-----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, HQyvCsw9h8uur23JVdvXsV9AwDnwAOCCPCa2amQNQaMfW4wAHoBm33KRh47Cha+M 9z+hjRb1oKgoi1uLb3cKgg== 0001047469-04-033797.txt : 20041110 0001047469-04-033797.hdr.sgml : 20041110 20041110140515 ACCESSION NUMBER: 0001047469-04-033797 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040831 FILED AS OF DATE: 20041110 DATE AS OF CHANGE: 20041110 EFFECTIVENESS DATE: 20041110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JP MORGAN FUNDS CENTRAL INDEX KEY: 0000894089 IRS NUMBER: 133692750 STATE OF INCORPORATION: MA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07340 FILM NUMBER: 041132476 BUSINESS ADDRESS: STREET 1: C/O FUNDS DISTRIBUTOR, INC. STREET 2: 522 FIFTH AVENUE, 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 BUSINESS PHONE: 212-837-1968 MAIL ADDRESS: STREET 1: C/O FUNDS DISTRIBUTOR, INC. STREET 2: 522 FIFTH AVENUE, 11TH FLOOR CITY: NEW YORK STATE: NY ZIP: 10036 FORMER COMPANY: FORMER CONFORMED NAME: JPM PIERPONT FUNDS DATE OF NAME CHANGE: 19961011 FORMER COMPANY: FORMER CONFORMED NAME: PIERPONT FUNDS DATE OF NAME CHANGE: 19930328 N-CSR 1 a2145904zn-csr.txt N-CSR ----------------------------- 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 811-07340 --------------------------------------------- J.P. Morgan Funds - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 522 Fifth Avenue, New York, NY 10036 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) BISYS Fund Services, 3435 Stelzer Road, Columbus, OH 43219 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 1-800-348-4782 ---------------------------- Date of fiscal year end: August 31, 2004 -------------------------- Date of reporting period: September 1, 2003 through August 31, 2004 ------------------------------------------------------ Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1). JPMORGAN FUNDS [GRAPHIC] ANNUAL REPORT AUGUST 31 2004 INCOME FUNDS BOND FUND BOND FUND II ENHANCED INCOME FUND FLEMING EMERGING MARKETS DEBT FUND GLOBAL STRATEGIC INCOME FUND SHORT TERM BOND FUND SHORT TERM BOND FUND II STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND [JPMORGAN FLEMING ASSET MANAGEMENT LOGO] [JPMORGAN FLEMING ASSET MANAGEMENT LOGO] JPMORGAN FLEMING ASSET MANAGEMENT is a premier global wealth manager that has been working with affluent investors for over a hundred years. This experience provides us with a keen understanding of the unique needs of the affluent investor's portfolio. The legacy of our experience, coupled with our GLOBAL INTELLECTUAL CAPITAL, is the foundation from which our investment products have been built. We have a worldwide investment presence. This local insight provides us with a global view of every investment decision we make which we believe is crucial in light of the ever-increasing rise of globalization in our marketplace. JPMorgan Fleming Asset Management is an EXPERIENCED PARTNER dedicated to working with your financial professional to help provide you with a broad array of WEALTH SOLUTIONS. CONTENTS President's Letter 1 Fund Commentaries: Bond Fund 3 Bond Fund II 5 Enhanced Income Fund 7 Fleming Emerging Markets Debt Fund 9 Global Strategic Income Fund 11 Short Term Bond Fund 13 Short Term Bond Fund II 15 Strategic Income Fund 17 U.S. Treasury Income Fund 19 Portfolio of Investments 21 Financial Statements 88 Notes to Financial Statements 102 Financial Highlights 136
HIGHLIGHTS - - The economic recovery accelerated during the period and made the transition from being policy-dependent to becoming self-sustaining. - - The uptick in inflation and sharply improved economic conditions during the second quarter altered expectations about the Fed's position on short-term interest rates. Investments in a Fund are not bank deposits or obligations of, or guaranteed or endorsed by, any bank and are not insured or guaranteed by the FDIC, the Federal Reserve Board or any other government agency. You could lose money if you sell when the Fund's share price is lower than when you invested. Past performance is no guarantee for future performance. The general market views expressed in this report are opinions based on current market conditions and are subject to change without notice. These views are not intended to predict the future performance of a Fund or the securities markets. References to specific securities and their issuers are for illustrative purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. Such views are not meant as investment advice and may not be relied on as an indication of trading intent on behalf of any Fund. Prospective investors should refer to the Fund's prospectus for a discussion of the Fund's investment objective, strategies and risks. Call JPMorgan Funds Service Center at (800) 348-4782 for a prospectus containing more complete information about a Fund including management fees and other expenses. Please read it carefully before investing. JPMorgan Funds are distributed by J.P. Morgan Fund Distributors, Inc. JPMORGAN INCOME FUNDS PRESIDENT'S LETTER AUGUST 31, 2004 [PHOTO OF GEORGE C.W. GATCH] "STRONG CORPORATE PROFITS BUOYED THE EQUITY MARKET AND SUPPORTED AN INCREASE IN CAPITAL SPENDING AND HIRING." DEAR SHAREHOLDER: We are pleased to present this annual report for the JPMorgan Income Funds for the one-year period ending August 31, 2004. Inside you'll find in-depth information on some of our fixed income funds along with an update from the portfolio management team. U.S. ECONOMY CONTINUES TO EXPAND The economic recovery accelerated during the period and made the transition from being policy-dependent to becoming self-sustaining. Strong corporate profits buoyed the equity market and supported an increase in capital spending and hiring. Consumer price inflation, however, continued to slow despite ongoing excess capacity and comparatively high unemployment. Under the circumstances, the Federal Reserve Board indicated that it would keep its monetary policy on hold until economic conditions warrant a change. Short-term money market rates remained relatively stable, while longer maturity yields fell in response to mixed economic data, low inflation, and a persistently weak labor market. In the early part of 2004, economic data was mixed. Although the corporate profit picture was brighter, improved earnings did not translate into new job creation. Consumer sentiment weakened, but consumer spending increased -- fueled by tax refunds and by the mortgage-refinancing boom. FEDERAL RESERVE BOARD RAISES SHORT-TERM INTEREST RATES The uptick in inflation and sharply improved economic conditions during the second quarter altered expectations about the Fed's position on short-term interest rates. Stronger labor conditions and an increase in pretax income indicated that consumer spending growth could continue without support from tax cuts and without monetary stimulus. In response, the Fed raised short-term interest rates during June by a quarter-percent to 1.25%. Consumer spending slowed in July, which was blamed mostly on higher energy prices. The economic outlook weakened during August. The main source of disappointment was the July payroll report, which showed an employment gain of only 32,000 jobs and a downward revision of the June estimate. The Fed maintained a moderate approach with another quarter-percent increase in August. At the end of the period, the Federal funds rate (the rate charged by banks for overnight loans) stood at 1.50%. As the economic expansion continues, your portfolio managers will continue to work hard on your behalf. They will look for opportunities to obtain the highest possible yields while focusing on the preservation of your principal. IMPORTANT MERGER NEWS As you may know, J.P. Morgan Chase & Co. and Bank One Corp. merged in July 2004, as approved by both firms' shareholders. The combined company is called JPMorgan Chase & Co. The merger is compelling both strategically and financially. The new combined organization has top-tier positions in both wholesale and retail financial services, an extensive client base and greater scale. And we have an extraordinarily talented team that shares common values and a strong client orientation. In the coming months, you will receive proxy information regarding proposed changes to the JPMorgan Funds. Please refer to Note 1 of the Financial Statements in this report for more details on these proposals. On behalf of all of us here at JPMorgan Investment Management, thank you for the trust you have placed in us. We value your business, and look forward to serving your investment needs for many years to come. Should you have any questions, please feel free to contact the JPMorgan Funds Service Center at 1-800-348-4782. Sincerely, /s/ George C.W. Gatch George C.W. Gatch President JPMorgan Funds 2 JPMORGAN BOND FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 7/26/1993 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $893 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality AA- Duration 7.7 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Bond Fund, which seeks to provide high total return consistent with moderate risk of capital and maintenance of liquidity, returned 6.96% (Institutional Shares) for the one-year period ending August 31, 2004. This compares to the 6.14% return of its benchmark index, the Lehman Aggregate Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund benefited from our underweight to Treasury and agency debt as other sectors out-performed. Our overweight in the residential mortgage sector was a strong positive for performance, as was our mortgage coupon selection. Modest positives were our positions in investment-grade corporate bonds, notably BBB-rated corporate credits, and commercial mortgage-backed securities (CMBS). Our duration positioning and conservative asset-backed securities (ABS) holdings were modest detractors. After European interest rates outperformed five-year Treasuries, we took profits on the short-U.S./long-Eurozone trade. Our overweights to high-yield and emerging markets debt also enhanced returns. Q: HOW WAS THE FUND MANAGED? A: We maintained a slightly long duration position during much of the period. We underweighted Treasury and agency debt, finding more compelling opportunities in other high-quality sectors with more generous yield spreads. In the first half of the period, we overweighted residential mortgages, then realized profits and pared back our position in January ahead of expected strong supply. We again moved to an overweight position during the second quarter, mostly in lower coupons, in response to reduced supply and to lower volatility. We modestly overweighted investment-grade corporate bonds. As the market in CMBS continued to outperform, we added to our overweight. We maintained an overweight to ABS. Because we believed that economic activity would increase more quickly in the U.S. than in the Eurozone, we took a position in which we were long the Eurozone and short the U.S. Taking a bottom-up view of company and country fundamentals, we overweighted high-yield and emerging markets debt. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes and Bonds 30.3% Residential Mortgage Backed Securities 29.6% Asset Backed Securities 17.9% U.S. Treasury Securities 5.4% Commercial Paper 5.3% Money Market Fund 3.4% Commercial Mortgage Backed Securities 2.6% Foreign Government Securities 2.1% Private Placements 1.9% U.S. Government Agency Securities 1.0% Other (Less than 1%) 0.5%
3 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------- CLASS A SHARES Without Sales Charge 6.61% 5.80% 7.17% 6.89% With Sales Charge* 1.84% 4.19% 6.20% 6.40% ----------------------------------------- CLASS B SHARES Without CDSC 5.89% 4.76% 6.54% 6.58% With CDSC** 0.89% 3.87% 6.23% 6.58% ----------------------------------------- CLASS C SHARES Without CDSC 5.84% 4.93% 6.65% 6.63% With CDSC*** 4.84% 4.93% 6.65% 6.63% ----------------------------------------- INSTITUTIONAL SHARES 6.96% 5.81% 7.26% 7.02% ----------------------------------------- SELECT SHARES 6.88% 5.67% 7.10% 6.86% ----------------------------------------- ULTRA SHARES 7.05% 5.92% 7.37% 7.11%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and 0% for the ten year period. *** Assumes 1% CDSC for the one year period and 0% thereafter. [CHART] TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
JPMORGAN BOND FUND LEHMAN AGGREGATE CITIGROUP BROAD INVESTMENT LIPPER INTERMEDIATE INVESTMENT (INSTITUTIONAL SHARES) BOND INDEX GRADE BOND INDEX GRADE DEBT FUNDS INDEX Aug-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000 $ 3,000,000 Sep-1994 $ 2,964,600 $ 2,955,900 $ 2,956,800 $ 2,966,100 Oct-1994 $ 2,958,671 $ 2,953,240 $ 2,953,843 $ 2,962,541 Nov-1994 $ 2,949,203 $ 2,946,743 $ 2,946,163 $ 2,954,542 Dec-1994 $ 2,965,424 $ 2,967,075 $ 2,968,554 $ 2,969,019 Jan-1995 $ 3,015,243 $ 3,025,823 $ 3,030,003 $ 3,019,196 Feb-1995 $ 3,083,990 $ 3,097,838 $ 3,100,905 $ 3,083,202 Mar-1995 $ 3,108,662 $ 3,116,735 $ 3,118,890 $ 3,103,552 Apr-1995 $ 3,153,116 $ 3,160,369 $ 3,161,619 $ 3,144,208 May-1995 $ 3,283,970 $ 3,282,675 $ 3,287,136 $ 3,254,570 Jun-1995 $ 3,304,659 $ 3,306,639 $ 3,310,145 $ 3,275,074 Jul-1995 $ 3,292,102 $ 3,299,364 $ 3,303,525 $ 3,267,868 Aug-1995 $ 3,333,253 $ 3,339,286 $ 3,341,516 $ 3,306,103 Sep-1995 $ 3,367,586 $ 3,371,677 $ 3,372,926 $ 3,337,510 Oct-1995 $ 3,416,416 $ 3,415,509 $ 3,418,123 $ 3,381,232 Nov-1995 $ 3,464,587 $ 3,466,742 $ 3,471,446 $ 3,431,612 Dec-1995 $ 3,512,052 $ 3,515,276 $ 3,519,352 $ 3,477,596 Jan-1996 $ 3,536,285 $ 3,538,477 $ 3,543,283 $ 3,500,548 Feb-1996 $ 3,469,803 $ 3,476,908 $ 3,483,048 $ 3,439,638 Mar-1996 $ 3,449,331 $ 3,452,569 $ 3,457,970 $ 3,415,905 Apr-1996 $ 3,425,186 $ 3,433,235 $ 3,432,381 $ 3,396,093 May-1996 $ 3,415,595 $ 3,426,368 $ 3,430,321 $ 3,390,999 Jun-1996 $ 3,458,632 $ 3,472,282 $ 3,474,572 $ 3,430,334 Jul-1996 $ 3,462,782 $ 3,481,657 $ 3,483,954 $ 3,439,939 Aug-1996 $ 3,459,319 $ 3,475,738 $ 3,479,076 $ 3,436,499 Sep-1996 $ 3,517,090 $ 3,536,216 $ 3,539,612 $ 3,493,889 Oct-1996 $ 3,594,466 $ 3,614,720 $ 3,619,253 $ 3,567,610 Nov-1996 $ 3,649,821 $ 3,676,532 $ 3,678,971 $ 3,629,329 Dec-1996 $ 3,627,557 $ 3,642,340 $ 3,646,596 $ 3,597,028 Jan-1997 $ 3,643,518 $ 3,653,631 $ 3,660,818 $ 3,608,179 Feb-1997 $ 3,655,542 $ 3,662,765 $ 3,664,845 $ 3,617,200 Mar-1997 $ 3,614,965 $ 3,622,109 $ 3,627,830 $ 3,578,496 Apr-1997 $ 3,665,213 $ 3,676,440 $ 3,679,708 $ 3,627,521 May-1997 $ 3,700,766 $ 3,711,366 $ 3,714,297 $ 3,659,806 Jun-1997 $ 3,747,765 $ 3,755,532 $ 3,758,497 $ 3,702,992 Jul-1997 $ 3,845,207 $ 3,856,931 $ 3,860,352 $ 3,801,121 Aug-1997 $ 3,812,523 $ 3,824,147 $ 3,827,153 $ 3,766,531 Sep-1997 $ 3,868,567 $ 3,880,744 $ 3,883,413 $ 3,820,769 Oct-1997 $ 3,909,574 $ 3,937,015 $ 3,939,334 $ 3,866,618 Nov-1997 $ 3,923,648 $ 3,955,125 $ 3,957,849 $ 3,877,831 Dec-1997 $ 3,964,062 $ 3,995,072 $ 3,998,219 $ 3,913,119 Jan-1998 $ 4,009,649 $ 4,046,209 $ 4,049,796 $ 3,965,164 Feb-1998 $ 4,011,252 $ 4,042,972 $ 4,046,961 $ 3,959,613 Mar-1998 $ 4,032,913 $ 4,056,718 $ 4,062,744 $ 3,974,263 Apr-1998 $ 4,050,658 $ 4,077,813 $ 4,083,870 $ 3,992,942 May-1998 $ 4,088,734 $ 4,116,552 $ 4,123,075 $ 4,028,879 Jun-1998 $ 4,117,764 $ 4,151,543 $ 4,156,885 $ 4,061,110 Jul-1998 $ 4,126,000 $ 4,160,261 $ 4,165,614 $ 4,069,232 Aug-1998 $ 4,171,798 $ 4,228,074 $ 4,229,348 $ 4,124,167 Sep-1998 $ 4,263,161 $ 4,327,011 $ 4,329,161 $ 4,216,548 Oct-1998 $ 4,229,908 $ 4,304,077 $ 4,309,679 $ 4,182,394 Nov-1998 $ 4,251,058 $ 4,328,611 $ 4,333,383 $ 4,203,306 Dec-1998 $ 4,263,386 $ 4,341,596 $ 4,346,816 $ 4,221,380 Jan-1999 $ 4,288,540 $ 4,372,422 $ 4,378,983 $ 4,247,553 Feb-1999 $ 4,210,059 $ 4,295,904 $ 4,302,350 $ 4,171,946 Mar-1999 $ 4,248,371 $ 4,319,532 $ 4,326,874 $ 4,204,905 Apr-1999 $ 4,269,613 $ 4,333,354 $ 4,341,152 $ 4,219,201 May-1999 $ 4,216,670 $ 4,295,221 $ 4,301,214 $ 4,176,165 Jun-1999 $ 4,188,840 $ 4,281,476 $ 4,286,590 $ 4,161,966 Jul-1999 $ 4,174,179 $ 4,263,494 $ 4,269,443 $ 4,147,400 Aug-1999 $ 4,167,083 $ 4,261,362 $ 4,266,455 $ 4,142,837 Sep-1999 $ 4,205,003 $ 4,310,794 $ 4,317,652 $ 4,188,409 Oct-1999 $ 4,230,654 $ 4,326,744 $ 4,330,605 $ 4,194,691 Nov-1999 $ 4,243,346 $ 4,326,311 $ 4,330,172 $ 4,199,725 Dec-1999 $ 4,239,102 $ 4,305,545 $ 4,310,253 $ 4,180,406 Jan-2000 $ 4,221,298 $ 4,291,337 $ 4,298,185 $ 4,165,357 Feb-2000 $ 4,271,109 $ 4,343,262 $ 4,348,473 $ 4,210,759 Mar-2000 $ 4,323,644 $ 4,400,593 $ 4,405,003 $ 4,262,551 Apr-2000 $ 4,293,811 $ 4,387,831 $ 4,391,788 $ 4,236,124 May-2000 $ 4,284,364 $ 4,385,637 $ 4,387,836 $ 4,228,499 Jun-2000 $ 4,367,909 $ 4,476,859 $ 4,479,542 $ 4,318,143 Jul-2000 $ 4,391,933 $ 4,517,598 $ 4,520,305 $ 4,354,847 Aug-2000 $ 4,467,913 $ 4,583,103 $ 4,584,946 $ 4,415,379 Sep-2000 $ 4,496,061 $ 4,611,977 $ 4,616,123 $ 4,444,521 Oct-2000 $ 4,519,890 $ 4,642,416 $ 4,645,667 $ 4,460,077 Nov-2000 $ 4,596,277 $ 4,718,551 $ 4,720,926 $ 4,530,992 Dec-2000 $ 4,703,370 $ 4,806,316 $ 4,810,152 $ 4,622,518 Jan-2001 $ 4,792,263 $ 4,884,659 $ 4,889,519 $ 4,703,874 Feb-2001 $ 4,826,768 $ 4,927,156 $ 4,933,036 $ 4,749,031 Mar-2001 $ 4,838,352 $ 4,951,792 $ 4,958,688 $ 4,767,553 Apr-2001 $ 4,794,323 $ 4,930,994 $ 4,935,382 $ 4,741,808 May-2001 $ 4,828,842 $ 4,960,580 $ 4,967,956 $ 4,771,207 Jun-2001 $ 4,841,880 $ 4,979,430 $ 4,984,350 $ 4,788,860 Jul-2001 $ 4,934,844 $ 5,090,970 $ 5,099,488 $ 4,905,230 Aug-2001 $ 4,992,582 $ 5,149,516 $ 5,155,583 $ 4,959,187 Sep-2001 $ 5,009,057 $ 5,209,250 $ 5,218,996 $ 4,997,373 Oct-2001 $ 5,127,271 $ 5,318,123 $ 5,324,420 $ 5,099,319 Nov-2001 $ 5,066,257 $ 5,244,733 $ 5,250,943 $ 5,035,068 Dec-2001 $ 5,045,991 $ 5,211,167 $ 5,219,963 $ 5,002,844 Jan-2002 $ 5,095,442 $ 5,253,377 $ 5,261,200 $ 5,038,864 Feb-2002 $ 5,142,320 $ 5,304,335 $ 5,311,708 $ 5,087,741 Mar-2002 $ 5,075,984 $ 5,216,283 $ 5,224,065 $ 4,999,214 Apr-2002 $ 5,156,185 $ 5,317,479 $ 5,323,322 $ 5,089,200 May-2002 $ 5,184,544 $ 5,362,678 $ 5,368,570 $ 5,130,932 Jun-2002 $ 5,190,247 $ 5,409,333 $ 5,408,298 $ 5,127,853 Jul-2002 $ 5,217,236 $ 5,474,786 $ 5,472,656 $ 5,148,364 Aug-2002 $ 5,317,929 $ 5,567,310 $ 5,568,428 $ 5,247,728 Sep-2002 $ 5,391,316 $ 5,657,500 $ 5,656,966 $ 5,304,928 Oct-2002 $ 5,363,821 $ 5,631,476 $ 5,631,509 $ 5,284,769 Nov-2002 $ 5,386,349 $ 5,629,786 $ 5,630,383 $ 5,310,136 Dec-2002 $ 5,493,537 $ 5,746,323 $ 5,747,495 $ 5,418,463 Jan-2003 $ 5,507,820 $ 5,751,495 $ 5,752,093 $ 5,435,260 Feb-2003 $ 5,587,684 $ 5,830,865 $ 5,833,773 $ 5,512,985 Mar-2003 $ 5,581,537 $ 5,826,201 $ 5,828,522 $ 5,513,536 Apr-2003 $ 5,651,306 $ 5,874,558 $ 5,879,813 $ 5,578,044 May-2003 $ 5,748,509 $ 5,983,825 $ 5,988,590 $ 5,681,796 Jun-2003 $ 5,741,611 $ 5,971,857 $ 5,977,811 $ 5,680,660 Jul-2003 $ 5,487,831 $ 5,771,203 $ 5,775,761 $ 5,489,221 Aug-2003 $ 5,530,636 $ 5,809,293 $ 5,815,613 $ 5,530,939 Sep-2003 $ 5,698,215 $ 5,963,239 $ 5,967,982 $ 5,679,722 Oct-2003 $ 5,633,255 $ 5,907,781 $ 5,913,077 $ 5,637,692 Nov-2003 $ 5,660,858 $ 5,921,959 $ 5,930,225 $ 5,652,350 Dec-2003 $ 5,735,015 $ 5,982,363 $ 5,989,527 $ 5,710,004 Jan-2004 $ 5,786,057 $ 6,030,222 $ 6,039,240 $ 5,755,684 Feb-2004 $ 5,837,553 $ 6,095,349 $ 6,103,860 $ 5,811,514 Mar-2004 $ 5,890,091 $ 6,141,064 $ 6,150,249 $ 5,853,357 Apr-2004 $ 5,736,948 $ 5,981,396 $ 5,990,343 $ 5,712,876 May-2004 $ 5,694,495 $ 5,957,471 $ 5,964,584 $ 5,684,883 Jun-2004 $ 5,722,398 $ 5,990,832 $ 5,999,775 $ 5,711,602 Jul-2004 $ 5,780,767 $ 6,050,142 $ 6,059,173 $ 5,765,291 Aug-2004 $ 5,914,426 $ 6,165,699 $ 6,179,145 $ 5,869,066
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 7/26/93. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Bond Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Bond Fund, which are similar to the expenses of the Select Shares. Returns for the Ultra Shares prior to 9/10/01 (offering date of the Ultra Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Bond Fund-Ultra, which are lower than the expenses of the Ultra Shares. Returns for the Class A and B Shares prior to 9/10/01 (offering date of the Class A and B Shares) are calculated using the historical expenses of the J.P. Morgan Bond Fund, which are lower than the expenses of the Class A and B Shares. Returns for the Class C Shares prior to 3/31/03 (offering date of the Class C Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class C Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Bond Fund, Lehman Aggregate Bond Index, Citigroup Broad Investment Grade Bond Index, and Lipper Intermediate Investment Grade Debt Funds Index from August 31, 1994 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage backed securities. The Citigroup Broad Investment Grade Bond Index is an unmanaged, market-weighted index that contains approximately 4,700 individually priced investment grade bonds. The Lipper Intermediate Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 4 JPMORGAN BOND FUND II AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 1/1/1997 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $901 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality AA+ Duration 6.7 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Bond Fund II, which seeks to provide as high a level of income as is consistent with reasonable risk, returned 6.38% (Select Shares) for the one-year period ending August 31, 2004. This compares to the 6.13% return of its benchmark index, the Lehman Aggregate Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund benefited from our underweight to Treasury and agency debt as other sectors out-performed. Our overweight in the residential mortgage sector was a strong positive for performance, as was our mortgage coupon selection. Modest positives were our positions in investment-grade corporate bonds, notably BBB-rated corporate credits, and commercial mortgage-backed securities (CMBS). Our duration positioning and conservative asset-backed securities (ABS) holdings were modest detractors. Q: HOW WAS THE FUND MANAGED? A: We maintained a slightly long duration position during much of the period. We underweighted Treasury and agency debt, finding more compelling opportunities in other high-quality sectors with more generous yield spreads. In the first half of the period, we overweighted residential mortgages, then realized profits and pared back our position in January ahead of expected strong supply. We again moved to an overweight position during the second quarter, mostly in lower coupons, in response to reduced supply and to lower volatility. We modestly overweighted investment-grade corporate bonds. As the market in CMBS continued to outperform, we added to our overweight. We maintained an overweight to ABS. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Residential Mortgage Backed Securities 26.6% Corporate Notes and Bonds 23.1% Asset Backed Securities 16.3% U.S. Treasury Securities 11.9% Money Market Fund 10.5% Commercial Paper 7.8% U.S. Government Agency Securities 1.9% Commercial Mortgage Backed Securities 1.3% Other (Less than 1%) 0.6%
5 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------- CLASS A SHARES Without Sales Charge 6.45% 5.91% 6.91% 6.80% With Sales Charge* 1.67% 4.29% 5.93% 6.31% ----------------------------------------- CLASS B SHARES Without CDSC 5.41% 4.93% 6.26% 6.47% With CDSC** 0.41% 4.01% 5.94% 6.47% ----------------------------------------- SELECT SHARES 6.38% 5.91% 6.94% 6.81%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and 0% for the ten year period. [CHART] TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
JPMORGAN BOND FUND II LEHMAN AGGREGATE LIPPER CORPORATE DEBT (SELECT SHARES) BOND INDEX A-RATED FUNDS INDEX Aug-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000 Sep-1994 $ 985,000 $ 985,300 $ 983,400 Oct-1994 $ 984,508 $ 984,413 $ 980,056 Nov-1994 $ 985,000 $ 982,248 $ 978,684 Dec-1994 $ 982,340 $ 989,025 $ 986,416 Jan-1995 $ 1,002,576 $ 1,008,608 $ 1,003,974 Feb-1995 $ 1,019,921 $ 1,032,613 $ 1,028,270 Mar-1995 $ 1,029,610 $ 1,038,912 $ 1,035,777 Apr-1995 $ 1,042,274 $ 1,053,456 $ 1,050,588 May-1995 $ 1,085,633 $ 1,094,225 $ 1,097,655 Jun-1995 $ 1,089,976 $ 1,102,213 $ 1,105,448 Jul-1995 $ 1,084,090 $ 1,099,788 $ 1,100,031 Aug-1995 $ 1,101,002 $ 1,113,095 $ 1,115,322 Sep-1995 $ 1,115,645 $ 1,123,892 $ 1,127,367 Oct-1995 $ 1,131,933 $ 1,138,503 $ 1,144,390 Nov-1995 $ 1,148,799 $ 1,155,581 $ 1,163,159 Dec-1995 $ 1,164,078 $ 1,171,759 $ 1,181,885 Jan-1996 $ 1,172,576 $ 1,179,492 $ 1,187,440 Feb-1996 $ 1,153,346 $ 1,158,969 $ 1,160,604 Mar-1996 $ 1,145,157 $ 1,150,856 $ 1,151,203 Apr-1996 $ 1,140,118 $ 1,144,412 $ 1,142,339 May-1996 $ 1,137,610 $ 1,142,123 $ 1,139,826 Jun-1996 $ 1,152,399 $ 1,157,427 $ 1,154,074 Jul-1996 $ 1,154,588 $ 1,160,552 $ 1,156,497 Aug-1996 $ 1,151,587 $ 1,158,579 $ 1,153,259 Sep-1996 $ 1,171,279 $ 1,178,739 $ 1,175,171 Oct-1996 $ 1,195,407 $ 1,204,907 $ 1,203,963 Nov-1996 $ 1,218,000 $ 1,225,511 $ 1,228,523 Dec-1996 $ 1,201,557 $ 1,214,113 $ 1,214,641 Jan-1997 $ 1,204,561 $ 1,217,877 $ 1,216,463 Feb-1997 $ 1,206,609 $ 1,220,922 $ 1,220,721 Mar-1997 $ 1,195,025 $ 1,207,370 $ 1,203,875 Apr-1997 $ 1,212,234 $ 1,225,480 $ 1,220,849 May-1997 $ 1,223,508 $ 1,237,122 $ 1,232,203 Jun-1997 $ 1,238,801 $ 1,251,844 $ 1,248,838 Jul-1997 $ 1,275,965 $ 1,285,644 $ 1,289,051 Aug-1997 $ 1,257,974 $ 1,274,716 $ 1,272,680 Sep-1997 $ 1,275,963 $ 1,293,581 $ 1,294,442 Oct-1997 $ 1,293,316 $ 1,312,338 $ 1,311,141 Nov-1997 $ 1,295,644 $ 1,318,375 $ 1,317,303 Dec-1997 $ 1,307,305 $ 1,331,691 $ 1,331,267 Jan-1998 $ 1,323,385 $ 1,348,736 $ 1,347,109 Feb-1998 $ 1,321,532 $ 1,347,657 $ 1,344,819 Mar-1998 $ 1,326,026 $ 1,352,239 $ 1,349,794 Apr-1998 $ 1,332,788 $ 1,359,271 $ 1,356,003 May-1998 $ 1,345,583 $ 1,372,184 $ 1,370,648 Jun-1998 $ 1,357,424 $ 1,383,848 $ 1,382,847 Jul-1998 $ 1,358,374 $ 1,386,754 $ 1,383,124 Aug-1998 $ 1,378,614 $ 1,409,358 $ 1,395,433 Sep-1998 $ 1,413,217 $ 1,442,337 $ 1,426,552 Oct-1998 $ 1,402,477 $ 1,434,692 $ 1,408,577 Nov-1998 $ 1,405,703 $ 1,442,870 $ 1,423,930 Dec-1998 $ 1,411,185 $ 1,447,199 $ 1,428,487 Jan-1999 $ 1,423,180 $ 1,457,474 $ 1,440,629 Feb-1999 $ 1,397,278 $ 1,431,968 $ 1,408,647 Mar-1999 $ 1,405,103 $ 1,439,844 $ 1,417,944 Apr-1999 $ 1,408,756 $ 1,444,451 $ 1,422,624 May-1999 $ 1,395,091 $ 1,431,740 $ 1,406,406 Jun-1999 $ 1,389,650 $ 1,427,159 $ 1,399,514 Jul-1999 $ 1,383,953 $ 1,421,165 $ 1,393,216 Aug-1999 $ 1,382,015 $ 1,420,454 $ 1,389,455 Sep-1999 $ 1,398,599 $ 1,436,931 $ 1,402,655 Oct-1999 $ 1,402,376 $ 1,442,248 $ 1,404,759 Nov-1999 $ 1,402,235 $ 1,442,104 $ 1,405,742 Dec-1999 $ 1,396,206 $ 1,435,182 $ 1,399,416 Jan-2000 $ 1,393,832 $ 1,430,446 $ 1,396,337 Feb-2000 $ 1,408,189 $ 1,447,754 $ 1,411,138 Mar-2000 $ 1,425,650 $ 1,466,864 $ 1,430,330 Apr-2000 $ 1,408,970 $ 1,462,610 $ 1,418,601 May-2000 $ 1,403,334 $ 1,461,879 $ 1,413,069 Jun-2000 $ 1,430,419 $ 1,492,286 $ 1,444,580 Jul-2000 $ 1,443,006 $ 1,505,866 $ 1,456,859 Aug-2000 $ 1,461,188 $ 1,527,701 $ 1,476,235 Sep-2000 $ 1,472,001 $ 1,537,326 $ 1,484,355 Oct-2000 $ 1,479,214 $ 1,547,472 $ 1,490,589 Nov-2000 $ 1,502,585 $ 1,572,850 $ 1,512,650 Dec-2000 $ 1,536,844 $ 1,602,105 $ 1,543,659 Jan-2001 $ 1,564,046 $ 1,628,220 $ 1,572,371 Feb-2001 $ 1,575,620 $ 1,642,385 $ 1,586,522 Mar-2001 $ 1,581,608 $ 1,650,597 $ 1,592,075 Apr-2001 $ 1,563,735 $ 1,643,665 $ 1,583,000 May-2001 $ 1,571,398 $ 1,653,527 $ 1,593,448 Jun-2001 $ 1,576,898 $ 1,659,810 $ 1,599,822 Jul-2001 $ 1,612,063 $ 1,696,990 $ 1,636,138 Aug-2001 $ 1,626,893 $ 1,716,505 $ 1,654,626 Sep-2001 $ 1,649,995 $ 1,736,417 $ 1,661,079 Oct-2001 $ 1,684,315 $ 1,772,708 $ 1,696,959 Nov-2001 $ 1,661,240 $ 1,748,244 $ 1,676,425 Dec-2001 $ 1,652,602 $ 1,737,056 $ 1,663,852 Jan-2002 $ 1,666,979 $ 1,751,126 $ 1,675,499 Feb-2002 $ 1,680,815 $ 1,768,112 $ 1,687,898 Mar-2002 $ 1,655,939 $ 1,738,761 $ 1,660,891 Apr-2002 $ 1,685,249 $ 1,772,493 $ 1,690,289 May-2002 $ 1,697,889 $ 1,787,559 $ 1,703,135 Jun-2002 $ 1,707,736 $ 1,803,111 $ 1,710,459 Jul-2002 $ 1,726,009 $ 1,824,929 $ 1,720,722 Aug-2002 $ 1,757,250 $ 1,855,770 $ 1,752,211 Sep-2002 $ 1,782,203 $ 1,885,833 $ 1,779,370 Oct-2002 $ 1,774,183 $ 1,877,159 $ 1,761,576 Nov-2002 $ 1,777,731 $ 1,876,595 $ 1,767,918 Dec-2002 $ 1,813,286 $ 1,915,441 $ 1,806,282 Jan-2003 $ 1,816,550 $ 1,917,165 $ 1,810,075 Feb-2003 $ 1,839,983 $ 1,943,622 $ 1,836,502 Mar-2003 $ 1,838,143 $ 1,942,067 $ 1,835,217 Apr-2003 $ 1,860,017 $ 1,958,186 $ 1,855,771 May-2003 $ 1,890,336 $ 1,994,608 $ 1,894,557 Jun-2003 $ 1,887,122 $ 1,990,619 $ 1,890,199 Jul-2003 $ 1,798,993 $ 1,923,734 $ 1,825,365 Aug-2003 $ 1,817,163 $ 1,936,431 $ 1,837,413 Sep-2003 $ 1,871,860 $ 1,987,746 $ 1,887,758 Oct-2003 $ 1,850,895 $ 1,969,260 $ 1,872,090 Nov-2003 $ 1,856,818 $ 1,973,986 $ 1,878,080 Dec-2003 $ 1,879,471 $ 1,994,121 $ 1,896,673 Jan-2004 $ 1,896,198 $ 2,010,074 $ 1,912,605 Feb-2004 $ 1,913,833 $ 2,031,783 $ 1,930,775 Mar-2004 $ 1,929,909 $ 2,047,021 $ 1,945,642 Apr-2004 $ 1,877,995 $ 1,993,799 $ 1,897,974 May-2004 $ 1,866,539 $ 1,985,824 $ 1,888,294 Jun-2004 $ 1,876,245 $ 1,996,944 $ 1,897,924 Jul-2004 $ 1,894,632 $ 2,016,714 $ 1,916,144 Aug-2004 $ 1,932,849 $ 2,055,233 $ 1,952,168
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 1/1/97. Returns for the Select Shares prior to 1/1/97 (offering date of the Select Shares) are calculated using performance of a predecessor account and the historical expenses at the level indicated (absent reimbursements) in the Expense Summary for the Fund as disclosed in the Prospectus. The account was not registered with the SEC and was not subject to investment restrictions of registered mutual funds. If the account had been registered, performance may have been adversely affected. Returns for the Class A and B Shares prior to 3/2/01 (offering date of the Class A and B Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class A and B Shares. The graph illustrates comparative performance for $1,000,000 invested in Select Shares of the JPMorgan Bond Fund II, Lehman Aggregate Bond Index, and Lipper Corporate Debt A-Rated Funds Index from August 31, 1994 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Corporate Debt A-Rated Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Select Shares have a $1,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 6 JPMORGAN ENHANCED INCOME FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 11/30/2001 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $294 Primary Benchmark 3 MONTH LIBOR INDEX Average Credit Quality AA- Duration 0.2 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Enhanced Income Fund, which seeks high current income consistent with principal preservation, returned 1.28% for the one-year period ending August 31, 2004. This compares to the 1.22% return of its benchmark, 3 Month LIBOR Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund outperformed the benchmark mainly because of its allocation to corporate and to asset-backed securities. Our overweight position to these sectors versus the benchmark was a positive contributor to performance as spreads continued to narrow during the period. In addition, the Fund's tactical mortgage positioning was a positive contributor to performance when the sector performed well during the year. Our duration position neither contributed nor detracted from performance. Q: HOW WAS THE FUND MANAGED? A: Short-term money market rates remained relatively stable because of the Fed's friendly stance, while longer maturity yields fell in response to mixed economic data, cooling inflation, a weak labor market, and a declining supply of long-term mortgage securities. Early in the period, we maintained a modestly longer duration position in the short end of the yield curve. However, stronger economic data towards year-end led us to reduce our duration position. We continued to take advantage of market volatility by tactically trading our duration position throughout the remainder of the period. In addition, we increased our allocation to floating rate notes as interest rates rose. We tactically traded our mortgage position and added short-dated collateralized mortgage obligations for their attractive returns. We also increased our exposure to corporate and to asset-backed securities. Because of a potential change in federal agency legislation and because of the ensuing headline risk, we reduced our agency exposure early in 2004. We also sold high-quality corporate names in the one- to three-year area of the yield curve in favor of lower-quality names. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes and Bonds 45.0% Asset Backed Securities 30.6% Residential Mortgage Backed Securities 8.8% U.S. Government Agency Securities 4.7% Commercial Mortgage Backed Securities 3.3% Other (Less than 1%) 2.4% Commercial Paper 1.8% Money Market Fund 1.8% Certificates of Deposit 1.6%
7 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
SINCE INCEPTION 1 YEAR (11/30/01) ---------------------- INSTITUTIONAL SHARES 1.28% 1.46%
[CHART] LIFE OF FUND PERFORMANCE (11/30/01 TO 8/31/04)
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 $ 3,003,900 Jan-2002 $ 3,008,706 $ 3,010,509 $ 3,007,805 Feb-2002 $ 3,014,422 $ 3,014,724 $ 3,014,121 Mar-2002 $ 3,020,451 $ 3,019,547 $ 3,012,012 Apr-2002 $ 3,032,231 $ 3,024,681 $ 3,024,963 May-2002 $ 3,037,992 $ 3,029,520 $ 3,033,131 Jun-2002 $ 3,043,764 $ 3,034,367 $ 3,038,590 Jul-2002 $ 3,044,069 $ 3,039,222 $ 3,041,021 Aug-2002 $ 3,047,722 $ 3,044,085 $ 3,048,320 Sep-2002 $ 3,051,684 $ 3,048,651 $ 3,056,550 Oct-2002 $ 3,055,651 $ 3,053,529 $ 3,059,301 Nov-2002 $ 3,061,762 $ 3,058,415 $ 3,065,420 Dec-2002 $ 3,061,150 $ 3,062,391 $ 3,075,842 Jan-2003 $ 3,069,415 $ 3,066,066 $ 3,080,763 Feb-2003 $ 3,071,256 $ 3,069,132 $ 3,090,006 Mar-2003 $ 3,074,635 $ 3,072,815 $ 3,093,405 Apr-2003 $ 3,081,092 $ 3,075,887 $ 3,098,045 May-2003 $ 3,090,643 $ 3,079,271 $ 3,103,002 Jun-2003 $ 3,090,334 $ 3,082,966 $ 3,106,725 Jul-2003 $ 3,073,955 $ 3,086,049 $ 3,101,754 Aug-2003 $ 3,082,255 $ 3,088,826 $ 3,106,097 Sep-2003 $ 3,089,960 $ 3,091,606 $ 3,118,211 Oct-2003 $ 3,084,399 $ 3,094,698 $ 3,116,963 Nov-2003 $ 3,087,791 $ 3,097,793 $ 3,118,834 Dec-2003 $ 3,091,497 $ 3,100,890 $ 3,124,759 Jan-2004 $ 3,095,206 $ 3,103,991 $ 3,130,071 Feb-2004 $ 3,101,706 $ 3,106,785 $ 3,137,584 Mar-2004 $ 3,105,118 $ 3,109,892 $ 3,142,290 Apr-2004 $ 3,105,429 $ 3,112,691 $ 3,135,377 May-2004 $ 3,106,050 $ 3,115,803 $ 3,134,436 Jun-2004 $ 3,109,777 $ 3,118,607 $ 3,135,377 Jul-2004 $ 3,114,131 $ 3,122,662 $ 3,141,961 Aug-2004 $ 3,121,639 $ 3,126,721 $ 3,150,444
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 11/30/01. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Enhanced Income Fund, 3 Month LIBOR Index, and the Lipper Ultra-Short Obligations Average from November 30, 2001 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of securities included in the benchmark. The 3 Month LIBOR Index is an abbreviation for the "London Interbank Offered Rate". Similarly to the Fed Funds Rate, it represents the rate at which banks are willing to loan each other reserves. The LIBOR is an average of the rate charged on dollar-denominated deposits traded between banks in London. The benchmark presented is the total return of the 3 Month LIBOR for the period presented. The Lipper Ultra-Short Obligations Average describes the average total returns for all the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 8 JPMORGAN FLEMING EMERGING MARKETS DEBT FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 4/17/1997 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $36 Primary Benchmark EMERGING MARKETS BOND INDEX GLOBAL Average Credit Quality BB Duration 5.8 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Fleming Emerging Markets Debt Fund, which seeks to provide high total return from a portfolio of fixed-income securities of emerging markets issuers, had a total return of 14.56% (Select Shares) for the one-year period ended August 31, 2004. This compares to the 13.58% return from the Emerging Markets Bond Index Global. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund benefited from our decision to overweight Brazil and Ecuador. Brazil's credit story continued to improve, while Ecuador was a direct beneficiary of oil prices. Higher oil prices were also good for Venezuela; however, our position modestly detracted because of an underweight we adopted due to ongoing questions about future political leadership. The underweight added to performance as the political uncertainty resolved itself. High credit-quality assets closely tracked U.S. Treasuries, and our underweight benefited the Fund as lower-rated credits outperformed. Detracting was our overweight to the Dominican Republic, which underperformed as questions about economic liquidity shifted to potential solvency issues. Q: HOW WAS THE FUND MANAGED? A: We overweighted Brazil and other Latin credits early in the period. We increased our holdings in Russia because of improving credit fundamentals and in Turkey as its fundamental outlook improved. The main drivers of returns over the period were Brazil, Ecuador, Turkey and Venezuela. Additionally, as most Asian credits lagged, the underweight to the region benefited the Fund. Early in 2004, profit taking followed the Fed's change in language with Venezuela, Brazil and Colombia suffering the most. The Philippines slipped while Europe performed most strongly, led by Russia. For most of the second quarter of 2004, fear of a Fed interest-rate hike drove down prices, with Latin American and European credits hit the hardest. We were overweight Brazil, Peru, Colombia and Turkey. However, when the market recovered during the summer, we reduced our position in Brazil to neutral, scaled back our allocation to Colombia, and moved to an overweight in Uruguay. We increased our overweight in Russian debt. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Foreign Government Securities 83.7% Corporate Notes and Bonds 6.6% U.S. Treasury Securities 8.6% Money Market Fund 1.1%
9 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (4/17/97) ----------------------------------------- SELECT SHARES 14.56% 15.15% 16.58% 10.11%
[CHART] LIFE OF FUND PERFORMANCE (4/17/97 TO 8/31/04)
JPMORGAN FLEMING EMERGING MARKETS EMERGING MARKETS BOND LIPPER EMERGING MARKETS DEBT FUND (SELECT SHARES) INDEX GLOBAL DEBT FUNDS INDEX Apr-1997 $ 1,000,000 $ 1,000,000 $ 1,000,000 Apr-1997 $ 1,020,000 $ 1,000,000 $ 1,000,000 May-1997 $ 1,051,008 $ 1,033,900 $ 1,041,100 Jun-1997 $ 1,068,034 $ 1,056,542 $ 1,073,686 Jul-1997 $ 1,090,036 $ 1,100,178 $ 1,119,855 Aug-1997 $ 1,078,917 $ 1,094,787 $ 1,116,047 Sep-1997 $ 1,105,783 $ 1,125,222 $ 1,151,426 Oct-1997 $ 986,026 $ 1,005,948 $ 1,027,878 Nov-1997 $ 1,034,835 $ 1,048,601 $ 1,067,246 Dec-1997 $ 1,053,462 $ 1,074,291 $ 1,099,050 Jan-1998 $ 1,051,144 $ 1,079,448 $ 1,096,742 Feb-1998 $ 1,080,891 $ 1,107,945 $ 1,127,122 Mar-1998 $ 1,107,373 $ 1,133,096 $ 1,156,427 Apr-1998 $ 1,108,481 $ 1,135,702 $ 1,157,121 May-1998 $ 1,072,455 $ 1,101,404 $ 1,110,026 Jun-1998 $ 1,033,310 $ 1,073,538 $ 1,065,070 Jul-1998 $ 1,045,090 $ 1,079,765 $ 1,073,590 Aug-1998 $ 763,229 $ 784,557 $ 701,591 Sep-1998 $ 808,794 $ 852,343 $ 732,952 Oct-1998 $ 862,417 $ 906,807 $ 778,395 Nov-1998 $ 914,162 $ 969,014 $ 849,152 Dec-1998 $ 885,640 $ 950,312 $ 817,478 Jan-1999 $ 846,141 $ 928,645 $ 793,853 Feb-1999 $ 855,702 $ 937,839 $ 807,428 Mar-1999 $ 920,650 $ 1,000,018 $ 860,718 Apr-1999 $ 1,000,286 $ 1,061,519 $ 922,518 May-1999 $ 930,566 $ 1,006,744 $ 872,148 Jun-1999 $ 974,954 $ 1,045,403 $ 907,819 Jul-1999 $ 949,995 $ 1,027,945 $ 894,293 Aug-1999 $ 944,675 $ 1,028,665 $ 893,309 Sep-1999 $ 977,267 $ 1,060,965 $ 915,374 Oct-1999 $ 1,019,582 $ 1,098,523 $ 953,636 Nov-1999 $ 1,050,782 $ 1,127,963 $ 992,259 Dec-1999 $ 1,115,615 $ 1,180,188 $ 1,044,551 Jan-2000 $ 1,104,459 $ 1,162,013 $ 1,035,359 Feb-2000 $ 1,194,803 $ 1,224,413 $ 1,101,829 Mar-2000 $ 1,237,816 $ 1,257,717 $ 1,128,713 Apr-2000 $ 1,206,376 $ 1,234,575 $ 1,099,818 May-2000 $ 1,163,429 $ 1,206,056 $ 1,067,264 Jun-2000 $ 1,229,744 $ 1,262,259 $ 1,124,255 Jul-2000 $ 1,274,015 $ 1,298,233 $ 1,157,421 Aug-2000 $ 1,311,853 $ 1,339,647 $ 1,192,491 Sep-2000 $ 1,281,681 $ 1,325,178 $ 1,171,384 Oct-2000 $ 1,254,381 $ 1,298,277 $ 1,142,099 Nov-2000 $ 1,232,931 $ 1,293,084 $ 1,134,219 Dec-2000 $ 1,285,330 $ 1,350,239 $ 1,179,928 Jan-2001 $ 1,353,324 $ 1,415,320 $ 1,244,588 Feb-2001 $ 1,332,754 $ 1,396,496 $ 1,230,399 Mar-2001 $ 1,305,966 $ 1,380,856 $ 1,209,975 Apr-2001 $ 1,295,257 $ 1,374,227 $ 1,201,989 May-2001 $ 1,333,078 $ 1,407,346 $ 1,234,803 Jun-2001 $ 1,361,073 $ 1,428,879 $ 1,256,536 Jul-2001 $ 1,272,059 $ 1,354,863 $ 1,203,636 Aug-2001 $ 1,332,354 $ 1,415,561 $ 1,245,642 Sep-2001 $ 1,270,933 $ 1,369,272 $ 1,186,101 Oct-2001 $ 1,278,685 $ 1,369,956 $ 1,201,164 Nov-2001 $ 1,307,072 $ 1,352,421 $ 1,239,121 Dec-2001 $ 1,346,807 $ 1,368,515 $ 1,271,834 Jan-2002 $ 1,379,535 $ 1,393,832 $ 1,297,143 Feb-2002 $ 1,436,509 $ 1,446,101 $ 1,343,840 Mar-2002 $ 1,444,554 $ 1,447,692 $ 1,355,801 Apr-2002 $ 1,455,966 $ 1,461,879 $ 1,371,257 May-2002 $ 1,438,640 $ 1,454,277 $ 1,359,875 Jun-2002 $ 1,344,984 $ 1,380,982 $ 1,268,084 Jul-2002 $ 1,263,344 $ 1,318,423 $ 1,192,886 Aug-2002 $ 1,360,495 $ 1,414,932 $ 1,278,178 Sep-2002 $ 1,307,572 $ 1,375,738 $ 1,236,381 Oct-2002 $ 1,404,463 $ 1,460,346 $ 1,322,186 Nov-2002 $ 1,452,355 $ 1,501,820 $ 1,365,686 Dec-2002 $ 1,500,864 $ 1,547,926 $ 1,414,578 Jan-2003 $ 1,523,527 $ 1,573,467 $ 1,445,557 Feb-2003 $ 1,577,459 $ 1,623,818 $ 1,498,320 Mar-2003 $ 1,617,211 $ 1,650,123 $ 1,536,227 Apr-2003 $ 1,725,403 $ 1,744,180 $ 1,636,389 May-2003 $ 1,790,623 $ 1,816,564 $ 1,710,027 Jun-2003 $ 1,778,268 $ 1,816,564 $ 1,710,882 Jul-2003 $ 1,722,252 $ 1,752,258 $ 1,661,095 Aug-2003 $ 1,775,470 $ 1,794,837 $ 1,703,453 Sep-2003 $ 1,832,463 $ 1,857,836 $ 1,756,260 Oct-2003 $ 1,854,086 $ 1,866,940 $ 1,767,851 Nov-2003 $ 1,883,566 $ 1,889,903 $ 1,793,132 Dec-2003 $ 1,944,028 $ 1,945,466 $ 1,852,664 Jan-2004 $ 1,957,442 $ 1,955,388 $ 1,864,150 Feb-2004 $ 1,954,701 $ 1,962,232 $ 1,861,540 Mar-2004 $ 2,007,869 $ 2,011,092 $ 1,907,520 Apr-2004 $ 1,863,504 $ 1,901,889 $ 1,810,237 May-2004 $ 1,843,005 $ 1,873,741 $ 1,777,653 Jun-2004 $ 1,873,230 $ 1,901,285 $ 1,806,273 Jul-2004 $ 1,933,361 $ 1,957,753 $ 1,859,558 Aug-2004 $ 2,034,242 $ 2,038,609 $ 1,936,916
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 4/17/97. The mountain chart illustrates comparative performance for $1,000,000 invested in the Select Shares of the JPMorgan Fleming Emerging Markets Debt Fund, Emerging Markets Bond Index Global and Lipper Emerging Markets Debt Funds Index from April 17, 1997 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Emerging Markets Bond Index Global is an unmanaged index which tracks total return for external currency-denominated debt (Brady bonds, loans, Eurobonds and U.S. dollar-denominated local market instruments) in emerging markets. The Lipper Emerging Markets Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. The Select Shares have a minimum investment of $1,000,000 and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 10 JPMORGAN GLOBAL STRATEGIC INCOME FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 3/17/1997 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $43 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality A- Duration 4.5 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Global Strategic Income Fund, which seeks to provide high total return from a portfolio of fixed income securities of foreign and domestic issuers, had a total return of 7.85% (Institutional Shares) for the one-year period ended August 31, 2004. This compares to the 6.13% return of the Lehman Aggregate Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: Our overweight to high-yield debt added to performance at a time when credit fundamentals and market supply dynamics continued to favor this sector. Another successful strategy was our overweight to emerging markets debt. The Fund also benefited as European interest rates outperformed five-year Treasuries, and as a result we took profits on the short-U.S./long-Eurozone trade. The Fund benefited from our underweight position to Treasury and agency debt as other sectors out-performed. Q: HOW WAS THE FUND MANAGED? A: As fundamental credit quality continued to improve, we maintained significant allocations to high-yield and to emerging markets debt, choosing our individual holdings by taking a bottom-up view of company and country fundamentals. Because we believed that economic activity would increase more quickly in the U.S. than in the Eurozone, we took a position in which we were long the Eurozone and short the U.S. We also favored the commercial mortgage-backed securities sector, maintaining our overweight. Our allocations to investment-grade corporate bonds, residential mortgages, Treasuries and agencies were underweight the benchmark index, which is consistent with our strategy. At the end of the period, we took advantage of an opportunity to liquidate a large private mortgage allocation at a profit. We redeployed the cash in the residential pass-through mortgage sector, which offers far more liquidity and did not require us to give up much yield. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes and Bonds 52.7% Foreign Government Securities 26.5% Private Placements 8.6% Commercial Mortgage Backed Securities 4.6% Money Market Fund 4.3% U.S. Treasury Securities 3.2% Other (Less than 1%) 0.1%
11 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (3/17/97) ----------------------------------------- CLASS A SHARES Without Sales Charge 7.20% 5.09% 6.00% 5.29% With Sales Charge* 2.50% 3.50% 5.03% 4.65% ----------------------------------------- INSTITUTIONAL SHARES 7.85% 5.82% 6.60% 5.78% ----------------------------------------- SELECT SHARES 7.48% 5.41% 6.20% 5.42%
* Sales charge for class a shares is 4.50%. [CHART] LIFE OF FUND PERFORMANCE (3/17/97 TO 8/31/04)
JPMORGAN GLOBAL STRATEGIC LEHMAN AGGREGATE LIPPER MULTI-SECTOR INCOME FUND (INSTITUTIONAL SHARES) BOND INDEX INCOME FUNDS INDEX Mar-1997 $ 3,000,000 $ 3,000,000 $ 3,000,000 Mar-1997 $ 2,967,900 $ 3,000,000 $ 3,000,000 Apr-1997 $ 3,018,651 $ 3,045,000 $ 3,026,700 May-1997 $ 3,069,968 $ 3,073,928 $ 3,076,943 Jun-1997 $ 3,114,483 $ 3,110,507 $ 3,120,636 Jul-1997 $ 3,200,131 $ 3,194,491 $ 3,192,098 Aug-1997 $ 3,179,010 $ 3,167,338 $ 3,172,946 Sep-1997 $ 3,242,590 $ 3,214,214 $ 3,237,039 Oct-1997 $ 3,184,548 $ 3,260,820 $ 3,222,149 Nov-1997 $ 3,222,444 $ 3,275,820 $ 3,235,360 Dec-1997 $ 3,256,602 $ 3,308,906 $ 3,267,713 Jan-1998 $ 3,296,658 $ 3,351,260 $ 3,309,213 Feb-1998 $ 3,327,976 $ 3,348,579 $ 3,325,098 Mar-1998 $ 3,358,927 $ 3,359,964 $ 3,361,341 Apr-1998 $ 3,365,980 $ 3,377,436 $ 3,371,089 May-1998 $ 3,369,683 $ 3,409,522 $ 3,364,010 Jun-1998 $ 3,365,302 $ 3,438,503 $ 3,355,600 Jul-1998 $ 3,381,456 $ 3,445,723 $ 3,368,686 Aug-1998 $ 3,260,400 $ 3,501,889 $ 3,169,597 Sep-1998 $ 3,316,479 $ 3,583,833 $ 3,224,114 Oct-1998 $ 3,276,681 $ 3,564,839 $ 3,199,289 Nov-1998 $ 3,327,142 $ 3,585,158 $ 3,312,223 Dec-1998 $ 3,341,116 $ 3,595,914 $ 3,304,605 Jan-1999 $ 3,366,508 $ 3,621,445 $ 3,322,120 Feb-1999 $ 3,322,744 $ 3,558,069 $ 3,277,603 Mar-1999 $ 3,368,597 $ 3,577,639 $ 3,318,573 Apr-1999 $ 3,422,495 $ 3,589,087 $ 3,376,980 May-1999 $ 3,351,307 $ 3,557,503 $ 3,306,401 Jun-1999 $ 3,341,253 $ 3,546,119 $ 3,302,764 Jul-1999 $ 3,331,564 $ 3,531,226 $ 3,295,168 Aug-1999 $ 3,315,239 $ 3,529,460 $ 3,271,443 Sep-1999 $ 3,338,446 $ 3,570,402 $ 3,285,183 Oct-1999 $ 3,361,815 $ 3,583,612 $ 3,289,454 Nov-1999 $ 3,392,407 $ 3,583,254 $ 3,311,164 Dec-1999 $ 3,424,296 $ 3,566,054 $ 3,339,640 Jan-2000 $ 3,390,738 $ 3,554,286 $ 3,308,247 Feb-2000 $ 3,448,719 $ 3,597,293 $ 3,351,916 Mar-2000 $ 3,476,654 $ 3,644,777 $ 3,350,911 Apr-2000 $ 3,451,970 $ 3,634,207 $ 3,303,663 May-2000 $ 3,424,699 $ 3,632,390 $ 3,262,367 Jun-2000 $ 3,502,097 $ 3,707,944 $ 3,345,557 Jul-2000 $ 3,535,017 $ 3,741,686 $ 3,356,263 Aug-2000 $ 3,586,982 $ 3,795,941 $ 3,383,784 Sep-2000 $ 3,592,362 $ 3,819,855 $ 3,353,669 Oct-2000 $ 3,594,518 $ 3,845,066 $ 3,283,242 Nov-2000 $ 3,607,817 $ 3,908,125 $ 3,244,499 Dec-2000 $ 3,696,931 $ 3,980,816 $ 3,327,234 Jan-2001 $ 3,804,511 $ 4,045,704 $ 3,442,024 Feb-2001 $ 3,810,979 $ 4,080,901 $ 3,449,596 Mar-2001 $ 3,786,970 $ 4,101,306 $ 3,390,263 Apr-2001 $ 3,761,976 $ 4,084,080 $ 3,361,107 May-2001 $ 3,793,952 $ 4,108,585 $ 3,390,685 Jun-2001 $ 3,776,121 $ 4,124,198 $ 3,359,490 Jul-2001 $ 3,796,890 $ 4,216,580 $ 3,392,749 Aug-2001 $ 3,850,426 $ 4,265,070 $ 3,437,873 Sep-2001 $ 3,722,977 $ 4,314,545 $ 3,331,299 Oct-2001 $ 3,804,882 $ 4,404,719 $ 3,412,916 Nov-2001 $ 3,869,565 $ 4,343,934 $ 3,445,680 Dec-2001 $ 3,844,413 $ 4,316,133 $ 3,439,133 Jan-2002 $ 3,867,095 $ 4,351,093 $ 3,457,704 Feb-2002 $ 3,870,962 $ 4,393,299 $ 3,469,806 Mar-2002 $ 3,862,059 $ 4,320,370 $ 3,472,929 Apr-2002 $ 3,899,135 $ 4,404,185 $ 3,527,107 May-2002 $ 3,901,084 $ 4,441,621 $ 3,537,335 Jun-2002 $ 3,839,057 $ 4,480,263 $ 3,469,418 Jul-2002 $ 3,799,899 $ 4,534,474 $ 3,424,663 Aug-2002 $ 3,877,416 $ 4,611,107 $ 3,488,704 Sep-2002 $ 3,878,580 $ 4,685,807 $ 3,494,635 Oct-2002 $ 3,902,627 $ 4,664,252 $ 3,505,818 Nov-2002 $ 3,975,216 $ 4,662,853 $ 3,589,256 Dec-2002 $ 4,030,074 $ 4,759,374 $ 3,662,477 Jan-2003 $ 4,053,448 $ 4,763,657 $ 3,709,723 Feb-2003 $ 4,107,764 $ 4,829,396 $ 3,769,821 Mar-2003 $ 4,141,448 $ 4,825,532 $ 3,808,650 Apr-2003 $ 4,238,772 $ 4,865,584 $ 3,934,716 May-2003 $ 4,294,300 $ 4,956,084 $ 4,023,247 Jun-2003 $ 4,301,600 $ 4,946,172 $ 4,053,421 Jul-2003 $ 4,178,575 $ 4,779,981 $ 3,956,950 Aug-2003 $ 4,220,778 $ 4,811,528 $ 3,989,001 Sep-2003 $ 4,318,700 $ 4,939,034 $ 4,105,081 Oct-2003 $ 4,308,767 $ 4,893,101 $ 4,123,144 Nov-2003 $ 4,332,035 $ 4,904,844 $ 4,165,200 Dec-2003 $ 4,395,282 $ 4,954,874 $ 4,254,335 Jan-2004 $ 4,430,444 $ 4,994,513 $ 4,295,177 Feb-2004 $ 4,452,154 $ 5,048,453 $ 4,306,344 Mar-2004 $ 4,489,552 $ 5,086,317 $ 4,340,795 Apr-2004 $ 4,423,555 $ 4,954,073 $ 4,247,034 May-2004 $ 4,387,725 $ 4,934,256 $ 4,204,563 Jun-2004 $ 4,415,806 $ 4,961,888 $ 4,238,620 Jul-2004 $ 4,473,653 $ 5,011,011 $ 4,280,583 Aug-2004 $ 4,562,738 $ 5,106,721 $ 4,364,054
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 3/17/97. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Global Strategic Income Fund, which are similar to the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Global Strategic Income Fund, which are similar to the expenses of the Select Shares. Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A Shares) are calculated using the historical expenses of the J.P. Morgan Global Strategic Income Fund, which are lower than the expenses of the Class A Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Global Strategic Income Fund, Lehman Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from March 17, 1997 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Multi-Sector Income Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 12 JPMORGAN SHORT TERM BOND FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 9/13/1993 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $739 Primary Benchmark MERRILL LYNCH 1-3 YEAR TREASURY INDEX Average Credit Quality A+ Duration 1.7 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Short Term Bond Fund, which seeks to provide high total return consistent with low volatility of principal, returned 2.38% (Institutional Shares) for the one-year period ending August 31, 2004. This compares to the 2.05% return of its benchmark index, the Merrill Lynch 1-3 Year Treasury Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: The Fund outperformed its benchmark because of its allocation to sectors that have spreads over Treasuries, such as asset-backed securities (ABS). It also benefited from its allocation to mortgages, which performed well, and the additional yield provided from lower-quality corporate, high-yield and from emerging markets credits. In addition, we realized profits on our U.S.-European interest rate position. Our duration positioning detracted from performance. Q: HOW WAS THE FUND MANAGED? A: Early in the period, we maintained a modestly longer duration position in the short end of the yield curve. However, stronger economic data towards year-end led us to implement a shorter duration position versus the benchmark. We continued to take advantage of market volatility by tactically trading our duration position. In addition, we targeted two- and three-year securities because they offered the most attractive yields. We tactically traded our mortgage position and added short-dated collateralized mortgage obligations. A potential change in federal agency legislation and the ensuing headline risk led us to reduce our agency exposure in early 2004. To capture attractive yields, we increased our exposure to corporate and to ABS. In addition, we sold high-quality corporate bonds in the one- to three-year area of the yield curve in favor of lower-quality names. Because we expected economic activity to increase more quickly in the U.S. than in the Eurozone, we took a position in which we were long the Eurozone and short the U.S. We later removed this position at a gain and entered a short Japanese position, as we believed Japanese interest rates would continue to increase. We also purchased select issues in the high-yield and in the emerging markets sectors. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes and Bonds 47.7% Asset Backed Securities 20.5% Residential Mortgage Backed Securities 13.6% Commercial Mortgage Backed Securities 7.0% U.S. Government Agency Securities 2.4% Money Market Fund 1.7% State and Municipal Obligations 1.6% Foreign Government Securities 1.4% Commercial Paper 1.4% Certificates of Deposit 1.2% Preferred Stocks 1.0% Other (Less than 1%) 0.5%
