75%, 03/15/11. Upon a defined credit
event, Fund pays notional amount and takes receipt of a defined
deliverable obligation. 12/31/06 5,300 5
Credit Default Contract with Deutsche Bank AG, New York. Fund
receives quarterly payment of 12 (48 per annum) BPS times notional
amount of Sun Trust Banks, Inc., 2.48%, 03/15/28. Upon a defined
credit event, Fund pays notional amount and takes receipt of a
defined deliverable obligation. 06/30/07 7,600 12
Credit Default Contract with Citibank, N.A. Fund receives
quarterly payment of 3.5 (14 per annum) BPS times notional amount
of General Electric Capital Corp., 3.50%, 05/01/08. Upon a defined
credit event, Fund pays notional amount and takes receipt of a
defined deliverable obligation. 12/20/07 15,000 20
Credit Default Contract with Deutsche Bank AG, New York. Fund
receives quarterly payment of 5 (20 per annum) BPS times notional
amount of Berkshire Hathaway, 9.75%, 01/15/18. Upon a defined
credit event, Fund pays notional amount and takes receipt of a
defined deliverable obligation. 03/20/10 12,100 2
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
64
<Page>
JPMORGAN SHORT TERM BOND FUND II
PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- 99.3%
U.S. TREASURY SECURITIES -- 0.7%
$ 6,977 U.S. Treasury Bond,
1.62%, 01/15/15, $ 6,933
(Cost $6,880)
U.S. GOVERNMENT AGENCY SECURITIES -- 12.8%
16,360 Federal Farm Credit Bank,
2.63%, 09/17/07 + 15,879
FEDERAL HOME LOAN MORTGAGE CORP.,
76,800 2.88%, 12/15/06 + 75,725
27,750 4.88%, 03/15/07 + 28,353
8,950 3.63%, 09/15/08 + 8,821
-----------------------------------------------------------------------------
Total U.S. Government
Agency Securities 128,778
(Cost $130,784)
-----------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES -- 1.1%
7,550 Republic of Chile (Chile),
3.11%, 01/28/08, FRN + 7,602
3,300 United Mexican States (Mexico),
3.33%, 01/13/09, FRN 3,345
-----------------------------------------------------------------------------
Total Foreign Government Securities 10,947
(Cost $10,843)
-----------------------------------------------------------------------------
STATE AND MUNICIPAL OBLIGATIONS -- 0.5%
TEXAS -- 0.5%
5,150 Texas Public Finance Authority,
Unemployment Compensation, Ser. B,
Rev., 2.63%, 06/15/06 5,074
(Cost $5,143)
CORPORATE NOTES & BONDS -- 41.8%
AGRICULTURAL PRODUCTION/SERVICES -- 0.5%
4,670 National Agricultural Cooperative
Federation (South Korea), 5.75%,
06/18/14, FRN 4,851
AUTOMOTIVE -- 3.2%
14,000 DaimlerChrysler N.A. Holding Corp.,
3.47%, 05/24/06, MTN, FRN + 14,071
Ford Motor Credit Co.,
6,400 4.95%, 01/15/08 + 6,335
1,100 5.80%, 01/12/09 + 1,099
General Motors Acceptance Corp.,
$ 1,500 6.75%, 01/15/06 + $ 1,531
9,250 6.13%, 08/28/07 + 9,420
-----------------------------------------------------------------------------
32,456
-----------------------------------------------------------------------------
BANKING -- 8.6%
2,900 Abbey National PLC (United Kingdom)
(Yankee), 7.35%, to 10/06;
thereafter FRN, 12/31/49, + 3,032
3,450 Bacob Bank SC (Belgium),
7.25%, to 09/07; thereafter FRN,
12/31/49, # + 3,679
600 BCI US Funding Trust, 8.01%, to
07/08; thereafter FRN, 12/31/49, # + 662
2,100 Capital One Bank, 6.88%, 02/01/06 + 2,160
1,900 Deutsche Bank Capital Funding Trust I,
7.87%, to 06/09; thereafter FRN,
12/31/49, # + 2,134
6,200 ForeningsSparbanken AB (Sweden),
7.50%, to 11/06; thereafter FRN,
12/31/49, # 6,532
5,750 Industrial Bank of Korea (South Korea),
4.00%, to 05/09; thereafter FRN,
05/19/14, # + 5,567
3,600 National Westminster Bank PLC
(United Kingdom) (Yankee), 7.75%, to
10/07; thereafter FRN, 12/31/49, + 3,876
2,750 Nordea Bank Finland PLC/New York,
7.50%, to 01/07; thereafter FRN,
12/31/49, # + 2,893
Popular North America, Inc.,
1,650 6.13%, 10/15/06, Ser. E, MTN + 1,700
3,250 4.25%, 04/01/08 + 3,241
12,440 Royal Bank of Scotland Group PLC
(United Kingdom), 7.82%, 12/31/49,
Ser. 3 + 12,799
9,050 Skandinaviska Enskilda Banken AB
(Sweden), 8.13%, to 09/06; thereafter
FRN, 09/06/49, # + 9,579
7,500 Spintab AB (Sweden), 7.50%, to
08/06; thereafter FRN, 12/31/49, # 7,868
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
65
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
BANKING -- CONTINUED
$ 4,950 Svenska Handelsbanken (Sweden),
7.13%, to 03/07; thereafter FRN,
12/31/49, # $ 5,228
4,350 Washington Mutual, Inc.,
7.50%, 08/15/06 4,564
3,250 Woori Bank (South Korea),
4.50%, 12/08/09, # 3,214
8,000 Zions Bancorporation,
2.70%, 05/01/06 7,891
-----------------------------------------------------------------------------
86,619
-----------------------------------------------------------------------------
BROADCASTING/CABLE -- 0.7%
7,195 Comcast Cable Communications, Inc.,
6.38%, 01/30/06 + 7,361
BUSINESS SERVICES -- 0.5%
5,050 Cendant Corp., 6.88%, 08/15/06 + 5,254
CONSUMER PRODUCTS -- 1.1%
3,650 Deluxe Corp., 3.50%, 10/01/07,
Ser. B + 3,572
7,225 Diageo Finance BV (The Netherlands),
3.00%, 12/15/06 + 7,102
-----------------------------------------------------------------------------
10,674
-----------------------------------------------------------------------------
FINANCIAL SERVICES -- 9.3%
7,900 BNP U.S. Funding LLC, 7.74%, to
12/07; thereafter FRN, 12/31/49, # + 8,582
7,700 Capital One Bank, 4.25%, 12/01/08 + 7,632
1,850 Capital One Financial Corp.,
4.74%, 05/17/07 + 1,869
Countrywide Home Loans, Inc.,
750 5.50%, 08/01/06, Ser. J, MTN + 767
10,750 2.88%, 02/15/07, Ser. L, MTN + 10,502
Counts Trusts,
6,050 3.57%, 08/15/07, Ser. 2002-10,
FRN, # + (i) 6,091
6,050 3.62%, 08/15/07, Ser. 2002-11,
FRN, # + (i) 6,096
3,600 Credit Suisse First Boston USA, Inc.,
4.63%, 01/15/08 + 3,643
$ 3,400 International Lease Finance Corp.,
4.35%, 09/15/08 + $ 3,385
2,700 Mantis Reef LTD (Australia),
4.69%, 11/14/08, # + 2,684
2,700 MBNA America Bank N.A., 4.63%,
08/03/09 + 2,708
5,400 Mizuho JGB Investment LLC, 9.87%,
to 06/08; thereafter FRN,
12/31/49, # + 6,228
10,100 Natexis AMBS Co., LLC, 8.44%, to
06/08; thereafter FRN, 12/31/49, # + 11,337
1,350 Pricoa Global Funding I, 3.90%,
12/15/08, # + 1,330
2,000 PrIncipal Life Global Funding I, 5.13%,
06/28/07, # + 2,037
7,100 Special Purpose Accounts Receivable
Cooperative Corp., 3.06%, 11/21/07,
Ser. 2004-4, FRN, # (i) 7,099
4,600 Twin Reefs Pass-Through Trust,
3.59%, to 12/09; thereafter FRN,
12/31/49, # 4,614
6,000 Two-Rock Pass Through (Bermuda),
3.71%, to 02/10; thereafter FRN,
12/31/49, # 6,038
-----------------------------------------------------------------------------
92,642
-----------------------------------------------------------------------------
FOOD/BEVERAGE PRODUCTS -- 0.3%
3,400 Kraft Foods, Inc., 5.25%, 06/01/07 + 3,483
INSURANCE -- 2.6%
ASIF Global Financing,
9,100 2.73%, 03/14/06, FRN, # + 9,100
5,300 2.50%, 01/30/07, # + 5,161
5,900 Metropolitan Life Global Funding I,
4.75%, 06/20/07, # + 5,984
6,150 Oil Insurance LTD (Bermuda),
2.74%, 04/07/06, FRN, # + (i) 6,150
-----------------------------------------------------------------------------
26,395
-----------------------------------------------------------------------------
MULTI-MEDIA -- 1.3%
2,750 Clear Channel Communications, Inc.,
4.63%, 01/15/08 + 2,757
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
66
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
MULTI-MEDIA -- CONTINUED
$ 4,048 TCI Communications, Inc., 6.88%,
02/15/06 $ 4,165
6,000 Time Warner, Inc., 6.15%, 05/01/07 + 6,252
-----------------------------------------------------------------------------
13,174
-----------------------------------------------------------------------------
OIL & GAS -- 0.7%
3,300 PEMEX Project Funding Master Trust,
3.79%, 06/15/10, FRN, # + 3,416
4,155 Texas Municipal Gas Corp., 2.60%,
07/01/07, # 4,114
-----------------------------------------------------------------------------
7,530
-----------------------------------------------------------------------------
PHARMACEUTICALS -- 0.2%
1,550 Hospira, Inc., 4.95%, 06/15/09 + 1,564
PIPELINES -- 0.6%
Duke Capital LLC,
3,650 4.30%, 05/18/06 + 3,670
2,400 4.33%, 11/16/06 + 2,412
-----------------------------------------------------------------------------
6,082
-----------------------------------------------------------------------------
REAL ESTATE -- 1.5%
14,100 Socgen Real Estate Co., LLC, 7.64%, to
09/07; thereafter FRN, 12/31/49, # + 15,201
REAL ESTATE INVESTMENT TRUST -- 0.3%
2,900 iStar Financial, Inc., 4.88%, 01/15/09,
Ser. B + 2,908
RETAILING -- 0.1%
1,350 The May Department Stores Co.,
3.95%, 07/15/07 + 1,337
TELECOMMUNICATIONS -- 4.9%
4,750 Alltel Corp., 4.66%, 05/17/07 + 4,799
7,950 BellSouth Corp., 5.00%, 10/15/06 + 8,087
5,150 France Telecom (France), 7.95%,
03/01/06 + 5,327
5,850 Motorola, Inc., 4.61%, 11/16/07 + 5,890
1,550 SBC Communications, Inc., 4.21%,
06/05/05, # + 1,555
Sprint Capital Corp.,
$ 4,000 4.78%, 08/17/06, SUB $ 4,042
5,500 6.00%, 01/15/07 5,684
Telecom Italia Capital SA (Luxembourg),
2,500 4.00%, 11/15/08 2,457
2,300 4.00%, 01/15/10, # 2,230
8,945 Verizon Wireless Capital LLC, 5.38%,
12/15/06 9,165
-----------------------------------------------------------------------------
49,236
-----------------------------------------------------------------------------
TRANSPORTATION -- 0.7%
7,450 CSX Corp., 2.75%, 02/15/06 + 7,364
UTILITIES -- 4.7%
8,600 Alabama Power Co., 2.80%, 12/01/06,
Ser. Y + 8,440
2,300 CC Funding Trust I, 6.90%, 02/16/07 + 2,418
2,250 Dominion Resources, Inc., 3.66%,
11/15/06, Ser. A, SUB + 2,238
5,300 National Rural Utilities Cooperative
Finance Corp., 6.00%, 05/15/06 + 5,440
4,800 Niagara Mohawk Power Corp., 7.75%,
05/15/06 + 5,024
900 Pacific Gas & Electric Co., 3.60%,
03/01/09 + 874
2,600 Pacificorp, 5.65%, 11/01/06 + 2,670
4,700 Pepco Holdings, Inc., 5.50%,
08/15/07 + 4,835
6,000 Progress Energy, Inc., 6.75%,
03/01/06 + 6,169
2,100 Sempra Energy, 4.62%, 05/17/07 + 2,118
6,950 Virginia Electric & Power Co., 5.38%,
02/01/07, Ser. A 7,123
-----------------------------------------------------------------------------
47,349
-----------------------------------------------------------------------------
Total Corporate Notes & Bonds 421,480
(Cost $426,537)
-----------------------------------------------------------------------------
RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.5%
COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.5%
3,901 ABN Amro Mortgage Corp, 4.00%,
01/25/33, Ser. 2002-10, Class 1A1 + 3,899
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
67
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COLLATERALIZED MORTGAGE
OBLIGATIONS -- CONTINUED
$ 5,489 Bank of America Alternative Loan
Trust, 5.50%, 09/25/33, Ser. 2003-7,
Class 1A1 + $ 5,565
5,323 Countrywide Home Loan Mortgage
Pass Through Trust, 6.50%, 01/25/32,
Ser. 2001-28, Class 2A4 + 5,311
Federal Home Loan Mortgage Corp.,
9,300 5.00%, 08/15/18, Ser. 2929,
Class PA + 9,427
6,581 5.00%, 10/15/23, Ser. 2781,
Class PI, IO + 615
10,200 5.00%, 04/15/28, Ser. 2939,
Class HP + 10,347
54,182 4.56%, 12/15/30, Ser. 2850, Class SM,
IO, FRN + 3,488
34,763 4.46%, 02/15/34, Ser. 2813, Class SB,
IO, FRN + 2,939
11,744 5.00%, 12/01/34, Ser. 227,
Class IO, IO + 3,035
Federal National Mortgage Association,
13,519 4.45%, 10/25/31, Ser. 2004-61,
Class TS, IO, FRN + 904
32,348 5.00%, 01/01/34, Ser. 347,
Class 2, IO + 7,875
46,120 5.00%, 07/01/34, Ser. 353,
Class 2, IO + 11,703
Government National Mortgage
Association,
2,989 5.50%, 04/20/25, Ser. 2004-46,
Class IH, IO + 211
4,555 5.50%, 01/20/27, Ser. 2004-39,
Class IM, IO + 391
7,143 5.50%, 10/20/27, Ser. 2004-44,
Class PK, IO + 762
23 3.09%, 04/16/32, Ser. 2002-24,
Class FA, FRN + 23
3,422 MASTR Adjustable Rate Mortgages
Trust, 2.41%, 12/25/33, Ser. 2003-6,
Class 1A1, FRN + 3,406
$ 791 Residential Asset Securitization Trust,
6.00%, 01/25/33, Ser. 2002-A15,
Class A1 + $ 789
15,156 Structured Adjustable Rate Mortgage
Loan Trust, 5.02%, 06/25/34,
Ser. 2004-6, Class 5A1, FRN 15,241
19,044 Washington Mutual, Inc., 5.50%,
07/25/34, Ser. 2004-S3, Class 2A1 19,200
Wells Fargo Mortgage Backed
Securities Trust,
7,666 4.64%, 12/25/33, Ser. 2003-N,
Class 1A4, FRN 7,743
6,942 3.54%, 09/25/34, Ser. 2004-S,
Class A5, FRN 6,707
16,988 3.54%, 09/25/34, Ser. 2004-S,
Class A3, FRN 16,869
