<PAGE> 1
INVESTMENT ADVISER OF
EMERGING MARKETS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV MARATHON
EMERGING MARKETS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution
plan, sales charges and expenses. Please read the prospectus carefully before
you invest or send money.
EV MARATHON
EMERGING MARKETS FUND
24 FEDERAL STREET
BOSTON, MA 02110 M-EMSRC
[LOGO]
EV MARATHON
EMERGING MARKETS
FUND
SEMI-ANNUAL
SHAREHOLDER REPORT
JUNE 30, 1995
<PAGE> 2
TO SHAREHOLDERS
EV Marathon Emerging Markets Fund had a total return of 4.9 percent for the six
months ended June 30, 1995. That return was the result of a rise in net asset
value per share from $9.96 on December 31, 1994 to $10.45 on June 30, 1995, and
does not include the effect of the Fund's contingent deferred sales charge
incurred by certain redeeming shareholders. By comparison, the Morgan Stanley
Capital International Emerging Market Index, a widely recognized, unmanaged
index of emerging equity markets throughout the world, had a total return of
-7.5 percent for the same period.
FOLLOWING SOME EARLY VOLATILITY, MOST EMERGING MARKETS RECOVERED...
The early months of 1995 tested the nerves of emerging market investors, as the
concerns over the Mexican currency crisis spread around the globe. However,
those concerns soon passed as investors focused on impressive economic
fundamentals. Many markets recovered the ground lost in those volatile early
months. In a difficult environment, emerging Asian markets fared best, paced by
Hong Kong -- the Portfolio's largest country holding -- which rose about 12
percent in the first six months.
DESPITE THE ROLLERCOASTER RIDE, THE ECONOMIC STORY REMAINS POSITIVE...
While the markets have featured some volatility in the past year, the economic
stories of most emerging markets remain strongly positive. That has encouraged
a continuing flow of investment from developed nations into these emerging
markets. According to the World Bank, foreign direct investment to developing
nations rose to $78 billion in 1994 from just $26 billion in 1989. And
investment in emerging market equity portfolios continues to rise. Baring
Securities estimates that, despite the difficulties of early 1995, the assets
of emerging market equity portfolios will increase by $25 billion in 1995.
HIGH GROWTH ECONOMIES AND STRONG ENTREPRENEURIAL SPIRIT SHOULD FAVOR THE
EMERGING MARKETS...
That flow of foreign investment is testimony not only to investors' belief in
these growing economies but also in the determination of hard-working people to
forge a better future through individual enterprise. Naturally, there will be
fluctuations in the emerging markets, and investors should be aware of the
added political, currency, and event risk. But with a long-term view, these
markets should represent some of the world's major growth areas in the coming
years. We anticipate continuing opportunities for investors in companies that
are well-positioned to benefit from the world's commitment to free markets. EV
Marathon Emerging Markets Fund will continue working to find those
opportunities.
Sincerely,
/s/ James B. Hawkes,
James B. Hawkes,
President
February 21, 1995
<PAGE> 3
MANAGEMENT DISCUSSION
An interview with the Hon. Robert Lloyd George, President of Lloyd George
Management, and Investment Adviser to the Emerging Markets Portfolio.
Q: ROBERT, HOW WOULD YOU EVALUATE THE PROGRESS OF THE EMERGING MARKETS SO FAR
IN 1995?
A. The emerging markets were volatile in the first six months of 1995, but
regained lost ground in the second quarter. Early in the year an odd confluence
of negative events pushed many of these markets lower. The most damaging event
occurred in Mexico, which has generated very impressive economic growth in
recent years. Due to a shortage of foreign reserves in mid-December 1994,
Mexico suffered a loss of confidence in its currency. In an effort to bring the
crisis to a halt, the government devalued the Mexican peso.
Oddly, while the Mexican crisis had no direct effect on emerging countries
elsewhere, those uncertainties echoed throughout many other emerging markets,
and caused many of these markets to post a subpar performance in the early
months of the year. Fortunately, investors soon realized that the Mexican
events were isolated and again started to focus on the strong economic growth
rates many of these markets enjoy. With that renewed focus, the emerging
markets began to recoup the ground lost during the Mexican affair. Thus, after
a rocky start, the six months actually ended on a fairly upbeat note.
Q: WITH THAT AS A BACKDROP, WHERE HAVE YOU BEEN FOCUSING THE PORTFOLIO'S
INVESTMENTS?
