<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN EMERGING MARKETS DEBT FUND
September 1, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan Emerging Markets Debt Fund
delivered a total return of 34.12% for the 12 months ended July 31, 2000. The
fund strongly outperformed its benchmark, the Emerging Markets Bond Index
Global, which returned 26.30%, and the Lipper Emerging Markets Debt Funds
Average, which returned 25.18% for the period.
The fund's net asset value on July 31, 2000 was $8.77 per share, increasing from
$7.29 per share on July 31, 1999. The fund's net assets stood at $20.2 million
on July 31, 2000.
Included in this report is an interview with Paul Dickson, a member of the
portfolio management team. This interview is designed to reflect what happened
during the reporting period, as well as provide an outlook for the months ahead.
As chairman and president of Asset Management Services, we thank you for
investing with J.P. Morgan. Should you have any comments or questions, please
telephone your Morgan representative or J.P. Morgan Funds Services at
800-521-5411.
Sincerely yours,
/s/ Ramon de Oliveira /s/ Keith M. Schappert
Ramon de Oliveira Keith M. Schappert
Chairman of Asset Management Services President of Asset Management Services
J.P. Morgan & Co. Incorporated J.P. Morgan & Co. Incorporated
--------------------------------------------------------------------------------
TABLE OF CONTENTS
LETTER TO THE SHAREHOLDERS............1 FUND FACTS AND HIGHLIGHTS............7
FUND PERFORMANCE......................2 FINANCIAL STATEMENTS................10
PORTFOLIO MANAGER Q&A.................3
--------------------------------------------------------------------------------
1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
There are several ways to evaluate a mutual fund's historical performance
record. One approach is to look at the growth of a hypothetical investment of
$10,000. The chart at right shows that $10,000 invested on April 30, 1997,*
would have increased to $12,506 on July 31, 2000.
Another way to look at performance is to review a fund's average annual total
return. This figure takes the fund's actual (or cumulative) return and shows
what would have happened if the fund had achieved that return by performing
at a constant rate each year. Average annual total returns represent the
average yearly change of a fund's value over various time periods, typically
one, five, or ten years (or since inception). Total returns for periods of
less than one year are not annualized and provide a picture of how a fund has
performed over the short term.
GROWTH OF $10,000 SINCE FUND INCEPTION* APRIL 30, 1997 - JULY 31, 2000
[GRAPH]
<TABLE>
<CAPTION>
JP MORGAN EMERGING MARKETS DEBT LIPPER EMERGING MARKETS DEBT FUNDS AVERAGE EMBI GLOBAL BENCHMARK
Net Monthly PLOT Monthly PLOT Monthly PLOT
Index Returns POINTS Returns POINTS Index Returns POINTS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
4/30/97 2550.00 10,000 10,000 145.41 10,000
5/31/97 2627.50 0.03 10,304 0.04 10387.13 150.34 0.03 10,339
6/30/97 2670.00 0.02 10,471 0.03 10679.76 153.63 0.02 10,565
7/31/97 2725.00 0.02 10,686 0.04 11071.63 159.98 0.04 11,002
8/31/97 2697.29 (0.01) 10,578 (0.01) 11012.86 159.21 (0.00) 10,949
9/30/97 2764.40 0.02 10,841 0.03 11336.12 163.62 0.03 11,253
10/31/97 2465.14 (0.11) 9,667 (0.10) 10160.98 146.29 (0.11) 10,060
11/30/97 2587.22 0.05 10,146 0.04 10524.24 152.49 0.04 10,487
12/31/97 2636.67 0.02 10,340 0.03 10817.53 156.22 0.02 10,743
1/31/98 2630.96 (0.00) 10,318 (0.00) 10791.73 156.97 0.00 10,795
2/28/98 2705.44 0.03 10,610 0.03 11091.05 161.12 0.03 11,080
3/31/98 2771.75 0.02 10,870 0.03 11374.20 164.78 0.02 11,332
4/30/98 2774.46 0.00 10,880 0.00 11369.55 165.16 0.00 11,358
5/31/98 2684.16 (0.03) 10,526 (0.04) 10925.44 160.17 (0.03) 11,015
6/30/98 2586.18 (0.04) 10,142 (0.04) 10520.08 156.11 (0.03) 10,736
7/31/98 2615.77 0.01 10,258 0.01 10626.22 157.02 0.01 10,799
8/31/98 1910.28 (0.27) 7,491 (0.32) 7231.82 114.09 (0.27) 7,846
9/30/98 2024.31 0.06 7,938 0.06 7644.96 123.95 0.09 8,524
10/31/98 2158.54 0.07 8,465 0.06 8118.00 131.87 0.06 9,069
11/30/98 2287.99 0.06 8,973 0.08 8796.26 140.91 0.07 9,690
12/31/98 2216.60 (0.03) 8,693 (0.03) 8553.01 138.18 (0.02) 9,503
1/31/99 2117.71 (0.04) 8,305 (0.03) 8311.12 135.04 (0.02) 9,286
2/28/99 2141.58 0.01 8,398 0.01 8421.31 136.37 0.01 9,378
3/31/99 2304.16 0.08 9,036 0.06 8932.24 145.41 0.07 10,000
4/30/99 2503.48 0.09 9,818 0.07 9566.08 154.35 0.06 10,615
5/31/99 2329.04 (0.07) 9,133 (0.05) 9081.94 146.38 (0.05) 10,066
6/30/99 2440.14 0.05 9,569 0.04 9459.89 152.00 0.04 10,453
7/31/99 2377.78 (0.03) 9,325 (0.01) 9315.43 149.47 (0.02) 10,279
8/31/99 2364.41 (0.01) 9,272 (0.00) 9289.94 149.57 0.00 10,286
9/30/99 2445.97 0.03 9,592 0.03 9506.78 154.27 0.03 10,609
10/31/99 2551.83 0.04 10,007 0.04 9869.45 159.73 0.04 10,985
11/30/99 2629.90 0.03 10,313 0.03 10220.05 164.01 0.03 11,279
12/31/99 2792.23 0.06 10,950 0.05 10749.22 171.61 0.05 11,802
1/31/00 2764.40 (0.01) 10,841 (0.01) 10643.43 168.97 (0.02) 11,620
2/29/00 2990.53 0.08 11,728 0.06 11269.14 178.04 0.05 12,244
3/31/00 3096.45 0.04 12,143 0.02 11552.32 182.88 0.03 12,577
4/30/00 3019.55 (0.02) 11,841 (0.02) 11235.43 179.52 (0.02) 12,345
5/31/00 2912.16 (0.04) 11,420 (0.03) 10885.63 175.37 (0.02) 12,060
6/30/00 3078.09 0.06 12,071 0.05 11431.99 183.54 0.05 12,622
7/31/00 3189.02 0.04 12,506 0.02 11,725 188.77 0.03 12,982
----------------------------------------------------------------------------------------------------------------------
39
7.12% 5.02% 8.36%
</TABLE>
PERFORMANCE
<TABLE>
<CAPTION>
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------ ---------------------------------
THREE SIX ONE THREE SINCE
AS OF JULY 31, 2000 MONTHS MONTHS YEAR YEARS INCEPTION*
---------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Emerging Markets Debt 5.61% 15.36% 34.12% 5.38% 7.12%
Emerging Markets Bond Index Global** 5.16% 11.72% 26.30% 5.76% 8.36%
Lipper Emerging Markets Debt Average*** 4.26% 10.15% 25.18% 2.46% 4.90%
<CAPTION>
TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
------------------ ---------------------------------
THREE SIX ONE THREE SINCE
AS OF JUNE 30, 2000 MONTHS MONTHS YEAR YEARS INCEPTION*
---------------------------------------------------------------------- ---------------------------------
<S> <C> <C> <C> <C> <C>
J.P. Morgan Emerging Markets Debt -0.59% 10.24% 26.14% 4.86% 6.12%
Emerging Markets Bond Index Global** 0.36% 6.95% 20.75% 6.11% 7.63%
Lipper Emerging Markets Debt Average*** -0.67% 6.45% 20.74% 2.45% 4.20%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON APRIL 17, 1997 AND HAS PROVIDED AN AVERAGE
ANNUAL TOTAL RETURN OF 7.96% FROM THAT DATE THROUGH JULY 31, 2000. FOR THE
PURPOSE OF COMPARISON, THE "SINCE INCEPTION" RETURNS IN THE TABLE ABOVE ARE
CALCULATED FROM APRIL 30, 1997, THE FIRST DATE WHEN DATA FOR THE FUND, ITS
BENCHMARK, AND ITS LIPPER CATEGORY AVERAGE WERE ALL AVAILABLE.
