-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PKL/3KKr8MZPtO7mbemE+PmQVXOSOhXfn7jjlZpNm5f2Nrdmno1rJujoe7W670zJ 3ZvFikUZo6RlZ04IRe5F1A== 0001047469-04-015966.txt : 20040505 0001047469-04-015966.hdr.sgml : 20040505 20040505145420 ACCESSION NUMBER: 0001047469-04-015966 CONFORMED SUBMISSION TYPE: N-CSRS PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040229 FILED AS OF DATE: 20040505 EFFECTIVENESS DATE: 20040505 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JP MORGAN MUTUAL FUND SELECT GROUP CENTRAL INDEX KEY: 0001023771 IRS NUMBER: 131481191 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-CSRS SEC ACT: 1940 Act SEC FILE NUMBER: 811-07843 FILM NUMBER: 04781158 BUSINESS ADDRESS: STREET 1: 522 FIFTH AVENUE STREET 2: 16TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 800-348-4782 MAIL ADDRESS: STREET 1: J.P. MORGAN FLEMING ASSET MANAGEMENT STREET 2: 522 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: MUTUAL FUND SELECT GROUP DATE OF NAME CHANGE: 19960926 N-CSRS 1 a2135378zn-csrs.txt N-CSRS ----------------------------- OMB APPROVAL ----------------------------- OMB Number: 3235-0570 Expires: November 30, 2005 Estimated average burden hours per response....... 5.0 ----------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07843 --------------------------------------------- J.P. Morgan Mutual Fund Select Group - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 522 Fifth Avenue, New York, NY 10036 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-348-4782 ---------------------------- Date of fiscal year end: August 31, 2004 ------------------------------------------------------- Date of reporting period: September 1, 2003 through February 29, 2004 ------------------------------------------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). [GRAPHIC] JPMORGAN FUNDS SEMI-ANNUAL REPORT FEBRUARY 29 2004 INCOME FUNDS BOND FUND BOND FUND II ENHANCED INCOME FUND FLEMING EMERGING MARKETS DEBT FUND GLOBAL STRATEGIC INCOME FUND SHORT TERM BOND FUND SHORT TERM BOND FUND II STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND [JPMORGAN FLEMING ASSET MANAGEMENT LOGO] [JPMORGAN FLEMING ASSET MANAGEMENT LOGO] JPMORGAN FLEMING ASSET MANAGEMENT is a premier global wealth manager that has been working with affluent investors for over a hundred years. This experience provides us with a keen understanding of the unique needs of the affluent investor's portfolio. The legacy of our experience, coupled with our GLOBAL INTELLECTUAL CAPITAL, is the foundation from which our investment products have been built. We have a worldwide investment presence. This local insight provides us with a global view of every investment decision we make which we believe is crucial in light of the ever-increasing rise of globalization in our marketplace. JPMorgan Fleming Asset Management is an EXPERIENCED PARTNER dedicated to working with your financial advisor to help provide you with a broad array of WEALTH SOLUTIONS. CONTENTS President's Letter 1 Fund Commentaries: 2 Bond Fund 2 Bond Fund II 4 Enhanced Income Fund 6 Fleming Emerging Markets Debt Fund 8 Global Strategic Income Fund 10 Short Term Bond Fund 12 Short Term Bond Fund II 14 Strategic Income Fund 16 U.S. Treasury Income Fund 18 Portfolio of Investments 20 Financial Statements 86 Notes to Financial Statements 100 Financial Highlights 130
HIGHLIGHTS - - US Economy Becomes More Self-Sustaining - - Monetary Policy Maintained by Federal Reserve Board - - JPMorgan Chase and Bank One to Combine Forces Investments in a Fund are not bank deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. You could lose money if you sell when the Fund's share price is lower than when you invested. Past performance is no guarantee for future performance. The general market views expressed in this report are opinions based on current market conditions and are subject to change without notice. These views are not intended to predict the future performance of a Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of any Fund. Prospective investors should refer to the Fund's prospectus for a discussion of the Fund's investment objective, strategies and risks. Call JPMorgan Funds Service Center at (800) 348-4782 for a prospectus containing more complete information about a Fund including management fees and other expenses. Please read it carefully before investing. JPMorgan Funds are distributed by J.P. Morgan Fund Distributors, Inc. JPMORGAN INCOME FUNDS PRESIDENT'S LETTER APRIL 12, 2004 "The economic expansion quickened, beginning the transition from being policy-dependent to becoming self-sustaining." [PHOTO OF GEORGE C.W. GATCH] DEAR SHAREHOLDER: We are pleased to present this semi-annual report for the JPMorgan Income Funds for the six month period ending February 29, 2004. Inside you'll find in-depth information on some of our fixed income funds along with an update from the portfolio management team. ECONOMY BECOMES MORE SELF-SUSTAINING The economic expansion quickened, beginning the transition from being policy-dependent to becoming self-sustaining. Strong profits supported the corporate sector's gradual increase in capital spending and hiring. Yet, with ongoing excess capacity and comparatively high unemployment, consumer price inflation continued to decelerate. During the fourth quarter of 2003, the U.S. gross domestic product (GDP) grew at 4.1%, slightly below the market consensus of 4.5% to 5%. January and February 2004 economic data were mixed, suggesting that the recent pattern of strong growth and stable interest rates would continue. Industrial production rose, and new orders remained near the two-decade high recorded in December. FEDERAL RESERVE BOARD MAINTAINED MONETARY POLICY The Federal Reserve Board (Fed) continued to indicate that it would keep its monetary policy on hold until economic conditions warrant a change. Short-term money market rates remained relatively stable during the period because of the Fed's friendly stance, while longer maturity yields fell in response to mixed economic data, low inflation, and a persistently weak labor market. Treasury yields ended the six-month period notably lower than the peak they reached in early September. The economic climate shows promise. Whatever happens in the coming months, your portfolio managers will continue to work hard on your behalf. Their goal: to obtain the highest possible yields in this low interest rate environment while focusing on the preservation of your principal. IMPORTANT MERGER NEWS As you may know, JPMorgan Chase and Bank One have agreed to combine forces by mid-2004, subject to approval of the Firms' shareholders and certain regulatory agencies. We believe that the merger is compelling both strategically and financially. We believe that the newly combined organization will have top-tier positions in both wholesale and retail financial services, an extensive client base and greater scale. And we will have an extraordinarily talented team that shares common values and a strong client orientation. On behalf of all of us here at JPMorgan Fleming Asset Management, thank you for the trust you have placed in us over the years. We look forward to serving your investment needs for many years to come. Should you have any questions, please feel free to contact the JPMorgan Funds Service Center at 1-800-348-4782. Sincerely, /s/ George C.W. Gatch George C.W. Gatch President JPMorgan Funds JPMORGAN BOND FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 7/26/1993 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 996 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality A Duration 4.3 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Bond Fund, which seeks to provide high total return consistent with moderate risk of capital and maintenance of liquidity, returned 5.55% (Institutional Shares) for the six-month period ending February 29, 2004. This compares to the 4.93% return of its benchmark index, the Lehman Aggregate Bond Index. Previously, the Fund compared its performance to that of the Citigroup Broad Investment Grade Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund benefited from our underweight to Treasury and agency debt as other sectors outperformed. As spreads ground tighter, our sector overweights in residential mortgages and investment-grade corporate bonds added to performance. Also a positive was our security selection within those sectors, particularly our allocation to 5.5% and 6% coupon mortgages and BBB-rated corporate credits. Our duration overweight was a modest detractor, but commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) holdings helped performance as credit performance stabilized and demand increased. Our overweights to high-yield and emerging markets debt also enhanced returns. Q: HOW WAS THE FUND MANAGED? A: We generally maintained a slightly long duration position, focusing on the shortest part of the yield curve to benefit from the accommodative Fed policy. Throughout the period, we underweighted Treasury and agency debt, finding more compelling opportunities in other sectors with more generous yield spreads. As spreads tightened, we overweighted prepayment-sensitive mortgages, then realized profits and pared back our position in January ahead of expected strong supply. We increased our sector exposure to investment-grade corporate bonds, while continuing to sell names that had appreciated significantly and shifting into those with better value. We added to our modest overweight in CMBS as that market continued to outperform and remained positioned in ABS. Taking a bottom-up view of company and country fundamentals, we increased our high yield allocation and maintained a modest allocation to emerging markets debt. 2 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------- CLASS A SHARES Without Sales Charge 4.66% 6.54% 6.68% 6.61% With Sales Charge* (0.09%) 4.91% 5.70% 6.12% CLASS B SHARES Without CDSC 3.41% 5.58% 6.10% 6.32% With CDSC** (1.46%) 4.71% 5.79% 6.32% CLASS C SHARES Without CDSC 4.05% 5.80% 6.23% 6.39% With CDSC*** 3.07% 5.80% 6.23% 6.39% INSTITUTIONAL SHARES 4.47% 6.54% 6.75% 6.75% SELECT SHARES 4.29% 6.35% 6.57% 6.56% ULTRA SHARES 4.66% 6.66% 6.89% 6.84%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and 0% for the ten year period. *** Assumes 1% CDSC for the one year period and 0% thereafter. [CHART] TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
JPMORGAN BOND FUND LEHMAN AGGREGATE CITIGROUP BROAD INVESTMENT LIPPER INTERMEDIATE INVESTMENT (INSTITUTIONAL SHARES) BOND INDEX GRADE BOND INDEX GRADE DEBT FUNDS INDEX Feb-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 Mar-1994 $ 2,940,000 $ 2,925,900 $ 2,925,600 $ 2,935,200 Apr-1994 $ 2,913,540 $ 2,902,493 $ 2,903,658 $ 2,911,131 May-1994 $ 2,918,493 $ 2,902,203 $ 2,903,368 $ 2,905,600 Jun-1994 $ 2,908,570 $ 2,895,818 $ 2,897,271 $ 2,900,370 Jul-1994 $ 2,961,215 $ 2,953,444 $ 2,952,029 $ 2,946,486 Aug-1994 $ 2,964,176 $ 2,956,989 $ 2,955,276 $ 2,951,790 Sep-1994 $ 2,929,199 $ 2,913,521 $ 2,912,720 $ 2,918,434 Oct-1994 $ 2,923,341 $ 2,910,899 $ 2,909,808 $ 2,914,932 Nov-1994 $ 2,913,986 $ 2,904,495 $ 2,902,242 $ 2,907,062 Dec-1994 $ 2,930,013 $ 2,924,536 $ 2,924,299 $ 2,921,307 Jan-1995 $ 2,979,237 $ 2,982,442 $ 2,984,832 $ 2,970,677 Feb-1995 $ 3,047,164 $ 3,053,424 $ 3,054,677 $ 3,033,655 Mar-1995 $ 3,071,541 $ 3,072,050 $ 3,072,394 $ 3,053,677 Apr-1995 $ 3,115,464 $ 3,115,058 $ 3,114,486 $ 3,093,680 May-1995 $ 3,244,756 $ 3,235,611 $ 3,238,131 $ 3,202,269 Jun-1995 $ 3,265,198 $ 3,259,231 $ 3,260,798 $ 3,222,443 Jul-1995 $ 3,252,790 $ 3,252,061 $ 3,254,276 $ 3,215,353 Aug-1995 $ 3,293,450 $ 3,291,411 $ 3,291,701 $ 3,252,973 Sep-1995 $ 3,327,373 $ 3,323,337 $ 3,322,643 $ 3,283,876 Oct-1995 $ 3,375,620 $ 3,366,541 $ 3,367,166 $ 3,326,895 Nov-1995 $ 3,423,216 $ 3,417,039 $ 3,419,694 $ 3,376,466 Dec-1995 $ 3,470,114 $ 3,464,877 $ 3,466,886 $ 3,421,710 Jan-1996 $ 3,494,058 $ 3,487,745 $ 3,490,460 $ 3,444,294 Feb-1996 $ 3,428,369 $ 3,427,059 $ 3,431,123 $ 3,384,363 Mar-1996 $ 3,408,142 $ 3,403,069 $ 3,406,419 $ 3,361,011 Apr-1996 $ 3,384,285 $ 3,384,012 $ 3,381,211 $ 3,341,517 May-1996 $ 3,374,809 $ 3,377,244 $ 3,379,182 $ 3,336,505 Jun-1996 $ 3,417,332 $ 3,422,499 $ 3,422,774 $ 3,375,208 Jul-1996 $ 3,421,432 $ 3,431,740 $ 3,432,015 $ 3,384,659 Aug-1996 $ 3,418,011 $ 3,425,906 $ 3,427,210 $ 3,381,274 Sep-1996 $ 3,475,092 $ 3,485,517 $ 3,486,844 $ 3,437,741 Oct-1996 $ 3,551,544 $ 3,562,895 $ 3,565,298 $ 3,510,278 Nov-1996 $ 3,606,237 $ 3,623,821 $ 3,624,125 $ 3,571,006 Dec-1996 $ 3,584,239 $ 3,590,119 $ 3,592,233 $ 3,539,224 Jan-1997 $ 3,600,010 $ 3,601,249 $ 3,606,243 $ 3,550,195 Feb-1997 $ 3,611,890 $ 3,610,252 $ 3,610,210 $ 3,559,071 Mar-1997 $ 3,571,798 $ 3,570,178 $ 3,573,746 $ 3,520,989 Apr-1997 $ 3,621,446 $ 3,623,731 $ 3,624,851 $ 3,569,226 May-1997 $ 3,656,574 $ 3,658,156 $ 3,658,925 $ 3,600,992 Jun-1997 $ 3,703,013 $ 3,701,688 $ 3,702,466 $ 3,643,484 Jul-1997 $ 3,799,291 $ 3,801,634 $ 3,802,803 $ 3,740,036 Aug-1997 $ 3,766,997 $ 3,769,320 $ 3,770,099 $ 3,706,002 Sep-1997 $ 3,822,372 $ 3,825,106 $ 3,825,519 $ 3,759,369 Oct-1997 $ 3,862,889 $ 3,880,570 $ 3,880,606 $ 3,804,481 Nov-1997 $ 3,876,795 $ 3,898,420 $ 3,898,845 $ 3,815,514 Dec-1997 $ 3,916,726 $ 3,937,794 $ 3,938,614 $ 3,850,235 Jan-1998 $ 3,961,769 $ 3,988,198 $ 3,989,422 $ 3,901,443 Feb-1998 $ 3,963,353 $ 3,985,008 $ 3,986,629 $ 3,895,981 Mar-1998 $ 3,984,756 $ 3,998,557 $ 4,002,177 $ 3,910,396 Apr-1998 $ 4,002,288 $ 4,019,349 $ 4,022,988 $ 3,928,775 May-1998 $ 4,039,910 $ 4,057,533 $ 4,061,609 $ 3,964,134 Jun-1998 $ 4,068,593 $ 4,092,022 $ 4,094,914 $ 3,995,847 Jul-1998 $ 4,076,731 $ 4,100,615 $ 4,103,513 $ 4,003,839 Aug-1998 $ 4,121,982 $ 4,167,455 $ 4,166,297 $ 4,057,891 Sep-1998 $ 4,212,254 $ 4,264,974 $ 4,264,622 $ 4,148,788 Oct-1998 $ 4,179,398 $ 4,242,369 $ 4,245,431 $ 4,115,182 Nov-1998 $ 4,200,295 $ 4,266,551 $ 4,268,781 $ 4,135,758 Dec-1998 $ 4,212,476 $ 4,279,350 $ 4,282,014 $ 4,153,542 Jan-1999 $ 4,237,330 $ 4,309,734 $ 4,313,701 $ 4,179,294 Feb-1999 $ 4,159,786 $ 4,234,313 $ 4,238,211 $ 4,104,903 Mar-1999 $ 4,197,640 $ 4,257,602 $ 4,262,369 $ 4,137,331 Apr-1999 $ 4,218,629 $ 4,271,227 $ 4,276,435 $ 4,151,398 May-1999 $ 4,166,318 $ 4,233,640 $ 4,237,092 $ 4,109,054 Jun-1999 $ 4,138,820 $ 4,220,092 $ 4,222,686 $ 4,095,083 Jul-1999 $ 4,124,334 $ 4,202,368 $ 4,205,795 $ 4,080,750 Aug-1999 $ 4,117,323 $ 4,200,267 $ 4,202,851 $ 4,076,262 Sep-1999 $ 4,154,790 $ 4,248,990 $ 4,253,285 $ 4,121,100 Oct-1999 $ 4,180,135 $ 4,264,711 $ 4,266,045 $ 4,127,282 Nov-1999 $ 4,192,675 $ 4,264,284 $ 4,265,618 $ 4,132,235 Dec-1999 $ 4,188,482 $ 4,243,816 $ 4,245,996 $ 4,113,227 Jan-2000 $ 4,170,891 $ 4,229,811 $ 4,234,108 $ 4,098,419 Feb-2000 $ 4,220,107 $ 4,280,992 $ 4,283,647 $ 4,143,092 Mar-2000 $ 4,272,015 $ 4,337,501 $ 4,339,334 $ 4,194,052 Apr-2000 $ 4,242,538 $ 4,324,922 $ 4,326,316 $ 4,168,049 May-2000 $ 4,233,204 $ 4,322,760 $ 4,322,422 $ 4,160,546 Jun-2000 $ 4,315,751 $ 4,412,673 $ 4,412,761 $ 4,248,750 Jul-2000 $ 4,339,488 $ 4,452,829 $ 4,452,917 $ 4,284,864 Aug-2000 $ 4,414,561 $ 4,517,395 $ 4,516,594 $ 4,344,424 Sep-2000 $ 4,442,373 $ 4,545,854 $ 4,547,307 $ 4,373,097 Oct-2000 $ 4,465,918 $ 4,575,857 $ 4,576,409 $ 4,388,403 Nov-2000 $ 4,541,392 $ 4,650,901 $ 4,650,547 $ 4,458,178 Dec-2000 $ 4,647,206 $ 4,737,408 $ 4,738,443 $ 4,548,233 Jan-2001 $ 4,735,038 $ 4,814,627 $ 4,816,627 $ 4,628,282 Feb-2001 $ 4,769,130 $ 4,856,515 $ 4,859,495 $ 4,672,714 Mar-2001 $ 4,780,576 $ 4,880,797 $ 4,884,764 $ 4,690,938 Apr-2001 $ 4,737,073 $ 4,860,298 $ 4,861,806 $ 4,665,606 May-2001 $ 4,771,180 $ 4,889,460 $ 4,893,894 $ 4,694,533 Jun-2001 $ 4,784,062 $ 4,908,040 $ 4,910,044 $ 4,711,903 Jul-2001 $ 4,875,916 $ 5,017,980 $ 5,023,466 $ 4,826,402 Aug-2001 $ 4,932,964 $ 5,075,686 $ 5,078,724 $ 4,879,493 Sep-2001 $ 4,949,243 $ 5,134,564 $ 5,141,192 $ 4,917,065 Oct-2001 $ 5,066,045 $ 5,241,877 $ 5,245,044 $ 5,017,373 Nov-2001 $ 5,005,759 $ 5,169,539 $ 5,172,662 $ 4,954,154 Dec-2001 $ 4,985,736 $ 5,136,454 $ 5,142,144 $ 4,922,447 Jan-2002 $ 5,034,597 $ 5,178,059 $ 5,182,767 $ 4,957,889 Feb-2002 $ 5,080,915 $ 5,228,286 $ 5,232,521 $ 5,005,981 Mar-2002 $ 5,015,371 $ 5,141,497 $ 5,146,185 $ 4,918,876 Apr-2002 $ 5,094,614 $ 5,241,242 $ 5,243,962 $ 5,007,416 May-2002 $ 5,122,634 $ 5,285,792 $ 5,288,536 $ 5,048,477 Jun-2002 $ 5,128,269 $ 5,331,779 $ 5,327,671 $ 5,045,448 Jul-2002 $ 5,154,936 $ 5,396,293 $ 5,391,070 $ 5,065,630 Aug-2002 $ 5,254,427 $ 5,487,491 $ 5,485,414 $ 5,163,396 Sep-2002 $ 5,326,938 $ 5,576,388 $ 5,572,632 $ 5,219,677 Oct-2002 $ 5,299,770 $ 5,550,737 $ 5,547,555 $ 5,199,843 Nov-2002 $ 5,322,029 $ 5,549,071 $ 5,546,446 $ 5,224,802 Dec-2002 $ 5,427,938 $ 5,663,937 $ 5,661,812 $ 5,331,388 Jan-2003 $ 5,442,050 $ 5,669,035 $ 5,666,341 $ 5,347,915 Feb-2003 $ 5,520,960 $ 5,747,267 $ 5,746,803 $ 5,424,390 Mar-2003 $ 5,514,887 $ 5,742,670 $ 5,741,631 $ 5,424,933 Apr-2003 $ 5,583,823 $ 5,790,334 $ 5,792,158 $ 5,488,404 May-2003 $ 5,679,865 $ 5,898,034 $ 5,899,312 $ 5,590,489 Jun-2003 $ 5,673,049 $ 5,886,238 $ 5,888,694 $ 5,589,371 Jul-2003 $ 5,422,300 $ 5,688,460 $ 5,689,656 $ 5,401,009 Aug-2003 $ 5,464,594 $ 5,726,004 $ 5,728,915 $ 5,442,057 Sep-2003 $ 5,630,171 $ 5,877,743 $ 5,879,012 $ 5,588,448 Oct-2003 $ 5,565,987 $ 5,823,080 $ 5,824,925 $ 5,547,093 Nov-2003 $ 5,593,261 $ 5,837,056 $ 5,841,817 $ 5,561,516 Dec-2003 $ 5,666,532 $ 5,896,594 $ 5,900,236 $ 5,618,243 Jan-2004 $ 5,716,965 $ 5,943,766 $ 5,949,208 $ 5,663,189 Feb-2004 $ 5,766,839 $ 6,007,959 $ 6,012,864 $ 5,718,122
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 7/26/93. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Bond Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Bond Fund, which are similar to the expenses of the Select Shares. Returns for the Ultra Shares prior to 9/10/01 (offering date of the Ultra Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Bond Fund-Ultra, which are lower than the expenses of the Ultra Shares. Returns for the Class A and B Shares prior to 9/10/01 (offering date of the Class A and B Shares) are calculated using the historical expenses of the J.P. Morgan Bond Fund, which are lower than the expenses of the Class A and B Shares. Returns for the Class C Shares prior to 3/31/03 (offering date of the Class C Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class C Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Bond Fund, Lehman Aggregate Bond Index, Citigroup Broad Investment Grade Bond Index, and Lipper Intermediate Investment Grade Debt Funds Index from February 28, 1994 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage backed securities. The Citigroup Broad Investment Grade Bond Index is an unmanaged, market-weighted index that contains approximately 4,700 individually priced investment grade bonds. The Lipper Intermediate Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 3 JPMORGAN BOND FUND II AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 1/1/1997 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 982 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality A+ Duration 4.4 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Bond Fund II, which seeks to provide as high a level of income as is consistent with reasonable risk, returned 5.32% (Select Shares) for the six-month period ending February 29, 2004. This compares to the 4.93% return of its benchmark index, the Lehman Aggregate Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund benefited from our underweight to Treasury and agency debt as other sectors outperformed. As spreads ground tighter, our sector overweights in residential mortgages and investment-grade corporate bonds added to performance. Also a positive was our security selection within those sectors, particularly our allocation to 5.5% and 6% coupon mortgages and BBB-rated corporate credits. Our duration overweight was a modest detractor, but commercial mortgage-backed securities (CMBS) and asset-backed securities (ABS) holdings helped performance as credit performance stabilized and demand increased. Q: HOW WAS THE FUND MANAGED? A: In general, we maintained a slightly long duration position, focusing on the shortest part of the yield curve to benefit from the accommodative Fed policy. Throughout the period, we underweighted Treasury and agency debt, finding more compelling opportunities in other sectors with more generous yield spreads. As spreads tightened, we overweighted prepayment-sensitive mortgages, then realized profits and pared back our position in January ahead of expected strong supply. We increased our sector exposure to investment-grade corporate bonds, while continuing to sell names that had appreciated significantly and shifting into those with better value. We added to our modest overweight in CMBS as that market continued to outperform and remained positioned in ABS. 4 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ---------------------------------------------- CLASS A SHARES Without Sales Charge 4.06% 6.67% 6.48% 6.51% With Sales Charge* (0.64%) 5.05% 5.51% 6.02% CLASS B SHARES Without CDSC 3.07% 5.72% 5.91% 6.23% With CDSC** (1.89%) 4.82% 5.59% 6.23% SELECT SHARES 4.00% 6.69% 6.50% 6.52%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and 0% for the ten year period. [CHART] TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
JPMORGAN BOND FUND II LEHMAN AGGREGATE LIPPER CORPORATE DEBT (SELECT SHARES) BOND INDEX A-RATED FUNDS INDEX Feb-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000 Mar-1994 $ 976,000 $ 975,300 $ 971,200 Apr-1994 $ 967,314 $ 967,498 $ 959,740 May-1994 $ 966,443 $ 967,401 $ 956,381 Jun-1994 $ 964,413 $ 965,273 $ 953,129 Jul-1994 $ 982,159 $ 984,481 $ 971,239 Aug-1994 $ 982,453 $ 985,663 $ 971,530 Sep-1994 $ 967,717 $ 971,174 $ 955,402 Oct-1994 $ 967,233 $ 970,300 $ 952,154 Nov-1994 $ 967,716 $ 968,165 $ 950,821 Dec-1994 $ 965,103 $ 974,845 $ 958,333 Jan-1995 $ 984,985 $ 994,147 $ 975,391 Feb-1995 $ 1,002,025 $ 1,017,808 $ 998,995 Mar-1995 $ 1,011,644 $ 1,024,017 $ 1,006,288 Apr-1995 $ 1,024,088 $ 1,038,353 $ 1,020,678 May-1995 $ 1,066,690 $ 1,078,537 $ 1,066,404 Jun-1995 $ 1,070,956 $ 1,086,410 $ 1,073,976 Jul-1995 $ 1,065,173 $ 1,084,020 $ 1,068,713 Aug-1995 $ 1,081,790 $ 1,097,137 $ 1,083,568 Sep-1995 $ 1,096,178 $ 1,107,779 $ 1,095,271 Oct-1995 $ 1,112,182 $ 1,122,180 $ 1,111,810 Nov-1995 $ 1,128,753 $ 1,139,013 $ 1,130,043 Dec-1995 $ 1,143,766 $ 1,154,959 $ 1,148,237 Jan-1996 $ 1,152,115 $ 1,162,582 $ 1,153,634 Feb-1996 $ 1,133,221 $ 1,142,353 $ 1,127,562 Mar-1996 $ 1,125,175 $ 1,134,356 $ 1,118,428 Apr-1996 $ 1,120,224 $ 1,128,004 $ 1,109,816 May-1996 $ 1,117,759 $ 1,125,748 $ 1,107,375 Jun-1996 $ 1,132,290 $ 1,140,833 $ 1,121,217 Jul-1996 $ 1,134,442 $ 1,143,913 $ 1,123,572 Aug-1996 $ 1,131,492 $ 1,141,969 $ 1,120,426 Sep-1996 $ 1,150,841 $ 1,161,839 $ 1,141,714 Oct-1996 $ 1,174,548 $ 1,187,632 $ 1,169,686 Nov-1996 $ 1,196,747 $ 1,207,940 $ 1,193,547 Dec-1996 $ 1,180,591 $ 1,196,706 $ 1,180,060 Jan-1997 $ 1,183,542 $ 1,200,416 $ 1,181,830 Feb-1997 $ 1,185,554 $ 1,203,417 $ 1,185,967 Mar-1997 $ 1,174,173 $ 1,190,059 $ 1,169,600 Apr-1997 $ 1,191,081 $ 1,207,910 $ 1,186,092 May-1997 $ 1,202,158 $ 1,219,385 $ 1,197,122 Jun-1997 $ 1,217,185 $ 1,233,896 $ 1,213,283 Jul-1997 $ 1,253,701 $ 1,267,211 $ 1,252,351 Aug-1997 $ 1,236,023 $ 1,256,440 $ 1,236,446 Sep-1997 $ 1,253,699 $ 1,275,035 $ 1,257,590 Oct-1997 $ 1,270,749 $ 1,293,523 $ 1,273,812 Nov-1997 $ 1,273,036 $ 1,299,473 $ 1,279,799 Dec-1997 $ 1,284,494 $ 1,312,598 $ 1,293,365 Jan-1998 $ 1,300,293 $ 1,329,399 $ 1,308,756 Feb-1998 $ 1,298,472 $ 1,328,336 $ 1,306,531 Mar-1998 $ 1,302,887 $ 1,332,852 $ 1,311,366 Apr-1998 $ 1,309,532 $ 1,339,783 $ 1,317,398 May-1998 $ 1,322,103 $ 1,352,511 $ 1,331,626 Jun-1998 $ 1,333,738 $ 1,364,007 $ 1,343,477 Jul-1998 $ 1,334,672 $ 1,366,872 $ 1,343,746 Aug-1998 $ 1,354,558 $ 1,389,152 $ 1,355,705 Sep-1998 $ 1,388,558 $ 1,421,658 $ 1,385,937 Oct-1998 $ 1,378,005 $ 1,414,123 $ 1,368,475 Nov-1998 $ 1,381,174 $ 1,422,184 $ 1,383,391 Dec-1998 $ 1,386,561 $ 1,426,450 $ 1,387,818 Jan-1999 $ 1,398,346 $ 1,436,578 $ 1,399,614 Feb-1999 $ 1,372,896 $ 1,411,438 $ 1,368,543 Mar-1999 $ 1,380,585 $ 1,419,201 $ 1,377,575 Apr-1999 $ 1,384,174 $ 1,423,742 $ 1,382,121 May-1999 $ 1,370,748 $ 1,411,213 $ 1,366,365 Jun-1999 $ 1,365,402 $ 1,406,697 $ 1,359,670 Jul-1999 $ 1,359,804 $ 1,400,789 $ 1,353,551 Aug-1999 $ 1,357,900 $ 1,400,089 $ 1,349,897 Sep-1999 $ 1,374,195 $ 1,416,330 $ 1,362,721 Oct-1999 $ 1,377,905 $ 1,421,570 $ 1,364,765 Nov-1999 $ 1,377,767 $ 1,421,428 $ 1,365,720 Dec-1999 $ 1,371,843 $ 1,414,605 $ 1,359,574 Jan-2000 $ 1,369,511 $ 1,409,937 $ 1,356,583 Feb-2000 $ 1,383,617 $ 1,426,997 $ 1,370,963 Mar-2000 $ 1,400,774 $ 1,445,834 $ 1,389,608 Apr-2000 $ 1,384,384 $ 1,441,641 $ 1,378,214 May-2000 $ 1,378,847 $ 1,440,920 $ 1,372,838 Jun-2000 $ 1,405,459 $ 1,470,891 $ 1,403,453 Jul-2000 $ 1,417,827 $ 1,484,276 $ 1,415,382 Aug-2000 $ 1,435,691 $ 1,505,798 $ 1,434,207 Sep-2000 $ 1,446,315 $ 1,515,285 $ 1,442,095 Oct-2000 $ 1,453,402 $ 1,525,286 $ 1,448,152 Nov-2000 $ 1,476,366 $ 1,550,300 $ 1,469,584 Dec-2000 $ 1,510,027 $ 1,579,136 $ 1,499,711 Jan-2001 $ 1,536,755 $ 1,604,876 $ 1,527,605 Feb-2001 $ 1,548,127 $ 1,618,838 $ 1,541,354 Mar-2001 $ 1,554,010 $ 1,626,932 $ 1,546,749 Apr-2001 $ 1,536,449 $ 1,620,099 $ 1,537,932 May-2001 $ 1,543,978 $ 1,629,820 $ 1,548,082 Jun-2001 $ 1,549,382 $ 1,636,013 $ 1,554,275 Jul-2001 $ 1,583,933 $ 1,672,660 $ 1,589,557 Aug-2001 $ 1,598,505 $ 1,691,895 $ 1,607,519 Sep-2001 $ 1,621,204 $ 1,711,521 $ 1,613,788 Oct-2001 $ 1,654,925 $ 1,747,292 $ 1,648,646 Nov-2001 $ 1,632,253 $ 1,723,180 $ 1,628,697 Dec-2001 $ 1,623,765 $ 1,712,151 $ 1,616,482 Jan-2002 $ 1,637,892 $ 1,726,020 $ 1,627,797 Feb-2002 $ 1,651,486 $ 1,742,762 $ 1,639,843 Mar-2002 $ 1,627,044 $ 1,713,832 $ 1,613,606 Apr-2002 $ 1,655,843 $ 1,747,081 $ 1,642,167 May-2002 $ 1,668,262 $ 1,761,931 $ 1,654,647 Jun-2002 $ 1,677,938 $ 1,777,260 $ 1,661,762 Jul-2002 $ 1,695,892 $ 1,798,764 $ 1,671,733 Aug-2002 $ 1,726,587 $ 1,829,164 $ 1,702,325 Sep-2002 $ 1,751,105 $ 1,858,796 $ 1,728,711 Oct-2002 $ 1,743,225 $ 1,850,246 $ 1,711,424 Nov-2002 $ 1,746,711 $ 1,849,690 $ 1,717,585 Dec-2002 $ 1,781,645 $ 1,887,979 $ 1,754,857 Jan-2003 $ 1,784,852 $ 1,889,678 $ 1,758,542 Feb-2003 $ 1,807,877 $ 1,915,756 $ 1,784,217 Mar-2003 $ 1,806,069 $ 1,914,223 $ 1,782,968 Apr-2003 $ 1,827,561 $ 1,930,111 $ 1,802,937 May-2003 $ 1,857,351 $ 1,966,011 $ 1,840,618 Jun-2003 $ 1,854,193 $ 1,962,079 $ 1,836,385 Jul-2003 $ 1,767,602 $ 1,896,153 $ 1,773,397 Aug-2003 $ 1,785,455 $ 1,908,668 $ 1,785,101 Sep-2003 $ 1,839,197 $ 1,959,248 $ 1,834,013 Oct-2003 $ 1,818,598 $ 1,941,027 $ 1,818,791 Nov-2003 $ 1,824,418 $ 1,945,685 $ 1,824,611 Dec-2003 $ 1,846,676 $ 1,965,531 $ 1,842,675 Jan-2004 $ 1,863,111 $ 1,981,255 $ 1,858,153 Feb-2004 $ 1,880,176 $ 2,002,653 $ 1,875,806
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 1/1/97. Returns for the Select Shares prior to 1/1/97 (offering date of the Select Shares) are calculated using performance of a predecessor account and the historical expenses at the level indicated (absent reimbursements) in the Expense Summary for the Fund as disclosed in the Prospectus. The account was not registered with the SEC and was not subject to investment restrictions of registered mutual funds. If the account had been registered, performance may have been adversely affected. Returns for the Class A and B Shares prior to 3/2/01 (offering date of the Class A and B Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class A and B Shares. The graph illustrates comparative performance for $1,000,000 invested in Select Shares of the JPMorgan Bond Fund II, Lehman Aggregate Bond Index, and Lipper Corporate Debt A-Rated Funds Index from February 28, 1994 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Corporate Debt A-Rated Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Select Shares have a $1,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 5 JPMORGAN ENHANCED INCOME FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 11/30/2001 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 410 Primary Benchmark 3 MONTH LIBOR INDEX Average Credit Quality AA- Duration 0.4 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Enhanced Income Fund, which seeks high current income consistent with principal preservation, returned 0.63% (Institutional Shares) for the six-month period ending February 29, 2004. This compares to the 0.58% return of its benchmark index, the 3-month LIBOR Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund outperformed its benchmark during the reporting period mainly because of its allocation to corporate and asset-backed securities (ABS), which experienced spread narrowing and added yield. Mortgages also performed well. Our duration position neither helped nor hurt performance. Q: HOW WAS THE FUND MANAGED? A: Early in the period, we targeted three-year securities because they offered attractive yields. Throughout the first three months, we maintained a longer duration position in the short end of the curve. Stronger economic data at year-end led us to reduce duration, but when it became more likely that the Fed would remain on hold until late 2004, we extended modestly. As interest rates rose, we increased our allocation to floating rate notes, which also enabled us to maintain a more neutral yield curve position. We gradually reduced our significant allocation to mortgage-backed securities (MBS) as interest rates declined and spreads tightened. Because ABS and lower-quality investment-grade corporate names offered attractive yield, we continued to add them selectively. 6 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
SINCE INCEPTION 1 YEAR (11/30/01) --------------------------- INSTITUTIONAL SHARES 0.98% 1.49%
[CHART] LIFE OF FUND PERFORMANCE (11/30/01 TO 2/29/04)
JPMORGAN ENHANCED INCOME FUND LIPPER ULTRA-SHORT (INSTITUTIONAL SHARES) 3 MONTH LIBOR INDEX OBLIGATIONS AVERAGE Nov-2001 $ 3,000,000 $ 3,000,000 $ 3,000,000 Dec-2001 $ 3,005,700 $ 3,005,700 $ 3,004,200 Jan-2002 $ 3,008,706 $ 3,010,509 $ 3,007,805 Feb-2002 $ 3,014,422 $ 3,014,724 $ 3,013,821 Mar-2002 $ 3,020,451 $ 3,019,547 $ 3,012,012 Apr-2002 $ 3,032,231 $ 3,024,681 $ 3,024,663 May-2002 $ 3,037,992 $ 3,029,520 $ 3,032,527 Jun-2002 $ 3,043,764 $ 3,034,367 $ 3,037,682 Jul-2002 $ 3,044,069 $ 3,039,222 $ 3,040,112 Aug-2002 $ 3,047,722 $ 3,044,085 $ 3,047,409 Sep-2002 $ 3,051,684 $ 3,048,651 $ 3,055,637 Oct-2002 $ 3,055,651 $ 3,053,529 $ 3,058,387 Nov-2002 $ 3,061,762 $ 3,058,415 $ 3,064,503 Dec-2002 $ 3,061,150 $ 3,062,391 $ 3,074,310 Jan-2003 $ 3,069,415 $ 3,066,066 $ 3,079,229 Feb-2003 $ 3,071,256 $ 3,069,132 $ 3,088,159 Mar-2003 $ 3,074,635 $ 3,072,815 $ 3,091,556 Apr-2003 $ 3,081,092 $ 3,075,887 $ 3,096,502 May-2003 $ 3,090,643 $ 3,079,271 $ 3,101,456 Jun-2003 $ 3,090,334 $ 3,082,966 $ 3,105,178 Jul-2003 $ 3,073,955 $ 3,086,049 $ 3,099,899 Aug-2003 $ 3,082,255 $ 3,088,826 $ 3,103,929 Sep-2003 $ 3,089,960 $ 3,091,606 $ 3,115,414 Oct-2003 $ 3,084,399 $ 3,094,698 $ 3,113,856 Nov-2003 $ 3,087,791 $ 3,097,793 $ 3,115,413 Dec-2003 $ 3,091,497 $ 3,100,890 $ 3,121,021 Jan-2004 $ 3,095,206 $ 3,103,991 $ 3,126,326 Feb-2004 $ 3,101,488 $ 3,106,785 $ 3,133,830
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 11/30/01. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Enhanced Income Fund, 3 Month LIBOR Index, and the Lipper Ultra-Short Obligations Average from November 30, 2001 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of securities included in the benchmark. The 3 Month LIBOR Index is an abbreviation for the "London Interbank Offered Rate". Similarly to the Fed Funds Rate, it represents the rate at which banks are willing to loan each other reserves. The LIBOR is an average of the rate charged on dollar-denominated deposits traded between banks in London. The benchmark presented is the total return of the 3 Month LIBOR for the period presented. The Lipper Ultra-Short Obligations Average describes the average total returns for all the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 7 JPMORGAN FLEMING EMERGING MARKETS DEBT FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 4/17/1997 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 40 Primary Benchmark EMERGING MARKETS BOND INDEX GLOBAL Average Credit Quality BB Duration 5.8 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Fleming Emerging Markets Debt Fund, which seeks to provide a high total return from a portfolio of fixed-income securities of emerging markets issuers, had a total return of 10.09% (Select Shares) for the six-month period ended February 29, 2004. This compares to the 9.33% return from the Emerging Markets Bond Index Global, the Fund's benchmark. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund benefited from our decision to overweight Brazil and Ecuador. Brazil's credit story continued to improve as economic reforms moved forward, and Ecuador was a direct beneficiary of the strength in oil prices. Higher oil prices were also good for Venezuela but our position modestly detracted from performance because of an underweight we adopted due to ongoing questions about future political leadership in the country. However, the underweight added to performance during the last two months of the period. High credit-quality assets closely tracked U.S. Treasuries, and our underweight benefited the Fund as lower-rated credits outperformed. Detracting was our small overweight to the Dominican Republic, which underperformed as questions about economic liquidity shifted to potential solvency issues. Q: HOW WAS THE FUND MANAGED? A: Emerging Markets Debt performed well in the final four months of 2003, driven by improving fundamentals, easy global liquidity and heavy demand for a relatively undervalued asset class. September was noteworthy for the return to the market of sovereign and corporate issuers. Markets moved higher in response to the strong fourth-quarter 4.1% growth of U.S. gross domestic product (GDP). The Federal Reserve Board announced in December that it would keep its monetary policy on hold until economic conditions warrant a change. However, in January, the Fed revised its language, removing "considerable period" and saying instead it could remain "patient" in regard to an increase in the Federal Funds Rate. The Fed's verbal switch made investors more risk averse and led to widespread profit-taking, a pattern that continued into February. A recovery in the middle of the month was due mostly to the release of weaker U.S. economic data, which suggested that the Fed might not raise short-term rates as soon as the market feared. Issuers added roughly $17 billion of new supply of emerging markets debt in January, the largest month of issuance since 1997, and it was met with strong demand. We overweighted Brazil and other Latin credits early in the period. Notable reductions were in Colombia and the Philippines. We increased our holdings in Russia because of improving credit fundamentals and in Turkey as its fundamental outlook improved. The main drivers of returns in the fourth quarter were Brazil, Ecuador, Turkey and Venezuela. Asia lagged as the high credit quality of this sector allowed for limited spread-tightening versus lower-rated, cheaper assets. Early in 2004, profit-taking followed the Fed's change in language with Venezuela, Brazil and the Dominican Republic suffering the most. The Philippines slipped because of political concerns while Europe performed most strongly, led by Russia. 8 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (4/17/97) --------------------------------------------- SELECT SHARES 23.92% 13.61% 17.96% 10.25%
[CHART] LIFE OF FUND PERFORMANCE (4/17/97 TO 2/29/04)
JPMORGAN FLEMING EMERGING EMERGING MARKETS BOND LIPPER EMERGING MARKETS MARKETS DEBT FUND (SELECT SHARES) INDEX GLOBAL DEBT FUNDS INDEX Apr-1997 $ 1,000,000 $ 1,000,000 $ 1,000,000 Apr-1997 $ 1,020,000 $ 1,000,000 $ 1,000,000 May-1997 $ 1,051,008 $ 1,033,900 $ 1,041,100 Jun-1997 $ 1,068,034 $ 1,056,542 $ 1,073,686 Jul-1997 $ 1,090,036 $ 1,100,178 $ 1,119,855 Aug-1997 $ 1,078,917 $ 1,094,787 $ 1,116,047 Sep-1997 $ 1,105,783 $ 1,125,222 $ 1,151,426 Oct-1997 $ 986,026 $ 1,005,948 $ 1,027,878 Nov-1997 $ 1,034,835 $ 1,048,601 $ 1,067,246 Dec-1997 $ 1,053,462 $ 1,074,291 $ 1,099,050 Jan-1998 $ 1,051,144 $ 1,079,448 $ 1,096,742 Feb-1998 $ 1,080,891 $ 1,107,945 $ 1,127,122 Mar-1998 $ 1,107,373 $ 1,133,096 $ 1,156,427 Apr-1998 $ 1,108,481 $ 1,135,702 $ 1,157,121 May-1998 $ 1,072,455 $ 1,101,404 $ 1,110,026 Jun-1998 $ 1,033,310 $ 1,073,538 $ 1,065,070 Jul-1998 $ 1,045,090 $ 1,079,765 $ 1,073,590 Aug-1998 $ 763,229 $ 784,557 $ 701,591 Sep-1998 $ 808,794 $ 852,343 $ 732,952 Oct-1998 $ 862,417 $ 906,807 $ 778,395 Nov-1998 $ 914,162 $ 969,014 $ 849,152 Dec-1998 $ 885,640 $ 950,312 $ 817,478 Jan-1999 $ 846,141 $ 928,645 $ 793,853 Feb-1999 $ 855,702 $ 937,839 $ 807,428 Mar-1999 $ 920,650 $ 1,000,018 $ 860,718 Apr-1999 $ 1,000,286 $ 1,061,519 $ 922,518 May-1999 $ 930,566 $ 1,006,744 $ 872,148 Jun-1999 $ 974,954 $ 1,045,403 $ 907,819 Jul-1999 $ 949,995 $ 1,027,945 $ 894,293 Aug-1999 $ 944,675 $ 1,028,665 $ 893,309 Sep-1999 $ 977,267 $ 1,060,965 $ 915,374 Oct-1999 $ 1,019,582 $ 1,098,523 $ 953,636 Nov-1999 $ 1,050,782 $ 1,127,963 $ 992,259 Dec-1999 $ 1,115,615 $ 1,180,188 $ 1,044,551 Jan-2000 $ 1,104,459 $ 1,162,013 $ 1,035,359 Feb-2000 $ 1,194,803 $ 1,224,413 $ 1,101,829 Mar-2000 $ 1,237,816 $ 1,257,717 $ 1,128,713 Apr-2000 $ 1,206,376 $ 1,234,575 $ 1,099,818 May-2000 $ 1,163,429 $ 1,206,056 $ 1,067,264 Jun-2000 $ 1,229,744 $ 1,262,259 $ 1,124,255 Jul-2000 $ 1,274,015 $ 1,298,233 $ 1,157,421 Aug-2000 $ 1,311,853 $ 1,339,647 $ 1,192,491 Sep-2000 $ 1,281,681 $ 1,325,178 $ 1,171,384 Oct-2000 $ 1,254,381 $ 1,298,277 $ 1,142,099 Nov-2000 $ 1,232,931 $ 1,293,084 $ 1,134,219 Dec-2000 $ 1,285,330 $ 1,350,239 $ 1,179,928 Jan-2001 $ 1,353,324 $ 1,415,320 $ 1,244,588 Feb-2001 $ 1,332,754 $ 1,396,496 $ 1,230,399 Mar-2001 $ 1,305,966 $ 1,380,856 $ 1,209,975 Apr-2001 $ 1,295,257 $ 1,374,227 $ 1,201,989 May-2001 $ 1,333,078 $ 1,407,346 $ 1,234,803 Jun-2001 $ 1,361,073 $ 1,428,879 $ 1,256,536 Jul-2001 $ 1,272,059 $ 1,354,863 $ 1,203,636 Aug-2001 $ 1,332,354 $ 1,415,561 $ 1,245,642 Sep-2001 $ 1,270,933 $ 1,369,272 $ 1,186,101 Oct-2001 $ 1,278,685 $ 1,369,956 $ 1,201,164 Nov-2001 $ 1,307,072 $ 1,352,421 $ 1,239,121 Dec-2001 $ 1,346,807 $ 1,368,515 $ 1,271,834 Jan-2002 $ 1,379,535 $ 1,393,832 $ 1,297,143 Feb-2002 $ 1,436,509 $ 1,446,101 $ 1,343,840 Mar-2002 $ 1,444,554 $ 1,447,692 $ 1,355,801 Apr-2002 $ 1,455,966 $ 1,461,879 $ 1,371,257 May-2002 $ 1,438,640 $ 1,454,277 $ 1,359,875 Jun-2002 $ 1,344,984 $ 1,380,982 $ 1,268,084 Jul-2002 $ 1,263,344 $ 1,318,423 $ 1,192,886 Aug-2002 $ 1,360,495 $ 1,414,932 $ 1,278,178 Sep-2002 $ 1,307,572 $ 1,375,738 $ 1,236,381 Oct-2002 $ 1,404,463 $ 1,460,346 $ 1,322,186 Nov-2002 $ 1,452,355 $ 1,501,820 $ 1,365,686 Dec-2002 $ 1,500,864 $ 1,547,926 $ 1,414,578 Jan-2003 $ 1,523,527 $ 1,573,467 $ 1,445,557 Feb-2003 $ 1,577,459 $ 1,623,818 $ 1,498,320 Mar-2003 $ 1,617,211 $ 1,650,123 $ 1,536,227 Apr-2003 $ 1,725,403 $ 1,744,180 $ 1,636,389 May-2003 $ 1,790,623 $ 1,816,564 $ 1,710,027 Jun-2003 $ 1,778,268 $ 1,816,564 $ 1,710,882 Jul-2003 $ 1,722,252 $ 1,752,258 $ 1,661,095 Aug-2003 $ 1,775,470 $ 1,794,837 $ 1,703,453 Sep-2003 $ 1,832,463 $ 1,857,836 $ 1,756,260 Oct-2003 $ 1,854,086 $ 1,866,940 $ 1,767,851 Nov-2003 $ 1,883,566 $ 1,889,903 $ 1,793,132 Dec-2003 $ 1,944,028 $ 1,945,466 $ 1,852,664 Jan-2004 $ 1,957,442 $ 1,955,388 $ 1,864,150 Feb-2004 $ 1,954,794 $ 1,962,232 $ 1,861,540
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 4/17/97. The mountain chart illustrates comparative performance for $1,000,000 invested in the Select Shares of the JPMorgan Fleming Emerging Markets Debt Fund, Emerging Markets Bond Index Global and Lipper Emerging Markets Debt Funds Index from April 17, 1997 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Emerging Markets Bond Index Global is an unmanaged index which tracks total return for external currency-denominated debt (Brady bonds, loans, Eurobonds and U.S. dollar-denominated local market instruments) in emerging markets. The Lipper Emerging Markets Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. The Select Shares have a minimum investment of $1,000,000 and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 9 JPMORGAN GLOBAL STRATEGIC INCOME FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 3/17/1997 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 56 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality BBB+ Duration 4.5 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Global Strategic Income Fund, which seeks to provide high total return from a portfolio of fixed income securities of foreign and domestic issuers, had a total return of 5.49% (Institutional shares) for the six-month period ended February 29, 2004. This compares to the 4.93% return of the Lehman Aggregate Bond Index, the Fund's benchmark. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: Our overweight to high-yield debt added to performance at a time when investors sought higher yielding securities. Another successful strategy was our overweight to emerging markets debt. The Fund benefited from successful security selection and our underweight in the residential mortgage sector. Our commercial mortgage-backed securities (CMBS) overweight was a positive as was our underweight to Treasury and agency debt. Conversely, the Fund's non-dollar international position detracted from performance. Q: HOW WAS THE FUND MANAGED? A: As fundamental credit quality continued to improve, we increased our allocation to high yield and emerging markets debt, choosing our individual holdings by taking a bottom-up view of company and country fundamentals. We overweighted CMBS. We underweighted investment-grade corporate bonds and residential mortgages. Within our mortgage holdings, we actively managed coupon selection, particularly 30-year current coupons (i.e., Fannie Mae 5.5% and 6%). Our allocation to Treasuries and agencies was underweight the benchmark index, which is consistent with our strategy. 10 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (3/17/97) --------------------------------------------------- CLASS A SHARES Without Sales Charge 7.73% 4.65% 5.47% 5.37% With Sales Charge* 2.88% 3.05% 4.50% 4.67% INSTITUTIONAL SHARES 8.39% 5.33% 6.03% 5.84% SELECT SHARES 7.89% 4.93% 5.64% 5.49%
* Sales charge for class a shares is 4.50%. [CHART] LIFE OF FUND PERFORMANCE (3/17/97 TO 2/29/04)
JPMORGAN GLOBAL STRATEGIC INCOME LEHMAN AGGREGATE LIPPER MULTI-SECTOR FUND (INSTITUTIONAL SHARES) BOND INDEX INCOME FUNDS INDEX Mar-1997 $ 3,000,000 $ 3,000,000 $ 3,000,000 Mar-1997 $ 2,967,900 $ 3,000,000 $ 3,000,000 Apr-1997 $ 3,018,651 $ 3,045,000 $ 3,026,700 May-1997 $ 3,069,968 $ 3,073,928 $ 3,076,943 Jun-1997 $ 3,114,483 $ 3,110,507 $ 3,120,636 Jul-1997 $ 3,200,131 $ 3,194,491 $ 3,192,098 Aug-1997 $ 3,179,010 $ 3,167,338 $ 3,172,946 Sep-1997 $ 3,242,590 $ 3,214,214 $ 3,237,039 Oct-1997 $ 3,184,548 $ 3,260,820 $ 3,222,149 Nov-1997 $ 3,222,444 $ 3,275,820 $ 3,235,360 Dec-1997 $ 3,256,602 $ 3,308,906 $ 3,267,713 Jan-1998 $ 3,296,658 $ 3,351,260 $ 3,309,213 Feb-1998 $ 3,327,976 $ 3,348,579 $ 3,325,098 Mar-1998 $ 3,358,927 $ 3,359,964 $ 3,361,341 Apr-1998 $ 3,365,980 $ 3,377,436 $ 3,371,089 May-1998 $ 3,369,683 $ 3,409,522 $ 3,364,010 Jun-1998 $ 3,365,302 $ 3,438,503 $ 3,355,600 Jul-1998 $ 3,381,456 $ 3,445,723 $ 3,368,686 Aug-1998 $ 3,260,400 $ 3,501,889 $ 3,169,597 Sep-1998 $ 3,316,479 $ 3,583,833 $ 3,224,114 Oct-1998 $ 3,276,681 $ 3,564,839 $ 3,199,289 Nov-1998 $ 3,327,142 $ 3,585,158 $ 3,312,223 Dec-1998 $ 3,341,116 $ 3,595,914 $ 3,304,605 Jan-1999 $ 3,366,508 $ 3,621,445 $ 3,322,120 Feb-1999 $ 3,322,744 $ 3,558,069 $ 3,277,603 Mar-1999 $ 3,368,597 $ 3,577,639 $ 3,318,573 Apr-1999 $ 3,422,495 $ 3,589,087 $ 3,376,980 May-1999 $ 3,351,307 $ 3,557,503 $ 3,306,401 Jun-1999 $ 3,341,253 $ 3,546,119 $ 3,302,764 Jul-1999 $ 3,331,564 $ 3,531,226 $ 3,295,168 Aug-1999 $ 3,315,239 $ 3,529,460 $ 3,271,443 Sep-1999 $ 3,338,446 $ 3,570,402 $ 3,285,183 Oct-1999 $ 3,361,815 $ 3,583,612 $ 3,289,454 Nov-1999 $ 3,392,407 $ 3,583,254 $ 3,311,164 Dec-1999 $ 3,424,296 $ 3,566,054 $ 3,339,640 Jan-2000 $ 3,390,738 $ 3,554,286 $ 3,308,247 Feb-2000 $ 3,448,719 $ 3,597,293 $ 3,351,916 Mar-2000 $ 3,476,654 $ 3,644,777 $ 3,350,911 Apr-2000 $ 3,451,970 $ 3,634,207 $ 3,303,663 May-2000 $ 3,424,699 $ 3,632,390 $ 3,262,367 Jun-2000 $ 3,502,097 $ 3,707,944 $ 3,345,557 Jul-2000 $ 3,535,017 $ 3,741,686 $ 3,356,263 Aug-2000 $ 3,586,982 $ 3,795,941 $ 3,383,784 Sep-2000 $ 3,592,362 $ 3,819,855 $ 3,353,669 Oct-2000 $ 3,594,518 $ 3,845,066 $ 3,283,242 Nov-2000 $ 3,607,817 $ 3,908,125 $ 3,244,499 Dec-2000 $ 3,696,931 $ 3,980,816 $ 3,327,234 Jan-2001 $ 3,804,511 $ 4,045,704 $ 3,442,024 Feb-2001 $ 3,810,979 $ 4,080,901 $ 3,449,596 Mar-2001 $ 3,786,970 $ 4,101,306 $ 3,390,263 Apr-2001 $ 3,761,976 $ 4,084,080 $ 3,361,107 May-2001 $ 3,793,952 $ 4,108,585 $ 3,390,685 Jun-2001 $ 3,776,121 $ 4,124,198 $ 3,359,490 Jul-2001 $ 3,796,890 $ 4,216,580 $ 3,392,749 Aug-2001 $ 3,850,426 $ 4,265,070 $ 3,437,873 Sep-2001 $ 3,722,977 $ 4,314,545 $ 3,331,299 Oct-2001 $ 3,804,882 $ 4,404,719 $ 3,412,916 Nov-2001 $ 3,869,565 $ 4,343,934 $ 3,445,680 Dec-2001 $ 3,844,413 $ 4,316,133 $ 3,439,133 Jan-2002 $ 3,867,095 $ 4,351,093 $ 3,457,704 Feb-2002 $ 3,870,962 $ 4,393,299 $ 3,469,806 Mar-2002 $ 3,862,059 $ 4,320,370 $ 3,472,929 Apr-2002 $ 3,899,135 $ 4,404,185 $ 3,527,107 May-2002 $ 3,901,084 $ 4,441,621 $ 3,537,335 Jun-2002 $ 3,839,057 $ 4,480,263 $ 3,469,418 Jul-2002 $ 3,799,899 $ 4,534,474 $ 3,424,663 Aug-2002 $ 3,877,416 $ 4,611,107 $ 3,488,704 Sep-2002 $ 3,878,580 $ 4,685,807 $ 3,494,635 Oct-2002 $ 3,902,627 $ 4,664,252 $ 3,505,818 Nov-2002 $ 3,975,216 $ 4,662,853 $ 3,589,256 Dec-2002 $ 4,030,074 $ 4,759,374 $ 3,662,477 Jan-2003 $ 4,053,448 $ 4,763,657 $ 3,709,723 Feb-2003 $ 4,107,764 $ 4,829,396 $ 3,769,821 Mar-2003 $ 4,141,448 $ 4,825,532 $ 3,808,650 Apr-2003 $ 4,238,772 $ 4,865,584 $ 3,934,716 May-2003 $ 4,294,300 $ 4,956,084 $ 4,023,247 Jun-2003 $ 4,301,600 $ 4,946,172 $ 4,053,421 Jul-2003 $ 4,178,575 $ 4,779,981 $ 3,956,950 Aug-2003 $ 4,220,778 $ 4,811,528 $ 3,989,001 Sep-2003 $ 4,318,700 $ 4,939,034 $ 4,105,081 Oct-2003 $ 4,308,767 $ 4,893,101 $ 4,123,144 Nov-2003 $ 4,332,035 $ 4,904,844 $ 4,165,200 Dec-2003 $ 4,395,282 $ 4,954,874 $ 4,254,335 Jan-2004 $ 4,430,444 $ 4,994,513 $ 4,295,177 Feb-2004 $ 4,453,177 $ 5,048,453 $ 4,306,344
