<PAGE>
LETTER TO THE SHAREHOLDERS OF THE J.P. MORGAN EMERGING MARKETS DEBT FUND
March 1, 2000
Dear Shareholder:
We are pleased to report that the J.P. Morgan Emerging Markets Debt Fund
delivered a total return of 16.26% for the six months ended January 31, 2000,
exceeding both its benchmark, the Emerging Markets Bond Index Global, and the
Lipper Emerging Markets Debt Funds Average.
The fund's net asset value on January 31 was $8.01 per share, compared with
$7.29 per share on July 31, 1999, after paying monthly income dividends totaling
nearly $0.44 over the period.
Included in this report is an interview with Michael Cembalest, 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...........5
FUND PERFORMANCE.......................2 FINANCIAL STATEMENTS................8
PORTFOLIO MANAGER Q&A..................3
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1
<PAGE>
FUND PERFORMANCE
EXAMINING PERFORMANCE
One 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.
<TABLE>
<CAPTION>
PERFORMANCE TOTAL RETURNS AVERAGE ANNUAL TOTAL RETURNS
----------------- -----------------------------
THREE SIX ONE SINCE
AS OF JANUARY 31, 2000 MONTHS MONTHS YEAR INCEPTION*
- -------------------------------------------------------------------------------------- -----------------------------
<S> <C> <C> <C> <C>
J.P. Morgan Emerging Markets Debt Fund 8.33% 16.26% 30.54% 2.98%
Emerging Markets Bond Index Plus** 6.25% 14.04% 28.25% 5.29%
Emerging Markets Bond Index Global*** 5.78% 13.04% 25.13% 5.61%
Lipper Emerging Markets Debt Funds Average 6.91% 13.28% 26.63% 1.64%
THREE SIX ONE SINCE
AS OF DECEMBER 31, 1999 MONTHS MONTHS YEAR INCEPTION*
- -------------------------------------------------------------------------------------- -----------------------------
J.P. Morgan Emerging Markets Debt Fund 14.16% 14.43% 25.97% 3.46%
Emerging Markets Bond Index Plus** 12.58% 13.93% 25.99% 6.25%
Emerging Markets Bond Index Global*** 11.24% 12.90% 24.19% 6.41%
Lipper Emerging Markets Debt Funds Average 12.34% 13.32% 24.51% 2.11%
</TABLE>
*THE FUND COMMENCED OPERATIONS ON APRIL 17, 1997, AND HAS PROVIDED A TOTAL
RETURN OF 3.67% FROM THAT DATE THROUGH JANUARY 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 PLUS 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 PLUS DOES NOT INCLUDE FEES OR OPERATING EXPENSES,
AND IS NOT AVAILABLE FOR ACTUAL INVESTMENT.
*** THE EMERGING MARKETS BOND INDEX GLOBAL IS A BROAD-BASED, UNMANAGED INDEX
WHICH TRACKS TOTAL RETURN FOR U.S. DOLLAR-DENOMINATED EMERGING MARKETS DEBT,
INCLUDING BRADY BONDS, EUROBONDS, AND LOANS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. 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.
2
<PAGE>
PORTFOLIO MANAGER Q&A
[PHOTO]
Following is an interview with MICHAEL CEMBALEST, managing director, who manages
the Emerging Markets Debt Group. Michael has been with J.P. Morgan since
1988, and joined J.P. Morgan Investment Management in 1998. He began his career
in J.P. Morgan's corporate finance group in 1988, transferred to Emerging
Markets Research in 1993, and served as head strategist for Emerging Markets
Debt. Michael was responsible for asset allocation recommendations to the firm's
clients and the firm's analytical framework for sovereign bonds. He graduated
with a B.A. from Tufts University in 1984 and an M.A. from Columbia in 1986.
This interview was conducted on February 16, 2000 and reflects his views on that
date.
EMERGING MARKET DEBT ONCE AGAIN OUTPERFORMED ALL OTHER SECTORS OF FIXED INCOME
INVESTMENTS IN THE SIX MONTHS ENDED JANUARY 31, 2000. WHY?
MC: The economic outlook for most emerging markets improved significantly in the
second half of 1999, further bolstering investor confidence. The decline in
global commodity prices has been reversed by the dramatic improvements in
economic activity in Asia in 1999, and in addition, oil has also benefited from
the OPEC-led output cuts. More important, however, has been the decisive
government action in most emerging markets to enact complementary fiscal and
monetary policy that should allow for their new floating exchange rates to work
as intended.
