<PAGE>
[LOGO OF EATON VANCE MUTUAL FUNDS APPEARS HERE]
[PHOTO OF EARTH FROM SPACE
Investing APPEARS HERE]
for the
21st
Century(R)
Semiannual Report June 30, 1998
EATON VANCE
[PHOTO OF INDIAN TEMPLE
FIGURE APPEARS HERE] EMERGING MARKETS
FUND
Eaton Vance
Global Management-Global Distribution
[PHOTO OF ORIENTAL
MARKETPLACE
APPEARS HERE]
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
- --------------------------------------------------------------------------------
INVESTMENT UPDATE
[PHOTO OF KIERSTEN
CHRITENSEN
APPEARS HERE]
Kiersten Christensen,
Portfolio Manager
Investment Environment
- ---------------------------
The Emerging Markets
. Slowing Asian economies, a weak yen, and depressed oil and commodity prices
dragged the emerging stock markets sharply lower in the first half of 1998.
Local Asian economies have continued to suffer from last fall's currency
upheavals, weak banking systems and poor political guidance. Meanwhile, in
Eastern Europe, the Russian market fell sharply in response to skyrocketing
interest rates and a collapsing ruble.
. While Latin American markets also moved lower during the period, the region's
underlying economic fundamentals remained fairly sound. Argentina reported
8.4% economic growth for 1997, while Chile is expected to realize 5.5% growth
in 1998, despite its high exposure to the Asian export market.
. In mid-June, as a collapsing yen threatened a new round of currency
devaluations, the Federal Reserve intervened to support the Japanese currency.
The move heartened foreign investors, prompting a modest recovery in some
emerging markets.
The Fund
- --------------------------------------------------------------------------------
Performance for the Past Six Months
. The Fund's Class A shares had a total return of -19.1% during the six months
ended June 30, 1998./1/ This return resulted from a decrease in net asset
value per share (NAV) to $9.69 on June 30, 1998 from $11.97 on December 31,
1997, and the reinvestment of $0.54 in capital gains distributions.
. The Fund's Class B shares had a total return of -19.2% during the six months
ended June 30, 1998./1/ This return resulted from a decrease in net asset
value per share (NAV) to $9.62 on June 30, 1998 from $11.91 on December 31,
1997, and the reinvestment of $0.362 in capital gains distributions.
Recent Portfolio Developments
. Amid volatile stock markets and an increasingly
uncertain near-term economic outlook, the Portfolio focused increasingly on
non-cyclical sectors, such as groceries and beverages, which are able to
generate good earnings growth regardless of the economy. Telephone utilities
also played a major role as emerging countries rush to replace their
antiquated telecommunications infrastructure.
. The Portfolio maintained its largest regional
exposure in Latin America, at 38.9%. The region remains a magnet for foreign
investment as Mexico, Brazil, and Argentina continue along the path of
economic reform.
. The Portfolio slightly reduced its weighting in Eastern Europe. Russian
President Yeltsin has encountered political obstacles in his reform efforts.
Concurrently, lower tax revenues have exerted increasing pressure on the
Russian currency.
Selected Portfolio Investments
. In Latin America, Compania Brasiliera de Distribuicao, a large Brazilian
supermarket chain, was among the Portfolio's largest holdings. As a major food
retailer, the company remains generally immune to fluctuations in the economy.
In recent years, the company has sharply increased the number of its outlets
in the country.
. In Chile, Vina Concha y Toro is among that nation's largest wineries. Chile
has become a major producer and exporter of wines in the past decade. Vina
Concha y Toro has expanded its vast land holdings in the region and increased
its production capacity.
. In India, the Portfolio had a large position in Videsh Sanchar Nigam Ltd.
(VSNL), India's main provider of international phone services. VSNL has
benefited from India's increasing global business presence and from the
government's efforts to upgrade the nation's telecommunications system.
- -------------------------------------------------------------------------------
Mutual fund shares are not insured 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.
