ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1996
[Door Logo]
EV Marathon
Emerging
Markets Fund
Annual
Shareholder
Report
December 31, 1996
Investment Adviser of
Emerging Markets Portfolio
Lloyd George Management
(Bermuda) Limited
3808 One Exchange Square
Central, Hong Kong
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
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
P.O. Box 5123
Westborough, MA 01581-5123
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
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 - 2/97
To Shareholders
We are happy to report that EV Marathon Emerging Markets Fund had a
total return of 28.5% for the year ended December 31, 1996. That return
resulted from a rise in net asset value per share from $10.05 on
December 31, 1995 to $12.72 on December 31, 1996 and capital gains
distributions of $0.175 per share. It 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 6.0% for the same period.*
We are pleased to add that the Fund was ranked #1 of 88 emerging market
funds for the year ended December 31, 1996, according to Lipper
Analytical Services, Inc., a mutual fund ranking service.+
1996 marked by robust performance in many emerging markets...
A strong showing in key regional areas, such as Greater China and Latin
America, set a generally upbeat tempo for global investors in 1996,
although it paid to be selective. The markets were fueled by continued,
strong economic growth and, in many cases, impressive results in
bringing down inflation.
Importantly, the currency problems of 1995, which cast a shadow over
many emerging markets, were very much a thing of the past in 1996.
Instead, investors focused on superior growth rates in the leading
markets. In Asia, the Hong Kong market surged 34%, while Taiwan also
jumped 34% and Malyasia was up 18%. In Latin America, where the "Tequila
Effect" of 1995 was most unsettling, Brazil rose a staggering 64%, while
Mexico climbed 20%. And in Eastern Europe, where old politics and new
economic promise wage a constant battle, markets in Russia, Croatia, and
Hungary each posted returns well over 100%.
With the U.S. market having soared for two years running, investors look
to the emerging markets...
The U.S. market has just recorded two of its strongest back-to-back
annual performances in history, well above the market's historical
returns. That is especially noteworthy given the fact that the U.S.
economy continues to register relatively modest growth. Not
surprisingly, many investors are looking to emerging markets, with their
high growth rates and superior corporate profit growth, as a possible
investment alternative. Naturally, these markets remain volatile and are
subject to higher currency and political risks. But as market reforms
spread and inflation is tamed around the world, we believe these markets
represent outstanding opportunities over the longer term.
Sincerely,
/S/James B. Hawkes
James B. Hawkes
President
February 21, 1997
* It is not possible to invest directly in the Index. +Lipper rankings
reflect historical performance through 12/31/96. Rankings are based on
the funds' total returns and do not take sales charges into
consideration. Past performance is no guarantee of future results.
Management Discussion
An interview with Kiersten Christensen, Lloyd George Management,
Portfolio Manager and Investment Adviser to the Emerging Markets
Portfolio.
Q: Kiersten, the Fund posted excellent returns in 1996, and, as noted
earlier, led its Lipper category. Where were you invested during the
period?
A. The Portfolio was well represented across a range of emerging
countries. East Asia - or the China region - remained the Portfolio's
largest regional component, making up 52% of its equity investments.
Latin America represented another 25% of the Portfolio, while South Asia
- - the India region - accounted for 6%. Smaller investments in Eastern
Europe, the Mediterranean, and Africa made up another 17%.
Hong Kong was among the Portfolio's largest country weightings. With the
imminent turnover of Hong Kong to Chinese jurisdiction in July,
investors are increasingly optimistic about the Hong Kong market. In
November 1996, the Chinese government appointed C.H. Tung, a shipping
magnate, as the colony's new Chief Executive. The appointment was viewed
positively by investors and the political establishment alike. Hong Kong
has long been regarded as a proxy for China investment and is likely to
receive still more attention as the turnover nears.
Elsewhere in the China region, Malaysia was a very strong performer. The
country appeared to achieve its goal of a soft landing, while recording
a surprising trade surplus, lowering inflation, and increasing
industrial production.
Q: Could we focus on some of your China-region investments?
A. Certainly. The Portfolio's largest holding, Rashid Hussein, is a
Malaysian financial conglomerate. Rashid has exposure to a variety of
financial businesses, including commercial lending, consumer banking,
and the capital markets. The company is very well positioned to provide
Malaysia the financial expertise to supplement its ample labor supply
and abundant natural resources.
Elsewhere in Malaysia, Star Publications publishes the largest English-
language daily in the country. Star enjoys a 20% market share of all
newspaper advertising. In the wake of its newspaper successes, Star has
begun to venture into magazines and other periodicals. The company
should be able to exploit growing consumer appetites and rising ad
expenditures.
