<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT+ SECURITY DESCRIPTION VALUE
- ------------------- ------------------------------------------------- ------------
<C> <S> <C>
CONVERTIBLE BONDS (2.3%)
MEXICO (2.0%)
227,000 Banamex S.A., (144A), 11.00% due 07/15/03........ $ 244,025
------------
THAILAND (0.3%)
70,000 Robinson Department Store Company Ltd., 3.25% due
07/27/00....................................... 40,600
------------
TOTAL CONVERTIBLE BONDS (COST $306,721)...... 284,625
------------
CORPORATE OBLIGATIONS (21.1%)
BRAZIL (6.1%)
68,000 Abril S.A., 12.00% due 10/25/03.................. 68,507
200,000 Companhia de Saneamento Basico de Sao Paulo,
(144A), 10.00% due 07/28/05.................... 180,000
500,000 CSN Iron S.A., 9.125% due 06/01/07............... 428,750
68,000 Furnas Centrais Eletricas S.A., Callable/Putable
05/23/02, 9.00% due 05/23/05................... 63,240
------------
740,497
------------
INDONESIA (2.0%)
40,000 Indah Kiat Finance Co. Mauritius, Callable
07/01/02, (144A), 10.00% due 07/01/07.......... 32,600
136,000 Matahari International Finance Co. BV, (144A),
11.25% due 03/15/01............................ 115,600
120,000 Tjiwi Kimia Finance Co. Mauritius, (144A), 10.00%
due 08/01/04................................... 96,000
------------
244,200
------------
MEXICO (4.2%)
18,000 Altos Hornos de Mexico S.A. de CV, Series B,
11.875% due 04/30/04........................... 18,765
75,000 Axa S.A. de CV, (144A), 9.00% due 08/04/04....... 72,375
136,000 Copamex Industrias S.A., 11.375% due 04/30/04.... 149,600
102,000 Grupo Imsa S.A. de CV, Callable 09/30/02, 8.93%
due 09/30/04................................... 102,000
68,000 Grupo Iusacell S.A. de CV, (144A), 10.00% due
07/15/04....................................... 68,000
102,000 TFM S.A. de CV, (144A), 10.25% due 06/15/07...... 104,805
------------
515,545
------------
RUSSIA (1.6%)
109,000 AO Rostelecom Loan Participation SPIRES, 9.094%
due 02/15/00(r){*}............................. 102,732
100,000 Tatneft Finance PLC, (144A), 9.00% due
10/29/02....................................... 86,000
------------
188,732
------------
SOUTH KOREA (3.3%)
75,000 Korea Development Bank, 9.48% due 04/02/01....... 66,713
140,000 Korea Electric Power Corp., 6.375% due
12/01/03....................................... 104,419
300,000 Pohang Iron & Steel Co. Ltd., 7.125% due
07/15/04....................................... 234,000
------------
405,132
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT+ SECURITY DESCRIPTION VALUE
- ------------------- ------------------------------------------------- ------------
<C> <S> <C>
THAILAND (0.4%)
68,000 Bangkok Bank Public Co. Ltd., (144A), 7.25% due
09/15/05....................................... $ 48,394
------------
TURKEY (3.5%)
136,000 Pera Financial Services Co., (144A), 9.375% due
10/15/02....................................... 125,120
300,000 Sultan Ltd., 8.75% due 06/11/99{*}............... 300,000
------------
425,120
------------
TOTAL CORPORATE OBLIGATIONS (COST
$2,663,502)................................ 2,567,620
------------
GOVERNMENT OBLIGATIONS (1.0%)
ARGENTINA (1.0%)
ARS 68,000 City of Buenos Aires, (144A), 10.50% due
05/28/04....................................... 58,820
68,000 Province of Mendoza, (144A), 10.00% due
09/04/07....................................... 64,430
------------
123,250
------------
TOTAL GOVERNMENT OBLIGATIONS (COST
$137,682).................................. 123,250
------------
SOVEREIGN BONDS (79.5%)
ARGENTINA (19.9%)
1,536,000 Republic of Argentina Bearer FRB, Callable
03/31/98, Sinking Fund, 6.688%
due 03/31/05{*}................................ 1,374,720
318,000 Republic of Argentina Bonos del Tesoro, Series
BT02, 8.75% due 05/09/02....................... 301,464
102,000 Republic of Argentina Discount Bonds Series L-GL,
6.875% due 03/31/23{*}......................... 85,048
692,000 Republic of Argentina Global Bonds, 9.75% due
09/19/27....................................... 664,320
------------
2,425,552
------------