- -------------------------------------------------------------------------------
Fund Information
as of June 30, 1998
Performance/2/ Class A Class B
- --------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
One Year -35.9% -36.3%
Life of Fund+ 0.9 0.2
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------
One Year -39.6% -39.4%
Life of Fund+ -0.8 -0.7
+Inception dates: Class A: (12/8/94); Class B: (11/30/94)
Ten Largest Holdings/3/
- --------------------------------------------------------------------------------
Compania Brasiliera de Distribuicao GDR 4.8%
Grupo Televiso GDR 4.8
Blue Square Stores 4.7
Corporation Interamericana de Entretenimiento 4.0
Vina Concha y Toro ADR 3.9
Carulla SA ADR 3.6
Panamerican Beverages, Inc. ADR 3.5
Mol Magyar Olayes Gazi GDR 3.5
Telefonos de Mexico ADR 3.3
Pyramids Brewers 3.3
/1/These returns do not include the 5.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC) for
the Class B shares. /2/ Returns are historical and are calculated by
determining the percentage change in net asset value with all distributions
reinvested. SEC average annual returns for Class A reflect a 5.75% sales
charge; for Class B, returns reflect applicable CDSC based on the following
schedule: 5%-1st and 2nd years; 4%-3rd year; 3%-4th year; 2%-5th year; 1%-6th
year. /3/ Based on market value as of 6/30/98. Ten largest holdings represent
39.4% of the Portfolio's net assets. Holdings are subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
2
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------------
Investment in Emerging Markets Portfolio, at value
(identified cost, $10,859,118) $10,083,303
Receivable for Fund shares sold 12,982
Deferred organization expenses 39,850
- --------------------------------------------------------------------------------
Total assets $10,136,135
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Dividends payable $ 247
Payable for Fund shares redeemed 13,194
Payable to affiliate for shareholders services 4,490
Payable to affiliate for Trustees' fees 94
Other accrued expenses 13,339
- --------------------------------------------------------------------------------
Total liabilities $ 31,364
- --------------------------------------------------------------------------------
Net Assets $10,104,771
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $12,697,395
Accumulated net realized loss on investments from
Portfolio (computed on the basis of identified cost) (1,668,931)
Accumulated net investment loss (147,878)
Net unrealized depreciation from Portfolio (computed
on the basis of identified cost) (775,815)
- --------------------------------------------------------------------------------
Total $10,104,771
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
Net Assets $ 4,094,843
Shares Outstanding 422,585
Net Asset Value and Redemption Price Per Share
(net assets/shares of beneficial interest outstanding) $ 9.69
Maximum Offering Price Per Share
(100 / 94.25 of $9.69) $ 10.28
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Net Assets $ 6,009,928
Shares Outstanding 624,509
Net Asset Value, Offering Price and Redemption Price Per Share
(net assets/shares of beneficial interest outstanding) $ 9.62
- --------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A shares is reduced.
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends allocated from Portfolio
(net of foreign taxes, $3,385) $ 114,519
Expenses allocated from Portfolio (95,431)
- --------------------------------------------------------------------------------
Net investment income from Portfolio $ 19,088
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Management fee $ 16,614
Trustees fees and expenses 102
Distribution and service fees
Class A 12,497
Class B 39,571
Printing and postage 23,335
Registration fees 18,100
Transfer and dividend disbursing agent fees 14,689
Amortization of organization expenses 13,856
Custodian fee 4,490
Legal and accounting services 1,618
Miscellaneous 4,328
- --------------------------------------------------------------------------------
Total expenses $ 149,200
- --------------------------------------------------------------------------------
Net investment loss $ (130,112)
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (803,492)
Foreign currency and forward foreign currency exchange
contract transactions (129,495)
- --------------------------------------------------------------------------------
Net realized loss $ (932,987)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments $(1,466,342)
Foreign currency and forward foreign currency exchange
contracts 54,392
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(1,411,950)
- --------------------------------------------------------------------------------
Net realized and unrealized loss $(2,344,937)
- --------------------------------------------------------------------------------
Net decrease in net assets from operations $(2,475,049)
- --------------------------------------------------------------------------------
See notes to financial statements
3
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
- -------------------------------------------------------------------------
From operations --
Net investment loss $ (130,112) $ (190,959)
Net realized loss (932,987) (168,823)
Net change in unrealized
appreciation (depreciation) (1,411,950) (571,715)
- -------------------------------------------------------------------------
Net decrease in net assets $(2,475,049) $ (931,497)
from operations
- -------------------------------------------------------------------------
Distributions to shareholders --
In excess of net realized gain
Class B $ -- $ (279,016)
- -------------------------------------------------------------------------
Total distributions to shareholders $ -- $ (279,016)
- -------------------------------------------------------------------------
Transactions in shares of beneficial
interest --
Proceeds from sale of shares
Class A $ 862,029 $ --
Class B 1,031,483 6,853,550
Net asset value of shares
issued to shareholders
in payment of
distributions declared
Class B -- 248,582
Cost of shares redeemed
Class A (793,555) --
Class B (2,583,479) (3,542,043)
- -------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions $(1,483,522) $ 3,560,089
- -------------------------------------------------------------------------