-----------------------------------------------------------------------------
136,450
-----------------------------------------------------------------------------
MORTGAGE BACKED PASS-THROUGH
SECURITIES -- 0.0% ^
Government National
Mortgage Association,
34 8.50%, 08/15/30, Pool 531310 + 37
7 8.50%, 09/15/30, Pool 526096 + 8
-----------------------------------------------------------------------------
45
-----------------------------------------------------------------------------
Total Residential Mortgage
Backed Securities 136,495
(Cost $136,191)
-----------------------------------------------------------------------------
COMMERCIAL MORTGAGE BACKED SECURITIES -- 10.9%
1,950 Banc of America Commercial
Mortgage, Inc., 4.18%, 11/10/41,
Ser. 2004-5, Class A2 + 1,948
18,736 CalSTRS Trust, 3.99%, 11/20/12,
Ser. 2002-C6, Class A2, # + 18,703
3,374 Calwest Industrial Trust, 2.86%,
06/15/15, Ser. 2003-CALA, Class A,
FRN, # + 3,381
3,990 CR, 6.70%, 08/10/14, Ser. 2000-ZC2,
Class A4A, # + (i) 4,242
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
68
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
COMMERCIAL MORTGAGE BACKED
SECURITIES -- CONTINUED
$ 6,200 Credit Suisse First Boston Mortgage
Securities Corp., 4.30%, 07/15/36,
Ser. 2004-C3, Class A3 + $ 6,149
6,308 First Union Commercial Mortgage
Securities, Inc., 7.38%, 04/18/29,
Ser. 1997-C1, Class A3 + 6,643
5,900 Greenwich Capital Commercial
Funding Corp., 4.31%, 08/10/42,
Ser. 2005-GG3, Class A2, FRN + 5,851
9,300 GS Mortgage Securities Corp. II,
4.60%, 08/10/38, Ser. 2004-GG2,
Class A3 + 9,363
LB-UBS Commercial Mortgage Trust,
5,100 3.32%, 03/15/27, Ser. 2003-C1,
Class A2 + 4,969
9,300 3.48%, 07/15/27, Ser. 2003-C5,
Class A2 + 9,058
5,700 3.25%, 03/15/29, Ser. 2004-C2,
Class A2 + 5,477
8,700 3.99%, 10/15/29, Ser. 2004-C7,
Class A2 + 8,535
12,600 Morgan Stanley Capital I, 6.48%,
11/15/30, Ser. 1998-HF2, Class A2 + 13,381
11,800 Wachovia Bank Commercial Mortgage
Trust, 4.38%, 10/15/41, Ser. 2005-C16,
Class A2 11,748
-----------------------------------------------------------------------------
Total Commercial Mortgage
Backed Securities 109,448
(Cost $111,970)
-----------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 15.3%
5,268 American Express Credit Account
Master Trust, 3.09%, 02/15/12,
Ser. 2004-C, Class C, FRN, # + 5,284
AmeriCredit Automobile Receivables Trust,
12,450 2.84%, 08/06/10, Ser. 2003-DM,
Class A4 + 12,244
3,650 2.67%, 03/07/11, Ser. 2004-BM,
Class A4 + 3,533
$ 3,000 Capital Auto Receivables Asset Trust,
1.96%, 01/15/09, Ser. 2003-2,
Class A4A + $ 2,907
1,800 Capital One Auto Finance Trust,
3.18%, 09/15/10, Ser. 2003-B,
Class A4 + 1,768
6,500 Capital One Master Trust, 3.39%,
08/15/08, Ser. 2000-4, Class C,
FRN, # + 6,521
3,600 Capital One Multi-Asset Execution
Trust, 3.70%, 05/17/10, Ser. 2004-B5,
Class B5 + 3,567
6,200 Carmax Auto Owner Trust, 3.07%,
10/15/10, Ser. 2003-2, Class A4 + 6,095
2,661 CARSS Finance LP (Cayman Islands),
2.87%, 01/15/11, Ser. 2004-A,
Class B1, FRN, # + 2,663
Citibank Credit Card Issuance Trust,
8,500 3.51%, 03/20/08, Ser. 2003-C2,
Class C2, FRN + 8,562
7,250 6.65%, 05/15/08, Ser. 2001-C3,
Class C3 + 7,490
7,000 2.88%, 06/25/09, Ser. 2002-B1,
Class B1, FRN + 7,029
10,300 Countrywide Asset-Backed
Certificates, 3.61%, 04/25/30,
Ser. 2003-5, Class AF3 + 10,264
5,250 Daimler Chrysler Auto Trust, 2.88%,
10/08/09, Ser. 2003-A, Class A4 + 5,187
11,700 Gracechurch Card Funding PLC
(United Kingdom), 2.70%, 08/15/08,
Ser. 5, Class A2 + 11,523
7,300 Onyx Acceptance Grantor Trust,
3.20%, 03/15/10, Ser. 2003-D,
Class A4 + 7,222
4,000 Residential Asset Securities Corp.,
3.37%, 12/25/28, Ser. 2003-KS7,
Class AI3 + 3,982
6,900 SLM Student Loan Trust, 2.99%,
12/15/22, Ser. 2003-11, Class A5, # + 6,787
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
69
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
(USD) ISSUER VALUE
- ----------------------------------------------------------------------------------------------
LONG-TERM INVESTMENTS -- CONTINUED
ASSET BACKED SECURITIES -- CONTINUED
$ 7,900 Triad Auto Receivables Owner Trust,
3.20%, 12/13/10, Ser. 2003-B,
Class A4 $ 7,760
Volkswagen Auto Loan Enhanced Trust,
7,300 1.93%, 01/20/10, Ser. 2003-1,
Class A4 7,082
4,300 2.94%, 03/22/10, Ser. 2003-2,
Class A4 4,217
15,600 WFS Financial Owner Trust, 3.25%,
05/20/11, Ser. 2003-3, Class A4 15,408
7,200 World Omni Auto Receivables Trust,
2.87%, 11/15/10, Ser. 2003-B,
Class A4 7,022
-----------------------------------------------------------------------------
Total Asset Backed Securities 154,117
(Cost $156,139)
-----------------------------------------------------------------------------
PARTICIPATORY NOTE -- 0.5%
DIVERSIFIED -- 0.5%
5,350 Tyco International Group SA
Participation Certificate Trust,
4.44%, 06/15/07, # 5,371
(Cost $5,350)
CERTIFICATES OF DEPOSIT -- 2.2%
17,650 Deutsche Bank AG/New York (Yankee),
3.02%, 05/15/07, Floating Rate + 17,641
4,200 Sovereign Bank, 4.00%, 02/01/08 4,185
-----------------------------------------------------------------------------
Total Certificates of Deposit 21,826
(Cost $21,847)
-----------------------------------------------------------------------------
Total Long-Term Investments 1,000,469
(Cost $1,011,684)
-----------------------------------------------------------------------------
SHORT-TERM INVESTMENTS -- 1.5%
U.S. TREASURY SECURITY -- 0.2%
$ 2,200 U.S. Treasury Bill, 2.34%,
04/14/05, @ + $ 2,194
(Cost $2,194)
COMMERCIAL PAPER -- 0.5%
CONSUMER PRODUCTS -- 0.5%
5,200 Altria Group, Inc., 3.00%, 05/02/05 + 5,173
(Cost $5,173)
<Caption>
SHARES
- ----------------------------------------------------------------------------------------------
MONEY MARKET FUND -- 0.8%
8,009 JPMorgan Prime Money Market
Fund @ + 8,009
(Cost $8,009)
-----------------------------------------------------------------------------
Total Short-Term Investments 15,376
(Cost $15,376)
-----------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.8% $ 1,015,845
(COST $1,027,060)
LIABILITIES IN EXCESS OF OTHER
ASSETS -- (0.8)% (7,777)
-----------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 1,008,068
-----------------------------------------------------------------------------
</Table>
Percentages indicated are based on net assets.
SEE NOTES TO FINANCIAL STATEMENTS.
70
<Page>
FUTURES CONTRACTS
(Amounts in thousands, except number of contracts)
<Table>
<Caption>
NOTIONAL UNREALIZED
NUMBER OF VALUE AT APPRECIATION
CONTRACTS DESCRIPTION EXPIRATION DATE 2/28/05 (USD) (DEPRECIATION) (USD)
- ----------------------------------------------------------------------------------------------------------------------
LONG FUTURES OUTSTANDING
322 30 day Federal Funds April, 2005 $ 130,454 $ (23)
320 2 Year Treasury Notes June, 2005 66,635 (17)
957 10 Year Treasury Notes June, 2005 105,150 (703)
617 Eurodollar December, 2005 148,041 (1,356)
SHORT FUTURES OUTSTANDING
(427) 5 Year Treasury Notes June, 2005 (45,936) 272
(88) 10 Year Treasury Notes June, 2005 (9,669) 59
(919) Eurodollar December, 2006 (219,652) 1,298
</Table>
SWAP CONTRACTS
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
Swap - price lock with Citibank N.A., on U.S. Treasury Note,
2.50%, 10/31/06, price less 98.80, the Fund pays negative,
receives positive. 03/18/05 $ 212,800 $ (921)
Swap - price lock with Citibank N.A., on U.S. Treasury Note,
3.13%, 10/15/08, price less 98.44, the Fund pays positive,
receives negative. 03/22/05 85,750 954
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 1.63%, 01/15/15, price less 99.74, the Fund
pays negative, receives positive. 03/31/05 6,700 (35)
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 4.00%, 02/15/15, price less 97.56, the Fund
pays positive, receives negative. 03/31/05 7,600 42
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 3.38%, 01/15/07, price less 104.82, the Fund
pays positive, receives negative. 03/31/05 25,900 3
Swap - price lock with Lehman Brothers Special Financing on
U.S. Treasury Note, 3.13%, 01/31/07, price less 99.21, the Fund
pays negative, receives positive. 03/31/05 32,700 (30)
Swap - price lock with Citibank N.A., on 30 Year FNMA, 4.50%,
TBA, price less 97.62, the Fund pays positive, receives negative. 04/13/05 32,000 455
Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.50%,
TBA, price less 101.62, the Fund pays negative, receives positive. 04/13/05 50,000 (406)
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
71
<Page>
<Table>
<Caption>
UNDERLYING UNREALIZED
NOTIONAL APPRECIATION
DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION)
- ------------------------------------------------------------------------------------------------------------------
Swap - price lock with Morgan Stanley Capital Services on
30 year FNMA, 5.5%, 04/15/05, price less 101.27, the Fund pays
positive, receives negative. 04/11/05 $ 60,000 $ 394
Swap - price lock with Morgan Stanley Capital Services on
30 year FNMA, 6.5%, 04/15/05, price less 104.37, the Fund pays
positive, receives negative. 04/11/05 60,000 234
Swap - price lock with Morgan Stanley Capital Services on
30 year FNMA, 6.0%, 04/15/05, price less 102.89, the Fund pays
negative, receives positive. 04/11/05 120,000 (586)
Credit default contract with Deutsche Bank AG, New York.
Fund receives quarterly payment of 17 (68 per annum) BPS times
notional amount of General Electric Capital Corp., 6.00%, 06/15/12.
Upon a defined credit event, Fund pays notional amount and
takes receipt of a defined deliverable obligation. 06/20/05 10,000 3
Credit default contract with Deutsche Bank AG, New York.
Fund receives quarterly payment of 12 (48 per annum) BPS times
notional amount of Sun Trust Banks, Inc., 2.48%, 03/15/28.
Upon a defined credit event, Fund pays notional amount and takes
receipt of a defined deliverable obligation. 06/30/07 12,400 19
Credit default contract with Citibank, N.A., Fund receives
quarterly payment of 3.5 (14 per annum) BPS times notional amount
of General Electric Capital Corp., 3.50%, 05/01/08. Upon a defined
credit event, Fund pays notional amount and takes receipt of
a defined deliverable obligation. 12/20/07 23,000 31
Credit default contract with Deutsche Bank AG, New York.
Fund receives quarterly payment of 5 (20 per annum) BPS times
notional amount of Berkshire Hathaway, 9.75%, 01/15/18. Upon a
defined credit event, Fund pays notional amount and takes receipt
of a defined deliverable obligation. 03/20/10 17,500 3
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
72
<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 for futures
contracts, TBA, when issued, delayed delivery securities or
swaps.
@ --Security is fully or partially segregated with brokers as initial
margin for futures contracts.
(a) --Affiliated. Money market fund registered under the Investment
Company Act of 1940, as amended and advised by JPMorgan
Investment Management, Inc.
AR --Adjustable rate. The dividend rate shown is the rate in effect at
February 28, 2005.
(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 $ 20,205 1.90%
JPMorgan Global Strategic Income Fund $ 2,488 4.81%
</Table>
(i) --Security is considered illiquid and may be difficult to sell.
ADR --American Depositary Receipt.
BPS --Basis Points.
CAD --Canadian Dollar.
COP --Colombian Peso
DN --Discount Note. The rate shown is the effective yield at the date
of purchase.
EUR --Euro.
FHLMC --Federal Home Loan Mortgage Corp.
FNMA --Federal National Mortgage Association.
FRDO --Floating Rate Demand Obligation. The maturity date shown is the
next interest reset date. The interest rate shown is the rate in
effect at February 28, 2005.
FRN --Floating Rate Note. The rate shown is the rate in effect as of
February 28, 2005.
GBP --Great Britain Pound.
GO --General Obligation Bond.
IO --Interest Only.
LIBOR --London Interbank Offered Rate.
MTN --Medium Term Note.
MXN --Mexican Peso
Regulation S --Securities registered under the Securities Act of 1933.
Rev. --Revenue Bond.
Ser. --Series.
SUB --Step-up Bond. The rate shown is the rate in effect as of February
28, 2005.
TBA --To Be Announced.
USD --United States Dollar.
UYU --Uruguay Peso
SEE NOTES TO FINANCIAL STATEMENTS.
