<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- ---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (7.0%)
MAURITIUS (3.1%)
FOREST PRODUCTS & PAPER
$ 600,000 Indah Kiat, Callable, 10.00% due 07/01/07........ Caa1/CCC+ $ 414,000
350,000 Tjiwi Kimia, 10.00% due 08/01/04................. Caa1/CCC+ 248,500
------------
662,500
------------
MEXICO (3.9%)
BROADCASTING & PUBLISHING
470,000 Grupo Televisa SA, Callable, 0.00% due 05/15/08
(v)............................................ Ba2/BB 380,700
250,000 TV Azteca SA, Callable, 10.50% due 02/15/07...... B1/B+ 185,000
------------
565,700
------------
FOREST PRODUCTS & PAPER
260,000 Grupo Industrial Durango Gidusa, 12.625% due
08/01/03 (s)................................... B2/BB- 251,550
------------
817,250
------------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$1,464,550)................................ 1,479,750
------------
SOVEREIGN BONDS (85.5%)
ARGENTINA (17.8%)
ARS 270,618 Republic of Argentina Bocon, Series PRO1,
Callable, Sinking Fund, 2.815% due 04/01/07
(v)............................................ Ba3/BBB- 176,545
$ 435,977 Republic of Argentina Bocon, Series Pre-4,
Callable, Sinking Fund, 4.913% due 09/01/02
(v)............................................ Ba3/NR 399,216
270,000 Republic of Argentina Bonos del Tesoro, Series
BT02, 8.75% due 05/09/02....................... Ba3/NR 244,890
280,000 Republic of Argentina Discount Bonds, Series
L-GL, Callable, 6.00% due 03/31/23 (v)......... Ba3/BB 196,000
340,000 Republic of Argentina Global Bonds, 9.75% due
09/19/27....................................... Ba3/BB 260,100
250,000 Republic of Argentina Global Bonds, Series BGL4,
11.00% due 10/09/06............................ Ba3/BB 231,250
555,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17 (s)....................... Ba3/BB 481,462
200,000 Republic of Argentina Global Bonds, Series BGLO,
8.375% due 12/20/03............................ Ba3/BB 182,500
150,000 Republic of Argentina Global Bonds, Series XW,
11.00% due 12/04/05............................ Ba3/BB 137,625
450,000 Republic of Argentina Par Bonds, Series L-GP,
Callable, 6.00% due 03/31/23 (v)............... Ba3/BB 284,062
1,106,700 Republic of Argentina, Series FRB, Callable,
Sinking Fund, 5.938% due 03/31/05 (v).......... Ba3/BB 945,675
232,500 Republic of Argentina, Series L, Callable,
Sinking Fund, 5.938% due 03/31/05 (v).......... Ba3/BB 198,671
------------
3,737,996
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- ---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
BRAZIL (18.6%)
$ 2,223,221 Republic of Brazil C Bonds, Series 20 Year,
Callable, Sinking Fund, 8.00% due 04/15/14
(v)............................................ B2/B+ $ 1,449,262
1,175,000 Republic of Brazil DCB, Series 18 Year, Callable,
Sinking Fund, 5.938% due 04/15/12 (v).......... B2/B+ 722,625
130,000 Republic of Brazil DCB, Series RG, Callable,
Sinking Fund, 5.938% due 04/15/12 (v).......... B2/B+ 79,950
450,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... B2/B+ 335,250
315,000 Republic of Brazil NMB, Series 15 Year, Callable,
Sinking Fund, 5.938% due 04/15/09 (v).......... B2/B+ 219,712
800,000 Republic of Brazil Par Bonds, Series 30 Year ZL,
5.75% due 04/15/24 (v)......................... B2/NR 456,000
47,500 Republic of Brazil, Series EI-L, Callable,
Sinking Fund, 5.875% due 04/15/06 (v).......... B2/B+ 37,525
650,000 Republic of Brazil Discount Bonds, Series 30 Year
ZL, Callable, 5.875% due 04/15/24 (v).......... B2/B+ 412,750
250,000 Republic of Brazil Global Bonds, 9.375% due