Contribution from EV Traditional
Emerging Markets Fund $ 4,989,133 $ --
- -------------------------------------------------------------------------
Net increase in net assets $ 1,030,562 $ 2,349,576
- -------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------
At beginning of period $ 9,074,209 $ 6,724,633
- -------------------------------------------------------------------------
At end of period $10,104,771 $ 9,074,209
- -------------------------------------------------------------------------
Accumulated
net investment loss
included in net assets
- -------------------------------------------------------------------------
At end of period $ (147,878) $ (17,766)
- -------------------------------------------------------------------------
See notes to financial statements
4
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 --------------------------------------------------
(Unaudited) 1997 1996 1995 1994 *
- -----------------------------------------------------------------------------------------------------------------------------
Class A Class B Class B Class B Class B Class B
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of period $ 11.970 $ 11.910 $ 12.720 $ 10.050 $ 9.960 $ 10.000
- -----------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (0.104) $ (0.141) $ (0.012) $ (0.143) $ (0.268) $ (0.003)
Net realized and unrealized gain (loss) (2.176) (2.149) (0.436) 2.988 0.358 (0.037)
- -----------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ (2.280) $ (2.290) $ (0.448) $ 2.845 $ 0.090 $ (0.040)
- -----------------------------------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------------------------------
From net realized gain $ -- $ -- $ -- $ (0.175) $ -- $ --
In excess of net realized gain -- -- (0.362) -- -- --
- -----------------------------------------------------------------------------------------------------------------------------
Total distributions $ -- $ -- $ (0.362) $ (0.175) $ -- $ --
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value-- End of period $ 9.690 $ 9.620 $ 11.910 $ 12.720 $ 10.050 $ 9.960
- -----------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ (19.05)% (19.23)% (3.48)% 28.49% 0.90% (0.40)%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data +
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 4,095 $ 6,010 $ 9,074 $ 6,725 $ 1,801 $ 229
Ratios (As a percentage of average daily net
assets): 3.69%+ 4.13%+ 3.50% 3.41% 6.19% 0.75%+
Net expenses/(2)(3)/
Net expenses after custodian fee reduction/(2)/ 3.43%+ 3.87%+ 3.32% 3.19% 6.19% --
Net investment loss (1.79)%+ (2.08)%+ (1.92)% (1.76)% (4.64)% (0.75)%+
- -----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
+ The operating expenses of the Fund and the Portfolio may reflect a reduction of the investment adviser fee, an allocation
of expenses to the Administrator, or both. Had such actions not been taken, the ratios and net investment loss per share
would have been as follows:
<S> <C> <C> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses/(2)(3)/ 3.79% 4.52% 11.35% 9.14%+
Expenses after custodian fee reduction/(2)/ 3.61% 4.30% 11.35% --
Net investment loss (2.21)% (2.87)% (9.80)% (9.14)%+
Net investment loss per share $ (0.014) $ (0.233) $ (0.566) $ (0.037)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, November 30, 1994, to December
31, 1994.
/(1)/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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
/(2)/Includes the Fund's share of its Portfolio's allocated expenses.
/(3)/The expense ratios for the year ended December 31, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund, as well as its
corresponding Portfolio, to increase its expense ratio by the effect of any
expense offset arrangements with its service providers. The expense ratios
for each of the prior periods have not been adjusted to reflect this
change.
See notes to financial statements
5
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
------------------------------------------------------------------------------
Eaton Vance 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 offers two classes of
shares. Class A shares are sold subject to a sales charge imposed at the time
of purchase. Class B shares are sold at net asset value and are subject to a
contingent deferred sales charge (see Note 6). All classes of shares have
equal rights to assets and voting privileges. Realized and unrealized gains
and losses and net investment income, other than class specific expenses, are
allocated daily to each class of shares based on the relative net assets of
each class to the total net assets of the Fund. Each class of shares differs
in its distribution plan and certain other class specific expenses. 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
(86.2% at June 30 1998). 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 1A 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 -- Investors Bank & Trust Company (IBT) serves as
custodian of the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based
on the average daily cash balances the Fund or the Portfolio maintains with
IBT. All significant credit balances used to reduce the Fund's custodian fees
are reported as a reduction of expenses on 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 provision for federal income or
excise tax is necessary.
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 Other -- Investment transactions are accounted for on a trade date basis.
G 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.
H Interim Financial Information -- The interim financial statements relating
to June 30, 1998 and for the six-month 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.
6
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 net
investment income allocated to the Fund by the Portfolio, less the Fund's
direct and allocated expenses and to distribute at least annually 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 ex-dividend 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 relating
to distributions are reclassified to paid-in capital.
3 Shares of Beneficial Interest
------------------------------------------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Such shares may be issued in a number of different classes.