73
<Page>
JPMORGAN FUNDS
STATEMENT OF ASSETS
AND LIABILITIES AS OF FEBRUARY 28, 2005
(Amounts in thousands, except per share amounts)
<Table>
<Caption>
ENHANCED EMERGING
BOND INCOME MARKETS DEBT
FUND FUND FUND
ASSETS
Investments in non-affiliates, at value $ 1,033,082 $ 204,447 $ 30,391
Investments in affiliates at value 31,127 3,814 --
- ---------------------------------------------------------------------------------------------------------------
Total Investment securities, at value 1,064,209 208,261 30,391
- ---------------------------------------------------------------------------------------------------------------
Cash 1,240 1,326 1,288
Foreign currency, at value -- -- 53
Receivables:
Investment securities sold 241,537 3,157 13,572
Fund shares sold 1,132 -- 67
Interest and dividends 7,057 505 544
Variation Margin 581 -- --
Unrealized appreciation on open
swap contracts 8,761 -- --
Expense reimbursements 2 -- --
- ---------------------------------------------------------------------------------------------------------------
Total Assets 1,324,519 213,249 45,915
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Foreign currency due to custodian, at value 394 -- --
Dividends 569 99 36
Investment securities purchased 474,712 5,053 6,592
Fund shares redeemed 1,204 -- 1,863
Variation margin 955 4 3
Unrealized loss on forward foreign
currency exchange contracts 215 -- --
Outstanding options written,
at fair value 2,382 -- --
Unrealized depreciation on open
swap contracts 7,316 -- --
Accrued liabilities:
Investment advisory fees 194 26 17
Administration fees 36 -- 2
Shareholder servicing fees 56 -- --
Distribution fees 2 -- --
Custodian fees 48 13 17
Trustees' fees - deferred
compensation plan 4 2 --^
Other 147 76 69
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 488,234 5,273 8,599
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 836,285 $ 207,976 $ 37,316
- ---------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
74
<Page>
<Table>
<Caption>
ENHANCED EMERGING
BOND INCOME MARKETS DEBT
FUND FUND FUND
NET ASSETS
Paid in capital $ 821,852 $ 214,498 $ 30,574
Accumulated undistributed
(overdistributed) net investment income (3,494) (53) --
Accumulated net realized gain (loss)
on investments, futures, foreign
exchange transactions, written options
and swaps 9,347 (6,348) 3,898
Net unrealized appreciation
(depreciation) of investments, futures,
foreign exchange translations, written
options and swaps 8,580 (121) 2,844
- ---------------------------------------------------------------------------------------------------------------
Total Net Assets $ 836,285 $ 207,976 $ 37,316
- ---------------------------------------------------------------------------------------------------------------
Class A $ 3,414 $ -- $ --
Class B $ 1,742 $ -- $ --
Class C $ 216 $ -- $ --
Institutional $ 284,328 $ 207,976 $ --
Select $ 188,358 $ -- $ 37,316
Ultra $ 358,227 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Total $ 836,285 $ 207,976 $ 37,316
- ---------------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding ($0.001 par
value; unlimited number of shares authorized):
Class A Shares 348 -- --
Class B Shares 179 -- --
Class C Shares 22 -- --
Institutional 29,296 21,158 --
Select 19,394 -- 4,169
Ultra 36,893 -- --
Net Asset Value:
Class A Shares
(and redemption price) $ 9.80 $ -- $ --
Class B Shares* $ 9.74 $ -- $ --
Class C Shares* $ 9.80 $ -- $ --
Institutional (and redemption price) $ 9.71 $ 9.83 $ --
Select (and redemption price) $ 9.71 $ -- $ 8.95
Ultra (and redemption price) $ 9.71 $ -- $ --
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 10.26 $ -- $ --
Cost of investments $ 1,056,248 $ 208,372 $ 27,506
Cost of foreign currency $ -- $ -- $ 90
Cost of foreign currency due to
custodian $ 396 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Premiums received from options written $ 2,275 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
75
<Page>
<Table>
<Caption>
GLOBAL
STRATEGIC SHORT TERM SHORT TERM
INCOME BOND BOND
FUND FUND FUND II
ASSETS
Investment in non-affiliates, at value $ 46,840 $ 671,029 $ 1,007,836
Investment in affiliates, at value 4,911 59,374 8,009
- ---------------------------------------------------------------------------------------------------------------
Total investment securities, at value 51,751 730,403 1,015,845
- ---------------------------------------------------------------------------------------------------------------
Cash -- 1,772 --
Foreign currency, at value 68 -- --
Receivables:
Investment securities sold 6,910 315 --
Fund shares sold 3 93 352
Interest and dividends 582 6,378 8,025
Variation margin 5 912 444
Unrealized appreciation on open
swap contracts -- 1,479 2,138
Unrealized gain on forward foreign
currency exchange contracts 11 -- --
- ---------------------------------------------------------------------------------------------------------------
Total Assets 59,330 741,352 1,026,804
- ---------------------------------------------------------------------------------------------------------------
LIABILITIES
Payables:
Due to custodian 1,081 -- 2,337
Foreign currency due to custodian,
at value -- 516 --
Dividends 34 736 2,191
Investment securities purchased 11,768 18,971 5,173
Fund shares redeemed 49 1,474 5,652
Variation margin -- 480 655
Unrealized loss on forward foreign
currency exchange contracts 50 30 --
Unrealized depreciation on open
swap contracts -- 1,945 1,978
Accrued liabilities:
Investment advisory fees 1 137 195
Administration fees -- 2 83
Shareholder servicing fees 2 19 148
Distribution fees 9 1 144
Custodian fees 33 27 45
Trustees' fees - deferred
compensation plan --^ 4 8
Other 145 133 127
- ---------------------------------------------------------------------------------------------------------------
Total Liabilities 13,172 24,475 18,736
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS $ 46,158 $ 716,877 $ 1,008,068
- ---------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
76
<Page>
<Table>
<Caption>
GLOBAL
STRATEGIC SHORT TERM SHORT TERM
INCOME BOND BOND
FUND FUND FUND II
NET ASSETS
Paid in capital $ 71,294 $ 727,693 $ 1,026,502
Accumulated undistributed
(overdistributed) net investment income (141) 914 (2,213)
Accumulated net realized gain (loss) on
investments, futures, foreign exchange
transactions, written options and swaps (25,837) (5,082) (4,696)
Net unrealized appreciation
(depreciation) of investments, futures,
foreign exchange translations and swaps 842 (6,648) (11,525)
- ---------------------------------------------------------------------------------------------------------------
Total Net Assets $ 46,158 $ 716,877 $ 1,008,068
- ---------------------------------------------------------------------------------------------------------------
Class A $ 3,831 $ 3,488 $ 48,729
Class B $ 7,319 $ -- $ --
Class C $ 2,907 $ -- $ --
Class M $ 6,492 $ -- $ 496,833
Institutional $ 23,160 $ 613,029 $ --
Select $ 2,449 $ 100,360 $ 462,506
- ---------------------------------------------------------------------------------------------------------------
Total $ 46,158 $ 716,877 $ 1,008,068
- ---------------------------------------------------------------------------------------------------------------
Shares of beneficial interest outstanding ($0.001 par
value; unlimited number of shares authorized):
Class A Shares 414 359 4,838
Class B Shares 792 -- --
Class C Shares 314 -- --
Class M Shares 703 -- 49,325
Institutional 2,506 63,100 --
Select 265 10,331 45,844
Net Asset Value:
Class A Shares
(and redemption price) $ 9.24 $ 9.71 $ 10.07
Class B Shares* $ 9.24 $ -- $ --
Class C Shares* $ 9.24 $ -- $ --
Class M Shares
(and redemption price) $ 9.24 $ -- $ 10.07
Institutional (and redemption price) $ 9.24 $ 9.71 $ --
Select (and redemption price) $ 9.24 $ 9.71 $ 10.09
Class A Maximum Public Offering
Price Per Share (net asset value per
share/95.5%) $ 9.68 $ -- $ --
Class A Maximum Public Offering
Price Per Share (net asset value per
share/97.0%) $ -- $ 10.01 $ 10.38
Class M Maximum Public Offering
Price Per Share (net asset value per
share/97.0%) $ 9.53 $ -- $ --
Class M Maximum Public Offering
Price Per Share (net asset value per
share/98.5%) $ -- $ -- $ 10.22
Cost of investments $ 50,869 $ 736,335 $ 1,027,060
- ---------------------------------------------------------------------------------------------------------------
Cost of foreign currency $ 67 $ -- $ --
- ---------------------------------------------------------------------------------------------------------------
Cost of foreign currency due to custodian $ -- $ 520 $ --
- ---------------------------------------------------------------------------------------------------------------
</Table>
* Redemption price may be reduced by contingent deferred sales charge.
SEE NOTES TO FINANCIAL STATEMENTS.
77
<Page>
STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 28, 2005
(Amounts in thousands)
<Table>
<Caption>
ENHANCED EMERGING
BOND INCOME MARKETS DEBT
FUND FUND FUND
INVESTMENT INCOME
Interest $ 16,744 $ 3,312 $ 1,465
Dividend -- 24 --
Dividend income from affiliated
investments* 499 61 10
Foreign taxes withheld (3) (2) --
- ---------------------------------------------------------------------------------------------------------------
Total investment income 17,240 3,395 1,475
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 1,255 349 129
Administration fees 620 207 27
Shareholder servicing fees 470 139 46
Distribution fees 12 -- --
Custodian fees 60 19 31
Interest expense -- --^ 1
Printing and postage 22 6 2
Professional fees 66 43 50
Registration expenses 43 10 12
Transfer agent fees 62 9 12
Trustees' fees 6 2 --^
Other 28 10 5
- ---------------------------------------------------------------------------------------------------------------
Total expenses 2,644 794 315
- ---------------------------------------------------------------------------------------------------------------
Less amounts waived 538 512 83
Less earnings credits 13 3 --^
Less expense reimbursements 22 -- --
- ---------------------------------------------------------------------------------------------------------------
Net expenses 2,071 279 232
- ---------------------------------------------------------------------------------------------------------------
Net investment income 15,169 3,116 1,243
- ---------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
78
<Page>
<Table>
<Caption>
ENHANCED EMERGING
BOND INCOME MARKETS DEBT
FUND FUND FUND
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on transactions from:
Investments 10,016 66 4,724
Futures (114) 31 (29)
Foreign exchange contracts 121 -- (3)
Written options (444) -- --
Swaps 3,793 -- --
Change in net unrealized appreciation (depreciation) of:
Investments (8,297) (263) (1,857)
Futures (649) 2 (10)
Foreign currency translations (210) -- 1
Written options 2,063 -- --
Swaps 270 -- --
Net realized and unrealized gain (loss) on investments,
futures, foreign exchange transactions, written options
and swaps 6,549 (164) 2,826
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 21,718 $ 2,952 $ 4,069
- ---------------------------------------------------------------------------------------------------------------
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 47 $ 6 $ 1
- ---------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
79
<Page>
<Table>
<Caption>
GLOBAL
STRATEGIC SHORT TERM SHORT TERM
INCOME BOND BOND
FUND FUND FUND II
INVESTMENT INCOME
Interest $ 757 $ 12,457 $ 18,238
Dividend -- 256 --
Dividend income from affiliated
investments* 59 357 317
Foreign taxes withheld -- (23) (8)
- ---------------------------------------------------------------------------------------------------------------
Total investment income 816 13,047 18,547
- ---------------------------------------------------------------------------------------------------------------
EXPENSES
Investment advisory fees 73 897 1,355
Administration fees 24 532 804
Shareholder servicing fees 19 431 1,355
Distribution fees 3 4 1,041
Custodian fees 42 44 63
Interest expense --^ -- --^
Printing and postage 1 16 30
Professional fees 40 52 66
Registration expenses 14 19 18
Transfer agent fees 20 40 52
Trustees' fees --^ 5 8
Other 4 26 35
- ---------------------------------------------------------------------------------------------------------------
Total expenses 240 2,066 4,827
- ---------------------------------------------------------------------------------------------------------------
Less amounts waived 111 840 651
Less earnings credits 1 5 6
Less expense reimbursements 13 8 --
- ---------------------------------------------------------------------------------------------------------------
Net expenses 115 1,213 4,170
- ---------------------------------------------------------------------------------------------------------------
Net investment income 701 11,834 14,377
- ---------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
80
<Page>
<Table>
<Caption>
GLOBAL
STRATEGIC SHORT TERM SHORT TERM
INCOME BOND BOND
FUND FUND FUND II
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on transactions from:
Investments 1,299 (766) (1,986)
Futures 51 (1,154) 135
Foreign exchange contracts (134) (141) --
Written options -- 18 10
Swaps -- (1,322) (1,245)
Change in net unrealized appreciation (depreciation) of:
Investments (549) (5,668) (11,442)
Futures (31) 195 (404)
Foreign currency translations (52) (23) --
Swaps -- 45 556
Net realized and unrealized gain (loss) on investments,
futures, foreign exchange transactions, written options
and swaps 584 (8,816) (14,376)
- ---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ 1,285 $ 3,018 $ 1
- ---------------------------------------------------------------------------------------------------------------
* Includes reimbursements of
investment advisory, administration
and shareholder servicing fees : $ 6 $ 32 $ 27
- ---------------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
SEE NOTES TO FINANCIAL STATEMENTS.
81
<Page>
STATEMENT OF CHANGES
IN NET ASSETS FOR THE PERIODS INDICATED
(Amounts in thousands)
<Table>
<Caption>
BOND FUND ENHANCED INCOME FUND
------------------------------ ------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
2/28/05 8/31/04 2/28/05 8/31/04
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 15,169 $ 35,765 $ 3,116 $ 5,561
Net realized gain (loss) on investments,
futures, foreign exchange transactions,
written options and swaps 13,372 23,049 97 (1,528)
Change in net unrealized appreciation
(depreciation) of investments, futures,
foreign currency translations, written
options and swaps (6,823) 14,183 (261) 330
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 21,718 72,997 2,952 4,363
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (18,302) (35,799) (3,064) (5,541)
Net realized gain on
investment transactions (25,251) (34,209) -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (43,553) (70,008) (3,064) (5,541)
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) (34,736) (344,128) (85,664) (59,478)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets (56,571) (341,139) (85,776) (60,656)
- --------------------------------------------------------------------------------------------------------------------------
Beginning of period 892,856 1,233,995 293,752 354,408
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 836,285 $ 892,856 $ 207,976 $ 293,752
- --------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ (3,494) $ (361) $ (53) $ (105)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
82
<Page>
<Table>
<Caption>
EMERGING MARKETS DEBT GLOBAL STRATEGIC INCOME
FUND FUND
------------------------------ ------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
2/28/05 8/31/04 2/28/05 8/31/04
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 1,243 $ 3,228 $ 701 $ 3,878
Net realized gain (loss) on investments,
futures, foreign exchange transactions,
written options and swaps 4,692 6,497 1,216 6,443
Change in net unrealized appreciation
(depreciation) of investments, futures,
foreign currency translations, written
options and swaps (1,866) (2,578) (632) (4,212)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 4,069 7,147 1,285 6,109
- --------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) -- -- --^ --
- --------------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand.
