<PAGE>
[LOGO]
[PHOTO]
SEMIANNUAL REPORT JUNE 30, 1999
EATON VANCE
EMERGING
[PHOTO]
MARKETS
FUND
Global Management-Global Distribution
[PHOTO]
<PAGE>
EATON VANCE EMERGING MARKETS FUND as of June 30, 1999
INVESTMENT UPDATE
[PHOTO]
Kiersten Christensen
Portfolio Manager
INVESTMENT ENVIRONMENT
- ----------------------------
- - Emerging market economies have improved significantly since the difficulties
of late 1998. In Latin America, Brazil has implemented structural reforms
after abandoning its currency peg in January. Financial help by the
International Monetary Fund (IMF) and continued low inflation have helped
restore investors' confidence in Brazil and its Latin neighbors.
- - Asian economies appear to be on the mend, with South Korea and Taiwan leading
the way. South Korea, following a prolonged recession, has been among Asia's
most resurgent economies, with first quarter Gross Domestic Product (GDP)
rising 4.6%, and short-term interest rates falling to historic lows.
- - In South Asia, India appears finally headed toward recovery. Investors have
focused once again on India's fast-improving economic fundamentals - a 5.5%
GDP growth rate, subdued inflation, and the prospect of lower interest rates.
THE FUND
- ----------------------------
PERFORMANCE FOR THE PAST SIX MONTHS
- - The Fund's Class A shares had a total return of 31.88% during the six months
ended June 30, 1999.(1) This return resulted from an increase in net asset
value per share (NAV) to $10.63 on June 30, 1999 from $8.06 on December 31,
1998.
- - The Fund's Class B shares had a total return of 31.91% during the six months
ended June 30, 1999.(1) This return resulted from an increase in net asset
value per share (NAV) to $10.54 on June 30, 1999 from $7.99 on December 31,
1998.
RECENT PORTFOLIO DEVELOPMENTS
- - The Portfolio's largest industry weightings at June 30 were telephone
utilities, investment services, and beverage companies. The move by emerging
nations to upgrade phone services led to continuing growth among
telecommunication companies. Lower interest rates gave a boost to banks and
finance companies.
- - The Portfolio's largest regional exposure was Latin America, at 32.7%. Brazil,
at 15.9% of the Portfolio, was the largest country weighting. The Brazilian
economy has benefited from a strong surge in export demand following the
devaluation of its currency, the REAL. Mexico, 11.3% of the Portfolio, has
benefited from trade with the U.S. and a rise in consumer activity.
- - The Portfolio nearly eliminated its Eastern Europe exposure for the present.
Russia must meet strict standards to secure continued IMF lending. Real
progress may await the 2000 elections, when the country will elect a new
parliament and president. However, if industrial activity increases in Germany
and the rest of Europe, this is an area the Portfolio might target.
SELECTED PORTFOLIO INVESTMENTS
- - Korea Electric Power Company (Kepco) was the Portfolio's largest holding. A
favored blue chip among Korea's investors, Kepco has initiated a major
restructuring effort by cutting expenses, improving plant efficiency, and
selling obsolete facilities.
- - In Latin America, the Portfolio increased its exposure to the
telecommunications sector. Telefonos de Mexico is Mexico's leader in domestic
and international phone services. The company has enjoyed fast growth in its
Internet business. Telenorte Leste fills a similar role in Brazil's
telecommunications industry.
- - In India, Hindalco Industries Ltd. has reported robust earnings growth. In the
face of domestic demand for aluminum products, the company has begun projects
to streamline productions and improve capacity.