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 3/17/97. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Global Strategic Income Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Global Strategic Income Fund, which are similar to the expenses of the Select Shares. Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A Shares) are calculated using the historical expenses of the J.P. Morgan Global Strategic Income Fund, which are lower than the expenses of the Class A Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Global Strategic Income Fund, Lehman Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from March 17, 1997 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Multi-Sector Income Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 11 JPMORGAN SHORT TERM BOND FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 9/13/1993 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 870 Primary Benchmark MERRILL LYNCH 1-3 YEAR TREASURY INDEX Average Credit Quality AA Duration 1.6 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Short Term Bond Fund, which seeks to provide high total return consistent with low volatility of principal, returned 1.80% (Institutional Shares) for the six-month period ending February 29, 2004. This compares to the 1.75% return of its benchmark index, the Merrill Lynch 1-3 Year Treasury Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund outperformed its benchmark during the period mainly due to credit spreads, which narrowed, and its allocation to asset-backed securities (ABS). It also benefited from its allocation to mortgages, which performed well, and the additional yield provided from lower quality corporate and emerging markets credits. The duration positioning slightly detracted from performance. Q: HOW WAS THE FUND MANAGED? A: At the beginning of the reporting period, we maintained a neutral yield curve stance and a modestly longer duration position in the short end of the curve. Stronger economic data at year-end led us to implement a shorter duration position, which was brought back to neutral toward the end of the period as it became more likely that the Fed would remain on hold until late 2004. We took advantage of market volatility to tactically trade our duration position, targeting three-year securities because they offered the most attractive yields. We reduced our significant allocation to mortgage-backed securities (MBS) as interest rates declined and spreads tightened. However, when rates rose, we tactically traded our position. Because they offered attractive yield, we added high-yield and emerging markets debt. 12 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------- CLASS A SHARES Without Sales Charge 1.40% 4.27% 4.82% 5.24% With Sales Charge* (0.10%) 3.74% 4.50% 5.08% INSTITUTIONAL SHARES 1.75% 4.70% 5.22% 5.55% SELECT SHARES 1.48% 4.42% 4.91% 5.28%
* Sales Charge for Class A Shares is 1.50%. [CHART] TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
JPMORGAN SHORT TERM BOND FUND MERRILL LYNCH 1-3 YEAR LIPPER SHORT-TERM INVESTMENT GRADE (INSTITUTIONAL SHARES) TREASURY INDEX DEBT FUNDS INDEX Feb-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000 Mar-1994 $ 2,981,400 $ 2,985,000 $ 2,977,200 Apr-1994 $ 2,968,282 $ 2,974,553 $ 2,965,589 May-1994 $ 2,970,953 $ 2,978,717 $ 2,968,851 Jun-1994 $ 2,980,757 $ 2,987,653 $ 2,971,226 Jul-1994 $ 3,000,729 $ 3,013,347 $ 2,988,459 Aug-1994 $ 3,012,131 $ 3,023,894 $ 3,004,298 Sep-1994 $ 3,004,902 $ 3,016,939 $ 3,000,092 Oct-1994 $ 3,010,611 $ 3,023,576 $ 3,004,892 Nov-1994 $ 3,000,375 $ 3,009,970 $ 2,999,483 Dec-1994 $ 3,006,376 $ 3,016,893 $ 2,992,285 Jan-1995 $ 3,041,250 $ 3,058,828 $ 3,022,806 Feb-1995 $ 3,082,003 $ 3,100,733 $ 3,058,475 Mar-1995 $ 3,101,419 $ 3,118,098 $ 3,075,297 Apr-1995 $ 3,130,573 $ 3,145,849 $ 3,101,744 May-1995 $ 3,189,115 $ 3,200,901 $ 3,158,506 Jun-1995 $ 3,205,379 $ 3,218,186 $ 3,178,089 Jul-1995 $ 3,211,790 $ 3,231,380 $ 3,188,259 Aug-1995 $ 3,234,272 $ 3,250,769 $ 3,209,620 Sep-1995 $ 3,253,355 $ 3,266,697 $ 3,225,026 Oct-1995 $ 3,275,803 $ 3,294,138 $ 3,255,342 Nov-1995 $ 3,304,957 $ 3,323,126 $ 3,282,686 Dec-1995 $ 3,331,066 $ 3,348,714 $ 3,305,337 Jan-1996 $ 3,359,714 $ 3,377,178 $ 3,335,085 Feb-1996 $ 3,337,204 $ 3,362,994 $ 3,322,745 Mar-1996 $ 3,342,543 $ 3,359,967 $ 3,308,125 Apr-1996 $ 3,344,214 $ 3,362,655 $ 3,310,441 May-1996 $ 3,355,585 $ 3,369,717 $ 3,317,062 Jun-1996 $ 3,378,403 $ 3,393,979 $ 3,340,944 Jul-1996 $ 3,387,524 $ 3,407,215 $ 3,354,642 Aug-1996 $ 3,400,397 $ 3,418,800 $ 3,366,384 Sep-1996 $ 3,431,001 $ 3,449,911 $ 3,398,701 Oct-1996 $ 3,472,516 $ 3,488,895 $ 3,435,067 Nov-1996 $ 3,499,949 $ 3,515,760 $ 3,463,578 Dec-1996 $ 3,500,998 $ 3,515,760 $ 3,464,963 Jan-1997 $ 3,518,854 $ 3,532,284 $ 3,482,635 Feb-1997 $ 3,529,410 $ 3,540,408 $ 3,494,476 Mar-1997 $ 3,529,763 $ 3,538,992 $ 3,490,981 Apr-1997 $ 3,554,824 $ 3,568,011 $ 3,518,909 May-1997 $ 3,580,064 $ 3,592,274 $ 3,542,486 Jun-1997 $ 3,602,260 $ 3,617,061 $ 3,567,283 Jul-1997 $ 3,639,724 $ 3,656,848 $ 3,607,950 Aug-1997 $ 3,643,727 $ 3,660,139 $ 3,610,476 Sep-1997 $ 3,673,970 $ 3,687,957 $ 3,638,638 Oct-1997 $ 3,689,401 $ 3,715,247 $ 3,660,833 Nov-1997 $ 3,697,518 $ 3,724,164 $ 3,669,985 Dec-1997 $ 3,724,140 $ 3,749,488 $ 3,692,005 Jan-1998 $ 3,765,850 $ 3,785,858 $ 3,724,126 Feb-1998 $ 3,769,616 $ 3,789,266 $ 3,729,339 Mar-1998 $ 3,784,694 $ 3,804,802 $ 3,744,630 Apr-1998 $ 3,803,996 $ 3,822,684 $ 3,762,229 May-1998 $ 3,826,440 $ 3,842,944 $ 3,782,546 Jun-1998 $ 3,841,363 $ 3,862,928 $ 3,799,567 Jul-1998 $ 3,864,411 $ 3,881,083 $ 3,816,285 Aug-1998 $ 3,891,462 $ 3,929,985 $ 3,842,236 Sep-1998 $ 3,960,730 $ 3,981,861 $ 3,882,964 Oct-1998 $ 3,962,314 $ 4,001,372 $ 3,877,916 Nov-1998 $ 3,967,465 $ 3,997,771 $ 3,887,998 Dec-1998 $ 3,986,509 $ 4,011,763 $ 3,904,717 Jan-1999 $ 4,008,834 $ 4,026,205 $ 3,924,240 Feb-1999 $ 3,990,794 $ 4,007,685 $ 3,911,290 Mar-1999 $ 4,021,922 $ 4,035,338 $ 3,941,798 Apr-1999 $ 4,036,401 $ 4,048,251 $ 3,955,989 May-1999 $ 4,022,274 $ 4,045,822 $ 3,950,846 Jun-1999 $ 4,015,838 $ 4,058,364 $ 3,958,353 Jul-1999 $ 4,021,862 $ 4,071,351 $ 3,962,707 Aug-1999 $ 4,036,340 $ 4,083,158 $ 3,970,632 Sep-1999 $ 4,067,017 $ 4,109,698 $ 3,996,838 Oct-1999 $ 4,082,065 $ 4,120,794 $ 4,005,631 Nov-1999 $ 4,102,067 $ 4,128,624 $ 4,018,850 Dec-1999 $ 4,114,373 $ 4,134,404 $ 4,027,290 Jan-2000 $ 4,118,076 $ 4,132,750 $ 4,028,900 Feb-2000 $ 4,138,666 $ 4,160,440 $ 4,055,088 Mar-2000 $ 4,149,013 $ 4,186,234 $ 4,076,175 Apr-2000 $ 4,169,343 $ 4,197,119 $ 4,076,990 May-2000 $ 4,187,271 $ 4,214,327 $ 4,091,260 Jun-2000 $ 4,209,464 $ 4,258,156 $ 4,136,672 Jul-2000 $ 4,236,825 $ 4,284,982 $ 4,162,320 Aug-2000 $ 4,255,467 $ 4,316,691 $ 4,192,705 Sep-2000 $ 4,291,213 $ 4,347,771 $ 4,228,343 Oct-2000 $ 4,305,803 $ 4,371,249 $ 4,241,028 Nov-2000 $ 4,360,487 $ 4,412,776 $ 4,279,621 Dec-2000 $ 4,411,505 $ 4,465,288 $ 4,324,985 Jan-2001 $ 4,449,003 $ 4,521,104 $ 4,386,400 Feb-2001 $ 4,484,150 $ 4,550,491 $ 4,417,105 Mar-2001 $ 4,515,987 $ 4,588,260 $ 4,448,908 Apr-2001 $ 4,514,632 $ 4,600,649 $ 4,459,585 May-2001 $ 4,540,817 $ 4,626,412 $ 4,487,235 Jun-2001 $ 4,561,251 $ 4,642,142 $ 4,505,632 Jul-2001 $ 4,618,266 $ 4,694,134 $ 4,561,052 Aug-2001 $ 4,651,518 $ 4,721,360 $ 4,590,698 Sep-2001 $ 4,716,639 $ 4,799,263 $ 4,634,310 Oct-2001 $ 4,766,636 $ 4,844,376 $ 4,669,531 Nov-2001 $ 4,743,279 $ 4,833,718 $ 4,646,650 Dec-2001 $ 4,747,074 $ 4,835,651 $ 4,642,004 Jan-2002 $ 4,767,011 $ 4,845,323 $ 4,655,465 Feb-2002 $ 4,786,556 $ 4,868,580 $ 4,668,966 Mar-2002 $ 4,757,837 $ 4,835,474 $ 4,647,956 Apr-2002 $ 4,819,689 $ 4,889,631 $ 4,685,139 May-2002 $ 4,837,522 $ 4,909,190 $ 4,711,376 Jun-2002 $ 4,865,095 $ 4,950,427 $ 4,716,559 Jul-2002 $ 4,917,639 $ 5,010,822 $ 4,730,708 Aug-2002 $ 4,935,834 $ 5,027,859 $ 4,760,512 Sep-2002 $ 4,978,282 $ 5,069,590 $ 4,791,455 Oct-2002 $ 4,995,208 $ 5,081,250 $ 4,794,330 Nov-2002 $ 4,978,724 $ 5,066,007 $ 4,796,248 Dec-2002 $ 5,011,583 $ 5,113,627 $ 4,844,210 Jan-2003 $ 5,032,632 $ 5,113,116 $ 4,851,961 Feb-2003 $ 5,058,299 $ 5,134,591 $ 4,881,073 Mar-2003 $ 5,066,392 $ 5,143,833 $ 4,888,394 Apr-2003 $ 5,084,124 $ 5,153,606 $ 4,909,415 May-2003 $ 5,107,511 $ 5,173,190 $ 4,937,398 Jun-2003 $ 5,109,043 $ 5,180,950 $ 4,946,285 Jul-2003 $ 5,044,159 $ 5,152,973 $ 4,902,758 Aug-2003 $ 5,056,265 $ 5,156,580 $ 4,907,171 Sep-2003 $ 5,108,344 $ 5,203,505 $ 4,958,205 Oct-2003 $ 5,077,183 $ 5,184,252 $ 4,946,306 Nov-2003 $ 5,076,168 $ 5,181,660 $ 4,947,295 Dec-2003 $ 5,107,132 $ 5,211,713 $ 4,972,031 Jan-2004 $ 5,122,454 $ 5,222,137 $ 4,987,942 Feb-2004 $ 5,148,922 $ 5,247,203 $ 5,010,886
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 9/13/93. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Short Term Bond Fund, which are similar to the expenses of the Institutional Shares. The returns presented prior to 9/13/93 are based on the historical expenses of the J.P. Morgan Short Term Bond Fund, which are higher than the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Short Term Bond Fund, which are similar to the expenses of the Select Shares. Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A Shares) are calculated using the historical expenses of the J.P. Morgan Short Term Bond Fund, which are lower than the expenses of the Class A Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Short Term Bond Fund, Merrill Lynch 1-3 Year Treasury Index, and Lipper Short-Term Investment Grade Debt Funds Index from February 28, 1994 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index which measures short-term bond performance. The Lipper Short-Term Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 13 JPMORGAN SHORT TERM BOND FUND II AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 11/30/1990 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 1,491 Primary Benchmark LEHMAN 1-3 YEAR U.S. GOV'T BOND INDEX Average Credit Quality AA Duration 1.6 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Short Term Bond Fund II, which seeks a high level of income consistent with reasonable risk, returned 1.60% (Select Shares) for the six-month period ending February 29, 2004. This compares to the 1.94% return of its benchmark index, the Lehman 1-3 Year U.S. Government Bond Index. Q: WHY DID THE FUND PERFORM THIS WAY? A: The Fund underperformed mainly due to its duration positioning, which was shorter than the benchmark as rates declined through year-end. Adding to performance were credit spreads, which narrowed, and the Fund's allocation to asset-backed securities (ABS). Mortgages also performed well, and the additional yield provided by lower quality corporate securities was a positive contributor. Q: HOW WAS THE FUND MANAGED? A: Early in the period, we maintained a neutral yield curve stance and a modestly longer duration position in the short end of the curve. Stronger economic data at year-end led us to implement a shorter duration position, which was brought back to neutral as it became more likely that the Fed would remain on hold until late 2004. We took advantage of market volatility to tactically trade our duration position, targeting three-year securities because they offered the most attractive yields. We reduced our significant allocation to mortgage-backed securities (MBS) as interest rates declined and spreads tightened. However, when rates rose, we tactically traded our position. Because they offered attractive yield, we continued to selectively add ABS and lower-quality investment-grade corporate names. 14 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------- CLASS A SHARES Without Sales Charge 1.32% 4.07% 4.78% 5.05% With Sales Charge* (0.22%) 3.56% 4.47% 4.89% CLASS M SHARES Without Sales Charge 0.98% 3.77% 4.52% 4.92% With Sales Charge** (0.56%) 3.27% 4.21% 4.76% SELECT SHARES 1.49% 4.33% 5.06% 5.31%
* Sales Charge for Class A Shares is 1.50%. ** Sales Charge for Class M Shares is 1.50%. [CHART] TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
JPMORGAN SHORT-TERM BOND FUND II LEHMAN 1-3 YEAR U.S. LIPPER SHORT-TERM INVESTMENT GRADE (SELECT SHARES) GOV'T BOND INDEX DEBT FUNDS INDEX Feb-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000 Mar-1994 $ 998,700 $ 994,900 $ 992,400 Apr-1994 $ 997,502 $ 991,119 $ 988,530 May-1994 $ 1,000,295 $ 992,408 $ 989,617 Jun-1994 $ 1,004,196 $ 994,889 $ 990,409 Jul-1994 $ 1,009,317 $ 1,003,843 $ 996,153 Aug-1994 $ 1,012,446 $ 1,007,156 $ 1,001,433 Sep-1994 $ 1,013,560 $ 1,004,839 $ 1,000,031 Oct-1994 $ 1,016,702 $ 1,007,150 $ 1,001,631 Nov-1994 $ 1,016,803 $ 1,002,920 $ 999,828 Dec-1994 $ 1,021,379 $ 1,004,826 $ 997,428 Jan-1995 $ 1,029,959 $ 1,018,491 $ 1,007,602 Feb-1995 $ 1,039,537 $ 1,032,343 $ 1,019,492 Mar-1995 $ 1,045,359 $ 1,038,124 $ 1,025,099 Apr-1995 $ 1,051,213 $ 1,047,363 $ 1,033,915 May-1995 $ 1,063,512 $ 1,065,273 $ 1,052,835 Jun-1995 $ 1,069,467 $ 1,071,026 $ 1,059,363 Jul-1995 $ 1,074,494 $ 1,075,310 $ 1,062,753 Aug-1995 $ 1,079,544 $ 1,081,762 $ 1,069,873 Sep-1995 $ 1,084,510 $ 1,087,062 $ 1,075,009 Oct-1995 $ 1,091,776 $ 1,096,085 $ 1,085,114 Nov-1995 $ 1,098,873 $ 1,105,402 $ 1,094,229 Dec-1995 $ 1,105,356 $ 1,113,803 $ 1,101,779 Jan-1996 $ 1,112,983 $ 1,123,270 $ 1,111,695 Feb-1996 $ 1,112,538 $ 1,118,889 $ 1,107,582 Mar-1996 $ 1,115,208 $ 1,117,994 $ 1,102,708 Apr-1996 $ 1,117,996 $ 1,119,112 $ 1,103,480 May-1996 $ 1,121,015 $ 1,121,574 $ 1,105,687 Jun-1996 $ 1,127,853 $ 1,129,762 $ 1,113,648 Jul-1996 $ 1,132,928 $ 1,134,168 $ 1,118,214 Aug-1996 $ 1,136,214 $ 1,138,364 $ 1,122,128 Sep-1996 $ 1,146,212 $ 1,148,723 $ 1,132,900 Oct-1996 $ 1,158,362 $ 1,161,704 $ 1,145,022 Nov-1996 $ 1,167,513 $ 1,170,300 $ 1,154,526 Dec-1996 $ 1,167,513 $ 1,170,534 $ 1,154,988 Jan-1997 $ 1,172,066 $ 1,176,153 $ 1,160,878 Feb-1997 $ 1,175,114 $ 1,178,976 $ 1,164,825 Mar-1997 $ 1,174,409 $ 1,178,033 $ 1,163,660 Apr-1997 $ 1,185,213 $ 1,187,692 $ 1,172,970 May-1997 $ 1,191,851 $ 1,196,006 $ 1,180,829 Jun-1997 $ 1,200,789 $ 1,204,259 $ 1,189,094 Jul-1997 $ 1,214,358 $ 1,217,385 $ 1,202,650 Aug-1997 $ 1,213,387 $ 1,218,603 $ 1,203,492 Sep-1997 $ 1,223,215 $ 1,227,864 $ 1,212,879 Oct-1997 $ 1,230,432 $ 1,236,950 $ 1,220,278 Nov-1997 $ 1,231,786 $ 1,240,043 $ 1,223,328 Dec-1997 $ 1,239,053 $ 1,248,351 $ 1,230,668 Jan-1998 $ 1,251,196 $ 1,260,210 $ 1,241,375 Feb-1998 $ 1,251,446 $ 1,261,344 $ 1,243,113 Mar-1998 $ 1,255,075 $ 1,266,137 $ 1,248,210 Apr-1998 $ 1,260,974 $ 1,272,215 $ 1,254,076 May-1998 $ 1,268,036 $ 1,278,958 $ 1,260,849 Jun-1998 $ 1,274,883 $ 1,285,480 $ 1,266,522 Jul-1998 $ 1,280,748 $ 1,291,522 $ 1,272,095 Aug-1998 $ 1,289,072 $ 1,307,279 $ 1,280,745 Sep-1998 $ 1,307,248 $ 1,324,927 $ 1,294,321 Oct-1998 $ 1,304,765 $ 1,331,419 $ 1,292,639 Nov-1998 $ 1,304,373 $ 1,330,088 $ 1,295,999 Dec-1998 $ 1,308,417 $ 1,335,142 $ 1,301,572 Jan-1999 $ 1,314,828 $ 1,340,216 $ 1,308,080 Feb-1999 $ 1,310,358 $ 1,334,185 $ 1,303,763 Mar-1999 $ 1,319,661 $ 1,343,257 $ 1,313,933 Apr-1999 $ 1,323,620 $ 1,347,421 $ 1,318,663 May-1999 $ 1,322,694 $ 1,346,478 $ 1,316,949 Jun-1999 $ 1,324,149 $ 1,350,383 $ 1,319,451 Jul-1999 $ 1,327,194 $ 1,354,569 $ 1,320,902 Aug-1999 $ 1,329,052 $ 1,358,362 $ 1,323,544 Sep-1999 $ 1,338,887 $ 1,367,191 $ 1,332,279 Oct-1999 $ 1,343,573 $ 1,370,882 $ 1,335,210 Nov-1999 $ 1,345,589 $ 1,373,487 $ 1,339,617 Dec-1999 $ 1,349,087 $ 1,374,723 $ 1,342,430 Jan-2000 $ 1,349,627 $ 1,374,448 $ 1,342,967 Feb-2000 $ 1,357,320 $ 1,383,795 $ 1,351,696 Mar-2000 $ 1,364,242 $ 1,392,097 $ 1,358,725 Apr-2000 $ 1,359,876 $ 1,395,578 $ 1,358,997 May-2000 $ 1,364,228 $ 1,400,741 $ 1,363,753 Jun-2000 $ 1,379,644 $ 1,416,009 $ 1,378,891 Jul-2000 $ 1,389,577 $ 1,425,072 $ 1,387,440 Aug-2000 $ 1,399,721 $ 1,435,902 $ 1,397,568 Sep-2000 $ 1,413,858 $ 1,447,102 $ 1,409,448 Oct-2000 $ 1,418,383 $ 1,454,917 $ 1,413,676 Nov-2000 $ 1,434,127 $ 1,469,029 $ 1,426,540 Dec-2000 $ 1,450,619 $ 1,487,098 $ 1,441,662 Jan-2001 $ 1,466,286 $ 1,506,728 $ 1,462,133 Feb-2001 $ 1,476,843 $ 1,516,522 $ 1,472,368 Mar-2001 $ 1,488,658 $ 1,528,806 $ 1,482,969 Apr-2001 $ 1,490,146 $ 1,533,239 $ 1,486,528 May-2001 $ 1,496,554 $ 1,541,672 $ 1,495,745 Jun-2001 $ 1,501,792 $ 1,547,222 $ 1,501,877 Jul-2001 $ 1,518,162 $ 1,565,325 $ 1,520,351 Aug-2001 $ 1,528,181 $ 1,575,186 $ 1,530,233 Sep-2001 $ 1,548,048 $ 1,601,492 $ 1,544,770 Oct-2001 $ 1,564,457 $ 1,617,507 $ 1,556,510 Nov-2001 $ 1,557,886 $ 1,612,978 $ 1,548,883 Dec-2001 $ 1,555,861 $ 1,613,945 $ 1,547,335 Jan-2002 $ 1,561,151 $ 1,617,819 $ 1,551,822 Feb-2002 $ 1,569,425 $ 1,625,908 $ 1,556,322 Mar-2002 $ 1,560,322 $ 1,614,201 $ 1,549,319 Apr-2002 $ 1,579,514 $ 1,633,733 $ 1,561,713 May-2002 $ 1,585,359 $ 1,640,105 $ 1,570,459 Jun-2002 $ 1,593,603 $ 1,654,702 $ 1,572,186 Jul-2002 $ 1,609,698 $ 1,674,724 $ 1,576,903 Aug-2002 $ 1,616,137 $ 1,681,590 $ 1,586,837 Sep-2002 $ 1,627,935 $ 1,695,211 $ 1,597,152 Oct-2002 $ 1,633,469 $ 1,699,449 $ 1,598,110 Nov-2002 $ 1,629,059 $ 1,694,690 $ 1,598,749 Dec-2002 $ 1,640,137 $ 1,710,959 $ 1,614,737 Jan-2003 $ 1,646,533 $ 1,711,302 $ 1,617,320 Feb-2003 $ 1,652,625 $ 1,719,174 $ 1,627,024 Mar-2003 $ 1,654,939 $ 1,722,612 $ 1,629,465 Apr-2003 $ 1,660,400 $ 1,726,057 $ 1,636,472 May-2003 $ 1,667,374 $ 1,733,134 $ 1,645,799 Jun-2003 $ 1,669,542 $ 1,735,907 $ 1,648,762 Jul-2003 $ 1,647,337 $ 1,724,624 $ 1,634,253 Aug-2003 $ 1,650,796 $ 1,725,314 $ 1,635,724 Sep-2003 $ 1,668,955 $ 1,742,739 $ 1,652,735 Oct-2003 $ 1,657,606 $ 1,735,594 $ 1,648,769 Nov-2003 $ 1,656,943 $ 1,735,247 $ 1,649,098 Dec-2003 $ 1,665,062 $ 1,745,485 $ 1,657,344 Jan-2004 $ 1,669,558 $ 1,749,674 $ 1,662,647 Feb-2004 $ 1,676,987 $ 1,758,772 $ 1,670,295
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 11/30/90. Returns for the Class A Shares prior to 5/6/96 (offering date of the Class A Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class A Shares. Returns for the Class M Shares prior to 7/1/99 (offering date of the Class M Shares) are calculated using the historical expenses of the Class A Shares, which are lower than the expenses of the Class M Shares. The graph illustrates comparative performance for $1,000,000 invested in Select Shares of the JPMorgan Short Term Bond Fund II, Lehman 1-3 Year U.S. Gov't Bond Index, and Lipper Short-Term Investment Grade Debt Funds Index from February 28, 1994 to February 29, 2004. The performance of the Fund assumes reinvestments of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman 1-3 Year U.S. Gov't Bond Index is composed of bonds covered by the U.S. Government Bond Index with maturities of one to three years. The Lipper Short-Term Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Select Shares have a $1,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 15 JPMORGAN STRATEGIC INCOME FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 11/30/1998 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 23 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality BBB Duration 4.6 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan Strategic Income Fund, which seeks to provide a high level of income, had a total return of 6.13% (Class A Shares, without sales charges) for the six-month period ended February 29, 2004. This compares to the 4.93% return of the Lehman Aggregate Bond Index, the Fund's benchmark. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: Our overweight to high-yield securities added to performance at a time when investors sought higher yielding securities. Another successful strategy was our overweight to emerging markets debt. The Fund benefited from successful security selection and our underweight in the residential mortgage sector. Our underweight to Treasury and agency debt enhanced returns. Our non-dollar international position detracted. Q: HOW WAS THE FUND MANAGED? A: As fundamental credit quality continued to improve, we increased our allocation to high yield and emerging markets debt, choosing our individual holdings by taking a bottom-up view of company and country fundamentals. We underweighted investment-grade corporate bonds and residential mortgages. Within our mortgage holdings, we actively managed coupon selection, particularly 30-year current coupons (i.e., Fannie Mae 5.5% and 6%). Our allocation to Treasuries and agencies was underweight the benchmark index, which is consistent with our strategy. 16 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (11/30/98) --------------------------------------------- CLASS A SHARES Without Sales Charge 9.67% 5.81% 5.76% 5.23% With Sales Charge* 4.69% 4.21% 4.78% 4.31% CLASS B SHARES Without CDSC 9.24% 5.30% 5.33% 4.80% With CDSC** 4.24% 4.39% 5.02% 4.66% CLASS C SHARES Without CDSC 9.13% 5.31% 5.33% 4.80% With CDSC*** 8.13% 5.31% 5.33% 4.80% CLASS M SHARES Without Sales Charge 9.46% 5.63% 5.54% 5.00% With Sales Charge**** 6.21% 4.58% 4.90% 4.39%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and since inception. *** Assumes 1% CDSC for the one year period and 0% thereafter. **** Sales Charge on Class M Shares is 3.0%. [CHART] LIFE OF FUND PERFORMANCE (11/30/98 TO 2/29/04)
JPMORGAN STRATEGIC INCOME LIPPER MULTI-SECTOR FUND (CLASS A SHARES) LEHMAN AGGREGATE BOND INDEX INCOME FUNDS INDEX Nov-1998 $ 9,550 $ 10,000 $ 10,000 Dec-1998 $ 9,471 $ 10,030 $ 9,977 Jan-1999 $ 9,445 $ 10,101 $ 10,030 Feb-1999 $ 9,430 $ 9,924 $ 9,895 Mar-1999 $ 9,594 $ 9,979 $ 10,019 Apr-1999 $ 9,776 $ 10,011 $ 10,196 May-1999 $ 9,621 $ 9,923 $ 9,982 Jun-1999 $ 9,701 $ 9,891 $ 9,971 Jul-1999 $ 9,716 $ 9,850 $ 9,949 Aug-1999 $ 9,719 $ 9,845 $ 9,877 Sep-1999 $ 9,792 $ 9,959 $ 9,918 Oct-1999 $ 9,858 $ 9,996 $ 9,931 Nov-1999 $ 9,937 $ 9,995 $ 9,997 Dec-1999 $ 10,075 $ 9,947 $ 10,083 Jan-2000 $ 10,027 $ 9,914 $ 9,988 Feb-2000 $ 10,190 $ 10,034 $ 10,120 Mar-2000 $ 10,155 $ 10,166 $ 10,117 Apr-2000 $ 10,075 $ 10,137 $ 9,974 May-2000 $ 9,959 $ 10,132 $ 9,849 Jun-2000 $ 10,147 $ 10,342 $ 10,101 Jul-2000 $ 10,198 $ 10,437 $ 10,133 Aug-2000 $ 10,277 $ 10,588 $ 10,216 Sep-2000 $ 10,274 $ 10,655 $ 10,125 Oct-2000 $ 10,111 $ 10,725 $ 9,913 Nov-2000 $ 9,981 $ 10,901 $ 9,796 Dec-2000 $ 10,214 $ 11,104 $ 10,045 Jan-2001 $ 10,507 $ 11,285 $ 10,392 Feb-2001 $ 10,531 $ 11,383 $ 10,415 Mar-2001 $ 10,465 $ 11,440 $ 10,236 Apr-2001 $ 10,319 $ 11,392 $ 10,148 May-2001 $ 10,451 $ 11,460 $ 10,237 Jun-2001 $ 10,432 $ 11,504 $ 10,143 Jul-2001 $ 10,512 $ 11,761 $ 10,243 Aug-2001 $ 10,642 $ 11,896 $ 10,379 Sep-2001 $ 10,355 $ 12,034 $ 10,058 Oct-2001 $ 10,589 $ 12,286 $ 10,304 Nov-2001 $ 10,686 $ 12,116 $ 10,403 Dec-2001 $ 10,630 $ 12,039 $ 10,383 Jan-2002 $ 10,680 $ 12,136 $ 10,439 Feb-2002 $ 10,720 $ 12,254 $ 10,476 Mar-2002 $ 10,698 $ 12,051 $ 10,485 Apr-2002 $ 10,815 $ 12,284 $ 10,649 May-2002 $ 10,816 $ 12,389 $ 10,680 Jun-2002 $ 10,594 $ 12,497 $ 10,475 Jul-2002 $ 10,479 $ 12,648 $ 10,339 Aug-2002 $ 10,706 $ 12,862 $ 10,533 Sep-2002 $ 10,702 $ 13,070 $ 10,551 Oct-2002 $ 10,754 $ 13,010 $ 10,584 Nov-2002 $ 11,008 $ 13,006 $ 10,836 Dec-2002 $ 11,153 $ 13,275 $ 11,057 Jan-2003 $ 11,234 $ 13,287 $ 11,200 Feb-2003 $ 11,373 $ 13,471 $ 11,382 Mar-2003 $ 11,439 $ 13,460 $ 11,499 Apr-2003 $ 11,736 $ 13,571 $ 11,879 May-2003 $ 11,876 $ 13,824 $ 12,147 Jun-2003 $ 11,941 $ 13,796 $ 12,238 Jul-2003 $ 11,611 $ 13,333 $ 11,947 Aug-2003 $ 11,751 $ 13,421 $ 12,043 Sep-2003 $ 12,043 $ 13,776 $ 12,394 Oct-2003 $ 12,068 $ 13,648 $ 12,448 Nov-2003 $ 12,126 $ 13,681 $ 12,575 Dec-2003 $ 12,314 $ 13,821 $ 12,844 Jan-2004 $ 12,402 $ 13,931 $ 12,968 Feb-2004 $ 12,476 $ 14,082 $ 13,001
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 11/30/98. All Share Classes, except Class M Shares, were introduced on 11/30/98. Returns for the Class M Shares prior to 10/28/99 (offering date of the Class M Shares) are calculated using the historical expenses of the Class B Shares, which are higher than the expenses of the Class M Shares. The graph illustrates comparative performance for $10,000 invested in Class A Shares of the JPMorgan Strategic Income Fund, Lehman Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from November 30, 1998 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and includes a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Multi-Sector Income Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Class A Shares have a $2,500 minimum initial deposit and carry a 4.50% sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 17 JPMORGAN U.S. TREASURY INCOME FUND AS OF FEBRUARY 29, 2004 (Unaudited) FUND FACTS Fund Inception 9/8/1987 Fiscal Year End AUGUST 31 Net Assets as of 2/29/2004 (In Millions) $ 158 Primary Benchmark LEHMAN U.S. GOV'T BOND INDEX Average Credit Quality GOVERNMENT Duration 5.2 YEARS
Q: HOW DID THE FUND PERFORM? A: JPMorgan U.S. Treasury Income Fund, which seeks to provide investors with monthly dividends while still protecting the value of their investment, returned 4.66% (Class A Shares, without sales charges) for the six-month period ending February 29, 2004. This compares to the 4.56% return of its benchmark index, the Lehman U.S. Gov't Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: Our Treasury overweight was a positive as falling interest rates benefited that sector. Our position in Government National Mortgage Association (GNMA) mortgage-backed securities was a relative detractor as other sectors in the index (Treasury and agency debt) outperformed. Within our GNMA holdings, the Portfolio benefited from our security selection, which focused on 5.5% and 6.0% coupons. Q: HOW WAS THE FUND MANAGED? A: In general, we maintained a slightly long duration position to benefit from the accommodative Fed policy. Because of their attractive yields, we overweighted mortgages issued by GNMA. We actively managed coupon selection, focusing on 30-year current coupon mortgages (i.e., 5.5% and 6%). Ahead of expected strong supply, we realized profits, paring back our GNMA position in January and exiting the position completely in February. Consistent with the Fund's strategy, we did not hold Agency debentures (debt of Freddie Mac or Fannie Mae) throughout the period. Even though they are included in the index, we do not hold them because they are not "full faith and credit" obligations of the U.S. government. 18 AVERAGE ANNUAL TOTAL RETURNS AS OF FEBRUARY 29, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------- CLASS A SHARES Without Sales Charge 2.33% 6.22% 6.47% 6.10% With Sales Charge* (2.27%) 4.60% 5.50% 5.61% CLASS B SHARES Without CDSC 1.59% 5.35% 5.53% 5.41% With CDSC** (3.36%) 4.44% 5.21% 5.41% SELECT SHARES 2.70% 6.46% 6.63% 6.18%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and 0% for the ten year period. [CHART] TEN-YEAR PERFORMANCE (2/28/94 TO 2/29/04)
JPMORGAN U.S. TREASURY INCOME FUND LIPPER GENERAL U.S. TREASURY (CLASS A SHARES) LEHMAN U.S. GOV'T BOND INDEX FUNDS AVERAGE Feb-1994 $ 9,550 $ 10,000 $ 10,000 Mar-1994 $ 9,349 $ 9,775 $ 9,764 Apr-1994 $ 9,259 $ 9,698 $ 9,674 May-1994 $ 9,237 $ 9,685 $ 9,658 Jun-1994 $ 9,205 $ 9,663 $ 9,612 Jul-1994 $ 9,377 $ 9,841 $ 9,794 Aug-1994 $ 9,374 $ 9,843 $ 9,778 Sep-1994 $ 9,202 $ 9,704 $ 9,584 Oct-1994 $ 9,177 $ 9,697 $ 9,559 Nov-1994 $ 9,151 $ 9,680 $ 9,556 Dec-1994 $ 9,206 $ 9,739 $ 9,643 Jan-1995 $ 9,383 $ 9,920 $ 9,829 Feb-1995 $ 9,583 $ 10,133 $ 10,050 Mar-1995 $ 9,637 $ 10,197 $ 10,104 Apr-1995 $ 9,750 $ 10,331 $ 10,237 May-1995 $ 10,125 $ 10,747 $ 10,747 Jun-1995 $ 10,202 $ 10,830 $ 10,836 Jul-1995 $ 10,163 $ 10,790 $ 10,753 Aug-1995 $ 10,268 $ 10,916 $ 10,898 Sep-1995 $ 10,363 $ 11,021 $ 11,022 Oct-1995 $ 10,515 $ 11,188 $ 11,220 Nov-1995 $ 10,666 $ 11,363 $ 11,408 Dec-1995 $ 10,819 $ 11,524 $ 11,601 Jan-1996 $ 10,881 $ 11,594 $ 11,640 Feb-1996 $ 10,630 $ 11,358 $ 11,315 Mar-1996 $ 10,522 $ 11,263 $ 11,188 Apr-1996 $ 10,433 $ 11,191 $ 11,075 May-1996 $ 10,392 $ 11,172 $ 11,042 Jun-1996 $ 10,511 $ 11,316 $ 11,204 Jul-1996 $ 10,545 $ 11,345 $ 11,219 Aug-1996 $ 10,493 $ 11,320 $ 11,136 Sep-1996 $ 10,661 $ 11,508 $ 11,361 Oct-1996 $ 10,890 $ 11,761 $ 11,680 Nov-1996 $ 11,078 $ 11,966 $ 11,963 Dec-1996 $ 10,955 $ 11,843 $ 11,764 Jan-1997 $ 10,950 $ 11,856 $ 11,724 Feb-1997 $ 10,949 $ 11,873 $ 11,717 Mar-1997 $ 10,835 $ 11,747 $ 11,527 Apr-1997 $ 10,979 $ 11,916 $ 11,719 May-1997 $ 11,066 $ 12,019 $ 11,822 Jun-1997 $ 11,183 $ 12,153 $ 11,983 Jul-1997 $ 11,505 $ 12,499 $ 12,483 Aug-1997 $ 11,359 $ 12,375 $ 12,236 Sep-1997 $ 11,519 $ 12,561 $ 12,479 Oct-1997 $ 11,689 $ 12,778 $ 12,772 Nov-1997 $ 11,754 $ 12,843 $ 12,875 Dec-1997 $ 11,870 $ 12,978 $ 13,053 Jan-1998 $ 12,020 $ 13,173 $ 13,277 Feb-1998 $ 11,967 $ 13,137 $ 13,195 Mar-1998 $ 12,001 $ 13,174 $ 13,224 Apr-1998 $ 12,024 $ 13,233 $ 13,259 May-1998 $ 12,155 $ 13,369 $ 13,457 Jun-1998 $ 12,296 $ 13,522 $ 13,666 Jul-1998 $ 12,293 $ 13,542 $ 13,644 Aug-1998 $ 12,626 $ 13,894 $ 14,138 Sep-1998 $ 12,979 $ 14,269 $ 14,578 Oct-1998 $ 12,927 $ 14,221 $ 14,447 Nov-1998 $ 12,896 $ 14,225 $ 14,473 Dec-1998 $ 12,912 $ 14,256 $ 14,483 Jan-1999 $ 12,993 $ 14,339 $ 14,575 Feb-1999 $ 12,618 $ 13,998 $ 14,059 Mar-1999 $ 12,664 $ 14,052 $ 14,081 Apr-1999 $ 12,699 $ 14,085 $ 14,116 May-1999 $ 12,572 $ 13,961 $ 13,925 Jun-1999 $ 12,544 $ 13,933 $ 13,835 Jul-1999 $ 12,519 $ 13,912 $ 13,785 Aug-1999 $ 12,516 $ 13,912 $ 13,750 Sep-1999 $ 12,606 $ 14,025 $ 13,862 Oct-1999 $ 12,618 $ 14,047 $ 13,845 Nov-1999 $ 12,604 $ 14,027 $ 13,798 Dec-1999 $ 12,532 $ 13,936 $ 13,646 Jan-2000 $ 12,543 $ 13,956 $ 13,721 Feb-2000 $ 12,742 $ 14,154 $ 13,988 Mar-2000 $ 12,961 $ 14,403 $ 14,341 Apr-2000 $ 12,915 $ 14,363 $ 14,268 May-2000 $ 12,924 $ 14,371 $ 14,240 Jun-2000 $ 13,140 $ 14,627 $ 14,522 Jul-2000 $ 13,260 $ 14,769 $ 14,689 Aug-2000 $ 13,441 $ 14,987 $ 14,947 Sep-2000 $ 13,474 $ 15,029 $ 14,898 Oct-2000 $ 13,583 $ 15,174 $ 15,074 Nov-2000 $ 13,853 $ 15,473 $ 15,447 Dec-2000 $ 14,114 $ 15,781 $ 15,780 Jan-2001 $ 14,270 $ 15,940 $ 15,863 Feb-2001 $ 14,406 $ 16,122 $ 16,074 Mar-2001 $ 14,466 $ 16,178 $ 16,057 Apr-2001 $ 14,254 $ 16,013 $ 15,732 May-2001 $ 14,325 $ 16,066 $ 15,776 Jun-2001 $ 14,365 $ 16,140 $ 15,866 Jul-2001 $ 14,717 $ 16,527 $ 16,344 Aug-2001 $ 14,873 $ 16,732 $ 16,579 Sep-2001 $ 15,172 $ 17,023 $ 16,745 Oct-2001 $ 15,579 $ 17,462 $ 17,373 Nov-2001 $ 15,149 $ 17,071 $ 16,756 Dec-2001 $ 14,955 $ 16,923 $ 16,523 Jan-2002 $ 15,085 $ 17,033 $ 16,680 Feb-2002 $ 15,228 $ 17,189 $ 16,834 Mar-2002 $ 14,905 $ 16,816 $ 16,364 Apr-2002 $ 15,238 $ 17,217 $ 16,822 May-2002 $ 15,329 $ 17,320 $ 16,891 Jun-2002 $ 15,501 $ 17,562 $ 17,123 Jul-2002 $ 15,862 $ 17,949 $ 17,540 Aug-2002 $ 16,170 $ 18,304 $ 18,045 Sep-2002 $ 16,584 $ 18,733 $ 18,598 Oct-2002 $ 16,429 $ 18,583 $ 18,252 Nov-2002 $ 16,290 $ 18,423 $ 18,082 Dec-2002 $ 16,650 $ 18,869 $ 18,597 Jan-2003 $ 16,610 $ 18,822 $ 18,530 Feb-2003 $ 16,870 $ 19,125 $ 18,914 Mar-2003 $ 16,803 $ 19,069 $ 18,782 Apr-2003 $ 16,874 $ 19,157 $ 18,883 May-2003 $ 17,280 $ 19,655 $ 19,561 Jun-2003 $ 17,190 $ 19,553 $ 19,379 Jul-2003 $ 16,396 $ 18,745 $ 18,284 Aug-2003 $ 16,491 $ 18,850 $ 18,447 Sep-2003 $ 16,993 $ 19,399 $ 19,107 Oct-2003 $ 16,768 $ 19,123 $ 18,765 Nov-2003 $ 16,770 $ 19,146 $ 18,780 Dec-2003 $ 16,931 $ 19,317 $ 18,947 Jan-2004 $ 17,060 $ 19,477 $ 19,118 Feb-2004 $ 17,265 $ 19,711 $ 19,374
Source: Lipper Analytical Services, Inc. Past performance is not indicative of future returns. Investment returns will fluctuate so that an investor's shares when redeemed may be worth more or less than original cost. Please note, current performance may be higher or lower than the performance data shown. Investors should carefully read the fund prospectus which includes information on the fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. The Fund commenced operations on 9/8/87. Returns for the Class B Shares prior to 11/4/93 (offering date of the Class B Shares) are calculated using the historical expenses of the Class A Shares, which are lower than the expenses of the Class B Shares. Returns for the Select Shares prior to 2/16/01 (offering date of the Select Shares) are calculated using the historical expenses of the Class A Shares, which are higher than the expenses of the Select Shares. The graph illustrates comparative performance for $10,000 invested in Class A Shares of the JPMorgan U.S. Treasury Income Fund, Lehman U.S. Gov't Bond Index, and Lipper General U.S. Treasury Funds Average from February 28, 1994 to February 29, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and includes a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman U.S. Gov't Bond Index is composed of the U.S. Treasury Bond Index and the Agency Bond Index and includes U.S. treasury and agency issues. The Lipper General U.S. Treasury Funds Average describes the average total returns for all the funds in the indicated category as defined by Lipper, Inc. Investors cannot invest directly in an index. Class A Shares have a $2,500 minimum initial deposit and carry a 4.50% sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 19 JPMORGAN BOND FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 89.3% U.S. TREASURY SECURITIES -- 7.4% U.S. Treasury Notes & Bonds, $ 11,060 1.50%, 07/31/05 + $ 11,088 1,420 1.88%, 01/31/06 + 1,427 1,720 3.50%, 11/15/06 + 1,788 3,415 2.25%, 02/15/07 + 3,428 3,385 3.38%, 11/15/08 + 3,460 11,000 5.75%, 08/15/10 + 12,530 11,500 7.25%, 05/15/16 @ + 14,682 17,800 8.13%, 08/15/19 + 24,717 12,580 5.38%, 02/15/31 + 13,556 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 86,676 (Cost $84,730) -------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 1.2% 8,090 Federal Home Loan Mortgage Corp., 6.25%, 07/15/32 + 9,095 Federal National Mortgage Association, 2 7.00%, 07/15/05 + 2 3,370 6.40%, 05/14/09 + 3,403 985 4.38%, 09/15/12 + 996 570 7.25%, 05/15/30 + 718 -------------------------------------------------------------------------------------------------- Total U.S. Government Agency Securities 14,214 (Cost $13,731) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 1.8% Federal Republic of Brazil (Brazil), 190 9.25%, 10/22/10 193 1,015 10.00%, 08/07/11 + 1,045 1,484 8.00%, 04/15/14 1,420 490 12.75%, 01/15/20 583 1,974 11.00%, 08/17/40 2,069 1,513 Republic of Colombia (Colombia), 9.75%, 04/09/11 1,732 Russian Federation (Russia), 2,720 8.75%, 07/24/05, Regulation S 2,931 5,150 5.00%, 03/31/30, Regulation S, SUB 5,066 990 Ukraine Government (Ukraine), 6.88%, 03/04/11, # 991 United Mexican States (Mexico), $ 850 7.50%, 01/14/12 $ 975 1,730 5.88%, 01/15/14 1,765 480 11.38%, 09/15/16 712 1,545 8.30%, 08/15/31, MTN 1,796 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 21,278 (Cost $20,263) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 33.0% AEROSPACE -- 0.2% 2,735 General Dynamics Corp., 2.13%, 05/15/06 + 2,737 AUTOMOTIVE -- 3.5% DaimlerChrysler N.A. Holding Corp., 2,155 4.05%, 06/04/08 + 2,166 2,720 6.50%, 11/15/13 + 2,907 Ford Motor Credit Co., 850 6.50%, 01/25/07 + 909 8,370 7.88%, 06/15/10 + 9,363 3,855 7.00%, 10/01/13 + 4,063 General Motors Acceptance Corp., 1,550 2.00%, 05/18/06, MTN, FRN + 1,548 4,790 2.02%, 01/16/07, MTN, FRN + 4,773 4,870 5.85%, 01/14/09 + 5,139 1,300 6.88%, 09/15/11 + 1,402 General Motors Corp., 1,410 8.25%, 07/15/23 + 1,577 2,785 8.38%, 07/15/33 + 3,156 3,120 Hyundai Motor Manufacturing Alabama LLC, 5.30%, 12/19/08, # 3,211 615 TRW Automotive, Inc., 9.38%, 02/15/13 701 -------------------------------------------------------------------------------------------------- 40,915 -------------------------------------------------------------------------------------------------- BANKING -- 6.1% 365 Abbey National Capital Trust I, 8.96%, to 6/30; thereafter FRN, 12/31/49 + 495 2,760 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/29/49, # + 3,073
SEE NOTES TO FINANCIAL STATEMENTS. 20
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 4,405 ANZ Capital Trust I, 5.36%, 12/15/53, # + $ 4,497 250 Bank of America Corp., 4.88%, 09/15/12 + 256 2,000 BBVA Bancomer Capital Trust I (Mexico), 10.50%, 02/16/11, # 2,273 1,290 BNP Paribas Capital Trust, 9.00%, to 10/10; thereafter FRN, 12/31/49, # + 1,658 1,750 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # + 1,707 6,880 HBOS PLC (United Kingdom), 5.38%, to 11/13; thereafter FRN, 12/31/49, # + 7,079 3,955 KBC Bank Fund Trust III, 9.86%, to 11/9; thereafter FRN, 11/29/49, # 5,096 1,590 Korea First Bank (South Korea), 7.27%, to 3/14; thereafter FRN, 03/02/34, # 1,607 1,995 Mizuho Finance Group LTD (Cayman Islands), 5.79%, to 10/15; thereafter FRN, 04/15/14, # 1,994 1,500 Nordea Bank AB (Sweden), 8.95%, to 11/12; thereafter FRN, 12/31/49, # 1,870 1,935 Popular North America, Inc., 4.25%, 04/01/08 1,985 4,905 Rabobank Capital Funding II, 5.26%, 12/31/49, # 5,036 RBS Capital Trust I, 180 6.43%, to 01/34; thereafter FRN, 12/29/49 189 4,265 4.71%, to 07/13; thereafter FRN, 12/29/49 4,172 1,415 Royal Bank of Scotland Group PLC (United Kingdom), 7.65%, to 09/31; thereafter FRN, 12/31/49 1,709 1,940 Sovereign Bank, 4.38%, to 08/08; thereafter FRN, 08/01/13 1,984 1,630 Standard Chartered Bank (United Kingdom), 8.00%, 05/30/31, # 2,044 3,665 SunTrust Bank, 2.50%, 11/01/06 3,704 1,870 Swedbank (Sweden), 9.00%, to 03/17; thereafter FRN, 12/29/49, # 2,348 4,885 U.S. Bank N.A., 2.85%, 11/15/06 4,957 2,735 Washington Mutual, Inc., 4.00%, 01/15/09 2,776 3,930 Westpac Capital Trust III, 5.82%, to 09/30; thereafter FRN, 12/31/49, # 4,166 $ 3,160 Woori Bank (South Korea), 5.75%, to 03/09; thereafter FRN, 03/13/14, # $ 3,235 1,755 Zions Bancorp, 6.00%, 09/15/15 1,894 -------------------------------------------------------------------------------------------------- 71,804 -------------------------------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.1% 680 British Sky Broadcasting PLC (United Kingdom) (Yankee), 8.20%, 07/15/09 + 817 490 Mediacom LLC/Mediacom Capital Corp., 9.50%, 01/15/13 497 -------------------------------------------------------------------------------------------------- 1,314 -------------------------------------------------------------------------------------------------- CHEMICALS -- 0.6% 490 Huntsman International LLC, 9.88%, 03/01/09 539 2,355 ICI Wilmington, Inc., 5.63%, 12/01/13 2,436 810 Lyondell Chemical Co., 10.88%, 05/01/09 812 2,300 Nova Chemicals LTD (Canada), 6.50%, 01/15/12, # 2,372 775 PolyOne Corp., 10.63%, 05/15/10 798 430 The Dow Chemical Co., 7.38%, 11/01/29 + 500 -------------------------------------------------------------------------------------------------- 7,457 -------------------------------------------------------------------------------------------------- COMPUTER SOFTWARE -- 0.1% 595 Unisys Corp., 6.88%, 03/15/10 644 COMPUTERS/COMPUTER HARDWARE -- 0.1% 765 Electronic Data Systems Corp., 6.00%, 08/01/13, Ser. B + 738 CONSTRUCTION -- 0.4% D.R. Horton, Inc., 510 9.75%, 09/15/10 + 616 150 8.50%, 04/15/12 + 171 2,540 KB Home, 5.75%, 02/01/14, # 2,450 170 Pulte Homes, Inc., 6.38%, 05/15/33 168 745 Standard-Pacific Corp., 6.88%, 05/15/11 777 -------------------------------------------------------------------------------------------------- 4,182 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.1% 1,280 Altria Group, Inc., 7.00%, 11/04/13 + 1,404 CONSUMER SERVICES-- 0.0% ^ 490 Iron Mountain, Inc., 6.63%, 01/01/16 475
SEE NOTES TO FINANCIAL STATEMENTS. 21
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED DIVERSIFIED -- 0.5% $ 2,455 General Electric Capital Corp., 6.75%, 03/15/32, Ser. A, MTN + $ 2,814 Hutchison Whampoa International LTD (Hong Kong), 2,320 6.25%, 01/24/14, # 2,386 830 7.45%, 11/24/33, # 872 -------------------------------------------------------------------------------------------------- 6,072 -------------------------------------------------------------------------------------------------- ENVIRONMENTAL SERVICES -- 0.3% Allied Waste North America, Inc., 275 10.00%, 08/01/09, Ser. B + 295 3,205 6.13%, 02/15/14, # + 3,101 -------------------------------------------------------------------------------------------------- 3,396 -------------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 9.5% American General Finance Corp., 4,195 3.00%, 11/15/06, Ser. H, MTN + 4,236 1,065 4.50%, 11/15/07, Ser. H, MTN + 1,117 600 Arch Western Finance LLC, 6.75%, 07/01/13, # + 633 4,790 The Bear Stearns Co., Inc., 1.28%, 01/16/07, Ser. B, MTN, FRN + 4,787 2,155 Capital One Bank, 4.88%, 05/15/08 + 2,260 CIT Group, Inc., 2,500 1.39%, 02/14/05, MTN, FRN + 2,505 5,000 1.39%, 06/19/06, MTN, FRN + 5,007 810 4.75%, 12/15/10, MTN + 833 2,900 Citigroup, Inc., 1.30%, 03/20/06, FRN + 2,906 3,100 Countrywide Home Loans, Inc., 1.27%, 02/17/06, Ser. L, MTN, FRN + 3,098 5,095 Credit Suisse First Boston USA, Inc., 5.13%, 01/15/14 + 5,187 Goldman Sachs Group, Inc., 1,750 1.32%, 02/21/06, Ser. B, MTN, FRN + 1,753 1,820 6.60%, 01/15/12 + 2,066 1,020 4.75%, 07/15/13 + 1,011 2,220 6.35%, 02/15/34 + 2,255 1,475 Household Finance Corp., 1.28%, 02/09/07, MTN, FRN 1,477 HSBC Capital Funding LP (Channel Islands), 4,650 4.61%, to 06/13; thereafter FRN, 12/31/49, # + 4,479 $ 2,665 9.55%, to 06/10; thereafter FRN, 12/31/49, # + $ 3,446 1,865 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 2,307 2,770 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # 2,816 Merrill Lynch & Co., Inc., 1,750 1.57%, 06/13/05, Ser. B, MTN, FRN 1,756 1,660 4.13%, 01/15/09, Ser. C, MTN 1,702 1,900 1.38%, 02/06/09, Ser. C, MTN, FRN 1,897 2,185 Mizuho Preferred Capital Co., LLC, 8.79%, to 06/30; thereafter FRN, 12/31/49, # 2,393 Morgan Stanley, 4,810 1.28%, 01/12/07, FRN 4,813 1,260 3.63%, 04/01/08 1,279 5,510 3.88%, 01/15/09 5,585 2,595 Pricoa Global Funding I, 3.90%, 12/15/08, # 2,636 4,000 SLM Corp., 5.63%, 04/10/07, Ser. A, MTN 4,352 15,990 Special Purpose Accounts Receivable Cooperative Corp. Trust, 1.44%, 05/23/05, Ser. 2003-6, FRN, # 15,989 10,416 Targeted Return Index (TRAINS), 8.67%, to 08/06; thereafter FRN, 08/15/08, Ser. 2003-1, # 11,509 1,820 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 1,958 -------------------------------------------------------------------------------------------------- 110,048 -------------------------------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS-- 0.0% ^ 525 Ingles Markets, Inc., 8.88%, 12/01/11 545 HEALTH CARE/HEALTH CARE SERVICES -- 0.4% 615 Fresenius Medical Care Capital Trust II, 7.88%, 02/01/08 + 667 3,205 HCA, Inc., 5.25%, 11/06/08 + 3,321 2,000 Mariner Health Group, Inc., 9.50%, 04/01/06, Ser. B (d) (f) * 0^^ 245 Medex, Inc., 8.88%, 05/15/13, # 265 820 Tenet Healthcare Corp., 5.00%, 07/01/07 761 -------------------------------------------------------------------------------------------------- 5,014 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 22
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED INSURANCE -- 1.3% Assurant, Inc., $ 1,665 5.63%, 02/15/14, # + $ 1,705 1,150 6.75%, 02/15/34, # + 1,191 2,685 AXA (France), 8.60%, 12/15/30 + 3,497 2,220 Commerce Group, Inc., 5.95%, 12/09/13 + 2,313 1,400 Fund American Companies, Inc., 5.88%, 05/15/13 + 1,455 1,360 Infinity Property & Casualty Corp., 5.50%, 02/18/14, # 1,361 1,680 Prudential Holdings LLC, 8.70%, 12/18/23, # 2,235 1,475 QBE Insurance Group LTD (Australia), 5.65%, to 07/13; thereafter FRN, 07/01/23, SUB # 1,466 -------------------------------------------------------------------------------------------------- 15,223 -------------------------------------------------------------------------------------------------- MANUFACTURING -- 0.1% 980 Bombardier, Inc. (Canada), 6.75%, 05/01/12, # + 1,081 METALS/MINING -- 0.1% 620 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B 662 MULTI-MEDIA -- 0.8% 1,544 Comcast Cable Communications Holdings, Inc., 8.38%, 03/15/13 + 1,906 750 Comcast Corp., 7.05%, 03/15/33 + 826 495 Echostar DBS Corp., 6.38%, 10/01/11, # + 523 655 Liberty Media Corp., 5.70%, 05/15/13 668 600 Medianews Group, Inc., 6.88%, 10/01/13, # 618 720 News America Holdings, Inc., 7.75%, 12/01/45 869 Time Warner, Inc., 3,245 7.63%, 04/15/31 + 3,774 185 7.70%, 05/01/32 + 218 -------------------------------------------------------------------------------------------------- 9,402 -------------------------------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.1% Xerox Corp., $ 270 7.13%, 06/15/10 $ 286 325 7.63%, 06/15/13 346 -------------------------------------------------------------------------------------------------- 632 -------------------------------------------------------------------------------------------------- OIL & GAS -- 1.1% Amerada Hess Corp., 1,255 6.65%, 08/15/11 + 1,388 240 7.30%, 08/15/31 + 261 2,660 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + 2,698 756 Chesapeake Energy Corp., 6.88%, 01/15/16 + 782 1,300 Consolidated Natural Gas Co., 6.25%, 11/01/11, Ser. C + 1,452 30 Devon Financing Corp. ULC, 7.88%, 09/30/31 + 37 2,565 Enterprise Products Partners LP, 7.50%, 02/01/11 + 2,966 1,740 Halliburton Co., 5.50%, 10/15/10, # 1,848 1,508 PEMEX Project Funding Master Trust, 8.63%, 02/01/22 1,713 -------------------------------------------------------------------------------------------------- 13,145 -------------------------------------------------------------------------------------------------- PACKAGING -- 0.2% 565 Crown European Holdings SA (France), 9.50%, 03/01/11 + 636 Owens-Brockway Glass Container, Inc., 1,045 8.88%, 02/15/09 1,136 460 7.75%, 05/15/11 488 -------------------------------------------------------------------------------------------------- 2,260 -------------------------------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.4% 1,325 Abitibi-Consolidated, Inc. (Canada) (Yankee), 6.00%, 06/20/13 + 1,272 2,520 Domtar, Inc. (Canada) (Yankee), 5.38%, 12/01/13 + 2,541 115 Georgia-Pacific Corp., 7.38%, 07/15/08 + 124 1,060 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 1,039 -------------------------------------------------------------------------------------------------- 4,976 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 23
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED PHARMACEUTICALS -- 0.3% Wyeth, $ 1,905 5.50%, 02/01/14 $ 1,982 1,180 6.45%, 02/01/24 1,247 -------------------------------------------------------------------------------------------------- 3,229 -------------------------------------------------------------------------------------------------- PIPELINES -- 0.7% 3,745 Duke Capital Corp., 6.25%, 02/15/13 + 3,996 Kinder Morgan Energy Partners LP 495 7.40%, 03/15/31 583 490 7.30%, 08/15/33 572 2,295 Plains All American Pipeline LP/PAA Finance Corp., 5.63%, 12/15/13, # 2,350 245 Transcontinental Gas Pipeline Corp., 8.88%, 07/15/12, Ser. B 290 245 Williams Companies, Inc., 8.13%, 03/15/12 267 -------------------------------------------------------------------------------------------------- 8,058 -------------------------------------------------------------------------------------------------- PRINTING & PUBLISHING -- 0.3% 2,485 Quebecor World, Inc. (Canada), 6.13%, 11/15/13, # 2,492 Von Hoffmann Corp., 315 10.25%, 03/15/09, # 330 315 10.25%, 03/15/09 330 -------------------------------------------------------------------------------------------------- 3,152 -------------------------------------------------------------------------------------------------- REAL ESTATE -- 0.3% 3,500 Socgen Real Estate Co., LLC, 7.64%, to 09/30; thereafter FRN, 12/31/49, # 4,007 REAL ESTATE INVESTMENT TRUST -- 0.1% 1,535 Istar Financial, Inc., 6.00%, 12/15/10 1,589 RETAILING -- 0.4% 3,245 Safeway, Inc., 4.13%, 11/01/08 3,283 1,740 Toys R US, Inc., 7.38%, 10/15/18 1,769 -------------------------------------------------------------------------------------------------- 5,052 -------------------------------------------------------------------------------------------------- SHIPPING/TRANSPORTATION -- 0.1% 615 Teekay Shipping Corp. (Bahamas), 8.88%, 07/15/11 701 STEEL -- 0.1% $ 765 United States Steel Corp., 9.75%, 05/15/10 $ 863 TELECOMMUNICATIONS -- 3.0% 1,255 AT&T Corp., 8.75%, 11/15/31 + 1,479 AT&T Wireless Services, Inc., 1,585 7.88%, 03/01/11 + 1,865 535 8.13%, 05/01/12 + 643 15 8.75%, 03/01/31 + 19 1,665 Citizens Communications Co., 9.25%, 05/15/11 + 1,875 Deutsche Telekom International Finance BV (The Netherlands), 1,185 8.50%, 06/15/10 + 1,441 220 5.25%, 07/22/13 + 225 1,210 8.75%, 06/15/30 + 1,559 France Telecom (France), 645 9.00%, 03/01/11 + 778 1,295 9.75%, 03/01/31 + 1,712 495 Nextel Communications, Inc., 7.38%, 08/01/15 533 2,700 Rogers Wireless Communications, Inc. (Canada), 6.38%, 03/01/14, # 2,720 Sprint Capital Corp., 2,190 6.00%, 01/15/07 2,364 420 7.63%, 01/30/11 484 2,675 8.75%, 03/15/32 3,318 3,370 TCI Communications, Inc., 8.75%, 08/01/15 4,340 4,205 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 4,251 Verizon Global Funding Corp., 1,230 7.38%, 09/01/12 1,449 1,305 7.75%, 12/01/30 1,564 2,155 Verizon New York, Inc., 6.88%, 04/01/12, Ser. A 2,428 -------------------------------------------------------------------------------------------------- 35,047 -------------------------------------------------------------------------------------------------- UTILITIES -- 1.7% 1,000 AEP Texas Central Co., 5.50%, 02/15/13, Ser. D + 1,047 1,725 Alabama Power Co., 2.80%, 12/01/06 + 1,740
SEE NOTES TO FINANCIAL STATEMENTS. 24