13 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------- CLASS A SHARES Without Sales Charge 1.92% 3.14% 4.68% 5.26% With Sales Charge* 0.39% 2.62% 4.36% 5.09% ----------------------------------------- INSTITUTIONAL SHARES 2.38% 3.63% 5.10% 5.57% ----------------------------------------- SELECT SHARES 1.99% 3.32% 4.79% 5.31%
* Sales Charge for Class A Shares is 1.50%. [CHART] TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
JPMORGAN SHORT TERM BOND FUND LIPPER SHORT-TERM INVESTMENT GRADE (INSTITUTIONAL SHARES) MERRILL LYNCH 1-3 YEAR TREASURY INDEX DEBT FUNDS INDEX Aug-1994 $ 3,000,000 $ 3,000,000 $ 3,000,000 Sep-1994 $ 2,992,800 $ 2,993,100 $ 2,995,800 Oct-1994 $ 2,998,486 $ 2,999,685 $ 3,000,593 Nov-1994 $ 2,988,291 $ 2,986,186 $ 2,995,192 Dec-1994 $ 2,994,268 $ 2,993,054 $ 2,988,004 Jan-1995 $ 3,029,002 $ 3,034,658 $ 3,018,481 Feb-1995 $ 3,069,590 $ 3,076,233 $ 3,054,099 Mar-1995 $ 3,088,929 $ 3,093,460 $ 3,070,897 Apr-1995 $ 3,117,965 $ 3,120,991 $ 3,097,307 May-1995 $ 3,176,270 $ 3,175,609 $ 3,153,987 Jun-1995 $ 3,192,469 $ 3,192,757 $ 3,173,542 Jul-1995 $ 3,198,854 $ 3,205,847 $ 3,183,698 Aug-1995 $ 3,221,246 $ 3,225,082 $ 3,205,028 Sep-1995 $ 3,240,252 $ 3,240,885 $ 3,220,412 Oct-1995 $ 3,262,609 $ 3,268,109 $ 3,250,684 Nov-1995 $ 3,291,647 $ 3,296,868 $ 3,277,990 Dec-1995 $ 3,317,651 $ 3,322,254 $ 3,300,608 Jan-1996 $ 3,346,182 $ 3,350,493 $ 3,330,314 Feb-1996 $ 3,323,763 $ 3,336,421 $ 3,317,991 Mar-1996 $ 3,329,081 $ 3,333,418 $ 3,303,392 Apr-1996 $ 3,330,746 $ 3,336,085 $ 3,305,705 May-1996 $ 3,342,070 $ 3,343,091 $ 3,312,316 Jun-1996 $ 3,364,796 $ 3,367,161 $ 3,336,165 Jul-1996 $ 3,373,881 $ 3,380,293 $ 3,349,843 Aug-1996 $ 3,386,702 $ 3,391,786 $ 3,361,568 Sep-1996 $ 3,417,182 $ 3,422,651 $ 3,393,839 Oct-1996 $ 3,458,530 $ 3,461,327 $ 3,430,153 Nov-1996 $ 3,485,853 $ 3,487,979 $ 3,458,623 Dec-1996 $ 3,486,898 $ 3,487,979 $ 3,460,006 Jan-1997 $ 3,504,681 $ 3,504,373 $ 3,477,652 Feb-1997 $ 3,515,196 $ 3,512,433 $ 3,489,476 Mar-1997 $ 3,515,547 $ 3,511,028 $ 3,485,987 Apr-1997 $ 3,540,507 $ 3,539,818 $ 3,513,875 May-1997 $ 3,565,645 $ 3,563,889 $ 3,537,418 Jun-1997 $ 3,587,752 $ 3,588,480 $ 3,562,180 Jul-1997 $ 3,625,065 $ 3,627,953 $ 3,602,789 Aug-1997 $ 3,629,052 $ 3,631,219 $ 3,605,310 Sep-1997 $ 3,659,173 $ 3,658,816 $ 3,633,432 Oct-1997 $ 3,674,542 $ 3,685,891 $ 3,655,596 Nov-1997 $ 3,682,626 $ 3,694,737 $ 3,664,735 Dec-1997 $ 3,709,141 $ 3,719,861 $ 3,686,723 Jan-1998 $ 3,750,683 $ 3,755,944 $ 3,718,798 Feb-1998 $ 3,754,434 $ 3,759,324 $ 3,724,004 Mar-1998 $ 3,769,452 $ 3,774,738 $ 3,739,272 Apr-1998 $ 3,788,676 $ 3,792,479 $ 3,756,847 May-1998 $ 3,811,029 $ 3,812,579 $ 3,777,134 Jun-1998 $ 3,825,892 $ 3,832,404 $ 3,794,131 Jul-1998 $ 3,848,847 $ 3,850,417 $ 3,810,825 Aug-1998 $ 3,875,789 $ 3,898,932 $ 3,836,739 Sep-1998 $ 3,944,778 $ 3,950,398 $ 3,877,408 Oct-1998 $ 3,946,356 $ 3,969,755 $ 3,872,368 Nov-1998 $ 3,951,486 $ 3,966,182 $ 3,882,436 Dec-1998 $ 3,970,454 $ 3,980,064 $ 3,899,130 Jan-1999 $ 3,992,688 $ 3,994,392 $ 3,918,626 Feb-1999 $ 3,974,721 $ 3,976,018 $ 3,905,695 Mar-1999 $ 4,005,724 $ 4,003,452 $ 3,936,159 Apr-1999 $ 4,020,144 $ 4,016,263 $ 3,950,329 May-1999 $ 4,006,074 $ 4,013,854 $ 3,945,194 Jun-1999 $ 3,999,664 $ 4,026,296 $ 3,952,690 Jul-1999 $ 4,005,664 $ 4,039,181 $ 3,957,038 Aug-1999 $ 4,020,084 $ 4,050,894 $ 3,964,952 Sep-1999 $ 4,050,637 $ 4,077,225 $ 3,991,120 Oct-1999 $ 4,065,624 $ 4,088,234 $ 3,999,901 Nov-1999 $ 4,085,546 $ 4,096,001 $ 4,013,100 Dec-1999 $ 4,097,802 $ 4,101,736 $ 4,021,528 Jan-2000 $ 4,101,490 $ 4,100,095 $ 4,023,137 Feb-2000 $ 4,121,998 $ 4,127,566 $ 4,049,287 Mar-2000 $ 4,132,303 $ 4,153,156 $ 4,070,343 Apr-2000 $ 4,152,551 $ 4,163,955 $ 4,071,157 May-2000 $ 4,170,407 $ 4,181,027 $ 4,085,406 Jun-2000 $ 4,192,510 $ 4,224,510 $ 4,130,754 Jul-2000 $ 4,219,762 $ 4,251,124 $ 4,156,365 Aug-2000 $ 4,238,328 $ 4,282,582 $ 4,186,706 Sep-2000 $ 4,273,930 $ 4,313,417 $ 4,222,294 Oct-2000 $ 4,288,462 $ 4,336,709 $ 4,234,960 Nov-2000 $ 4,342,925 $ 4,377,908 $ 4,273,499 Dec-2000 $ 4,393,738 $ 4,430,005 $ 4,318,798 Jan-2001 $ 4,431,084 $ 4,485,380 $ 4,380,125 Feb-2001 $ 4,466,090 $ 4,514,535 $ 4,410,785 Mar-2001 $ 4,497,799 $ 4,552,006 $ 4,442,543 Apr-2001 $ 4,496,450 $ 4,564,296 $ 4,453,205 May-2001 $ 4,522,529 $ 4,589,856 $ 4,480,815 Jun-2001 $ 4,542,881 $ 4,605,462 $ 4,499,186 Jul-2001 $ 4,599,667 $ 4,657,043 $ 4,554,526 Aug-2001 $ 4,632,784 $ 4,684,054 $ 4,584,131 Sep-2001 $ 4,697,643 $ 4,761,341 $ 4,627,680 Oct-2001 $ 4,747,438 $ 4,806,097 $ 4,662,850 Nov-2001 $ 4,724,176 $ 4,795,524 $ 4,640,002 Dec-2001 $ 4,727,955 $ 4,797,442 $ 4,635,362 Jan-2002 $ 4,747,812 $ 4,807,037 $ 4,648,805 Feb-2002 $ 4,767,278 $ 4,830,111 $ 4,662,287 Mar-2002 $ 4,738,675 $ 4,797,266 $ 4,641,306 Apr-2002 $ 4,800,278 $ 4,850,995 $ 4,678,437 May-2002 $ 4,818,039 $ 4,870,399 $ 4,704,636 Jun-2002 $ 4,845,501 $ 4,911,311 $ 4,709,811 Jul-2002 $ 4,897,833 $ 4,971,229 $ 4,723,940 Aug-2002 $ 4,915,955 $ 4,988,131 $ 4,753,701 Sep-2002 $ 4,958,232 $ 5,029,532 $ 4,784,600 Oct-2002 $ 4,975,090 $ 5,041,100 $ 4,787,471 Nov-2002 $ 4,958,672 $ 5,025,977 $ 4,789,386 Dec-2002 $ 4,991,399 $ 5,073,221 $ 4,837,280 Jan-2003 $ 5,012,363 $ 5,072,714 $ 4,845,020 Feb-2003 $ 5,037,926 $ 5,094,019 $ 4,874,090 Mar-2003 $ 5,045,987 $ 5,103,189 $ 4,881,401 Apr-2003 $ 5,063,648 $ 5,112,885 $ 4,902,391 May-2003 $ 5,086,941 $ 5,132,314 $ 4,930,335 Jun-2003 $ 5,088,467 $ 5,140,012 $ 4,939,209 Jul-2003 $ 5,023,843 $ 5,112,256 $ 4,895,744 Aug-2003 $ 5,035,901 $ 5,115,835 $ 4,900,150 Sep-2003 $ 5,087,770 $ 5,162,389 $ 4,951,112 Oct-2003 $ 5,056,735 $ 5,143,288 $ 4,939,229 Nov-2003 $ 5,055,724 $ 5,140,716 $ 4,940,217 Dec-2003 $ 5,086,564 $ 5,170,532 $ 4,964,918 Jan-2004 $ 5,101,823 $ 5,180,873 $ 4,980,806 Feb-2004 $ 5,126,822 $ 5,205,742 $ 5,003,718 Mar-2004 $ 5,142,203 $ 5,221,879 $ 5,020,730 Apr-2004 $ 5,094,380 $ 5,171,749 $ 4,976,046 May-2004 $ 5,088,776 $ 5,167,095 $ 4,966,094 Jun-2004 $ 5,089,285 $ 5,166,578 $ 4,969,570 Jul-2004 $ 5,117,276 $ 5,185,178 $ 4,989,448 Aug-2004 $ 5,157,475 $ 5,220,955 $ 5,024,873
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 9/13/93. Returns for the Institutional Shares prior to 9/10/01 (offering date of the Institutional Shares) are calculated using the historical expenses of the J.P. Morgan Institutional Short Term Bond Fund, which are similar to the expenses of the Institutional Shares. The returns presented prior to 9/13/93 are based on the historical expenses of the J.P. Morgan Short Term Bond Fund, which are higher than the expenses of the Institutional Shares. Returns for the Select Shares prior to 9/10/01 (offering date of the Select Shares) are calculated using the historical expenses of the J.P. Morgan Short Term Bond Fund, which are similar to the expenses of the Select Shares. Returns for the Class A Shares prior to 9/10/01 (offering date of the Class A Shares) are calculated using the historical expenses of the J.P. Morgan Short Term Bond Fund, which are lower than the expenses of the Class A Shares. The graph illustrates comparative performance for $3,000,000 invested in Institutional Shares of the JPMorgan Short Term Bond Fund, Merrill Lynch 1-3 Year Treasury Index, and Lipper Short-Term Investment Grade Debt Funds Index from August 31, 1994 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and does not include a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Merrill Lynch 1-3 Year Treasury Index is an unmanaged index which measures short-term bond performance. The Lipper Short-Term Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Institutional Shares have a $3,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 14 JPMORGAN SHORT TERM BOND FUND II AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 11/30/1990 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $1,191 Primary Benchmark LEHMAN 1-3 YEAR U.S. GOV'T BOND INDEX Average Credit Quality AA- Duration 1.8 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Short Term Bond Fund II, which seeks a high level of income consistent with preservation of capital, returned 2.01% (Select Shares) for the one-year period ending August 31, 2004. This compares to the 2.27% return of its benchmark index, the Lehman 1-3 Year U.S. Government Bond Index. Q: WHY DID THE FUND PERFORM THIS WAY? A: The Fund underperformed mainly due to its duration positioning and due to its inability to invest in high-yield, emerging markets, and international sectors. Contributing to performance was the Fund's allocation to corporate and to asset-backed securities (ABS). Q: HOW WAS THE FUND MANAGED? A: Early in the period, we maintained a modestly longer duration position in the short end of the yield curve. However, stronger economic data towards year-end led us to implement a shorter duration position versus the benchmark. We continued to take advantage of market volatility by tactically trading our duration position throughout the remainder of the period. In addition, we targeted two- and three-year securities because they offered the most attractive yields. We tactically traded our mortgage position and added short-dated collateralized mortgage obligations. Because of the potential change in federal agency legislation and because of the ensuing headline risk, we reduced our agency exposure early in 2004. To capture attractive yields, we increased our exposure to corporate and to ABS. In addition, we sold high-quality corporate names in the one- to three-year area of the yield curve in favor of lower-quality names. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes and Bonds 44.6% U.S. Government Agency Securities 18.8% Asset Backed Securities 16.0% Residential Mortgage Backed Securities 9.2% Commercial Mortgage Backed Securities 6.4% Foreign Government Securities 1.5% Certificates of Deposit 1.2% Other (Less than 1%) 2.3%
15 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------- CLASS A SHARES Without Sales Charge 1.85% 3.06% 4.56% 4.94% With Sales Charge* 0.28% 2.52% 4.24% 4.79% ----------------------------------------- CLASS M SHARES Without Sales Charge 1.58% 2.79% 4.31% 4.81% With Sales Charge** 0.02% 2.26% 4.00% 4.65% ----------------------------------------- SELECT SHARES 2.01% 3.29% 4.84% 5.22%
* Sales Charge for Class A Shares is 1.50%. ** Sales Charge for Class M Shares is 1.50%. [CHART] TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
JPMORGAN SHORT TERM BOND FUND II LIPPER SHORT-TERM INVESTMENT GRADE (SELECT SHARES) LEHMAN 1-3 YEAR U.S. GOV'T BOND INDEX DEBT FUNDS INDEX Aug-1994 $ 1,000,000 $ 1,000,000 $ 1,000,000 Sep-1994 $ 1,001,100 $ 997,700 $ 998,600 Oct-1994 $ 1,004,203 $ 999,995 $ 1,000,198 Nov-1994 $ 1,004,304 $ 995,795 $ 998,397 Dec-1994 $ 1,008,823 $ 997,687 $ 996,001 Jan-1995 $ 1,017,297 $ 1,011,255 $ 1,006,160 Feb-1995 $ 1,026,758 $ 1,025,008 $ 1,018,033 Mar-1995 $ 1,032,508 $ 1,030,748 $ 1,023,632 Apr-1995 $ 1,038,290 $ 1,039,922 $ 1,032,436 May-1995 $ 1,050,438 $ 1,057,705 $ 1,051,329 Jun-1995 $ 1,056,321 $ 1,063,416 $ 1,057,847 Jul-1995 $ 1,061,285 $ 1,067,670 $ 1,061,233 Aug-1995 $ 1,066,273 $ 1,074,076 $ 1,068,343 Sep-1995 $ 1,071,178 $ 1,079,339 $ 1,073,471 Oct-1995 $ 1,078,355 $ 1,088,298 $ 1,083,561 Nov-1995 $ 1,085,364 $ 1,097,548 $ 1,092,663 Dec-1995 $ 1,091,768 $ 1,105,889 $ 1,100,203 Jan-1996 $ 1,099,301 $ 1,115,289 $ 1,110,105 Feb-1996 $ 1,098,861 $ 1,110,940 $ 1,105,997 Mar-1996 $ 1,101,499 $ 1,110,051 $ 1,101,131 Apr-1996 $ 1,104,252 $ 1,111,161 $ 1,101,902 May-1996 $ 1,107,234 $ 1,113,606 $ 1,104,105 Jun-1996 $ 1,113,988 $ 1,121,735 $ 1,112,055 Jul-1996 $ 1,119,001 $ 1,126,110 $ 1,116,614 Aug-1996 $ 1,122,246 $ 1,130,276 $ 1,120,523 Sep-1996 $ 1,132,122 $ 1,140,562 $ 1,131,280 Oct-1996 $ 1,144,122 $ 1,153,450 $ 1,143,384 Nov-1996 $ 1,153,161 $ 1,161,986 $ 1,152,874 Dec-1996 $ 1,153,161 $ 1,162,218 $ 1,153,335 Jan-1997 $ 1,157,658 $ 1,167,797 $ 1,159,217 Feb-1997 $ 1,160,668 $ 1,170,600 $ 1,163,159 Mar-1997 $ 1,159,972 $ 1,169,663 $ 1,161,996 Apr-1997 $ 1,170,644 $ 1,179,254 $ 1,171,292 May-1997 $ 1,177,199 $ 1,187,509 $ 1,179,139 Jun-1997 $ 1,186,028 $ 1,195,703 $ 1,187,393 Jul-1997 $ 1,199,430 $ 1,208,736 $ 1,200,930 Aug-1997 $ 1,198,471 $ 1,209,945 $ 1,201,770 Sep-1997 $ 1,208,178 $ 1,219,140 $ 1,211,144 Oct-1997 $ 1,215,307 $ 1,228,162 $ 1,218,532 Nov-1997 $ 1,216,643 $ 1,231,232 $ 1,221,578 Dec-1997 $ 1,223,822 $ 1,239,482 $ 1,228,908 Jan-1998 $ 1,235,815 $ 1,251,257 $ 1,239,599 Feb-1998 $ 1,236,062 $ 1,252,383 $ 1,241,335 Mar-1998 $ 1,239,647 $ 1,257,142 $ 1,246,424 Apr-1998 $ 1,245,473 $ 1,263,176 $ 1,252,282 May-1998 $ 1,252,448 $ 1,269,871 $ 1,259,045 Jun-1998 $ 1,259,211 $ 1,276,347 $ 1,264,710 Jul-1998 $ 1,265,003 $ 1,282,346 $ 1,270,275 Aug-1998 $ 1,273,226 $ 1,297,991 $ 1,278,913 Sep-1998 $ 1,291,178 $ 1,315,514 $ 1,292,469 Oct-1998 $ 1,288,725 $ 1,321,960 $ 1,290,789 Nov-1998 $ 1,288,339 $ 1,320,638 $ 1,294,145 Dec-1998 $ 1,292,332 $ 1,325,656 $ 1,299,710 Jan-1999 $ 1,298,665 $ 1,330,694 $ 1,306,209 Feb-1999 $ 1,294,249 $ 1,324,706 $ 1,301,898 Mar-1999 $ 1,303,439 $ 1,333,714 $ 1,312,053 Apr-1999 $ 1,307,349 $ 1,337,848 $ 1,316,776 May-1999 $ 1,306,434 $ 1,336,912 $ 1,315,065 Jun-1999 $ 1,307,871 $ 1,340,789 $ 1,317,563 Jul-1999 $ 1,310,879 $ 1,344,945 $ 1,319,013 Aug-1999 $ 1,312,714 $ 1,348,711 $ 1,321,651 Sep-1999 $ 1,322,428 $ 1,357,478 $ 1,330,373 Oct-1999 $ 1,327,057 $ 1,361,143 $ 1,333,300 Nov-1999 $ 1,329,047 $ 1,363,729 $ 1,337,700 Dec-1999 $ 1,332,503 $ 1,364,956 $ 1,340,509 Jan-2000 $ 1,333,036 $ 1,364,683 $ 1,341,046 Feb-2000 $ 1,340,634 $ 1,373,963 $ 1,349,762 Mar-2000 $ 1,347,471 $ 1,382,207 $ 1,356,781 Apr-2000 $ 1,343,159 $ 1,385,662 $ 1,357,052 May-2000 $ 1,347,458 $ 1,390,789 $ 1,361,802 Jun-2000 $ 1,362,684 $ 1,405,949 $ 1,376,918 Jul-2000 $ 1,372,495 $ 1,414,947 $ 1,385,455 Aug-2000 $ 1,382,514 $ 1,425,701 $ 1,395,569 Sep-2000 $ 1,396,478 $ 1,436,821 $ 1,407,431 Oct-2000 $ 1,400,946 $ 1,444,580 $ 1,411,653 Nov-2000 $ 1,416,497 $ 1,458,592 $ 1,424,500 Dec-2000 $ 1,432,787 $ 1,476,533 $ 1,439,599 Jan-2001 $ 1,448,261 $ 1,496,023 $ 1,460,042 Feb-2001 $ 1,458,688 $ 1,505,747 $ 1,470,262 Mar-2001 $ 1,470,358 $ 1,517,944 $ 1,480,848 Apr-2001 $ 1,471,828 $ 1,522,346 $ 1,484,402 May-2001 $ 1,478,157 $ 1,530,719 $ 1,493,605 Jun-2001 $ 1,483,331 $ 1,536,230 $ 1,499,729 Jul-2001 $ 1,499,499 $ 1,554,203 $ 1,518,175 Aug-2001 $ 1,509,396 $ 1,563,995 $ 1,528,044 Sep-2001 $ 1,529,018 $ 1,590,114 $ 1,542,560 Oct-2001 $ 1,545,225 $ 1,606,015 $ 1,554,283 Nov-2001 $ 1,538,735 $ 1,601,518 $ 1,546,667 Dec-2001 $ 1,536,735 $ 1,602,479 $ 1,545,121 Jan-2002 $ 1,541,960 $ 1,606,325 $ 1,549,602 Feb-2002 $ 1,550,132 $ 1,614,356 $ 1,554,096 Mar-2002 $ 1,541,141 $ 1,602,733 $ 1,547,102 Apr-2002 $ 1,560,098 $ 1,622,126 $ 1,559,479 May-2002 $ 1,565,870 $ 1,628,452 $ 1,568,212 Jun-2002 $ 1,574,012 $ 1,642,946 $ 1,569,937 Jul-2002 $ 1,589,910 $ 1,662,825 $ 1,574,647 Aug-2002 $ 1,596,270 $ 1,669,643 $ 1,584,567 Sep-2002 $ 1,607,922 $ 1,683,167 $ 1,594,867 Oct-2002 $ 1,613,389 $ 1,687,375 $ 1,595,824 Nov-2002 $ 1,609,033 $ 1,682,650 $ 1,596,462 Dec-2002 $ 1,619,975 $ 1,698,804 $ 1,612,427 Jan-2003 $ 1,626,292 $ 1,699,143 $ 1,615,007 Feb-2003 $ 1,632,310 $ 1,706,959 $ 1,624,697 Mar-2003 $ 1,634,595 $ 1,710,373 $ 1,627,134 Apr-2003 $ 1,639,989 $ 1,713,794 $ 1,634,130 May-2003 $ 1,646,877 $ 1,720,821 $ 1,643,445 Jun-2003 $ 1,649,018 $ 1,723,574 $ 1,646,403 Jul-2003 $ 1,627,086 $ 1,712,371 $ 1,631,915 Aug-2003 $ 1,630,503 $ 1,713,056 $ 1,633,383 Sep-2003 $ 1,648,438 $ 1,730,358 $ 1,650,371 Oct-2003 $ 1,637,229 $ 1,723,263 $ 1,646,410 Nov-2003 $ 1,636,574 $ 1,722,918 $ 1,646,739 Dec-2003 $ 1,644,593 $ 1,733,084 $ 1,654,973 Jan-2004 $ 1,649,034 $ 1,737,243 $ 1,660,269 Feb-2004 $ 1,656,619 $ 1,746,277 $ 1,667,906 Mar-2004 $ 1,662,915 $ 1,752,039 $ 1,673,577 Apr-2004 $ 1,646,452 $ 1,734,169 $ 1,658,682 May-2004 $ 1,642,665 $ 1,732,088 $ 1,655,365 Jun-2004 $ 1,642,993 $ 1,732,261 $ 1,656,523 Jul-2004 $ 1,649,730 $ 1,739,190 $ 1,663,149 Aug-2004 $ 1,662,884 $ 1,752,060 $ 1,674,958
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 11/30/90. Returns for the Class A Shares prior to 5/6/96 (offering date of the Class A Shares) are calculated using the historical expenses of the Select Shares, which are lower than the expenses of the Class A Shares. Returns for the Class M Shares prior to 7/1/99 (offering date of the Class M Shares) are calculated using the historical expenses of the Class A Shares, which are lower than the expenses of the Class M Shares. The graph illustrates comparative performance for $1,000,000 invested in Select Shares of the JPMorgan Short Term Bond Fund II, Lehman 1-3 Year U.S. Gov't Bond Index, and Lipper Short-Term Investment Grade Debt Funds Index from August 31, 1994 to August 31, 2004. The performance of the Fund assumes reinvestments of all dividends and capital gains and does not include a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman 1-3 Year U.S. Gov't Bond Index is composed of bonds covered by the U.S. Government Bond Index with maturities of one to three years. The Lipper Short-Term Investment Grade Debt Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Select Shares have a $1,000,000 minimum initial deposit and carry no sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 16 JPMORGAN STRATEGIC INCOME FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 11/30/1998 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $21 Primary Benchmark LEHMAN AGGREGATE BOND INDEX Average Credit Quality BBB+ Duration 4.5 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan Strategic Income Fund, which seeks to provide a high level of income had a total return of 8.56% (Class A shares, without sales charges) for the one-year period ended August 31, 2004. This compares to the 6.13% return of the Lehman Aggregate Bond Index. Q: WHY DID THE FUND OUTPERFORM ITS BENCHMARK? A: Our overweight to high-yield debt added to performance at a time when credit fundamentals and market supply dynamics continued to favor this sector. Another successful strategy was our overweight to emerging markets debt. The Fund also benefited as European interest rates outperformed five-year Treasuries, and as a result we took profits on the short-U.S./long-Eurozone trade. The Fund benefited from our underweight position to Treasury and agency debt as other sectors out-performed. Q: HOW WAS THE FUND MANAGED? A: As fundamental credit quality continued to improve, we maintained significant allocations to high-yield and to emerging markets debt, choosing our individual holdings by taking a bottom-up view of company and country fundamentals. Because we believed that economic activity would increase more quickly in the U.S. than in the Eurozone, we took a position in which we were long the Eurozone and short the U.S. Our allocations to investment-grade corporate bonds, residential mortgages, Treasuries and agencies were underweight the benchmark index, which is consistent with our strategy. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS Corporate Notes and Bonds 38.9% Foreign Government Securities 28.1% Residential Mortgage Backed Securities 13.4% U.S. Treasury Securities 5.9% Money Market Fund 5.0% Asset Backed Securities 4.2% Commercial Mortgage Backed Securities 2.6% Supranational Notes & Bonds 1.1% Other (Less than 1%) 0.8%
17 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
SINCE INCEPTION 1 YEAR 3 YEARS 5 YEARS (11/30/98) ----------------------------------------- CLASS A SHARES Without Sales Charge 8.56% 6.23% 5.60% 5.17% With Sales Charge* 3.67% 4.63% 4.63% 4.33% ----------------------------------------- CLASS B SHARES Without CDSC 8.01% 5.69% 5.10% 4.72% With CDSC** 3.01% 4.79% 4.78% 4.59% ----------------------------------------- CLASS C SHARES Without CDSC 8.11% 5.73% 5.11% 4.73% With CDSC*** 7.11% 5.73% 5.11% 4.73% ----------------------------------------- CLASS M SHARES Without Sales Charge 8.36% 5.99% 5.33% 4.93% With Sales Charge**** 5.16% 4.91% 4.69% 4.37%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, a 2% CDSC for the five year period and since inception. *** Assumes 1% CDSC for the one year period and 0% thereafter. **** Sales Charge on Class M Shares is 3.0%. [CHART] LIFE OF FUND PERFORMANCE (11/30/98 TO 8/31/04)
JPMORGAN STRATEGIC INCOME FUND (CLASS A SHARES) LEHMAN AGGREGATE BOND INDEX LIPPER MULTI-SECTOR INCOME FUNDS INDEX Nov-1998 $ 9,550 $ 10,000 $ 10,000 Dec-1998 $ 9,471 $ 10,030 $ 9,977 Jan-1999 $ 9,445 $ 10,101 $ 10,030 Feb-1999 $ 9,430 $ 9,924 $ 9,895 Mar-1999 $ 9,594 $ 9,979 $ 10,019 Apr-1999 $ 9,776 $ 10,011 $ 10,196 May-1999 $ 9,621 $ 9,923 $ 9,982 Jun-1999 $ 9,701 $ 9,891 $ 9,971 Jul-1999 $ 9,716 $ 9,850 $ 9,949 Aug-1999 $ 9,719 $ 9,845 $ 9,877 Sep-1999 $ 9,792 $ 9,959 $ 9,918 Oct-1999 $ 9,858 $ 9,996 $ 9,931 Nov-1999 $ 9,937 $ 9,995 $ 9,997 Dec-1999 $ 10,075 $ 9,947 $ 10,083 Jan-2000 $ 10,027 $ 9,914 $ 9,988 Feb-2000 $ 10,190 $ 10,034 $ 10,120 Mar-2000 $ 10,155 $ 10,166 $ 10,117 Apr-2000 $ 10,075 $ 10,137 $ 9,974 May-2000 $ 9,959 $ 10,132 $ 9,849 Jun-2000 $ 10,147 $ 10,342 $ 10,101 Jul-2000 $ 10,198 $ 10,437 $ 10,133 Aug-2000 $ 10,277 $ 10,588 $ 10,216 Sep-2000 $ 10,274 $ 10,655 $ 10,125 Oct-2000 $ 10,111 $ 10,725 $ 9,913 Nov-2000 $ 9,981 $ 10,901 $ 9,796 Dec-2000 $ 10,214 $ 11,104 $ 10,045 Jan-2001 $ 10,507 $ 11,285 $ 10,392 Feb-2001 $ 10,531 $ 11,383 $ 10,415 Mar-2001 $ 10,465 $ 11,440 $ 10,236 Apr-2001 $ 10,319 $ 11,392 $ 10,148 May-2001 $ 10,451 $ 11,460 $ 10,237 Jun-2001 $ 10,432 $ 11,504 $ 10,143 Jul-2001 $ 10,512 $ 11,761 $ 10,243 Aug-2001 $ 10,642 $ 11,896 $ 10,379 Sep-2001 $ 10,355 $ 12,034 $ 10,058 Oct-2001 $ 10,589 $ 12,286 $ 10,304 Nov-2001 $ 10,686 $ 12,116 $ 10,403 Dec-2001 $ 10,630 $ 12,039 $ 10,383 Jan-2002 $ 10,680 $ 12,136 $ 10,439 Feb-2002 $ 10,720 $ 12,254 $ 10,476 Mar-2002 $ 10,698 $ 12,051 $ 10,485 Apr-2002 $ 10,815 $ 12,284 $ 10,649 May-2002 $ 10,816 $ 12,389 $ 10,680 Jun-2002 $ 10,594 $ 12,497 $ 10,475 Jul-2002 $ 10,479 $ 12,648 $ 10,339 Aug-2002 $ 10,706 $ 12,862 $ 10,533 Sep-2002 $ 10,702 $ 13,070 $ 10,551 Oct-2002 $ 10,754 $ 13,010 $ 10,584 Nov-2002 $ 11,008 $ 13,006 $ 10,836 Dec-2002 $ 11,153 $ 13,275 $ 11,057 Jan-2003 $ 11,234 $ 13,287 $ 11,200 Feb-2003 $ 11,373 $ 13,471 $ 11,382 Mar-2003 $ 11,439 $ 13,460 $ 11,499 Apr-2003 $ 11,736 $ 13,571 $ 11,879 May-2003 $ 11,876 $ 13,824 $ 12,147 Jun-2003 $ 11,941 $ 13,796 $ 12,238 Jul-2003 $ 11,611 $ 13,333 $ 11,947 Aug-2003 $ 11,751 $ 13,421 $ 12,043 Sep-2003 $ 12,043 $ 13,776 $ 12,394 Oct-2003 $ 12,068 $ 13,648 $ 12,448 Nov-2003 $ 12,126 $ 13,681 $ 12,575 Dec-2003 $ 12,314 $ 13,821 $ 12,844 Jan-2004 $ 12,402 $ 13,931 $ 12,968 Feb-2004 $ 12,473 $ 14,082 $ 13,001 Mar-2004 $ 12,634 $ 14,187 $ 13,105 Apr-2004 $ 12,343 $ 13,818 $ 12,822 May-2004 $ 12,200 $ 13,763 $ 12,694 Jun-2004 $ 12,311 $ 13,840 $ 12,797 Jul-2004 $ 12,471 $ 13,977 $ 12,924 Aug-2004 $ 12,763 $ 14,244 $ 13,176
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 11/30/98. All Share Classes, except Class M Shares, were introduced on 11/30/98. Returns for the Class M Shares prior to 10/28/99 (offering date of the Class M Shares) are calculated using the historical expenses of the Class B Shares, which are higher than the expenses of the Class M Shares. The graph illustrates comparative performance for $10,000 invested in Class A Shares of the JPMorgan Strategic Income Fund, Lehman Aggregate Bond Index, and Lipper Multi-Sector Income Funds Index from November 30, 1998 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and includes a sales charge. The performance of the indices reflects an initial investment at the end of the month following the Fund's inception. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman Aggregate Bond Index is composed of the Lehman Gov't/Credit Index and the Mortgage-Backed Securities Index and includes U.S. treasury issues, agency issues, corporate bond issues and mortgage-backed securities. The Lipper Multi-Sector Income Funds Index represents the total returns of the funds in the indicated category, as defined by Lipper, Inc. Investors cannot invest directly in an index. Class A Shares have a $2,500 minimum initial deposit and carry a 4.50% sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 18 JPMORGAN U.S. TREASURY INCOME FUND AS OF AUGUST 31, 2004 (Unaudited) FUND FACTS Fund Inception 9/8/1987 Fiscal Year End AUGUST 31 Net Assets as of 8/31/2004 (In Millions) $134 Primary Benchmark LEHMAN U.S. GOV'T BOND INDEX Average Credit Quality GOVERNMENT Duration 4.9 YEARS Q: HOW DID THE FUND PERFORM? A: JPMorgan U.S. Treasury Income Fund, which seeks to provide investors with monthly dividends while still protecting the value of their investments returned 5.05% (Class A Shares, without sales charges) for the one-year period ending August 31, 2004. This compares to the 5.30% return of its benchmark index, the Lehman U.S. Government Bond Index. Q: WHY DID THE FUND PERFORM THIS WAY? A: We overweighted short-term holdings, which underperformed as interest rates rose. Our positioning in Government National Mortgage Association (GNMA) mortgage-backed securities was positive when these issues outperformed Treasury and agency debt in the Index. Within our GNMA holdings, the portfolio benefited from our security selection, which focused on 5.5% and on 6.0% coupons. We did not hold Agency debentures (debt of Freddie Mac or Fannie Mae), which added to performance relative to the Index. Q: HOW WAS THE FUND MANAGED? A: We maintained a slightly long duration position during much of the period. Because of their attractive yields, we overweighted mortgages issued by the GNMA. We actively managed coupon selection, focusing on 30-year current coupon mortgages (i.e., 5.5% and 6%). Ahead of expected strong supply, we realized profits, paring back our GNMA position in January and exiting the position completely in February. We again moved to an overweight position during the second quarter, mostly in lower coupons, in response to reduced supply and lower volatility. Consistent with the Fund's strategy, we did not hold Agency debentures (debt of Freddie Mac or Fannie Mae) throughout the period. Even though they are included in the Index, we do not hold them because they are not "full faith and credit" obligations of the U.S. government. [CHART] PERCENTAGE OF TOTAL PORTFOLIO INVESTMENTS U.S. Treasury Securities 89.8% Money Market Fund 6.4% Residential Mortgage Backed Securities 3.8%
19 AVERAGE ANNUAL TOTAL RETURNS AS OF AUGUST 31, 2004
1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------- CLASS A SHARES Without Sales Charge 5.05% 5.22% 6.72% 6.34% With Sales Charge* 0.30% 3.63% 5.75% 5.84% ----------------------------------------- CLASS B SHARES Without CDSC 4.13% 4.33% 5.77% 5.63% With CDSC** (0.87%) 3.41% 5.45% 5.63% ----------------------------------------- SELECT SHARES 5.26% 5.46% 6.89% 6.42%
* Sales Charge for Class A Shares is 4.50%. ** Assumes 5% CDSC (contingent deferred sales charge) for the one year period, 3% CDSC for the three year period, 2% CDSC for the five year period and 0% CDSC for the ten year period. [CHART] TEN-YEAR PERFORMANCE (8/31/94 TO 8/31/04)
JPMORGAN U.S. TREASURY INCOME LIPPER GENERAL U.S. FUND (CLASS A SHARES) LEHMAN U.S. GOV'T BOND INDEX TREASURY FUNDS AVERAGE Aug-1994 $ 9,550 $ 10,000 $ 10,000 Sep-1994 $ 9,374 $ 9,859 $ 9,817 Oct-1994 $ 9,349 $ 9,852 $ 9,793 Nov-1994 $ 9,322 $ 9,834 $ 9,780 Dec-1994 $ 9,379 $ 9,894 $ 9,858 Jan-1995 $ 9,559 $ 10,078 $ 10,045 Feb-1995 $ 9,762 $ 10,295 $ 10,271 Mar-1995 $ 9,817 $ 10,360 $ 10,326 Apr-1995 $ 9,933 $ 10,496 $ 10,462 May-1995 $ 10,314 $ 10,919 $ 10,956 Jun-1995 $ 10,393 $ 11,003 $ 11,045 Jul-1995 $ 10,353 $ 10,962 $ 10,971 Aug-1995 $ 10,460 $ 11,090 $ 11,111 Sep-1995 $ 10,557 $ 11,197 $ 11,229 Oct-1995 $ 10,712 $ 11,367 $ 11,422 Nov-1995 $ 10,866 $ 11,544 $ 11,609 Dec-1995 $ 11,022 $ 11,708 $ 11,794 Jan-1996 $ 11,085 $ 11,780 $ 11,846 Feb-1996 $ 10,829 $ 11,539 $ 11,542 Mar-1996 $ 10,719 $ 11,443 $ 11,418 Apr-1996 $ 10,628 $ 11,370 $ 11,313 May-1996 $ 10,587 $ 11,351 $ 11,279 Jun-1996 $ 10,708 $ 11,497 $ 11,437 Jul-1996 $ 10,743 $ 11,526 $ 11,453 Aug-1996 $ 10,689 $ 11,501 $ 11,383 Sep-1996 $ 10,860 $ 11,692 $ 11,601 Oct-1996 $ 11,094 $ 11,949 $ 11,904 Nov-1996 $ 11,286 $ 12,157 $ 12,173 Dec-1996 $ 11,160 $ 12,033 $ 11,988 Jan-1997 $ 11,155 $ 12,046 $ 11,962 Feb-1997 $ 11,154 $ 12,063 $ 11,955 Mar-1997 $ 11,038 $ 11,935 $ 11,778 Apr-1997 $ 11,184 $ 12,107 $ 11,961 May-1997 $ 11,273 $ 12,211 $ 12,064 Jun-1997 $ 11,392 $ 12,348 $ 12,216 Jul-1997 $ 11,720 $ 12,698 $ 12,683 Aug-1997 $ 11,571 $ 12,573 $ 12,459 Sep-1997 $ 11,735 $ 12,761 $ 12,692 Oct-1997 $ 11,908 $ 12,982 $ 12,971 Nov-1997 $ 11,974 $ 13,048 $ 13,060 Dec-1997 $ 12,092 $ 13,185 $ 13,231 Jan-1998 $ 12,245 $ 13,383 $ 13,459 Feb-1998 $ 12,191 $ 13,347 $ 13,379 Mar-1998 $ 12,226 $ 13,384 $ 13,404 Apr-1998 $ 12,249 $ 13,445 $ 13,442 May-1998 $ 12,383 $ 13,583 $ 13,628 Jun-1998 $ 12,527 $ 13,738 $ 13,817 Jul-1998 $ 12,523 $ 13,758 $ 13,806 Aug-1998 $ 12,862 $ 14,116 $ 14,281 Sep-1998 $ 13,222 $ 14,497 $ 14,735 Oct-1998 $ 13,169 $ 14,448 $ 14,613 Nov-1998 $ 13,138 $ 14,452 $ 14,619 Dec-1998 $ 13,154 $ 14,484 $ 14,636 Jan-1999 $ 13,236 $ 14,568 $ 14,732 Feb-1999 $ 12,854 $ 14,221 $ 14,229 Mar-1999 $ 12,902 $ 14,277 $ 14,262 Apr-1999 $ 12,936 $ 14,310 $ 14,301 May-1999 $ 12,807 $ 14,184 $ 14,107 Jun-1999 $ 12,779 $ 14,155 $ 14,021 Jul-1999 $ 12,753 $ 14,134 $ 13,972 Aug-1999 $ 12,751 $ 14,134 $ 13,943 Sep-1999 $ 12,843 $ 14,249 $ 14,063 Oct-1999 $ 12,854 $ 14,272 $ 14,050 Nov-1999 $ 12,840 $ 14,252 $ 14,012 Dec-1999 $ 12,767 $ 14,159 $ 13,862 Jan-2000 $ 12,778 $ 14,179 $ 13,914 Feb-2000 $ 12,980 $ 14,380 $ 14,156 Mar-2000 $ 13,203 $ 14,633 $ 14,501 Apr-2000 $ 13,157 $ 14,592 $ 14,434 May-2000 $ 13,166 $ 14,601 $ 14,416 Jun-2000 $ 13,386 $ 14,861 $ 14,701 Jul-2000 $ 13,508 $ 15,005 $ 14,854 Aug-2000 $ 13,693 $ 15,227 $ 15,105 Sep-2000 $ 13,726 $ 15,270 $ 15,090 Oct-2000 $ 13,837 $ 15,416 $ 15,256 Nov-2000 $ 14,113 $ 15,720 $ 15,624 Dec-2000 $ 14,378 $ 16,033 $ 15,956 Jan-2001 $ 14,537 $ 16,195 $ 16,062 Feb-2001 $ 14,676 $ 16,379 $ 16,269 Mar-2001 $ 14,737 $ 16,437 $ 16,274 Apr-2001 $ 14,521 $ 16,269 $ 15,976 May-2001 $ 14,593 $ 16,323 $ 16,017 Jun-2001 $ 14,634 $ 16,398 $ 16,104 Jul-2001 $ 14,993 $ 16,791 $ 16,576 Aug-2001 $ 15,151 $ 17,000 $ 16,801 Sep-2001 $ 15,456 $ 17,295 $ 17,023 Oct-2001 $ 15,870 $ 17,742 $ 17,604 Nov-2001 $ 15,432 $ 17,344 $ 17,030 Dec-2001 $ 15,235 $ 17,193 $ 16,808 Jan-2002 $ 15,367 $ 17,305 $ 16,949 Feb-2002 $ 15,513 $ 17,464 $ 17,110 Mar-2002 $ 15,184 $ 17,085 $ 16,659 Apr-2002 $ 15,523 $ 17,492 $ 17,115 May-2002 $ 15,616 $ 17,597 $ 17,202 Jun-2002 $ 15,791 $ 17,843 $ 17,448 Jul-2002 $ 16,159 $ 18,236 $ 17,869 Aug-2002 $ 16,472 $ 18,597 $ 18,343 Sep-2002 $ 16,894 $ 19,032 $ 18,896 Oct-2002 $ 16,737 $ 18,880 $ 18,588 Nov-2002 $ 16,595 $ 18,717 $ 18,393 Dec-2002 $ 16,961 $ 19,170 $ 18,906 Jan-2003 $ 16,921 $ 19,122 $ 18,831 Feb-2003 $ 17,186 $ 19,430 $ 19,213 Mar-2003 $ 17,118 $ 19,374 $ 19,100 Apr-2003 $ 17,190 $ 19,463 $ 19,184 May-2003 $ 17,604 $ 19,969 $ 19,844 Jun-2003 $ 17,512 $ 19,865 $ 19,679 Jul-2003 $ 16,703 $ 19,045 $ 18,650 Aug-2003 $ 16,800 $ 19,151 $ 18,795 Sep-2003 $ 17,311 $ 19,709 $ 19,442 Oct-2003 $ 17,082 $ 19,429 $ 19,117 Nov-2003 $ 17,084 $ 19,452 $ 19,123 Dec-2003 $ 17,248 $ 19,625 $ 19,283 Jan-2004 $ 17,379 $ 19,788 $ 19,444 Feb-2004 $ 17,581 $ 20,026 $ 19,696 Mar-2004 $ 17,739 $ 20,202 $ 19,881 Apr-2004 $ 17,175 $ 19,594 $ 19,134 May-2004 $ 17,099 $ 19,521 $ 19,057 Jun-2004 $ 17,173 $ 19,601 $ 19,147 Jul-2004 $ 17,308 $ 19,784 $ 19,342 Aug-2004 $ 17,647 $ 20,169 $ 19,799
SOURCE: LIPPER ANALYTICAL SERVICES, INC. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. INVESTMENT RETURNS WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN ORIGINAL COST. PLEASE NOTE, CURRENT PERFORMANCE MAY BE HIGHER OR LOWER THAN THE PERFORMANCE DATA SHOWN. INVESTORS SHOULD CAREFULLY READ THE FUND PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUND'S INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. The Fund commenced operations on 9/8/87. Returns for the Class B Shares prior to 11/4/93 (offering date of the Class B Shares) are calculated using the historical expenses of the Class A Shares, which are lower than the expenses of the Class B Shares. Returns for the Select Shares prior to 2/16/01 (offering date of the Select Shares) are calculated using the historical expenses of the Class A Shares, which are higher than the expenses of the Select Shares. The graph illustrates comparative performance for $10,000 invested in Class A Shares of the JPMorgan U.S. Treasury Income Fund, Lehman U.S. Gov't Bond Index, and Lipper General U.S. Treasury Funds Average from August 31, 1994 to August 31, 2004. The performance of the Fund assumes reinvestment of all dividends and capital gains and includes a sales charge. The performance of the indices does not include a sales charge and has been adjusted to reflect reinvestment of all dividends and capital gains of the securities included in the benchmark. The Lehman U.S. Gov't Bond Index is composed of the U.S. Treasury Bond Index and the Agency Bond Index and includes U.S. treasury and agency issues. The Lipper General U.S. Treasury Funds Average describes the average total returns for all the funds in the indicated category as defined by Lipper, Inc. Investors cannot invest directly in an index. Class A Shares have a $2,500 minimum initial deposit and carry a 4.50% sales charge. Certain fees and expenses of the Fund are currently being waived and reimbursed as described in the prospectus. Had the expenses not been subsidized or waived, returns would have been lower. Also, all performance shown in this section does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. 20 JPMORGAN BOND FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 90.8% U.S. TREASURY SECURITIES -- 5.4% U.S. Treasury Notes & Bonds, $ 1,720 3.50%, 11/15/06 @ + $ 1,757 5,075 3.88%, 05/15/09 + 5,210 18,160 4.00%, 06/15/09 + 18,730 1,230 3.63%, 07/15/09 + 1,248 1,640 3.50%, 08/15/09 + 1,654 3,710 4.00%, 02/15/14 + 3,678 10,700 4.75%, 05/15/14 + 11,230 11,115 4.25%, 08/15/14 + 11,226 1,425 7.25%, 05/15/16 @ + 1,792 2,035 5.38%, 02/15/31 + 2,167 ------------------------------------------------------------------------- Total U.S. Treasury Securities 58,692 (Cost $57,323) ------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 1.0% 8,090 Federal Home Loan Mortgage Corp., 6.25%, 07/15/32 9,011 Federal National Mortgage Association, 2 7.00%, 07/15/05 + 2 985 4.38%, 09/15/12 986 570 7.25%, 05/15/30 711 ------------------------------------------------------------------------- Total U.S. Government Agency Securities 10,710 (Cost $10,323) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 2.1% Federal Republic of Brazil (Brazil), 190 9.25%, 10/22/10 198 495 10.00%, 08/07/11 + 522 500 11.00%, 01/11/12 554 969 2.13%, 04/15/12, FRN 874 490 12.75%, 01/15/20 592 2,464 Republic of Colombia (Colombia), 9.75%, 04/09/11 2,796 1,830 Republic of Peru (Peru), 8.38%, 05/03/16 1,848 Republic of Ukraine (Ukraine), 990 6.88%, 03/04/11, # 980 1,615 7.65%, 06/11/13, Regulation S 1,631 Russian Federation (Russia), 2,720 8.75%, 07/24/05, Regulation S 2,856 625 10.00%, 06/26/07, Regulation S 709 4,300 5.00%, 03/31/30, Regulation S, SUB 4,118 United Mexican States (Mexico), $ 850 7.50%, 01/14/12 $ 961 1,730 5.88%, 01/15/14, Ser. A, MTN 1,751 205 11.50%, 05/15/26 308 2,160 8.30%, 08/15/31, MTN 2,476 ------------------------------------------------------------------------- Total Foreign Government Securities 23,174 (Cost $22,356) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 30.3% AEROSPACE -- 0.2% 2,735 General Dynamics Corp., 2.13%, 05/15/06 2,708 AUTOMOTIVE -- 2.5% DaimlerChrysler N.A. Holding Corp., 2,800 2.34%, 05/24/06, MTN, FRN + 2,811 870 7.20%, 09/01/09 + 977 Ford Motor Credit Co., 850 7.38%, 10/28/09 930 8,370 7.88%, 06/15/10 9,306 150 7.00%, 10/01/13 157 General Motors Acceptance Corp., 1,550 2.60%, 05/18/06, MTN, FRN 1,554 4,790 2.51%, 01/16/07, MTN, FRN 4,795 General Motors Corp., 3,600 7.20%, 01/15/11 3,823 1,410 8.25%, 07/15/23 1,486 1,160 8.38%, 07/15/33 1,233 549 TRW Automotive, Inc., 9.38%, 02/15/13 633 ------------------------------------------------------------------------- 27,705 ------------------------------------------------------------------------- BANKING -- 6.1% 365 Abbey National Capital Trust I, 8.96%, to 6/30; thereafter FRN, 12/31/49 + 489 1,735 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/31/49, # + 1,907 4,405 ANZ Capital Trust I, 5.36%, 12/15/53, # + 4,422 2,000 BBVA Bancomer Capital Trust I (Mexico), 10.50%, 02/16/11, # + 2,202
SEE NOTES TO FINANCIAL STATEMENTS. 21
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 1,750 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # + $ 1,698 2,060 HBOS PLC (United Kingdom), 5.38%, to 11/13; thereafter FRN, 12/31/49, # 2,082 1,720 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # 1,686 3,955 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # 4,917 2,100 KeyCorp, 1.83%, 07/23/07, Ser. G, MTN, FRN 2,098 1,230 Korea First Bank (South Korea), 7.27%, to 03/14; thereafter FRN, 03/03/34, # 1,281 1,655 Mizuho Finance Group LTD (Cayman Islands), 5.79%, 04/15/14, # 1,704 1,500 Nordea Bank AB (Sweden), 8.95%, to 11/09; thereafter FRN, 12/31/49, # 1,816 2,630 Northern Rock PLC (United Kingdom), 5.60% to 04/14; thereafter FRN, 12/31/49, MTN, # 2,668 3,040 Popular North America, Inc., 4.70%, 06/30/09 3,120 1,665 RBS Capital Trust I, 5.51%, to 9/14; thereafter FRN, 12/31/49 1,688 1,415 Royal Bank of Scotland Group PLC (United Kingdom), 7.65%, to 09/31; thereafter FRN, 12/31/49 1,665 2,320 Skandinaviska Enskilda Banken AB (Sweden), 4.96%, to 03/14; thereafter FRN, 12/31/49, # 2,258 1,630 Standard Chartered Bank (United Kingdom), 8.00%, 05/30/31, # 2,031 3,665 SunTrust Bank, 2.50%, 11/01/06 3,635 1,870 Swedbank (Sweden), 9.00%, to 03/10; thereafter FRN, 12/31/49, # 2,263 2,430 United Overseas Bank LTD (Singapore), 5.38%, to 9/14; thereafter FRN, 12/31/49, # 2,460 4,885 U.S. Bank N.A., 2.85%, 11/15/06 4,884 2,500 Wachovia Corp., 1.71%, 07/20/07, FRN 2,498 1,500 Wells Fargo & Co, 1.62%, 03/23/07, FRN 1,500 $ 2,800 Westpac Banking Corp. (Australia), 1.81%, 05/25/07, FRN, # $ 2,800 2,025 Westpac Capital Trust III, 5.82%, to 09/13; thereafter FRN, 12/31/49, # 2,107 905 Westpac Capital Trust IV, 5.26%, 12/31/49, # 886 3,160 Woori Bank (South Korea), 5.75%, to 03/09; thereafter FRN, 03/13/14, # 3,277 ------------------------------------------------------------------------- 66,042 ------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.2% 2,180 Cox Communications, Inc., 4.63%, 06/01/13 + 1,995 495 Echostar DBS Corp., 6.38%, 10/01/11 496 ------------------------------------------------------------------------- 2,491 ------------------------------------------------------------------------- BUSINESS SERVICES -- 0.1% 1,290 Cendant Corp., 7.13%, 03/15/15 + 1,476 CHEMICALS -- 0.5% 490 Huntsman International LLC, 9.88%, 03/01/09 529 2,355 ICI Wilmington, Inc., 5.63%, 12/01/13 2,405 810 Lyondell Chemical Co., 10.88%, 05/01/09 852 775 PolyOne Corp., 10.63%, 05/15/10 843 925 The Dow Chemical Co., 7.38%, 11/01/29 1,069 ------------------------------------------------------------------------- 5,698 ------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.1% 765 Electronic Data Systems Corp., 6.50%, 08/01/13, Ser. B 757 CONSTRUCTION -- 0.7% 1,460 Centex Corp., 5.70%, 05/15/14 + 1,490 2,540 KB Home, 5.75%, 02/01/14 2,471 1,520 Pulte Homes, Inc., 5.25%, 01/15/14 1,498 745 Standard-Pacific Corp., 6.88%, 05/15/11 773 950 Toll Brothers, Inc., 5.95%, 09/15/13 989 ------------------------------------------------------------------------- 7,221 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 22
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED CONSUMER SERVICES -- 0.0%^ $ 490 Iron Mountain, Inc., 6.63%, 01/01/16 $ 461 DIVERSIFIED -- 0.3% 1,810 General Electric Capital Corp., 6.75%, 03/15/32, Ser. A, MTN 2,056 1,260 Hutchison Whampoa International LTD (Hong Kong), 6.25%, 01/24/14, # 1,301 ------------------------------------------------------------------------- 3,357 ------------------------------------------------------------------------- ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.1% 545 Celestica, Inc. (Canada), 7.88%, 07/01/11 + 570 ENVIRONMENTAL SERVICES -- 0.2% 2,205 Allied Waste North America, Inc., 6.13%, 02/15/14 + 2,056 FINANCIAL SERVICES -- 8.4% American General Finance Corp., 4,195 3.00%, 11/15/06, Ser. H, MTN + 4,183 1,065 4.50%, 11/15/07, Ser. H, MTN + 1,099 600 Arch Western Finance LLC, 7.50%, 07/01/13, # + 621 1,000 Aries Vermoegensverwaltungs (Russia), 9.60%, 10/25/14, # 1,120 4,790 The Bear Stearns Co., Inc., 1.77%, 01/16/07, Ser. B, MTN, FRN + 4,791 2,910 Capital One Financial Corp., 8.75%, 02/01/07 + 3,254 CIT Group, Inc., 2,650 1.72%, 04/19/06, MTN, FRN + 2,649 2,500 1.77%, 06/19/06, MTN, FRN + 2,505 2,900 Citigroup, Inc., 1.68%, 03/20/06, FRN + 2,905 3,100 Countrywide Home Loans, Inc., 1.87%, 02/17/06, Ser. L, MTN, FRN + 3,100 Goldman Sachs Group, Inc., 1,750 1.94%, 02/21/06, Ser. B, MTN, FRN 1,754 2,220 6.35%, 02/15/34 2,221 3,590 Household Finance Corp., 1.86%, 02/09/07, MTN, FRN 3,593 HSBC Capital Funding LP (Channel Islands), $ 1,980 4.61%, to 06/13; thereafter FRN, 12/31/49, # $ 1,899 2,665 9.55%, to 06/10; thereafter FRN, 12/31/49, # 3,360 1,865 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 2,253 2,000 John Deere Capital Corp., 1.61%, 03/16/06, Ser. D, MTN, FRN 2,000 Merrill Lynch & Co., Inc., 1,750 1.87%, 06/13/05, Ser. B, MTN, FRN 1,754 1,900 1.95%, 02/06/09, Ser. C, MTN, FRN 1,899 1,815 Mizuho JGB Investment LLC, 9.87%, to 06/08; thereafter FRN, 12/31/49, # 2,132 2,185 Mizuho Preferred Capital Co., LLC, 8.79%, to 06/08; thereafter FRN, 12/31/49, # 2,476 Morgan Stanley, 4,810 1.73%, 01/12/07, FRN 4,815 225 3.63%, 04/01/08 225 1,400 4.75%, 04/01/14 1,354 Pricoa Global Funding I, 4,225 1.73%, 12/22/06, FRN, # 4,232 2,595 3.90%, 12/15/08, # 2,604 4,000 SLM Corp., 5.63%, 04/10/07, Ser. A, MTN 4,234 15,990 Special Purpose Accounts Receivable Cooperative Corp. Trust, 2.06%, 05/23/05, Ser. 2003-6, FRN, # 15,989 5,013 Targeted Return Index (TRAINS), 8.21% to 08/06; thereafter FRN, 08/01/15, Ser. HY-2004-1, # 5,346 1,120 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 1,239 ------------------------------------------------------------------------- 91,606 ------------------------------------------------------------------------- HEALTH CARE/HEALTH CARE SERVICES -- 0.5% 615 Fresenius Medical Care Capital Trust II, 7.88%, 02/01/08 658 3,205 HCA, Inc., 5.25%, 11/06/08 3,269
SEE NOTES TO FINANCIAL STATEMENTS. 23
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED HEALTH CARE/HEALTH CARE SERVICES -- CONTINUED $ 2,000 Mariner Health Group, Inc., 9.50%, 04/01/06, Ser. B* (d) (f) $ 0^^ 245 Medex, Inc., 8.88%, 05/15/13 267 820 Tenet Healthcare Corp., 5.00%, 07/01/07 818 ------------------------------------------------------------------------- 5,012 ------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 0.0%^ 420 ITT Corp., 7.38%, 11/15/15 445 INSURANCE -- 1.2% 1,515 Arch Capital Group LTD (Bermuda), 7.35%, 05/01/34 + 1,596 2,320 Aspen Insurance Holdings LTD (Bermuda), 6.00%, 08/15/14, # + 2,341 1,430 AXA (France), 8.60%, 12/15/30 + 1,838 555 Fund American Companies, Inc., 5.88%, 05/15/13 566 3,010 Liberty Mutual Group, 5.75%, 03/15/14, # 2,986 845 Odyssey Re Holdings Corp., 7.65%, 11/01/13 936 1,680 Prudential Holdings LLC, 8.70%, 12/18/23, # 2,148 805 QBE Insurance Group LTD (Australia), 5.65%, to 07/13; thereafter FRN, 07/01/23, # 792 ------------------------------------------------------------------------- 13,203 ------------------------------------------------------------------------- MANUFACTURING -- 0.3% 3,255 Caterpillar Financial Services Corp., 1.83%, 02/26/07, Ser. F, MTN, FRN + 3,255 METALS/MINING -- 0.1% 620 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B 654 MULTI-MEDIA -- 0.6% 420 Comcast Corp., 7.05%, 03/15/33 + 458 600 Medianews Group, Inc., 6.88%, 10/01/13 605 720 News America Holdings, Inc., 7.75%, 12/01/45 852 $ 625 Time Warner Companies, Inc., 9.15%, 02/01/23 $ 800 930 Time Warner Entertainment Co., LP, 8.38%, 03/15/23 1,109 2,040 Time Warner, Inc., 7.63%, 04/15/31 + 2,327 ------------------------------------------------------------------------- 6,151 ------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.0%^ 325 Xerox Corp., 7.63%, 06/15/13 345 OIL & GAS -- 0.8% Amerada Hess Corp., 1,255 6.65%, 08/15/11 + 1,377 240 7.30%, 08/15/31 + 258 2,660 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + 2,661 1,135 Husky Energy, Inc. (Canada), 6.15%, 06/15/19 1,196 1,205 Kerr-McGee Corp., 6.95%, 07/01/24 1,268 1,508 PEMEX Project Funding Master Trust (Mexico), 8.63%, 02/01/22 1,719 ------------------------------------------------------------------------- 8,479 ------------------------------------------------------------------------- PACKAGING -- 0.2% 565 Crown European Holdings SA (France), 9.50%, 03/01/11 + 627 Owens-Brockway Glass Container, Inc., 1,045 8.88%, 02/15/09 1,136 460 7.75%, 05/15/11 488 ------------------------------------------------------------------------- 2,251 ------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.1% 95 Abitibi-Consolidated, Inc. (Canada) (Yankee), 6.00%, 06/20/13 + 87 115 Georgia-Pacific Corp., 7.38%, 07/15/08 126 1,060 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 1,115 ------------------------------------------------------------------------- 1,328 ------------------------------------------------------------------------- PHARMACEUTICALS -- 0.1% 550 Wyeth, 6.45%, 02/01/24 551
SEE NOTES TO FINANCIAL STATEMENTS. 24
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PIPELINES -- 0.9% Duke Capital Corp., $ 3,745 6.25%, 02/15/13 $ 3,991 800 8.00%, 10/01/19 943 Kinder Morgan Energy Partners LP, 1,245 7.40%, 03/15/31 1,386 575 7.75%, 03/15/32 667 490 7.30%, 08/15/33 542 1,150 Plains All American Pipeline LP/PAA Finance Corp., 5.63%, 12/15/13, # 1,164 245 Transcontinental Gas Pipeline Corp., 8.88%, 07/15/12, Ser. B 297 245 Williams Companies, Inc., 8.13%, 03/15/12 282 ------------------------------------------------------------------------- 9,272 ------------------------------------------------------------------------- PRINTING & PUBLISHING -- 0.3% 2,085 Quebecor World Capital Corp. (Canada), 6.13%, 11/15/13 2,056 630 Von Hoffman Corp., 10.25%, 03/15/09 701 ------------------------------------------------------------------------- 2,757 ------------------------------------------------------------------------- REAL ESTATE -- 0.4% 3,500 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # 3,907 REAL ESTATE INVESTMENT TRUST -- 0.1% 1,535 iStar Financial, Inc., 6.00%, 12/15/10 1,585 RETAILING -- 0.3% 525 Ingles Markets, Inc., 8.88%, 12/01/11 557 3,245 Safeway, Inc., 4.13%, 11/01/08 3,246 ------------------------------------------------------------------------- 3,803 ------------------------------------------------------------------------- SEMI-CONDUCTORS -- 0.0%^ 340 Freescale Semiconductor, Inc., 7.13%, 07/15/14, # 346 SHIPPING/TRANSPORTATION -- 0.2% Norfolk Southern Corp., 885 7.80%, 05/15/27 1,070 620 7.25%, 02/15/31 714 $ 615 Teekay Shipping Corp. (Bahamas), 8.88%, 07/15/11 $ 690 ------------------------------------------------------------------------- 2,474 ------------------------------------------------------------------------- STEEL -- 0.1% 643 United States Steel Corp., 9.75%, 05/15/10 723 TELECOMMUNICATIONS -- 2.5% AT&T Wireless Services, Inc., 1,585 7.88%, 03/01/11 + 1,868 535 8.13%, 05/01/12 + 644 950 8.75%, 03/01/31 + 1,230 Deutsche Telekom International Finance BV (The Netherlands), 1,185 8.50%, 06/15/10 1,421 855 8.75%, 06/15/30 1,096 France Telecom (France), 645 8.50%, 03/01/11 769 1,295 9.25%, 03/01/31 1,705 495 Nextel Communications, Inc., 7.38%, 08/01/15 517 805 Qwest Corp., 9.13%, 03/15/12, # 863 2,700 Rogers Wireless Communications, Inc. (Canada), 6.38%, 03/01/14 2,586 2,270 SBC Communications, Inc., 5.63%, 06/15/16 2,297 Sprint Capital Corp., 2,190 6.00%, 01/15/07 2,326 1,460 8.75%, 03/15/32 1,848 3,370 TCI Communications, Inc., 8.75%, 08/01/15 4,204 1,370 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 1,376 Verizon Global Funding Corp., 1,230 7.38%, 09/01/12 1,431 1,305 7.75%, 12/01/30 1,545 ------------------------------------------------------------------------- 27,726 ------------------------------------------------------------------------- TRANSPORTATION -- 0.4% 4,000 CSX Corp., 1.99%, 08/03/06, FRN + 3,998
SEE NOTES TO FINANCIAL STATEMENTS. 25
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED UTILITIES -- 1.8% $ 1,725 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + $ 1,721 1,395 Arizona Public Service Co., 4.65%, 05/15/15 + 1,330 615 Calpine Corp., 8.75%, 07/15/13, # + 480 1,220 Dominion Resources, Inc., 5.00%, 03/15/13 1,212 1,275 DTE Energy Co., 6.38%, 04/15/33 + 1,277 2,495 Nisource Finance Corp., 6.15%, 03/01/13 2,680 Pacific Gas & Electric Co., 2,470 2.30%, 04/03/06, FRN 2,473 1,360 4.20%, 03/01/11 1,343 1,475 4.80%, 03/01/14 1,459 Pepco Holdings, Inc., 1,430 6.45%, 08/15/12 1,538 435 7.45%, 08/15/32 489 PSEG Power LLC, 2,145 5.50%, 12/01/15 2,128 460 8.63%, 04/15/31 582 775 Reliant Resources, Inc., 9.50%, 07/15/13 856 ------------------------------------------------------------------------- 19,568 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 329,981 (Cost $322,092) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 29.6% COLLATERALIZED MORTGAGE OBLIGATIONS -- 10.7% Countrywide Home Loans, Inc., 15,115 6.25%, 10/25/32, Ser. 2002-22, Class A20 + 15,796 7,691 5.50%, 08/25/33, Ser. 2003-29, Class A1 + 7,740 Federal Home Loan Mortgage Corp., 5,290 4.50%, 02/15/11, Ser. 2760, Class GI, IO 370 6,868 5.00%, 10/15/23, Ser. 2781, Class PI, IO 693 11,533 5.00%, 02/15/34, Ser. 2743, Class OZ 11,580 37,873 5.45%, 02/15/34, Ser. 2813, Class SB, IO, FRN 3,726 Federal National Mortgage Association, 3,008 5.75%, 06/25/29, Ser. 2002-57, Class DM 3,021 15,183 5.49%, 10/25/31, Ser. 2004-61, Class TS, IO, FRN 1,382 Government National Mortgage Association, $ 3,216 5.50%, 04/20/25, Ser. 2004-46, Class IH, IO $ 268 4,465 5.50%, 01/20/27, Ser. 2004-39, Class IM, IO 454 7,400 5.50%, 10/20/27, Ser. 2004-44, Class PK, IO 843 5,242 10.10%, 12/16/33, Ser. 2004-7, Class SB, FRN 5,116 5,400 Impac Secured Assets Corp., 2.00%, 12/25/34, Ser. 2004-3, Class 1A4, FRN 5,400 5,900 Indymac Index Mortgage Loan Trust, 2.08%, 09/25/34, Ser. 2004-AR7, Class A1, FRN 5,900 6,344 MASTR Asset Securitization Trust, 6.25%, 09/25/32, Ser. 2002-5, Class 5A27 6,334 2,722 Medallion Trust (Australia), 1.88%, 05/25/35, Ser. 2004-1G, Class A1, FRN 2,722 2,500 Permanent Financing PLC (United Kingdom), 1.48%, 03/10/09, Ser. 4, Class 2A, FRN 2,499 RESI Finance LP (Cayman Islands), 3,927 3.12%, 07/10/35, Ser. 2003-B, Class B3, FRN, # 3,997 6,707 2.97%, 09/10/35, Ser. 2003-C, Class B3, FRN, # 6,824 1,284 3.17%, 09/10/35, Ser. 2003-C, Class B4, FRN, # 1,300 6,390 2.87%, 12/10/35, Ser. 2003-D, Class B3, FRN, # 6,416 2,089 3.07%, 12/10/35, Ser. 2003-D, Class B4, FRN, # 2,097 4,971 Residential Funding Mortgage Securities I, 6.25%, 01/25/32, Ser. 2002-S1, Class A4 5,013 2,970 RMAC (United Kingdom), 1.58%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 2,970 1,215 SACO I, Inc., 7.00%, 08/25/36, Ser. 1997-2, Class 1A5, # + 1,230
SEE NOTES TO FINANCIAL STATEMENTS. 26