- --------------------------------------------------------------------------------
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, 1999
<TABLE>
<CAPTION>
PERFORMANCE(2) CLASS A CLASS B
- -------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- -------------------------------------------------------------------------------
<S> <C> <C>
One Year 9.70% 9.56%
Life of Fund+ 2.74 2.15
<CAPTION>
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -------------------------------------------------------------------------------
<S> <C> <C>
One Year 3.40% 4.56%
Life of Fund+ 1.41 1.74
</TABLE>
+Inception dates: Class A: (12/8/94); Class B: (11/30/94)
<TABLE>
<CAPTION>
TEN LARGEST EQUITY HOLDINGS(3)
- ---------------------------------------------
<S> <C>
Korea Electric Power Company. 3.8%
Videsh Sanchar Nigam Ltd. 3.8
Hindalco Industries Ltd. 3.6
Cia Cervejaria Brahma 3.5
Samsung Fire & Marine 3.5
Taiwan Semiconductor 3.4
Compania Brasileira de Distribuicao 3.4
Telenorte Leste 3.4
Korea Telecom 3.3
Gulf Indonesia Resources Ltd. 3.2
</TABLE>
(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 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. Ten largest holdings represent
34.9% 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, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investment in Emerging Markets
Portfolio, at value
(identified cost, $7,491,935) $ 9,067,018
Receivable for Fund shares sold 1,143
Receivable from the Manager 11,017
Receivable from the Investment Adviser 16,525
Deferred organization expenses 11,911
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TOTAL ASSETS $ 9,107,614
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for Fund shares redeemed $ 25
Payable to affiliate for Trustees' fees 135
Other accrued expenses 9,890
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TOTAL LIABILITIES $ 10,050
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NET ASSETS $ 9,097,564
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Sources of Net Assets
- ------------------------------------------------------
Paid-in capital $ 10,782,311
Accumulated net realized loss from
Portfolio (computed on the basis of
identified cost) (3,230,088)
Accumulated net investment loss (29,742)
Net unrealized appreciation from
Portfolio (computed on the basis of
identified cost) 1,575,083
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TOTAL $ 9,097,564
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Class A Shares
- ------------------------------------------------------
NET ASSETS $ 4,024,234
SHARES OUTSTANDING 378,619
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 10.63
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 94.25 of $10.63) $ 11.28
- ------------------------------------------------------
Class B Shares
- ------------------------------------------------------
NET ASSETS $ 5,073,330
SHARES OUTSTANDING 481,401
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 10.54
- ------------------------------------------------------
</TABLE>
On sales of $50,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- -----------------------------------------------------
Dividends allocated from Portfolio
(net of foreign taxes, $6,818) $ 92,885
Expenses allocated from Portfolio (63,833)
- -----------------------------------------------------
NET INVESTMENT INCOME FROM PORTFOLIO $ 29,052
- -----------------------------------------------------
Expenses
- -----------------------------------------------------
Management fee $ 9,229
Trustees fees and expenses 96
Distribution and service fees
Class A 8,254
Class B 19,943
Amortization of organization expenses 13,855
Registration fees 11,131
Transfer and dividend disbursing agent
fees 9,541
Printing and postage 7,240
Legal and accounting services 6,166
Custodian fee 4,191
Miscellaneous 2,821
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TOTAL EXPENSES $ 92,467
- -----------------------------------------------------
Deduct --
Preliminary allocation of expenses to
the Investment Adviser $ 16,525
Preliminary allocation of expenses to
the Manager 11,017
Preliminary reduction of management
fee 9,229
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TOTAL EXPENSE REDUCTIONS $ 36,771
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NET EXPENSES $ 55,696
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NET INVESTMENT LOSS $ (26,644)
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Realized and Unrealized
Gain (Loss) from Portfolio
- -----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 239,090
Foreign currency and forward foreign
currency exchange
contract transactions (7,818)
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NET REALIZED GAIN $ 231,272
- -----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments $ 1,959,432
Foreign currency and forward foreign
currency exchange contracts (18,593)