BRAZIL (23.2%)
125,000 Republic of Brazil Bearer DCB Series L, 6.75% due
04/15/12{*}.................................... 94,687
1,046,759 Republic of Brazil C Bonds, Callable 04/15/98,
Sinking Fund, 8.00% due 04/15/14............... 819,089
49,000 Republic of Brazil EI Bonds Series L, Callable
04/15/98, Sinking Fund, 6.688% due
04/15/06{*}.................................... 42,140
750,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... 703,875
82,425 Republic of Brazil IDU Series A, 6.813% due
01/01/01{*}.................................... 78,510
564,516 Republic of Brazil MYDFA Trust Certificates
Series REGS, Sinking Fund, 6.688% due
09/15/07{*}.................................... 479,133
750,000 Republic of Brazil NMB-1994L Bearer, Callable
04/15/98, Sinking Fund, 6.75% due
04/15/09{*}.................................... 605,625
------------
2,823,059
------------
BULGARIA (3.7%)
750,000 Republic of Bulgaria FLIRB Series A Global
Bearer, Callable 01/28/98, Sinking Fund, 2.25%
due 07/28/12{*}................................ 455,625
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT+ SECURITY DESCRIPTION VALUE
- ------------------- ------------------------------------------------- ------------
<C> <S> <C>
ECUADOR (1.5%)
273,390 Republic of Ecuador Global Bearer PDI Bonds,
6.688% due 02/27/15{*}......................... $ 178,742
------------
MEXICO (12.2%)
50,000 United Mexican States Discount Bonds Series A
(including 76,900 value recovery rights
expiring 6/30/03), 6.693% due 12/31/19{*}...... 46,312
250,000 United Mexican States Discount Bonds Series D
(including 384,500 value recovery rights
expiring 6/30/03), 6.75% due 12/31/19{*}....... 231,563
319,000 United Mexican States Global Bonds, 9.875% due
01/15/07....................................... 332,558
404,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... 462,580
344,000 United Mexican States Global Bonds, 11.50% due
05/15/26....................................... 407,227
------------
1,480,240
------------
PERU (5.3%)
250,000 Republic of Peru FLIRB, Sinking Fund, 3.25% due
03/07/17{*}.................................... 148,450
750,000 Republic of Peru PDI, Sinking Fund, 4.00% due
03/07/17{*}.................................... 492,150
------------
640,600
------------
RUSSIA (6.0%)
272,000 Russia IAN, Sinking Fund, 6.719% due
12/15/15{*}.................................... 191,080
863,000 Russia Principal Loans, Sinking Fund, 6.719% due
12/15/20{*}.................................... 532,903
------------
723,983
------------
TURKEY (0.3%)
34,000 Republic of Turkey, (144A), 10.00% due
09/19/07....................................... 34,510
------------
VENEZUELA (7.4%)
476,190 Republic of Venezuela DCB Series DL, Callable
03/19/98, Sinking Fund, 6.813% due
12/18/07{*}.................................... 426,761
226,190 Republic of Venezuela FLIRB Series B, Callable
03/31/98, Sinking Fund, 6.75% due
03/31/07{*}.................................... 203,006
308,000 Republic of Venezuela Global Bonds, 9.25% due
09/15/27....................................... 276,584
------------
906,351
------------
TOTAL SOVEREIGN BONDS (COST $9,724,704)...... 9,668,662
------------
</TABLE>
<TABLE>
<C> <S> <C>
SHORT-TERM INVESTMENTS (33.6%)
EURO DOLLAR TIME DEPOSITS (31.9%)
3,887,000 State Street Bank, Euro Dollar 4.50% due
01/02/98....................................... 3,887,000
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT+ SECURITY DESCRIPTION VALUE
- ------------------- ------------------------------------------------- ------------
<C> <S> <C>
TURKEY (1.6%)
TRL 22,508,000,000 Turkey Treasury Bills, 102.207%* due 08/05/98.... $ 64,192
TRL 47,610,000,000 Turkey Treasury Bills, 130.273%* due 08/12/98.... 133,698
------------
197,890
------------
U.S. TREASURY OBLIGATIONS (0.1%)
10,000 U.S. Treasury Bills, 5.404%* due 07/23/98........ 9,706
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$4,149,385)................................ 4,094,596
------------
TOTAL INVESTMENTS (COST $16,981,994) (137.5%).... 16,738,753
