<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (29.0%)
ARGENTINA (8.2%)
$ 750,000 Banco Hipotecario SA, (144A), 10.000% due
04/17/03....................................... B1/BB- $ 691,650
500,000 CIA Radiocomunic Moviles (144A), 9.250% due
05/08/08(s).................................... B1/BBB- 442,500
500,000 CSN Iron SA, 9.125% due 06/01/07................. B2/BB- 402,500
-----------
1,536,650
-----------
BRAZIL (10.3%)
850,000 Banco Nacional De Desenvolvi, 12.193% due
06/16/08(s).................................... B2/B+ 760,750
500,000 Globo Communicacoes Participacoes, 10.625% due
12/05/08....................................... B2/B+ 401,250
1,000,000 Trikem SA, (144A), 10.625% due 07/24/07.......... B+/BB- 752,500
-----------
1,914,500
-----------
MAURITIUS (1.3%)
340,000 Indah Kiat, 10.000% due 07/01/07................. Caa1/CCC+ 234,600
-----------
MEXICO (9.2%)
500,000 Bancomext Trust Division, (144A), 11.250% due
05/30/06....................................... Ba1/BB/ 520,000
490,000 Grupo Televisa SA, 0.000% due 05/15/08(v)(s)..... Ba2/BB 450,800
850,000 Petroleos Mexicanos, 9.250% due 03/30/18......... Ba1/BB 756,500
-----------
1,727,300
-----------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$5,469,139)................................ 5,413,050
-----------
SOVEREIGN BONDS (66.6%)
ARGENTINA (16.1%)
200,000 Republic of Argentina Global Bonds, Series XW,
11.000% due 12/04/05........................... B1/BB 190,500
730,400 Republic of Argentina, Series FRB, 6.813% due
03/31/05(v).................................... B1/BB 656,995
1,131,174 Republic of Argentina - Bocon, Series PRO1,
3.114% due 04/01/07(v)......................... B1/BBB- 796,447
183,413 Republic of Argentina Bocon, Series Pre-4, 6.500%
due 09/01/02(v)................................ B1/NR 173,615
350,000 Republic of Argentina Bonds Del Tesoro, Series
BT06, 11.250% due 05/24/04..................... NR/NR 335,300
205,000 Republic of Argentina Discount Bonds, Series
L-GL, 6.875% due 03/31/23(v)................... B1/BB 158,619
240,000 Republic of Argentina Global Bonds, 9.750% due
09/19/27....................................... B1/BB 205,800
100,000 Republic of Argentina Global Bonds, 11.750% due
04/07/09....................................... B1/BB 97,000
250,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17(s)........................ B1/BB 238,250
250,000 Republic of Argentina Par Bonds, Series L-GP,
6.000% due 03/31/23(v)......................... B1/BB 160,312
-----------
3,012,838
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
17
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
BRAZIL (17.2%)
$ 450,000 Republic of Brazil Discount Bonds, Series 30 Year
ZL, 6.938% due 04/15/24(v)..................... B2/B+ $ 331,875
1,043,361 Republic of Brazil C Bonds, Series 20 Year,
8.000% due 04/15/14(s)......................... B2/B+ 727,744
685,000 Republic of Brazil DCB, Series 18 Year, 7.000%
due 04/15/12(v)(s)............................. B2/B+ 479,500
130,000 Republic of Brazil DCB, Series RG, 7.000% due
04/15/12(v).................................... B2/B+ 91,000
550,000 Republic of Brazil Discount Bonds, Series 30
Year-ZU, 6.938%(v)............................. B2/B+ 338,250
270,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... B2/B+ 210,600
200,000 Republic of Brazil Global Bonds, 12.750% due
01/15/20....................................... B2/B+ 190,000
150,000 Republic of Brazil Global Bonds, 14.500% due
10/15/09(s).................................... B2/B+ 156,750
9,000 Republic of Brazil Global Bonds, 14.500% due
10/15/09....................................... B2/B+ 9,405
295,000 Republic of Brazil NMB, Series 15 Year, 7.000%
due 04/15/09(v)................................ B2/B+ 230,469
531,100 Republic of Brazil, Series EI-L, 6.938% due
04/15/06(v)(s)................................. B2/B+ 454,090
-----------
3,219,683
-----------
BULGARIA (1.6%)
140,000 Republic of Bulgaria Discount Bonds, Series A,
7.063% due 07/28/24(v)......................... B2/NR 110,250
90,000 Republic of Bulgaria Global FLIRB, Series A,
2.750% due 07/28/12(v)......................... B2/NR 64,125
150,000 Republic of Bulgaria IAB, PDI, 7.063% due
07/28/11(v)(s)................................. B2/NR 118,125
-----------
292,500
-----------
COLOMBIA (0.9%)
70,000 Republic of Colombia, 7.625% due 02/15/07........ Ba2/BB+ 55,825
130,000 Republic of Columbia, 9.750% due 04/23/09........ Ba2/BB+ 114,400
-----------
170,225
-----------
CROATIA (0.2%)
38,182 Republic of Croatia, Series A, 7.063% due
