<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COMMON STOCKS (92.0%)
BASIC INDUSTRIES (4.0%)
CHEMICALS (4.0%)
Albemarle Corp................................... 168,600 $ 3,709,200
General Chemical Group, Inc.+.................... 155,500 150,641
Geon Co.......................................... 102,600 2,205,900
Georgia Gulf Corp................................ 151,800 3,795,000
Minerals Technologies, Inc....................... 63,200 2,923,000
Solutia, Inc..................................... 44,900 544,412
Symyx Technologies, Inc.+........................ 54,800 1,589,200
Wellman, Inc..................................... 310,800 6,118,875
------------
TOTAL BASIC INDUSTRIES......................... 21,036,228
------------
CONSUMER GOODS & SERVICES (10.0%)
APPARELS & TEXTILES (0.3%)
Skechers USA, Inc., Class A+..................... 57,900 628,991
Vans, Inc.+...................................... 67,600 1,064,700
------------
1,693,691
------------
BROADCASTING & PUBLISHING (4.4%)
Entercom Communications Corp.+................... 68,900 3,134,950
IBEAM Broadcasting Corp.+........................ 57,175 728,981
Lightspan, Inc.+................................. 29,675 246,673
Mediapex, Inc.+.................................. 105,325 1,612,789
SmartForce Public Limited Co., Spon. ADR+(i)..... 177,900 7,482,919
Spanish Broadcasting System, Inc., Class A+...... 141,500 2,405,500
Univision Communications, Inc., Class A+......... 50,800 5,232,400
Valassis Communications, Inc.+................... 71,800 2,369,400
------------
23,213,612
------------
ENTERTAINMENT, LEISURE & MEDIA (3.6%)
American Classic Voyages Co.+.................... 135,950 2,583,050
Anchor Gaming+................................... 73,300 3,275,594
ARTISTdirect, Inc.+.............................. 29,200 135,050
Catalina Marketing Corp.......................... 48,600 4,692,937
Insight Communications Co., Inc.+................ 92,700 1,315,181
Lifeminders.com, Inc.+........................... 30,125 1,014,836
Media Metrix, Inc.+.............................. 67,750 1,888,531
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
ENTERTAINMENT, LEISURE & MEDIA (CONTINUED)
NBC Internet, Inc., Class A+..................... 134,700 $ 2,677,162
Ticketmaster Online-CitySearch, Inc., Class B+... 93,300 1,691,063
------------
19,273,404
------------
FOOD, BEVERAGES & TOBACCO (1.0%)
Keebler Foods Co................................. 64,100 2,323,625
Robert Mondavi Corp., Class A+................... 92,000 2,886,500
------------
5,210,125
------------
RETAIL (0.7%)
Cost Plus, Inc.+................................. 88,450 2,581,634
Pacific Sunwear of California, Inc.+............. 43,000 690,687
Stamps.com, Inc.+................................ 32,650 326,500
------------
3,598,821
------------
TOTAL CONSUMER GOODS & SERVICES................ 52,989,653
------------
ENERGY (3.2%)
GAS EXPLORATION (0.5%)
Spinnaker Exploration Co.+....................... 96,100 2,450,550
------------
OIL-PRODUCTION (0.5%)
Devon Energy Corp................................ 40,800 2,440,350
------------
OIL-SERVICES (2.2%)
Cooper Cameron Corp.+............................ 39,200 2,734,200
Global Industries Ltd.+.......................... 77,100 1,358,887
Global Marine, Inc.+............................. 87,400 2,474,512
Gulf Island Fabrication, Inc.+................... 27,400 474,362
National-Oilwell, Inc.+.......................... 150,300 3,907,800
Universal Compression Holdings, Inc.+............ 27,425 653,058
------------
11,602,819
------------
TOTAL ENERGY................................... 16,493,719
------------
FINANCE (6.2%)
BANKING (2.0%)
Bank United Corp., Class A....................... 130,100 4,667,337
City National Corp............................... 62,900 2,453,100
National Commerce Bancorporation................. 86,600 1,645,400
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
BANKING (CONTINUED)
Pacific Century Financial Corp................... 59,500 $ 1,338,750
Sterling Bancshares, Inc......................... 57,700 638,306
------------
10,742,893
------------
FINANCIAL SERVICES (3.5%)
Allied Capital Corp.............................. 180,300 3,076,369
CheckFree Holdings Corp.+........................ 84,000 3,512,250
Donaldson, Lufkin & Jenrette, Inc. - DLJ......... 61,300 2,394,531