LIABILITIES IN EXCESS OF OTHER ASSETS (-37.5%)... (4,567,211)
------------
NET ASSETS (100.0%).............................. $ 12,171,542
------------
------------
</TABLE>
- ------------------------------
Note: The cost of securities for Federal Income Tax purposes at December 31,
1997, was $17,871,277; the aggregate gross unrealized appreciation and
depreciation was $101,326 and $1,233,850, respectively, resulting in net
unrealized depreciation of $1,132,524.
{*} -- Rate shown reflects current rate on variable rate instrument or
instrument with step coupon rates.
* -- Yield to maturity.
(r) -- Restricted security.
+ -- Denominated in USD unless otherwise indicated.
144A -- Securities restricted for resale to qualified institutional buyers.
ARS -- Argentine Peso.
C -- Capitalization.
DCB -- Debt Conversion Bonds.
EI -- Eligible Interest.
FLIRB -- Front Loaded Interest Reduction Bonds.
GKO -- Russian Treasury Bills.
IAN -- Interest in Arrears Notes.
IDU -- Interest Due and Unpaid.
MYDFA -- Multi-Year Refinancing Agreement.
NMB -- New Money Bonds.
PDI -- Past Due Interest.
SPIRES -- Special purpose investment vehicle registered in Ireland.
TRL -- Turkish Lira.
USD -- United States Dollar.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $16,981,994) $16,738,753
Cash 952
Foreign Currency at Value (Cost $129,464 ) 129,408
Receivable for Investments Sold 1,350,527
Interest Receivable 271,418
Unrealized Appreciation of Forward Foreign
Currency Contracts 22,870
Deferred Organization Expenses 13,547
Prepaid Expenses and Other Assets 384
-----------
Total Assets 18,527,859
-----------
LIABILITIES
Payable for Investments Purchased 6,240,164
Custody Fee Payable 49,250
Advisory Fee Payable 37,263
Organization Expenses Payable 14,200
Unrealized Depreciation of Forward Foreign
Currency Contracts 4,820
Administrative Services Fee Payable 1,597
Fund Services Fee Payable 145
Administration Fee Payable 20
Accrued Trustees' Fees and Expenses 7
Accrued Expenses 8,851
-----------
Total Liabilities 6,356,317
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $12,171,542
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 7, 1997 (COMMENCEMENT OF OPERATIONS) TO DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $ 9,767,718
EXPENSES
Advisory Fee $ 652,074
Custodian Fees and Expenses 105,724
Professional Fees and Expenses 48,376
Administrative Services Fee 28,564
Printing Expenses 5,571
Fund Services Fee 3,074
Amortization of Organization Expenses 2,653
Administration Fee 2,152
Trustees' Fees and Expenses 1,209
Registration Fees 610
Insurance Expense 211
Miscellaneous 291
-----------
Total Expenses 850,509
-----------
NET INVESTMENT INCOME 8,917,209
NET REALIZED GAIN (LOSS) ON
Investment Transactions (including $134,200 net
realized gain from futures contracts and
$13,391 net realized gain from swap
contracts) (6,194,283)
Foreign Currency Transactions 937,710
-----------
Net Realized Loss (5,256,573)
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments (243,241)
Foreign Currency Contracts and Translations 17,994
-----------
Net Change in Unrealized Depreciation (225,247)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $ 3,435,389
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 7, 1997
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31,
1997
----------------
<S> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 8,917,209
Net Realized Loss on Investment and Foreign
Currency Transactions (5,256,573)
Net Change in Unrealized Depreciation of
Investments and Foreign Currency Contracts and
Translations (225,247)
----------------
Net Increase in Net Assets Resulting from
Operations 3,435,389
----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 178,496,163
Withdrawals (169,760,010)
----------------
Net Increase from Investors' Transactions 8,736,153
----------------
Total Increase in Net Assets 12,171,542
NET ASSETS
Beginning of Period --
----------------
End of Period $ 12,171,542
----------------
----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 7, 1997