In Hong Kong, the property sector is a very influential market segment.
New World Development is one of Hong Kong's largest property companies.
In Hong Kong, the company has a diversified portfolio of investments,
including real estate development, commercial and residential rental
properties, and hotel management. In addition to its massive holdings in
the colony, the company has a strong exposure to mainland China, with
250 kilometers of toll roads and bridges.
[PHOTO OF KIERSTEN CHRISTENSEN OMITTED]
Kiersten Christensen
Q: Latin America - your second largest regional commitment - achieved a
major turnaround in 1996. Where have you been investing in that area?
A. With the currency crises of 1995 well behind them, Latin American
investors had much to cheer in the past year. Mexico, Brazil, and Chile
were our largest Latin weightings. Mexico's recession appeared to bottom
out during the year while the government made significant headway
against inflation, allowing interest rates to fall further.
Brazil benefited from further progress in the country's privatization
plans, especially in the mining and utility sectors, as well as from
more liberal tax treatments of exports and plans to repurchase the
country's outstanding Brady bonds. In addition, Brazil made remarkable
inroads on inflation.
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are
subject to investment risks, including possible loss of principal
invested.
[GRAPHIC MAP OF BRAZIL OMITTED: BRAZIL: REFORMS AND PRIVATIZATION
BUILDING A POWERFUL ECONOMY]
Brazil: A Snapshot*-
GDP Growth: 4.8%
Size of economy: $715 billion
Fixed investment
growth 10%
Savings as % of GDP: 18%
Foreign investment: $28 billion
* Information for 1996
Sources: Financial Times; J.P. Morgan, Inc.
Chile was under pressure for much of the year as GDP growth fell short
of expectations. However, following two years of underperformance,
selected Chilean stocks appeared to offer outstanding value and should
participate fully in the eventual economic recovery. And from a
geographic standpoint, Chile is uniquely well positioned to benefit from
expanding trade with Asia, as they have already demonstrated by doubling
their wine exports to Asia in the past year alone.
Q: What kind of companies did you favor in Latin America?
A. As many investors know, Chile is well-regarded throughout the world
for its wine production. Vina Concha y Toro is Chile's leading wine
producer and exporter, with a 22% market share. Thanks to a recent
reorganization that overhauled its production facilities, it's estimated
that Concha should increase production by 40% in the next year. The
company has also made a large acquisition of land in Argentina that
should further enhance its production capacity.
U.S.-based Coca-Cola - the most recognized brand name in the world - is
making a massive marketing effort in Latin America. Pan American
Beverages (Panamco) is the largest Coke franchiser outside the U.S. and
has operations in Mexico, Brazil, and Colombia. The company's geographic
diversity offers a hedge against an adverse turn in any single country.
In addition, Panamco's vast distribution network provides tremendous
marketing muscle that sets up a major barrier to entry for prospective
competitors. Banco Bradesco is the largest private sector bank in Latin
America. The company ranks first in terms of total assets, net worth, and
deposits. Bradesco operates primarily in the retail banking market,
concentrating on individuals and small businesses. With over 2,300
service sites, the bank maintains more than 21 million checking and
savings accounts.
Q: You mentioned investments in Eastern Europe, the Middle East, and
Africa. Could we take a brief look at those?
A. Yes. Many of these markets are still in their infancy, and therefore
have a significantly higher risk profile. Naturally, that puts a premium
on stock-picking, but there are some very attractive special situations.
Russia, for example, has witnessed considerable political uncertainty
with respect to President Yeltsin's health and his ultimate hold on
power. But the country has nonetheless made impressive economic progress
in some important areas. The Portfolio has an investment in Mosenergo, a
large electric utility that serves the metropolitan Moscow area. The
company has reduced its cost structure while improving the efficiency of
its generating facilities.
[GRAPHIC PIE CHART OMITTED: THE PORTFOLIO'S COMMON STOCK INVESTMENTS BY
REGION]
South Asia
(Greater India) 6.1%
East Asia
(Greater China) 51.8%
Latin America 25.1%
Other 17.0%
Based on market value as of December 31, 1996.
Because the Portfolio is actively managed, regional
allocations are subject to change.
The African markets are also in their early stages but there are
interesting opportunities available. Meikles Africa Limited is among the
leading retailing and hotel companies in Zimbabwe. Formed a century ago,
the company runs the country's largest supermarket chain, as well as a
large portfolio of department stores and retail food outlets. In the
Mediterranean, Israel represents a promising but volatile market,
with political uncertainties often changing the investment climate.
Super Sol is one of Israel's largest supermarket chains and boasts
strong management. As a defensive stock, Super Sol offers some
participation in the region's growth but also a measure of insulation
from politics.