ESPEED, Inc., Class A+........................... 112,275 2,905,116
Financial Federal Corp.+......................... 118,500 2,103,375
Gabelli Asset Management, Inc., Class A+......... 72,300 1,455,037
Heller Financial, Inc............................ 98,500 1,859,187
LendingTree, Inc.+............................... 10,600 57,637
Southwest Securities Group, Inc.................. 41,400 1,200,600
------------
18,564,102
------------
INSURANCE (0.7%)
Hooper Holmes, Inc............................... 110,350 1,131,087
RenaissanceRe Holdings Ltd.(i)................... 54,200 2,347,537
------------
3,478,624
------------
TOTAL FINANCE.................................. 32,785,619
------------
HEALTHCARE (13.7%)
BIOTECHNOLOGY (6.6%)
Aclara Biosciences, Inc.+........................ 12,175 321,116
Affymetrix, Inc.+................................ 34,300 4,073,125
Corixa Corp.+.................................... 68,250 2,175,469
Diversa Corp.+................................... 57,050 1,255,100
Exelixis, Inc.+.................................. 68,550 1,662,337
Gene Logic, Inc.+................................ 15,600 329,550
Human Genome Sciences, Inc.+..................... 156,700 13,750,425
Maxygen, Inc.+................................... 14,800 610,500
Millennium Pharmaceuticals, Inc.+................ 67,900 5,678,137
Molecular Devices Corp.+......................... 6,125 326,922
Neurocrine Biosciences, Inc.+.................... 65,200 1,385,500
Orchid Biosciences+.............................. 119,300 1,431,600
Vical, Inc.+..................................... 97,675 1,855,825
------------
34,855,606
------------
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
HEALTH SERVICES (0.8%)
Accredo Health, Inc.+............................ 40,700 $ 976,800
Allscripts, Inc.+................................ 118,575 3,290,456
HealthGate Data Corp.+........................... 100,400 225,900
------------
4,493,156
------------
MEDICAL SUPPLIES (1.0%)
Cytyc Corp.+..................................... 39,900 2,002,481
Eclipse Surgical Technologies, Inc.+............. 165,400 589,237
Kensey Nash Corp.+............................... 97,425 949,894
ORATEC Interventions, Inc.+...................... 33,300 1,257,075
Sonic Innovations, Inc.+......................... 13,700 226,906
------------
5,025,593
------------
PHARMACEUTICALS (5.3%)
Abgenix, Inc.+................................... 56,900 4,495,100
Akorn, Inc.+..................................... 158,900 1,271,200
Bindley Western Industries, Inc.................. 85,100 1,622,219
Gilead Sciences, Inc.+........................... 90,700 4,960,156
IDEC Pharmaceuticals Corp.+...................... 51,700 3,299,106
ILEX Oncology, Inc.+............................. 28,150 701,991
Ligand Pharmaceuticals, Inc., Class B+........... 249,700 2,668,669
SangStat Medical Corp.+.......................... 28,100 748,162
Vertex Pharmaceuticals, Inc.+.................... 113,700 8,399,587
------------
28,166,190
------------
TOTAL HEALTHCARE............................... 72,540,545
------------
INDUSTRIAL PRODUCTS & SERVICES (1.6%)
BUILDING & CONSTRUCTION (0.8%)
Dycom Industries, Inc.+.......................... 83,450 4,042,109
------------
DIVERSIFIED MANUFACTURING (0.6%)
GenTek, Inc...................................... 248,300 3,352,050
------------
MANUFACTURING (0.2%)
Rayovac Corp.+................................... 68,900 1,222,975
------------
TOTAL INDUSTRIAL PRODUCTS & SERVICES........... 8,617,134
------------
TECHNOLOGY (41.7%)
BUSINESS & PUBLIC SERVICES (0.0%)
Vicinity Corp.+.................................. 14,000 213,500
------------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COMPUTER PERIPHERALS (2.2%)
Integrated Circuit Systems, Inc.+................ 70,625 $ 847,500
JNI Corp.+....................................... 79,000 2,054,000
M-Systems Flash Disk Pioneers Ltd.+(i)........... 78,075 4,723,537
Pinnacle Systems, Inc............................ 153,600 3,686,400
------------
11,311,437
------------
COMPUTER SOFTWARE (17.8%)
Accrue Software, Inc.+........................... 123,700 2,968,800
Actuate Software Corp............................ 134,800 3,125,675
Agile Software Corp.+............................ 123,400 5,167,375
Allaire Corp.+................................... 51,100 2,123,844