**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 EMERGING MARKETS BOND INDEX GLOBAL DOES NOT INCLUDE FEES OR
OPERATING EXPENSES AND IS NOT AVAILABLE FOR ACTUAL INVESTMENT.
***DESCRIBES THE AVERAGE TOTAL RETURN FOR ALL FUNDS IN THE INDICATED LIPPER
CATEGORY, AS DEFINED BY LIPPER INC., AND DOES NOT TAKE INTO ACCOUNT APPLICABLE
SALES CHARGES. FUND RETURNS ARE NET OF FEES, ASSUME THE REINVESTMENT OF
DISTRIBUTIONS, AND REFLECT THE REIMBURSEMENT OF CERTAIN FUND AND PORTFOLIO
EXPENSES AS DESCRIBED IN THE PROSPECTUS. HAD EXPENSES NOT BEEN REIMBURSED,
RETURNS WOULD HAVE BEEN LOWER. LIPPER ANALYTICAL SERVICES, INC. IS A LEADING
SOURCE FOR MUTUAL FUND DATA. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with PAUL DICKSON, vice president and member of the
Emerging Markets Debt team. Prior to becoming a J.P. Morgan Investment
Management employee in 1999, he was the senior emerging markets debt strategist
at Lehman Brothers, where he was responsible for sovereign risk analysis and
asset recommendations and ran a dedicated emerging markets model portfolio.
Before his tenure at Lehman, he held a similar position with the Chase Manhattan
Bank from 1993 to 1997. He has been involved in a number of sovereign debt
restructurings and, among a number of capital markets transactions, worked
closely on the 1996 Mexican Brady exchange. Prior to coming to Wall Street, he
conducted a seminar at the Johns Hopkins University, School of Advanced
International Studies on Finance in Emerging Markets and also managed the
School's Center for Brazilian Studies. Paul holds a dual M.A. in international
economics and international studies from the Johns Hopkins University. This
interview was conducted on August 13, 2000 and reflects his views on that date.
WHAT WERE A FEW OF THE KEY EVENTS THAT DEFINED THE EMERGING MARKETS DEBT
UNIVERSE, DURING THE YEAR ENDED JULY 31, 2000?
PD: Clearly, Moody's upgrade of Mexico's debt to investment grade in early March
of this year ranks among the top events, one that helped to stimulate debt
markets throughout the Latin American region. Elsewhere, Russia successfully
renegotiated its Soviet-era debt. This helped to close out the unfortunate
episode of the Russian debt default and devaluation crisis of 1998.
A constant and highly positive theme for the period in question was Brazil's
ability to meet and exceed all of its IMF targets. If you had asked analysts
18-24 months ago whether Brazil could meet these targets, most would have said
no, that it would have been politically impossible. Fortunately, the Brazilian
government surprised nearly everyone by effectively managing its economy, its
debt, and its fiscal policy - in many ways following Mexico's successful
example.
WHAT ARE THE KEY DETERMINANTS OF WHETHER YOU WILL OR WILL NOT BUY EMERGING
MARKET DEBT?
PD: Our strategy in emerging markets debt is built upon a fundamental analysis
of a country's economic prospects. Here, our focus is on sovereign debt, as
opposed to corporate debt. This is not an exclusive focus, as we do invest in
corporate debt, but only if spreads are appreciably wider than sovereign debt,
and the corporations in question possess solid fundamentals.
In the sovereign world, we look at issues of fiscal solvency, monetary policy,
and the ability of a country to service its long-term debt. We use this analysis
to determine the value of its debt relative to current yield spreads. We also
try to capitalize on underlying improvements in creditworthiness that the market
at large has not valued appropriately. Brazil was a very good example of this.
We were overweight Brazil well before everyone else realized how quickly this
country was coming around.
3
<PAGE>
WHAT COUNTRIES CURRENTLY MERIT A BUY AND WHY?
PD: Brazil is still a buy, as is Russia. Brazil likely will continue to benefit
from liquidity flows into the region and its own demonstrated success in
managing its economy. In the case of Russia, President Putin's cabinet is doing
a great job of developing a sound fiscal policy and monetary discipline.
Progress is also being made on much needed reforms to the country's financial
sector.
Colombia may also merit some special attention at this point in time, despite
some difficult political issues that have kept yields there very high. One of
these issues is that the president's party doesn't have a majority in the
country's legislature. This certainly hinders his ability to pass needed
reforms, particularly in the banking sector. Colombia also continues to be beset
by expensive and problematic drug- and guerrilla-related issues. Looking
forward, the question to be answered is whether a minority government can
legislate or impose sufficient fiscal discipline to ensure the country's
long-term solvency. The government has made tremendous strides in this
direction, but only time will tell whether it eventually succeeds.
HAVE YOU FOUND ANY PROSPECTS IN EASTERN EUROPE?
PD: Absolutely. In Eastern Europe, the key buys are Bulgaria and Turkey.
Bulgaria is slowly progressing toward entry into the European Union (EU). While
it will take years to make this transition, its government is maintaining the
policy mix that is needed to achieve this long-term goal. We view this
steadfastness and forward thinking very favorably. Turkey has also been invited
to enter the EU. As is the case with Bulgaria, it is working with the IMF to
stabilize the economy, bring down inflation, and fix its fiscal accounts in
preparation for its eventual entry into the EU. We saw this process play out in
Poland, the Czech Republic, and Hungary, all of which are closer to entering the
EU. Their success in managing their fiscal accounts has led to tremendous
returns, and tremendous spread compression in their debt. While it may take a
little longer for Turkey and Bulgaria to do the same, we believe they are well
on their way.
AND IN THE ASIA/PACIFIC REGION?
PD: There, most of the countries have performed so well over the last two years
that sovereign debt spreads are relatively tight. There are, however, some
specific corporate names that are attractive at current spread levels. We are
also looking at the Philippines. Like Colombia, this country has experienced
some problems on the political and fiscal fronts. In our view, the market
appears to have focused more on the problems than the solutions being
implemented there, and thus have punished the country unduly over the past six
months or so. We are closely monitoring the situation to determine when might be
the best time to step in and take advantage of what may be a near-term
turnaround.
4
<PAGE>
WE ALMOST NEVER HEAR ABOUT THE DEBT PROSPECTS OF EMERGING NATIONS IN AFRICA. IS
THERE A MARKET FOR AFRICAN DEBT?
PD: To some extent. South Africa is, of course, an investment grade country, and
investors do buy its debt. Egypt is investment grade as well, but its debt is
not as commonly purchased by emerging markets debt investors. And there is some
debt in Morocco and Algeria that some investors find attractive. Algeria is more
of an oil play, and Morocco is a reasonably high-grade credit. Unfortunately,
that's about where it ends, as most other African nations are simply too risky
at the present time.
