<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
----------- ------------------------------------------------- ------------
<C> <S> <C>
CORPORATE OBLIGATIONS (1.1%)
INDIA (1.1%)
$ 250,000 Reliance Industries Ltd., (144A), 10.375% due
06/24/16 (cost $203,386)....................... $ 202,870
------------
OTHER GOVERNMENT AGENCIES (4.6%)
MEXICO (4.6%)
261,000 Banco Nacional de Comercio Exterior SNC, 7.25%
due 02/02/04................................... 240,120
660,000 Petroleos Mexicanos, (144A), Tranche 5, MTN,
Putable, 9.375% due 12/02/08................... 655,050
------------
TOTAL OTHER GOVERNMENT AGENCIES (COST
$876,891)................................... 895,170
------------
SOVEREIGN BONDS (62.8%)
ARGENTINA (18.1%)
502,918 Republic of Argentina Bocon, Series Pre-4,
Callable, Sinking Fund, 5.01% due
09/01/02(v).................................... 445,892
1,130,000 Republic of Argentina Bonos del Tesoro, Series
BT02, 8.75% due 05/09/02....................... 1,021,520
280,000 Republic of Argentina Global Bonds, 9.75% due
09/19/27....................................... 248,500
805,000 Republic of Argentina Global Bonds, Series XW,
11.00% due 12/04/05............................ 800,975
280,000 Republic of Argentina Par Bonds, Series L-GP,
Callable, 5.75% due 03/31/23(v)................ 201,600
935,300 Republic of Argentina, Series L, Callable,
Sinking Fund, 6.188% due 03/31/05(v)........... 787,990
------------
3,506,477
------------
BRAZIL (8.3%)
760,000 Republic of Brazil DCB, Series 18 Year L,
Callable, Sinking Fund, 6.188% due
04/15/12(v).................................... 380,000
680,000 Republic of Brazil DCB, Series 18 Year RG,
Callable, Sinking Fund, 6.188% due
04/15/12(v).................................... 340,000
790,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... 525,350
645,000 Republic of Brazil NMB, Series 15 Year L,
Callable, Sinking Fund, 6.188% due
04/15/09(v).................................... 350,719
------------
1,596,069
------------
BULGARIA (12.1%)
1,370,000 Republic of Bulgaria Discount Bonds, Series A,
Callable, 6.688% due 07/28/24(v)............... 959,000
660,000 Republic of Bulgaria Global FLIRB, Series A,
Callable, Sinking Fund, 2.50% due
07/28/12(v).................................... 376,200
1,500,000 Republic of Bulgaria IAB PDI, Callable, Sinking
Fund, 6.688% due 07/28/11(v)................... 1,008,750
------------
2,343,950
------------
ECUADOR (1.2%)
548,855 Republic of Ecuador Global PDI Bonds, Series 20
Year, 6.625% due 02/27/15(v)................... 222,286
------------
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
----------- ------------------------------------------------- ------------
<C> <S> <C>
MEXICO (4.3%)
$ 570,000 United Mexican States Global Bonds, Series W-B,
6.25% due 12/31/19............................. $ 441,750
385,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... 396,550
------------
838,300
------------
MOROCCO (0.9%)
220,000 Government of Morocco - Restructuring &
Consolidation Agreement, Series A, Sinking
Fund, 6.063% due 01/01/09(v)(s)................ 173,250
------------
PANAMA (2.8%)
470,000 Republic of Panama Global Bonds, 8.25% due
04/22/08(s).................................... 440,625
131,833 Republic of Panama PDI, Series 20 Year, 6.688%
due 07/17/16(v)................................ 97,556
------------
538,181
------------
PERU (1.6%)
220,000 Republic of Peru FLIRB, Series 20 Year, Sinking
Fund, 3.25% due 03/07/17(v).................... 124,575
305,000 Republic of Peru PDI, Series 20 Year, Sinking
Fund, 4.00% due 03/07/17(v).................... 191,387