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31,
1997
----------------
<S> <C>
RATIOS TO AVERAGE NET ASSETS
Expenses 0.91%(a)
Net Investment Income 9.57%(a)
Portfolio Turnover 182%
</TABLE>
- ------------------------
(a) Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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.
Investments in emerging markets may involve certain considerations and risks not
typically associated with investments in the United States. Future economic and
political developments in emerging market countries could adversely affect the
liquidity or value, or both, of such securities in which the Portfolio is
invested. 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 value of each security for which readily available market quotations
exist is based on a decision as to the broadest and most representative
market for such security. The value of such security will be based on the
most recent sale price, or, in the absence of recorded sales, at the
closing bid price. Securities listed on a foreign exchange are valued at
the last quoted sale price available before the time when net assets are
valued. Unlisted securities are valued at the quoted bid price in the
over-the-counter market. Securities or other assets for which market
quotations are not readily available are valued at fair value in
accordance with procedures established by the Portfolio's Trustees. Such
procedures include the use of independent pricing services, which use
prices based upon yields or prices of securities of comparable quality,
coupon, maturity and type; indications as to values from dealers; and
general market conditions. All portfolio securities with a remaining
maturity of less than 60 days are valued at amortized cost.
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.
b) The books and records of the Portfolio are maintained in U.S. dollars. The
market values 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
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
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 other
than with respect to debt instruments for income tax reporting purposes.
c) Securities transactions are recorded on a trade date basis. Dividend
income is recorded on the ex-dividend date or as of the time that the
relevant ex-dividend date and amount become known. 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 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 based on procedures established
by and under the general supervision of the Portfolio's Trustees, and the
change in the market value is recorded by the Portfolio as unrealized
appreciation or depreciation of foreign currency translations. At December
31, 1997, the Portfolio had open forward foreign currency contracts as
follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
VALUE AT APPRECIATION/
COST/PROCEEDS 12/31/97 (DEPRECIATION)
------------- ----------- --------------
<S> <C> <C> <C>
PURCHASE CONTRACTS
- ------------------
Malaysian Ringgit 692,738, expiring 1/8/98....... $ 198,067 $ 178,033 $ (20,034)
Mexican Peso 1,244,479, expiring 6/26/98......... 136,031 153,410 17,379
Mexican Peso 1,424,924, expiring 9/22/98......... 160,230 175,104 14,874
SALES CONTRACTS
- ---------------
German Mark 54,140, expiring 1/12/98............. 31,128 30,132 996
German Mark 126,521, expiring 8/12/98............ 71,416 71,232 184
Malaysian Ringgit 692,738, expiring 1/8/98....... 204,065 178,033 26,032
Mexican Peso 428,293, expiring 6/26/98........... 47,977 52,797 (4,820)
Mexican Peso 816,186, expiring 6/26/98........... 94,368 100,613 (6,245)
Mexican Peso 1,424,924, expiring 9/22/98......... 164,788 175,104 (10,316)
--------------
NET UNREALIZED APPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ 18,050
--------------
--------------
</TABLE>
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
e) 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 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. At December 31, 1997, the Portfolio had no open futures
contracts.