WHAT EFFECTS DO RISING U.S. INTEREST RATES HAVE ON THE ABILITY OF EMERGING
NATIONS TO BORROW?
PD: Rising U.S. interest rates increase the borrowing costs of emerging nations,
which must compete against the world's leading economy for global capital. As
investors are lured by higher rates here, there is less money available for
emerging nations. This hurts the ability of local corporations to raise money
and, by extension, damages their respective country's growth prospects.
These, among other negative impacts, were our main concerns going into the year
2000. Fortunately, the U.S. economy has begun to slow a little bit, and the
prospects for substantial future rate increases here have diminished. So, it is
beginning to look like emerging markets may soon be able to move back into
global capital markets in a big way.
HOW DID THE PORTFOLIO PERFORM OVER THIS REPORTING PERIOD?
PD: We did very well, actually. For the year ended July 31, 2000, we had a
return of 34.12%, well ahead of both our peer group and the Emerging Markets
Bond Index Global benchmark, which returned 25.18% and 26.30%, respectively.
WHAT DROVE PERFORMANCE OVER THIS PERIOD?
PD: We were ahead of the curve in our recognition of Russia's debt resolution
prospects, and so benefited handsomely. Our holdings in Soviet-era debt, for
example, tripled in price from when we bought it, making it our best investment
over this reporting period in terms of actual performance. Of course, owing to
our diversified strategy, we didn't have an unreasonable amount of this debt in
the portfolio, but the amount that we did have greatly assisted performance. We
also correctly anticipated the timing of Mexico's upgrade, which was very
helpful. Finally, we participated in a number of Brady bond exchanges in
Argentina and elsewhere, which boosted performance significantly.
5
<PAGE>
WHAT EFFECT DID BRAZIL HAVE ON PERFORMANCE?
PD: We were overweighted in Brazil during this period. As one of the higher
yielding emerging markets credits, the country's bonds provided us with good
performance in terms of running yield. This said, Brazil hasn't really tightened
in as much as we would have liked. We think that trade is still coming.
YOU'VE NOTED THE UPGRADE OF MEXICO'S DEBT TO INVESTMENT GRADE. HOW MIGHT THIS
IMPACT BRAZIL AND OTHER EMERGING MARKETS?
PD: Mexico's upgrade will cause its debt to be put into the Lehman Aggregate
Bond Index, so it will attract primarily investment grade investors. As a
consequence, former emerging markets investors in Mexico will need to look
elsewhere for yield. This should benefit countries like Brazil, Argentina,
Turkey, and Bulgaria.
WHAT DETRACTED FROM PERFORMANCE OVER THIS PERIOD?
PD: An overweight in Peru hurt performance. We didn't expect the elections to go
quite as badly as they did, with the substantially negative political fallout
that ensued. We also entered into the Colombia trade somewhat early in the
cycle. We anticipate getting that back at some point, but for this reporting
period it detracted in some small measure from performance.
WHAT IS YOUR OUTLOOK FOR EMERGING MARKETS DEBT GOING FORWARD?
PD: We're positive about the economic fundamentals of most emerging economies.
We believe that, in general, credit spreads in emerging markets will continue to
tighten over the coming six months. Should the U.S. economy move toward a soft
landing, as we fully expect it will, this will serve to make emerging markets
debt very attractive. We also think that Brazil will receive a well-deserved
upgrade at some point, either by year-end or early next year. It still has a
number of levels to go before it reaches investment grade, but it appears to be
making meaningful progress toward this goal.
Beyond this, we think that Mexico will achieve another upgrade by the other
major rating agency. Russia also is likely to receive an upgrade on the back of
its successful debt resolution efforts. So, there are a number of positive
credit events in the wings that will help to tighten the market.
The real question going forward is whether we can expect the market to continue
to outperform over the next two years, as it has over the past two. The reality
is that it probably will not have the same level of returns. We expect the
returns will certainly be good, just not quite as good. Should the U.S. slowdown
become something more serious, this scenario could easily shift to the negative,
but we don't foresee this happening at this point in time.
6
<PAGE>
FUND FACTS
INVESTMENT OBJECTIVE
J.P. Morgan Emerging Markets Debt Fund seeks to provide a high total return from
a portfolio of fixed income securities of emerging markets issuers. It is
designed for investors who seek exposure to emerging markets debt in their
investment portfolios. As an international investment, the fund is subject to
foreign political and currency risks, in addition to market risk.
-------------------------------------------------------------------------------
COMMENCEMENT OF INVESTMENT OPERATIONS
4/17/97
-------------------------------------------------------------------------------
FUND NET ASSETS AS OF 7/31/00
$20,163,013
-------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 7/31/00
$20,264,624
-------------------------------------------------------------------------------
DIVIDEND PAYABLE DATES
MONTHLY
-------------------------------------------------------------------------------
CAPITAL GAIN PAYABLE DATE (IF APPLICABLE)
12/20/00
EXPENSE RATIO
The fund's current annualized expense ratio of 1.25% covers shareholders'
expenses for custody, tax reporting, investment advisory and shareholder
services after reimbursement. The fund is no-load and does not charge any sales,
redemption, or exchange fees. There are no additional charges for buying,
selling, or safekeeping fund shares, or for wiring redemption proceeds from the
fund.
FUND HIGHLIGHTS
ALL DATA AS OF JULY 31, 2000
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
[PIE CHART]
BRAZIL 23.2%
ARGENTINA 19.9%
RUSSIA 15.1%
MEXICO 10.6%
VENEZUELA 4.6%
COLOMBIA 4.3%
TURKEY 4.0%
U.S. DOLLAR & SHORT TERM 4.0%
BULGARIA 3.1%
PAKISTAN 2.2%
OTHER 9.0%
30-DAY SEC YIELD
10.45%*
DURATION
4.33 years
* YIELD REFLECTS THE REIMBURSEMENT OF CERTAIN EXPENSES AS DESCRIBED IN THE
PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, YIELD WOULD HAVE BEEN 10.08%.
7
<PAGE>
DISTRIBUTED BY FUNDS DISTRIBUTOR, INC. J.P. MORGAN INVESTMENT MANAGEMENT INC.
SERVES AS INVESTMENT ADVISOR. SHARES OF THE FUND ARE NOT BANK DEPOSITS AND ARE
NOT GUARANTEED BY ANY BANK, GOVERNMENT ENTITY, OR THE FDIC. RETURN AND SHARE
PRICE WILL FLUCTUATE AND REDEMPTION VALUE MAY BE MORE OR LESS THAN ORIGINAL
COST.
Opinions expressed herein and other fund data presented are based on current
market conditions and are subject to change without notice. The fund invests
through a master portfolio (another fund with the same objective). The fund
invests in emerging markets foreign securities which are subject to special
risks; investors should refer to the fund's prospectus for a discussion of these
risks.
CALL J.P. MORGAN FUNDS SERVICES AT (800) 521-5411 FOR A PROSPECTUS
CONTAINING MORE COMPLETE INFORMATION ABOUT THE FUND, INCLUDING MANAGEMENT FEES
AND OTHER EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE INVESTING.