07/31/10(v).................................... Baa3/BBB- 35,127
-----------
ECUADOR (0.9%)
480,000 Republic of Ecuador Par Bonds, 4.000% due
02/28/25(v).................................... Caa2/NR 161,400
-----------
MEXICO (4.6%)
200,000 United Mexican States Discount Bonds, Series D,
6.903% due 12/31/19(v)......................... Ba1/BB 185,750
255,000 United Mexican States Global Bonds, 11.500% due
05/15/26....................................... Ba1/BB 288,150
500,000 United Mexican States Par Bonds, Series W-A,
6.250% due 12/31/19............................ Ba1/BB 389,375
-----------
863,275
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
18
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
MOROCCO (0.3%)
$ 68,053 Kingdom of Morocco Restructuring & Consolidation
Agreement, Series A, 6.844% due 01/01/09(v).... Ba1/NR $ 61,247
-----------
NIGERIA (0.8%)
250,000 Central Bank of Nigeria, Series WW, 6.250% due
11/15/20(v).................................... NR/NR 144,062
-----------
PAKISTAN (1.4%)
378,000 Republic of Pakistan (144A) , 10.000% due
12/13/05....................................... Caa1/B- 257,040
-----------
PANAMA (2.2%)
175,000 Republic of Panama Global Bonds, 8.875% due
09/30/27(s).................................... Ba1/BB+ 143,500
240,000 Republic of Panama IRB, Series 18 Year, 4.250%
due 07/17/14(v)................................ Ba1/BB+ 184,500
109,345 Republic of Panama PDI, Series 20 Year, 7.063%
due 07/17/16(v)................................ Ba1/BB+ 86,383
-----------
414,383
-----------
PERU (3.2%)
400,000 Republic of Peru Discount Bonds, Series 30 Year,
6.813% due 03/08/27(v)(s)...................... Ba3/BB 280,000
295,000 Republic of Peru FLIRB, Series 20 Year, 3.750%
due 03/07/17(v)................................ Ba3/BB 177,000
215,000 Republic of Peru PDI, Series 20 Year, 4.500% due
03/07/17....................................... Ba3/BB 141,900
-----------
598,900
-----------
RUSSIA (12.1%)
40,042 Russia IAN, Vnesheconombank, Series US, 6.906%
due 12/15/15(v)................................ Ca/NR 7,333
5,848,000 Russia Principal Loan, Vnesheconombank, Series 24
Year, 6.906% due 12/15/20(v) TRIANGLE ......... NR/NR 913,750
350,000 Russian Federation, 8.750% due 07/24/05.......... B3/CCC+ 222,250
90,000 Russian Federation, 9.250% due 11/27/01.......... B3/CCC+ 71,662
320,000 Russian Federation, 10.000% due 06/26/07......... B3/CCC+ 204,800
400,000 Russian Federation, 11.000% due 07/24/18......... B3/CCC+ 258,000
230,000 Russian Federation, 11.750% due 06/10/03......... B3/CCC+ 178,250
350,000 Russian Federation, 12.750% due 06/24/28......... B3/CCC+ 253,313
830,000 Russian IAN, Vnesheconombank, Series 19 Year,
6.906% due 12/15/15(v)......................... Ca/NR 151,994
-----------
2,261,352
-----------
TURKEY (0.8%)
100,000 Republic of Turkey Global Bonds, 11.875% due
01/15/30....................................... B1/B 102,250
50,000 Republic of Turkey Global Bonds, 12.375% due
06/15/09....................................... B1/B 53,000
-----------
155,250
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
19
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT SECURITY DESCRIPTION (UNAUDITED) VALUE
- ----------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
VENEZUELA (4.3%)
$ 190,475 Republic of Venezuela DCB, Series DL, 7.000% due
12/18/07(s).................................... B2/B $ 149,166
178,570 Republic of Venezuela FLIRB, Series B, 6.875% due
03/31/07(v).................................... B2/B 140,624
540,000 Republic of Venezuela Global Bonds, 9.250% due
09/15/27(s).................................... B2/B 340,200
250,000 Republic of Venezuela Par, Series W-A, 6.750% due
03/31/20(s).................................... B2/B 166,250
-----------
796,240
-----------
TOTAL SOVEREIGN BONDS (COST $11,135,516)..... 12,443,522
-----------
U.S. TREASURY OBLIGATIONS (1.0%)
U.S. TREASURY BONDS (1.0%)
200,000 United States Treasury Bonds, 6.125% due 08/15/29
(cost $200,063)................................ 190,374
-----------
RIGHTS (0.0%)
MEXICO (0.0%)
3,643,000 United Mexican States Value Recovery, Series Par,
Expiring 06/30/03+............................. NR/NR 0
-----------
WARRANTS (0.0%)
ARGENTINA (0.0%)
310 Republic of Argentina, Expiring 02/25/00+........ NR/NR 465
-----------
NIGERIA (0.0%)
1,500 Central Bank of Nigeria, Expiring 11/15/20+...... NR/NR 0
-----------
VENEZUELA (0.0%)
2,500 Republic of Venezuela, Expiring 04/15/20+........ NR/B+ 0
-----------
TOTAL WARRANTS (COST $8,552)................. 465