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- UTILITIES -- CONTINUED $ 1,395 Arizona Public Service Co., 4.65%, 05/15/15 + $ 1,349 615 Calpine Corp., 8.75%, 07/15/13, # + 566 1,460 DPL, Inc., 6.88%, 09/01/11 + 1,544 DTE Energy Co., 5 7.05%, 06/01/11 + 6 1,225 6.38%, 04/15/33 + 1,228 755 FirstEnergy Corp., 7.38%, 11/15/31, Ser. C + 834 2,285 National Rural Utilities Cooperative Finance Corp., 3.88%, 02/15/08 2,347 Pepco Holdings, Inc., 2,240 6.45%, 08/15/12 2,489 195 7.45%, 08/15/32 228 770 Progress Energy, Inc., 6.85%, 04/15/12 876 775 Reliant Resources, Inc., 9.50%, 07/15/13 841 1,080 Southern California Edison Co., 5.00%, 01/15/14 1,098 3,195 TXU Energy Co., 7.00%, 03/15/13 3,631 -------------------------------------------------------------------------------------------------- 19,824 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 385,648 (Cost $371,254) -------------------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 23.9% COLLATERALIZED MORTGAGE OBLIGATIONS -- 4.0% 9,110 Countrywide Home Loans, 5.50%, 08/25/33, Ser. 2003-29, Class A1 + 9,279 Federal Home Loan Mortgage Corp., 599 2.44%, 08/15/31, Ser. 2570, Class FQ, FRN + 600 7,189 6.00%, 02/01/33, Ser. 244, IO + 1,258 3,087 Federal National Mortgage Association, 6.00%, 02/01/33, Ser. 332, Class 2, IO + 560 9,951 MASTR Asset Securitization Trust, 5.50%, 09/25/33, Ser. 2003-8, Class 1A1 10,081 RESI Finance LP (Cayman Islands), 3,959 2.65%, 07/10/35, Ser. 2003-B, Class B3, FRN, # 4,039 COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 6,753 2.50%, 09/10/35, Ser. 2003-C, Class B3, FRN, # $ 6,763 1,293 2.70%, 09/10/35, Ser. 2003-C, Class B4, FRN, # 1,295 6,443 2.40%, 12/10/35, Ser. 2003-D, Class B3, FRN, # 6,459 2,106 2.60%, 12/10/35, Ser. 2003-D, Class B4, FRN, # 2,112 3,135 RMAC (United Kingdom), 1.23%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 3,136 1,649 SACO I, Inc., 7.00%, 08/25/36, Ser. 1997-2, Class 1A5, # + 1,691 -------------------------------------------------------------------------------------------------- 47,273 -------------------------------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 19.9% 25,500 Federal Home Loan Mortgage Corp., 5.50%, 03/15/34, Gold Pool, TBA 26,098 Federal National Mortgage Association, 59,000 5.00%, 03/25/19, TBA 60,567 0^^ 8.00%, 08/01/22, Pool 50617 + 0^^ 50,098 5.50%, 11/01/33, TBA + 51,292 55,500 5.50%, 03/25/34, TBA 56,766 36,500 Government National Mortgage Association, 5.50%, 03/15/34, TBA 37,470 -------------------------------------------------------------------------------------------------- 232,193 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 279,466 (Cost $279,175) COMMERCIAL MORTGAGE BACKED SECURITIES -- 4.0% 9,580 Capital One Multi-Asset Execution Trust, 2.34%, 12/15/10, Ser. 2003-A, FRN, # + 9,894 10,000 Commercial Mortgage Acceptance Corp., 6.92%, 09/15/30, Ser. 1998-C2, Class D, FRN + 11,248 8,625 Credit Suisse First Boston Mortgage Securities Corp., 4.90%, 12/15/36, Ser. 2003-C5, Class A4 + 8,834
SEE NOTES TO FINANCIAL STATEMENTS. 25
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- CONTINUED $ 4,000 GS Mortgage Securities Corp. II, 6.73%, 02/10/16, Ser. 2001-LIBA, Class E, # + $ 4,355 LB-UBS Commercial Mortgage Trust, 3,505 4.69%, 07/16/32, Ser. 2003-C5, Class A4, FRN 3,546 8,780 4.93%, 09/15/35, Ser. 2003-C7, Class A4, FRN 9,028 -------------------------------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 46,905 (Cost $44,237) -------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 16.2% AmeriCredit Automobile Receivables Trust, 2,065 2.75%, 10/09/07, Ser. 2003-CF, Class A3 + 2,098 5,175 1.32%, 12/06/07, Ser. 2003-DM, Class A3B, FRN + 5,193 3,300 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 3,390 2,790 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 2,809 7,550 Bank One Issuance Trust, 2.23%, 12/15/10, Ser. 2003-C2, Class C2, FRN + 7,577 4,595 Capital Auto Receivables Asset Trust, 1.96%, 01/15/09, Ser. 2003-2, Class A4A + 4,529 1,140 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 1,140 Capital One Master Trust, 3,930 1.89%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 3,943 6,480 4.60%, 08/17/09, Ser. 2001-8A, Class A + 6,853 7,340 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 + 7,434 $ 3,075 Citibank Credit Card Issuance Trust, 5.00%, 06/10/15, Ser. 2003-C4, Class C4 + $ 3,072 4,418 Citigroup Mortgage Loan Trust, Inc., 1.47%, 12/25/33, Ser. 2003-HE3, Class A, FRN + 4,418 Countrywide Asset-Backed Certificates, 1,975 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 2,016 1,785 5.41%, 01/25/34, Ser. 2003-5, Class MF1 + 1,846 1,320 1.59%, 03/25/34, Ser. 2004-1, Class M1, FRN + 1,320 1,080 1.64%, 03/25/34, Ser. 2004-1, Class M2, FRN + 1,080 2,000 1.32%, 04/25/34, Ser. 2004-BC1, Class A1, FRN 2,000 DaimlerChrysler Auto Trust, 5,000 3.53%, 12/06/07, Ser. 2002-B, Class A4 + 5,133 1,385 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 1,406 4,415 Discover Card Master Trust I, 1.14%, 05/16/07, Ser. 2002-5, Class A, FRN + 4,416 6,115 First USA Credit Card Master Trust, 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN + 6,116 8,155 Honda Auto Receivables Owner Trust, 2.48%, 07/18/08, Ser. 2003-1, Class A4 8,238 15,395 Household Automotive Trust, 4.37%, 12/17/08, Ser. 2001-3, Class A4 15,885 Long Beach Mortgage Loan Trust, 7,960 1.40%, 02/25/34, Ser. 2004-1, Class A3, FRN 7,971 2,030 1.60%, 03/25/34, Ser. 2004-1, Class M1, FRN 2,036 1,360 1.65%, 03/25/34, Ser. 2004-1, Class M2, FRN 1,361 1,905 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 1,930
SEE NOTES TO FINANCIAL STATEMENTS. 26
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES -- CONTINUED $ 3,000 MBNA Credit Card Master Note Trust, 2.24%, 12/15/13, Ser. 2001-C2, Class C2, FRN, # $ 3,055 3,285 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 3,273 3,130 Onyx Acceptance Grantor Trust, 2.66%, 05/17/10, Ser. 2003-C, Class A4 3,144 Option One Mortgage Loan Trust, 4,752 1.51%, 02/25/33, Ser. 2003-1, Class A2, FRN 4,777 2,911 1.41%, 08/25/33, Ser. 2003-5, Class A2, FRN 2,916 5,998 PP&L Transition Bond Co., LLC, 7.15%, 06/25/09, Ser. 1999-1, Class A8 6,944 4,080 Residential Asset Securities Corp., 1.41%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN 4,080 Residential Asset Securities Corp., 2,554 1.34%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 2,553 5,765 1.38%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN 5,758 26 Sears Credit Account Master Trust, 7.00%, 07/15/08, Ser. 1996-3, Class A 26 SLM Student Loan Trust, 8,410 1.23%, 12/17/12, Ser. 2003-12, Class A2, FRN 8,410 4,975 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 5,017 720 The Money Store Home Equity Trust, 6.49%, 12/15/38, Ser. 1997-D, Class AF7 725 2,580 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 2,620 7,000 Volkswagen Auto Loan Enhanced Trust, 1.93%, 01/20/10, Ser. 2003-1, Class A4 6,927 Wachovia Asset Securitization, Inc., 3,000 1.34%, 11/25/33, Ser. 2003-HE3, Class A, FRN 2,998 $ 3,627 1.52%, 12/25/32, Ser. 2002-HE2, Class A, FRN $ 3,643 5,306 1.35%, 06/25/33, Ser. 2003-HE2, Class AII1, FRN 5,315 2,455 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 2,494 -------------------------------------------------------------------------------------------------- Total Asset Backed Securities 189,885 (Cost $188,753) -------------------------------------------------------------------------------------------------- PRIVATE PLACEMENTS -- 1.8% CO-OP APARTMENTS -- 1.8% 4,224 180 East End Ave. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.88%, 12/01/28, # (i) (f) 4,785 740 200 East 57th St. Note, Secured by Second Mortgage and Agreement on Co-op Apartment Building in New York City, 6.72%, 01/01/14, # (i) (f) 827 10,676 200 East 57th St. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.50%, 01/01/40, # (i) (f) 11,703 3,101 81 Irving Place Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.95%, 01/01/29, # (i) (f) 3,503 -------------------------------------------------------------------------------------------------- Total Private Placements 20,818 (Cost $18,741) -------------------------------------------------------------------------------------------------- Total Long-Term Investments 1,044,890 (Cost $1,020,884) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 27
UNITS ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 10.7% OPTIONS -- 0.1% 34,045 Call Option on Interest Rate Swap, expiring 03/18/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.31%, European Style $ 131 32,270 Call Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 3.33%, European Style 83 56,000 Call Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 3.47%, European Style 356 29,445 Call Option on Interest Rate Swap, expiring 03/29/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.29%, European Style 147 166,980 Call Option on Interest Rate Swap, expiring 05/11/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 1.70%, European Style 383 166,895 Call Option on Interest Rate Swap, expiring 05/13/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 1.70%, European Style 355 74,000 Put Option on FNMA, 30 year Fixed, 5.50%, TBA, strike price of 99.71, expiring 03/08/04, European Style 0^^ 36,043 Put Option on Interest Rate Swap, expiring 03/10/04, if exercised the Fund pays fixed 4.65% and receives floating 3 month LIBOR, European Style 10 36,043 Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays fixed 4.85% and receives floating 3 month LIBOR, European Style 2 12,470 Put Option on Interest Rate Swap, expiring 04/22/04, if exercised the Fund pays fixed 4.49% and receives floating 3 month LIBOR, European Style 147 -------------------------------------------------------------------------------------------------- Total Options 1,614 (Cost $2,468) -------------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 6.7% ASSET BACKED SECURITIES -- 4.7% $ 33,000 Grampian Funding LLC, 1.13%, 07/02/04 + $ 32,877 21,000 Sheffield Receivables Corp., 1.03%, 03/05/04 + 20,997 -------------------------------------------------------------------------------------------------- 53,874 -------------------------------------------------------------------------------------------------- AUTOMOTIVE -- 0.2% 2,600 General Motors Acceptance Corp., 1.24%, 03/26/04 + 2,598 BANKING -- 1.4% 10,500 CBA (Delaware) Finance, Inc., 1.09%, 07/20/04 + 10,457 6,000 Natexis Banques Populaires (France), 1.12%, 08/04/04 + 5,971 -------------------------------------------------------------------------------------------------- 16,428 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.4% 4,920 Altria Group, Inc., 1.97%, 10/15/04 + 4,875 -------------------------------------------------------------------------------------------------- Total Commercial Paper 77,775 (Cost $77,753) -------------------------------------------------------------------------------------------------- SHARES ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 3.9% 45,041 JPMorgan Prime Money Market Fund (a) + 45,041 (Cost $45,041) -------------------------------------------------------------------------------------------------- Total Short-Term Investments 124,430 (Cost $125,262) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 1,169,320 (COST $1,146,146) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 28 FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 200 Euro-BOBL March, 2004 $ 22,554 $ 83 122 Euro-BUND March, 2004 14,128 373 98 Treasury Bonds June, 2004 11,019 49 236 2 Year Treasury Notes June, 2004 50,629 82 699 Eurodollar December, 2004 171,727 133 SHORT FUTURES OUTSTANDING (340) 5 Year Treasury Notes June, 2004 (38,218) (123) (512) 10 Year Treasury Notes June, 2004 (58,304) (362)
OPTIONS
UNITS CALL OPTIONS WRITTEN VALUE - --------------------------------------------------------------------------------------------------------------------- (56,000) Call Option on FNMA, 30 Year Fixed, TBA, 5.00%, strike price of 99.70, expiring 03/08/04, European Style. $ (314) (35,000) Call Option on FNMA, 30 Year Fixed, TBA, 5.00%, strike price of 100.30, expiring 03/08/04, European Style. (74) (55,000) Call Option on FNMA, 30 Year Fixed, TBA, 5.00%, strike price of 100.18, expiring 03/18/04, European Style. (131) (53,535) Call Option on Interest Rate Swap, expiring 03/29/04. If exercised the Fund pays fixed 3.25% and receives 3 month LIBOR, European Style. (147) (333,960) Call Option on Interest Rate Swap, expiring 05/11/04. If exercised the Fund pays fixed 1.50% and receives 3 month LIBOR, European Style. (334) (333,790) Call Option on Interest Rate Swap, expiring 05/13/04. If exercised the Fund pays fixed 1.50% and receives 3 month LIBOR, European Style. (328) Total Call Options Written $ (1,328) PUT OPTIONS WRITTEN (74,000) Put Option on FNMA, 30 Year Fixed, TBA, 5.50%, strike price of 100.84, expiring 03/08/04, European Style. $ (2) (60,834) Put Option on Interest Rate Swap, expiring 03/08/04. If exercised the Fund pays 3 month LIBOR and receives 3.97%, European Style. (1) (36,043) Put Option on Interest Rate Swap, expiring 03/08/04. If exercised the Fund pays 3 month LIBOR and receives fixed 4.65%, European Style. (18) (52,305) Put Option on Interest Rate Swap, expiring 04/22/04. If exercised the Fund pays 3 month LIBOR and receives fixed 2.22%, European Style. (110) (1) Put Option on Sept. 04 Euro Dollar Future, strike price of 98.50, expiring 09/13/04, European Style. (188) Total Put Options Written $ (319)
SEE NOTES TO FINANCIAL STATEMENTS. 29 SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------- Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA, 5.50%, TBA 03/04, price less 101.45, the Fund pays negative, receives positive 03/08/04 $ 30,000 $ 246 Swap - price lock with Citibank N.A. on 30 Year FNMA, 5.50%, TBA 03/04, price less 101.56, the Fund pays negative, receives positive 03/08/04 5,500 68 Swap - price lock with Morgan Stanley Capital Services on U.S. Treasury Note, 4.25%, 08/15/13, price less 101.10, the Fund pays positive, receives negative 03/12/04 18,670 (254) Swap - price lock with Credit Suisse First Boston International on U.S. Treasury Note, 4.25%, 11/15/13, price less 101.47, the Fund pays positive, receives negative 03/16/04 47,750 (306) Swap - rate lock with Credit Suisse First Boston International on 5 Year Forward Contract, rate less 3.90, the Fund pays positive, receives negative 03/22/04 16,900 390 Swap - rate lock with Credit Suisse First Boston International on 10 Year Forward Contract, rate less 4.78, the Fund pays negative, receives positive 03/22/04 9,540 (291) Swap - price lock with Deutsche Bank AG, New York on U.S. Treasury Note, 2.00%, 01/15/14, price less 102.41, the Fund pays positive, receives negative 03/30/04 29,750 (395) Swap - price lock with Citibank N.A. on U.S. Treasury Note, 4.25%, 11/15/13, price less 101.50, the Fund pays positive, receives negative 04/01/04 12,470 (60) Swap - price lock with Citibank N.A. on U.S. Treasury Note, 3.25%, 01/15/09, price less 101.02, the Fund pays negative, receives positive 04/01/04 21,945 270 Swap - price lock with Bank of America N.A. on U.S. Treasury Note, 4.38%, 08/15/12, price less 103.56, the Fund pays positive, receives negative 04/01/04 39,770 (215) Total Return Swap with Bank of America N.A. on Bank of America AAA 10 Year CMBS Index, the Fund pays 1 month LIBOR, receives 65.00 bps. 06/30/04 40,390 834 Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS Index, the Fund pays 1 month LIBOR, receives 65.00 bps. 07/01/04 24,000 638 Total Return Swap with Citibank N.A. on Lehman AAA 8.5 Year CMBS Index, the Fund pays 1 month LIBOR, receives 65.00 bps. 08/31/04 24,000 -- Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 month LIBOR, receives 1.30% 09/15/04 257,210 45 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 1.90%, receives 3 month LIBOR 03/16/05 514,420 (187) Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 month LIBOR, receives 2.69% 09/21/05 257,210 161
SEE NOTES TO FINANCIAL STATEMENTS. 30 JPMORGAN BOND FUND II PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 89.4% U.S. TREASURY SECURITIES -- 14.2% U.S. Treasury Notes & Bonds, $ 38,605 1.50%, 07/31/05 + $ 38,704 3,015 1.88%, 01/31/06 + 3,030 23,730 2.63%, 11/15/06 + 24,117 2,410 2.25%, 02/15/07 + 2,419 5,845 3.38%, 11/15/08 + 5,974 2,725 3.25%, 01/15/09 + 2,765 2,540 4.00%, 11/15/12 + @ 2,576 2,140 4.25%, 11/15/13 + 2,189 4,565 7.25%, 05/15/16 + 5,828 24,490 7.25%, 08/15/22 + @ 31,849 26,000 6.88%, 08/15/25 + 32,867 11,565 5.38%, 02/15/31 + 12,462 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 164,780 (Cost $162,114) -------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 2.6% 10,400 Federal Home Loan Bank, 1.63%, 06/15/05 10,435 Federal National Mortgage Association, 2,940 6.40%, 05/14/09 2,969 13,590 7.13%, 01/15/30 16,859 -------------------------------------------------------------------------------------------------- Total U.S. Government Agency Securities 30,263 (Cost $28,358) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 0.6% United Mexican States (Mexico), 1,500 6.38%, 01/16/13, MTN 1,604 2,035 5.88%, 01/15/14 2,076 1,500 11.38%, 09/15/16 2,223 1,000 8.30%, 08/15/31, MTN 1,163 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 7,066 (Cost $6,399) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 26.3% AEROSPACE -- 0.2% 2,220 General Dynamics Corp., 2.13%, 05/15/06 2,222 5 United Technologies Corp., 6.10%, 05/15/12 6 -------------------------------------------------------------------------------------------------- 2,228 -------------------------------------------------------------------------------------------------- AUTOMOTIVE -- 3.0% DaimlerChrysler N.A. Holding Corp., $ 1,595 4.05%, 06/04/08 $ 1,603 760 7.75%, 01/18/11 881 2,555 6.50%, 11/15/13 2,731 Ford Motor Credit Co., 940 6.50%, 01/25/07 1,005 8,140 7.38%, 10/28/09 8,954 3,185 7.00%, 10/01/13 3,357 General Motors Acceptance Corp., 1,525 2.00%, 05/18/06, MTN, FRN 1,523 4,650 2.02%, 01/16/07, MTN, FRN 4,634 3,700 7.25%, 03/02/11 4,063 General Motors Corp., 1,625 7.20%, 01/15/11 1,774 1,200 8.25%, 07/15/23 1,343 2,990 8.38%, 07/15/33 3,388 -------------------------------------------------------------------------------------------------- 35,256 -------------------------------------------------------------------------------------------------- BANKING -- 4.8% 465 Abbey National Capital Trust I, 8.96%, to 06/30; thereafter FRN, 12/31/49 + 631 3,380 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/29/49, # + 3,763 3,975 ANZ Capital Trust I, 5.36%, 12/15/53, # + 4,058 1,500 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # 1,463 920 Den Norske Bank ASA (Norway), 7.73%, to 06/11; thereafter FRN, 12/31/49, SUB # 1,095 5,790 HBOS PLC (United Kingdom), 5.38%, to 11/13; thereafter FRN, 12/31/49, # 5,958 1,745 KBC Bank Fund Trust III, 9.86%, to 11/02; thereafter FRN, 11/29/49, # 2,248 1,970 Mizuho Finance Group LTD (Cayman Islands), 5.79%, to 10/15; thereafter FRN, 04/15/14, # 1,969 935 National City Bank, 6.20%, 12/15/11 1,046 2,300 Nordea Bank AB (Sweden), 8.95%, to 11/12; thereafter FRN, 12/31/49, # 2,868
SEE NOTES TO FINANCIAL STATEMENTS. 31
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 1,590 Popular North America, Inc., 4.25%, 04/01/08 $ 1,631 4,250 Rabobank Capital Funding II, 5.26%, 12/31/49, # 4,364 RBS Capital Trust I, 535 6.43%, to 01/34; thereafter FRN, 12/31/49 560 3,350 4.71%, to 07/13; thereafter FRN, 12/29/49 3,277 1,145 Royal Bank of Scotland Group PLC (United Kingdom), 7.65%, to 09/31; thereafter FRN, 12/31/49 1,383 1,700 Sovereign Bank, 4.38%, to 08/08; thereafter FRN, 08/01/13 1,738 1,420 Standard Chartered Bank (United Kingdom), 8.00%, 05/30/31, # 1,780 3,180 SunTrust Bank, 2.50%, 11/01/06 3,214 1,445 Swedbank (Sweden), 9.00%, to 03/17; thereafter FRN, 12/29/49, # 1,814 US Bank N.A., 2,430 2.85%, 11/15/06 2,466 690 6.38%, 08/01/11 783 2,795 Washington Mutual, Inc., 4.00%, 01/15/09 2,837 3,475 Westpac Capital Trust III, 5.82%, to 09/30; thereafter FRN, 12/31/49, # 3,684 1,505 Zions Bancorp, 6.00%, 09/15/15 1,624 -------------------------------------------------------------------------------------------------- 56,254 -------------------------------------------------------------------------------------------------- CHEMICALS -- 0.2% 2,035 ICI Wilmington, Inc., 5.63%, 12/01/13 2,105 520 The Dow Chemical Co., 7.38%, 11/01/29 605 -------------------------------------------------------------------------------------------------- 2,710 -------------------------------------------------------------------------------------------------- CONSTRUCTION -- 0.0% ^ 210 Pulte Homes, Inc., 6.38%, 05/15/33 208 CONSUMER PRODUCTS -- 0.1% 1,110 Altria Group, Inc., 7.00%, 11/04/13 + 1,218 DIVERSIFIED -- 0.6% General Electric Capital Corp., 1,620 5.88%, 02/15/12, Ser. A, MTN 1,775 $ 1,560 6.75%, 03/15/32, Ser. A, MTN $ 1,788 Hutchison Whampoa International LTD (Hong Kong) 2,030 6.25%, 01/24/14, # 2,088 940 7.45%, 11/24/33, # 987 -------------------------------------------------------------------------------------------------- 6,638 -------------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 7.6% American General Finance Corp., 3,650 3.00%, 11/15/06, Ser. H, MTN + 3,686 685 4.50%, 11/15/07, Ser. H, MTN + 718 4,650 The Bear Stearns Co., Inc., 1.28%, 01/16/07, Ser. B, MTN, FRN + 4,647 1,720 Capital One Bank, 4.88%, 05/15/08 1,804 CIT Group, Inc., 2,100 1.39%, 02/14/05, MTN, FRN 2,104 2,750 1.39%, 06/19/06, MTN, FRN 2,754 835 4.75%, 12/15/10, MTN 859 3,900 Citigroup Global Markets Holdings, Inc., 1.28%, 12/12/06, Series A, MTN, FRN 3,898 1,500 Citigroup, Inc., 1.30%, 03/20/06, FRN 1,503 3,050 Countrywide Home Loans, Inc., 1.27%, 02/17/06, Ser. L, MTN, FRN 3,048 4,965 Credit Suisse First Boston USA, Inc., 5.13%, 01/15/14 5,054 610 FleetBoston Financial Corp., 7.25%, 09/15/05 661 Goldman Sachs Group, Inc., 1,500 1.32%, 02/21/06, Ser. B, MTN, FRN 1,503 10 5.70%, 09/01/12 11 2,885 4.75%, 07/15/13 2,859 2,095 6.35%, 02/15/34 2,128 1,450 Household Finance Corp., 1.28%, 02/09/07, MTN, FRN 1,452 HSBC Capital Funding LP (Channel Islands), 2,380 4.61%, to 06/13; thereafter FRN, 12/31/49, # 2,292 5,745 9.55%, to 06/10; thereafter FRN, 12/31/49, # 7,428 1,515 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 1,874
SEE NOTES TO FINANCIAL STATEMENTS. 32
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 2,465 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # $ 2,506 Merrill Lynch & Co., Inc., 1,500 1.57%, 06/13/05, Ser. B, MTN, FRN 1,505 1,340 4.13%, 01/15/09, Ser. C, MTN 1,374 2,100 1.38%, 02/06/09, Ser. C, MTN, FRN 2,097 Morgan Stanley 4,665 1.28%, 01/12/07, FRN 4,667 2,420 5.80%, 04/01/07 2,651 4,705 3.88%, 01/15/09 4,769 2,100 Pricoa Global Funding I, 3.90%, 12/15/08, # 2,133 14,010 Special Purpose Accounts Receivable Cooperative Corp. Trust, 1.44%, 05/23/05, Ser. 2003-6, FRN, # 14,009 1,785 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 1,921 -------------------------------------------------------------------------------------------------- 87,915 -------------------------------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.1% 775 SABMiller PLC (United Kingdom), 6.63%, 08/15/33, # 852 HEALTH CARE/HEALTH CARE SERVICES -- 0.2% 2,035 UnitedHealth Group, Inc., 3.30%, 01/30/08 2,050 HOTELS/OTHER LODGING -- 0.1% 910 Harrah's Operating Co., Inc., 5.38%, 12/15/13, # 919 INSURANCE -- 1.3% Assurant, Inc., 1,555 5.63%, 02/15/14, # + 1,592 605 6.75%, 02/15/34, # + 627 2,880 AXA (France), 8.60%, 12/15/30 + 3,752 1,950 Commerce Group, Inc., 5.95%, 12/09/13 2,032 1,385 Fund American Companies, Inc., 5.88%, 05/15/13 1,439 1,340 Infinity Property & Casualty Corp., 5.50%, 02/18/14, # 1,341 Nationwide Financial Services, Inc., $ 510 6.25%, 11/15/11 $ 563 1,130 5.90%, 07/01/12 1,225 1,220 Prudential Holdings LLC, 8.70%, 12/18/23, # 1,623 1,190 QBE Insurance Group LTD (Australia), 5.65%, to 07/13; thereafter FRN, 07/01/23, SUB # 1,182 -------------------------------------------------------------------------------------------------- 15,376 -------------------------------------------------------------------------------------------------- MULTI-MEDIA -- 0.9% 3,413 Comcast Cable Communications Holdings, Inc., 8.38%, 03/15/13 + 4,213 585 Comcast Cable Communications, Inc., 6.75%, 01/30/11 663 545 Liberty Media Corp., 5.70%, 05/15/13 556 900 News America, Inc., 7.25%, 05/18/18 1,050 1,390 Time Warner Entertainment Co., LP, 8.38%, 03/15/23 1,738 Time Warner, Inc., 1,620 7.63%, 04/15/31 + 1,884 225 7.70%, 05/01/32 + 265 -------------------------------------------------------------------------------------------------- 10,369 -------------------------------------------------------------------------------------------------- OIL & GAS -- 1.0% 505 Alberta Energy Co., LTD (Canada) (Yankee), 7.38%, 11/01/31 + 616 735 Anadarko Finance Co. (Canada), 6.75%, 05/01/11, Ser. B + 848 1,470 Anadarko Petroleum Corp., 6.13%, 03/15/12 + 1,620 2,350 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + 2,383 445 Devon Financing Corp. ULC, 7.88%, 09/30/31 548 1,715 Halliburton Co., 5.50%, 10/15/10, # 1,822 992 PEMEX Project Funding Master Trust (Mexico), #8.63%, 02/01/22 1,127 960 Transocean, Inc., 7.50%, 04/15/31 1,156 1,480 Weatherford International LTD (Bermuda), 4.95%, 10/15/13 1,487 -------------------------------------------------------------------------------------------------- 11,607 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 33
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED PAPER/FOREST PRODUCTS -- 0.3% $ 2,180 Domtar, Inc. (Canada) (Yankee), 5.38%, 12/01/13 $ 2,198 885 International Paper Co., 5.85%, 10/30/12 945 235 Westvaco Corp., 8.20%, 01/15/30 282 -------------------------------------------------------------------------------------------------- 3,425 -------------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.4% 1,250 Schering-Plough Corp., 5.30%, 12/01/13 1,300 Wyeth, 1,685 5.50%, 02/01/14 1,754 1,045 6.45%, 02/01/24 1,104 -------------------------------------------------------------------------------------------------- 4,158 -------------------------------------------------------------------------------------------------- PIPELINES -- 0.6% 3,645 Duke Capital Corp., 6.25%, 02/15/13 3,891 Kinder Morgan Energy Partners LP 460 7.40%, 03/15/31 541 760 7.30%, 08/15/33 887 2,055 Plains All American Pipeline LP/PAA Finance Corp., 5.63%, 12/15/13, # 2,104 -------------------------------------------------------------------------------------------------- 7,423 -------------------------------------------------------------------------------------------------- RETAILING -- 0.3% 465 Federated Department Stores, Inc., 6.63%, 04/01/11 530 2,930 Safeway, Inc., 4.13%, 11/01/08 2,965 365 The May Department Stores Co., 6.90%, 01/15/32 407 -------------------------------------------------------------------------------------------------- 3,902 -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 2.5% AT&T Corp., 1,475 8.05%, 11/15/11 + 1,718 545 8.75%, 11/15/31 + 642 1,675 AT&T Wireless Services, Inc., 7.88%, 03/01/11 + 1,971 1,515 Citizens Communications Co., 9.25%, 05/15/11 1,706 Deutsche Telekom International Finance BV (The Netherlands), 1,025 8.50%, 06/15/10 1,247 1,310 8.75%, 06/15/30 1,688 France Telecom (France), $ 1,125 9.00%, 03/01/11 $ 1,357 1,000 9.75%, 03/01/31 1,322 750 Koninklijke KPN NV (The Netherlands), 8.00%, 10/01/10 900 Sprint Capital Corp., 2,690 7.63%, 01/30/11 3,102 1,815 8.75%, 03/15/32 2,251 1,337 TCI Communications, Inc., 7.13%, 02/15/28 1,485 3,540 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 3,578 Verizon Global Funding Corp., 1,540 7.38%, 09/01/12 1,815 820 7.75%, 12/01/30 983 2,695 Verizon New York, Inc., 6.88%, 04/01/12, Ser. A 3,036 -------------------------------------------------------------------------------------------------- 28,801 -------------------------------------------------------------------------------------------------- UTILITIES -- 2.1% 1,420 AEP Texas Central Co., 5.50%, 02/15/13, Ser. D + 1,487 1,515 Alabama Power Co., 2.80%, 12/01/06 + 1,528 1,110 Arizona Public Service Co., 4.65%, 05/15/15 + 1,073 955 Columbus Southern Power Co., 5.50%, 03/01/13, Ser. C 1,008 3,000 Dominion Resources, Inc., 8.13%, 06/15/10, Ser. A 3,623 1,210 DTE Energy Co., 6.38%, 04/15/33 1,213 1,055 MidAmerican Energy Holdings Co., 6.75%, 12/30/31 1,199 National Rural Utilities Cooperative Finance Corp., 500 6.13%, 05/15/05 527 1,985 3.88%, 02/15/08 2,039 930 7.25%, 03/01/12, Ser. C, MTN 1,105 1,600 PacifiCorp, 4.30%, 09/15/08 1,652 Pepco Holdings, Inc., 1,545 6.45%, 08/15/12 1,716 395 7.45%, 08/15/32 461 Progress Energy, Inc., 25 7.10%, 03/01/11 29 395 6.85%, 04/15/12 449
SEE NOTES TO FINANCIAL STATEMENTS. 34
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED UTILITIES -- CONTINUED Southern California Edison Co. $ 1,055 5.00%, 01/15/14 $ 1,073 620 6.00%, 01/15/34 634 2,890 TXU Energy Co., 7.00%, 03/15/13 3,285 -------------------------------------------------------------------------------------------------- 24,101 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 305,410 (Cost $289,370) -------------------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 23.4% COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.3% 7,288 Countrywide Home Loans, 5.50%, 08/25/33, Ser. 2003-29, Class A1 7,423 Federal Home Loan Mortgage Corp., 561 2.44%, 08/15/31, Ser. 2570, Class FQ, FRN 562 5,733 6.00%, 02/01/33, Ser. 244, IO 1,003 2,286 Federal National Mortgage Association, 6.00%, 02/01/33, Ser. 332, Class 2, IO 415 7,598 MASTR Asset Securitization Trust, 5.50%, 09/25/33, Ser. 2003-8, Class 1A1 7,697 RESI Finance LP (Cayman Islands), 3,464 2.65%, 07/10/35, Ser. 2003-B, Class B3, FRN, # 3,534 5,878 2.50%, 09/10/35, Ser. 2003-C, Class B3, FRN, # 5,887 1,193 2.70%, 09/10/35, Ser. 2003-C, Class B4, FRN, # 1,195 5,565 2.40%, 12/10/35, Ser. 2003-D, Class B3, FRN, # 5,579 1,830 2.60%, 12/10/35, Ser. 2003-D, Class B4, FRN, # 1,835 3,090 RMAC (United Kingdom), 1.23%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 3,091 -------------------------------------------------------------------------------------------------- 38,221 -------------------------------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 20.1% 27,500 Federal Home Loan Mortgage Corp., 5.50%, 03/15/34, Gold Pool, TBA 28,145 Federal National Mortgage Association, $ 57,500 5.00%, 03/25/19, TBA $ 59,027 0^^ 7.50%, 07/01/30, Pool 529276 0^^ 48,996 5.50%, 11/01/33, TBA 50,163 59,500 5.50%, 03/25/34, TBA 60,858 35,500 Government National Mortgage Association, 5.50%, 03/15/34, TBA 36,443 -------------------------------------------------------------------------------------------------- 234,636 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 272,857 (Cost $272,424) -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 6.2% 4,630 Bear Stearns Commercial Mortgage Securities, 6.48%, 02/15/35, Ser. 2001-TOP2, Class A2 + 5,269 9,300 Capital One Multi-Asset Execution Trust, 2.34%, 12/15/10, Ser. 2003-A, FRN, # 9,605 Credit Suisse First Boston Mortgage Securities Corp., 8,255 6.13%, 04/15/37, Ser. 2002-CKN2, Class A3 9,207 13,060 3.94%, 05/15/38, Ser. 2003-C3, Class A5 12,541 4,499 Goldman Sachs Mortgage Securities II, 1.24%, 11/15/15, Ser. 2003-FL6A, Class A1, FRN 4,499 LB-UBS Commercial Mortgage Trust, 7,350 6.65%, 11/15/27, Ser. 2001-C2, Class A2 8,438 7,617 4.93%, 09/15/35, Ser. 2003-C7, Class A4, FRN 7,832 Morgan Stanley Dean Witter Capital I, 13,290 6.39%, 07/15/33, Ser. 2001-TOP3, Class A4 15,085 25 5.98%, 01/15/39, Ser. 2002-TOP7, Class A2 28 -------------------------------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 72,504 (Cost $68,567) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 35
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- 16.1% American Express Credit Account Master Trust, $ 3,500 1.44%, 12/15/08, Ser. 2001-6, Class B, FRN + $ 3,509 3,380 1.20%, 09/15/09, Ser. 2002-1, Class A, FRN + 3,387 AmeriCredit Automobile Receivables Trust, 1,245 2.75%, 10/09/07, Ser. 2003-CF, Class A3 + 1,265 4,475 1.32%, 12/06/07, Ser. 2003-DM, Class A3B, FRN + 4,490 1,985 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 2,039 2,400 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 2,416 6,000 Bank One Issuance Trust, 2.23%, 12/15/10, Ser. 2003-C2, Class C2, FRN + 6,021 Capital Auto Receivables Asset Trust, 5,740 1.13%, 02/15/07, Ser. 2003-2, Class A3B, FRN 5,740 3,710 1.96%, 01/15/09, Ser. 2003-2, Class A4A 3,657 1,340 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 1,340 3,400 Capital One Master Trust, 1.89%, 08/15/08, Ser. 2000-4, Class C, FRN, # 3,412 6,355 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 6,436 Citibank Credit Card Issuance Trust, 11,250 6.88%, 11/16/09, Ser. 2000-A3, Class A3 12,801 2,480 5.00%, 06/10/15, Ser. 2003-C4, Class C4 2,477 3,954 Citigroup Mortgage Loan Trust, Inc., 1.47%, 12/25/33, Ser. 2003-HE3, Class A, FRN 3,954 Countrywide Asset-Backed Certificates, $ 2,285 3.61%, 04/25/30, Ser. 2003-5, Class AF3 $ 2,333 2,070 5.41%, 01/25/34, Ser. 2003-5, Class MF1 2,140 1,290 1.59%, 03/25/34, Ser. 2004-1, Class M1, FRN 1,290 1,060 1.64%, 03/25/34, Ser. 2004-1, Class M2, FRN 1,060 1,205 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 1,223 3,580 Discover Card Master Trust I, 1.14%, 05/16/07, Ser. 2002-5, Class A, FRN 3,580 5,270 First USA Credit Card Master Trust, 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN 5,271 7,165 Honda Auto Receivables Owner Trust, 2.48%, 07/18/08, Ser. 2003-1, Class A4 7,238 Long Beach Mortgage Loan Trust, 5,327 1.41%, 07/25/33, Ser. 2003-3, Class A, FRN 5,337 7,770 1.40%, 02/25/34, Ser. 2004-1, Class A3, FRN 7,780 1,980 1.60%, 03/25/34, Ser. 2004-1, Class M1, FRN 1,986 1,340 1.65%, 03/25/34, Ser. 2004-1, Class M2, FRN 1,341 1,655 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 1,677 MBNA Master Credit Card Trust USA, 9,900 6.80%, 04/16/07, Ser. 1999-M, Class B 10,270 9,980 5.75%, 10/15/08, Ser. 2001-A1, Class A1 10,765 3,000 3.30%, 07/15/10, Ser. 2003 - A1, Class A1 3,034 3,000 2.24%, 12/15/13, Ser. 2001-C2, Class C2, FRN, # 3,055 2,775 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 2,765
SEE NOTES TO FINANCIAL STATEMENTS. 36
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 2,670 Onyx Acceptance Grantor Trust, 2.66%, 05/17/10, Ser. 2003-C, Class A4 $ 2,682 4,174 Option One Mortgage Loan Trust, 1.51%, 02/25/33, Ser. 2003-1, Class A2, FRN 4,196 3,475 Residential Asset Securities Corp., 1.41%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN 3,475 Residential Asset Securities Corp., 2,062 1.34%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 2,061 4,235 1.38%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN 4,230 1,000 Sears Credit Account Master Trust, 5.25%, 10/16/08, Ser. 1998-2, Class A 1,014 SLM Student Loan Trust, 7,290 1.23%, 12/17/12, Ser. 2003-12, Class A2, FRN 7,290 5,605 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 5,652 2,215 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 2,249 Volkswagon Auto Loan Enhanced Trust, 5,000 1.49%, 05/21/07, Ser. 2003-1, Class A3 4,991 2,615 2.94%, 03/22/10, Ser. 2003-2, Class A4 2,644 Wachovia Asset Securitization, Inc., 7,000 1.34%, 11/25/33, Ser. 2003-HE3, Class A, FRN 6,995 2,938 1.52%, 12/25/32, Ser. 2002-HE2, Class A, FRN 2,952 2,110 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 2,143 -------------------------------------------------------------------------------------------------- Total Asset Backed Securities 187,663 (Cost $184,384) -------------------------------------------------------------------------------------------------- Total Long-Term Investment 1,040,543 (Cost $1,011,616) -------------------------------------------------------------------------------------------------- UNITS ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 10.6% OPTIONS -- 0.1% 54,500 Call Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 3.47%, European Style. $ 345 34,114 Call Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 3.33%, European Style. 88 33,736 Call Option on Interest Rate Swap, expiring 03/18/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 4.31%, European Style. 130 29,110 Call Option on Interest Rate Swap, expiring 03/29/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 4.29%, European Style. 146 82,510 Call Option on Interest Rate Swap, expiring 05/11/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 1.70%, European Style. 190 82,495 Call Option on Interest Rate Swap, expiring 05/13/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 1.70%, European Style. 175 66,000 Put Option on FNMA, 30 year Fixed, 5.50%, TBA, strike price of 99.72, expiring 03/08/04, European Style. 0^^ 32,146 Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays Fixed 4.65% and receives 3 Month LIBOR, European Style. 9 32,146 Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays Fixed 4.85% and receives 3 Month LIBOR, European Style. 2 12,150 Put Option on Interest Rate Swap, expiring 04/22/04, if exercised the Fund pays Fixed 4.49% and receives 3 Month LIBOR, European Style. 143 -------------------------------------------------------------------------------------------------- Total Options 1,228 (Cost $2,006) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 37
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 6.3% ASSET BACKED SECURITIES -- 2.4% $ 24,000 Atlantis One Funding Corp., 1.09%, 07/19/04 + $ 23,899 4,500 Surrey Funding Corp., 1.05%, 04/07/04 + 4,495 -------------------------------------------------------------------------------------------------- 28,394 -------------------------------------------------------------------------------------------------- BANKING -- 2.3% 12,500 Bradford & Bingley PLC (United Kingdom), 1.12%, 03/16/04 + 12,493 7,000 Danske Bank AS (Denmark), 1.03%, 07/30/04 + 6,969 7,000 Natexis Banques Populaires (France), 1.12%, 08/04/04 + 6,967 -------------------------------------------------------------------------------------------------- 26,429 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.4% 4,790 Altria Group, Inc., 1.97%, 10/15/04 + 4,746 FINANCIAL SERVICES -- 1.2% $ 13,500 Statens Bostadsfinansier (Luxembourg), 1.04%, 04/13/04 + $ 13,484 -------------------------------------------------------------------------------------------------- Total Commercial Paper 73,053 (Cost $73,035) -------------------------------------------------------------------------------------------------- SHARES - --------------------------------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 4.2% 49,412 JPMorgan Prime Money Market Fund (a) + 49,412 (Cost $49,412) -------------------------------------------------------------------------------------------------- Total Short-Term Investment 123,693 (Cost $124,453) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 1,164,236 (COST $1,136,069)
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 302 5 Year Treasury Notes June, 2004 $ 33,947 $ 145 343 Eurodollar December, 2004 84,267 65 SHORT FUTURES OUTSTANDING (292) Treasury Bonds June, 2004 (32,832) (227) (8) 10 Year Treasury Notes June, 2004 (911) (4) (25) 2 Year Treasury Notes June, 2004 (5,363) (11)
OPTIONS
UNITS CALL OPTIONS WRITTEN VALUE - ------------------------------------------------------------------------------------------------------------------------ (165,020) Call Option on Interest Rate Swap, expiring 05/11/04. if exercised the Fund pays Fixed 1.50% and receives 3 Month LIBOR, European Style. $ (165) (164,990) Call Option on Interest Rate Swap, expiring 05/13/04, if exercised the Fund pays Fixed 1.50% and receives 3 Month LIBOR, European Style. (162) (54,500) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 99.70, expiring 03/08/04, European Style (306) (54,500) Call Option on FNMA, 30 Year Fixed, 5.00%,TBA, strike price of 100.18, expiring 03/18/04, European Style (130) (52,925) Call Option on Interest Rate Swap, expiring 03/29/04, if exercised the Fund pays Fixed 3.25% and receives 3 Month LIBOR, European Style. (145)
SEE NOTES TO FINANCIAL STATEMENTS. 38
UNITS CALL OPTIONS WRITTEN VALUE - --------------------------------------------------------------------------------------------------------------------- (37,000) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 100.30, expiring 03/08/04, European Style $ (78) Total Call Options Written $ (986) PUT OPTIONS WRITTEN (66,000) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 100.84, expiring 03/08/04, European Style $ (1) (54,257) Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 3.97%, European Style. (1) (50,960) Put Option on Interest Rate Swap, expiring 04/22/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 2.22%, European Style. (108) (32,146) Put Option on Interest Rate Swap, expiring 03/08/04, if exercised the Fund pays 3 Month LIBOR and receives Fixed 4.65%, European Style. (16) (--)^^ Put Option on Sept. 04 Euro Dollar Future, strike price of 98.50, expiring 09/13/04, European Style. (93) Total Put Options Written $ (219)
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - --------------------------------------------------------------------------------------------------------------- Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.50%, TBA 03/04, price less 101.39, the Fund pays negative, receives positive. 03/08/04 $ 24,500 $ 222 Swap - price lock with Lehman Brothers Special Financing, on 30 Year FNMA, 5.50%, TBA 03/04, price less 101.45, the Fund pays positive, receives negative. 03/08/04 4,000 33 Swap - price lock with Morgan Stanley Capital Services, on U.S. Treasury Note, 4.25%, 08/15/13, price less 101.10, the Fund pays positive and recieves negative. 03/12/04 16,535 (225) Swap - price lock with Credit Suisse First Boston International, on U.S. Treasury Note, 4.25%, 11/15/13, price less 101.47, the Fund pays positive, receives negative. 03/16/04 40,400 (259) Swap Rate Lock with Credit Suisse First Boston International on 5 Year Forward Contract, rate less 3.90, the Fund pays positive, receives negative. 03/22/04 13,470 311 Swap Rate Lock with Credit Suisse First Boston International on 10 Year Forward Contract, rate less 4.78, the Fund pays negative, receives positive. 03/22/04 7,860 (240) Swap - price lock with Deutsche Bank AG, New York, on U.S. Treasury Note, 2.00%, 01/15/14, price less 102.41, the Fund pays positive, receives negative. 03/30/04 14,540 (193) Swap - price lock with Citibank N.A., on U.S. Treasury Note, 4.25%, 11/15/13, price less 101.50, the Fund pays positive, receives negative. 04/01/04 12,245 (59) Swap - price lock with Citibank N.A., on U.S. Treasury Note, 3.25%, 01/15/09, price less 101.02, the Fund pays negative, receives positive. 04/01/04 21,545 265 Swap - price lock with Bank of America N.A., on U.S. Treasury Note, 4.38%, 08/15/12, price less 103.56, the Fund pays positive, receives negative. 04/01/04 32,685 (177) Total Return Swap with Bank of America N.A. on Bank of America AAA 10 Year CMBS Index, the Fund pays 1 Month LIBOR, receives 65.00 bps. 06/30/04 35,600 735 Total Return Swap with Citibank on Lehman AAA 8.5 Year CMBS Index, the Fund pays 1 Month LIBOR, receives 65.00 bps. 08/31/04 21,000 -- Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS Index, the Fund pays 1 Month LIBOR, receives 65.00 bps. 07/01/04 20,500 537 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 Month LIBOR, receives 1.30% 09/15/04 249,005 44 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 1.90% and receives 3 Month LIBOR. 03/16/05 498,010 (181) Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 Month LIBOR, receives 2.69%. 09/21/05 249,005 156
SEE NOTES TO FINANCIAL STATEMENTS. 39 JPMORGAN ENHANCED INCOME FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
SHARES ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 95.8% PREFERRED STOCKS -- 0.7% FINANCIAL SERVICES -- 0.7% 0^^ Lehman CR-ABN Amro VIX $ 1,500 0^^ Smithkline Beecham Holdings Corp. 900 -------------------------------------------------------------------------------------------------- Total Preferred Stocks 2,400 (Cost $2,400) -------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) - --------------------------------------------------------------------------------------------------------------------- U.S. TREASURY SECURITIES -- 0.1% $ 400 U.S. Treasury Notes & Bonds, 1.75%, 12/31/04 @ + 402 (Cost $400) U.S. GOVERNMENT AGENCY SECURITIES -- 5.4% Federal Home Loan Mortgage Corp., 1,600 1.88%, 02/15/06 + 1,602 3,650 1.62%, 05/19/06, MTN, FRN + 3,650 Federal National Mortgage Association, 1,700 1.65%, 04/07/06, FRN + 1,700 3,700 2.59%, 05/05/06 + 3,710 1,900 3.35%, 12/01/06 + 1,906 3,500 2.38%, 02/15/07 + 3,501 40 3.50%, 10/15/07 + 40 2,697 1.49%, 02/25/28, Ser. 2003-121, Class FC, FRN + 2,693 -------------------------------------------------------------------------------------------------- Total U.S. Government Agency Securities 18,802 (Cost $18,789) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 2.6% 1,900 Government of Canada (Canada), 6.38%, 07/21/05 2,027 Province of Ontario (Canada), 3,000 4.20%, 06/30/05, (Yankee) 3,104 700 6.00%, 02/21/06 754 1,000 Province of Quebec (Canada), 7.00%, 01/30/07 1,123 1,750 Republic of Finland (Finland), 5.88%, 02/27/06 + 1,886 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 8,894 (Cost $8,858) -------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- SUPRANATIONAL NOTES & BONDS -- 0.7% $ 2,200 Inter-American Development Bank, 6.13%, 03/08/06 $ 2,387 (Cost $2,381) STATE AND MUNICIPAL OBLIGATIONS -- 0.9% ILLINOIS -- 0.3% 1,000 Illinois State, Taxable Pension, GO, 2.50%, 06/01/08 976 NORTH CAROLINA -- 0.1% 500 Wake Forest University, Ser. 1997, FRDO, 1.09%, 07/01/17 500 OHIO -- 0.1% 350 Ohio State Air Quality Development Authority, Toledo, Ser. A, Rev., Adj., 2.20%, 04/01/24 350 TEXAS -- 0.4% 1,250 Texas Public Finance Authority, Taxable, Unemployment Compensation, Ser. B, Rev., 2.00%, 06/15/05 1,258 -------------------------------------------------------------------------------------------------- Total State and Municipal Obligations 3,084 (Cost $3,100) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 45.5% AUTOMOTIVE -- 2.5% American Honda Finance Corp., 700 1.29%, 03/07/05, MTN, FRN, # + 701 1,500 1.34%, 09/11/06, MTN, FRN, # + 1,502 DaimlerChrysler N.A. Holdings Corp., 300 7.40%, 01/20/05 314 600 7.75%, 06/15/05 643 1,850 1.97%, 09/26/05, Ser. D, MTN, FRN + 1,861 200 Ford Motor Credit Co., 6.70%, 07/16/04 204 General Motors Acceptance Corp., 420 6.75%, 01/15/06 + 450 600 2.00%, 05/18/06, MTN, FRN + 599 2,400 2.02%, 01/16/07, MTN, FRN + 2,391 -------------------------------------------------------------------------------------------------- 8,665 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 40