WHERE HAS REFORM BEEN MOST EFFECTIVE?
MC: Brazil is a good example. Its government has exceeded its IMF targets,
turning around its fiscal deficit and reducing its outstanding debt as a
percentage of GDP. This has fostered positive economic growth, stabilized the
currency, and curtailed Brazil's trade and current account deficits. Analysts
are already drawing parallels to Mexico's success after the 1994 peso
devaluation, and that country's subsequent ability to weather the 1997-98
crises. Hope is increasing that Brazil, like Mexico, will be able to implement
the policy mix that will ensure continued economic growth and stability.
The role of the international community should not be discounted. The IMF helped
Brazil take appropriate steps to stabilize its economy after the devaluation and
has monitored its progress to date. Coordinated lending from the international
financial institutions and member governments, coupled with the tough
performance targets they imposed, allowed worthy governments to be able to meet
immediate financing needs when capital markets were closed to them. This
framework also provided the private sector with concrete criteria so it could
gauge performance and begin lending again. While not entirely recovered, the
markets are again open for new bond issuance and the need for multilateral
assistance has declined significantly. The crisis is clearly over.
3
<PAGE>
HOW DID YOU MANAGE THE FUND DURING THIS PERIOD?
MC: As the economic outlook in the emerging markets continued to improve, we
took more decisively overweighted positions in a number of the large commodity
exporters. As it became clearer that Brazil was enacting the necessary reforms,
was outperforming its targets with the IMF, and beginning to attract significant
inflows of foreign direct investment, we increased and maintained an overweight
position in the government's external obligations. We also held an overweight
position in Venezuela until it became clear to us that rising oil prices were no
longer helping. We also increased our holdings of Russian debt as the
government's ability to service its bonds improved and the likelihood grew that
defaulted Soviet-era debt would be restructured.
THE MARKET SEEMED TO SHRUG OFF ECUADOR'S DEFAULT, WHICH WAS THE FIRST-EVER ON
BRADY BONDS. WHY?
MC: Ecuador is a small country. Its bonds constitute a very small portion of our
benchmark index. Signs that the economy was close to collapse abounded: its debt
to GDP ratio exceeded 100%, the prior year's El Nino had been devastating, and
oil prices had collapsed earlier. The question was not whether the government
could service its debts, but whether the IMF or some other institution would
bail the country out. To its credit, the IMF never did bail out Ecuador. That
was positive because it demonstrated that the IMF is interested in holding
governments to reasonably high standards. It gives us confidence that when IMF
targets are met, governments are performing well.
WHAT IS YOUR OUTLOOK?
MC: Given the continued signals of rebounding global growth, we believe that
core positions in some of the commodity exporting countries, particularly
Brazil, will continue to outperform the market. The Latin region will also
benefit from the likely credit rating upgrade of Mexico to investment grade at
some point in the coming few months. This will encourage new interest in buying
Mexican securities and eventually lead to lower yields throughout the region.
Eastern European credits should also fare well, with stronger EU growth plus the
political support and financial inflows that the slow EU accession process will
provide. Improving prospects in both regions have already attracted a
significant source of financing from foreign direct investment, which will
reduce borrowing needs generally. A successful restructuring of Russia's
Soviet-era debt and the arrival of a new, more stable, and possibly reformist
government is expected to bolster Russia's prospects as well as those of the
region. The greatest concerns are that U.S. (and global) equity weakness could
damage prospects for global growth or that a significant tightening by the
Federal Reserve could have the same effect (or at least divert needed and scarce
capital from the emerging markets). A correction in the U.S. current account
deficit would be detrimental to emerging economies.
Although asset prices have continued to recover from their very depressed levels
at the worst of the Russian financial crisis in August 1998, they have yet to
reach the high levels of mid-1997 before the Asian crisis. With the index yield
still over 13%, and fundamentals improving on a general basis -- with few shocks
foreseen -- the asset class remains poised for another year of positive returns.