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 7,063 Washington Mutual, 2.06%, 07/25/44, Ser. 2004-AR10, Class A1A, FRN $ 7,063 6,116 Wells Fargo Mortgage Backed Securities Trust, 6.00%, 03/25/32, Ser. 2002-7, Class 2A6 6,154 ------------------------------------------------------------------------- 116,908 ------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 18.9% Federal National Mortgage Association, 33,600 4.50%, 09/25/19, TBA 33,568 33,600 5.50%, 10/25/19, TBA 34,692 0^^ 8.00%, 08/01/22, Pool 50617 0^^ 51,500 5.50%, 09/25/34, TBA 52,289 19,000 5.00%, 10/25/34, TBA 18,792 47,500 5.50%, 10/25/34, TBA 48,079 5,700 6.00%, 10/25/34, TBA 5,882 12,050 6.00%, 11/25/34, TBA 12,389 ------------------------------------------------------------------------- 205,691 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 322,599 (Cost $321,409) ------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.6% 2,500 Calwest Industrial Trust, 1.98%, 02/15/12, Ser. 2002-CALW, Class AFL, FRN, # + 2,502 9,580 Capital One Multi-Asset Execution Trust, 2.85%, 12/15/10, Ser. 2003-A, FRN, # + 9,903 4,000 GS Mortgage Securities Corp. II, 6.73%, 02/10/16, Ser. 2001-LIBA, Class E, # 4,409 11,400 Wachovia Bank Commercial Mortgage Trust, 3.96%, 12/15/35, Ser. 2003-C9, Class A2 11,468 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 28,282 (Cost $27,717) ------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 17.9% $ 8,100 American Express Credit Account Master Trust, 2.10%, 02/15/12, Ser. 2004-C, Class C, FRN, # + $ 8,100 AmeriCredit Automobile Receivables Trust, 2,065 2.75%, 10/09/07, Ser. 2003-CF, Class A3 + 2,074 5,175 1.76%, 12/06/07, Ser. 2003-DM, Class A3B, FRN + 5,187 3,300 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 3,339 2,790 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 2,785 4,595 Capital Auto Receivables Asset Trust, 1.96%, 01/15/09, Ser. 2003-2, Class A4A + 4,504 Capital One Auto Finance Trust, 1,140 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 1,140 3,250 1.70%, 03/15/11, Ser. 2004-A, Class A4, FRN + 3,250 Capital One Master Trust, 3,930 2.40%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 3,941 6,480 4.60%, 08/17/09, Ser. 2001-8A, Class A + 6,710 7,340 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 + 7,341 CARSS Finance LP, 900 1.88%, 01/15/11, Ser. 2004-A, Class B1, FRN, # + 900 1,500 2.55%, 01/15/11, Ser. 2004-A, Class B2, FRN, # + 1,500 4,660 Citibank Credit Card Issuance Trust, 2.55%, 03/20/08, Ser. 2003-C2, Class C2, FRN + 4,702 3,628 Citigroup Mortgage Loan Trust, Inc., 2.00%, 12/25/33, Ser. 2003-HE3, Class A, FRN + 3,639 Countrywide Asset-Backed Certificates, 1,975 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 1,989
SEE NOTES TO FINANCIAL STATEMENTS. 27
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 1,785 5.41%, 01/25/34, Ser. 2003-5, Class MF1 + $ 1,837 1,320 2.12%, 03/25/34, Ser. 2004-1, Class M1, FRN + 1,324 1,080 2.17%, 03/25/34, Ser. 2004-1, Class M2, FRN + 1,080 1,652 1.85%, 04/25/34, Ser. 2004-BC1, Class A1, FRN + 1,652 2,494 1.90%, 04/25/34, Ser. 2004-1, Class 3A, FRN + 2,497 DaimlerChrysler Auto Trust, 5,000 3.53%, 12/06/07, Ser. 2002-B, Class A4 5,058 1,385 2.88%, 10/08/09, Ser. 2003-A, Class A4 1,388 4,415 Discover Card Master Trust I, 1.65%, 05/16/07, Ser. 2002-5, Class A, FRN 4,416 8,155 Honda Auto Receivables Owner Trust, 2.48%, 07/18/08, Ser. 2003-1, Class A4 8,142 15,395 Household Automotive Trust, 4.37%, 12/17/08, Ser. 2001-3, Class A4 15,617 2,000 Household Mortgage Loan Trust, 1.98%, 01/20/34, Ser. 2004-HC1, Class A, FRN 2,000 Long Beach Mortgage Loan Trust, 4,987 1.94%, 07/25/33, Ser. 2003-3, Class A, FRN 4,991 2,000 2.30%, 08/25/33, Ser. 2003-4, Class M1, FRN 2,014 6,488 1.92%, 02/25/34, Ser. 2004-1, Class A3, FRN 6,491 2,030 2.12%, 02/25/34, Ser. 2004-1, Class M1, FRN 2,035 1,360 2.17%, 02/25/34, Ser. 2004-1, Class M2, FRN 1,361 1,500 1.88%, 07/25/34, Ser. 2004-3, Class A3, FRN 1,500 1,500 2.19%, 07/25/34, Ser. 2004-3, Class M1, FRN 1,499 1,905 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 1,902 3,000 MBNA Credit Card Master Note Trust, 2.75%, 12/15/13, Ser. 2001-C2, Class C2, FRN, # 3,071 $ 3,285 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 $ 3,241 3,130 Onyx Acceptance Grantor Trust, 2.66%, 05/17/10, Ser. 2003-C, Class A4 3,110 Option One Mortgage Loan Trust, 3,260 2.04%, 02/25/33, Ser. 2003-1, Class A2, FRN 3,270 2,251 1.94%, 08/25/33, Ser. 2003-5, Class A2, FRN 2,253 5,998 PP&L Transition Bond Co., LLC, 7.15%, 06/25/09, Ser. 1999-1, Class A8 6,756 Residential Asset Securities Corp., 1,650 1.87%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 1,649 4,374 1.91%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN 4,377 3,337 1.94%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN 3,339 SLM Student Loan Trust, 8,410 1.57%, 12/15/12, Ser. 2003-12, Class A2, FRN 8,415 4,975 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 4,974 2,580 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 2,580 7,000 Volkswagen Auto Loan Enhanced Trust, 1.93%, 01/20/10, Ser. 2003-1, Class A4 6,868 Wachovia Asset Securitization, Inc., 3,137 2.05%, 12/25/32, Ser. 2002-HE2, Class A, FRN 3,147 4,604 1.88%, 07/25/33, Ser. 2003-HE2, Class AII1, FRN 4,609 2,516 1.87%, 11/25/33, Ser. 2003-HE3, Class A, FRN 2,513 2,455 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 2,460 ------------------------------------------------------------------------- Total Asset Backed Securities 194,537 (Cost $194,589) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 28
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PRIVATE PLACEMENTS -- 1.9% CO-OP APARTMENTS -- 1.9% $ 4,191 180 East End Ave. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.88%, 12/01/28, # (f) (i) $ 4,691 737 200 East 57th St. Note, Secured by Second Mortgage and Agreement on Co-op Apartment Building in New York City, 6.72%, 01/01/14, # (f) (i) 808 10,638 200 East 57th St. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.50%, 01/01/40, # (f) (i) 11,508 3,077 81 Irving Place Note, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.95%, 01/01/29, # (f) (i) 3,450 ------------------------------------------------------------------------- Total Private Placements 20,457 (Cost $18,644) ------------------------------------------------------------------------- Total Long-Term Investments 988,432 (Cost $974,453) ------------------------------------------------------------------------- UNITS - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 9.2% OPTIONS -- 0.5% 1 Call Option on 10 Year Treasury Notes, strike price of 113.00, expiring 09/24/04 449 1 Call Option on Eurodollar Future, strike price of 98.13, expiring 09/13/04, European Style 48 75,000 Call Option on FNMA, 30 Year Fixed, 6.00%, TBA, strike price of 101.41, expiring 11/08/04, European Style 1,231 21,000 Call Option on Interest Rate Swap, expiring 02/02/15, if exercised the Fund pays floating 3 month LIBOR and receives fixed 5.08%, European Style 791 19,253 Call Option on Interest Rate Swap, expiring 09/10/09, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.00%, European Style $ 194 55,470 Call Option on Interest Rate Swap, expiring 09/10/09, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.02%, European Style 665 32,625 Call Option on Interest Rate Swap, expiring 09/10/09, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.05%, European Style 432 22,125 Call Option on Interest Rate Swap, expiring 09/10/14, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.81%, European Style 435 44,400 Call Option on Interest Rate Swap, expiring 09/10/14, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.57%, European Style 255 13,200 Call Option on Interest Rate Swap, expiring 09/10/14, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.75%, European Style 187 152,190 Call Option on Interest Rate Swap, expiring 09/16/05, if exercised the Fund pays floating 3 month LIBOR and receives fixed 3.03%, European Style 1,075 0^^ Put Option on Eurodollar Future, strike price of 97.88, expiring 09/13/04, European Style 1 21,000 Put Option on Interest Rate Swap, expiring 01/31/05, if exercised the Fund pays fixed 5.58% and receives floating 3 month LIBOR, European Style 76 39,560 Put Option on Interest Rate Swap, expiring 09/02/04, if exercised the Fund pays fixed 4.94% and receives floating 3 month LIBOR, European Style 0^^
SEE NOTES TO FINANCIAL STATEMENTS. 29
UNITS ISSUER VALUE - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- CONTINUED OPTIONS -- CONTINUED 39,560 Put Option on Interest Rate Swap, expiring 09/02/04, if exercised the Fund pays fixed 4.94% and receives floating 3 month LIBOR, European Style $ 0^^ 56,040 Put Option U.S. Treasury Note, 4.75%, 05/15/14, strike price of 102.47, expiring 09/07/04, European Style 2 ------------------------------------------------------------------------- Total Options 5,841 (Cost $3,561) ------------------------------------------------------------------------- PRINCIPAL AMOUNT (USD) - ------------------------------------------------------------------------------------------ COMMERCIAL PAPER -- 5.3% ASSET BACKED SECURITIES -- 2.1% Compass Securitization LLC, $ 7,150 1.50%, 09/15/04 + 7,146 6,000 1.82%, 11/26/04 + 5,975 5,000 Hatteras Funding Corp., 1.66%, 11/08/04 + 4,983 4,500 K2 (USA) LLC, 1.52%, 10/04/04 + 4,493 ------------------------------------------------------------------------- 22,597 ------------------------------------------------------------------------- BANKING -- 2.0% 9,600 Natexis Banques Populaires (France), 1.68%, 11/22/04 + 9,562 13,500 Spintab AB (Sweden), 1.51%, 09/15/04 + 13,492 ------------------------------------------------------------------------- 23,054 ------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.5% $ 4,920 Altria Group, Inc., 1.97%, 10/15/04 + $ 4,909 FINANCIAL SERVICES -- 0.5% 5,000 Govco, Inc., 1.35%, 09/08/04 + 4,999 UTILITIES -- 0.2% 2,000 Public Service Enterprise Group, Inc., 2.00%, 02/14/05 + 2,000 ------------------------------------------------------------------------- Total Commercial Paper 57,559 (Cost $57,560) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 3.4% 37,330 JPMorgan Prime Money Market Fund (a) + 37,330 (Cost $37,330) ------------------------------------------------------------------------- Total Short-Term Investments 100,730 (Cost $98,451) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 1,089,162 (COST $1,072,904) -------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 150 Treasury Bonds December, 2004 $ 16,697 $ 235 218 2 Year Treasury Notes December, 2004 46,144 87 43 5 Year Treasury Notes December, 2004 4,759 23 SHORT FUTURES OUTSTANDING (7) 10 Year Japanese Government Bonds September, 2004 (8,780) (35) (217) 10 Year Treasury Notes December, 2004 (24,372) (170)
SEE NOTES TO FINANCIAL STATEMENTS. 30 OPTIONS
UNITS CALL OPTIONS WRITTEN VALUE - ---------------------------------------------------------------------------------------------------------------------- (18,905) Call Option on Interest Rate Swap, expiring 09/16/14, if exercised the Fund pays fixed 5.50% and receives floating 3 Month LIBOR, European Style. $ (1,391) (50,000) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 98.12, expiring 09/08/04, European Style. (535) (48,750) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 96.50, expiring 11/08/04, European Style. (1,219) (21,000) Call Option on Interest Rate Swap, expiring 09/29/04, if exercised the Fund pays fixed 4.67% and receives floating 3 Month LIBOR, European Style. (254) (37,500) Call Option on FNMA, 30 Year Fixed, 5.00%, TBA, strike price of 98.44, expiring 09/08/04, European Style. (346) (100,000) Call Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 101.63, expiring 09/08/04, European Style. (273) (75,000) Call Option on FNMA, 30 Year Fixed, 5.50%, TBA, strike price of 100.71, expiring 09/08/04, European Style. (710) - ---------------------------------------------------------------------------------------------------------------------- Total Call Options Written $ (4,728) PUT OPTIONS WRITTEN - ---------------------------------------------------------------------------------------------------------------------- (39,560) Put Option on Interest Rate Swap, expiring 09/02/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.87%, European Style. $ (2) (39,560) Put Option on Interest Rate Swap, expiring 09/02/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 4.87%, European Style. (1) (21,000) Put Option on Interest Rate Swap, expiring 09/29/04, if exercised the Fund pays floating 3 month LIBOR and receives fixed 5.69%, European Style. (-)^^ (56,040) Put Option on U.S. Treasury Note, 4.75%, 05/15/14, strike price of 101.68, expiring 09/07/04, European Style. (-)^^ (1) Put Option on Eurodollar Future, strike price of 98.38, expiring 09/13/04, European Style. (4) (1) Put Option on Eurodollar Future, strike price of 98.25, expiring 09/13/04, European Style. (11) (-)^^ Put Option on Eurodollar Future, strike price of 97.75 expiring 09/13/04, European Style. (1) (-)^^ Put Option on Eurodollar Future, strike price of 97.63, expiring 09/13/04, European Style. (1) (1) Put Option on Treasury Notes, strike price of 114.00, expiring 09/24/04, European Style. (225) Total Put Options Written $ (245) (Total premiums received on written options $2,803)
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------- Swap - rate lock with Barclays Bank PLC. on 10 Year Forward Interest Rate Swap less 4.73%, the Fund pays positive, receives negative. 09/01/04 $ 17,065 $ 205 Swap - rate lock with Barclays Bank PLC. on 2 Year Forward Interest Rate Swap less 2.89%, the Fund pays positive, receives negative. 09/01/04 65,715 145 Swap - rate lock with Barclays Bank PLC, New York on 5 Year Forward Interest Rate Swap less 3.93%, the Fund pays negative, receives positive. 09/01/04 52,050 (369)
SEE NOTES TO FINANCIAL STATEMENTS. 31
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------- Swap - price lock with Citibank N.A., on 30 Year FNMA, 4.50%, TBA, price less 95.34, the Fund pays negative, receives positive. 09/08/04 $ 50,000 $ 523 Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.50%, TBA, price less 100.85, the Fund pays negative, receives positive. 09/08/04 50,000 332 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, TBA, price less 101.03, the Fund pays negative, receives positive. 09/08/04 25,000 129 Swap - price lock with Citibank N.A., on 30 Year FNMA, 5.00%, TBA, price less 98.34, the Fund pays positive, receives negative. 09/08/04 92,000 (791) Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 6.50%, TBA, price less 104.83, the Fund pays positive, receives negative. 09/08/04 67,000 (115) Swap - price lock with Bank of America N.A., on U.S. Treasury Note, 4.38%, 8/15/12, price less 99.75, the Fund pays positive, receives negative. 09/09/04 39,770 (1,301) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 4.75%, 05/15/14, price less 103.93, the Fund receives negative, pays positive. 09/10/04 56,395 (490) Swap - price lock with UBS AG on 15 Year FNMA, 5.00%, TBA, price less 101.31, the Fund pays negative, receives positive. 09/13/04 14,000 219 Swap - spread lock with Morgan Stanley Capital Services on 5 Year Mid Market Swap Spread, price less 51.18, the Fund pays negative, receives positive. 09/13/04 38,340 (83) Swap - spread lock with Morgan Stanley Capital Services on 10 Year Mid Market Swap Spread, price less 49.29, the Fund pays negative, receives positive. 09/13/04 21,695 (119) Swap - price lock with Deutsche Bank AG, New York on U.S. Treasury Note, 4.25%, 8/15/14, price less 101.02, the Fund receives negative, pays positive. 09/14/04 9,290 -- Swap - price lock with UBS AG, on 30 Year GNMA, 6.00%, TBA, price less 103.19, the Fund pays negative, receives positive. 09/15/04 32,000 180 Swap - price lock with Citibank N.A., on U.S. Treasury Note, 3.63%, 7/15/09, price less 100.63, the Fund pays negative, receives positive. 09/27/04 19,900 119 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, TBA, price less 100.41, the Fund pays negative, receives positive. 10/07/04 33,000 278 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%, TBA, price less 94.95, the Fund pays positive, receives negative. 10/07/04 26,000 (303) Swap - price lock with Citibank N.A. on 30 Year GNMA, 6.00%, TBA, price less 102.38, the Fund pays negative, receives positive. 10/14/04 52,000 569 Swap - price lock with Citibank N.A., on 30 Year GNMA, 6.00%, TBA, price less 103.08, the Fund pays negative, receives positive. 10/14/04 34,000 133 Swap - price lock with Citibank N.A., on 30 Year GNMA, 5.00%, TBA, price less 97.73, the Fund pays positive, receives negative. 10/14/04 31,000 (489)
SEE NOTES TO FINANCIAL STATEMENTS. 32
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------- Swap - price lock with Citibank N.A., on 30 Year GNMA, 5.00%, TBA, price less 98.69, the Fund pays positive, receives negative. 10/14/04 $ 20,000 $ (125) Total Return Swap with Bank of America N.A. on Bank of America AAA 10 Year CMBS Index, the fund receives total return of Index, and pays 1 month LIBOR, less 73.00 bps. 11/01/04 14,200 614 Swap - price lock with UBS AG, on 30 Year FNMA, 6.00%, TBA, price less 102.22, the Fund pays negative, receives positive. 11/08/04 240,000 1,425 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, TBA, price less 100.53, the Fund pays negative, receives positive. 11/08/04 67,000 272 Swap - price lock with UBS AG, on 30 Year FNMA, 6.50%, TBA, price less 104.05, the Fund receives negative, pays positive. 11/08/04 120,000 (525) Swap - price lock with UBS AG, on 30 Year FNMA, 5.50%, TBA, price less 100.11, the Fund receives negative, pays positive. 11/08/04 120,000 (956) Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%, TBA, price less 95.22, the Fund receives negative, pays positive. 11/08/04 52,000 (325) Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.5%, TBA, price less 101.02, the Fund receives negative, pays positive. 11/08/04 46,000 - Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.5%, TBA, price less 95.94, the Fund receives negative, pays positive. 11/08/04 27,000 - Swap - Forward Rate Agreement with Citibank N.A., the Fund pays 3 month LIBOR, receives 1.97%. 12/15/04 586,710 170 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 month LIBOR, receives 1.95%. 12/15/04 111,015 23 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 month LIBOR, receives 1.91%. 12/15/04 913,560 98 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 Month LIBOR, receives 1.88%. 12/15/04 611,140 19 Total Return Swap with Lehman AAA 8.5 Year CMBS Index, the fund receives total return of Index, and pays 1 Month LIBOR, less 45.00 bps. 01/01/05 25,000 - Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS Index, the fund receives total return of Index, and pays 1 Month LIBOR, less 77.00 bps. 01/01/05 24,000 901 Total Return Swap with Bank of America N.A. on Bank of America AAA 10 Year CMBS Index, the fund receives total return of Index, and pays 1 Month LIBOR, less 70.00 bps. 01/01/05 40,390 1,366 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 2.32%, receives 3 Month LIBOR. 03/16/05 702,740 (246) Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 3 month LIBOR, receives 3.65%. 12/21/05 879,920 1,591 Swap - Forward Rate Agreement with Merrill Lynch Capital Services, the Fund pays 4.24%, receives 3 Month LIBOR. 06/21/06 879,920 (1,899)
SEE NOTES TO FINANCIAL STATEMENTS. 33 JPMORGAN BOND FUND II PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 81.7% U.S. TREASURY SECURITIES -- 11.9% U.S. Treasury Notes & Bonds, $ 18,280 1.50%, 07/31/05 + $ 18,208 4,600 3.88%, 05/15/09 + 4,722 26,215 4.00%, 06/15/09 + 27,039 1,225 3.63%, 07/15/09 + 1,242 1,425 3.50%, 08/15/09 + 1,437 2,540 4.00%, 11/15/12 + @ 2,551 3,645 4.00%, 02/15/14 + 3,614 2,805 4.75%, 05/15/14 + 2,944 28,125 4.25%, 08/15/14 + 28,406 24,490 7.25%, 08/15/22 + @ 31,400 4,685 6.13%, 11/15/27 + 5,402 7,420 5.38%, 02/15/31 + 7,900 ------------------------------------------------------------------------- Total U.S. Treasury Securities 134,865 (Cost $132,221) ------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 1.9% 10,400 Federal Home Loan Bank, 1.63%, 06/15/05 + 10,368 9,060 Federal National Mortgage Association, 7.13%, 01/15/30 11,132 ------------------------------------------------------------------------- Total U.S. Government Agency Securities 21,500 (Cost $20,385) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 0.6% United Mexican States (Mexico), 1,500 6.38%, 01/16/13, MTN 1,575 2,035 5.88%, 01/15/14, Ser. A, MTN 2,059 2,925 8.30%, 08/15/31, MTN 3,354 ------------------------------------------------------------------------- Total Foreign Government Securities 6,988 (Cost $6,764) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 23.1% AEROSPACE -- 0.2% 2,220 General Dynamics Corp., 2.13%, 05/15/06 2,198 5 United Technologies Corp., 6.10%, 05/15/12 6 ------------------------------------------------------------------------- 2,204 ------------------------------------------------------------------------- AUTOMOTIVE -- 2.4% DaimlerChrysler N.A. Holding Corp., $ 2,950 2.34%, 05/24/06, MTN, FRN $ 2,961 1,220 7.20%, 09/01/09 1,370 Ford Motor Credit Co., 9,080 7.38%, 10/28/09 9,939 1,040 7.00%, 10/01/13 1,092 General Motors Acceptance Corp., 1,525 2.60%, 05/18/06, MTN, FRN 1,529 4,650 2.51%, 01/16/07, MTN, FRN 4,655 1,210 6.88%, 09/15/11 1,267 General Motors Corp., 1,625 7.20%, 01/15/11 1,725 1,200 8.25%, 07/15/23 1,265 1,775 8.38%, 07/15/33 1,887 ------------------------------------------------------------------------- 27,690 ------------------------------------------------------------------------- BANKING -- 4.6% 465 Abbey National Capital Trust I, 8.96% to 6/30; thereafter FRN, 12/31/49 + 623 1,790 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52% to 11/12; thereafter FRN, 12/31/49, # + 1,968 3,975 ANZ Capital Trust I, 5.36%, 12/15/53, # + 3,989 1,500 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # 1,455 920 Den Norske Bank ASA (Norway), 7.73% to 6/11; thereafter FRN, 12/31/49, # 1,077 2,130 HBOS PLC (United Kingdom), 5.38% to 11/13; thereafter FRN, 12/31/49, # 2,153 1,740 Industrial Bank of Korea (South Korea), 4.00% to 05/09; thereafter FRN, 05/19/14, # 1,706 1,745 KBC Bank Fund Trust III, 9.86% to 11/09; thereafter FRN, 11/29/49, # 2,169 1,705 Mizuho Finance Group LTD (Cayman Islands), 5.79%, 04/15/14, # 1,755 2,300 Nordea Bank AB (Sweden), 8.95% to 11/09; thereafter FRN, 12/31/49, # 2,785
SEE NOTES TO FINANCIAL STATEMENTS. 34
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 2,685 Northern Rock PLC (United Kingdom), 5.60%, 12/31/49, MTN, # $ 2,724 3,105 Popular North America, Inc., 4.70%, 06/30/09 3,185 RBS Capital Trust I, 535 6.43% to 1/34; thereafter FRN, 12/31/49 540 1,370 5.51% to 9/14; thereafter FRN, 12/31/49 1,389 1,145 Royal Bank of Scotland Group PLC (United Kingdom), 7.65% to 09/31; thereafter FRN, 12/31/49 1,347 2,305 Skandinaviska Enskilda Banken AB (Sweden), 4.96% to 03/14; thereafter FRN, 12/31/49, # 2,244 1,420 Standard Chartered Bank (United Kingdom), 8.00%, 05/30/31, # 1,769 3,180 SunTrust Bank, 2.50%, 11/01/06 3,154 1,445 Swedbank (Sweden), 9.00% to 03/10; thereafter FRN, 12/31/49, # 1,749 2,460 United Overseas Bank LTD (Singapore), 5.38% to 9/14; thereafter FRN, 12/31/49, # 2,490 US Bank N.A., 2,430 2.85%, 11/15/06 2,430 690 6.38%, 08/01/11 771 3,000 Wells Fargo & Co, 1.62%, 03/23/07, FRN 3,001 2,950 Westpac Banking Corp. (Australia), 1.81%, 05/25/07, FRN, # 2,950 1,970 Westpac Capital Trust III, 5.82% to 09/13; thereafter FRN, 12/31/49, # 2,050 985 Westpac Capital Trust IV, 5.26%, 12/29/49, # 965 ------------------------------------------------------------------------- 52,438 ------------------------------------------------------------------------- BUSINESS SERVICES -- 0.1% 1,315 Cendant Corp., 7.13%, 03/15/15 1,504 CHEMICALS -- 0.3% 2,035 ICI Wilmington, Inc., 5.63%, 12/01/13 2,078 945 The Dow Chemical Co., 7.38%, 11/01/29 1,092 ------------------------------------------------------------------------- 3,170 ------------------------------------------------------------------------- CONSTRUCTION -- 0.3% $ 1,485 Centex Corp., 5.70%, 05/15/14 $ 1,516 1,465 Pulte Homes, Inc., 5.25%, 01/15/14 1,444 960 Toll Brothers, Inc., 5.95%, 09/15/13 999 ------------------------------------------------------------------------- 3,959 ------------------------------------------------------------------------- DIVERSIFIED -- 0.4% General Electric Capital Corp., 1,620 5.88%, 02/15/12, Ser. A, MTN 1,759 1,560 6.75%, 03/15/32, Ser. A, MTN 1,772 1,300 Hutchison Whampoa International LTD (Hong Kong), 6.25%, 01/24/14, # 1,342 ------------------------------------------------------------------------- 4,873 ------------------------------------------------------------------------- FINANCIAL SERVICES -- 6.3% American General Finance Corp., 3,650 3.00%, 11/15/06, Ser. H, MTN + 3,639 685 4.50%, 11/15/07, Ser. H, MTN + 707 4,650 The Bear Stearns Co., Inc., 1.77%, 01/16/07, Ser. B, MTN, FRN 4,651 CIT Group, Inc., 2,100 1.72%, 04/19/06, MTN, FRN 2,099 2,750 1.77%, 06/19/06, MTN, FRN 2,756 3,885 1.94%, 05/18/07, MTN, FRN 3,885 3,900 Citigroup Global Markets Holdings, Inc., 1.58%, 12/12/06, Series A, MTN, FRN 3,899 1,500 Citigroup, Inc., 1.68%, 03/20/06, FRN 1,502 3,050 Countrywide Home Loans, Inc., 1.87%, 02/17/06, Ser. L, MTN, FRN 3,050 610 FleetBoston Financial Corp., 7.25%, 09/15/05 640 Goldman Sachs Group, Inc., 1,500 1.94%, 02/21/06, Ser. B, MTN, FRN 1,503 10 5.70%, 09/01/12 11 2,095 6.35%, 02/15/34 2,096 1,450 Household Finance Corp., 1.86%, 02/09/07, MTN, FRN 1,451 5,745 HSBC Capital Funding LP (Channel Islands), 9.55% to 06/10; thereafter FRN, 12/31/49, # 7,244 1,515 ING Capital Funding Trust III, 8.44% to 12/10; thereafter FRN, 12/31/49 1,830
SEE NOTES TO FINANCIAL STATEMENTS. 35
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 2,700 John Deere Capital Corp., 1.61%, 03/16/06, Ser. D, MTN, FRN $ 2,701 Merrill Lynch & Co., Inc., 1,500 1.87%, 06/13/05, Ser. B, MTN, FRN 1,503 2,100 1.95%, 02/06/09, Ser. C, MTN, FRN 2,099 Morgan Stanley, 4,665 1.73%, 01/12/07, FRN 4,670 2,420 5.80%, 04/01/07 2,581 2,100 Pricoa Global Funding I, 3.90%, 12/15/08, # 2,107 14,010 Special Purpose Accounts Receivable Cooperative Corp. Trust, 2.06%, 05/23/05, Ser. 2003-6, FRN, # 14,011 1,140 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 1,261 ------------------------------------------------------------------------- 71,896 ------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.1% 775 SABMiller PLC (United Kingdom), 6.63%, 08/15/33, # 855 HEALTH CARE/HEALTH CARE SERVICES -- 0.2% 2,035 UnitedHealth Group, Inc., 3.30%, 01/30/08 2,024 INSURANCE -- 1.2% 1,045 Arch Capital Group LTD (Bermuda), 7.35%, 05/01/34 + 1,101 2,350 Aspen Insurance Holdings LTD (Bermuda), 6.00%, 08/15/14, # + 2,372 1,460 AXA (France), 8.60%, 12/15/30 + 1,876 530 Fund American Companies, Inc., 5.88%, 05/15/13 541 2,980 Liberty Mutual Group, 5.75%, 03/15/14, # 2,955 Nationwide Financial Services, Inc., 510 6.25%, 11/15/11 560 1,130 5.90%, 07/01/12 1,215 855 Odyssey Re Holdings Corp., 7.65%, 11/01/13 947 1,220 Prudential Holdings LLC, 8.70%, 12/18/23, # 1,560 $ 830 QBE Insurance Group LTD (Australia), 5.65% to 07/13; thereafter FRN, 07/01/23, # $ 817 ------------------------------------------------------------------------- 13,944 ------------------------------------------------------------------------- MULTI-MEDIA -- 0.8% 2,813 Comcast Cable Communications Holdings, Inc., 8.38%, 03/15/13 + 3,401 900 News America, Inc., 7.25%, 05/18/18 1,035 665 Time Warner Companies, Inc., 9.15%, 02/01/23 851 1,920 Time Warner Entertainment Co., LP, 8.38%, 03/15/23 2,290 1,165 Time Warner, Inc., 7.63%, 04/15/31 + 1,329 ------------------------------------------------------------------------- 8,906 ------------------------------------------------------------------------- OIL & GAS -- 0.6% 455 Alberta Energy Co., LTD (Canada) (Yankee), 7.38%, 11/01/31 + 534 2,350 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + 2,351 1,155 Husky Energy, Inc. (Canada), 6.15%, 06/15/19 1,217 1,230 Kerr-McGee Corp., 6.95%, 07/01/24 1,294 992 PEMEX Project Funding Master Trust (Mexico), 8.63%, 02/01/22 1,131 ------------------------------------------------------------------------- 6,527 ------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.1% 885 International Paper Co., 5.85%, 10/30/12 933 PHARMACEUTICALS -- 0.1% 790 Wyeth, 6.45%, 02/01/24 792 PIPELINES -- 0.7% Duke Capital Corp., 3,645 6.25%, 02/15/13 3,885 980 8.00%, 10/01/19 1,155 Kinder Morgan Energy Partners LP, 935 7.40%, 03/15/31 1,041 635 7.75%, 03/15/32 736
SEE NOTES TO FINANCIAL STATEMENTS. 36
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PIPELINES -- CONTINUED $ 760 7.30%, 08/15/33 $ 841 505 Plains All American Pipeline LP/PAA Finance Corp., 5.63%, 12/15/13, # 511 ------------------------------------------------------------------------- 8,169 ------------------------------------------------------------------------- RETAILING -- 0.3% 2,930 Safeway, Inc., 4.13%, 11/01/08 2,931 SHIPPING/TRANSPORTATION -- 0.2% Norfolk Southern Corp., 905 7.80%, 05/15/27 1,094 625 7.25%, 02/15/31 720 ------------------------------------------------------------------------- 1,814 ------------------------------------------------------------------------- TELECOMMUNICATIONS -- 2.0% AT&T Wireless Services, Inc., 1,675 7.88%, 03/01/11 + 1,974 1,215 8.75%, 03/01/31 + 1,573 Deutsche Telekom International Finance BV (The Netherlands), 1,025 8.50%, 06/15/10 1,230 950 8.75%, 06/15/30 1,218 France Telecom (France), 1,895 8.75%, 03/01/11 2,260 1,000 9.50%, 03/01/31 1,316 2,295 SBC Communications, Inc., 5.63%, 06/15/16 2,322 Sprint Capital Corp., 1,665 6.90%, 05/01/19 1,807 750 8.75%, 03/15/32 950 1,337 TCI Communications, Inc., 7.13%, 02/15/28 1,437 1,415 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 1,421 Verizon Global Funding Corp., 1,540 7.38%, 09/01/12 1,792 820 7.75%, 12/01/30 971 2,695 Verizon New York, Inc., 6.88%, 04/01/12, Ser. A 2,984 ------------------------------------------------------------------------- 23,255 ------------------------------------------------------------------------- UTILITIES -- 2.2% $ 1,515 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + $ 1,512 1,110 Arizona Public Service Co., 4.65%, 05/15/15 + 1,058 Dominion Resources, Inc., 3,000 8.13%, 06/15/10, Ser. A 3,556 520 6.30%, 03/15/33 521 1,405 DTE Energy Co., 6.38%, 04/15/33 1,407 500 National Rural Utilities Cooperative Finance Corp., 6.13%, 05/15/05 514 2,560 Nisource Finance Corp., 6.15%, 03/01/13 2,751 Pacific Gas & Electric Co., 2,465 2.30%, 04/03/06, FRN 2,468 1,345 4.20%, 03/01/11 1,328 1,460 4.80%, 03/01/14 1,444 1,600 PacifiCorp, 4.30%, 09/15/08 1,627 Pepco Holdings, Inc., 675 6.45%, 08/15/12 726 865 7.45%, 08/15/32 972 PSEG Power LLC, 2,190 5.50%, 12/01/15 2,172 460 8.63%, 04/15/31 582 1,840 TXU Energy Co., 7.00%, 03/15/13 2,062 ------------------------------------------------------------------------- 24,700 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 262,584 (Cost $252,764) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 26.6% COLLATERALIZED MORTGAGE OBLIGATIONS -- 6.9% Countrywide Home Loans, Inc., 15,440 6.25%, 10/25/32, Ser. 2002-22, Class A20 16,136 6,153 5.50%, 08/25/33, Ser. 2003-29, Class A1 6,192 Federal Home Loan Mortgage Corp., 7,029 5.00%, 10/15/23, Ser. 2781, Class PI, IO 709 38,610 5.45%, 02/15/34, Ser. 2813, Class SB, IO, FRN 3,798 Federal National Mortgage Association, 3,079 5.75%, 06/25/29, Ser. 2002-57, Class DM 3,093
SEE NOTES TO FINANCIAL STATEMENTS. 37
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED $ 15,492 5.49%, 10/25/31, Ser. 2004-61, Class TS, IO, FRN $ 1,411 Government National Mortgage Association, 3,280 5.50%, 04/20/25, Ser. 2004-46, Class IH, IO 273 4,555 5.50%, 01/20/27, Ser. 2004-39, Class IM, IO 463 7,544 5.50%, 10/20/27, Ser. 2004-44, Class PK, IO 860 4,765 10.10%, 12/16/33, Ser. 2004-7, Class SB, FRN 4,650 3,000 Impac Secured Assets Corp., 2.00%, 12/25/34, Ser. 2004-3, Class 1A4, FRN 3,000 2,705 Medallion Trust (Australia), 1.88%, 05/25/35, Ser. 2004-1G, Class A1, FRN 2,705 2,500 Permanent Financing PLC (United Kingdom), 1.48%, 03/10/09, Ser. 4, Class 2A, FRN 2,499 RESI Finance LP (Cayman Islands), 3,436 3.12%, 07/10/35, Ser. 2003-B, Class B3, FRN, # 3,497 5,838 2.97%, 09/10/35, Ser. 2003-C, Class B3, FRN, # 5,940 1,185 3.17%, 09/10/35, Ser. 2003-C, Class B4, FRN, # 1,200 5,519 2.87%, 12/10/35, Ser. 2003-D, Class B3, FRN, # 5,542 1,815 3.07%, 12/10/35, Ser. 2003-D, Class B4, FRN, # 1,822 5,089 Residential Funding Mortgage Securities I, 6.25%, 01/25/32, Ser. 2002-S1, Class A4 5,132 2,927 RMAC (United Kingdom), 1.58%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 2,927 6,245 Wells Fargo Mortgage Backed Securities Trust, 6.00%, 03/25/32, Ser. 2002-7, Class 2A6 6,285 ------------------------------------------------------------------------- 78,134 ------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 19.7% Federal National Mortgage Association, $ 39,100 4.50%, 09/25/19, TBA $ 39,063 3,250 5.00%, 09/25/19, TBA 3,310 1,050 5.00%, 10/25/19, TBA 1,067 39,100 5.50%, 10/25/19, TBA 40,371 0^^ 7.50%, 07/01/30, Pool 529276 0^^ 83,500 5.50%, 09/25/34, TBA 84,779 17,500 5.00%, 10/25/34, TBA 17,309 28,900 6.00%, 11/25/34, TBA 29,713 8,500 Government National Mortgage Association, 6.00%, 09/15/34, TBA 8,819 ------------------------------------------------------------------------- 224,431 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 302,565 (Cost $301,395) ------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 1.3% 815 Calwest Industrial Trust, 1.98%, 02/15/12, Ser. 2002-CALW, Class AFL, FRN, # 816 9,300 Capital One Multi-Asset Execution Trust, 2.85%, 12/15/10, Ser. 2003-A, FRN, # 9,614 4,394 Goldman Sachs Mortgage Securities II, 1.75%, 11/15/15, Ser. 2003-FL6A, Class A1, FRN, # 4,395 25 Morgan Stanley Dean Witter Capital I, 5.98%, 01/15/39, Ser. 2002-TOP7, Class A2 27 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 14,852 (Cost $14,813) ------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 16.3% American Express Credit Account Master Trust, 3,500 1.95%, 12/15/08, Ser. 2001-6, Class B, FRN + 3,511 3,380 1.71%, 09/15/09, Ser. 2002-1, Class A, FRN + 3,387
SEE NOTES TO FINANCIAL STATEMENTS. 38
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED AmeriCredit Automobile Receivables Trust, $ 1,245 2.75%, 10/06/07, Ser. 2003-CF, Class A3 + $ 1,250 4,475 1.76%, 12/06/07, Ser. 2003-DM, Class A3B, FRN + 4,485 1,985 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 2,009 2,400 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 2,395 Capital Auto Receivables Asset Trust, 5,651 1.64%, 02/15/07, Ser. 2003-2, Class A3B, FRN 5,652 3,710 1.96%, 01/15/09, Ser. 2003-2, Class A4A 3,636 Capital One Auto Finance Trust, 1,340 3.18%, 09/15/10, Ser. 2003-B, Class A4 1,340 3,450 1.70%, 03/15/11, Ser. 2004-A, Class A4, FRN 3,450 3,400 Capital One Master Trust, 2.40%, 08/15/08, Ser. 2000-4, Class C, FRN, # 3,410 6,355 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 6,356 CARSS Finance LP, 920 1.88%, 01/15/11, Ser. 2004-A, Class B1, FRN, # 920 1,540 2.55%, 01/15/11, Ser. 2004-A, Class B2, FRN, # 1,540 Citibank Credit Card Issuance Trust, 4,900 2.55%, 03/20/08, Ser. 2003-C2, Class C2, FRN 4,944 11,250 6.88%, 11/16/09, Ser. 2000-A3, Class A3 12,476 3,248 Citigroup Mortgage Loan Trust, Inc., 2.00%, 12/25/33, Ser. 2003-HE3, Class A, FRN 3,257 Countrywide Asset-Backed Certificates, 2,285 3.61%, 04/25/30, Ser. 2003-5, Class AF3 2,301 2,070 5.41%, 01/25/34, Ser. 2003-5, Class MF1 2,131 $ 1,290 2.12%, 03/25/34, Ser. 2004-1, Class M1, FRN $ 1,294 1,060 2.17%, 03/25/34, Ser. 2004-1, Class M2, FRN 1,060 2,544 1.90%, 04/25/34, Ser. 2004-1, Class 3A, FRN 2,547 1,205 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 1,207 3,580 Discover Card Master Trust I, 1.65%, 05/16/07, Ser. 2002-5, Class A, FRN 3,581 7,165 Honda Auto Receivables Owner Trust, 2.48%, 07/18/08, Ser. 2003-1, Class A4 7,154 Long Beach Mortgage Loan Trust, 8,028 1.94%, 07/25/33, Ser. 2003-3, Class A, FRN 8,035 2,200 2.30%, 08/25/33, Ser. 2003-4, Class M1, FRN 2,215 6,333 1.92%, 02/25/34, Ser. 2004-1, Class A3, FRN 6,336 1,980 2.12%, 02/25/34, Ser. 2004-1, Class M1, FRN 1,985 1,340 2.17%, 02/25/34, Ser. 2004-1, Class M2, FRN 1,341 1,500 1.88%, 07/25/34, Ser. 2004-3, Class A3, FRN 1,500 1,500 2.19%, 07/25/34, Ser. 2004-3, Class M1, FRN 1,499 1,655 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 1,653 MBNA Credit Card Master Note Trust, 9,980 5.75%, 10/15/08, Ser. 2001-A1, Class A1 10,499 3,000 3.30%, 07/15/10, Ser. 2003-A1, Class A1 2,998 3,000 2.75%, 12/15/13, Ser. 2001-C2, Class C2, FRN, # 3,071 9,900 MBNA Master Credit Card Trust USA, 6.80%, 04/16/07, Ser. 1999-M, Class B 9,996 2,775 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 2,738 2,670 Onyx Acceptance Grantor Trust, 2.66%, 05/17/10, Ser. 2003-C, Class A4 2,653 2,863 Option One Mortgage Loan Trust, 2.04%, 02/25/33, Ser. 2003-1, Class A2, FRN 2,873
SEE NOTES TO FINANCIAL STATEMENTS. 39
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED Residential Asset Securities Corp., $ 1,331 1.87%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN $ 1,331 3,214 1.91%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN 3,215 2,842 1.94%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN 2,844 250 Sears Credit Account Master Trust, 5.25%, 10/16/08, Ser. 1998-2, Class A 251 SLM Student Loan Trust, 7,290 1.57%, 12/15/12, Ser. 2003-12, Class A2, FRN 7,295 5,605 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 5,604 2,215 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 2,215 Volkswagon Auto Loan Enhanced Trust, 5,000 1.49%, 05/21/07, Ser. 2003-1, Class A3 4,965 2,615 2.94%, 03/22/10, Ser. 2003-2, Class A4 2,609 Wachovia Asset Securitization, Inc., 2,541 2.05%, 12/25/32, Ser. 2002-HE2, Class A, FRN 2,550 5,869 1.87%, 11/25/33, Ser. 2003-HE3, Class A, FRN 5,864 2,110 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 2,114 ------------------------------------------------------------------------- Total Asset Backed Securities 185,542 (Cost $183,723) ------------------------------------------------------------------------- Total Long-Term Investments 928,896 (Cost $912,065) ------------------------------------------------------------------------- SHORT-TERM INVESTMENTS - 18.3% COMMERCIAL PAPER -- 7.8% ASSET BACKED SECURITIES -- 1.6% Compass Securitization LLC, 10,000 1.50%, 09/15/04 + 9,995 4,000 1.82%, 11/26/04 + 3,983 4,400 Hatteras Funding Corp., 1.66%, 11/08/04 + 4,385 ------------------------------------------------------------------------- 18,363 ------------------------------------------------------------------------- BANKING -- 5.2% $ 11,250 Credit Lyonnais N.A., 1.16%, 11/03/04 + $ 11,217 18,215 Natexis Banques Populaires (France), 1.68%, 11/22/04 + 18,144 2,700 Santander Central Hispano SA (Spain), 1.48%, 09/22/04 + 2,698 7,500 Spintab AB (Sweden), 1.51%, 09/15/04 + 7,496 20,000 Westdeutsche Landesbank Girozentrale (Germany), 1.83%, 01/20/05 + 19,858 ------------------------------------------------------------------------- 59,413 ------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.4% 4,790 Altria Group, Inc., 1.97%, 10/15/04 + 4,779 FINANCIAL SERVICES -- 0.6% 6,400 Govco, Inc., 1.72%, 11/26/04 + 6,373 ------------------------------------------------------------------------- Total Commercial Paper 88,928 (Cost $88,938) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 10.5% 118,963 JPMorgan Prime Money Market Fund (a) + 118,963 (Cost $118,963) ------------------------------------------------------------------------- Total Short-Term Investments 207,891 (Cost $207,901) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 1,136,787 (COST $1,119,966) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 40 FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 359 2 Year Treasury Notes December, 2004 $ 75,990 $ 140 263 5 Year Treasury Notes December, 2004 29,107 100 98 10 Year Treasury Notes December, 2004 11,007 3 SHORT FUTURES OUTSTANDING (194) Treasury Bonds December, 2004 (21,595) (301)
SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------- Swap - price lock with Bank of America N.A., on U.S. Treasury Note, 4.38%, 8/15/12, price less 99.75, the Fund pays positive, receives negative. 09/09/04 $ 32,685 $ (1,069) Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 4.75%, 5/15/14, price less 103.93, the Fund pays positive, receives negative. 09/10/04 49,695 (432) Swap - spread lock with Morgan Stanley Capital Services on 10-year Swap Spread, price less 49.29, the Fund pays negative, receives positive. 09/13/04 22,135 (122) Swap - spread lock with Morgan Stanley Capital Services on 5-year Swap Spread, price less 51.18, the Fund pays negative, receives positive. 09/13/04 39,120 (85) Swap - price lock with Citibank N.A., on U.S. Treasury Note, 3.63%, 7/15/09, price less 100.63, the Fund pays negative, receives positive. 09/27/04 19,550 117 Total Return Swap with Bank of America N.A. on Bank of America AAA 10 Year CMBS Index, the fund receives total return of Index, and pays 1 Month LIBOR, less 73.00 bps. 11/01/04 44,100 1,909 Total Return Swap with Bank of America N.A. on Bank of America AAA 10 Year CMBS Index, the fund receives total return of Index, and pays 1 Month LIBOR, less 70.00 bps. 01/01/05 35,600 1,204 Total Return Swap with UBS AG on Lehman AAA 8.5 Year CMBS Index, the fund receives total return of Index, and pays 1 Month LIBOR, less 77.00 bps. 01/01/05 20,500 770
SEE NOTES TO FINANCIAL STATEMENTS. 41 JPMORGAN ENHANCED INCOME FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
SHARES ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 95.5% PREFERRED STOCKS -- 0.5% FINANCIAL SERVICES -- 0.5% 0^^ Lehman CR-ABN Amro VIX, 0.00%* $ 1,500 (Cost $1,500) PRINCIPAL AMOUNT (USD) - ------------------------------------------------------------------------------------------ U.S. TREASURY SECURITIES -- 0.1% $ 400 U.S. Treasury Notes, 1.75%, 12/31/04 @ 400 (Cost $400) U.S. GOVERNMENT AGENCY SECURITIES -- 4.7% Federal Home Loan Mortgage Corp., 550 1.91%, 01/27/06, MTN, FRN 550 2,300 2.40%, 03/29/07 2,274 Federal National Mortgage Association, 1,900 3.35%, 12/01/06 1,900 2,232 2.02%, 02/25/28, Ser. 2003-121, Class FC, FRN 2,231 Overseas Private Investment Corp., 1,653 1.50%, 12/16/06, Ser. A, FRN 1,649 1,051 1.50%, 12/16/06, Ser. B, FRN 1,049 276 1.50%, 12/16/06, Ser. C, FRN 275 114 1.50%, 12/16/06, Ser. D, FRN 114 1,114 1.50%, 12/16/06, Ser. E, FRN 1,111 552 1.50%, 12/16/06, Ser. F, FRN 551 504 1.50%, 12/16/06, Ser. G, FRN 503 363 1.50%, 12/16/06, Ser. H, FRN 362 838 1.50%, 12/16/06, Ser. I, FRN 836 363 1.50%, 12/16/06, Ser. J, FRN 362 160 1.50%, 12/16/06, Ser. K, FRN 160 ------------------------------------------------------------------------- Total U.S. Government Agency Securities 13,927 (Cost $13,905) ------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 0.9% ILLINOIS - 0.4% 1,000 Illinois State, Taxable Pension, GO, 2.50%, 06/01/08 966 PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ OHIO - 0.1% $ 350 Ohio State Air Quality Development Authority, Toledo, Ser. A, Rev., Adj., 2.20%, 04/01/24 $ 350 TEXAS - 0.4% 1,250 Texas Public Finance Authority, Taxable, Unemployment Compensation, Ser. B, Rev., 2.00%, 06/15/05 1,250 ------------------------------------------------------------------------- Total State and Municipal Obligations 2,566 (Cost $2,600) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 45.0% AUTOMOTIVE -- 4.7% 1,500 American Honda Finance Corp., 1.60%, 09/11/06, MTN, FRN, # 1,503 DaimlerChrysler N.A. Holding Corp., 300 7.40%, 01/20/05 306 1,850 2.39%, 09/26/05, Ser. D, MTN, FRN 1,860 600 6.40%, 05/15/06 634 1,850 2.34%, 05/24/06, MTN, FRN 1,857 1,000 Ford Motor Credit Co., 7.60%, 08/01/05 1,043 General Motors Acceptance Corp., 2,000 4.15%, 02/07/05, MTN 2,019 420 6.75%, 01/15/06 440 1,650 2.51%, 01/16/07, MTN, FRN 1,652 2,450 2.56%, 07/16/07, FRN 2,451 ------------------------------------------------------------------------- 13,765 ------------------------------------------------------------------------- BANKING -- 5.4% 950 ABN Amro Bank NV (The Netherlands) (Yankee), 1.73%, 05/11/07, FRN 951 Bank of America Corp., 1,000 1.96%, 12/23/04, Ser. F, MTN, FRN 1,000 1,300 6.63%, 08/01/07 1,418 500 Capital One Bank, 6.88%, 02/01/06 529 1,550 KeyCorp, 1.83%, 07/23/07, Ser. G, MTN, FRN 1,549 1,150 Sovereign Bancorp, Inc., 2.10%, 08/25/06, FRN 1,149
SEE NOTES TO FINANCIAL STATEMENTS. 42
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 5,000 TD North America LP, 1.95%, 04/23/09, FRN, # $ 4,995 1,850 Washington Mutual, Inc., 1.97%, 11/03/05, FRN 1,853 2,400 Westpac Banking Corp. (Australia), 1.81%, 05/25/07, FRN, # 2,400 ------------------------------------------------------------------------- 15,844 ------------------------------------------------------------------------- DIVERSIFIED -- 1.1% 3,300 General Electric Capital Corp., 1.84%, 02/02/09, Ser. A, MTN, FRN 3,306 FINANCIAL SERVICES -- 23.8% Bear Stearns Companies, Inc., 2,800 1.77%, 01/16/07, Ser. B, MTN, FRN 2,801 2,650 1.98%, 01/30/09, Ser. B, MTN, FRN 2,656 CIT Group, Inc., 3,000 1.72%, 04/19/06, MTN, FRN 2,999 4,300 1.91%, 02/15/07, MTN, FRN 4,300 3,700 Citigroup Global Markets Holdings, Inc., 1.61%, 03/16/07, Ser. A, MTN, FRN 3,698 Countrywide Home Loans, Inc., 1,150 2.29%, 05/20/05, Ser. K, MTN, FRN 1,154 3,650 1.87%, 02/17/06, Ser. L, MTN, FRN 3,650 600 1.70%, 03/29/06, Ser. L, MTN, FRN 600 500 1.80%, 06/02/06, Ser. L, MTN, FRN 503 Counts Trusts, 1,400 2.49%, 08/15/07, Ser. 2002-10, FRN, # 1,412 1,400 2.54%, 08/15/07, Ser. 2002-11, FRN, # 1,414 2,700 Credit Suisse First Boston/New York (Yankee), 1.61%, 12/29/05, Ser. YCD, FRN 2,700 5,900 Goldman Sachs Group, Inc., 1.69%, 03/30/07, MTN, FRN 5,898 Household Finance Corp., 1,550 1.64%, 06/16/05, MTN, FRN 1,551 3,100 1.82%, 07/27/07, MTN, FRN 3,097 International Lease Finance Corp., 1,500 2.84%, 01/13/05, FRN 1,506 1,030 4.00%, 01/17/06, Ser. O, MTN 1,050 4,150 John Deere Capital Corp., 1.61%, 03/16/06, Ser. D, MTN, FRN 4,151 $ 600 John Hancock Global Funding II, 1.75%, 12/15/06, MTN, FRN, # $ 600 Merrill Lynch & Co., Inc., 2,000 1.79%, 01/26/07, Ser. C, MTN, FRN 2,000 2,200 1.66%, 03/19/07, Ser. C, MTN, FRN 2,200 1,400 1.79%, 07/27/07, Ser. C, MTN, FRN 1,399 Morgan Stanley Group, Inc., 5,100 1.87%, 03/27/06, FRN 5,114 600 1.89%, 11/24/06, FRN 600 1,200 1.84%, 02/15/07, FRN 1,201 500 1.79%, 07/27/07, FRN 500 Pricoa Global Funding I, 750 1.86%, 04/25/05, MTN, FRN, # 751 1,300 1.42%, 03/02/07, MTN, FRN, # 1,300 Principal Life Global, 2,900 1.85%, 11/13/06, MTN, FRN, # 2,904 1,000 1.71%, 01/12/07, MTN, FRN, # 1,000 SLM Corp., 2,700 1.78%, 01/25/07, Ser. A, MTN, FRN 2,701 1,100 1.87%, 07/25/08, Ser. A, MTN, FRN 1,099 2,000 Special Purpose Accounts Receivable Cooperative Corp. Trust, 2.07%, 05/23/05, Ser. 2003-6, FRN, # 2,000 ------------------------------------------------------------------------- 70,509 ------------------------------------------------------------------------- INSURANCE -- 2.5% ASIF Global Financing, 2,400 1.72%, 03/14/07, FRN, # 2,402 700 1.91%, 05/30/06, FRN, # 701 2,350 Genworth Financial, Inc., 1.67%, 06/15/07, FRN 2,352 1,950 Oil Insurance LTD (Bermuda), 1.71%, 04/08/09, FRN, # 1,950 ------------------------------------------------------------------------- 7,405 ------------------------------------------------------------------------- MULTI-MEDIA -- 0.2% 500 TCI Communications, Inc., 8.65%, 09/15/04 501 OIL & GAS -- 0.4% 1,245 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 1,246
SEE NOTES TO FINANCIAL STATEMENTS. 43
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PIPELINES -- 0.6% $ 1,800 Duke Energy Field Services LLC, 7.50%, 08/16/05 $ 1,881 RETAILING -- 0.3% 750 Safeway, Inc., 2.16%, 11/01/05, FRN 751 TELECOMMUNICATIONS -- 0.3% 750 Deutsche Telekom International Finance BV (The Netherlands), 8.25%, 06/15/05 784 TRANSPORTATION -- 0.4% 1,100 CSX Corp., 1.99%, 08/03/06, FRN 1,099 UTILITIES -- 5.3% 600 AEP Texas Central Co., 3.00%, 02/15/05, Ser. F 602 900 Appalachian Power Co., 1.93%, 06/29/07, FRN 900 850 Commonwealth Edison Co., 6.40%, 10/15/05 885 Dominion Resources, Inc., 1,100 2.80%, 02/15/05 1,102 1,000 2.01%, 05/15/06, Ser. B, FRN 1,002 1,800 Duke Energy Corp., 1.95%, 01/15/05, FRN 1,801 1,000 FPL Group Capital, Inc., 1.89%, 03/30/05, FRN 1,001 National Rural Utilities Cooperative Finance Corp., 1,700 2.11%, 02/07/05, FRN 1,703 950 1.82%, 02/17/06, MTN, FRN 950 2,400 Pacific Gas & Electric Co., 2.30%, 04/03/06, FRN 2,403 1,950 Public Service Electric & Gas, 1.70%, 06/23/06, FRN 1,950 1,350 Southern California Edison Co., 1.89%, 01/13/06, FRN 1,355 ------------------------------------------------------------------------- 15,654 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 132,745 (Cost $132,560) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 8.8% COLLATERALIZED MORTGAGE OBLIGATIONS -- 8.8% Federal National Mortgage Association, $ 673 3.50%, 07/25/14, Ser. 2003-62, Class OB $ 676 603 2.12%, 06/25/32, Ser. 2002-36, Class FS, FRN 608 898 2.12%, 06/25/32, Ser. 2002-36, Class FT, FRN 905 595 1.95%, 09/25/43, Ser. 2003-W14, Class 1A-1 593 1,900 Impac Secured Assets Corp., 2.04%, 11/25/34, Ser. 2004-3, Class 1A4, FRN 1,900 2,200 Indymac Index Mortgage Loan Trust, 2.08%, 09/25/34, Ser. 2004-AR7, Class A1, FRN 2,200 4,154 Medallion Trust (Australia), 1.88%, 05/25/35, Ser. 2004-1G, Class A1, FRN 4,155 1,850 Mound Financing PLC (United Kingdom), 1.85%, 02/08/08, Ser. 3A, Class A1-1, FRN, # 1,850 5,400 Permanent Financing PLC (United Kingdom), 1.48%, 03/10/09, Ser. 4, Class 2A 5,398 538 Residential Asset Securitization Trust, 5.15%, 01/25/33, Ser. 2002-A14J, Class A2 539 1,705 RMAC (United Kingdom), 1.58%, 12/12/20, Ser. 2004-NS1A, Class A1B, FRN, # 1,705 Thornburg Mortgage Securities Trust, 1,517 1.96%, 04/25/43, Ser. 2003-2, Class A1, FRN 1,522 1,079 1.93%, 06/25/44, Ser. 2004-2, Class A1, FRN 1,077 1,343 Washington Mutual, 2.06%, 07/25/44, Ser. 2004-AR10, Class A1A, FRN 1,343 1,400 Wells Fargo Mortgage Backed Securities Trust, 3.54%, 09/25/34, Ser. 2004-S, Class A4, FRN 1,369 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 25,840 (Cost $25,855) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 44
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED COMMERCIAL MORTGAGE BACKED SECURITIES -- 3.3% $ 1,870 Calstrs Trust, 1.90%, 11/20/12, Ser. 2002-C6, Class A1, FRN, # $ 1,870 Calwest Industrial Trust, 2,700 1.98%, 02/15/12, Ser. 2002-CALW, Class AFL, FRN, # 2,702 1,353 1.87%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # 1,355 1,650 Capital One Multi-Asset Execution Trust, 2.85%, 12/15/10, Ser. 2003-A, FRN, # 1,706 2,050 Goldman Sachs Mortgage Securities II, 1.75%, 11/15/15, Ser. 2003-FL6A, Class A1, FRN, # 2,051 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 9,684 (Cost $9,674) ------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 30.6% 1,500 American Express Credit Account Master Trust, 2.10%, 02/15/12, Ser. 2004-C, Class C, FRN, # 1,500 AmeriCredit Automobile Receivables Trust, 568 1.74%, 10/12/06, Ser. 2002-A, Class A3, FRN 568 1,903 1.72%, 04/12/07, Ser. 2002-C, Class A3, FRN 1,904 Capital One Auto Finance Trust, 700 1.71%, 01/15/08, Ser. 2003-B, Class A3, FRN 701 4,000 1.70%, 03/15/11, Ser. 2004-A, Class A4, FRN 4,000 1,600 Capital One Master Trust, 2.40%, 08/15/08, Ser. 2000-4, Class C, FRN, # 1,604 Capital One Multi-Asset Execution Trust, 800 1.71%, 05/15/08, Ser. 2003-A2, Class A2, FRN 801 1,350 1.99%, 01/15/09, Ser. 2003-A1, Class A1, FRN 1,357 1,700 2.77%, 02/17/09, Ser. 2003-B1, Class B1, FRN 1,725 1,000 CARSS Finance LP(Cayman Islands), 1.88%, 01/15/11, Ser. 2004-A, Class B1, FRN, # 1,000 Centex Home Equity, $ 1,337 1.90%, 01/25/34, Ser. 2004-A, Class AV2, FRN $ 1,339 1,402 1.82%, 03/25/34, Ser. 2004-B, Class AV1, FRN 1,402 1,543 1.87%, 06/25/34, Ser. 2004-C, Class AV2, FRN 1,543 Citibank Credit Card Issuance Trust, 1,400 7.45%, 09/15/07, Ser. 2000-C1, Class C1 1,470 200 2.70%, 01/15/08, Ser. 2003-A2, Class A2 201 2,050 2.55%, 03/20/08, Ser. 2003-C2, Class C2, FRN 2,069 2,900 1.82%, 05/20/11, Ser. 2004-B1, Class B1, FRN 2,900 1,350 Citifinancial Mortgage Securities, Inc., 1.91%, 08/25/33, Ser. 2003-3, Class AV1, FRN 1,351 1,940 Citigroup Mortgage Loan Trust, Inc., 2.00%, 12/25/33, Ser. 2003-HE3, Class A, FRN 1,945 2,130 CNH Equipment Trust, 1.74%, 01/15/08, Ser. 2003-B, Class A3A, FRN 2,134 Countrywide Asset-Backed Certificates, 900 2.12%, 02/25/34, Ser. 2004-BC1, Class M1, FRN 900 500 2.07%, 11/25/34, Ser. 2004-6, Class 2A4, FRN 500 3,434 Countrywide Home Equity Loan Trust, 1.87%, 05/15/29, Ser. 2003-C, Class A, FRN 3,432 2,750 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 2,755 360 EQCC Trust, 1.92%, 11/25/31, Ser. 2002-1, Class 2A, FRN 361 1,642 Fifth Third Home Equity Loan Trust, 1.85%, 09/20/23, Ser. 2003-1, Class A, FRN 1,640 35 Fleet Credit Card Master Trust II, 1.65%, 10/15/07, Ser. 2002-A, Class A, FRN 35 1,854 Fleet Home Equity Loan Trust, 1.85%, 01/20/33, Ser. 2003-1, Class A, FRN 1,854 287 Ford Credit Auto Owner Trust, 1.72%, 01/15/06, Ser. 2002-A, Class A3B, FRN 287