8
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Emerging Markets Debt Portfolio
("Portfolio"), at value $20,233,952
Receivable for Expense Reimbursements 13,028
Deferred Organization Expenses 2,959
Prepaid Trustees' Fees 278
Prepaid Expenses and Other Assets 61
-----------
Total Assets 20,250,278
-----------
LIABILITIES
Dividends Payable to Shareholders 34,468
Shareholder Servicing Fee Payable 4,154
Administrative Services Fee Payable 403
Administration Fee Payable 21
Fund Services Fee Payable 17
Accrued Expenses 48,202
-----------
Total Liabilities 87,265
-----------
NET ASSETS
Applicable to 2,300,116 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $20,163,013
===========
Net Asset Value, Offering and Redemption Price
Per Share $8.77
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $20,692,754
Undistributed Net Investment Income 367,164
Accumulated Net Realized Loss on Investment (3,013,746)
Net Unrealized Appreciation of Investment 2,116,841
-----------
Net Assets $20,163,013
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
10
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $2,900,370
Allocated Portfolio Expenses (Net of
Reimbursement of $13,869) (288,675)
----------
Net Investment Income Allocated from
Portfolio 2,611,695
FUND EXPENSES
Shareholder Servicing Fee $ 58,859
Transfer Agent Fees 22,444
Financial and Fund Accounting Services Fee 21,984
Interest Expense 14,130
Registration Fees 13,342
Professional Fees 11,456
Administrative Services Fee 5,838
Amortization of Organization Expenses 3,370
Fund Services Fee 395
Administration Fee 293
Trustees' Fees and Expenses 280
Miscellaneous 4,798
--------
Total Fund Expenses 157,189
Less: Reimbursement of Expenses (138,197)
--------
NET FUND EXPENSES 18,992
----------
NET INVESTMENT INCOME 2,592,703
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 2,479,043
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 2,101,968
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $7,173,714
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
11
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FOR THE FOR THE
FISCAL YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED
JULY 31, 2000 JULY 31, 1999(A) DECEMBER 31, 1998
----------------- ---------------------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,592,703 $ 1,273,633 $ 1,514,455
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 2,479,043 (643,966) (4,587,310)
Net Change in Unrealized Appreciation of
Investment Allocated from Portfolio 2,101,968 17,712 226,246
---------------- --------------------------- ----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 7,173,714 647,379 (2,846,609)
---------------- --------------------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (2,589,129) (1,273,633) (1,514,455)
In Excess of Net Investment Income -- (275) (309,561)
---------------- --------------------------- ----------------
Total Distributions to Shareholders (2,589,129) (1,273,908) (1,824,016)
---------------- --------------------------- ----------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 11,884,438 16,750,849 15,105,562
Reinvestment of Dividends and Distributions 2,331,816 1,227,642 1,773,903
Cost of Shares of Beneficial Interest Redeemed (24,854,149) (10,448,230) (4,874,109)
---------------- --------------------------- ----------------
Net (Decrease) Increase from Transactions in
Shares of Beneficial Interest (10,637,895) 7,530,261 12,005,356
---------------- --------------------------- ----------------
Total (Decrease) Increase in Net Assets (6,053,310) 6,903,732 7,334,731
NET ASSETS
Beginning of Period 26,216,323 19,312,591 11,977,860
---------------- --------------------------- ----------------
End of Period (including undistributed net
investment income of $367,164 and $333,740,
respectively) $ 20,163,013 $ 26,216,323 $ 19,312,591
================ =========================== ================
</TABLE>
------------------------
(a)Fiscal year changed to July 31. Prior to this, the fiscal year end was
December 31. The numbers reflected are for the period January 1, 1999 through
July 31, 1999.
The Accompanying Notes are an Integral Part of the Financial Statements.
12
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
Selected data for a share outstanding throughout each period are as follows:
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 17, 1997
FOR THE FOR THE FOR THE (COMMENCEMENT OF
FISCAL YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED OPERATIONS) THROUGH
JULY 31, 2000 JULY 31, 1999(A) DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ----------------- ------------------ -------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.29 $ 7.30 $ 9.76 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.95 0.49 1.15 0.58
Net Realized and Unrealized Gain (Loss) on
Investment 1.42 0.02 (2.64) (0.05)
------- ------- ------- -------
Total from Investment Operations 2.37 0.51 (1.49) 0.53
------- ------- ------- -------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (0.89) (0.52) (0.81) (0.58)
In Excess of Net Investment Income -- -- (0.16) (0.02)
Net Realized Gain -- -- -- (0.17)
------- ------- ------- -------
Total Distributions to Shareholders (0.89) (0.52) (0.97) (0.77)
------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD $ 8.77 $ 7.29 $ 7.30 $ 9.76
======= ======= ======= =======
RATIOS AND SUPPLEMENTAL DATA
Total Return 34.12% 7.27%(b) (15.93)% 5.47%(b)
Net Assets, End of Period (in thousands) $20,163 $26,216 $19,313 $11,978
Ratios to Average Net Assets
Net Expenses (excluding Interest Expense) 1.25% 1.25%(c) 1.25% 1.25%(c)
Net Investment Income 11.01% 12.28%(c) 10.05% 9.71%(c)
Expenses without Reimbursement and including
Interest Expense 1.95% 2.51%(c) 2.09% 2.40%(c)
Interest Expense 0.06% 0.02%(c) -- --
</TABLE>
------------------------
(a) Fiscal year changed to July 31. Prior to this, the fiscal year end was
December 31. The numbers reflected are for the period January 1, 1999
through July 31, 1999.
(b) Not Annualized.
(c) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
13
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
J.P. Morgan Emerging Markets Debt Fund (the "fund") is a separate series of the
J.P. Morgan Funds, a Massachusetts business trust (the "trust") which was
organized on November 4, 1992. The trust is registered under the Investment
Company Act of 1940, as amended, as an open-end management investment company.
The fund commenced operations on April 17, 1997.
The fund invests all of its investable assets in The Emerging Markets Debt
Portfolio (the "portfolio"), a no-load, open-end management investment company
having the same investment objective as the fund. The value of such investment
included in the Statement of Assets and Liabilities reflects the fund's
proportionate interest in the net assets of the portfolio (approximately 99% at
July 31, 2000). The performance of the fund is directly affected by the
performance of the portfolio. The financial statements of the portfolio,
including the Schedule of Investments, are included elsewhere in this report and
should be read in conjunction with the fund's financial statements.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the fund:
a) Valuation of securities by the portfolio is discussed in Note 1a of the
portfolio's Notes to Financial Statements which are included elsewhere in
this report.
b) The fund records its share of net investment income, realized and
unrealized gain and loss and adjusts its investment in the portfolio each
day. All the net investment income and realized and unrealized gain and
loss of the portfolio is allocated pro rata among the fund and other
investors in the portfolio at the time of such determination.
c) Substantially all the fund's net investment income is declared as
dividends daily and paid monthly. Distributions to shareholders of net
realized capital gains, if any, are declared and paid annually.
d) The fund incurred organization expenses in the amount of $16,800. Morgan
Guaranty Trust Company of New York ("Morgan"), a wholly owned subsidiary
of J.P. Morgan & Co., Incorporated ("J.P. Morgan"), has paid the
organization expenses of the fund. The fund has reimbursed Morgan for
these costs which are being deferred and amortized on a straight-line
basis over a period not to exceed five years beginning with the
commencement of operations of the fund.
e) Expenses incurred by the trust with respect to any two or more funds in
the trust are allocated in proportion to the net assets of each fund in
the trust, except where allocations of direct expenses to each fund can
otherwise be made fairly. Expenses directly attributable to a fund are
charged to that fund.
f ) The fund is treated as a separate entity for federal income tax purposes
and intends to comply with the provisions of the Internal Revenue Code of
1986, as amended, applicable to regulated investment companies and to
distribute substantially all of its income, including net realized
capital gains, if any, within the prescribed time periods. Accordingly,
no provision for federal income or excise tax is necessary.