4
<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 OPERATIONS
4/17/97
- --------------------------------------------------------------------------------
FUND NET ASSETS AS OF 1/31/00
$18,435,549
- --------------------------------------------------------------------------------
PORTFOLIO NET ASSETS AS OF 1/31/00
$18,686,737
- --------------------------------------------------------------------------------
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 JANUARY 31, 2000
PORTFOLIO ALLOCATION
(PERCENTAGE OF TOTAL INVESTMENTS)
BRAZIL 28.1%
ARGENTINA 24.9%
MEXICO 14.2%
RUSSIA 12.4%
VENEZUELA 4.4%
PERU 3.3%
PANAMA 2.3%
BULGARIA 1.6%
PAKISTAN 1.4%
MAURITIUS 1.3%
OTHER 3.6%
U.S. DOLLAR 2.5%
30-DAY SEC YIELD
10.41%*
DURATION
3.4 YEARS
* YIELD REFLECTS THE REIMBURSEMENT OF CERTAIN EXPENSES AS DESCRIBED IN THE
PROSPECTUS. HAD EXPENSES NOT BEEN SUBSIDIZED, YIELD WOULD HAVE BEEN LOWER.
5
<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 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 foreign securities which are
subject to special risks; prospective 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.
6
<PAGE>
THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investment in The Emerging Markets Debt Portfolio
("Portfolio"), at value $18,660,133
Receivable for Expense Reimbursements 22,950
Deferred Organization Expenses 7,421
Prepaid Trustees' Fees 302
Receivable for Shares of Beneficial Interest Sold 33
Prepaid Expenses and Other Assets 87
-----------
Total Assets 18,690,926
-----------
LIABILITIES
Payable for Shares of Beneficial Interest
Redeemed 201,782
Dividends Payable to Shareholders 16,027
Shareholder Servicing Fee 4,557
Organization Expenses Payable 2,787
Administrative Services Fee Payable 456
Administration Fee Payable 21
Fund Services Fee Payable 8
Accrued Expenses 29,739
-----------
Total Liabilities 255,377
-----------
NET ASSETS
Applicable to 2,302,614 Shares of Beneficial
Interest Outstanding
(par value $0.001, unlimited shares authorized) $18,435,549
===========
Net Asset Value, Offering and Redemption Price
Per Share $8.01
----
----
ANALYSIS OF NET ASSETS
Paid-in Capital $20,648,049
Accumulated Net Investment Income 308,171
Accumulated Net Realized Loss on Investment (3,766,503)
Net Unrealized Appreciation of Investment 1,245,832
-----------
Net Assets $18,435,549
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
8
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME ALLOCATED FROM PORTFOLIO
Allocated Interest Income $1,750,827
Allocated Portfolio Expenses (Net of
Reimbursement of $1,627) (170,302)
----------
Net Investment Income Allocated from
Portfolio 1,580,525
FUND EXPENSES
Shareholder Servicing Fee $ 35,222
Interest Expense 12,141
Transfer Agent Fees 11,458
Printing Expenses 6,360
Professional Fees 5,744
Administrative Services Fee 3,542
Amortization of Organization Expenses 1,695
Fund Services Fee 247
Administration Fee 190
Trustees' Fees and Expenses 96
Miscellaneous 6,615
--------
Total Fund Expenses 83,310
Less: Reimbursement of Expenses (65,408)
--------
NET FUND EXPENSES 17,902
----------
NET INVESTMENT INCOME 1,562,623
NET REALIZED GAIN ON INVESTMENT ALLOCATED FROM
PORTFOLIO 1,745,301
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENT ALLOCATED FROM PORTFOLIO 1,230,959
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $4,538,883
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
9
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE PERIOD
JANUARY 31, 2000 ENDED
(UNAUDITED) JULY 31, 1999(A)
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,562,623 $ 1,273,633
Net Realized Gain (Loss) on Investment Allocated
from Portfolio 1,745,301 (643,966)
Net Change in Unrealized Appreciation of
Investment
Allocated from Portfolio 1,230,959 17,712
--------------- ---------------
Net Increase in Net Assets Resulting from
Operations 4,538,883 647,379
--------------- ---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net Investment Income (1,562,623) (1,273,633)
In Excess of Net Investment Income (25,569) (275)
--------------- ---------------
(1,588,192) (1,273,908)
--------------- ---------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
Proceeds from Shares of Beneficial Interest Sold 8,429,592 16,750,849
Reinvestment of Dividends and Distributions 1,469,014 1,227,642
Cost of Shares of Beneficial Interest Redeemed (20,630,071) (10,448,230)
--------------- ---------------
Net Increase (Decrease) from Shareholder
Transactions (10,731,465) 7,530,261
--------------- ---------------
Total Increase (Decrease) in Net Assets (7,780,774) 6,903,732
NET ASSETS
Beginning of Period 26,216,323 19,312,591
--------------- ---------------
End of Period (including undistributed net
investment income of $308,170 and $333,740,
respectively) $ 18,435,549 $ 26,216,323
=============== ===============
</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.