Transactions in Fund shares were as follows:
Six Months
Ended
June 30, 1998
Class A (Unaudited)
------------------------------------------------------------------------------
Sales 72,844
Redemptions (67,167)
Issued to EV Traditional Emerging Markets Fund
shareholders 416,908
-------------------------------------------------------------------------------
Net increase 422,585
-------------------------------------------------------------------------------
Six Months Ended
June 30, 1998 Year Ended
Class B (Unaudited) December 31, 1997
----------------------------------------------------------------------------
Sales 87,632 478,265
Issued to shareholders electing
to receive payment of
distributions -- 21,003
in Fund shares
Redemptions (224,965) (266,016)
----------------------------------------------------------------------------
Net increase (decrease) (137,333) 233,252
----------------------------------------------------------------------------
4 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, 1998, the fee was equivalent to 0.25% (annualized) of the
Fund's average daily net assets for such period and amounted to $16,614.
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. Certain officers and Trustees of the Fund and
the Portfolio are officers and directors/trustees of the above
organizations. In addition, investment adviser and administrative fees are
paid by the Portfolio to Lloyd George Management (Bermuda), and to EVM and
its affiliates. See Note 2 of the Portfolio's Notes to Financial Statement,
which are included elsewhere in this report.
5 Distribution Plan
----------------------------------------------------------------------------
The Fund has adopted distribution plans (Class A Plan and Class B Plan, the
Plans) pursuant to Rule 12b-1 under the Investment Company Act of 1940. The
Plans require the Fund to pay the Principal Underwriter, Eaton Vance
Distributors, Inc. (EVD) an amount equal to (a) 0.50% of that portion of the
Fund's Class A shares average daily net assets attributable to Class A
shares of the Fund which have remained outstanding for less than one year
and (b) 0.25% of that portion of the Fund's Class A average daily net assets
which is attributable to Class A shares of the Fund which have remained
outstanding for more than one year and an amount equal to 1/365 of 0.75% of
the Fund's average daily net assets attributable to Class B shares for
providing ongoing distribution services and facilities to the Fund. The Fund
will automatically discontinue payments
7
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
attributable to Class B shares 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 Class B
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 the
contingent deferred sales charge (see Note 6) and daily amounts theretofore
paid to EVD. The Fund paid or accrued $12,497 and $31,077 for Class A and
Class B shares, respectively to EVD for the six months ended June 30, 1998,
representing 0.51% and 0.75% (annualized) of average daily net assets for
Class A and Class B shares, respectively. At June 30, 1998, the amount of
Uncovered Distribution Charges of EVD calculated under the Plan was
approximately $255,000 for Class B shares.
In addition, the Plan authorized 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 attributable to
Class A and Class B shares 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 attributable to Class A and Class B shares based on the value of Fund
shares sold by such persons and remaining outstanding for at least one year.
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 when there are no
outstanding Uncovered Distribution Charges to EVD. The Fund paid or accrued
service fees to EVD for the six months ended June 30, 1998 in the amount of
$0 and $8,494 for Class A and Class B shares, respectively. 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
Class B 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 for Class B shares 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 EVD 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 $50,000 of CDSC paid by shareholders for Class B
shares for the six months ended June 30, 1998.
7 Investment Transactions
----------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio aggregated
$1,964,061 and $3,900,626, respectively for the six months ended June 30,
1998.
8 Transfer of Net Assets
----------------------------------------------------------------------------
On January 1, 1998, EV Marathon Emerging Markets Fund acquired the net
assets of EV Traditional Emerging Markets Fund pursuant to an Agreement and
Plan of Reorganization dated June 23, 1997. In accordance with the
agreement, EV Marathon Emerging Markets Fund, at the closing, issued 416,908
Class A shares of the Fund having an aggregate value of $4,989,133. As a
result, the Fund issued one Class A share for each share of EV Traditional
Emerging Markets Fund. The transaction was structured for tax purposes to
qualify as a tax free reorganization under the Internal Revenue Code. The EV
Traditional Emerging Markets Fund's net assets at the date of the
transaction was $4,989,133, including $229,578 of unrealized appreciation.
Directly after the merger, the combined net assets of the Eaton Vance
Emerging Markets Fund (formerly EV Marathon Emerging Markets Fund) were
$14,063,342 with a net asset value of $11.97 and $11.91 for Class A and
Class B shares, respectively.
9 Name Change
----------------------------------------------------------------------------
Effective January 1, 1998, EV Marathon Emerging Markets Fund changed its
name to Eaton Vance Emerging Markets Fund.