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NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 1,940,839
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NET REALIZED AND UNREALIZED GAIN $ 2,172,111
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NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 2,145,467
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</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment loss $ (26,644) $ (171,193)
Net realized gain (loss) 231,272 (2,936,493)
Net change in unrealized
appreciation (depreciation) 1,940,839 (1,001,891)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 2,145,467 $ (4,109,577)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial interest --
Proceeds from sale of shares
Class A $ 1,568,432 $ 1,790,820
Class B 766,176 1,560,888
Issued in reorganization of EV
Traditional
Emerging Markets Fund
Class A -- 4,989,133
Cost of shares redeemed
Class A (1,575,344) (2,105,721)
Class B (936,964) (4,069,955)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM
FUND SHARE TRANSACTIONS $ (177,700) $ 2,165,165
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ 1,967,767 $ (1,944,412)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 7,129,797 $ 9,074,209
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 9,097,564 $ 7,129,797
- --------------------------------------------------------------------------------
Accumulated
net investment loss
included in net assets
- --------------------------------------------------------------------------------
AT END OF PERIOD $ (29,742) $ (3,098)
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
SIX MONTHS ENDED ---------------------------------------------------------------------
JUNE 30, 1999
(UNAUDITED)(1) 1998 1997 1996 1995 1994(2)
--------------------- --------------------- --------- --------- --------- ---------
CLASS A CLASS B CLASS A CLASS B CLASS B CLASS B CLASS B CLASS B
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Net asset value --
Beginning of
period $ 8.060 $ 7.990 $ 11.970 $ 11.910 $ 12.720 $ 10.050 $ 9.960 $ 10.000
- --------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- --------------------------------------------------------------------------------------------------------------------
Net investment loss $ (0.020) $ (0.040) $ (0.146) $ (0.236) $ (0.012) $ (0.143) $ (0.268) $ (0.003)
Net realized and
unrealized gain
(loss) 2.590 2.590 (3.764) (3.684) (0.436) 2.988 0.358 (0.037)
- --------------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS)
FROM OPERATIONS $ 2.570 $ 2.550 $ (3.910) $ (3.920) $ (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 $ 10.630 $ 10.540 $ 8.060 $ 7.990 $ 11.910 $ 12.720 $ 10.050 $ 9.960
- --------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3) 31.88% 31.91% (32.66)% (32.91)% (3.48)% 28.49% 0.90% (0.40)%
- --------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of
period (000's
omitted) $ 4,024 $ 5,073 $ 3,066 $ 4,064 $ 9,074 $ 6,725 $ 1,801 $ 229
Ratios (As a
percentage of
average daily net
assets):
Net expenses(4)(5) 3.02%(6) 3.47%(6) 3.25% 3.70% 3.50% 3.41% 6.19% 0.75%(6)
Net expenses after
custodian fee
reduction(4) 2.95%(6) 3.40%(6) 2.95% 3.40% 3.32% 3.19% 6.19% --
Net investment
loss (0.46)%(6) (0.91)%(6) (1.34)% (1.79)% (1.92)% (1.76)% (4.64)% (0.75)%(6)
- --------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Fund and the Portfolio may reflect a reduction of the investment adviser fee and/or
management fee, an allocation of expenses to the Investment Adviser and/or Manager, or both. Had such actions not
been taken, the ratios and net investment loss per share would have been as follows:
Ratios (As a
percentage of
average daily net
assets):
Expenses(4)(5) 5.01%(6) 5.45%(6) 3.65% 4.10% 3.79% 4.52% 11.35% 9.14%(6)
Expenses after
custodian fee
reduction(4) 4.94%(6) 5.38%(6) 3.35% 3.80% 3.61% 4.30% 11.35% --
Net investment
loss (2.45)%(6) (2.89)%(6) (1.74)% (2.19)% (2.21)% (2.87)% (9.80)% (9.14)%(6)
Net investment loss
per share $ (0.107) $ (0.127) $ (0.188) $ (0.289) $ (0.014) $ (0.233) $ (0.566) $ (0.037)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) For the period from the start of business, November 30, 1994, to December
31, 1994.
(3) 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.
(4) Includes the Fund's share of the Portfolio's allocated expenses.
(5) 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 the prior period have not been adjusted to reflect this change.
(6) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 1999
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 generally sold subject to a sales charge imposed
at time of purchase. Class B shares are sold at net asset value and are
subject to a contingent deferred sales charge (see Note 6). Each class
represents a pro rata interest in the Fund, but votes separately on
class-specific matters and (as noted below) is subject to different expenses.