10
<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
FOR THE APRIL 17, 1997
SIX MONTHS ENDED FOR THE (COMMENCEMENT OF
JANUARY 31, 2000 FOR THE PERIOD FISCAL YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) ENDED 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 0.48 0.49 1.15 0.58
Net Realized and
Unrealized Gain (Loss)
on Investments 0.68 0.02 (2.64) (0.05)
------- ------- ------- -------
Total from investment
operations 1.16 0.51 (1.49) 0.53
------- ------- ------- -------
LESS DISTRIBUTIONS TO
SHAREHOLDERS FROM
Net Investment Income (0.43) (0.52) (0.81) (0.58)
In Excess of Net
Investment Income (0.01) -- (0.16) (0.02)
Net Realized Gain -- -- -- (0.17)
------- ------- ------- -------
Total distributions to
Shareholders (0.44) (0.52) (0.97) (0.77)
------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD $ 8.01 $ 7.29 $ 7.30 $ 9.76
======= ======= ======= =======
RATIOS AND SUPPLEMENTAL
DATA
Total return 16.26% 7.27%(b) (15.93)% 5.47%(b)
Net Assets, End of period
(in thousands) $18,436 $26,216 $19,313 $11,978
Ratios to Average Net
Assets
Net Expenses 1.25% 1.25%(c) 1.25% 1.25%(c)
Net Investment Income 11.09% 12.28%(c) 10.05% 9.71%(c)
Expense without
Reimbursement and
Including Interest
Expense 1.81% 2.51%(c) 2.09% 2.40%(c)
Interest Expense 0.09% 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.
11
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The 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"), an 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 100% at June 30,
1999). 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 generally accepted
accounting principles 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 agreed to reimburse 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.
12
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 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 six
months ended January 31, 2000, the fee for these services amounted to
$190.
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 six months ended January 31, 2000, the fee for these
services amounted to $3,542.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund, including
the expenses allocated to the fund from the portfolio, at no more than
1.25% of the average daily net assets of the fund until further
notification. For the six months ended January 31, 2000, Morgan has agreed
to reimburse the fund $65,408 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 six months ended January 31, 2000, the fee for these
services amounted to $35,222.
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
13
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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. The fund's
allocated portion of Group's costs in performing its services amounted to
$247 for the six months ended January 31, 2000.
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 these 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 SIX
MONTHS ENDED FOR THE PERIOD
JANUARY 31, 2000 ENDED
(UNAUDITED) JULY 31, 1999
---------------- --------------
<S> <C> <C>
Shares sold...................................... 1,109,235 2,249,726
Reinvestment of dividends and distributions...... 192,263 168,286
Shares redeemed.................................. (2,594,871) (1,466,759)
--------------- -------------
Net Increase (Decrease).......................... (1,293,373) 951,253
=============== =============
</TABLE>
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 27, 1998, with unaffiliated lenders. Additionally, since all
of the investable assets of the fund are in the portfolio, the portfolio is
party to certain covenants of the Agreement. The Agreement expired on May 26,
1999, however, the fund as party to the Agreement has renewed the Agreement and
will continue its participation therein for an additional 364 days until
May 23, 2000. 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. The funds pay a commitment fee at an annual rate of
0.085% (.065%
14
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
prior to May 26, 1999) on the unused portion of the committed amount. This is
allocated to the funds in accordance with procedures established by their
respective trustees. There were no outstanding borrowings pursuant to the
Agreement at January 31, 2000. The average daily balance outstanding for the six
months ended January 31, 2000 was $385,870 at a weighted average interest rate
of 6.16%.