A. East Asia remains the Fund's largest regional weighting. Hong Kong,
Thailand, Indonesia, Malaysia, and the Philippines, -- the Asian Tigers of
Greater China -- continue to post economic growth rates higher than those of the
industrialized nations. China's economy has slowed this year, but should still
achieve growth in the 10 percent range. And happily, inflation in China is
showing signs of abating. Some of the Asian Tigers such as Malaysia and Taiwan
are generating growth of 6-to-8 percent, while most industrialized nations are
growing in the 4 percent range, and the U.S. and Japan fall below that level.
So clearly, the China region is achieving significant growth.
Q: COULD YOU DESCRIBE SOME OF YOUR INVESTMENTS IN THE REGION?
A. Yes. Hong Kong-based Hutchison Whampoa remains a large core holding. As a
highly diversified conglomerate, Hutchison maintains strong interests in real
estate, telecommunications, retailing, trading, and property development. The
company is well-exposed to many of the prime areas under development in
<PAGE> 4
<TABLE>
-----------------------------------------------------------------------
BRAZIL: A SNAPSHOT* -
<S> <C> <C>
[MAP OF BRAZIL] GDP GROWTH:.................. 5.3%
[BAR GRAPH]
Brazil: Emerging as a
Global Player. SIZE OF ECONOMY:............. $ 508 BILLION
Brazil Exports TOTAL EXPORTS:............... $43.6 BILLION
($US billions)
1990 - $31.4 MAIN TRADING PARTNERS;
1991 - $31.6 EUROPE.................. 25.9%
1992 - $35.9 U.S. ................... 20.6%
1993 - $38.6 ASIA.................... 9.9%
1994 - $43.6 ARGENTINA............... 9.4%
BOVESPA STOCK MARKET INDEX:
............................ +60.0%
<FN>
* Information for 1994.
Source: Ministry of Finance
-----------------------------------------------------------------------
</TABLE>
China. Yet, the diversity of its businesses and its geographical locations
gives the company a measure of insulation from the ebb and flow of the region's
politics.
Elsewhere, China Steel is the only fully integrated steel manufacturer in
Taiwan. The company enjoys a 45 percent market share in Taiwan and has
benefited from an ongoing privatization campaign by the government. China Steel
should benefit further from the infrastructure build-up occurring within the
region.
Q: LATIN AMERICA REMAINS THE FUND'S SECOND LARGEST REGIONAL WEIGHTING. WHAT DO
YOU FIND ESPECIALLY ENCOURAGING ABOUT THE LATIN REGION?
A. The Fund has its largest Latin investments in Brazil, Mexico, Chile and
Argentina. Initially, investor concerns about Mexico spilled into Argentina and
Brazil, which were using a currency peg to keep inflation down. But the growth
story remains intact in Latin America and those concerns have been alleviated.
Argentina has enjoyed even stronger growth than Mexico in recent years. Despite
some capital outflow due to the "Tequila effect" of the Mexican crisis early in
the year, the China. Yet, the diversity of its businesses and its geographical
locations gives the company a measure of insulation from the ebb and flow of
the region's politics.
<PAGE> 5
country has strengthened its banking system, sharply lowered inflation, and
lowered its trade deficit. With the re-election of reform-minded President
Menem, the country should continue along the path of a market-oriented economy.
Brazil has reduced inflation dramatically, from 50 percent per month at the
beginning of the decade to a rate of 2 percent per month last year. Meanwhile,
the government is expanding its efforts to privatize publicly-owned companies,
including major manufacturers, banks, petrochemical producers, and
transportation facilities. So there is good reason for optimism about Brazil.
Q: WHAT KIND OF COMPANIES HAVE YOU BEEN BUYING IN LATIN AMERICA?
A. The Portfolio's largest holding at June 30 was a Peruvian brewer, Backus &
Johnson. The company was founded in 1879 and is the country's largest brewer.
Backus maintains two plants in the capital city of Lima, where they produce
beer and soft drinks. In addition, the company is a majority shareholder in
three other brewers. In effect, Backus has a near-monopoly of the beverage
market in Peru.
<TABLE>
--------------------------------------------------------------------------------
"The Portfolio's common stock investments by Region"
<S> <C> <C>
Other -- 1.7%
South Asia (Greater India) -- 13.3
Latin America -- 27.6
East Asia (Greater China) -- 57.4
Based on market value as of
June 30, 1995.
--------------------------------------------------------------------------------
</TABLE>
Another large Latin holding is Compania de Telefonos de Chile (CTC). One of the
major hurdles to be overcome in Latin America is an antiquated phone system.
The region is greatly in need of modern equipment and an updated line system.
CTC is Chile's largest provider of phone services and maintains an established
local phone franchise. In 1994, the company was permitted to begin providing
long distance services, both domestically and internationally. CTC is now the
country's only full-service telecommunications company.