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- 9.1% $ 3,200 Abbey National Treasury Services PLC (United Kingdom), 1.21%, 01/16/07, FRN, # + $ 3,201 4,425 American Express Credit Corp., 1.19%, 04/18/05, Ser. B, MTN, FRN + 4,429 Bank of America Corp., 1,000 1.57%, 12/23/04, Ser. F, MTN, FRN 1,001 3,000 1.37%, 08/26/05, Ser. H, MTN, FRN + 3,009 1,300 6.63%, 08/01/07 + 1,456 2,000 Bank One Corp., 1.28%, 09/15/06, Ser. C, MTN, FRN + 2,001 1,800 Bank One N.A. Illinois, 1.24%, 01/13/06, FRN + 1,803 2,000 Bayerische Landesbank Girozentrale (Germany) (Yankee), 1.04%, 01/31/05, MTN, FRN + 2,000 2,900 Canadian Imperial Bank of Commerce (Canada) (Yankee), 1.24%, 06/13/05, FRN + 2,899 500 Capital One Bank, 6.88%, 02/01/06 + 541 3,500 HBOS Treasury Services PLC (United Kingdom), 1.22%, 01/12/07, FRN, # + 3,501 1,850 Washington Mutual, Inc., 1.40%, 11/03/05, FRN 1,852 Wells Fargo & Co., 2,000 1.28%, 03/03/06, FRN 2,003 1,300 5.13%, 02/15/07 1,397 -------------------------------------------------------------------------------------------------- 31,093 -------------------------------------------------------------------------------------------------- DIVERSIFIED -- 2.1% General Electric Capital Corp., 1,937 1.30%, 09/18/06, MTN, FRN + 1,943 3,300 1.28%, 02/02/09, Ser. A, MTN, FRN + 3,295 2,100 General Electric Co., 1.17%, 10/24/05, FRN + 2,102 -------------------------------------------------------------------------------------------------- 7,340 -------------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- 24.3% Bear Stearns Companies, Inc. 2,800 1.28%, 01/16/07, Ser. B, MTN, FRN + 2,798 2,650 1.42%, 01/30/09, Ser. B, MTN, FRN + 2,647 CIT Group, Inc., $ 2,150 1.39%, 06/19/06, MTN, FRN + $ 2,153 4,300 1.32%, 02/15/07, MTN, FRN + 4,298 4,300 Citigroup Global Markets Holdings, Inc., 1.28%, 12/12/06, Series A, MTN, FRN + 4,297 Countrywide Home Loans, Inc., 1,150 1.67%, 05/20/05, Ser. K, MTN, FRN + 1,156 3,650 1.27%, 02/17/06, Ser. L, MTN, FRN + 3,648 500 1.65%, 06/02/06, Ser. L, MTN, FRN + 504 Counts Trusts, 1,400 1.90%, 08/15/07, Ser. 2002-10, FRN, # + 1,400 1,400 1.95%, 08/15/07, Ser. 2002-11, FRN, # + 1,400 4,200 Credit Suisse First Boston USA, Inc., 1.57%, 01/14/05, MTN, FRN + 4,217 4,050 Goldman Sachs Group, Inc., 1.29%, 10/27/06, Ser. B, MTN, FRN + 4,056 2,099 Goldman Sachs Mortgage Securities II, 1.24%, 11/15/15, Ser. 2003-FL6A, Class A1, FRN + 2,099 1,550 Household Finance Corp., 1.27%, 06/16/05, MTN, FRN 1,552 International Lease Finance Corp., 1,500 2.39%, 01/13/05, FRN 1,515 1,030 4.00%, 01/17/06, Ser. O, MTN 1,067 John Hancock Global Funding II 600 1.24%, 12/15/06, MTN, FRN, # 600 4,700 1.20%, 02/23/07, MTN, FRN, # 4,696 Merrill Lynch & Co., Inc., 900 1.49%, 03/07/06, Ser. B, MTN, FRN 903 2,000 1.25%, 01/26/07, Ser. C, MTN, FRN 1,998 2,200 1.38%, 02/06/09, Ser. C, MTN, FRN 2,197 Morgan Stanley Group, Inc., 5,100 1.45%, 03/27/06, Ser. E, MTN, FRN 5,116 600 1.27%, 11/24/06, FRN 600 1,200 1.25%, 02/15/07, MTN, FRN 1,199 4,100 Nationwide Building Society (United Kingdom), 1.17%, 07/22/05, MTN, FRN, # 4,101 Pricoa Global Funding I 750 1.32%, 04/25/05, MTN, FRN, # 751 1,300 1.22%, 03/02/07, FRN, # (f) 1,300
SEE NOTES TO FINANCIAL STATEMENTS. 41
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED Principal Life Global, $ 2,900 1.27%, 11/13/06, MTN, FRN, # $ 2,899 1,000 1.23%, 06/12/07, MTN, FRN, # 999 Restructured Asset Securities with Enhanced Returns (RACERS), 2,400 0.95%, 04/15/04, Ser. 2002-35, Class C, FRN, # 2,399 2,400 0.96%, 04/15/04, Ser. 2002-40, Class C, FRN, # 2,399 SLM Corp. 850 1.29%, 04/25/06, MTN, FRN 852 2,450 1.24%, 01/25/07, Ser. A, MTN, FRN 2,449 1,100 1.34%, 07/25/07, Ser. 1, MTN, FRN 1,102 Special Purpose Accounts Receivable Cooperative Corp., 2,000 1.44%, 05/23/05, Ser. 2003-6, FRN, # 2,000 6,700 1.72%, 05/15/06, Ser. 2003-4, FRN, # 6,699 -------------------------------------------------------------------------------------------------- 84,066 -------------------------------------------------------------------------------------------------- INSURANCE -- 3.7% ASIF Global Financing, 2,400 1.42%, 03/14/06, FRN, # + 2,407 700 1.27%, 05/30/06, FRN, # + 701 3,650 Metropolitan Life Global Funding I, 1.27%, 08/28/06, MTN, FRN, # 3,655 1,600 Monumental Global Funding II, 1.17%, 07/06/05, FRN, # 1,600 4,600 Nationwide Life Global Funding I, 1.21%, 05/15/07, FRN, # 4,596 -------------------------------------------------------------------------------------------------- 12,959 -------------------------------------------------------------------------------------------------- OIL & GAS -- 0.7% 700 Halliburton Co., 1.87%, 01/26/07, FRN, # 702 1,595 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 1,614 -------------------------------------------------------------------------------------------------- 2,316 -------------------------------------------------------------------------------------------------- RETAILING -- 0.2% 750 Safeway, Inc., 1.60%, 11/01/05, FRN 751 TELECOMMUNICATIONS -- 0.2% 750 Deutsche Telekom International Finance (Germany), 8.25%, 06/15/05 + 810 UTILITIES -- 2.7% $ 600 AEP Texas Central Co., 3.00%, 02/15/05, Ser. F + $ 607 850 Commonwealth Edison Co., 6.40%, 10/15/05 + 910 Dominion Resources, Inc., 100 2.80%, 02/15/05 101 1,000 1.39%, 05/15/06, Ser. B, FRN + 1,001 100 DTE Energy Co., 6.00%, 06/01/04 101 1,800 Duke Energy Corp., 1.47%, 01/15/05, FRN + 1,802 1,000 FPL Group Capital, Inc., 1.47%, 03/30/05, FRN + 1,000 National Rural Utilities Cooperative Finance Corp., 1,700 1.53%, 02/07/05, FRN 1,706 950 1.22%, 02/17/06, MTN, FRN 950 1,350 Southern California Edison Co., 1.42%, 01/13/06, FRN 1,352 -------------------------------------------------------------------------------------------------- 9,530 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 157,530 (Cost $157,204) -------------------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 3.5% COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.5% 2,129 Federal Home Loan Mortgage Corp., 5.50%, 01/15/26, Ser. 2471, Class ES + 2,137 Federal National Mortgage Association, 783 1.59%, 06/25/32, Ser. 2002-36, Class FS, FRN + 788 1,167 1.59%, 06/25/32, Ser. 2002-36, Class FT, FRN + 1,174 774 2.50%, 07/25/42, Ser. 2003-W2, Class 2A3 + 774 1,534 1.95%, 09/25/43, Ser. 2003-W14, Class 1A-1 + 1,530 Government National Mortgage Association, 588 1.59%, 03/16/32, Ser. 2002-21, Class FD, FRN + 592 554 1.59%, 04/16/32, Ser. 2002-24, Class FA, FRN + 557 839 1.59%, 05/16/32, Ser. 2002-27, Class FA, FRN + 843
SEE NOTES TO FINANCIAL STATEMENTS. 42
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 232 GSR Mortgage Loan Trust, 2.24%, 08/25/32, Ser. 2003-5F, Class 1A3, FRN + $ 232 1,850 Mound Financing PLC (United Kingdom), 1.27%, 02/08/08, Ser. 3A, Class A1-1, FRN, # 1,850 1,800 RMAC (United Kingdom), 1.23%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 1,800 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 12,277 (Cost $12,257) -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.9% 1,719 CalSTRS Trust, 1.39%, 11/20/12, Ser. 2002-C6, Class A1, FRN, # + 1,717 Calwest Industrial Trust, 2,400 1.47%, 02/15/12, Ser. 2002-CALW, Class AFL, FRN, # + 2,395 1,367 1.36%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # + 1,367 1,650 Capital One Multi-Asset Execution Trust, 2.34%, 12/15/10, Ser. 2003-A, FRN, # + 1,704 6,218 Federal National Mortgage Association, 5.00%, 07/25/12, Ser. 2003-3, Class PB 6,419 -------------------------------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 13,602 (Cost $13,654) -------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 31.7% American Express Credit Account Master Trust, 1,050 1.23%, 09/15/08, Ser. 2001-1, Class A, FRN + 1,052 1,550 1.20%, 09/15/09, Ser. 2002-1, Class A, FRN + 1,553 1,000 1.20%, 11/16/09, Ser. 2002-2, Class A, FRN + 1,002 AmeriCredit Automobile Receivables Trust, 1,327 1.30%, 10/12/06, Ser. 2002-A, Class A3, FRN + 1,327 3,051 1.28%, 04/12/07, Ser. 2002-C, Class A3, FRN + 3,051 3,300 Bank One Issuance Trust, 1.47%, 12/15/09, Ser. 2002-B1, Class B1, FRN + 3,313 45 Capital Auto Receivables Asset Trust, 5.00%, 12/15/06, Ser. 2001-2, Class A-4 + 46 $ 700 Capital One Auto Finance Trust, 1.20%, 01/15/08, Ser. 2003-B, Class A3, FRN + $ 701 1,600 Capital One Master Trust, 1.89%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 1,605 Capital One Multi-Asset Execution Trust, 800 1.20%, 05/15/08, Ser. 2003-A2, Class A2, FRN + 801 1,350 1.48%, 01/15/09, Ser. 2003-A1, Class A1, FRN + 1,356 2,250 Carco Auto Loan Master Trust, 1.16%, 11/15/06, Ser. 2001-A, Class A, FRN + 2,250 Centex Home Equity, 1,777 1.37%, 01/25/05, Ser. 2004-A, Class AV2, FRN + 1,778 1,600 1.29%, 03/25/34, Ser. 2004-B, Class AVI, FRN 1,600 Citibank Credit Card Issuance Trust, 200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 + 203 2,050 2.17%, 03/20/08, Ser. 2003-C2, Class C2, FRN + 2,069 1,826 Citifinancial Mortgage Securities, Inc., 1.38%, 08/25/33, Ser. 2003-3, Class AV1, FRN + 1,828 2,362 Citigroup Mortgage Loan Trust, Inc., 1.47%, 12/25/33, Ser. 2003-HE3, Class A, FRN + 2,362 2,130 CNH Equipment Trust, 1.23%, 01/15/08, Ser. 2003-B, Class A3A, FRN + 2,134 Countrywide Asset-Backed Certificates, 348 1.37%, 08/25/32, Ser. 2002-1, Class A, FRN + 349 2,509 1.49%, 03/25/33, Ser. 2003-BC1, Class A1, FRN + 2,519 900 1.59%, 02/25/34, Ser. 2004-BC1, Class M1, FRN 900 1,300 1.32%, 04/25/34, Ser. 2004-BC1, Class A1, FRN 1,300 1,975 Countrywide Home Equity Loan Trust, 1.33%, 08/15/28, Ser. 2002-D, Class A, FRN + 1,972 2,750 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 2,791
SEE NOTES TO FINANCIAL STATEMENTS. 43
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED Discover Card Master Trust I, $ 50 5.30%, 11/16/06, Ser. 2001-5, Class A + $ 50 2,685 1.15%, 04/15/08, Ser. 2002-4, Class A, FRN + 2,686 527 EQCC Trust, 1.39%, 11/25/31, Ser. 2002-1, Class 2A, FRN + 528 1,793 Fifth Third Home Equity Loan Trust, 1.34%, 09/20/23, Ser. 2003-1, Class A , FRN + 1,793 First USA Credit Card Master Trust, 1,100 1.18%, 11/20/06, Ser. 2001-2, Class A, FRN + 1,100 1,900 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN + 1,900 35 Fleet Credit Card Master Trust II, 1.14%, 10/15/07, Ser. 2002-A, Class A, FRN + 35 2,267 Fleet Home Equity Loan Trust, 1.34%, 01/20/33, Ser. 2003-1, Class A, FRN + 2,267 Ford Credit Auto Owner Trust, 6 2.48%, 12/15/04, Ser. 2002-C, Class A2A + 6 832 1.21%, 01/15/06, Ser. 2002-A, Class A3B, FRN + 832 2,450 Ford Credit Floorplan Master Owner Trust, 1.23%, 07/15/08, Ser. 2001-2, Class A, FRN + 2,456 843 GE Corp. Aircraft Financing, 1.26%, 06/25/10, Ser. 2003-1A, Class 1A, FRN + 843 747 Greenpoint Home Equity Loan Trust, 1.36%, 04/15/29, Ser. 2003-1, Class A, FRN # + 748 641 HFC Home Equity Loan Asset Backed Certificates, 1.39%, 04/20/32, Ser. 2002-2, Class A, FRN 642 Honda Auto Receivables Owner Trust, 1,250 1.57%, 06/19/06, Ser. 2003-5, Class A2 1,253 1,900 1.92%, 11/20/06, Ser. 2003-1, Class A3 1,910 959 3.96%, 02/19/07, Ser. 2001-3, Class A4 972 200 Household Automotive Trust, 1.43%, 05/18/09, Ser. 2002-3, Class A4B, FRN 201 2,289 Household Mortgage Loan Trust, 1.44%, 02/20/33, Ser. 2003-HC1, Class A, FRN 2,295 Long Beach Mortgage Loan Trust, 571 1.55%, 11/26/32, FRN 574 1,251 1.41%, 07/25/33, Ser. 2003-3, Class A, FRN 1,253 3,550 1.43%, 08/25/33, Ser. 2003-4, Class AV3, FRN 3,559 MBNA Credit Card Master Note Trust $ 1,000 1.89%, 12/15/06, Ser. 1999-G, Class C, FRN, # $ 1,000 50 1.22%, 02/15/07, Ser. 2001-A4, Class A, FRN 50 5,000 1.20%, 08/17/09, Ser. 2002-A4, Class A4, FRN 5,010 2,000 1.47%, 10/15/09, Ser. 2002-B2, Class B2, FRN 2,008 Option One Mortgage Loan Trust, 730 1.38%, 02/25/32, Ser. 2002-1, Class A, FRN 732 301 1.36%, 06/25/32, Ser. 2002-2, Class A, FRN 301 335 1.36%, 08/25/32, Ser. 2002-3, Class A2, FRN 335 2,376 1.51%, 02/25/33, Ser. 2003-1, Class A2, FRN 2,388 3,425 Orchid Structured Finance CDO LTD, 1.22%, 11/18/38, Ser. 2003-1A, Class A1-MM, FRN, # + 3,425 Residential Asset Securities Corp., 2,499 1.41%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN 2,499 2,319 1.34%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 2,319 1,598 Residential Funding Mortgage Securities II, 1.35%, 01/29/29, Ser. 2003-HS4, Class AIB, FRN 1,598 Sears Credit Account Master Trust, 1,600 1.20%, 06/16/08, Ser. 2001-2, Class A, FRN 1,600 1,250 1.19%, 02/18/09, Ser. 2002-1, Class A, FRN 1,248 1,010 1.22%, 08/18/09, Ser. 2002-4, Class A, FRN 1,011 SLM Student Loan Trust, 1,011 1.21%, 06/15/10, Ser. 2002-8, Class A2, FRN 1,012 1,821 1.15%, 10/25/10, Ser. 2002-1, Class A1, FRN 1,822 1,450 Superior Wholesale Inventory Financing Trust, 1.17%, 06/15/06, Ser. 2001-C7, Class A, FRN 1,450 2,900 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 2,932 Wachovia Asset Securitization, Inc., 3,798 1.52%, 12/25/32, Ser. 2002-HE2, Class A, FRN 3,815 2,643 1.38%, 03/25/33, Ser. 2003-HE1, Class A1, FRN 2,646
SEE NOTES TO FINANCIAL STATEMENTS. 44
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED WFS Financial Owner Trust, $ 568 1.31%, 03/20/06, Ser. 2001-C, Class A3, FRN $ 568 2,500 1.25%, 05/20/08, Ser. 2003-A3, Class B, FRN 2,504 22 World Omni Auto Receivables Trust, 5.51%, 07/20/07, Ser. 2001-A, Class A4 22 -------------------------------------------------------------------------------------------------- Total Asset Backed Securities 110,060 (Cost $109,920) -------------------------------------------------------------------------------------------------- CERTIFICATE OF DEPOSIT -- 0.8% FINANCIAL SERVICES -- 0.8% 2,900 M&I Marshall & Ilsley Bank, 1.57%, 03/10/05 2,904 (Cost $2,897) -------------------------------------------------------------------------------------------------- Total Long-Term Investments $ 332,342 (Cost $331,860) -------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 4.2% MUNICIPAL SECURITIES -- 0.9% PENNSYLVANIA -- 0.3% 1,100 Beaver County Industrial Development Authority, Ser. A, Rev., FRDO, 4.85%, 04/24/04 1,106 SOUTH CAROLINA -- 0.6% 2,050 South Carolina Student Loan Corp., Education Loans, Ser. A-1, Rev., FRDO, 1.25%, 06/22/04 2,050 Total Municipal Securities 3,156 (Cost $3,157) -------------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 0.5% CONSUMER PRODUCTS -- 0.5% $ 1,650 Altria Group, Inc., 1.97%, 10/15/04 + $ 1,635 (Cost $1,629) CERTIFICATES OF DEPOSIT -- 2.3% FINANCIAL SERVICES -- 2.3% 2,030 Bayerische Landesbank Girozentrale (Germany) (Yankee), 1.17%, 12/17/04, Floating Rate + 2,030 1,300 Credit Suisse First Boston New York (Yankee), 1.18%, 07/08/05, Floating Rate + 1,300 1,900 Manufacturers & Traders Trust Co., 1.12%, 06/15/05, FRN 1,900 2,650 Suntrust Bank, 1.15%, 10/03/05, FRN 2,650 -------------------------------------------------------------------------------------------------- Total Certificates of Deposit 7,880 (Cost $7,876) -------------------------------------------------------------------------------------------------- SHARES - --------------------------------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 0.5% 1,896 JPMorgan Prime Money Market Fund (a) + 1,896 (Cost $1,896) -------------------------------------------------------------------------------------------------- Total Short-Term Investments 14,567 (Cost $14,558) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 346,909 (COST $346,418) --------------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION/ CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - ------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 10 2 Year Treasury Notes June, 2004 $ 2,145 $ 4 32 5 Year Treasury Notes June, 2004 3,597 --^^ 357 Eurodollar September, 2004 87,978 17 SHORT FUTURES OUTSTANDING (358) Eurodollar December, 2004 (87,952) (42)
SEE NOTES TO FINANCIAL STATEMENTS. 45 JPMORGAN FLEMING EMERGING MARKETS DEBT FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 98.4% U.S. TREASURY SECURITIES -- 5.7% UNITED STATES -- 5.7% U.S. Treasury Notes & Bonds, $ 135 6.88%, 05/15/06 @ + $ 150 1,375 4.00%, 02/15/14 + 1,376 665 5.38%, 02/15/31 + 717 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 2,243 (Cost $2,238) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 83.5% ARGENTINA -- 1.0% Republic of Argentina, 350 7.00%, 12/19/08, Ser. 2008 + (d) * 96 525 12.25%, 06/19/18, Ser. 2018 + (d) * 144 345 2.06%, 03/31/23, Ser. L-GL, FRN (d) * 170 -------------------------------------------------------------------------------------------------- 410 -------------------------------------------------------------------------------------------------- BRAZIL -- 23.8% 300 Banco Nacional de Desenvolvimiento Economico e Social, 6.97%, 06/16/08, Regulation S, FRN 296 Federal Republic of Brazil, 190 11.50%, 03/12/08 + 212 395 12.00%, 04/15/10 450 130 9.25%, 10/22/10 132 430 10.00%, 08/07/11 443 2,260 2.06%, 04/15/12, FRN 1,939 1,108 8.00%, 04/15/14 1,060 825 8.00%, 04/15/14, # 792 515 12.75%, 01/15/20 613 3,187 11.00%, 08/17/40 3,341 -------------------------------------------------------------------------------------------------- 9,278 -------------------------------------------------------------------------------------------------- BULGARIA -- 0.9% National Republic of Bulgaria, 202 2.00%, 07/28/11, Ser. IAB, FRN, # 198 162 2.00%, 07/28/12, Ser. A, FRN 159 -------------------------------------------------------------------------------------------------- 357 -------------------------------------------------------------------------------------------------- COLOMBIA -- 4.9% Republic of Colombia, 250 9.75%, 04/23/09 283 569 9.75%, 04/09/11 652 283 10.00%, 01/23/12 316 $ 460 10.75%, 01/15/13 $ 530 105 11.75%, 02/25/20 129 -------------------------------------------------------------------------------------------------- 1,910 -------------------------------------------------------------------------------------------------- DOMINICAN REPUBLIC -- 0.5% Dominican Republic, 247 9.50%, 09/27/06 178 10 9.04%, 01/23/13, # 7 -------------------------------------------------------------------------------------------------- 185 -------------------------------------------------------------------------------------------------- ECUADOR -- 4.8% Republic of Ecuador, 574 12.00%, 11/15/12 571 1,567 7.00%, 08/15/30, SUB 1,297 -------------------------------------------------------------------------------------------------- 1,868 -------------------------------------------------------------------------------------------------- EGYPT -- 0.3% 100 Arab Republic of Egypt, 8.75%, 07/11/11, # 123 EL SALVADOR -- 0.9% Republic of El Salvador, 65 7.75%, 01/24/23, # 70 285 8.25%, 04/10/32, # 285 -------------------------------------------------------------------------------------------------- 355 -------------------------------------------------------------------------------------------------- MEXICO -- 7.8% 260 Bancomext Trust Division, 11.25%, 05/30/06, # + 309 United Mexican States, 250 10.38%, 02/17/09, Ser. XW 320 650 7.50%, 01/14/12 746 450 8.00%, 09/24/22, Ser. A, MTN 510 570 11.50%, 05/15/26 861 200 8.30%, 08/15/31, MTN 233 70 8.30%, 08/15/31 81 -------------------------------------------------------------------------------------------------- 3,060 -------------------------------------------------------------------------------------------------- PANAMA -- 2.1% Republic of Panama, 210 9.63%, 02/08/11 243 20 10.75%, 05/15/20 25
SEE NOTES TO FINANCIAL STATEMENTS. 46 SEMI-ANNUAL REPORT FEBRUARY 29 2004
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED PANAMA -- CONTINUED $ 515 9.38%, 01/16/23 $ 561 -------------------------------------------------------------------------------------------------- 829 -------------------------------------------------------------------------------------------------- PERU -- 4.0% Republic of Peru, 37 9.13%, 02/21/12 41 366 9.13%, 02/21/12, Regulation S 408 65 9.88%, 02/06/15 74 930 4.50%, 03/07/17, FRN, SUB 804 273 5.00%, 03/07/17, FRN, SUB 249 -------------------------------------------------------------------------------------------------- 1,576 -------------------------------------------------------------------------------------------------- PHILIPPINES -- 2.9% Republic of Philippines, 229 8.38%, 03/12/09 238 158 9.88%, 03/16/10 172 170 6.50%, to 12/04; thereafter FRN, 12/01/17, Ser. B 162 290 9.88%, 01/15/19 295 245 10.63%, 03/16/25 261 -------------------------------------------------------------------------------------------------- 1,128 -------------------------------------------------------------------------------------------------- RUSSIA -- 17.9% Russian Federation, 705 10.00%, 06/26/07, Regulation S 827 52 8.25%, 03/31/10, # 58 402 8.25%, 03/31/10, Regulation S 451 725 11.00%, 07/24/18, Regulation S 993 350 12.75%, 06/24/28, Regulation S 564 3,548 5.00%, 03/31/30, SUB, # 3,490 655 5.00%, 03/31/30, Regulation S, SUB 644 -------------------------------------------------------------------------------------------------- 7,027 -------------------------------------------------------------------------------------------------- SOUTH AFRICA -- 0.9% 295 Republic of South Africa (Yankee), 8.50%, 06/23/17 360 TRINIDAD/TOBAGO -- 0.5% 155 Republic of Trinidad & Tobago, 9.75%, 07/01/20 205 TUNISIA -- 0.4% $ 125 Banque Centrale de Tunisie, 7.38%, 04/25/12 $ 143 TURKEY -- 4.0% Republic of Turkey, 15 9.88%, 03/19/08 17 500 12.38%, 06/15/09 634 465 11.75%, 06/15/10 584 125 11.88%, 01/15/30 176 165 8.00%, 02/14/34 171 -------------------------------------------------------------------------------------------------- 1,582 -------------------------------------------------------------------------------------------------- UKRAINE -- 2.4% 180 Republic of Ukraine, 11.00%, 03/15/07, Regulation S 197 730 Ukraine Government, 6.88%, 03/04/11, # (f) 731 -------------------------------------------------------------------------------------------------- 928 -------------------------------------------------------------------------------------------------- URUGUAY -- 0.7% 118 Republic of Uruguay, 7.88%, 01/15/33 81 215 Uruguay Government International Bond, 7.50%, 03/15/15 174 -------------------------------------------------------------------------------------------------- 255 -------------------------------------------------------------------------------------------------- VENEZUELA -- 2.8% Republic of Venezuela, 95 2.13%, 12/18/07, Ser. DL, FRN 86 600 7.00%, 12/01/18 424 695 9.25%, 09/15/27 583 -------------------------------------------------------------------------------------------------- 1,093 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 32,672 (Cost $26,208) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 9.2% BRAZIL -- 1.4% 550 Trikem SA, 10.63%, 07/24/07, # 545 COTE D'IVOIRE -- 1.5% 615 CSN Islands VIII Corp 9.75% 12/16/13, # + 583
SEE NOTES TO FINANCIAL STATEMENTS. 47
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- MALAYSIA -- 1.7% $ 575 Petroliam Nasional BHD, 7.88%, 05/22/22, # $ 678 MEXICO -- 4.6% 400 BBVA Bancomer Capital Trust I, 10.50%, 02/16/11, # + 455 Pemex Project Funding Master Trust, 160 7.88%, 02/01/09 183 370 9.13%, 10/13/10 449 340 7.38%, 12/15/14 372 285 Petroleos Mexicanos (Yankee), 9.25%, 03/30/18 342 -------------------------------------------------------------------------------------------------- 1,801 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 3,607 (Cost $3,478) -------------------------------------------------------------------------------------------------- SHARES - --------------------------------------------------------------------------------------------------------------------- WARRANTS -- 0.0% NIGERIA -- 0.0% 1 Central Bank of Nigeria, expires 11/15/20* 0 SINGAPORE -- 0.0% 0^^ Asia Pulp & Paper Co., LTD, ADR, expires 03/15/05, # (f) * $ 0 -------------------------------------------------------------------------------------------------- VENEZUELA -- 0.0% 1 Republic of Venezuela (Oil Obligation), expires 04/15/20 * 0 -------------------------------------------------------------------------------------------------- Total Warrants 0 (Cost $0^^) -------------------------------------------------------------------------------------------------- Total Long-Term Investments 38,522 (Cost $31,924) -------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.6% MONEY MARKET FUND -- 1.6% 633 JPMorgan Prime Money Market Fund (a) + 633 (Cost $633) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 39,155 (COST $32,557) --------------------------------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY INDUSTRY, FEBRUARY 29, 2004
INDUSTRY % OF INVESTMENT SECURITIES - --------------------------------------------------------------------------------------------------------------------- Foreign Government Securities 83.5% U.S. Treasury Securities 5.7 Oil & Gas 2.6 Financial Services 2.5 Money Market Fund 1.6 Steel 1.5 Chemicals 1.4 Banking 1.2 TOTAL 100.0% - ---------------------------------------------------------------------------------------------------------------------
FUTURES CONTRACT (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION/ CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------- SHORT FUTURES OUTSTANDING (32) 10 Year Treasury Notes June, 2004 $ (3,644) $ (22)
SEE NOTES TO FINANCIAL STATEMENTS. 48 JPMORGAN GLOBAL STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT~ (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 96.3% U.S. TREASURY SECURITIES -- 0.7% U.S. Treasury Notes & Bonds, $ 100 3.25%, 05/31/04 @ + $ 101 100 1.88%, 11/30/05 @ + 101 80 6.63%, 05/15/07 @ + 91 125 5.50%, 08/15/28 @ + 134 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 427 (Cost $406) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 21.2% Dominican Republic (Dominican Republic), 327 9.50%, 09/27/06 235 325 9.04%, 01/23/13 218 Federal Republic of Brazil (Brazil), 97 2.06%, 04/15/09, FRN 89 90 10.00%, 08/07/11 93 130 2.06%, 04/15/12, FRN 111 180 8.00%, 04/15/14 172 25 12.75%, 01/15/20 30 135 8.88%, 04/15/24 122 418 11.00%, 08/17/40 438 Federal Republic of Germany (Germany), EUR 130 5.00%, 05/20/05, Ser. 135 167 EUR 170 5.00%, 08/19/05, Ser. 136 220 EUR 200 4.00%, 02/16/07, Ser. 139 258 EUR 370 5.25%, 01/04/08, Ser. 98 497 EUR 10 4.50%, 07/04/09, Ser. 99 13 EUR 20 5.25%, 01/04/11, Ser. 00 27 EUR 10 6.25%, 01/04/24, Ser. 94 15 EUR 75 4.75%, 07/04/34, Ser. 0301 92 Government of Canada (Canada), CAD 20 7.00%, 12/01/06 17 CAD 70 5.50%, 06/01/10 57 CAD 40 5.25%, 06/01/12 32 CAD 30 8.00%, 06/01/27, Ser. VW17 + 31 Government of France (France), EUR 145 5.50%, 04/25/07 195 EUR 450 4.00%, 04/25/13 557 EUR 200 5.00%, 10/25/16 265 EUR 60 5.75%, 10/25/32 85 EUR 140 Kingdom of Belgium (Belgium), 4.25%, 09/28/13, Ser. 41 + 176 Malaysia Government International Bond (Malaysia), $ 140 8.75%, 06/01/09 + $ 173 190 7.50%, 07/15/11 226 National Republic of Bulgaria (Bulgaria), 141 2.00%, 07/28/11, Ser. IAB, FRN 138 166 2.00%, 07/28/12, Ser. A, FRN 163 198 8.25%, 01/15/15, # 237 Republic of Colombia (Colombia), 15 9.75%, 04/23/09 17 290 9.75%, 04/09/11 + 333 89 10.00%, 01/23/12 + 99 220 11.75%, 02/25/20, MTN 270 55 10.38%, 01/28/33 + 60 140 Republic of Costa Rica (Costa Rica), 6.55%, 03/20/14, + 141 Republic of El Salvador (El Salvador), 138 8.50%, 07/25/11 157 255 7.75%, 01/24/23 275 215 8.25%, 04/10/32 215 85 Republic of Korea (South Korea), 8.88%, 04/15/08 103 Republic of Panama (Panama), 100 9.63%, 02/08/11 116 145 10.75%, 05/15/20 + 178 240 9.38%, 01/16/23 262 Republic of Peru (Peru), 245 9.13%, 02/21/12 273 342 4.50%, 03/07/17, FRN 296 155 5.00%, 03/07/17, FRN 142 Republic of Philippines (Philippines), 110 8.88%, 04/15/08 119 159 8.38%, 03/12/09 165 85 9.88%, 01/15/19 + 87 Republic of South Africa (South Africa), 210 9.13%, 05/19/09 256 205 8.50%, 06/23/17 250 95 Republic of Trinidad & Tobago (Trinidad & Tobago), 9.75%, 07/01/20 125 Republic of Turkey (Turkey), 25 9.88%, 03/19/08 29 55 12.00%, 12/15/08 68 100 11.75%, 06/15/10 126 90 11.00%, 01/14/13 112 30 11.88%, 01/15/30 42
SEE NOTES TO FINANCIAL STATEMENTS. 49
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- CONTINUED Republic of Ukraine (Ukraine), $ 369 11.00%, 03/15/07, Regulation S $ 405 100 6.88%, 03/04/11 100 160 7.65%, 06/11/13, Regulation S 164 Republic of Venezuela (Venezuela), 95 2.13%, 12/18/07, Ser. DL, FRN 86 165 7.00%, 12/01/18 117 230 9.25%, 09/15/27 193 Russian Federation (Russia), 70 8.25%, 03/31/10, Regulation S 79 75 11.00%, 07/24/18, Regulation S 103 850 5.00%, 03/31/30, Regulation S, SUB 835 U.K. Treasury Gilt (United Kingdom), GBP 10 8.50%, 12/07/05 20 GBP 40 5.75%, 12/07/09 78 GBP 20 8.00%, 09/27/13 46 GBP 30 5.00%, 09/07/14 57 United Mexican States (Mexico), 85 8.13%, 12/30/19 99 85 8.00%, 09/24/22, Ser. A, MTN 96 105 11.50%, 05/15/26 159 10 8.30%, 08/15/31, MTN 12 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 12,114 (Cost $10,501) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 38.0% ADVERTISING -- 0.3% 130 RH Donnelley Finance Corp. I, 10.88%, 12/15/12, # 155 AEROSPACE -- 0.2% 100 L-3 Communications Corp., 7.63%, 06/15/12 + 111 AGRICULTURAL PRODUCTION/SERVICES -- 0.2% 30 RJ Reynolds Tobacco Holdings, Inc., 7.88%, 05/15/09, Ser. B + 32 65 Seminis Vegetable Seeds, Inc., 10.25%, 10/01/13, # 69 -------------------------------------------------------------------------------------------------- 101 -------------------------------------------------------------------------------------------------- AIRLINES -- 1.4% Delta Air Lines, Inc., $ 40 7.70%, 12/15/05 + $ 36 60 7.90%, 12/15/09 + 44 636 Northwest Airlines Corp., 8.07%, 10/01/19, Ser. 2000-1 + 712 -------------------------------------------------------------------------------------------------- 792 -------------------------------------------------------------------------------------------------- AUTOMOTIVE -- 4.6% 300 DaimlerChrysler N.A. Holding Corp., 6.50%, 11/15/13 + 320 45 Dana Corp., 9.00%, 08/15/11 + 54 Ford Motor Credit Co., 575 7.38%, 10/28/09 + 632 250 7.88%, 06/15/10 + 279 200 General Motors Acceptance Corp., 6.88%, 09/15/11 + 216 General Motors Corp., 240 8.25%, 07/15/23 + 269 450 8.38%, 07/15/33 + 509 35 HLI Operating Co., Inc., 10.50%, 06/15/10 + 40 100 Tenneco Automotive, Inc., 10.25%, 07/15/13, Ser. B 117 TRW Automotive, Inc., 25 9.38%, 02/15/13 29 100 11.00%, 02/15/13 118 -------------------------------------------------------------------------------------------------- 2,583 -------------------------------------------------------------------------------------------------- BANKING -- 1.2% 175 Abbey National Capital Trust I, 8.96%, to 06/30; thereafter FRN, 12/31/49 + 237 300 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/29/49 # + 335 Korea Development Bank (South Korea), 40 7.13%, 04/22/04 40 85 7.38%, 09/17/04 87 -------------------------------------------------------------------------------------------------- 699 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 50
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BIOTECHNOLOGY -- 0.1% $ 45 Bio-Rad Laboratories, Inc., 7.50%, 08/15/13 + $ 50 BROADCASTING/CABLE -- 0.2% 120 Mediacom LLC Capital Corp., 9.50%, 01/15/13 + 122 BUSINESS SERVICES -- 0.3% 150 Iron Mountain, Inc., 8.63%, 04/01/13 + 163 CHEMICALS -- 1.6% Equistar Chemicals LP/Equistar Funding Corp., 80 10.13%, 09/01/08 + 86 100 10.63%, 05/01/11 + 109 155 Huntsman ICI Chemicals, LLC, 10.13%, 07/01/09 + 158 45 Huntsman LLC, 11.63%, 10/15/10, # + 47 140 IMC Global, Inc., 10.88%, 06/01/08, Ser. B + 168 210 Lyondell Chemical Co., 10.88%, 05/01/09 + 210 75 Noveon, Inc., 11.00%, 02/28/11, Ser. B + 86 65 PolyOne Corp., 10.63%, 05/15/10 + 67 -------------------------------------------------------------------------------------------------- 931 -------------------------------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.2% 120 Electronic Data Systems Corp., 6.00%, 08/01/13, Ser. B + 116 CONSTRUCTION -- 0.8% 45 Beazer Homes USA, Inc., 8.38%, 04/15/12 + 50 175 Pulte Homes, Inc., 6.38%, 05/15/33 + 173 200 Terex Corp., 10.38%, 04/01/11, Ser. B 226 -------------------------------------------------------------------------------------------------- 449 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.1% 60 Elizabeth Arden, Inc., 7.75%, 01/15/14, # + 62 CONSUMER SERVICES -- 0.5% 150 Corrections Corp. of America, 7.50%, 05/01/11 + 157 $ 100 United Rentals North America, Inc., 6.50%, 02/15/12, # $ 100 257 DIVERSIFIED -- 0.0% ^ 15 Tyco International Group SA (Luxembourg) (Yankee), 6.38%, 10/15/11 16 ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.4% 85 Legrand SA (France), 8.50%, 02/15/25 + 92 110 Sanmina-SCI Corp., 10.38%, 01/15/10 128 -------------------------------------------------------------------------------------------------- 220 -------------------------------------------------------------------------------------------------- ENTERTAINMENT/LEISURE -- 0.4% 125 Argosy Gaming Co., 7.00%, 01/15/14, # + 128 110 Six Flags, Inc., 8.88%, 02/01/10 113 -------------------------------------------------------------------------------------------------- 241 -------------------------------------------------------------------------------------------------- ENVIRONMENTAL SERVICES -- 0.2% 125 Allied Waste North America, 10.00%, 08/01/09, Ser. B + 134 FINANCIAL SERVICES -- 4.2% 65 Arch Western Finance LLC, 6.75%, 07/01/13, # + 69 350 Capital One Bank, 4.88%, 05/15/08 + 367 100 Eircom Funding (Ireland), 8.25%, 08/15/13 + 111 325 Erac USA Finance Co., 9.13%, 12/15/04, MTN, # + 343 150 H&E Equipment Services LLC/H&E Finance Corp., 11.13%, 06/15/12 + 155 125 HSBC Capital Funding LP (Channel Islands), 4.61%, to 06/13; thereafter FRN, 12/31/49, # + 120 200 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49, + 247 150 IOS Capital LLC, 7.25%, 06/30/08 + 158 50 Nexstar Finance LLC/Nexstar Finance, Inc., 12.00%, 04/01/08 + 56
SEE NOTES TO FINANCIAL STATEMENTS. 51
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- FINANCIAL SERVICES -- CONTINUED Pemex Project Funding Master Trust (Mexico), $ 90 8.00%, 11/15/11, MTN, # $ 101 70 7.38%, 12/15/14 77 235 Targeted Return Index (TRAINS), 6.54%, to 08/06; thereafter FRN, 08/15/08, Ser. 2002-5 255 250 UBS Preferred Funding Trust I, 8.62%, to 10/10; thereafter FRN, 12/31/49 314 -------------------------------------------------------------------------------------------------- 2,373 -------------------------------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.7% 25 Del Monte Corp., 9.25%, 05/15/11, Ser. B + 28 105 Delhaize America, Inc., 8.13%, 04/15/11 + 121 110 Ingles Markets, Inc., 8.88%, 12/01/11 + 114 150 Swift & Co., 10.13%, 10/01/09 157 -------------------------------------------------------------------------------------------------- 420 -------------------------------------------------------------------------------------------------- HEALTH CARE/HEALTH CARE SERVICES -- 1.6% 90 Ardent Health Services, 10.00%, 08/15/13, # + 100 100 Fresenius Medical Care Capital Trust IV, 7.88%, 06/15/11 + 109 85 Genesis HealthCare Corp., 8.00%, 10/15/13, # + 91 HCA, Inc., 115 5.25%, 11/06/08 + 119 165 6.75%, 07/15/13 + 179 700 Mariner Health Group, Inc., 9.50%, 04/01/06, Ser. B (d) (f) + * 0^^ 100 Medex, Inc., 8.88%, 05/15/13, # + 108 135 Tenet Healthcare Corp., 7.38%, 02/01/13 125 100 Triad Hospitals, Inc., 7.00%, 11/15/13, # 104 -------------------------------------------------------------------------------------------------- 935 -------------------------------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 0.6% 100 Ameristar Casinos, Inc., 10.75%, 02/15/09 + 115 100 Mandalay Resort Group, 10.25%, 08/01/07, Ser. B + 117 $ 100 MGM Mirage, Inc., 8.38%, 02/01/11 + $ 115 -------------------------------------------------------------------------------------------------- 347 -------------------------------------------------------------------------------------------------- INSURANCE -- 0.9% 225 Aegon NV (The Netherlands), 4.75%, 06/01/13 + 226 200 AXA (France), 8.60%, 12/15/30 + 260 -------------------------------------------------------------------------------------------------- 486 -------------------------------------------------------------------------------------------------- METALS/MINING -- 0.1% 50 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B + 53 MULTI-MEDIA -- 2.3% 230 Dex Media, Inc., 8.00%, 11/15/13, # + 230 100 DirecTV Holdings LLC, 8.38%, 03/15/13 + 114 150 Echostar DBS Corp., 6.38%, 10/01/11, # + 158 100 Lodgenet Entertainment Corp., 9.50%, 06/15/13 + 112 150 Primedia, Inc., 8.88%, 05/15/11 + 155 200 Radio One, Inc., 8.88%, 07/01/11, Ser. B + 221 300 Time Warner, Inc., 7.63%, 04/15/31 + 349 -------------------------------------------------------------------------------------------------- 1,339 -------------------------------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.4% 100 Moore North America Finance, Inc., 7.88%, 01/15/11 + 114 Xerox Corp., 5 7.13%, 06/15/10 5 110 7.63%, 06/15/13 117 -------------------------------------------------------------------------------------------------- 236 -------------------------------------------------------------------------------------------------- OIL & GAS -- 2.5% 175 Amerada Hess Corp., 7.30%, 08/15/31 + 190 168 Chesapeake Energy Corp., 6.88%, 01/15/16 + 174 175 Devon Financing Corp. ULC, 7.88%, 09/30/31 + 215
SEE NOTES TO FINANCIAL STATEMENTS. 52
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- OIL & GAS -- CONTINUED $ 60 Petroleos Mexicanos (Mexico) (Yankee), 9.25%, 03/30/18 $ 72 55 Plains Exploration & Production Co., 8.75%, 07/01/12, Ser. B + 61 100 Pogo Producing Co., 8.25%, 04/15/11, Ser. B + 112 90 Swift Energy Co., 9.38%, 05/01/12 100 100 The Premcor Refining Group, Inc., 7.50%, 06/15/15 + 110 175 Valero Energy Corp., 7.50%, 04/15/32 206 150 Westport Resources Corp., 8.25%, 11/01/11 166 -------------------------------------------------------------------------------------------------- 1,406 -------------------------------------------------------------------------------------------------- PACKAGING -- 1.0% 150 Crown European Holdings SA (France), 9.50%, 03/01/11 + 169 200 Owens-Brockway Glass Container, Inc., 8.88%, 02/15/09 + 217 45 Silgan Holdings, Inc., 6.75%, 11/15/13, # 46 100 Stone Container Corp., 9.75%, 02/01/11 112 -------------------------------------------------------------------------------------------------- 544 -------------------------------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.8% Boise Cascade Corp., 45 6.50%, 11/01/10 + 47 23 7.00%, 11/01/13 + 24 Georgia-Pacific Corp., 125 8.88%, 02/01/10 + 143 100 9.50%, 12/01/11 + 116 100 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 98 -------------------------------------------------------------------------------------------------- 428 -------------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.2% 100 Omnicare, Inc., 6.13%, 06/01/13 + 103 PIPELINES -- 1.2% 70 Aquila, Inc., 14.88%, 07/01/12 + 95 50 Dynegy Holdings, Inc., 10.13%, 07/15/13, # + 56 270 El Paso Corp., 7.88%, 06/15/12 + 244 Williams Companies, Inc., $ 100 8.63%, 06/01/10 $ 109 155 8.13%, 03/15/12 169 -------------------------------------------------------------------------------------------------- 673 -------------------------------------------------------------------------------------------------- PRINTING & PUBLISHING -- 0.2% 100 Von Hoffman Press, Inc., 10.25%, 03/15/09 105 REAL ESTATE INVESTMENT TRUST -- 0.7% 180 Host Marriott LP, 9.25%, 10/01/07, Ser. G + 200 200 MeriStar Hospitality Operating Partnership LP/MeriStar Hospitality Finance Corp., 10.50%, 06/15/09 + 211 -------------------------------------------------------------------------------------------------- 411 -------------------------------------------------------------------------------------------------- RETAILING -- 0.6% 90 Dillard's, Inc., 7.85%, 10/01/12 + 94 185 JC Penney Co., Inc., 7.60%, 04/01/07 + 204 60 The Gap, Inc., 6.90%, 09/15/07 + 66 -------------------------------------------------------------------------------------------------- 364 -------------------------------------------------------------------------------------------------- SEMI-CONDUCTORS -- 0.1% 62 AMI Semiconductor, Inc., 10.75%, 02/01/13 + 72 STEEL -- 0.5% 170 AK Steel Corp., 7.88%, 02/15/09 + 150 50 Euramax International LTD, 8.50%, 08/15/11, # + 52 75 IPSCO, Inc. (Canada), 8.75%, 06/01/13 + 85 -------------------------------------------------------------------------------------------------- 287 -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 4.3% 175 AT&T Wireless Services, Inc., 8.13%, 05/01/12 + 210 35 Cincinnati Bell, Inc., 8.38%, 01/15/14 + 37 Deutsche Telekom International Finance BV (The Netherlands), 255 8.50%, 06/15/10 + 311 100 8.75%, 06/15/30 + 129
SEE NOTES TO FINANCIAL STATEMENTS. 53
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- CONTINUED $ 100 France Telecom SA (France), 9.75%, 03/01/31 + $ 132 90 Insight Midwest LP/Insight Capital, Inc., 10.50%, 11/01/10 + 97 75 Koninklijke KPN NV (The Netherlands), 8.00%, 10/01/10 + 90 Nextel Communications, Inc., 5 9.38%, 11/15/09 + 5 295 7.38%, 08/01/15 + 319 70 Nortel Networks LTD (Canada), 6.13%, 02/15/06 + 72 15 Qwest Corp., 9.13%, 03/15/12, # + 17 200 Rogers Wireless Communications, Inc. (Canada), 9.63%, 05/01/11 + 244 Sprint Capital Corp., 200 6.90%, 05/01/19 213 225 8.75%, 03/15/32 279 75 Syniverse Technologies, Inc., 12.75%, 02/01/09, Ser. B 83 175 Verizon Global Funding Corp., 7.38%, 09/01/12 206 -------------------------------------------------------------------------------------------------- 2,444 -------------------------------------------------------------------------------------------------- TRANSPORTATION -- 0.3% 135 CP Ships LTD (Canada), 10.38%, 07/15/12 + 159 UTILITIES -- 2.0% Calpine Corp., 35 9.88%, 12/01/11, # + 34 100 8.75%, 07/15/13, # + 92 130 CMS Energy Corp., 7.75%, 08/01/10, # + 135 175 Dominion Resources, Inc., 6.30%, 03/15/33 + 180 130 Reliant Resources, Inc., 9.50%, 07/15/13 + 141 TECO Energy, Inc., 80 7.20%, 05/01/11 84 110 7.00%, 05/01/12 114 45 The AES Corp., 8.75%, 06/15/08 + 47 275 TXU Energy Co., 7.00%, 03/15/13 314 -------------------------------------------------------------------------------------------------- 1,141 -------------------------------------------------------------------------------------------------- WHOLESALING -- 0.1% $ 75 Aviall, Inc., 7.63%, 07/01/11 + $ 80 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 21,608 (Cost $20,886) -------------------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 2.5% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% 3,825 Credit Suisse First Boston Mortgage Securities Corp., 1.02%, 06/25/20, Ser. 1997-2X, FRN, # + IO 63 6 DLJ Mortgage Acceptance Corp., 36.42%, 07/25/27, Ser. 1997-D, FRN, # + 6 -------------------------------------------------------------------------------------------------- 69 -------------------------------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 2.4% 1,300 Federal National Mortgage Association, 5.50%, 03/25/34, TBA 1,330 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 1,399 (Cost $1,544) -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 7.5% 315 COMM, 2.37%, 12/16/11, Ser. 2000-FL1A, Class H, FRN, # + 315 300 Credit Suisse First Boston Mortgage Securities Corp., 6.38%, 12/16/35, Ser. 2001-CK1, Class A3, + 338 876 First Union Commercial Mortgage Trust, 5.73%, 10/15/35, Ser. 1999-C1, Class A + 920 770 Greenwich Capital Commercial Funding Corp., 3.86%, 07/05/12, Ser. 2003-C1, Class A3 + 751 Morgan Stanley Capital I, 300 7.93%, 12/03/05, Ser. 2000-HG, Class E, FRN, # + 321 1,000 7.70%, 10/03/30, Ser. 1997-XL1 G, # + 873 690 Nomura Asset Securities Corp., 6.59%, 03/15/30, Ser. 1998-D6, Class A1B + 779 Total Commercial Mortgage Backed Securities 4,297 (Cost $4,184) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 54
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- PRIVATE PLACEMENTS -- 26.4% CO-OP APARTMENTS -- 18.5% $ 2,565 127-129-131 West 96th Street Note, Secured by First Mortgage and Agreement on Co-op Apartment Building In New York City, 6.85%, 12/01/18, #, (i) (f) $ 2,814 1,470 127-129-131 West 96th Street Note, Secured by Second Mortgage and Agreement on Co-op Apartment Building In New York City, 6.85%, 11/01/27, #, (i) (f) 1,619 976 14-16 East 17th St., Secured By First Mortgage and Agreement on Co-op Apartment Building in Brooklyn, New York, 7.00%, 03/01/12, #, (i) (f) 980 1,356 270 5th Ave., Secured by First Mortgage and Agreement on Co-op Apartment Building in Brooklyn, New York, 6.93%, 08/01/18, #, (i) (f) 1,493 538 3512 Oxford Ave., Secured By First Mortgage and Agreement on Co-op Apartment Building in Riverdale, New York, 8.45%, 06/01/17, #, (i) (f) 632 481 86-06/86-42 155th Street, 7.00%, 01/01/14, #, (i) (f) 538 746 421 West 57th St. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building In New York City, 8.98%, 07/01/22, #, (i) (f) 866 428 482 East 9th St., Kensington Gardens Corp., Secured By First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.85%, 12/01/18, #, (i) (f) 465 539 3810 Greystone Avenue, 8.50%, 06/01/17, #, (i) (f) 597 449 31-33 Mercer St., 7.49%, 04/01/23, #, (i) (f) 525 -------------------------------------------------------------------------------------------------- 10,529 -------------------------------------------------------------------------------------------------- CONVENTIONAL MULTI-FAMILY -- 7.9% $ 1,399 Bel Clare Estates MHC, MN, 6.81%, 08/01/18, # (f) (i) + $ 1,562 1,187 Northstar Terrace MN, 6.63%, 10/01/18, #, (i) (f) 1,289 1,539 Shangri La MHC Co., 6.40%, 10/01/08, #, (i) (f) 1,681 -------------------------------------------------------------------------------------------------- 4,532 -------------------------------------------------------------------------------------------------- Total Private Placements 15,061 (Cost $13,674) -------------------------------------------------------------------------------------------------- SHARES - --------------------------------------------------------------------------------------------------------------------- WARRANT -- 0.0% FOREIGN GOVERNMENT SECURITIES -- 0.0% 1 Republic of Venezuela (Oil Obligation) (Venezuela), expires 04/15/20, 0 (Cost $0) -------------------------------------------------------------------------------------------------- Total Long-Term Investments 54,906 (Cost $51,195) -------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 3.7% U.S. TREASURY SECURITY -- 0.3% $ 150 U.S. Treasury Bills, 0.92%, 05/20/04 + 150 (Cost $150) SHARES - --------------------------------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 3.4% 1,953 JPMorgan Prime Money Market Fund (a) + 1,953 (Cost $1,953) -------------------------------------------------------------------------------------------------- Total Short-Term Investments 2,103 (Cost $2,103) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 57,009 (COST $53,298) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 55 SUMMARY OF INVESTMENTS BY COUNTRY, FEBRUARY 29, 2004
COUNTRY % OF INVESTMENT SECURITIES - --------------------------------------------------------------------------------------------------------------------- United States 74.2% France 3.1 Germany 2.3 Brazil 1.8 Russia 1.8 Colombia 1.4 Canada 1.3 The Netherlands 1.3 Peru 1.2 Ukraine 1.2 El Salvador 1.1 Mexico 1.1 Panama 1.0 Bulgaria 0.9 South Africa 0.9 Dominican Republic 0.8 Malaysia 0.7 Philippines 0.7 Turkey 0.7 Venezuela 0.7 Other (below 0.5%) 1.8 TOTAL 100.0% - ---------------------------------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 3 Euro-BOBL March, 2004 $ 420 $ 12 22 Euro-BUND March, 2004 3,165 58 30 Treasury Bonds June, 2004 3,373 15 SHORT FUTURES OUTSTANDING (9) Treasury Bonds June, 2004 (1,012) (8) (30) 5 Year Treasury Notes June, 2004 (3,372) (15) (136) 10 Year Treasury Notes June, 2004 (15,487) (75)
SEE NOTES TO FINANCIAL STATEMENTS. 56 FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO BUY DATE VALUE (USD) 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------- 811 EUR 03/04/04 $ 1,024 $ 1,008 $ (16) 13 GBP 03/04/04 23 23 --^^ - --------------------------------------------------------------------------------------------------------------------- $ 1,047 $ 1,031 $ (16) - --------------------------------------------------------------------------------------------------------------------- NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO SELL DATE VALUE (USD) 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------- 175 CAD 03/04/04 $ 134 $ 130 $ 4 119 GBP 03/04/04 218 220 (2) 3,010 EUR 03/04/04 3,817 3,739 78 - --------------------------------------------------------------------------------------------------------------------- $ 4,169 $ 4,089 $ 80 - ---------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 57 JPMORGAN SHORT TERM BOND FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