15
<PAGE>
The Emerging Markets Debt Portfolio
Semi-Annual Report January 31, 2000
(unaudited)
(The following pages should be read in conjunction
with the J.P. Morgan Emerging Markets Debt Fund
Semi-Annual Financial Statements)
16
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (29.0%)
ARGENTINA (8.2%)
$ 750,000 Banco Hipotecario SA, (144A), 10.000% due
04/17/03....................................... B1/BB- $ 691,650
500,000 CIA Radiocomunic Moviles (144A), 9.250% due
05/08/08(s).................................... B1/BBB- 442,500
500,000 CSN Iron SA, 9.125% due 06/01/07................. B2/BB- 402,500
-----------
1,536,650
-----------
BRAZIL (10.3%)
850,000 Banco Nacional De Desenvolvi, 12.193% due
06/16/08(s).................................... B2/B+ 760,750
500,000 Globo Communicacoes Participacoes, 10.625% due
12/05/08....................................... B2/B+ 401,250
1,000,000 Trikem SA, (144A), 10.625% due 07/24/07.......... B+/BB- 752,500
-----------
1,914,500
-----------
MAURITIUS (1.3%)
340,000 Indah Kiat, 10.000% due 07/01/07................. Caa1/CCC+ 234,600
-----------
MEXICO (9.2%)
500,000 Bancomext Trust Division, (144A), 11.250% due
05/30/06....................................... Ba1/BB/ 520,000
490,000 Grupo Televisa SA, 0.000% due 05/15/08(v)(s)..... Ba2/BB 450,800
850,000 Petroleos Mexicanos, 9.250% due 03/30/18......... Ba1/BB 756,500
-----------
1,727,300
-----------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$5,469,139)................................ 5,413,050
-----------
SOVEREIGN BONDS (66.6%)
ARGENTINA (16.1%)
200,000 Republic of Argentina Global Bonds, Series XW,
11.000% due 12/04/05........................... B1/BB 190,500
730,400 Republic of Argentina, Series FRB, 6.813% due
03/31/05(v).................................... B1/BB 656,995
1,131,174 Republic of Argentina - Bocon, Series PRO1,
3.114% due 04/01/07(v)......................... B1/BBB- 796,447
183,413 Republic of Argentina Bocon, Series Pre-4, 6.500%
due 09/01/02(v)................................ B1/NR 173,615
350,000 Republic of Argentina Bonds Del Tesoro, Series
BT06, 11.250% due 05/24/04..................... NR/NR 335,300
205,000 Republic of Argentina Discount Bonds, Series
L-GL, 6.875% due 03/31/23(v)................... B1/BB 158,619
240,000 Republic of Argentina Global Bonds, 9.750% due
09/19/27....................................... B1/BB 205,800
100,000 Republic of Argentina Global Bonds, 11.750% due
04/07/09....................................... B1/BB 97,000
250,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17(s)........................ B1/BB 238,250
250,000 Republic of Argentina Par Bonds, Series L-GP,
6.000% due 03/31/23(v)......................... B1/BB 160,312
-----------
3,012,838
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
BRAZIL (17.2%)
$ 450,000 Republic of Brazil Discount Bonds, Series 30 Year
ZL, 6.938% due 04/15/24(v)..................... B2/B+ $ 331,875
1,043,361 Republic of Brazil C Bonds, Series 20 Year,
8.000% due 04/15/14(s)......................... B2/B+ 727,744
685,000 Republic of Brazil DCB, Series 18 Year, 7.000%
due 04/15/12(v)(s)............................. B2/B+ 479,500
130,000 Republic of Brazil DCB, Series RG, 7.000% due
04/15/12(v).................................... B2/B+ 91,000
550,000 Republic of Brazil Discount Bonds, Series 30
Year-ZU, 6.938%(v)............................. B2/B+ 338,250
270,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... B2/B+ 210,600
200,000 Republic of Brazil Global Bonds, 12.750% due
01/15/20....................................... B2/B+ 190,000
150,000 Republic of Brazil Global Bonds, 14.500% due
10/15/09(s).................................... B2/B+ 156,750
9,000 Republic of Brazil Global Bonds, 14.500% due
10/15/09....................................... B2/B+ 9,405
295,000 Republic of Brazil NMB, Series 15 Year, 7.000%
due 04/15/09(v)................................ B2/B+ 230,469
531,100 Republic of Brazil, Series EI-L, 6.938% due
04/15/06(v)(s)................................. B2/B+ 454,090
-----------
3,219,683
-----------
BULGARIA (1.6%)
140,000 Republic of Bulgaria Discount Bonds, Series A,
7.063% due 07/28/24(v)......................... B2/NR 110,250
90,000 Republic of Bulgaria Global FLIRB, Series A,
2.750% due 07/28/12(v)......................... B2/NR 64,125
150,000 Republic of Bulgaria IAB, PDI, 7.063% due
07/28/11(v)(s)................................. B2/NR 118,125
-----------
292,500
-----------