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (1,372) (3,506) (694) (3,871)
Net realized gain on
investment transactions (4,588) -- -- --
- --------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (5,960) (3,506) (694) (3,871)
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) 3,062 (27,807) 3,023 (70,427)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets 1,171 (24,166) 3,614 (68,189)
- --------------------------------------------------------------------------------------------------------------------------
Beginning of period 36,145 60,311 42,544 110,733
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 37,316 $ 36,145 $ 46,158 $ 42,544
- --------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ -- $ 129 $ (141) $ (148)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
83
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND SHORT TERM BOND FUND II
------------------------------ ------------------------------
SIX MONTHS SIX MONTHS
ENDED YEAR ENDED ENDED YEAR ENDED
2/28/05 8/31/04 2/28/05 8/31/04
INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS:
Net investment income $ 11,834 $ 20,769 $ 14,377 $ 27,977
Net realized gain (loss) on investments,
futures, foreign exchange transactions,
written options and swaps (3,365) 3,116 (3,086) 1,244
Change in net unrealized appreciation/
depreciation of investments, futures,
written options and swaps (5,451) (5,507) (11,290) (5,601)
- --------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in net assets
from operations 3,018 18,378 1 23,620
- --------------------------------------------------------------------------------------------------------------------------
Net equalization credits/(debits) -- -- (197) (357)
- --------------------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO
SHAREHOLDERS FROM:
Net investment income (12,954) (20,381) (14,142) (27,690)
Return of Capital -- -- -- (149)
- --------------------------------------------------------------------------------------------------------------------------
Total distributions to shareholders (12,954) (20,381) (14,142) (27,839)
- --------------------------------------------------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS:
Increase (decrease) (12,409) (195,985) (168,538) (358,251)
- --------------------------------------------------------------------------------------------------------------------------
NET ASSETS:
Total increase (decrease) in net assets (22,345) (197,988) (182,876) (362,827)
- --------------------------------------------------------------------------------------------------------------------------
Beginning of period 739,222 937,210 1,190,944 1,553,771
- --------------------------------------------------------------------------------------------------------------------------
End of period $ 716,877 $ 739,222 $ 1,008,068 $ 1,190,944
- --------------------------------------------------------------------------------------------------------------------------
Accumulated undistributed
(overdistributed) net
investment income $ 914 $ 2,034 $ (2,213) $ (2,251)
- --------------------------------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS.
84
<Page>
JPMORGAN FUNDS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
J.P. Morgan Mutual Fund Group ("MFG") and JPMorgan Trust I ("JPM I") (the
"Trusts") were organized as a Massachusetts business trust and Delaware
statutory trust, respectively. 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
JPM I November 12, 2004
</Table>
The following are six 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 Enhanced Income Fund ("EIF") Institutional
JPMorgan Emerging Markets Debt Fund ("EMDF") Select
JPMorgan Global Strategic Income Fund ("GSIF") Class A, Class B, Class C, Class M, 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
</Table>
The Funds, excluding STBFII, are separate series of JPM I. STBFII is a separate
series of MFG.
Prior to February 19, 2005 BF, GSIF, and STBF were separate series of J.P.
Morgan Institutional Funds. EIF was a separate series of J.P. Morgan Series
Trust. EMDF was a separate series of J.P. Morgan Funds. On August 19, 2004, the
Boards of Trustees of the then existing Trusts each approved Agreements and
Plans of Reorganization regarding the reorganization of each series of their
respective Trust into a corresponding series of J.P. Morgan Mutual Fund Series
("JPMMFS").
At a special meeting of shareholders of JPMorgan Bond Fund, JPMorgan Enhanced
Income Fund, JPMorgan Emerging Markets Debt Fund, JPMorgan Global Strategic
Income Fund and JPMorgan Short Term Bond Fund (the "Funds") held on January 20,
2005, and adjourned and reconvened on February 3, 2005, shareholders of each of
the Funds approved the Agreement and Plan of Reorganization with respect to each
respective Fund.
Effective as of 5:00 p.m. on February 18, 2005 pursuant to the Agreement and
Plan of Reorganization, the Funds were each reorganized, by means of a tax-free
reorganization, each as a separate series of JPMMFS.
Additionally, at a special meeting of shareholders on January 20, 2005, the
shareholders of JPMMFS approved an Agreement and Plan of Reorganization and
Redomiciliation providing for the reorganization and redomiciliation of each
series of JPMMFS as a corresponding series of JPMorgan Trust I, a Delaware
statutory trust, including those series of JPMMFS such as the Funds which became
a series of JPMMFS as of February 18, 2005. Therefore, effective as of 5:00 p.m.
on February 18, 2005, pursuant to the Agreement and Plan of Reorganization and
Redomiciliation, the Funds were each reorganized and redomiciled, by means of a
tax-free reorganization, as a separate series of JPMorgan Trust I.
Effective February 19, 2005, JPMorgan Fleming Emerging Markets Debt Fund changed
its name to JPMorgan Emerging Markets Debt Fund.
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
85
<Page>
and Select classes. All classes of shares have equal rights as to earnings,
assets and voting privileges except that each class may bear different
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.
On November 11, 2004, the Board of Trustees approved the increase of the maximum
front-end sales charge for Class A shares from 1.50% to 3.00% for STBF and
STBFII, for shares purchased on or after November 15, 2004.
2. REORGANIZATION
On August 19, 2004, the Board of Trustees of the then existing Trusts approved
management's proposal to merge the JPMorgan Strategic Income Fund (the "Target
Fund") into the JPMorgan Global Strategic Income Fund (the "Acquiring Fund").
The Agreement and Plan of Reorganization with respect to the JPMorgan Strategic
Income Fund was approved by the Fund's shareholders at a special meeting of
shareholders held on January 20, 2005, and adjourned and reconvened on February
3, 2005.
The merger was effective after the close of business on February 18, 2005. The
Acquiring Fund acquired all the assets and liabilities of the Target Fund as
shown in the table below. The transaction was structured for tax purposes to
qualify as a tax-free reorganization under the Internal Revenue Code of 1986.
Pursuant to the Agreement and Plan of Reorganization, shareholders of the Target
Fund received the number of shares of the corresponding class in the Acquiring
Fund with a value equal to their holdings in the Target Fund as of the close of
business on the date of the reorganization.
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 GLOBAL STRATEGIC INCOME FUND REORGANIZATION
<Table>
<Caption>
NET ASSET NET
SHARES VALUE UNREALIZED
OUTSTANDING NET ASSETS PER SHARE APPRECIATION
TARGET FUND
JPMorgan Strategic Income Fund $ 828
Class A 322 $ 3,011 $ 9.34
Class B 784 $ 7,328 $ 9.35
Class C 313 $ 2,925 $ 9.35
Class M 698 $ 6,507 $ 9.32
ACQUIRING FUND
JPMorgan Global Strategic
Income Fund $ 360
Class A 89 $ 827 $ 9.26
Institutional 2,506 $ 23,220 $ 9.27
Select 270 $ 2,502 $ 9.26
POST REORGANIZATION
JPMorgan Global Strategic
Income Fund $ 1,188
Class A 414 $ 3,838 $ 9.26
Class B 792 $ 7,328 $ 9.26
Class C 316 $ 2,925 $ 9.26
Class M 702 $ 6,507 $ 9.26
Institutional 2,506 $ 23,220 $ 9.27
Select 270 $ 2,502 $ 9.26
</Table>
86
<Page>
3. SIGNIFICANT ACCOUNTING POLICIES
THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE
FUNDS:
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
A. VALUATION OF INVESTMENTS -- Fixed income securities, other than convertible
bonds, with a maturity of 61 days or more, 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. Purchased options and
futures contracts are valued at the last sale price on the exchange on which
they are primarily 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
that 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.
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 February 28, 2005, the Funds had outstanding futures contracts as listed
on the Funds' Portfolios of Investments.
C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the prevailing exchange rates, or at the mean of the current bid and
asked prices, of such currencies against the U.S. dollar as quoted by a major
bank, on the following basis:
1. Market value of investment securities and other assets and liabilities: at
the rate of exchange at the valuation date.
2. Purchases and sales of investment securities, income and expenses: at the
rates of exchange prevailing on the respective dates of such transactions.
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
87
<Page>
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. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains or
losses are recorded for financial statement purposes as unrealized appreciation
or depreciation until the contract settlement date. 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 February 28, 2005, the Funds had outstanding forward foreign currency
exchange contracts as listed on the Funds' Portfolios 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 generally settled for cash and subject the
Funds to unlimited risk of loss. The Funds, however, are not subject to credit
risk on written options as the counterparty has already performed its obligation
by paying the premium at the inception of the contract.
As of February 28, 2005, the Funds had written options contracts outstanding as
listed on the Funds' Portfolios of Investments.
88
<Page>
Transactions in options written during the six months ended February 28, 2005,
were as follows (amounts in thousands):
<Table>
<Caption>
BF STBF STBF II
---------------------- --------------------- ---------------------
NUMBER OF PREMIUMS NUMBER OF PREMIUMS NUMBER OF PREMIUMS
UNITS RECEIVED UNITS RECEIVED UNITS RECEIVED
Options outstanding at
August 31, 2004 (507,318) $ 2,803 -- $ -- -- $ --
Options written (1,473,603) 9,435 (300,000) 270 (225,000) 202
Options expired or terminated in
closing purchase transactions 1,696,218 (9,963) 300,000 (270) 225,000 (202)
Options exercised -- -- -- -- -- --
Options outstanding at
February 28, 2005 (284,703) $ 2,275 -- $ -- -- $ --
</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 accruals of 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 February 28, 2005, the Funds had outstanding swap agreements as listed on
the Funds' Portfolios of Investments. Swap transactions present risk of loss in
excess of the related amounts included in the Statement of Assets and
Liabilities.
G. COMMITMENTS -- The Funds may enter into commitments to buy and sell
investments to settle on future dates as part of their normal investment
activities. These commitments are reported at market value in the financial
statements. Credit risk exists on these commitments to the extent of any
unrealized gains on the underlying securities purchased and any realized gains
on the underlying securities sold. Market risk exists on commitments to buy to
the same extent as if the securities were owned on a settled basis and gains and
losses are recorded and reported in the same manner. However, during the
commitment period, these investments earn no interest or dividends.
H. DOLLAR ROLLS -- The Funds may enter into dollar rolls principally using 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.
89
<Page>
In a "fee based" 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.
As of February 28, 2005, the Funds had no fee based Dollar Rolls outstanding.
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 $ 27,803 3.33% $ 170,953 20.44%
EIF 11,330 5.45% 60,833 29.25%
EMDF -- -- 4,720 12.65%
GSIF 2,522 5.47% 5,993 12.98%
STBF 28,749 4.01% 166,947 23.29%
STBFII 29,678 2.95% 215,355 21.37%
</Table>
* Includes Illiquid Securities
J. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are
accounted for on the trade date (the date the order to buy or sell is executed).
Securities gains and losses are calculated on the identified cost basis.
Interest income is determined on the basis of coupon interest accrued using the
interest method adjusted for amortization of premiums and accretion of
discounts. Dividend income less foreign taxes withheld (if any) is recorded on
the ex-dividend date or when the Funds first learn of the dividend.
Purchases of 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. Each Fund's policy is to comply with the provisions
of the Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of 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.
90
<Page>
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.
O. EQUALIZATION -- STBFII and GSIF (after the reorganization) 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 is a wholly-owned subsidiary of JPMorgan Fleming Asset
Management Holdings, Inc., which is a wholly-owned subsidiary of JPMorgan Chase
& Co. ("JPMorgan"). 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
rate for each Fund is as follows:
<Table>
<Caption>
INVESTMENT
ADVISORY FEE (%)
FUND
BF 0.30%
EIF 0.25%
EMDF 0.70%
GSIF 0.45%
STBF 0.25%
STBFII 0.25%
</Table>
The Advisor 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 -- Effective February 19, 2005, pursuant to a Distribution
Agreement with JPMorgan Distribution Services, Inc. ("JPMDS" or "Distributor"),
a wholly-owned subsidiary of JPMorgan Chase & Co., serves as the Trusts'
exclusive underwriter and promotes and arranges for the sale of each Fund's
shares. JPMDS receives no compensation in its capacity as the Funds'
underwriter.
91
<Page>
Prior to February 19, 2005, J.P. Morgan Fund Distributors, Inc. ("JPMFD"), a
wholly-owned subsidiary of The BISYS Group, Inc., served as the Funds' exclusive
underwriter. JPMFD received no compensation in its capacity as the Funds'
underwriter.
The Trustees have adopted a Distribution Plan (the "Distribution Plan") for
Class A, B, C and M Shares of the Funds in accordance with Rule 12b-1 under the
1940 Act. The Distribution Plan provides 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
GSIF 0.25 0.75 0.75 0.50
STBF 0.25 n/a n/a n/a
STBFII 0.25 n/a n/a 0.35
</Table>
In addition, JPMDS is entitled to receive the front-end sales charges from
purchases of Class A and Class M shares and the contingent deferred sales
charges ("CDSC") from redemptions of Class B and Class C shares. For the period
2/19/05 to 2/28/05, JPMDS received the following amounts as Distributor:
<Table>
<Caption>
FRONT-END
SALES
(AMOUNTS IN THOUSANDS) 12b-1 CHARGE CDSC
FUND
BF $ -- $ 4 $ 1
GSIF 2 --^ --^
STBF --^ --^ --^
STBFII 2 1 --
</Table>
^ Amount rounds to less than one thousand.
JPMFD and JPMDS waived Distribution Fees as outlined in Note 4.F.
C. SHAREHOLDER SERVICING FEES -- Effective February 19, 2005, the Trusts have
entered into a Shareholder Servicing Agreement on behalf of the Funds with JPMDS
under which JPMDS provides account administration and personal account
maintenance services to the shareholders. For performing these services JPMDS
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 0.00*
EIF n/a n/a n/a n/a 0.10 n/a n/a
EMDF n/a n/a n/a n/a n/a 0.25 n/a
GSIF 0.25 0.25 0.25 0.30 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
</Table>
* Prior to February 19, 2005, the Shareholder Servicing Fee for BF ultra
shares was 0.05%.
92
<Page>
JPMDS 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, JPMDS, Charles Schwab & Co. ("Schwab") and JPM I are parties to
separate servicing and operating agreements (the "Schwab Agreements") whereby
Schwab makes shares of BF, EIF, EMDF, GSIF and STBF available to customers of
investment advisers and other financial intermediaries who are Schwab's clients.
BF, EIF, EMDF, GSIF and STBF are not responsible for payments to Schwab under
the Schwab Agreements; however, in the event the servicing agreement with Schwab
is terminated for reasons other than a breach by Schwab and the relationship
between JPM I and JPMDS is terminated, BF, EIF, EMDF, GSIF and STBF would be
responsible for the ongoing payments to Schwab with respect to pre-termination
shares.
Prior to February 19, 2005, JPMorgan Chase Bank, N.A. ("JPMCB") served as the
Funds' Shareholder Servicing Agent. JPMCB was subject to the fee rates disclosed
in the previous table.