04/07/08....................................... B2/B+ 200,000
------------
3,913,074
------------
BULGARIA (2.6%)
190,000 Republic of Bulgaria Discount Bonds, Series A,
Callable, 5.875% due 07/28/24 (v).............. B2/NR 128,250
280,000 Republic of Bulgaria Global FLIRB, Series A,
Callable, Sinking Fund, 2.50% due 07/28/12
(v)............................................ B2/NR 166,950
360,000 Republic of Bulgaria IAB PDI, Callable, Sinking
Fund, 5.875% due 07/28/11 (v).................. B2/NR 243,000
------------
538,200
------------
COLOMBIA (0.8%)
5,000 Republic of Colombia, 8.625% due 04/01/08........ Baa3/BBB- 3,850
210,000 Republic of Colombia, 7.625% due 02/15/07........ Baa3/BBB- 158,550
------------
162,400
------------
ECUADOR (1.9%)
581,239 Republic of Ecuador Global PDI Bonds, Callable,
Sinking Fund, 6.00% due 02/27/15 (v)........... B3/NR 188,176
570,000 Republic of Ecuador Par Bonds, Callable, 4.00%
due 02/28/25 (v)............................... B3/NR 220,519
------------
408,695
------------
MEXICO (16.0%)
500,000 United Mexican States Discount Notes, Series B,
Callable, 5.875% due 12/31/19 (v).............. Ba2/BB 420,000
160,000 United Mexican States Global Bonds, 8.625% due
03/12/08....................................... Ba2/BB 150,400
600,000 United Mexican States Global Bonds, 9.875% due
01/15/07....................................... Ba2/BB 598,500
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- ---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
MEXICO (CONTINUED)
$ 130,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... Ba2/BB $ 139,100
485,000 United Mexican States Global Bonds, 11.50% due
05/15/26 (s)................................... Ba2/BB 540,775
1,000,000 United Mexican States Par Bonds, Series W-A,
Callable, 6.25% due 12/31/19................... Ba2/BB 742,500
1,050,000 United Mexican States Par Bonds, Series W-B,
Callable, 6.25% due 12/31/19................... Ba2/BB 779,625
------------
3,370,900
------------
MOROCCO (0.9%)
230,000 Kingdom of Morocco, Series A, Sinking Fund,
5.906% due 01/01/09 (v)........................ NR/NR 185,725
------------
NIGERIA (0.7%)
250,000 Central Bank of Nigeria, Series WW, Callable,
6.25% due 11/15/20 (v)......................... NR/NR 154,375
------------
PANAMA (2.0%)
180,000 Republic of Panama Global Bonds, 8.875% due
09/30/27....................................... Ba1/BB+ 148,500
240,000 Republic of Panama IRB, Series 18 Year, Sinking
Fund, 4.00% due 07/17/14 (v)................... Ba1/BB+ 176,100
139,009 Republic of Panama PDI, Series 20 Year, Sinking
Fund, 5.938% due 07/17/16 (v).................. Ba1/BB+ 101,998
------------
426,598
------------
PERU (1.6%)
295,000 Republic of Peru FLIRB, Series 20 Year, Sinking
Fund, 3.75% due 03/07/17 (v)................... NR/BB 161,881
275,000 Republic of Peru PDI, Series 20 Year, Sinking
Fund, 4.50% due 03/07/17 (v)................... NR/BB 168,438
------------
330,319
------------
PHILIPPINES (1.9%)
200,000 Republic of Philippines Global Bonds, 8.875% due
04/15/08....................................... Ba1/BB+ 195,500
200,000 Republic of Philippines Global Bonds, 9.875% due
01/15/19....................................... Ba1/BB+ 197,260
------------
392,760
------------
RUSSIA (12.8%)
40,042 Russian IAN, Vnesheconombank, Series US, Sinking
Fund, 6.063% due 12/15/15 (v) TRIANGLE ........ Ca/NR 6,207
3,900,000 Russian IAN, Vnesheconombank, Series 19 Year,
Sinking Fund, 6.063% due 12/15/15
(v) TRIANGLE .................................. Ca/NR 604,500
3,438,000 Russia Principal Loan, Vnesheconombank, Series 24