14
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
g) The fund accounts for and reports distributions to shareholders in
accordance with Statement of Position 93-2: "Determination, Disclosure,
and Financial Statement Presentation of Income, Capital Gain, and Return
of Capital Distributions by Investment Companies." The effect of applying
this statement as of July 31, 2000 was to increase undistributed net
investment income by $29,850, increase accumulated net realized gain/loss
on investment by $19,015 and decrease paid in-capital by $48,865. Net
investment income, net realized gains and net assets were not affected by
this change. This adjustment is primarily due to a book/tax difference on
the recognition of interest income.
h) For federal income tax purposes, the fund had a capital loss-carryforward
of $2,856,915 at July 31, 2000, which will expire in the year 2006. To the
extent that this capital loss is used to offset future capital gains, it
is probable that the gains so offset will not be distributed to
shareholders.
i) For federal income tax, the fund incurred approximately $1,876 of foreign
currency loss and $61,874 of long-term capital loss in the period from
November 1, 1999 to July 31, 2000. These losses were deferred for tax
purposes until August 1, 2000.
2. TRANSACTIONS WITH AFFILIATES
a) The trust, on behalf of the fund, has retained Funds Distributor, Inc.
("FDI"), a registered broker-dealer, to serve as co-administrator and
distributor for the fund. Under a Co-Administration Agreement between FDI
and the trust, on behalf of the fund, FDI provides administrative services
necessary for the operations of the fund, furnishes office space and
facilities required for conducting the business of the fund and pays the
compensation of the fund's officers affiliated with FDI. The fund has
agreed to pay FDI fees equal to its allocable share of an annual
complex-wide charge of $425,000 plus FDI's out-of-pocket expenses. The
amount allocable to the fund is based on the ratio of the fund's net
assets to the aggregate net assets of the trust and certain other
investment companies subject to similar agreements with FDI. For the
fiscal year ended July 31, 2000, the fee for these services amounted to
$293.
b) The trust, on behalf of the fund, has an Administrative Services Agreement
(the "Services Agreement") with Morgan Guaranty Trust Company of New York
("Morgan"), under which Morgan is responsible for certain aspects of the
administration and operation of the fund. Under the Services Agreement,
the fund has agreed to pay Morgan a fee equal to its allocable share of an
annual complex-wide charge. This charge is calculated based on the
aggregate average daily net assets of the portfolio and the other
portfolios in which the trust and the J.P. Institutional Funds invest (the
"master portfolios") and J.P. Morgan Series Trust in accordance with the
following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess of $7 billion less the complex-wide fees
payable to FDI. The portion of this charge payable by the fund is
determined by the proportionate share that its net assets bear to the net
assets of the trust, the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the fiscal year July 31, 2000, the fee for these
services amounted to $5,838.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund (which
excludes interest expense and taxes), including the expenses
15
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
allocated to the fund from the portfolio, at no more than 1.25% of the
average daily net assets of the fund until November 28, 2000. For the
fiscal year ended July 31, 2000, Morgan has agreed to reimburse the fund
$152,066 for expenses under this agreement.
c) The trust, on behalf of the fund, has a Shareholder Servicing Agreement
with Morgan to provide account administration and personal account
maintenance service to fund shareholders. The agreement provides for the
fund to pay Morgan a fee for these services which is computed daily and
paid monthly at an annual rate of 0.25% of the average daily net assets of
the fund. For the fiscal year ended July 31, 2000, the fee for these
services amounted to $58,859.
Morgan, Charles Schwab & Co. ("Schwab") and the trust are parties to
separate services and operating agreements (the "Schwab Agreements")
whereby Schwab makes fund shares available to customers of investment
advisors and other financial intermediaries who are Schwab's clients. The
fund is not responsible for payments to Schwab under the Schwab
Agreements; however, in the event the services agreement with Schwab is
terminated for reasons other than a breach by Schwab and the relationship
between the trust and Morgan is terminated, the fund would be responsible
for the ongoing payments to Schwab with respect to pre-termination shares.
d) The trust, on behalf of the fund, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the trust's affairs. The trustees
of the trust represent all the existing shareholders of Group. For the
fiscal year ended July 31, 2000, the fund's allocated portion of Group's
costs in performing its services amounted to $395.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the trust, the J.P. Morgan Institutional Funds, the master
portfolios and J.P. Morgan Series Trust. The Trustees' Fees and Expenses
shown in the financial statements represents the fund's allocated portion
of the total fees and expenses. The trust's Chairman and Chief Executive
Officer also serves as Chairman of Group and receives compensation and
employee benefits from Group in his role as Group's Chairman. The
allocated portion of such compensation and benefits included in the fund
Services Fee shown in the financial statements was $20.
3. TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the trustees to issue an unlimited number of
full and fractional shares of beneficial interest of one or more series.
Transactions in shares of beneficial interest of the fund were as follows:
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED FOR THE PERIOD YEAR ENDED
JULY 31, 2000 ENDED JULY 31, 1999 DECEMBER 31, 1998
-------------- ------------------- -----------------
<S> <C> <C> <C>
Shares of Beneficial Interest Sold............... 1,512,345 2,249,726 1,775,810
Reinvestment of Dividends and Distributions...... 291,794 168,286 221,158
Shares of Beneficial Interest Redeemed........... (3,100,010) (1,466,759) (578,862)
------------- ------------------ ----------------
Net (Decrease) Increase.......................... (1,295,871) 951,253 1,418,106
============= ================== ================
</TABLE>
16
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
From time to time, the fund may have a concentration of several shareholders
holding a significant percentage of shares outstanding. Investment activities of
these shareholders could have a material impact on the fund and portfolio.
4. CREDIT AGREEMENT
The trust, on behalf of the fund, together with other affiliated investment
companies (the "funds"), entered into a revolving line of credit agreement (the
"Agreement") on May 26, 1999, with unaffiliated lenders. The maximum borrowing
under the Agreement was $150,000,000. The Agreement expired on May 23, 2000,
however, the fund as party to the Agreement has extended the Agreement and will
continue its participation therein for an additional 364 days until May 21,
2001. The maximum borrowing under the new Agreement is $150,000,000. The purpose
of the Agreement is to provide another alternative for settling large fund
shareholder redemptions. Interest on any such borrowings outstanding will
approximate market rates. Under the Agreement, the commitment fee at an annual
rate of 0.085% on the unused portion of the committed amount. The commitment fee
is allocated to the funds in accordance with the procedures established by their
respective trustees or directors. There were no outstanding borrowings pursuant
to the Agreement at July 31, 2000. The average daily balance outstanding for the
fiscal year ended July 31, 2000 was $427,989 at a weighted average interest rate
of 6.28%.