JPMCB and JPMDS waived Shareholder Servicing 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 -- Effective February 19,2005, pursuant to an
Administration Agreement, JPMorgan Funds Management, Inc. ("JPMFM" or the
"Administrator"), an indirect, wholly-owned subsidiary of JPMorgan Chase & Co.,
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 and all non-investor funds in the JPMorgan
Fund Complex and 0.075% of the average daily net assets in excess of $25 billion
of all such funds.
Prior to February 19, 2005, JPMCB served as the Funds' administrator, subject to
the same fee arrangements.
JPMCB and JPMFM waived Administration Fees and reimbursed expenses as outlined
in Note 4.F.
BISYS Fund Services, L.P. ("BISYS") serves as the Funds' sub-administrator and
will continue to do so until mid-2005. For its services as sub-administrator,
BISYS received a portion of the fees paid to the Administrator. Beginning in
mid-2005, J.P. Morgan Investor Services, Co. ("JPMIS") will serve as the Funds'
sub-administrator. For its services as sub-administrator, JPMIS will receive a
portion of the fees payable to the Administrator.
F. WAIVERS AND REIMBURSEMENTS -- The Administrator, Advisor and Distributor have
contractually agreed to waive fees and 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
the Funds' 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
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* 1.15 1.65 1.65 1.45 0.65 0.90 n/a
STBF 0.75 n/a n/a n/a 0.30 0.60 n/a
STBFII** 0.75 n/a n/a 0.99 n/a 0.50 n/a
</Table>
* Prior to February 19, 2005, the contractual expense limitation for GSIF
Class A and Select class were 1.25% and 1.00%, respectively.
** Prior to February 19, 2005, the contractual expense limitation for STBFII
Class M was 1.00%.
93
<Page>
The contractual expense limitation agreements were in effect for the six months
ended February 28, 2005. The expense limitation percentages in the table above
are due to expire on December 31, 2006.
For the six months ended February 28, 2005, the Funds' service providers waived
fees and contractually reimbursed expenses for each of the Funds as follows
(amounts in thousands). None of these parties expects 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
BF $ -- $ 408 $ 110 $ -- $ 518 $ 22
EIF 166 137 139 -- 442 --
EMDF 17 20 46 -- 83 --
GSIF 69 24 18 -- 111 13
STBF 37 477 315 --^ 829 8
STBFII -- 215 426 10 651 --
</Table>
^ Amount rounds to less than one thousand.
<Table>
<Caption>
VOLUNTARY WAIVERS
---------------------------------------------------------
INVESTMENT SHAREHOLDER
ADVISORY ADMINISTRATION SERVICING DISTRIBUTION
BF $ -- $ 20 $ -- $ --
EIF -- 70 -- --
STBF -- 11 -- --
</Table>
G. OTHER -- Certain officers of the Trusts are officers of J.P. Morgan Chase &
Co. and BISYS or their subsidiaries. Such officers received no compensation from
the Funds for serving in their respective roles.
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 Advisor.
The Funds may use related party broker/dealers. For the six months ended
February 28, 2005, STBF incurred approximately (in thousands) $50 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.
94
<Page>
5. CLASS SPECIFIC EXPENSES
The Funds' class specific expenses for the six months ended February 28, 2005
are as follows (amounts in thousands):
<Table>
<Caption>
SHAREHOLDER
SERVICING DISTRIBUTION TRANSFER AGENT *
BF
Class A $ 4 $ 4 $ 14
Class B 2 7 8
Class C --^ 1 1
Institutional 147 -- 11
Select 233 -- 21
Ultra 84 -- 7
- ---------------------------------------------------------------------------
$ 470 $ 12 $ 62
- ---------------------------------------------------------------------------
EIF
Institutional $ 139 $ -- $ 9
EMDF
Select $ 46 $ -- $ 12
GSIF
Class A $ 1 $ 1 $ 5
Class B 1 1 --
Class C --^ --^ --
Class M --^ 1 --
Institutional 14 -- 8
Select 3 -- 7
- ---------------------------------------------------------------------------
$ 19 $ 3 $ 20
- ---------------------------------------------------------------------------
STBF
Class A $ 4 $ 4 $ 9
Institutional 311 -- 15
Select 116 -- 16
- ---------------------------------------------------------------------------
$ 431 $ 4 $ 40
- ---------------------------------------------------------------------------
STBFII
Class A $ 65 $ 65 $ 34
Class M 697 976 6
Select 593 -- 12
- ---------------------------------------------------------------------------
$ 1,355 $ 1,041 $ 52
- ---------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
* Effective February 19, 2005, the Funds no longer bear class specific
charges relating to Transfer Agent fees. The amounts in the table above
relate to the fees charged to each specific class prior to February 19,
2005.
95
<Page>
6. CLASS SPECIFIC DISTRIBUTIONS
The Funds' class specific distributions from net investment income and realized
gain on investment transactions for the six months ended February 28, 2005 and
the year ended August 31, 2004 are as follows (amounts in thousands):
<Table>
<Caption>
SIX MONTHS ENDED 2/28/05 YEAR ENDED 8/31/04
--------------------------------- ------------------------------------
NET NET
INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN
BF
Class A $ 61 $ 91 $ 78 $ 71
Class B 26 55 58 76
Class C 3 6 7 9
Institutional 6,446 8,858 13,088 11,950
Select 3,840 5,644 7,804 8,959
Ultra 7,926 10,597 14,764 13,144
- ----------------------------------------------------------------------------------------------------
$ 18,302 $ 25,251 $ 35,799 $ 34,209
- ----------------------------------------------------------------------------------------------------
EIF
Institutional $ 3,064 $ -- $ 5,541 $ --
EMDF
Select $ 1,372 $ 4,588 $ 3,506 $ --
GSIF
Class A $ 18 $ -- $ 28 $ --
Class B 6 -- -- --
Class C 2 -- -- --
Class M 6 -- -- --
Institutional 615 -- 3,689 --
Select 47 -- 154 --
- ----------------------------------------------------------------------------------------------------
$ 694 $ -- $ 3,871 $ --
- ----------------------------------------------------------------------------------------------------
STBF
Class A $ 47 $ -- $ 131 $ --
Institutional 11,396 -- 17,897 --
Select 1,511 -- 2,353 --
- ----------------------------------------------------------------------------------------------------
$ 12,954 $ -- $ 20,381 $ --
- ----------------------------------------------------------------------------------------------------
STBFII
Class A $ 688 $ -- $ 955(a) $ --
Class M 6,537 -- 15,711(a) --
Select 6,917 -- 11,173(a) --
- ----------------------------------------------------------------------------------------------------
$ 14,142 $ -- $ 27,839 $ --
- ----------------------------------------------------------------------------------------------------
</Table>
(a) Includes return of capital of $7, $80 and $62 for Class A, M and Select,
respectively (amounts in thousands).
96
<Page>
7. INVESTMENT TRANSACTIONS
For the six months ended February 28, 2005, 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 $ 268,151 $ 256,957 $ 2,118,985 $ 2,113,673
EIF 118,239 192,008 -- 948
EMDF 4,009 5,158 59,924 65,700
GSIF 4,928 13,112 73,527 69,290
STBF 212,140 292,376 167,856 141,717
STBFII 311,185 484,497 190,270 173,446
</Table>
8. FEDERAL INCOME TAX MATTERS
For Federal income tax purposes, the cost and unrealized appreciation
(depreciation) in value of the investment securities at February 28, 2005 are as
follows (amounts in thousands):
<Table>
<Caption>
GROSS GROSS NET UNREALIZED
AGGREGATE UNREALIZED UNREALIZED APPRECIATION
COST APPRECIATION DEPRECIATION (DEPRECIATION)
BF $ 1,056,248 $ 16,343 $ (8,382) $ 7,961
EIF 208,372 228 (339) (111)
EMDF 27,506 2,895 (10) 2,885
GSIF 50,869 2,120 (1,238) 882
STBF 736,335 2,428 (8,360) (5,932)
STBFII 1,027,060 2,373 (13,588) (11,215)
</Table>
9. BORROWINGS
Effective February 18, 2005, the Trusts and JPMCB have entered into a financing
arrangement. Under this arrangement, JPMCB provides an unsecured, uncommitted
credit facility in the aggregate amount of $100 million to certain of the
JPMorgan Funds including the Funds. Advances under the arrangement are taken
primarily for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition of
securities, and are subject to each Fund's borrowing restrictions. Interest on
borrowings is payable at a rate determined by JPMCB at the time of borrowing.
Prior to February 18, 2005, the Funds were allowed to borrow money for temporary
or emergency purposes, pursuant, to a Line of Credit dated April 17, 2003. This
agreement enabled the Funds to participate with other JPMorgan Funds in a line
of credit with JPMCB, as administrative agent, and a syndicate of banks, which
permitted borrowings up to $250 million, collectively. Interest was 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 paid a commitment fee of 0.09% per
annum on the average daily amount of the available commitment, which was
97
<Page>
allocated on a pro-rata basis to the Funds. This agreement was terminated as of
February 18, 2005.
Effective February 19, 2005, the Funds began relying upon an exemptive order
("Order") permitting the establishment and operation of an Interfund Lending
Facility ("Facility"). The Facility allows the Funds to directly lend and borrow
money to or from any other fund relying upon the Order at rates beneficial to
both the borrowing and lending funds. Advances under the Facility are taken
primarily for temporary or emergency purposes, including the meeting of
redemption requests that otherwise might require the untimely disposition of
securities, and are subject to each Fund's borrowing restrictions. The Interfund
Loan Rate is determined, as specified in the Order, by averaging the current
repurchase agreement rate and the current bank loan rate. The Order was granted
to JPMorgan Trust II (formerly One Group Mutual Funds) and may be relied upon by
the Funds because they are investment companies in the same "group of investment
companies" (as defined in Section 12(d)(1)(G) of the Investment Company Act of
1940).
The Funds had no borrowings outstanding at February 28, 2005, nor at any time
during the six months then ended.
10. CONCENTRATIONS AND INDEMNIFICATIONS
The Funds may have elements of risk not typically associated with investments in
the United States of America due to concentrated investments in a limited number
of countries or regions, which may vary throughout the year. Such concentrations
may subject the Funds to additional risks resulting from political or economic
conditions in such countries or regions and the possible imposition of adverse
governmental laws or currency exchange restrictions could cause the securities
and their markets to be less liquid and their prices more volatile than those of
comparable U.S. securities.
The ability of the issuers of debt, asset-backed and mortgage-backed securities,
along with counterparties to swap and option agreements, to meet their
obligations may be affected by the economic and political developments in a
specific industry or region. The value of asset-backed and mortgage-backed
securities can be significantly affected by changes in interest rates or rapid
principal payments including prepayments.
As to illiquid investments, a Fund is subject to the risk that should the Fund
decide to sell them when a ready buyer is not available at a price the Fund
deems representative of their value, the value of the Fund's net assets could be
adversely affected.
From time to time, the Funds may have a concentration of several shareholders
which may be a related party, holding a significant percentage of shares
outstanding. Investment activities of these shareholders could have a material
impact on the Funds.
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 can expect the risk of loss to
be remote.
98
<Page>
11. CAPITAL SHARE TRANSACTIONS
Capital share transactions were as follows for the periods presented (amounts in
thousands):
<Table>
<Caption>
BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
CLASS A
AMOUNT
Shares sold $ 753 $ 1,767
Shares issued in reinvestment of distributions 142 143
Shares redeemed (408) (907)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 487 $ 1,003
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 76 177
Shares issued in reinvestment of distributions 14 14
Shares redeemed (41) (91)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 49 100
- ---------------------------------------------------------------------------------------------------
CLASS B
AMOUNT
Shares sold $ 60 $ 237
Shares issued in reinvestment of distributions 36 67
Shares redeemed (284) (836)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (188) $ (532)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 6 24
Shares issued in reinvestment of distributions 4 7
Shares redeemed (29) (86)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (19) (55)
- ---------------------------------------------------------------------------------------------------
</Table>
99
<Page>
<Table>
<Caption>
BOND FUND (CONTINUED)
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
CLASS C**
AMOUNT
Shares sold $ 34 $ 127
Shares issued in reinvestment of distributions 8 14
Shares redeemed (32) (199)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 10 $ (58)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 3 13
Shares issued in reinvestment of distributions 1 1
Shares redeemed (3) (20)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 1 (6)
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL
AMOUNT
Shares sold $ 33,384 $ 75,515
Shares issued in reinvestment of distributions 9,716 15,282
Shares redeemed (69,366) (252,219)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (26,266) $ (161,422)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 3,403 7,584
Shares issued in reinvestment of distributions 997 1,545
Shares redeemed (7,028) (25,296)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (2,628) (16,167)
- ---------------------------------------------------------------------------------------------------
</Table>
** From commencement of offering class shares on March 31, 2003.
100
<Page>
<Table>
<Caption>
BOND FUND (CONTINUED)
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
SELECT
AMOUNT
Shares sold $ 22,424 $ 45,098
Shares issued in reinvestment of distributions 8,713 15,587
Shares redeemed (26,730) (179,415)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund
shares outstanding $ 4,407 $ (118,730)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 2,271 4,528
Shares issued in reinvestment of distributions 894 1,575
Shares redeemed (2,712) (18,118)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 453 (12,015)
- ---------------------------------------------------------------------------------------------------
ULTRA
AMOUNT
Shares sold $ 32,522 $ 69,894
Shares issued in reinvestment of distributions 16,272 24,753
Shares redeemed (61,980) (159,036)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (13,186) $ (64,389)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 3,290 7,078
Shares issued in reinvestment of distributions 1,669 2,501
Shares redeemed (6,260) (16,016)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (1,301) (6,437)
- ---------------------------------------------------------------------------------------------------
</Table>
101
<Page>
<Table>
<Caption>
ENHANCED INCOME FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
INSTITUTIONAL
AMOUNT
Shares sold $ 35,296 $ 263,773
Shares issued in reinvestment of distributions 2,289 3,814
Shares redeemed (123,249) (327,065)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (85,664) $ (59,478)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 3,589 26,783
Shares issued in reinvestment of distributions 232 388
Shares redeemed (12,527) (33,263)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (8,706) (6,092)
- ---------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
EMERGING MARKETS DEBT FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
SELECT
AMOUNT
Shares sold $ 21,945 $ 14,341
Shares issued in reinvestment of distributions 5,138 3,085
Shares redeemed (24,021) (45,233)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 3,062 $ (27,807)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 2,349 1,542
Shares issued in reinvestment of distributions 578 330
Shares redeemed (2,531) (4,787)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 396 (2,915)
- ---------------------------------------------------------------------------------------------------
</Table>
102
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND
-------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004@
CLASS A
AMOUNT
Shares sold $ 289 $ 838
Shares issued in connection with Fund Reorganization (Note 2) 3,011
Shares issued in reinvestment of distributions 17 26
Shares redeemed (294) (466)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 3,023 $ 398
- ----------------------------------------------------------------------------------------------------------
SHARES
Shares sold 31 93
Shares issued in connection with Fund Reorganization (Note 2) 325
Shares issued in reinvestment of distributions 2 3
Shares redeemed (32) (52)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 326 44
- ----------------------------------------------------------------------------------------------------------
CLASS B*
AMOUNT
Shares sold $ 45 $ --
Shares issued in connection with Fund Reorganization (Note 2) 7,328
Shares issued in reinvestment of distributions 3 --
Shares redeemed (37) (317)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 7,339 $ (317)
- ----------------------------------------------------------------------------------------------------------
SHARES
Shares sold 4 --
Shares issued in connection with Fund Reorganization (Note 2) 792
Shares issued in reinvestment of distributions --^ --
Shares redeemed (4) (36)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 792 (36)
- ----------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
* From commencement of offering of shares on February 19, 2005.