SEE NOTES TO FINANCIAL STATEMENTS. 45
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 2,450 Ford Credit Floorplan Master Owner Trust, 1.74%, 07/15/08, Ser. 2001-2, Class A, FRN $ 2,456 756 GE Corp. Aircraft Financing, 1.79%, 06/25/10, Ser. 2003-A, Class A1, FRN, # 756 3,400 GMAC Mortgage Corp Loan Trust, 1.70%, 06/25/34, Ser. 2004-HE1, Class A1, FRN 3,400 481 Greenpoint Home Equity Loan Trust, 1.87%, 04/15/29, Ser. 2003-1, Class A, FRN 482 400 Household Home Equity Loan Trust 1.90%, 04/20/32, Ser. 2002-2, Class A, FRN 400 Honda Auto Receivables Owner Trust, 1,250 1.57%, 06/19/06, Ser. 2003-5, Class A2 1,248 569 3.96%, 02/19/07, Ser. 2001-3, Class A4 572 200 Household Automotive Trust, 1.94%, 05/18/09, Ser. 2002-3, Class A4B, FRN 201 Household Mortgage Loan Trust, 1,683 1.95%, 02/20/33, Ser. 2003-HC1, Class A, FRN 1,686 550 1.98%, 01/20/34, Ser. 2004-HC1, Class A, FRN 550 Long Beach Mortgage Loan Trust, 405 2.08%, 11/26/32, Ser. 2002-4, Class 2A, FRN 407 2,737 1.96%, 08/25/33, Ser. 2003-4, Class AV3, FRN 2,741 2,050 2.30%, 08/25/33, Ser. 2003-4, Class M1, FRN 2,064 50 MBNA Master Credit Card Trust USA, 1.73%, 02/15/07, Ser. 2001-A4, Class A, FRN 50 1,204 Metris Master Trust, 1.88%, 04/20/11, Ser. 2004-1, Class A, FRN 1,204 Option One Mortgage Loan Trust, 380 1.91%, 02/25/32, Ser. 2002-1, Class A, FRN 380 100 1.89%, 06/25/32, Ser. 2002-2, Class A, FRN 101 1,630 2.04%, 02/25/33, Ser. 2003-1, Class A2, FRN 1,635 6,482 Orchid Structured Finance CDO LTD (Cayman Islands), 1.82%, 11/18/38, Ser. 2003-1A, Class A1-MM, FRN, # 6,481 Residential Asset Securities Corp., $ 1,498 1.87%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN $ 1,497 2,044 1.94%, 11/25/33, Ser. 2003-KS9, Class A2B, FRN 2,045 1,187 Residential Funding Mortgage Securities II, 1.88%, 01/29/29, Ser. 2003-HS4, Class AIB, FRN 1,187 1,250 Sears Credit Account Master Trust, 1.70%, 02/18/09, Ser. 2002-1, Class A, FRN 1,250 SLM Student Loan Trust, 538 1.56%, 06/15/10, Ser. 2002-8, Class A2, FRN 538 1,093 1.69%, 10/25/10, Ser. 2002-1, Class A1, FRN 1,093 1,300 1.68%, 12/16/19, Ser. 2003-10A, Class A2, FRN, # 1,304 2,900 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 2,893 Wachovia Asset Securitization, Inc., 3,285 2.05%, 12/25/32, Ser. 2002-HE2, Class A, FRN 3,296 2,450 1.84%, 06/25/34, Ser. 2004-HE1, Class A, FRN 2,450 2,500 WFS Financial Owner Trust, 1.86%, 05/20/08, Ser. 2003-A3, Class B, FRN 2,503 ------------------------------------------------------------------------- Total Asset Backed Securities 90,148 (Cost $90,157) ------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT -- 1.6% 4,600 Deutsche Bank AG/New York (Yankee), 1.94%, 05/15/07, Floating Rate 4,593 (Cost $4,600) ------------------------------------------------------------------------- Total Long-Term Investments 281,403 (Cost $281,251) ------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 4.5% U.S. TREASURY SECURITY -- 0.0% ^ 100 United States Treasury Bill, 1.19%, 09/30/04 @ 100 (Cost $100)
SEE NOTES TO FINANCIAL STATEMENTS. 46
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- CONTINUED MUNICIPAL SECURITIES -- 0.9% NORTH CAROLINA - 0.2% $ 500 Wake Forest University, Ser. 1997, Rev., FRDO, 1.62%, 09/01/04 $ 500 SOUTH CAROLINA - 0.7% 2,050 South Carolina Student Loan Corp., Education Loans, Ser. A-1, Rev., FRDO, 1.68%, 09/14/04 2,050 ------------------------------------------------------------------------- Total Municipal Securities 2,550 (Cost $2,550) ------------------------------------------------------------------------- COMMERCIAL PAPER -- 1.8% AUTOMOTIVE -- 1.2% 3,700 Ford Motor Credit Co., 1.77%, 09/03/04 + 3,700 CONSUMER PRODUCTS -- 0.6% $ 1,650 Altria Group, Inc., 1.97%, 10/15/04 + $ 1,646 ------------------------------------------------------------------------- Total Commercial Paper 5,346 (Cost $5,346) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 1.8% 5,393 JPMorgan Prime Money Market Fund (a) 5,393 (Cost $5,393) ------------------------------------------------------------------------- Total Short-Term Investments 13,389 (Cost $13,389) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 294,792 (COST $294,640) -------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- SHORT FUTURES OUTSTANDING (7) 2 Year Treasury Notes December, 2004 $ (1,482) $ (2) (22) 5 Year Treasury Notes December, 2004 (2,435) (10)
SEE NOTES TO FINANCIAL STATEMENTS. 47 JPMORGAN FLEMING EMERGING MARKETS DEBT FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 96.3% U.S. TREASURY SECURITIES -- 6.0% U.S. Treasury Notes & Bonds, $ 135 6.88%, 05/15/06 + @ $ 145 1,515 4.25%, 08/15/14 + 1,530 350 5.38%, 02/15/31 373 Total U.S. Treasury Securities 2,048 (Cost $2,034) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 83.7% ARGENTINA -- 3.1% 1,500 Republic of Argentina, 1.98%, 08/03/12, FRN 1,071 BRAZIL -- 21.7% 300 Banco Nacional de Desenvolvimiento Economico e Social, 9.62%, 06/16/08, Regulation S, FRN 308 Federal Republic of Brazil, 350 7.34%, 06/29/09, FRN 375 625 12.00%, 04/15/10 720 525 10.00%, 08/07/11 554 700 11.00%, 01/11/12 775 2,504 2.13%, 04/15/12, FRN 2,257 651 8.00%, 04/15/14 637 665 12.75%, 01/15/20 803 585 8.88%, 04/15/24, Ser. B 532 50 10.13%, 05/15/27 51 425 11.00%, 08/17/40 454 ------------------------------------------------------------------------- 7,466 ------------------------------------------------------------------------- COLOMBIA -- 2.8% Republic of Colombia, 250 9.75%, 04/23/09, Ser. NOV 279 428 9.75%, 04/09/11 486 170 11.75%, 02/25/20, MTN 207 ------------------------------------------------------------------------- 972 ------------------------------------------------------------------------- DOMINICAN REPUBLIC -- 0.6% 267 Dominican Republic, 9.50%, 09/27/06, Regulation S 203 ECUADOR -- 0.5% $ 179 Republic of Ecuador, 12.00%, 11/15/12, Regulation S $ 174 EL SALVADOR -- 0.8% 285 Republic of El Salvador, 8.25%, 04/10/32, # 278 MEXICO -- 8.6% United Mexican States, 220 11.50%, 05/15/26 330 650 8.00%, 09/24/22, Ser. A, MTN 733 490 8.30%, 08/15/31, MTN 562 1,253 7.50%, 04/08/33, Ser. A, MTN 1,326 ------------------------------------------------------------------------- 2,951 ------------------------------------------------------------------------- PANAMA -- 1.9% Republic of Panama, 210 9.63%, 02/08/11 239 20 10.75%, 05/15/20 24 345 9.38%, 01/16/23 374 ------------------------------------------------------------------------- 637 ------------------------------------------------------------------------- PERU -- 4.8% Republic of Peru, 240 9.88%, 02/06/15 270 425 8.38%, 05/03/16 429 830 4.50%, 03/07/17, FRN 718 264 5.00%, 03/07/17, FRN 239 ------------------------------------------------------------------------- 1,656 ------------------------------------------------------------------------- PHILIPPINES -- 2.1% Republic of Philippines, 83 9.88%, 03/16/10 92 409 8.38%, 02/15/11 415 195 9.88%, 01/15/19 204 ------------------------------------------------------------------------- 711 ------------------------------------------------------------------------- RUSSIA -- 19.1% 1,250 Aries Vermoegensverwaltungs, 9.60%, 10/25/14, # 1,400
SEE NOTES TO FINANCIAL STATEMENTS. 48
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED RUSSIA -- CONTINUED Russian Federation, $ 430 11.00%, 07/24/18, Regulation S $ 561 250 12.75%, 06/24/28, Regulation S 379 870 5.00%, 03/31/30, Regulation S, SUB 833 3,548 5.00%, 03/31/30, SUB, # 3,398 ------------------------------------------------------------------------- 6,571 ------------------------------------------------------------------------- TRINIDAD/TOBAGO -- 0.6% 155 Republic of Trinidad & Tobago, 9.75%, 07/01/20, Regulation S 205 TURKEY -- 4.8% Republic of Turkey, 275 11.75%, 06/15/10 338 373 11.50%, 01/23/12 459 265 11.00%, 01/14/13 322 475 9.50%, 01/15/14 536 ------------------------------------------------------------------------- 1,655 ------------------------------------------------------------------------- UKRAINE -- 3.9% Republic of Ukraine, 154 11.00%, 03/15/07, Regulation S 166 595 6.88%, 03/04/11, # 589 585 7.65%, 06/11/13, # 591 ------------------------------------------------------------------------- 1,346 ------------------------------------------------------------------------- URUGUAY -- 3.6% Republic of Uruguay, 290 7.50%, 03/15/15 241 120 7.88%, 01/15/33 89 UYU 24,500 Republic Orient Uruguay, 17.75%, 02/04/06 910 ------------------------------------------------------------------------- 1,240 ------------------------------------------------------------------------- VENEZUELA -- 4.8% Republic of Venezuela, 125 5.38%, 08/07/10 109 500 10.75%, 09/19/13 544 $ 400 7.00%, 12/01/18, Regulation S $ 327 725 9.25%, 09/15/27 676 ------------------------------------------------------------------------- 1,656 ------------------------------------------------------------------------- Total Foreign Government Securities 28,792 (Cost $24,110) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 6.6% BRAZIL -- 1.1% 380 Trikem SA, 10.63%, 07/24/07, # 394 LUXEMBOURG -- 1.3% 440 Gazprom International SA, 7.20%, 02/01/20, # 442 MEXICO -- 4.2% 400 BBVA Bancomer Capital Trust I, 10.50%, 02/16/11, # 440 580 PEMEX Project Funding Master Trust (Mexico), 7.38%, 12/15/14 636 330 Petroleos Mexicanos, 8.63%, 12/01/23, Regulation S 370 ------------------------------------------------------------------------- 1,446 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 2,282 (Cost $2,236) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ WARRANTS -- 0.0% NIGERIA -- 0.0% 1 Central Bank of Nigeria, expires 11/15/20 * 0 SINGAPORE -- 0.0% 0^^ Asia Pulp & Paper Co., LTD, ADR, expires 3/15/05, # * (f) 0
SEE NOTES TO FINANCIAL STATEMENTS. 49
SHARES ISSUER VALUE - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 3.7% VENEZUELA -- 0.0% 1 Republic of Venezuela (Oil Obligation), expires 4/15/20 * 0 Total Warrants 0 (Cost $0^^) ------------------------------------------------------------------------- Total Long-Term Investments 33,122 (Cost $28,380) ------------------------------------------------------------------------- PRINCIPAL AMOUNT ~ - ------------------------------------------------------------------------------------------ U.S. TREASURY SECURITY -- 2.6% $ 900 United States Treasury Bill, 1.54%, 11/26/04 + $ 897 (Cost $897) SHARES ISSUER VALUE - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 1.1% 371 JPMorgan Prime Money Market Fund (a) + 371 (Cost $371) Total Short-Term Investments (Cost $1,268) 1,268 ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 34,390 (COST $29,648) -------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY INDUSTRY, AUGUST 31, 2004
INDUSTRY - ------------------------------------------------------------------------------- Foreign Government Securities 79.6% U.S. Treasury Securities 8.6 Financial Services 5.9 Oil & Gas 2.4 Banking 1.3 Chemicals 1.1 Money Market Fund 1.1 100.0%
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 17 10 Year Treasury Notes December, 2004 $ 1,909 $ 11 SHORT FUTURES OUTSTANDING (3) Treasury Bonds December, 2004 (334) (5)
SEE NOTES TO FINANCIAL STATEMENTS. 50 JPMORGAN GLOBAL STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 93.5% U.S. TREASURY SECURITIES -- 3.1% U.S. Treasury Notes & Bonds, $ 110 1.88%, 11/30/05 @ + $ 110 80 6.63%, 05/15/07 @ + 88 145 4.75%, 05/15/14 + 152 125 5.50%, 08/15/28 @ + 133 405 5.38%, 02/15/31 + 432 ------------------------------------------------------------------------- Total U.S. Treasury Securities 915 (Cost $896) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 24.4% Dominican Republic (Dominican Republic), 387 9.50%, 09/27/06, Regulation S 293 18 9.04%, 01/23/13, # 13 ------------------------------------------------------------------------- 306 ------------------------------------------------------------------------- Federal Republic of Brazil (Brazil), 65 7.72%, 06/29/09, FRN 70 20 10.00%, 08/07/11 21 25 11.00%, 01/11/12 28 160 2.13%, 04/15/12, FRN 144 72 8.00%, 04/15/14 70 75 8.88%, 04/15/24, Ser. B 68 40 11.00%, 08/17/40 43 ------------------------------------------------------------------------- 444 ------------------------------------------------------------------------- Federal Republic of Germany (Germany), EUR 30 5.00%, 05/20/05, Ser. 135 37 EUR 60 5.00%, 08/19/05, Ser. 136 75 EUR 200 4.00%, 02/16/07, Ser. 139 251 EUR 120 5.25%, 01/04/08, Ser. 98 157 EUR 10 5.25%, 01/04/11, Ser. 00 13 EUR 60 6.25%, 01/04/24, Ser. 94 89 EUR 130 4.75%, 07/04/34, Ser. 03 160 ------------------------------------------------------------------------- 782 ------------------------------------------------------------------------- Government of Canada (Canada), CAD 20 7.00%, 12/01/06 16 CAD 40 5.50%, 06/01/10 32 CAD 40 5.25%, 06/01/12 32 CAD 20 8.00%, 06/01/27, Ser. VW17 21 ------------------------------------------------------------------------- 101 ------------------------------------------------------------------------- Government of France (France), EUR 50 4.50%, 07/12/06 $ 63 EUR 145 5.50%, 04/25/07 189 EUR 90 4.00%, 04/25/13 110 EUR 40 4.00%, 04/25/14 48 EUR 190 5.00%, 10/25/16 248 EUR 35 5.75%, 10/25/32 49 ------------------------------------------------------------------------- 707 ------------------------------------------------------------------------- Kingdom of Belgium (Belgium), EUR 60 3.75%, 03/28/09, Ser. 32 74 EUR 80 4.25%, 09/28/13, Ser. 41 99 ------------------------------------------------------------------------- 173 ------------------------------------------------------------------------- Malaysia Government International Bond (Malaysia), 30 8.75%, 06/01/09 36 190 7.50%, 07/15/11 223 ------------------------------------------------------------------------- 259 ------------------------------------------------------------------------- National Republic of Bulgaria (Bulgaria), 50 2.75%, 07/28/11, Ser. IAB, FRN 50 46 2.75%, 07/28/11, Ser. RIAB, FRN 45 42 2.75%, 07/28/12, Ser. A, FRN 42 124 8.25%, 01/15/15, # 152 ------------------------------------------------------------------------- 289 ------------------------------------------------------------------------- EUR 135 Netherlands Government Bond (The Netherlands), 3.00%, 07/15/07 165 Republic of Colombia (Colombia), 15 9.75%, 04/23/09, Ser. NOV 17 190 9.75%, 04/09/11 216 70 11.75%, 02/25/20, MTN 85 ------------------------------------------------------------------------- 318 ------------------------------------------------------------------------- 60 Republic of Costa Rica (Costa Rica), 6.55%, 03/20/14, # 54 Republic of El Salvador (El Salvador), 38 8.50%, 07/25/11, Regulation S 42 170 8.25%, 04/10/32, # 166 ------------------------------------------------------------------------- 208 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 51
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED Republic of Panama (Panama), $ 75 9.63%, 02/08/11 $ 86 100 10.75%, 05/15/20 120 125 9.38%, 01/16/23 136 15 9.38%, 04/01/29 17 ------------------------------------------------------------------------- 359 ------------------------------------------------------------------------- Republic of Peru (Peru), 40 9.88%, 02/06/15 45 85 8.38%, 05/03/16 86 227 4.50%, 03/07/17, FRN 196 137 5.00%, 03/07/17, FRN 124 ------------------------------------------------------------------------- 451 ------------------------------------------------------------------------- Republic of Philippines (Philippines), 103 8.38%, 02/15/11 104 85 9.88%, 01/15/19 89 ------------------------------------------------------------------------- 193 ------------------------------------------------------------------------- Republic of South Africa (South Africa), 40 9.13%, 05/19/09 48 115 8.50%, 06/23/17 138 ------------------------------------------------------------------------- 186 ------------------------------------------------------------------------- 40 Republic of Trinidad & Tobago (Trinidad & Tobago), 9.75%, 07/01/20, Regulation S 53 Republic of Turkey (Turkey), 25 9.88%, 03/19/08 28 55 12.00%, 12/15/08 67 65 11.75%, 06/15/10 80 19 11.50%, 01/23/12 23 90 11.00%, 01/14/13 109 25 9.50%, 01/15/14 28 ------------------------------------------------------------------------- 335 ------------------------------------------------------------------------- Republic of Ukraine (Ukraine), 148 11.00%, 03/15/07, Regulation S 160 100 6.88%, 03/04/11, # 99 130 7.65%, 06/11/13, Regulation S 131 ------------------------------------------------------------------------- 390 ------------------------------------------------------------------------- Republic of Venezuela (Venezuela), $ 83 2.75%, 12/18/07, Ser. DL, FRN $ 82 215 5.38%, 08/07/10 188 165 7.00%, 12/01/18, Regulation S 135 145 9.25%, 09/15/27 135 ------------------------------------------------------------------------- 540 ------------------------------------------------------------------------- 600 Russian Federation (Russia), 5.00%, 03/31/30, Regulation S, SUB 574 U.K. Treasury Gilt (United Kingdom), GBP 10 8.50%, 12/07/05 19 GBP 20 5.75%, 12/07/09 37 GBP 10 8.00%, 09/27/13 22 GBP 30 5.00%, 09/07/14 54 GBP 15 4.75%, 09/07/15 27 ------------------------------------------------------------------------- 159 ------------------------------------------------------------------------- United Mexican States (Mexico), 25 6.38%, 01/16/13, MTN 26 40 6.63%, 03/03/15 42 60 11.50%, 05/15/26 90 55 8.30%, 08/15/31, MTN 63 53 7.50%, 04/08/33, Ser. A, MTN 56 ------------------------------------------------------------------------- 277 ------------------------------------------------------------------------- Total Foreign Government Securities 7,323 (Cost $6,479) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 52.7% ADVERTISING -- 0.5% 130 RH Donnelley Finance Corp. I, 10.88%, 12/15/12, # 154 AEROSPACE -- 0.4% 100 L-3 Communications Corp., 7.63%, 06/15/12 108 AGRICULTURAL PRODUCTION/SERVICES -- 0.3% 30 RJ Reynolds Tobacco Holdings, Inc., 7.88%, 05/15/09, Ser. B 31
SEE NOTES TO FINANCIAL STATEMENTS. 52
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED AGRICULTURAL PRODUCTION/SERVICES -- CONTINUED $ 65 Seminis Vegetable Seeds, Inc., 10.25%, 10/01/13 $ 72 ------------------------------------------------------------------------- 103 ------------------------------------------------------------------------- AIRLINES -- 0.6% 60 Delta Air Lines, Inc., 7.90%, 12/15/09* (d) 19 134 Northwest Airlines Corp., 8.07%, 10/01/19, Ser. 2000-1 147 ------------------------------------------------------------------------- 166 ------------------------------------------------------------------------- AUTOMOTIVE -- 5.1% 300 DaimlerChrysler N.A. Holding Corp., 6.50%, 11/15/13 324 45 Dana Corp., 9.00%, 08/15/11 54 Ford Motor Credit Co., 300 7.38%, 10/28/09 328 250 7.88%, 06/15/10 278 300 General Motors Corp., 8.38%, 07/15/33 319 23 HLI Operating Co., Inc., 10.50%, 06/15/10 26 100 Tenneco Automotive, Inc., 10.25%, 07/15/13, Ser. B 116 TRW Automotive, Inc., 22 9.38%, 02/15/13 25 65 11.00%, 02/15/13 79 ------------------------------------------------------------------------- 1,549 ------------------------------------------------------------------------- BANKING -- 1.9% 175 Abbey National Capital Trust I, 8.96%, to 6/30; thereafter FRN, 12/31/49 234 300 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52% to 11/12; thereafter FRN, 12/31/49, # 330 ------------------------------------------------------------------------- 564 ------------------------------------------------------------------------- BIOTECHNOLOGY -- 0.2% 45 Bio-Rad Laboratories, Inc., 7.50%, 08/15/13 48 BROADCASTING/CABLE -- 0.6% $ 30 Cablevision Systems Corp., 8.00%, 04/15/12, # $ 31 150 Echostar DBS Corp., 6.38%, 10/01/11 150 ------------------------------------------------------------------------- 181 ------------------------------------------------------------------------- BUSINESS SERVICES -- 0.2% 50 Iron Mountain, Inc., 8.63%, 04/01/13 54 CHEMICALS -- 1.8% 35 Crompton Corp., 9.88%, 08/01/12, # 36 30 Huntsman International LLC, 9.88%, 03/01/09 32 55 Huntsman LLC, 11.63%, 10/15/10 62 210 Lyondell Chemical Co., 10.88%, 05/01/09 220 100 Nalco Co., 7.75%, 11/15/11, # 107 65 PolyOne Corp., 10.63%, 05/15/10 71 ------------------------------------------------------------------------- 528 ------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.4% 120 Electronic Data Systems Corp., 6.50%, 08/01/13, Ser. B 119 CONSTRUCTION -- 1.1% 45 Beazer Homes USA, Inc., 8.38%, 04/15/12 49 175 Pulte Homes, Inc., 6.38%, 05/15/33 169 100 Terex Corp., 10.38%, 04/01/11, Ser. B 113 ------------------------------------------------------------------------- 331 ------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.1% 20 THL Buildco, Inc., 8.50%, 09/01/14, # 21 CONSUMER PRODUCTS -- 0.4% 60 Elizabeth Arden, Inc., 7.75%, 01/15/14 62 45 Rayovac Corp., 8.50%, 10/01/13 48 ------------------------------------------------------------------------- 110 ------------------------------------------------------------------------- CONSUMER SERVICES -- 1.1% 20 Alderwoods Group, Inc., 7.75%, 09/15/12, # 21 150 Corrections Corp. of America, 7.50%, 05/01/11 157
SEE NOTES TO FINANCIAL STATEMENTS. 53
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED CONSUMER SERVICES -- CONTINUED $ 110 Service Corp. International, 6.75%, 04/01/16, # $ 106 50 United Rentals North America, Inc., 6.50%, 02/15/12 48 ------------------------------------------------------------------------- 332 ------------------------------------------------------------------------- ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.4% 40 Celestica, Inc. (Canada), 7.88%, 07/01/11 42 85 Legrand SA (France), 8.50%, 02/15/25 92 ------------------------------------------------------------------------- 134 ------------------------------------------------------------------------- ENTERTAINMENT/LEISURE -- 0.6% 125 Argosy Gaming Co., 7.00%, 01/15/14 127 20 Six Flags, Inc., 9.75%, 04/15/13 19 50 Vail Resorts, Inc., 6.75%, 02/15/14 49 ------------------------------------------------------------------------- 195 ------------------------------------------------------------------------- ENVIRONMENTAL SERVICES -- 0.5% 150 Allied Waste North America, Inc., 7.38%, 04/15/14, Ser. B 146 FINANCIAL SERVICES -- 7.7% 30 Arch Western Finance LLC, 7.50%, 07/01/13, # 31 1,000 Core Investment Grade Bond Trust I, 4.73%, 11/30/07 1,044 100 Eircom Funding (Ireland), 8.25%, 08/15/13 108 325 Erac USA Finance Co., 9.13%, 12/15/04, MTN, # 331 125 HSBC Capital Funding LP (Channel Islands), 4.61%, to 06/13; thereafter FRN, 12/31/49, # 120 200 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 242 50 Nexstar Finance LLC/Nexstar Finance, Inc., 12.00%, 04/01/08 55 35 PEMEX Project Funding Master Trust (Mexico), 7.38%, 12/15/14 38 250 UBS Preferred Funding Trust I, 8.62%, to 10/10; thereafter FRN, 12/31/49 303 45 UGS Corp., 10.00%, 06/01/12, # 49 ------------------------------------------------------------------------- 2,321 ------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.5% $ 25 Del Monte Corp., 9.25%, 05/15/11, Ser. B $ 28 105 Delhaize America, Inc., 8.13%, 04/15/11 119 ------------------------------------------------------------------------- 147 ------------------------------------------------------------------------- HEALTH CARE/HEALTH CARE SERVICES -- 3.0% 25 Alliance Imaging, Inc., 10.38%, 04/15/11 27 90 Ardent Health Services, Inc., 10.00%, 08/15/13 97 55 Extendicare Health Services, Inc., 6.88%, 05/01/14 54 100 Fresenius Medical Care Capital Trust IV, 7.88%, 06/15/11 109 85 Genesis HealthCare Corp., 8.00%, 10/15/13 91 HCA, Inc., 115 5.25%, 11/06/08 117 40 6.75%, 07/15/13 42 700 Mariner Health Group, Inc., 9.50%, 04/01/06, Ser. B (d) (f) * 0^^ 100 Medex, Inc., 8.88%, 05/15/13 109 Tenet Healthcare Corp., 135 7.38%, 02/01/13 125 20 9.88%, 07/01/14, # 21 100 Triad Hospitals, Inc., 7.00%, 11/15/13 101 ------------------------------------------------------------------------- 893 ------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 1.5% 100 Ameristar Casinos, Inc., 10.75%, 02/15/09 112 20 ITT Corp., 7.38%, 11/15/15 21 100 Mandalay Resort Group, 10.25%, 08/01/07, Ser. B 112 MGM Mirage, 100 8.38%, 02/01/11 109 45 6.75%, 09/01/12, # 46 40 Starwood Hotels & Resorts Worldwide, Inc., 7.88%, 05/01/12 45 ------------------------------------------------------------------------- 445 ------------------------------------------------------------------------- INSURANCE -- 0.9% 200 AXA (France), 8.60%, 12/15/30 257
SEE NOTES TO FINANCIAL STATEMENTS. 54
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED METALS/MINING -- 0.2% $ 50 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B $ 53 MULTI-MEDIA -- 2.1% 50 Charter Communications Operating LLC, 8.00%, 04/30/12, # 50 100 Lodgenet Entertainment Corp., 9.50%, 06/15/13 109 150 Primedia, Inc., 8.88%, 05/15/11 147 50 Radio One, Inc., 8.88%, 07/01/11, Ser. B 55 45 Sinclair Broadcast Group, Inc., 8.00%, 03/15/12 46 200 Time Warner, Inc., 7.63%, 04/15/31 229 ------------------------------------------------------------------------- 636 ------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.4% 110 Xerox Corp., 7.63%, 06/15/13 117 OIL & GAS -- 3.3% 175 Amerada Hess Corp., 7.30%, 08/15/31 188 68 Chesapeake Energy Corp., 6.88%, 01/15/16 69 175 Devon Financing Corp. ULC, 7.88%, 09/30/31 211 165 Gazprom International SA (Luxembourg), 7.20%, 02/01/20, # 166 20 Giant Industries, Inc., 8.00%, 05/15/14 20 50 Newfield Exploration Co., 6.63%, 09/01/14, # 51 90 Swift Energy Co., 9.38%, 05/01/12 99 175 Valero Energy Corp., 7.50%, 04/15/32 203 ------------------------------------------------------------------------- 1,007 ------------------------------------------------------------------------- PACKAGING -- 1.6% 150 Crown European Holdings SA (France), 9.50%, 03/01/11 167 Owens-Brockway Glass Container, Inc., 75 8.75%, 11/15/12 83 75 8.25%, 05/15/13 79 45 Silgan Holdings, Inc., 6.75%, 11/15/13 45 100 Stone Container Corp., 9.75%, 02/01/11 112 ------------------------------------------------------------------------- 486 ------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 1.5% Boise Cascade Corp., $ 45 6.50%, 11/01/10 $ 50 23 7.00%, 11/01/13 26 60 Bowater, Inc., 6.50%, 06/15/13 59 Georgia-Pacific Corp., 125 8.88%, 02/01/10 146 100 9.50%, 12/01/11 122 50 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 53 ------------------------------------------------------------------------- 456 ------------------------------------------------------------------------- PIPELINES -- 1.8% 60 Dynegy Holdings, Inc., 10.13%, 07/15/13, # 68 170 El Paso Corp., 7.88%, 06/15/12 164 Williams Companies, Inc., 100 8.63%, 06/01/10 116 155 8.13%, 03/15/12 177 ------------------------------------------------------------------------- 525 ------------------------------------------------------------------------- PRINTING & PUBLISHING -- 0.5% 35 Sun Media Corp. (Canada), 7.63%, 02/15/13 37 100 Von Hoffman Corp., 10.25%, 03/15/09 112 ------------------------------------------------------------------------- 149 ------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUST -- 0.3% 80 Host Marriott LP, 9.25%, 10/01/07, Ser. G 89 RETAILING -- 0.8% 90 Dillard's, Inc., 7.85%, 10/01/12 95 30 Ferrellgas Escrow LLC/Ferrellgas Finance Escrow Corp., 6.75%, 05/01/14 30 110 Ingles Markets, Inc., 8.88%, 12/01/11 116 ------------------------------------------------------------------------- 241 ------------------------------------------------------------------------- SEMI-CONDUCTORS -- 0.4% 62 AMI Semiconductor, Inc., 10.75%, 02/01/13 72 50 Freescale Semiconductor, Inc., 7.13%, 07/15/14, # 51 ------------------------------------------------------------------------- 123 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 55
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED STEEL -- 0.2% $ 50 Euramax International, Inc., 8.50%, 08/15/11 $ 53 TELECOMMUNICATIONS -- 5.7% 100 AT&T Corp., 8.05%, 11/15/11 109 175 AT&T Wireless Services, Inc., 8.13%, 05/01/12 210 65 Cincinnati Bell, Inc., 8.38%, 01/15/14 58 100 Deutsche Telekom International Finance BV (The Netherlands), 8.75%, 06/15/30 128 100 France Telecom SA (France), 9.25%, 03/01/31 132 90 Insight Midwest LP/Insight Capital, Inc., 10.50%, 11/01/10 97 75 Koninklijke KPN NV (The Netherlands), 8.00%, 10/01/10 89 Nextel Communications, Inc., 5 9.38%, 11/15/09 5 170 7.38%, 08/01/15 178 70 Nortel Networks LTD (Canada), 6.13%, 02/15/06 71 55 PanAmSat Corp., 9.00%, 08/15/14, # 57 40 Qwest Communications International, 7.25%, 02/15/11, # 37 15 Qwest Corp., 9.13%, 03/15/12, # 16 50 Rogers Wireless Communications, Inc. (Canada), 9.63%, 05/01/11 57 Sprint Capital Corp., 100 6.90%, 05/01/19 109 100 8.75%, 03/15/32 127 50 Triton PCS, Inc., 8.50%, 06/01/13 45 175 Verizon Global Funding Corp., 7.38%, 09/01/12 204 ------------------------------------------------------------------------- 1,729 ------------------------------------------------------------------------- UTILITIES -- 3.8% 100 Calpine Corp., 8.75%, 07/15/13, # 78 130 CMS Energy Corp., 7.75%, 08/01/10, # 137 175 Dominion Resources, Inc., 6.30%, 03/15/33 175 55 DPL, Inc., 6.88%, 09/01/11 57 130 Reliant Resources, Inc., 9.50%, 07/15/13 144 $ 65 Sierra Pacific Resources, 8.63%, 03/15/14, # $ 68 TECO Energy, Inc., 80 7.20%, 05/01/11 84 110 7.00%, 05/01/12 114 275 TXU Energy Co., 7.00%, 03/15/13 309 ------------------------------------------------------------------------- 1,166 ------------------------------------------------------------------------- WHOLESALING -- 0.3% 75 Aviall, Inc., 7.63%, 07/01/11 80 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 15,816 (Cost $15,907) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 0.1% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.1% 3,121 Credit Suisse First Boston Mortgage Securities Corp., 0.99%, 06/25/20, Ser. 1997-2X, FRN, IO, # 31 2 DLJ Mortgage Acceptance Corp., 70.73%, 07/28/27, Ser. 1997-D, FRN, # 2 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 33 (Cost $203) ------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 4.6% Credit Suisse First Boston Mortgage Securities Corp., 150 6.38%, 12/16/35, Ser. 2001-CK1, Class A3 166 200 4.30%, 07/15/36, Ser. 2004-C3, Class A3 203 Morgan Stanley Capital I, 300 8.20%, 12/03/05, Ser. 2000-HG, Class E, FRN, # 313 1,000 7.70%, 10/03/30, Ser. 1997-XL1, Class G, # 682 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 1,364 (Cost $1,632) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 56
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PRIVATE PLACEMENTS -- 8.6% CO-OP APARTMENTS -- 8.6% $ 0^^ 127-129-131 West 96th Street Note, Secured by First Mortgage and Agreement on Co-op Apartment Building In New York City, 6.85%, 12/01/18, #, (f) (i) $ 0^^ 0^^ 127-129-131 West 96th Street Note, Secured by Second Mortgage and Agreement on Co-op Apartment Building In New York City, 6.85%, 11/01/27, #, (f) (i) 0^^ 0^^ 14-16 East 17th St., Secured By First Mortgage and Agreement on Co-op Apartment Building in Brooklyn, New York, 7.00%, 03/01/12, #, (f) (i) 0^^ 1,329 270 5th Ave., Secured by First Mortgage and Agreement on Co-op Apartment Building in Brooklyn, New York, 6.93%, 08/01/18, #, (f) (i) 1,454 527 3512 Oxford Ave., Secured By First Mortgage and Agreement on Co-op Apartment Building in Riverdale, New York, 8.45%, 06/01/17, #, (f) (i) 623 464 42 155th Street, Secured by First Mortgage and Agreement on Co-op Apartment Building in New York City, 7.00%, 01/01/14, #, (f) (i) 510 0^^ 421 West 57th St. Note, Secured by First Mortgage and Agreement on Co-op Apartment Building In New York City, 8.98%, 07/01/22, #, (f) (i) 0^^ 0^^ 482 East 9th St., Kensington Gardens Corp., Secured By First Mortgage and Agreement on Co-op Apartment Building in New York City, 6.85%,12/01/18, #, (f) (i) 0^^ CONVENTIONAL MULTI-FAMILY -- 0.0%^ 0^^ PC Shangri La MHC Co., 6.40%, 10/01/08, #, (f) (i) 0^^ ------------------------------------------------------------------------- Total Private Placements 2,587 (Cost $2,320) ------------------------------------------------------------------------- SHARES ISSUER VALUE - ------------------------------------------------------------------------------------------ WARRANTS -- 0.0% FOREIGN GOVERNMENT SECURITIES -- 0.0% 1 Republic of Venezuela (Oil Obligation) (Venezuela), expires 4/15/20 * $ 0 (Cost $0^^) ------------------------------------------------------------------------- Total Long - Term Investments 28,038 (Cost $27,437) ------------------------------------------------------------------------- PRINCIPAL AMOUNT ~ - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- 6.5% U.S. TREASURY SECURITY -- 0.1% $ 15 United States Treasury Bill, 1.24%, 10/07/04 + @ 15 (Cost $15) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 2.1% EUR 350 French Treasury Bill (France), 0.00%, 09/23/04 + 425 EUR 160 German Treasury Bill (Germany), 0.00%, 09/15/04 194 ------------------------------------------------------------------------- Total Foreign Government Securities 619 (Cost $617) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 4.3% 1,301 JPMorgan Prime Money Market Fund (a) + 1,301 (Cost $1,301) ------------------------------------------------------------------------- Total Short-Term Investments 1,935 (Cost $1,933) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 29,973 (COST $29,370) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 57 SUMMARY OF INVESTMENTS BY COUNTRY, AUGUST 31, 2004
COUNTRY % OF INVESTMENT SECURITIES - ------------------------------------------------------------------------------------------- United States 68.6% France 5.9 Germany 3.3 Russia 1.9 Venezuela 1.8 Brazil 1.5 Peru 1.5 The Netherlands 1.3 Ukraine 1.3 Panama 1.2 Colombia 1.1 Turkey 1.1 Bulgaria 1.0 Dominican Republic 1.0 Mexico 1.0 Canada 0.9 Malaysia 0.9 El Salvador 0.7 Belgium 0.6 Luxembourg 0.6 Philippines 0.6 South Africa 0.6 United Kingdom 0.5 Other (below 0.5%) 1.1 TOTAL 100.0% - -------------------------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 3 Euro-BOBL September, 2004 $ 409 $ 8 16 Treasury Bonds December, 2004 1,781 25 16 2 Year Treasury Notes December, 2004 3,387 6 38 5 Year Treasury Notes December, 2004 4,206 21 32 10 Year Treasury Notes December, 2004 3,594 20 SHORT FUTURES OUTSTANDING (1) Euro-BUND September, 2004 (141) (5) (22) Treasury Bonds December, 2004 (2,449) (34) (18) 10 Year Treasury Notes December, 2004 (2,022) (13)
SEE NOTES TO FINANCIAL STATEMENTS. 58 FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO BUY DATE VALUE (USD) 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- 10 EUR 9/21/04 $ 12 $ 12 $ --^^ NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO SELL DATE VALUE (USD) 8/31/04 (USD) (DEPRECIATION) (USD) - ----------------------------------------------------------------------------------------------------------------- 124 CAD 9/21/04 $ 93 $ 94 $ (1) 2,057 EUR 9/21/04 2,512 2,499 13 84 GBP 9/21/04 154 151 3 - ----------------------------------------------------------------------------------------------------------------- $ 2,759 $ 2,744 $ 15 - -----------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 59 JPMORGAN SHORT TERM BOND FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
SHARES ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 96.2% PREFERRED STOCKS -- 1.0% FINANCIAL SERVICES -- 1.0% 7 Pinto Totta International Finance, 7.77%, # $ 7,298 (Cost $7,577) PRINCIPAL AMOUNT (USD) - ------------------------------------------------------------------------------------------ U.S. GOVERNMENT AGENCY SECURITIES -- 2.4% $ 2,100 Federal Home Loan Mortgage Corp., 2.40%, 03/29/07 2,077 2,000 Federal National Mortgage Association, 3.25%, 06/04/08, SUB 1,995 Overseas Private Investment Corp., 3,306 1.50%, 12/16/06, Ser. A, FRN 3,299 2,102 1.50%, 12/16/06, Ser. B, FRN 2,098 552 1.50%, 12/16/06, Ser. C, FRN 550 228 1.50%, 12/16/06, Ser. D, FRN 227 2,228 1.50%, 12/16/06, Ser. E, FRN 2,223 1,105 1.50%, 12/16/06, Ser. F, FRN 1,102 1,008 1.50%, 12/16/06, Ser. G, FRN 1,005 726 1.50%, 12/16/06, Ser. H, FRN 724 1,676 1.50%, 12/16/06, Ser. I, FRN 1,672 726 1.50%, 12/16/06, Ser. J, FRN 724 320 1.50%, 12/16/06, Ser. K, FRN 319 ------------------------------------------------------------------------- Total U.S. Government Agency Securities 18,015 (Cost $18,018) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 1.4% 4,250 Republic of Chile (Chile), 2.06%, 01/28/08, FRN 4,278 3,600 Russian Federation (Russia), 10.00%, 06/26/07, # 4,086 1,800 United Mexican States (Mexico), 2.29%, 01/13/09, FRN 1,826 ------------------------------------------------------------------------- Total Foreign Government Securities 10,190 (Cost $10,175) ------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 1.0% ILLINOIS -- 0.3% 2,350 Illinois State, Taxable Pension, GO, 2.50%, 06/01/08 2,270 PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ NORTH CAROLINA -- 0.2% $ 1,285 North Carolina Municipal Power Agency No. 1, Catawba, Taxable, Ser. B, Rev., 3.26%, 01/01/05 $ 1,287 OHIO -- 0.1% 550 Ohio State Air Quality Development Authority, Toledo, Ser. A, Rev., Adj., 2.20%, 04/01/24 550 TEXAS -- 0.4% 3,150 Texas Public Finance Authority, Unemployment Compensation, Ser. B, Rev., 2.63%, 06/15/06 3,151 ------------------------------------------------------------------------- Total State and Municipal Obligations 7,258 (Cost $7,327) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 47.7% AUTOMOTIVE -- 5.0% 8,950 DaimlerChrysler N.A. Holding Corp., 2.34%, 05/24/06, MTN, FRN 8,983 Ford Motor Credit Co., 3,900 3.54%, 10/25/04, FRN 3,908 1,000 7.60%, 08/01/05 1,043 7,300 6.50%, 01/25/07 7,759 650 5.80%, 01/12/09 671 General Motors Acceptance Corp., 2,300 4.15%, 02/07/05, MTN 2,322 900 6.75%, 01/15/06 944 2,300 2.51%, 01/16/07, MTN, FRN 2,303 3,500 2.56%, 07/16/07, FRN 3,501 5,150 6.13%, 08/28/07 5,449 ------------------------------------------------------------------------- 36,883 ------------------------------------------------------------------------- BANKING -- 8.9% 1,764 Abbey National PLC (United Kingdom) (Yankee), 7.35%, to 10/06; thereafter FRN, 12/31/49 + 1,908 2,050 Bacob Bank SC (Belgium), 7.25%, to 09/07; thereafter FRN, 12/31/49, # + 2,243 2,800 BBVA Bancomer Capital Trust I (Mexico), 10.50%, 02/16/11, # + 3,083
SEE NOTES TO FINANCIAL STATEMENTS. 60
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 3,500 ForeningsSparbanken AB (Sweden), 7.50%, to 11/06; thereafter FRN, 12/31/49, # $ 3,801 2,000 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # 1,961 2,000 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # 2,486 KorAm Bank (South Korea), 2,800 6.95%, 12/06/11 3,025 3,350 4.68%, 06/18/13, Ser. E, FRN, MTN 3,350 Popular North America, Inc., 200 6.13%, 10/15/06, Ser. E, MTN 212 1,950 4.25%, 04/01/08 1,988 7,195 Royal Bank of Scotland Group PLC (United Kingdom), 7.82%, 11/30/49, Ser. 3 7,644 5,150 Skandinaviska Enskilda Banken AB (Sweden), 8.13%, to 09/06; thereafter FRN, 09/06/49, # 5,641 6,750 Spintab AB (Sweden), 7.50%, to 08/06; thereafter FRN, 12/31/49, # 7,297 2,050 Svenska Handelsbanken (Sweden), 7.13%, to 03/07; thereafter FRN, 12/31/49, # 2,226 2,000 Unicredito Italiano Capital Trust II, 9.20%, to 10/10; thereafter FRN, 12/31/49, # 2,477 US Bancorp, 2,700 6.75%, 10/15/05 2,824 4,750 2.75%, 03/30/06, MTN 4,765 2,500 Washington Mutual, Inc., 7.50%, 08/15/06 2,715 1,430 Woori Bank (South Korea), 5.75%, to 03/09; thereafter FRN, 03/13/14, # 1,483 4,650 Zions Bancorporation, 2.70%, 05/01/06 4,646 ------------------------------------------------------------------------- 65,775 ------------------------------------------------------------------------- BROADCASTING/CABLE -- 1.0% 4,200 Comcast Cable Communications, Inc., 6.38%, 01/30/06 4,397 2,650 Echostar DBS Corp., 9.13%, 01/15/09 2,915 ------------------------------------------------------------------------- 7,312 ------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.8% $ 3,800 Compaq Computer Corp., 7.65%, 08/01/05 $ 3,980 2,000 Unisys Corp., 8.13%, 06/01/06 2,120 ------------------------------------------------------------------------- 6,100 ------------------------------------------------------------------------- CONSUMER PRODUCTS -- 0.5% 3,900 Diageo Finance BV (The Netherlands), 3.00%, 12/15/06 3,905 DIVERSIFIED -- 0.4% 3,000 Tyco International Group SA (Luxembourg) (Yankee), 6.38%, 02/15/06 3,152 FINANCIAL SERVICES -- 13.1% 4,600 BNP US Funding LLC, 7.74%, to 12/07; thereafter FRN, 12/31/49, # + 5,176 1,800 Capital One Bank, 4.25%, 12/01/08 + 1,817 6,650 Capital One Financial Corp., 8.75%, 02/01/07 + 7,434 4,350 Caterpillar Financial Services Corp., 2.59%, 07/15/06, MTN 4,340 3,150 CIT Group, Inc., 6.50%, 02/07/06 + 3,319 6,150 Countrywide Home Loans, Inc., 2.88%, 02/15/07, Ser. L, MTN 6,101 Counts Trusts, 3,450 2.49%, 08/15/07, Ser. 2002-10, FRN, # + 3,479 3,450 2.54%, 08/15/07, Ser. 2002-11, FRN, # + 3,485 3,250 Household Finance Corp., 3.38%, 02/21/06, MTN 3,279 2,000 HSBC Capital Funding LP (Channel Islands), 9.55%, to 06/10; thereafter FRN, 12/31/49, # 2,522 International Lease Finance Corp., 1,400 3.13%, 05/03/07, Ser. P, MTN 1,395 2,100 4.35%, 09/15/08 2,143 6,100 Lehman Brothers Holdings, Inc., 3.50%, 08/07/08 6,059 1,650 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # 1,670 1,650 MBNA America Bank N.A., 4.63%, 08/03/09 1,683
SEE NOTES TO FINANCIAL STATEMENTS. 61
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED FINANCIAL SERVICES -- CONTINUED $ 5,050 Merrill Lynch & Co., Inc., 5.36%, 02/01/07, Ser. B, MTN $ 5,352 700 Mizuho JGB Investment LLC, 9.87%, to 06/08; thereafter FRN, 12/31/49, # 822 2,000 Mizuho Preferred Capital Co., LLC, 8.79%, to 06/08; thereafter FRN, 12/31/49, # 2,266 2,800 Morgan Stanley, 5.80%, 04/01/07 2,986 5,905 Natexis AMBS Co., LLC, 8.44%, to 06/08, thereafter FRN, 12/31/49, # 6,842 1,800 Pricoa Global Funding I, 3.90%, 12/15/08, # 1,806 5,500 SLM Corp., 2.75%, 12/01/05 5,500 1,575 Sovereign Bancorp., Inc., 10.50%, 11/15/06 1,829 Special Purpose Accounts Receivable Cooperative Corp. (SPARCS), 2,900 2.04%, 05/23/05, Ser. 2003-3, FRN, # 2,900 6,300 2.07%, 05/23/05, Ser. 2003-6, FRN, # 6,300 2,000 1.98%, 05/23/06, Ser. 2004-2, FRN, # 2,000 5,050 The Bear Stearns Co., Inc., 6.50%, 05/01/06 + 5,355 ------------------------------------------------------------------------- 97,860 ------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.9% 3,900 Conagra Foods, Inc., 6.00%, 09/15/06 4,122 2,100 Kraft Foods, Inc., 5.25%, 06/01/07 2,208 ------------------------------------------------------------------------- 6,330 ------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 0.8% 2,650 Caesars Entertainment, Inc., 7.88%, 12/15/05 2,792 2,650 Starwood Hotels & Resorts Worldwide, Inc., 7.38%, 05/01/07 2,836 ------------------------------------------------------------------------- 5,628 ------------------------------------------------------------------------- INSURANCE -- 2.0% 5,350 ASIF Global Financing, 1.72%, 03/14/07, FRN, # + 5,355 3,650 Oil Insurance LTD (Bermuda), 1.71%, 04/08/09, FRN, # + 3,650 3,100 Prudential Financial, Inc., 4.10%, 11/15/06 3,161 $ 2,600 Prudential Insurance Co. of America, 6.38%, 07/23/06, # $ 2,774 ------------------------------------------------------------------------- 14,940 ------------------------------------------------------------------------- MULTI-MEDIA -- 0.9% 6,000 Time Warner, Inc., 6.13%, 04/15/06 + 6,307 OIL & GAS -- 1.3% 1,800 PEMEX Project Funding Master Trust (Mexico), 2.82%, 06/15/10, FRN, # 1,835 4,000 Salomon Brothers AG for OAO Gazprom (Russia), 9.13%, 04/25/07 4,335 3,195 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 3,197 ------------------------------------------------------------------------- 9,367 ------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 0.3% 2,000 Georgia-Pacific Corp., 7.38%, 07/15/08 2,185 PHARMACEUTICALS -- 0.1% 950 Hospira, Inc., 4.95%, 06/15/09 976 PIPELINES -- 0.5% Duke Capital LLC, 2,250 4.30%, 05/18/06 2,292 1,400 4.33%, 11/16/06 1,429 ------------------------------------------------------------------------- 3,721 ------------------------------------------------------------------------- REAL ESTATE -- 1.2% 7,960 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # 8,887 REAL ESTATE INVESTMENT TRUST -- 0.3% 2,000 iStar Financial, Inc., 4.88%, 01/15/09, Ser. B 1,998 RETAILING -- 0.1% 800 The May Department Stores Co., 3.95%, 07/15/07, # 809
SEE NOTES TO FINANCIAL STATEMENTS. 62
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED TELECOMMUNICATIONS -- 5.5% $ 3,700 British Telecom PLC (United Kingdom), 7.88%, 12/15/05 + $ 3,945 3,165 Crown Castle International Corp., 10.75%, 08/01/11 3,553 3,100 Deutsche Telekom International Finance BV (The Netherlands), 8.25%, 06/15/05 3,239 3,050 France Telecom (France), 7.20%, 03/01/06 3,273 3,450 Motorola, Inc., 4.61%, 11/16/07 3,545 2,000 Nextel Communications, Inc., 9.38%, 11/15/09 2,120 7,150 SBC Communications, Inc., 4.21%, 06/05/05, # 7,254 3,230 Sprint Capital Corp., 6.00%, 01/15/07 3,431 1,500 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 1,506 8,300 Verizon Wireless Capital LLC, 5.38%, 12/15/06 8,728 ------------------------------------------------------------------------- 40,594 ------------------------------------------------------------------------- UTILITIES -- 4.1% 1,500 AEP Texas Central Co., 3.00%, 02/15/05, Ser. F + 1,505 4,850 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + 4,838 4,050 Commonwealth Edison Co., 6.40%, 10/15/05 4,219 2,250 Consolidated Edison Co. of New York, 6.63%, 12/15/05, Ser. C 2,367 2,700 FPL Group Capital, Inc., 1.88%, 03/30/05 2,695 National Rural Utilities Cooperative Finance Corp., 1,700 3.00%, 02/15/06 1,713 3,100 6.00%, 05/15/06 3,268 3,800 Niagara Mohawk Power Corp., 7.75%, 05/15/06 4,103 525 Pacific Gas & Electric Co., 3.60%, 03/01/09 519 1,500 Pacificorp, 5.65%, 11/01/06 1,580 $ 3,700 Progress Energy, Inc., 6.75%, 03/01/06 $ 3,907 ------------------------------------------------------------------------- 30,714 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 353,443 (Cost $353,515) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.6% COLLATERALIZED MORTGAGE OBLIGATIONS -- 13.2% 3,879 Bank of America Alternative Loan Trust, 5.50%, 09/25/33, Ser. 2003-7, Class 1A1 + 4,020 3,934 Countrywide Home Loans, 6.50%, 01/25/32, Ser. 2001-28, Class 2A4 + 4,001 240 Credit Suisse First Boston Mortgage Securities Corp., 2.27%, 11/25/31, Ser. 2001-26, Class 3A2, FRN 240 Federal Home Loan Mortgage Corp., 4,795 6.00%, 08/15/08, Ser. 1565, Class P 4,982 12,440 4.50%, 05/15/11, Ser. 2780, Class IE, IO 806 3,043 Federal National Mortgage Association, 5.00%, 08/25/33, Ser. 2004-29, Class ZB 3,015 Government National Mortgage Association, 63,047 5.60%, 02/20/24, Ser. 2003-85, Class CS, IO, FRN 5,423 14,900 5.50%, 10/20/27, Ser. 2004-44, Class PK, IO 1,698 5,008 MASTR Adjustable Rate Mortgages Trust, 2.46%, 12/25/33, Ser. 2003-6, Class 1A1, FRN 4,996 78 Residential Accredit Loans, Inc., 2.17%, 08/25/31, Ser. 2001-QS11, Class A5, FRN 78 4,347 Residential Asset Securitization Trust, 6.00%, 01/25/33, Ser. 2002-A15, Class A1 4,369 Structured Adjustable Rate Mortgage Loan Trust., 9,580 5.02%, 06/25/34, Ser. 2004-6, Class 5A1, FRN 9,688 7,750 4.74%, 07/25/34, Ser. 2004-8, Class 5A2, FRN 7,835
SEE NOTES TO FINANCIAL STATEMENTS. 63
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED COLLATERALIZED MORTGAGE OBLIGATIONS -- CONTINUED Washington Mutual, $ 15,648 3.87%, 06/25/34, Ser. 2004-AR5, Class A3, FRN $ 15,661 600 3.96%, 07/25/34, Ser. 2004-AR7, Class A2B, FRN 600 Wells Fargo Mortgage Backed Securities Trust, 5,358 4.64%, 12/25/33, Ser. 2003-N, Class 1A4, FRN 5,397 9,697 4.74%, 08/25/34, Ser. 2004-M, Class A3, FRN 9,761 5,550 3.54%, 09/25/34, Ser. 2004-S, Class A4, FRN 5,429 10,100 3.54%, 09/25/34, Ser. 2004-S, Class A3, FRN 10,105 ------------------------------------------------------------------------- 98,104 ------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.4% 3,000 Federal National Mortgage Association, 5.50%, 10/25/34, TBA 3,037 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 101,141 (Cost $101,295) ------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 7.0% 10,363 Calstrs Trust, 3.99%, 11/20/12, Ser. 2002-C6, Class A2, # + 10,517 3,141 Calwest Industrial Trust, 1.87%, 06/15/15, Ser. 2003-CALA, Class A, FRN, # + 3,146 3,700 Credit Suisse First Boston Mortgage Securities Corp., 4.30%, 07/15/36, Ser. 2004-C3, Class A3 3,756 4,414 First Union - Lehman Brothers Commercial Mortgage Securities, Inc., 7.38%, 04/18/29, Ser. 1997-C1, Class A3 4,786 5,550 GS Mortgage Securities Corp. II, 4.60%, 08/10/38, Ser. 2004-GG2, Class A3 5,709 LB-UBS Commercial Mortgage Trust, 2,950 3.32%, 03/15/27, Ser. 2003-C1, Class A2 2,927 5,750 3.48%, 07/15/27, Ser. 2003-C5, Class A2 5,717 3,000 Mall of America Capital Co., LLC, 1.88%, 03/12/10, Ser. 2000-1, Class A, FRN, # 3,002 Morgan Stanley Capital I, $ 2,943 6.22%, 06/03/30, Ser. 1998-XL1, Class A1 $ 2,996 7,400 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 8,101 989 Mortgage Capital Funding, Inc., 6.00%, 11/18/31, Ser. 1998-MC3, Class A1 1,023 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 51,680 (Cost $51,620) ------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 20.5% American Express Credit Account Master Trust, 4,000 1.95%, 12/15/08, Ser. 2001-6, Class B, FRN + 4,013 3,300 2.10%, 02/15/12, Ser. 2004-C, Class C, FRN, # + 3,300 AmeriCredit Automobile Receivables Trust, 9,200 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 9,182 2,800 2.67%, 03/07/11, Ser. 2004-BM, Class A4 + 2,756 550 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 550 3,700 Capital One Master Trust, 2.40%, 08/15/08, Ser. 2000-4, Class C, FRN, # + 3,710 Capital One Multi-Asset Execution Trust, 4,400 3.70%, 05/17/10, Ser. 2004-B5, Class B5 + 4,438 2,200 3.65%, 07/15/11, Ser. 2003-A4, Class A4 + 2,200 3,650 Carmax Auto Owner Trust, 3.07%, 10/15/10, Ser. 2003-2, Class A4 + 3,642 CARSS Finance LP, 600 1.88%, 01/15/11, Ser. 2004-A, Class B1, FRN, # 600 1,400 2.55%, 01/15/11, Ser. 2004-A, Class B2, FRN, # 1,400 Citibank Credit Card Issuance Trust, 5,050 2.55%, 03/20/08, Ser. 2003-C2, Class C2, FRN 5,096
SEE NOTES TO FINANCIAL STATEMENTS. 64
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 4,375 6.65%, 05/15/08, Ser. 2001-C3, Class C3 $ 4,633 4,990 2.55%, 01/20/09, Ser. 2004-A1, Class A1 4,948 1,188 Comed Transitional Funding Trust, 5.44%, 03/25/07, Ser. 1998-1, Class A5 1,201 5,400 Countrywide Asset-Backed Certificates, 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 5,437 1,100 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 1,102 1,589 EQCC Trust, 1.92%, 11/25/31, Ser. 2002-1, Class 2A, FRN 1,592 14,205 Honda Auto Receivables Owner Trust, 2.48%, 07/18/08, Ser. 2003-1, Class A4 14,182 Household Automotive Trust, 12,000 3.44%, 05/18/09, Ser. 2002-3, Class A4A 12,095 1,700 3.02%, 12/17/10, Ser. 2003-2, Class A4 1,697 4,000 Long Beach Mortgage Loan Trust, 2.19%, 07/25/34, Ser. 2004-3, Class M1, FRN 3,996 2,200 MBNA Credit Card Master Note Trust, 2.00%, 01/15/08, Ser. 2002-B3, Class B3, FRN 2,206 2,727 Onyx Acceptance Grantor Trust, 5.23%, 05/15/08, Ser. 2001-C, Class A4 2,759 950 Option One Mortgage Loan Trust, 1.91%, 02/25/32, Ser. 2002-1, Class A, FRN 951 12,452 Orchid Structured Finance CDO LTD (Cayman Islands), 1.82%, 11/18/38, Ser. 2003-1A, Class A1-MM, FRN, # 12,451 2,190 Peco Energy Transition Trust, 5.80%, 03/01/07, Ser. 1999-A, Class A4 2,217 386 Providian Home Equity Loan Trust, 1.91%, 06/25/25, Ser. 1999-1, Class A, FRN 387 4,100 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 4,099 6,800 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 6,785 Wachovia Asset Securitization, Inc., 3,104 2.05%, 12/25/32, Ser. 2002-HE2, Class A, FRN 3,115 $ 7,800 1.84%, 06/25/34, Ser. 2004-HE1, Class A, FRN $ 7,800 WFS Financial Owner Trust, 7,400 4.50%, 02/20/10, Ser. 2002-2, Class A4, SUB 7,557 6,400 3.25%, 05/20/11, Ser. 2003-3, Class A4 6,438 3,500 World Omni Auto Receivables Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 3,472 ------------------------------------------------------------------------- Total Asset Backed Securities 152,007 (Cost $151,829) ------------------------------------------------------------------------- PARTICIPATORY NOTE -- 0.4% DIVERSIFIED -- 0.4% 3,150 Tyco International Group SA Participation Certificate Trust, 4.44%, 06/15/07, # 3,223 (Cost $3,150) CERTIFICATES OF DEPOSIT -- 1.2% 8,800 Deutsche Bank AG/New York (Yankee), 1.94%, 05/15/07, Floating Rate 8,787 (Cost $8,800) ------------------------------------------------------------------------- Total Long-Term Investments 713,042 (Cost $713,306) ------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 3.8% U.S. TREASURY SECURITY -- 0.1% 1,025 United States Treasury Bill, 1.19%, 09/30/04 @ + 1,024 (Cost $1,024) MUNICIPAL SECURITIES -- 0.6% SOUTH CAROLINA - 0.6% 4,700 South Carolina Student Loan Corp., Education Loans, Ser. A-1, Rev., FRDO, 1.68%, 09/14/04 4,700 (Cost $4,700)
