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The Eaton Vance Special Investment Trust II
For the Emerging Markets Portfolio
[LOGO]
Semi-Annual Shareholder Report
June 30, 1996
Investment Adviser of Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617) 482-8260
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
Cooper & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
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EMERGING MARKETS PORTFOLIO
PORTFOLIO OF INVESTMENTS - JUNE 30, 1996 (UNAUDITED)
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STOCKS - 88.5%
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SHARES VALUE
ARGENTINA - 2.1%
Disco S A ADR 10,000 $ 221,250
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BRAZIL - 7.9%
Banco Bradesco S.A. Pfd. 36,258,993 $ 296,582
Brasmotor S.A. Pfd. 910,000 287,185
Compania Brasileira de Distrib. 14,000 231,000
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$ 814,767
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CHILE - 5.1%
Compania de Telecomunicaciones 2,400 $ 234,000
Vina Concha Y Toro ADR 16,000 296,000
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$ 530,000
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COLOMBIA - 1.1%
CIA NAC Chocolates 13,571 $ 112,660
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CROATIA - 0.8%
Pliva D.D. GDR Reg S 2,000 $ 78,500
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GREAT BRITAIN - 1.5%
Bakyrchik Gold 25,000 $ 155,270
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HONG KONG - 8.2%
Cheung Kong 18,000 $ 129,638
Citic Pacific Ltd. 28,000 113,219
First Pacific Co. 90,000 138,359
Giordano Holdings Ltd. 82,000 79,450
Li & Fung Ltd. 230,000 216,904
Varitronix International Ltd. 85,000 177,341
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$ 854,911
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HUNGARY - 0.8%
Zagrebacka Banka GDR 10,000 $ 85,425
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INDIA - 5.1%
Hindalco Industries Ltd. 4,000 $ 152,000
Larsen & Toubro Ltd GDR (New) 11,000 209,000
Tata Engineering & Locomotion GDR 9,720 171,315
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$ 532,315
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INDONESIA - 8.8%
Bank Bira 132,000 $ 119,098
PT Indostat (Foreign) 90,000 302,578
PT Lippo Bank 93,000 157,830
Lippo Bank (Rights) 46,500 36,960
PT Mulia Industrindo 182,200 270,071
PT Mulia Industrindo (Foreign) (Rights) 46,880 31,220
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$ 917,757
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REPUBLIC OF KOREA - 3.4%
Korea Electric Power Corp. 6,500 $ 154,375
Korea Mobile Telecom Corp. 60 73,057
Korea Mobile Telecom 144A ADR 12,500 125,625
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$ 353,057
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MALAYSIA - 9.4%
Eastern & Oriental BHD 70,000 $ 165,564
KFC Holdings (Malaysia) BHD 24,000 129,886
Konsortium Perkapalan BHD 39,000 234,516
Rashid Hussein Berhad 70,000 256,765
Sistem Televisyen Malaysia BHD 30,000 61,335
Star Publications 40,000 127,407
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$ 975,473
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MEXICO - 2.2%
Pan American Beverages, Inc. 3,400 $ 152,150
Sigma Alimentos S.A. 8,200 72,978
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$ 225,128
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PERU - 0.7%
Cerveceria Backus & Johnston 55,385 $ 70,052
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PHILIPPINES - 13.4%
Hi Cement Corporation 300,000 $ 113,359
Belle Corporation 1,200,000 288,550
Benpres Holdings 30,000 240,000
Far East Bank & Trust Co. Ltd. 5,000 175,573
Far East Bank & Trust Co. (Rights) 1,250 16,794
Filinvest Land Inc. 480,000 196,946
Marsman & Co. Inc. "B" 375,000 178,912
Alsons Consolidated Resources 2,200,000 183,053
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$ 1,393,187
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RUSSIA - 4.1%
Mosenergo-RDC 144ADR 14,500 $ 420,500
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SOUTH AFRICA - 1.9%
Richemont Securities 13,000 $ 200,306
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SRI LANKA - 0.1%
John Keells Holdings 1,429 $ 7,502
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TAIWAN - 4.0%
Yuanta Securities Co. Ltd. 74,000 $ 118,314
Yung Shin Pharmaceutical Ind. 60,000 150,436
Taiwan Acer Peripheral Inc. 69,000 150,436
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$ 419,186
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THAILAND - 7.9%
Industrial Finance Corp. 39,000 $ 175,075
Krung Thai Bank Ltd. (Foreign) 32,600 152,762
Mah Boon Krong Properties Dev. 149,800 175,489
MBK Properties and Development 50,200 58,809
Pizza Co. (Thailand) Ltd. (Foreign) 45,000 256,055
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$ 818,190
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TOTAL COMMON STOCKS (IDENTIFIED COST, $7,798,017) $ 9,185,436
OTHER ASSETS, LESS LIABILITIES - 11.5% 1,197,360
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NET ASSETS - 100% $10,382,795
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See notes to financial statements
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EMERGING MARKETS PORTFOLIO
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
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June 30, 1996 (Unaudited)
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ASSETS:
Investments, at value (Note 1A)
(identified cost, $7,798,017) $ 9,185,436
Cash 1,872,373
Cash denominated in foreign currencies
(cost $422,099) 420,926
Receivable for investments sold 269,358
Dividends receivable 11,038
Receivable from Administrator 27,000
Deferred organization expenses (Note 1D) 13,025
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Total assets $ 11,799,156
LIABILITIES:
Payable for investments purchased $ 1,392,870
Payable for forward foreign currency
exchange contracts 159
Payable to affiliates -
Trustee's fees 7,500
Accrued expenses and other liabilities 15,832
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Total liabilities 1,416,361
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NET ASSETS applicable to investors'
interest in Portfolio $ 10,382,795
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SOURCES OF NET ASSETS:
Net proceeds from capital contributions
and withdrawals $ 8,996,515
Net unrealized appreciation of investments
(computed on the basis of identified cost) 1,387,419
Net unrealized depreciation of foreign currencies (1,139)
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Total $ 10,382,795
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See notes to financial statements
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FINANCIAL STATEMENTS (CONTINUED)
STATEMENT OF OPERATIONS
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Six Months Ended June 30, 1996 (Unaudited)
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INVESTMENT INCOME:
Dividend income (net of foreign
withholding tax, $4,103) $ 46,426
Expenses-
Investment adviser fee (Note 2) $ 23,321
Administration fee (Note 2) 7,069
Compensation of Trustees not members
of the Investment Adviser's
organization (Note 2) 16,054
Custodian fees (Note 1C) 41,696
Legal and accounting services 15,091
Registration costs 631
Amortization of organization expenses
(Note 1D) 2,873
Miscellaneous 1,520
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Total expenses $ 108,183
Deduct -
Preliminary allocation of
expenses to the Administrator 27,000
Preliminary waiver of adviser fee 5,571
Preliminary waiver of management
fee 1,140
Reduction of custodian fee
(Note 1C) 7,194
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Total deducted 40,905
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Net expenses 67,278
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Net investment loss $ (20,852)
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REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized loss -
Investments $ 286,088
Foreign currency (12,695)
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Net realized gain $ 273,393
Change in unrealized appreciation
(depreciation) -
Investments $ 1,112,249
Foreign currency (727)
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Net unrealized appreciation 1,111,522
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Net realized and unrealized
gain on investments $ 1,384,915
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Net increase in net assets
from operations $ 1,364,063
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See notes to financial statements
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<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
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SIX MONTHS ENDED
JUNE 30, 1995 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
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<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations-
Net investment loss $ (20,852) $ (23,217)
Net investment gain (loss) on investments and
foreign currency transactions 273,393 (147,448)
Change in unrealized appreciation 1,111,522 281,463
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Net increase in net assets from operations $ 1,364,063 $ 110,798
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Capital transactions:
Contributions $ 6,522,489 $ 3,550,731
Withdrawals (1,091,026) (1,269,530)
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Increase in net assets from capital transactions $ 5,431,463 $ 2,281,201
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Net increase in net assets $ 6,795,526 $ 2,391,999
NET ASSETS:
At beginning of period 3,587,269 1,195,270
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At end of period $ 10,382,795 $ 3,587,269
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</TABLE>
See notes to financial statements
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FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
SUPPLEMENTARY DATA
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SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1996 ---------------------------------
(UNAUDITED) 1995 1994*
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<S> <C> <C> <C>
RATIOS (to average daily net assets):
Net expenses (1) 2.38% + 2.58% 0.00%
Net expenses after custodian fee reduction (1) 2.15% + -- --
Net investment loss (0.67%)+ (1.00%) 0.00%
PORTFOLIO TURNOVER 69% 98% 0%
Net assets, end of period (000s omitted) $10,383 $3,587 $1,195
AVERAGE COMMISSION RATE PAID (2) $ 0.002 -- --
The operating expenses of the Portfolio reflect an allocation of expenses to the Administrator. Had such action not been taken,
the ratios would have been as follows:
RATIOS (to average daily net assets):
Expenses (1) 3.46% + 5.24% 2.21% +
Expenses after custodian fee reduction (1) 3.23% + -- --
Net investment loss (1.74%)+ (3.66%) (2.21%)+
<FN>
+ Annualized.