8
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 82.8%
Security Shares Value
- -----------------------------------------------------------------------------
Apparel -- 2.0%
- -----------------------------------------------------------------------------
Zaklady Metali Lekkich Kety* 15,693 $ 236,273
Poland metal company
- -----------------------------------------------------------------------------
$ 236,273
- -----------------------------------------------------------------------------
Banks and Money Services -- 4.5%
- -----------------------------------------------------------------------------
Akbank T.A.S. 80,000 $ 258,152
Turkish commercial bank
Alpha Credit Bank 3,300 267,437
Greek bank
- -----------------------------------------------------------------------------
$ 525,589
- -----------------------------------------------------------------------------
Beverages -- 12.6%
- -----------------------------------------------------------------------------
Pan American Beverages, Inc. ADR 13,000 $ 408,688
Coca Cola franchiser
Pyramids Brewers 6,000 383,437
The largest brewer in Egypt
Suncrush Ltd. 107,000 226,887
Coca Cola franchiser
Vina Concha y Toro ADR 16,000 456,000
Wine producer/exporter
- -----------------------------------------------------------------------------
$ 1,475,012
- -----------------------------------------------------------------------------
Communications Equipment -- 4.8%
- -----------------------------------------------------------------------------
Grupo Televisa GDR 15,000 $ 564,374
Largest media company in the
Spanish-speaking world
- -----------------------------------------------------------------------------
$ 564,374
- -----------------------------------------------------------------------------
Communications Services -- 1.9%
- -----------------------------------------------------------------------------
China Telecom* 130,000 $ 225,645
Only listed Chinese mobile
telephone company
- -----------------------------------------------------------------------------
$ 225,645
- -----------------------------------------------------------------------------
Conglomerates -- 3.4%
- -----------------------------------------------------------------------------
John Keells Holdings GDR 2,041 $ 11,226
A diversified conglomerate operating in
tourism, food & beverages, property
development sectors
Quinenco SA ADR* 5,400 48,600
A large diversified company engaged
in industrial and financial services
Sabanci Holdings 55,000 340,513
The second largest conglomerate in
Turkey
- -----------------------------------------------------------------------------
$ 400,339
- -----------------------------------------------------------------------------
Consumer Products -- 0.5%
- ----------------------------------------------------------------------------
Lever Brothers Pakistan Ltd. 2,800 $ 52,775
The largest and oldest consumer
non-durables company in Pakistan
- -----------------------------------------------------------------------------
$ 52,775
- -----------------------------------------------------------------------------
Electric Utilities -- 1.9%
- -----------------------------------------------------------------------------
BSES, Ltd. ADR* 22,000 $ 222,200
Generator and distributor of
electricity to the
Bombay region
- -----------------------------------------------------------------------------
$ 222,200
- -----------------------------------------------------------------------------
Foods -- 3.6%
- -----------------------------------------------------------------------------
Carulla SA ADR 155,000 $ 426,250
Columbian grocery and supermarket
chain
- -----------------------------------------------------------------------------
$ 426,250
- -----------------------------------------------------------------------------
Information Services -- 1.8%
- -----------------------------------------------------------------------------
Forsoft Ltd.* 13,500 $ 207,563
Israeli technology company
concentrating on the year 2000
problem
- -----------------------------------------------------------------------------
$ 207,563
- -----------------------------------------------------------------------------
Investment Services -- 0.8%
- -----------------------------------------------------------------------------
National Finance and Securities
Public Company Ltd.* 1,211,400 $ 94,506
Thai company operating in commercial
consumer and housing finance
- -----------------------------------------------------------------------------
$ 94,506
- -----------------------------------------------------------------------------
Manufacturing -- 4.2%
- -----------------------------------------------------------------------------
Barlow Ltd. 35,000 $ 185,539
South African conglomerate with
primary products interests
Ege Biracilik Ve Malt Sanayii A.S. 20,125 237,866
Turkish brewery
Uralmash-Zavody ADR* 12,500 71,982
Russian engineering company
- -----------------------------------------------------------------------------
$ 495,387
- -----------------------------------------------------------------------------
Media & Leisure -- 4.5%
- -----------------------------------------------------------------------------
Berjaya Sports Toto Bhd 37,000 $ 54,861
Malaysian gaming company
See notes to financial statements
9
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- -----------------------------------------------------------------------------
Media & Leisure (continued)
- -----------------------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento S.A.* 150,040 $ 422,695
Corporacion Interamericana de
Entretenimiento S.A., L Shares* 20,005 46,780
South American fibre optic cable
company for telecommunications
- -----------------------------------------------------------------------------
$ 524,336
- -----------------------------------------------------------------------------
Metals - Industrial -- 3.4%
- -----------------------------------------------------------------------------
Anglo America Corp. 5,700 $ 193,384
Major South African mining finance
company
Hindalco Industries Ltd. GDR* 15,000 210,000
Aluminum producer in India
- -----------------------------------------------------------------------------
$ 403,384
- -----------------------------------------------------------------------------
Miscellaneous -- 0.6%
- -----------------------------------------------------------------------------
Legend Holdings Ltd.* 220,000 $ 66,009
PC and services vendor in China
- -----------------------------------------------------------------------------