------------
315,962
------------
PHILIPPINES (1.9%)
360,000 Republic of Philippines Global Bonds, 8.875% due
04/15/08....................................... 359,100
------------
RUSSIA (0.9%)
40,042 Russia IAN, Vnesheconombank, Series US, Sinking
Fund, 5.969% due 12/15/15(v)................... 4,305
2,888,000 Russia Principal Loan, Vnesheconombank, Series 24
Year, Sinking Fund, 5.969% due 12/15/20(v)..... 173,280
------------
177,585
------------
SOUTH KOREA (7.8%)
360,000 Republic of Korea Global Bonds, 8.75% due
04/15/03....................................... 369,000
1,100,000 Republic of Korea Global Bonds, 8.875% due
04/15/08....................................... 1,130,250
------------
1,499,250
------------
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
----------- ------------------------------------------------- ------------
<C> <S> <C>
VENEZUELA (2.9%)
$ 642,856 Republic of Venezuela DCB, Series DL, Callable,
Sinking Fund, 5.938% due 12/18/07(s)(v)........ $ 408,213
260,000 Republic of Venezuela Global Bonds, 9.25% due
09/15/27....................................... 158,600
------------
566,813
------------
TOTAL SOVEREIGN BONDS (COST $12,127,156)..... 12,137,223
------------
U.S. TREASURY OBLIGATIONS (3.8%)
U.S. TREASURY BONDS (3.8%)
200,000 5.25% due 11/15/28............................... 204,746
450,000 6.75% due 08/15/26(s)............................ 539,294
------------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$720,836)................................... 744,040
------------
RIGHTS (0.0%)
MEXICO (0.0%)
2,258,000 United Mexican States Value Recovery, Expiring
06/30/03 (cost $0)............................. 0
------------
WARRANTS (0.1%)
ARGENTINA (0.1%)
555 Republic of Argentina, Expiring 12/03/99......... 24,975
------------
NIGERIA (0.0%)
1,000 Central Bank of Nigeria, Expiring 11/15/20....... 0
------------
VENEZUELA (0.0%)
1,250 Republic of Venezuela, Expiring 04/15/20......... 0
------------
TOTAL WARRANTS (COST $19,425)................ 24,975
------------
</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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT{::} SECURITY DESCRIPTION VALUE
----------- ------------------------------------------------- ------------
SHORT-TERM INVESTMENTS (1.8%)
<C> <S> <C>
U.S. TREASURY OBLIGATIONS (1.8%)
$ 349,000 Bills, 4.34% due 04/01/99(y)..................... $ 345,340
10,000 Bills, 4.34% due 06/24/99(y)..................... 9,794
------------
TOTAL SHORT-TERM INVESTMENTS (COST
$354,969)................................... 355,134
------------
TOTAL INVESTMENTS (COST $14,302,663) (74.2%)..... 14,359,412
OTHER ASSETS IN EXCESS OF LIABILITIES (25.8%).... 4,988,840
------------
NET ASSETS (100.0%).............................. $ 19,348,252
------------
------------
</TABLE>
- ------------------------------
Note: Based on the cost of investments of $15,341,590 for Federal Income Tax
purposes at December 31, 1998, the aggregate gross unrealized appreciation and
depreciation was $281,164 and $1,263,342, respectively, resulting in net
unrealized depreciation of $982,178.
(s) Security is fully or partially segregated with custodian as collateral for
futures contracts or with broker as initial margin for futures contracts.
$1,025,517 of the market value has been segregated.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instruments with step coupon rate.
(y) Yield to maturity.
{::} Denominated in USD unless otherwise indicated.
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.
MTN - Medium Term Notes.
NMB - New Money Bonds.
PDI - Past Due Interest.