SEE NOTES TO FINANCIAL STATEMENTS. 65
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENTS -- CONTINUED COMMERCIAL PAPER -- 1.4% AUTOMOTIVE -- 0.1% $ 500 Ford Motor Credit Co., 1.78%, 09/03/04 + $ 500 CONSUMER PRODUCTS -- 0.4% 2,700 Altria Group, Inc., 1.97%, 10/15/04 + 2,694 OIL & GAS -- 0.4% 3,750 Kerr-McGee Credit LLC, 2.05%, 09/30/04 + 3,744 UTILITIES -- 0.5% 3,650 Public Service Enterprise Group, Inc., 2.00%, 02/14/05 + 3,649 ------------------------------------------------------------------------- Total Commercial Paper 10,587 (Cost $10,587) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 1.7% 12,666 JPMorgan Prime Money Market Fund (a) + 12,666 (Cost $12,666) ------------------------------------------------------------------------- Total Short-Term Investments 28,977 (Cost $28,977) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 742,019 (COST $742,283) -------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION/ CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - ------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 320 2 Year Treasury Notes December, 2004 $ 67,735 $ (1) SHORT FUTURES OUTSTANDING (24) 10 Year Japanese Government Bonds September, 2004 (30,103) (300) (311) 5 Year Treasury Notes December, 2004 (34,419) (122)
SEE NOTES TO FINANCIAL STATEMENTS. 66 SWAP CONTRACTS
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------------- Swap - price lock with Lehman Brothers Special Financing on U.S. Treasury Note, 2.63%, 05/18/08, price less 96.85, JPMorgan receives negative, pays positive 09/01/04 $ 80,800 $ (1,539) Swap - price lock with Credit Suisse First Boston International, on U.S. Treasury Note, 2.75%, 06/30/06, price less 100.05, the Fund receives positive, pays negative 09/08/04 180,600 1,167 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 6.50%, price less 104.83, the Fund receives negative, pays positive 09/08/04 27,000 (47) Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, price less 101.03, the Fund receives positive, pays negative 09/08/04 10,000 52 Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA, 5.00%, price less 98.67, the Fund receives negative, pays positive 09/08/04 40,000 (213) Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA, 4.50%, price less 95.70, the Fund receives positive, pays negative 09/08/04 22,000 138 Swap - price lock with Lehman Brothers Special Financing on 30 Year FNMA, 5.50%, price less 101.13, the Fund receives positive, pays negative 09/08/04 22,000 93 Swap - spread lock with Citibank N.A., on 3 Year Swap Spread, price less 58.25, the Fund receives positive, pays negative 09/13/04 109,000 (139) Swap - price lock with Citibank N.A., on 30 Year GNMA, 5.00%, price less 97.73, the Fund receives negative, pays positive 10/14/04 21,000 (331) Swap - price lock with Citibank N.A., on 30 Year GNMA, 6.00%, price less 102.38, the Fund receives positive, pays negative 10/14/04 34,500 377 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, price less 100.53, the Fund receives positive, pays negative 11/08/04 27,000 110 Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%, price less 95.22, the Fund receives negative, pays positive 11/08/04 20,500 (128) Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, price less 101.02, the Fund receives positive, pays negative 11/08/04 14,000 -- Swap - price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%, price less 95.94, the Fund receives negative, pays positive 11/08/04 7,500 -- Swap - price lock with UBS AG, on 30 Year FNMA, 6.00%, price less 102.22, the Fund receives positive, pays negative 11/08/04 96,000 570 Swap - price lock with UBS AG, on 30 Year FNMA, 6.50%, price less 104.05, the Fund receives negative, pays positive. 11/08/04 48,000 (210) Swap - price lock with UBS AG, on 30 Year FNMA, 5.50%, price less 100.11, the Fund receives negative, pays positive. 11/08/04 48,000 (383) Swap - price lock with UBS AG, on 30 Year FNMA, 5.50%, price less 100.50, the Fund receives positive, pays negative 11/08/04 16,000 65 Swap - price lock with UBS AG, on 30 Year FNMA, 4.50%, price less 95.06, the Fund receives negative, pays positive. 11/08/04 14,000 (101)
SEE NOTES TO FINANCIAL STATEMENTS. 67
UNDERLYING UNREALIZED NOTIONAL APPRECIATION DESCRIPTIONS EXPIRATION DATE VALUE (DEPRECIATION) - ---------------------------------------------------------------------------------------------------------------------------- Swap - credit default with Deutsche Bank AG, New York on 10Mil Wachovia Corp., 3.63%, 2/17/09, 14 bps per annum paid quarterly, if default the Fund receives an obligation of the underlying entity. 12/20/05 $ 10,000 4 Swap - credit default with Deutsche Bank AG, New York on 7.6Mil Prudential, 6.38%, 6/23/06, 19 bps per annum paid quarterly, if default the Fund receives an obligation of the underlying entity. 09/20/06 7,600 5 Swap - credit default with Deutsche Bank AG, New York on 5.3Mil Coca-Cola Co., 5.75%, 3/15/11, 16 bps per annum paid quarterly, if default the Fund receives an obligation of the underlying entity. 12/31/06 5,300 (3) Swap - credit default with Deutsche Bank AG, New York on 7.6Mil Sun Trust Capital, 2.48%, 3/15/28, 48 bps per annum paid quarterly, if default the Fund receives an obligation of the underlying entity. 06/30/07 7,600 2
SEE NOTES TO FINANCIAL STATEMENTS. 68 JPMORGAN SHORT TERM BOND FUND II
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 98.9% U.S. GOVERNMENT AGENCY SECURITIES -- 18.8% $ 16,360 Federal Farm Credit Bank, 2.63%, 09/17/07 $ 16,156 43,900 Federal Home Loan Bank, 2.50%, 02/24/06 43,975 Federal Home Loan Mortgage Corp., 19,000 1.88%, 02/15/06 18,875 39,350 4.88%, 03/15/07 41,302 2,750 2.40%, 03/29/07 2,719 18,950 3.63%, 09/15/08 19,093 4,600 2.05%, 11/28/08, MTN 4,590 Federal National Mortgage Association, 42,070 2.50%, 06/15/06 42,051 35,300 3.13%, 07/15/06 35,655 ------------------------------------------------------------------------- Total U.S. Government Agency Securities 224,416 (Cost $224,254) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 1.5% 6,750 Province of Quebec (Canada), 5.50%, 04/11/06 7,065 7,550 Republic of Chile (Chile), 2.06%, 01/28/08, FRN 7,599 3,300 United Mexican States (Mexico), 2.29%, 01/13/09, FRN 3,348 ------------------------------------------------------------------------- Total Foreign Government Securities 18,012 (Cost $17,932) ------------------------------------------------------------------------- STATE AND MUNICIPAL OBLIGATIONS -- 0.7% NORTH CAROLINA -- 0.2% 2,140 North Carolina Municipal Power Agency No. 1, Catawba, Taxable, Ser. B, Rev., 3.26%, 01/01/05 2,143 OHIO -- 0.1% 1,350 Ohio State Air Quality Development Authority, Toledo, Ser. A, Rev., Adj., 2.20%, 04/01/24 1,350 TEXAS -- 0.4% $ 5,150 Texas Public Finance Authority, Unemployment Compensation, Ser. B, Rev., 2.63%, 06/15/06 $ 5,152 ------------------------------------------------------------------------- Total State and Municipal Obligations 8,645 (Cost $8,631) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 44.6% AUTOMOTIVE -- 4.5% 14,000 DaimlerChrysler N.A. Holding Corp., 2.34%, 05/24/06, MTN, FRN 14,054 Ford Motor Credit Co., 500 7.60%, 08/01/05 522 13,000 6.50%, 01/25/07 13,818 1,100 5.80%, 01/12/09 1,136 General Motors Acceptance Corp., 2,100 4.15%, 02/07/05, MTN 2,120 1,500 6.75%, 01/15/06 1,573 4,450 2.51%, 01/16/07, MTN, FRN 4,455 6,750 2.56%, 07/16/07, FRN 6,751 9,250 6.13%, 08/28/07 9,786 ------------------------------------------------------------------------- 54,215 ------------------------------------------------------------------------- BANKING -- 7.9% 2,900 Abbey National PLC (United Kingdom) (Yankee), 7.35% to 10/06; thereafter FRN, 12/31/49 + 3,136 3,450 Bacob Bank SC (Belgium), 7.25% to 09/07; thereafter FRN, 12/31/49, # 3,775 Capital One Bank, 2,100 6.88%, 02/01/06 2,223 7,700 4.25%, 12/01/08 7,772 6,200 ForeningsSparbanken AB (Sweden), 7.50% to 11/06; thereafter FRN, 12/31/49, # 6,734 2,000 Industrial Bank of Korea (South Korea), 4.00% to 05/09; thereafter FRN, 05/19/14, # 1,961 Popular North America, Inc., 500 6.13%, 10/15/06, Ser. E, MTN 531 3,250 4.25%, 04/01/08 3,314 12,440 Royal Bank of Scotland Group PLC (United Kingdom), 7.82%, 11/30/49, Ser. 3 13,215
SEE NOTES TO FINANCIAL STATEMENTS. 69
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 9,050 Skandinaviska Enskilda Banken AB (Sweden), 8.13% to 09/06; thereafter FRN, 12/31/49, # $ 9,913 7,500 Spintab AB (Sweden), 7.50% to 08/06; thereafter FRN, 12/31/49, # 8,108 3,400 Svenska Handelsbanken (Sweden), 7.13% to 03/07; thereafter FRN, 12/31/49, # 3,692 5,800 US Bancorp, 6.75%, 10/15/05 6,067 10,100 U.S. Bank N.A., 2.85%, 11/15/06 10,099 4,350 Washington Mutual, Inc., 7.50%, 08/15/06 4,724 8,000 Zions Bancorporation, 2.70%, 05/01/06 7,993 ------------------------------------------------------------------------- 93,257 ------------------------------------------------------------------------- BROADCASTING/CABLE -- 0.6% 7,195 Comcast Cable Communications, Inc., 6.38%, 01/30/06 7,532 COMPUTERS/COMPUTER HARDWARE -- 0.6% 6,600 Compaq Computer Corp., 7.65%, 08/01/05 6,913 CONSUMER PRODUCTS -- 0.6% 7,225 Diageo Finance BV (The Netherlands), 3.00%, 12/15/06 7,234 FINANCIAL SERVICES -- 12.3% 7,900 BNP US Funding LLC, 7.74% to 12/07; thereafter FRN, 12/31/49, # 8,889 7,400 Caterpillar Financial Services Corp., 2.59%, 07/15/06, MTN 7,383 6,950 CIT Group, Inc., 4.13%, 02/21/06 7,097 Countrywide Home Loans, Inc., 750 5.50%, 08/01/06, Ser. J, MTN 785 10,750 2.88%, 02/15/07, Ser. L, MTN 10,664 Counts Trusts, 6,050 2.49%, 08/15/07, Ser. 2002-10, FRN, # 6,100 6,050 2.54%, 08/15/07, Ser. 2002-11, FRN, # 6,111 $ 5,300 Household Finance Corp., 3.38%, 02/21/06, MTN $ 5,348 3,400 International Lease Finance Corp., 4.35%, 09/15/08 3,469 11,800 Lehman Brothers Holdings, Inc., 3.50%, 08/07/08 11,723 2,700 Mantis Reef LTD (Australia), 4.69%, 11/14/08, # 2,733 2,700 MBNA America Bank N.A., 4.63%, 08/03/09 2,754 8,895 Merrill Lynch & Co., Inc., 5.36%, 02/01/07, Ser. B, MTN 9,426 4,800 Morgan Stanley, 5.80%, 04/01/07 5,119 10,100 Natexis AMBS Co., LLC, 8.44%, to 06/08, thereafter FRN, 12/31/49, # 11,704 3,150 Pricoa Global Funding I, 3.90%, 12/15/08, # 3,160 2,000 Principal Life Global, 5.13%, 06/28/07, # 2,103 9,100 SLM Corp., 2.75%, 12/01/05 9,099 2,697 Sovereign Bancorp., Inc., 10.50%, 11/15/06 3,132 Special Purpose Accounts Receivable Cooperative Corp. (SPARCS), 5,100 2.04%, 05/23/05, Ser. 2003-3, FRN, # 5,100 10,100 2.13%, 05/23/05, Ser. 2003-6, FRN, # 10,100 3,100 1.98%, 05/23/06, Ser. 2004-2, FRN, # 3,100 8,700 The Bear Stearns Co., Inc., 6.50%, 05/01/06 9,226 ------------------------------------------------------------------------- 144,325 ------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 0.3% 3,400 Kraft Foods, Inc., 5.25%, 06/01/07 3,574 INSURANCE -- 3.7% ASIF Global Financing, 9,100 1.72%, 03/14/06, FRN, # 9,106 11,900 2.50%, 01/30/07, # + 11,758 5,900 Metropolitan Life Global Funding I, 4.75%, 06/20/07, # 6,146 6,150 Oil Insurance LTD (Bermuda), 1.71%, 04/08/09, FRN, # + 6,150
SEE NOTES TO FINANCIAL STATEMENTS. 70
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED INSURANCE -- CONTINUED $ 5,800 Prudential Financial, Inc., 4.10%, 11/15/06 $ 5,915 4,600 Prudential Insurance Co. of America, 6.38%, 07/23/06, # 4,909 ------------------------------------------------------------------------- 43,984 ------------------------------------------------------------------------- MULTI-MEDIA -- 1.2% 4,048 TCI Communications, Inc., 6.88%, 02/15/06 4,270 9,875 Time Warner, Inc., 6.13%, 04/15/06 + 10,379 ------------------------------------------------------------------------- 14,649 ------------------------------------------------------------------------- OIL & GAS -- 0.7% 3,300 PEMEX Project Funding Master Trust (Mexico), 2.82%, 06/15/10, FRN, # 3,364 5,350 Texas Municipal Gas Corp., 2.60%, 07/01/07, # 5,353 ------------------------------------------------------------------------- 8,717 ------------------------------------------------------------------------- PHARMACEUTICALS -- 0.1% 1,550 Hospira, Inc., 4.95%, 06/15/09 1,592 PIPELINES -- 0.5% Duke Capital LLC, 3,650 4.30%, 05/18/06 3,719 2,400 4.33%, 11/16/06 2,450 ------------------------------------------------------------------------- 6,169 ------------------------------------------------------------------------- REAL ESTATE -- 1.3% 14,100 Socgen Real Estate Co., LLC, 7.64%, to 09/07; thereafter FRN, 12/31/49, # 15,742 RETAILING -- 0.1% 1,350 The May Department Stores Co., 3.95%, 07/15/07, # 1,365 TELECOMMUNICATIONS -- 4.5% 7,950 BellSouth Corp., 5.00%, 10/15/06 8,278 1,800 BellSouth Telecommunications, Inc., 6.50%, 06/15/05 1,857 6,200 British Telecom PLC (United Kingdom), 7.88%, 12/15/05 $ 6,610 5,500 Deutsche Telekom International Finance BV (The Netherlands), 7.75%, 06/15/05 5,747 5,150 France Telecom (France), 7.20%, 03/01/06 5,527 5,850 Motorola, Inc., 4.61%, 11/16/07 6,011 1,550 SBC Communications, Inc., 4.21%, 06/05/05, # 1,573 5,500 Sprint Capital Corp., 6.00%, 01/15/07 5,842 2,500 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 2,511 8,945 Verizon Wireless Capital LLC, 5.38%, 12/15/06 9,405 ------------------------------------------------------------------------- 53,361 ------------------------------------------------------------------------- TRANSPORTATION -- 0.8% 9,450 CSX Corp., 2.75%, 02/15/06 9,406 UTILITIES -- 4.9% 2,550 AEP Texas Central Co., 3.00%, 02/15/05, Ser. F + 2,558 8,600 Alabama Power Co., 2.80%, 12/01/06, Ser. Y + 8,582 7,100 Commonwealth Edison Co., 6.40%, 10/15/05 7,396 3,900 Consolidated Edison Co. of New York, 6.63%, 12/15/05, Ser. C 4,102 National Rural Utilities Cooperative Finance Corp., 2,900 3.00%, 02/15/06 2,922 5,300 6.00%, 05/15/06 5,588 4,800 Niagara Mohawk Power Corp., 7.75%, 05/15/06 5,183 900 Pacific Gas & Electric Co., 3.60%, 03/01/09 890 2,600 Pacificorp, 5.65%, 11/01/06 2,738 4,700 Pepco Holdings, Inc., 5.50%, 08/15/07 4,912
SEE NOTES TO FINANCIAL STATEMENTS. 71
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED UTILITIES -- CONTINUED $ 6,000 Progress Energy, Inc., 6.75%, 03/01/06 $ 6,335 6,950 Virginia Electric & Power Co., 5.38%, 02/01/07, Ser. A 7,305 ------------------------------------------------------------------------- 58,511 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 530,546 (Cost $530,077) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 9.2% COLLATERALIZED MORTGAGE OBLIGATIONS -- 9.0% 6,352 Bank of America Alternative Loan Trust, 5.50%, 09/25/33, Ser. 2003-7, Class 1A1 6,582 6,688 Countrywide Home Loans, 6.50%, 01/25/32, Ser. 2001-28, Class 2A4 6,801 286 Credit Suisse First Boston Mortgage Securities Corp., 2.27%, 11/25/31, Ser. 2001-26, Class 3A2, FRN 286 159 Fifth Third Mortgage Loan Trust, 4.69%, 10/18/30, Ser. 2000-FTB1, Class A2, FRN 159 30 Government National Mortgage Association, 2.10%, 04/16/32, Ser. 2002-24, Class FA, FRN 30 8,411 MASTR Adjustable Rate Mortgages Trust, 2.46%, 12/25/33, Ser. 2003-6, Class 1A1, FRN 8,390 78 Residential Accredit Loans, Inc., 2.17%, 08/25/31, Ser. 2001-QS11, Class A5, FRN 78 7,227 Residential Asset Securitization Trust, 6.00%, 01/25/33, Ser. 2002-A15, Class A1 7,263 Structured Adjustable Rate Mortgage Loan Trust., 15,882 5.02%, 06/25/34, Ser. 2004-6, Class 5A1, FRN 16,061 7,050 4.74%, 07/25/34, Ser. 2004-8, Class 5A2, FRN 7,127 Washington Mutual, 11,957 3.87%, 06/25/34, Ser. 2004-AR5, Class A3, FRN 11,968 $ 900 3.96%, 07/25/34, Ser. 2004-AR7, Class A2B, FRN $ 900 Wells Fargo Mortgage Backed Securities Trust, 9,206 4.64%, 12/25/33, Ser. 2003-N, Class 1A4, FRN 9,273 16,988 3.54%, 09/25/34, Ser. 2004-S, Class A3, FRN 16,999 6,942 3.54%, 09/25/34, Ser. 2004-S, Class A5, FRN 6,891 9,100 3.54%, 09/25/34, Ser. 2004-S, Class A4, FRN 8,901 ------------------------------------------------------------------------- 107,709 ------------------------------------------------------------------------- MORTGAGE BACKED PASS-THROUGH SECURITIES -- 0.2% 2,000 Federal National Mortgage Association, 5.50%, 10/25/34, TBA 2,024 Government National Mortgage Association, 47 8.50%, 08/15/30, Pool 531310 52 7 8.50%, 09/15/30, Pool 526096 8 ------------------------------------------------------------------------- 2,084 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 109,793 (Cost $109,688) ------------------------------------------------------------------------- COMMERCIAL MORTGAGE BACKED SECURITIES -- 6.4% 18,941 Calstrs Trust, 3.99%, 11/20/12, Ser. 2002-C6, Class A2, # 19,226 5,316 Calwest Industrial Trust, 1.87%, 06/15/15, Ser.2003-CALA, Class A, FRN, # 5,323 6,200 Credit Suisse First Boston Mortgage Securities Corp., 4.30%, 07/15/36, Ser. 2004-C3, Class A3 6,293 7,562 First Union-Lehman Brothers Commercial Mortgage Securities, Inc., 7.38%, 04/18/29, Ser. 1997-C1, Class A3 8,198 9,300 GS Mortgage Securities Corp. II, 4.60%, 08/10/38, Ser. 2004-GG2, Class A3 9,566
SEE NOTES TO FINANCIAL STATEMENTS. 72
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED COMMERCIAL MORTGAGE BACKED SECURITIES -- CONTINUED LB-UBS Commercial Mortgage Trust, $ 5,100 3.32%, 03/15/27, Ser. 2003-C1, Class A2 $ 5,060 3,300 3.48%, 07/15/27, Ser. 2003-C5, Class A2 3,281 5,700 3.25%, 03/15/29, Ser. 2004-C2, Class A2 5,570 12,600 Morgan Stanley Capital I, 6.48%, 11/15/30, Ser. 1998-HF2, Class A2 13,794 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 76,311 (Cost $76,767) ------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 16.0% American Express Credit Account Master Trust, 7,000 1.95%, 12/15/08, Ser. 2001-6, Class B, FRN 7,022 5,450 2.10%, 02/15/12, Ser. 2004-C, Class C, FRN, # 5,450 AmeriCredit Automobile Receivables Trust, 12,450 2.84%, 08/06/10, Ser. 2003-DM, Class A4 12,425 3,650 2.67%, 03/07/11, Ser. 2004-BM, Class A4 3,592 3,000 Capital Auto Receivables Asset Trust, 1.96%, 01/15/09, Ser. 2003-2, Class A4A 2,940 1,800 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 1,800 6,500 Capital One Master Trust, 2.40%, 08/15/08, Ser. 2000-4, Class C, FRN, # 6,518 3,600 Capital One Multi-Asset Execution Trust, 3.70%, 05/17/10, Ser. 2004-B5, Class B5 3,631 6,200 Carmax Auto Owner Trust, 3.07%, 10/15/10, Ser. 2003-2, Class A4 6,187 3,300 CARSS Finance LP (Cayman Islands), 1.88%, 01/15/11, Ser. 2004-A, Class B1, FRN, # 3,301 Citibank Credit Card Issuance Trust, $ 8,500 2.55%, 03/20/08, Ser. 2003-C2, Class C2, FRN $ 8,577 7,250 6.65%, 05/15/08, Ser. 2001-C3, Class C3 7,677 5,975 2.55%, 01/20/09, Ser. 2004-A1, Class A1 5,924 10,300 Countrywide Asset-Backed Certificates, 3.61%, 04/25/30, Ser. 2003-5, Class AF3 10,370 8,400 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 8,415 Ford Credit Auto Owner Trust, 175 1.64%, 06/15/05, Ser. 2003-B, Class A2B, FRN 175 600 3.79%, 09/15/06, Ser. 2002-C, Class A4 607 15,000 Gracechurch Card Funding PLC (United Kingdom), 2.70%, 08/15/08, Ser. 5, Class A2 14,982 7,300 Onyx Acceptance Grantor Trust, 3.20%, 03/15/10, Ser. 2003-D, Class A4 7,319 20,893 Orchid Structured Finance CDO LTD (Cayman Islands), 1.82%, 11/18/38, Ser. 2003-1A, Class A1-MM, FRN, # 20,894 4,000 Residential Asset Securities Corp., 3.37%, 12/25/28, Ser. 2003-KS7, Class AI3 4,020 440 Sears Credit Account Master Trust, 5.25%, 10/16/08, Ser. 1998-2, Class A 442 6,900 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 6,898 7,900 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 7,900 Volkswagon Auto Loan Enhanced Trust, 7,300 1.93%, 01/20/10, Ser. 2003-1, Class A4 7,162 4,300 2.94%, 03/22/10, Ser. 2003-2, Class A4 4,290 15,600 WFS Financial Owner Trust, 3.25%, 05/20/11, Ser. 2003-3, Class A4 15,692 7,200 World Omni Auto Receivables Trust, 2.87%, 11/15/10, Ser. 2003-B, Class A4 7,142 ------------------------------------------------------------------------- Total Asset Backed Securities 191,352 (Cost $191,602) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 73
PRINCIPAL AMOUNT (USD) ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PARTICIPATORY NOTE -- 0.5% DIVERSIFIED -- 0.5% $ 5,350 Tyco International Group SA Participation Certificate Trust, 4.44%, 06/15/07, # $ 5,475 ------------------------------------------------------------------------- Total Participatory Note 5,475 (Cost $5,350) ------------------------------------------------------------------------- CERTIFICATES OF DEPOSIT -- 1.2% 14,700 Deutsche Bank AG/New York (Yankee), 1.94%, 05/15/07, Floating Rate 14,678 (Cost $14,700) ------------------------------------------------------------------------- Total Long-Term Investments 1,179,228 (Cost $1,179,001) ------------------------------------------------------------------------- SHORT-TERM INVESTMENTS -- 1.1% U.S. TREASURY SECURITY-- 0.1% $ 675 United States Treasury Bill, 1.20%, 09/30/04 + @ $ 674 (Cost $674) COMMERCIAL PAPER -- 0.1% CONSUMER PRODUCTS -- 0.1% 1,600 Altria Group, Inc., 1.97%, 10/15/04 + 1,596 (Cost $1,596) SHARES - ------------------------------------------------------------------------------------------ MONEY MARKET FUND -- 0.9% 11,188 JPMorgan Prime Money Market Fund (a) + 11,188 (Cost $11,188) Total Short-Term Investments 13,458 (Cost $13,458) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 1,192,686 (COST $1,192,459) -------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION/ CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 100 2 Year Treasury Notes December, 2004 $ 21,167 $ 31 SHORT FUTURES OUTSTANDING (219) 5 Year Treasury Notes December, 2004 (24,237) (97)
SEE NOTES TO FINANCIAL STATEMENTS. 74 SWAP CONTRACTS
UNDERLYING UNREALIZED EXPIRATION NOTIONAL APPRECIATION DESCRIPTIONS DATE VALUE (DEPRECIATION) - ------------------------------------------------------------------------------------------------------------------- Swap-price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, price less 101.03, the Fund pays negative, receives positive. 09/08/04 $ 6,000 $ 31 Swap-price lock with Deutsche Bank AG, New York on 30 Year FNMA, 6.50%, price less 104.83, the Fund pays positive, receives negative. 09/08/04 16,000 (28) Swap-spread lock with Citibank N.A., on 3 Year Mid Market Swap Spread, price less 58.25, the Fund pays negative, receives positive. 09/13/04 53,300 (68) Swap-price lock with Citibank N.A.on U.S. Treasury Note, 2.75%, 7/31/06, price less 100.44, the Fund pays negative, receives positive. 09/20/04 267,800 500 Swap-price lock with Citibank N.A.on U.S. Treasury Note, 3.00%, 2/15/08, price less 99.69, the Fund pays positive, receives negative. 09/27/04 154,850 (812) Swap-price lock with Citibank N.A., on 30 Year GNMA, 6.00%, price less 103.08, the Fund pays negative, receives positive. 10/14/04 20,500 80 Swap-price lock with Citibank N.A., on 30 Year GNMA, 5.00%, price less 98.69, the Fund pays positive, receives negative. 10/14/04 12,500 (78) Swap-price lock with Deutsche Bank AG, New York on 30 Year FNMA, 5.50%, price less 100.53, the Fund pays negative, receives positive. 11/08/04 25,500 104 Swap-price lock with Deutsche Bank AG, New York on 30 Year FNMA, 4.50%, price less 95.22, the Fund pays positive, receives negative. 11/08/04 20,500 (128) Swap-price lock with Deutsche Bank AG, New York on 30 Year FNMA , 5.50% TBA, price less 101.02, the Fund pays negative, receives positive. 11/08/04 45,500 -- Swap-price lock with Deutsche Bank AG, New York on 30 Year FNMA , 4.50% TBA, price less 95.94, the Fund pays positive, receives negative. 11/08/04 30,500 -- Swap (Credit Default) with Deutsche Bank AG, New York on $12.4Mil Sun Trust Capital, 2.48%, 3/15/28, 48 bps per annum paid quarterly, if default, the fund receives an obligation of the underlying entity. 06/30/07 12,400 3
SEE NOTES TO FINANCIAL STATEMENTS. 75 JPMORGAN STRATEGIC INCOME FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 95.0% U.S. TREASURY SECURITIES -- 5.9% U.S. Treasury Notes & Bonds, $ 35 2.13%, 10/31/04 @ + $ 35 25 1.75%, 12/31/04 + 25 50 1.63%, 04/30/05 + 50 50 1.63%, 02/28/06 + 50 285 2.63%, 11/15/06 + 286 20 2.25%, 02/15/07 + 20 145 4.00%, 06/15/09 + 150 5 3.63%, 07/15/09 + 5 10 3.50%, 08/15/09 + 10 330 4.75%, 05/15/14 + 346 145 4.25%, 08/15/14 + 146 50 6.25%, 05/15/30 + 59 30 5.38%, 02/15/31 + 32 ------------------------------------------------------------------------- Total U.S. Treasury Securities 1,214 (Cost $1,200) ------------------------------------------------------------------------- U.S. GOVERNMENT AGENCY SECURITIES -- 0.8% 75 Federal Home Loan Bank, 1.63%, 06/15/05 + 75 80 Federal National Mortgage Association, 7.13%, 01/15/30 98 ------------------------------------------------------------------------- Total U.S. Government Agency Securities 173 (Cost $163) ------------------------------------------------------------------------- FOREIGN GOVERNMENT SECURITIES -- 28.1% Federal Republic of Brazil (Brazil), 70 11.25%, 07/26/07 79 60 11.50%, 03/12/08 + 68 42 2.13%, 04/15/12, FRN 38 199 8.00%, 04/15/14 195 100 Malaysia Government International Bond (Malaysia), 7.50%, 07/15/11 117 National Republic of Bulgaria (Bulgaria), 68 2.75%, 07/28/11, Ser. IAB, FRN 68 107 2.75%, 07/28/12, Ser. A, FRN 106 100 8.25%, 01/15/15, # 122 EUR 500 Netherlands Government Bond (The Netherlands), 5.50%, 07/15/10 670 250 Province of Ontario (Canada), 6.00%, 02/21/06 263 $ 100 Province of Quebec (Canada), 6.13%, 01/22/11, Ser. PJ $ 111 250 Republic of Chile (Chile), 5.63%, 07/23/07 + 266 Republic of Colombia (Colombia), 235 9.75%, 04/23/09, Ser. NOV 262 135 11.75%, 02/25/20, MTN 164 250 Republic of Costa Rica (Costa Rica), 8.11%, 02/01/12, # + 254 25 Republic of Egypt (Egypt), 8.75%, 07/11/11, Regulation S 30 100 Republic of El Salvador (El Salvador), 8.25%, 04/10/32, # 98 250 Republic of Italy (Italy), 2.50%, 03/31/06, MTN 250 Republic of Panama (Panama), 90 9.63%, 02/08/11 103 100 10.75%, 05/15/20 120 Republic of Peru (Peru), 25 9.88%, 02/06/15 28 210 8.38%, 05/03/16 212 135 4.50%, 03/07/17, FRN 117 46 5.00%, 03/07/17, FRN 41 Republic of Philippines (Philippines), 82 9.88%, 03/16/10 91 40 8.38%, 02/15/11 41 145 9.88%, 01/15/19 152 200 Republic of South Africa (South Africa), 8.50%, 06/23/17 240 Republic of Turkey (Turkey), 91 12.38%, 06/15/09 112 72 11.50%, 01/23/12 89 92 9.50%, 01/15/14 104 100 Republic of Ukraine (Ukraine), 7.65%, 06/11/13, Regulation S 101 Republic of Venezuela (Venezuela), 83 2.75%, 12/18/07, Ser. DL, FRN 82 100 9.25%, 09/15/27 93 Russian Federation (Russia), 100 10.00%, 06/26/07, Regulation S 114 69 8.25%, 03/31/10, Regulation S 75 5 11.00%, 07/24/18, Regulation S 7
SEE NOTES TO FINANCIAL STATEMENTS. 76
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED FOREIGN GOVERNMENT SECURITIES -- CONTINUED $ 307 5.00%, 03/31/30, Regulation S, SUB $ 293 100 State of Qatar (Qatar), 9.50%, 05/21/09, Regulation S 123 United Mexican States (Mexico), 100 6.38%, 01/16/13, MTN 105 80 6.63%, 03/03/15 84 100 8.30%, 08/15/31, MTN 115 ------------------------------------------------------------------------- Total Foreign Government Securities 5,803 (Cost $5,100) ------------------------------------------------------------------------- SUPRANATIONAL NOTES & BONDS -- 1.1% 200 Inter-American Development Bank, 7.38%, 01/15/10 236 (Cost $203) ------------------------------------------------------------------------- CORPORATE NOTES & BONDS -- 38.9% AEROSPACE -- 0.6% 15 General Dynamics Corp., 2.13%, 05/15/06 15 100 L-3 Communications Corp., 7.63%, 06/15/12 108 ------------------------------------------------------------------------- 123 ------------------------------------------------------------------------- AGRICULTURAL PRODUCTION/SERVICES -- 0.2% 30 Seminis Vegetable Seeds, Inc., 10.25%, 10/01/13 33 AIRLINES -- 0.0%^ 25 Delta Air Lines, Inc., 7.90%, 12/15/09* + (d) 8 AUTOMOTIVE -- 1.0% 10 DaimlerChrysler N.A. Holding Corp., 7.20%, 09/01/09 + 11 Ford Motor Credit Co., 30 7.38%, 10/28/09 32 20 7.88%, 06/15/10 22 20 7.00%, 10/01/13 21 General Motors Corp., 25 7.20%, 01/15/11 27 10 8.25%, 07/15/23 11 10 8.38%, 07/15/33 11 $ 25 Goodyear Tire & Rubber Co., 7.86%, 08/15/11 $ 24 32 TRW Automotive, Inc., 11.00%, 02/15/13 38 ------------------------------------------------------------------------- 197 ------------------------------------------------------------------------- BANKING -- 2.5% 5 Abbey National Capital Trust I, 8.96%, to 6/30; thereafter FRN, 12/31/49 + 7 15 ABN-Amro North American Holding Preferred Capital Repackage Trust I, 6.52%, to 11/12; thereafter FRN, 12/31/49, # + 16 40 ANZ Capital Trust I, 5.36%, 12/15/53, # + 40 250 Banque Centrale de Tunisie (Tunisia), 7.38%, 04/25/12 + 280 10 Cadets Trust, 4.80%, 07/15/13, Ser. 2003-1, # + 10 10 HBOS PLC (United Kingdom), 5.38%, to 11/13; thereafter FRN, 12/31/49, # 10 15 HBOS Treasury Services PLC (United Kingdom), 3.60%, 08/15/07, MTN, # 15 15 Industrial Bank of Korea (South Korea), 4.00%, to 05/09; thereafter FRN, 05/19/14, # 15 10 KBC Bank Fund Trust III, 9.86%, to 11/09; thereafter FRN, 11/29/49, # 12 25 Popular North America, Inc., 4.70%, 06/30/09 26 RBS Capital Trust I, 5 6.43%, to 1/34; thereafter FRN, 12/31/49 5 15 5.51%, to 9/14; thereafter FRN, 12/31/49 15 10 Royal Bank of Scotland Group PLC (United Kingdom), 7.65%, to 09/31; thereafter FRN, 12/31/49 12 20 SunTrust Bank, 2.50%, 11/01/06 20 5 Swedbank (Sweden), 9.00%, to 03/10; thereafter FRN, 12/31/49, # 6
SEE NOTES TO FINANCIAL STATEMENTS. 77
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED BANKING -- CONTINUED $ 15 Westpac Capital Trust III, 5.82%, to 09/13; thereafter FRN, 12/31/49, # $ 16 10 Westpac Capital Trust IV, 5.26%, 12/31/49, # 10 ------------------------------------------------------------------------- 515 ------------------------------------------------------------------------- BROADCASTING/CABLE -- 1.6% 120 British Sky Broadcasting PLC (United Kingdom) (Yankee), 6.88%, 02/23/09 + 132 15 Cablevision Systems Corp., 8.00%, 04/15/12 + 15 175 Echostar DBS Corp., 10.38%, 10/01/07 + 185 ------------------------------------------------------------------------- 332 ------------------------------------------------------------------------- BUSINESS SERVICES -- 0.6% 10 Cendant Corp., 7.13%, 03/15/15 + 11 100 Iron Mountain, Inc., 8.63%, 04/01/13 108 ------------------------------------------------------------------------- 119 ------------------------------------------------------------------------- CHEMICALS -- 1.8% 25 Crompton Corp., 9.88%, 08/01/12, # + 26 60 Huntsman LLC, 11.63%, 10/15/10 67 15 ICI Wilmington, Inc., 5.63%, 12/01/13 15 Lyondell Chemical Co., 10 9.63%, 05/01/07, Ser. A 11 125 10.88%, 05/01/09 131 75 Nalco Co., 7.75%, 11/15/11, # 80 25 PolyOne Corp., 10.63%, 05/15/10 27 5 The Dow Chemical Co., 7.38%, 11/01/29 + 6 ------------------------------------------------------------------------- 363 ------------------------------------------------------------------------- COMPUTERS/COMPUTER HARDWARE -- 0.0%^ 5 Electronic Data Systems Corp., 6.50%, 08/01/13, Ser. B 5 CONSTRUCTION -- 1.7% 10 Centex Corp., 5.70%, 05/15/14 + 10 80 D.R. Horton, Inc., 9.38%, 03/15/11 + 90 100 KB Home, 8.63%, 12/15/08 112 10 Pulte Homes, Inc., 5.25%, 01/15/14 10 $ 100 Terex Corp., 10.38%, 04/01/11, Ser. B $ 113 10 Toll Brothers, Inc., 5.95%, 09/15/13 10 ------------------------------------------------------------------------- 345 ------------------------------------------------------------------------- CONSTRUCTION MATERIALS -- 0.1% 15 THL Buildco, Inc., 8.50%, 09/01/14, # 16 CONSUMER PRODUCTS -- 0.2% 313 Drypers Corp., 10.25%, 06/15/07, Ser. B + (f) (d) * 3 20 Elizabeth Arden, Inc., 7.75%, 01/15/14 21 25 Rayovac Corp., 8.50%, 10/01/13 26 ------------------------------------------------------------------------- 50 ------------------------------------------------------------------------- CONSUMER SERVICES -- 1.0% 15 Alderwoods Group, Inc., 7.75%, 09/15/12, # 16 100 Corrections Corp. of America, 7.50%, 05/01/11 + 105 Service Corporation International, 9 6.00%, 12/15/05 9 80 6.75%, 04/01/16, # 77 ------------------------------------------------------------------------- 207 ------------------------------------------------------------------------- DIVERSIFIED -- 0.3% 50 Tyco International Group SA (Luxembourg) (Yankee), 6.38%, 10/15/11 55 ELECTRONICS/ELECTRICAL EQUIPMENT -- 0.3% 30 Celestica, Inc. (Canada), 7.88%, 07/01/11 + 31 35 Legrand SA (France), 8.50%, 02/15/25 38 ------------------------------------------------------------------------- 69 ------------------------------------------------------------------------- ENTERTAINMENT/LEISURE -- 0.6% 100 Caesars Entertainment Inc., 7.00%, 04/15/13 107 Six Flags, Inc., 3 8.88%, 02/01/10 3 15 9.75%, 04/15/13 14 ------------------------------------------------------------------------- 124 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 78
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ENVIRONMENTAL SERVICES -- 0.2% $ 40 Allied Waste North America, Inc., 7.38%, 04/15/14, Ser. B $ 39 FINANCIAL SERVICES -- 3.5% American General Finance Corp., 25 3.00%, 11/15/06, Ser. H, MTN + 25 5 4.50%, 11/15/07, Ser. H, MTN + 5 25 Arch Western Finance LLC, 7.25%, 07/01/13, # + 26 10 FleetBoston Financial Corp., 7.25%, 09/15/05 10 20 Goldman Sachs Group, Inc., 6.35%, 02/15/34 20 HSBC Capital Funding LP (Channel Islands), 5 4.61%, to 06/13; thereafter FRN, 12/31/49, # 5 30 9.55%, to 06/10; thereafter FRN, 12/31/49, # 38 10 ING Capital Funding Trust III, 8.44%, to 12/10; thereafter FRN, 12/31/49 12 25 Morgan Stanley, 5.80%, 04/01/07 27 100 Nexstar Finance LLC/Nexstar Finance, Inc., 12.00%, 04/01/08 111 35 SLM Corp., 5.63%, 04/10/07, Ser. A, MTN 37 282 Targeted Return Index (TRAINS), 8.21%, to 08/06; thereafter FRN, 08/01/15, Ser. HY-2004-1, # 301 10 UFJ Finance AEC (Aruba), 6.75%, 07/15/13 11 35 UGS Corp., 10.00%, 06/01/12, # 38 65 Yell Finance BV (The Netherlands), 10.75%, 08/01/11 76 ------------------------------------------------------------------------- 742 ------------------------------------------------------------------------- FOOD/BEVERAGE PRODUCTS -- 1.0% 100 Del Monte Corp., 9.25%, 05/15/11, Ser. B + 110 45 Delhaize America, Inc., 8.13%, 04/15/11 + 51 5 SABMiller PLC (United Kingdom), 6.63%, 08/15/33, # 6 35 Swift & Co., 10.13%, 10/01/09 39 ------------------------------------------------------------------------- 206 ------------------------------------------------------------------------- HEALTH CARE/HEALTH CARE SERVICES -- 1.8% $ 20 Alliance Imaging, Inc., 10.38%, 04/15/11 $ 21 40 Ardent Health Services, Inc., 10.00%, 08/15/13 + 43 40 Extendicare Health Services, Inc., 6.88%, 05/01/14 40 35 Genesis HealthCare Corp., 8.00%, 10/15/13 37 HCA, Inc., 15 5.25%, 11/06/08 15 110 6.75%, 07/15/13 118 30 Mariner Health Care, Inc., 8.25%, 12/15/13, # 32 Tenet Healthcare Corp., 35 7.38%, 02/01/13 32 15 9.88%, 07/01/14, # 16 15 UnitedHealth Group, Inc., 3.30%, 01/30/08 15 ------------------------------------------------------------------------- 369 ------------------------------------------------------------------------- HOTELS/OTHER LODGING -- 1.7% 100 Ameristar Casinos, Inc., 10.75%, 02/15/09 + 113 20 ITT Corp., 7.38%, 11/15/15 21 50 Mandalay Resort Group, 10.25%, 08/01/07, Ser. B 56 MGM Mirage, 90 9.75%, 06/01/07 100 35 6.75%, 09/01/12, # 36 20 Starwood Hotels & Resorts Worldwide, Inc., 7.88%, 05/01/12 22 ------------------------------------------------------------------------- 348 ------------------------------------------------------------------------- INSURANCE -- 0.6% 10 Arch Capital Group LTD (Bermuda), 7.35%, 05/01/34 + 11 20 Aspen Insurance Holdings LTD (Bermuda), 6.00%, 08/15/14, # + 20 10 AXA (France), 8.60%, 12/15/30 + 13 5 Fund American Companies, Inc., 5.88%, 05/15/13 5 25 Liberty Mutual Group, 5.75%, 03/15/14, # 25
SEE NOTES TO FINANCIAL STATEMENTS. 79
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED INSURANCE -- CONTINUED $ 20 Monumental Global Funding II, 3.90%, 06/15/09, # $ 20 Nationwide Financial Services, Inc., 5 6.25%, 11/15/11 5 5 5.90%, 07/01/12 5 5 Odyssey Re Holdings Corp., 7.65%, 11/01/13 6 5 Prudential Holdings LLC, 8.70%, 12/18/23, # 6 5 QBE Insurance Group LTD (Australia), 5.65%, to 07/13; thereafter FRN, 07/01/23, # 5 ------------------------------------------------------------------------- 121 ------------------------------------------------------------------------- METALS/MINING -- 0.8% 150 Peabody Energy Corp., 6.88%, 03/15/13, Ser. B 158 MULTI-MEDIA -- 1.6% 40 Charter Communications Operating LLC, 8.00%, 04/30/12, # + 40 25 Comcast Cable Communications Holdings, Inc., 8.38%, 03/15/13 30 5 Dex Media, Inc., 8.00%, 11/15/13, # + 5 60 DirecTV Holdings LLC, 8.38%, 03/15/13 + 69 50 Lodgenet Entertainment Corp., 9.50%, 06/15/13 55 5 News America Holdings, Inc., 7.75%, 01/20/24 6 50 Radio One, Inc., 8.88%, 07/01/11, Ser. B 55 35 Sinclair Broadcast Group, Inc., 8.00%, 03/15/12 36 10 Time Warner Entertainment Co., LP, 8.38%, 03/15/23 12 15 Time Warner, Inc., 7.63%, 04/15/31 17 10 Viacom, Inc., 7.88%, 07/30/30 12 ------------------------------------------------------------------------- 337 ------------------------------------------------------------------------- OFFICE/BUSINESS EQUIPMENT -- 0.5% 90 Xerox Corp., 7.63%, 06/15/13 96 OIL & GAS -- 1.5% $ 5 Alberta Energy Co., LTD (Canada) (Yankee), 7.38%, 11/01/31 $ 6 15 BP Capital Markets PLC (United Kingdom), 2.75%, 12/29/06 + 15 5 Canadian Natural Resources LTD (Canada) (Yankee), 7.20%, 01/15/32 + 6 47 Chesapeake Energy Corp., 6.88%, 01/15/16 + 47 100 Denbury Resources, Inc., 7.50%, 04/01/13 + 104 15 Devon Financing Corp. ULC, 7.88%, 09/30/31 + 18 15 Giant Industries, Inc., 8.00%, 05/15/14 15 10 Husky Energy, Inc. (Canada), 6.15%, 06/15/19 11 10 Kerr-McGee Corp., 6.95%, 07/01/24 11 35 Newfield Exploration Co., 6.63%, 09/01/14, # 36 30 The Premcor Refining Group, Inc., 7.50%, 06/15/15 32 5 Transocean, Inc., 7.50%, 04/15/31 6 ------------------------------------------------------------------------- 307 ------------------------------------------------------------------------- PACKAGING -- 1.5% 60 Crown European Holdings SA (France), 9.50%, 03/01/11 + 67 Owens-Brockway Glass Container, Inc., 50 8.75%, 11/15/12 56 50 8.25%, 05/15/13 53 20 Silgan Holdings, Inc., 6.75%, 11/15/13 20 100 Stone Container Corp., 9.75%, 02/01/11 111 ------------------------------------------------------------------------- 307 ------------------------------------------------------------------------- PAPER/FOREST PRODUCTS -- 1.2% Boise Cascade Corp., 20 6.50%, 11/01/10 + 22 10 7.00%, 11/01/13 + 11 50 Bowater, Inc., 6.50%, 06/15/13 + 49 100 Georgia-Pacific Corp., 8.88%, 02/01/10 117 5 International Paper Co., 5.85%, 10/30/12 5 50 Tembec Industries, Inc. (Canada), 8.50%, 02/01/11 53 ------------------------------------------------------------------------- 257 -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 80
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED PHARMACEUTICALS -- 0.1% $ 10 Hospira, Inc., 4.95%, 06/15/09 $ 10 5 Wyeth, 6.45%, 02/01/24 5 ------------------------------------------------------------------------- 15 ------------------------------------------------------------------------- PIPELINES -- 1.7% Duke Capital Corp., 35 4.37%, 03/01/09 + 35 20 6.25%, 02/15/13 + 21 30 Dynegy Holdings, Inc., 10.13%, 07/15/13, # + 34 130 El Paso Corp., 7.88%, 06/15/12 124 Kinder Morgan Energy Partners LP, 10 7.40%, 03/15/31 11 5 7.75%, 03/15/32 6 5 7.30%, 08/15/33 6 100 Northwest Pipeline Corp., 8.13%, 03/01/10 113 ------------------------------------------------------------------------- 350 ------------------------------------------------------------------------- PRINTING & PUBLISHING -- 0.2% 30 Sun Media Corp. (Canada), 7.63%, 02/15/13 32 REAL ESTATE INVESTMENT TRUST -- 0.8% 22 FelCor Lodging LP, 9.50%, 09/15/08 23 100 Host Marriott LP, 9.25%, 10/01/07, Ser. G 112 35 Ventas Realty LP/Ventas Capital Corp., 9.00%, 05/01/12 39 ------------------------------------------------------------------------- 174 ------------------------------------------------------------------------- RESTAURANTS/FOOD SERVICES -- 0.3% 60 NE Restaurant Co., Inc., 10.75%, 07/15/08 59 RETAILING -- 1.6% 40 Dillard's, Inc., 7.85%, 10/01/12 + 42 20 Ferrellgas Escrow LLC/Ferrellgas Finance Escrow Corp., 6.75%, 05/01/14 20 45 Ingles Markets, Inc., 8.88%, 12/01/11 48 J.C. Penney Co., Inc., 25 7.60%, 04/01/07 27 40 8.00%, 03/01/10 45 $ 10 7.13%, 11/15/23 $ 10 100 Rite Aid Corp., 9.50%, 02/15/11 110 20 Safeway, Inc., 4.13%, 11/01/08 20 ------------------------------------------------------------------------- 322 ------------------------------------------------------------------------- SEMI-CONDUCTORS -- 0.1% 30 Freescale Semiconductor, Inc., 7.13%, 07/15/14, # 30 SHIPPING/TRANSPORTATION -- 0.1% Norfolk Southern Corp., 5 7.80%, 05/15/27 6 5 7.25%, 02/15/31 6 5 Union Pacific Corp., 6.65%, 01/15/11 5 ------------------------------------------------------------------------- 17 ------------------------------------------------------------------------- STEEL -- 0.4% 70 Euramax International, Inc., 8.50%, 08/15/11 74 TELECOMMUNICATIONS -- 3.1% 75 AT&T Corp., 8.05%, 11/15/11 82 AT&T Wireless Services, Inc., 10 7.88%, 03/01/11 12 10 8.75%, 03/01/31 13 15 British Telecom PLC (United Kingdom), 8.88%, 12/15/30, + 19 45 Cincinnati Bell, Inc., 8.38%, 01/15/14 + 40 Deutsche Telekom International Finance BV (The Netherlands), 30 8.50%, 06/15/10 + 36 5 5.25%, 07/22/13 + 5 5 8.75%, 06/15/30 + 6 France Telecom (France), 15 7.75%, 03/01/11 18 10 8.50%, 03/01/31 13 40 Insight Midwest LP/Insight Capital, Inc., 9.75%, 10/01/09 42 85 Nextel Communications, Inc., 9.38%, 11/15/09 90 30 Nortel Networks LTD (Canada), 6.13%, 02/15/06 30 40 PanAmSat Corp., 9.00%, 08/15/14, # 42
SEE NOTES TO FINANCIAL STATEMENTS. 81
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED TELECOMMUNICATIONS -- CONTINUED $ 30 Qwest Communications International, 7.25%, 02/15/11, # $ 28 80 Qwest Corp., 9.13%, 03/15/12, # 86 20 SBC Communications, Inc., 5.63%, 06/15/16 20 Sprint Capital Corp., 10 6.90%, 05/01/19 11 5 8.75%, 03/15/32 6 10 TCI Communications, Inc., 7.88%, 02/15/26 12 10 Telecom Italia Capital SA (Luxembourg), 4.00%, 11/15/08, # 10 5 Verizon Global Funding Corp., 7.38%, 09/01/12 6 15 Verizon New England, Inc., 4.75%, 10/01/13, Ser. C 15 15 Verizon New York, Inc., 6.88%, 04/01/12, Ser. A 17 ------------------------------------------------------------------------- 659 ------------------------------------------------------------------------- UTILITIES -- 2.1% 10 AEP Texas Central Co., 5.50%, 02/15/13, Ser. D 10 10 Alabama Power Co., 2.80%, 12/01/06, Ser. Y 10 5 Arizona Public Service Co., 4.65%, 05/15/15 + 5 75 Calpine Corp., 9.88%, 12/01/11, # + 62 50 CMS Energy Corp., 7.75%, 08/01/10, # + 53 5 Columbus Southern Power Co., 5.50%, 03/01/13, Ser. C + 5 Dominion Resources, Inc., 15 8.13%, 06/15/10, Ser. A + 18 10 6.30%, 03/15/33 + 10 40 DPL, Inc., 6.88%, 09/01/11 + 42 10 DTE Energy Co., 6.38%, 04/15/33 + 10 15 FPL Group Capital, Inc., 7.63%, 09/15/06 16 5 National Rural Utilities Cooperative Finance Corp., 6.50%, 03/01/07, Ser. C, MTN 5 20 Nisource Finance Corp., 6.15%, 03/01/13 21 Pacific Gas & Electric Co., $ 10 4.20%, 03/01/11 $ 10 10 4.80%, 03/01/14 10 10 PacifiCorp, 4.30%, 09/15/08 10 10 Pepco Holdings, Inc., 7.45%, 08/15/32 11 PSEG Power LLC, 5 5.00%, 04/01/14 5 15 5.50%, 12/01/15 15 30 Reliant Resources, Inc., 9.50%, 07/15/13 33 45 Sierra Pacific Resources, 8.63%, 03/15/14, # 47 15 TXU Energy Co., 7.00%, 03/15/13 17 ------------------------------------------------------------------------- 425 ------------------------------------------------------------------------- Total Corporate Notes & Bonds 8,005 (Cost $7,798) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 13.4% COLLATERALIZED MORTGAGE OBLIGATIONS -- 0.4% 75 Wells Fargo Mortgage Backed Securities Trust, 3.54%, 09/25/34, Ser. 2004-S, Class A4, FRN 73 MORTGAGE BACKED PASS-THROUGH SECURITIES -- 13.0% 21 Federal Home Loan Mortgage Corp., 6.00%, 05/01/17, Gold Pool E89420 22 Federal National Mortgage Association, 413 5.00%, 07/01/19, Pool 785934 421 97 5.50%, 11/01/32, Pool 254594 99 85 5.50%, 01/01/34, Pool 357472 86 47 5.50%, 02/01/34, Pool 759855 48 71 5.50%, 05/01/34, Pool 781078 72 100 5.50%, 08/01/34, Pool 792526 102 Government National Mortgage Association, 373 6.00%, 03/15/33, Pool 781607 388 398 6.00%, 06/20/34, Pool 3570 413 997 6.00%, 07/20/34, Pool 3584 1,036 ------------------------------------------------------------------------- 2,687 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 2,760 (Cost $2,718) -------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 82
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED COMMERCIAL MORTGAGE BACKED SECURITIES -- 2.6% $ 45 Banc of America Commercial Mortgage, Inc., 5.06%, 03/11/41, Ser. 2003-2, Class A4 + $ 46 Credit Suisse First Boston Mortgage Securities Corp., 25 6.38%, 12/16/35, Ser. 2001-CK1, Class A3 + 28 30 4.30%, 07/15/36, Ser. 2004-C3, Class A3 + 30 55 4.90%, 12/15/36, Ser. 2003-C5, Class A4 + 56 45 Greenwich Capital Commercial Funding Corp., 4.11%, 07/05/35, Ser. 2003-C1, Class A4 43 45 GS Mortgage Securities Corp. II, 5.40%, 08/10/38, Ser. 2004-GG2, Class A6, FRN 47 LB-UBS Commercial Mortgage Trust, 60 6.65%, 11/15/27, Ser. 2001-C2, Class A2 68 5 3.25%, 03/15/29, Ser. 2004-C2, Class A2 5 Morgan Stanley Capital I, 30 4.05%, 01/13/41, Ser. 2004-HQ3, Class A2 30 110 4.66%, 09/13/45, Ser. 2004-T13, Class A4 110 20 Morgan Stanley Dean Witter Capital I, 4.92%, 03/12/35, Ser. 2003-HQ2, Class A2 20 60 Wachovia Bank Commercial Mortgage Trust, 3.96%, 12/15/35, Ser. 2003-C9, Class A2 60 ------------------------------------------------------------------------- Total Commercial Mortgage Backed Securities 543 (Cost $530) ------------------------------------------------------------------------- ASSET BACKED SECURITIES -- 4.2% 35 American Express Credit Account Master Trust, 1.69%, 01/15/09, Ser. 2003-4, Class A + 34 AmeriCredit Automobile Receivables Trust, 10 2.75%, 10/09/07, Ser. 2003-CF, Class A3 + 10 10 3.48%, 05/06/10, Ser. 2003-CF, Class A4 + 10 15 2.84%, 08/06/10, Ser. 2003-DM, Class A4 + 15 Capital Auto Receivables Asset Trust, 39 1.64%, 02/15/07, Ser. 2003-2, Class A3B, FRN + 39 $ 25 1.96%, 01/15/09, Ser. 2003-2, Class A4A + $ 25 10 Capital One Auto Finance Trust, 3.18%, 09/15/10, Ser. 2003-B, Class A4 + 10 45 Capital One Multi-Asset Execution Trust, 3.65%, 07/15/11, Ser. 2003-A4, Class A4 + 45 15 Citibank Credit Card Issuance Trust, 5.65%, 06/16/08, Ser. 2001-A6, Class A6 + 16 Countrywide Asset-Backed Certificates, 20 3.61%, 04/25/30, Ser. 2003-5, Class AF3 + 20 15 5.41%, 01/25/34, Ser. 2003-5, Class MF1 + 15 10 Daimler Chrysler Auto Trust, 2.88%, 10/08/09, Ser. 2003-A, Class A4 + 10 75 Ford Credit Auto Owner Trust, 3.54%, 11/15/08, Ser. 2004-A, Class A4 76 75 Household Automotive Trust, 2.22%, 11/17/09, Ser. 2003-1, Class A4 74 50 Long Beach Mortgage Loan Trust, 1.94%, 07/25/33, Ser. 2003-3, Class A, FRN 50 10 M&I Auto Loan Trust, 2.97%, 04/20/09, Ser. 2003-1, Class A4 10 20 Morgan Stanley Auto Loan Trust, 2.17%, 04/15/11, Ser. 2003-HB1, Class A2 20 40 National City Auto Receivables Trust, 2.88%, 05/15/11, Ser. 2004-A, Class A4 40 Onyx Acceptance Grantor Trust, 10 3.20%, 03/15/10, Ser. 2003-D, Class A4 10 15 2.66%, 05/17/10, Ser. 2003-C, Class A4 15 75 3.89%, 02/15/11, Ser. 2004-B, Class A4 75 14 Option One Mortgage Loan Trust, 1.94%, 07/01/33, Ser. 2003-5, Class A2, FRN 14 20 PSE&G Transition Funding LLC, 6.61%, 06/15/15, Ser. 2001-1, Class A6 23 Residential Asset Securities Corp., 7 1.87%, 07/25/32, Ser. 2002-KS4, Class AIIB, FRN 7
SEE NOTES TO FINANCIAL STATEMENTS. 83
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- CONTINUED ASSET BACKED SECURITIES -- CONTINUED $ 20 1.91%, 07/25/33, Ser. 2003-KS5, Class AIIB, FRN $ 20 65 SLM Student Loan Trust, 2.99%, 12/15/22, Ser. 2003-11, Class A5, # 65 20 Triad Auto Receivables Owner Trust, 3.20%, 12/13/10, Ser. 2003-B, Class A4 20 40 USAA Auto Owner Trust, 2.04%, 02/16/10, Ser. 2003-1, Class A4 40 25 Volkswagen Auto Loan Enhanced Trust, 2.94%, 03/22/10, Ser. 2003-2, Class A4 25 18 Wachovia Asset Securitization, Inc., 2.05%, 12/25/32, Ser. 2002-HE2, Class A, FRN 18 15 WFS Financial Owner Trust, 3.15%, 05/20/11, Ser. 2003-4, Class A4 15 ------------------------------------------------------------------------- Total Asset Backed Securities 866 (Cost $868) ------------------------------------------------------------------------- WARRANTS -- 0.0%^ TELECOMMUNICATIONS -- 0.0%^ 0^^ Startec Global Communications Corp., 0.00%, 05/15/08 (Cost $0^^) $ 0^^ ------------------------------------------------------------------------- Total Long-Term Investments 19,600 (Cost $18,580) SHORT-TERM INVESTMENTS -- 5.0% MONEY MARKET FUND -- 5.0% 1,028 JPMorgan Prime Money Market Fund (a) + $ 1,028 (Cost $1,028) ------------------------------------------------------------------------- TOTAL INVESTMENTS -- 100.0% $ 20,628 (COST $19,608) -------------------------------------------------------------------------
SUMMARY OF INVESTMENTS BY COUNTRY, AUGUST 31, 2004
COUNTRY % OF INVESTMENT SECURITIES - ---------------------------------------------------------------------------------------- United States 66.7% The Netherlands 3.9 Canada 2.5 Russia 2.4 Colombia 2.1 Peru 1.9 Brazil 1.9 Turkey 1.5 Mexico 1.5 Bulgaria 1.4 Philippines 1.4 Tunisia 1.4 Chile 1.3 Costa Rica 1.2 Italy 1.2 South Africa 1.2 Panama 1.1 United Kingdom 1.0 Venezuela 0.9 France 0.7 Qatar 0.6 Malaysia 0.6 Ukraine 0.5 El Salvador 0.5 Other (below 0.5%) 0.6 - ----------------------------------------------------------------------------- TOTAL 100.0% - -----------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 84 FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION/ CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 10 Treasury Bonds December, 2004 $ 1,113 $ 16 1 2 Year Treasury Notes December, 2004 212 --^^ 14 5 Year Treasury Notes December, 2004 1,549 7 SHORT FUTURES OUTSTANDING (22) 10 Year Treasury Notes December, 2004 (2,471) (17)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACT
NET UNREALIZED SETTLEMENT SETTLEMENT VALUE AT APPRECIATION CONTRACTS TO SELL DATE VALUE (USD) 8/31/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------------- 555 EUR 9/30/04 $ 670 $ 674 $ (4)
SEE NOTES TO FINANCIAL STATEMENTS. 85 JPMORGAN U.S. TREASURY INCOME FUND PORTFOLIO OF INVESTMENTS AS OF AUGUST 31, 2004 (Amounts in thousands)
PRINCIPAL AMOUNT ~ ISSUER VALUE - ------------------------------------------------------------------------------------------ LONG-TERM INVESTMENTS -- 93.6% U.S. TREASURY SECURITIES -- 89.8% U.S. Treasury Notes & Bonds, $ 13,430 1.13%, 06/30/05 $ 13,347 24,020 2.38%, 08/31/06 24,019 13,000 2.63%, 11/15/06 13,040 2,700 3.00%, 02/15/08 2,710 10,030 2.63%, 05/15/08 9,908 1,555 3.88%, 05/15/09 1,596 8,890 3.63%, 07/15/09 9,017 4,045 5.75%, 08/15/10 4,517 2,085 3.88%, 02/15/13 2,070 6,430 4.25%, 08/15/13 6,521 1,350 4.75%, 05/15/14 1,417 3,140 7.25%, 05/15/16 + 3,949 1,020 9.00%, 11/15/18 + 1,483 5,525 8.13%, 08/15/19 + @ 7,550 3,635 8.00%, 11/15/21 + 4,977 4,220 7.25%, 08/15/22 + 5,411 8,000 5.38%, 02/15/31 + 8,518 ------------------------------------------------------------------------- Total U.S. Treasury Securities 120,050 (Cost $117,123) ------------------------------------------------------------------------- RESIDENTIAL MORTGAGE BACKED SECURITIES -- 3.8% MORTGAGE BACKED PASS-THROUGH SECURITIES -- 3.8% $ 0^^ Federal Home Loan Mortgage Corp., 7.00%, 12/01/14, Gold Pool E00766 $ 0^^ ------------------------------------------------------------------------- 4,838 Government National Mortgage Association, 6.00%, 10/15/33, Pool 604714 5,030 ------------------------------------------------------------------------- Total Residential Mortgage Backed Securities 5,030 (Cost $4,941) ------------------------------------------------------------------------- Total Long-Term Investments 125,080 (Cost $122,064) ------------------------------------------------------------------------- SHARES - ------------------------------------------------------------------------------------------ SHORT-TERM INVESTMENT -- 6.4% MONEY MARKET FUND -- 6.4% 8,491 JPMorgan 100% U.S. Treasury Securities Money Market Fund (a) 8,491 (Cost $8,491) TOTAL INVESTMENTS -- 100.0% $ 133,571 (COST $130,555) -------------------------------------------------------------------------