$ 66,009
- -----------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 5.6%
- -----------------------------------------------------------------------------
JSC Surgutneftegaz ADR 60,000 $ 360,000
Russia's largest oil producer
YPF Sociedad Anonima ADR 10,000 300,625
Exploration, development and
production of oil and natural gas
- -----------------------------------------------------------------------------
$ 660,625
- -----------------------------------------------------------------------------
Oil and Gas - Integrated -- 3.5%
- -----------------------------------------------------------------------------
Mol Magyar Olayes Gazi GDR 15,000 $ 405,000
Interests in oil and gas
exploration and production, gas
wholesale distribution, storage
and transmission, oil refining and
marketing
- -----------------------------------------------------------------------------
$ 405,000
- -----------------------------------------------------------------------------
Retail - Food and Drug -- 11.5%
- -----------------------------------------------------------------------------
Blue Square Stores* 45,000 $ 553,996
Supermarket and specialty store
chain
Compania Brasileira de Distrib. GDR 25,000 565,624
Supermarket chain
Dairy Farm International Holdings 207,726 222,267
Ltd.*
Hong Kong and Pacific supermarket
operator and general retailer
- -----------------------------------------------------------------------------
$ 1,341,887
- -----------------------------------------------------------------------------
Sanitation -- 1.9%
- -----------------------------------------------------------------------------
Saneamento Basico (Sabesp) 1,885,000 $ 226,539
Brazil's largest water and
sanitation utility
- -----------------------------------------------------------------------------
$ 226,539
- -----------------------------------------------------------------------------
Telephone Utilities -- 8.4%
- ----------------------------------------------------------------------------
Telefonica del Peru ADR 12,000 $ 245,250
Peru's primary operator of the
public telephone system
Telefonos de Mexico ADR 8,000 384,500
Largest telecom operator with
interests in local and long
distance telecommunications
Videsh Sanchar Nigam Ltd., GDR 32,500 347,750
India's monopoly International
Telephone service provider
- -----------------------------------------------------------------------------
$ 977,500
- -----------------------------------------------------------------------------
Transportation -- 1.4%
- -----------------------------------------------------------------------------
Pacific Ports Company Ltd. 1,150,000 $ 160,281
Development and management of
terminals in Asian sea and
river ports
- ----------------------------------------------------------------------------
$ 160,281
- ----------------------------------------------------------------------------
Total Common Stocks
(identified cost $10,484,652) $ 9,691,474
- ----------------------------------------------------------------------------
Preferred Stocks -- 4.0%
Security Shares Value
- ----------------------------------------------------------------------------
Electric Utilities -- 0.1%
- ----------------------------------------------------------------------------
Centrais Geradoras do Sul do
Brasil S.A.* 7,000,000 $ 9,563
This company is an electricity
generator owned by the government
which will be sold off in 1998.
- ----------------------------------------------------------------------------
$ 9,563
- ----------------------------------------------------------------------------
Oil and Gas - Integrated -- 1.8%
- ----------------------------------------------------------------------------
Petroleo Brasiliero SA 1,100,000 $ 204,479
Brazil's sole integrated oil company,
a monopoly in exploration, production,
refining, transportation, importing
and exporting of oil and natural gas
- ----------------------------------------------------------------------------
$ 204,479
- ----------------------------------------------------------------------------
Telephone Utilities -- 2.1%
- ----------------------------------------------------------------------------
Telec de Minas Gerias 2,500,000 $ 174,001
Third largest telecommunications
system by access lines in state of
Minas Gerias (Brazil)
See notes to financial statements
10
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- ----------------------------------------------------------------------------
Telephone Utilities (continued)
- ----------------------------------------------------------------------------
Telemig Celular S.A.* 2,500,000 $ 75,653
Part of Telebras operating mobile
telephones awaiting privatization
- ----------------------------------------------------------------------------
$ 249,654
- ----------------------------------------------------------------------------
Total Preferred Stocks
(identified cost $676,088) $ 463,696
- ----------------------------------------------------------------------------
Warrants -- 0.1%
Security Shares Value
- ----------------------------------------------------------------------------
Investment Services -- 0.1%
- ----------------------------------------------------------------------------
National Finance and Securities
Public Company Ltd. 670,600 $ 17,439
Thai company operating in
commercial consumer and housing
finance
- ----------------------------------------------------------------------------
$ 17,439
- ----------------------------------------------------------------------------
Lodging and Gaming -- 0.0%
- ----------------------------------------------------------------------------
Belle Corp. (Warrants) 240,000 $ 331
Philippine gaming and property
company with hotel interests,
golf resorts, casinos, jai-lai,
and lottery franchises
- ----------------------------------------------------------------------------
$ 331
- ----------------------------------------------------------------------------
Total Warrants
(identified cost $0) $ 17,770
- ----------------------------------------------------------------------------
Total Investments -- 86.9%
(identified cost $11,160,740) $10,172,940
- ----------------------------------------------------------------------------
Other Assets, Less Liabilities -- 13.1% $ 1,530,198
- ----------------------------------------------------------------------------
Net Assets -- 100% $11,703,138
- ----------------------------------------------------------------------------
ADR -- American Depository Receipt
GDR -- Global Depository Receipt
* Non-income producing security.