COLOMBIA (0.9%)
70,000 Republic of Colombia, 7.625% due 02/15/07........ Ba2/BB+ 55,825
130,000 Republic of Columbia, 9.750% due 04/23/09........ Ba2/BB+ 114,400
-----------
170,225
-----------
CROATIA (0.2%)
38,182 Republic of Croatia, Series A, 7.063% due
07/31/10(v).................................... Baa3/BBB- 35,127
-----------
ECUADOR (0.9%)
480,000 Republic of Ecuador Par Bonds, 4.000% due
02/28/25(v).................................... Caa2/NR 161,400
-----------
MEXICO (4.6%)
200,000 United Mexican States Discount Bonds, Series D,
6.903% due 12/31/19(v)......................... Ba1/BB 185,750
255,000 United Mexican States Global Bonds, 11.500% due
05/15/26....................................... Ba1/BB 288,150
500,000 United Mexican States Par Bonds, Series W-A,
6.250% due 12/31/19............................ Ba1/BB 389,375
-----------
863,275
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
MOROCCO (0.3%)
$ 68,053 Kingdom of Morocco Restructuring & Consolidation
Agreement, Series A, 6.844% due 01/01/09(v).... Ba1/NR $ 61,247
-----------
NIGERIA (0.8%)
250,000 Central Bank of Nigeria, Series WW, 6.250% due
11/15/20(v).................................... NR/NR 144,062
-----------
PAKISTAN (1.4%)
378,000 Republic of Pakistan (144A) , 10.000% due
12/13/05....................................... Caa1/B- 257,040
-----------
PANAMA (2.2%)
175,000 Republic of Panama Global Bonds, 8.875% due
09/30/27(s).................................... Ba1/BB+ 143,500
240,000 Republic of Panama IRB, Series 18 Year, 4.250%
due 07/17/14(v)................................ Ba1/BB+ 184,500
109,345 Republic of Panama PDI, Series 20 Year, 7.063%
due 07/17/16(v)................................ Ba1/BB+ 86,383
-----------
414,383
-----------
PERU (3.2%)
400,000 Republic of Peru Discount Bonds, Series 30 Year,
6.813% due 03/08/27(v)(s)...................... Ba3/BB 280,000
295,000 Republic of Peru FLIRB, Series 20 Year, 3.750%
due 03/07/17(v)................................ Ba3/BB 177,000
215,000 Republic of Peru PDI, Series 20 Year, 4.500% due
03/07/17....................................... Ba3/BB 141,900
-----------
598,900
-----------
RUSSIA (12.1%)
40,042 Russia IAN, Vnesheconombank, Series US, 6.906%
due 12/15/15(v)................................ Ca/NR 7,333
5,848,000 Russia Principal Loan, Vnesheconombank, Series 24
Year, 6.906% due 12/15/20(v) TRIANGLE ......... NR/NR 913,750
350,000 Russian Federation, 8.750% due 07/24/05.......... B3/CCC+ 222,250
90,000 Russian Federation, 9.250% due 11/27/01.......... B3/CCC+ 71,662
320,000 Russian Federation, 10.000% due 06/26/07......... B3/CCC+ 204,800
400,000 Russian Federation, 11.000% due 07/24/18......... B3/CCC+ 258,000
230,000 Russian Federation, 11.750% due 06/10/03......... B3/CCC+ 178,250
350,000 Russian Federation, 12.750% due 06/24/28......... B3/CCC+ 253,313
830,000 Russian IAN, Vnesheconombank, Series 19 Year,
6.906% due 12/15/15(v)......................... Ca/NR 151,994
-----------
2,261,352
-----------
TURKEY (0.8%)
100,000 Republic of Turkey Global Bonds, 11.875% due
01/15/30....................................... B1/B 102,250
50,000 Republic of Turkey Global Bonds, 12.375% due
06/15/09....................................... B1/B 53,000
-----------
155,250
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
VENEZUELA (4.3%)
$ 190,475 Republic of Venezuela DCB, Series DL, 7.000% due
12/18/07(s).................................... B2/B $ 149,166
178,570 Republic of Venezuela FLIRB, Series B, 6.875% due
03/31/07(v).................................... B2/B 140,624
540,000 Republic of Venezuela Global Bonds, 9.250% due
09/15/27(s).................................... B2/B 340,200
250,000 Republic of Venezuela Par, Series W-A, 6.750% due
03/31/20(s).................................... B2/B 166,250
-----------
796,240
-----------
TOTAL SOVEREIGN BONDS (COST $11,135,516)..... 12,443,522
-----------
U.S. TREASURY OBLIGATIONS (1.0%)
U.S. TREASURY BONDS (1.0%)
200,000 United States Treasury Bonds, 6.125% due 08/15/29
(cost $200,063)................................ 190,374
-----------
RIGHTS (0.0%)
MEXICO (0.0%)
3,643,000 United Mexican States Value Recovery, Series Par,
Expiring 06/30/03+............................. NR/NR 0
-----------
WARRANTS (0.0%)
ARGENTINA (0.0%)
310 Republic of Argentina, Expiring 02/25/00+........ NR/NR 465
-----------
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/B+ 0
-----------
TOTAL WARRANTS (COST $8,552)................. 465
-----------