FUTURES CONTRACTS (Amounts in thousands, except number of contracts)
NOTIONAL UNREALIZED NUMBER OF VALUE AT APPRECIATION CONTRACTS DESCRIPTION EXPIRATION DATE 8/31/04 (USD) (DEPRECIATION) (USD) - --------------------------------------------------------------------------------------------------------------------------- LONG FUTURES OUTSTANDING 12 2 Year Treasury Notes December, 2004 $ 2,540 $ 5 111 5 Year Treasury Notes December, 2004 12,285 53 21 10 Year Treasury Notes December, 2004 2,359 7 SHORT FUTURES OUTSTANDING (46) Treasury Bonds December, 2004 (5,120) (71)
SEE NOTES TO FINANCIAL STATEMENTS. 86 Abbreviations * -- Non-income producing security. # -- All or a portion of this security is a 144A or private placement security and can only be sold to qualified institutional buyers. ~ -- Denominated in United States Dollars unless otherwise noted. ^^ -- Amount rounds to less than one thousand. ^ -- Amount rounds to less than 0.1%. + -- All or a portion of this security is segregated with the custodian for futures contracts, TBA, when issued, delayed delivery securities or swaps. @ -- Security is fully or partially segregated with brokers as intitial margin for futures contracts. (a) -- Affiliated. Money market fund registered under the Investment Company Act of 1940, as amended and advised by JPMorgan Fleming Asset Management, Inc. Adj. -- Adjustable. The interest rate shown is the rate in effect at August 31, 2004. (d) -- Defaulted Security. (f) -- Fair Valued Investment. The following are approximately the market value and percentage of the investments that are fair valued (amounts in thousands):
FUND MARKET VALUE PERCENTAGE ---- ------------ ---------- JPMorgan Bond Fund $ 20,457 1.88% JPMorgan Global Strategic Income Fund $ 2,587 8.63% JPMorgan Strategic Income Fund $ 3 0.00%^
(i) -- Security is considered illiquid and may be difficult to sell. CAD -- Canadian Dollar. CMBS -- Commercial Mortgage Backed Security. EUR -- Euro. FNMA -- Federal National Mortgage Association. FRDO -- Floating Rate Demand Obligation. The maturity date shown is the next interest reset date. The interest rate shown is the rate in effect at August 31, 2004. FRN -- Floating Rate Note. The rate shown is the rate in effect as of August 31, 2004. GBP -- Great Britain Pound. GNMA -- Government National Mortgage Association. GO -- General Obligation Bond. IO -- Interest Only. LIBOR -- London Interbank Offered Rate. MTN -- Medium Term Note. Regulation S -- Securities registered under the Securities Act of 1933. Rev. -- Revenue Bond. Ser. -- Series. SUB -- Step-up Bond. The rate shown is the rate in effect as of August 31, 2004. TBA -- To Be Announced. USD -- United States Dollar. UYU -- Uruguay Peso SEE NOTES TO FINANCIAL STATEMENTS. 87 JPMORGAN FUNDS STATEMENT OF ASSETS AND LIABILITIES AS OF AUGUST 31, 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 Investments in non-affiliates, at value $ 1,051,832 $ 1,017,824 $ 289,399 $ 34,019 $ 28,672 Investments in affiliates at value 37,330 118,963 5,393 371 1,301 - ---------------------------------------------------------------------------------------------------------------------------------- Total Investment securities, at value 1,089,162 1,136,787 294,792 34,390 29,973 - ---------------------------------------------------------------------------------------------------------------------------------- Cash 1,911 -- -- 1 12,332 Foreign currency, at value 11 -- -- 16 21 Receivables: Investment securities sold 282,371 375,146 -- 3,043 181 Fund shares sold 630 3 -- 75 2 Interest and dividends 7,172 5,223 706 606 489 Variation margin 85 33 -- 4 18 Unrealized appreciation on forward foreign currency exchange contracts -- -- -- -- 16 Unrealized appreciation on open swap contracts 9,311 4,000 -- -- -- Expense reimbursements 5 -- -- -- 18 - ---------------------------------------------------------------------------------------------------------------------------------- Total Assets 1,390,658 1,521,192 295,498 38,135 43,050 - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payables: Due to custodian -- 1,616 -- -- -- Dividends 570 2,043 112 6 185 Investment securities purchased 483,225 613,806 1,518 1,873 125 Fund shares redeemed 376 529 -- 13 5 Unrealized depreciation on forward foreign currency exchange contracts -- -- -- -- 1 Variation margin 36 -- 9 -- -- Outstanding options written, at fair value 4,973 -- -- -- -- Unrealized depreciation on open swap contracts 8,136 1,708 -- -- -- Accrued liabilities: Investment advisory fees 225 228 36 9 -- Administration fees 15 85 -- -- -- Shareholder servicing fees 61 99 -- -- --^ Distribution fees 2 8 -- -- --^ Custodian fees 46 37 10 15 27 Trustees' fees -- -- -- -- --^ Professional fees -- -- -- -- 142 Trustees' fees - deferred compensation plan 2 56 1 --^ -- Other 135 102 60 74 21 - ---------------------------------------------------------------------------------------------------------------------------------- Total Liabilities 497,802 620,317 1,746 1,990 506 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 892,856 $ 900,875 $ 293,752 $ 36,145 $ 42,544 - ----------------------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 88
FLEMING GLOBAL ENHANCED EMERGING STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND NET ASSETS Paid in capital $ 856,588 $ 871,433 $ 300,162 $ 27,512 $ 69,099 Accumulated undistributed (overdistributed) net investment income (361) (961) (105) 129 (148) Accumulated net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 21,226 11,347 (6,445) 3,794 (27,053) Net unrealized appreciation (depreciation) of investments, futures, foreign exchange translations, written options and swaps 15,403 19,056 140 4,710 646 - ---------------------------------------------------------------------------------------------------------------------------------- Total Net Assets $ 892,856 $ 900,875 $ 293,752 $ 36,145 $ 42,544 - ---------------------------------------------------------------------------------------------------------------------------------- Class A $ 3,004 $ 20,201 $ -- $ -- $ 802 Class B $ 1,972 $ 11,975 $ -- $ -- $ -- Class C $ 211 $ -- $ -- $ -- $ -- Institutional $ 318,100 $ -- $ 293,752 $ -- $ 39,378 Select $ 188,775 $ 868,699 $ -- $ 36,145 $ 2,364 Ultra $ 380,794 $ -- $ -- $ -- $ -- - ---------------------------------------------------------------------------------------------------------------------------------- Total $ 892,856 $ 900,875 $ 293,752 $ 36,145 $ 42,544 - ---------------------------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized): Class A 299 484 -- -- 88 Class B 198 289 -- -- -- Class C 21 -- -- -- -- Institutional 31,924 -- 29,864 -- 4,336 Select 18,941 20,928 -- 3,773 260 Ultra 38,194 -- -- -- -- Net Asset Value: Class A (and redemption price) $ 10.05 $ 41.69 $ -- $ -- $ 9.08 Class B* $ 9.97 $ 41.48 $ -- $ -- $ -- Class C* $ 10.03 $ -- $ -- $ -- $ -- Institutional (and redemption price) $ 9.96 $ -- $ 9.84 $ -- $ 9.08 Select (and redemption price) $ 9.97 $ 41.51 $ -- $ 9.58 $ 9.08 Ultra (and redemption price) $ 9.97 $ -- $ -- $ -- $ -- Class A Maximum Public Offering Price Per Share (net asset value per share/95.5%) $ 10.52 $ 43.65 $ -- $ -- $ 9.51 Cost of investments $ 1,072,904 $ 1,119,966 $ 294,640 $ 29,648 $ 29,370 Cost of foreign currency $ 11 $ -- $ -- $ 54 $ 20 - ---------------------------------------------------------------------------------------------------------------------------------- Premiums received from options written $ 2,803 $ -- $ -- $ -- $ -- - ----------------------------------------------------------------------------------------------------------------------------------
* Redemption price may be reduced by contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 89
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND ASSETS Investments in non-affiliates, at value $ 729,353 $ 1,181,498 $ 19,600 $ 125,080 Investments in affiliates, at value 12,666 11,188 1,028 8,491 - ---------------------------------------------------------------------------------------------------------------------------------- Total investment securities, at value 742,019 1,192,686 20,628 133,571 - ---------------------------------------------------------------------------------------------------------------------------------- Cash 54 7,262 -- -- Foreign currency, at value -- -- 1 -- Receivables: Investment securities sold 27,243 11,905 66 -- Fund shares sold 74 587 3 1 Interest and dividends 5,927 8,611 288 584 Variation margin -- 51 -- 6 Unrealized appreciation on open swap contracts 2,583 718 -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Expense reimbursements -- -- 10 -- - ---------------------------------------------------------------------------------------------------------------------------------- Total Assets 777,900 1,221,820 20,996 134,162 - ---------------------------------------------------------------------------------------------------------------------------------- LIABILITIES Payables: Due to custodian -- -- 45 1 Dividends 604 2,242 52 116 Investment securities purchased 33,284 24,930 63 -- Fund shares redeemed 1,219 1,669 2 7 Variation margin 174 -- 2 -- Unrealized depreciation on open swap contracts 3,094 1,114 -- -- Unrealized loss on forward foreign currency exchange contracts -- -- 4 -- Accrued liabilities: Investment advisory fees 138 258 -- 29 Administration fees 19 106 -- 5 Shareholder servicing fees 21 201 1 10 Distribution fees --^ 207 10 9 Custodian fees 23 37 17 11 Professional Fees -- -- 53 52 Transfer Agent Fees -- -- -- 15 Trustees' fees - deferred compensation plan 3 9 --^ 10 Other 99 103 14 8 - ---------------------------------------------------------------------------------------------------------------------------------- Total Liabilities 38,678 30,876 263 273 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS $ 739,222 $ 1,190,944 $ 20,733 $ 133,889 - ----------------------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 90
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND NET ASSETS Paid in capital $ 740,102 $ 1,195,040 $ 22,152 $ 133,090 Accumulated undistributed (overdistributed) net investment income 2,034 (2,251) (47) 8 Accumulated net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (1,717) (1,610) (2,394) (2,219) Net unrealized appreciation (depreciation) of investments, futures foreign exchange translations and swaps (1,197) (235) 1,022 3,010 - ---------------------------------------------------------------------------------------------------------------------------------- Total Net Assets $ 739,222 $ 1,190,944 $ 20,733 $ 133,889 - ---------------------------------------------------------------------------------------------------------------------------------- Class A $ 2,672 $ 55,488 $ 2,816 $ 44,694 Class B -- -- $ 7,753 $ 13,486 Class C -- -- $ 2,931 $ -- Institutional $ 641,869 $ -- -- -- Class M $ -- $ 643,278 $ 7,233 $ -- Select $ 94,681 $ 492,178 $ -- $ 75,709 - ---------------------------------------------------------------------------------------------------------------------------------- Total $ 739,222 $ 1,190,944 $ 20,733 $ 133,889 - ---------------------------------------------------------------------------------------------------------------------------------- Shares of beneficial interest outstanding ($0.001 par value; unlimited number of shares authorized): Class A 272 5,437 306 3,779 Class B -- -- 843 1,141 Class C -- -- 319 -- Institutional 65,160 -- -- -- Class M -- 63,028 789 -- Select 9,620 48,141 -- 6,394 Net Asset Value: Class A (and redemption price) $ 9.84 $ 10.21 $ 9.19 $ 11.83 Class B* $ -- $ -- $ 9.19 $ 11.82 Class C* $ -- $ -- $ 9.20 $ -- Institutional (and redemption price) $ 9.85 $ -- $ -- $ -- Class M (and redemption price) $ -- $ 10.21 $ 9.17 $ -- Select (and redemption price) $ 9.84 $ 10.22 $ -- $ 11.84 Class A Maximum Public Offering Price Per Share (net asset value per share/98.5%) $ 9.99 $ 10.37 $ 9.62 $ 12.39 Class M Maximum Public Offering Price Per Share (net asset value per share/98.5%) $ -- $ 10.37 $ -- $ -- Class M Maximum Public Offering Price Per Share (net asset value per share/97.0%) $ -- $ -- $ 9.45 $ -- Cost of investments $ 742,283 $ 1,192,459 $ 19,608 $ 130,555 - ---------------------------------------------------------------------------------------------------------------------------------- Cost of foreign currency $ -- $ -- $ --^ $ -- - ----------------------------------------------------------------------------------------------------------------------------------
* Redemption price may be reduced by contingent deferred sales charge. SEE NOTES TO FINANCIAL STATEMENTS. 91 STATEMENT OF OPERATIONS FOR THE YEAR ENDED AUGUST 31, 2004 (Amounts in thousands)
FLEMING GLOBAL ENHANCED EMERGING STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND INVESTMENT INCOME Interest $ 40,017 $ 35,724 $ 6,020 $ 3,796 $ 4,270 Dividend -- -- 18 -- -- Dividend income from affiliated investments* 847 1,182 280 11 77 Foreign taxes withheld (23) (4) -- -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total investment income 40,841 36,902 6,318 3,807 4,347 - ---------------------------------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 3,070 2,926 946 323 312 Administration fees 1,535 1,463 568 69 104 Shareholder servicing fees 1,176 2,438 378 115 74 Distribution fees 26 165 -- -- 1 Custodian fees 238 199 54 91 157 Interest expense 2 -- --^ 2 6 Printing and postage 35 44 10 1 2 Professional fees 152 123 93 111 112 Registration expenses 100 98 12 7 48 Transfer agent fees 131 120 21 29 45 Trustees' fees 15 15 6 1 1 Other 75 57 18 8 13 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 6,555 7,648 2,106 757 875 - ---------------------------------------------------------------------------------------------------------------------------------- Less amounts waived 1,429 1,634 1,346 178 335 Less earnings credits 8 2 3 --^ 1 Less expense reimbursements 42 -- -- -- 70 - ---------------------------------------------------------------------------------------------------------------------------------- Net expenses 5,076 6,012 757 579 469 - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $ 35,765 $ 30,890 $ 5,561 $ 3,228 $ 3,878 - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 92
FLEMING ENHANCED EMERGING GLOBAL STRATEGIC BOND BOND INCOME MARKETS DEBT INCOME FUND FUND II FUND FUND FUND REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on transactions from: Investments $ 8,220 $ 13,472 $ 63 $ 6,238 $ 7,576 Futures (5,147) (6,101) (1,619) 258 (685) Foreign exchange contracts (3) -- -- 1 (448) Written options 8,898 3,346 (132) -- -- Swaps 11,081 (719) 160 -- -- Change in net unrealized appreciation(depreciation) of: Investments 11,863 10,120 365 (2,583) (3,850) Futures 1,109 1,664 51 5 38 Foreign currency translations -- -- -- -- (400) Written options 2,519 3,759 (94) -- -- Swaps (1,308) 4,346 8 -- -- Net realized and unrealized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 37,232 29,887 (1,198) 3,919 2,231 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations $ 72,997 $ 60,777 $ 4,363 $ 7,147 $ 6,109 - ---------------------------------------------------------------------------------------------------------------------------------- * Includes reimbursements of investment advisory, administration and shareholder servicing fees : $ 139 $ 189 $ 46 $ 2 $ 13 - ----------------------------------------------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. SEE NOTES TO FINANCIAL STATEMENTS. 93
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND INVESTMENT INCOME Interest $ 22,483 $ 39,101 $ 1,342 $ 5,367 Dividend 260 -- -- -- Dividend income from affiliated investments* 917 845 18 83 Foreign taxes withheld (17) (7) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- Total investment income 23,643 39,939 1,360 5,450 - ---------------------------------------------------------------------------------------------------------------------------------- EXPENSES Investment advisory fees 2,122 3,627 111 430 Administration fees 1,273 2,176 33 215 Shareholder servicing fees 1,021 3,627 59 359 Distribution fees 17 3,330 135 250 Custodian fees 125 233 101 61 Interest expense -- 1 --^ --^ Printing and postage 30 59 10 20 Professional fees 113 128 105 95 Registration expenses 59 73 38 38 Transfer agent fees 76 105 64 146 Trustees' fees 13 22 --^ 2 Other 51 75 8 15 - ---------------------------------------------------------------------------------------------------------------------------------- Total expenses 4,900 13,456 664 1,631 - ---------------------------------------------------------------------------------------------------------------------------------- Less amounts waived 2,019 1,487 196 559 Less earnings credits 7 7 --^ 1 Less expense reimbursements -- -- 115 -- - ---------------------------------------------------------------------------------------------------------------------------------- Net expenses 2,874 11,962 353 1,071 - ---------------------------------------------------------------------------------------------------------------------------------- Net investment income $ 20,769 $ 27,977 $ 1,007 $ 4,379 - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 94
SHORT TERM SHORT TERM STRATEGIC U.S. TREASURY BOND BOND INCOME INCOME FUND FUND II FUND FUND REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on transactions from: Investments $ 6,540 $ 9,688 $ 535 $ 507 Futures (4,588) (3,919) 37 (541) Foreign exchange contracts (20) (2) (118) -- Written options (1,243) (1,207) -- -- Swaps 2,427 (3,316) -- -- Change in net unrealized appreciation (depreciation) of: Investments (4,230) (4,904) 212 2,108 Futures 250 155 10 271 Foreign currency translations -- -- 12 -- Written options (211) (352) -- -- Swaps (1,316) (500) -- -- Net realized and unrealized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (2,391) (4,357) 688 2,345 - ---------------------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from operations $ 18,378 $ 23,620 $ 1,695 $ 6,724 - ---------------------------------------------------------------------------------------------------------------------------------- * Includes reimbursements of investment advisory, administration and shareholder servicing fees : $ 150 $ 139 $ 3 $ 16 - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 95 STATEMENT OF CHANGES IN NET ASSETS FOR THE PERIODS INDICATED (Amounts in thousands)
BOND FUND BOND FUND II ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 8/31/04 8/31/03 8/31/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 35,765 $ 62,273 $ 30,890 $ 38,411 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 23,049 45,619 9,998 11,293 Change in net unrealized appreciation (depreciation) of investments, futures, foreign currency translations, written options and swaps 14,183 (40,167) 19,889 (23,834) - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 72,997 67,725 60,777 25,870 - ---------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (35,799) (62,540) (31,034) (38,594) Net realized gain on investment transactions (34,209) (12,241) (5,792) (8,146) - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (70,008) (74,781) (36,826) (46,740) - ---------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (344,128) (429,181) (192,507) 386,134 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (341,139) (436,237) (168,556) 365,264 - ---------------------------------------------------------------------------------------------------------------------------------- Beginning of period 1,233,995 1,670,232 1,069,431 704,167 - ---------------------------------------------------------------------------------------------------------------------------------- End of period $ 892,856 $ 1,233,995 $ 900,875 $ 1,069,431 - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (361) $ (573) $ (961) $ (737) - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 96
ENHANCED INCOME FLEMING EMERGING MARKETS FUND DEBT FUND ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 8/31/04 8/31/03 8/31/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 5,561 $ 8,508 $ 3,228 $ 4,778 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps (1,528) (3,952) 6,497 3,573 Change in net unrealized appreciation (depreciation) of investments, futures, written options and swaps 330 (572) (2,578) 6,981 - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 4,363 3,984 7,147 15,332 - ---------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (5,541) (8,519) (3,506) (4,996) - ---------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (59,478) 58,849 (27,807) 8,503 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (60,656) 54,314 (24,166) 18,839 - ---------------------------------------------------------------------------------------------------------------------------------- Beginning of period 354,408 300,094 60,311 41,472 - ---------------------------------------------------------------------------------------------------------------------------------- End of period $ 293,752 $ 354,408 $ 36,145 $ 60,311 - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (105) $ (131) $ 129 $ 292 - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 97
GLOBAL STRATEGIC INCOME FUND -------------------------------- YEAR ENDED YEAR ENDED 8/31/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 3,878 $ 7,042 Net realized gain (loss) on investments, futures and foreign exchange transactions 6,443 178 Change in net unrealized appreciation (depreciation) of investments, futures and foreign currency translations (4,212) 4,192 - ------------------------------------------------------------------------------------------ Increase (decrease) in net assets from operations 6,109 11,412 - ------------------------------------------------------------------------------------------ DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (3,871) (7,077) - ------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Increase (decrease) (70,427) (33,539) - ------------------------------------------------------------------------------------------ NET ASSETS Total increase (decrease) in net assets (68,189) (29,204) - ------------------------------------------------------------------------------------------ Beginning of period 110,733 139,937 - ------------------------------------------------------------------------------------------ End of period $ 42,544 $ 110,733 - ------------------------------------------------------------------------------------------ Accumulated undistributed (overdistributed) net investment income $ (148) $ (1,273) - ------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 98
SHORT TERM BOND FUND SHORT TERM BOND FUND II ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 8/31/04 8/31/03 8/31/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 20,769 $ 24,860 $ 27,977 $ 32,784 Net realized gain (loss) on investments, futures, foreign exchange transactions, written options and swaps 3,116 1,350 1,244 3,428 Change in net unrealized appreciation (depreciation) of investments, futures, written options and swaps (5,507) (6,030) (5,601) (10,667) - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 18,378 20,180 23,620 25,545 - ---------------------------------------------------------------------------------------------------------------------------------- Net equalization credits/(debits) -- -- (357) 1,123 - ---------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (20,381) (25,414) (27,690) (33,316) Return of Capital -- -- (149) (587) Net realized gain on investment transactions -- (11,813) -- (7,040) - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions to shareholders (20,381) (37,227) (27,839) (40,943) - ---------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (195,985) 204,640 (358,251) 227,176 - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (197,988) 187,593 (362,827) 212,901 - ---------------------------------------------------------------------------------------------------------------------------------- Beginning of period 937,210 749,617 1,553,771 1,340,870 - ---------------------------------------------------------------------------------------------------------------------------------- End of period $ 739,222 $ 937,210 $ 1,190,944 $ 1,553,771 - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ 2,034 $ 996 $ (2,251) $ (2,896) - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 99
STRATEGIC INCOME FUND U.S. TREASURY INCOME FUND ------------------------------- ------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED 8/31/04 8/31/03 8/31/04 8/31/03 INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS Net investment income $ 1,007 $ 1,116 $ 4,379 $ 5,681 Net realized gain (loss) on investments, futures and foreign exchange transactions 454 (335) (34) 3,804 Change in net unrealized appreciation (depreciation) of investments, futures and foreign currency translations 234 1,092 2,379 (6,183) - ---------------------------------------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from operations 1,695 1,873 6,724 3,302 - ---------------------------------------------------------------------------------------------------------------------------------- Net equalization credits/(debits) (7) (9) -- -- - ---------------------------------------------------------------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (1,008) (1,103) (4,379) (5,719) - ---------------------------------------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Increase (decrease) (2,304) 794 (3,139) (5,521) - ---------------------------------------------------------------------------------------------------------------------------------- NET ASSETS Total increase (decrease) in net assets (1,624) 1,555 (794) (7,938) - ---------------------------------------------------------------------------------------------------------------------------------- Beginning of period 22,357 20,802 134,683 142,621 - ---------------------------------------------------------------------------------------------------------------------------------- End of period $ 20,733 $ 22,357 $ 133,889 $ 134,683 - ---------------------------------------------------------------------------------------------------------------------------------- Accumulated undistributed (overdistributed) net investment income $ (47) $ (195) $ 8 $ 9 - ----------------------------------------------------------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 100 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 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 $40) $ 5,230 Operating expenses paid (432) Expense reimbursements received 52 Purchases of long-term investments (116,905) Net (purchases)/sales of short-term investments 15,962 Proceeds from disposition of long-term investments and principal paydowns 184,165 Net cash used for futures transactions (641) Net cash used for foreign exchange transactions (443) - ------------------------------------------------------------------------------- Net cash provided by operating activities 86,988 - ------------------------------------------------------------------------------- Cash flows used by financing activities: Proceeds from shares sold 1,994 Payment from shares redeemed (73,256) Cash distributions paid (3,665) - ------------------------------------------------------------------------------- Net cash used in financing activities (74,927) - ------------------------------------------------------------------------------- Net increase (decrease) in cash 12,061 - ------------------------------------------------------------------------------- Cash, beginning of year 292 - ------------------------------------------------------------------------------- Cash, end of year $ 12,353 - ------------------------------------------------------------------------------- RECONCILIATION OF NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net increase (decrease) in net assets resulting from operations 6,109 Decrease in market value of investments 92,910 Decrease in receivable for investment securities sold 3,226 Decrease in dividend and interest receivable 903 Increase in expense reimbursement receivable (18) Decreased in unrealized appreciation on foreign exchange contracts 405 Decrease in net variation margin receivable 6 Decrease in payable for investment securities purchased (16,660) Increase in accrued expenses and other payables 107 - ------------------------------------------------------------------------------- Total adjustments 80,879 - ------------------------------------------------------------------------------- Net cash provided by operating activities 86,988 - -------------------------------------------------------------------------------
SEE NOTES TO FINANCIAL STATEMENTS. 101 JPMORGAN FUNDS NOTES TO FINANCIAL STATEMENTS 1. ORGANIZATION J.P. Morgan Mutual Fund Group ("MFG"), J.P. Morgan Institutional Funds ("JPMIF"), J.P. Morgan Mutual Fund Select Group ("MFSG"), J.P. Morgan Series Trust ("JPMST) and J.P. Morgan Funds ("JPMF") (the "Trusts") were organized as Massachusetts business trusts. The Trusts are registered under the Investment Company Act of 1940, as amended, (the "1940 Act"), as open-end management investment companies. The Trusts were organized on the following dates:
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 convert to Class A shares after eight years. No sales charges are assessed with respect to Institutional, Ultra and Select classes. All classes of shares have equal rights as to earnings, assets and voting privileges except that each class may bear different transfer agent, distribution and shareholder servicing fees and each class has exclusive voting rights with respect to its distribution plan and shareholder servicing agreements. Class A shares, for which front-end sales charges have been waived, may be subject to redemption charges as described in the Funds' prospectus. 102 On August 19, 2004, the Board of Trustees of the Trust approved management's proposal to merge the Target Funds listed below with and into the Acquiring Funds listed below:
TARGET FUND ACQUIRING FUND JPMorgan Bond Fund II merges with and into One Group Bond Fund JPMorgan Strategic Income Fund merges with and into JPMorgan Global Strategic Income Fund JPMorgan U.S. Treasury Income Fund merges with and into One Group Government Bond Fund
Each proposed merger is contingent upon, among other things, approval by the respective Target Fund's shareholders and regulatory review and receipt of an opinion of counsel to the effect that the merger will qualify as a tax-free reorganization for Federal income tax purposes. If approved, the mergers are expected to occur on February 18, 2005, or such later date as the parties to each such merger transaction may agree. 2. REORGANIZATIONS On October 23, 2002, the Board of Trustees approved management's proposal to merge the JPMorgan Intermediate Bond Fund (the "Target Fund") into the JPMorgan Bond Fund II (the "Acquiring Fund"). The proposed merger was approved by the Target Fund's shareholders on February 13, 2003. The merger occurred on March 21, 2003. Prior to the open of business on March 24, 2003, the Acquiring Fund acquired all the assets and liabilities of the Target Fund as shown in the table below, pursuant to the Reorganization Plan approved by the Target Fund's shareholders on February 13, 2003. The transaction was structured for tax purposes to qualify as a tax-free reorganization under the Internal Revenue Code. Under the Reorganization Plan, shareholders of the Target Fund received a number of shares of the corresponding class in the Acquiring Fund with a value equal to their holdings in the Target Fund on the date of the exchange. The following is a summary of Shares Outstanding, Net Assets, Net Asset Values Per Share and Net Unrealized Appreciation immediately before and after the Reorganization (amounts in thousands, except per share amounts): JPMORGAN BOND FUND II REORGANIZATION
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
103 3. SIGNIFICANT ACCOUNTING POLICIES THE FOLLOWING IS A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES FOLLOWED BY THE FUNDS: The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. A. VALUATION OF INVESTMENTS -- Purchased options and futures contracts are valued at the last sale price on the exchange on which they are primarily traded. Fixed income securities, other than convertible bonds, with a maturity of 61 days or more held by the Funds will be valued each day based on readily available market quotations received from independent or affiliated commercial pricing services. Such pricing services will generally provide bidside quotations. Convertible bonds are valued at the last sale price on the primary exchange on which the bond is principally traded. All short-term securities with a remaining maturity of sixty days or less are valued using the amortized cost method, which approximates market value. When valuations are not readily available, securities are valued at fair value as determined in accordance with procedures adopted by the Trustees. Valuations may be based upon current market prices of securities, which are comparable in coupon, rating, maturity and industry. It is possible that the estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and such differences could have been material. Trading in securities on most foreign exchanges and over-the-counter markets is normally completed before the close of the domestic market and may also take place on days when the domestic market is closed. If events materially affecting the value of foreign securities occur between the time when the exchange on which they are traded closes and the time when the Funds' net assets are calculated, such securities may be valued at fair value in accordance with procedures adopted by the Trustees. B. FUTURES CONTRACTS -- When a Fund enters into a futures contract, it makes an initial margin deposit in a segregated account, either in cash or liquid securities. Thereafter, the futures contract is marked to market and the Fund makes (or receives) additional cash payments daily to (or from) the broker. Changes in the value of the contract are recorded as unrealized appreciation (depreciation) until the contract is closed or settled, at which time a realized gain or loss is recognized. The Funds may invest in exchange-traded interest rate futures for hedging purposes, to either modify the duration of the portfolio, modify the yield curve exposure of the portfolio, or in anticipation of buying or selling a specific security. Use of long futures contracts subjects the Funds to risk of loss in excess of amounts shown on the Statement of Assets and Liabilities up to the notional value of the futures contracts. Use of short futures contracts subjects the Funds to unlimited risk of loss. The Funds may enter into futures contracts only on exchanges or boards of trade. The exchange or board of trade acts as the counterparty to each futures transaction; therefore, the Fund's credit risk is limited to failure of the exchange or board of trade. As of August 31, 2004, the Funds had outstanding futures contracts as listed on the Funds' Portfolio of Investments. C. FOREIGN CURRENCY TRANSLATION -- The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates, or at the mean of the current bid and asked prices, of such currencies against 104 the U.S. dollar as quoted by a major bank, on the following basis: 1. Market value of investment securities and other assets and liabilities: at the rate of exchange at the valuation date. 2. Purchases and sales of investment securities, income and expenses: at the rates of exchange prevailing on the respective dates of such transactions. Although the net assets of the Funds are presented at the foreign exchange rates and market values at the close of the periods, the Funds do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held or sold during the year. Accordingly, such realized foreign currency gains (losses) are included in the reported net realized gains (losses) on investment transactions. Reported realized foreign currency gains or losses arise from disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on each Fund's books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at period end. D. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Funds may enter into forward foreign currency exchange contracts (obligations to purchase or sell foreign currency in the future on a date and price fixed at the time the contracts are entered into) to manage the Fund's exposure to foreign currency exchange fluctuations. Each day the forward contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking to market". When the forward contract is closed, or the delivery of the currency is made or taken, each Fund records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract. The Funds are subject to off-balance sheet risk to the extent of the value of the contracts for purchases of foreign currency and in an unlimited amount for sales of foreign currency. As of August 31, 2004, the Funds had outstanding forward foreign currency exchange contracts as listed on the Funds' Portfolio of Investments. E. WRITTEN OPTIONS -- When a Fund writes an option, an amount equal to the premium received by the Fund is included in the Fund's Statement of Assets and Liabilities as an asset and corresponding liability. The amount of the liability is adjusted daily to reflect the current market value of the written option and the change is recorded in a corresponding unrealized gain or loss account. When a written option expires on its stipulated expiration date, or when a closing transaction is entered into, the related liability is extinguished and the Fund realizes a gain or loss contingent on whether the cost of the closing transaction exceeds the premium received when the option was written. The Funds write options on securities, futures and interest rate swaps ("swaptions"). These options are settled for cash and subject the Funds to unlimited risk of loss. The Funds, however, are not subject to credit risk on written options as the counterparty has already performed its obligation by paying the premium at the inception of the contract. As of August 31, 2004, the Funds had written options contracts outstanding as listed on the Funds' Portfolio of Investments. 105 Transactions in options written during the year ended August 31, 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 (3,402,363) 19,006 (1,672,925) 8,098 -- -- Options expired or terminated in closing purchase transactions 3,351,795 (18,552) 2,046,425 (10,007) 23,700 (112) Options exercised -- -- -- -- -- -- Options outstanding at August 31, 2004 (507,318) $ 2,803 -- $ -- -- $ --
STBF STBFII ---------------------------- ----------------------------- NUMBER OF PREMIUMS NUMBER OF PREMIUMS UNITS RECEIVED UNITS RECEIVED Options outstanding at August 31, 2003 (53,550) $ 251 (89,250) $ 418 Options written (654,553) 2,263 (1,149,133) 3,778 Options expired or terminated in closing purchase transactions 708,103 (2,514) 1,238,383 (4,196) Options exercised -- -- -- -- Options outstanding at August 31, 2004 -- $ -- -- $ --
F. SWAPS -- The Funds may engage in various swap transactions, including forward rate agreements, interest rate, currency, fixed income, index, credit default and total return swaps, primarily to manage duration and yield curve risk, or as alternatives to direct investments. Unrealized gains are reported as an asset and unrealized losses are reported as a liability on the Statement of Assets and Liabilities. The change in value of swaps, including the periodic amounts of interest to be paid or received on swaps is reported as unrealized gains or losses in the Statement of Operations. A realized gain or loss is recorded upon payment or receipt of a periodic payment or termination of swap agreements. Swap agreements are stated at fair value. Notional principal amounts are used to express the extent of involvement in these transactions, but the amounts potentially subject to credit risk are much smaller. As of August 31, 2004, the Funds had outstanding swap agreements as listed on the Funds' Portfolio of Investments. Swap transactions present risk of loss in excess of the related amounts included in the Statement of Assets and Liabilities. 106 G. COMMITMENTS -- The Funds may enter into commitments to buy and sell investments to settle on future dates as part of their normal investment activities. These commitments are reported at market value in the financial statements. Credit risk exists on these commitments to the extent of any unrealized gains on the underlying securities purchased and any realized gains on the underlying securities sold. Market risk exists on commitments to buy to the same extent as if the securities were owned on a settled basis and gains and losses are recorded and reported in the same manner. However, during the commitment period, these investments earn no interest or dividends. H. DOLLAR ROLLS -- The Funds may enter into dollar rolls principally using To Be Announced (TBA) securities, in which the Funds sell mortgage securities for delivery in the current month and simultaneously contract to repurchase similar, but not identical, securities at an agreed-upon price on a fixed date. The Funds account for such dollar rolls as purchases and sales and receive compensation as consideration for entering into the commitment to repurchase. The Funds must maintain liquid securities having a value not less than the repurchase price (including accrued interest) for such dollar rolls. The market value of the securities that a Fund is required to purchase may decline below the agreed upon repurchase price of those securities. BF, BFII, STB and STBII had TBA Dollar Rolls outstanding as of August 31, 2004, which are included in Receivable for Investment securities sold and Payable for Investment securities purchased on the Statement of Assets and Liabilities. The Funds segregate assets with a current value at least equal to the amount of their TBA Dollar Rolls. In a "fee" roll, the compensation is recorded as deferred income and amortized to income over the roll period. The counterparty receives all principal and interest payments, including prepayments, made in respect of a security subject to such a contract while it is the holder. Mortgage dollar rolls may be renewed with a new purchase and repurchase price and a cash settlement made on settlement date without physical delivery of the securities subject to the contract. The Funds engage in dollar rolls for the purpose of enhancing their yields, principally by earning a negotiated fee. BFII had Fee-based Dollar Rolls outstanding as of August 31, 2004. I. RESTRICTED AND ILLIQUID SECURITIES -- The Funds are permitted to invest in securities that are subject to legal or contractual restrictions on resale or are illiquid. Restricted securities generally may be resold in transactions exempt from registration. A security may be considered illiquid if it lacks a readily available market or if its valuation has not changed for a certain period of time. Disposal of these securities may involve time-consuming negotiations and expense, and prompt sale at the current valuation may be difficult. The following is the market value and percentage of net assets of restricted and illiquid securities (amounts in thousands):
ILLIQUID RESTRICTED * FUND BF $ 20,457 2.29% $ 20,457 2.29% GSIF 2,587 6.08% 2,587 6.08%
* Includes Illiquid Securities 107 J. SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Investment transactions are accounted for on the trade date (the date the order to buy or sell is executed). Securities gains and losses are calculated on the identified cost basis. Interest income is determined on the basis of coupon interest accrued using the interest method adjusted for amortization of premiums and accretion of discounts. Dividend income less foreign taxes withheld (if any) is recorded on the ex-dividend date or when the Funds first learn of the dividend. Purchases of TBA, when-issued or delayed delivery securities may be settled a month or more after the trade date; interest income is not accrued until settlement date. It is each Fund's policy to segregate assets with a current value at least equal to the amount of its TBA, when-issued or delayed delivery purchase commitments. K. ALLOCATION OF INCOME AND EXPENSES -- Expenses directly attributable to a Fund are charged to that Fund; other expenses of the Trusts are allocated proportionately among each of the Funds within the Trusts in relation to the net assets of each Fund or on another reasonable basis. Expenses directly attributable to a particular class are charged directly to such class. In calculating the net asset value per share of each class, investment income, realized and unrealized gains and losses and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. L. FEDERAL INCOME TAXES -- Each Fund is treated as a separate taxable entity for Federal income tax purposes. The Funds' policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of their distributable net investment income and net realized gain on investments. In addition, the Funds intend to make distributions as required to avoid excise taxes. Accordingly, no provision for Federal income or excise tax is necessary. M. FOREIGN TAXES -- The Funds may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Funds will accrue such taxes and recoveries as applicable, based upon their current interpretation of tax rules and regulations that exist in the markets in which they invest. N. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions paid to shareholders are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains is determined in accordance with Federal income tax regulations, which may differ from accounting principles generally accepted in the United States of America. To the extent these "book/tax" differences are permanent in nature, (i.e., that they result from other than timing of recognition -- "temporary differences") such amounts are reclassified within the capital accounts based on their Federal tax-basis treatment. The following amounts were reclassified within the capital accounts (amounts in thousands):
ACCUMULATED ACCUMULATED UNDISTRIBUTED/ NET REALIZED PAID-IN (OVERDISTRIBUTED) GAIN (LOSS) CAPITAL NET INVESTMENT INCOME ON INVESTMENTS FUND BF $ -- $ 246 $ (246) BFII -- (80) 80 EIF -- 6 (6) EMDF (3) 115 (112) GSIF (15) 1,118 (1,103) STBF -- 650 (650) STBFII (505) 864 (359) SIF (85) 156 (71) USTI -- (1) 1
108 O. EQUALIZATION -- STBFII and SIF use the accounting practice known as equalization by which a portion of the proceeds from sales and costs of redemptions of Trust shares of beneficial interest equivalent, on a per-share basis, to the amount of undistributed net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or redemptions of Trust shares. 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES A. INVESTMENT ADVISORY FEE -- Pursuant to the Investment Advisory Agreement, J.P. Morgan Investment Management, Inc. ("JPMIM") acts as the investment advisor to the Funds. JPMIM, a wholly owned subsidiary of JPMorgan Fleming Asset Management Holdings, Inc., which is a wholly owned subsidiary of JPMorgan Chase & Co. ("JPMorgan"), is the advisor for the Funds. The Advisor supervises the investments of each respective Fund and for such services is paid a fee. The fee is accrued daily and paid monthly based on each Fund's respective average daily net assets. The annual fee for each Fund is as follows:
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. 109 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. On August 19, 2004, the Board of Trustees approved management's proposal to enter into a Distribution Agreement with One Group Dealer Services, Inc., an indirect wholly-owned subsidiary of JPMorgan Chase & Co. The foregoing change in the service provider is expected to occur effective February 19, 2005. The Distributor waived fees and reimbursed expenses as outlined in Note 4.F. C. SHAREHOLDER SERVICING FEES -- The Trusts have entered into Shareholder Servicing Agreements on behalf of the Funds with JPMorgan Chase Bank ("JPMCB") under which JPMCB provides account administration and personal account maintenance services to the shareholders. For performing these services JPMCB receives a fee that is computed daily and paid monthly equal to a percentage of the average daily net assets as shown in the table below (%):
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
110 On August 19, 2004, the Board of Trustees approved management's proposal to replace JPMCB with One Group Dealer Services, Inc. as Shareholder Servicing Agent. The foregoing change in the service provider is expected to occur effective February 19, 2005. JPMCB may enter into service contracts with certain entities under which it will pay all or a portion of the annual fee to such entities for performing shareholding and administrative services. In addition, JPMCB, Charles Schwab & Co. ("Schwab") and JPMF, JPMIF and JPMST are parties to separate servicing and operating agreements (the "Schwab Agreements") whereby Schwab makes shares of BF, EIF, EMDF, GSIF and STBF available to customers of investment advisors and other financial intermediaries who are Schwab's clients. BF, EIF, EMDF, GSIF and STBF are not responsible for payments to Schwab under the Schwab Agreements; however, in the event the servicing agreement with Schwab is terminated for reasons other than a breach by Schwab and the relationship between JPMF, JPMIF, JPMST and JPMCB is terminated, BF, EIF, EMDF, GSIF and STBF would be responsible for the ongoing payments to Schwab with respect to pre-termination shares. JPMCB waived fees as outlined in Note 4.F. D. CUSTODIAN AND ACCOUNTING FEES -- JPMCB provides portfolio custody and accounting services for the Funds. Compensation for such services is presented in the Statement of Operations as custodian fees. The custodian fees may be reduced by credits earned by each Fund, based on uninvested cash balances held by the custodian. Such earnings credits are presented separately in the Statement of Operations. E. ADMINISTRATION FEE -- Pursuant to an Administration Agreement, JPMCB (the "Administrator") provides certain administration services to the Funds. In consideration of these services, the Administrator receives a fee computed daily and paid monthly at an annual rate equal to 0.15% of the first $25 billion of the average daily net assets of all non-money market funds in the JPMorgan Fund Complex and 0.075% of the average daily net assets in excess of $25 billion. BISYS Fund Services, L.P. ("BISYS") serves as the Funds' sub-administrator. For its services as sub-administrator, BISYS receives a portion of the fees payable to JPMCB as Administrator. The Administrator, Advisor and Distributor have contractually agreed to reimburse the Funds to the extent that total operating expenses (excluding interest, taxes, extraordinary expenses and expenses related to the deferred compensation plan) exceed the percentages of their respective average daily net assets as shown in the table below (%):
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
111 The contractual expense limitation agreements were in effect for the year ended August 31, 2004. The expense limitation percentages in the table above are due to expire December 31, 2006. On August 19, 2004, the Board of Trustees approved management's proposal to enter into an Administration Agreement with One Group Administrative Services, Inc., (OGA) an indirect wholly-owned subsidiary of JPMorgan Chase & Co. The foregoing change in the service provider is expected to occur effective February 19, 2005. The Administrative fees charged to the Funds will be subject to the same fee structure as those paid to the current Administrator. JPMCB will begin to provide sub-administrative services to the Funds in 2005. For such services, JPMCB will receive a portion of the fees payable to OGA as Administrator. The Administrator waived fees and reimbursed expenses as outlined in Note 4.F. F. WAIVERS AND REIMBURSEMENTS -- For the year ended August 31, 2004, the Funds' service providers waived fees and the Administrator contractually reimbursed expenses for each of the Funds as follows (amounts in thousands). Neither the Funds' service providers nor the Administrator expect the Funds to repay any such waived fees and reimbursed expenses in future years.