SHARES ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 84.0% PREFERRED STOCKS -- 0.2% FINANCIAL SERVICES -- 0.2% 0^^ Smithkline Beecham Holdings Corp. + $ 2,100 (Cost $2,100) PRINCIPAL AMOUNT (USD) - --------------------------------------------------------------------------------------------------------------------- U.S. TREASURY SECURITIES -- 6.0% U.S. Treasury Notes & Bonds, $ 35,150 2.25%, 02/15/07 35,284 17,850 4.38%, 05/15/07 + 19,025 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 54,309 (Cost $54,145) -------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 5.8% 12,600 Federal Home Loan Mortgage Corp., 2.50%, 12/04/06, MTN + 12,630 Federal National Mortgage Association, 26,900 2.38%, 02/15/07 + 26,911 1,650 4.10%, 08/27/08 + 1,674 11,270 6.40%, 05/14/09 + 11,381 -------------------------------------------------------------------------------------------------- Total U.S. Government Agency Securities 52,596 (Cost $52,507) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 2.9% Province of Ontario (Canada), 3,900 4.20%, 06/30/05, (Yankee) + 4,034 8,100 2.63%, 12/15/05 + 8,202 4,250 Republic of Chile (Chile), 1.52%, 01/28/08, FRN + 4,245 Russian Federation (Russia), 5,750 8.75%, 07/24/05, # + 6,196 1,800 10.00%, 06/26/07, # + 2,106 1,800 United Mexican States (Mexico), 1.84%, 01/13/09, FRN 1,806 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 26,589 (Cost $26,449) -------------------------------------------------------------------------------------------------- SUPRANATIONAL NOTES & BONDS -- 0.6% Inter-American Development Bank, 1,800 3.88%, 09/27/04 + 1,828 3,400 6.13%, 03/08/06 + 3,689 -------------------------------------------------------------------------------------------------- Total Supranational Notes & Bonds 5,517 (Cost $5,481) -------------------------------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 0.8% ILLINOIS -- 0.3% $ 2,350 Illinois State, Taxable Pension, GO, 2.50%, 06/01/08 + $ 2,292 NORTH CAROLINA -- 0.1% 1,285 North Carolina Municipal Power Agency No. 1, Catawba, Taxable, Ser. B, Rev., 3.26%, 01/01/05 + 1,293 OHIO -- 0.1% 550 Ohio State Air Quality Development Authority, Toledo, Ser. A, Rev., Adj., 2.20%, 04/01/24 + 550 TEXAS -- 0.3% 3,150 Texas Public Finance Authority, Unemployment Compensation, Ser. B, Rev., 2.63%, 06/15/06 3,178 -------------------------------------------------------------------------------------------------- Total State and Municipal Obligations 7,313 (Cost $7,326) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 34.8% AGRICULTURAL PRODUCTION/SERVICES -- 0.1% 1,200 Altria Group, Inc., 5.63%, 11/04/08 + 1,256 AUTOMOTIVE -- 2.6% 7,300 Ford Motor Credit Co., 6.50%, 01/25/07 + 7,807 General Motors Acceptance Corp., 900 6.75%, 01/15/06 + 964 5,800 2.02%, 01/16/07, MTN, FRN + 5,779 6,300 6.13%, 02/01/07 + 6,764 2,000 Hyundai Motor Manufacturing Alabama LLC, 5.30%, 12/19/08, # + 2,058 -------------------------------------------------------------------------------------------------- 23,372 -------------------------------------------------------------------------------------------------- BANKING -- 7.3% 2,800 BBVA Bancomer Capital Trust I (Mexico), 10.50%, 02/16/11, # 3,182 1,200 Capital One Bank, 6.88%, 02/01/06 + 1,299
SEE NOTES TO FINANCIAL STATEMENTS. 58 SEMI-ANNUAL REPORT FEBRUARY 29 2004
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 3,500 ForeningsSparbanken AB (Sweden), 7.50%, to 11/06; thereafter FRN, 12/31/49, # $ 3,903 2,000 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # + 2,577 10,500 Northern Rock PLC (United Kingdom), 1.27%, 03/18/04, MTN, FRN, # + 10,501 Popular North America, Inc., 200 6.13%, 10/15/06, MTN + 218 1,950 4.25%, 04/01/08 + 2,001 4,100 Skandinaviska Enskilda Banken AB (Sweden), 8.13%, to 9/06; thereafter FRN, 12/31/49, # + 4,620 5,000 Spintab AB (Sweden), 7.50%, to 08/06; thereafter FRN, 12/31/49, # + 5,556 2,000 Unicredito Italiano Capital Trust II, 9.20%, to 10/10; thereafter FRN, 10/05/49, # 2,528 US Bancorp, 2,700 6.75%, 10/15/05 2,920 4,750 2.75%, 03/30/06, MTN 4,843 5,850 U.S. Bank N.A., 2.85%, 11/15/06 5,937 6,280 Washington Mutual Bank FA, 1.44%, 05/14/04, FRN 6,285 2,500 Washington Mutual, Inc., 7.50%, 08/15/06 2,803 1,430 Woori Bank (South Korea), 5.75%, to 03/09; thereafter FRN, 03/13/14, # 1,464 4,650 Zions Bancorporation, 2.70%, 05/01/06 4,696 -------------------------------------------------------------------------------------------------- 65,333 -------------------------------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.7% 3,800 Compaq Computer Corp., 7.65%, 08/01/05 + 4,081 2,000 Unisys Corp., 8.13%, 06/01/06 2,170 -------------------------------------------------------------------------------------------------- 6,251 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.4% $ 3,900 Diageo Finance BV (The Netherlands), 3.00%, 12/15/06 + $ 3,956 FINANCIAL SERVICES -- 14.9% 4,600 BNP US Funding LLC, 7.74%, to 12/07; thereafter FRN, 12/29/49, # 5,339 4,300 Capital One Bank, 4.25%, 12/01/08 + 4,381 4,350 Caterpillar Financial Services Corp., 2.59%, 07/15/06, MTN + 4,389 4,545 CIT Group, Inc., 4.13%, 02/21/06 + 4,717 4,250 Citigroup, Inc., 5.75%, 05/10/06 + 4,580 6,150 Countrywide Home Loans, Inc., 2.88%, 02/15/07, Ser. L, MTN + 6,177 3,450 Counts Trusts, 1.90%, 08/15/07, Ser. 2002-10, FRN, # + 3,450 3,450 1.95%, 08/15/07, Ser. 2002-11, FRN, # + 3,450 4,250 FleetBoston Financial Corp., 7.25%, 09/15/05 + 4,603 4,600 General Electric Capital Corp., 2.85%, 01/30/06, Ser. A, MTN + 4,673 Household Finance Corp., 3,050 1.47%, 05/28/04, MTN, FRN + 3,053 3,250 3.38%, 02/21/06, MTN + 3,329 2,000 HSBC Capital Funding LP (Channel Islands), 9.55%, 12/31/49, FRN, # + 2,586 2,100 International Lease Finance Corp., 4.35%, 09/15/08 + 2,178 6,100 Lehman Brothers Holdings, Inc., 3.50%, 08/07/08 + 6,159 1,650 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # + 1,677 2,300 MBNA Corp., 4.63%, 09/15/08 + 2,393 5,050 Merrill Lynch & Co., Inc., 5.36%, 02/01/07, Ser. B, MTN + 5,474 2,000 Mizuho Preferred Capital Co., LLC, 8.79%, to 06/08; thereafter FRN, 12/31/49, # + 2,190 4,050 Natexis AMBS Co., LLC, 8.44%, to 06/08; thereafter FRN, 12/29/49, # 4,775 1,800 Pricoa Global Funding I, 3.90%, 12/15/08, # + 1,828
SEE NOTES TO FINANCIAL STATEMENTS. 59
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 8,300 Principal Life Global, 5.13%, 06/28/07, # + $ 8,991 Restructured Asset Securities with Enhanced Returns (RACERS), 6,300 0.95%, 04/15/04, Ser. 2002-35, Class C, FRN, # + 6,297 6,200 0.96%, 04/15/04, Ser. 2002-40, Class C, FRN, # + 6,197 1,475 Sovereign BanCorp., Inc., 10.50%, 11/15/06 + 1,763 Special Purpose Accounts Receivable Cooperative Corp., 2,900 1.42%, 05/23/05, Ser. 2003-3, FRN, # 2,900 6,300 1.44%, 05/23/05, Ser. 2003-6, FRN, # 6,300 15,000 1.72%, 05/15/06, Ser. 2003-4, FRN, # 15,001 5,050 The Bear Stearns Co., Inc., 6.50%, 05/01/06 + 5,501 -------------------------------------------------------------------------------------------------- 134,351 -------------------------------------------------------------------------------------------------- INSURANCE -- 2.1% ASIF Global Financing, 5,350 1.42%, 03/15/07, FRN, # + 5,365 6,700 2.50%, 01/30/07, # + 6,678 3,800 Metropolitan Life Global Funding I, 4.75%, 06/20/07, # + 4,028 2,600 Prudential Insurance Co. of America, 6.38%, 07/23/06, # + 2,844 -------------------------------------------------------------------------------------------------- 18,915 -------------------------------------------------------------------------------------------------- MULTI-MEDIA -- 0.3% 2,600 Time Warner, Inc., 6.13%, 04/15/06 + 2,801 OIL & GAS -- 0.8% 1,600 Halliburton Co., 1.87%, 01/26/07, FRN, # + 1,604 1,800 Pemex Project Funding Master Trust (Mexico), 2.92%, 10/15/09, FRN, # + 1,859 4,075 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 4,124 -------------------------------------------------------------------------------------------------- 7,587 -------------------------------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.2% $ 2,000 Georgia-Pacific Corp., 7.38%, 07/15/08 + $ 2,160 REAL ESTATE -- 1.0% 7,960 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # + 9,113 REAL ESTATE INVESTMENT TRUST -- 0.2% 2,000 iStar Financial, Inc., 4.88%, 01/15/09, # + 2,000 TELECOMMUNICATIONS -- 1.7% 3,100 Deutsche Telekom International Finance (Germany), 8.25%, 06/15/05 + 3,348 3,050 France Telecom (France), 8.45%, 03/01/06 + 3,377 2,400 Sprint Capital Corp., 7.13%, 01/30/06 + 2,610 1,500 Telecom Italia Capital (Luxembourg), 4.00%, 11/15/08, # 1,516 3,900 Verizon Wireless, Inc., 5.38%, 12/15/06 4,190 -------------------------------------------------------------------------------------------------- 15,041 -------------------------------------------------------------------------------------------------- UTILITIES -- 2.5% 1,500 AEP Texas Central Co., 3.00%, 02/15/05, Ser. F + 1,518 4,850 Alabama Power Co., 2.80%, 12/01/06 + 4,891 4,050 Commonwealth Edison Co., 6.40%, 10/15/05 + 4,334 2,250 Consolidated Edison Co. of New York, Series C, 6.63%, 12/15/05 + 2,435 2,700 FPL Group Capital, Inc., 1.88%, 03/30/05 + 2,713 National Rural Utilities Cooperative Finance Corp., 1,700 3.00%, 02/15/06 + 1,731 3,100 6.00%, 05/15/06 + 3,352 1,500 Pacificorp, 5.65%, 11/01/06 + 1,619 -------------------------------------------------------------------------------------------------- 22,593 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 314,729 (Cost $312,105) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 60
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED RESIDENTIAL MORTGAGE BACKED SECURITIES -- 3.3% COLLATERALIZED MORTGAGE OBLIGATIONS -- 3.3% $ 727 Credit Suisse First Boston Mortgage Securities Corp., 1.74%, 11/25/31, Ser. 2001-26, Class 3A2, FRN + $ 728 6,161 Federal Home Loan Mortgage Corp., 6.00%, 08/15/08, Ser. 1565, Class P + 6,469 Federal National Mortgage Association, 724 5.50%, 10/25/11, Ser. 2002-57, Class PC + 725 769 5.50%, 03/25/12, Ser. 2002-70, Class PC + 771 Government National Mortgage Association, 2,450 1.59%, 04/16/32, Ser. 2002-24, Class FA, FRN + 2,462 3,396 1.59%, 05/16/32, Ser. 2002-27, Class FA, FRN + 3,414 8,515 Mastr Adjustable Rate Mortgages Trust, 2.51%, 12/25/33, Ser. 2003-6, Class 1A1, FRN + 8,576 256 Residential Accredit Loans, Inc., 1.64%, 08/25/31, Ser. 2001-QS11, Class A5, FRN + 256 6,903 Wells Fargo Mortgage Backed Securities Trust, 4.69%, 12/25/33, Ser. 2003-N, Class 1A4, FRN 7,015 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 30,416 (Cost $30,242) -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 5.6% 10,472 CalSTRS Trust, 3.99%, 11/20/12, Ser. 2002-C6, Class A2, # + 10,806 3,174 Calwest Industrial Trust, 1.36%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # + 3,174 1,889 COMM, 2.37%, 12/16/11, Ser. 2000-FL1A, Class H, FRN, # + 1,889 754 Credit Suisse First Boston Mortgage Securities Corp., 7.15%, 06/20/29, Ser. 1997-C1, Class A1B + 752 $ 5,190 First Union - Lehman Brothers Commercial Mortgage Securities, Inc., 7.38%, 04/18/29, Ser. 1997-C1, Class A3 + $ 5,782 LB-UBS Commercial Mortgage Trust, 2,950 3.32%, 03/15/27, Ser. 2003-C1, Class A2 + 2,969 5,750 3.48%, 07/15/27, Ser. 2003-C5, Class A2 + 5,781 3,261 Lehman Large Loan, 6.79%, 10/12/34, Ser. 1997-LL1, Class A1 3,301 3,000 Mall of America Capital Co. LLC, 1.30%, 03/12/10, Ser. 2000-1, Class A, FRN, # + 2,995 3,311 Morgan Stanley Capital I, 6.22%, 06/03/30, Ser. 1998-XL1, Class A1 + 3,444 7,400 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 + 8,310 1,943 Mortgage Capital Funding, Inc., 6.00%, 11/18/31, Ser. 1998-MC3, Class A1 + 2,072 -------------------------------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 51,275 (Cost $50,415) -------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 24.0% American Express Credit Account Master Trust, 6,000 1.23%, 09/15/08, Ser. 2001-1, Class A, FRN + 6,014 4,000 1.44%, 12/15/08, Ser. 2001-6, Class B, FRN + 4,010 4,900 American Express Master Trust, 1.16%, 12/15/05, Ser. 2002-1, Class A, FRN + 4,902 AmeriCredit Automobile Receivables Trust, 3,600 4.41%, 11/12/08, Ser. 2001-D, Class A4 + 3,713
SEE NOTES TO FINANCIAL STATEMENTS. 61
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 9,200 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + $ 9,263 11,400 Bank One Issuance Trust, 4.16%, 01/15/08, Ser. 2002-A2, Class A2 + 11,761 3,000 Capital Auto Receivables Asset Trust, 1.18%, 04/17/06, Ser. 2002-5, Class A3A, FRN + 3,001 550 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 550 3,700 Capital One Master Trust, 1.89%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 3,713 Capital One Multi-Asset Execution Trust, 6,400 1.20%, 05/15/08, Ser. 2003-A2, Class A2, FRN + 6,404 3,000 3.65%, 07/15/11, Ser. 2003-A4, Class A4 + 3,038 3,650 Carmax Auto Owner Trust, 3.07%, 10/15/10, Ser. 2003-2, Class A4 + 3,679 Citibank Credit Card Issuance Trust, 5,600 2.70%, 01/15/08, Ser. 2003-A2, Class A2 + 5,680 5,050 2.17%, 03/20/08, Ser. 2003-C2, Class C2, FRN + 5,096 1,125 Citibank Credit Card Master Trust I, 0.00%, 08/15/06, Ser. 1997-6, Class A, PO + 1,120 1,969 Comed Transitional Funding Trust, 5.44%, 03/25/07, Ser. 1998-1, Class A5 + 2,017 Countrywide Asset-Backed Certificates, 5,400 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 5,513 448 1.43%, 04/25/32, Ser. 2001-4, Class A, FRN + 449 DaimlerChrysler Auto Trust, 0^^ 3.85%, 04/06/06, Ser. 2002-A, Class A3 0^^ 700 3.53%, 12/06/07, Ser. 2002-B, Class A4 + 719 1,100 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 1,116 Discover Card Master Trust I, $ 4,750 1.16%, 07/15/07, Ser. 2002-1, Class A, FRN + $ 4,750 6,520 1.27%, 11/15/07, Ser. 2000-5, Class A, FRN + 6,529 5,735 1.15%, 04/15/08, Ser. 2002-4, Class A, FRN + 5,737 1,400 1.24%, 09/15/08, Ser. 2001-3, Class A, FRN + 1,404 2,324 EQCC Trust, 1.39%, 11/25/31, Ser. 2002-1, Class 2A, FRN + 2,329 First USA Credit Card Master Trust, 4,800 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN + 4,801 2,430 2.04%, 11/20/06, Ser. 2001-2, Class C, FRN, # + 2,431 120 Ford Credit Auto Owner Trust, 4.83%, 02/15/05, Ser. 2001-C, Class A4 + 120 8,450 Ford Credit Floorplan Master Owner Trust, 1.23%, 07/15/08, Ser. 2001-2, Class A, FRN + 8,472 Honda Auto Receivables Owner Trust, 4,500 1.92%, 11/20/06, Ser. 2003-1, Class A3 + 4,524 14,205 2.48%, 07/18/08, Ser. 2003-1, Class A4 + 14,348 Household Automotive Trust, 12,000 3.44%, 05/18/09, Ser. 2002-3, Class A4A + 12,263 1,700 3.02%, 12/17/10, Ser. 2003-2, Class A4 + 1,713 2,200 MBNA Credit Card Master Note Trust, 1.49%, 01/15/08, Ser. 2002-B3, Class B3 + 2,204 Onyx Acceptance Grantor Trust, 3,552 5.49%, 11/15/07, Ser. 2001-B, Class A4 + 3,626 4,146 5.23%, 05/15/08, Ser. 2001-C, Class A4 + 4,252 1,825 Option One Mortgage Loan Trust, 1.38%, 02/25/32, Ser. 2002-1, Class A, FRN + 1,829 4,617 Orchid Structured Finance CDO LTD, 1.22%, 11/18/38, Ser. 2003-1A, Class A1-MM, FRN, # + 4,617
SEE NOTES TO FINANCIAL STATEMENTS. 62
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 2,954 Peco Energy Transition Trust, 5.80%, 03/01/07, Ser. 1999-A, Class A4 + $ 3,038 534 Providian Home Equity Loan Trust, 1.38%, 06/25/25, Ser. 1999-1, Class A, FRN + 535 1,083 Sears Credit Account Master Trust, 7.00%, 07/15/08, Ser. 1996-3, Class A + 1,097 4,100 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # + 4,135 6,800 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 6,875 Wachovia Asset Securitization, Inc., 3,589 1.52%, 12/25/32, Ser. 2002-HE2, Class A, FRN 3,606 6,166 1.38%, 03/25/33, Ser. 2003-HE1, Class A1, FRN 6,174 WFS Financial Owner Trust, 7,400 4.50%, 02/20/10, Ser. 2002-2, Class A4, SUB 7,702 6,400 3.25%, 05/20/11, Ser. 2003-3, Class A4 6,501 10,400 World Omni Auto Receivables Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 10,475 -------------------------------------------------------------------------------------------------- Total Asset Backed Securities 217,845 (Cost $215,603) -------------------------------------------------------------------------------------------------- Total Long-Term Investments 762,689 (Cost $756,373) -------------------------------------------------------------------------------------------------- UNITS - --------------------------------------------------------------------------------------------------------------------- SHORT - TERM INVESTMENTS -- 16.0% OPTIONS -- 0.1% 45,792 Call Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund receives fixed 3.47% and pays 3 month USD-LIBOR, European Style 285 106,850 Call Option on Interest Rate Swap, expiring 5/11/04, if exercised the Fund receives fixed 1.70% and pays 3 month USD-LIBOR, European Style 229 UNITS ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- 54,350 Put Option on FNMA, 30yr, 5.50% strike price of 99.72, expires 3/8/04, European Style $ 0^^ 26,472 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund pays fixed 4.65% and receives 3 month USD-LIBOR, European Style 7 26,472 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund pays fixed 4.85% and receives 3 month USD-LIBOR, European Style 1 -------------------------------------------------------------------------------------------------- Total Options 522 (Cost $1,100) -------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) - --------------------------------------------------------------------------------------------------------------------- U.S. TREASURY SECURITY -- 0.1% $ 1,300 U.S. Treasury Bills, 0.92%, 07/08/04 + 1,296 (Cost $1,296) MUNICIPAL SECURITIES -- 1.0% FLORIDA -- 0.2% 1,800 Florida Educational Loan Marketing Corp., RAMS, Ser. A-2, Rev., FRDO, 1.07%, 03/12/04 + 1,800 PENNSYLVANIA -- 0.3% 2,800 Beaver County Industrial Development Authority, Ser. A, Rev., FRDO, 4.85%, 06/01/04 + 2,816 SOUTH CAROLINA -- 0.5% 4,700 South Carolina Student Loan Corp., Education Loans, Ser. A-1, Rev., FRDO, 1.25%, 06/22/04 + 4,700 -------------------------------------------------------------------------------------------------- Total Municipal Securities 9,316 (Cost $9,319) -------------------------------------------------------------------------------------------------- COMMERCIAL PAPER -- 0.3% CONSUMER PRODUCTS -- 0.3% 2,700 Altria Group, Inc., 1.97%, 10/15/04 + 2,675 (Cost $2,666)
SEE NOTES TO FINANCIAL STATEMENTS. 63
SHARES ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- CONTINUED MONEY MARKET FUND -- 14.5% 131,559 JPMorgan Prime Money Market Fund (a) + $ 131,559 (Cost $131,559) -------------------------------------------------------------------------------------------------- Total Short- Term Investments 145,368 (Cost $145,940) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 908,057 (COST $902,313) --------------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION/ CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 90 Euro-BOBL March, 2004 $ 12,610 $ 31 101 Euro-Bund March, 2004 14,532 309 1,321 Eurodollar September, 2004 325,544 63 SHORT FUTURES OUTSTANDING (1,325) Eurodollar December, 2004 (325,519) (156) (8) 2 Year Treasury Notes June, 2004 (1,716) (2) (267) 5 Year Treasury Notes June, 2004 (30,012) (116) (133) 10 Year Treasury Notes June, 2004 (15,145) (92)
OPTIONS
UNITS CALL OPTIONS WRITTEN VALUE - --------------------------------------------------------------------------------------------------------------------- (47,700) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 99.72, expiring 3/8/04, European Style $ (291) (213,700) Call Option on Interest Rate Swap, expiring 5/13/05, if exercised the Fund pays fixed 1.50% and receives 3 month LIBOR, European Style (215) Total Call Options Written $ (506) PUT OPTIONS WRITTEN (54,350) Put Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 100.84, expiring 3/8/04, European Style $ (1) (1) Put Option on Sept 04 Euro Dollar Future, strike price of 98.25, expiring 9/13/04, European Style (177) (44,680) Put Option on Interest Rate Swap, expiring 3/10/09, if exercised the Fund receives fixed 3.97% and pays 3 month LIBOR, European Style ( - )^^ (26,472) Put Option on Interest Rate Swap, expiring 3/10/14, if exercised the Fund receives fixed 4.65% and pays 3 month LIBOR, European Style (13) Total Put Options Written $ (191)
SEE NOTES TO FINANCIAL STATEMENTS. 64 SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------------- Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 2.25%, 02/15/07, price less 100.16, the Fund receives positive, pays negative 03/24/04 $ 33,400 $ 46 Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 3.00%, 02/15/08, price less 104.39, the Fund receives negative, pays positive 03/24/04 77,150 (113) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 3.13%, 10/15/08, price less 100.94, the Fund receives negative, pays positive 03/24/04 29,690 (49) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 3.88%, 01/15/09, price less 114.49, the Fund receives negative, pays positive 03/30/04 18,400 (79) Swap - price lock with Credit Suisse First Boston International, on U.S. Treasury Note, 1.88%, 01/31/06, price less 100.39, the Fund receives positive, pays negative 04/06/04 280,900 - Swap - credit default with Deutsche Bank AG, New York on 5.3Mil Coca-Cola Co., 5.75%, 3/15/11, the Fund receives 16 bps, if default, the Fund takes on underlying security 12/31/06 5,300 (8) Swap - credit default with Lehman Brothers Special Financing, protection of 10 million IBOXX SERIES BB2, quarterly receipt of 290 BPS on notional subject to terms of agreement 03/20/09 10,000 20
SEE NOTES TO FINANCIAL STATEMENTS. 65 JPMORGAN SHORT TERM BOND FUND II PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
SHARES ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 93.0% PREFERRED STOCKS -- 0.3% FINANCIAL SERVICES -- 0.3% 0^^ Smithkline Beecham Holdings Corp. (Cost $3,800) $ 3,800 PRINCIPAL AMOUNT (USD) - --------------------------------------------------------------------------------------------------------------------- U.S. TREASURY SECURITIES -- 4.3% $ 64,950 U.S. Treasury Notes & Bonds, 2.25%, 02/15/07 + (Cost $65,151) 65,199 U.S. GOVERNMENT AGENCY SECURITIES -- 24.6% Federal Home Loan Bank, 8,300 3.75%, 04/15/04 + 8,327 11,100 1.50%, 08/26/05 + 11,092 Federal Home Loan Mortgage Corp., 80,600 1.88%, 02/15/06 + 80,711 40,200 2.50%, 12/04/06, MTN + 40,296 61,800 4.88%, 03/15/07 + 66,257 30,750 3.63%, 09/15/08, MTN + 31,420 4,600 2.05%, 11/28/08, MTN + 4,610 Federal National Mortgage Association, 17,600 1.88%, 09/15/05 + 17,693 34,350 2.75%, 08/11/06 + 34,512 13,300 2.38%, 02/15/07 + 13,305 2,830 4.10%, 08/27/08 + 2,871 18,507 6.40%, 05/14/09 + 18,690 40,667 Student Loan Marketing Association, 3.38%, 07/15/04, MTN + 41,023 -------------------------------------------------------------------------------------------------- Total U.S. Government Agency Securities 370,807 (Cost $369,089) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 1.8% Province of Ontario (Canada), 4,850 4.20%, 06/30/05, (Yankee) 5,017 3,000 6.00%, 02/21/06 3,233 6,750 Province of Quebec (Canada), 5.50%, 04/11/06 7,243 7,550 Republic of Chile (Chile), 1.52%, 01/28/08, FRN + 7,541 $ 3,300 United Mexican States (Mexico), 1.84%, 01/13/09, FRN $ 3,312 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 26,346 (Cost $26,234) -------------------------------------------------------------------------------------------------- SUPRANATIONAL NOTES & BONDS -- 0.2% 2,600 Inter-American Development Bank, 3.88%, 09/27/04 (Cost $2,601) 2,641 STATE AND MUNICIPAL OBLIGATIONS -- 0.6% NORTH CAROLINA -- 0.1% 2,140 North Carolina Municipal Power Agency No. 1, Catawba, Taxable, Ser. B, Rev., 3.26%, 01/01/05 2,154 OHIO -- 0.1% 1,350 Ohio State Air Quality Development Authority, Toledo, Ser. A, Rev., Adj., 2.20%, 04/01/24 1,350 TEXAS-- 0.4% 5,150 Texas Public Finance Authority, Unemployment Compensation, Ser. B, Rev., 2.63%, 06/15/06 5,194 -------------------------------------------------------------------------------------------------- Total State and Municipal Obligations 8,698 (Cost $8,628) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 32.5% AGRICULTURAL PRODUCTION/SERVICES -- 0.1% 2,100 Altria Group, Inc., 5.63%, 11/04/08 + 2,198 AUTOMOTIVE -- 2.7% Ford Motor Credit Co., 13,000 6.50%, 01/25/07 + 13,902 1,100 5.63%, 10/01/08 + 1,132 General Motors Acceptance Corp., 1,500 6.75%, 01/15/06 + 1,607 11,200 2.02%, 01/16/07, MTN, FRN + 11,160 11,250 6.13%, 02/01/07 + 12,078 -------------------------------------------------------------------------------------------------- 39,879 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 66
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- 5.6% $ 250 Bank of America NA, 1.26%, 06/03/04, FRN + $ 250 2,100 Capital One Bank, 6.88%, 02/01/06 + 2,274 6,200 ForeningsSparbanken AB (Sweden), 7.50%, to 11/06; thereafter FRN, 12/31/49, # 6,914 15,800 Northern Rock PLC (United Kingdom), 1.27%, 03/18/04, MTN, FRN, # 15,800 Popular North America, Inc., 500 6.13%, 10/15/06, MTN 546 3,250 4.25%, 04/01/08 3,335 7,300 Skandinaviska Enskilda Banken AB (Sweden), 8.13%, to 09/06; thereafter FRN, 12/31/49, # 8,227 U.S. Bancorp, 5,800 6.75%, 10/15/05 6,272 7,900 2.75%, 03/30/06, MTN 8,054 10,100 U.S. Bank N.A., 2.85%, 11/15/06 10,249 10,100 Washington Mutual Bank FA, 1.44%, 05/14/04, FRN 10,107 4,350 Washington Mutual, Inc., 7.50%, 08/15/06 4,877 8,000 Zions Bancorporation, 2.70%, 05/01/06 8,079 -------------------------------------------------------------------------------------------------- 84,984 -------------------------------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.5% 6,600 Compaq Computer Corp., 7.65%, 08/01/05 + 7,089 CONSUMER PRODUCTS -- 0.5% 7,225 Diageo Finance BV (The Netherlands), 3.00%, 12/15/06 + 7,329 FINANCIAL SERVICES -- 14.5% 7,900 BNP US Funding LLC, 7.74%, to 12/07; thereafter FRN, 12/31/49, # 9,169 7,700 Capital One Bank, 4.25%, 12/01/08 + 7,845 7,400 Caterpillar Financial Services Corp., 2.59%, 07/15/06, MTN + 7,467 6,950 CIT Group, Inc., 4.13%, 02/21/06 + 7,214 Citigroup, Inc., 3,150 6.75%, 12/01/05 + 3,414 $ 7,100 5.75%, 05/10/06 + $ 7,651 10,750 Countrywide Home Loans, Inc., 2.88%, 02/15/07, Ser. L, MTN + 10,796 Counts Trusts, 6,050 1.90%, 08/15/07, Ser. 2002-10, FRN, # + 6,050 6,050 1.95%, 08/15/07, Ser. 2002-11, FRN, # + 6,050 7,500 FleetBoston Financial Corp., 7.25%, 09/15/05 + 8,122 4,200 General Electric Capital Corp., 2.85%, 01/30/06, Ser. A, MTN + 4,267 Household Finance Corp., 4,969 1.52%, 05/29/04, MTN, FRN 4,974 5,300 3.38%, 02/21/06, MTN 5,428 3,400 International Lease Finance Corp., 4.35%, 09/15/08 3,527 11,800 Lehman Brothers Holdings, Inc., 3.50%, 08/07/08 11,914 2,700 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # 2,745 3,900 MBNA Corp., 4.63%, 09/15/08 4,058 8,895 Merrill Lynch & Co., Inc., 5.36%, 02/01/07, Ser. B, MTN 9,643 6,950 Natexis AMBS Co., LLC, 8.44%, to 06/08; thereafter FRN, 12/29/49, # 8,194 3,150 Pricoa Global Funding I, 3.90%, 12/15/08, # 3,199 10,600 Principal Life Global, 5.13%, 06/28/07, # 11,482 Restructured Asset Securities with Enhanced Returns (RACERS), 11,000 0.98%, 04/15/04, Ser. 2002-35, Class C, FRN, # 10,994 10,800 0.96%, 04/15/04, Ser. 2002-40, Class C, FRN, # 10,794 2,647 Sovereign BanCorp., Inc., 10.50%, 11/15/06 3,164 Special Purpose Accounts Receivable Cooperative Corp., 5,100 1.42%, 05/23/05, Ser. 2003-3, FRN, # 5,100 10,100 1.44%, 05/23/05, Ser. 2003-6, FRN, # 10,100 25,176 1.72%, 05/15/06, Ser. 2003-4, FRN, # 25,176
SEE NOTES TO FINANCIAL STATEMENTS. 67
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 8,700 The Bear Stearns Co., Inc., 6.50%, 05/01/06 + $ 9,477 -------------------------------------------------------------------------------------------------- 218,014 -------------------------------------------------------------------------------------------------- INSURANCE -- 2.1% ASIF Global Financing, 9,100 1.42%, 03/15/07, FRN, # + 9,125 11,900 2.50%, 01/30/07, # + 11,860 5,900 Metropolitan Life Global Funding I, 4.75%, 06/20/07, # 6,255 4,600 Prudential Insurance Co. of America, 6.38%, 07/23/06, # 5,032 -------------------------------------------------------------------------------------------------- 32,272 -------------------------------------------------------------------------------------------------- MULTI-MEDIA -- 0.3% 4,450 Time Warner, Inc., 6.13%, 04/15/06 + 4,794 OIL & GAS -- 0.9% 2,900 Halliburton Co., 1.87%, 01/26/07, FRN, # 2,907 3,300 Pemex Project Funding Master Trust, 2.92%, 10/15/09, FRN, # 3,407 6,825 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 6,908 -------------------------------------------------------------------------------------------------- 13,222 -------------------------------------------------------------------------------------------------- REAL ESTATE-- 1.1% 14,100 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # 16,143 TELECOMMUNICATIONS -- 1.6% 1,800 BellSouth Telecommunications, Inc., 6.50%, 06/15/05 + 1,910 5,500 Deutsche Telekom International Finance (Germany), 8.25%, 06/15/05 + 5,940 5,150 France Telecom (France), 8.45%, 03/01/06 + 5,702 4,000 Sprint Capital Corp., 7.13%, 01/30/06 4,349 2,500 Telecom Italia Capital (Luxembourg), 4.00%, 11/15/08, # 2,527 3,445 Verizon Wireless, Inc., 5.38%, 12/15/06 3,702 -------------------------------------------------------------------------------------------------- 24,130 -------------------------------------------------------------------------------------------------- UTILITIES -- 2.6% $ 2,550 AEP Texas Central Co., 3.00%, 02/15/05, Ser. F + $ 2,580 8,600 Alabama Power Co., 2.80%, 12/01/06 + 8,675 7,100 Commonwealth Edison Co., 6.40%, 10/15/05 + 7,598 3,900 Consolidated Edison Co. of New York, Series C, 6.63%, 12/15/05 + 4,221 4,400 FPL Group Capital, Inc., 1.88%, 03/30/05 + 4,421 National Rural Utilities Cooperative Finance Corp., 2,900 3.00%, 02/15/06 2,952 5,300 6.00%, 05/15/06 5,731 2,600 Pacificorp, 5.65%, 11/01/06 2,806 -------------------------------------------------------------------------------------------------- 38,984 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 489,038 (Cost $484,885) -------------------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 2.2% COLLATERALIZED MORTGAGE OBLIGATIONS -- 2.2% 865 Credit Suisse First Boston Mortgage Securities Corp., 1.74%, 11/25/31, Ser. 2001-26, Class 3A2, FRN + 867 Federal National Mortgage Association, 1,181 5.50%, 10/25/11, Ser. 2002-57, Class PC + 1,183 1,255 5.50%, 03/25/12, Ser. 2002-70, Class PC + 1,258 64 Fifth Third Mortgage Loan Trust, 4.90%, 10/18/30, Ser. 2000-FTB1, Class A2, FRN + 65 3,601 Government National Mortgage Association, 1.59%, 04/16/32, Ser. 2002-24, Class FA, FRN + 3,618 14,300 Mastr Adjustable Rate Mortgages Trust, 2.51%, 12/25/33, Ser. 2003-6, Class 1A1, FRN 14,403 256 Residential Accredit Loans, Inc., 1.64%, 08/25/31, Ser. 2001-QS11, Class A5, FRN 256 11,888 Wells Fargo Mortgage Backed Securities Trust, 4.69%, 12/25/33, Ser. 2003-N, Class 1A4, FRN 12,081 -------------------------------------------------------------------------------------------------- 33,731 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 68
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.0% ^ Government National Mortgage Association, $ 78 8.50%, 08/15/30, Pool 531310 + $ 84 7 8.50%, 09/15/30, Pool 526096 + 8 -------------------------------------------------------------------------------------------------- 92 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 33,823 (Cost $33,691) -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.8% 19,141 CalSTRS Trust, 3.99%, 11/20/12, Ser. 2002-C6, Class A2, # + 19,749 5,372 Calwest Industrial Trust, 1.36%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # + 5,372 8,890 First Union - Lehman Brothers Commercial Mortgage Securities, Inc., 7.38%, 04/18/29, Ser. 1997-C1, Class A3 + 9,904 LB-UBS Commercial Mortgage Trust, 5,100 3.32%, 03/15/27, Ser. 2003-C1, Class A2 5,133 3,300 3.48%, 07/15/27, Ser. 2003-C5, Class A2 3,318 12,600 Morgan Stanley Capital I, 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 14,150 -------------------------------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 57,626 (Cost $57,253) -------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 22.7% 7,000 American Express Credit Account Master Trust, 1.44%, 12/15/08, Ser. 2001-6, Class B, FRN + 7,018 AmeriCredit Automobile Receivables Trust, 10,215 4.41%, 11/12/08, Ser. 2001-D, Class A4 + 10,536 12,450 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 12,535 22,000 Bank One Issuance Trust, 4.16%, 01/15/08, Ser. 2002-A2, Class A2 + 22,697 3,000 Capital Auto Receivables Asset Trust, 1.96%, 01/15/09, Ser. 2003-2, Class A4A + 2,957 $ 1,800 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + $ 1,799 6,500 Capital One Master Trust, 1.89%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 6,522 6,200 Carmax Auto Owner Trust, 3.07%, 10/15/10, Ser. 2003-2, Class A4 + 6,249 Citibank Credit Card Issuance Trust, 3,050 2.70%, 01/15/08, Ser. 2003-A2, Class A2 + 3,094 8,500 2.17%, 03/20/08, Ser. 2003-C2, Class C2, FRN + 8,577 10,300 Countrywide Asset-Backed Certificates, 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 10,515 9,030 Countrywide Home Equity Loan Trust, 1.33%, 08/15/28, Ser. 2002-D, Class A, FRN + 9,015 DaimlerChrysler Auto Trust, 1,070 3.53%, 12/06/07, Ser. 2002-B, Class A4 + 1,099 8,400 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 8,525 Discover Card Master Trust I, 7,550 1.16%, 07/15/07, Ser. 2002-1, Class A, FRN + 7,549 21,000 1.24%, 09/15/08, Ser. 2001-3, Class A, FRN + 21,055 3,254 EQCC Trust, 1.39%, 11/25/31, Ser. 2002-1, Class 2A, FRN + 3,261 First USA Credit Card Master Trust, 7,800 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN + 7,801 4,200 2.04%, 11/20/06, Ser. 2001-2, Class C, FRN, # + 4,201 Ford Credit Auto Owner Trust, 21 4.83%, 02/15/05, Ser. 2001-C, Class A4 + 21 1,168 1.13%, 06/15/05, Ser. 2003-B, Class A2B, FRN + 1,168 1,056 4.31%, 06/15/05, Ser. 2001-D, Class A3 + 1,063
SEE NOTES TO FINANCIAL STATEMENTS. 69
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 2,200 5.25%, 09/15/05, Ser. 2001-C, Class A5 + $ 2,228 600 3.79%, 09/15/06, Ser. 2002-C, Class A4 + 615 15,000 Gracechurch Card Funding PLC (United Kingdom), 2.70%, 08/15/08, Ser. 5, Class A2 + 15,002 9,900 Honda Auto Receivables Owner Trust, 1.92%, 11/20/06, Ser. 2003-1, Class A3 9,953 25,500 Household Automotive Trust, 4.39%, 05/18/09, Ser. 2002-1, Class A4 26,461 3,700 MBNA Master Credit Card Trust USA, 1.89%, 12/15/06, Ser. 1999-G, Class C, FRN, # 3,700 Onyx Acceptance Grantor Trust, 1,040 5.49%, 11/15/07, Ser. 2001-B, Class A4 1,061 7,500 4.71%, 03/15/09, Ser. 2002-B, Class A4 7,786 7,300 3.20%, 03/15/10, Ser. 2003-D, Class A4 7,398 Option One Mortgage Loan Trust, 2,920 1.38%, 02/25/32, Ser. 2002-1, Class A, FRN 2,927 2,830 1.34%, 10/25/32, Ser. 2002-05, Class A2, FRN 2,831 8,142 Orchid Structured Finance CDO LTD, 1.22%, 11/18/38, Ser. 2003-1A, Class A1-MM, FRN, # + 8,142 4,000 Residential Asset Securities Corp., 3.37%, 12/25/28, Ser. 2003-KS7, Class AI3 4,067 1,761 Sears Credit Account Master Trust, 5.25%, 10/16/08, Ser. 1998-2, Class A 1,786 6,900 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 6,958 7,900 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 8,022 Volkswagen Auto Loan Enhanced Trust, 7,300 1.93%, 01/20/10, Ser. 2003-1, Class A4 7,224 4,300 2.94%, 03/22/10, Ser. 2003-2, Class A4 4,347 Wachovia Asset Securitization, Inc., $ 6,094 1.52%, 12/25/32, Ser. 2002-HE2, Class A, FRN $ 6,121 10,650 1.38%, 03/25/33, Ser. 2003-HE1, Class A1, FRN 10,665 WFS Financial Owner Trust, 11,900 4.50%, 02/20/10, Ser. 2002-2, Class A4, SUB 12,386 15,600 3.25%, 05/20/11, Ser. 2003-3, Class A4 15,847 18,800 World Omni Auto Receivables Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 18,936 -------------------------------------------------------------------------------------------------- Total Asset Backed Securities 341,720 (Cost $337,640) -------------------------------------------------------------------------------------------------- Total Long-Term Investments 1,399,698 (Cost $1,388,972) -------------------------------------------------------------------------------------------------- UNITS - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 7.0% OPTIONS -- 0.1% 95,200 Put Option on FNMA, 30 Year, 5.5%, strike price of 99.72, expiring 3/8/04, European Style 0^^ 46,369 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund pays fixed 4.85% and receives 3 month USD-LIBOR, European Style 2 80,304 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund receives fixed 3.47% and pays 3 month USD-LIBOR, European Style 499 46,369 Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund pays fixed 4.65% and receives 3 month USD-LIBOR, European Style 13 189,550 Put Option on Interest Rate Swap, expiring 5/11/04, if exercised, the Fund receives fixed 1.70% and pays 3 month USD-LIBOR, European Style 406 -------------------------------------------------------------------------------------------------- Total Options 920 (Cost $1,932) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 70
PRINCIPAL AMOUNT (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- CONTINUED U.S. TREASURY SECURITY -- 0.1% $ 1,500 U.S. Treasury Bills, 0.92%, 07/08/04 + @ $ 1,495 (Cost $1,495) MUNICIPAL SECURITIES -- 0.3% PENNSYLVANIA -- 0.3% 4,550 Beaver County Industrial Development Authority, Ser. A, Rev., FRDO, 4.85%, 06/01/04 + (Cost $4,580) 4,576 COMMERCIAL PAPER -- 0.1% CONSUMER PRODUCTS -- 0.1% 1,600 Altria Group, Inc., 1.97%, 10/15/04 + 1,585 (Cost $1,580) SHARES ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- MONEY MARKET FUND -- 6.4% 96,379 JPMorgan Prime Money Market Fund (a) + $ 96,379 (Cost $96,379) -------------------------------------------------------------------------------------------------- Total Short- Term Investments 104,955 (Cost $105,966) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 1,504,653 (COST $1,494,938) --------------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 838 2 Year Treasury Notes June, 2004 $ 179,777 $ 292 154 5 Year Treasury Notes June, 2004 17,311 63 1,527 Eurodollar September, 2004 376,310 73 SHORT FUTURES OUTSTANDING (1,532) Eurodollar December, 2004 (376,374) (181)
SEE NOTES TO FINANCIAL STATEMENTS. 71 OPTIONS
UNITS CALL OPTIONS WRITTEN VALUE - ---------------------------------------------------------------------------------------------------------------------------------- (83,650) Call Option on FNMA, 30 Year, 5.00%, strike price of 99.72, expiring 3/8/04, European Style $ (510) (379,100) Call Option on Interest Rate Swap, expiring 5/11/04, if exercised the Fund pays fixed 1.50% and receives 3 month LIBOR, European Style (381) Total Call Options Written $ (891) PUT OPTIONS WRITTEN (95,200) Put Option on FNMA, 30 Year Fixed, 5.50%, strike price of 100.84, expiring 3/8/04, European Style $ (2) (78,263) Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund receives fixed 3.97% and pays 3 month LIBOR, European Style (1) (46,369) Put Option on Interest Rate Swap, expiring 3/8/04, if exercised the Fund receives fixed 4.65% and pays 3 month LIBOR, European Style (23) (1) Put Option on Sept. 04 Euro Dollar Future, strike price of 98.25, expiring 9/13/04, European Style (121) Total Put Options Written $ (147)
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------------------- Swap - price lock with Citibank N.A. on U.S. Treasury Note, 1.63%, 10/31/05, price less 100.08, the Fund receives positive, pays negative 03/01/04 $ 253,000 $ 497 Swap - price lock with Citibank N.A. on U.S. Treasury Note, 2.63%, 11/15/06, price less 101.23, the Fund receives positive, pays negative 03/29/04 50,200 126 Swap - price lock with Citibank N.A.on U.S. Treasury Note, 3.00%, 2/15/08, price less 101.06, the Fund receives positive, pays negative 03/29/04 120,700 (545) Swap - price lock with Citibank N.A. on U.S. Treasury Note, 2.63%, 5/15/08, price less 99.29, the Fund receives negative, pays positive 03/29/04 102,900 (488) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 3.88%, 01/15/09, price less 114.49, the Fund receives negative, pays positive 03/30/04 32,450 (140)
SEE NOTES TO FINANCIAL STATEMENTS. 72 JPMORGAN STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 88.5% U.S. TREASURY SECURITIES -- 7.6% U.S. Treasury Notes & Bonds, $ 35 2.13%, 10/31/04 @ $ 35 25 1.75%, 12/31/04 25 50 1.63%, 04/30/05 + 50 130 1.13%, 06/30/05 + 130 100 2.38%, 08/15/06 + 101 420 2.63%, 11/15/06 + 427 20 2.25%, 02/15/07 + 20 455 3.38%, 11/15/08 + 466 210 3.25%, 01/15/09 + 213 70 3.00%, 02/15/09 + 70 185 4.25%, 08/15/13 + 190 5 4.25%, 11/15/13 + 5 5 4.00%, 02/15/14 5 55 6.25%, 05/15/30 + 66 70 5.38%, 02/15/31 + 75 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 1,878 (Cost $1,868) -------------------------------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 0.7% 75 Federal Home Loan Bank, 1.63%, 06/15/05 75 80 Federal National Mortgage Association, 7.13%, 01/15/30 99 -------------------------------------------------------------------------------------------------- Total U.S. Government Agency Securities 174 (Cost $163) -------------------------------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 26.4% Federal Republic of Brazil (Brazil), 70 11.25%, 07/26/07 78 60 11.50%, 03/12/08 67 41 2.06%, 04/15/09, FRN 38 209 8.00%, 04/15/14 200 145 11.00%, 08/17/40 152 EUR 95 Federal Republic of Germany (Germany), 4.25%, 01/04/14 120 EUR 155 Government of France (France), 4.00%, 04/25/09 199 100 Malaysia Government International Bond (Malaysia), 7.50%, 07/15/11 119 National Republic of Bulgaria (Bulgaria), $ 71 2.00%, 07/28/11, Ser. IAB, FRN $ 69 113 2.00%, 07/28/12, Ser. A, FRN 111 100 8.25%, 01/15/15, # 120 EUR 500 Netherlands Government Bond (The Netherlands), 5.50%, 07/15/10 690 250 Province of Ontario (Canada), 6.00%, 02/21/06 269 100 Province of Quebec (Canada), 6.13%, 01/22/11, Ser. PJ 113 250 Republic of Chile (Chile), 5.63%, 07/23/07 270 Republic of Colombia (Colombia), 235 9.75%, 04/23/09 266 135 11.75%, 02/25/20 166 250 Republic of Costa Rica (Costa Rica), 8.11%, 02/01/12, # 279 25 Arab Republic of Egypt (Egypt), 8.75%, 07/11/11, Regulation S 30 Republic of El Salvador (El Salvador), 100 7.75%, 01/24/23, # 108 100 8.25%, 04/10/32, # 100 250 Republic of Italy (Italy), 2.50%, 03/31/06 254 Republic of Panama (Panama), 90 9.63%, 02/08/11 104 100 10.75%, 05/15/20 123 Republic of Peru (Peru), 193 9.13%, 02/21/12 215 25 9.88%, 02/06/15 29 135 4.50%, 03/07/17, FRN 117 47 5.00%, 03/07/17, FRN 43 Republic of Philippines (Philippines), 38 8.38%, 03/12/09 40 82 9.88%, 03/16/10 89 145 9.88%, 01/15/19 148 200 Republic of South Africa (South Africa) (Yankee), 8.50%, 06/23/17 244 Republic of Turkey (Turkey), 91 12.38%, 06/15/09 115 95 11.88%, 01/15/30 134
SEE NOTES TO FINANCIAL STATEMENTS. 73
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED FOREIGN GOVERNMENT SECURITIES -- CONTINUED $ 100 Republic of Ukraine (Ukraine), 7.65%, 06/11/13, Regulation S $ 103 Republic of Venezuela (Venezuela), 95 2.13%, 12/18/07, Ser. DL, FRN 86 100 9.25%, 09/15/27 84 Russian Federation (Russia), 100 10.00%, 06/26/07, Regulation S 117 69 8.25%, 03/31/10, Regulation S 77 5 11.00%, 07/24/18, Regulation S 7 50 5.00%, 03/31/30, SUB, # 49 257 5.00%, 03/31/30, Regulation S 252 100 State of Qatar (Qatar), 9.50%, 05/21/09, Regulations S 127 United Mexican States (Mexico), 80 9.88%, 02/01/10 102 35 8.38%, 01/14/11 42 100 6.38%, 01/16/13, MTN 107 100 8.30%, 08/15/31, MTN 116 -------------------------------------------------------------------------------------------------- Total Foreign Government Securities 6,488 (Cost $5,630) -------------------------------------------------------------------------------------------------- SUPRANATIONAL NOTES & BONDS -- 1.8% 200 Inter-American Development Bank, 7.38%, 01/15/10 243 200 International Bank for Reconstruction & Development, 7.00%, 01/27/05 210 -------------------------------------------------------------------------------------------------- Total Supranational Notes & Bonds 453 (Cost $403) -------------------------------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 39.3% AEROSPACE -- 0.5% 15 General Dynamics Corp., 2.13%, 05/15/06 15 100 L-3 Communications Corp., 7.63%, 06/15/12 111 -------------------------------------------------------------------------------------------------- 126 -------------------------------------------------------------------------------------------------- AGRICULTURAL PRODUCTION/SERVICES -- 0.1% 30 Seminis Vegetable Seeds, Inc., 10.25%, 10/01/13, # 32 AIRLINES -- 0.1% Delta Air Lines, Inc., $ 15 7.70%, 12/15/05 $ 13 25 7.90%, 12/15/09 19 -------------------------------------------------------------------------------------------------- 32 -------------------------------------------------------------------------------------------------- AUTOMOTIVE -- 1.2% DaimlerChrysler N.A. Holding Corp., 15 4.05%, 06/04/08 15 5 7.75%, 01/18/11 6 30 6.50%, 11/15/13 32 Ford Motor Credit Co., 30 7.38%, 10/28/09 33 20 7.38%, 02/01/11 22 40 7.00%, 10/01/13 42 10 General Motors Acceptance Corp., 6.88%, 09/15/11 11 General Motors Corp., 30 7.20%, 01/15/11 33 10 8.25%, 07/15/23 11 20 8.38%, 07/15/33 23 25 Goodyear Tire & Rubber Co., 7.86%, 08/15/11 21 50 TRW Automotive, Inc., 11.00%, 02/15/13 58 -------------------------------------------------------------------------------------------------- 307 -------------------------------------------------------------------------------------------------- BANKING -- 2.3% 5 Abbey National Capital Trust I, 8.96%, to 06/30; thereafter FRN, 12/31/49 7 20 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/29/49, # 22 30 ANZ Capital Trust I, 5.36%, 12/15/53, # 31 250 Banque Centrale de Tunisie (Tunisia), 7.38%, 04/25/12 285 10 Barclays Bank PLC (United Kingdom), 8.55%, to 06/11; thereafter FRN, 12/31/49, # 13 10 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # 10
SEE NOTES TO FINANCIAL STATEMENTS. 74
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 40 HBOS PLC (United Kingdom), 5.38%, to 11/13; thereafter FRN, 12/31/49, # $ 41 10 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # 13 5 National City Bank, 6.20%, 12/15/11 6 10 Popular North America, Inc., 4.25%, 04/01/08 10 RBS Capital Trust I, 5 6.43%, to 01/31; thereafter FRN, 12/29/49 5 20 4.71%, to 07/13; thereafter FRN, 12/29/49 20 10 Royal Bank of Scotland Group PLC (United Kingdom), 7.65%, to 09/31; thereafter FRN, 12/31/49 12 20 SunTrust Bank, 2.50%, 11/01/06 20 5 Swedbank (Sweden), 9.00%, to 03/10; thereafter FRN, 12/29/49, # 6 20 Washington Mutual, Inc., 4.00%, 01/15/09 20 25 Westpac Capital Trust III, 5.82%, to 09/30; thereafter FRN, 12/31/49, # 27 10 Zions Bancorp, 6.00%, 09/15/15 11 -------------------------------------------------------------------------------------------------- 559 -------------------------------------------------------------------------------------------------- BROADCASTING/CABLE -- 1.5% 120 British Sky Broadcasting PLC (United Kingdom) (Yankee), 6.88%, 02/23/09 136 175 Echostar DBS Corp., 10.38%, 10/01/07 192 50 Mediacom LLC/ Capital Corp., 9.50%, 01/15/13 51 -------------------------------------------------------------------------------------------------- 379 -------------------------------------------------------------------------------------------------- BUSINESS SERVICES -- 0.4% 100 Iron Mountain, Inc., 8.63%, 04/01/13 109 CHEMICALS -- 1.4% $ 60 Huntsman LLC, 11.63%, 10/15/10, # $ 62 15 ICI Wilmington, Inc., 5.63%, 12/01/13 16 50 IMC Global, Inc., 10.88%, 06/01/08, Ser. B 60 Lyondell Chemical Co., 10 9.63%, 05/01/07, Ser. A, 11 125 10.88%, 05/01/09 124 25 Noveon, Inc., 11.00%, 02/28/11, Ser. B 29 25 PolyOne Corp., 10.63%, 05/15/10 26 5 The Dow Chemical Co., 7.38%, 11/01/29 6 -------------------------------------------------------------------------------------------------- 334 -------------------------------------------------------------------------------------------------- COMPUTER SOFTWARE -- 0.4% 100 Unisys Corp., 6.88%, 03/15/10 108 COMPUTERS/COMPUTER HARDWARE -- 0.0% ^ 5 Electronic Data Systems Corp., 6.00%, 08/01/13, Ser. B 5 CONSTRUCTION -- 1.3% 80 D.R. Horton, Inc., 9.38%, 03/15/11 91 100 KB Home, 8.63%, 12/15/08 112 100 Terex Corp., 10.38%, 04/01/11, Ser. B 113 -------------------------------------------------------------------------------------------------- 316 -------------------------------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.1% 10 Altria Group, Inc., 7.00%, 11/04/13 11 313 Drypers Corp., 10.25%, 06/15/07, Ser. B (d) (f) * 3 20 Elizabeth Arden, Inc., 7.75%, 01/15/14, # 20 -------------------------------------------------------------------------------------------------- 34 -------------------------------------------------------------------------------------------------- CONSUMER SERVICES -- 0.8% 100 Corrections Corp. of America, 7.50%, 05/01/11 105 100 Service Corp. International, 6.00%, 12/15/05 103 -------------------------------------------------------------------------------------------------- 208 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 75