Notes from the Emerging Markets:
(bullet) China - The State Statistics Bureau reported in December that
the nation's inflation rate had fallen to 6% for 1996, down from 14.5%
in 1995. The government credited the success on inflation to a cooling
of economic growth, up a manageable 9.7% in 1996.
(bullet) Malaysia - The Economist Intelligence Unit's "World Outlook-
1997" estimates that Malaysia's economy will expand by 8% in 1997, just
behind China and Vietnam among emerging nations. Interestingly, the
report suggests that the U.S. and Japan will rank among the slowest
growing economies.
(bullet) Hungary - In 1996, Hungary joined the Organization for Economic
Cooperation and Development, a group of the world's industrialized
nations. The move marks a remarkable transition to a market economy
since Hungary's "Velvet Revolution" in 1990.
Q: In closing, Kiersten, what is your outlook for the emerging markets?
A. We believe that strong economic fundamentals should continue to
benefit emerging markets such as Hong Kong, China, Brazil and Mexico.
Others will no doubt continue to feel the impact of political change,
but countries such as India and South Korea still present opportunities
in companies with growing franchises. And of course, the continued
build-up of infrastructure and telecommunications is an ongoing secular
trend.
While past performance is, of course, no guarantee of future results,
the emerging markets provide economic growth rates and corporate profit
growth that, in many cases, far outpace those of the more developed
nations. As the emerging nations become more successful at integrating
political stability with manageable growth, the investment potential is
likely to be realized. I believe that, over time, patient, long-term
investors will reap the rewards of that potential.
[GRAPHIC WORM CHART OMITTED: COMPARISON CHANGE IN VALUE OF A $10,000
INVESTMENT IN EV MARATHON EMERGING MARKETS FUND AND THE MSCI EMERGING
MARKETS INDEX]
Plot Points
EMEMX vs. MSCI Emerging Markets Index
Date Fund/NAV Fund w/ CDS MSCI
11/30/94 $10,000 $12,514 $10,000
12/31/94 $9,960 $12,514 $9,478
1/31/95 $9,590 $12,514 $8,440
2/28/95 $9,660 $12,514 $8,290
3/31/95 $9,640 $12,514 $8,406
4/30/95 $9,820 $12,514 $8,578
5/31/95 $10,440 $12,514 $8,880
6/30/95 $10,450 $12,514 $8,858
7/31/95 $10,610 $12,514 $8,993
8/31/95 $10,480 $12,514 $8,695
9/30/95 $10,410 $12,514 $8,791
10/31/95 $10,100 $12,514 $8,499
11/30/95 $9,710 $12,514 $8,286
12/31/95 $10,050 $12,514 $8,606
1/31/96 $11,020 $12,514 $8,998
2/28/96 $11,420 $12,514 $8,883
3/31/96 $11,130 $12,514 $9,009
4/30/96 $11,890 $12,514 $9,654
5/31/96 $12,550 $12,514 $9,466
6/30/96 $12,580 $12,514 $9,590
7/31/96 $11,740 $12,514 $8,939
8/31/96 $12,110 $12,514 $9,137
9/30/96 $12,360 $12,514 $9,215
10/31/96 $12,270 $12,514 $8,955
11/30/96 $12,660 $12,514 $9,116
12/31/96 $12,914 $12,514 $9,121
Past performance is not indicative of future results. Investment returns
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. Source:
Towers Data Systems, Bethesda, MD. *Investment operations commenced on
11/30/94.
Fund performance
In accordance with guidelines issued by the Securities and Exchange
Commission, we are including a performance chart that compares your
Fund's total return with that of a broad-based investment index. The
lines on the chart represent the total returns of a $10,000 hypothetical
investment in EV Marathon Emerging Markets Fund, and the unmanaged
Morgan Stanley Capital International Emerging Market Index.
Total return figures
The solid line on the chart represents the Fund's performance at net
asset value. The Fund's total return figure reflects Fund expenses and
transaction costs. The second dollar figure for the Fund reflects the
Fund's maximum applicable deferred sales charge (CDSC), deducted at
redemption as follows: 5% - 1st and 2nd years; 4% - 3rd year; 3% - 4th
year; 2% - 5th year; 1% - 6th year.
The dotted line represents the performance of the Morgan Stanley Capital
International Emerging Market Index, a broad-based, widely recognized
unmanaged index of common stocks traded on emerging markets around the
world. The Index's total return does not reflect any commissions or
expenses that would be incurred if an investor individually purchased or
sold the securities represented in the Index. It is not possible to
invest directly in the Index.