SHORT-TERM INVESTMENTS (1.4%)
EURO DOLLAR TIME DEPOSITS (1.4%)
258,000 State Street Bank Euro Dollar (cost $258,000).... 258,000
-----------
TOTAL INVESTMENTS (COST $17,071,270) (98.0%)................... 18,305,411
OTHER ASSETS IN EXCESS OF LIABILITIES (2.0%)................... 381,326
-----------
NET ASSETS (100.0%)............................................ $18,686,737
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
- ------------------------------
Note: Based on the cost of investments of $17,729,689 for Federal Income Tax
Purposes at January 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $806,259 and $230,537, respectively, resulting in net
unrealized depreciation of $575,722.
+ Non-income producing security.
(s) Security is fully or partially segregated with custodian as collateral for
futures or with brokers at initial margin for futures contracts. $2,483,381 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.
144A - Securities restricted for resale to Qualified Institutional Buyers.
C - Capitalization.
DCB - Debt Conversion Bonds.
FLIRB - Front Loaded Interest Reduction Bonds.
IAB - Interest in Arrears Bonds.
IAN - Interest in Arrears Notes.
IRB - Interest Reduction Bonds.
NMB - New Money Bonds.
PDI - Past Due Interest.
FRB - Floating Rate Bond.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $17,071,270) $18,305,411
Cash 704
Interest Receivable 382,996
Receivable for Investments Sold 162,442
Deferred Organization Expenses 6,796
Receivable for Expense Reimbursement 1,618
Prepaid Trustees' Fees 334
Prepaid Expenses and Other Assets 85
-----------
Total Assets 18,860,386
-----------
LIABILITIES
Payable for Investments Purchased 101,971
Custody Fee Payable 15,770
Advisory Fee Payable 13,589
Variation Margin Payable 5,031
Organization Expenses Payable 3,491
Administrative Services Fee Payable 480
Fund Services Fee Payable 8
Accrued Expenses 33,309
-----------
Total Liabilities 173,649
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $18,686,737
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $1,752,348
EXPENSES
Advisory Fee $ 100,303
Custodian Fees and Expenses 37,537
Professional Fees and Expenses 25,159
Administrative Services Fee 3,601
Printing Expenses 3,320
Amortization of Organization Expense 1,632
Fund Services Fee 250
Administration Fee 160
Trustees' Fees and Expenses 82
Insurance Expense 29
Miscellaneous 7
----------
Total Expenses 172,080
Less: Reimbursement of Expenses (1,629)
----------
NET EXPENSES 170,451
----------
NET INVESTMENT INCOME 1,581,897
NET REALIZED GAIN ON
Investment Transactions 1,755,550
Futures Contracts (23,896)
Foreign Currency Contracts and Transactions 15,281
----------
Net Realized Gain 1,746,935
NET CHANGE IN UNREALIZED APPRECIATION OF
Investment Transactions 1,215,203
Futures Contracts 15,876
Foreign Currency Contracts and Translations 489
----------
Net Change in Unrealized Appreciation 1,231,568
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $4,560,400
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
JANUARY 31, 2000 PERIOD ENDED
(UNAUDITED) JULY 31, 1999(A)
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,581,897 $ 1,275,824
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 1,746,935 (644,480)
Net Change in Unrealized Appreciation of
Investments, Futures, and Foreign Currency
Contracts and Translations 1,231,568 18,215
--------------- ---------------
Net Increase in Net Assets Resulting from
Operations 4,560,400 649,559
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 20,730,229 19,855,226
Withdrawals (32,868,266) (13,588,663)
--------------- ---------------
Net Increase (Decrease) from Investors'
Transactions (12,138,037) 6,266,563
--------------- ---------------
Total Increase (Decrease) in Net Assets (7,577,637) 6,916,122
NET ASSETS
Beginning of Period 26,264,374 19,348,252
--------------- ---------------
End of Period $ 18,686,737 $ 26,264,374
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE MARCH 7, 1997
SIX MONTHS ENDED FOR THE FISCAL YEAR (COMMENCEMENT OF
JANUARY 31, 2000 PERIOD ENDED ENDED OPERATIONS) THROUGH
(UNAUDITED) JULY 31, 1999(A) DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.19%(b) 1.25%(b) 1.07% 0.91%(b)
Net Investment Income 11.04%(b) 12.19%(b) 10.16% 9.57%(b)
Expenses without Reimbursement 1.20%(b) 1.70%(b) 1.25% 0.91%(b)
Portfolio Turnover 210%(c) 555%(c) 791% 182%(c)
</TABLE>
- ------------------------
(a) Fiscal year changed 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.