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED DIVERSIFIED -- 0.6% $ 140 Tyco International Group SA (Luxembourg) (Yankee), 6.38%, 10/15/11 $ 151 ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.2% 35 Legrand SA (France), 8.50%, 02/15/25 38 ENTERTAINMENT/LEISURE -- 0.4% 100 Caesars Entertainment Inc., 7.00%, 04/15/13 109 FINANCIAL SERVICES -- 5.7% American General Finance Corp., 25 3.00%, 11/15/06, Ser. H, MTN 25 5 4.50%, 11/15/07, Ser. H, MTN 5 25 Arch Western Finance LLC, 6.75%, 07/01/13, # 26 10 Capital One Bank, 4.88%, 05/15/08 10 10 CIT Group, Inc., 4.75%, 12/15/10, MTN 10 Credit Suisse First Boston USA, Inc., 5 6.50%, 01/15/12 6 35 5.13%, 01/15/14 36 10 FleetBoston Financial Corp., 7.25%, 09/15/05 11 Goldman Sachs Group, Inc., 10 6.60%, 01/15/12 11 10 4.75%, 07/15/13 10 20 6.35%, 02/15/34 20 50 H&E Equipment Services LLC/H&E Finance Corp., 11.13%, 06/15/12 52 HSBC Capital Funding LP (Channel Islands), 25 4.61%, to 06/13; thereafter FRN, 12/31/49, # 24 30 9.55%, to 06/10; thereafter FRN, 12/31/49, # 39 10 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 12 Morgan Stanley, $ 25 5.80%, 04/01/07 $ 27 10 3.63%, 04/01/08 10 20 3.88%, 01/15/09 20 100 Nexstar Finance LLC/Nexstar Finance, Inc., 12.00%, 04/01/08 113 35 SLM Corp., 5.63%, 04/10/07, Ser. A, MTN 38 696 TRAINS, 8.67%, 05/15/13, Ser. 2003-1, SUB, # 771 15 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 16 65 Yell Finance BV (The Netherlands), 10.75%, 08/01/11 76 -------------------------------------------------------------------------------------------------- 1,368 -------------------------------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 1.3% 100 Del Monte Corp., 9.25%, 05/15/11, Ser. B 111 45 Delhaize America, Inc., 8.13%, 04/15/11 52 45 Ingles Markets, Inc., 8.88%, 12/01/11 47 5 SABMiller PLC (United Kingdom), 6.63%, 08/15/33, # 5 100 Swift & Co., 10.13%, 10/01/09 105 -------------------------------------------------------------------------------------------------- 320 -------------------------------------------------------------------------------------------------- HEALTH CARE/HEALTH CARE SERVICES -- 1.2% 40 Ardent Health Services, 10.00%, 08/15/13, # 44 35 Genesis HealthCare Corp., 8.00%, 10/15/13, # 37 HCA, Inc., 15 5.25%, 11/06/08 16 110 6.75%, 07/15/13 120 30 Mariner Health Care, Inc., 8.25%, 12/15/13, # 31 35 Tenet Healthcare Corp., 7.38%, 02/01/13 32 15 UnitedHealth Group, Inc., 3.30%, 01/30/08 15 -------------------------------------------------------------------------------------------------- 295 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 76
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED HOTELS/OTHER LODGING -- 1.6% $ 100 Ameristar Casinos, Inc., 10.75%, 02/15/09 $ 114 100 Extended Stay America, Inc., 9.88%, 06/15/11 111 5 Harrah's Operating Co., Inc., 5.38%, 12/15/13, # 5 50 Mandalay Resort Group, 10.25%, 08/01/07, Ser. B 58 90 MGM Mirage, Inc., 9.75%, 06/01/07 104 -------------------------------------------------------------------------------------------------- 392 -------------------------------------------------------------------------------------------------- INSURANCE -- 0.5% Assurant, Inc., 10 5.63%, 02/15/14, # 10 10 6.75%, 02/15/34, # 10 20 AXA (France), 8.60%, 12/15/30 27 15 Commerce Group, Inc., 5.95%, 12/09/13 16 10 Fund American Companies, Inc., 5.88%, 05/15/13 10 10 Infinity Property & Casualty Corp., 5.50%, 02/18/14, # 10 20 Monumental Global Funding II, 3.90%, 06/15/09, # 20 Nationwide Financial Services, Inc., 5 6.25%, 11/15/11 6 5 5.90%, 07/01/12 5 5 Prudential Holdings LLC, 8.70%, 12/18/23, # 7 10 QBE Insurance Group LTD (Australia), 5.65%, to 07/01; thereafter FRN, 07/01/23, # 10 -------------------------------------------------------------------------------------------------- 131 -------------------------------------------------------------------------------------------------- METALS/MINING -- 0.7% 150 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B 160 MULTI-MEDIA -- 1.5% 25 Comcast Cable Communications Holdings, Inc., 8.38%, 03/15/13 31 5 Dex Media, Inc., 8.00%, 11/15/13, # 5 $ 60 DirecTV Holdings LLC, 8.38%, 03/15/13 $ 68 100 Emmis Communications Corp., 8.13%, 03/15/09, Ser. B 104 5 Liberty Media Corp., 5.70%, 05/15/13 5 50 Lodgenet Entertainment Corp., 9.50%, 06/15/13 56 5 News America, Inc., 7.28%, 06/30/28 6 50 Radio One, Inc., 8.88%, 07/01/11, Ser. B 55 Time Warner, Inc., 20 7.63%, 04/15/31 23 5 7.70%, 05/01/32 6 -------------------------------------------------------------------------------------------------- 359 -------------------------------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.4% 90 Xerox Corp., 7.63%, 06/15/13 96 OIL & GAS -- 2.5% 5 Alberta Energy Co., LTD (Canada) (Yankee), 7.38%, 11/01/31 6 10 Anadarko Finance Co. (Canada), 6.75%, 05/01/11, Ser. B 12 15 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 15 5 Canadian Natural Resources LTD (Canada) (Yankee), 7.20%, 01/15/32 6 112 Chesapeake Energy Corp., 6.88%, 01/15/16 116 100 Denbury Resources, Inc., 7.50%, 04/01/13 105 5 Devon Financing Corp. ULC, 7.88%, 09/30/31 6 15 Halliburton Co., 5.50%, 10/15/10, # 16 100 Plains Exploration & Production Co., 8.75%, 07/01/12, Ser. B 112 30 The Premcor Refining Group, Inc., 7.50%, 06/15/15 33 5 Transocean, Inc., 7.50%, 04/15/31 6 10 Weatherford International LTD (Bermuda), 4.95%, 10/15/13 10 125 XTO Energy, Inc., 6.25%, 04/15/13 136 -------------------------------------------------------------------------------------------------- 579 --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 77
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED PACKAGING -- 1.3% $ 60 Crown European Holdings SA (France), 9.50%, 03/01/11 $ 68 100 Owens-Brockway Glass Container, Inc., 8.88%, 02/15/09 109 20 Silgan Holdings, Inc., 6.75%, 11/15/13, # 20 100 Stone Container Corp., 9.75%, 02/01/11 111 -------------------------------------------------------------------------------------------------- 308 -------------------------------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 1.2% Boise Cascade Corp., 20 6.50%, 11/01/10 21 10 7.00%, 11/01/13 11 15 Domtar, Inc. (Canada) (Yankee), 5.38%, 12/01/13 15 Georgia-Pacific Corp., 100 8.88%, 02/01/10 114 65 9.50%, 12/01/11 75 5 International Paper Co., 5.85%, 10/30/12 5 50 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 49 -------------------------------------------------------------------------------------------------- 290 -------------------------------------------------------------------------------------------------- PHARMACEUTICALS -- 0.2% 10 Schering-Plough Corp., 5.30%, 12/01/13 10 Wyeth, 15 5.50%, 02/01/14 16 10 6.45%, 02/01/24 11 -------------------------------------------------------------------------------------------------- 37 -------------------------------------------------------------------------------------------------- PIPELINES -- 1.2% 15 Aquila, Inc., 14.88%, 07/01/12 20 20 Duke Capital Corp., 6.25%, 02/15/13 21 25 Dynegy Holdings, Inc., 10.13%, 07/15/13, # 28 130 El Paso Corp., 7.88%, 06/15/12 118 5 Kinder Morgan Energy Partners LP, 7.30%, 08/15/33 6 100 Northwest Pipeline Corp., 8.13%, 03/01/10 109 -------------------------------------------------------------------------------------------------- 302 -------------------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST -- 1.8% $ 100 FelCor Lodging LP, 10.00%, 09/15/08 $ 106 100 Host Marriott LP, 9.25%, 10/01/07, Ser. G 111 100 MeriStar Hospitality Operating Partnership LP/MeriStar Hospitality Finance Corp., 10.50%, 06/15/09 106 100 Ventas Realty LP/Ventas Capital Corp., 9.00%, 05/01/12 114 -------------------------------------------------------------------------------------------------- 437 -------------------------------------------------------------------------------------------------- RESTAURANTS/FOOD SERVICES -- 1.2% 60 NE Restaurant Co., Inc., 10.75%, 07/15/08 52 200 Yum! Brands, Inc., 8.88%, 04/15/11 247 -------------------------------------------------------------------------------------------------- 299 -------------------------------------------------------------------------------------------------- RETAILING -- 1.2% 40 Dillard's, Inc., 7.85%, 10/01/12 42 5 Federated Department Stores, Inc., 6.63%, 04/01/11 6 J.C. Penney Co., Inc., 25 7.60%, 04/01/07 28 40 8.00%, 03/01/10 45 10 7.13%, 11/15/23 11 100 Rite Aid Corp., 9.50%, 02/15/11 111 20 Safeway, Inc., 4.13%, 11/01/08 20 25 The Gap, Inc., 6.90%, 09/15/07 28 -------------------------------------------------------------------------------------------------- 291 -------------------------------------------------------------------------------------------------- SHIPPING/TRANSPORTATION -- 0.0% ^ 5 Union Pacific Corp., 6.65%, 01/15/11 6 STEEL -- 0.5% 65 AK Steel Corp., 7.88%, 02/15/09 58 70 Euramax International LTD, 8.50%, 08/15/11, # 72 -------------------------------------------------------------------------------------------------- 130 -------------------------------------------------------------------------------------------------- TELECOMMUNICATIONS -- 2.4% 5 AT&T Corp., 8.75%, 11/15/31 6 10 AT&T Wireless Services, Inc., 7.88%, 03/01/11 12
SEE NOTES TO FINANCIAL STATEMENTS. 78
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED TELECOMMUNICATIONS -- CONTINUED $ 15 Cincinnati Bell, Inc., 8.38%, 01/15/14 $ 16 10 Citizens Communications Co., 9.25%, 05/15/11 11 Deutsche Telekom International Finance BV (The Netherlands), 5 8.50%, 06/15/10 6 5 5.25%, 07/22/13 5 5 8.75%, 06/15/30 6 France Telecom (France), 15 9.00%, 03/01/11 18 10 9.75%, 03/01/31 13 40 Insight Midwest LP/Insight Capital, Inc., 9.75%, 10/01/09 42 5 Koninklijke KPN NV (The Netherlands), 8.00%, 10/01/10 6 85 Nextel Communications, Inc., 9.38%, 11/15/09 92 30 Nortel Networks LTD (Canada), 6.13%, 02/15/06 31 80 Qwest Corp., 9.13%, 03/15/12, # 91 Sprint Capital Corp., 15 7.63%, 01/30/11 17 15 8.75%, 03/15/32 19 100 Syniverse Technologies, Inc., 12.75%, 02/01/09, Ser. B 112 10 TCI Communications, Inc., 7.88%, 02/15/26 12 25 Telecom Italia Capital (Luxembourg), 4.00%, 11/15/08, # 25 5 Verizon Global Funding Corp., 7.38%, 09/01/12 6 15 Verizon New England, Inc., 4.75%, 10/01/13, Ser. C 15 15 Verizon New York, Inc., 6.88%, 04/01/12, Ser. A 17 -------------------------------------------------------------------------------------------------- 578 -------------------------------------------------------------------------------------------------- TRANSPORTATION -- 0.2% 35 CP Ships LTD (Canada), 10.38%, 07/15/12 41 UTILITIES -- 1.4% $ 10 AEP Texas Central Co., 5.50%, 02/15/13, Ser. D $ 10 10 Alabama Power Co., 2.80%, 12/01/06 10 5 Arizona Public Service Co., 4.65%, 05/15/15 5 60 Calpine Corp., 9.88%, 12/01/11, # 59 50 CMS Energy Corp., 7.75%, 08/01/10, # 52 5 Columbus Southern Power Co., 5.50%, 03/01/13, Ser. C 5 15 Consolidated Edison Company of New York, 5.63%, 07/01/12, Ser. 2002-A 16 15 Dominion Resources, Inc., 8.13%, 06/15/10, Ser. A 18 10 DTE Energy Co., 6.38%, 04/15/33 10 5 MidAmerican Energy Holdings Co., 6.75%, 12/30/31 6 National Rural Utilities Cooperative Finance Corp., 5 6.50%, 03/01/07, Ser. C, MTN 6 15 3.88%, 02/15/08 15 10 PacifiCorp, 4.30%, 09/15/08 10 Pepco Holdings, Inc., 10 6.45%, 08/15/12 11 5 7.45%, 08/15/32 6 5 Progress Energy, Inc., 7.10%, 03/01/11 6 30 Reliant Resources, Inc., 9.50%, 07/15/13 33 Southern California Edison Co. 10 5.00%, 01/15/14 10 5 6.00%, 01/15/34 5 35 TXU Energy Co., 7.00%, 03/15/13 40 20 Virginia Electric and Power Co., 4.50%, 12/15/10 20 -------------------------------------------------------------------------------------------------- 353 -------------------------------------------------------------------------------------------------- Total Corporate Notes & Bonds 9,619 (Cost $9,154) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 79
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED RESIDENTIAL MORTGAGE BACKED PASS-THROUGH SECURITIES -- 6.4% Federal Home Loan Mortgage Corp., $ 21 6.00%, 05/01/17, Gold Pool E89420 $ 22 307 6.00%, 04/01/32, Gold Pool C66183 321 47 5.50%, 04/01/33, Gold Pool C01527 48 Federal National Mortgage Association, 195 5.50%, 11/01/32, Pool 254594 199 473 5.00%, 05/01/33, Pool 254766 474 500 5.50%, 01/01/34, Pool 357472 513 -------------------------------------------------------------------------------------------------- Total Residential Mortgage Backed Pass-Through Securities 1,577 (Cost $1,560) -------------------------------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.6% 45 Banc of America Commercial Mortgage, Inc., 5.06%, 03/11/41, Ser. 2003-2, Class A4 47 Credit Suisse First Boston Mortgage Securities Corp., 15 4.60%, 03/15/35, Ser. 2003-CPN1, Class A2 15 45 6.38%, 12/16/35, Ser. 2001-CK1, Class A3 51 55 4.90%, 12/15/36, Ser. 2003-C5, Class A4 56 225 3.94%, 05/15/38, Ser. 2003-C3, Class A5 216 45 Greenwich Capital Commercial Funding Corp., 4.11%, 07/05/35, Ser. 2003-C1, Class A4 44 60 LB-UBS Commercial Mortgage Trust, 6.65%, 11/15/27, Ser. 2001-C2, Class A2 69 Morgan Stanley Capital I, 30 4.05%, 01/31/41, Ser. 2004-HQ3, Class A2 30 40 4.66%, 09/13/45, Ser. 2004-T13, Class A4 40 $ 20 Morgan Stanley Dean Witter Capital I, 4.92%, 03/12/35, Ser. 2003-HQ2, Class A2 $ 21 60 Wachovia Bank Commercial Mortgage Trust, 3.96%, 12/15/35, Ser. 2003-C9, Class A2 60 -------------------------------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 649 (Cost $645) -------------------------------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 3.7% 35 American Express Credit Account Master Trust, 1.69%, 01/15/09, Ser. 2003-4, Class A 35 AmeriCredit Automobile Receivables Trust, 10 2.75%, 10/09/07, Ser. 2003-CF, Class A3 10 10 3.48%, 05/06/10, Ser. 2003-CF, Class A4 10 15 2.84%, 08/06/10, Ser. 2003-DM, Class A4 15 20 Bank One Issuance Trust, 4.77%, 02/16/16, Ser. 2003-C3, Class C3 20 Capital Auto Receivables Asset Trust, 40 1.13%, 02/15/07, Ser. 2003-2, Class A3B, FRN 40 25 1.96%, 01/15/09, Ser. 2003-2, Class A4A 25 10 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 10 45 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 46 Citibank Credit Card Issuance Trust, 15 5.65%, 06/16/08, Ser. 2001-A6, Class A6 16 15 5.00%, 06/10/15, Ser. 2003-C4, Class C4 15
SEE NOTES TO FINANCIAL STATEMENTS. 80
PRINCIPAL AMOUNT~ ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED Countrywide Asset-Backed Certificates, $ 20 3.61%, 04/25/30, Ser. 2003-5, Class AF3 $ 20 15 5.41%, 01/25/34, Ser. 2003-5, Class MF1 16 10 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 10 35 First USA Credit Card Master Trust, 1.45%, 11/20/06, Ser. 2001- 2, Class B, FRN 35 75 Household Automotive Trust, 2.22%, 11/17/09, Ser. 2003-1, Class A4 74 81 Long Beach Mortgage Loan Trust, 1.41%, 07/25/33, Ser. 2003-3, Class A, FRN 82 10 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 10 20 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 20 40 National City Auto Receivables Trust, 2.88%, 05/15/11, Ser. 2004-A, Class A4 40 Onyx Acceptance Grantor Trust, 10 3.20%, 03/15/10, Ser. 2003-D, Class A4 10 15 2.66%, 05/17/10, Ser. 2003-C, Class A4 15 75 2.94%, 12/15/10, Ser. 2004-A, Class A4 75 18 Option One Mortgage Loan Trust, 1.41%, 07/01/33, Ser. 2003-5, Class A2, FRN 18 20 PSE&G Transition Funding Funding LLC, 6.61%, 06/15/15, Ser. 2001-1, Class A6 23 Residential Asset Securities Corp., 11 1.34%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 11 27 1.38%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN 27 65 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 66 20 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 20 $ 40 USAA Auto Owner Trust, 2.04%, 02/16/10, Ser. 2003-1, Class A4 $ 40 25 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 25 21 Wachovia Asset Securitization, Inc., 1.52%, 12/25/32, Ser. 2002-HE2, Class A, FRN 21 15 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 15 -------------------------------------------------------------------------------------------------- Total Asset Backed Securities 915 (Cost $912) -------------------------------------------------------------------------------------------------- SHARES - --------------------------------------------------------------------------------------------------------------------- WARRANTS -- 0.0% ^ TELECOMMUNICATIONS -- 0.0% ^ 0^^ Startec Global Communications Corp., 0.00%, 05/15/08 0^^ (Cost $0) ^^ -------------------------------------------------------------------------------------------------- Total Long- Term Investments 21,753 (Cost $20,335) -------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 11.5% MONEY MARKET FUND -- 11.5% 2,813 JPMorgan Prime Money Market Fund (a) 2,813 (Cost $2,813) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 24,566 (COST $23,148) --------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 81 SUMMARY OF INVESTMENTS BY COUNTRY, FEBRUARY 29, 2004
COUNTRY % OF INVESTMENT SECURITIES - ----------------------------------------------------------------------------------------------------------------- United States 68.6% The Netherlands 3.2 Brazil 2.2 Canada 2.2 Russia 2.1 Colombia 1.8 Peru 1.7 Mexico 1.5 France 1.5 Bulgaria 1.2 Tunisia 1.2 Philippines 1.1 Chile 1.1 Costa Rica 1.1 Italy 1.0 Turkey 1.0 South Africa 1.0 United Kingdom 0.9 Panama 0.9 El Salvador 0.9 Venezuela 0.7 Luxembourg 0.7 Germany 0.5 Qatar 0.5 Malaysia 0.5 Other (below 0.5%) 0.9 TOTAL 100.0% - -----------------------------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 2 Treasury Bonds June, 2004 $ 225 $ 1 2 2 Year Treasury Notes June, 2004 429 1 SHORT FUTURES OUTSTANDING (5) 5 Year Treasury Notes June, 2004 (562) (2) (5) 10 Year Treasury Notes June, 2004 (569) (4)
SEE NOTES TO FINANCIAL STATEMENTS. 82 FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO SELL DATE VALUE (USD) 2/29/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------- 166 EUR 3/31/04 $ 210 $ 205 $ 5 99 EUR 6/30/04 125 123 2 554 EUR 3/31/04 697 688 9 - --------------------------------------------------------------------------------------------------------------- $ 1,032 $ 1,016 $ 16 - ---------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 83 JPMORGAN U.S. TREASURY INCOME FUND PORTFOLIO OF INVESTMENTS AS OF FEBRUARY 29, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT~ (USD) ISSUER VALUE - --------------------------------------------------------------------------------------------------------------------- LONG-TERM INVESTMENTS -- 93.3% U.S. TREASURY SECURITIES -- 93.3% U.S. Treasury Notes & Bonds, $ 13,910 1.13%, 06/30/05 $ 13,883 21,520 2.38%, 08/15/06 21,777 8,765 3.00%, 02/15/08 8,912 11,985 2.63%, 05/15/08 11,973 4,365 3.25%, 01/15/09 4,429 6,145 5.75%, 08/15/10 + 7,000 2,315 3.88%, 02/15/13 2,319 8,165 4.25%, 08/15/13 8,369 6,685 7.25%, 05/15/16 + 8,535 13,000 9.00%, 11/15/18 + 19,228 5,700 8.13%, 08/15/19 @ + 7,915 3,540 8.00%, 11/15/21 + 4,921 17,020 7.25%, 08/15/22 + 22,136 4,800 6.38%, 08/15/27 5,765 -------------------------------------------------------------------------------------------------- Total U.S. Treasury Securities 147,162 (Cost $144,118) -------------------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.0% ^ $ 0^^ Federal Home Loan Mortgage Corp., 7.00%, 12/01/14, Gold Pool E00766 $ 0^^ (Cost $0) -------------------------------------------------------------------------------------------------- Total Long-Term Investments 147,162 (Cost $144,118) -------------------------------------------------------------------------------------------------- SHARES - --------------------------------------------------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 6.7% MONEY MARKET FUND -- 6.7% 10,534 JPMorgan 100% U.S. Treasury Securities Money Market Fund (a) 10,534 (Cost $10,534 ) -------------------------------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 157,696 (COST $154,652) --------------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 2/29/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 91 2 Year Treasury Notes June, 2004 $ 19,522 $ 31 104 5 Year Treasury Notes June, 2004 11,690 43 82 10 Year Treasury Notes June, 2004 9,338 15 SHORT FUTURES OUTSTANDING (253) Treasury Bonds June, 2004 (28,447) (197)
SEE NOTES TO FINANCIAL STATEMENTS. 84 Abbreviations * -- Non-income producing security. # -- All or a portion of this security is a 144A or private placement security and can only be sold to qualified institutional buyers. ~ -- Denominated in United States Dollars unless otherwise noted. ^^ -- Amount rounds to less than one thousand. ^ -- Amount rounds to less than 0.1%. + -- All or a portion of this security is segregated with the custodian for futures contracts, TBA, when issued, delayed delivery securities or swaps. @ -- Security is fully or partially segregated with brokers as intitial margin for futures contracts. (a) -- Affiliated. Money market fund registered under the Investment Company Act of 1940, as amended and advised by JPMorgan Fleming Asset Management, Inc. Adj. -- Adjustable. The interest rate shown is the rate in effect at February 29, 2004. (d) -- Defaulted Security. (f) -- Fair Valued Investment. The following are approximately the market value and percentage of the investments that are fair valued (amounts in thousands):
FUND MARKET VALUE PERCENTAGE ---- ------------ ---------- JPMorgan Bond Fund $ 20,818 1.78% JPMorgan Enhanced Income Fund 1,300 0.37% JPMorgan Fleming Emerging Markets Debt Fund 731 1.86% JPMorgan Global Strategic Income Fund 15,061 26.42% JPMorgan Strategic Income Fund 3 0.00%^
(i) -- Security is considered illiquid and may be difficult to sell. ADR -- American Depository Receipt. CAD -- Canadian Dollar. EUR -- Euro. FNMA -- Federal National Mortgage Association. FRDO -- Floating Rate Demand Obligation. The maturity date shown is the next interest reset date. The interest rate shown is the rate in effect at February 29, 2004. FRN -- Floating Rate Note. The rate shown is the rate in effect as of February 29, 2004. GBP -- Great Britain Pound. GO -- General Obligation Bond. IO -- Interest Only. LIBOR -- London Interbank Offered Rate. MTN -- Medium Term Note. PO -- Principal Only. RAMS -- Reverse Annuity Mortgage Security. Regulation S -- Securities registered under the Securities Act of 1933 Rev. -- Revenue Bond. Ser. -- Series. SUB -- Step-up Bond. The rate shown is the rate in effect as of February 29, 2004. TBA -- To Be Announced. USD -- United States Dollar. SEE NOTES TO FINANCIAL STATEMENTS. 85 JPMORGAN FUNDS STATEMENT OF ASSETS AND LIABILITIES AS OF FEBRUARY 29, 2004 (Amounts in thousands, except per share amounts)
FLEMING GLOBAL ENHANCED EMERGING STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND ASSETS Investment securities, at value $ 1,169,320 $ 1,164,236 $ 346,909 $ 39,155 $ 57,009 Cash -- -- 1,871 -- 117 Foreign currency, at value 11 -- -- 16 154 Receivables: Investment securities sold 94,498 83,137 7,028 985 7,877 Fund shares sold 3,893 95 75,075 7 1 Interest and dividends 6,775 6,151 619 643 759 Variation margin 443 -- -- -- -- Unrealized appreciation on forward foreign currency exchange contracts -- -- -- -- 82 Unrealized appreciation on open swap contracts 2,652 2,303 -- -- -- Expense reimbursements 4 -- -- -- 2 - ------------------------------------------------------------------------------------------------------------------ Total Assets 1,277,596 1,255,922 431,502 40,806 66,001 - ------------------------------------------------------------------------------------------------------------------ LIABILITIES Payables: Due to custodian 771 84 -- -- -- Dividends 643 2,280 97 32 282 Investment securities purchased 274,701 268,081 20,909 962 9,146 Fund shares redeemed 1,124 415 618 8 9 Variation margin 145 201 11 14 32 Unrealized depreciation on forward foreign currency exchange contracts -- -- -- -- 18 Outstanding options written, at fair value 1,647 1,205 -- -- -- Unrealized depreciation on open swap contracts 1,708 1,334 -- -- -- Accrued liabilities: Investment advisory fees 237 233 38 22 10 Administration fees 35 82 -- 2 -- Shareholder servicing fees 65 99 -- 2 4 Distribution fees 2 8 -- -- --^ Custodian fees 79 66 23 24 33 Trustees' fees - deferred compensation plan 1 148 --^ --^ --^ Other 93 87 66 59 69 - ------------------------------------------------------------------------------------------------------------------ Total Liabilities 281,251 274,323 21,762 1,125 9,603 - ------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 996,345 $ 981,599 $ 409,740 $ 39,681 $ 56,398 - ------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 86
FLEMING GLOBAL ENHANCED EMERGING STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND NET ASSETS Paid in capital $ 955,472 $ 945,885 $ 415,413 $ 30,836 $ 82,548 Accumulated undistributed (overdistributed) net investment income (410) (893) (128) 39 (1,269) Accumulated net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 15,908 6,589 (6,015) 2,268 (28,642) Net unrealized appreciation (depreciation) of investments, futures, foreign exchange translations, written options and swaps 25,375 30,018 470 6,538 3,761 - ------------------------------------------------------------------------------------------------------------------ Total Net Assets $ 996,345 $ 981,599 $ 409,740 $ 39,681 $ 56,398 - ------------------------------------------------------------------------------------------------------------------ Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized): Class A 252 570 -- -- 47 Class B 246 337 -- -- -- Class C 33 -- -- -- -- Institutional 36,144 -- 41,608 -- 5,777 Select 20,437 22,620 -- 4,151 335 Ultra 42,474 -- -- -- -- Net Asset Value: Class A (and redemption price) $ 10.09 $ 41.89 $ -- $ -- $ 9.15 Class B* $ 10.00 $ 41.69 $ -- $ -- $ -- Class C* $ 10.07 $ -- $ -- $ -- $ -- Institutional (and redemption price) $ 10.00 $ -- $ 9.85 $ -- $ 9.16 Select (and redemption price) $ 10.00 $ 41.71 $ -- $ 9.56 $ 9.15 Ultra (and redemption price) $ 10.01 $ -- $ -- $ -- $ -- Class A Maximum Public Offering Price Per Share (net asset value per share/95.5%) $ 10.57 $ 43.86 $ -- $ -- $ 9.58 Cost of investments $ 1,146,146 $ 1,136,069 $ 346,418 $ 32,557 $ 53,298 Cost of foreign currency $ 353 $ -- $ -- $ 54 $ 155 - ------------------------------------------------------------------------------------------------------------------ Premiums received from options written $ 2,672 $ 2,119 $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------------
* Redemption price may be reduced by contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 87
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND ASSETS Investment securities, at value $ 908,057 $ 1,504,653 $ 24,566 $ 157,696 Cash -- 16,988 -- 113 Foreign currency, at value -- -- --^ -- Receivables: Investment securities sold 40,486 64,721 47 12,384 Fund shares sold 896 2,434 38 37 Interest and dividends 4,604 8,898 333 866 Variation margin 330 135 -- -- Unrealized appreciation on forward foreign currency exchange contracts -- -- 16 -- Unrealized appreciation on open swap contracts 66 623 -- -- Expense reimbursements -- -- 8 -- - ------------------------------------------------------------------------------------------------------------------ Total Assets 954,439 1,598,452 25,008 171,096 - ------------------------------------------------------------------------------------------------------------------ LIABILITIES Payables: Due to custodian 730 -- 806 -- Dividends 472 1,953 48 123 Investment securities purchased 79,073 99,035 867 12,809 Fund shares redeemed 2,527 2,662 30 134 Variation margin 193 -- 2 169 Outstanding options written, at fair value 697 1,038 -- -- Unrealized depreciation on open swap contracts 249 1,173 -- -- Accrued liabilities: Investment advisory fees 150 298 -- 32 Administration fees 20 131 -- 7 Shareholder servicing fees 20 259 1 8 Distribution fees 1 268 11 10 Custodian fees 50 76 35 23 Trustees' fees - deferred compensation plan 1 20 1 28 Other 92 68 63 82 - ------------------------------------------------------------------------------------------------------------------ Total Liabilities 84,275 106,981 1,864 13,425 - ------------------------------------------------------------------------------------------------------------------ NET ASSETS $ 870,164 $ 1,491,471 $ 23,144 $ 157,671 - ------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 88
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND NET ASSETS Paid in capital $ 864,474 $ 1,483,373 $ 24,505 $ 154,850 Accumulated undistributed (overdistributed) net investment income 1,031 (2,963) (198) 10 Accumulated net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (1,510) 631 (2,593) (125) Net unrealized appreciation (depreciation) of investments, futures, foreign exchange transactions, written options and swaps 6,169 10,430 1,430 2,936 - ------------------------------------------------------------------------------------------------------------------ Total Net Assets $ 870,164 $ 1,491,471 $ 23,144 $ 157,671 - ------------------------------------------------------------------------------------------------------------------ Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized): Class A 768 4,156 303 4,034 Class B -- -- 942 1,447 Class C -- -- 424 -- Institutional 76,575 -- -- -- Class M -- 90,917 843 -- Select 10,422 49,853 -- 7,693 Net Asset Value: Class A (and redemption price) $ 9.91 $ 10.29 $ 9.21 $ 11.96 Class B* $ -- $ -- $ 9.22 $ 11.96 Class C* $ -- $ -- $ 9.22 $ -- Institutional (and redemption price) $ 9.92 $ -- $ -- $ -- Class M (and redemption price) $ -- $ 10.28 $ 9.20 $ -- Select (and redemption price) $ 9.91 $ 10.30 $ -- $ 11.98 Class A Maximum Public Offering Price Per Share (net asset value per share/98.5%) $ 10.06 $ 10.45 $ -- $ -- Class A Maximum Public Offering Price Per Share (net asset value per share/95.5%) $ -- $ -- $ 9.64 $ 12.52 Class M Maximum Public Offering Price Per Share (net asset value per share/98.5%) $ -- $ 10.44 $ -- $ -- Class M Maximum Public Offering Price Per Share (net asset value per share/97.0%) $ -- $ -- $ 9.48 $ -- Cost of investments $ 902,313 $ 1,494,938 $ 23,148 $ 154,652 Cost of foreign currency $ -- $ -- $ -- $ -- - ------------------------------------------------------------------------------------------------------------------ Premiums received from options written $ 1,273 $ 2,056 $ -- $ -- - ------------------------------------------------------------------------------------------------------------------
* Redemption price may be reduced by contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 89 STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004 (Amounts in thousands)
FLEMING GLOBAL ENHANCED EMERGING STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND INVESTMENT INCOME Interest $ 22,487 $ 19,777 $ 2,907 $ 2,272 $ 2,737 Dividend -- -- 3 -- -- Dividend income from affiliated investments* 497 568 133 5 69 Foreign taxes withheld (7) (5) -- --^ -- - ------------------------------------------------------------------------------------------------------------------ Total investment income 22,977 20,340 3,043 2,277 2,806 - ------------------------------------------------------------------------------------------------------------------ EXPENSES Investment advisory fees 1,694 1,528 457 199 210 Administration fees 847 764 274 43 70 Shareholder servicing fees 664 1,273 183 71 49 Distribution fees 13 88 -- -- 1 Custodian fees 118 106 34 45 67 Printing and postage 21 23 2 -- 2 Professional fees 69 57 49 48 47 Registration expenses 51 71 7 1 25 Transfer agent fees 61 61 9 12 24 Trustees' fees 8 8 3 --^ 1 Other 31 21 6 4 6 - ------------------------------------------------------------------------------------------------------------------ Total expenses 3,577 4,000 1,024 423 502 - ------------------------------------------------------------------------------------------------------------------ Less amounts waived 737 857 658 68 184 Less earnings credits 3 1 1 --^ --^ Less expense reimbursements 17 -- -- -- 8 - ------------------------------------------------------------------------------------------------------------------ Net expenses 2,820 3,142 365 355 310 - ------------------------------------------------------------------------------------------------------------------ Net investment income 20,157 17,198 2,678 1,922 2,496 - ------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 90
FLEMING GLOBAL ENHANCED EMERGING STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on transactions from: Investments 14,283 10,560 297 4,777 5,173 Futures (7,502) (5,965) (658) 82 (866) Foreign exchange contracts (9) -- -- -- (556) Written options 3,020 2,375 (126) -- -- Swaps 7,693 (1,649) (617) -- -- Change in net unrealized appreciation/depreciation of: Investments 18,779 21,466 704 (727) (742) Futures 1,204 1,689 42 (23) (3) Foreign currency translations (3) -- -- -- (352) Written options 5,714 4,673 (94) -- -- Swaps (1,539) 3,023 8 -- -- Net realized and unrealized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 41,640 36,172 (444) 4,109 2,654 - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from operations $ 61,797 $ 53,370 $ 2,234 $ 6,031 $ 5,150 - ------------------------------------------------------------------------------------------------------------------ * Includes reimbursements of investment advisory, administration and shareholder servicing fees : $ 84 $ 95 $ 22 $ 1 $ 12 - ------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 91
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND INVESTMENT INCOME Interest $ 11,348 $ 20,124 $ 684 $ 2,778 Dividend income from affiliated investments* 470 576 10 49 Foreign taxes withheld (3) (4) --^ -- - ------------------------------------------------------------------------------------------------------------------ Total investment income 11,815 20,696 694 2,827 - ------------------------------------------------------------------------------------------------------------------ EXPENSES Investment advisory fees 1,105 1,912 57 215 Administration fees 663 1,147 17 108 Shareholder servicing fees 534 1,912 30 179 Distribution fees 10 1,883 69 134 Custodian fees 73 125 54 34 Printing and postage 13 20 4 8 Professional fees 55 57 48 48 Registration expenses 31 42 21 22 Transfer agent fees 38 39 33 78 Trustees' fees 7 12 --^ 1 Other 26 33 4 8 - ------------------------------------------------------------------------------------------------------------------ Total expenses 2,555 7,182 337 835 - ------------------------------------------------------------------------------------------------------------------ Less amounts waived 1,054 689 101 288 Less earnings credits 2 3 --^ --^ Less expense reimbursements -- -- 54 -- - ------------------------------------------------------------------------------------------------------------------ Net expenses 1,499 6,490 182 547 - ------------------------------------------------------------------------------------------------------------------ Net investment income 10,316 14,206 512 2,280 - ------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 92
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on transactions from: Investments 5,547 10,564 390 2,870 Futures (3,489) (2,444) (43) (809) Foreign exchange contracts (6) (2) (163) -- Written options (284) (474) -- -- Swaps 905 (4,518) -- -- Change in net unrealized appreciation/depreciation of: Investments 1,778 4,584 610 2,136 Futures 709 468 -- 169 Foreign currency translations (5) -- 32 -- Written options 365 666 -- -- Swaps (988) (654) -- -- Net realized and unrealized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 4,532 8,190 826 4,366 - ------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in net assets from operations $ 14,848 $ 22,396 $ 1,338 $ 6,646 - ------------------------------------------------------------------------------------------------------------------ * Includes reimbursements of investment advisory, administration and shareholder servicing fees : $ 78 $ 95 $ 2 $ 9 - ------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 93 STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED (Amounts in thousands)
BOND FUND BOND FUND II ---------------------------------- ---------------------------------- 9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED 2/29/04 8/31/03 2/29/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 20,157 $ 62,273 $ 17,198 $ 38,411 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 17,485 45,619 5,321 11,293 Change in net unrealized appreciation (depreciation) of investments, futures, foreign currency translations, written options and swaps 24,155 (40,167) 30,851 (23,834) - --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 61,797 67,725 53,370 25,870 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (19,994) (62,540) (17,354) (38,594) Net realized gain on investment transactions (34,209) (12,241) (5,793) (8,146) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (54,203) (74,781) (23,147) (46,740) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (245,244) (429,181) (118,055) 386,134 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (237,650) (436,237) (87,832) 365,264 - --------------------------------------------------------------------------------------------------------------------------------- Beginning of period 1,233,995 1,670,232 1,069,431 704,167 - --------------------------------------------------------------------------------------------------------------------------------- End of period $ 996,345 $ 1,233,995 $ 981,599 $ 1,069,431 - --------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (410) $ (573) $ (893) $ (737) - ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 94
FLEMING EMERGING MARKETS ENHANCED INCOME FUND DEBT FUND ---------------------------------- ---------------------------------- 9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED 2/29/04 8/31/03 2/29/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 2,678 $ 8,508 $ 1,922 $ 4,778 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (1,104) (3,952) 4,859 3,573 Change in net unrealized appreciation (depreciation) of investments, futures, foreign currency translations, written options and swaps 660 (572) (750) 6,981 - --------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 2,234 3,984 6,031 15,332 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (2,675) (8,519) (2,175) (4,996) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) 55,773 58,849 (24,486) 8,503 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets 55,332 54,314 (20,630) 18,839 - --------------------------------------------------------------------------------------------------------------------------------- Beginning of period 354,408 300,094 60,311 41,472 - --------------------------------------------------------------------------------------------------------------------------------- End of period $ 409,740 $ 354,408 $ 39,681 $ 60,311 - --------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (128) $ (131) $ 39 $ 292 - ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 95
GLOBAL STRATEGIC INCOME FUND ---------------------------------- 9/1/03 THROUGH YEAR ENDED 2/29/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 2,496 $ 7,042 Net realized gain (loss) on investments, futures and foreign exchange transactions 3,751 178 Change in net unrealized appreciation (depreciation) of investments, futures and foreign currency translations (1,097) 4,192 - -------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 5,150 11,412 - -------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (2,492) (7,077) - -------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (56,993) (33,539) - -------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (54,335) (29,204) - -------------------------------------------------------------------------------------------------------------------------------- Beginning of period 110,733 139,937 - -------------------------------------------------------------------------------------------------------------------------------- End of period $ 56,398 $ 110,733 - -------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (1,269) $ (1,273) - --------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 96
SHORT TERM BOND FUND SHORT TERM BOND FUND II ---------------------------------- ---------------------------------- 9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED 2/29/04 8/31/03 2/29/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 10,316 $ 24,860 $ 14,206 $ 32,784 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 2,673 1,350 3,126 3,428 Change in net unrealized appreciation/ depreciation of investments, futures, foreign currency translations, written options and swaps 1,859 (6,030) 5,064 (10,667) Increase (decrease) in net assets from operations 14,848 20,180 22,396 25,545 - --------------------------------------------------------------------------------------------------------------------------------- Net equalization credits/(debits) -- -- (66) 1,123 - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (10,281) (25,414) (14,207) (33,316) Return of capital -- -- -- (587) Net realized gain on investment transactions -- (11,813) -- (7,040) - --------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (10,281) (37,227) (14,207) (40,943) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (71,613) 204,640 (70,423) 227,176 - --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (67,046) 187,593 (62,300) 212,901 - --------------------------------------------------------------------------------------------------------------------------------- Beginning of period 937,210 749,617 1,553,771 1,340,870 - --------------------------------------------------------------------------------------------------------------------------------- End of period $ 870,164 $ 937,210 $ 1,491,471 $ 1,553,771 - --------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ 1,031 $ 996 $ (2,963) $ (2,896) - ---------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 97
STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND ---------------------------------- ---------------------------------- 9/1/03 THROUGH YEAR ENDED 9/1/03 THROUGH YEAR ENDED 2/29/04 8/31/03 2/29/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 512 $ 1,116 $ 2,280 $ 5,681 Net realized gain (loss) on investments, futures and foreign exchange transactions 184 (335) 2,061 3,804 Change in net unrealized appreciation/ depreciation of investments, futures and foreign currency translations 642 1,092 2,305 (6,183) Increase (decrease) in net assets from operations 1,338 1,873 6,646 3,302 - --------------------------------------------------------------------------------------------------------------------------------- Net equalization credits/(debits) --^ (9) -- -- - --------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (515) (1,103) (2,279) (5,719) - --------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (36) 794 18,621 (5,521) - --------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets 787 1,555 22,988 (7,938) - --------------------------------------------------------------------------------------------------------------------------------- Beginning of period 22,357 20,802 134,683 142,621 - --------------------------------------------------------------------------------------------------------------------------------- End of period $ 23,144 $ 22,357 $ 157,671 $ 134,683 - --------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (198) $ (195) $ 10 $ 9 - ---------------------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 98 STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED FEBRUARY 29, 2004 (Amounts in thousands)
GLOBAL STRATEGIC INCOME FUND INCREASE (DECREASE) IN CASH* CASH FLOWS PROVIDED BY OPERATING ACTIVITIES: Net interest and dividend income received (excluding premium/discount amortization of $35) $ 3,474 Operating expenses paid (284) Expense reimbursements received 6 Purchases of long-term investments (97,379) Net (purchases)/sales of short-term investments 15,793 Proceeds from disposition of long-term investments and principal paydowns 139,747 Net cash used for futures transactions (813) Net cash used for foreign exchange transactions (552) - ------------------------------------------------------------------------------------------ Net cash provided by operating activities 59,992 - ------------------------------------------------------------------------------------------ CASH FLOWS USED BY FINANCING ACTIVITIES: Proceeds from shares sold 1,196 Payment from shares redeemed (58,847) Cash distributions paid (2,362) - ------------------------------------------------------------------------------------------ Net cash used in financing activities (60,013) - ------------------------------------------------------------------------------------------ Net increase (decrease) in cash (21) - ------------------------------------------------------------------------------------------ Cash, beginning of period 292 - ------------------------------------------------------------------------------------------ Cash, end of period $ 271 - ------------------------------------------------------------------------------------------ RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net increase (decrease) in net assets resulting from operations $ 5,150 - ------------------------------------------------------------------------------------------ Decrease in market value of investments 65,874 Increase in receivable for investment securities sold (4,470) Decrease in dividend and interest receivable 633 Increase in expense reimbursement receivable (2) Decrease in unrealized appreciation on foreign exchange contracts 356 Decrease in net variation margin receivable 56 Decrease in payable for investment securities purchased (7,639) Increase in accrued expenses and other payables 34 - ------------------------------------------------------------------------------------------ Total adjustments 54,842 - ------------------------------------------------------------------------------------------ Net cash provided by operating activities $ 59,992 - ------------------------------------------------------------------------------------------
* Includes cash and foreign currency, at value. SEE NOTES TO FINANCIAL STATEMENTS. 99 NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION J.P. Morgan Mutual Fund Group ("MFG"), J.P. Morgan Institutional Funds ("JPMIF"), J.P. Morgan Mutual Fund Select Group ("MFSG"), J.P. Morgan Series Trust ("JPMST) and J.P. Morgan Funds ("JPMF") (the "Trusts") were organized as Massachusetts business trusts and are registered under the Investment Company Act of 1940, as amended, (the "1940 Act"), as open-end management investment companies. The Trusts were organized on the following dates:
TRUST DATE MFG May 11, 1987 JPMIF November 4, 1992 MFSG October 1, 1996 JPMST August 15, 1996 JPMF November 4, 1992
The following are nine separate portfolios of the Trusts (collectively, the "Funds").