EV Marathon Emerging Markets Fund
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1996
<S> <C> <C>
Assets:
Investment in Emerging Markets Portfolio, at value (Note 1A)
(identified cost, $5,694,052) $6,672,324
Receivable for Fund shares sold 6,242
Receivable from Administrator 13,250
Deferred organization expenses (Note 1E) 42,834
----------
Total assets $6,734,650
Liabilities:
Dividends payable $ 3,697
Payable to affiliates --
Trustees' fees 42
Distribution fees 1,280
Accrued expenses and other liabilities 4,998
----------
Total liabilities 10,017
----------
Net Assets for 528,590 shares of
beneficial interest outstanding $6,724,633
==========
Sources of Net Assets:
Paid-in capital $5,859,537
Accumulated net realized loss on investment transactions
(computed on the basis of identified cost) (111,343)
Unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 978,272
Accumulated net investment loss (1,833)
----------
Total $6,724,633
==========
Net Asset Value, Offering Price and Redemption Price
(Note 6) Per Share ($6,724,633 (divided by) 528,590
shares of beneficial interest outstanding) $12.72
======
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended December 31, 1996
<S> <C> <C>
Investment Income (Note 1B):
Investment income allocated from Portfolio
(net of foreign taxes, $4,843) $ 61,798
Expenses allocated from Portfolio (51,815)
----------
Net investment income from Portfolio $ 9,983
Expenses --
Management fee (Note 3) $ 10,732
Compensation of Trustees not members of the
Administrator's organization 42
Custodian fee (Note 1C) 2,832
Distribution fees (Note 5) 35,858
Transfer and dividend disbursing agent fees 4,588
Printing and postage 10,878
Legal and accounting services 3,430
Registration fees 19,980
Amortization of organization expenses (Note 1E) 13,710
Miscellaneous 2,095
----------
Total expenses $ 104,145
----------
Deduct --
Waiver of management fee (Note 3) (10,732)
Allocation of expenses to Administrator (Note 3) (7,616)
----------
Total deducted $ (18,348)
----------
Net expenses 85,797
----------
Net investment loss $ (75,814)
Realized and Unrealized Gain (Loss) from Portfolio:
Net realized gain (loss) --
Investments $ 113,801
Foreign currency (12,491)
----------
Net realized gain $ 101,310
Change in unrealized appreciation of investments 858,544
----------
Net realized and unrealized gain 959,854
----------
Net increase in net assets from operations $ 884,040
==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended December 31,
-----------------------------
1996 1995
---------- ----------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment loss $ (75,814) $ (48,494)
Net realized gain (loss) from Portfolio 101,310 (64,561)
Change in unrealized appreciation from Portfolio 858,544 120,580
---------- ----------
Net increase in net assets from operations $ 884,040 $ 7,525
---------- ----------
Distributions to shareholders (Note 2) --
From net realized gain on investment transactions $ (90,006) $ --
---------- ----------
Transactions in shares of
beneficial interest (Note 4) --
Proceeds from sales of shares $6,036,226 $2,355,841
Net asset value of shares issued to shareholders
in payment of distributions declared 86,318 --
Cost of shares redeemed (1,992,734) (791,708)
---------- ----------
Increase in net assets from Fund share transactions $4,129,810 $1,564,133
---------- ----------
Net increase in net assets $4,923,844 $1,571,658
Net Assets:
At beginning of year 1,800,789 229,131
---------- ----------
At end of year (including accumulated net investment
loss of $1,833 and $0, respectively) $6,724,633 $1,800,789
========== ==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Year Ended December 31,
----------------------------------------
1996 1995 1994*
------- ------- -------
<S> <C> <C> <C>
Net asset value -- beginning of year $10.050 $ 9.960 $10.000
-------- -------- --------
Income (loss) from operations:
Net investment loss $ (0.143) $ (0.268) $ (0.003)
Net realized and unrealized gain
(loss) on investments 2.988 0.358 (0.037)
-------- -------- --------
Total income (loss) from operations $ 2.845 $ 0.090 $ (0.040)
-------- -------- --------
Less distributions:
From net realized gain $ (0.175) $ -- $ --
-------- -------- --------
Net asset value -- end of year $12.720 $10.050 $ 9.960
======== ======== ========
Total Return (2) 28.49% 0.90% (0.40%)
Ratios/Supplemental Data**:
Net assets, end of year (000 omitted) $ 6,725 $ 1,801 $ 229
Ratio of net expenses to average
daily net assets (1)(3) 3.41% 6.19% 0.75%+
Ratio of net expenses to average daily
net assets after custodian fee
reduction (1)(3) 3.19% 6.19% --
Ratio of net investment loss
to average daily net assets (1.76%) (4.64%) (0.75%)+
** The expenses related to the operation of the Fund reflect a waiver of the management fee or
an assumption of expenses or both by the Administrator. Had such action not been taken, net
investment loss per share and the ratios would have been as follows:
Net investment loss per share $ (0.233) $ (0.566) $ (0.037)
======== ======== ========
Ratios (As a percentage of average
daily net assets):
Expenses (1)(3) 4.52% 11.35% 9.14%+
Expenses after custodian fee reduction (1)(3) 4.30% 11.35% --
Net investment loss (2.87%) (9.80%) (9.14%)+
* For the period from the start of business, November 30, 1994, to December 31, 1994.