CONTRACTUAL WAIVERS --------------------------------------------------------------- INVESTMENT SHAREHOLDER CONTRACTUAL ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL REIMBURSEMENTS FUND BF $ -- $ 1,080 $ 279 $ -- $ 1,359 $ 42 BFII -- 389 1,184 61 1,634 -- EIF 400 442 378 -- 1,220 -- EMDF 44 41 93 -- 178 -- GSIF 199 101 35 -- 335 70 STBF 255 983 751 2 1,991 -- STBFII -- 597 823 67 1,487 -- SIF 111 33 52 -- 196 115 USTI 57 130 247 125 559 -- Total $ 1,066 $ 3,796 $ 3,842 $ 255 $ 8,959 $ 227
VOLUNTARY WAIVERS ------------------------------------------------------------------------------ INVESTMENT SHAREHOLDER ADVISORY ADMINISTRATION SERVICING DISTRIBUTION TOTAL YEAR ENDED AUGUST 31, 2004 BF $ -- $ 70 $ -- $ -- $ 70 EIF $ -- $ 126 $ -- $ -- $ 126 STBF $ -- $ 28 $ -- $ -- $ 28 Total $ -- $ 224 $ -- $ -- $ 224
G. OTHER-- Certain officers of the Trusts are officers of J.P. Morgan Chase & Co. or of BISYS or their subsidiaries. During the period, certain Funds may have purchased securities from an underwriting syndicate in which the principal underwriter or members of the syndicate are affiliated with the Advisors. 112 The Funds may use related party broker/dealers. For the year ended August 31, 2004, STBF incurred approximately (in thousands) $236 as brokerage commissions with brokers/dealers affiliated with JPMorgan. The SEC has granted an exemptive order permitting the Funds to engage in principal transactions with J.P. Morgan Securities, Inc., an affiliated broker, involving taxable money market instruments subject to certain conditions. 5. CLASS SPECIFIC EXPENSES The Funds' class specific expenses for the year ended August 31, 2004 are as follows (amounts in thousands):
SHAREHOLDER SERVICING DISTRIBUTION TRANSFER AGENT BF Class A $ 6 $ 6 $ 21 Class B 6 18 20 Class C 1 2 2 Institutional 373 -- 27 Select 584 -- 45 Ultra 206 -- 16 - ------------------------------------------------------------------------------ $ 1,176 $ 26 $ 131 BFII Class A $ 61 $ 61 $ 61 Class B 34 104 35 Select 2,343 -- 24 - ------------------------------------------------------------------------------ $ 2,438 $ 165 $ 120 EIF Institutional $ 378 $ -- $ 21 EMDF Select $ 115 $ -- $ 29 GSIF Class A $ 1 $ 1 $ 13 Institutional 66 -- 17 Select 7 -- 15 - ------------------------------------------------------------------------------ $ 74 $ 1 $ 45 STBF Class A $ 17 $ 17 $ 15 Institutional 733 -- 29 Select 271 -- 32 - ------------------------------------------------------------------------------ $ 1,021 $ 17 $ 76 - ------------------------------------------------------------------------------
113
SHAREHOLDER SERVICING DISTRIBUTION TRANSFER AGENT STBFII Class A $ 116 $ 116 $ 76 Class M 2,296 3,214 9 Select 1,215 -- 20 - ------------------------------------------------------------------------------ $ 3,627 $ 3,330 $ 105 SIF Class A $ 7 $ 7 $ 10 Class B 21 63 31 Class C 9 28 13 Class M 22 37 10 - ------------------------------------------------------------------------------ $ 59 $ 135 $ 64 USTI Class A $ 125 $ 125 $ 98 Class B 42 125 33 Select 192 -- 15 - ------------------------------------------------------------------------------ $ 359 $ 250 $ 146 - ------------------------------------------------------------------------------
6. CLASS SPECIFIC DISTRIBUTIONS The Funds' class specific distributions from net investment income and realized gain on investment transactions for the year ended August 31, 2004 and the year ended August 31, 2003 are as follows (amounts in thousands):
YEAR ENDED 8/31/04 YEAR ENDED 8/31/03 ---------------------------------- --------------------------------- NET NET INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN BF Class A $ 78 $ 71 $ 62 $ 8 Class B 58 76 70 13 Class C 7 9 1 -- Institutional 13,088 11,950 26,560 5,442 Select 7,804 8,959 13,353 2,562 Ultra 14,764 13,144 22,494 4,216 - ------------------------------------------------------------------------------------------------------------- $ 35,799 $ 34,209 $ 62,540 $ 12,241 BFII Class A $ 752 $ 141 $ 1,413 $ 389 Class B 318 83 492 170 Select 29,964 5,568 36,689 7,587 - ------------------------------------------------------------------------------------------------------------- $ 31,034 $ 5,792 $ 38,594 $ 8,146 - -------------------------------------------------------------------------------------------------------------
114
YEAR ENDED 8/31/04 YEAR ENDED 8/31/03 ---------------------------------- --------------------------------- NET NET INVESTMENT INCOME REALIZED GAIN INVESTMENT INCOME REALIZED GAIN EIF Institutional $ 5,541 $ -- $ 8,519 $ -- EMDF Select $ 3,506 $ -- $ 4,996 $ -- GSIF Class A $ 28 $ -- $ 9 $ -- Class B** -- -- 12 -- Institutional 3,689 -- 6,870 -- Select 154 -- 186 -- - ------------------------------------------------------------------------------------------------------------- $ 3,871 $ -- $ 7,077 $ -- STBF Class A $ 131 $ -- $ 255 $ 155 Institutional 17,897 -- 21,501 9,747 Select 2,353 -- 3,658 1,911 - ------------------------------------------------------------------------------------------------------------- $ 20,381 $ -- $ 25,414 $ 11,813 STBFII Class A $ 955(a) $ -- $ 1,997* $ 510 Class M 15,711(a) -- 26,550* 5,842 Select 11,173(a) -- 5,356* 688 - ------------------------------------------------------------------------------------------------------------- $ 27,839 $ -- $ 33,903 $ 7,040 SIF Class A $ 133 $ -- $ 158 $ -- Class B 366 -- 384 -- Class C 158 -- 140 -- Class M 351 -- 421 -- - ------------------------------------------------------------------------------------------------------------- $ 1,008 $ -- $ 1,103 $ -- USTI Class A $ 1,532 $ -- $ 1,913 $ -- Class B 366 -- 670 -- Select 2,481 -- 3,136 -- - ------------------------------------------------------------------------------------------------------------- $ 4,379 $ -- $ 5,719 $ -- - -------------------------------------------------------------------------------------------------------------
* Includes return of capital $33, $478 and $76 for Class A, M and Select, respectively (amounts in thousands). ** Class ceased operations as of September 12, 2003. (a) Includes return of capital of $7, $80 and $62 for Class A, M and Select, respectively (amounts in thousands). 115 7. INVESTMENT TRANSACTIONS For the year ended August 31, 2004, purchases and sales of investments (excluding short-term investments) were as follows (amounts in thousands):
PURCHASES SALES PURCHASES SALES (EXCLUDING U.S. (EXCLUDING U.S. OF U.S. OF U.S. GOVERNMENT) GOVERNMENT) GOVERNMENT GOVERNMENT BF $ 941,374 $ 754,807 $ 5,131,810 $ 5,518,217 BFII 685,218 624,080 5,298,753 5,452,819 EIF 483,580 511,844 43,964 54,950 EMDF 2,547 2,955 70,058 96,491 GSIF 7,559 52,364 92,686 128,575 STBF 936,222 877,280 1,046,102 1,155,246 STBFII 1,863,755 1,783,566 1,694,872 1,998,877 SIF 7,852 9,383 18,921 19,678 USTI -- 1,887 225,439 229,373
8. FEDERAL INCOME TAX MATTERS For Federal income tax purposes, the cost and unrealized appreciation (depreciation) in value of the investment securities at August 31, 2004 are as follows (amounts in thousands):
GROSS GROSS NET UNREALIZED AGGREGATE UNREALIZED UNREALIZED APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) BF $ 1,073,423 $ 20,749 $ (5,010) $ 15,739 BFII 1,120,988 16,894 (1,115) 15,779 EIF 294,640 352 (200) 152 EMDF 29,772 4,342 (95) 4,247 GSIF 29,428 1,997 (1,452) 545 STBF 742,319 2,606 (2,906) (300) STBFII 1,192,459 4,033 (3,806) 227 SIF 19,611 1,289 (272) 1,017 USTI 130,689 2,973 (91) 2,882
116 The tax character of distributions paid during the year ended August 31, 2004 and year ended August 31, 2003, were as follows (amounts in thousands):
ORDINARY LONG-TERM RETURN OF TOTAL INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS YEAR ENDED AUGUST 31, 2004 BF $ 50,592 $ 19,416 $ -- $ 70,008 BFII 31,533 5,293 -- 36,826 EIF 5,541 -- -- 5,541 EMDF 3,506 -- -- 3,506 GSIF 3,871 -- -- 3,871 STBF 20,381 -- -- 20,381 STBFII 27,690 -- 149 27,839 SIF 1,008 -- -- 1,008 USTI 4,379 -- -- 4,379
ORDINARY LONG-TERM RETURN OF TOTAL INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS YEAR ENDED AUGUST 31, 2003 BF $ 71,135 $ 3,646 $ -- $ 74,781 BFII 42,125 4,615 -- 46,740 EIF 8,519 -- -- 8,519 EMDF 4,996 -- -- 4,996 GSIF 7,077 -- -- 7,077 STBF 29,709 7,518 -- 37,227 STBFII 36,036 4,320 587 40,943 SIF 1,103 -- -- 1,103 USTI 5,719 -- -- 5,719
At August 31, 2004, the components of net assets (excluding paid in capital) on a tax basis were as follows (amounts in thousands):
BF BFII EIF Current distributable ordinary income $ 12,123 $ 5,929 $ 7 Plus/Less: cumulative timing differences (575) (2,098) (113) Undistributed ordinary income or overdistribution of ordinary income $ 11,548 $ 3,831 $ (106) Current distributable long-term capital gain or tax basis capital loss carryover 11,226 8,465 (5,913) Plus/Less: cumulative timing differences -- -- (542) Undistributed long-term gains/ accumulated capital loss 11,226 8,465 (6,455) Unrealized appreciation (depreciation) $ 13,494 $ 17,146 $ 150
117
EMDF GSIF STBF Current distributable ordinary income $ 134 $ 53 $ 2,641 Plus/Less: cumulative timing differences (7) (185) (606) Undistributed ordinary income or overdistribution of ordinary income $ 127 $ (132) $ 2,035 Current distributable long-term capital gain or tax basis capital loss carryover 3,925 (26,955) (1,803) Plus/Less: cumulative timing differences -- -- -- Undistributed long-term gains/ accumulated capital loss 3,925 (26,955) (1,803) Unrealized appreciation (depreciation) $ 4,581 $ 532 $ (1,112) STBFII SIF USTI Current distributable ordinary income $ 0 $ -- $ 133 Plus/Less: cumulative timing differences (2,251) (52) (126) Undistributed ordinary income or overdistribution of ordinary income $ (2,251) $ (52) $ 7 Current distributable long-term capital gain or tax basis capital loss carryover (1,675) (2,368) (1,306) Plus/Less: cumulative timing differences -- -- (783) Undistributed long-term gains/ accumulated capital loss (1,675) (2,368) (2,089) Unrealized appreciation (depreciation) $ 170 $ 1,001 $ 2,881
For BFII and USTI, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sales, the mark to market of futures and straddle loss deferrals. For EIF, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to the mark to market of futures and straddle loss deferrals. For EMDF, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sales, the mark to market of futures and allocation of tax basis on "master/feeder" takedown. For BF, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sales, the mark to market of futures and options and straddle loss deferrals. For STBF, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sales and the mark to market of futures. For STBFII, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to the mark to market of futures. For SIF and GSIF, the difference between book and tax basis unrealized appreciation/(depreciation) is primarily attributed to wash sales, the mark to market of futures, forward foreign currency contracts and straddle loss deferrals. For BFII, EMDF, STBF, STBFII and SIF, the cumulative timing difference account primarily consists of dividends payable and deferred compensation. For BF, EIF and USTI, the cumulative timing difference account primarily consists of post-October loss deferrals, dividends 118 payable and deferred compensation. For GSIF, the cumulative timing difference account primarily consists of dividends payable. At August 31, 2004, the following Funds have capital loss carryovers, which will be available to offset capital gains. To the extent that any net capital loss carryovers are used to offset future capital gains, it is probable that the gains so offset will not be distributed to shareholders (amounts in thousands).
EXPIRATION AMOUNT DATE EIF $ (792) August 31, 2010 (1,180) August 31, 2011 (3,941) August 31, 2012 - ---------------------------------------------------------------------------------- TOTAL (5,913) - ---------------------------------------------------------------------------------- GSIF $ (2,681) August 31, 2006 (4,926) August 31, 2007 (6,628) August 31, 2008 (4,320) August 31, 2009 (8,400) August 31, 2010 - ---------------------------------------------------------------------------------- TOTAL $ (26,955)* - ---------------------------------------------------------------------------------- STBF $ (1,803) August 31, 2012 - ---------------------------------------------------------------------------------- STBF II $ (1,675) August 31, 2012 - ---------------------------------------------------------------------------------- SIF $ (1,404) August 31, 2009 (917) August 31, 2010 (46) August 31, 2011 - ---------------------------------------------------------------------------------- TOTAL $ (2,367) - ---------------------------------------------------------------------------------- USTI $ (1,306) August 31, 2008 - ----------------------------------------------------------------------------------
* The above capital loss carryover includes $383 (amount in thousands) of losses acquired from J.P. Morgan Global Strategic Income Fund. Utilization of these losses will be subject to an annual limitation as prescribed by the Internal Revenue Code. 119 During the year ended August 31, 2004, EMDF, GSIF, SIF and USTI utilized capital loss carryovers of $2,324, $5,335, $248 and $281, respectively (amounts in thousands). Capital losses incurred after October 31, within a Fund's fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The following Funds have incurred the following post-October realized losses (amounts in thousands):
CURRENCY CAPITAL FUND BF $ 3 $ -- EIF -- 540 USTI -- 784
9. BANK BORROWINGS Pursuant to a Line of Credit Agreement, dated April 17, 2003, the Funds may borrow money for temporary or emergency purposes. The Funds have entered into the agreement, enabling them to participate with other JPMorgan Funds in a line of credit with JPMCB, as administrative agent, and with a syndicate of banks, which permits borrowings up to $250 million, collectively. Interest is charged to each Fund based on its borrowings at an annual rate equal to the sum of the Federal Funds Rate plus 0.50%. The Funds also pay a commitment fee of 0.09% per annum on the average daily amount of the available commitment, which is allocated on a pro-rata basis to the Funds. The commitment fee is included in Other expenses on the Statement of Operations. This agreement has been extended to April 14, 2005. During the year ended August 31, 2004, EMDF and GSI had borrowed against the Line of Credit Agreement. The details of the borrowing were as follows (amounts in thousands):
AVERAGE AVERAGE FUND AMOUNT OUTSTANDING* INTEREST RATE FUND EMDF $ 20 1.63% GSIF 150 1.61%
* The average amount outstanding was calculated based on the daily balances during the period from September 1, 2003, through August 31, 2004. 120 10. CONCENTRATIONS AND INDEMNIFICATIONS The Funds may have elements of risk not typically associated with investments in the United States of America due to concentrated investments in a limited number of countries or regions, which may vary throughout the year. Such concentrations may subject the Funds to additional risks resulting from political or economic conditions in such countries or regions and the possible imposition of adverse governmental laws or currency exchange restrictions could cause the securities and their markets to be less liquid and their prices more volatile than those of comparable U.S. securities. The ability of the issuers of debt, asset-backed and mortgage-backed securities, along with counterparties to swap and option agreements, to meet their obligations may be affected by the economic and political developments in a specific industry or region. The value of asset-backed and mortgage-backed securities can be significantly affected by changes in interest rates or rapid principal payments including prepayments. As to illiquid investments, a Fund is subject to the risk that should the Fund decide to sell them when a ready buyer is not available at a price the Fund deems representative of their value, the value of the Fund's net assets could be adversely affected. As of August 31, 2004, EMDF invested approximately 22.8% of its total investments in Brazil. From time to time, the Funds may have a concentration of several shareholders which may be a related party, holding a significant percentage of shares outstanding. Investment activities of these shareholders could have a material impact on the Funds. In the normal course of business, the Funds may enter into contracts that contain a variety of representations which provide general indemnifications. Each Funds' maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 11. CORPORATE EVENT On May 25, 2004, J.P.Morgan Chase & Co. and Bank One Corp. announced that, at separate meetings, their respective shareholders had approved the merger of the two companies. The companies completed the merger of their holding companies on July 1, 2004. Effective July 20, 2004, the name of the holding company changed to JPMorgan Chase & Co. Effective November 15, 2004, the bank name will be JPMorgan Chase Bank, National Association. 121 12. CAPITAL SHARE TRANSACTIONS Capital share transactions were as follows for the periods presented (amounts in thousands):
BOND FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 1,767 $ 5,626 Shares issued in reinvestment of distributions 143 59 Shares redeemed (907) (4,362) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 1,003 $ 1,323 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 177 550 Shares issued in reinvestment of distributions 14 6 Shares redeemed (91) (430) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 100 126 - ----------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 237 $ 1,762 Shares issued in reinvestment of distributions 67 50 Shares redeemed (836) (623) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (532) $ 1,189 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 24 172 Shares issued in reinvestment of distributions 7 5 Shares redeemed (86) (61) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (55) 116 - -----------------------------------------------------------------------------------------------
122
BOND FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS C SHARES** AMOUNT Shares sold $ 127 $ 277 Shares issued in reinvestment of distributions 14 1 Shares redeemed (199) -- - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (58) $ 278 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 13 27 Shares issued in reinvestment of distributions 1 --^ Shares redeemed (20) -- - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (6) 27 - ----------------------------------------------------------------------------------------------- INSTITUTIONAL SHARES AMOUNT Shares sold $ 75,515 $ 100,824 Shares issued in reinvestment of distributions 15,282 18,575 Shares redeemed (252,219) (387,582) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (161,422) $ (268,183) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 7,584 9,955 Shares issued in reinvestment of distributions 1,545 1,827 Shares redeemed (25,296) (38,087) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (16,167) (26,305) - -----------------------------------------------------------------------------------------------
** From commencement of offering class shares on March 31, 2003. ^ Amount rounds to less than one thousand. 123
BOND FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 SELECT SHARES AMOUNT Shares sold $ 45,098 $ 164,875 Shares issued in reinvestment of distributions 15,587 14,339 Shares redeemed (179,415) (179,758) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (118,730) $ (544) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 4,528 16,205 Shares issued in reinvestment of distributions 1,575 1,410 Shares redeemed (18,118) (17,684) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (12,015) (69) - ----------------------------------------------------------------------------------------------- ULTRA SHARES AMOUNT Shares sold $ 69,894 $ 83,572 Shares issued in reinvestment of distributions 24,753 21,583 Shares redeemed (159,036) (268,399) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (64,389) $ (163,244) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 7,078 8,169 Shares issued in reinvestment of distributions 2,501 2,122 Shares redeemed (16,016) (26,279) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (6,437) (15,988) - -----------------------------------------------------------------------------------------------
124
BOND FUND II -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 3,951 $ 19,019 Shares issued in connection with Fund Reorganization (Note 2) -- 4,321 Shares issued in reinvestment of distributions 666 1,250 Shares redeemed (16,855) (21,390) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (12,238) $ 3,200 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 95 456 Shares issued in connection with Fund Reorganization (Note 2) -- 104 Shares issued in reinvestment of distributions 16 30 Shares redeemed (411) (514) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (300) 76 - ----------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 966 $ 5,212 Shares issued in reinvestment of distributions 320 535 Shares redeemed (4,739) (3,864) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (3,453) $ 1,883 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 23 125 Shares issued in reinvestment of distributions 8 13 Shares redeemed (116) (93) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (85) 45 - -----------------------------------------------------------------------------------------------
125
BOND FUND II -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 SELECT SHARES AMOUNT Shares sold $ 64,877 $ 101,070 Shares issued in connection with Fund Reorganization (Note 2) -- 530,889 Shares issued in reinvestment of distributions 6,484 9,918 Shares redeemed (248,177) (260,826) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (176,816) $ 381,051 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 1,576 2,423 Shares issued in connection with Fund Reorganization (Note 2) -- 12,846 Shares issued in reinvestment of distributions 158 239 Shares redeemed (6,047) (6,274) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (4,313) 9,234 - ----------------------------------------------------------------------------------------------- ENHANCED INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 INSTITUTIONAL SHARES AMOUNT Shares sold $ 263,773 $ 447,159 Shares issued in reinvestment of distributions 3,814 6,334 Shares redeemed (327,065) (394,644) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (59,478) $ 58,849 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 26,783 44,983 Shares issued in reinvestment of distributions 388 638 Shares redeemed (33,263) (39,744) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (6,092) 5,877 - -----------------------------------------------------------------------------------------------
126
FLEMING EMERGING MARKETS DEBT FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 SELECT AMOUNT Shares sold $ 14,341 $ 48,541 Shares issued in reinvestment of distributions 3,085 4,368 Shares redeemed (45,233) (44,406) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (27,807) $ 8,503 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 1,542 5,767 Shares issued in reinvestment of distributions 330 517 Shares redeemed (4,787) (5,103) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,915) 1,181 - -----------------------------------------------------------------------------------------------
127
GLOBAL STRATEGIC INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 838 $ 563 Shares issued in reinvestment of distributions 26 2 Shares redeemed (466) (233) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 398 $ 332 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 93 62 Shares issued in reinvestment of distributions 3 --^ Shares redeemed (52) (26) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 44 36 - ----------------------------------------------------------------------------------------------- CLASS B SHARES* AMOUNT Shares sold $ -- $ 103 Shares issued in reinvestment of distributions -- 11 Shares redeemed (317) (29) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (317) $ 85 - ----------------------------------------------------------------------------------------------- SHARES Shares sold -- 12 Shares issued in reinvestment of distributions -- 1 Shares redeemed (36) (3) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (36) 10 - -----------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. * For Class B Shares, activity through September 12, 2003 128
GLOBAL STRATEGIC INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 INSTITUTIONAL SHARES AMOUNT Shares sold $ 861 $ 19,855 Shares issued in reinvestment of distributions 263 1,670 Shares redeemed (70,986) (53,142) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (69,862) $ (31,617) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 94 2,212 Shares issued in reinvestment of distributions 29 189 Shares redeemed (7,786) (5,948) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (7,663) (3,547) - ----------------------------------------------------------------------------------------------- SELECT SHARES AMOUNT Shares sold $ 271 $ 813 Shares issued in reinvestment of distributions 141 173 Shares redeemed (1,058) (3,325) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (646) $ (2,339) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 30 90 Shares issued in reinvestment of distributions 15 19 Shares redeemed (116) (377) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (71) (268) - -----------------------------------------------------------------------------------------------
129
SHORT TERM BOND FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 1,777 $ 10,476 Shares issued in reinvestment of distributions 60 234 Shares redeemed (7,872) (11,597) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (6,035) $ (887) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 180 1,047 Shares issued in reinvestment of distributions 6 23 Shares redeemed (800) (1,161) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (614) (91) - ----------------------------------------------------------------------------------------------- INSTITUTIONAL SHARES AMOUNT Shares sold $ 232,147 $ 577,952 Shares issued in reinvestment of distributions 12,345 22,428 Shares redeemed (406,830) (397,855) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (162,338) $ 202,525 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 23,525 57,811 Shares issued in reinvestment of distributions 1,252 2,246 Shares redeemed (41,331) (39,844) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (16,554) 20,213 - ----------------------------------------------------------------------------------------------- SELECT SHARES AMOUNT Shares sold $ 46,594 $ 114,380 Shares issued in reinvestment of distributions 1,497 4,787 Shares redeemed (75,703) (116,165) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (27,612) $ 3,002 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 4,723 11,457 Shares issued in reinvestment of distributions 152 479 Shares redeemed (7,682) (11,649) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (2,807) 287 - -----------------------------------------------------------------------------------------------
130
SHORT TERM BOND FUND II -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 45,840 $ 113,310 Shares issued in reinvestment of distributions 815 2,068 Shares redeemed (35,304) (141,585) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 11,351 $ (26,207) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 4,499 10,975 Shares issued in reinvestment of distributions 80 200 Shares redeemed (3,449) (13,686) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 1,130 (2,511) - ----------------------------------------------------------------------------------------------- CLASS M SHARES AMOUNT Shares sold $ 62,729 $ 396,087 Shares issued in reinvestment of distributions 20 166 Shares redeemed (584,516) (344,293) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (521,767) $ 51,960 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 6,131 38,320 Shares issued in reinvestment of distributions 2 16 Shares redeemed (57,237) (33,291) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (51,104) 5,045 - ----------------------------------------------------------------------------------------------- SELECT AMOUNT Shares sold $ 354,225 $ 265,146 Shares issued in reinvestment of distributions 1,103 1,917 Shares redeemed (203,163) (65,640) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 152,165 $ 201,423 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 34,518 25,618 Shares issued in reinvestment of distributions 108 185 Shares redeemed (19,866) (6,337) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 14,760 19,466 - -----------------------------------------------------------------------------------------------
131
STRATEGIC INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 1,141 $ 1,934 Shares issued in reinvestment of distributions 79 99 Shares redeemed (1,548) (1,596) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (328) $ 437 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 126 219 Shares issued in reinvestment of distributions 9 11 Shares redeemed (172) (183) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (37) 47 - ----------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 1,013 $ 2,084 Shares issued in reinvestment of distributions 177 159 Shares redeemed (2,027) (1,486) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (837) $ 757 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 111 236 Shares issued in reinvestment of distributions 19 18 Shares redeemed (224) (170) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (94) 84 - -----------------------------------------------------------------------------------------------
132
STRATEGIC INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS C SHARES AMOUNT Shares sold $ 1,238 $ 2,257 Shares issued in reinvestment of distributions 101 75 Shares redeemed (2,164) (1,271) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (825) $ 1,061 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 137 254 Shares issued in reinvestment of distributions 12 8 Shares redeemed (242) (147) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (93) 115 - ----------------------------------------------------------------------------------------------- CLASS M SHARES AMOUNT Shares sold $ 431 $ 499 Shares issued in reinvestment of distributions -- --^ Shares redeemed (745) (1,960) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (314) $ (1,461) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 47 57 Shares issued in reinvestment of distributions -- --^ Shares redeemed (83) (221) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (36) (164) - -----------------------------------------------------------------------------------------------
^ Amount rounds to less than one thousand. 133
U.S. TREASURY INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 CLASS A SHARES AMOUNT Shares sold $ 18,542 $ 20,583 Shares issued in reinvestment of distributions 1,136 1,450 Shares redeemed (22,287) (19,203) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (2,609) $ 2,830 - ----------------------------------------------------------------------------------------------- SHARES Shares sold 1,592 1,726 Shares issued in reinvestment of distributions 96 121 Shares redeemed (1,898) (1,611) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (210) 236 - ----------------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT Shares sold $ 1,039 $ 6,965 Shares issued in reinvestment of distributions 270 488 Shares redeemed (7,811) (8,907) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ (6,502) $ (1,454) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 88 581 Shares issued in reinvestment of distributions 23 41 Shares redeemed (665) (747) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding (554) (125) - -----------------------------------------------------------------------------------------------
134
U.S. TREASURY INCOME FUND -------------------------------------- YEAR ENDED YEAR ENDED AUGUST 31, 2004 AUGUST 31, 2003 SELECT AMOUNT Shares sold $ 38,641 $ 47,402 Shares issued in reinvestment of distributions 1,395 1,857 Shares redeemed (34,064) (56,156) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding $ 5,972 $ (6,897) - ----------------------------------------------------------------------------------------------- SHARES Shares sold 3,255 3,957 Shares issued in reinvestment of distributions 118 155 Shares redeemed (2,893) (4,685) - ----------------------------------------------------------------------------------------------- Net increase (decrease) in Fund shares outstanding 480 (573) - -----------------------------------------------------------------------------------------------
135 JPMORGAN FUNDS FINANCIAL HIGHLIGHTS CLASS A 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 Year Ended 8/31/04 $ 10.03 0.32 0.32 0.64 Year Ended 8/31/03 $ 10.07 0.40 0.04 0.44 11/1/01 Through 8/31/02^^ $ 10.08 0.31 0.05 0.36 9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.20 0.26 BOND FUND II Year Ended 8/31/04 $ 40.59 1.26^ 1.33 2.59 Year Ended 8/31/03 $ 41.39 1.66^ (0.31) 1.35 11/1/01 Through 8/31/02^^ $ 41.01 1.35^ 0.34 1.69 3/2/01** Through 10/31/01 $ 39.55 1.32 1.46 2.78 GLOBAL STRATEGIC INCOME FUND Year Ended 8/31/04 $ 8.92 0.48^ 0.15 0.63 Year Ended 8/31/03 $ 8.64 0.40^ 0.31 0.71 11/1/01 Through 8/31/02^^ $ 8.91 0.55 (0.33) 0.22 9/10/01** Through 10/31/01 $ 9.13 0.09^ (0.22) (0.13) SHORT TERM BOND FUND Year Ended 8/31/04 $ 9.85 0.20 (0.01) 0.19 Year Ended 8/31/03 $ 10.03 0.24 (0.03) 0.21 11/1/01 Through 8/31/02^^ $ 10.01 0.27 0.05 0.32 9/10/01** Through 10/31/01 $ 9.87 0.05^ 0.15 0.20 PER SHARE OPERATING PERFORMANCE: ---------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TOTAL INCOME GAINS DISTRIBUTIONS BOND FUND Year Ended 8/31/04 0.32 0.30 0.62 Year Ended 8/31/03 0.40 0.08 0.48 11/1/01 Through 8/31/02^^ 0.31 0.06 0.37 9/10/01** Through 10/31/01 0.07 -- 0.07 BOND FUND II Year Ended 8/31/04 1.25 0.24 1.49 Year Ended 8/31/03 1.66 0.49 2.15 11/1/01 Through 8/31/02^^ 1.31 -- 1.31 3/2/01** Through 10/31/01 1.32 -- 1.32 GLOBAL STRATEGIC INCOME FUND Year Ended 8/31/04 0.47 -- 0.47 Year Ended 8/31/03 0.43 -- 0.43 11/1/01 Through 8/31/02^^ 0.47 0.02 0.49 9/10/01** Through 10/31/01 0.09 -- 0.09 SHORT TERM BOND FUND Year Ended 8/31/04 0.20 -- 0.20 Year Ended 8/31/03 0.25 0.14 0.39 11/1/01 Through 8/31/02^^ 0.26 0.04 0.30 9/10/01** Through 10/31/01 0.06 -- 0.06
^^ The fund changed its fiscal year end from October 31 to August 31. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. (1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 136
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) BOND FUND Year Ended 8/31/04 $ 10.05 6.61% Year Ended 8/31/03 $ 10.03 4.32% 11/1/01 Through 8/31/02^^ $ 10.07 3.72% 9/10/01** Through 10/31/01 $ 10.08 2.63% BOND FUND II Year Ended 8/31/04 $ 41.69 6.45% Year Ended 8/31/03 $ 40.59 3.26% 11/1/01 Through 8/31/02^^ $ 41.39 4.26% 3/2/01** Through 10/31/01 $ 41.01 7.23% GLOBAL STRATEGIC INCOME FUND Year Ended 8/31/04 $ 9.08 7.20% Year Ended 8/31/03 $ 8.92 8.33% 11/1/01 Through 8/31/02^^ $ 8.64 2.54% 9/10/01** Through 10/31/01 $ 8.91 (2.30%) SHORT TERM BOND FUND Year Ended 8/31/04 $ 9.84 1.92% Year Ended 8/31/03 $ 9.85 2.08% 11/1/01 Through 8/31/02^^ $ 10.03 3.18% 9/10/01** Through 10/31/01 $ 10.01 2.01% RATIOS/SUPPLEMENTAL DATA: ------------------------- NET ASSETS, END OF PERIOD (MILLIONS) BOND FUND Year Ended 8/31/04 $ 3 Year Ended 8/31/03 $ 2 11/1/01 Through 8/31/02^^ $ 1 9/10/01** Through 10/31/01 $ --~~ BOND FUND II Year Ended 8/31/04 $ 20 Year Ended 8/31/03 $ 32 11/1/01 Through 8/31/02^^ $ 29 3/2/01** Through 10/31/01 $ 63 GLOBAL STRATEGIC INCOME FUND Year Ended 8/31/04 $ 1 Year Ended 8/31/03 $ --~~ 11/1/01 Through 8/31/02^^ $ --~~ 9/10/01** Through 10/31/01 $ --~~ SHORT TERM BOND FUND Year Ended 8/31/04 $ 3 Year Ended 8/31/03 $ 9 11/1/01 Through 8/31/02^^ $ 10 9/10/01** Through 10/31/01 $ 2 RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ---------------------------------------------------------------------- NET INVESTMENT NET EXPENSES INCOME (LOSS) INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Year Ended 8/31/04 0.75% 3.19% 1.88% 2.06% 571% Year Ended 8/31/03 0.75% 3.86% 1.59% 3.02% 679% 11/1/01 Through 8/31/02^^ 0.75% 3.59% 5.64% (1.30%) 572% 9/10/01** Through 10/31/01 0.75% 3.93% 10.75% (6.07%) 423% BOND FUND II Year Ended 8/31/04 0.75% 3.06% 1.26% 2.55% 590% Year Ended 8/31/03 0.75% 3.96% 1.16% 3.55% 806% 11/1/01 Through 8/31/02^^ 0.75% 4.02% 1.10% 3.67% 496% 3/2/01** Through 10/31/01 0.75% 4.90% 1.25% 4.40% 319% GLOBAL STRATEGIC INCOME FUND Year Ended 8/31/04 1.27%(o) 5.31% 4.23% 2.35% 152% Year Ended 8/31/03 1.25% 4.45% 7.26% (1.56%) 248% 11/1/01 Through 8/31/02^^ 1.25% 6.20% 35.90%!! (28.45%)!! 178% 9/10/01** Through 10/31/01 1.25% 6.99% 11.01% (2.77%) 107% SHORT TERM BOND FUND Year Ended 8/31/04 0.75% 2.00% 1.17% 1.58% 261% Year Ended 8/31/03 0.75% 2.39% 1.10% 2.04% 386% 11/1/01 Through 8/31/02^^ 0.75% 3.01% 1.00% 2.76% 215% 9/10/01** Through 10/31/01 0.75% 3.62% 10.76% (6.39%) 160%
~~ Amount rounds to less than one million. # Short periods have been annualized. !! Due to the size of net assets and fixed expenses, ratios may appear disproportionate. (o) Includes interest expense for custody overdraft of 1 basis point. SEE NOTES TO FINANCIAL STATEMENTS. 137
PER SHARE OPERATING PERFORMANCE: -------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: ----------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS SHORT TERM BOND FUND II Year Ended 8/31/04 $ 10.23 0.21^ (0.02) 0.19 Year Ended 8/31/03 $ 10.33 0.23^ (0.04) 0.19 11/1/01 Through 8/31/02^^ $ 10.38 0.25 0.06 0.31 Year Ended 10/31/01 $ 9.89 0.43^ 0.53 0.96 Year Ended 10/31/00 $ 9.94 0.56 (0.05) 0.51 Year Ended 10/31/99 $ 10.14 0.46 (0.20) 0.26 STRATEGIC INCOME FUND Year Ended 8/31/04 $ 8.89 0.44^ 0.31 0.75 Year Ended 8/31/03 $ 8.55 0.48^ 0.34 0.82 11/1/01 Through 8/31/02^^ $ 8.85 0.41 (0.31) 0.10 Year Ended 10/31/01 $ 9.05 0.62 (0.20) 0.42 Year Ended 10/31/00 $ 9.59 0.78 (0.53) 0.25 11/30/98* Through 10/31/99 $ 10.00 0.72 (0.41) 0.31 U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 11.61 0.35 0.23 0.58 Year Ended 8/31/03 $ 11.83 0.45 (0.21) 0.24 11/1/01 Through 8/31/02^^ $ 11.77 0.38 0.05 0.43 Year Ended 10/31/01 $ 10.77 0.53 1.01 1.54 Year Ended 10/31/00 $ 10.67 0.68 0.10 0.78 Year Ended 10/31/99 $ 11.66 0.71 (0.99) (0.28) PER SHARE OPERATING PERFORMANCE: ---------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN INCOME GAINS OF CAPITAL SHORT TERM BOND FUND II Year Ended 8/31/04 0.21 -- --~~ Year Ended 8/31/03 0.24 0.05 --~~ 11/1/01 Through 8/31/02^^ 0.25 0.11 -- Year Ended 10/31/01 0.47 -- -- Year Ended 10/31/00 0.56 -- -- Year Ended 10/31/99 0.46 -- -- STRATEGIC INCOME FUND Year Ended 8/31/04 0.45 -- -- Year Ended 8/31/03 0.48 -- -- 11/1/01 Through 8/31/02^^ 0.38 -- 0.02 Year Ended 10/31/01 0.60 -- 0.02 Year Ended 10/31/00 0.78 -- 0.01 11/30/98* Through 10/31/99 0.72 -- -- U.S. TREASURY INCOME FUND Year Ended 8/31/04 0.36 -- -- Year Ended 8/31/03 0.46 -- -- 11/1/01 Through 8/31/02^^ 0.37 -- -- Year Ended 10/31/01 0.54 -- -- Year Ended 10/31/00 0.68 -- -- Year Ended 10/31/99 0.71 -- --
^^ The fund changed its fiscal year end from October 31 to August 31. * Commencement of operations. ^ Calculated based upon average shares outstanding. (1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 138
PER SHARE OPERATING PERFORMANCE: --------------------------------- LESS DISTRIBUTIONS: --------------------------------- TOTAL DISTRIBUTIONS SHORT TERM BOND FUND II Year Ended 8/31/04 0.21 Year Ended 8/31/03 0.29 11/1/01 Through 8/31/02^^ 0.36 Year Ended 10/31/01 0.47 Year Ended 10/31/00 0.56 Year Ended 10/31/99 0.46 STRATEGIC INCOME FUND Year Ended 8/31/04 0.45 Year Ended 8/31/03 0.48 11/1/01 Through 8/31/02^^ 0.40 Year Ended 10/31/01 0.62 Year Ended 10/31/00 0.79 11/30/98* Through 10/31/99 0.72 U.S. TREASURY INCOME FUND Year Ended 8/31/04 0.36 Year Ended 8/31/03 0.46 11/1/01 Through 8/31/02^^ 0.37 Year Ended 10/31/01 0.54 Year Ended 10/31/00 0.68 Year Ended 10/31/99 0.71 PER SHARE OPERATING PERFORMANCE: ---------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) SHORT TERM BOND FUND II Year Ended 8/31/04 $ 10.21 1.85% Year Ended 8/31/03 $ 10.23 1.88% 11/1/01 Through 8/31/02^^ $ 10.33 3.06% Year Ended 10/31/01 $ 10.38 9.95% Year Ended 10/31/00 $ 9.89 5.27% Year Ended 10/31/99 $ 9.94 2.64% STRATEGIC INCOME FUND Year Ended 8/31/04 $ 9.19 8.56% Year Ended 8/31/03 $ 8.89 9.77% 11/1/01 Through 8/31/02^^ $ 8.55 1.10% Year Ended 10/31/01 $ 8.85 4.73% Year Ended 10/31/00 $ 9.05 2.59% 11/30/98* Through 10/31/99 $ 9.59 3.23% U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 11.83 5.05% Year Ended 8/31/03 $ 11.61 2.00% 11/1/01 Through 8/31/02^^ $ 11.83 3.80% Year Ended 10/31/01 $ 11.77 14.72% Year Ended 10/31/00 $ 10.77 7.63% Year Ended 10/31/99 $ 10.67 (2.41%) RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND II Year Ended 8/31/04 $ 55 0.75% 2.03% 1.10% 1.68% 253% Year Ended 8/31/03 $ 44 0.75% 2.31% 0.96% 2.10% 319% 11/1/01 Through 8/31/02^^ $ 70 0.75% 2.66% 1.00% 2.41% 192% Year Ended 10/31/01 $ 52 0.75% 4.25% 1.15% 3.85% 315% Year Ended 10/31/00 $ 19 0.75% 5.68% 1.37% 5.06% 139% Year Ended 10/31/99 $ 22 0.75% 4.58% 1.37% 3.96% 302% STRATEGIC INCOME FUND Year Ended 8/31/04 $ 3 1.25% 4.87% 2.69% 3.43% 130% Year Ended 8/31/03 $ 3 1.25% 5.44% 2.69% 4.00% 116% 11/1/01 Through 8/31/02^^ $ 3 1.25% 5.74% 3.13% 3.86% 176% Year Ended 10/31/01 $ 2 1.25% 6.81% 2.75% 5.31% 174% Year Ended 10/31/00 $ 2 1.11% 7.84% 2.43% 6.52% 113% 11/30/98* Through 10/31/99 $ 3 0.15% 8.38% 3.59% 4.94% 136% U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 45 0.75% 3.07% 1.31% 2.51% 169% Year Ended 8/31/03 $ 46 0.75% 3.85% 1.31% 3.29% 106% 11/1/01 Through 8/31/02^^ $ 44 0.75% 3.87% 1.32% 3.30% 228% Year Ended 10/31/01 $ 46 0.75% 4.74%+ 1.35% 4.14%+ 134% Year Ended 10/31/00 $ 41 0.75% 6.45% 1.30% 5.90% 29% Year Ended 10/31/99 $ 69 0.75% 6.40% 1.32% 5.83% 59%
~~ Amount rounds to less than $0.005. + Restated. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 139 CLASS B 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 Year Ended 8/31/04 $ 9.95 0.25 0.32 0.57 Year Ended 8/31/03 $ 10.05 0.33 (0.03) 0.30 11/1/01 Through 8/31/02^^ $ 10.08 0.24 0.03 0.27 9/10/01** Through 10/31/01 $ 9.89 0.06^ 0.19 0.25 BOND FUND II Year Ended 8/31/04 $ 40.49 0.94^ 1.23 2.17 Year Ended 8/31/03 $ 41.30 1.35^ (0.32) 1.03 11/1/01 Through 8/31/02^^ $ 40.96 1.04^ 0.36 1.40 3/2/01** Through 10/31/01 $ 39.55 1.12 1.41 2.53 STRATEGIC INCOME FUND Year Ended 8/31/04 $ 8.89 0.40^ 0.30 0.70 Year Ended 8/31/03 $ 8.56 0.44^ 0.33 0.77 11/1/01 Through 8/31/02^^ $ 8.85 0.38 (0.31) 0.07 Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37 Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21 11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30 U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 11.60 0.22 0.26 0.48 Year Ended 8/31/03 $ 11.81 0.37 (0.22) 0.15 11/1/01 Through 8/31/02^^ $ 11.75 0.28 0.06 0.34 Year Ended 10/31/01 $ 10.75 0.43+ 1.01+ 1.44 Year Ended 10/31/00 $ 10.67 0.59 0.08 0.67 Year Ended 10/31/99 $ 11.66 0.61 (0.99) (0.38) PER SHARE OPERATING PERFORMANCE: ---------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN INCOME GAINS OF CAPITAL BOND FUND Year Ended 8/31/04 0.25 0.30 -- Year Ended 8/31/03 0.32 0.08 -- 11/1/01 Through 8/31/02^^ 0.24 0.06 -- 9/10/01** Through 10/31/01 0.06 -- -- BOND FUND II Year Ended 8/31/04 0.94 0.24 -- Year Ended 8/31/03 1.35 0.49 -- 11/1/01 Through 8/31/02^^ 1.06 -- -- 3/2/01** Through 10/31/01 1.12 -- -- STRATEGIC INCOME FUND Year Ended 8/31/04 0.40 -- -- Year Ended 8/31/03 0.44 -- -- 11/1/01 Through 8/31/02^^ 0.34 -- 0.02 Year Ended 10/31/01 0.55 -- 0.02 Year Ended 10/31/00 0.74 -- 0.01 11/30/98* Through 10/31/99 0.71 -- -- U.S. TREASURY INCOME FUND Year Ended 8/31/04 0.26 -- -- Year Ended 8/31/03 0.36 -- -- 11/1/01 Through 8/31/02^^ 0.28 -- -- Year Ended 10/31/01 0.44 -- -- Year Ended 10/31/00 0.59 -- -- Year Ended 10/31/99 0.61 -- --
^^ The fund changed its fiscal year end from October 31 to August 31. * Commencement of operations. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. (1) Total return figures do not include the effect of any front-end or deferred sales load. SEE NOTES TO FINANCIAL STATEMENTS. 140
PER SHARE OPERATING PERFORMANCE: --------------------------------- LESS DISTRIBUTIONS: --------------------------------- TOTAL DISTRIBUTIONS BOND FUND Year Ended 8/31/04 0.55 Year Ended 8/31/03 0.40 11/1/01 Through 8/31/02^^ 0.30 9/10/01** Through 10/31/01 0.06 BOND FUND II Year Ended 8/31/04 1.18 Year Ended 8/31/03 1.84 11/1/01 Through 8/31/02^^ 1.06 3/2/01** Through 10/31/01 1.12 STRATEGIC INCOME FUND Year Ended 8/31/04 0.40 Year Ended 8/31/03 0.44 11/1/01 Through 8/31/02^^ 0.36 Year Ended 10/31/01 0.57 Year Ended 10/31/00 0.75 11/30/98* Through 10/31/99 0.71 U.S. TREASURY INCOME FUND Year Ended 8/31/04 0.26 Year Ended 8/31/03 0.36 11/1/01 Through 8/31/02^^ 0.28 Year Ended 10/31/01 0.44 Year Ended 10/31/00 0.59 Year Ended 10/31/99 0.61 PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END OF PERIOD BOND FUND Year Ended 8/31/04 $ 9.97 Year Ended 8/31/03 $ 9.95 11/1/01 Through 8/31/02^^ $ 10.05 9/10/01** Through 10/31/01 $ 10.08 BOND FUND II Year Ended 8/31/04 $ 41.48 Year Ended 8/31/03 $ 40.49 11/1/01 Through 8/31/02^^ $ 41.30 3/2/01** Through 10/31/01 $ 40.96 STRATEGIC INCOME FUND Year Ended 8/31/04 $ 9.19 Year Ended 8/31/03 $ 8.89 11/1/01 Through 8/31/02^^ $ 8.56 Year Ended 10/31/01 $ 8.85 Year Ended 10/31/00 $ 9.05 11/30/98* Through 10/31/99 $ 9.59 U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 11.82 Year Ended 8/31/03 $ 11.60 11/1/01 Through 8/31/02^^ $ 11.81 Year Ended 10/31/01 $ 11.75 Year Ended 10/31/00 $ 10.75 Year Ended 10/31/99 $ 10.67 RATIOS/SUPPLEMENTAL DATA: --------------------------------- NET ASSETS, END OF TOTAL PERIOD RETURN (1)(b) (MILLIONS) BOND FUND Year Ended 8/31/04 5.89% $ 2 Year Ended 8/31/03 2.94% $ 2 11/1/01 Through 8/31/02^^ 2.83% $ 1 9/10/01** Through 10/31/01 2.53% $ --~~ BOND FUND II Year Ended 8/31/04 5.41% $ 12 Year Ended 8/31/03 2.47% $ 15 11/1/01 Through 8/31/02^^ 3.52% $ 14 3/2/01** Through 10/31/01 6.58% $ 8 STRATEGIC INCOME FUND Year Ended 8/31/04 8.01% $ 8 Year Ended 8/31/03 9.11% $ 8 11/1/01 Through 8/31/02^^ 0.76% $ 7 Year Ended 10/31/01 4.20% $ 8 Year Ended 10/31/00 2.17% $ 8 11/30/98* Through 10/31/99 3.13% $ 5 U.S. TREASURY INCOME FUND Year Ended 8/31/04 4.13% $ 13 Year Ended 8/31/03 1.19% $ 20 11/1/01 Through 8/31/02^^ 3.04% $ 21 Year Ended 10/31/01 13.74% $ 20 Year Ended 10/31/00 6.49% $ 16 Year Ended 10/31/99 (3.27%) $ 16 RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------ NET INVESTMENT NET EXPENSES INCOME (LOSS) INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Year Ended 8/31/04 1.50% 2.48% 2.36% 1.62% 571% Year Ended 8/31/03 1.50% 3.19% 2.14% 2.55% 679% 11/1/01 Through 8/31/02^^ 1.50% 2.80% 6.02% (1.72%) 572% 9/10/01** Through 10/31/01 1.48% 4.07% 11.25% (5.70%) 423% BOND FUND II Year Ended 8/31/04 1.50% 2.29% 1.76% 2.03% 590% Year Ended 8/31/03 1.50% 3.24% 1.67% 3.07% 806% 11/1/01 Through 8/31/02^^ 1.50% 3.09% 1.56% 3.03% 496% 3/2/01** Through 10/31/01 1.50% 4.22% 1.75% 3.97% 319% STRATEGIC INCOME FUND Year Ended 8/31/04 1.75% 4.37% 3.19% 2.93% 130% Year Ended 8/31/03 1.75% 4.98% 3.21% 3.52% 116% 11/1/01 Through 8/31/02^^ 1.75% 5.28% 3.63% 3.40% 176% Year Ended 10/31/01 1.75% 6.35% 3.25% 4.85% 174% Year Ended 10/31/00 1.53% 7.42% 3.06% 5.89% 113% 11/30/98* Through 10/31/99 0.17% 8.40% 3.98% 4.59% 136% U.S. TREASURY INCOME FUND Year Ended 8/31/04 1.64% 2.19% 1.81% 2.02% 169% Year Ended 8/31/03 1.64% 2.96% 1.80% 2.80% 106% 11/1/01 Through 8/31/02^^ 1.64% 2.99% 1.82% 2.81% 228% Year Ended 10/31/01 1.64% 3.84%+ 1.85% 3.63%+ 134% Year Ended 10/31/00 1.64% 5.56% 1.80% 5.40% 29% Year Ended 10/31/99 1.64% 5.51% 1.82% 5.33% 59%
(b) Not annualized for periods less than one year. ~~ Amount rounds to less than one million. + Restated. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 141 CLASS C 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 Year Ended 8/31/04 $ 10.01 0.24 0.33 0.57 3/31/03** Through 8/31/03 $ 10.22 0.14 (0.21) (0.07) STRATEGIC INCOME FUND Year Ended 8/31/04 $ 8.89 0.40^ 0.31 0.71 Year Ended 8/31/03 $ 8.56 0.44^ 0.33 0.77 11/1/01 Through 8/31/02^^ $ 8.85 0.38 (0.31) 0.07 Year Ended 10/31/01 $ 9.05 0.57 (0.20) 0.37 Year Ended 10/31/00 $ 9.59 0.74 (0.53) 0.21 11/30/98* Through 10/31/99 $ 10.00 0.71 (0.41) 0.30 PER SHARE OPERATING PERFORMANCE: ---------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN INCOME GAINS OF CAPITAL BOND FUND Year Ended 8/31/04 0.25 0.30 -- 3/31/03** Through 8/31/03 0.14 -- -- STRATEGIC INCOME FUND Year Ended 8/31/04 0.40 -- -- Year Ended 8/31/03 0.44 -- -- 11/1/01 Through 8/31/02^^ 0.34 -- 0.02 Year Ended 10/31/01 0.55 -- 0.02 Year Ended 10/31/00 0.74 -- 0.01 11/30/98* Through 10/31/99 0.71 -- --
^^ The fund changed its fiscal year end from October 31 to August 31. * Commencement of operations. ** Commencement of offering of class of shares. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 142
PER SHARE OPERATING PERFORMANCE: --------------------------------- LESS DISTRIBUTIONS: --------------------------------- TOTAL DISTRIBUTIONS BOND FUND Year Ended 8/31/04 0.55 3/31/03** Through 8/31/03 0.14 STRATEGIC INCOME FUND Year Ended 8/31/04 0.40 Year Ended 8/31/03 0.44 11/1/01 Through 8/31/02^^ 0.36 Year Ended 10/31/01 0.57 Year Ended 10/31/00 0.75 11/30/98* Through 10/31/99 0.71 PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END OF PERIOD BOND FUND Year Ended 8/31/04 $ 10.03 3/31/03** Through 8/31/03 $ 10.01 STRATEGIC INCOME FUND Year Ended 8/31/04 $ 9.20 Year Ended 8/31/03 $ 8.89 11/1/01 Through 8/31/02^^ $ 8.56 Year Ended 10/31/01 $ 8.85 Year Ended 10/31/00 $ 9.05 11/30/98* Through 10/31/99 $ 9.59 RATIOS/SUPPLEMENTAL DATA: --------------------------------- NET ASSETS, END OF TOTAL PERIOD RETURN (1)(b) (MILLIONS) BOND FUND Year Ended 8/31/04 5.84% $ --~~ 3/31/03** Through 8/31/03 (0.69%) $ --~~ STRATEGIC INCOME FUND Year Ended 8/31/04 8.11% $ 3 Year Ended 8/31/03 9.10% $ 4 11/1/01 Through 8/31/02^^ 0.78% $ 3 Year Ended 10/31/01 4.21% $ 3 Year Ended 10/31/00 2.15% $ 2 11/30/98* Through 10/31/99 3.12% $ 4 RATIOS/SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ----------------------------------------------------------------------- NET INVESTMENT NET EXPENSES INCOME (LOSS) INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Year Ended 8/31/04 1.50% 2.45% 2.36% 1.59% 571% 3/31/03** Through 8/31/03 1.50% 3.02% 1.78% 2.74% 679% STRATEGIC INCOME FUND Year Ended 8/31/04 1.75% 4.36% 3.19% 2.92% 130% Year Ended 8/31/03 1.75% 4.93% 3.20% 3.48% 116% 11/1/01 Through 8/31/02^^ 1.75% 5.24% 3.63% 3.36% 176% Year Ended 10/31/01 1.75% 6.33% 3.25% 4.83% 174% Year Ended 10/31/00 1.49% 7.46% 2.89% 6.06% 113% 11/30/98* Through 10/31/99 0.17% 8.40% 3.98% 4.59% 136%
(1) Total return figures do not include the effect of any front-end or deferred sales load. (b) Not annualized for periods less than one year. ~~ Amount rounds to less than one million. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 143 CLASS M 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 SHORT TERM BOND FUND II Year Ended 8/31/04 $ 10.23 0.18^ (0.02) 0.16 Year Ended 8/31/03 $ 10.33 0.21^ (0.04) 0.17 11/1/01 Through 8/31/02^^ $ 10.37 0.23 0.06 0.29 Year Ended 10/31/01 $ 9.89 0.35^ 0.58 0.93 Year Ended 10/31/00 $ 9.94 0.54 (0.05) 0.49 7/1/99** Through 10/31/99 $ 9.98 0.16 (0.04) 0.12 STRATEGIC INCOME FUND Year Ended 8/31/04 $ 8.87 0.42^ 0.31 0.73 Year Ended 8/31/03 $ 8.54 0.47^ 0.32 0.79 11/1/01 Through 8/31/02^^ $ 8.83 0.40 (0.31) 0.09 Year Ended 10/31/01 $ 9.03 0.60 (0.20) 0.40 Year Ended 10/31/00 $ 9.59 0.75 (0.55) 0.20 10/28/99** Through 10/31/99 $ 9.64 0.07 (0.05) 0.02 PER SHARE OPERATING PERFORMANCE: ---------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN INCOME GAINS OF CAPITAL SHORT TERM BOND FUND II Year Ended 8/31/04 0.18 -- --~~ Year Ended 8/31/03 0.22 0.05 --~~ 11/1/01 Through 8/31/02^^ 0.22 0.11 -- Year Ended 10/31/01 0.45 -- -- Year Ended 10/31/00 0.54 -- -- 7/1/99** Through 10/31/99 0.16 -- -- STRATEGIC INCOME FUND Year Ended 8/31/04 0.43 -- -- Year Ended 8/31/03 0.46 -- -- 11/1/01 Through 8/31/02^^ 0.36 -- 0.02 Year Ended 10/31/01 0.58 -- 0.02 Year Ended 10/31/00 0.75 -- 0.01 10/28/99** Through 10/31/99 0.07 -- --
(1) Total return figures do not include the effect of any front-end sales load. ^^ The fund changed its fiscal year end from October 31 to August 31. ^ Calculated based upon average shares outstanding. ** Commencement of offering of class of shares. SEE NOTES TO FINANCIAL STATEMENTS. 144
PER SHARE OPERATING PERFORMANCE: --------------------------------- LESS DISTRIBUTIONS: --------------------------------- TOTAL DISTRIBUTIONS SHORT TERM BOND FUND II Year Ended 8/31/04 0.18 Year Ended 8/31/03 0.27 11/1/01 Through 8/31/02^^ 0.33 Year Ended 10/31/01 0.45 Year Ended 10/31/00 0.54 7/1/99** Through 10/31/99 0.16 STRATEGIC INCOME FUND Year Ended 8/31/04 0.43 Year Ended 8/31/03 0.46 11/1/01 Through 8/31/02^^ 0.38 Year Ended 10/31/01 0.60 Year Ended 10/31/00 0.76 10/28/99** Through 10/31/99 0.07 PER SHARE OPERATING PERFORMANCE: --------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) SHORT TERM BOND FUND II Year Ended 8/31/04 $ 10.21 1.58% Year Ended 8/31/03 $ 10.23 1.64% 11/1/01 Through 8/31/02^^ $ 10.33 2.92% Year Ended 10/31/01 $ 10.37 9.63% Year Ended 10/31/00 $ 9.89 5.04% 7/1/99** Through 10/31/99 $ 9.94 1.26% STRATEGIC INCOME FUND Year Ended 8/31/04 $ 9.17 8.36% Year Ended 8/31/03 $ 8.87 9.44% 11/1/01 Through 8/31/02^^ $ 8.54 1.03% Year Ended 10/31/01 $ 8.83 4.50% Year Ended 10/31/00 $ 9.03 2.10% 10/28/99** Through 10/31/99 $ 9.59 0.16% RATIOS/SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------ NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND II Year Ended 8/31/04 $ 643 1.00% 1.75% 1.04% 1.71% 253% Year Ended 8/31/03 $ 1,168 1.00% 2.07% 1.04% 2.03% 319% 11/1/01 Through 8/31/02^^ $ 1,127 1.00% 2.41% 1.03% 2.38% 192% Year Ended 10/31/01 $ 689 1.00% 3.45% 1.11% 3.34% 315% Year Ended 10/31/00 $ 13 0.99% 5.51% 1.73% 4.77% 139% 7/1/99** Through 10/31/99 $ 3 0.97% 4.72% 1.41% 4.28% 302% STRATEGIC INCOME FUND Year Ended 8/31/04 $ 7 1.45% 4.67% 2.77% 3.35% 130% Year Ended 8/31/03 $ 7 1.45% 5.31% 2.77% 3.99% 116% 11/1/01 Through 8/31/02^^ $ 8 1.45% 5.52% 3.05% 3.92% 176% Year Ended 10/31/01 $ 10 1.45% 6.69% 2.55% 5.59% 174% Year Ended 10/31/00 $ 16 1.43% 7.52% 2.54% 6.41% 113% 10/28/99** Through 10/31/99 $ 12 0.17% 4.56% 3.73% 1.00% 136%