FUND CLASSES OFFERED JPMorgan Bond Fund ("BF") Class A, Class B, Class C, Institutional, Select and Ultra JPMorgan Bond Fund II ("BFII") Class A, Class B and Select JPMorgan Enhanced Income Fund ("EIF") Institutional JPMorgan Fleming Emerging Markets Debt Fund ("EMDF") Select JPMorgan Global Strategic Income Fund ("GSIF") Class A, Institutional and Select JPMorgan Short Term Bond Fund ("STBF") Class A, Institutional and Select JPMorgan Short Term Bond Fund II ("STBFII") Class A, Class M and Select JPMorgan Strategic Income Fund ("SIF") Class A, Class B, Class C and Class M JPMorgan U.S. Treasury Income Fund ("USTI") Class A, Class B and Select
On September 12, 2003, GSIF Class B shares merged into Class A shares and GSIF Class B shares closed. STBFII, SIF and USTI are separate series of MFG. BFII is a separate series of MFSG. BF, GSIF and STBF are separate series of JPMIF. EIF is a separate series of JPMST. EMDF is a separate series of JPMF. Class A and Class M shares generally provide for a front-end sales charge while Class B and Class C shares provide for a contingent deferred sales charge. Class B shares automatically converts to Class A shares after eight years. No sales charges are assessed with respect to Institutional, Select and Ultra classes. All classes of shares have equal rights as to earnings, assets and voting privileges except that each class may bear different transfer agent, distribution and shareholder servicing fees and each class has exclusive voting rights with respect to its distribution plan and shareholder servicing agreements. Class A shares, for which front-end sales charges have been waived, may be subject to redemption charges as described in the Funds' prospectus. 100 2. REORGANIZATIONS On October 23, 2002, the Board of Trustees approved management's proposal to merge the JPMorgan Intermediate Bond Fund (the "Target Fund") into the JPMorgan Bond Fund II (the "Aquiring Fund"). The proposed merger was approved by the Target Fund's shareholders on February 13, 2003. The merger occurred on March 21, 2003. Prior to the open of business on March 24, 2003, the Acquiring Fund acquired all the assets and liabilities of the Target Fund as shown in the table below, pursuant to the Reorganization Plan approved by the Target Fund's shareholders on February 13, 2003. The transaction was structured for tax purposes to qualify as a tax-free reorganization under the Internal Revenue Code. Under the Reorganization Plan, shareholders of the Target Fund received a number of shares of the corresponding class in the Acquiring Fund with a value equal to their holdings in the Target Fund on the date of the exchange. The following is a summary of Shares Outstanding, Net Assets, Net Asset Values Per Share and Net Unrealized Appreciation immediately before and after the Reorganization (amounts in thousands, except per share amounts): JPMORGAN BOND FUND II REORGANIZATION
NET ASSET NET SHARES VALUE UNREALIZED OUTSTANDING NET ASSETS PER SHARE APPRECIATION TARGET FUND JPMorgan Intermediate Bond Fund $ 7,076 Class A 423 $ 4,321 $ 10.22 Select 51,938 $ 530,889 $ 10.22 ACQUIRING FUND JPMorgan Bond Fund II $ 11,525 Class A 846 $ 35,026 $ 41.41 Class B 364 $ 15,025 $ 41.31 Select 15,317 $ 632,912 $ 41.32 POST REORGANIZATION JPMorgan Bond Fund II $ 18,601 Class A 950 $ 39,347 $ 41.41 Class B 364 $ 15,025 $ 41.31 Select 28,163 $ 1,163,801 $ 41.32
101 3. SIGNIFICANT ACCOUNTING POLICIES THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE FUNDS: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. VALUATION OF INVESTMENTS -- Fixed income securities, other than convertible bonds, with a maturity of 61 days or more at the purchase date held by the Funds will be valued each day based on readily available market quotations received from independent or affiliated commercial pricing services. Such pricing services will generally provide bidside quotations. Convertible bonds are valued at the last sale price on the primary exchange on which the bond is principally traded. All short-term securities with a remaining maturity of sixty days or less are valued using the amortized cost method, which approximates market value. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Trustees. Valuations may be based upon current market prices of securities, which are comparable in coupon, rating, maturity and industry. It is possible that the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and such differences could have been material. Trading in securities on most foreign exchanges and over-the-counter markets is normally completed before the close of the domestic market and may also take place on days when the domestic market is closed. If events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Funds' net assets are calculated, such securities may be valued at fair value in accordance with procedures adopted by the Trustees. B. FUTURES CONTRACTS -- When a Fund enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the Fund makes (or receives) additional cash payments daily to (or from) the broker. Changes in the value of the contract are recorded as unrealized appreciation (depreciation) until the contract is closed or settled, at which time a realized gain or loss is recognized. The Funds invest in exchange-traded interest rate futures for hedging purposes, to either modify the duration of the portfolio, modify the yield curve exposure of the portfolio, or in anticipation of buying or selling a specific security. Use of long futures contracts subjects the Funds to risk of loss in excess of amounts shown on the Statement of Assets and Liabilities, up to the notional value of the futures contracts. Use of short futures contracts subjects the Funds to unlimited risk of loss. The Funds may enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, the Funds' credit risk is limited to failure of the exchange or board of trade. As of February 29, 2004, the Funds had outstanding futures contracts as listed on the Funds' Portfolio of Investments. C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates, or at the mean of the current bid and asked prices, of such currencies against the U.S. dollar as quoted by a major bank, on the following basis: 1. Market value of investment securities and other assets and liabilities: at the rate of exchange at the valuation date. 102 2. Purchases and sales of investment securities, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets of the Funds are presented at the foreign exchange rates and market values at the close of the periods, the Funds do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held or sold during the year. Accordingly, such realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions. Reported realized foreign currency gains or losses arise from disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds' books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at period end. D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into forward foreign currency contracts (obligations to purchase or sell foreign currency in the future on a date and price fixed at the time the contracts are entered into) to manage the Funds' exposure to foreign currency exchange fluctuations. Each day the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking to market". When the forward contract is closed, or the delivery of the currency exchange is made or taken, each Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract. The Funds are subject to off-balance sheet risk to the extent of the value of the contracts for purchases of foreign currency and in an unlimited amount for sales of foreign currency. As of February 29, 2004, the Funds had outstanding forward foreign currency exchange contracts as listed on the Funds' Portfolio of Investments. E. WRITTEN OPTIONS -- When a Fund writes an option, an amount equal to the premium received by the Fund is included in the Fund's Statement of Assets and Liabilities as an asset and corresponding liability. The amount of the liability is adjusted daily to reflect the current market value of the written option and the change is recorded in a corresponding unrealized gain or loss account. When a written option expires on its stipulated expiration date, or when a closing transaction is entered into, the related liability is extinguished and the Fund realizes a gain or loss contingent on whether the cost of the closing transaction exceeds the premium received when the option was written. The Funds write options on securities, futures and interest rate swaps ("swaptions"). These options are settled for cash and subject the Funds to unlimited risk of loss. The Funds, however, are not subject to credit risk on written options as the counterparty has already performed its obligation by paying the premium at the inception of the contract. As of February 29, 2004, the Funds had written options contracts outstanding as listed on the Funds' Portfolio of Investments. 103 Transactions in options written during the six months ended February 29, 2004, were as follows (amounts in thousands):
BF BFII EIF ------------------------- ------------------------- ------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS NUMBER OF PREMIUMS UNITS RECEIVED UNITS RECEIVED UNITS RECEIVED Options outstanding at August 31, 2003 (456,750) $ 2,349 (373,500) $ 1,909 (23,700) $ 112 Options written (1,868,018) 7,084 (1,411,498) 5,859 -- -- Options terminated in closing purchase transactions 1,234,300 (6,761) 1,052,700 (5,649) 23,700 (112) Options exercised -- -- -- -- -- -- Options outstanding at February 29, 2004 (1,090,468) $ 2,672 (732,298) $ 2,119 -- $ -- STBF STBFII ------------------------- ------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS UNITS RECEIVED UNITS RECEIVED Options outstanding at August 31, 2003 (53,550) $ 251 (89,250) $ 418 Options written (559,853) 1,665 (986,583) 2,748 Options terminated in closing purchase transactions 226,500 (643) 393,250 (1,110) Options exercised -- -- -- -- Options outstanding at February 29, 2004 (386,903) $ 1,273 (682,583) $ 2,056
F. SWAPS -- The Funds may engage in various swap transactions, including forward rate agreements, interest rate, currency, fixed income, index and total return swaps, primarily to manage duration and curve risk, or as alternatives to direct investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in the value of the swaps, including the periodic amounts of interest to be paid or received on swaps is reported as unrealized gains or losses in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of swap agreements. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. 104 As of February 29, 2004, the Funds had outstanding swap agreements as listed on the Funds' Portfolio of Investments. Swap transactions present risk of loss in excess of the related amounts included in the Statement of Assets & Liabilities. G. COMMITMENTS -- The Funds may enter into commitments to buy and sell investments to settle on future dates as part of their normal investment activities. These commitments are reported at market value in the financial statements. Credit risk exists on these commitments to the extent of any unrealized gains on the underlying securities purchased and any realized gains on the underlying securities sold. Market risk exists on commitments to buy to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. However, during the commitment period, these investments earn no interest or dividends. H. DOLLAR ROLLS -- The Funds may enter into dollar rolls (principally using TBA's) in which the Funds sell mortgage securities for delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at an agreed-upon price on a fixed date. The Funds account for such dollar rolls as purchases and sales and receive compensation as consideration for entering into the commitment to repurchase. The Funds must maintain liquid securities having a value not less than the repurchase price (including accrued interest) for such dollar rolls. The market value of the securities that a Fund is required to purchase may decline below the agreed upon repurchase price of those securities. BF and BFII had TBA Dollar Rolls outstanding as of February 29, 2004, which are included in Receivable for Investment securities sold and Payable for Investment securities purchased on the Statement of Assets and Liabilities. The Funds segregate assets with a current value at least equal to the amount of their TBA Dollar Rolls. In a "fee" roll, the compensation is recorded as deferred income and amortized to income over the roll period. The counterparty receives all principal and interest payments, including prepayments, made in respect of a security subject to such a contract while it is the holder. Mortgage dollar rolls may be renewed with a new purchase and repurchase price and a cash settlement made on settlement date without physical delivery of the securities subject to the contract. I. RESTRICTED AND ILLIQUID SECURITIES -- The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult. 105 The following is the market value and percentage of net assets of restricted and illiquid securities (amounts in thousands).
ILLIQUID RESTRICTED* FUND BF $ 20,818 2.09% $ 20,818 2.09% GSIF 15,061 26.70% 15,061 26.70%
* Includes Illiquid Securities J. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on the identified cost basis. Interest income is determined on the basis of coupon interest accrued using the interest method adjusted for amortization of premiums and accretion of discounts. Dividend income less foreign taxes withheld (if any) is recorded on the ex-dividend date or when the Funds first learn of the dividend. Purchases of To Be Announced (TBA), when-issued or delayed delivery securities may be settled a month or more after the trade date; interest income is not accrued until settlement date. It is each Fund's policy to segregate assets with a current value at least equal to the amount of its TBA, when-issued or delayed delivery purchase commitments. K. ALLOCATION OF INCOME AND EXPENSES -- Expenses directly attributable to a Fund are charged to that Fund; other expenses of the Trusts are allocated proportionately among each of the Funds within the Trusts in relation to the net assets of each Fund or on another reasonable basis. Expenses directly attributable to a particular class are charged directly to such class. In calculating the net asset value per share of each class, investment income, realized and unrealized gains and losses and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. L. FEDERAL INCOME TAXES -- Each Fund is treated as a separate taxable entity for Federal income tax purposes. The Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its distributable net investment income and net realized gain on investments. In addition, the Funds intend to make distributions as required to avoid excise taxes. Accordingly, no provision for Federal income or excise tax is necessary. M. FOREIGN TAXES -- The Funds may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Funds will accrue such taxes and recoveries as applicable, based upon their current interpretation of tax rules and regulations that exist in the markets in which it invests. N. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions paid to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. To the extent these "book/tax" differences are permanent in nature, (i.e., that they result from other than timing of recognition "temporary differences") such amounts are reclassified within the capital accounts based on their Federal tax-basis treatment. 106 O. EQUALIZATION -- STBFII and SIF use the accounting practice known as equalization by which a portion of the proceeds from sales and costs of redemptions of Trust shares of beneficial interest equivalent, on a per-share basis, to the amount of undistributed net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or redemptions of Trust shares. P. OTHER EXPENSES -- Other expenses in the Statement of Operations include fees related to line of credit, insurance, pricing and reporting services. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. INVESTMENT ADVISORY FEE -- Pursuant to the Investment Advisory Agreement, JPMIM acts as the investment advisor to the Funds. Prior to September 1, 2003, J.P. Morgan Fleming Asset Management (USA) Inc. ("JPMFAM"), served as the Advisor to BF II, STBFII, SIF and USTI. On September 1, 2003, JPMFAM and Robert Fleming Inc. merged into JPMIM. Prior to October 1, 2003, JPMIM was a wholly owned subsidiary of J.P. Morgan Chase & Co. On October 1, 2003, JPMIM became a wholly owned subsidiary of J.P. Morgan Fleming Asset Management Holdings, Inc., which is a wholly owned subsidiary of J.P. Morgan Chase & Co. The investment advisory services and personnel providing investment advice have not changed as a result of the merger and ownership change. Neither the merger nor the ownership change constituted an assignment under the 1940 Act or the Investment Advisers Act of 1940. The Advisor supervises the investments of each respective Fund and for such services is paid a fee. The fee is accrued daily and paid monthly based on each Fund's respective average daily net assets. The annual fee for each Fund is as follows:
INVESTMENT ADVISORY FEE (%) FUND BF 0.30 BFII 0.30 EIF 0.25 EMDF 0.70 GSIF 0.45 STBF 0.25 STBFII 0.25 SIF 0.50 USTI 0.30
The Advisors waived fees as outlined in Note 4.F. The Funds may invest in one or more of the affiliated JPMorgan Money Market Funds. The Advisor has agreed to waive and/or reimburse its advisory fee from the Funds in an amount sufficient to offset any doubling up of investment advisory, administration and shareholder servicing fees related to each Fund's investment in an affiliated money market fund. B. DISTRIBUTION FEES -- Pursuant to a Distribution Agreement, J.P. Morgan Fund Distributors, Inc. ("JPMFD" or "Distributor"), a wholly-owned subsidiary of The BISYS Group, Inc., serves as the Trusts' exclusive underwriter and promotes and arranges for the sale of each Fund's shares. JPMFD receives no compensation in its capacity as the Funds' underwriter. 107 The Trustees have adopted Distribution Plans (the "Distribution Plans") for Class A, B, C and M Shares of the Funds in accordance with Rule 12b-1 under the 1940 Act. The Distribution Plans provide that each Fund shall pay distribution fees, including payments to the Distributor, at annual rates of the average daily net assets as shown in the table below (%):
CLASS A CLASS B CLASS C CLASS M FUND BF 0.25 0.75 0.75 n/a BFII 0.25 0.75 n/a n/a GSIF 0.25 n/a n/a n/a STBF 0.25 n/a n/a n/a STBFII 0.25 n/a n/a 0.35 SIF 0.25 0.75 0.75 0.50 USTI 0.25 0.75 n/a n/a
In addition, JPMFD is entitled to receive the contingent deferred sales charges ("CDSC") from redemptions of Class B and Class C shares. The Distributor waived fees and reimbursed expenses as outlined in Note 4.F. C. SHAREHOLDER SERVICING FEES -- The Trusts have entered into Shareholder Servicing Agreements on behalf of the Funds with JPMorgan Chase Bank ("JPMCB") under which JPMCB provides account administration and personal account maintenance services to the shareholders. For performing these services, JPMCB receives a fee that is computed daily and paid monthly equal to a percentage of the average daily net assets as shown in the table below (%):
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA FUND BF 0.25 0.25 0.25 n/a 0.10 0.25 0.05 BFII 0.25 0.25 n/a n/a n/a 0.25 n/a EIF n/a n/a n/a n/a 0.10 n/a n/a EMDF n/a n/a n/a n/a n/a 0.25 n/a GSIF 0.25 n/a n/a n/a 0.10 0.25 n/a STBF 0.25 n/a n/a n/a 0.10 0.25 n/a STBFII 0.25 n/a n/a 0.25 n/a 0.25 n/a SIF 0.25 0.25 0.25 0.30 n/a n/a n/a USTI 0.25 0.25 n/a n/a n/a 0.25 n/a
108 JPMCB may enter into services contracts with certain entities under which it will pay all or a portion of the annual fee to such entities for performing shareholdings and administrative services. In addition, JPMCB, Charles Schwab & Co. ("Schwab") and JPMF, JPMIF and JPMST are parties to separate servicing and operating agreements (the "Schwab Agreements") whereby Schwab makes shares of BF, EIF, EMDF, GSIF and STBF available to customers of investment advisors and other financial intermediaries who are Schwab's clients. BF, EIF, EMDF, GSIF and STBF are not responsible for payments to Schwab under the Schwab Agreements; however, in the event the servicing agreement with Schwab is terminated for reasons other than a breach by Schwab and the relationship between JPMF, JPMIF, JPMST and JPMCB is terminated, BF, EIF, EMDF, GSIF and STBF would be responsible for the ongoing payments to Schwab with respect to pre-termination shares. The Shareholder Servicing Agent waived fees as outlined in Note 4.F. D. CUSTODIAN AND ACCOUNTING FEES -- JPMCB provides portfolio custody and Fund accounting services for the Funds. Compensation for such services is presented in the Statement of Operations as custodian fees. The custodian fees may be reduced by credits earned by each Fund, based on uninvested cash balances held by the custodian. Such earnings credits are presented separately in the Statement of Operations. E. ADMINISTRATION FEE -- Pursuant to the Administration Agreement, JPMCB (the "Administrator") provides certain administration services to the Funds. In consideration of these services, the Administrator receives a fee computed daily and paid monthly at an annual rate equal to 0.15% of the first $25 billion of the average daily net assets of all non-money market funds in the JPMorgan Fund Complex and 0.075% of such average daily net assets in excess of $25 billion. BISYS Fund Services, L.P. ("BISYS") serves as the Funds' sub-administrator. For its services as sub-administrator, BISYS receives a portion of the fees payable to JPMCB as Administrator. The Administrator has contractually agreed to reimburse the Funds to the extent that total operating expenses (excluding interest, taxes, extraordinary expenses and expenses related to the deferred compensation plan) exceed the percentages of their respective average daily net assets as shown in the table below (%):
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA FUND BF 0.75 1.50 1.50 n/a 0.49 0.69 0.40 BFII 0.75 1.50 n/a n/a n/a 0.60 n/a EIF n/a n/a n/a n/a 0.25 n/a n/a EMDF n/a n/a n/a n/a n/a 1.25 n/a GSIF 1.25 n/a n/a n/a 0.65 1.00 n/a STBF 0.75 n/a n/a n/a 0.30 0.60 n/a STBFII 0.75 n/a n/a 1.00 n/a 0.50 n/a SIF 1.25 1.75 1.75 1.45 n/a n/a n/a USTI 0.75 1.64 n/a n/a n/a 0.55 n/a
109 The contractual expense limitation agreements were in effect for the six months ended February 29, 2004. The expense limitation percentages in the table above are due to expire as follows:
CLASS A CLASS B CLASS C CLASS M INSTITUTIONAL SELECT ULTRA FUND BF 12/31/04 12/31/04 12/31/04 n/a 12/31/04 12/31/04 12/31/05 BFII 12/31/04 12/31/04 n/a n/a n/a 12/31/04 n/a EIF n/a n/a n/a n/a 12/31/04 n/a n/a EMDF n/a n/a n/a n/a n/a 12/31/04 n/a GSIF 12/31/04 n/a n/a n/a 12/31/04 12/31/04 n/a STBF 12/31/04 n/a n/a n/a 12/31/04 12/31/04 n/a STBFII 12/31/04 n/a n/a 12/31/04 n/a 12/31/04 n/a SIF 12/31/04 12/31/04 12/31/04 12/31/04 n/a n/a n/a USTI 12/31/04 12/31/04 n/a n/a n/a 12/31/04 n/a
The Administrator waived fees and reimbursed expenses as outlined in Note 4.F. F. WAIVERS AND REIMBURSEMENTS -- For the six months ended February 29, 2004, the Funds' vendors waived fees and the Administrator contractually reimbursed expenses for each of the Funds as follows (amounts in thousands):
CONTRACTUAL WAIVERS -------------------------------------------------------------------- INVESTMENT SHAREHOLDER CONTRACTUAL ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL REIMBURSEMENTS BF $ -- $ 553 $ 143 $ -- $ 696 $ 17 BFII -- 208 616 33 857 -- EIF 201 246 183 -- 630 -- EMDF -- 17 51 -- 68 -- GSIF 103 67 14 -- 184 8 STBF 133 513 391 -- 1,037 -- STBFII -- 293 362 34 689 -- SIF 57 17 27 -- 101 54 USTI 29 62 130 67 288 -- Total $ 523 $ 1,976 $ 1,917 $ 134 $ 4,550 $ 79
110
VOLUNTARY WAIVERS -------------------------------------------------------------------- INVESTMENT SHAREHOLDER ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL BF $ -- $ 41 $ -- $ -- $ 41 EIF -- 28 -- -- 28 STBF -- 17 -- -- 17 Total $ -- $ 86 $ -- $ -- $ 86
G. OTHER -- Certain officers of the Trust(s) are officers of J.P. Morgan Chase & Co. or of BISYS or their subsidiaries. During the period, certain Funds may have purchased securities from an underwriting syndicate in which the principal underwriter or members of the syndicate were affiliated with the Advisor. The Funds may use related party broker dealers. For the six months ended February 29, 2004, STBF incurred approximately (in thousands) $104, as brokerage commissions with brokers/dealers affiliated with JPMorgan. The SEC has granted an exemptive order permitting each fund to engage in principal transactions with J.P. Morgan Securities Inc., an affiliated broker, involving taxable money market instruments subject to certain conditions. 111 5. CLASS SPECIFIC EXPENSES The Funds' class specific expenses for the six months ended February 29, 2004 are as follows (amounts in thousands):
SHAREHOLDER SERVICING DISTRIBUTION TRANSFER AGENT BF Class A $ 3 $ 3 $ 9 Class B 3 9 9 Class C --^ 1 1 Institutional 208 -- 13 Select 341 -- 22 Ultra 109 -- 7 Total $ 664 $ 13 $ 61 BFII Class A $ 33 $ 34 $ 31 Class B 18 54 17 Select 1,222 -- 13 Total $ 1,273 $ 88 $ 61 EIF Institutional $ 183 $ -- $ 9 EMDF Select $ 71 $ -- $ 12 GSIF Class A $ 1 $ 1 $ 8 Class B** --^ --^ --^ Institutional 44 -- 8 Select 4 -- 8 Total $ 49 $ 1 $ 24 STBF Class A $ 10 $ 10 $ 8 Institutional 380 -- 15 Select 144 -- 15 Total $ 534 $ 10 $ 38 STBFII Class A $ 56 $ 56 $ 24 Class M 1,305 1,827 5 Select 551 -- 10 Total $ 1,912 $ 1,883 $ 39
112
SHAREHOLDER SERVICING DISTRIBUTION TRANSFER AGENT SIF Class A $ 3 $ 3 $ 5 Class B 11 32 16 Class C 5 15 7 Class M 11 19 5 Total $ 30 $ 69 $ 33 USTI Class A $ 66 $ 66 $ 52 Class B 23 68 18 Select 90 -- 8 Total $ 179 $ 134 $ 78
^ Amount rounds to less than one thousand. ** Class ceased operations as of September 12, 2003. 6. CLASS SPECIFIC DISTRIBUTIONS The Funds' class specific distributions from net investment income and realized gain on investment transactions for the six months ended February 29, 2004 and the year ended August 31, 2003 are as follows (amounts in thousands):
SIX MONTHS ENDED 2/29/04 YEAR ENDED 8/31/03 --------------------------------- --------------------------------- NET NET INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN BF Class A $ 37 $ 71 $ 62 $ 8 Class B 32 76 70 13 Class C 3 9 1 -- Institutional 7,395 11,950 26,560 5,442 Select 4,607 8,959 13,353 2,562 Ultra 7,920 13,144 22,494 4,216 - --------------------------------------------------------------------------------------------------------------------- Total $ 19,994 $ 34,209 $ 62,540 $ 12,241 BFII Class A $ 442 $ 142 $ 1,413 $ 389 Class B 183 83 492 170 Select 16,729 5,568 36,689 7,587 - --------------------------------------------------------------------------------------------------------------------- Total $ 17,354 $ 5,793 $ 38,594 $ 8,146 EIF Institutional $ 2,675 $ -- $ 8,519 $ -- EMDF Select $ 2,175 $ -- $ 4,996 $ --
113
SIX MONTHS ENDED 2/29/04 YEAR ENDED 8/31/03 --------------------------------- --------------------------------- NET NET INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN GSIF Class A $ 10 $ -- $ 9 $ -- Class B** 1 -- 12 -- Institutional 2,403 -- 6,870 -- Select 78 -- 186 -- - --------------------------------------------------------------------------------------------------------------------- Total $ 2,492 $ -- $ 7,077 $ -- STBF Class A $ 77 $ -- $ 255 $ 155 Institutional 9,000 -- 21,501 9,747 Select 1,204 -- 3,658 1,911 - --------------------------------------------------------------------------------------------------------------------- Total $ 10,281 $ -- $ 25,414 $ 11,813 STBFII Class A $ 439 $ -- $ 1,997* $ 510 Class M 8,793 -- 26,550* 5,842 Select 4,975 -- 5,356* 688 - --------------------------------------------------------------------------------------------------------------------- Total $ 14,207 $ -- $ 33,903 $ 7,040 SIF Class A $ 65 $ -- $ 158 $ -- Class B 187 -- 384 -- Class C 87 -- 140 -- Class M 176 -- 421 -- - --------------------------------------------------------------------------------------------------------------------- Total $ 515 $ -- $ 1,103 $ -- USTI Class A $ 853 $ -- $ 1,913 $ -- Class B 210 -- 670 -- Select 1,216 -- 3,136 -- - --------------------------------------------------------------------------------------------------------------------- Total $ 2,279 $ -- $ 5,719 $ -- - ---------------------------------------------------------------------------------------------------------------------
* Includes return of capital $33, $478 and $76 for Class A, M and Select, respectively (amounts in thousands). ** Class ceased operations as of September 12, 2003. 114 7. INVESTMENT TRANSACTIONS For the six months ended February 29, 2004, purchases and sales of investments (excluding short-term investments) were as follows (amounts in thousands):
PURCHASES SALES PURCHASES SALES (EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S. GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT BF $ 571,583 $ 388,579 $ 2,600,532 $ 2,937,945 BFII 445,291 321,292 2,473,955 2,588,509 EIF 253,633 232,093 50,290 49,265 EMDF 1,685 2,324 39,064 60,124 GSIF 4,325 29,895 85,415 114,322 STBF 441,458 390,786 711,488 753,436 STBFII 968,667 742,303 1,296,901 1,534,499 SIF 4,138 3,874 5,856 6,519 USTI -- 1,886 105,968 90,479
8. FEDERAL INCOME TAX MATTERS For Federal income tax purposes, the cost and unrealized appreciation (depreciation) in value of the investment securities at February 29, 2004 are as follows (amounts in thousands):
GROSS GROSS NET UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) BF $ 1,146,146 $ 28,332 $ (5,158) $ 23,174 BFII 1,136,069 30,748 (2,581) 28,167 EIF 346,418 642 (151) 491 EMDF 32,557 6,845 (247) 6,598 GSIF 53,298 5,050 (1,339) 3,711 STBF 902,313 6,928 (1,184) 5,744 STBFII 1,494,938 11,537 (1,822) 9,715 SIF 23,148 1,680 (262) 1,418 USTI 154,652 3,092 (48) 3,044
9. BANK BORROWINGS Pursuant to a Line of Credit Agreement, dated April 17, 2003, the Funds may borrow money for temporary or emergency purposes. The Funds have entered into the agreement, enabling them to participate with other JPMorgan Funds in a line of credit with JPMCB, as administrative agent, and with a syndicate of banks, which permits borrowings up to $250 million, collectively. Interest is charged to each Fund based on its borrowings at an annual rate equal to the sum of the Federal Funds Rate plus 0.50%. The Funds also pay a commitment fee of 0.09% per annum on the average daily amount of the available commitment, which is allocated on a pro-rata basis to the Funds. The commitment fee is included in 115 Other expenses on the Statement of Operations. This agreement will expire on April 15, 2004. Prior to April 17, 2003, the Funds could borrow money for temporary or emergency purposes. The Funds had entered into an agreement, enabling them to participate with other JPMorgan Funds in an unsecured line of credit with a syndicate of banks, which permitted borrowings up to $400 million, collectively. Interest was charged to the Fund based on its borrowings at an annual rate equal to the sum of the Federal Funds Rate plus 0.50%. The Funds also paid a commitment fee of 0.09% per annum on the average daily amount of the available commitment, which was allocated on a pro-rata basis to the Fund. This agreement expired on April 16, 2003. The commitment fee is included in Other expenses on the Statement of Operations. During the six months ended February 29, 2004, EMDF and GSI had borrowed against the Line of Credit Agreement. The details of the borrowing were as follows (amounts in thousands):
AVERAGE AVERAGE AMOUNT OUTSTANDING* INTEREST RATE FUND EMDF $ 40 1.63% GSI 301 1.61%
* The average amount outstanding was calculated based on the daily balances during the period from September 1, 2003, through February 29, 2004. Effective April 15, 2004, the Line of Credit Agreement has been extended to April 14, 2005. 10. CONCENTRATIONS AND INDEMNIFICATIONS The Funds may have elements of risk not typically associated with investments in the United States of America due to concentrated investments in a limited number of countries or regions, which may vary throughout the year. Such concentrations may subject the Funds to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices more volatile than those of comparable U.S. securities. The ability of the issuers of debt, asset-backed and mortgage-backed securities, along with counterparties to swap and option agreements, to meet their obligations may be affected by the economic and political developments in a specific industry or region. The value of asset-backed and mortgage-backed securities can be significantly affected by changes in interest rates or rapid principal payments including prepayments. As to illiquid investments, a Fund is subject to the risk that should the Fund decide to sell them when a ready buyer is not available at a price the Fund deems representative of their value, the value of the Fund's net assets could be adversely affected. From time to time, the Funds may have a concentration of several shareholders which may be a related party, holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Funds. As of February 29, 2004 there was one shareholder who owned 18.3% of EIF. In the normal course of business the Funds enter into contracts that contain a variety of representations which provide general indemnifications. Each Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 11. CORPORATE EVENT On January 14, 2004, J.P. Morgan Chase & Co. and Bank One Corp. announced they have entered into an agreement and plan of merger. The merger is subject to the approval of the shareholders of both institutions as well as U.S. federal and state and foreign regulatory authorities. Completion of the transaction is expected to occur in mid-2004. 116 12. CAPITAL SHARE TRANSACTIONS Capital share transactions were as follows for the periods presented (amounts in thousands):
BOND FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 1,016 $ 5,626 Shares issued in reinvestment of distributions 104 59 Shares redeemed (576) (4,362) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 544 $ 1,323 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 100 550 Shares issued in reinvestment of distributions 10 6 Shares redeemed (57) (430) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 53 126 - --------------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 68 $ 1,762 Shares issued in reinvestment of distributions 55 50 Shares redeemed (189) (623) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (66) $ 1,189 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 6 172 Shares issued in reinvestment of distributions 6 5 Shares redeemed (19) (61) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (7) 116 - ---------------------------------------------------------------------------------------------------
117
BOND FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS C SHARES** AMOUNT Shares sold $ 100 $ 277 Shares issued in reinvestment of distributions 11 1 Shares redeemed (51) -- - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 60 $ 278 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 10 27 Shares issued in reinvestment of distributions 1 --^ Shares redeemed (5) -- - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 6 27 - --------------------------------------------------------------------------------------------------- INSTITUTIONAL SHARES AMOUNT Shares sold $ 52,099 $ 100,824 Shares issued in reinvestment of distributions 12,188 18,575 Shares redeemed (184,377) (387,582) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (120,090) $ (268,183) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 5,199 9,955 Shares issued in reinvestment of distributions 1,230 1,827 Shares redeemed (18,376) (38,087) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (11,947) (26,305) - ---------------------------------------------------------------------------------------------------
** From commencement of offering class shares on March 31, 2003. ^ Amount rounds to less than one thousand. 118
BOND FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 SELECT SHARES AMOUNT Shares sold $ 29,405 $ 164,875 Shares issued in reinvestment of distributions 12,697 14,339 Shares redeemed (146,119) (179,758) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (104,017) $ (544) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 2,931 16,205 Shares issued in reinvestment of distributions 1,281 1,410 Shares redeemed (14,731) (17,684) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (10,519) (69) - --------------------------------------------------------------------------------------------------- ULTRA SHARES AMOUNT Shares sold $ 34,582 $ 83,572 Shares issued in reinvestment of distributions 18,681 21,583 Shares redeemed (74,938) (268,399) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (21,675) $ (163,244) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 3,455 8,169 Shares issued in reinvestment of distributions 1,883 2,122 Shares redeemed (7,495) (26,279) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,157) (15,988) - ---------------------------------------------------------------------------------------------------
119
BOND FUND II ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 2,203 $ 19,019 Shares issued in connection with Fund Reorganization (Note 2) -- 4,321 Shares issued in reinvestment of distributions 438 1,250 Shares redeemed (11,381) (21,390) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (8,740) $ 3,200 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 53 456 Shares issued in connection with Fund Reorganization (Note 2) -- 104 Shares issued in reinvestment of distributions 11 30 Shares redeemed (278) (514) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (214) 76 - --------------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 578 $ 5,212 Shares issued in reinvestment of distributions 213 535 Shares redeemed (2,293) (3,864) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (1,502) $ 1,883 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 14 125 Shares issued in reinvestment of distributions 5 13 Shares redeemed (56) (93) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (37) 45 - ---------------------------------------------------------------------------------------------------
120
BOND FUND II ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 SELECT SHARES AMOUNT Shares sold $ 31,519 $ 101,070 Shares issued in connection with Fund Reorganization (Note 2) -- 530,889 Shares issued in reinvestment of distributions 5,695 9,918 Shares redeemed (145,027) (260,826) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (107,813) $ 381,051 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 765 2,423 Shares issued in connection with Fund Reorganization (Note 2) -- 12,846 Shares issued in reinvestment of distributions 138 239 Shares redeemed (3,524) (6,274) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,621) 9,234 - --------------------------------------------------------------------------------------------------- ENHANCED INCOME FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 INSTITUTIONAL SHARES AMOUNT Shares sold $ 167,069 $ 447,159 Shares issued in reinvestment of distributions 1,974 6,334 Shares redeemed (113,270) (394,644) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 55,773 $ 58,849 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 16,958 44,983 Shares issued in reinvestment of distributions 200 638 Shares redeemed (11,506) (39,744) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 5,652 5,877 - ---------------------------------------------------------------------------------------------------
121
FLEMING EMERGING MARKETS DEBT FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 SELECT SHARES AMOUNT Shares sold $ 5,436 $ 48,541 Shares issued in reinvestment of distributions 1,854 4,368 Shares redeemed (31,776) (44,406) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (24,486) $ 8,503 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 575 5,767 Shares issued in reinvestment of distributions 197 517 Shares redeemed (3,309) (5,103) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,537) 1,181 - ---------------------------------------------------------------------------------------------------
122
GLOBAL STRATEGIC INCOME FUND ------------------------------------- SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004* AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 422 $ 563 Shares issued in reinvestment of distributions 8 2 Shares redeemed (409) (233) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 21 $ 332 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 47 62 Shares issued in reinvestment of distributions 1 --^ Shares redeemed (45) (26) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 3 36 - --------------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ -- $ 103 Shares issued in reinvestment of distributions -- 11 Shares redeemed (317) (29) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (317) $ 85 - --------------------------------------------------------------------------------------------------- SHARES Shares sold -- 12 Shares issued in reinvestment of distributions -- 1 Shares redeemed (36) (3) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (36) 10 - ---------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. * For Class B Shares, activity through September 12, 2003 123
GLOBAL STRATEGIC INCOME FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 INSTITUTIONAL SHARES AMOUNT Shares sold $ 506 $ 19,855 Shares issued in reinvestment of distributions 175 1,670 Shares redeemed (57,409) (53,142) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (56,728) $ (31,617) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 56 2,212 Shares issued in reinvestment of distributions 19 189 Shares redeemed (6,297) (5,948) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (6,222) (3,547) - --------------------------------------------------------------------------------------------------- SELECT SHARES AMOUNT Shares sold $ 244 $ 813 Shares issued in reinvestment of distributions 74 173 Shares redeemed (287) (3,325) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 31 $ (2,339) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 27 90 Shares issued in reinvestment of distributions 8 19 Shares redeemed (31) (377) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 4 (268) - ---------------------------------------------------------------------------------------------------
124
SHORT TERM BOND FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 1,233 $ 10,476 Shares issued in reinvestment of distributions 34 234 Shares redeemed (2,431) (11,597) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (1,164) $ (887) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 125 1,047 Shares issued in reinvestment of distributions 3 23 Shares redeemed (246) (1,161) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (118) (91) - --------------------------------------------------------------------------------------------------- INSTITUTIONAL SHARES AMOUNT Shares sold $ 166,155 $ 577,952 Shares issued in reinvestment of distributions 6,435 22,428 Shares redeemed (223,295) (397,855) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (50,705) $ 202,525 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 16,811 57,811 Shares issued in reinvestment of distributions 651 2,246 Shares redeemed (22,601) (39,844) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (5,139) 20,213 - --------------------------------------------------------------------------------------------------- SELECT SHARES AMOUNT Shares sold $ 28,480 $ 114,380 Shares issued in reinvestment of distributions 798 4,787 Shares redeemed (49,022) (116,165) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (19,744) $ 3,002 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 2,882 11,457 Shares issued in reinvestment of distributions 80 479 Shares redeemed (4,967) (11,649) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,005) 287 - ---------------------------------------------------------------------------------------------------
125
SHORT TERM BOND FUND II ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 15,111 $ 113,310 Shares issued in reinvestment of distributions 359 2,068 Shares redeemed (17,002) (141,585) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (1,532) $ (26,207) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 1,473 10,975 Shares issued in reinvestment of distributions 35 200 Shares redeemed (1,659) (13,686) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (151) (2,511) - --------------------------------------------------------------------------------------------------- CLASS M SHARES AMOUNT Shares sold $ 48,675 $ 396,087 Shares issued in reinvestment of distributions 15 166 Shares redeemed (286,676) (344,293) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (237,986) $ 51,960 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 4,749 38,320 Shares issued in reinvestment of distributions 2 16 Shares redeemed (27,966) (33,291) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (23,215) 5,045 - --------------------------------------------------------------------------------------------------- SELECT SHARES AMOUNT Shares sold $ 240,468 $ 265,146 Shares issued in reinvestment of distributions 545 1,917 Shares redeemed (71,918) (65,640) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 169,095 $ 201,423 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 23,422 25,618 Shares issued in reinvestment of distributions 53 185 Shares redeemed (7,003) (6,337) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 16,472 19,466 - ---------------------------------------------------------------------------------------------------
126
STRATEGIC INCOME FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 772 $ 1,934 Shares issued in reinvestment of distributions 38 99 Shares redeemed (1,168) (1,596) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (358) $ 437 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 86 219 Shares issued in reinvestment of distributions 4 11 Shares redeemed (130) (183) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (40) 47 - --------------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 711 $ 2,084 Shares issued in reinvestment of distributions 89 159 Shares redeemed (751) (1,486) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 49 $ 757 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 78 236 Shares issued in reinvestment of distributions 9 18 Shares redeemed (82) (170) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 5 84 - ---------------------------------------------------------------------------------------------------
127
STRATEGIC INCOME FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS C SHARES AMOUNT Shares sold $ 735 $ 2,257 Shares issued in reinvestment of distributions 58 75 Shares redeemed (688) (1,271) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 105 $ 1,061 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 81 254 Shares issued in reinvestment of distributions 6 8 Shares redeemed (75) (147) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 12 115 - --------------------------------------------------------------------------------------------------- CLASS M SHARES AMOUNT Shares sold $ 404 $ 499 Shares issued in reinvestment of distributions -- --^ Shares redeemed (236) (1,960) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 168 $ (1,461) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 44 57 Shares issued in reinvestment of distributions -- --^ Shares redeemed (26) (221) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 18 (164) - ---------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. 128
U.S. TREASURY INCOME FUND ------------------------------------ SIX MONTHS ENDED YEAR ENDED FEBRUARY 29, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 15,079 $ 20,583 Shares issued in reinvestment of distributions 654 1,450 Shares redeemed (15,427) (19,203) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 306 $ 2,830 - --------------------------------------------------------------------------------------------------- SHARES Shares sold 1,301 1,726 Shares issued in reinvestment of distributions 55 121 Shares redeemed (1,311) (1,611) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 45 236 - --------------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 704 $ 6,965 Shares issued in reinvestment of distributions 156 488 Shares redeemed (3,768) (8,907) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (2,908) $ (1,454) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 60 581 Shares issued in reinvestment of distributions 13 41 Shares redeemed (321) (747) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (248) (125) - --------------------------------------------------------------------------------------------------- SELECT SHARES AMOUNT Shares sold $ 34,386 $ 47,402 Shares issued in reinvestment of distributions 640 1,857 Shares redeemed (13,803) (56,156) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 21,223 $ (6,897) - --------------------------------------------------------------------------------------------------- SHARES Shares sold 2,894 3,957 Shares issued in reinvestment of distributions 54 155 Shares redeemed (1,169) (4,685) - --------------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 1,779 (573) - ---------------------------------------------------------------------------------------------------