@ For Class B Shares, activity through September 12, 2003.
103
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND (CONTINUED)
----------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
CLASS C*
AMOUNT
Shares sold $ --^ $ --
Shares issued in connection with Fund Reorganization (Note 2) 2,925
Shares issued in reinvestment of distributions 2 --
Shares redeemed (13) --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 2,914 $ --
- ----------------------------------------------------------------------------------------------------------
SHARES
Shares sold --^ --
Shares issued in connection with Fund Reorganization (Note 2) 316
Shares issued in reinvestment of distributions --^ --
Shares redeemed (2) --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 314 --
- ----------------------------------------------------------------------------------------------------------
CLASS M*
AMOUNT
Shares sold $ 2 $ --
Shares issued in connection with Fund Reorganization (Note 2) 6,507
Shares issued in reinvestment of distributions -- --
Shares redeemed -- --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 6,509 $ --
- ----------------------------------------------------------------------------------------------------------
SHARES
Shares sold 1 --
Shares issued in connection with Fund Reorganization (Note 2) 702
Shares issued in reinvestment of distributions -- --
Shares redeemed -- --
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 703 --
- ----------------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
* From commencement of offering of shares on February 19, 2005.
104
<Page>
<Table>
<Caption>
GLOBAL STRATEGIC INCOME FUND (CONTINUED)
----------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
INSTITUTIONAL
AMOUNT
Shares sold $ 1,421 $ 861
Shares issued in reinvestment of distributions 50 263
Shares redeemed (18,275) (70,986)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (16,804) $ (69,862)
- ----------------------------------------------------------------------------------------------------------
SHARES
Shares sold 154 94
Shares issued in reinvestment of distributions 5 29
Shares redeemed (1,989) (7,786)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (1,830) (7,663)
- ----------------------------------------------------------------------------------------------------------
SELECT
AMOUNT
Shares sold $ 269 $ 271
Shares issued in reinvestment of distributions 44 141
Shares redeemed (271) (1,058)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 42 $ (646)
- ----------------------------------------------------------------------------------------------------------
SHARES
Shares sold 29 30
Shares issued in reinvestment of distributions 5 15
Shares redeemed (29) (116)
- ----------------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 5 (71)
- ----------------------------------------------------------------------------------------------------------
</Table>
105
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
CLASS A
AMOUNT
Shares sold $ 1,302 $ 1,777
Shares issued in reinvestment of distributions 34 60
Shares redeemed (479) (7,872)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 857 $ (6,035)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 133 180
Shares issued in reinvestment of distributions 3 6
Shares redeemed (49) (800)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 87 (614)
- ---------------------------------------------------------------------------------------------------
INSTITUTIONAL
AMOUNT
Shares sold $ 68,286 $ 232,147
Shares issued in reinvestment of distributions 7,638 12,345
Shares redeemed (96,095) (406,830)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (20,171) $ (162,338)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 6,969 23,525
Shares issued in reinvestment of distributions 781 1,252
Shares redeemed (9,810) (41,331)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (2,060) (16,554)
- ---------------------------------------------------------------------------------------------------
SELECT
AMOUNT
Shares sold $ 21,511 $ 46,594
Shares issued in reinvestment of distributions 889 1,497
Shares redeemed (15,495) (75,703)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ 6,905 $ (27,612)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 2,203 4,723
Shares issued in reinvestment of distributions 91 152
Shares redeemed (1,583) (7,682)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding 711 (2,807)
- ---------------------------------------------------------------------------------------------------
</Table>
106
<Page>
<Table>
<Caption>
SHORT TERM BOND FUND II
------------------------------------
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 2005 AUGUST 31, 2004
CLASS A
AMOUNT
Shares sold $ 2,164 $ 45,840
Shares issued in reinvestment of distributions 616 815
Shares redeemed (8,850) (35,304)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (6,070) $ 11,351
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 213 4,499
Shares issued in reinvestment of distributions 61 80
Shares redeemed (873) (3,449)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (599) 1,130
- ---------------------------------------------------------------------------------------------------
CLASS M
AMOUNT
Shares sold $ 7,495 $ 62,729
Shares issued in reinvestment of distributions 2 20
Shares redeemed (146,643) (584,516)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (139,146) $ (521,767)
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 739 6,131
Shares issued in reinvestment of distributions --^ 2
Shares redeemed (14,442) (57,237)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (13,703) (51,104)
- ---------------------------------------------------------------------------------------------------
SELECT
AMOUNT
Shares sold $ 52,300 $ 354,225
Shares issued in reinvestment of distributions 560 1,103
Shares redeemed (76,182) (203,163)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding $ (23,322) $ 152,165
- ---------------------------------------------------------------------------------------------------
SHARES
Shares sold 5,141 34,518
Shares issued in reinvestment of distributions 55 108
Shares redeemed (7,493) (19,866)
- ---------------------------------------------------------------------------------------------------
Net increase (decrease) in Fund shares outstanding (2,297) 14,760
- ---------------------------------------------------------------------------------------------------
</Table>
^ Amount rounds to less than one thousand.
107
<Page>
JPMORGAN FUNDS
FINANCIAL HIGHLIGHTS
CLASS A
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
--------------------------------------- ------------------------------------------
NET GAINS
OR (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
Six Months Ended 2/28/05 $ 10.05 0.17 0.08 0.25 0.20 0.30 0.50
Year Ended 8/31/04 $ 10.03 0.32 0.32 0.64 0.32 0.30 0.62
Year Ended 8/31/03 $ 10.07 0.40 0.04 0.44 0.40 0.08 0.48
11/1/01 Through 8/31/02^^ $ 10.08 0.31 0.05 0.36 0.31 0.06 0.37
9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.20 0.26 0.07 -- 0.07
GLOBAL STRATEGIC INCOME FUND
Six Months Ended 2/28/05 $ 9.08 0.18^ 0.15 0.33 0.17 -- 0.17
Year Ended 8/31/04 $ 8.92 0.48^ 0.15 0.63 0.47 -- 0.47
Year Ended 8/31/03 $ 8.64 0.40^ 0.31 0.71 0.43 -- 0.43
11/1/01 Through 8/31/02^^ $ 8.91 0.55 (0.33) 0.22 0.47 0.02 0.49
9/10/01** Through 10/31/01 $ 9.13 0.09^ (0.22) (0.13) 0.09 -- 0.09
SHORT TERM BOND FUND
Six Months Ended 2/28/05 $ 9.84 0.14 (0.12) 0.02 0.15 -- 0.15
Year Ended 8/31/04 $ 9.85 0.20 (0.01) 0.19 0.20 -- 0.20
Year Ended 8/31/03 $ 10.03 0.24 (0.03) 0.21 0.25 0.14 0.39
11/1/01 Through 8/31/02^^ $ 10.01 0.27 0.05 0.32 0.26 0.04 0.30
9/10/01** Through 10/31/01 $ 9.87 0.05^ 0.15 0.20 0.06 -- 0.06
</Table>
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
^^ The fund changed its fiscal year end from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
108
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND
Six Months Ended 2/28/05 $ 9.80 2.48%
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%
GLOBAL STRATEGIC INCOME FUND
Six Months Ended 2/28/05 $ 9.24 3.65%
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
Six Months Ended 2/28/05 $ 9.71 0.16%
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:
-------------------------------------------------------------------------------------------------
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
Six Months Ended 2/28/05 $ 3 0.74% 3.36% 1.90% 2.20% 243%
Year Ended 8/31/04 $ 3 0.75% 3.19% 1.88% 2.06% 571%
Year Ended 8/31/03 $ 2 0.75% 3.86% 1.59% 3.02% 679%
11/1/01 Through 8/31/02^^ $ 1 0.75% 3.59% 5.64% (1.30%) 572%
9/10/01** Through 10/31/01 $ --+ 0.75% 3.93% 10.75% (6.07%) 423%
GLOBAL STRATEGIC INCOME FUND
Six Months Ended 2/28/05 $ 4 1.22% 3.79% 2.69% 2.32% 261%
Year Ended 8/31/04 $ 1 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
Six Months Ended 2/28/05 $ 3 0.75% 2.88% 1.54% 2.09% 56%
Year Ended 8/31/04 $ 3 0.75% 2.00% 1.17% 1.58% 261%
Year Ended 8/31/03 $ 9 0.75% 2.39% 1.10% 2.04% 386%
11/1/01 Through 8/31/02^^ $ 10 0.75% 3.01% 1.00% 2.76% 215%
9/10/01** Through 10/31/01 $ 2 0.75% 3.62% 10.76% (6.39%) 160%
</Table>
# Short periods have been annualized.
(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.
(o) Includes interest expense for custody overdraft of 1 basis point.
@ Due to the size of net assets and fixed expenses, ratios may appear
disproportionate.
SEE NOTES TO FINANCIAL STATEMENTS.
109
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
--------------------------------------- ----------------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS TAX
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL RETURN OF TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 $ 10.21 0.14 (0.15) (0.01) 0.13 -- -- 0.13
Year Ended 8/31/04 $ 10.23 0.21^ (0.02) 0.19 0.21 -- --+ 0.21
Year Ended 8/31/03 $ 10.33 0.23^ (0.04) 0.19 0.24 0.05 --+ 0.29
11/1/01 Through 8/31/02^^ $ 10.38 0.25 0.06 0.31 0.25 0.11 -- 0.36
Year Ended 10/31/01 $ 9.89 0.43^ 0.53 0.96 0.47 -- -- 0.47
Year Ended 10/31/00 $ 9.94 0.56 (0.05) 0.51 0.56 -- -- 0.56
Year Ended 10/31/99 $ 10.14 0.46 (0.20) 0.26 0.46 -- -- 0.46
</Table>
^ Calculated based upon average shares outstanding.
+ Rounds to less than .005 per share amount.
^^ The fund changed its fiscal year from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
110
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 $ 10.07 (0.06%)
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%
<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
Six Months Ended 2/28/05 $ 49 0.75% 2.67% 1.07% 2.35% 47%
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%
</Table>
# Short periods have been annualized.
(1) Total return figures do not include the effect of any front-end sales load.
(b) Not annualized for periods less than one year.
SEE NOTES TO FINANCIAL STATEMENTS.
111
<Page>
CLASS B
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
-------------------------------------- ----------------------------------------
NET GAINS
OR (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
Six Months Ended 2/28/05 $ 9.97 0.13 0.08 0.21 0.14 0.30 0.44
Year Ended 8/31/04 $ 9.95 0.25 0.32 0.57 0.25 0.30 0.55
Year Ended 8/31/03 $ 10.05 0.33 (0.03) 0.30 0.32 0.08 0.40
11/1/01 Through 8/31/02^^ $ 10.08 0.24 0.03 0.27 0.24 0.06 0.30
9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.19 0.25 0.06 -- 0.06
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 9.26 0.01^ (0.02) (0.01) 0.01 -- 0.01
</Table>
^^ The fund changed its fiscal year from October 31 to August 31.
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
112
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND
Six Months Ended 2/28/05 $ 9.74 2.09%
Year Ended 8/31/04 $ 9.97 5.89%
Year Ended 8/31/03 $ 9.95 2.94%
11/1/01 Through 8/31/02^^ $ 10.05 2.83%
9/10/01** Through 10/31/01 $ 10.08 2.53%
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 9.24 (0.13%)
<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
Six Months Ended 2/28/05 $ 2 1.49% 2.65% 2.41% 1.73% 243%
Year Ended 8/31/04 $ 2 1.50% 2.48% 2.36% 1.62% 571%
Year Ended 8/31/03 $ 2 1.50% 3.19% 2.14% 2.55% 679%
11/1/01 Through 8/31/02^^ $ 1 1.50% 2.80% 6.02% (1.72%) 572%
9/10/01** Through 10/31/01 $ --+ 1.48% 4.07% 11.25% (5.70%) 423%
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 7 1.65% 4.04% 2.11% 3.58% 261%
</Table>
# Short periods have been annualized.
(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.
SEE NOTES TO FINANCIAL STATEMENTS.
113
<Page>
CLASS C
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
-------------------------------------- ----------------------------------------
NET GAINS
OR (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
Six Months Ended 2/28/05 $ 10.03 0.13 0.08 0.21 0.14 0.30 0.44
Year Ended 8/31/04 $ 10.01 0.24 0.33 0.57 0.25 0.30 0.55
3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07) 0.14 -- 0.14
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 9.26 0.01^ (0.02) (0.01) 0.01 -- 0.01
</Table>
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
114
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
BOND FUND
Six Months Ended 2/28/05 $ 9.80 2.09%
Year Ended 8/31/04 $ 10.03 5.84%
3/31/03** Through 8/31/03 $ 10.01 (0.69%)
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 9.24 (0.13%)
<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
Six Months Ended 2/28/05 $ --+ 1.49% 2.62% 2.40% 1.71% 243%
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%
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 3 1.65% 4.04% 2.11% 3.58% 261%
</Table>
# Short periods have been annualized.
(b) Not annualized for periods less than one year.
+ Amount rounds to less than one million.
(1) Total return figures do not include the effect of any front-end or deferred
sales load.
SEE NOTES TO FINANCIAL STATEMENTS.
115
<Page>
CLASS M
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
-------------------------------------- ---------------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES DIVIDENDS
VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS TAX
BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL RETURN OF TOTAL
OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS CAPITAL DISTRIBUTIONS
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 9.26 0.01^ (0.02) (0.01) 0.01 -- -- 0.01
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 $ 10.21 0.12 (0.14) (0.02) 0.12 -- 0.12
Year Ended 8/31/04 $ 10.23 0.18^ (0.02) 0.16 0.18 -- --+ 0.18
Year Ended 8/31/03 $ 10.33 0.21^ (0.04) 0.17 0.22 0.05 --+ 0.27
11/1/01 Through 8/31/02^^ $ 10.37 0.23 0.06 0.29 0.22 0.11 -- 0.33
Year Ended 10/31/01 $ 9.89 0.35^ 0.58 0.93 0.45 -- -- 0.45
Year Ended 10/31/00 $ 9.94 0.54 (0.05) 0.49 0.54 -- -- 0.54
7/1/99** Through 10/31/99 $ 9.98 0.16 (0.04) 0.12 0.16 -- -- 0.16
</Table>
** Commencement of offering of class of shares.
^ Calculated based upon average shares outstanding.
+ Rounds to less than .005 per share amount.
^^ The fund changed its fiscal year from October 31 to August 31.