Alteon Websystems, Inc.+......................... 52,800 2,682,900
Art Technology Group, Inc.+...................... 97,500 5,722,031
Aspen Technologies, Inc.+........................ 97,900 2,019,187
BroadVision, Inc................................. 67,954 2,433,603
Certicom Corp.+.................................. 105,400 3,353,037
Clarent Corp.+................................... 81,200 3,440,850
Corillian Corp.+................................. 66,350 1,028,425
Datastream Systems, Inc.+........................ 46,300 463,000
DSET Corp.+...................................... 52,000 988,000
E.piphany, Inc.+................................. 20,700 1,617,187
FASTNET Corp.+................................... 91,425 405,698
Informatica Corp.+............................... 59,600 2,398,900
ISS Group, Inc.+................................. 40,600 3,004,400
Keynote Systems, Inc.+........................... 90,375 3,146,180
Liberate Technologies, Inc.+..................... 44,000 1,025,750
Mercury Interactive Corp.+....................... 94,400 8,000,400
Metasolv Software, Inc.+......................... 69,375 2,740,312
Netegrity Inc.+.................................. 119,500 6,423,125
Nuance Communications, Inc.+..................... 24,825 980,588
Numerical Technologies, Inc.+.................... 10,050 416,447
Packeteer, Inc.+................................. 136,600 1,767,263
PC-Tel, Inc...................................... 36,400 973,700
Peregrine Systems, Inc.+......................... 76,200 1,581,150
Quest Software, Inc.+............................ 112,000 4,480,000
Retek, Inc.+..................................... 94,025 1,939,266
Sequoia Software Corp.+.......................... 27,100 182,925
Software Technlogies Corp.+...................... 69,000 1,552,500
Software.com, Inc.+.............................. 43,900 3,698,575
Sonic Foundry, Inc.+............................. 83,800 1,178,438
The 3DO Co.+..................................... 187,400 1,054,125
Ulticom, Inc.+................................... 39,250 1,010,688
Websense, Inc.+.................................. 31,000 658,266
WebTrends Corp.+................................. 111,000 2,844,375
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
COMPUTER SOFTWARE (CONTINUED)
Wind River Systems, Inc.+........................ 68,900 $ 2,497,625
Wireless Facilities, Inc.+....................... 55,100 2,600,031
Witness Systems, Inc.+........................... 57,275 404,505
------------
94,099,146
------------
COMPUTER SYSTEMS (1.0%)
eMachines, Inc.+................................. 87,250 346,273
National Computer Systems, Inc................... 42,500 1,931,094
Optimal Robotics Corp.+.......................... 27,600 928,050
SonicWALL, Inc.+................................. 36,800 2,217,200
------------
5,422,617
------------
ELECTRONICS (0.6%)
C-Cube Microsystems Inc.+........................ 104,100 1,789,219
DDi Corp.+....................................... 91,675 1,226,153
Therma-Wave, Inc.+............................... 17,000 323,000
------------
3,338,372
------------
INFORMATION PROCESSING (3.4%)
Diamond Technology Partners, Inc., Class A+...... 76,325 4,808,475
Digitas, Inc.+................................... 62,625 763,242
Gartner Group, Inc., Class A..................... 107,000 1,424,438
Go2Net, Inc.+.................................... 12,300 561,188
Net Perceptions, Inc.+........................... 176,500 2,625,438
NetRatings, Inc.+................................ 85,950 1,627,678
Safeguard Scientifics, Inc.+..................... 80,700 2,597,531
VerticalNet, Inc................................. 35,000 1,122,188
Visual Networks, Inc.+........................... 52,200 2,590,425
------------
18,120,603
------------
SEMICONDUCTORS (16.7%)
Applied Micro Circuits Corp.+.................... 81,700 8,108,725
ATMI, Inc.+...................................... 244,100 9,367,338
Brooks Automation, Inc.+......................... 49,100 1,951,725
Cirrus Logic, Inc.+.............................. 98,000 1,702,750
Cypress Semiconductor Corp.+..................... 104,500 4,395,531
Electro Scientific Industries, Inc............... 104,000 4,914,000
Exar Corp.+...................................... 90,500 6,221,875