See notes to financial statements
11
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS
Country Concentration of Portfolio
Percentage
Country of Net Assets Value
- --------------------------------------------------------------------------------
Argentina 2.6% $ 300,625
Brazil 10.7% 1,255,859
Chile 4.3% 504,600
Colombia 3.6% 426,250
Egypt 3.3% 383,437
Greece 2.3% 267,437
Hong Kong 3.9% 451,935
Hungary 3.5% 405,000
India 6.7% 779,950
Israel 6.5% 761,559
Malaysia 0.5% 54,861
Mexico 15.6% 1,827,037
Pakistan 0.4% 52,775
Peru 2.1% 245,250
Philippines 0.0% 331
Poland 2.0% 236,273
Russia 3.7% 431,982
Singapore 1.9% 222,267
South Africa 5.2% 605,810
Sri Lanka 0.1% 11,226
Thailand 0.9% 111,945
Turkey 7.1% 836,531
See notes to financial statements
12
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------
Investments, at value
(identified cost, $11,160,740) $10,172,940
Cash 1,447,199
Foreign currency, at value
(identified cost, $60,722) 55,594
Dividends receivable 38,724
Deferred organization expenses 5,396
- --------------------------------------------------------------------------
Total assets $11,719,853
- --------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------
Payable for investments purchased $ 924
Payable to affiliate for Trustees' fees 150
Other accrued expenses 15,641
- --------------------------------------------------------------------------
Total liabilities $ 16,715
- --------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $11,703,138
- --------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $12,697,698
Net unrealized depreciation (computed on the basis of
identified cost) (994,560)
- --------------------------------------------------------------------------
Total $11,703,138
- --------------------------------------------------------------------------
Statement of Operations
For the Six Months
Ended June 30, 1998
Investment Income
- --------------------------------------------------------------------------
Dividends (net of foreign taxes, $3,898) $ 153,136
- --------------------------------------------------------------------------
Total investment income $ 153,136
- --------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------
Investment adviser fee $ 57,469
Administration fee 19,156
Trustees fees and expenses 2,702
Custodian fee 41,109
Amortization of organization expenses 1,902
Legal and accounting services 348
Miscellaneous 7,852
- --------------------------------------------------------------------------
Total expenses $ 130,538
- --------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 20,079
- --------------------------------------------------------------------------
Total expense reductions $ 20,079
- --------------------------------------------------------------------------
Net expenses $ 110,459
- --------------------------------------------------------------------------
Net investment income $ 42,677
- --------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- --------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $(1,063,368)
Foreign currency and forward foreign
currency exchange contract transactions (146,963)
- --------------------------------------------------------------------------
Net realized loss $(1,210,331)
- --------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(1,700,826)
Foreign currency and forward foreign
currency exchange contracts 52,553
- --------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(1,648,273)
- --------------------------------------------------------------------------
Net realized and unrealized loss $(2,858,604)
- --------------------------------------------------------------------------
Net decrease in net assets from operations $(2,815,927)
- --------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
- --------------------------------------------------------------------------
From operations --
Net investment income $ 42,677 $ 15,335
Net realized loss (1,210,331) (593,013)
Net change in unrealized
appreciation (depreciation) (1,648,273) (1,182,400)
- --------------------------------------------------------------------------
Net decrease in net assets
from operations $ (2,815,927) $ (1,760,078)
- --------------------------------------------------------------------------
Capital transactions --
Contributions $ 2,546,154 $ 26,595,739
Withdrawals (6,580,694) (16,940,583)
- --------------------------------------------------------------------------
Net increase (decrease) in net
assets from capital transactions $ (4,034,540) $ 9,655,156
- --------------------------------------------------------------------------
Net increase (decrease) in net assets $ (6,850,467) $ 7,895,078
- --------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------
At beginning of period $ 18,553,605 $ 10,658,527
- --------------------------------------------------------------------------
At end of period $ 11,703,138 $ 18,553,605
- --------------------------------------------------------------------------
See notes to financial statements
14
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1998 Year Ended December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 *
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets +
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net expenses (1) 1.71%+ 1.53% 1.54% 2.58% 0.00%
Net expenses after custodian fee reduction 1.45%+ 1.35% 1.32% 2.58% --
Net investment income (loss) 0.56%+ 0.08% 0.14% (1.00)% 0.00%
Portfolio Turnover 55% 160% 125% 98% 0%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 11,703 $ 18,554 $ 10,659 $ 3,587 $ 1,195
- ------------------------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Portfolio may reflect a reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser, or both. Had such actions not been taken, the ratios would have been as follows:
Expenses (1) 1.81% 2.24% 5.24% 2.21%+
Expenses after custodian fee reduction 1.63% 2.02% 5.24% --
Net investment loss (0.20)% (0.56)% (3.66)% (2.21)%+
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, November 30, 1994, to December
31, 1994.