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 (82.8% at June 30, 1999). 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. At December 31, 1998, net currency losses of
$3,098, attributable to security transactions incurred after October 31,
1998, are treated as arising on the first day of the Fund's next taxable
year. At December 31, 1998, the Fund, for federal income tax purposes had a
capital loss carryover of $3,519,591 which will reduce the taxable income
arising from future net realized gains on investments, if any, to the extent
permitted by the Internal Revenue Code, and thus will reduce the amount of
the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income or excise tax. The
capital loss carryover expires on December 31, 2006.
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.
6
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
H Interim Financial Statements -- The interim financial statements relating to
June 30, 1999 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
- -------------------------------------------
It is the present policy of the Fund to make at least one distribution
annually (normally in December) of all or substantially all of the 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 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 series (such as
the Fund(s)) and classes. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS A (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
Sales 167,427 196,494
Redemptions (169,046) (233,164)
Issued to EV Traditional Emerging
Markets Fund shareholders -- 416,908
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) (1,619) 380,238
- ------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS B (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
Sales 82,210 154,536
Redemptions (109,528) (407,659)
- ------------------------------------------------------------------------------
NET DECREASE (27,318) (253,123)
- ------------------------------------------------------------------------------
</TABLE>
4 Management Fee and Other Transactions with Affiliates
- -------------------------------------------
The management fee is earned by Eaton Vance Management (EVM) (the "Manager")
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, 1999, the fee was equivalent to 0.25%
(annualized) of the Fund's average daily net assets for such period and
amounted to $9,229. To reduce the net operating loss of the Fund, the Manager
made a reduction of its management fee of $9,229. In addition, the Manager
was allocated $11,017 of the Fund's operating expenses. 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 of the Portfolio are
officers 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. To reduce the net operating loss of
the Fund, the Adviser was allocated $16,525 of the Fund's operating expenses.
See Note 2 of the Portfolio's Notes to Financial Statements, which are
included elsewhere in this report.
5 Distribution Plans
- -------------------------------------------
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 attributable to Class B shares during any period in
which there are no outstanding Uncovered
7
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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)
interest 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 $5,974
and $15,765 for Class A and Class B shares, respectively, to EVD for the six
months ended June 30, 1999, representing 0.36% and 0.75% of average daily net
assets for Class A and Class B shares, respectively. At June 30, 1999, the
amount of Uncovered Distribution Charges of EVD calculated under the Plan was
approximately $241,000 for Class B shares.
In addition, the Plans authorize the Fund to make payments of service fees to
EVD, investment dealers 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
Plans by authorizing the Fund to make quarterly payments of service fees to
EVD and investment dealers 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, 1999 in the amounts of $2,280 and $4,178 for Class A shares and
Class B shares, respectively.
Certain officers and Trustees of the Fund are officers of EVD.
6 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
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 and may be waived under certain other
circumstances. 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 $16,000 of CDSC paid by
shareholders for Class B shares for the six months ended June 30, 1999. A
CDSC of 1% is imposed on any redemption of Class A shares made within 12
months of purchase that were acquired at net asset value because the purchase
amount was $1 million or more.
7 Investment Transactions
- -------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio aggregated
$2,454,598 and $2,841,255, respectively, for the six months ended June 30,
1999.
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.