Fairchild Semiconductor Intl., Class A+.......... 138,730 6,242,850
GaSonics International Corp...................... 148,200 4,056,975
Genesis Microchip, Inc.+......................... 29,100 525,619
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SEMICONDUCTORS (CONTINUED)
Integrated Device Technology, Inc.+.............. 144,400 $ 6,849,975
Lam Research Corp.+.............................. 210,300 6,755,888
Lattice Semiconductor Corp.+..................... 84,325 5,001,527
LTX Corp.+....................................... 115,100 3,006,988
Metron Technology N.V.+.......................... 92,100 1,024,613
Microchip Technology, Inc........................ 58,600 3,326,466
MKS Instruments, Inc.+........................... 113,200 4,457,250
PRI Automation, Inc.+............................ 80,800 4,152,363
Silicon Image, Inc.+............................. 84,500 3,047,281
Silicon Laboratories, Inc.+...................... 22,320 1,028,115
TranSwitch Corp.+................................ 30,200 1,891,275
------------
88,029,129
------------
TOTAL TECHNOLOGY............................... 220,534,804
------------
TELECOMMUNICATIONS (11.6%)
TELECOMMUNICATION SERVICES (4.7%)
Allegiance Telecom, Inc.+........................ 123,350 6,522,131
CapRock Communications Corp.+.................... 162,300 3,246,000
Choice One Communications, Inc.+................. 107,725 2,558,469
GoAmerica, Inc.+................................. 44,050 275,313
iBasis, Inc.+.................................... 207,950 2,924,297
Illuminet Holdings, Inc.+........................ 25,000 953,125
MGC Communications, Inc.+........................ 51,200 2,099,200
Motient Corp.+................................... 194,500 1,762,656
Net2Phone, Inc.+................................. 56,950 1,680,025
TeleCorp PCS, Inc., Class A+..................... 18,400 558,900
Verio, Inc.+..................................... 24,100 1,370,688
WinStar Communications, Inc...................... 21,750 617,156
------------
24,567,960
------------
TELECOMMUNICATIONS-EQUIPMENT (6.9%)
Advanced Fibre Communications, Inc.+............. 207,400 9,540,400
Aether Systems, Inc.+............................ 8,925 1,226,630
Anaren Microwave, Inc............................ 28,625 2,905,438
Avanex Corp.+.................................... 7,175 487,900
Ditech Communications Group...................... 19,400 1,590,800
FLAG Telecom Holdings Ltd.+(i)................... 71,525 1,014,761
Metawave Communications Corp.+................... 39,275 $ 1,173,341
<CAPTION>
SECURITY DESCRIPTION SHARES VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
TELECOMMUNICATIONS-EQUIPMENT (CONTINUED)
Netro Corp.+..................................... 51,600 1,541,550
New Focus, Inc.+................................. 10,500 678,563
ONI Systems Corp.+............................... 12,975 324,375
Polycom, Inc.+................................... 96,300 8,095,219
Turnstone Systems, Inc.+......................... 42,050 3,698,429
UTStarcom, Inc.+................................. 32,100 1,227,825
Vyyo, Inc.+...................................... 107,550 1,586,363
Williams Communication Group, Inc.+.............. 33,200 1,218,025
------------
36,309,619
------------
TOTAL TELECOMMUNICATIONS....................... 60,877,579
------------
TOTAL COMMON STOCKS (COST $454,734,256)........ 485,875,281
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
SECURITY DESCRIPTION AMOUNT VALUE
------------------------------------------------- ------------ -------------
<S> <C> <C>
SHORT-TERM INVESTMENTS (7.8%)
OTHER INVESTMENT COMPANIES (7.8%)
J.P. Morgan Institutional
Prime Money Market Fund
(cost $41,069,039)*............................ $41,069,039 41,069,040
------------
TOTAL INVESTMENTS
(COST $495,803,295) (99.8%).................................. 526,944,321
OTHER ASSETS IN EXCESS OF
LIABILITIES (0.2%)........................................... 874,934
------------
NET ASSETS (100.0%)............................................ $527,819,255
============
</TABLE>
------------------------------
Note: Based on the cost of investments of $497,087,069 for federal income tax
purposes at May 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $121,210,905 and $91,353,653, respectively, resulting in net
unrealized appreciation of $29,857,252.