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, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $14,302,663 ) $14,359,412
Cash 565,822
Receivable for Investments Sold 4,185,168
Interest Receivable 296,199
Receivable from Advisor 23,124
Deferred Organization Expenses 10,309
Prepaid Trustees' Fees 356
Unrealized Appreciation of Forward Foreign
Currency Contracts 203
Prepaid Expenses and Other Assets 1,008
-----------
Total Assets 19,441,601
-----------
LIABILITIES
Unrealized Depreciation of Forward Foreign
Currency Contracts 19,075
Organization Expenses Payable 14,200
Advisory Fee Payable 11,495
Variation Margin Payable 1,250
Administrative Services Fee Payable 445
Fund Services Fee Payable 16
Accrued Expenses 46,868
-----------
Total Liabilities 93,349
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $19,348,252
-----------
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income (Net of Foreign Withholding Tax
of $22) $ 1,706,984
EXPENSES
Advisory Fee $ 106,372
Professional Fees and Expenses 52,355
Custodian Fees and Expenses 16,262
Printing Expenses 6,543
Administrative Services Fee 4,349
Amortization of Organization Expense 3,238
Fund Services Fee 423
Insurance Expense 335
Administration Fee 274
Trustees' Fees and Expenses 99
Miscellaneous 114
-----------
Total Expenses 190,364
Less: Reimbursement of Expenses (27,722)
-----------
NET EXPENSES 162,642
-----------
NET INVESTMENT INCOME 1,544,342
NET REALIZED GAIN (LOSS) ON
Investment Transactions (4,955,945)
Futures Contracts 144,392
Foreign Currency Transactions 218,887
-----------
Net Realized Loss (4,592,666)
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) OF
Investments 299,990
Futures Contracts (25,060)
Foreign Currency Contracts and Translations (51,223)
-----------
Net Change in Unrealized Appreciation 223,707
-----------
NET DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS $(2,824,617)
-----------
-----------
</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
FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED OPERATIONS) THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -------------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,544,342 $ 8,917,209
Net Realized Loss on Investments, Futures and
Foreign Currency Contracts and Transactions (4,592,666) (5,256,573)
Net Change in Unrealized Appreciation
(Depreciation) of Investments, Futures and
Foreign Currency Contracts and Translations 223,707 (225,247)
----------------- -------------------
Net Increase (Decrease) in Net Assets
Resulting from Operations (2,824,617) 3,435,389
----------------- -------------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 15,100,514 178,496,163
Withdrawals (5,099,187) (169,760,010)
----------------- -------------------
Net Increase from Investors' Transactions 10,001,327 8,736,153
----------------- -------------------
Total Increase in Net Assets 7,176,710 12,171,542
NET ASSETS
Beginning of Period 12,171,542 --
----------------- -------------------
End of Period $ 19,348,252 $ 12,171,542
----------------- -------------------
----------------- -------------------
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 7, 1997
FOR THE (COMMENCEMENT OF
FISCAL YEAR ENDED OPERATIONS) THROUGH
DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- -------------------
<S> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.07% 0.91%(a)
Net Investment Income 10.16% 9.57%(a)
Expenses without Reimbursement 1.25% 0.91%(a)
Portfolio Turnover 791% 182%(b)
</TABLE>
- ------------------------
(a) Annualized.
(b) Not 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, 1998
- --------------------------------------------------------------------------------
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.
("Limited") in exchange for a beneficial interest in the portfolio. On December
12, 1997, Limited withdrew its entire 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.
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
future 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 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 short-term portfolio securities with a
remaining maturity of less than 60 days 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 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.
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expenses are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations.
Although the net assets of the portfolio are presented at the exchange
rates and market values prevailing at the end of the period, the portfolio
does not isolate the portion of the results of operations arising as a
result of changes in foreign exchange rates from the fluctuations arising
from changes in the market prices of securities during the period.
c) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. Dividend income is recorded on the
ex-dividend date or as of the time that the relevant ex-dividend date and
amount become known. 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 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. At December 31, 1998, the portfolio had open
forward currency contracts as follows:
SUMMARY OF OPEN FORWARD FOREIGN CURRENCY CONTRACTS
<TABLE>
<CAPTION>
U.S. DOLLAR NET UNREALIZED
CONTRACTUAL VALUE AT APPRECIATION/
PURCHASE CONTRACTS VALUE 12/31/98 (DEPRECIATION)
- ------------------------------------------------- ----------- ----------- --------------
<S> <C> <C> <C>
German Mark 273,380, expiring 02/09/99........... $ 170,129 $ 164,462 $ (5,667)
German Mark 124,492, expiring 03/09/99........... 74,797 75,000 203
</TABLE>
<TABLE>
<CAPTION>
SETTLEMENT
SALES CONTRACTS VALUE
- ------------------------------------------------- ----------
<S> <C> <C> <C>
German Mark 273,380, expiring 02/09/99........... $ 155,259 $ 164,462 $ (9,203)
German Mark 124,492, expiring 03/09/99........... 70,795 75,000 (4,205)
--------------
NET UNREALIZED DEPRECIATION ON FORWARD FOREIGN
CURRENCY CONTRACTS.............................. $ (18,872)
--------------
--------------
</TABLE>
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
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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. Futures contracts open at December 31, 1998 are
summarized as follows:
SUMMARY OF OPEN CONTRACTS AT DECEMBER 31, 1998
<TABLE>
<CAPTION>
NET UNREALIZED PRINCIPAL AMOUNT
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ----------------
<S> <C> <C> <C>
U.S. Long Bond, expiring March 1999.............. 10 $ (25,060) $ 1,302,873
-------------- -------------- ----------------
-------------- -------------- ----------------
</TABLE>
f) The portfolio may engage in swap transactions, specifically interest rate,
currency, index and total return swaps. The portfolio will use these
transactions to preserve a return or spread on a particular investment or
portion of its investments, to protect against currency fluctuations, as a
duration management technique, to protect against any increase in the
price of securities the portfolio anticipates purchasing at a later date,
or to gain exposure to certain markets in the most economical way
possible. An interest rate swap is an agreement between two parties to
exchange interest payments on a specified amount ("the notional amount")
for a specified period. If a swap agreement provides for payments in
different currencies, the parties might agree to exchange the notional
amount as well. Risks associated with swap transactions include the
ability of counterparties to meet the terms of their contracts, and the
amount of the portfolio's potential gain or loss on swap transactions is
not subject to any fixed limit.
g) 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 portfolio.
h) 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.
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
28
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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) Prior to October 28, 1998, the portfolio had an Investment Advisory
Agreement with Morgan. Under the terms of the agreement, the portfolio
paid Morgan at an annual rate of 0.70% of the portfolio's average daily
net assets. Effective October 28, 1998, the portfolio's Investment Advisor
is J.P. Morgan Investment Management, Inc. ("JPMIM"), an affiliate of
Morgan and wholly owned subsidiary of J.P. Morgan, and the terms of the
agreement remain the same. For the fiscal year ended December 31, 1998,
this fee amounted to $106,372.
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. Under a Co-Administration Agreement between FDI
and the portfolio, FDI provides administrative services necessary for the
operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the portfolio's officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the fiscal year ended December 31, 1998, the fee for these services
amounted to $274.
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 fiscal year ended December 31, 1998, the fee for
these services amounted to $4,349.
During the year, Morgan reimbursed the portfolio for $27,722 based on its
voluntary undertaking to limit the expenses of the portfolio and the
related funds to 1.25% of the average net assets.
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 $423 for the fiscal year ended December 31, 1998.
29
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
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 $90.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended December 31, 1998 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
- ----------------- ------------
<S> <C>
113,756,184...... 108,117,482
</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 the Financial Statements which are
included elsewhere in this report.
30
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Shareholders 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, 1998, the results of its operations for the
year then ended, and the changes in its net assets and supplementary data for
the year then ended and for the period from March 7, 1997 (commencement of
operations) through 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 audits. We conducted our audits 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 audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodians and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
New York, New York
February 18, 1999
31
<PAGE>
J.P. MORGAN EMERGING MARKETS DEBT FUND
ADDITIONAL INFORMATION (UNAUDITED)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
YEAR 2000 PROCESSING ISSUE
Many computer programs in use today use two digits rather than four to identify
the year and cannot distinguish the year 2000 from the year 1900. The Year 2000
issue affects virtually all companies and organizations. The funds' Investment
Adviser is working on necessary changes to its computer systems to deal with the
Year 2000 issue. The funds' Transfer Agent, Custodian and other services
providers have reported that they are working on dealing with the Year 2000
issue as well. There can be no assurance that the problem will be corrected in
all respects or that it will not have a negative effect on the funds' operations
or results. In addition, companies in which the funds invest could be adversely
affected by the Year 2000 issue, which could have a negative effect on the
funds' investment returns.
32