SEE NOTES TO FINANCIAL STATEMENTS.
116
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (1)(b)
GLOBAL STRATEGIC INCOME FUND
2/19/05** Through 2/28/05 $ 9.24 (0.13%)
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 $ 10.07 (0.19%)
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%
<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
2/19/05** Through 2/28/05 $ 6 1.45% 4.23% 1.91% 3.78% 261%
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 $ 497 0.99% 2.40% 1.03% 2.36% 47%
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%
</Table>
# Short periods have been annualized.
(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.
117
<Page>
INSTITUTIONAL
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
-------------------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
BOND FUND
Six Months Ended 2/28/05 $ 9.96 0.18 0.08 0.26
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
Six Months Ended 2/28/05 $ 9.84 0.11 (0.01) 0.10
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
Six Months Ended 2/28/05 $ 9.08 0.20^ 0.16 0.36
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 TAX
INVESTMENT FROM CAPITAL RETURN OF TOTAL
INCOME GAINS CAPITAL DISTRIBUTIONS
BOND FUND
Six Months Ended 2/28/05 0.21 0.30 -- 0.51
Year Ended 8/31/04 0.35 0.30 -- 0.65
Year Ended 8/31/03 0.42 0.08 -- 0.50
11/1/01 Through 8/31/02^^ 0.34 0.06 -- 0.40
Year Ended 10/31/01 0.58 -- -- 0.58
Year Ended 10/31/00 0.60 --(a) -- 0.60
Year Ended 10/31/99 0.57 0.12 -- 0.69
ENHANCED INCOME FUND
Six Months Ended 2/28/05 0.11 -- -- 0.11
Year Ended 8/31/04 0.14 -- -- 0.14
Year Ended 8/31/03 0.23 -- -- 0.23
11/30/01* Through 8/31/02 0.18 -- -- 0.18
GLOBAL STRATEGIC INCOME FUND
Six Months Ended 2/28/05 0.20 -- -- 0.20
Year Ended 8/31/04 0.52 -- -- 0.52
Year Ended 8/31/03 0.48 -- -- 0.48
11/1/01 Through 8/31/02^^ 0.45 -- 0.02 0.47
Year Ended 10/31/01 0.87 -- -- 0.87
Year Ended 10/31/00 0.69 -- -- 0.69
Year Ended 10/31/99 0.62 -- -- 0.62
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
(a) Rounds to less than .005 per share amount.
* Commencement of operations.
SEE NOTES TO FINANCIAL STATEMENTS.
118
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND
Six Months Ended 2/28/05 $ 9.71 2.71%
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
Six Months Ended 2/28/05 $ 9.83 1.03%
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
Six Months Ended 2/28/05 $ 9.24 3.94%
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
Six Months Ended 2/28/05 $ 284 0.49% 3.65% 0.61% 3.53% 243%
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
Six Months Ended 2/28/05 $ 208 0.20% 2.23% 0.57% 1.86% 45%
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
Six Months Ended 2/28/05 $ 23 0.65% 4.38% 1.38% 3.65% 261%
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.
(b) Not annualized for periods less than one year.
(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.
119
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
------------------------------------------ ------------------------------------------
NET GAINS
OR (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
SHORT TERM BOND FUND
Six Months Ended 2/28/05 $ 9.85 0.16 (0.12) 0.04 0.18 -- 0.18
Year Ended 8/31/04 $ 9.86 0.25 (0.02) 0.23 0.24 -- 0.24
Year Ended 8/31/03 $ 10.05 0.28 (0.04) 0.24 0.29 0.14 0.43
11/1/01 Through 8/31/02^^ $ 10.03 0.29 0.06 0.35 0.29 0.04 0.33
Year Ended 10/31/01 $ 9.58 0.54^ 0.46 1.00 0.55 -- 0.55
Year Ended 10/31/00 $ 9.67 0.60 (0.08) 0.52 0.61 -- 0.61
Year Ended 10/31/99 $ 9.96 0.58 (0.29) 0.29 0.54 0.04 0.58
</Table>
^^ The fund changed its fiscal year end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
120
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
SHORT TERM BOND FUND
Six Months Ended 2/28/05 $ 9.71 0.39%
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
Six Months Ended 2/28/05 $ 613 0.30% 3.30% 0.54% 3.06% 56%
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.
(b) Not annualized for periods less than one year.
(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.
121
<Page>
SELECT
<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@
Six Months Ended 2/28/05 $ 9.97 0.17 0.07 0.24
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)
EMERGING MARKETS DEBT FUND
Six Months Ended 2/28/05 $ 9.58 0.31 0.71 1.02
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
GLOBAL STRATEGIC INCOME
FUND@
Six Months Ended 2/28/05 $ 9.08 0.18^ 0.16 0.34
Year Ended 8/31/04 $ 8.92 0.49^ 0.16 0.65
Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72
11/1/01 Through 8/31/02^^ $ 8.95 0.45 (0.31) 0.14
Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29
Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61
Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22
<Caption>
PER SHARE OPERATING PERFORMANCE:
------------------------------------------------------
LESS DISTRIBUTIONS:
------------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS TAX
INVESTMENT FROM CAPITAL RETURN OF TOTAL
INCOME GAINS CAPITAL DISTRIBUTIONS
BOND FUND@
Six Months Ended 2/28/05 0.20 0.30 -- 0.50
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
EMERGING MARKETS DEBT FUND
Six Months Ended 2/28/05 0.34 1.31 -- 1.65
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
GLOBAL STRATEGIC INCOME
FUND@
Six Months Ended 2/28/05 0.18 -- -- 0.18
Year Ended 8/31/04 0.49 -- -- 0.49
Year Ended 8/31/03 0.45 -- -- 0.45
11/1/01 Through 8/31/02^^ 0.42 -- 0.02 0.44
Year Ended 10/31/01 0.76 -- -- 0.76
Year Ended 10/31/00 0.66 -- -- 0.66
Year Ended 10/31/99 0.59 -- -- 0.59
</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 end from October 31 to August 31.
^^^ The fund changed its fiscal year end from July 31 to August 31.
^ Calculated based upon average shares outstanding.
SEE NOTES TO FINANCIAL STATEMENTS.
122
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND@
Six Months Ended 2/28/05 $ 9.71 2.47%
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%)
EMERGING MARKETS DEBT FUND
Six Months Ended 2/28/05 $ 8.95 11.32%
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%
GLOBAL STRATEGIC INCOME
FUND@
Six Months Ended 2/28/05 $ 9.24 3.76%
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%
<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@
Six Months Ended 2/28/05 $ 188 0.67% 3.48% 0.77% 3.38% 243%
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)
EMERGING MARKETS DEBT FUND
Six Months Ended 2/28/05 $ 37 1.25% 6.71% 1.70% 6.26% 182%
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)
GLOBAL STRATEGIC INCOME
FUND@
Six Months Ended 2/28/05 $ 2 0.99% 4.00% 2.02% 2.97% 261%
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)
</Table>
# Short periods have been annualized.
(b) Not annualized for periods less than one year.
(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.
(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.
(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.
123
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
----------------------------------------
NET GAINS
OR (LOSSES) ON
NET ASSET NET SECURITIES
VALUE, INVESTMENT (BOTH TOTAL FROM
BEGINNING INCOME REALIZED AND INVESTMENT
OF PERIOD (LOSS) UNREALIZED) OPERATIONS
SHORT TERM BOND FUND@
Six Months Ended 2/28/05 $ 9.84 0.15 (0.12) 0.03
Year Ended 8/31/04 $ 9.86 0.22 (0.02) 0.20
Year Ended 8/31/03 $ 10.04 0.26 (0.03) 0.23
11/1/01 Through 8/31/02^^ $ 10.03 0.28 0.04 0.32
Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97
Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49
Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 $ 10.22 0.15 (0.13) 0.02
Year Ended 8/31/04 $ 10.25 0.23^ (0.03) 0.20
Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22
11/1/01 Through 8/31/02^^ $ 10.40 0.26 0.07 0.33
Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99
Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54
Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------
LESS DISTRIBUTIONS:
---------------------------------------------------
DIVIDENDS
FROM NET DISTRIBUTIONS TAX
INVESTMENT FROM CAPITAL RETURN OF TOTAL
INCOME GAINS CAPITAL DISTRIBUTIONS
SHORT TERM BOND FUND@
Six Months Ended 2/28/05 0.16 -- -- 0.16
Year Ended 8/31/04 0.22 -- -- 0.22
Year Ended 8/31/03 0.27 0.14 -- 0.41
11/1/01 Through 8/31/02^^ 0.27 0.04 -- 0.31
Year Ended 10/31/01 0.55 -- -- 0.55
Year Ended 10/31/00 0.58 -- -- 0.58
Year Ended 10/31/99 0.51 0.05 -- 0.56
SHORT TERM BOND FUND II
Six Months Ended 2/28/05 0.15 -- -- 0.15
Year Ended 8/31/04 0.23 -- --+ 0.23
Year Ended 8/31/03 0.27 0.05 --+ 0.32
11/1/01 Through 8/31/02^^ 0.27 0.11 -- 0.38
Year Ended 10/31/01 0.49 -- -- 0.49
Year Ended 10/31/00 0.59 -- -- 0.59
Year Ended 10/31/99 0.49 -- -- 0.49
</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 end from October 31 to August 31.
^ Calculated based upon average shares outstanding.
+ Rounds to less than .005 per share amount.
SEE NOTES TO FINANCIAL STATEMENTS.
124
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
SHORT TERM BOND FUND@
Six Months Ended 2/28/05 $ 9.71 0.28%
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
Six Months Ended 2/28/05 $ 10.09 0.17%
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)
SHORT TERM BOND FUND@
Six Months Ended 2/28/05 $ 100 0.58% 3.06% 0.73% 2.91% 56%
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
Six Months Ended 2/28/05 $ 463 0.50% 2.92% 0.69% 2.73% 47%
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.
(b) Not annualized for periods less than one year.
(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.
125
<Page>
ULTRA@
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS:
---------------------------------------- ----------------------------------------
NET GAINS
OR (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
Six Months Ended 2/28/05 $ 9.97 0.18 0.08 0.26 0.22 0.30 0.52
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.
126
<Page>
<Table>
<Caption>
PER SHARE OPERATING PERFORMANCE:
--------------------------------
NET ASSET
VALUE, END TOTAL
OF PERIOD RETURN (b)
BOND FUND
Six Months Ended 2/28/05 $ 9.71 2.67%
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
Six Months Ended 2/28/05 $ 358 0.40% 3.74% 0.55% 3.59% 243%
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>
# Short periods have been annualized.
(b) Not annualized for periods less than one year.
(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.
127
<Page>
JPMORGAN FUNDS
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Trustees and Shareholders of
J.P. Morgan Mutual Fund Group and JPMorgan Trust I:
In our opinion, the accompanying statements of assets and liabilities, including
the portfolios of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of JPMorgan Short Term Bond Fund II (a
separate series of J.P. Morgan Mutual Fund Group), JPMorgan Bond Fund, JPMorgan
Enhanced Income Fund, JPMorgan Emerging Markets Debt Fund (formerly JPMorgan
Fleming Emerging Markets Debt Fund), JPMorgan Global Strategic Income Fund and
JPMorgan Short Term Bond Fund (separate series of JPMorgan Trust I) (hereafter
collectively referred to as the "Funds") at February 28, 2005, and the results
of each of their operations, the changes in each of their net assets and the
financial highlights for each of the periods presented, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Funds' management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with 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 February 28, 2005 by
correspondence with the custodian and brokers, provide a reasonable basis for
our opinion.
PricewaterhouseCoopers LLP
New York, New York
April 25, 2005
128
<Page>
SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED)
A Special Meeting of Shareholders of J.P. Morgan Funds ("JPMF") was held on
January 20, 2005, and adjourned and reconvened on February 3, 2005, at 522 Fifth
Avenue, New York, New York 10036 for purposes of asking shareholders to consider
the following proposals: To elect thirteen (13) Trustees for each JPMorgan Fund.