17
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders of
J.P. Morgan Emerging Markets Debt Fund
In our opinion, the accompanying statement of assets and liabilities and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
J.P. Morgan Emerging Markets Debt Fund (one of the series constituting part of
the J.P. Morgan Funds, hereafter referred to as the "fund") at July 31, 2000,
the results of its operations for the year then ended, and the changes in its
net assets for the year then ended, for the period January 1, 1999 through July
31, 1999 and for the year ended December 31, 1998 and the financial highlights
for the year then ended, for the period January 1, 1999 through July 31, 1999,
for the year ended December 31, 1998 and for the period April 17, 1997
(commencement of operations) through December 31, 1997, in conformity with
accounting principles generally accepted in the United States. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with auditing
standards generally accepted in the United States, which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
September 15, 2000
18
<PAGE>
The Emerging Markets Debt Portfolio
Annual Report July 31, 2000
(The following pages should be read in conjunction
with J.P. Morgan Emerging Markets Debt Fund
Annual Financial Statements)
19
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (19.0%)
ARGENTINA (5.2%)
BANKING (3.5%)
$ 750,000 Banco Hipotecario SA, Series REGS, 10.000% due
04/17/03....................................... B1/BB- $ 701,250
-----------
TELECOMMUNICATION SERVICES (1.7%)
400,000 CIA Radiocomunic Moviles, (144A), 9.250% due
05/08/08(s).................................... B1/BBB- 352,000
-----------
1,053,250
-----------
BRAZIL (7.3%)
BANKING (2.3%)
500,000 Banco Nacional De Desenvolvi, 12.554% due
06/16/08(v).................................... B2/B+ 470,000
-----------
CHEMICALS (2.9%)
750,000 Trikem SA, (144A), 10.625% due 07/24/07.......... B+/BB- 585,000
-----------
TELECOMMUNICATION SERVICES (2.1%)
500,000 Globo Communicacoes Participacoes, 10.625% due
12/05/08....................................... B2/B+ 422,500
-----------
1,477,500
-----------
CHINA (0.8%)
FOREST PRODUCTS & PAPER (0.8%)
300,000 APP China Group, Ltd., (144A), 14.000% due
03/15/10....................................... B3/CCC+ 171,000
-----------
MAURITIUS (0.9%)
FOREST PRODUCTS & PAPER (0.9%)
340,000 Indah Kiat Finance Mauritius, 10.000% due
07/01/07....................................... B3/CCC+ 192,100
-----------
MEXICO (4.2%)
BUILDING MATERIALS (2.0%)
400,000 Cemex SA de C.V., (144A), 8.625% due 07/18/03.... Ba1/BBB- 400,000
-----------
OIL PRODUCTION (2.2%)
450,000 Petroleos Mexicanos, 9.250% due 03/30/18......... Baa3/BB+ 436,500
-----------
836,500
-----------
PANAMA (0.6%)
INDUSTRIAL (0.6%)
150,000 CSN Iron SA, 9.125% due 06/01/07................. B2/BB- 120,750
-----------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$3,959,253)................................ 3,851,100
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN GOVERNMENT AGENCY (1.9%)
MEXICO (1.9%)
$ 360,000 Bancomext Trust Division, (144A), 11.250% due
05/30/06 (cost $377,796)....................... Baa3/BB $ 392,400
-----------
SOVEREIGN BONDS (73.2%)
ARGENTINA (14.3%)
280,000 Republic of Argentina Global Bonds, 10.250% due
07/21/30....................................... B1/BB 230,720
318,000 Republic of Argentina Global Bonds, 11.750% due
06/15/15....................................... B1/BB 293,514
ARS 726,365 Republic of Argentina - Bocon, Series PRO1,
2.935% due 04/01/07(v)......................... B1/BBB- 518,257
250,000 Republic of Argentina Bonos del Tesoro, Series
BTO6, 11.250% due 05/24/04(v).................. NR/NR 245,625
105,000 Republic of Argentina Discount Bonds, Series
L-GL, 7.875% due 03/31/23(v)................... B1/BB 85,050
740,000 Republic of Argentina Global Bonds, 9.750% due
09/19/27(v).................................... B1/BB 587,560
100,000 Republic of Argentina Global Bonds, 11.750% due
04/07/09....................................... B1/BB 94,500
160,000 Republic of Argentina Global Bonds, 12.125% due
02/25/19(v).................................... B1/BB 153,280
399,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17(v)(s)..................... B1/BB 363,489
35,000 Republic of Argentina Par Bonds, Series L-GP,
6.000% due 03/31/23(v)......................... B1/BB 23,866
336,000 Republic of Argentina, Series FRB, 7.375% due
03/31/05(v).................................... B1/BB 310,128
-----------
2,905,989
-----------
BRAZIL (15.5%)
480,000 Republic of Brazil Global Bonds, 12.250% due
03/06/30....................................... B2/B+ 452,160
150,000 Republic of Brazil Global Bonds, 12.750% due
01/15/20....................................... B2/B+ 146,400
849,673 Republic of Brazil C Bonds, Series 20 Year,
8.000% due 04/15/14(v)(s)...................... B2/B+ 632,475
665,000 Republic of Brazil DCB, Series 18 Year, 7.438%
due 04/15/12(v)(s)............................. B2/B+ 495,009
200,000 Republic of Brazil DCB, Series RG, 7.438% due
04/15/12(v).................................... B2/B+ 148,875
450,000 Republic of Brazil Discount Bonds, Series 30 Year
ZL, 7.375% due 04/15/24(v)..................... B2/B+ 354,375
70,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... B2/B+ 55,300
50,000 Republic of Brazil Global Bonds, 11.625% due
04/15/04(s).................................... B2/B+ 50,825
159,000 Republic of Brazil Global Bonds, 14.500% due
10/15/09(s).................................... B2/B+ 172,753
145,000 Republic of Brazil NMB, Series 15 Year, 7.438%
due 04/15/09(v)................................ B2/B+ 122,434
450,000 Republic of Brazil Par Bonds, Series 30 Year ZL,
6.000% due 04/15/24(v)......................... B2/B+ 294,750
232,500 Republic of Brazil, Series EI-L, 7.375% due
04/15/06(v).................................... B2/B+ 213,464
-----------
3,138,820
-----------
BULGARIA (3.0%)
240,000 Republic of Bulgaria Discount Bonds, Series A,
7.750% due 07/28/24(v)......................... B2/NR 192,600
290,000 Republic of Bulgaria Global FLIRB, Series A,
2.750% due 07/28/12(v)......................... B2/B+ 218,950
250,000 Republic of Bulgaria IAB, Series PDI, 7.750% due
07/28/11(v)(s)................................. B2/B+ 201,562
-----------
613,112
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
COLOMBIA (4.3%)
$ 130,000 Republic of Colombia, 9.750% due 04/23/09........ Ba2/BB $ 104,975
600,000 Republic of Colombia, 11.750% due 02/25/20....... Ba2/BB 516,900
240,000 Republic of Colombia, 8.625% due 04/01/08........ Ba2/BB 189,000
70,000 Republic of Columbia, 7.625% due 02/15/07........ Ba2/BB 53,025
-----------
863,900
-----------
ECUADOR (0.9%)
480,000 Republic of Ecuador Par Bonds, 4.000% due
02/28/25(v) TRIANGLE +......................... Caa2/NR 184,800
-----------
MEXICO (4.4%)
50,000 United Mexican States Discount Bonds, Series C,
7.800% due 12/31/19(v)......................... Baa3/BB+ 49,688
160,000 United Mexican States, Series XW, 10.375% due
02/17/09....................................... Baa3/BB+ 172,000
250,000 United Mexican States Discount Bonds, Series D,
7.925% due 12/31/19(v)......................... Baa3/BB+ 248,438
85,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... Baa3/BB+ 98,685
80,000 United Mexican States Global Bonds, 11.500% due
05/15/26....................................... Baa3/BB+ 97,760
250,000 United Mexican States Par Bonds, Series W-A,
6.250% due 12/31/19............................ Baa3/BB+ 214,375
-----------
880,946
-----------
MOROCCO (0.3%)
64,272 Kingdom of Morocco Restructuring & Consolidation
Agreement, Series A, 7.750% due 01/01/09(v).... Ba1/BB 58,487
-----------
NIGERIA (0.7%)
250,000 Central Bank of Nigeria, Series WW, 6.250% due
11/15/20(v).................................... NR/NR 143,750
-----------
PAKISTAN (2.1%)
658,000 Republic of Pakistan, (144A), 10.000% due
12/13/05....................................... Caa1/B- 434,280
-----------
PANAMA (1.8%)
110,000 Republic of Panama, 10.750% due 05/15/20......... Ba1/BB+ 110,000