Finally, YPF, an Argentine oil company, is the nation's dominant producer of
oil and gas. Since the company was privatized in 1989, it has sharply reduced
its cost structure while benefiting from the lifting of fuel price controls.
The company boasts proven reserves of more than 1 billion barrels of crude oil
and 11 trillion cubic feet of natural gas, and is rapidly increasing its
production schedule.
Marathon
Emerging Mkts
<PAGE> 6
--------------------------------------------------------------------------------
NOTES FROM THE EMERGING MARKETS:
- BANGLADESH -- The Dhaka Stock Exchange has risen 114 percent since 1993. The
Bangladesh SEC has adapted tax rules that encourage new savings and investment
and is preparing for the opening of the country's first venture capital funds.
- CHILE -- Chile plans to capitalize on its expansive seacoast access to the
Pacific Basin. Minister of Public Works Ricardo Lagos indicated in June that
the country has earmarked $10 billion to modernize the country's ports and
transport facilities.
- INDIA -- The Indian Ministry of Commerce has announced that the country's
exports grew by 27 percent in the quarter ended June 30. The Ministry aims to
lift exports to $70 billion by the year 2001, from $26 billion in 1994.
--------------------------------------------------------------------------------
Q: YOU ALSO HAVE SOME INVESTMENTS IN THE INDIA REGION OF SOUTH ASIA. WHERE HAVE
YOU INVESTED THERE?
A. The Portfolio's largest India-region investment is John Keells Holdings of
Sri Lanka, which has enjoyed strong earnings growth in recent years. With
businesses ranging from tourism, plantations, and real estate to financial
services, industrial exports, and domestic trade, the company is well
represented in many of the region's growth industries. Keells has expansive
real estate holdings, which form a strong asset base.
Elsewhere in the region, Mahindra & Mahindra is an automobile manufacturer with
manufacturing lines for jeeps, tractors, agricultural vehicles, and auto
components. Mahindra is the dominant maker of jeeps in India with a 90 percent
market share. With a growing middle class, the demand for vehicles continues to
grow. The company's growth has reflected that demand, having reported a 73
percent earnings increase during the first half of 1995.
Q: ROBERT, WHAT IS YOUR OUTLOOK FOR THE EMERGING MARKETS?
A. The emerging markets have been characteristically volatile in 1995 and,
while that's been unnerving for some investors, it's not especially surprising
given the fluid nature of developing markets. It's likely that we can expect
more volatility in the future. However, investors should remember that we are
witnessing a sea change in the way these nations conduct business. The
economies of Greater China, India and Latin America are recovering from decades
of stagnation and political control. With the on-going privatization of
previously state-controlled companies, corporate profit growth for these
regions is unparalleled in the world. Naturally, past trends do not necessarily
guarantee future growth. But, in my view, over time, patient investors should
share in that future growth.
<PAGE> 7
EV MARATHON EMERGING MARKETS FUND
FINANCIAL STATEMENTS (UNAUDITED)
<TABLE>
--------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995
<S> <C> <C>
ASSETS:
Investment in Emerging Markets Portfolio, at value (Note 1A)
(identified cost, $1,109,142) $1,191,645
Receivable for Fund shares sold 954
Deferred organization expenses (Note 1D) 46,555
Receivable from Administrator 19,937
----------
Total assets $1,259,091
LIABILITIES:
Payable to Affiliate -- Custodian Fee $ 83
Accrued expenses and other liabilities 39,893
-------
Total liabilities 39,976
----------
NET ASSETS for 116,684 shares of beneficial interest outstanding $1,219,115
==========
SOURCES OF NET ASSETS:
Paid-in capital $1,157,922
Accumulated net investment loss (12,844)
Accumulated net realized loss from the Portfolio (8,466)
Unrealized appreciation of investments from Portfolio (computed on
the basis of identified cost) 82,503
----------
Total $1,219,115
==========
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE (NOTE 6) PER SHARE
($1,219,115 / 116,684 shares of beneficial interest) $ 10.45
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 8
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Investment income allocated from Portfolio $ 6,431
Expenses allocated from Portfolio (8,323)
--------
Net investment income (loss) from Portfolio $ (1,892)
Expenses --
Management fee (Note 3) $ 901
Custodian fee (Note 3) 583
Distribution fees (Note 5) 2,697
Registration fees 11,827
Printing and postage 7,182
Amortization of organization expenses (Note 1D) 5,249
Legal and accounting services 1,554
Transfer and dividend disbursing agent fees 354
Miscellaneous 475
-------
Total expenses $30,822
Allocation of expense to Administrator 19,937
-------
Net expenses 10,885
--------
Net investment loss $(12,777)
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (loss)
Investments $(7,438)
Foreign currency (1,173)
-------
Net realized loss $(8,611)
Change in unrealized appreciation 83,355
-------
Net realized and unrealized gain 74,744
--------
Net increase in net assets from operations $ 61,967
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 9
<TABLE>
-------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended
(Unaudited) December 31, 1994*
---------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment loss $ (12,777) $ (67)