8
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 94.0%
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Banks and Money Services -- 5.9%
- --------------------------------------------------------------------
Bank of Ayudhya(1) 370,000 $ 253,356
Thailand's fifth largest commercial bank
accounting for 91% of domestic loans and
deposits
Hana Bank 19,800 290,799
Korean commercial bank
Shinhan Bank GDR(1) 4,725 105,131
One of the principal commercial banks in
Korea
- --------------------------------------------------------------------
$ 649,286
- --------------------------------------------------------------------
Beverages -- 10.4%
- --------------------------------------------------------------------
Cia Cervejaria Brahma-sp ADR 34,000 $ 384,625
Largest beer brewer in Brazil and Latin
America with a 48% domestic market share
Pan American Beverages, Inc. ADR 11,000 261,938
Latin America's largest anchor Coke
bottler with exposure to Mexico, Brazil,
Venezuela, Guatemala, Costa Rica,
Nicaragua and Colombia
Pyramids Brewers(1) 3,000 167,536
The largest brewer in Egypt
Vina Concha y Toro ADR 9,000 324,000
Wine producer/exporter
- --------------------------------------------------------------------
$ 1,138,099
- --------------------------------------------------------------------
Broadcasting and Cable -- 1.4%
- --------------------------------------------------------------------
TV Azteca SA(1) 30,000 $ 157,500
Mexico's second largest television
company
- --------------------------------------------------------------------
$ 157,500
- --------------------------------------------------------------------
Conglomerates -- 0.1%
- --------------------------------------------------------------------
John Keells Holdings GDR 2,041 $ 9,185
A conglomerate involved in tea, hotels,
beverages and others
- --------------------------------------------------------------------
$ 9,185
- --------------------------------------------------------------------
Drugs -- 1.5%
- --------------------------------------------------------------------
Pliva GDR 11,000 $ 165,550
The biggest pharmaceutical company in
the Central and Eastern European region
- --------------------------------------------------------------------
$ 165,550
- --------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Electric Utilities -- 3.8%
- --------------------------------------------------------------------
Korea Electric Power Corp. 10,000 $ 415,550
Korean Electricity generator and
distributor
- --------------------------------------------------------------------
$ 415,550
- --------------------------------------------------------------------
Electrical / Electronics -- 2.1%
- --------------------------------------------------------------------
Hon Hai Precision Industry(1) 25,000 $ 226,006
Taiwan's largest connector manufacturer
and one of the largest global PC case
manufacturers
- --------------------------------------------------------------------
$ 226,006
- --------------------------------------------------------------------
Electronics - Semiconductors -- 3.4%
- --------------------------------------------------------------------
Taiwan Semiconductor Manufacturing,
Co.(1) 98,400 $ 376,235
One of the world's largest contract
manufacturers of integrated circuits
(foundry) for third parties
- --------------------------------------------------------------------
$ 376,235
- --------------------------------------------------------------------
Foods -- 1.0%
- --------------------------------------------------------------------
Carulla SA ADR 80,000 $ 110,000
Columbian grocery and supermarket chain
- --------------------------------------------------------------------
$ 110,000
- --------------------------------------------------------------------
Insurance -- 6.2%
- --------------------------------------------------------------------
Liberty International PLC(1) 8,560 $ 56,669
South African / UK investment company
focusing on the property sector as well
as certain financial services
activities, including life insurance,
pensions, and asset management
Liberty Life Associates of Africa 18,360 235,186
One of South Africa's most efficient
life insurance companies
Samsung Fire & Marine Insurance 544 383,032
Korean non-life insurer
- --------------------------------------------------------------------
$ 674,887
- --------------------------------------------------------------------
Investment Services -- 10.4%
- --------------------------------------------------------------------
Grupo Financiero Banamex(1) 100,000 $ 254,103
Mexico's largest private bank
Li & Fung, Ltd. 117,000 280,482
Largest global intermediator between
garment suppliers and retailers
Unibanco GDR 11,000 264,688
Brazil's third largest private bank
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Investment Services (continued)
- --------------------------------------------------------------------
Yuanta Securities Ltd.(1) 184,000 $ 333,251
Taiwan's largest securities and
brokerage company
- --------------------------------------------------------------------
$ 1,132,524
- --------------------------------------------------------------------
Machinery -- 2.4%
- --------------------------------------------------------------------
Siam Cement Co. Ltd.(1) 8,500 $ 258,169
Largest industrial and building material
producer in Thailand
- --------------------------------------------------------------------
$ 258,169
- --------------------------------------------------------------------
Manufacturing -- 3.1%
- --------------------------------------------------------------------
Ege Biracilik Ve Malt Sanayii AS 600,000 $ 44,803
Turkish brewer with the largest beer
capacity
Tata Engineering and Locomotion GDR 39,000 224,250
Largest automobile manufacturer in India
with a dominant position in the
commercial vehicle business