115,000 Republic of Panama, 8.875% due 09/30/27(s)....... Ba1/BB+ 99,475
90,000 Republic of Panama IRB, Series 18 Year, 4.500%
due 07/17/14(v)................................ Ba1/BB+ 73,238
109,345 Republic of Panama PDI, Series 20 Year, 7.750%
due 07/17/16(v)(s)............................. Ba1/BB+ 89,936
-----------
372,649
-----------
PERU (1.5%)
145,000 Republic of Peru FLIRB, Series 20 Year, 3.750%
due 03/07/17(v)................................ Ba3/BB 89,900
295,000 Republic of Peru PDI, Series 20 Year, 4.500% due
03/07/17(v)(s)................................. Ba3/BB 202,075
-----------
291,975
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
PHILIPPINES (1.2%)
$ 300,000 Republic of Philippines, 10.625% due 03/16/25.... Ba1/BB+ $ 250,050
-----------
RUSSIA (14.8%)
340,000 Russia IAN, Vnesheconombank, Series US, 7.938%
due 12/15/15(v) TRIANGLE +..................... Ca/NR 113,492
4,848,000 Russia Principal Loan, Vnesheconombank, Series 24
Year, 7.938% due 12/15/20(v) TRIANGLE +........ NR/NR 1,599,840
350,000 Russian Federation, 8.750% due 07/24/05.......... B3/B- 279,125
90,000 Russian Federation, 9.250% due 11/27/01.......... B3/B- 87,584
330,000 Russian Federation, 10.000% due 06/26/07......... B3/B- 259,050
300,000 Russian Federation, 11.000% due 07/24/18......... B3/B- 227,250
130,000 Russian Federation, 11.750% due 06/10/03......... B3/B- 123,500
350,000 Russian Federation, 12.750% due 06/24/28......... B3/B- 309,313
-----------
2,999,154
-----------
TURKEY (3.9%)
400,000 Republic of Turkey, 11.875% due 01/15/30......... B1/B+ 434,800
330,000 Republic of Turkey, 12.375% due 06/15/09......... B1/B+ 356,400
-----------
791,200
-----------
VENEZUELA (4.5%)
357,140 Republic of Venezuela DCB, 7.875% due
12/18/07(v)(s)................................. B2/B 296,426
166,665 Republic of Venezuela FLIRB, Series B, 7.438% due
03/31/07(v).................................... B2/B 138,749
440,000 Republic of Venezuela Global Bonds, 9.250% due
09/15/27(s).................................... B2/B 295,240
250,000 Republic of Venezuela Par Bonds, Series W-A,
6.750% due 03/31/20(s)......................... B2/B 178,750
-----------
909,165
-----------
TOTAL SOVEREIGN BONDS (COST $12,673,063)..... 14,838,277
-----------
U.S. TREASURY OBLIGATIONS (2.8%)
U.S. TREASURY BONDS (0.3%)
50,000 6.125% due 08/15/29.............................. 51,461
-----------
U.S. TREASURY NOTES (2.5%)
500,000 6.500% due 02/15/10.............................. 516,485
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$566,985).................................. 567,946
-----------
RIGHTS (0.0%)
MEXICO (0.0%)
2,644,000 United Mexican States Value Recovery, Series Par,
Expiring 06/30/03 (cost $0) +.................. NR/NR 0
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
WARRANTS (0.0%)
NIGERIA (0.0%)
$ 1,500 Central Bank of Nigeria, Expiring 11/15/20+...... NR/NR $ 0
-----------
VENEZUELA (0.0%)
2,500 Republic of Venezuela, Expiring 04/15/20+........ NR/NR 0
-----------
TOTAL WARRANTS (COST $0)..................... 0
-----------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
SHORT-TERM INVESTMENTS (1.2%)
OTHER INVESTMENT COMPANIES (1.2%)
239,325 J.P. Morgan Institutional Prime Money Market Fund
(cost $239,325)*............................... 239,325
-----------
TOTAL INVESTMENTS (COST $17,816,422) (98.1%)..... 19,889,048
OTHER ASSETS IN EXCESS OF LIABILITIES (1.9%)..... 375,576
-----------
NET ASSETS (100.0%).............................. $20,264,624
===========
</TABLE>
------------------------------
Note: Based on the cost of investments of $17,864,834 for Federal Income Tax
Purposes at July 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $2,310,349 and $286,135, respectively, resulting in net
unrealized appreciation of $2,024,214.
+Non-income producing security.
(s)Security is fully of partially segregated with custodian as collateral for
futures or with brokers as initial margin for futures contracts. $1,974,275
of the market value has been segregated.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
TRIANGLE Defaulted security.
/ / Denominated in United States Dollar unless otherwise indicated.
ARS - Denominated in Argentina Pesos.
144A - Securities restricted for resale to Qualified Institutional Buyers.
C - Capitalization.
DCB - Debt Conversion Bond.
FLIRB - Front Loaded Interest Reduction Bond.
IAB - Interest in Arrears Bond.
IAN - Interest in Arrears Note.
IRB - Interest Reduction Bond.
NMB - New Money Bond.
PDI - Past Due Interest.
FRB - Floating Rate Bond.
*Money Market Mutual Fund registered under the Investment Company Act of 1940,
as amended, and advised by J.P. Morgan Investment Management, Inc.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $17,816,422 ) $19,889,048
Cash 399,094
Interest Receivable 422,845
Receivable for Investments Sold 172,025
Deferred Organization Expenses 1,690
Receivable for Expense Reimbursement 1,077
Prepaid Trustees' Fees 195
Prepaid Expenses and Other Assets 213
-----------
Total Assets 20,886,187
-----------
LIABILITIES
Payable for Investments Purchased 531,883
Custody Fee Payable 18,296
Advisory Fee Payable 11,727
Variation Margin Payable 1,312
Administrative Services Fee Payable 405
Fund Services Fee Payable 17
Accrued Expenses 57,923
-----------
Total Liabilities 621,563
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $20,264,624
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $2,903,636
EXPENSES
Advisory Fee $ 166,951
Custodian Fees and Expenses 68,131
Professional Fees and Expenses 50,261
Printing Expenses 7,325
Administrative Services Fee 5,919
Amortization of Organization Expense 3,247
Fund Services Fee 399
Trustees' Fees and Expenses 383
Administration Fee 222
Insurance Expense 55
----------
Total Expenses 302,893
Less: Reimbursement of Expenses (13,890)
----------
NET EXPENSES 289,003
----------
NET INVESTMENT INCOME 2,614,633
NET REALIZED GAIN ON
Investments 2,452,953
Futures Contracts 28,247
----------
Net Realized Gain 2,481,200
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 2,053,688
Futures Contracts 46,188
Foreign Currency Translations 2,750
----------
Net Change in Unrealized Appreciation 2,102,626
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $7,198,459
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD FOR THE
YEAR ENDED ENDED FISCAL YEAR ENDED
JULY 31, 2000 JULY 31, 1999(A) DECEMBER 31, 1998
-------------- ---------------------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,614,633 $ 1,275,824 $ 1,544,342
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 2,481,200 (644,480) (4,592,666)
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 2,102,626 18,215 223,707
------------- --------------------------- ----------------
Net Increase in Net Assets Resulting from
Operations 7,198,459 649,559 (2,824,617)
------------- --------------------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 25,094,412 19,855,226 15,100,514
Withdrawals (38,292,621) (13,588,663) (5,099,187)
------------- --------------------------- ----------------
Net (Decrease) Increase from Investors'
Transactions (13,198,209) 6,266,563 10,001,327
------------- --------------------------- ----------------
Total (Decrease) Increase in Net Assets (5,999,750) 6,916,122 7,176,710
NET ASSETS
Beginning of Period 26,264,374 19,348,252 12,171,542
------------- --------------------------- ----------------
End of Period $ 20,264,624 $ 26,264,374 $ 19,348,252
============= =========================== ================
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 7, 1997
FOR THE FISCAL FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED OPERATIONS) THROUGH
JULY 31, 2000 JULY 31, 1999(A) DECEMBER 31, 1998 DECEMBER 31, 1997
-------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.21% 1.25%(b) 1.07% 0.91%(b)
Net Investment Income 10.97% 12.19%(b) 10.16% 9.57%(b)
Expenses without Reimbursement 1.27% 1.70%(b) 1.25% 0.91%(b)
Portfolio Turnover 295% 555%(c) 791% 182%(c)
</TABLE>
------------------------
(a)Fiscal year changed to July 31. Prior to this, the fiscal year end was
December 31. The numbers reflected are for the period January 1, 1999 through
July 31, 1999.