+ Annualized.
(1) Includes the Fund's share of Emerging Markets Portfolio's allocated expenses.
(2) 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.
Total return is computed on a non-annualized basis.
(3) The expense ratios for the years ended December 31, 1996 and 1995 have been adjusted to reflect
a change in reporting requirements. The new reporting guidelines require the Fund to increase its
expense ratio by the effect of any expense offset arrangements with its service providers. The
expense ratios for the period ended December 31, 1994 have not been adjusted to reflect this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
EV Marathon Emerging Markets Fund (the Fund) is a mutual fund seeking
long-term capital appreciation through investment in a portfolio of
equity securities of companies in countries with emerging markets. 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 (62.6% at December 31, 1996). 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. Expense Reduction -- The Fund has entered into an arrangement with
its custodian whereby interest earned on uninvested cash balances are
used to offset custodian fees. All significant reductions are reported
as a reduction of expenses in the Statement of Operations.
D. 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
provisions for Federal income or excise tax is necessary. At December
31, 1996, net capital loss of $110,758, attributable to security
transactions incurred after October 31, 1996, are treated as arising on
the first day of the Fund's next taxable year.
E. 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.
F. Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of financial statements
and the reported amounts of revenue and expense during the reporting
period. Actual results could differ from those estimates.
(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 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 carryforwards 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 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 are reclassified to paid-in
capital. During the year ended December 31, 1996, $73, 981 was
reclassified from accumulated net investment loss, $59,835 was
reclassified to accumulated net realized loss and $14,146 was
reclassified from paid-in capital due to permanent differences between
book and tax accounting for net operating losses, foreign currency gains
and losses, and character reclassifications. Net investment loss, net
realized gain, and net assets were not affected by these
reclassifications.
(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 year ended December 31, 1996, the fee was equivalent to
0.25% of the Fund's average net assets for such period and amounted to
$10,732. To enhance the net income of the Fund, EVM made a waiver of its
management fee in the amount of $10,732 and was allocated expenses in
the amount of $7,616. 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 investment a
dviser fee. Certain of the officers and Trustees of the Fund and
Portfolio are officers and directors/trustees of the above
organizations. In addition, investment adviser, and administrative
fees are paid by the Portfolio to EVM and its affliates. See Note 2 of
the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
(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:
Year Ended Year Ended
December 31, December 31,
1996 1995
------------ ------------
Sales 507,267 235,674
Issued to shareholders electing
to receive payment of distributions
in Fund shares 7,110 --
Redemptions (164,922) (79,545)
---------- ----------
Net increase 349,455 156,129
========== ==========
(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
caculated 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
$32,288 as payable to EVD for the year ended December 31, 1996,
representing 0.75% of average daily net assets. At December 31, 1996,
the amount of Uncovered Distribution Charges of EVD calculated under the
Plan was approximately $199,548.
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. The Fund paid or accrued service fees to EVD for
the year ended December 31, 1996 in the amount of $3,570. Service fee
payments will be made for personal services and/or the maintenance of
shareholder accounts. Service fees are separate and distinct from 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 $29,130 of CDSC paid by shareholders for the year ended
December 31, 1996.
(7) Investment Transactions
Increases and deceases in the Fund's investment in the Portfolio
aggregated $6,069,516 and $2,142,318, respectively.
Independent Auditors' Report
To the Trustees and Shareholders of
Eaton Vance Special Investment Trust:
We have audited the accompanying statement of assets and liabilities, of
EV Marathon Emerging Markets Fund (the Fund) (one of the series
constituting Eaton Vance Special Investment Trust) as of December 31,
1996, and the related statement of operations for the year then ended,
the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the two years
in the period then ended and for the period from the start of business,
November 30, 1994, to December 31, 1994. These financial statements and
financial highlights are the responsibility of the Fund's management.