Uralmash-Zavody ADR(1) 12,500 16,766
Russian engineering company
Vestel Elektronik Sanayi(1) 530,000 57,793
Turkey's largest television producer and
PC monitor manufacturer
- --------------------------------------------------------------------
$ 343,612
- --------------------------------------------------------------------
Media & Leisure -- 2.2%
- --------------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento S.A.(1) 75,040 $ 243,910
South American fiber optic cable company
for telecommunications
- --------------------------------------------------------------------
$ 243,910
- --------------------------------------------------------------------
Metals - Industrial -- 6.0%
- --------------------------------------------------------------------
Anglo American PLC 5,700 $ 266,368
The world's largest producer of gold,
platinum, and diamonds
Hindalco Industries Ltd. GDR 20,000 391,500
India's second largest aluminum producer
and lowest cost producer in the world
- --------------------------------------------------------------------
$ 657,868
- --------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 5.3%
- --------------------------------------------------------------------
Gulf Indonesia Resources Ltd. ADR(1) 30,000 $ 345,000
Cheap explorer of oil and natural gas in
Indonesia
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Oil and Gas - Equipment and Services (continued)
- --------------------------------------------------------------------
JSC Surgutneftegaz ADR 30,000 $ 238,050
Russia's largest oil producer
- --------------------------------------------------------------------
$ 583,050
- --------------------------------------------------------------------
Oil and Gas - Integrated -- 2.2%
- --------------------------------------------------------------------
Mol Magyar Olayes Gazi GDR 10,000 $ 240,000
Interests in oil and gas exploration and
production, gas wholesale distribution,
storage and transmission, oil refining
and marketing
- --------------------------------------------------------------------
$ 240,000
- --------------------------------------------------------------------
Retail - Food and Drug -- 5.2%
- --------------------------------------------------------------------
Blue Square Stores(1) 12,000 $ 196,885
Supermarket and specialty store chain
Compania Brasileira de Distribuicao
Grupo Pao de Acurcar 20,000 372,500
Supermarket chain
- --------------------------------------------------------------------
$ 569,385
- --------------------------------------------------------------------
Retail - General -- 4.3%
- --------------------------------------------------------------------
Pizza Co. Ltd. 48,400 $ 169,974
Owner and operator of all Pizza Hut and
other fast food franchises in Thailand
President Chain Store Corp. 90,000 305,108
Taiwanese operator of 7-11 convenience
stores and other consumer businesses
- --------------------------------------------------------------------
$ 475,082
- --------------------------------------------------------------------
Telecommunications -- 0.9%
- --------------------------------------------------------------------
Synergon Info Systems GDR(1) 8,000 $ 92,800
Hungarian systems integrator
specializing in the restructuring of the
Hungarian IT industry
- --------------------------------------------------------------------
$ 92,800
- --------------------------------------------------------------------
Telephone Utilities -- 15.8%
- --------------------------------------------------------------------
Compania de Telecomunicaciones ADR 7,000 $ 171,500
Chile's largest telecom provider
Korea Telecom Corp ADR(1) 9,070 362,800
The leading provider of
telecommunications services in Korea
Tele Norte Leste Participacoes ADR 20,000 371,250
One of Brazil's three fixed line holding
companies, located in the northeast of
Brazil
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- --------------------------------------------------------------------
<S> <C> <C>
Telephone Utilities (continued)
- --------------------------------------------------------------------
Telefonos de Mexico ADR 4,000 $ 323,250
Largest telecom operator with interests
in local and long distance
telecommunications
Telesp Participacoes SA 6,750,000 86,470
The holding company that controls two
operators in the state of Sao Paulo,
Brazil's wealthiest state
Videsh Sanchar Nigam Ltd., GDR 32,500 413,563
India's monopoly international telephone
service provider
- --------------------------------------------------------------------
$ 1,728,833
- --------------------------------------------------------------------
Trucks and Parts -- 0.4%
- --------------------------------------------------------------------
Uzel Makina Sanayii AS 630,000 $ 38,829
The second largest tractor and farm
equipment manufacturer in Turkey
- --------------------------------------------------------------------
$ 38,829
- --------------------------------------------------------------------
Total Common Stocks
(identified cost $8,787,208) $ 10,286,360
- --------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 1.2%
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Banks and Money Centers -- 1.2%
- --------------------------------------------------------------------
Siam Commerce Bank(1) 90,000 $ 128,136
One of Thailand's largest commercial
banks
- --------------------------------------------------------------------
$ 128,136
- --------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $63,235) $ 128,136
- --------------------------------------------------------------------
PREFERRED STOCKS -- 2.4%
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Electric Utilities -- 0.1%
- --------------------------------------------------------------------
Centrais Geradoras do Sul do Brasil S.A. 7,000,000 $ 5,531
This company is an electricity
generator.