~~ Rounds to less than .005 per share amount. (b) Not annualized for periods less than one year. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 145 INSTITUTIONAL 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 Year Ended 8/31/04 $ 9.94 0.35 0.32 0.67 Year Ended 8/31/03 $ 10.04 0.42 (0.02) 0.40 11/1/01 Through 8/31/02^^ $ 10.08 0.34 0.02 0.36 Year Ended 10/31/01 $ 9.43 0.58^ 0.65 1.23 Year Ended 10/31/00 $ 9.41 0.60 0.02 0.62 Year Ended 10/31/99 $ 10.10 0.57 (0.57) -- ENHANCED INCOME FUND Year Ended 8/31/04 $ 9.86 0.14 (0.02) 0.12 Year Ended 8/31/03 $ 9.98 0.23 (0.12) 0.11 11/30/01* Through 8/31/02 $ 10.00 0.18 (0.02) 0.16 GLOBAL STRATEGIC INCOME FUND^^ Year Ended 8/31/04 $ 8.92 0.51^ 0.17 0.68 Year Ended 8/31/03 $ 8.65 0.48^ 0.27 0.75 11/1/01 Through 8/31/02 $ 8.95 0.47 (0.30) 0.17 Year Ended 10/31/01 $ 9.29 0.69^ (0.16) 0.53 Year Ended 10/31/00 $ 9.35 0.88 (0.25) 0.63 Year Ended 10/31/99 $ 9.72 0.62 (0.37) 0.25 PER SHARE OPERATING PERFORMANCE: ---------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TAX RETURN INCOME GAINS OF CAPITAL BOND FUND Year Ended 8/31/04 0.35 0.30 -- Year Ended 8/31/03 0.42 0.08 -- 11/1/01 Through 8/31/02^^ 0.34 0.06 -- Year Ended 10/31/01 0.58 -- -- Year Ended 10/31/00 0.60 --(a) -- Year Ended 10/31/99 0.57 0.12 -- ENHANCED INCOME FUND Year Ended 8/31/04 0.14 -- -- Year Ended 8/31/03 0.23 -- -- 11/30/01* Through 8/31/02 0.18 -- -- GLOBAL STRATEGIC INCOME FUND^^ Year Ended 8/31/04 0.52 -- -- Year Ended 8/31/03 0.48 -- -- 11/1/01 Through 8/31/02 0.45 -- 0.02 Year Ended 10/31/01 0.87 -- -- Year Ended 10/31/00 0.69 -- -- Year Ended 10/31/99 0.62 -- --
^^ The fund changed its fiscal year from October 31 to August 31. ^ Calculated based upon average shares outstanding. * Commencement of operations. (a) Amount is less than $0.005. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 146
PER SHARE OPERATING PERFORMANCE: --------------------------------- LESS DISTRIBUTIONS: --------------------------------- TOTAL DISTRIBUTIONS BOND FUND Year Ended 8/31/04 0.65 Year Ended 8/31/03 0.50 11/1/01 Through 8/31/02^^ 0.40 Year Ended 10/31/01 0.58 Year Ended 10/31/00 0.60 Year Ended 10/31/99 0.69 ENHANCED INCOME FUND Year Ended 8/31/04 0.14 Year Ended 8/31/03 0.23 11/30/01* Through 8/31/02 0.18 GLOBAL STRATEGIC INCOME FUND^^ Year Ended 8/31/04 0.52 Year Ended 8/31/03 0.48 11/1/01 Through 8/31/02 0.47 Year Ended 10/31/01 0.87 Year Ended 10/31/00 0.69 Year Ended 10/31/99 0.62 PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) BOND FUND Year Ended 8/31/04 $ 9.96 6.96% Year Ended 8/31/03 $ 9.94 3.99% 11/1/01 Through 8/31/02^^ $ 10.04 3.71% Year Ended 10/31/01 $ 10.08 13.46% Year Ended 10/31/00 $ 9.43 6.83% Year Ended 10/31/99 $ 9.41 0.03% ENHANCED INCOME FUND Year Ended 8/31/04 $ 9.84 1.28% Year Ended 8/31/03 $ 9.86 1.14% 11/30/01* Through 8/31/02 $ 9.98 1.58% GLOBAL STRATEGIC INCOME FUND^^ Year Ended 8/31/04 $ 9.08 7.85% Year Ended 8/31/03 $ 8.92 8.86% 11/1/01 Through 8/31/02 $ 8.65 1.92% Year Ended 10/31/01 $ 8.95 5.86% Year Ended 10/31/00 $ 9.29 6.93% Year Ended 10/31/99 $ 9.35 2.62% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------------------ NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Year Ended 8/31/04 $ 318 0.49% 3.51% 0.62% 3.38% 571% Year Ended 8/31/03 $ 478 0.49% 4.10% 0.60% 3.99% 679% 11/1/01 Through 8/31/02^^ $ 747 0.49% 4.14% 0.58% 4.05% 572% Year Ended 10/31/01 $ 1,016 0.49% 5.98% 0.51% 5.96% 423%(x) Year Ended 10/31/00 $ 907 0.49% 6.37% 0.49% 6.37% 531%(x) Year Ended 10/31/99 $ 1,041 0.50% 5.92% 0.51% 5.91% 465%(x) ENHANCED INCOME FUND Year Ended 8/31/04 $ 294 0.20% 1.47% 0.56% 1.12% 156% Year Ended 8/31/03 $ 354 0.20% 2.33% 0.56% 1.97% 328% 11/30/01* Through 8/31/02 $ 300 0.20% 2.40% 0.68% 1.92% 120% GLOBAL STRATEGIC INCOME FUND^^ Year Ended 8/31/04 $ 40 0.66%(o) 5.63% 1.22% 5.07% 152% Year Ended 8/31/03 $ 108 0.65% 5.42% 0.97% 5.10% 248% 11/1/01 Through 8/31/02 $ 135 0.65% 6.44% 0.98% 6.11% 178% Year Ended 10/31/01 $ 143 0.65% 7.50% 0.80% 7.35% 107%(y) Year Ended 10/31/00 $ 163 0.65% 7.36% 0.80% 7.21% 266%(y) Year Ended 10/31/99 $ 183 0.65% 6.70% 0.78% 5.29% 318%(y)
# Short periods have been annualized. (x) Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. (y) Percentages prior to 9/10/01 reflect the portfolio turnover of The Global Strategic Income Portfolio, in which the Fund invested all of its investable assets. (o) Includes interest expense for custody overdraft of 1 basis point. SEE NOTES TO FINANCIAL STATEMENTS. 147
PER SHARE OPERATING PERFORMANCE: -------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: -------------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES VALUE, INVESTMENT (BOTH TOTAL FROM BEGINNING INCOME REALIZED AND INVESTMENT OF PERIOD (LOSS) UNREALIZED) OPERATIONS SHORT TERM BOND FUND Year Ended 8/31/04 $ 9.86 0.25 (0.02) 0.23 Year Ended 8/31/03 $ 10.05 0.28 (0.04) 0.24 11/1/01 Through 8/31/02^^ $ 10.03 0.29 0.06 0.35 Year Ended 10/31/01 $ 9.58 0.54^ 0.46 1.00 Year Ended 10/31/00 $ 9.67 0.60 (0.08) 0.52 Year Ended 10/31/99 $ 9.96 0.58 (0.29) 0.29 PER SHARE OPERATING PERFORMANCE: ------------------------------------------- LESS DISTRIBUTIONS: ------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TOTAL INCOME GAINS DISTRIBUTIONS SHORT TERM BOND FUND Year Ended 8/31/04 0.24 -- 0.24 Year Ended 8/31/03 0.29 0.14 0.43 11/1/01 Through 8/31/02^^ 0.29 0.04 0.33 Year Ended 10/31/01 0.55 -- 0.55 Year Ended 10/31/00 0.61 -- 0.61 Year Ended 10/31/99 0.54 0.04 0.58
^^ The fund changed its fiscal year from October 31 to August 31. ^ Calculated based upon average shares outstanding. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 148
PER SHARE OPERATING PERFORMANCE: ---------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (1)(b) SHORT TERM BOND FUND Year Ended 8/31/04 $ 9.85 2.38% Year Ended 8/31/03 $ 9.86 2.44% 11/1/01 Through 8/31/02^^ $ 10.05 3.55% Year Ended 10/31/01 $ 10.03 10.70% Year Ended 10/31/00 $ 9.58 5.49% Year Ended 10/31/99 $ 9.67 3.03% RATIOS/SUPPLEMENTAL DATA: -------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) SHORT TERM BOND FUND Year Ended 8/31/04 $ 642 0.30% 2.49% 0.55% 2.24% 261% Year Ended 8/31/03 $ 806 0.30% 2.85% 0.55% 2.60% 386% 11/1/01 Through 8/31/02^^ $ 618 0.30% 3.53% 0.54% 3.29% 215% Year Ended 10/31/01 $ 697 0.30% 5.52% 0.48% 5.34% 160%(z) Year Ended 10/31/00 $ 415 0.30% 6.30% 0.47% 6.13% 271%(z) Year Ended 10/31/99 $ 354 0.29% 5.51% 0.51% 5.29% 398%(z)
# Short periods have been annualized. (z) Percentages prior to 9/10/01 reflect the portfolio turnover of The Short term Bond Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 149 SELECT 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@ Year Ended 8/31/04 $ 9.94 0.33 0.33 0.66 Year Ended 8/31/03 $ 10.04 0.40 (0.01) 0.39 11/1/01 Through 8/31/02^^ $ 10.08 0.32 0.02 0.34 Year Ended 10/31/01 $ 9.43 0.52^ 0.70 1.22 Year Ended 10/31/00 $ 9.41 0.58 0.02 0.60 Year Ended 10/31/99 $ 10.09 0.55 (0.57) (0.02) BOND FUND II Year Ended 8/31/04 $ 40.51 1.31^ 1.24 2.55 Year Ended 8/31/03 $ 41.32 1.79^ (0.38) 1.41 11/1/01 Through 8/31/02^^ $ 40.97 1.36^ 0.35 1.71 Year Ended 10/31/01 $ 38.02 2.18 2.95 5.13 Year Ended 10/31/00 $ 38.38 2.38 (0.36) 2.02 Year Ended 10/31/99 $ 41.29 2.36 (2.37) (0.01) FLEMING EMERGING MARKETS DEBT FUND Year Ended 8/31/04 $ 9.02 0.67 0.60 1.27 Year Ended 8/31/03 $ 7.53 0.68 1.53 2.21 8/1/02 Through 8/31/02^^^ $ 7.05 0.05 0.49 0.54 Year Ended 7/31/02 $ 7.82 0.77 (0.77) -- Year Ended 7/31/01 $ 8.77 0.88 (0.87) 0.01 Year Ended 7/31/00 $ 7.29 0.95 1.42 2.37 PER SHARE OPERATING PERFORMANCE: ---------------------------------------------- LESS DISTRIBUTIONS: ---------------------------------------------- DIVIDENDS FROM NET DISTRIBUTIONS INVESTMENT FROM CAPITAL TOTAL INCOME GAINS DISTRIBUTIONS BOND FUND@ Year Ended 8/31/04 0.33 0.30 0.63 Year Ended 8/31/03 0.41 0.08 0.49 11/1/01 Through 8/31/02^^ 0.32 0.06 0.38 Year Ended 10/31/01 0.57 -- 0.57 Year Ended 10/31/00 0.58 -- 0.58 Year Ended 10/31/99 0.56 0.10 0.66 BOND FUND II Year Ended 8/31/04 1.31 0.24 1.55 Year Ended 8/31/03 1.73 0.49 2.22 11/1/01 Through 8/31/02^^ 1.36 -- 1.36 Year Ended 10/31/01 2.18 -- 2.18 Year Ended 10/31/00 2.38 -- 2.38 Year Ended 10/31/99 2.36 0.54 2.90 FLEMING EMERGING MARKETS DEBT FUND Year Ended 8/31/04 0.71 -- 0.71 Year Ended 8/31/03 0.72 -- 0.72 8/1/02 Through 8/31/02^^^ 0.06 -- 0.06 Year Ended 7/31/02 0.77 -- 0.77 Year Ended 7/31/01 0.96 -- 0.96 Year Ended 7/31/00 0.89 -- 0.89
@ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^ The fund changed its fiscal year from October 31 to August 31. ^ Calculated based upon average shares outstanding. (b) Not annualized for periods less than one year. ^^^ The Fund changed its fiscal year end from July 31 to August 31. SEE NOTES TO FINANCIAL STATEMENTS. 150
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) BOND FUND@ Year Ended 8/31/04 $ 9.97 6.88% Year Ended 8/31/03 $ 9.94 3.82% 11/1/01 Through 8/31/02^^ $ 10.04 3.57% Year Ended 10/31/01 $ 10.08 13.32% Year Ended 10/31/00 $ 9.43 6.61% Year Ended 10/31/99 $ 9.41 (0.23%) BOND FUND II Year Ended 8/31/04 $ 41.51 6.38% Year Ended 8/31/03 $ 40.51 3.39% 11/1/01 Through 8/31/02^^ $ 41.32 4.33% Year Ended 10/31/01 $ 40.97 13.87% Year Ended 10/31/00 $ 38.02 5.50% Year Ended 10/31/99 $ 38.38 (0.01%) FLEMING EMERGING MARKETS DEBT FUND Year Ended 8/31/04 $ 9.58 14.56% Year Ended 8/31/03 $ 9.02 30.49% 8/1/02 Through 8/31/02^^^ $ 7.53 7.69% Year Ended 7/31/02 $ 7.05 (0.67%) Year Ended 7/31/01 $ 7.82 (0.17%) Year Ended 7/31/00 $ 8.77 34.12% RATIOS/SUPPLEMENTAL DATA: ------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS: # ------------------------------------------------------------------------ NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND@ Year Ended 8/31/04 $ 189 0.66% 3.33% 0.78% 3.21% 571% Year Ended 8/31/03 $ 308 0.66% 3.97% 0.76% 3.87% 679% 11/1/01 Through 8/31/02^^ $ 312 0.66% 3.95% 0.74% 3.87% 572% Year Ended 10/31/01 $ 315 0.69% 5.77% 0.70% 5.76% 423%(x) Year Ended 10/31/00 $ 240 0.69% 6.19% 0.69% 6.19% 531%(x) Year Ended 10/31/99 $ 235 0.69% 5.72% 0.69% 5.72% 465%(x) BOND FUND II Year Ended 8/31/04 $ 869 0.60% 3.19% 0.76% 3.03% 590% Year Ended 8/31/03 $ 1,022 0.60% 4.27% 0.75% 4.12% 806% 11/1/01 Through 8/31/02^^ $ 661 0.60% 4.08% 0.74% 3.94% 496% Year Ended 10/31/01 $ 683 0.63% 5.52% 0.75% 5.40% 319% Year Ended 10/31/00 $ 587 0.69% 6.30% 0.71% 6.28% 157% Year Ended 10/31/99 $ 620 0.03% 5.97% 0.49% 5.51% 300% FLEMING EMERGING MARKETS DEBT FUND Year Ended 8/31/04 $ 36 1.26%(o) 7.01% 1.65% 6.62% 166% Year Ended 8/31/03 $ 60 1.25% 8.11% 1.52% 7.84% 157% 8/1/02 Through 8/31/02^^^ $ 41 1.25% 9.86% 1.30% 9.81% 12% Year Ended 7/31/02 $ 35 1.25% 9.59% 1.54% 9.30% 110%(v) Year Ended 7/31/01 $ 35 1.25% 11.20% 1.92% 10.53% 141%(v) Year Ended 7/31/00 $ 20 1.25% 11.01% 1.95% 10.31% 295%(v)
# Short periods have been annualized. (x) Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. (o) Includes interest expense for custody overdraft of 1 basis point. (v) Percentages prior to 9/10/01 reflect the portfolio turnover of Emerging Markets Debt Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 151
PER SHARE OPERATING PERFORMANCE: --------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: ------------------------------------- ------------------------------------- NET GAINS (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TAX RETURN OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS OF CAPITAL GLOBAL STRATEGIC INCOME FUND^^@ Year Ended 8/31/04 $ 8.92 0.49^ 0.16 0.65 0.49 -- -- Year Ended 8/31/03 $ 8.65 0.45^ 0.27 0.72 0.45 -- -- 11/1/01 Through 8/31/02 $ 8.95 0.45 (0.31) 0.14 0.42 -- 0.02 Year Ended 10/31/01 $ 9.42 0.67^ (0.38) 0.29 0.76 -- -- Year Ended 10/31/00 $ 9.47 0.87 (0.26) 0.61 0.66 -- -- Year Ended 10/31/99 $ 9.84 0.60 (0.38) 0.22 0.59 -- -- SHORT TERM BOND FUND@ Year Ended 8/31/04 $ 9.86 0.22 (0.02) 0.20 0.22 -- -- Year Ended 8/31/03 $ 10.04 0.26 (0.03) 0.23 0.27 0.14 -- 11/1/01 Through 8/31/02^^ $ 10.03 0.28 0.04 0.32 0.27 0.04 -- Year Ended 10/31/01 $ 9.61 0.51^ 0.46 0.97 0.55 -- -- Year Ended 10/31/00 $ 9.70 0.58 (0.09) 0.49 0.58 -- -- Year Ended 10/31/99 $ 10.00 0.57 (0.31) 0.26 0.51 0.05 -- SHORT TERM BOND FUND II Year Ended 8/31/04 $ 10.25 0.23^ (0.03) 0.20 0.23 -- --~~ Year Ended 8/31/03 $ 10.35 0.27^ (0.05) 0.22 0.27 0.05 --~~ 11/1/01 Through 8/31/02^^ $ 10.40 0.26 0.07 0.33 0.27 0.11 -- Year Ended 10/31/01 $ 9.90 0.42^ 0.57 0.99 0.49 -- -- Year Ended 10/31/00 $ 9.95 0.59 (0.05) 0.54 0.59 -- -- Year Ended 10/31/99 $ 10.15 0.49 (0.20) 0.29 0.49 -- --
@ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^ The fund changed its fiscal year from October 31 to August 31. ^ Calculated based upon average shares outstanding. ~~ Amount rounds to less than $0.005. (b) Not annualized for periods less than one year. SEE NOTES TO FINANCIAL STATEMENTS. 152
PER SHARE OPERATING PERFORMANCE: -------------------------------- LESS DISTRIBUTIONS: -------------------------------- TOTAL DISTRIBUTIONS GLOBAL STRATEGIC INCOME FUND^^@ Year Ended 8/31/04 0.49 Year Ended 8/31/03 0.45 11/1/01 Through 8/31/02 0.44 Year Ended 10/31/01 0.76 Year Ended 10/31/00 0.66 Year Ended 10/31/99 0.59 SHORT TERM BOND FUND@ Year Ended 8/31/04 0.22 Year Ended 8/31/03 0.41 11/1/01 Through 8/31/02^^ 0.31 Year Ended 10/31/01 0.55 Year Ended 10/31/00 0.58 Year Ended 10/31/99 0.56 SHORT TERM BOND FUND II Year Ended 8/31/04 0.23 Year Ended 8/31/03 0.32 11/1/01 Through 8/31/02^^ 0.38 Year Ended 10/31/01 0.49 Year Ended 10/31/00 0.59 Year Ended 10/31/99 0.49 PER SHARE OPERATING PERFORMANCE: ------------------------------------ NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) GLOBAL STRATEGIC INCOME FUND^^@ Year Ended 8/31/04 $ 9.08 7.48% Year Ended 8/31/03 $ 8.92 8.48% 11/1/01 Through 8/31/02 $ 8.65 1.61% Year Ended 10/31/01 $ 8.95 5.46% Year Ended 10/31/00 $ 9.42 6.57% Year Ended 10/31/99 $ 9.47 2.26% SHORT TERM BOND FUND@ Year Ended 8/31/04 $ 9.84 1.99% Year Ended 8/31/03 $ 9.86 2.28% 11/1/01 Through 8/31/02^^ $ 10.04 3.21% Year Ended 10/31/01 $ 10.03 10.39% Year Ended 10/31/00 $ 9.61 5.19% Year Ended 10/31/99 $ 9.70 2.70% SHORT TERM BOND FUND II Year Ended 8/31/04 $ 10.22 2.01% Year Ended 8/31/03 $ 10.25 2.15% 11/1/01 Through 8/31/02^^ $ 10.35 3.30% Year Ended 10/31/01 $ 10.40 10.29% Year Ended 10/31/00 $ 9.90 5.56% Year Ended 10/31/99 $ 9.95 2.97% RATIOS/SUPPLEMENTAL DATA: --------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ---------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) GLOBAL STRATEGIC INCOME FUND^^@ Year Ended 8/31/04 $ 2 1.01%(o) 5.44% 1.95% 4.50% 152% Year Ended 8/31/03 $ 3 1.00% 5.10% 1.48% 4.62% 248% 11/1/01 Through 8/31/02 $ 5 1.00% 6.08% 1.48% 5.60% 178% Year Ended 10/31/01 $ 5 1.00% 7.32% 2.63% 5.69% 107%(y) Year Ended 10/31/00 $ 7 1.00% 7.05% 2.50% 5.55% 266%(y) Year Ended 10/31/99 $ 9 1.00% 6.35% 1.54% 5.81% 318%(y) SHORT TERM BOND FUND@ Year Ended 8/31/04 $ 94 0.58% 2.22% 0.73% 2.07% 261% Year Ended 8/31/03 $ 122 0.56% 2.59% 0.71% 2.44% 386% 11/1/01 Through 8/31/02^^ $ 122 0.57% 3.22% 0.72% 3.07% 215% Year Ended 10/31/01 $ 67 0.60% 5.22% 0.82% 5.00% 160%(w) Year Ended 10/31/00 $ 38 0.60% 6.00% 0.82% 5.78% 271%(w) Year Ended 10/31/99 $ 39 0.57% 5.24% 0.80% 5.01% 398%(w) SHORT TERM BOND FUND II Year Ended 8/31/04 $ 492 0.50% 2.26% 0.70% 2.06% 253% Year Ended 8/31/03 $ 342 0.50% 2.58% 0.70% 2.38% 319% 11/1/01 Through 8/31/02^^ $ 144 0.50% 2.91% 0.70% 2.71% 192% Year Ended 10/31/01 $ 144 0.50% 4.15% 0.77% 3.88% 315% Year Ended 10/31/00 $ 21 0.45% 5.99% 1.02% 5.42% 139% Year Ended 10/31/99 $ 28 0.42% 4.89% 1.02% 4.29% 302%
# Short periods have been annualized. (y) Percentages prior to 9/10/01 reflect the portfolio turnover of The Global Strategic Income Portfolio, in which the Fund invested all of its investable assets. (o) Includes interest expense for custody overdraft of 1 basis point. (w) Percentages prior to 9/10/01 reflect the portfolio turnover of The Short term Bond Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 153
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: --------------------------------------- ------------------------------------------ NET GAINS (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 11.62 0.37 0.23 0.60 0.38 -- 0.38 Year Ended 8/31/03 $ 11.83 0.49 (0.21) 0.28 0.49 -- 0.49 11/1/01 Through 8/31/02^^ $ 11.77 0.39 0.06 0.45 0.39 -- 0.39 2/16/01* Through 10/31/01 $ 11.10 0.37 0.66 1.03 0.36 -- 0.36
^^ The fund changed its fiscal year from October 31 to August 31. * Commencement of offering of class of shares. SEE NOTES TO FINANCIAL STATEMENTS. 154
PER SHARE OPERATING PERFORMANCE: ------------------------------------ NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 11.84 5.26% Year Ended 8/31/03 $ 11.62 2.29% 11/1/01 Through 8/31/02^^ $ 11.83 3.97% 2/16/01* Through 10/31/01 $ 11.77 9.52% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ---------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) U.S. TREASURY INCOME FUND Year Ended 8/31/04 $ 76 0.55% 3.23% 0.88% 2.90% 169% Year Ended 8/31/03 $ 69 0.55% 4.04% 0.87% 3.72% 106% 11/1/01 Through 8/31/02^^ $ 78 0.55% 4.07% 0.86% 3.76% 228% 2/16/01* Through 10/31/01 $ 76 0.55% 4.73% 0.98% 4.30% 134%
(b) Not annualized for periods less than one year. # Short periods have been annualized. SEE NOTES TO FINANCIAL STATEMENTS. 155 ULTRA SHARES@
PER SHARE OPERATING PERFORMANCE: ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: LESS DISTRIBUTIONS: --------------------------------------- ------------------------------------------ NET GAINS (LOSSES) ON NET ASSET NET SECURITIES DIVIDENDS VALUE, INVESTMENT (BOTH TOTAL FROM FROM NET DISTRIBUTIONS BEGINNING INCOME REALIZED AND INVESTMENT INVESTMENT FROM CAPITAL TOTAL OF PERIOD (LOSS) UNREALIZED) OPERATIONS INCOME GAINS DISTRIBUTIONS BOND FUND Year Ended 8/31/04 $ 9.95 0.36 0.32 0.68 0.36 0.30 0.66 Year Ended 8/31/03 $ 10.05 0.43 (0.02) 0.41 0.43 0.08 0.51 11/1/01 Through 8/31/02^^ $ 10.09 0.34 0.02 0.36 0.34 0.06 0.40 Year Ended 10/31/01 $ 9.47 0.54^ 0.72 1.26 0.62 0.02 0.64 Year Ended 10/31/00 $ 9.46 0.64 (0.02) 0.62 0.61 -- 0.61 Year Ended 10/31/99 $ 10.02 0.60 (0.57) 0.03 0.59 -- 0.59
@ Prior to the open of business on September 10, 2001, the class underwent a split of shares. Prior periods have been restated to reflect the split. ^^ The fund changed its fiscal year from October 31 to August 31. ^ Calculated based upon average shares outstanding. SEE NOTES TO FINANCIAL STATEMENTS. 156
PER SHARE OPERATING PERFORMANCE: -------------------------------- NET ASSET VALUE, END TOTAL OF PERIOD RETURN (b) BOND FUND Year Ended 8/31/04 $ 9.97 7.05% Year Ended 8/31/03 $ 9.95 4.08% 11/1/01 Through 8/31/02^^ $ 10.05 3.80% Year Ended 10/31/01 $ 10.09 13.63% Year Ended 10/31/00 $ 9.47 6.92% Year Ended 10/31/99 $ 9.46 0.28% RATIOS/SUPPLEMENTAL DATA: ----------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS: # ---------------------------------------------------------------------- NET INVESTMENT NET ASSETS, NET EXPENSES INCOME (LOSS) END OF INVESTMENT WITHOUT WAIVERS, WITHOUT WAIVERS, PORTFOLIO PERIOD NET INCOME REIMBURSEMENTS REIMBURSEMENTS TURNOVER (MILLIONS) EXPENSES (LOSS) AND EARNINGS CREDITS AND EARNINGS CREDITS RATE (b) BOND FUND Year Ended 8/31/04 $ 381 0.40% 3.59% 0.56% 3.43% 571% Year Ended 8/31/03 $ 444 0.40% 4.19% 0.55% 4.04% 679% 11/1/01 Through 8/31/02^^ $ 609 0.40% 4.20% 0.53% 4.07% 572% Year Ended 10/31/01 $ 598 0.37% 6.08% 0.47% 5.98% 423%(x) Year Ended 10/31/00 $ 466 0.35% 6.49% 0.42% 6.42% 531%(x) Year Ended 10/31/99 $ 299 0.36% 6.08% 0.49% 5.95% 465%(x)
(b) Not annualized for periods less than one year. # Short periods have been annualized. (x) Percentages prior to 9/10/01 reflect the portfolio turnover of The U.S. Fixed Income Portfolio, in which the Fund invested all of its investable assets. SEE NOTES TO FINANCIAL STATEMENTS. 157 JPMORGAN FUNDS REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Trustees and Shareholders of J.P. Morgan Mutual Fund Group, J.P. Morgan Institutional Funds, J.P. Morgan Mutual Fund Select Group, J.P. Morgan Series Trust and J.P. Morgan Funds In our opinion, the accompanying statements of assets and liabilities, including the portfolios of investments, and the related statements of operations, of changes in net assets and of cash flows and the financial highlights present fairly, in all material respects, the financial position of JPMorgan Bond Fund, JPMorgan Global Strategic Income Fund, JPMorgan Short Term Bond Fund (separate portfolios of J.P. Morgan Institutional Funds), JPMorgan Short Term Bond Fund II, JPMorgan Strategic Income Fund, JPMorgan U.S. Treasury Income Fund (separate portfolios of J.P. Morgan Mutual Fund Group), JPMorgan Bond Fund II (a separate portfolio of the J.P. Morgan Mutual Fund Select Group), JPMorgan Enhanced Income Fund (a separate portfolio of J.P. Morgan Series Trust) and JPMorgan Fleming Emerging Markets Debt Fund (a separate portfolio of J.P. Morgan Funds), (hereafter referred to as the "Funds") at August 31, 2004, the results of each of their operations and the cash flows of the JPMorgan Global Strategic Income Fund for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP New York, New York October 19, 2004 158 SCHEDULE OF SHAREHOLDER EXPENSES Hypothetical $1,000 Investment at Beginning of Period August 31, 2004 (Unaudited) As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments and redemption fees: and (2) ongoing costs, including investment advisory, administration fees, distribution fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. The examples assume that you had a $1,000 investment in the Class at the beginning of the reporting period, March 1, 2004, and continued to hold your shares at the end of the reporting period, August 31, 2004. ACTUAL EXPENSES For each Class of each Fund in the table below, the first line provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line of each Class under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of each Class in the table below provides information about hypothetical account values and hypothetical expenses based on the Class' actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Class' actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Class of the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) or redemption fees. Therefore, the second line for each Class in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher. The examples also assume all dividends and distributions have been reinvested. 159
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE, ACCOUNT VALUE, MARCH 1 TO ANNUALIZED MARCH 1, 2004 AUGUST 31, 2004 AUGUST 31, 2004* EXPENSE RATIO BOND FUND CLASS A Actual period return $ 1,000 $ 1,012 $ 3.79 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75% CLASS B Actual period return $ 1,000 $ 1,009 $ 7.58 1.50% Hypothetical $ 1,000 $ 1,017 $ 7.61 1.50% CLASS C Actual period return $ 1,000 $ 1,008 $ 7.57 1.50% Hypothetical $ 1,000 $ 1,017 $ 7.61 1.50% INSTITUTIONAL Actual period return $ 1,000 $ 1,013 $ 2.48 0.49% Hypothetical $ 1,000 $ 1,023 $ 2.49 0.49% SELECT Actual period return $ 1,000 $ 1,014 $ 3.34 0.66% Hypothetical $ 1,000 $ 1,022 $ 3.35 0.66% ULTRA Actual period return $ 1,000 $ 1,014 $ 2.02 0.40% Hypothetical $ 1,000 $ 1,023 $ 2.03 0.40% BOND FUND II CLASS A Actual period return $ 1,000 $ 1,009 $ 3.79 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75% CLASS B Actual period return $ 1,000 $ 1,005 $ 7.56 1.50% Hypothetical $ 1,000 $ 1,017 $ 7.61 1.50% SELECT Actual period return $ 1,000 $ 1,010 $ 3.03 0.60% Hypothetical $ 1,000 $ 1,022 $ 3.05 0.60%
* Expenses are equal to the Class' annualized expense ratio in the table above, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 160
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE, ACCOUNT VALUE, MARCH 1 TO ANNUALIZED MARCH 1, 2004 AUGUST 31, 2004 AUGUST 31, 2004* EXPENSE RATIO ENHANCED INCOME FUND INSTITUTIONAL Actual period return $ 1,000 $ 1,007 $ 1.01 0.20% Hypothetical $ 1,000 $ 1,024 $ 1.02 0.20% FLEMING EMERGING MARKETS DEBT FUND SELECT Actual period return $ 1,000 $ 1,041 $ 6.41 1.25% Hypothetical $ 1,000 $ 1,019 $ 6.34 1.25% GLOBAL STRATEGIC INCOME FUND CLASS A Actual period return $ 1,000 $ 1,022 $ 6.35 1.25% Hypothetical $ 1,000 $ 1,019 $ 6.34 1.25% INSTITUTIONAL Actual period return $ 1,000 $ 1,025 $ 3.31 0.65% Hypothetical $ 1,000 $ 1,022 $ 3.30 0.65% SELECT Actual period return $ 1,000 $ 1,023 $ 5.08 1.00% Hypothetical $ 1,000 $ 1,020 $ 5.08 1.00% SHORT TERM BOND FUND CLASS A Actual period return $ 1,000 $ 1,003 $ 3.78 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75% INSTITUTIONAL Actual period return $ 1,000 $ 1,006 $ 1.51 0.30% Hypothetical $ 1,000 $ 1,023 $ 1.53 0.30% SELECT Actual period return $ 1,000 $ 1,004 $ 2.87 0.57% Hypothetical $ 1,000 $ 1,022 $ 2.90 0.57%
* Expenses are equal to the Class' annualized expense ratio in the table above, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 161
EXPENSES PAID BEGINNING ENDING DURING PERIOD ACCOUNT VALUE, ACCOUNT VALUE, MARCH 1 TO ANNUALIZED MARCH 1, 2004 AUGUST 31, 2004 AUGUST 31, 2004* EXPENSE RATIO SHORT TERM BOND FUND II CLASS A Actual period return $ 1,000 $ 1,003 $ 3.78 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75% CLASS M Actual period return $ 1,000 $ 1,002 $ 5.03 1.00% Hypothetical $ 1,000 $ 1,020 $ 5.08 1.00% SELECT Actual period return $ 1,000 $ 1,004 $ 2.52 0.50% Hypothetical $ 1,000 $ 1,022 $ 2.54 0.50% STRATEGIC INCOME FUND CLASS A Actual period return $ 1,000 $ 1,023 $ 6.36 1.25% Hypothetical $ 1,000 $ 1,019 $ 6.34 1.25% CLASS B Actual period return $ 1,000 $ 1,019 $ 8.88 1.75% Hypothetical $ 1,000 $ 1,016 $ 8.87 1.75% CLASS C Actual period return $ 1,000 $ 1,020 $ 8.89 1.75% Hypothetical $ 1,000 $ 1,016 $ 8.87 1.75% CLASS M Actual period return $ 1,000 $ 1,021 $ 7.37 1.45% Hypothetical $ 1,000 $ 1,018 $ 7.35 1.45% U.S. TREASURY INCOME FUND CLASS A Actual period return $ 1,000 $ 1,004 $ 3.78 0.75% Hypothetical $ 1,000 $ 1,021 $ 3.81 0.75% CLASS B Actual period return $ 1,000 $ 998 $ 8.24 1.64% Hypothetical $ 1,000 $ 1,017 $ 8.31 1.64% SELECT Actual period return $ 1,000 $ 1,004 $ 2.77 0.55% Hypothetical $ 1,000 $ 1,022 $ 2.80 0.55%
* Expenses are equal to the Class' annualized expense ratio in the table above, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). 162 TRUSTEE AND OFFICER INFORMATION (UNAUDITED) The following tables contain basic information regarding the Trustees and Officers, respectively, that oversee operations of the Trusts and other investment companies within the JPMorgan Funds complex.
NUMBER OF POSITIONS PORTFOLIOS IN OTHER HELD WITH PRINCIPAL JPMORGAN FUND DIRECTORSHIPS EACH TERM OF OFFICE OCCUPATIONS COMPLEX(1) HELD OUTSIDE NAME, CONTACT ADDRESS JP MORGAN AND LENGTH OF DURING PAST OVERSEEN JPMORGAN FUND AND YEAR OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX - ----------------------------------------------------------------------------------------------------------------------------------- NON-INTERESTED TRUSTEE(S) William J. Armstrong; Trustee Trustee of Funds that Retired; Vice 70 None 522 Fifth Avenue, are series of JPMIF President and New York, NY 10036; since 2001, Funds that Treasurer of 1941 are series of MFSG Ingersoll-Rand Company since 1996 and Funds (manufacturer of that are series of MFG industrial equipment) since 1987. (1972 - 2000) Roland R. Eppley, Jr.; Trustee Trustee of Funds that are Retired 70 Director, Janel Hydro, 522 Fifth Avenue, series of JPMIF since 2001, Inc. (Automotive) New York, NY 10036; Funds that are series of (1993-Present) 1932 MFSG since 1996 and Funds that are series of MFG since 1989. Ann Maynard Gray; Trustee Since 2001 Vice President 70 Director of Duke 522 Fifth Avenue, of Capital Energy Corporation New York, NY 10036; Cities/ABC, Inc. (1997-Present); 1945** (communications) Director of Elan (1986-1998) Corporation, Plc (pharmaceuticals) (2001-Present); Director of The Phoenix Companies (wealth management) (2002-Present) Matthew Healey; Trustee Trustee of Funds that are Retired; Chief 70 None 522 Fifth Avenue, series of of JPMIF since Executive Officer of New York, NY 10036; 1992 and Funds that are certain J.P. Morgan 1937 series of MFG since 2001 Fund Trusts and MFSG since 2001. (1982-2001) Fergus Reid, III; Trustee and Trustee of Funds that are Chairman of Lumelite 70 Trustee Morgan Stanley 522 Fifth Avenue, Chairman of series of JPMIF since 2001, Corporation (plastics Funds (209 portfolios) New York, NY 10036; the Board Funds that are series of manufacturing) (1995-Present) 1932 of Trustees MFSG since 1996 and Funds (2003-Present); that are series of MFG Chairman and CEO of since 1987. Lumelite Corporation (1985-2002)
163
NUMBER OF POSITIONS PORTFOLIOS IN OTHER HELD WITH PRINCIPAL JPMORGAN FUND DIRECTORSHIPS EACH TERM OF OFFICE OCCUPATIONS COMPLEX(1) HELD OUTSIDE NAME, CONTACT ADDRESS JP MORGAN AND LENGTH OF DURING PAST OVERSEEN JPMORGAN FUND AND YEAR OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX - ----------------------------------------------------------------------------------------------------------------------------------- NON-INTERESTED TRUSTEE(S) (CONTINUED) James J. Schonbachler; Trustee Since 2001 Retired; Managing 70 None 522 Fifth Avenue, Director of Bankers New York, NY 10036; Trust Company, 1943 (financial services) (1968-1998) Robert J. Higgins; Trustee Since 2002 Retired; Director of 70 Director of Providian 522 Fifth Avenue, Administration of the Financial Corp. New York, NY 10036; State of Rhode Island (banking) (2002- 1945 (2003-Present); Present) President - Consumer Banking and Investment Services Fleet Boston Financial (1971-2002) Dr. Matthew Goldstein; Trustee Since 2003 Chancellor of the City 70 Director of National 522 Fifth Avenue, University of New Financial Partners New York, NY 10036; York, since September (financial services 1941 1, 1999; President, distributor) (2003- Adelphi University Present); Trustee of (New York) Bronx-Lebanon Hospital (1998-1999). Center (1992-Present); Director of New Plan Excel Realty Trust, Inc. (real estate investment trust) (2000-Present); Director of Lincoln Center Institute for the Arts in Education (1999-Present).
164
NUMBER OF POSITIONS PORTFOLIOS IN OTHER HELD WITH PRINCIPAL JPMORGAN FUND DIRECTORSHIPS EACH TERM OF OFFICE OCCUPATIONS COMPLEX(1) HELD OUTSIDE NAME, CONTACT ADDRESS JP MORGAN AND LENGTH OF DURING PAST OVERSEEN JPMORGAN FUND AND YEAR OF BIRTH TRUST TIME SERVED 5 YEARS BY TRUSTEE COMPLEX - ----------------------------------------------------------------------------------------------------------------------------------- NON-INTERESTED TRUSTEE(s) (CONTINUED) William G. Morton, Jr.; Trustee Since 2003 Chairman Emeritus 70 Director of Radio 522 Fifth Avenue, (2001 - 2002), and Shack Corporation New York, NY 10036; Chairman and (electronics) 1937 Chief Executive (1987-Present); Officer, Boston Director of the Stock Exchange Griswold Company (1985 - 2001). (securities brokerage) (2002-2004); Director of The National Football Foundation and College Hall of Fame (1994-Present); Trustee of the Berklee College of Music (1998-Present); Trustee of the Stratton Mountain School (2001-Present). INTERESTED TRUSTEE(S) Leonard M. Spalding Trustee Trustee of Funds that Retired; Chief 70 None 522 Fifth Avenue, are series of JPMIF Executive Officer of New York, NY 10036; since 2001, Funds that Chase Mutual Funds 1935 are series of MFSG (investment company) since 1996 and Funds (1989-1998); that are series of MFG President and Chief since 1998. Executive Officer of Vista Capital Management (Investment Management) (1990-1998); Chief Investment Executive of Chase Manhattan Private Bank (investment management)(1990-1998)
* Mr. Spalding is deemed to be an "interested person" due to his ownership of equity securities of J.P. Morgan Chase & Co. ** Dana Maynard Gray, the daughter of Ann Maynard Gray, became employed with JPMorgan Securities, Inc., as an Associate Analyst, on May 3, 2004. (1) A Fund Complex means two or more investment companies that hold themselves out to investors as related companies for purposes of investment and investment services or have a common investment advisor or have an investment advisor that is an affiliated person of the investment advisor of any of the other investment companies. The JPMorgan Fund Complex for which the Trustees serve includes 13 investment companies. 165
POSITIONS HELD TERM OF OFFICE NAME, CONTACT ADDRESS WITH EACH AND LENGTH OF PRINCIPAL OCCUPATIONS AND YEAR OF BIRTH JPMORGAN TRUST TIME SERVED DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ OFFICERS George Gatch; President Since 2001 Managing Director, JPMIM; Head of J.P. Morgan Fleming's U.S. 522 Fifth Avenue, Mutual Funds and Financial Intermediaries Business ("FFI"). New York, NY 10036; He has also held numerous positions throughout the firm in 1962 business management, marketing and sales. Robert L. Young; Senior Vice President Since 2004 Mr. Young joined Banc One Investment Advisors Corporation in 522 Fifth Avenue, 1996 and in 1999, he became Vice President and Treasurer of New York, NY 10036; One Group Administrative Services, Inc. and One Group Dealer 1963 Services, Inc. and in 2001, Mr. Young became COO of the One Group Mutual Funds. Patricia A. Maleski; Vice President and Chief Since 2003 Vice President, JPMIM, head of FFI and US Institutional 522 Fifth Avenue, Administrative Officer Funds Administration and Board Liaison. Prior to joining New York, NY 10036; JPMorgan in 2001, she was the Vice President of Finance for 1960 the Pierpont Group, Inc., a service provider to the board of trustees of the heritage JPMorgan Funds. Wayne H. Chan; Vice President and Assistant Since 2003 Vice President and Assistant General Counsel, JPMIM, 522 Fifth Avenue, Secretary since September 2002; Mr. Chan was an associate at the New York, NY 10036; law firm of Shearman and Sterling from May 2001 through 1965 September 2002; Swidler Berlin Shereff Friedman LLP from June 1999 through May 2001 and Whitman Breed Abbott & Morgan LLP from September 1997 through May 1999. Stephanie J. Dorsey Treasurer Since 2004 Director of Mutual Fund Administration, One Group 522 Fifth Avenue, Administrative Services, since January 2004; Ms. Dorsey New York, NY 10036; worked for Bank One Corporation from January 2003 to January 1969 2004; Prior to joining Bank One Corporation, she held various positions at PricewaterhouseCoopers LLP from September 1992. Jessica K. Ditullio Assistant Secretary Since 2004 From August 1990 to present, various attorney positions 522 Fifth Avenue, for Bank One Corporation (now known as JPMorgan Chase & Co.) New York, NY 10036; 1963 Nancy E. Fields Assistant Secretary Since 2004 From October 1999 to present, Director, Mutual Fund 522 Fifth Avenue, Administration, One Group Administrative Services, Inc. New York, NY 10036; and Senior Project Manager, Mutual Funds, One Group 1949 Dealer Services, Inc. From July 1999 to October 1999, Project Manager, One Group, Banc One Investment Advisors Corporation.
166
POSITIONS HELD TERM OF OFFICE NAME, CONTACT ADDRESS WITH EACH AND LENGTH OF PRINCIPAL OCCUPATIONS AND YEAR OF BIRTH JPMORGAN TRUST TIME SERVED DURING PAST 5 YEARS - ------------------------------------------------------------------------------------------------------------------------------------ Alaina Metz Assistant Secretary Since 2001 Chief Administrative Officer of BISYS Fund Services, Inc.; 3435 Stelzer Rd. formerly, Supervisor of the Blue Sky Department of Columbus, OH 43219 Alliance Capital Management, L.P. 1967 Martin R. Dean Assistant Treasurer Since 2001 Vice President of Regulatory Services of BISYS Fund 3435 Stelzer Rd. Services, Inc. Columbus, OH 43219 1963 Arthur A. Jensen Assistant Treasurer Since 2001 Vice President of Financial Services of BISYS Fund 3435 Stelzer Rd. Services, Inc. since June 2001; formerly Section Manager Columbus, OH 43219 of Northern Trust Company and Accounting Supervisor at 1966 Allstate Insurance Company. Christopher D. Walsh Assistant Treasurer Since 2004 Vice President, JPMIM; Mr. Walsh manages all aspects of 522 Fifth Avenue, institutional and retail mutual fund administration and New York, NY 10036; vendor relationships within the mutual funds, 1965 commingled/Erisa funds, 3C-7 funds, hedge funds and LLC products. Prior to joining JPMorgan in 2000, he was a director from 1996 to 2000 of Mutual Fund Administration at Prudential Investments. Paul M. DeRusso Assistant Treasurer Since 2001 Vice President, JPMIM; Manager of the Budgeting and 522 Fifth Avenue, Expense Group of Funds Administration Group. New York, NY 10036; 1954 Mary D. Squires Assistant Treasurer Since 2001 Vice President, JPMIM; Ms. Squires has held numerous 522 Fifth Avenue, financial and operations positions supporting the J.P. New York, NY 10036; Morgan Chase organization complex. 1955 Stephen M. Ungerman Chief Compliance Officer Since 2004 Vice President, JPMIM; Fund Administration - Pooled 522 Fifth Avenue, Vehicles; prior to joining J.P. Morgan Chase in 2000, he New York, NY 10036; held a number of positions in Prudential Financial's asset 1953 management business, including Assistant General Counsel, Tax Director and Co-head of Fund Administration; Mr. Ungerman also served as Assistant Treasurer for all mutual funds managed by Prudential.
Additional information concerning the Trustees is contained in the Statement of Additional Information and is available without charge by calling 1-800-348-4782. 167 TAX LETTER (UNAUDITED) JPMorgan Bond Fund ("BF") JPMorgan Bond Fund II ("BFII") JPMorgan Enhanced Income Fund ("EIF") JPMorgan Fleming Emerging Markets Debt Fund ("EMDF") JPMorgan Global Strategic Income Fund ("GSIF") JPMorgan Short Term Bond Fund ("STBF") JPMorgan Short Term Bond Fund II ("STBFII") JPMorgan Strategic Income Fund ("SIF") JPMorgan U.S. Treasury Income Fund ("USTI") Certain tax information for the JPMorgan Funds is required to be provided to shareholders based upon the Funds' income and distributions for the taxable year end August 31, 2004. The information and distributions reported in this letter may differ from the information and taxable distributions reported to the shareholders for the calendar year ending December 31, 2004. The information necessary to complete your income tax returns for the calendar year ending December 31, 2004 will be received under separate cover. During the period ended August 31, 2004, the following long-term capital gains were distributed by the following Funds:
LONG-TERM CAPITAL GAINS DISTRIBUTION FUND BF $ 19,415,785 BF II 5,293,048
168 JPMORGAN FAMILY OF FUNDS U.S. EQUITY FUNDS Capital Growth Fund Disciplined Equity Fund Diversified Fund Dynamic Small Cap Fund Equity Growth Fund Equity Income Fund Growth and Income Fund Mid Cap Equity Fund Mid Cap Growth Fund Mid Cap Value Fund Small Cap Equity Fund Small Cap Growth Fund Trust Small Cap Equity Fund U.S. Equity Fund U.S. Small Company Fund U.S. Small Company Opportunities Fund Value Opportunities Fund INTERNATIONAL EQUITY FUNDS Fleming Asia Equity Fund Fleming Emerging Markets Equity Fund Fleming Intrepid European Fund Fleming International Equity Fund Fleming International Growth Fund Fleming International Opportunities Fund Fleming International Value Fund Fleming Japan Fund SPECIALTY FUNDS Global 50 Fund Global Healthcare Fund Market Neutral Fund TAX AWARE FUNDS Fleming Tax Aware International Opportunities Fund Tax Aware Disciplined Equity Fund Tax Aware Enhanced Income Fund Tax Aware Large Cap Growth Fund Tax Aware Large Cap Value Fund Tax Aware Short-Intermediate Income Fund Tax Aware U.S. Equity Fund INCOME FUNDS Bond Fund Bond Fund II Enhanced Income Fund Fleming Emerging Markets Debt Fund Global Strategic Income Fund Short Term Bond Fund Short Term Bond Fund II Strategic Income Fund U.S. Treasury Income Fund TAX FREE FUNDS California Bond Fund Intermediate Tax Free Income Fund New Jersey Tax Free Income Fund New York Intermediate Tax Free Income Fund Tax Free Income Fund MONEY MARKET FUNDS 100% U.S. Treasury Securities Money Market Fund California Tax Free Money Market Fund Federal Money Market Fund Liquid Assets Money Market Fund New York Tax Free Money Market Fund Prime Money Market Fund Tax Free Money Market Fund Treasury Plus Money Market Fund U.S. Government Money Market Fund UNDISCOVERED MANAGERS FUNDS Behavioral Growth Fund Behavioral Value Fund REIT Fund Small Cap Growth Fund Funds may be registered under separate registrants. 169 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 FUNDS' PROSPECTUS WHICH INCLUDES INFORMATION ON THE FUNDS' INVESTMENT OBJECTIVES, RISK, AS WELL AS CHARGES AND EXPENSES ALONG WITH OTHER INFORMATION. INVESTORS SHOULD REVIEW THE INFORMATION IN THE PROSPECTUS CAREFULLY BEFORE INVESTING. FOR UP TO DATE MONTH-END PERFORMANCE INFORMATION, OR TO RECEIVE A FUND'S PROSPECTUS PLEASE CALL 800 348-4782. PLEASE READ CAREFULLY BEFORE INVESTING OR SENDING MONEY. No sooner than 30 days after the end of each month, the Fund will make available upon request a complete uncertified schedule of its portfolio holdings as of the last day of that month. Not later than 60 days after the end of each fiscal quarter, the Fund will make available a complete schedule of its portfolio holdings as of the last day of that quarter, as filed in a certified filing with the SEC. In addition to providing hard copies upon request, the Fund will post these quarterly schedules on the Fund's website at www.jpmorganfunds.com and on the SEC's website at www.sec.gov. Shareholders may request portfolio holdings schedules at no charge by calling 1-800-480-4111. A description of the Fund's policies and procedures with respect to the disclosure of the Fund's portfolio holdings is available in the Statement of Additional Information. A copy of proxy policies and procedures are available without charge upon request by calling 1-800-348-4782 and on the Commission's website at www.sec.gov. The Trustees have delegated the authority to vote proxies for securities owned by the Fund to JPMIM. A copy of the Fund's voting record for the 12-month period ended June 30, 2004 is available on the SEC's website at www.sec.gov or at the Fund's website at www.jpmorgan.com. The Fund's proxy voting record will include, among other things, a brief description of the matter voted on for each portfolio security, and will state how each vote was cast, for example, for or against the proposal. JPMorgan Funds Fulfillment Center PRSRT STD 6112 W. 73rd Street U.S. POSTAGE Bedford Park, IL 60638 PAID PERMIT 2891 KANSAS CITY, MO (C) J.P. Morgan Chase & Co., 2004 All rights reserved. August 2004. AN-INC-804 ITEM 2. CODE OF ETHICS. Disclose whether, as of the end of the period covered by the report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. If the registrant has not adopted such a code of ethics, explain why it has not done so. THE REGISTRANT HAS ADOPTED A CODE OF ETHICS THAT APPLIES TO THE REGISTRANT'S PRINCIPAL EXECUTIVE OFFICER, PRINCIPAL FINANCIAL OFFICER, PRINCIPAL ACCOUNTING OFFICER OR CONTROLLER, OR PERSONS PERFORMING SIMILAR FUNCTIONS. THE REGISTRANT WILL PROVIDE TO ANY PERSON WITHOUT CHARGE, UPON REQUEST, A COPY OF THE CODE OF ETHICS. A REQUEST MAY BE MADE BY CALLING 1-800-348-4782. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. (a) (1) Disclose that the registrant's board of directors has determined that the registrant either: (i) Has at least one audit committee financial expert serving on its audit committee; or (ii) Does not have an audit committee financial expert serving on its audit committee. THE REGISTRANT'S BOARD OF DIRECTORS HAS DETERMINED THAT THE REGISTRANT HAS AT LEAST ONE AUDIT COMMITTEE FINANCIAL EXPERT SERVING ON ITS AUDIT COMMITTEE. (2) If the registrant provides the disclosure required by paragraph (a)(1)(i) of this Item, it must disclose the name of the audit committee financial expert and whether that person is "independent." In order to be considered "independent" for purposes of this Item, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee: (i) Accept directly or indirectly any consulting, advisory, or other compensatory fee from the issuer; or (ii) Be an "interested person" of the investment company as defined in Section 2(a)(19) of the Act (15 U.S.C. 80a- 2(a)(19)). THE AUDIT COMMITTEE FINANCIAL EXPERT IS WILLIAM ARMSTRONG. HE IS A "NON-INTERESTED" TRUSTEE AND IS ALSO "INDEPENDENT" AS DEFINED BY THE SECURITIES AND EXCHANGE COMMISSION FOR PURPOSES OF AUDIT COMMITTEE FINANCIAL EXPERT DETERMINATIONS. (3) If the registrant provides the disclosure required by paragraph (a)(1)(ii) of this Item, it must explain why it does not have an audit committee financial expert. NOT APPLICABLE. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. (a) AUDIT FEES. The aggregate fees billed for each of the last two fiscal years (the "Reporting Periods") for professional services rendered by the Registrant's principal accountant (the "Auditor") for the audit of the Registrant's annual financial statements, or services that are normally provided by the Auditor in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $93,186 in 2003 and $91,631 in 2004. (b) AUDIT-RELATED FEES. There were no audit-related fees for the Registrant during the Reporting Periods. The aggregate fees billed in the Reporting Periods for assurance and related services by the Auditor to the Registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by or under common control with the investment adviser that provides ongoing services to the Registrant ("Service Affiliates"), that were reasonably related to the performance of the annual audit of the Service Affiliates, which required pre-approval by the Audit Committee were $8,277,000 from May 6, 2003 to December 31, 2003 (prior to May 6, 2003 services provided by the Auditor were not required to be pre-approved). (c) TAX FEES. The aggregate fees billed to the Registrant in the Reporting Periods for professional services rendered by the Auditor for tax compliance, tax advice and tax planning ("Tax Services") were $8,200 in 2003 and $8,400 in 2004. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns. There were no fees billed for Tax Services by the Auditor to Service Affiliates which required pre-approval by the Audit Committee for the period May 6, 2003 through December 31, 2003. (d) ALL OTHER FEES. There were no other fees billed in the Reporting Periods for products and services provided by the Auditor to the Registrant, or services provided to Service Affiliates which were required to be pre-approved on or after May 6, 2003 until December 31, 2003, other than the services reported above. (e) AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES. In addition to pre-approving any services to be provided by the Auditor to the Registrant, the Audit Committee considers and approves any non-audit services to be provided to the Service Affiliates by the Auditor and the fees to be charged for such non-audit services. Pre-approval considerations include whether the proposed services are compatible with maintaining the Auditor's independence. The Chairman of the Audit Committee has been given the authority to pre-approve permissible non-audit services. (g) NON-AUDIT FEES. The aggregate non-audit fees billed by the Auditor for services rendered to the Registrant, and rendered to Service Affiliates, for the last two calendar year ends were $46.4 million in 2002 and $28.3 million in 2003. (h) AUDITOR INDEPENDENCE. The Registrant's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates that were not pre-approved (not requiring pre-approval) is compatible with maintaining the Auditor's independence. All services provided by the Auditor to the Registrant or to Service Affiliates that were required to be pre-approved were pre-approved as required. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. (a) If the registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act (17CFR 240.10A-3), state whether or not the registrant has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act (15 U.S.C. 78c(a)(58)(A)). If the registrant has such a committee, however designated, identify each committee member. If the entire board of directors is acting as the registrant's audit committee as specified in Section 3(a)(58)(B) of the Exchange Act (15 U.S.C. 78c(a)(58)(B)), so state. (b) If applicable, provide the disclosure required by Rule 10A-3(d) under the Exchange Act (17CFR 240.10A-3(d)) regarding an exemption from the listing standards for all audit committees. NOT APPLICABLE. ITEM 6. SCHEDULE OF INVESTMENTS. File Schedule I - Investments in securities of unaffiliated issuers as of the close of the reporting period as set forth in Section 210.12-12 of Regulation S-X, unless the schedule is included as part of the report to shareholders filed under Item 1 of this Form. NOT APPLICABLE. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. A closed-end management investment company that is filing an annual report on this Form N-CSR must, unless it invests exclusively in non-voting securities, describe the policies and procedures that it uses to determine how to vote proxies relating to portfolio securities, including the procedures that the company uses when a vote presents a conflict between the interests of its shareholders, on the one hand, and those of the company's investment adviser; principal underwriter; or any affiliated person (as defined in Section 2(a)(3) of the Investment Company Act of 1940 (15 U.S.C. 80a-2(a)(3)) and the rules thereunder) of the company, its investment adviser, or its principal underwriter, on the other. Include any policies and procedures of the company's investment adviser, or any other third party, that the company uses, or that are used on the company's behalf, to determine how to vote proxies relating to portfolio securities. NOT APPLICABLE. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. (a) If the registrant is a closed-end management investment company, provide the information specified in paragraph (b) of this Item with respect to any purchase made by or on behalf of the registrant or any "affiliated purchaser," as defined in Rule 10b-18(a)(3) under the Exchange Act (17 CFR 240.10b-18(a)(3)), of shares or other units of any class of the registrant's equity securities that is registered by the registrant pursuant to Section 12 of the Exchange Act (15 U.S.C. 781). NOT APPLICABLE. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Describe any material changes to the procedures by which shareholders may recommend nominees to the registrant's board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 7(d)(2)(ii)(G) of Schedule 14A (17 CFR 240.14a-101), or this Item. NOT APPLICABLE. ITEM 10. CONTROLS AND PROCEDURES. (a) Disclose the conclusions of the registrant's principal executive and principal financial officers, or persons performing similar functions, regarding the effectiveness of the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Act (17 CFR 270.30a-3(c))) as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Exchange Act (17 CFR 240.13a-15(b) or 240.15d-15(b)). THE REGISTRANT'S PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS HAVE CONCLUDED, BASED ON THEIR EVALUATION OF THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES AS OF A DATE WITHIN 90 DAYS OF THE FILING DATE OF THIS REPORT, THAT THE REGISTRANT'S DISCLOSURE CONTROLS AND PROCEDURES ARE REASONABLY DESIGNED TO ENSURE THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT ON FORM N-CSR IS RECORDED, PROCESSED, SUMMARIZED AND REPORTED WITHIN THE REQUIRED TIME PERIODS AND THAT INFORMATION REQUIRED TO BE DISCLOSED BY THE REGISTRANT IN THE REPORTS THAT IT FILES OR SUBMITS ON FORM N-CSR IS ACCUMULATED AND COMMUNICATED TO THE REGISTRANT'S MANAGEMENT, INCLUDING ITS PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS, AS APPROPRIATE TO ALLOW TIMELY DECISIONS REGARDING REQUIRED DISCLOSURE. (b) Disclose any change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. THERE WERE NO CHANGES IN THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING THAT OCCURRED DURING THE REGISTRANT'S MOST RECENT FISCAL HALF-YEAR (THE REGISTRANT'S SECOND FISCAL HALF-YEAR IN THE CASE OF AN ANNUAL REPORT) THAT HAVE MATERIALLY AFFECTED, OR ARE REASONABLY LIKELY TO MATERIALLY AFFECT, THE REGISTRANT'S INTERNAL CONTROL OVER FINANCIAL REPORTING. ITEM 11. EXHIBITS. (a) File the exhibits listed below as part of this Form. Letter or number the exhibits in the sequence indicated. (a)(1) Any code of ethics, or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy the Item 2 requirements through filing of an exhibit. NOT APPLICABLE - SEE ITEM 2 ABOVE. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2). CERTIFICATIONS PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 ARE ATTACHED HERETO. (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 Funds -------------------------------------------------------------------- By (Signature and Title)* /s/ Stephanie J. Dorsey ------------------------------------------------------- Stephanie J. Dorsey, Treasurer Date November 5, 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/ Stephanie J. Dorsey ----------------------------------------------------- Stephanie J. Dorsey, Treasurer Date November 5, 2004 ---------------------------------------------------------------------------- By (Signature and Title)* /s/ George C.W. Gatch ------------------------------------------------------- George C.W. Gatch, President Date November 9, 2004 ---------------------------------------------------------------------------- * Print the name and title of each signing officer under his or her signature. EX-99.CERT 2 a2145904zex-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 Fleming Emerging Markets Debt Fund (the "Fund"), a series of J.P. Morgan Funds (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 November 9, 2004 - ---------------- Date CERTIFICATION PURSUANT TO RULE 30a-2(a) UNDER THE INVESTMENT COMPANY ACT OF 1940 I, Stephanie J. Dorsey, certify that: 1. I have reviewed this report on Form N-CSR of the JPMorgan Fleming Emerging Markets Debt Fund (the "Fund"), a series of J.P. Morgan Funds (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/ Stephanie J. Dorsey - ------------------------ Stephanie J. Dorsey Treasurer November 5, 2004 - ---------------- Date EX-99.906CERT 3 a2145904zex-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 of the JPMorgan Fleming Emerging Markets Debt Fund (the "Fund"), a series of J.P. Morgan Funds. 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 November 9, 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 Securities 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 of the JPMorgan Fleming Emerging Markets Debt Fund (the "Fund"), a series of J.P. Morgan Funds. I, Stephanie J. Dorsey, 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 Fund. /s/ Stephanie J. Dorsey - -------------------------- Stephanie J. Dorsey Treasurer November 5, 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 Securities Exchange Act of 1934. -----END PRIVACY-ENHANCED MESSAGE-----