24
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 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 and received a contribution of
certain assets and liabilities, including securities, with a value of
$113,127,989 on that date from the JPM Emerging Markets Debt Fund, Ltd. in
exchange for a beneficial interest in the portfolio. 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. At a meeting on
November 12, 1998, the trustees elected to change the portfolio's fiscal year
end from December 31 to July 31, 1999.
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 generally accepted
accounting principles 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 mean of the bid and asked
prices 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 mean of the bid
and asked prices 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 by 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
25
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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.
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 expense 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 agreed to
reimburse 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 payable s against
fluctuations in future foreign currency rates and to enhance returns. 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) Futures -- 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
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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 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. 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 and
wholly-owned subsidiary of J.P. Morgan. Under the terms of the agreement,
the portfolio pays JPMIM at an annual rate of 0.70 % of the portfolio's
average daily net assets. For the six months ended December 31, 2000, such
fees amounted to $100,303.
b) The portfolio, on behalf of the fund, has retained Funds
Distributor, Inc. ("FDI"), a registered broker-dealer, to serve as the
co-administrator and exclusive placement agent for the fund. Under a Co-
Administration Agreement between FDI and the portfolio on behalf of the
fund, 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 th e 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 six months ended
January 31, 2000, the fee for these services amounted to $160.
c) The portfolio, on behalf of the fund, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for overseeing certain aspects of the 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 the other portfolios in
which the portfolio and the J.P. Morgan/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
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
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 six months ended
January 31, 2000, the fee for these services amounted to $3,601.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund from the
portfolio, at no more than 1.25% of the average daily net assets of the
portfolio until further notification. For the six months ended
January 31, 2000, J.P. Morgan has agreed to reimburse the portfolio $1,629
for expenses under this agreement.
d) 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. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $250 for the six months ended January 31, 2000.
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 $17.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
$53,569,796 $63,244,805
</TABLE>
Open futures contracts at January 31, 2000 are summarized as follows:
SUMMARY OF OPEN CONTRACTS AT JANUARY 31, 2000
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
U.S. Long Bond, expiring March 2000.............. 7 $ 16,364 $ 645,531
------------- ------------- -----------
Totals........................................... 7 $ 16,364 $ 645,531
============= ============= ===========
</TABLE>
At January 31, 2000, the portfolio had no open forward currency contracts.
28
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
29
<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
CALIFORNIA BOND FUND: SELECT SHARES
NEW YORK TAX EXEMPT BOND FUND
DIVERSIFIED FUND
DISCIPLINED EQUITY FUND
TAX AWARE U.S. EQUITY FUND: SELECT SHARES
U.S. EQUITY FUND
U.S. SMALL COMPANY FUND
U.S. SMALL COMPANY OPPORTUNITIES FUND
EMERGING MARKETS EQUITY FUND
EUROPEAN EQUITY FUND
GLOBAL 50 FUND: SELECT SHARES
INTERNATIONAL EQUITY FUND
INTERNATIONAL OPPORTUNITIES FUND
FOR MORE INFORMATION ON THE J.P. MORGAN
FUNDS, CALL J.P. MORGAN FUNDS SERVICES AT
(800) 521-5411.
IMSAR203
J.P. MORGAN
EMERGING MARKETS
DEBT FUND
SEMIANNUAL REPORT
JANUARY 31, 2000