- --------------------------------------------------------------------
$ 5,531
- --------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Telephone Utilities -- 2.3%
- --------------------------------------------------------------------
Telecommunication Sudeste Celular 45,500,000 $ 256,772
The holding company for the cellular
operators in the states of Rio de
Janeiro and Espirito Santo
- --------------------------------------------------------------------
$ 256,772
- --------------------------------------------------------------------
Total Preferred Stocks
(identified cost $176,632) $ 262,303
- --------------------------------------------------------------------
WARRANTS -- 0.5%
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- --------------------------------------------------------------------
Banks and Money Services -- 0.5%
- --------------------------------------------------------------------
Siam Commerce Bank, 0.00%, 1/1/80 90,000 $ 57,966
- --------------------------------------------------------------------
Total Warrants
(identified cost $0) $ 57,966
- --------------------------------------------------------------------
Total Investments -- 98.1%
(identified cost $9,027,075) $ 10,734,765
- --------------------------------------------------------------------
Other Assets, Less Liabilities -- 1.9% $ 210,698
- --------------------------------------------------------------------
Net Assets -- 100% $ 10,945,463
- --------------------------------------------------------------------
</TABLE>
ADR - American Depository Receipt
GDR - Global Depository Receipt
(1) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
COUNTRY CONCENTRATION OF PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
COUNTRY OF NET ASSETS VALUE
<S> <C> <C>
- ---------------------------------------------------------------------
Brazil 15.9% $ 1,741,836
Chile 4.5 495,500
Colombia 1.0 110,000
Croatia 1.5 165,550
Egypt 1.5 167,536
Hong Kong 2.6 280,482
Hungary 3.1 332,800
India 9.4 1,029,313
Indonesia 3.2 345,000
Israel 1.8 196,885
Mexico 11.3 1,240,701
Republic of Korea 13.3 1,452,181
Russia 2.3 254,816
South Africa 4.6 501,554
Sri Lanka 0.1 9,185
Taiwan 11.3 1,240,600
Thailand 7.9 867,601
Turkey 1.3 141,425
United Kingdom 0.5 56,669
United States 1.0 105,131
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $9,027,075) $ 10,734,765
Cash 203,582
Foreign currency, at value
(identified cost, $3,737) 3,793
Dividends receivable 22,894
Deferred organization expenses 1,582
- ------------------------------------------------------
TOTAL ASSETS $ 10,966,616
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Other accrued expenses $ 21,153
- ------------------------------------------------------
TOTAL LIABILITIES $ 21,153
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $ 10,945,463
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $ 9,242,826
Net unrealized appreciation (computed on
the basis of identified cost) 1,702,637
- ------------------------------------------------------
TOTAL $ 10,945,463
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- -----------------------------------------------------
Dividends (net of foreign taxes, $7,377) $ 103,029
- -----------------------------------------------------
TOTAL INVESTMENT INCOME $ 103,029
- -----------------------------------------------------
Expenses
- -----------------------------------------------------
Investment adviser fee $ 31,149
Administration fee 10,383
Custodian fee 40,842
Legal and accounting services 20,453
Trustees fees and expenses 4,656
Interest 3,217
Amortization of organization expenses 1,891
Miscellaneous 3,078
- -----------------------------------------------------
TOTAL EXPENSES $ 115,669
- -----------------------------------------------------
Deduct --
Reduction of custodian fee $ 2,815
Preliminary reduction of investment
adviser fee 31,149
Preliminary reduction of
administration fee 10,383
- -----------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 44,347
- -----------------------------------------------------
NET EXPENSES $ 71,322
- -----------------------------------------------------
NET INVESTMENT INCOME $ 31,707
- -----------------------------------------------------
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 258,124
Foreign currency and forward foreign
currency exchange contract
transactions (8,488)
- -----------------------------------------------------
NET REALIZED GAIN $ 249,636
- -----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 2,212,612
Foreign currency and forward foreign
currency exchange contracts (22,992)
- -----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 2,189,620
- -----------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 2,439,256
- -----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 2,470,963
- -----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 31,707 $ 45,011
Net realized gain (loss) 249,636 (3,643,640)
Net change in unrealized appreciation
(depreciation) 2,189,620 (1,140,696)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ 2,470,963 $ (4,739,325)
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 3,663,675 $ 3,995,966