Year, Sinking Fund, 6.063% due 12/15/20
(v) TRIANGLE .................................. NR/NR 412,560
460,000 Russian Federation, 8.75% due 07/24/05........... B3/CC 228,850
240,000 Russian Federation, 9.25% due 11/27/01........... B3/CC 160,800
420,000 Russian Federation, 10.00% due 06/26/07.......... B3/CC 208,950
620,000 Russian Federation, 11.00% due 07/24/18.......... B3/CC 308,450
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- ---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
RUSSIA (CONTINUED)
$ 580,000 Russian Federation, 11.75% due 06/10/03.......... B3/CC $ 352,350
730,000 Russian Federation, 12.75% due 06/24/28.......... B3/CC 401,500
------------
2,684,167
------------
VENEZUELA (7.9%)
404,761 Republic of Venezuela DCB, Series DL, Callable,
Sinking Fund, 6.313% due 12/18/07 (v).......... B2/B+ 312,172
380,950 Republic of Venezuela FLIRB, Series A, Callable,
Sinking Fund, 6.00% due 03/31/07 (v)........... B2/B+ 287,617
190,475 Republic of Venezuela FLIRB, Series B, Callable,
Sinking Fund, 6.00% due 03/31/07 (v)........... B2/B+ 143,809
1,030,000 Republic of Venezuela Global Bonds, 9.25% due
09/15/27....................................... B2/B+ 684,950
340,000 Republic of Venezuela Par Bonds, Series W-A,
Callable, 6.75% due 03/31/20................... B2/B+ 238,000
------------
1,666,548
------------
TOTAL SOVEREIGN BONDS (COST $17,341,634)..... 17,971,757
------------
U.S. TREASURY OBLIGATIONS (1.0%)
U.S. TREASURY BONDS (1.0%)
205,000 6.75% due 08/15/26 (s)
(COST $214,156)................................ 219,477
------------
OTHER GOVERNMENT AGENCIES (0.9%)
MEXICO (0.9%)
200,000 Banco Nacional de Comercio Exterior SNC, 7.25%
due 02/02/04 (COST $183,855)................... Ba2/BB 183,000
------------
WARRANTS (0.0%)
ARGENTINA (0.0%)
310 Republic of Argentina, Expiring 02/25/00......... 3,100
555 Republic of Argentina, Expiring 12/03/99......... 4,163
------------
7,263
------------
NIGERIA (0.0%)
1,250 Central Bank of Nigeria, Expiring 11/15/20....... 0
------------
VENEZUELA (0.0%)
2,950 Republic of Venezuela, Expiring 04/15/20......... 0
------------
TOTAL WARRANTS (COST $27,977)................ 7,263
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT{::} SECURITY DESCRIPTION (UNAUDITED) VALUE
- ---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
RIGHTS (0.0%)
MEXICO (0.0%)
$ 3,411,000 United Mexican States Value Recovery, Expiring
06/30/03 (COST $0)............................. $ 0
------------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
SHORT-TERM INVESTMENTS (6.0%)
U.S. TREASURY OBLIGATIONS (6.0%)
1,258,000 U.S. Treasury Bill, 3.650%, (y) due 7/15/99 (COST
$1,256,288).................................... 1,256,288
------------
TOTAL INVESTMENTS (COST $20,488,460) (100.4%).... 21,117,535
OTHER ASSETS IN EXCESS OF LIABILITIES (-0.4%).... (84,939)
------------
NET ASSETS (100.0%).............................. $ 21,032,596
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $21,062,614 for Federal Income Tax
Purposes at June 30, 1999, the aggregate gross unrealized appreciation and
depreciation was $636,690 and $581,769, respectively, resulting in net
unrealized appreciation of $54,921.
(s) Security is fully or partially segregated with custodian as collateral for
futures or with brokers as initial margin for futures contracts. $973,594 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.
(y) Yield to maturity.
TRIANGLE Defaulted security.
{::} Denominated in United States Dollar unless othewise indicated.
ARS -- Denominated in Argentina Pesos.