129 FINANCIAL HIGHLIGHTS CLASS A SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.03 0.17 0.35 0.52 Year Ended 8/31/03 $ 10.07 0.40 0.04 0.44 11/1/01 Through 8/31/02 $ 10.08 0.31 0.05 0.36 9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.20 0.26 BOND FUND II^^ 9/1/03 Through 2/29/04 $ 40.59 0.68^ 1.53 2.21 Year Ended 8/31/03 $ 41.39 1.66^ (0.31) 1.35 11/1/01 Through 8/31/02 $ 41.01 1.35^ 0.34 1.69 3/2/01** Through 10/31/01 $ 39.55 1.32 1.46 2.78 GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.92 0.22^ 0.23 0.45 Year Ended 8/31/03 $ 8.64 0.40^ 0.31 0.71 11/1/01 Through 8/31/02 $ 8.91 0.55 (0.33) 0.22 9/10/01** Through 10/31/01 $ 9.13 0.09^ (0.22) (0.13) SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 $ 9.85 0.09 0.06 0.15 Year ended 8/31/03 $ 10.03 0.24 (0.03) 0.21 11/1/01 Through 8/31/02 $ 10.01 0.27 0.05 0.32 9/10/01** Through 10/31/01 $ 9.87 0.05^ 0.15 0.20 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS BOND FUND^^ 9/1/03 Through 2/29/04 0.16 0.30 -- 0.46 Year Ended 8/31/03 0.40 0.08 -- 0.48 11/1/01 Through 8/31/02 0.31 0.06 -- 0.37 9/10/01** Through 10/31/01 0.07 -- -- 0.07 BOND FUND II^^ 9/1/03 Through 2/29/04 0.67 0.24 -- 0.91 Year Ended 8/31/03 1.66 0.49 -- 2.15 11/1/01 Through 8/31/02 1.31 -- -- 1.31 3/2/01** Through 10/31/01 1.32 -- -- 1.32 GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.22 -- -- 0.22 Year Ended 8/31/03 0.43 -- -- 0.43 11/1/01 Through 8/31/02 0.47 -- 0.02 0.49 9/10/01** Through 10/31/01 0.09 -- -- 0.09 SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 0.09 -- -- 0.09 Year ended 8/31/03 0.25 0.14 -- 0.39 11/1/01 Through 8/31/02 0.26 0.04 -- 0.30 9/10/01** Through 10/31/01 0.06 -- -- 0.06
** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. ^^ The fund changed its fiscal year end from October 31 to August 31. (1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 130
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS) BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.09 5.36% $ 3 0.75% 3.26% Year Ended 8/31/03 $ 10.03 4.32% $ 2 0.75% 3.86% 11/1/01 Through 8/31/02 $ 10.07 3.72% $ 1 0.75% 3.59% 9/10/01** Through 10/31/01 $ 10.08 2.63% $ --+ 0.75% 3.93% BOND FUND II^^ 9/1/03 Through 2/29/04 $ 41.89 5.48% $ 24 0.75% 3.29% Year Ended 8/31/03 $ 40.59 3.26% $ 32 0.75% 3.96% 11/1/01 Through 8/31/02 $ 41.39 4.26% $ 29 0.75% 4.02% 3/2/01** Through 10/31/01 $ 41.01 7.23% $ 63 0.75% 4.90% GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.15 5.06% $ --+ 1.25% 4.93% Year Ended 8/31/03 $ 8.92 8.33% $ --+ 1.25% 4.45% 11/1/01 Through 8/31/02 $ 8.64 2.54% $ --+ 1.25% 6.20% 9/10/01** Through 10/31/01 $ 8.91 (2.30%) $ --+ 1.25% 6.99% SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 $ 9.91 1.57% $ 8 0.75% 1.94% Year ended 8/31/03 $ 9.85 2.08% $ 9 0.75% 2.39% 11/1/01 Through 8/31/02 $ 10.03 3.18% $ 10 0.75% 3.01% 9/10/01** Through 10/31/01 $ 10.01 2.01% $ 2 0.75% 3.62% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND^^ 9/1/03 Through 2/29/04 1.77% 2.24% 285% Year Ended 8/31/03 1.59% 3.02% 679% 11/1/01 Through 8/31/02 5.64% (1.30%) 572% 9/10/01** Through 10/31/01 10.75% (6.07%) 423% BOND FUND II^^ 9/1/03 Through 2/29/04 1.24% 2.80% 286% Year Ended 8/31/03 1.16% 3.55% 806% 11/1/01 Through 8/31/02 1.10% 3.67% 496% 3/2/01** Through 10/31/01 1.25% 4.40% 319% GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 5.00% 1.18% 101% Year Ended 8/31/03 7.26% (1.56%) 248% 11/1/01 Through 8/31/02 35.90%!! (28.45%)!! 178% 9/10/01** Through 10/31/01 11.01% (2.77%) 107% SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 1.15% 1.54% 145% Year ended 8/31/03 1.10% 2.04% 386% 11/1/01 Through 8/31/02 1.00% 2.76% 215% 9/10/01** Through 10/31/01 10.76% (6.39%) 160%
# Short periods have been annualized. + Amount rounds to less than one million. !! Due to the size of net assets and fixed expenses, ratios may appear disproportionate. SEE NOTES TO FINANCIAL STATEMENTS. 131
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 $ 10.23 0.10^ 0.06 0.16 Year ended 8/31/03 $ 10.33 0.23^ (0.04) 0.19 11/1/01 Through 8/31/02 $ 10.38 0.25 0.06 0.31 Year Ended 10/31/01 $ 9.89 0.43^ 0.53 0.96 Year Ended 10/31/00 $ 9.94 0.56 (0.05) 0.51 Year Ended 10/31/99 $ 10.14 0.46 (0.20) 0.26 Year Ended 10/31/98 $ 10.10 0.53 0.02 0.55 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.89 0.22^ 0.32 0.54 Year Ended 8/31/03 $ 8.55 0.48^ 0.34 0.82 11/1/01 Through 8/31/02 $ 8.85 0.41 (0.31) 0.10 Year Ended 10/31/01 $ 9.05 0.62 (0.20) 0.42 Year Ended 10/31/00 $ 9.59 0.78 (0.53) 0.25 11/30/98* Through 10/31/99 $ 10.00 0.72 (0.41) 0.31 U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 $ 11.61 0.19^ 0.35 0.54 Year Ended 8/31/03 $ 11.83 0.45 (0.21) 0.24 11/1/01 Through 8/31/02 $ 11.77 0.38 0.05 0.43 Year Ended 10/31/01 $ 10.77 0.53 1.01 1.54 Year Ended 10/31/00 $ 10.67 0.68 0.10 0.78 Year Ended 10/31/99 $ 11.66 0.71 (0.99) (0.28) Year Ended 10/31/98 $ 11.26 0.75 0.40 1.15 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 0.10 -- -- 0.10 Year ended 8/31/03 0.24 0.05 --+ 0.29 11/1/01 Through 8/31/02 0.25 0.11 -- 0.36 Year Ended 10/31/01 0.47 -- -- 0.47 Year Ended 10/31/00 0.56 -- -- 0.56 Year Ended 10/31/99 0.46 -- -- 0.46 Year Ended 10/31/98 0.51 -- -- 0.51 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.22 -- -- 0.22 Year Ended 8/31/03 0.48 -- -- 0.48 11/1/01 Through 8/31/02 0.38 -- 0.02 0.40 Year Ended 10/31/01 0.60 -- 0.02 0.62 Year Ended 10/31/00 0.78 -- 0.01 0.79 11/30/98* Through 10/31/99 0.72 -- -- 0.72 U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 0.19 -- -- 0.19 Year Ended 8/31/03 0.46 -- -- 0.46 11/1/01 Through 8/31/02 0.37 -- -- 0.37 Year Ended 10/31/01 0.54 -- -- 0.54 Year Ended 10/31/00 0.68 -- -- 0.68 Year Ended 10/31/99 0.71 -- -- 0.71 Year Ended 10/31/98 0.75 -- -- 0.75
* Commencement of operations. ^ Calculated based upon average shares outstanding. ^^ The fund changed its fiscal year end from October 31 to August 31. (1) Total return figures do not include the effect of any front-end or deferred sales load. SEE NOTES TO FINANCIAL STATEMENTS. 132
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS) SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 $ 10.29 1.57% $ 43 0.75% 1.96% Year ended 8/31/03 $ 10.23 1.88% $ 44 0.75% 2.31% 11/1/01 Through 8/31/02 $ 10.33 3.06% $ 70 0.75% 2.66% Year Ended 10/31/01 $ 10.38 9.95% $ 52 0.75% 4.25% Year Ended 10/31/00 $ 9.89 5.27% $ 19 0.75% 5.68% Year Ended 10/31/99 $ 9.94 2.64% $ 22 0.75% 4.58% Year Ended 10/31/98 $ 10.14 5.58% $ 19 0.76% 5.28% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.21 6.13% $ 3 1.25% 4.85% Year Ended 8/31/03 $ 8.89 9.77% $ 3 1.25% 5.44% 11/1/01 Through 8/31/02 $ 8.55 1.10% $ 3 1.25% 5.74% Year Ended 10/31/01 $ 8.85 4.73% $ 2 1.25% 6.81% Year Ended 10/31/00 $ 9.05 2.59% $ 2 1.11% 7.84% 11/30/98* Through 10/31/99 $ 9.59 3.23% $ 3 0.15% 8.38% U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 $ 11.96 4.66% $ 48 0.75% 3.21% Year Ended 8/31/03 $ 11.61 2.00% $ 46 0.75% 3.85% 11/1/01 Through 8/31/02 $ 11.83 3.80% $ 44 0.75% 3.87% Year Ended 10/31/01 $ 11.77 14.72% $ 46 0.75% 4.74%+ Year Ended 10/31/00 $ 10.77 7.63% $ 41 0.75% 6.45% Year Ended 10/31/99 $ 10.67 (2.41%) $ 69 0.75% 6.40% Year Ended 10/31/98 $ 11.66 10.59% $ 63 0.79% 6.53% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 1.05% 1.66% 153% Year ended 8/31/03 0.96% 2.10% 319% 11/1/01 Through 8/31/02 1.00% 2.41% 192% Year Ended 10/31/01 1.15% 3.85% 315% Year Ended 10/31/00 1.37% 5.06% 139% Year Ended 10/31/99 1.37% 3.96% 302% Year Ended 10/31/98 1.44% 4.60% 439% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 2.65% 3.45% 47% Year Ended 8/31/03 2.69% 4.00% 116% 11/1/01 Through 8/31/02 3.13% 3.86% 176% Year Ended 10/31/01 2.75% 5.31% 174% Year Ended 10/31/00 2.43% 6.52% 113% 11/30/98* Through 10/31/99 3.59% 4.94% 136% U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 1.31% 2.65% 69% Year Ended 8/31/03 1.31% 3.29% 106% 11/1/01 Through 8/31/02 1.32% 3.30% 228% Year Ended 10/31/01 1.35% 4.14%+ 134% Year Ended 10/31/00 1.30% 5.90% 29% Year Ended 10/31/99 1.32% 5.83% 59% Year Ended 10/31/98 1.30% 6.02% 75%
(b) Not annualized for periods less than one year. # Short periods have been annualized. ## Amount rounds to less than .005 per share amount. + Restated. SEE NOTES TO FINANCIAL STATEMENTS. 133 CLASS B SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND^^ 9/1/03 Through 2/29/04 $ 9.95 0.13 0.35 0.48 Year Ended 8/31/03 $ 10.05 0.33 (0.03) 0.30 11/1/01 Through 8/31/02 $ 10.08 0.24 0.03 0.27 9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.19 0.25 BOND FUND II^^ 9/1/03 Through 2/29/04 $ 40.49 0.51^ 1.45 1.96 Year Ended 8/31/03 $ 41.30 1.35^ (0.32) 1.03 11/1/01 Through 8/31/02 $ 40.96 1.04^ 0.36 1.40 3/2/01** Through 10/31/01 $ 39.55 1.12 1.41 2.53 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.89 0.20^ 0.33 0.53 Year Ended 8/31/03 $ 8.56 0.44^ 0.33 0.77 11/1/01 Through 8/31/02 $ 8.85 0.38 (0.31) 0.07 Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37 Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21 11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30 U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 $ 11.60 0.14^ 0.36 0.50 Year Ended 8/31/03 $ 11.81 0.37 (0.22) 0.15 11/1/01 Through 8/31/02 $ 11.75 0.28 0.06 0.34 Year Ended 10/31/01 $ 10.75 0.43+ 1.01+ 1.44 Year Ended 10/31/00 $ 10.67 0.59 0.08 0.67 Year Ended 10/31/99 $ 11.66 0.61 (0.99) (0.38) Year Ended 10/31/98 $ 11.25 0.65 0.41 1.06 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS BOND FUND^^ 9/1/03 Through 2/29/04 0.13 0.30 -- 0.43 Year Ended 8/31/03 0.32 0.08 -- 0.40 11/1/01 Through 8/31/02 0.24 0.06 -- 0.30 9/10/01** Through 10/31/01 0.06 -- -- 0.06 BOND FUND II^^ 9/1/03 Through 2/29/04 0.52 0.24 -- 0.76 Year Ended 8/31/03 1.35 0.49 -- 1.84 11/1/01 Through 8/31/02 1.06 -- -- 1.06 3/2/01** Through 10/31/01 1.12 -- -- 1.12 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.20 -- -- 0.20 Year Ended 8/31/03 0.44 -- -- 0.44 11/1/01 Through 8/31/02 0.34 -- 0.02 0.36 Year Ended 10/31/01 0.55 -- 0.02 0.57 Year Ended 10/31/00 0.74 -- 0.01 0.75 11/30/98* Through 10/31/99 0.71 -- -- 0.71 U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 0.14 -- -- 0.14 Year Ended 8/31/03 0.36 -- -- 0.36 11/1/01 Through 8/31/02 0.28 -- -- 0.28 Year Ended 10/31/01 0.44 -- -- 0.44 Year Ended 10/31/00 0.59 -- -- 0.59 Year Ended 10/31/99 0.61 -- -- 0.61 Year Ended 10/31/98 0.65 -- -- 0.65
^ Calculated based upon average shares outstanding. ^^ The fund changed its fiscal year end from October 31 to August 31. ** Commencement of offering of class of shares. (1) Total return figures do not include the effect of any front-end or deferred sales load. * Commencement of operations. SEE NOTES TO FINANCIAL STATEMENTS. 134
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS) BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.00 4.91% $ 2 1.50% 2.54% Year Ended 8/31/03 $ 9.95 2.94% $ 2 1.50% 3.19% 11/1/01 Through 8/31/02 $ 10.05 2.83% $ 1 1.50% 2.80% 9/10/01** Through 10/31/01 $ 10.08 2.53% $ --+ 1.48% 4.07% BOND FUND II^^ 9/1/03 Through 2/29/04 $ 41.69 4.85% $ 14 1.50% 2.50% Year Ended 8/31/03 $ 40.49 2.47% $ 15 1.50% 3.24% 11/1/01 Through 8/31/02 $ 41.30 3.52% $ 14 1.50% 3.09% 3/2/01** Through 10/31/01 $ 40.96 6.58% $ 8 1.50% 4.22% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.22 5.98% $ 8 1.75% 4.35% Year Ended 8/31/03 $ 8.89 9.11% $ 8 1.75% 4.98% 11/1/01 Through 8/31/02 $ 8.56 0.76% $ 7 1.75% 5.28% Year Ended 10/31/01 $ 8.85 4.20% $ 8 1.75% 6.35% Year Ended 10/31/00 $ 9.05 2.17% $ 8 1.53% 7.42% 11/30/98* Through 10/31/99 $ 9.59 3.13% $ 5 0.17% 8.40% U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 $ 11.96 4.29% $ 18 1.64% 2.33% Year Ended 8/31/03 $ 11.60 1.19% $ 20 1.64% 2.96% 11/1/01 Through 8/31/02 $ 11.81 3.04% $ 21 1.64% 2.99% Year Ended 10/31/01 $ 11.75 13.74% $ 20 1.64% 3.84%+ Year Ended 10/31/00 $ 10.75 6.49% $ 16 1.64% 5.56% Year Ended 10/31/99 $ 10.67 (3.27%) $ 16 1.64% 5.51% Year Ended 10/31/98 $ 11.66 9.68% $ 14 1.64% 5.69% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND^^ 9/1/03 Through 2/29/04 2.26% 1.78% 285% Year Ended 8/31/03 2.14% 2.55% 679% 11/1/01 Through 8/31/02 6.02% (1.72%) 572% 9/10/01** Through 10/31/01 11.25% (5.70%) 423% BOND FUND II^^ 9/1/03 Through 2/29/04 1.74% 2.26% 286% Year Ended 8/31/03 1.67% 3.07% 806% 11/1/01 Through 8/31/02 1.56% 3.03% 496% 3/2/01** Through 10/31/01 1.75% 3.97% 319% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 3.16% 2.94% 47% Year Ended 8/31/03 3.21% 3.52% 116% 11/1/01 Through 8/31/02 3.63% 3.40% 176% Year Ended 10/31/01 3.25% 4.85% 174% Year Ended 10/31/00 3.06% 5.89% 113% 11/30/98* Through 10/31/99 3.98% 4.59% 136% U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 1.82% 2.15% 69% Year Ended 8/31/03 1.80% 2.80% 106% 11/1/01 Through 8/31/02 1.82% 2.81% 228% Year Ended 10/31/01 1.85% 3.63%## 134% Year Ended 10/31/00 1.80% 5.40% 29% Year Ended 10/31/99 1.82% 5.33% 59% Year Ended 10/31/98 1.79% 5.54% 75%
(b) Not annualized for periods less than one year. # Short periods have been annualized. + Amount rounds to less than one million. ## Restated. SEE NOTES TO FINANCIAL STATEMENTS. 135 CLASS C SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.01 0.13 0.36 0.49 3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07) STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.89 0.20^ 0.33 0.53 Year ended 8/31/03 $ 8.56 0.44^ 0.33 0.77 11/1/01 Through 8/31/02 $ 8.85 0.38 (0.31) 0.07 Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37 Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21 11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS BOND FUND^^ 9/1/03 Through 2/29/04 0.13 0.30 -- 0.43 3/31/03** Through 8/31/03 0.14 -- -- 0.14 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.20 -- -- 0.20 Year ended 8/31/03 0.44 -- -- 0.44 11/1/01 Through 8/31/02 0.34 -- 0.02 0.36 Year Ended 10/31/01 0.55 -- 0.02 0.57 Year Ended 10/31/00 0.74 -- 0.01 0.75 11/30/98* Through 10/31/99 0.71 -- -- 0.71
* Commencement of operations. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. ^^ The fund changed its fiscal year end from October 31 to August 31. (1) Total return figures do not include the effect of any front-end or deferred sales load. SEE NOTES TO FINANCIAL STATEMENTS. 136
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS) BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.07 4.98% $ --+ 1.50% 2.50% 3/31/03** Through 8/31/03 $ 10.01 (0.69%) $ --+ 1.50% 3.02% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.22 5.99% $ 4 1.75% 4.34% Year ended 8/31/03 $ 8.89 9.10% $ 4 1.75% 4.93% 11/1/01 Through 8/31/02 $ 8.56 0.78% $ 3 1.75% 5.24% Year Ended 10/31/01 $ 8.85 4.21% $ 3 1.75% 6.33% Year Ended 10/31/00 $ 9.05 2.15% $ 2 1.49% 7.46% 11/30/98* Through 10/31/99 $ 9.59 3.12% $ 4 0.17% 8.40% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND^^ 9/1/03 Through 2/29/04 2.26% 1.74% 285% 3/31/03** Through 8/31/03 1.78% 2.74% 679% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 3.15% 2.94% 47% Year ended 8/31/03 3.20% 3.48% 116% 11/1/01 Through 8/31/02 3.63% 3.36% 176% Year Ended 10/31/01 3.25% 4.83% 174% Year Ended 10/31/00 2.89% 6.06% 113% 11/30/98* Through 10/31/99 3.98% 4.59% 136%
(b) Not annualized for periods less than one year. # Short periods have been annualized. + Amount rounds to less than one million. SEE NOTES TO FINANCIAL STATEMENTS. 137 CLASS M SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 $ 10.23 0.09^ 0.05 0.14 Year ended 8/31/03 $ 10.33 0.21^ (0.04) 0.17 11/1/01 Through 8/31/02 $ 10.37 0.23 0.06 0.29 Year Ended 10/31/01 $ 9.89 0.35^ 0.58 0.93 Year Ended 10/31/00 $ 9.94 0.54 (0.05) 0.49 7/1/99** Through 10/31/99 $ 9.98 0.16 (0.04) 0.12 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.87 0.21^ 0.33 0.54 Year ended 8/31/03 $ 8.54 0.47^ 0.32 0.79 11/1/01 Through 8/31/02 $ 8.83 0.40 (0.31) 0.09 Year Ended 10/31/01 $ 9.03 0.60 (0.20) 0.40 Year Ended 10/31/00 $ 9.59 0.75 (0.55) 0.20 10/28/99** Through 10/31/99 $ 9.64 0.07 (0.05) 0.02 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 0.09 -- -- 0.09 Year ended 8/31/03 0.22 0.05 --~~ 0.27 11/1/01 Through 8/31/02 0.22 0.11 -- 0.33 Year Ended 10/31/01 0.45 -- -- 0.45 Year Ended 10/31/00 0.54 -- -- 0.54 7/1/99** Through 10/31/99 0.16 -- -- 0.16 STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.21 -- -- 0.21 Year ended 8/31/03 0.46 -- -- 0.46 11/1/01 Through 8/31/02 0.36 -- 0.02 0.38 Year Ended 10/31/01 0.58 -- 0.02 0.60 Year Ended 10/31/00 0.75 -- 0.01 0.76 10/28/99** Through 10/31/99 0.07 -- -- 0.07
^^ The fund changed its fiscal year end from October 31 to August 31. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. (1) Total return figures do not include the effect of any front-end or deferred sales load. SEE NOTES TO FINANCIAL STATEMENTS. 138
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS) SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 $ 10.28 1.34% $ 935 1.00% 1.72% Year ended 8/31/03 $ 10.23 1.64% $ 1,168 1.00% 2.07% 11/1/01 Through 8/31/02 $ 10.33 2.92% $ 1,127 1.00% 2.41% Year Ended 10/31/01 $ 10.37 9.63% $ 689 1.00% 3.45% Year Ended 10/31/00 $ 9.89 5.04% $ 13 0.99% 5.51% 7/1/99** Through 10/31/99 $ 9.94 1.26% $ 3 0.97% 4.72% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.20 6.16% $ 8 1.45% 4.65% Year ended 8/31/03 $ 8.87 9.44% $ 7 1.45% 5.31% 11/1/01 Through 8/31/02 $ 8.54 1.03% $ 8 1.45% 5.52% Year Ended 10/31/01 $ 8.83 4.50% $ 10 1.45% 6.69% Year Ended 10/31/00 $ 9.03 2.10% $ 16 1.43% 7.52% 10/28/99** Through 10/31/99 $ 9.59 0.16% $ 12 0.17% 4.56% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 1.04% 1.68% 153% Year ended 8/31/03 1.04% 2.03% 319% 11/1/01 Through 8/31/02 1.03% 2.38% 192% Year Ended 10/31/01 1.11% 3.34% 315% Year Ended 10/31/00 1.73% 4.77% 139% 7/1/99** Through 10/31/99 1.41% 4.28% 302% STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 2.74% 3.36% 47% Year ended 8/31/03 2.77% 3.99% 116% 11/1/01 Through 8/31/02 3.05% 3.92% 176% Year Ended 10/31/01 2.55% 5.59% 174% Year Ended 10/31/00 2.54% 6.41% 113% 10/28/99** Through 10/31/99 3.73% 1.00% 136%
(b) Not annualized for periods less than one year. # Short periods have been annualized. ~~ Amount rounds to less than .005 per share amount. SEE NOTES TO FINANCIAL STATEMENTS. 139 INSTITUTIONAL CLASS SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND^^ 9/1/03 Through 2/29/04 $ 9.94 0.18 0.36 0.54 Year Ended 8/31/03 $ 10.04 0.42 (0.02) 0.40 11/1/01 Through 8/31/02 $ 10.08 0.34 0.02 0.36 Year Ended 10/31/01 $ 9.43 0.58^ 0.65 1.23 Year Ended 10/31/00 $ 9.41 0.60 0.02 0.62 Year Ended 10/31/99 $ 10.10 0.57 (0.57) -- Year Ended 10/31/98 $ 10.01 0.64 0.15 0.79 ENHANCED INCOME FUND 9/1/03 Through 2/29/04 $ 9.86 0.07 (0.01) 0.06 Year Ended 8/31/03 $ 9.98 0.23 (0.12) 0.11 11/30/01* Through 8/31/02 $ 10.00 0.18 (0.02) 0.16 GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.92 0.24^ 0.25 0.49 Year Ended 8/31/03 $ 8.65 0.48^ 0.27 0.75 11/1/01 Through 8/31/02 $ 8.95 0.47 (0.30) 0.17 Year Ended 10/31/01 $ 9.29 0.69^ (0.16) 0.53 Year Ended 10/31/00 $ 9.35 0.88 (0.25) 0.63 Year Ended 10/31/99 $ 9.72 0.62 (0.37) 0.25 Year Ended 10/31/98 $ 10.16 0.75 (0.45) 0.30 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS BOND FUND^^ 9/1/03 Through 2/29/04 0.18 0.30 -- 0.48 Year Ended 8/31/03 0.42 0.08 -- 0.50 11/1/01 Through 8/31/02 0.34 0.06 -- 0.40 Year Ended 10/31/01 0.58 -- -- 0.58 Year Ended 10/31/00 0.60 --(a) -- 0.60 Year Ended 10/31/99 0.57 0.12 -- 0.69 Year Ended 10/31/98 0.63 0.07 -- 0.70 ENHANCED INCOME FUND 9/1/03 Through 2/29/04 0.07 -- -- 0.07 Year Ended 8/31/03 0.23 -- -- 0.23 11/30/01* Through 8/31/02 0.18 -- -- 0.18 GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.25 -- -- 0.25 Year Ended 8/31/03 0.48 -- -- 0.48 11/1/01 Through 8/31/02 0.45 -- 0.02 0.47 Year Ended 10/31/01 0.87 -- -- 0.87 Year Ended 10/31/00 0.69 -- -- 0.69 Year Ended 10/31/99 0.62 -- -- 0.62 Year Ended 10/31/98 0.70 0.02 0.02 0.74
^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. * Commencement of operations. (a) Amount is less than $0.005. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 140
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS) BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.00 5.55% $ 362 0.49% 3.59% Year Ended 8/31/03 $ 9.94 3.99% $ 478 0.49% 4.10% 11/1/01 Through 8/31/02 $ 10.04 3.71% $ 747 0.49% 4.14% Year Ended 10/31/01 $ 10.08 13.46% $ 1,016 0.49% 5.98% Year Ended 10/31/00 $ 9.43 6.83% $ 907 0.49% 6.37% Year Ended 10/31/99 $ 9.41 0.03% $ 1,041 0.50% 5.92% Year Ended 10/31/98 $ 10.10 8.18% $ 1,001 0.49% 6.32% ENHANCED INCOME FUND 9/1/03 Through 2/29/04 $ 9.85 0.63% $ 410 0.20% 1.47% Year Ended 8/31/03 $ 9.86 1.14% $ 354 0.20% 2.33% 11/30/01* Through 8/31/02 $ 9.98 1.58% $ 300 0.20% 2.40% GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.16 5.49% $ 53 0.65% 5.37% Year Ended 8/31/03 $ 8.92 8.86% $ 108 0.65% 5.42% 11/1/01 Through 8/31/02 $ 8.65 1.92% $ 135 0.65% 6.44% Year Ended 10/31/01 $ 8.95 5.86% $ 143 0.65% 7.50% Year Ended 10/31/00 $ 9.29 6.93% $ 163 0.65% 7.36% Year Ended 10/31/99 $ 9.35 2.62% $ 183 0.65% 6.70% Year Ended 10/31/98 $ 9.72 2.91% $ 224 0.65% 6.59% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND^^ 9/1/03 Through 2/29/04 0.61% 3.47% 285% Year Ended 8/31/03 0.60% 3.99% 679% 11/1/01 Through 8/31/02 0.58% 4.05% 572% Year Ended 10/31/01 0.51% 5.96% 423%@ Year Ended 10/31/00 0.49% 6.37% 531%@ Year Ended 10/31/99 0.51% 5.91% 465%@ Year Ended 10/31/98 0.50% 6.31% 115%@ ENHANCED INCOME FUND 9/1/03 Through 2/29/04 0.56% 1.11% 85% Year Ended 8/31/03 0.56% 1.97% 328% 11/30/01* Through 8/31/02 0.68% 1.92% 120% GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 1.04% 4.98% 101% Year Ended 8/31/03 0.97% 5.10% 248% 11/1/01 Through 8/31/02 0.98% 6.11% 178% Year Ended 10/31/01 0.80% 7.35% 107% Year Ended 10/31/00 0.80% 7.21% 266%~ Year Ended 10/31/99 0.78% 5.29% 318%~ Year Ended 10/31/98 0.83% 6.41% 368%~
# Short periods have been annualized. ~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Global Strategic Income Portfolio, in which the Fund invested all of its investable assets. @ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 141 INSTITUTIONAL CLASS SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 $ 9.86 0.12 0.06 0.18 Year ended 8/31/03 $ 10.05 0.28 (0.04) 0.24 11/1/01 Through 8/31/02 $ 10.03 0.29 0.06 0.35 Year Ended 10/31/01 $ 9.58 0.54^ 0.46 1.00 Year Ended 10/31/00 $ 9.67 0.60 (0.08) 0.52 Year Ended 10/31/99 $ 9.96 0.58 (0.29) 0.29 Year Ended 10/31/98 $ 9.84 0.59 0.12 0.71 PER SHARE OPERATING PERFORMANCE: --------------------------------------------- LESS DISTRIBUTIONS: --------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TOTAL INCOME GAINS DISTRIBUTIONS SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 0.12 -- 0.12 Year ended 8/31/03 0.29 0.14 0.43 11/1/01 Through 8/31/02 0.29 0.04 0.33 Year Ended 10/31/01 0.55 -- 0.55 Year Ended 10/31/00 0.61 -- 0.61 Year Ended 10/31/99 0.54 0.04 0.58 Year Ended 10/31/98 0.59 -- 0.59
^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. (1) Total return figures do not include the effect of any front-end sales load. SEE NOTES TO FINANCIAL STATEMENTS. 142
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (1)(b) (MILLIONS) EXPENSES (LOSS) SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 $ 9.92 1.80% $ 759 0.30% 2.38% Year ended 8/31/03 $ 9.86 2.44% $ 806 0.30% 2.85% 11/1/01 Through 8/31/02 $ 10.05 3.55% $ 618 0.30% 3.53% Year Ended 10/31/01 $ 10.03 10.70% $ 697 0.30% 5.52% Year Ended 10/31/00 $ 9.58 5.49% $ 415 0.30% 6.30% Year Ended 10/31/99 $ 9.67 3.03% $ 354 0.29% 5.51% Year Ended 10/31/98 $ 9.96 7.40% $ 233 0.25% 5.84% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND^^ 9/1/03 Through 2/28/04 0.55% 2.13% 145% Year ended 8/31/03 0.55% 2.60% 386% 11/1/01 Through 8/31/02 0.54% 3.29% 215% Year Ended 10/31/01 0.48% 5.34% 160% Year Ended 10/31/00 0.47% 6.13% 271%~ Year Ended 10/31/99 0.51% 5.29% 398%~ Year Ended 10/31/98 0.62% 5.47% 381%~
(b) Not annualized for periods less than one year. # Short periods have been annualized. ~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Short Term Bond Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 143 SELECT CLASS SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND^^@ 9/1/03 Through 2/29/04 $ 9.94 0.16 0.37 0.53 Year Ended 8/31/03 $ 10.04 0.40 (0.01) 0.39 11/1/01 Through 8/31/02 $ 10.08 0.32 0.02 0.34 Year Ended 10/31/01 $ 9.43 0.52^ 0.70 1.22 Year Ended 10/31/00 $ 9.41 0.58 0.02 0.60 Year Ended 10/31/99 $ 10.09 0.55 (0.57) (0.02) Year Ended 10/31/98 $ 9.93 0.62 0.16 0.78 BOND FUND II^^ 9/1/03 Through 2/29/04 $ 40.51 0.70^ 1.44 2.14 Year Ended 8/31/03 $ 41.32 1.79^ (0.38) 1.41 11/1/01 Through 8/31/02 $ 40.97 1.36^ 0.35 1.71 Year Ended 10/31/01 $ 38.02 2.18 2.95 5.13 Year Ended 10/31/00 $ 38.38 2.38 (0.36) 2.02 Year Ended 10/31/99 $ 41.29 2.36 (2.37) (0.01) Year Ended 10/31/98 $ 41.01 2.56 0.76 3.32 FLEMING EMERGING MARKETS DEBT FUND ^^^ 9/1/03 Through 2/29/04 $ 9.02 0.32 0.58 0.90 Year Ended 8/31/03 $ 7.53 0.68 1.53 2.21 8/1/02 Through 8/31/02 $ 7.05 0.05 0.49 0.54 Year Ended 7/31/02 $ 7.82 0.77 (0.77) -- Year Ended 7/31/01 $ 8.77 0.88 (0.87) 0.01 Year Ended 7/31/00 $ 7.29 0.95 1.42 2.37 1/1/99 Through 7/31/99 $ 7.30 0.49 0.02 0.51 Year Ended 12/31/98 $ 9.76 1.15 (2.64) (1.49) PER SHARE OPERATING PERFORMANCE: --------------------------------------------- LESS DISTRIBUTIONS: --------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TOTAL INCOME GAINS DISTRIBUTIONS BOND FUND^^@ 9/1/03 Through 2/29/04 0.17 0.30 0.47 Year Ended 8/31/03 0.41 0.08 0.49 11/1/01 Through 8/31/02 0.32 0.06 0.38 Year Ended 10/31/01 0.57 -- 0.57 Year Ended 10/31/00 0.58 -- 0.58 Year Ended 10/31/99 0.56 0.10 0.66 Year Ended 10/31/98 0.62 -- 0.62 BOND FUND II^^ 9/1/03 Through 2/29/04 0.70 0.24 0.94 Year Ended 8/31/03 1.73 0.49 2.22 11/1/01 Through 8/31/02 1.36 -- 1.36 Year Ended 10/31/01 2.18 -- 2.18 Year Ended 10/31/00 2.38 -- 2.38 Year Ended 10/31/99 2.36 0.54 2.90 Year Ended 10/31/98 2.55 0.49 3.04 FLEMING EMERGING MARKETS DEBT FUND ^^^ 9/1/03 Through 2/29/04 0.36 -- 0.36 Year Ended 8/31/03 0.72 -- 0.72 8/1/02 Through 8/31/02 0.06 -- 0.06 Year Ended 7/31/02 0.77 -- 0.77 Year Ended 7/31/01 0.96 -- 0.96 Year Ended 7/31/00 0.89 -- 0.89 1/1/99 Through 7/31/99 0.52 -- 0.52 Year Ended 12/31/98 0.97 -- 0.97
^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. @ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^^ The fund changed its fiscal year end from July 31 to August 31. SEE NOTES TO FINANCIAL STATEMENTS. 144
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS) BOND FUND^^@ 9/1/03 Through 2/29/04 $ 10.00 5.46% $ 204 0.66% 3.41% Year Ended 8/31/03 $ 9.94 3.82% $ 308 0.66% 3.97% 11/1/01 Through 8/31/02 $ 10.04 3.57% $ 312 0.66% 3.95% Year Ended 10/31/01 $ 10.08 13.32% $ 315 0.69% 5.77% Year Ended 10/31/00 $ 9.43 6.61% $ 240 0.69% 6.19% Year Ended 10/31/99 $ 9.41 (0.23%) $ 235 0.69% 5.72% Year Ended 10/31/98 $ 10.09 8.06% $ 216 0.66% 6.14% BOND FUND II^^ 9/1/03 Through 2/29/04 $ 41.71 5.32% $ 944 0.60% 3.40% Year Ended 8/31/03 $ 40.51 3.39% $ 1,022 0.60% 4.27% 11/1/01 Through 8/31/02 $ 41.32 4.33% $ 661 0.60% 4.08% Year Ended 10/31/01 $ 40.97 13.87% $ 683 0.63% 5.52% Year Ended 10/31/00 $ 38.02 5.50% $ 587 0.69% 6.30% Year Ended 10/31/99 $ 38.38 (0.01%) $ 620 0.03% 5.97% Year Ended 10/31/98 $ 41.29 8.44% $ 590 0.03% 6.27% FLEMING EMERGING MARKETS DEBT FUND ^^^ 9/1/03 Through 2/29/04 $ 9.56 10.09% $ 40 1.25% 6.79% Year Ended 8/31/03 $ 9.02 30.49% $ 60 1.25% 8.11% 8/1/02 Through 8/31/02 $ 7.53 7.69% $ 41 1.25% 9.86% Year Ended 7/31/02 $ 7.05 (0.67%) $ 35 1.25% 9.59% Year Ended 7/31/01 $ 7.82 (0.17%) $ 35 1.25% 11.20% Year Ended 7/31/00 $ 8.77 34.12% $ 20 1.25% 11.01% 1/1/99 Through 7/31/99 $ 7.29 7.27% $ 26 1.25% 12.28% Year Ended 12/31/98 $ 7.30 (15.93%) $ 19 1.25% 10.05% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND^^@ 9/1/03 Through 2/29/04 0.77% 3.30% 285% Year Ended 8/31/03 0.76% 3.87% 679% 11/1/01 Through 8/31/02 0.74% 3.87% 572% Year Ended 10/31/01 0.70% 5.76% 423%~ Year Ended 10/31/00 0.69% 6.19% 531%~ Year Ended 10/31/99 0.69% 5.72% 465%~ Year Ended 10/31/98 0.66% 6.14% 115%~ BOND FUND II^^ 9/1/03 Through 2/29/04 0.76% 3.24% 286% Year Ended 8/31/03 0.75% 4.12% 806% 11/1/01 Through 8/31/02 0.74% 3.94% 496% Year Ended 10/31/01 0.75% 5.40% 319% Year Ended 10/31/00 0.71% 6.28% 157% Year Ended 10/31/99 0.49% 5.51% 300% Year Ended 10/31/98 0.51% 5.79% 306% FLEMING EMERGING MARKETS DEBT FUND ^^^ 9/1/03 Through 2/29/04 1.49% 6.55% 77% Year Ended 8/31/03 1.52% 7.84% 157% 8/1/02 Through 8/31/02 1.30% 9.81% 12% Year Ended 7/31/02 1.54% 9.30% 110% Year Ended 7/31/01 1.92% 10.53% 141% Year Ended 7/31/00 1.95% 10.31% 295% 1/1/99 Through 7/31/99 2.51% 11.02% 555% Year Ended 12/31/98 2.09% 9.21% 791%
(b) Not annualized for periods less than one year. # Short periods have been annualized. ~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 145 SELECT CLASS SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 8.92 0.23^ 0.23 0.46 Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72 11/1/01 Through 8/31/02 $ 8.95 0.45 (0.31) 0.14 Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29 Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61 Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22 11/5/97** Through 10/31/98 $ 10.28 0.70 (0.49) 0.21 SHORT TERM BOND FUND@ 9/1/03 Through 2/28/04 $ 9.86 0.10 0.05 0.15 Year ended 8/31/03 $ 10.04 0.26 (0.03) 0.23 11/1/01 Through 8/31/02 $ 10.03 0.28 0.04 0.32 Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97 Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49 Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26 Year Ended 10/31/98 $ 9.87 0.56 0.13 0.69 SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 $ 10.25 0.11^ 0.05 0.16 Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22 11/1/01 Through 8/31/02 $ 10.40 0.26 0.07 0.33 Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99 Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54 Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29 Year Ended 10/31/98 $ 10.11 0.57 0.02 0.59 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 0.23 -- -- 0.23 Year Ended 8/31/03 0.45 -- -- 0.45 11/1/01 Through 8/31/02 0.42 -- 0.02 0.44 Year Ended 10/31/01 0.76 -- -- 0.76 Year Ended 10/31/00 0.66 -- -- 0.66 Year Ended 10/31/99 0.59 -- -- 0.59 11/5/97** Through 10/31/98 0.63 0.02 -- 0.65 SHORT TERM BOND FUND@ 9/1/03 Through 2/28/04 0.10 -- -- 0.10 Year ended 8/31/03 0.27 0.14 -- 0.41 11/1/01 Through 8/31/02 0.27 0.04 -- 0.31 Year Ended 10/31/01 0.55 -- -- 0.55 Year Ended 10/31/00 0.58 -- -- 0.58 Year Ended 10/31/99 0.51 0.05 -- 0.56 Year Ended 10/31/98 0.56 -- -- 0.56 SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 0.11 -- -- 0.11 Year Ended 8/31/03 0.27 0.05 --~~ 0.32 11/1/01 Through 8/31/02 0.27 0.11 -- 0.38 Year Ended 10/31/01 0.49 -- -- 0.49 Year Ended 10/31/00 0.59 -- -- 0.59 Year Ended 10/31/99 0.49 -- -- 0.49 Year Ended 10/31/98 0.55 -- -- 0.55
^^ The fund changed its fiscal year end from October 31 to August 31. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. @ Prior to the open of business on September 10, 2001, the class underwent a split of shares in connection with the Fund reorganization described in Note 2. Prior periods have been restated to reflect the split. ~ Percentages prior to 9/10/01 reflect the portfolio turnover of The Global Strategic Income Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 146
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS) GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 $ 9.15 5.19% $ 3 1.00% 5.09% Year Ended 8/31/03 $ 8.92 8.48% $ 3 1.00% 5.10% 11/1/01 Through 8/31/02 $ 8.65 1.61% $ 5 1.00% 6.08% Year Ended 10/31/01 $ 8.95 5.46% $ 5 1.00% 7.32% Year Ended 10/31/00 $ 9.42 6.57% $ 7 1.00% 7.05% Year Ended 10/31/99 $ 9.47 2.26% $ 9 1.00% 6.35% 11/5/97** Through 10/31/98 $ 9.84 1.97% $ 10 1.00% 6.24% SHORT TERM BOND FUND@ 9/1/03 Through 2/28/04 $ 9.91 1.56% $ 103 0.57% 2.11% Year ended 8/31/03 $ 9.86 2.28% $ 122 0.56% 2.59% 11/1/01 Through 8/31/02 $ 10.04 3.21% $ 122 0.57% 3.22% Year Ended 10/31/01 $ 10.03 10.39% $ 67 0.60% 5.22% Year Ended 10/31/00 $ 9.61 5.19% $ 38 0.60% 6.00% Year Ended 10/31/99 $ 9.70 2.70% $ 39 0.57% 5.24% Year Ended 10/31/98 $ 10.00 7.24% $ 31 0.50% 5.66% SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 $ 10.30 1.60% $ 513 0.50% 2.19% Year Ended 8/31/03 $ 10.25 2.15% $ 342 0.50% 2.58% 11/1/01 Through 8/31/02 $ 10.35 3.30% $ 144 0.50% 2.91% Year Ended 10/31/01 $ 10.40 10.29% $ 144 0.50% 4.15% Year Ended 10/31/00 $ 9.90 5.56% $ 21 0.45% 5.99% Year Ended 10/31/99 $ 9.95 2.97% $ 28 0.42% 4.89% Year Ended 10/31/98 $ 10.15 6.03% $ 31 0.42% 5.68% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) GLOBAL STRATEGIC INCOME FUND^^ 9/1/03 Through 2/29/04 1.70% 4.39% 101% Year Ended 8/31/03 1.48% 4.62% 248% 11/1/01 Through 8/31/02 1.48% 5.60% 178% Year Ended 10/31/01 2.63% 5.69% 107%~ Year Ended 10/31/00 2.50% 5.55% 266%~ Year Ended 10/31/99 1.54% 5.81% 318%~ 11/5/97** Through 10/31/98 1.89% 5.35% 368%~ SHORT TERM BOND FUND@ 9/1/03 Through 2/28/04 0.72% 1.96% 145% Year ended 8/31/03 0.71% 2.44% 386% 11/1/01 Through 8/31/02 0.72% 3.07% 215% Year Ended 10/31/01 0.82% 5.00% 160%^^^ Year Ended 10/31/00 0.82% 5.78% 271%^^^ Year Ended 10/31/99 0.80% 5.01% 398%^^^ Year Ended 10/31/98 0.98% 5.18% 381%^^^ SHORT TERM BOND FUND II^^ 9/1/03 Through 2/29/04 0.69% 2.00% 153% Year Ended 8/31/03 0.70% 2.38% 319% 11/1/01 Through 8/31/02 0.70% 2.71% 192% Year Ended 10/31/01 0.77% 3.88% 315% Year Ended 10/31/00 1.02% 5.42% 139% Year Ended 10/31/99 1.02% 4.29% 302% Year Ended 10/31/98 1.04% 5.06% 439%
^^^ Percentages prior to 9/10/01 reflect the portfolio turnover of The Short Term Bond Portfolio, in which the Fund invested all of its investable assets. (b) Not annualized for periods less than one year. # Short periods have been annualized. ~~ Amount rounds to less than .005 per share amount. SEE NOTES TO FINANCIAL STATEMENTS. 147 SELECT CLASS SHARES
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS OR (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 $ 11.62 0.20^ 0.36 0.56 Year Ended 8/31/03 $ 11.83 0.49 (0.21) 0.28 11/1/01 Through 8/31/02 $ 11.77 0.39 0.06 0.45 2/16/01* Through 8/31/01 $ 11.10 0.37 0.66 1.03 PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN TOTAL INCOME GAINS OF CAPITAL DISTRIBUTIONS U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 0.20 -- -- 0.20 Year Ended 8/31/03 0.49 -- -- 0.49 11/1/01 Through 8/31/02 0.39 -- -- 0.39 2/16/01* Through 8/31/01 0.36 -- -- 0.36
^^ The fund changed its fiscal year end from October 31 to August 31. * Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 148
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS) U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 $ 11.98 4.85% $ 92 0.55% 3.37% Year Ended 8/31/03 $ 11.62 2.29% $ 69 0.55% 4.04% 11/1/01 Through 8/31/02 $ 11.83 3.97% $ 78 0.55% 4.07% 2/16/01* Through 8/31/01 $ 11.77 9.52% $ 76 0.55% 4.73% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) U.S. TREASURY INCOME FUND^^ 9/1/03 Through 2/29/04 0.89% 3.03% 69% Year Ended 8/31/03 0.87% 3.72% 106% 11/1/01 Through 8/31/02 0.86% 3.76% 228% 2/16/01* Through 8/31/01 0.98% 4.30% 134%
(b) Not annualized for periods less than one year. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 149 ULTRA CLASS SHARES@
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: --------------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS BOND FUND^^ 9/1/03 Through 2/29/04 $ 9.95 0.18 0.36 0.54 Year Ended 8/31/03 $ 10.05 0.43 (0.02) 0.41 11/1/01 Through 8/31/02 $ 10.09 0.34 0.02 0.36 Year Ended 10/31/01 $ 9.47 0.54^ 0.72 1.26 Year Ended 10/31/00 $ 9.46 0.64 (0.02) 0.62 Year Ended 10/31/99 $ 10.02 0.60 (0.57) 0.03 12/15/97** Through 10/31/98 $ 9.88 0.53 0.16 0.69 PER SHARE OPERATING PERFORMANCE: --------------------------------------------- LESS DISTRIBUTIONS: --------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TOTAL INCOME GAINS DISTRIBUTIONS BOND FUND^^ 9/1/03 Through 2/29/04 0.18 0.30 0.48 Year Ended 8/31/03 0.43 0.08 0.51 11/1/01 Through 8/31/02 0.34 0.06 0.40 Year Ended 10/31/01 0.62 0.02 0.64 Year Ended 10/31/00 0.61 -- 0.61 Year Ended 10/31/99 0.59 -- 0.59 12/15/97** Through 10/31/98 0.55 -- 0.55
^^ The fund changed its fiscal year from October 31 to August 31. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. @ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. SEE NOTES TO FINANCIAL STATEMENTS. 150
PER SHARE OPERATING PERFORMANCE: RATIOS/SUPPLEMENTAL DATA: -------------------------------- --------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------- NET ASSETS, NET NET ASSET END OF INVESTMENT VALUE, END TOTAL PERIOD NET INCOME OF PERIOD RETURN (b) (MILLIONS) EXPENSES (LOSS) BOND FUND^^ 9/1/03 Through 2/29/04 $ 10.01 5.59% $ 425 0.40% 3.67% Year Ended 8/31/03 $ 9.95 4.08% $ 444 0.40% 4.19% 11/1/01 Through 8/31/02 $ 10.05 3.80% $ 609 0.40% 4.20% Year Ended 10/31/01 $ 10.09 13.63% $ 598 0.37% 6.08% Year Ended 10/31/00 $ 9.47 6.92% $ 466 0.35% 6.49% Year Ended 10/31/99 $ 9.46 0.28% $ 299 0.36% 6.08% 12/15/97** Through 10/31/98 $ 10.02 7.17% $ 128 0.37% 6.28% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------- NET INVESTMENT EXPENSES INCOME (LOSS) WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO REIMBURSEMENTS REIMBURSEMENTS TURNOVER AND EARNINGS CREDITS AND EARNINGS CREDITS RATE ~(b) BOND FUND^^ 9/1/03 Through 2/29/04 0.56% 3.51% 285% Year Ended 8/31/03 0.55% 4.04% 679% 11/1/01 Through 8/31/02 0.53% 4.07% 572% Year Ended 10/31/01 0.47% 5.98% 423% Year Ended 10/31/00 0.42% 6.42% 531% Year Ended 10/31/99 0.49% 5.95% 465% 12/15/97** Through 10/31/98 0.60% 6.05% 115%
~ Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. (b) Not annualized for periods less than one year. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 151 JPMORGAN FUNDS REPORT OF INDEPENDENT AUDITORS To the Trustees and Shareholders of J.P. Morgan Mutual Fund Group, J.P. Morgan Mutual Fund Select Group J.P. Morgan Institutional Funds, J.P. Morgan Series Trust and J.P. Morgan Funds In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of JPMorgan Short Term Bond Fund II, JPMorgan Strategic Income Fund, JPMorgan U.S. Treasury Income Fund (separate series of J.P. Morgan Mutual Fund Group), JPMorgan Bond Fund II (a separate series of J.P. Morgan Mutual Fund Select Group), JPMorgan Bond Fund, JPMorgan Global Strategic Income Fund, JPMorgan Short Term Bond Fund (separate series of J.P. Morgan Institutional Funds), JPMorgan Enhanced Income Fund, (a separate series of J.P. Morgan Series Trust) and JPMorgan Fleming Emerging Markets Debt Fund (a separate series of J.P. Morgan Funds), (hereafter collectively referred to as the "Funds"), at February 29, 2004, the results of each of their operations, the cash flows of JPMorgan Global Strategic Income Fund, the changes in each of their net assets and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at February 29, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York April 23, 2004 152 JPMORGAN FAMILY OF FUNDS U.S. EQUITY FUNDS Capital Growth Fund Disciplined Equity Fund Diversified Fund Dynamic Small Cap Fund Equity Growth Fund Equity Income Fund Growth and Income Fund Mid Cap Equity Fund Mid Cap Growth Fund Mid Cap Value Fund Small Cap Equity Fund Small Cap Growth Fund Trust Small Cap Equity Fund U.S. Equity Fund U.S. Small Company Fund U.S. Small Company Opportunities Fund Value Opportunities Fund INTERNATIONAL EQUITY FUNDS Fleming Asia Equity Fund Fleming Emerging Markets Equity Fund Fleming European Fund Fleming International Equity Fund Fleming International Growth Fund Fleming International Opportunities Fund Fleming International Value Fund Fleming Japan Fund SPECIALTY FUNDS Global 50 Fund Global Healthcare Fund Market Neutral Fund TAX AWARE FUNDS Fleming Tax Aware International Opportunities Fund Tax Aware Disciplined Equity Fund Tax Aware Enhanced Income Fund Tax Aware Large Cap Growth Fund Tax Aware Large Cap Value Fund Tax Aware Short-Intermediate Income Fund Tax Aware U.S. Equity Fund INCOME FUNDS Bond Fund Bond Fund II Enhanced Income Fund Fleming Emerging Markets Debt Fund Global Strategic Income Fund Short Term Bond Fund Short Term Bond Fund II Strategic Income Fund U.S. Treasury Income Fund TAX FREE FUNDS California Bond Fund Intermediate Tax Free Income Fund New Jersey Tax Free Income Fund New York Intermediate Tax Free Income Fund Tax Free Income Fund MONEY MARKET FUNDS 100% U.S. Treasury Securities Money Market Fund California Tax Free Money Market Fund Federal Money Market Fund Liquid Assets Money Market Fund New York Tax Free Money Market Fund Prime Money Market Fund Tax Free Money Market Fund Treasury Plus Money Market Fund U.S. Government Money Market Fund UNDISCOVERED MANAGERS FUNDS Behavioral Growth Fund Behavioral Value Fund REIT Fund Small Cap Growth Fund Funds may be registered under separate registrants. 153 THIS PAGE IS INTENTIONALLY LEFT BLANK THIS PAGE IS INTENTIONALLY LEFT BLANK THIS PAGE IS INTENTIONALLY LEFT BLANK [JPMORGAN FLEMING ASSET MANAGEMENT LOGO] JPMorgan Funds are distributed by J.P. Morgan Fund Distributors, Inc., which is unaffiliated with The JPMorgan Chase Bank. JPMorgan Chase and its respective affiliates receive compensation from JPMorgan Funds for providing services to the Funds. This report is submitted for the general information of the shareholders of the funds. It is not authorized for distribution to prospective investors in the funds unless preceded or accompanied by a prospectus. Investors should carefully read the fund prospectus which includes information on the Fund's investment objectives, risk, as well as charges and expenses along with other information. Investors should review the information in the prospectus carefully before investing. For up to date month-end performance information, or to receive a fund prospectus please call 800 348-4782. Please read carefully before investing or sending money. A list of portfolio holdings is available fifteen days after month end upon request. Please contact your JPMorgan Fleming representative or call 1-800-766-7722 to obtain further information. A copy of proxy policies and procedures are available without charge upon request by calling 1-800-348-4782 and on the Commission's website at http://www.sec.gov. JPMorgan Funds Fulfillment Center PRSRT STD 600 North Bedford Street U.S. POSTAGE East Bridgewater, MA 02333 PAID PERMIT 2891 KANSAS CITY, MO (C) J.P. Morgan Chase & Co., 2004 All rights reserved. April 2004. SAN-INC-204 ITEM 2. CODE OF ETHICS. (a) Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. NOT APPLICABLE. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. NOT APPLICABLE - ONLY FOR ANNUAL REPORTS. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) Disclose, under the caption AUDIT FEES, the aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. (b) Disclose, under the caption AUDIT-RELATED FEES, the aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant's financial statements and are not reported under paragraph (a) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (c) Disclose, under the caption TAX FEES, the aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (d) Disclose, under the caption ALL OTHER FEES, the aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item. Registrants shall describe the nature of the services comprising the fees disclosed under this category. (e) (1) Disclose the audit committee's pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X. (2) Disclose the percentage of services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. (f) If greater than 50 percent, disclose the percentage of hours expended on the principal accountant's engagement to audit the registrant's financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. (g) Disclose the aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant. (h) Disclose whether the registrant's audit committee of the board of directors has considered whether the provision of nonaudit services that were rendered to the registrant's investment adviser (not including any subadviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant's independence. NOT APPLICABLE. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. (a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state. (b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees. NOT APPLICABLE. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. (a) If the registrant is a closed-end management investment company, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the registrant or any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant's equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781). NOT APPLICABLE. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. NOT APPLICABLE. ITEM 10. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). THE REGISTRANT'S PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES AS OF A DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE REASONABLY DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE REQUIRED TIME PERIODS AND THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT IN THE REPORTS THAT IT FILES OR SUBMITS ON FORM N-CSR IS ACCUMULATED AND COMMUNICATED TO THE REGISTRANT'S MANAGEMENT, INCLUDING ITS PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS, AS APPROPRIATE TO ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE REGISTRANT'S MOST RECENT FISCAL HALF-YEAR (THE REGISTRANT'S SECOND FISCAL HALF-YEAR IN THE CASE OF AN ANNUAL REPORT) THAT HAVE MATERIALLY AFFECTED, OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING. ITEM 11. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2). CERTIFICATIONS PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 ARE ATTACHED HERETO. (a)(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. NOT APPLICABLE. (b) A separate or combined certification for each principal executive officer and principal officer of the registrant as required by Rule 30a-2(b) under the Act of 1940. CERTIFICATIONS PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF 1940 ARE ATTACHED HERETO. 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 Select Group -------------------------------------------------------------------- By (Signature and Title)* /s/ Patricia A. Maleski ------------------------------------------------------- Patricia A. Maleski, Treasurer Date April 29, 2004 ---------------------------------------------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Patricia A. Maleski ------------------------------------------------------- Patricia A. Maleski, Treasurer Date April 29, 2004 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ George C.W. Gatch ------------------------------------------------------- George C.W. Gatch, President Date April 29, 2004 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 a2135378zex-99_cert.txt EX-99.CERT Exhibit 99.Cert CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 I, George C.W. Gatch, certify that: 1. I have reviewed this report on Form N-CSR of the JPMorgan Bond Fund II (the "Fund"), a series of J.P. Morgan Mutual Fund Select Group (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Fund and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year (the Fund's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. /s/ George C.W. Gatch - ------------------------- George C.W. Gatch President April 29, 2004 - ------------------------- Date CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 I, Patricia A. Maleski, certify that: 1. I have reviewed this report on Form N-CSR of the JPMorgan Bond Fund II (the "Fund"), a series of J.P. Morgan Mutual Fund Select Group (the "Registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements and other information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the Fund as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the Fund and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Fund, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the Fund's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and c) Disclosed in this report any change in the Fund's internal control over financial reporting that occurred during the Fund's most recent fiscal half-year (the Fund's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Fund's internal control over financial reporting; and 5. The Registrant's other certifying officer(s) and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Fund's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Fund's internal control over financial reporting. /s/ Patricia A. Maleski - --------------------------- Patricia A. Maleski Treasurer April 29, 2004 - --------------------------- Date EX-99.906CERT 3 a2135378zex-99_906cert.txt EX-99.906CERT Exhibit 99.906CERT CERTIFICATION PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF 1940 This certification is provided pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, and accompanies the report on Form N-CSR furnished to the Securities and Exchange Commission on the date hereof the JPMorgan Bond Fund II (the "Fund"), a series of J.P. Morgan Mutual Fund Select Group. I, George C.W. Gatch, certify that: 1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of the operations of the Fund. /s/ George C.W. Gatch - ------------------------- George C.W. Gatch President April 29, 2004 - ------------------------- Date This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934. CERTIFICATION PURSUANT TO RULE 30a-2(b) UNDER THE INVESTMENT COMPANY ACT OF 1940 This certification is provided pursuant to Rule 30a-2(b) under the Investment Company Act of 1940, and accompanies the report on Form N-CSR furnished to the Securities and Exchange Commission on the date hereof the JPMorgan Bond Fund II (the "Fund"), a series of J.P. Morgan Mutual Fund Select Group. I, Patricia A. Maleski, certify that: 1. The Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as applicable; and 2. The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Fund. /s/ Patricia A. Maleski - ---------------------------- Patricia A. Maleski Treasurer April 29, 2004 - ---------------------------- Date This certificate is furnished pursuant to the requirements of Form N-CSR and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----