Withdrawals (3,066,023) (9,933,398)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM CAPITAL TRANSACTIONS $ 597,652 $ (5,937,432)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ 3,068,615 $ (10,676,757)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 7,876,848 $ 18,553,605
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 10,945,463 $ 7,876,848
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 ------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994(1)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets+
- ---------------------------------------------------------------------------------------------------------------
Net expenses(2) 1.78%(3) 1.71% 1.53% 1.54% 2.58% 0.00%
Net expenses after custodian
fee reduction 1.71%(3) 1.41% 1.35% 1.32% 2.58% --
Net investment income (loss) 0.76%(3) 0.37% 0.08% 0.14% (1.00)% 0.00%
Portfolio Turnover 54% 117% 160% 125% 98% 0%
- ---------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $10,945 $ 7,877 $18,554 $10,659 $ 3,587 $ 1,195
- ---------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Portfolio may reflect a reduction of the investment adviser fee and/or
administration fee, an allocation of expenses to the Investment Adviser and/or Administrator, or both. Had
such actions not been taken, the ratios would have been as follows:
Expenses(2) 2.78%(3) 1.87% 1.81% 2.24% 5.24% 2.21%(3)
Expenses after custodian fee
reduction 2.71%(3) 1.57% 1.63% 2.02% 5.24% --
Net investment income (loss) (0.24)%(3) 0.21% (0.20)% (0.56)% (3.66)% (2.21)%(3)
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, November 30, 1994, to December
31, 1994.
(2) 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 the prior period have
not been adjusted to reflect this change.
(3) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
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 (IBT) 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 rates are recorded
for financial statement purposes as net realized gains and losses on
investments. That portion of
16
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
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 Statements -- The interim financial statements relating to
June 30, 1999 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the
Portfolio'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, 1999,
the adviser fee was 0.75% (annualized) of average daily net assets and
amounted to $31,149. To enhance the net income of the Portfolio, the Adviser
made a reduction of the investment adviser fee of $31,149. 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, 1999, the administration fee was 0.25%
(annualized) of average daily net assets and amounted to $10,383. To enhance
the net income of the Portfolio, the administrator reduced fees in the amount
of $10,383. 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 officers and Trustees of the Portfolio are
officers of the above organizations.
3 Investment Transactions
- -------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $4,755,645 and $4,377,436 respectively, for the six months ended
June 30, 1999.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 1999, as computed on a federal income tax
basis, are as follows:
<TABLE>
<S> <C>
AGGREGATE COST $ 9,027,075
- -----------------------------------------------------
Gross unrealized appreciation $ 2,396,700
Gross unrealized depreciation (689,010)
- -----------------------------------------------------
NET UNREALIZED APPRECIATION $ 1,707,690
- -----------------------------------------------------
</TABLE>
5 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $130 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
17
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
portfolios and funds at the end of each quarter. The Portfolio did not have
any significant borrowings or allocated fees during the six months ended June
30, 1999.
6 Risks Associated with Foreign Investments
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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
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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, 1999, there were no
obligations under these financial instruments outstanding.
18
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 1999
INVESTMENT MANAGEMENT
EATON VANCE EMERGING MARKETS FUND
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr.
Vice President
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
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
President of Lingnan College,
University of Hong Kong
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, 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
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
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
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
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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.
- --------------------------------------------------------------------------------
2-2229-8/99 EMSRC-8/99