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.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $20,488,460 ) $21,117,535
Cash 534
Foreign Currency at Value (Cost $180,148 ) 180,148
Receivable for Investments Sold 2,904,575
Interest Receivable 570,095
Receivable for Expense Reimbursement 17,984
Deferred Organization Expenses 8,704
Variation Margin Receivable 6,976
Prepaid Trustees' Fees 305
Prepaid Administration Fee 117
-----------
Total Assets 24,806,973
-----------
LIABILITIES
Payable for Investments Purchased 3,679,732
Organization Expenses Payable 14,200
Advisory Fee Payable 11,449
Administrative Services Fee Payable 419
Fund Services Fee Payable 21
Accrued Expenses 68,556
-----------
Total Liabilities 3,774,377
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $21,032,596
-----------
-----------
</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 JUNE 30, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $1,168,391
EXPENSES
Advisory Fee $ 59,295
Professional Fees and Expenses 42,601
Custodian Fees and Expenses 33,287
Administrative Services Fee 2,192
Amortization of Organization Expense 1,606
Fund Services Fee 189
Trustees' Fees and Expenses 148
Administration Fee 104
Miscellaneous 5,873
--------
Total Expenses 145,295
Less: Reimbursement of Expenses (39,411)
--------
NET EXPENSES 105,884
----------
NET INVESTMENT INCOME 1,062,507
NET REALIZED LOSS ON
Investment Transactions (394,746)
Futures (57,701)
Foreign Currency Contracts and Transactions (18,849)
--------
Net Realized Loss (471,296)
NET CHANGE IN UNREALIZED APPRECIATION OF
Investment Transactions 572,326
Futures 31,618
Foreign Currency Contracts and Translations 31,038
--------
Net Change in Unrealized Appreciation 634,982
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,226,193
----------
----------
</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
JUNE 30, FOR THE FISCAL
1999 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1998
------------ -----------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,062,507 $ 1,544,342
Net Realized Loss on Investments, Futures and
Foreign Currency Contracts and Transactions (471,296) (4,592,666)
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 634,982 223,707
------------ -----------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 1,226,193 (2,824,617)
------------ -----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 13,946,438 15,100,514
Withdrawals (13,488,287) (5,099,187)
------------ -----------------
Net Increase from Investors' Transactions 458,151 10,001,327
------------ -----------------
Total Increase in Net Assets 1,684,344 7,176,710
NET ASSETS
Beginning of Period 19,348,252 12,171,542
------------ -----------------
End of Period $ 21,032,596 $ 19,348,252
------------ -----------------
------------ -----------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE MARCH 7, 1997
SIX MONTHS ENDED FOR THE FISCAL (COMMENCEMENT OF
JUNE 30, 1999 YEAR ENDED OPERATIONS) THROUGH
(UNAUDITED) DECEMBER 31, 1998 DECEMBER 31, 1997
---------------- ----------------- -------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.25%(a) 1.07% 0.91%(a)
Net Investment Income 12.54%(a) 10.16% 9.57%(a)
Expenses without Reimbursement 1.72%(a) 1.25% 0.91%(a)
Portfolio Turnover 497%(b) 791% 182%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) 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)
JUNE 30, 1999
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Debt Portfolio (the "portfolio") is one of eight subtrusts
(portfolios) comprising The Series Portfolio (the "Series Portfolio"). The
Series Portfolio is registered under the Investment Company Act of 1940, as
amended, as a no-load open-end management investment company which was organized
as a trust under the laws of the State of New York on June 24, 1994. The
portfolio commenced operations on March 7, 1997. The portfolio's investment
objective is high total return from a portfolio of fixed income securities of
emerging markets issuers. The Declaration of Trust permits the trustees to issue
an unlimited number of beneficial interests in the portfolio. At a meeting on
November 12, 1998, the trustees elected to change the portfolio's fiscal year
end from December 31 to July 31.
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 is closed. If
events materially affecting the value of foreign securities occur between
the time when the
25
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
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.
f) 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.
g) 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 and to enhance returns. A
forward foreign currency 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.
h) 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
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
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.
i) 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 June 30, 1999, this fee
amounted to $59,295.
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 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 six months ended June 30, 1999, the
fee for these services amounted to $104.
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 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
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JUNE 30, 1999
- --------------------------------------------------------------------------------
portfolios, other investors in the master portfolios for which Morgan
provides similar services and J.P. Morgan Series Trust. For the six months
ended June 30, 1999, the fee for these services amounted to $2,192.
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 June 30,
1999, J.P. Morgan has agreed to reimburse the portfolio $39,411 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 $189 for the six months ended June 30, 1999.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios, and J.P. Morgan Series Trust. The Trustees' Fees
and Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $40.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------------- --------------
<S> <C>
$ 80,053,825 $ 74,745,695
</TABLE>
Open futures contracts at June 30, 1999 are summarized as follows:
SUMMARY OF OPEN CONTRACTS AT JUNE 30, 1999
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT MARKET VALUE
CONTRACTS LONG APPRECIATION OF CONTRACTS
-------------- -------------- --------------------
<S> <C> <C> <C>
U.S. Long Bond,
expiring September 1999......................... 6 $ 6,558 $ 695,438
-------------- -------------- --------------------
-------------- -------------- --------------------
</TABLE>
At June 30, 1999, the portfolio had no open forward currency contracts.
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.
28