(b) Annualized.
(c) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Debt Portfolio (the "portfolio") is one of eight subtrusts
(portfolios) comprising The Series Portfolio (the "Series Portfolio"). The
Series Portfolio is registered under the Investment Company Act of 1940, as
amended, as a no-load, open-end management investment company which was
organized as a trust under the laws of the State of New York on June 24, 1994.
The portfolio commenced operations on March 7, 1997. The portfolio's investment
objective is high total return from a portfolio of fixed income securities of
emerging markets issuers. The Declaration of Trust permits the trustees to issue
an unlimited number of beneficial interests in the portfolio.
The portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the portfolio 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
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States. The ability of the issuers of the debt securities held by the
portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available bid price on such exchange,
if such exchange or market constitutes the broadest and most
representative market for the security. Securities listed on a foreign
exchange are valued at the last traded price or, in the absence of
recorded trades, at the readily available bid price on such exchange
available before the time when net assets are valued. Independent pricing
service procedures may also include the use of prices based on yields or
prices of securities of comparable quality, coupon, maturity and type,
indications as to values from dealers, operating data, and general market
conditions. Unlisted securities are valued at the quoted bid price in the
over-the-counter market provided by a principal market maker or dealer. If
prices are not supplied by the portfolio's independent pricing service or
principal market maker or dealer, such securities are priced using fair
values in accordance with procedures adopted by the portfolio's trustees.
All short-term securities with a remaining maturity of sixty days or less
are valued using the amortized cost method.
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 on which 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 portfolio's net assets are calculated, such securities will be
valued at fair value in accordance with procedures established by and
under the general supervision of the portfolio's trustees.
28
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
d) The portfolio incurred organization expenses in the amount of $16,200.
Morgan Guaranty Trust Company of New York ("Morgan"), a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") has paid the
organization expenses of the portfolio. The portfolio has reimbursed
Morgan for these costs which are being deferred and amortized on a
straight-line basis over a period not to exceed five years beginning with
the commencement of operations of the fund.
e) Expenses incurred by the series portfolio with respect to any two or more
portfolios in the series portfolio are allocated in proportion to the net
assets of each portfolio in the series portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
f) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payables against
fluctuations in future foreign currency rates. A forward contract is an
agreement to buy or sell currencies of different countries on a specified
future date at a specified rate. Risks associated with such contracts
include the movement in the value of the foreign currency relative to the
U.S. dollar and the ability of the counterparty to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
g) A futures contract is an agreement to purchase/sell a specified quantity
of an underlying instrument at a specified future date or to make/receive
a cash payment based on the value of a securities index. The price at
which the purchase and sale will take place is fixed when the portfolio
enters into the contract. Upon entering into such a contract, the
portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the
29
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
time it was opened and the value at the time when it was closed. The
portfolio invests in futures contracts for the purpose of hedging its
existing portfolio securities, or securities the portfolio intends to
purchase, against fluctuations in value caused by changes in prevailing
market interest rates or securities movements and to manage exposure to
changing interest rates and securities prices. The use of futures
transactions involves the risk of imperfect correlation in movements in
the price of futures contracts, interest rates and the underlying hedged
assets, and the possible inability of counterparties to meet the terms of
their contracts.
h) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan"), a wholly-owned subsidiary of J.P.
Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio paid JPMIM at an annual rate of 0.70% of the
portfolio's average daily net assets. For the fiscal year ended July 31,
2000, such fees amounted to $167,122.
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory,
shareholder servicing and administrative service fees. For fiscal year
ended July 31, 2000, J.P. Morgan has agreed to reimburse the portfolio
$171 under the agreement. Interest Income included in the Statement of
Operations for the year ended July 31, 2000 includes $5,293 of interest
income from investments in affiliated money market funds.
b) The trust, on behalf of the portfolio, has retained Funds Distributor,
Inc. ("FDI"), a registered broker-dealer, to serve as the co-administrator
and exclusive placement agent. Under a Co-Administration Agreement between
FDI and the portfolio, FDI provides administrative services necessary for
the operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the portfolio's officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the fiscal year ended July 31, 2000, the fee for these services
amounted to $222.
c) The trust, on behalf of the portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for certain aspects of the
30
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
administration and operation of the portfolio. Under the Services
Agreement, the portfolio has agreed to pay Morgan a fee equal to its
allocable share of an annual complex-wide charge. This charge is
calculated based on the aggregate average daily net assets of the
portfolio and certain other portfolios for which JPMIM acts as investment
advisor (the "master portfolios") and J.P. Morgan Series Trust in
accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by the proportionate share its net assets bear
to the net assets of the master portfolios, other investors in the master
portfolios for which Morgan provides similar services, and J.P. Morgan
Series Trust. For the fiscal year ended July 31, 2000, the fee for these
services amounted to $5,919.
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the
portfolio, at no more than 1.25% of the average daily net assets of the
portfolio until November 28, 2000. For the fiscal year ended July 31,
2000, J.P. Morgan has agreed to reimburse the portfolio $13,890 for
expenses under this agreement.
d) The trust, on behalf of the portfolio, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the portfolio's affairs. The
trustees of the portfolio represent all the existing shareholders of
Group. For the fiscal year ended July 31, 2000, the portfolio's allocated
portion of Group's costs in performing its services amounted to $399.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $40.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended July 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- -----------
<S> <C>
$66,203,188...... $74,017,216
================ ===========
</TABLE>
31
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
Open futures contracts at July 31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- --------------------
<S> <C> <C> <C>
U.S. Long Bond, expiring
September 2000.................................. 10 $ 47,765 $ 985,938
============= ============= ===================
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C> <C>
U.S. Ten Year Note, expiring
September 2000.................................. 2 $ (1,089) $ (197,781)
============== ============= ===================
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Emerging Markets Debt Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Emerging Markets Debt Portfolio (the
"portfolio") at July 31, 2000, the results of its operations for the year then
ended, and the changes in its net assets for the year then ended, for the period
January 1, 1999 through July 31, 1999 and for the year ended December 31, 1998
and the supplementary data for the year then ended, for the period from
January 1, 1999 through July 31, 1999, for the year ended December 31, 1998 and
for the period March 7, 1997 (commencement of operations) through December 31,
1997, in conformity with accounting principles generally accepted in the United
States. These financial statements and supplementary data (hereafter referred to
as "financial statements") are the responsibility of the portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at July 31, 2000 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
September 15, 2000
33
<PAGE>
J.P. MORGAN FUNDS
PRIME MONEY MARKET FUND
FEDERAL MONEY MARKET FUND
TAX EXEMPT MONEY MARKET FUND
TAX AWARE ENHANCED INCOME FUND: SELECT SHARES
SHORT TERM BOND FUND
BOND FUND
GLOBAL STRATEGIC INCOME FUND
EMERGING MARKETS DEBT FUND
TAX EXEMPT BOND FUND
NEW YORK TAX EXEMPT BOND FUND
CALIFORNIA BOND FUND: SELECT SHARES
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
EUROPEAN EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
FOR MORE INFORMATION ON THE J.P. MORGAN
FUNDS, CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
IMAR203
J.P. MORGAN
EMERGING MARKETS
DEBT FUND
ANNUAL REPORT
JULY 31, 2000