Net realized gain (loss) from Portfolio (8,611) 145
Change in unrealized appreciation (depreciation) from Portfolio 83,355 (852)
---------- --------
Net increase (decrease) in net assets from operations $ 61,967 $ (774)
---------- --------
Transactions in shares of beneficial interest (Note 4)
Proceeds from sale of shares $1,084,040 $229,895
Cost of shares redeemed (156,023) -
---------- --------
Increase in net assets resulting from capital stock transactions $ 928,017 $229,895
---------- --------
Net increase in net assets $ 989,984 $229,121
NET ASSETS:
At beginning of period 229,131 10
---------- --------
At end of period (including accumulated net investment loss of
$12,844 and $67, respectively) $1,219,115 $229,131
========== ========
<FN>
*For the period from the start of business, November 30, 1994 to December 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 10
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
----------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended
(Unaudited) December 31, 1994*
---------------- ------------------
<S> <C> <C>
NET ASSET VALUE, beginning of period $ 9.960 $10.000
------- -------
Income from Investment Operations:
Net investment loss $(0.107) $(0.003)
Net realized and unrealized gain (loss) on investments 0.597 (0.037)
------- -------
Total gain (loss) from investment operations $ 0.490 $(0.040)
------- -------
NET ASSET VALUE, end of period $10.450 $ 9.960
======= =======
TOTAL RETURN*** 4.92% (0.40)%
RATIOS/SUPPLEMENTAL DATA:**
Net assets, end of period (000 omitted) $ 1,219 $ 229
Ratio of net expenses to average daily net assets (1) 5.30%+ 0.75%+
Ratio of net investment loss to average daily net assets (3.53)%+ (0.75)%+
<FN>
(1) Includes the Fund's share of Emerging Markets Portfolio's allocated expenses.
+ Annualized
** The expenses related to the operation of the fund reflect an assumption of expenses
by the investment advisor. Had such action not been taken, net investment income
(loss) per share the ratios would have been as follows:
Net Investment Loss Per Share $(0.107) $(0.037)
Ratios (to average daily net assets)
Expenses (1) 14.56%+ 9.14%+
Net Investment income (12.79%)+ (9.14%)+
*** Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed to be reinvested at
the net asset value on the record date.
* For the period from the start of business, November 30, 1994 to December 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 11
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Emerging Markets Fund (the Fund) is a diversified series of Eaton
Vance Special Investment Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund invests all of its investable assets in interests
in Emerging Markets Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (49.2% at June 30, 1995). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the Portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS -- Valuation of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, and any
net realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on the
straight-line basis over five years.
E. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to
June 30, 1995 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
--------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make at least one distribution annually
(normally in December) of all or substantially all of the investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses and at least one distribution annually of all or substantially all of
the net realized capital gains (reduced by any available capital loss carry
forwards from prior years) allocated by the Portfolio to the Fund, if any.
Shareholders may reinvest all distributions in shares of the Fund
without a sales charge at the per share net asset value as of the close of
business on the record date. The Fund distinguishes between distributions on a
tax basis and a financial reporting basis. Generally accepted
<PAGE> 12
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
accounting principles require that only distributions in excess of tax basis
earnings and profits be reported in the financial statements as a return of
capital. Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in temporary over
distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
--------------------------------------------------------------------------------
(3) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The management fee is earned by Eaton Vance Management (EVM) as compensation
for management and administration of the business affairs of the Fund. The fee
is based on a percentage of average daily net assets. For the six months ended
June 30, 1995, the fee was equivalent to 0.25% of the Fund's average net assets
for such period and amounted to $901. To enhance the net income of the Fund,
the Administrator was allocated expenses in the amount of $19,937. Except as to
Trustees of the Fund who are not members of EVM's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
management fee. Investors Bank & Trust Company (IBT) , an affiliate of EVM,
serves as custodian of the Fund. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Fund maintains with IBT. Certain officers and Trustees
of the Fund and the Portfolio are officers and directors/trustees of the above
organizations. In addition, investment adviser, administrative fees, and
custodian fees are paid by the Portfolio to EVM and its affiliates. See Note 2
of the Portfolio's Notes to Financial Statements which are included elsewhere
in this report.
--------------------------------------------------------------------------------
<TABLE>
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1994*
---------------- ------------------
<S> <C> <C>
Sales 109,211 23,006
Redemptions (15,534) -
------- ------
Net increase 93,677 23,006
======= ======
<FN>
*For the period from the start of business, November 30, 1994 to December 31, 1994.
</TABLE>
<PAGE> 13
--------------------------------------------------------------------------------
5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay the
Principal Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal to
1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no outstanding
Uncovered Distribution Charges, which are equivalent to the sum of (i) 5% of
the aggregate amount received by the Fund for the shares sold plus, (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD
reduced by the aggregate amount of contingent deferred sales charges (see Note
6) and daily amounts theretofore paid to EVD. The amount payable to EVD with
respect to each day is accrued on such day as a liability of the Fund and,
accordingly, reduces the Fund's net assets. The Fund accrued $2,697 as payable
to EVD for the six months ended June 30, 1995, representing 0.75% of average
daily net assets. At June 30, 1995, the amount of Uncovered Distribution
Charges of EVD calculated under the Plan was approximately $47,109.
In addition, the Plan authorizes the Fund to make payments of service
fees to the Principal Underwriter, Authorized Firms and other persons in amounts
not exceeding 0.25% of the Fund's average daily net assets for each fiscal year.
The Trustees have initially implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% per annum of the Fund's average
daily net assets based on the value of Fund shares sold by such persons and
remaining outstanding for at least one year, and that payment of these service
fees shall commence with the quarter ending December 31, 1995. Service fee
payments will be made for personal services and/or the maintenance of
shareholder accounts. Service fees are separate and distinct from the sales
commissions and distribution fees payable by the Fund to EVD, and, as such, are
not subject to automatic discontinuance where there are no outstanding Uncovered
Distribution Charges of EVD.
Certain officers and Trustees of the Fund are officers or directors of
EVD.
--------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at declining rates that begin at 5% in the
first and second year of redemption after purchase, declining one percentage
point each year thereafter. No CDSC is levied on shares which have been sold to
EVM or its affiliates or to their respective employees or clients. CDSC charges
are paid to EVD to reduce the amount of Uncovered Distribution Charges
calculated under the Fund's Distribution Plan. CDSC charges received when no
Uncovered Distribution Charges exist will be retained by the Fund. EVD received
approximately $2,600 of CDSC paid by shareholders for the six months ended
June 30, 1995.
--------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$1,156,108 and $191,023 respectively.
<PAGE> 14
<TABLE>
----------------------------------------------------------------
EMERGING MARKETS PORTFOLIO (UNAUDITED)
----------------------------------------------------------------
SEMI-ANNUAL REPORT -- JUNE 30, 1995
----------------------------------------------------------------
STOCKS -- 93.6%
----------------------------------------------------------------
<CAPTION>
----------------------------------------------------------------
STOCKS--93.6%
SHARES VALUE
<S> <C> <C>
ARGENTINA--4.3%
Inversiones Y Representaciones ADR 2,000 $ 47,500
YPF Sociedad Anonima ADR 2,960 56,610
--------
$104,110
--------
BANGLADESH--0.8%
Eastern Housing Ltd. 5,500 $ 20,214
--------
BRAZIL--6.8%
Banco Bradesco S.A. Pfd. 6,683,066 $ 56,806
Brasmotor S.A. Pfd. 310,000 58,807
Usiminas Siderurg Minas ADR 4,325 48,397
--------
$164,010
--------
CHILE--4.8%
Banco Osorno Y LA Union ADR 3,160 $ 43,845
Compania de Telefonos de Chile 900 72,000
--------
$115,845
--------
HONG KONG--17.2%
China Light & Power Co. 12,000 $ 61,730
Hong Kong Telecommunications Ltd. 30,800 60,910
HSBC Holdings PLC 4,000 51,313
Hutchison Whampoa 15,000 72,510
National Mutual Limited 100,000 63,980
Sun Hung Kai Properties Ltd. 6,000 44,398
Swire Pacific Ltd. A 472,000 61,007
--------
$415,848
--------
INDIA--6.6%
Mahindra & Mahindra GDR 4,800 $ 57,000
Tata Engineering & Locomotion GDR 2,000 39,750
USHA Beltron Ltd. GDR 10,000 63,750
--------
$160,500
--------
INDONESIA--8.2%
PT HM Sampoerna (Foreign) 10,000 $ 78,581
PT Indonesia Satellite ADR 1,750 66,719
Wicaksana (Foreign) 19,500 54,727
--------
$200,027
--------
REPUBLIC OF KOREA--2.8%
Korea Mobile Telecom Corp. 1,900 $ 67,925
--------
MAYLASIA--7.6%
DCB Holdings Behard 20,000 $ 58,662
Genting Behard 6,000 59,319
Land & General Behard 20,000 66,866
--------
$184,847
--------
MEXICO--6.7%
Pan American Beverages, Inc. 1,600 $ 47,400
Sigma Alimentos S.A. 8,200 53,663
Telefonos de Mexico ADR 2,050 60,475
--------
$161,538
--------
PERU--3.3%
Cerveceria Backus & Johnston 35,000 $ 80,745
--------
</TABLE>
<PAGE> 15
<TABLE>
------------------------------------------------------------------
EMERGING MARKETS PORTFOLIO, UNAUDITED (CONTINUED)
------------------------------------------------------------------
STOCKS (CONTINUED)
------------------------------------------------------------------
<CAPTION>
------------------------------------------------------------------
SHARES VALUE
<S> <C> <C>
PHILIPPINES--8.0%
Bacnotan Consolidated Industries 9,000 $ 59,729
Philippine Long Distance Telephone 700 49,951
Philippine Long Distance Telephone ADR 300 21,413
SM Prime Holdings 227,500 62,358
----------
$ 193,451
----------
PORTUGAL--1.6%
Portugal Telecom S.A. 2,000 $ 37,750
----------
SRI LANKA--5.0%
Development Financial Corp of Ceylon 5,833 $ 43,450
John Keells Holdings GDR 10,000 78,750
----------
$ 122,200
----------
TAIWAN--3.1%
China Steel Corp. 3,500 $ 74,375
----------
THAILAND--6.8%
Electricity Generating (Foreign) 8,000 $ 24,144
Electricity Generating (Local) 8,000 23,496
Siam Cement Co. Ltd. (Foreign) 1,000 63,845
Thai Farmers Bank Public Co. 7,400 53,660
----------
$ 165,145
----------
TOTAL COMMON STOCKS
(IDENTIFIED COST, $2,082,979) $2,268,530
OTHER ASSETS, LESS LIABLITIES-- 6.4% 154,481
----------
NET ASSETS - 100% $2,423,011
==========
</TABLE>
See notes to financial statements
<PAGE> 16
FINANCIAL STATEMENTS
<TABLE>
------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1995 (Unaudited)
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (Identified cost, $2,082,979) $2,268,530
Cash 216,593
Cash denominated in foreign currencies (cost, $236) 236
Receivable for investments sold 30,861
Dividends and interest receivable 2,562
Deferred organization expenses (Note 1C) 33,645
Receivable from Administrator 28,800
----------
Total assets $2,581,227
LIABILITIES:
Payable for investments purchased $119,665
Payable to Affiliates -- Custodian fees 601
Accrued expenses and other liabilities 37,950
--------
Total liabilities 158,216
----------
NET ASSETS applicable to investors' interest in Portfolio $2,423,011
==========
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $2,237,568
Net unrealized appreciation of investments (computed on the
basis of identified cost) 185,551
Net unrealized depreciation of foreign currencies (108)
----------
TOTAL $2,423,011
==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 17
<TABLE>
------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (Unaudited)
<S> <C> <C>
INVESTMENT INCOME:
Dividend income (net of withholding taxes of $549) $ 15,218
Expenses --
Investment adviser fee (Note 2) $ 6,627
Administration fee (Note 2) 2,209
Custodian fees (Note 2) 14,850
Legal and accounting services 10,676
Compensation of Directors not members of the Investment Adviser's
organization (Note 2) 7,500
Amortization of organization expense (Note 1C) 3,801
Registration fees 125
Miscellaneous 3,346
--------
Total expenses $ 49,134
Deduct:
Allocation of expenses to Administrator 28,800
--------
Net Expenses 20,334
--------
Net investment loss $ (5,116)
--------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on
Investments (identified cost basis) $(26,649)
Foreign currency transactions (2,863)
--------
Net realized loss $(29,512)
Change in unrealized appreciation
Investments $192,213
Foreign currency (65)
--------
Net unrealized appreciation 192,148
--------
Net realized and unrealized gain on investments $162,636
--------
Net increase in net assets from operations $157,520
========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 18
FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
--------------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
For the period from
the start of business
Six Months Ended November 30, 1994
June 30, 1995 to
(Unaudited) December 31, 1994
---------------- ---------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS
From operations
Net investment loss $ (5,116) $ -
Net realized gain (loss) on investments and foreign currency transactions (29,512) 1,132
Net increase (decrease) in unrealized appreciation 192,148 (6,075)
---------- ----------
Increase (decrease) in net assets from operations $ 157,520 $ (5,573)
---------- ----------
Capital transactions:
Contributions $1,523,586 $1,107,223
Withdrawals (453,365) (6,400)
---------- ----------
Increase in net assets resulting from capital transactions $1,070,221 $1,100,823
---------- ----------
Total increase in net assets $1,227,741 $1,095,250
NET ASSETS:
At beginning of period 1,195,270 100,020
---------- ----------
At end of period $2,423,011 $1,195,270
========== ==========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 19
<TABLE>
----------------------------------------------------------------------------------------
SUPPLEMENTARY DATA
<CAPTION>
Six Months Ended
June 30, 1995 Year Ended
(Unaudited) December 31, 1994*