f) The Portfolio may engage in swap transactions, specifically interest rate,
currency, index and total return swaps as part of its investment
strategies. Swaps involve the exchange by the Portfolio with another party
of their respective commitments to pay or receive interest, effective
return or total return throughout the lives of the agreements. The
interest to be paid or received on swaps is recognized as net interest
expense or net interest income on the Statement of Operations over the
life of the agreement, while related receivables and payables are recorded
on a gross basis on the Statement of Assets and Liabilities. Swap
agreements are stated at fair value. Unrealized gains are reported as an
asset and unrealized losses are reported as a liability on the Statement
of Assets and Liabilities. A realized gain or loss is recorded upon
termination of swap agreements. Notional principal amounts are used to
express the extent of involvement in these transactions, but the amounts
potentially subject to credit risk are much smaller. At December 31, 1997,
the Portfolio had no open swap transactions.
g) 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.
h) The Portfolio incurred organization expenses in the amount of $16,200.
Morgan Guaranty Trust Company of New York ("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 Portfolio.
28
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
i) 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.
2. TRANSACTIONS WITH AFFILIATES
a) The Portfolio has an Investment Advisory Agreement with Morgan. Under the
terms of the agreement, the Portfolio pays Morgan at an annual rate of
0.70% of the Portfolio's average daily net assets. For the period from
March 7, 1997 (commencement of operations) to December 31, 1997, such fees
amounted to $652,074.
b) 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 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 period from March 7, 1997 (commencement of
operations) to December 31, 1997, the fee for these services amounted to
$2,152.
c) The Portfolio 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 certain other portfolios for which Morgan 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 period from March 7, 1997 (commencement of
operations) to December 31, 1997, the fee for these services amounted to
$28,564.
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 $3,074 for the period from March 7, 1997 (commencement of
operations) to December 31, 1997.
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
29
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
Trustees' Fees and Expenses shown in the financial statements represents
the Portfolio's allocated portion of the total fees and expenses. Prior to
April 1, 1997, the aggregate annual Trustee Fee was $65,000. 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 $600.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the period from
March 7, 1997 (commencement of operations) to December 31, 1997 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
$205,233,912...... $181,137,367
</TABLE>
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 Financial Statements which are included
elsewhere in this report.
5. OTHER MATTERS
On December 12, 1997, the Portfolio received a withdrawal request in the amount
of $111,987,828 as discussed in Note 5 of the Fund's Notes to Financial
Statements which are included elsewhere in this report. This amount is included
in Withdrawals shown on the Statement of Changes in Net Assets. The withdrawal
which was made in-kind by transferring certain assets and liabilities, including
securities, directly to a non-U.S. fund resulted in a net realized loss on
transfer of the securities in the amount of $4,757,425, which is included in the
Net Realized Loss on Investment and Foreign Currency Transactions in the
Statement of Operations.
30
<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 (one of
the portfolios comprising part of The Series Portfolio, hereafter referred to as
the "Portfolio") at December 31, 1997, and the results of its operations, the
changes in its net assets and the supplementary data for the period March 7,
1997 (commencement of operations) to December 31, 1997, in conformity with
generally accepted accounting principles. 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 audit. We conducted our
audit of these financial statements in accordance with generally accepted
auditing standards 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
audit, which included confirmation of securities at December 31, 1997 by
correspondence with the custodian and brokers and the application of alternative
auditing procedures where confirmations from brokers were not received, provides
a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
February 23, 1998
31