(i) Foreign security.
+ - Non income Producing
Spon. ADR - Sponsored American Depository Receipt.
* Money Market mutual fund registered under the Investment Company Act of 1940,
as amended, and advised by J.P. Morgan Investment Management, Inc.
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $495,803,295 ) $526,944,321
Cash 1,880,011
Receivable for Investments Sold 5,725,545
Interest Receivable 190,269
Dividends Receivable 60,587
Deferred Organization Expenses 2,484
Prepaid Expenses and Other Assets 798
------------
Total Assets 534,804,015
------------
LIABILITIES
Payable for Investments Purchased 6,621,923
Advisory Fee Payable 274,497
Custody Fee Payable 49,354
Administrative Services Fee Payable 11,411
Administration Fee Payable 691
Fund Services Fee Payable 518
Accrued Trustees' Fees and Expenses 376
Accrued Expenses 25,990
------------
Total Liabilities 6,984,760
------------
NET ASSETS
Applicable to Investors' Beneficial Interests $527,819,255
============
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED MAY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Dividend Income (Net of Foreign Withholding Tax
of $10,827) $ 1,147,750
Interest Income 1,336,905
-----------
Investment Income 2,484,655
EXPENSES
Advisory Fee $2,833,187
Custodian Fees and Expenses 146,751
Administrative Services Fee 118,303
Professional Fees and Expenses 43,297
Fund Services Fee 8,042
Printing Expenses 7,688
Trustees' Fees and Expenses 5,371
Administration Fee 4,343
Amortization of Organization Expense 1,215
Insurance Expense 311
----------
Total Expenses 3,168,508
-----------
NET INVESTMENT LOSS (683,853)
NET REALIZED GAIN ON INVESTMENTS 60,819,593
NET CHANGE IN UNREALIZED APPRECIATION OF
INVESTMENTS 8,034,675
-----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $68,170,415
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE FISCAL
YEAR ENDED YEAR ENDED
MAY 31, 2000 MAY 31, 1999
-------------- --------------
<S> <C> <C>
INCREASE IN NET ASSETS
FROM OPERATIONS
Net Investment Loss $ (683,853) $ (137,253)
Net Realized Gain (Loss) on Investments 60,819,593 (19,297,966)
Net Change in Unrealized Appreciation of
Investments 8,034,675 15,587,441
------------- -------------
Net Increase (Decrease) in Net Assets
Resulting from Operations 68,170,415 (3,847,778)
------------- -------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 395,274,370 208,622,616
Withdrawals (220,426,363) (108,552,920)
------------- -------------
Net Increase from Investors' Transactions 174,848,007 100,069,696
------------- -------------
Total Increase in Net Assets 243,018,422 96,221,918
NET ASSETS
Beginning of Fiscal Year 284,800,833 188,578,915
------------- -------------
End of Fiscal Year $ 527,819,255 $ 284,800,833
============= =============
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 16, 1997
FOR THE FISCAL FOR THE FISCAL (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) THROUGH
MAY 31, 2000 MAY 31, 1999 MAY 31, 1998
-------------- -------------- -------------------
<S> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 0.66% 0.71% 0.84%(a)
Net Investment Loss (0.14)% (0.07)% (0.04)%(a)
Expenses without Reimbursement 0.66% 0.71% 0.84%(a)(b)
Portfolio Turnover 132% 116% 73%
</TABLE>
------------------------
(a) Annualized.
(b) Reimbursement was less than 0.01%.
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2000
--------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The U.S. Small Company Opportunities Portfolio (the "portfolio") is one of seven
subtrusts (portfolios) comprising The Series Portfolio (the "series portfolio").
The portfolio is registered under the Investment Company Act of 1940, as
amended, as a diversified, 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 June 16, 1997. The portfolio's investment
objective is long term capital appreciation from a portfolio of equity
securities of small companies. The Declaration of Trust permits the trustees to
issue an unlimited number of beneficial interests in the portfolio.
The preparation of financial statements in accordance with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts and disclosures. Actual amounts
could differ from those estimates. The following is a summary of the significant
accounting policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available 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 the values from
dealers, operating data, and general market conditions. Unlisted
securities are valued at the average of the quoted bid and asked prices in
the over-the-counter market provided by a principal market maker or
dealer. If prices are not supplied by the portfolio's independent pricing
service or principal market maker or dealer, such securities are priced
using fair values in accordance with procedures adopted by the portfolio's
trustees. All short-term securities with a remaining maturity of sixty
days or less are valued using the amortized cost method
b) 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.
c) The portfolio incurred organization expenses in the amount of $9,000.