Our responsibility is to express an opinion on these financial
statements and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, such financial statements and financial highlights
present fairly, in all material respects, the financial position of the
EV Marathon Emerging Markets Fund series of Eaton Vance Special
Investment Trust at December 31, 1996, and the results of its
operations, the changes in its net assets and its financial highlights
for the respective stated periods, in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 31, 1997
Emerging Markets Portfolio
Portfolio of Investments -- December 31, 1996
<TABLE>
<CAPTION>
Common Stocks - 93.6%
<S> <C> <C>
Beverages - 6.2%
Pan American Beverages, Inc. 6,000 $281,250
Coca Cola franchiser
Vina Concha Y Toro ADR 16,000 376,000
Wine producer/exporter
-----------
$657,250
-----------
Commerce - 1.9%
Li & Fung Ltd. 230,000 $203,685
Trading company
-----------
Construction - 2.5%
Konsortium Perkapalan BHD 39,000 $262,470
Infrastructure logistics
-----------
Finance - 17.9%
Banco Bradesco S.A. Pfd. 36,258,993 $262,769
Banking
Banco Totta & Acores 13,700 257,696
Banking
Corp. Banco Credito del Peru 12,500 231,250
Financial Conglomerate
Far East Bank & Trust Co. Ltd. 3,120 12,456
Far East Bank & Trust Co. Ltd. (Rights)+ 6,260 11,544
Banking
HSBC Holdings PLC 11,200 239,638
Banking
Kwong Yik Bank 57,000 200,831
Banking
Rashid Hussein BHD 70,000 462,787
Financial Conglomerate
Yuanta Securities Co. Ltd. 7,770 20,343
Securities firm
Zagrebacka Banka GDR 10,000 203,750
Banking
-----------
$1,903,064
-----------
Manufacturing - 12.5%
Brasmotor S.A. Pfd. 410,000 $113,839
White goods manufacturer
Compania Siderurgica Nacio 9,000,000 255,522
Steel manufacturer
Hindalco Industries Ltd. GDR 10,000 246,250
Aluminum manufacturer
Larsen & Toubro Ltd GDR (New) 10,000 145,750
Engineering and manufacturing
Pliva D.D. GDR Reg S 2,000 106,000
Generic pharmaceutical manufacturer
Tata Engineering & Locomotion GDR 9,720 103,275
Tata Engineering & LocomotionSP GDR 10,000 106,250
Heavy equipment manufacturer
Yung Shin Pharmaceutical Ind. 86,000 258,000
Pharmaceutical manufacturer
-----------
$1,334,886
-----------
Media - 5.8%
Star Publications 76,000 $299,367
Newspaper and magazine publisher
Grupo Radio ADR 30,000 206,250
Radio station
Matichon Public Co. Ltd. 43,500 112,778
Newspaper publisher
-----------
$618,395
-----------
Multi-Industry - 17.7%
Alsons Consolidated Resources 2,200,000 $182,357
Electric power/cement
Belle Corporation 1,200,000 333,080
Tourism/gaming/property
Benpres Holdings 38,000 285,000
Property/telecommunications/power
Cheung Kong 33,000 293,310
Property/infrastructure
Hutchison Whampoa 30,000 235,618
Property/telecommunications
John Keells Holdings GDR 1,429 9,646
Tourism/trading/agriculture
Meikles Africa Limited 189,100 279,868
Tourism/hotels/retail stores
Poland (Govt. of) Privatisation 5,400 267,885
Diversified conglomerate
-----------
$1,886,764
-----------
Property - 5.2%
New World Development 60,000 $405,301
Property developer
Solidere GDR 13,000 149,500
Property developer
-----------
$554,801
-----------
Retail - 13.9%
Compania Brasileira de Distrib. GDR 14,000 $244,090
Supermarket chain
Disco S A ADR 10,000 282,500
Supermarket chain
KFC Holdings (Malaysia) BHD 60,000 247,031
KFC Holdings (Malaysia) BHD (Warrants)+ 8,000 9,565
Fast food chain
Pizza Co. (Thailand) Ltd. (Foreign) 45,000 263,158
Fast food chain
PT Hero Supermarket (Foreign) 300,000 222,222
Supermarket chain
Super Sol 8,600 210,660
Supermarket chain
-----------
$1,479,226
-----------
Telecommunications - 5.8%
Compania de Telecomunicaciones ADR 2,400 $242,400
International phone and media company
Korea Mobile Telecom Corp. 60 60,872
Korea Mobile Telecom 144A ADR 7,725 99,459
Mobile telecommunications operator
PT Telecomunikasion (Foreign) 125,000 215,608
International telecommunications operator
-----------
$618,339
-----------
Utilities - 4.2%
Korea Electric Power Corp. ADR 11,500 $235,750
Electric power utilities
Mosenergo-RDC 144 ADR 7,000 217,000
-----------
Gas power utilities
$452,750
-----------
Total Common Stocks (identified cost, $8,135,381) $9,971,630
Other Assets, less Liabilities - 6.4% 686,897
-----------
Net Assets - 100% $10,658,527
===========
+ Non income producing
See notes to financial statements.