---------------- ------------------
<S> <C> <C>
RATIOS (As a percentage of average net assets):
Expenses 2.29%+ 0%
Net investment income (loss) (0.58)%+ 0%
PORTFOLIO TURNOVER 28% 0%
The operating expenses of the Portfolio reflect an allocation of expenses to the
Administrator. Had such action not been taken, the annualized ratios would have
been as follows:
Expenses 5.54%+ 2.21%+
Net Investment Loss (3.83)%+ (2.21)%+
<FN>
+ Annualized
*For the period from the start of business, November 30, 1994 to December 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
<PAGE> 20
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
--------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Emerging Markets Portfolio (the "Portfolio") is registered under the Investment
Company Act of 1940 as a diversified, open end investment company which was
organized as a trust under the laws of the State of New York. The Declaration
of Trust permits the Trustees to issue interests in the Portfolio. The
following is a summary of the significant accounting policies of the Portfolio.
The policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National Market
System are valued at closing sale prices, on the exchange where such securities
are principally traded. Futures positions on securities or currencies are
generally valued at closing settlement prices. Unlisted or listed securities
for which closing sale prices are not available are valued at the mean between
the latest bid and asked prices. Short term debt securities with a remaining
maturity of 60 days or less are valued at amortized cost. Other fixed income
and debt securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined in
good faith by or at the direction of the Trustees.
B. FEDERAL TAXES -- The Portfolio has elected to be treated as a partnership for
Federal tax purposes. No provision is made by the Portfolio for federal or
state taxes on any taxable income of the Portfolio because each investor in the
Portfolio is individually responsible for the payment of any taxes on its share
of such income. Since some of the Portfolio's investors are regulated
investment companies that invest all or substantially all of their assets in
the Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements, (under the Internal Revenue Code), in
order for its investors to satisfy them. The Portfolio will allocate, at least
annually among its investors, each investor's distributive share of the
Portfolio's net investment income, net realized capital gains, and any other
items of income, gain, loss, deduction or credit. Withholding taxes on foreign
dividends and capital gains have been provided for in accordance with the
Portfolio's understanding of the applicable countries' tax rules and rates.
C. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
D. FUTURES CONTRACTS -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit ("initial margin") either in cash or
securities an amount equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on daily
fluctuations in the value of the underlying security, and are recorded for book
purposes as unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed only to hedge against
anticipated future changes in interest or currency exchange rates. Should
interest or currency exchange rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. If the Portfolio enters into a closing transaction, the
Portfolio will realize, for book purposes, a gain or loss equal to the
difference between the value of the financial futures contract to sell and
financial futures contract to buy.
E. FOREIGN CURRENCY TRANSLATION -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investment securities and income and expenses are
converted into U.S. dollars
<PAGE> 21
--------------------------------------------------------------------------------
based upon currency exchange rates prevailing on the respective dates of such
transactions. Recognized gains or losses on investment transactions
attributable to foreign currency rates are recorded for financial statement
purposes as net realized gains and losses on investments. That portion of
realized and unrealized gains and losses on investments that result from
fluctuations in foreign currency exchange rates are not separately disclosed.
F. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties to
meet the terms of their contracts and from movements in the value of a foreign
currency relative to the U.S. dollar. The Portfolio will enter into forward
contracts for hedging purposes as well as non-hedging purposes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until such time as the contracts have been
closed or offset.
G. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Dividend income is recorded on the
ex-dividend date. However, if the ex-dividend date has passed, certain
dividends from foreign securities are recorded as the Portfolio is informed of
the ex-dividend date. Interest income is recorded on the accrual basis.
H. INTERIM FINANCIAL INFORMATION -- The interim financial statements relating to
June 30, 1995 and for the period then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
--------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Lloyd George Management (Bermuda)
Limited (the Adviser) as compensation for management and investment advisory
services rendered to the Portfolio. Under the advisory agreement, the Adviser
receives a monthly fee of 0.0625% (0.75% annually) of the average daily net
assets of the Portfolio up to $500,000,000, and at reduced rates as daily net
assets exceed that level. For the six months ended June 30, 1995 the adviser fee
was 0.75% (annualized) of average net assets. In addition, an administration fee
is earned by Eaton Vance Management (EVM) for managing and administering the
business affairs of the Portfolio. Under the administration agreement, EVM earns
a monthly fee in the amount of 1/48th of 1% (equal to 0.25% annually) of the
average daily net assets of the Portfolio up to $500,000,000, and at reduced
rates as daily net assets exceed that level. For the six months ended June 30,
1995, the administration fee was 0.25% (annualized) of average net assets. To
enhance the net income of the portfolio, the administrator was allocated
expenses in the amount of $28,800. Except as to Trustees of the Portfolio who
are not members of the Adviser or EVM's organization, officers and Trustees
receive remuneration for their services to the Portfolio out of such investment
adviser and administration fees. Investors Bank & Trust Company (IBT), an
affiliate of EVM, serves as custodian of the Portfolio. Pursuant to the
custodian agreement, IBT receives a fee reduced by credits which are determined
based on the average daily cash balances the Portfolio maintains with IBT.
Certain of the officers and Trustees of the Portfolio are officers or
directors/trustees of the above organizations.
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $2,045,927 and $363,857, respectively.
--------------------------------------------------------------------------------
<TABLE>
(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 1995, as computed on a federal income tax basis,
are as follows:
<S> <C>
Aggregate cost $2,082,979
==========
Gross unrealized appreciation $ 236,742
Gross unrealized depreciation (51,191)
----------
Net unrealized appreciation $ 185,551
==========
</TABLE>
--------------------------------------------------------------------------------
(5) RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and
more volatile than securities of comparable U.S. companies. In general, there
is less overall governmental supervision and regulation of foreign securities
markets, broker-dealers, and issuers than in the United States.
<PAGE> 23
--------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $120 million unsecured line of credit agreement with a
bank. The line of credit consists of a $20 million committed facility and a
$100 million discretionary facility. Borrowings will be made by the Portfolio
solely to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each portfolio and fund based on its
borrowings at an amount above either the bank's adjusted certificate of deposit
rate, a variable adjusted certificate of deposit rate, or a federal funds
effective rate. In addition, a fee computed at an annual rate of 1/4 of 1% on
the $20 million committed facility and on the daily unused portion of the $100
million discretionary facility is allocated among the participating funds and
portfolios at the end of each quarter. The Portfolio did not have any
significant borrowings or allocated fees during the period.
<PAGE> 24
<TABLE>
INVESTMENT MANAGEMENT
<S> <C> <C>
EV MARATHON OFFICERS TRUSTEES
EMERGING MARKETS
FUND JAMES B. HAWKES LANDON T. CLAY
24 Federal Street President Chairman, Eaton Vance Corp.
Boston, MA 02110
CLIFFORD H. KRAUSS DONALD R. DWIGHT
Vice President President, Dwight Partners, Inc.
Chairman, Newspapers of New
JAMES L. O'CONNOR England, Inc.
Treasurer
JAMES B. HAWKES
THOMAS OTIS Executive Vice President,
Secretary Eaton Vance Management
SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
Investment Banking, Harvard
University Graduate School of
Business Administration
NORTON H. REAMER
President and Director, United
Asset Management Corporation
JOHN L. THORNDIKE
Director, Fiduciary Company
Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
------------------------------------------------------------------------
EMERGING MARKETS OFFICERS TRUSTEES
PORTFOLIO
24 Federal Street HON. ROBERT LLOYD GEORGE HON. ROBERT LLOYD GEORGE
Boston, MA 02110 President Chairman and Chief Executive,
Lloyd George Management
JAMES B. HAWKES
Vice President JAMES B. HAWKES
Executive Vice President,
SCOBIE DICKINSON WARD Eaton Vance Management
Vice President, Assistant
Secretary and Assistant Treasurer SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
WILLIAM WALTER RALEIGH KERR Investment Banking, Harvard
Vice President, Secretary and University Graduate School of
Assistant Treasurer Business Administration
JAMES L. O'CONNOR STUART HAMILTON LECKIE
Vice President and Treasurer Managing Director and Actuary,
Wyatt Company, Hong Kong
THOMAS OTIS
Vice President and HON. EDWARD K.Y. CHEN
Assistant Secretary Professor and Director, Center for
Asian Studies, University of
JANET E. SANDERS Hong Kong
Assistant Secretary
</TABLE>