-----------
SHORT-TERM INVESTMENTS (1.4%)
EURO DOLLAR TIME DEPOSITS (1.4%)
258,000 State Street Bank Euro Dollar (cost $258,000).... 258,000
-----------
TOTAL INVESTMENTS (COST $17,071,270) (98.0%)................... 18,305,411
OTHER ASSETS IN EXCESS OF LIABILITIES (2.0%)................... 381,326
-----------
NET ASSETS (100.0%)............................................ $18,686,737
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
- ------------------------------
Note: Based on the cost of investments of $17,729,689 for Federal Income Tax
Purposes at January 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $806,259 and $230,537, respectively, resulting in net
unrealized depreciation of $575,722.
+ Non-income producing security.
(s) Security is fully or partially segregated with custodian as collateral for
futures or with brokers at initial margin for futures contracts. $2,483,381 of
the market value has been segregated.
(v) Rate shown reflects current rate on variable or floating rate instrument or
instrument with step coupon rate.
TRIANGLE Defaulted security.
144A - Securities restricted for resale to Qualified Institutional Buyers.
C - Capitalization.
DCB - Debt Conversion Bonds.
FLIRB - Front Loaded Interest Reduction Bonds.
IAB - Interest in Arrears Bonds.
IAN - Interest in Arrears Notes.
IRB - Interest Reduction Bonds.
NMB - New Money Bonds.
PDI - Past Due Interest.
FRB - Floating Rate Bond.
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $17,071,270) $18,305,411
Cash 704
Interest Receivable 382,996
Receivable for Investments Sold 162,442
Deferred Organization Expenses 6,796
Receivable for Expense Reimbursement 1,618
Prepaid Trustees' Fees 334
Prepaid Expenses and Other Assets 85
-----------
Total Assets 18,860,386
-----------
LIABILITIES
Payable for Investments Purchased 101,971
Custody Fee Payable 15,770
Advisory Fee Payable 13,589
Variation Margin Payable 5,031
Organization Expenses Payable 3,491
Administrative Services Fee Payable 480
Fund Services Fee Payable 8
Accrued Expenses 33,309
-----------
Total Liabilities 173,649
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $18,686,737
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
FOR THE SIX MONTHS ENDED JANUARY 31, 2000
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $1,752,348
EXPENSES
Advisory Fee $ 100,303
Custodian Fees and Expenses 37,537
Professional Fees and Expenses 25,159
Administrative Services Fee 3,601
Printing Expenses 3,320
Amortization of Organization Expense 1,632
Fund Services Fee 250
Administration Fee 160
Trustees' Fees and Expenses 82
Insurance Expense 29
Miscellaneous 7
----------
Total Expenses 172,080
Less: Reimbursement of Expenses (1,629)
----------
NET EXPENSES 170,451
----------
NET INVESTMENT INCOME 1,581,897
NET REALIZED GAIN ON
Investment Transactions 1,755,550
Futures Contracts (23,896)
Foreign Currency Contracts and Transactions 15,281
----------
Net Realized Gain 1,746,935
NET CHANGE IN UNREALIZED APPRECIATION OF
Investment Transactions 1,215,203
Futures Contracts 15,876
Foreign Currency Contracts and Translations 489
----------
Net Change in Unrealized Appreciation 1,231,568
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $4,560,400
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE SIX
MONTHS ENDED FOR THE FISCAL
JANUARY 31, 2000 PERIOD ENDED
(UNAUDITED) JULY 31, 1999(A)
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 1,581,897 $ 1,275,824
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 1,746,935 (644,480)
Net Change in Unrealized Appreciation of
Investments, Futures, and Foreign Currency
Contracts and Translations 1,231,568 18,215
--------------- ---------------
Net Increase in Net Assets Resulting from
Operations 4,560,400 649,559
--------------- ---------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 20,730,229 19,855,226
Withdrawals (32,868,266) (13,588,663)
--------------- ---------------
Net Increase (Decrease) from Investors'
Transactions (12,138,037) 6,266,563
--------------- ---------------
Total Increase (Decrease) in Net Assets (7,577,637) 6,916,122
NET ASSETS
Beginning of Period 26,264,374 19,348,252
--------------- ---------------
End of Period $ 18,686,737 $ 26,264,374
=============== ===============
</TABLE>
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
FOR THE FOR THE MARCH 7, 1997
SIX MONTHS ENDED FOR THE FISCAL YEAR (COMMENCEMENT OF
JANUARY 31, 2000 PERIOD ENDED ENDED OPERATIONS) THROUGH
(UNAUDITED) JULY 31, 1999(A) DECEMBER 31, 1998 DECEMBER 31, 1997
----------------- ------------------ ----------------- -------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.19%(b) 1.25%(b) 1.07% 0.91%(b)
Net Investment Income 11.04%(b) 12.19%(b) 10.16% 9.57%(b)
Expenses without Reimbursement 1.20%(b) 1.70%(b) 1.25% 0.91%(b)
Portfolio Turnover 210%(c) 555%(c) 791% 182%(c)
</TABLE>
- ------------------------
(a) Fiscal year changed July 31. Prior to this, the fiscal year end was
December 31. The numbers reflected are for the period January 1, 1999 through
July 31, 1999.
(b) Annualized.
(c) Not Annualized.
The Accompanying Notes are an Integral Part of the Financial Statements.
24
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Emerging Markets Debt Portfolio (the "portfolio") is one of eight subtrusts
(portfolios) comprising The Series Portfolio (the "Series Portfolio"). The
Series Portfolio is registered under the Investment Company Act of 1940, as
amended, as a no-load open-end management investment company which was organized
as a trust under the laws of the State of New York on June 24, 1994. The
portfolio commenced operations on March 7, 1997 and received a contribution of
certain assets and liabilities, including securities, with a value of
$113,127,989 on that date from the JPM Emerging Markets Debt Fund, Ltd. in
exchange for a beneficial interest in the portfolio. The portfolio's investment
objective is high total return from a portfolio of fixed income securities of
emerging markets issuers. The Declaration of Trust permits the trustees to issue
an unlimited number of beneficial interests in the portfolio. At a meeting on
November 12, 1998, the trustees elected to change the portfolio's fiscal year
end from December 31 to July 31, 1999.
The portfolio may have elements of risk not typically associated with
investments in the United States due to concentrated investments in a limited
number of countries or regions which may vary throughout the year. Such
concentrations may subject the portfolio to additional risks resulting from
political or economic conditions in such countries or regions and the possible
imposition of adverse governmental laws or currency exchange restrictions
affecting such countries or regions which could cause the securities and their
markets to be less liquid and prices more volatile than those comparable to the
United States. The ability of the issuers of the debt securities held by the
portfolio to meet their obligations may be affected by economic and political
developments in a specific industry or region.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures. Actual amounts could differ from
those estimates. The following is a summary of the significant accounting
policies of the portfolio:
a) The portfolio values securities that are listed on an exchange using
prices supplied daily by an independent pricing service that are based on
the last traded price on a national securities exchange or in the absence
of recorded trades, at the readily available mean of the bid and asked
prices on such exchange, if such exchange or market constitutes the
broadest and most representative market for the security. Securities
listed on a foreign exchange are valued at the last traded price or, in
the absence of recorded trades, at the readily available mean of the bid
and asked prices on such exchange available before the time when net
assets are valued. Independent pricing service procedures may also include
the use of prices based on yields or prices of securities of comparable
quality, coupon, maturity and type, indications as to values from dealers,
operating data, and general market conditions. Unlisted securities are
valued at the quoted bid price in the over-the-counter market provided by
a principal market maker or dealer. If prices are not supplied by the
portfolio's independent pricing service or principal market maker or
dealer, such securities are priced using fair values in accordance with
procedures adopted by the portfolio's Trustees. All short-term securities
with a remaining maturity of sixty days or less are valued by the
amortized cost method.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the domestic market and
may also take place on days on which the domestic market
25
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
is closed. If events materially affecting the value of foreign securities
occur between the time when the exchange on which they are traded closes
and the time when the portfolio's net assets are calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the portfolio's
trustees.
b) The books and records of the portfolio are maintained in U.S. dollars. The
market value of investment securities, other assets and liabilities and
foreign currency contracts are translated at the prevailing exchange rates
at the end of the period. Purchases, sales, income and expense are
translated at the exchange rates prevailing on the respective dates of
such transactions. Translation gains and losses resulting from changes in
exchange rates during the reporting period and gains and losses realized
upon settlement of foreign currency transactions are reported in the
Statement of Operations. Although the net assets of the portfolio are
presented at the exchange rates and market values prevailing at the end of
the period, the portfolio does not isolate the portion of the results of
operations arising as a result of changes in foreign exchange rates from
the fluctuations arising from changes in the market prices of securities
during the period.
c) Securities transactions are recorded on a trade date basis. Interest
income, which includes the amortization of premiums and discounts, if any,
is recorded on an accrual basis. For financial and tax reporting purposes,
realized gains and losses are determined on the basis of specific lot
identification.
d) The portfolio incurred organization expenses in the amount of $16,200.
Morgan Guaranty Trust Company of New York ("Morgan"), a wholly owned
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") has paid the
organization expenses of the portfolio. The portfolio has agreed to
reimburse Morgan for these costs which are being deferred and amortized on
a straight-line basis over a period not to exceed five years beginning
with the commencement of operations of the fund.
e) Expenses incurred by the Series Portfolio with respect to any two or more
portfolios in the Series Portfolio are allocated in proportion to the net
assets of each portfolio in the Series Portfolio, except where allocations
of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that
portfolio.
f) The portfolio may enter into forward and spot foreign currency contracts
to protect securities and related receivables and payable s against
fluctuations in future foreign currency rates and to enhance returns. A
forward contract is an agreement to buy or sell currencies of different
countries on a specified future date at a specified rate. Risks associated
with such contracts include the movement in the value of the foreign
currency relative to the U.S. dollar and the ability of the counterparty
to perform.
The market value of the contract will fluctuate with changes in currency
exchange rates. Contracts are valued daily at the current foreign exchange
rates, and the change in the market value is recorded by the portfolio as
unrealized appreciation or depreciation of forward foreign currency
contract translations.
g) Futures -- A futures contract is an agreement to purchase/sell a specified
quantity of an underlying instrument at a specified future date or to
make/receive a cash payment based on the value of a securities index. The
price at which the purchase and sale will take place is fixed when the
portfolio enters into the contract. Upon entering into such a contract,
the portfolio is required to pledge to the
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
broker an amount of cash and/or liquid securities equal to the minimum
"initial margin" requirements of the exchange. Pursuant to the contract,
the portfolio agrees to receive from, or pay to, the broker an amount of
cash equal to the daily fluctuation in the value of the contract. Such
receipts or payments are known as "variation margin" and are recorded by
the portfolio as unrealized gains or losses. When the contract is closed,
the portfolio records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value
at the time when it was closed. The portfolio invests in futures contracts
for the purpose of hedging its existing portfolio securities, or
securities the portfolio intends to purchase, against fluctuations in
value caused by changes in prevailing market interest rates or securities
movements. The use of futures transactions involves the risk of imperfect
correlation in movements in the price of futures contracts, interest rates
and the underlying hedged assets, and the possible inability of
counterparties to meet the terms of their contracts.
h) The portfolio intends to be treated as a partnership for federal income
tax purposes. As such, each investor in the portfolio will be taxed on its
share of the portfolio's ordinary income and capital gains. It is intended
that the portfolio's assets will be managed in such a way that an investor
in the portfolio will be able to satisfy the requirements of Subchapter M
of the Internal Revenue Code. The portfolio earns foreign income which may
be subject to foreign withholding taxes at various rates.
2. TRANSACTIONS WITH AFFILIATES
a) The portfolio has an Investment Advisory Agreement with J.P. Morgan
Investment Management Inc. ("JPMIM"), an affiliate of Morgan and
wholly-owned subsidiary of J.P. Morgan. Under the terms of the agreement,
the portfolio pays JPMIM at an annual rate of 0.70 % of the portfolio's
average daily net assets. For the six months ended December 31, 2000, such
fees amounted to $100,303.
b) The portfolio, on behalf of the fund, has retained Funds
Distributor, Inc. ("FDI"), a registered broker-dealer, to serve as the
co-administrator and exclusive placement agent for the fund. Under a Co-
Administration Agreement between FDI and the portfolio on behalf of the
fund, FDI provides administrative services necessary for the operations of
the portfolio, furnishes office space and facilities required for
conducting the business of the portfolio and pays the compensation of the
portfolio's officers affiliated with FDI. The portfolio has agreed to pay
FDI fees equal to its allocable share of an annual complex-wide charge of
$425,000 plus FDI's out-of-pocket expenses. The amount allocable to the
portfolio is based on the ratio of th e portfolio's net assets to the
aggregate net assets of the portfolio and certain other investment
companies subject to similar agreements with FDI. For the six months ended
January 31, 2000, the fee for these services amounted to $160.
c) The portfolio, on behalf of the fund, has an Administrative Services
Agreement (the "Services Agreement") with Morgan, under which Morgan is
responsible for overseeing certain aspects of the administration and
operation of the portfolio. Under the Services Agreement, the portfolio
has agreed to pay Morgan a fee equal to its allocable share of an annual
complex-wide charge. This charge is calculated based on the aggregate
average daily net assets of the portfolio and the other portfolios in
which the portfolio and the J.P. Morgan/Institutional Funds invest (the
"master portfolios") and J.P. Morgan Series Trust in accordance with the
following annual schedule: 0.09% on the first $7 billion of their
aggregate average daily net assets and 0.04% of their aggregate average
daily net assets in excess
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
of $7 billion less the complex-wide fees payable to FDI. The portion of
this charge payable by the portfolio is determined by the proportionate
share its net assets bear to the net assets of the master portfolios,
other investors in the master portfolios for which Morgan provides similar
services and J.P. Morgan Series Trust. For the six months ended
January 31, 2000, the fee for these services amounted to $3,601.
In addition, J.P. Morgan has agreed to reimburse the fund to the extent
necessary to maintain the total operating expenses of the fund from the
portfolio, at no more than 1.25% of the average daily net assets of the
portfolio until further notification. For the six months ended
January 31, 2000, J.P. Morgan has agreed to reimburse the portfolio $1,629
for expenses under this agreement.
d) The portfolio has a Fund Services Agreement with Pierpont Group, Inc.
("Group") to assist the trustees in exercising their overall supervisory
responsibilities for the portfolio's affairs. The trustees of the
portfolio represent all the existing shareholders of Group. The
portfolio's allocated portion of Group's costs in performing its services
amounted to $250 for the six months ended January 31, 2000.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios, and J.P. Morgan Series Trust. The Trustees' Fees
and Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $17.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the six months
ended January 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
----------- -----------
<S> <C> <C>
$53,569,796 $63,244,805
</TABLE>
Open futures contracts at January 31, 2000 are summarized as follows:
SUMMARY OF OPEN CONTRACTS AT JANUARY 31, 2000
<TABLE>
<CAPTION>
NET UNREALIZED CURRENT
APPRECIATION/ MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- ------------
<S> <C> <C> <C>
U.S. Long Bond, expiring March 2000.............. 7 $ 16,364 $ 645,531
------------- ------------- -----------
Totals........................................... 7 $ 16,364 $ 645,531
============= ============= ===========
</TABLE>
At January 31, 2000, the portfolio had no open forward currency contracts.
28
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
JANUARY 31, 2000
- --------------------------------------------------------------------------------
4. CREDIT AGREEMENT
The portfolio is party to a revolving line of credit agreement as discussed more
fully in Note 4 of the fund's Notes to the Financial Statements which are
included elsewhere in this report.
29