</TABLE>
Country concentration - Below are the countries represented
in the Portfolio of Investments (unaudited)
Percentages
Country of Net Assets Value
- ------------ -------------- -------------
Argentina 2.7% $282,500
Brazil 8.2 876,220
Chile 5.8 618,400
Croatia 1.0 106,000
Hong Kong 12.9 1,377,552
Hungary 1.9 203,750
India 5.7 601,525
Indonesia 4.1 437,830
Israel 2.0 210,660
Republic of Korea 3.7 396,081
Lebanon 1.4 149,500
Malaysia 13.9 1,482,051
Mexico 4.6 487,500
Peru 2.2 231,250
Philippines 7.8 824,437
Poland 2.5 267,885
Portugal 2.4 257,696
Russia 2.0 217,000
South Africa 2.6 279,868
Sri Lanka 0.1 9,646
Taiwan 2.6 278,343
Thailand 3.5 375,936
See notes to financial statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
December 31, 1996
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $8,135,381) $ 9,971,630
Cash 399,281
Receivable for investments sold 316,445
Dividends receivable 12,101
Deferred organization expenses (Note 1D) 11,102
Tax reclaim receivable 199
-----------
Total assets $10,710,758
Liabilities:
Payable to affiliates --
Trustees' fees $ 1,268
Accrued expenses and other liabilities 5,538
Bank overdraft 45,425
-----------
Total liabilities 52,231
-----------
Net Assets applicable to investors' interest in Portfolio $10,658,527
===========
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $ 8,822,414
Net unrealized appreciation of investments
(computed on the basis of identified cost) 1,836,249
Net unrealized depreciation of foreign currencies (136)
-----------
Total $10,658,527
===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended December 31, 1996
<S> <C> <C>
Investment Income:
Dividend income (net of foreign withholding tax of $9,218) $ 121,828
Expenses --
Investment adviser fee (Note 2) $ 62,401
Administration fee (Note 2) 20,096
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 13,376
Custodian fees 63,743
Legal and accounting services 15,747
Amortization of organization expenses (Note 1D) 4,795
Miscellaneous 6,913
----------
Total expenses $ 187,071
----------
Deduct --
Waiver of investment adviser fee (Note 2) $ (44,320)
Allocation of expenses to the Administrator (Note 2) (14,221)
Reduction of custodian fee (Note 1C) (18,112)
----------
Total deducted $ (76,653)
----------
Net expenses 110,418
----------
Net investment income $ 11,410
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) (identified cost basis) --
Investments $ 164,066
Foreign currency (24,364)
----------
Net realized gain $ 139,702
Change in unrealized appreciation --
Investments $1,561,079
Foreign currency 276
----------
Change in unrealized appreciation of investments 1,561,355
----------
Net realized and unrealized gain on investments $1,701,057
----------
Net increase in net assets from operations $1,712,467
==========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended December 31,
------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income (loss) $ 11,410 $ (23,217)
Net realized gain (loss) on investments
and foreign currency transactions 139,702 (147,448)
Change in unrealized appreciation 1,561,355 281,463
----------- -----------
Net increase in net assets from operations $ 1,712,467 $ 110,798
----------- -----------
Capital transactions --
Contributions $11,229,400 $ 3,550,731
Withdrawals (5,870,609) (1,269,530)
----------- -----------
Increase in net assets from capital transactions $ 5,358,791 $ 2,281,201
----------- -----------
Net increase in net assets $ 7,071,258 $ 2,391,999
Net Assets:
At beginning of year 3,587,269 1,195,270
----------- -----------
At end of year $10,658,527 $ 3,587,269
=========== ===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
Year Ended December 31,
--------------------------------------------
1996 1995 1994*
---------- ---------- ----------
<S> <C> <C> <C>
Ratios (to average daily net assets):**
Net expenses (1) 1.54% 2.58% 0.00%
Net expenses after custodian fee reduction 1.32% 2.58% --
Net investment income (loss) 0.14% (1.00%) 0.00%
Portfolio Turnover 125% 98% 0%
Net assets, end of year (000's omitted) $10,659 $ 3,587 $ 1,195
Average Commission Rate Paid (2) $0.0029 -- --
**The operating expenses of the Portfolio reflect an allocation of expenses to the Administrator
and a waiver of investment advisor fees. Had such actions not been taken, the ratios would have
been as follows:
Expenses (1) 2.24% 5.24% 2.21%+
Expenses after custodian fee reduction 2.02% 5.24% --
Net investment loss (0.56%) (3.66%) (2.21%)+
+ Annualized.