* For the period from the start of business, November 30, 1994, to December 31, 1994.
(1) The annualized expense ratios for the six months ended June 30, 1996 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 ratio for the period ended June 30, 1996 has not been adjusted to
reflect this change.
(2) Average commission rate paid is computed by dividing the total dollar amount of commissions paid during the fiscal year by the
total number of shares purchased and sold during the fiscal year for which commissions were charged. For fiscal years beginning
on or after September 1, 1995, a Fund is required to disclose its average commission rate per share for security trades on
which commissions are charged.
</TABLE>
See notes to financial statements
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NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996 (UNAUDITED)
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(1) SIGNIFICANT ACCOUNTING POLICIES
Emerging Markets Portfolio (Portfolio) is registered under the Investment
Company Act of 1940 as a diversified, open-end investment company which was
organized as a trust under the laws of the State of New York. The Declaration of
Trust permits the Trustees to issue interests in the Portfolio. The following is
a summary of the significant accounting policies of the Portfolio. The policies
are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS - Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National Market
System are valued at closing sale prices, on the exchange where such securities
are principally traded. Futures positions on securities or currencies are
generally valued at closing settlement prices. Unlisted or listed securities for
which closing sale prices are not available are valued at the mean between the
latest bid and asked prices. Short-term debt securities with a remaining
maturity of 60 days or less are valued at amortized cost. Other fixed income and
debt securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined in
good faith by or at the direction of the Trustees.
B. FEDERAL TAXES - The Portfolio has elected to be treated as a partnership for
Federal tax purposes. No provision is made by the Portfolio for Federal or state
taxes on any taxable income of the Portfolio because each investor in the
Portfolio is individually responsible for the payment of any taxes on its share
of such income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements, (under the Internal Revenue Code), in order for
its investors to satisfy them. The Portfolio will allocate, at least annually
among its investors, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. Withholding taxes on foreign dividends and
capital gains have been provided for in accordance with the Portfolio's
understanding of the applicable countries' tax rules and rates.
C. EXPENSE REDUCTION - The Portfolio has entered into an arrangement with its
custodian whereby interest earned on uninvested cash balances are used to offset
custody fees. All significant reductions are reported as a reduction of expenses
in the Statement of Operations.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
E. FUTURES CONTRACTS - Upon the entering of a financial futures contract, the
Portfolio is required to deposit (initial margin) either in cash or securities
an amount equal to a certain percentage of the purchase price indicated in the
financial futures contract. Subsequent payments are made or received by the
Portfolio (margin maintenance) each day, dependent on daily fluctuations in the
value of the underlying security, and are recorded for book purposes as
unrealized gains or losses by the Portfolio. The Portfolio's investment in
financial futures contracts is designed only to hedge against anticipated future
changes in interest or currency exchange rates. Should interest or currency
exchange rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss. If the
Portfolio enters into a closing transaction, the Portfolio will realize, for
book purposes, a gain or loss equal to the difference between the value of the
financial futures contract to sell and financial futures contract to buy.
F. FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investment securities and income and expenses are converted
into U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. Recognized gains or losses on investment
transactions attributable to foreign currency rates are recorded for financial
statement purposes as net realized gains and losses on investments. That portion
of unrealized gains and losses on investments that result from fluctuations in
foreign currency exchange rates are not separately disclosed.
G. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties to
meet the terms of their contracts and from movements in the value of a foreign
currency relative to the U.S. dollar. The Portfolio will enter into forward
contracts for hedging purposes as well as non-hedging purposes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until such time as the contracts have been
closed or offset.
H. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold. Dividend income is recorded on the ex-dividend date.
However, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as the Portfolio is informed of the ex-dividend date.
Interest income is recorded on the accrual basis.
I. USE OF ESTIMATES - The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expense during the reporting period. Actual results could differ
from those estimates.
J. INTERIM FINANCIAL INFORMATION - The interim financial statements relating to
June 30, 1996 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.
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(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Lloyd George Management (Bermuda)
Limited (the Adviser) as compensation for management and investment advisory
services rendered to the Portfolio. Under the advisory agreement, the Adviser
receives a monthly fee of 0.0625% (0.75% annually) of the average daily net
assets of the Portfolio up to $500,000,000, and at reduced rates as daily net
assets exceed that level. For the six months ended June 30, 1996 the adviser fee
was 0.75% (annualized) of average net assets. To enhance the net income of the
Portfolio the Adviser made a preliminary waiver of $5,571 of investment adviser
fees. In addition, an administrative fee is earned by Eaton Vance Management
(EVM) for managing and administering the business affairs of the Portfolio.
Under the administration agreement, EVM earns a monthly fee in the amount of
1/48th of 1% (equal to 0.25% annually) of the average daily net assets of the
Portfolio up to $500,000,000, and at reduced rates as daily net assets exceed
that level. For the six months ended June 30, 1996, the administration fee was
0.25% (annualized) of average net assets. To enhance the net income of the
Portfolio, the administrator made a preliminary waiver of $1,140 of
administration fee and was allocated expenses in the amount of $27,000. Except
as to Trustees of the Portfolio who are not members of the Adviser or EVM's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser and administrative fees. Certain of
the officers and Trustees of the Portfolio are officers or directors/trustees of
the above organizations.
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(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $8,762,377 and $4,061,621, respectively.
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(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in the value of the
investments owned at June 30, 1996, as computed on a Federal income tax basis,
are as follows:
Aggregate cost $ 7,798,017
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Gross unrealized appreciation $ 1,557,208
Gross unrealized depreciation (162,167)
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Net unrealized appreciation $ 1,395,041
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(5) RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
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(6) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $120 million unsecured line of credit agreement with a bank.
The line of credit consists of a $20 million committed facility and a $100
million discretionary facility. Borrowings will be made by the Portfolio solely
to facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio based on its borrowings at
an amount above either the bank's adjusted certificate of deposit rate, a
variable adjusted certificate of deposit rate, or a federal funds effective
rate. In addition, a fee computed at an annual rate of 1/4 of 1% on the $20
million committed facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and portfolios
at the end of each quarter. The Portfolio did not have any significant
borrowings or allocated fees during the period.
<PAGE>
INVESTMENT MANAGEMENT FOR EMERGING MARKETS PORTFOLIO
OFFICERS DIRECTORS
JAMES B. HAWKES LANDON T. CLAY
President, Director Chairman, Eaton Vance Corp.
MARK S. VENEZIA DONALD R. DWIGHT
Vice President President, Dwight Partners, Inc.
Chairman, Newspapers of
New England, Inc.
SAMUEL L. HAYES, III
JAMES L. O'CONNOR Jacob H. Schiff Professor of
Treasurer Investment Banking,
Harvard University Graduate School
THOMAS OTIS of Business Administration
Secretary
NORTON H. REAMER
President and Director, United Asset
Management Corporation
JOHN L. THORNDIKE
Director,
Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant