<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN CORPORATE OBLIGATIONS (19.0%)
ARGENTINA (5.2%)
BANKING (3.5%)
$ 750,000 Banco Hipotecario SA, Series REGS, 10.000% due
04/17/03....................................... B1/BB- $ 701,250
-----------
TELECOMMUNICATION SERVICES (1.7%)
400,000 CIA Radiocomunic Moviles, (144A), 9.250% due
05/08/08(s).................................... B1/BBB- 352,000
-----------
1,053,250
-----------
BRAZIL (7.3%)
BANKING (2.3%)
500,000 Banco Nacional De Desenvolvi, 12.554% due
06/16/08(v).................................... B2/B+ 470,000
-----------
CHEMICALS (2.9%)
750,000 Trikem SA, (144A), 10.625% due 07/24/07.......... B+/BB- 585,000
-----------
TELECOMMUNICATION SERVICES (2.1%)
500,000 Globo Communicacoes Participacoes, 10.625% due
12/05/08....................................... B2/B+ 422,500
-----------
1,477,500
-----------
CHINA (0.8%)
FOREST PRODUCTS & PAPER (0.8%)
300,000 APP China Group, Ltd., (144A), 14.000% due
03/15/10....................................... B3/CCC+ 171,000
-----------
MAURITIUS (0.9%)
FOREST PRODUCTS & PAPER (0.9%)
340,000 Indah Kiat Finance Mauritius, 10.000% due
07/01/07....................................... B3/CCC+ 192,100
-----------
MEXICO (4.2%)
BUILDING MATERIALS (2.0%)
400,000 Cemex SA de C.V., (144A), 8.625% due 07/18/03.... Ba1/BBB- 400,000
-----------
OIL PRODUCTION (2.2%)
450,000 Petroleos Mexicanos, 9.250% due 03/30/18......... Baa3/BB+ 436,500
-----------
836,500
-----------
PANAMA (0.6%)
INDUSTRIAL (0.6%)
150,000 CSN Iron SA, 9.125% due 06/01/07................. B2/BB- 120,750
-----------
TOTAL FOREIGN CORPORATE OBLIGATIONS (COST
$3,959,253)................................ 3,851,100
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
20
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
FOREIGN GOVERNMENT AGENCY (1.9%)
MEXICO (1.9%)
$ 360,000 Bancomext Trust Division, (144A), 11.250% due
05/30/06 (cost $377,796)....................... Baa3/BB $ 392,400
-----------
SOVEREIGN BONDS (73.2%)
ARGENTINA (14.3%)
280,000 Republic of Argentina Global Bonds, 10.250% due
07/21/30....................................... B1/BB 230,720
318,000 Republic of Argentina Global Bonds, 11.750% due
06/15/15....................................... B1/BB 293,514
ARS 726,365 Republic of Argentina - Bocon, Series PRO1,
2.935% due 04/01/07(v)......................... B1/BBB- 518,257
250,000 Republic of Argentina Bonos del Tesoro, Series
BTO6, 11.250% due 05/24/04(v).................. NR/NR 245,625
105,000 Republic of Argentina Discount Bonds, Series
L-GL, 7.875% due 03/31/23(v)................... B1/BB 85,050
740,000 Republic of Argentina Global Bonds, 9.750% due
09/19/27(v).................................... B1/BB 587,560
100,000 Republic of Argentina Global Bonds, 11.750% due
04/07/09....................................... B1/BB 94,500
160,000 Republic of Argentina Global Bonds, 12.125% due
02/25/19(v).................................... B1/BB 153,280
399,000 Republic of Argentina Global Bonds, Series BGL5,
11.375% due 01/30/17(v)(s)..................... B1/BB 363,489
35,000 Republic of Argentina Par Bonds, Series L-GP,
6.000% due 03/31/23(v)......................... B1/BB 23,866
336,000 Republic of Argentina, Series FRB, 7.375% due
03/31/05(v).................................... B1/BB 310,128
-----------
2,905,989
-----------
BRAZIL (15.5%)
480,000 Republic of Brazil Global Bonds, 12.250% due
03/06/30....................................... B2/B+ 452,160
150,000 Republic of Brazil Global Bonds, 12.750% due
01/15/20....................................... B2/B+ 146,400
849,673 Republic of Brazil C Bonds, Series 20 Year,
8.000% due 04/15/14(v)(s)...................... B2/B+ 632,475
665,000 Republic of Brazil DCB, Series 18 Year, 7.438%
due 04/15/12(v)(s)............................. B2/B+ 495,009
200,000 Republic of Brazil DCB, Series RG, 7.438% due
04/15/12(v).................................... B2/B+ 148,875
450,000 Republic of Brazil Discount Bonds, Series 30 Year
ZL, 7.375% due 04/15/24(v)..................... B2/B+ 354,375
70,000 Republic of Brazil Global Bonds, 10.125% due
05/15/27....................................... B2/B+ 55,300
50,000 Republic of Brazil Global Bonds, 11.625% due
04/15/04(s).................................... B2/B+ 50,825
159,000 Republic of Brazil Global Bonds, 14.500% due
10/15/09(s).................................... B2/B+ 172,753
145,000 Republic of Brazil NMB, Series 15 Year, 7.438%
due 04/15/09(v)................................ B2/B+ 122,434
450,000 Republic of Brazil Par Bonds, Series 30 Year ZL,
6.000% due 04/15/24(v)......................... B2/B+ 294,750
232,500 Republic of Brazil, Series EI-L, 7.375% due
04/15/06(v).................................... B2/B+ 213,464
-----------
3,138,820
-----------
BULGARIA (3.0%)
240,000 Republic of Bulgaria Discount Bonds, Series A,
7.750% due 07/28/24(v)......................... B2/NR 192,600
290,000 Republic of Bulgaria Global FLIRB, Series A,
2.750% due 07/28/12(v)......................... B2/B+ 218,950
250,000 Republic of Bulgaria IAB, Series PDI, 7.750% due
07/28/11(v)(s)................................. B2/B+ 201,562
-----------
613,112
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
21
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
COLOMBIA (4.3%)
$ 130,000 Republic of Colombia, 9.750% due 04/23/09........ Ba2/BB $ 104,975
600,000 Republic of Colombia, 11.750% due 02/25/20....... Ba2/BB 516,900
240,000 Republic of Colombia, 8.625% due 04/01/08........ Ba2/BB 189,000
70,000 Republic of Columbia, 7.625% due 02/15/07........ Ba2/BB 53,025
-----------
863,900
-----------
ECUADOR (0.9%)
480,000 Republic of Ecuador Par Bonds, 4.000% due
02/28/25(v) TRIANGLE +......................... Caa2/NR 184,800
-----------
MEXICO (4.4%)
50,000 United Mexican States Discount Bonds, Series C,
7.800% due 12/31/19(v)......................... Baa3/BB+ 49,688
160,000 United Mexican States, Series XW, 10.375% due
02/17/09....................................... Baa3/BB+ 172,000
250,000 United Mexican States Discount Bonds, Series D,
7.925% due 12/31/19(v)......................... Baa3/BB+ 248,438
85,000 United Mexican States Global Bonds, 11.375% due
09/15/16....................................... Baa3/BB+ 98,685
80,000 United Mexican States Global Bonds, 11.500% due
05/15/26....................................... Baa3/BB+ 97,760
250,000 United Mexican States Par Bonds, Series W-A,
6.250% due 12/31/19............................ Baa3/BB+ 214,375
-----------
880,946
-----------
MOROCCO (0.3%)
64,272 Kingdom of Morocco Restructuring & Consolidation
Agreement, Series A, 7.750% due 01/01/09(v).... Ba1/BB 58,487
-----------
NIGERIA (0.7%)
250,000 Central Bank of Nigeria, Series WW, 6.250% due
11/15/20(v).................................... NR/NR 143,750
-----------
PAKISTAN (2.1%)
658,000 Republic of Pakistan, (144A), 10.000% due
12/13/05....................................... Caa1/B- 434,280
-----------
PANAMA (1.8%)
110,000 Republic of Panama, 10.750% due 05/15/20......... Ba1/BB+ 110,000
115,000 Republic of Panama, 8.875% due 09/30/27(s)....... Ba1/BB+ 99,475
90,000 Republic of Panama IRB, Series 18 Year, 4.500%
due 07/17/14(v)................................ Ba1/BB+ 73,238
109,345 Republic of Panama PDI, Series 20 Year, 7.750%
due 07/17/16(v)(s)............................. Ba1/BB+ 89,936
-----------
372,649
-----------
PERU (1.5%)
145,000 Republic of Peru FLIRB, Series 20 Year, 3.750%
due 03/07/17(v)................................ Ba3/BB 89,900
295,000 Republic of Peru PDI, Series 20 Year, 4.500% due
03/07/17(v)(s)................................. Ba3/BB 202,075
-----------
291,975
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
22
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
PHILIPPINES (1.2%)
$ 300,000 Republic of Philippines, 10.625% due 03/16/25.... Ba1/BB+ $ 250,050
-----------
RUSSIA (14.8%)
340,000 Russia IAN, Vnesheconombank, Series US, 7.938%
due 12/15/15(v) TRIANGLE +..................... Ca/NR 113,492
4,848,000 Russia Principal Loan, Vnesheconombank, Series 24
Year, 7.938% due 12/15/20(v) TRIANGLE +........ NR/NR 1,599,840
350,000 Russian Federation, 8.750% due 07/24/05.......... B3/B- 279,125
90,000 Russian Federation, 9.250% due 11/27/01.......... B3/B- 87,584
330,000 Russian Federation, 10.000% due 06/26/07......... B3/B- 259,050
300,000 Russian Federation, 11.000% due 07/24/18......... B3/B- 227,250
130,000 Russian Federation, 11.750% due 06/10/03......... B3/B- 123,500
350,000 Russian Federation, 12.750% due 06/24/28......... B3/B- 309,313
-----------
2,999,154
-----------
TURKEY (3.9%)
400,000 Republic of Turkey, 11.875% due 01/15/30......... B1/B+ 434,800
330,000 Republic of Turkey, 12.375% due 06/15/09......... B1/B+ 356,400
-----------
791,200
-----------
VENEZUELA (4.5%)
357,140 Republic of Venezuela DCB, 7.875% due
12/18/07(v)(s)................................. B2/B 296,426
166,665 Republic of Venezuela FLIRB, Series B, 7.438% due
03/31/07(v).................................... B2/B 138,749
440,000 Republic of Venezuela Global Bonds, 9.250% due
09/15/27(s).................................... B2/B 295,240
250,000 Republic of Venezuela Par Bonds, Series W-A,
6.750% due 03/31/20(s)......................... B2/B 178,750
-----------
909,165
-----------
TOTAL SOVEREIGN BONDS (COST $12,673,063)..... 14,838,277
-----------
U.S. TREASURY OBLIGATIONS (2.8%)
U.S. TREASURY BONDS (0.3%)
50,000 6.125% due 08/15/29.............................. 51,461
-----------
U.S. TREASURY NOTES (2.5%)
500,000 6.500% due 02/15/10.............................. 516,485
-----------
TOTAL U.S. TREASURY OBLIGATIONS (COST
$566,985).................................. 567,946
-----------
RIGHTS (0.0%)
MEXICO (0.0%)
2,644,000 United Mexican States Value Recovery, Series Par,
Expiring 06/30/03 (cost $0) +.................. NR/NR 0
-----------
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
23
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MOODY'S/S&P
PRINCIPAL RATING
AMOUNT/ / SECURITY DESCRIPTION (UNAUDITED) VALUE
---------------- ------------------------------------------------- ------------ ------------
<C> <S> <C> <C>
WARRANTS (0.0%)
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/NR 0
-----------
TOTAL WARRANTS (COST $0)..................... 0
-----------
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
SHORT-TERM INVESTMENTS (1.2%)
OTHER INVESTMENT COMPANIES (1.2%)
239,325 J.P. Morgan Institutional Prime Money Market Fund
(cost $239,325)*............................... 239,325
-----------
TOTAL INVESTMENTS (COST $17,816,422) (98.1%)..... 19,889,048
OTHER ASSETS IN EXCESS OF LIABILITIES (1.9%)..... 375,576
-----------
NET ASSETS (100.0%).............................. $20,264,624
===========
</TABLE>
------------------------------
Note: Based on the cost of investments of $17,864,834 for Federal Income Tax
Purposes at July 31, 2000, the aggregate gross unrealized appreciation and
depreciation was $2,310,349 and $286,135, respectively, resulting in net
unrealized appreciation of $2,024,214.
+Non-income producing security.
(s)Security is fully of partially segregated with custodian as collateral for
futures or with brokers as initial margin for futures contracts. $1,974,275
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.
/ / Denominated in United States Dollar unless otherwise indicated.
ARS - Denominated in Argentina Pesos.
144A - Securities restricted for resale to Qualified Institutional Buyers.
C - Capitalization.
DCB - Debt Conversion Bond.
FLIRB - Front Loaded Interest Reduction Bond.
IAB - Interest in Arrears Bond.
IAN - Interest in Arrears Note.
IRB - Interest Reduction Bond.
NMB - New Money Bond.
PDI - Past Due Interest.
FRB - Floating Rate Bond.
*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.
24
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments at Value (Cost $17,816,422 ) $19,889,048
Cash 399,094
Interest Receivable 422,845
Receivable for Investments Sold 172,025
Deferred Organization Expenses 1,690
Receivable for Expense Reimbursement 1,077
Prepaid Trustees' Fees 195
Prepaid Expenses and Other Assets 213
-----------
Total Assets 20,886,187
-----------
LIABILITIES
Payable for Investments Purchased 531,883
Custody Fee Payable 18,296
Advisory Fee Payable 11,727
Variation Margin Payable 1,312
Administrative Services Fee Payable 405
Fund Services Fee Payable 17
Accrued Expenses 57,923
-----------
Total Liabilities 621,563
-----------
NET ASSETS
Applicable to Investors' Beneficial Interests $20,264,624
===========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
25
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JULY 31, 2000
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME
Interest Income $2,903,636
EXPENSES
Advisory Fee $ 166,951
Custodian Fees and Expenses 68,131
Professional Fees and Expenses 50,261
Printing Expenses 7,325
Administrative Services Fee 5,919
Amortization of Organization Expense 3,247
Fund Services Fee 399
Trustees' Fees and Expenses 383
Administration Fee 222
Insurance Expense 55
----------
Total Expenses 302,893
Less: Reimbursement of Expenses (13,890)
----------
NET EXPENSES 289,003
----------
NET INVESTMENT INCOME 2,614,633
NET REALIZED GAIN ON
Investments 2,452,953
Futures Contracts 28,247
----------
Net Realized Gain 2,481,200
NET CHANGE IN UNREALIZED APPRECIATION OF
Investments 2,053,688
Futures Contracts 46,188
Foreign Currency Translations 2,750
----------
Net Change in Unrealized Appreciation 2,102,626
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $7,198,459
==========
</TABLE>
The Accompanying Notes are an Integral Part of the Financial Statements.
26
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE FISCAL FOR THE PERIOD FOR THE
YEAR ENDED ENDED FISCAL YEAR ENDED
JULY 31, 2000 JULY 31, 1999(A) DECEMBER 31, 1998
-------------- ---------------------------- -----------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS
Net Investment Income $ 2,614,633 $ 1,275,824 $ 1,544,342
Net Realized Gain (Loss) on Investments, Futures
and Foreign Currency Contracts and Transactions 2,481,200 (644,480) (4,592,666)
Net Change in Unrealized Appreciation of
Investments, Futures and Foreign Currency
Contracts and Translations 2,102,626 18,215 223,707
------------- --------------------------- ----------------
Net Increase in Net Assets Resulting from
Operations 7,198,459 649,559 (2,824,617)
------------- --------------------------- ----------------
TRANSACTIONS IN INVESTORS' BENEFICIAL INTERESTS
Contributions 25,094,412 19,855,226 15,100,514
Withdrawals (38,292,621) (13,588,663) (5,099,187)
------------- --------------------------- ----------------
Net (Decrease) Increase from Investors'
Transactions (13,198,209) 6,266,563 10,001,327
------------- --------------------------- ----------------
Total (Decrease) Increase in Net Assets (5,999,750) 6,916,122 7,176,710
NET ASSETS
Beginning of Period 26,264,374 19,348,252 12,171,542
------------- --------------------------- ----------------
End of Period $ 20,264,624 $ 26,264,374 $ 19,348,252
============= =========================== ================
</TABLE>
--------------------------------------------------------------------------------
SUPPLEMENTARY DATA
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MARCH 7, 1997
FOR THE FISCAL FOR THE FOR THE (COMMENCEMENT OF
YEAR ENDED PERIOD ENDED FISCAL YEAR ENDED OPERATIONS) THROUGH
JULY 31, 2000 JULY 31, 1999(A) DECEMBER 31, 1998 DECEMBER 31, 1997
-------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
RATIOS TO AVERAGE NET ASSETS
Net Expenses 1.21% 1.25%(b) 1.07% 0.91%(b)
Net Investment Income 10.97% 12.19%(b) 10.16% 9.57%(b)
Expenses without Reimbursement 1.27% 1.70%(b) 1.25% 0.91%(b)
Portfolio Turnover 295% 555%(c) 791% 182%(c)
</TABLE>
------------------------
(a)Fiscal year changed to 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.
27
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
JULY 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. 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
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 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 bid price 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 bid price 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 using 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.
28
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
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. 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 reimbursed
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 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.
g) A futures contract is an agreement to purchase/sell a specified quantity
of an underlying instrument at a specified future date or to make/receive
a cash payment based on the value of a securities index. The price at
which the purchase and sale will take place is fixed when the portfolio
enters into the contract. Upon entering into such a contract, the
portfolio is required to pledge to the broker an amount of cash and/or
liquid securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the portfolio agrees to receive
from, or pay to, the broker an amount of cash equal to the daily
fluctuation in the value of the contract. Such receipts or payments are
known as "variation margin" and are recorded by the portfolio as
unrealized gains or losses. When the contract is closed, the portfolio
records a realized gain or loss equal to the difference between the value
of the contract at the
29
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
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 and to manage exposure to
changing interest rates and securities prices. 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 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 0.70% of the
portfolio's average daily net assets. For the fiscal year ended July 31,
2000, such fees amounted to $167,122.
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,
shareholder servicing and administrative service fees. For fiscal year
ended July 31, 2000, J.P. Morgan has agreed to reimburse the portfolio
$171 under the agreement. Interest Income included in the Statement of
Operations for the year ended July 31, 2000 includes $5,293 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 July 31, 2000, the fee for these services
amounted to $222.
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
30
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
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 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 July 31, 2000, the fee for these
services amounted to $5,919.
In addition, J.P. Morgan has agreed to reimburse the portfolio to the
extent necessary to maintain the total operating expenses of the
portfolio, at no more than 1.25% of the average daily net assets of the
portfolio until November 28, 2000. For the fiscal year ended July 31,
2000, J.P. Morgan has agreed to reimburse the portfolio $13,890 for
expenses under this agreement.
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 July 31, 2000, the portfolio's allocated
portion of Group's costs in performing its services amounted to $399.
e) An aggregate annual fee of $75,000 is paid to each trustee for serving as
a trustee of the J.P. Morgan Funds, the J.P. Morgan Institutional Funds,
the master portfolios and J.P. Morgan Series Trust. The Trustees' Fees and
Expenses shown in the financial statements represents the portfolio's
allocated portion of the total fees and expenses. The portfolio's Chairman
and Chief Executive Officer also serves as Chairman of Group and receives
compensation and employee benefits from Group in his role as Group's
Chairman. The allocated portion of such compensation and benefits included
in the Fund Services Fee shown in the financial statements was $40.
3. INVESTMENT TRANSACTIONS
Investment transactions (excluding short-term investments) for the fiscal year
ended July 31, 2000 were as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
--------- -----------
<S> <C>
$66,203,188...... $74,017,216
================ ===========
</TABLE>
31
<PAGE>
THE EMERGING MARKETS DEBT PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2000
--------------------------------------------------------------------------------
Open futures contracts at July 31, 2000 are summarized as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATION/ CURRENT MARKET VALUE
CONTRACTS LONG (DEPRECIATION) OF CONTRACTS
-------------- -------------- --------------------
<S> <C> <C> <C>
U.S. Long Bond, expiring
September 2000.................................. 10 $ 47,765 $ 985,938
============= ============= ===================
</TABLE>
<TABLE>
<CAPTION>
CONTRACTS SHORT
---------------
<S> <C> <C> <C>
U.S. Ten Year Note, expiring
September 2000.................................. 2 $ (1,089) $ (197,781)
============== ============= ===================
</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.
32
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Trustees and Investors of
The Emerging Markets Debt Portfolio
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of The Emerging Markets Debt Portfolio (the
"portfolio") at July 31, 2000, the results of its operations for the year then
ended, and the changes in its net assets for the year then ended, for the period
January 1, 1999 through July 31, 1999 and for the year ended December 31, 1998
and the supplementary data for the year then ended, for the period from
January 1, 1999 through July 31, 1999, for the year ended December 31, 1998 and
for the period March 7, 1997 (commencement of operations) through December 31,
1997, 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 July 31, 2000 by correspondence with the custodian
and brokers, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
New York, New York
September 15, 2000
33