These costs were deferred and are being amortized on a straight-line basis
over a five year period from commencement of operations.
d) 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.
26
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
e) 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.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan Guaranty
Trust Company of New York ("Morgan"), a wholly-owned subsidiary of
J.P. Morgan & Co. Incorporated ("J.P. Morgan"). Under the terms of the
agreement, the portfolio paid JPMIM at an annual rate of 0.60% of the
portfolio's average daily net assets. For the fiscal year ended May 31,
2000, such fee amounted to $2,866,705.
The portfolio may invest in one or more affiliated money market funds:
J.P. Morgan Institutional Prime Money Market Fund, J.P. Morgan
Institutional Tax Exempt Money Market Fund, J.P. Morgan Institutional
Federal Money Market Fund and J.P. Morgan Institutional Treasury Money
Market Fund. The Advisor has agreed to reimburse its advisory fee from the
portfolio in an amount to offset any doubling of investment advisory and
shareholder servicing fees. For the fiscal year ended May 31, 2000,
J.P. Morgan has agreed to reimburse the portfolio $33,518, under this
agreement. Interest income included in the Statement of Operations for the
year ended May 31, 2000 includes $760,031 of interest income from
investments in affiliated Money Market Funds.
b) The trust, on behalf of the portfolio, has retained Funds Distributor,
Inc. ("FDI"), a registered broker-dealer, to serve as the co-administrator
and exclusive placement agent. Under a Co-Administration Agreement between
FDI and the portfolio, FDI provides administrative services necessary for
the operations of the portfolio, furnishes office space and facilities
required for conducting the business of the portfolio and pays the
compensation of the portfolio's officers affiliated with FDI. The
portfolio has agreed to pay FDI fees equal to its allocable share of an
annual complex-wide charge of $425,000 plus FDI's out-of-pocket expenses.
The amount allocable to the portfolio is based on the ratio of the
portfolio's net assets to the aggregate net assets of the portfolio and
certain other investment companies subject to similar agreements with FDI.
For the fiscal year ended May 31, 2000, the fee for these services
amounted to $4,343.
c) The trust, on behalf of the portfolio, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for certain aspects of the administration and operation of the
portfolio. Under the Services Agreement, the portfolio has agreed to pay
Morgan a fee equal to its allocable share of an annual complex-wide
charge. This charge is calculated based on the aggregate average daily net
assets of the portfolio and certain other portfolios for which JPMIM acts
as investment advisor (the "master portfolios") and J.P. Morgan Series
Trust in accordance with the following annual schedule: 0.09% on the first
$7 billion of their aggregate average daily net assets and 0.04% of their
aggregate average daily net assets in excess of $7 billion less the
complex-wide fees payable to FDI. The portion of this charge payable by
the portfolio is determined by
27
<PAGE>
THE U.S. SMALL COMPANY OPPORTUNITIES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
MAY 31, 2000
--------------------------------------------------------------------------------
the proportionate share that 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 May 31, 2000, the fees for these services amounted to
$118,303.
d) The trust, on behalf of the portfolio, has a Fund Services Agreement with
Pierpont Group, Inc. ("Group") to assist the trustees in exercising their
overall supervisory responsibilities for the portfolio's affairs. The
trustees of the portfolio represent all the existing shareholders of
Group. For the fiscal year ended May 31, 2000, the portfolio's allocated
portion of Group's costs in performing its services amounted to $8,042.
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 $1,500.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended May 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- ------------
<S> <C>
$737,070,164 $589,100,369
</TABLE>
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement (the "Agreement")
as discussed more fully in Note 4 of the fund's Notes to the Financial
Statements which are included elsewhere in this report.
28
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The U.S. Small Company Opportunities 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 U.S. Small Company Opportunities
Portfolio (the "portfolio") at May 31, 2000, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the supplementary data for each of the two years in
the period then ended and for the period June 16, 1997 (commencement of
operations) through May 31, 1998, in conformity with accounting principles
generally accepted in the United States. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States, which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at May 31,
2000 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
July 14, 2000
29