* For the period from the start of business, November 30, 1994, to December 31, 1994.
(1) The expense ratios for the years ended December 31, 1996 and 1995 have been adjusted to
reflect a change in reporting requirements. The new reporting guidelines require the
Portfolio to increase its expense ratio by the effect of any expense offset arrangements
with its service providers. The expense ratios for the period ended on December 31, 1994
have not been adjusted to reflect this change.
(2) Average commission rate paid is computed by dividing the total dollar amount of commissions
paid during the fiscal year by the total number of shares purchased and sold during the
fiscal year for which commissions were charged. For fiscal years beginning on or after
September 1, 1995, a Fund is required to disclose its average commission rate per share
for security trades on which commissions are charged.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(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. Expense Reduction -- The Portfolio has entered into an arrangement
with its custodian whereby interest earned on uninvested cash balances
are used to offset custody fees. All significant reductions are reported
as a reduction of expenses in the Statement of Operations.
D. 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.
E. Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit (initial margin) either
of 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.
F. 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 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 unrealized
gains and losses on investments that result from fluctuations in foreign
currency exchange rates are not separately disclosed.
G. 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.
H. 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.
I. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
(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 year ended December 31, 1996, the adviser fee was 0.75%
of average net assets.To enhance the net income of the Portfolio the
Adviser made a waiver of $44,320 of investment adviser fees. In
addition, an administrative 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 year ended
December 31, 1996, the administration fee was 0.25% of average net
assets. To enhance the net income of the Portfolio, the administrator
was allocated expenses in the amount of $14,221. 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
administrative fees. Certain of the officers and Trustees of the
Portfolio are officers or directors/trustees of the above organizations.
(3) Investment Transactions
Purchases and sales of investments, other than short-term obligations,
aggregated $4,805,461 and $9,652,394 respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1996, as computed on a Federal income
tax basis, are as follows:
Aggregate cost $8,135,381
==========
Gross unrealized appreciation 2,050,202
Gross unrealized depreciation (213,953)
------------
Net unrealized appreciation $1,836,249
==========
(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.
(6) Line of Credit
The Portfolio participates with other portfolios and funds managed by
BMR and EVM and its affiliates in a committed $120 million unsecured
line of credit agreement with a group of banks. The Portfolio may
temporarily borrow from the line of credit to satisfy redemption
requests or settle investment transactions. Interest is charged to each
portfolio or fund based on its borrowings at an amount above either the
banks' adjusted certificate of deposit rate, eurodollar rate or federal
funds rate. In addition, a fee computed at an annual rate of 0.15% on
the daily unused portion of the line of credit is allocated among the
participating portfolios and funds at the end of each quarter. The
Portfolio did not have any significant borrowings or allocated fees
during the year ended December 31, 1996.
Independent Auditors' Report
To the Trustees and Shareholders of
Emerging Markets Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Emerging Markets Portfolio
(the Portfolio) as of December 31, 1996, and the related statement of
operations for the year then ended, the statements of changes in net
assets for each of the two years then ended and the supplementary data
for each of the two years then ended and for the period from the start
of business November 30, 1994, to December 31, 1994. These financial
statements and supplementary data are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion on
these financial statments and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supplementary data are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included
confirmations of the securities owned at December 31, 1996, by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present
fairly, in all material respects, the financial position of the Emerging
Markets Portfolio at December 31, 1996, and the results of its
operations, the changes in its net assets, and its supplementary data
for the respective stated periods in conformity with generally accepted
accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
January 31, 1997
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Investment Management
EV Marathon
Emerging Markets
Fund
24 Federal Street
Boston, MA 02110
Officers
James B. Hawkes
President, Trustee
Edward E. Smiley, Jr.
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
Directors
M. Dozier Gardner
Vice Chairman, Eaton Vance
Management
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New
England, Inc.
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
Portfolio
24 Federal Street
Boston, MA 02110
Officers
Hon. Robert Lloyd George
President, Trustee
James B. Hawkes
Vice President, Trustee
Scobie Dickinson Ward
Vice President, Assistant
Secretary and Assistant Treasurer
William Walter Raleigh Kerr
Vice President,
Assistant Treasurer
James L. O'Connor
Vice President, Treasurer
Thomas Otis
Vice President, Secretary
Trustees
Hon. Edward K.Y. Chen
Professor and Director, Center for
Asian Studies, University of
Hong Kong
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New
England, Inc.
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