A majority of shareholders of the JPMF approved the election of each Trustee by
the following votes:
<Table>
<Caption>
AFFIRMATIVE NEGATIVE
William J. Armstrong 23,945,137 946,540
Roland R. Eppley, Jr. 23,943,509 948,169
John F. Finn 23,946,044 945,633
Dr. Matthew Goldstein 23,983,122 908,556
Robert J. Higgins 23,942,018 949,660
Peter C. Marshall 23,946,044 945,633
Marilyn McCoy 23,983,749 907,928
William G. Morton, Jr. 23,940,389 951,288
Robert A. Oden, Jr. 23,941,453 950,224
Fergus Reid, III 23,940,546 951,131
Frederick W. Ruebeck 23,984,028 907,649
James J. Schonbachler 23,983,122 908,556
Leonard M. Spalding 23,943,509 948,169
</Table>
To approve proposed Agreement and Plan of Reorganization (each, a
"Reorganization Agreement") pursuant to which the Fund would be reorganized as a
corresponding series of J.P. Morgan Mutual Fund Series. The following Fund
approved the Agreement and Plan of Reorganization by the following votes:
<Table>
<Caption>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
JPMorgan Emerging Markets Debt Fund 17,271,301 136,300 693,417 3,205,849
</Table>
129
<Page>
A Special Meeting of Shareholders of J.P. Morgan Institutional Funds ("JPMIF")
was held on January 20, 2005, and adjourned and reconvened on February 3, 2005,
at 522 Fifth Avenue, New York, New York 10036 for purposes of asking
shareholders to consider the following proposals: To elect thirteen (13)
Trustees for each JPMorgan Fund. A majority of shareholders of the JPMIF
approved the election of each Trustee by the following votes:
<Table>
<Caption>
AFFIRMATIVE NEGATIVE
William J. Armstrong 2,570,614,090 22,720,763
Roland R. Eppley, Jr. 2,570,399,817 22,935,037
John F. Finn 2,569,881,278 23,453,575
Dr. Matthew Goldstein 2,570,332,886 23,001,967
Robert J. Higgins 2,569,489,951 23,844,902
Peter C. Marshall 2,569,718,781 23,616,072
Marilyn McCoy 2,569,796,782 23,538,071
William G. Morton, Jr. 2,569,572,614 23,762,240
Robert A. Oden, Jr. 2,569,148,888 24,185,965
Fergus Reid, III 2,570,290,303 23,044,550
Frederick W. Ruebeck 2,569,687,035 23,647,818
James J. Schonbachler 2,570,727,808 22,607,045
Leonard M. Spalding 2,570,279,217 23,055,636
</Table>
To approve proposed Agreement and Plan of Reorganization (each, a
"Reorganization Agreement") pursuant to which each of the Funds would be
reorganized as a corresponding series of J.P. Morgan Mutual Fund Series. The
following Funds approved the Agreement and Plan of Reorganization by the
following votes:
<Table>
<Caption>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
JPMorgan Bond Fund 519,182,831 875,750 265,483 8,673,201
JPMorgan Global Strategic Income Fund 28,454,263 20,142 10,561 1,064,906
JPMorgan Short Term Bond Fund 449,627,214 549,723 39,341 15,332,708
</Table>
130
<Page>
A Special Meeting of Shareholders of J.P. Morgan Mutual Fund Group ("JPMMFG")
was held on January 20, 2005, and adjourned and reconvened on February 3, 2005,
at 522 Fifth Avenue, New York, New York 10036 for purposes of asking
shareholders to consider the following proposals: To elect thirteen (13)
Trustees for each JPMorgan Fund. A majority of shareholders of the JPMMFG
approved the election of each Trustee by the following votes:
<Table>
<Caption>
AFFIRMATIVE NEGATIVE ABSTAIN
William J. Armstrong 128,297,849 3,531,682 261,556
Roland R. Eppley, Jr. 128,420,274 3,409,257 261,556
John F. Finn 128,500,853 3,328,678 261,556
Dr. Matthew Goldstein 128,448,980 3,380,551 261,556
Robert J. Higgins 128,521,979 3,307,551 261,556
Peter C. Marshall 128,497,115 3,331,416 261,556
Marilyn McCoy 128,478,689 3,350,842 261,556
William G. Morton, Jr. 128,470,511 3,359,020 261,556
Robert A. Oden, Jr. 128,476,705 3,352,826 261,556
Fergus Reid, III 128,378,739 3,450,792 261,556
Frederick W. Ruebeck 128,426,489 3,403,042 261,556
James J. Schonbachler 128,537,477 3,292,054 261,556
Leonard M. Spalding 128,197,032 3,632,498 261,556
</Table>
To approve proposed Agreement and Plan of Reorganization (each, a
"Reorganization Agreement") pursuant to which the Fund would be reorganized as a
corresponding series of J.P. Morgan Mutual Fund Series. The necessary quorum was
not met and, as a result, a majority of the shareholders of the Fund did not
approve the Agreement and Plan of Reorganization. The following votes were
represented:
<Table>
<Caption>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
JPMorgan Short Term Bond Fund II 44,881,345 39,939 155,878 3,391,120
</Table>
131
<Page>
To approve the amendment of certain fundamental investment restrictions on
borrowing in order to make them simpler, more flexible and consistent with the
borrowing restrictions for the other JPMorgan Funds. The necessary quorum was
not met and, as a result, a majority of the shareholders of the Fund did not
approve the Agreement and Plan of Reorganization. The following votes were
represented:
<Table>
<Caption>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
JPMorgan Short Term Bond Fund II 44,864,382 41,811 170,968 3,391,120
</Table>
A Special Meeting of Shareholders of J.P. Morgan Series Trust ("JPMST") was held
on January 20, 2005, and adjourned and reconvened on February 3, 2005, at 522
Fifth Avenue, New York, New York 10036 for purposes of asking shareholders to
consider the following proposals: To elect thirteen (13) Trustees for each
JPMorgan Fund. A majority of shareholders of the JPMST approved the election of
each Trustee by the following votes:
<Table>
<Caption>
AFFIRMATIVE NEGATIVE
William J. Armstrong 1,992,936,052 8,575,717
Roland R. Eppley, Jr. 1,993,051,772 8,459,997
John F. Finn 1,993,318,545 8,193,223
Dr. Matthew Goldstein 1,993,320,045 8,191,724
Robert J. Higgins 1,993,309,565 8,202,204
Peter C. Marshall 1,993,308,029 8,203,740
Marilyn McCoy 1,993,308,029 8,203,740
William G. Morton, Jr. 1,993,305,371 8,206,397
Robert A. Oden, Jr. 1,993,298,511 8,213,258
Fergus Reid, III 1,992,861,420 8,650,349
Frederick W. Ruebeck 1,993,251,990 8,259,779
James J. Schonbachler 1,993,126,404 8,385,365
Leonard M. Spalding 1,993,173,822 8,337,947
</Table>
132
<Page>
To approve proposed Agreement and Plan of Reorganization (each, a
"Reorganization Agreement") pursuant to which each of the JPMorgan Funds would
be reorganized as a corresponding series of J.P. Morgan Mutual Fund Series. The
following Fund approved the Agreement and Plan of Reorganization by the
following votes:
<Table>
<Caption>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
JPMorgan Enhanced Income Fund 187,049,628 117,369 1,464,793 --
</Table>
133
<Page>
Hypothetical $1,000 Investment at Beginning of Period
February 28, 2005
(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, September 1, 2004, and continued to hold your
shares at the end of the reporting period, February 28, 2005.
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.
134
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE, ACCOUNT VALUE, SEPTEMBER 1 TO ANNUALIZED
SEPTEMBER 1, 2004 FEBRUARY 28, 2005 FEBRUARY 28, 2005* EXPENSE RATIO
- ---------------------------------------------------------------------------------------------------------------------
BOND FUND
CLASS A
Actual period return $ 1,000 $ 1,025 $ 3.72 0.74%
Hypothetical $ 1,000 $ 1,021 $ 3.71 0.74%
CLASS B
Actual period return $ 1,000 $ 1,021 $ 7.47 1.49%
Hypothetical $ 1,000 $ 1,018 $ 7.45 1.49%
CLASS C
Actual period return $ 1,000 $ 1,021 $ 7.47 1.49%
Hypothetical $ 1,000 $ 1,018 $ 7.45 1.49%
INSTITUTIONAL
Actual period return $ 1,000 $ 1,027 $ 2.46 0.49%
Hypothetical $ 1,000 $ 1,023 $ 2.46 0.49%
SELECT
Actual period return $ 1,000 $ 1,025 $ 3.36 0.67%
Hypothetical $ 1,000 $ 1,022 $ 3.36 0.67%
ULTRA
Actual period return $ 1,000 $ 1,027 $ 2.01 0.40%
Hypothetical $ 1,000 $ 1,023 $ 2.01 0.40%
ENHANCED INCOME FUND
INSTITUTIONAL
Actual period return $ 1,000 $ 1,010 $ 1.00 0.20%
Hypothetical $ 1,000 $ 1,024 $ 1.00 0.20%
EMERGING MARKETS DEBT FUND
SELECT
Actual period return $ 1,000 $ 1,113 $ 6.55 1.25%
Hypothetical $ 1,000 $ 1,019 $ 6.26 1.25%
</Table>
135
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE, ACCOUNT VALUE, SEPTEMBER 1 TO ANNUALIZED
SEPTEMBER 1, 2004 FEBRUARY 28, 2005 FEBRUARY 28, 2005* EXPENSE RATIO
- ---------------------------------------------------------------------------------------------------------------------
GLOBAL STRATEGIC INCOME FUND
CLASS A
Actual period return $ 1,000 $ 1,037 $ 6.16 1.22%
Hypothetical $ 1,000 $ 1,019 $ 6.11 1.22%
CLASS B
Actual period return $ 1,000 $ 1,036 $ 8.33 1.65%
Hypothetical $ 1,000 $ 1,017 $ 8.25 1.65%
CLASS C
Actual period return $ 1,000 $ 1,036 $ 8.33 1.65%
Hypothetical $ 1,000 $ 1,017 $ 8.25 1.65%
INSTITUTIONAL
Actual period return $ 1,000 $ 1,039 $ 3.29 0.65%
Hypothetical $ 1,000 $ 1,022 $ 3.26 0.65%
SELECT
Actual period return $ 1,000 $ 1,038 $ 5.00 0.99%
Hypothetical $ 1,000 $ 1,020 $ 4.96 0.99%
CLASS M
Actual period return $ 1,000 $ 1,036 $ 7.32 1.45%
Hypothetical $ 1,000 $ 1,018 $ 7.25 1.45%
SHORT TERM BOND FUND
CLASS A
Actual period return $ 1,000 $ 1,001 $ 3.72 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.76 0.75%
INSTITUTIONAL
Actual period return $ 1,000 $ 1,004 $ 1.49 0.30%
Hypothetical $ 1,000 $ 1,024 $ 1.51 0.30%
SELECT
Actual period return $ 1,000 $ 1,003 $ 2.88 0.58%
Hypothetical $ 1,000 $ 1,022 $ 2.91 0.58%
</Table>
136
<Page>
<Table>
<Caption>
EXPENSES PAID
BEGINNING ENDING DURING PERIOD
ACCOUNT VALUE, ACCOUNT VALUE, SEPTEMBER 1 TO ANNUALIZED
SEPTEMBER 1, 2004 FEBRUARY 28, 2005 FEBRUARY 28, 2005* EXPENSE RATIO
- ---------------------------------------------------------------------------------------------------------------------
SHORT TERM BOND FUND II
CLASS A
Actual period return $ 1,000 $ 999 $ 3.72 0.75%
Hypothetical $ 1,000 $ 1,021 $ 3.76 0.75%
CLASS M
Actual period return $ 1,000 $ 998 $ 4.90 0.99%
Hypothetical $ 1,000 $ 1,020 $ 4.96 0.99%
SELECT
Actual period return $ 1,000 $ 1,002 $ 2.48 0.50%
Hypothetical $ 1,000 $ 1,023 $ 2.51 0.50%
</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 181/365 (to reflect the one-half year period).
137
<Page>
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<Page>
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<Page>
THIS PAGE IS INTENTIONALLY LEFT BLANK
<Page>
JPMorgan Funds are distributed by JPMorgan Distribution Services, Inc.
Affiliates of JPMorgan Chase & Co. receive fees for providing various 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.
CONTACT JPMORGAN FUNDS DISTRIBUTION SERVICES AT 1-800-480-4111 FOR A FUND
PROSPECTUS. YOU CAN ALSO VISIT US AT www.jpmorganfunds.com. INVESTORS SHOULD
CAREFULLY CONSIDER THE INVESTMENT OBJECTIVES AND RISK AS WELL AS CHARGES AND
EXPENSES OF THE MUTUAL FUND BEFORE INVESTING. THE PROSPECTUS CONTAINS THIS AND
OTHER INFORMATION ABOUT THE MUTUAL FUND. READ THE PROSPECTUS CAREFULLY BEFORE
INVESTING.
No sooner than 30 days after the end of each month, each 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, each 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, each
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 each 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 1-800-480-4111 and on the Commission's website at
www.sec.gov. The Trustees have delegated the authority to vote proxies for
securities owned by each Fund to JPMIM. A copy of each 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. Each 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., 2005 All rights reserved. February 2005.
SAN-INC-205
<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.
NOT APPLICABLE - ONLY FOR ANNUAL REPORTS.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
(a) (1) Disclose that the registrant's board of directors has determined
that the registrant either:
(i) Has at least one audit committee financial expert serving
on its audit committee; or
(ii) Does not have an audit committee financial expert serving
on its audit committee.
(2) If the registrant provides the disclosure required by paragraph
(a)(1)(i) of this Item, it must disclose the name of the audit
committee financial expert and whether that person is
"independent." In order to be considered "independent" for purposes
of this Item, a member of an audit committee may not, other than in
his or her capacity as a member of the audit committee, the board
of directors, or any other board committee:
(i) Accept directly or indirectly any consulting, advisory, or
other compensatory fee from the issuer; or
(ii) Be an "interested person" of the investment company as
defined in Section 2(a)(19) of the Act (15 U.S.C. 80a-
2(a)(19)).
(3) If the registrant provides the disclosure required by paragraph
(a)(1)(ii) of this Item, it must explain why it does not have an
audit committee financial expert.
NOT APPLICABLE - ONLY FOR ANNUAL REPORTS.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for
each of the last two fiscal years for professional services rendered by the
principal accountant for the audit of the registrant's annual financial
statements or services that are normally provided by the accountant in
connection with statutory and regulatory filings or engagements for those fiscal
years.
(b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees
billed in each of the last two fiscal years for assurance and related services
by the principal accountant that are reasonably related to the performance of
the audit of the registrant's financial statements and are not reported under
paragraph (a) of this Item. Registrants shall describe the nature of the
services comprising the fees disclosed under this category.
(c) Disclose, under the caption TAX FEES, the aggregate fees billed in each
of the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning. Registrants shall
describe the nature of the services comprising the fees disclosed under this
category.
(d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed
in each of the last two fiscal years for products and services provided by the
principal accountant, other than the services reported in paragraphs (a) through
(c) of this Item. Registrants shall describe the nature of the services
comprising the fees disclosed under this category.
(e) (1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2) Disclose the percentage of services described in each of paragraphs
(b) through (d) of this Item that were approved by the audit committee pursuant
to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) If greater than 50 percent, disclose the percentage of hours expended
on the principal accountant's engagement to audit the registrant's financial
statements for the most recent fiscal year that were attributed to work
performed by persons other than the principal accountant's full-time, permanent
employees.
<Page>
(g) Disclose the aggregate non-audit fees billed by the registrant's
accountant for services rendered to the registrant, and rendered to the
registrant's investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by another
investment adviser), and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant for
each of the last two fiscal years of the registrant.
(h) Disclose whether the registrant's audit committee of the board of
directors has considered whether the provision of nonaudit services that were
rendered to the registrant's investment adviser (not including any subadviser
whose role is primarily portfolio management and is subcontracted with or
overseen by another investment adviser), and any entity controlling, controlled
by, or under common control with the investment adviser that provides ongoing
services to the registrant that were not pre-approved pursuant to paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the
principal accountant's independence.
NOT APPLICABLE - ONLY FOR ANNUAL REPORTS.
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.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
NOT APPLICABLE.
ITEM 9. 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 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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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 11. 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.
EFFECTIVE FEBRUARY 19, 2005, THE REGISTRANT CHANGED ITS ADMINISTRATOR FROM
JPMORGAN CHASE BANK TO JPMORGAN FUNDS MANAGEMENT, INC. THE ADMINISTRATOR
PREPARES FINANCIAL REPORTS AND ADMINISTRATIVE FILINGS ON BEHALF OF THE
REGISTRANT. ALL PRE-EXISTING POLICIES AND PROCEDURES REMAIN SUBSTANTIALLY THE
SAME.
ITEM 12. EXHIBITS.
(a) File the exhibits listed below as part of this Form. Letter or
number the exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of
the disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit.
NOT APPLICABLE.
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2).
CERTIFICATIONS PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF
1940 ARE ATTACHED HERETO.
(a)(3) Any written solicitation to purchase securities under Rule 23c-1
under the Act (17 CFR 270.23c-1) sent or given during the period covered by the
report by or on behalf of the registrant to 10 or more persons.
NOT APPLICABLE.
(b) A separate or combined certification for each principal executive
officer and principal officer of the registrant as required by Rule 30a-2(b)
under the Act of 1940.
CERTIFICATIONS PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF
1940 ARE ATTACHED HERETO.
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SIGNATURES
[See General Instruction F]
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) J.P. Morgan Mutual Fund Group
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By (Signature and Title)* /s/ George C. W. Gatch
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George C.W. Gatch, President
Date May 9, 2005
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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 May 9, 2005
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By (Signature and Title)* /s/ George C.W. Gatch
-------------------------------------------------------
George C.W. Gatch, President
Date May 9, 2005
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* Print the name and title of each signing officer under his or her signature.
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