(1) The expense ratios for the year ended December 31, 1995 and periods
thereafter 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 each of the periods ended December 31,
1994 have not been adjusted to reflect this change.
See notes to financial statements
15
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
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 management investment company
which was organized as a trust under the laws of the State of New York on
January 18, 1994. The Declaration of Trust permits the Trustees to issue
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
accounting principles generally accepted in the United States.
A Investment Valuation -- 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 sales 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 which approximates value. 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 Income -- Dividend income is recorded on the ex-dividend date. However, if
the ex-dividend date has passed, certain dividends from securities are
recorded as the Portfolio is informed of the ex-dividend date. Interest income
is recorded on the accrual basis.
C Federal Taxes -- The Portfolio has elected to be treated as a partnership
for United States 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.
D Expense Reduction -- Investors Bank & Trust Company 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. All significant credit balances used to reduce
the Portfolio's custodian fees are reported as a reduction of expenses on the
Statement of Operations.
E 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.
F Futures Contracts -- Upon the entering of a financial futures contract, the
Portfolio is required to deposit (initial margin) either cash or securities in
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 the 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.
G 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
16
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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.
H 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. Risk 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.
I Other -- Investment transactions are accounted for on a trade date basis.
J 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 income and expense during the reporting period. Actual results could
differ from those estimates.
K Interim Financial Information -- The interim financial statements relating
to June 30, 1998 and for the six-month 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 Investment Adviser Fee and Other Transactions
with Affiliates
-----------------------------------------------------------------------------
The investment adviser fee is earned by Lloyd George Investment 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, 1998,
the adviser fee was 0.75% (annualized) of average daily net assets and
amounted to $57,469. In addition, an administrative fee is earned by Eaton
Vance Management (EVM) for managing and administrating the business affairs of
the Portfolio. Under the administration agreement, EVM earns a monthly fee in
the amount of 1/48th of 1% (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, 1998, the administration
fee was 0.25% (annualized) of average daily net assets and amounted to
$19,156. 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 and/or directors/trustees of the above organizations.
3 Investment Transactions
-----------------------------------------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $8,097,242 and $11,186,373, respectively.
4 Federal Income Tax Basis of Investments
-----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $ 11,160,740
-----------------------------------------------------------------------
Gross unrealized appreciation $ 1,202,692
Gross unrealized depreciation (2,190,492)
-----------------------------------------------------------------------
Net unrealized depreciation $ (987,800)
-----------------------------------------------------------------------
17
<PAGE>
Emerging Markets Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
5 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $100 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
the Eurodollar rate or federal funds rate. In addition, a fee computed at an
annual rate of 0.10% 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 period.
6 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. Investment in foreign securities also involves
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.
7 Financial Instruments
-----------------------------------------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include forward
foreign currency exchange contracts and futures contracts and may involve, to
a varying degree, elements of risk in excess of the amounts recognized for
financial statement purposes. The notional or contractual amounts of these
instruments represent the investment the Portfolio has in particular classes
of financial instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with
these instruments is meaningful only when all related and offsetting
transactions are considered. At June 30, 1998, there were no outstanding
obligations under these financial instruments.
18
<PAGE>
Eaton Vance Emerging Markets Fund as of June 30, 1998
INVESTMENT MANAGEMENT
Eaton Vance Emerging Markets Fund
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr.
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
M. Dozier Gardner
Vice Chairman, Eaton Vance Management
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate
School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer, United Asset
Management Corporation
John L. Thorndike
Formerly Director of, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
Emerging Markets Portfolio
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
Alan R. Dynner
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.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate
School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer, United Asset
Management Corporation
19
<PAGE>
Investment Adviser of
Emerging Markets Portfolio
Lloyd George Management
(Bermuda) Limited
3808 One Exchange Square
Central, Hong Kong
Sponsor and Manager of
Eaton Vance Emerging Markets Fund
and Administrator of Emerging Markets Portfolio
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
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Eaton Vance
Emerging Markets Fund
24 Federal 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 sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- -------------------------------------------------------------------------------
EMSRC-8/98
