<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED)
COMMON STOCKS -- 88.9%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Aircraft Manufacture -- 2.4%
----------------------------------------------------------------------
Embraer - Empresa Brasileira de
Aeronautica SA 65,000 $ 396,201
Brazil's regional aircraft manufacturer
----------------------------------------------------------------------
$ 396,201
----------------------------------------------------------------------
Banks and Money Services -- 12.6%
----------------------------------------------------------------------
China Everbright Pacific, Ltd. 304,000 $ 237,878
One of China's fastest growing banks
Grupo Financiero Banamex(1) 100,000 420,625
Mexico's largest private bank
OTP Bank Rt. GDR 11,805 607,957
Hungary's biggest bank
Sanlam Ltd. 90,000 106,406
South Africa's second largest life
assurer
Turkiye Garanti Bankasi A.S.(1) 36,521,723 441,478
The largest private sector bank in
Turkey
Unibanco GDR 11,000 316,250
Brazil's third largest private bank
----------------------------------------------------------------------
$ 2,130,594
----------------------------------------------------------------------
Beverages -- 4.8%
----------------------------------------------------------------------
Cia Cervejaria Brahma-sp ADR 34,000 $ 578,000
Largest beer brewer in Brazil and Latin
America
Vina Concha y Toro ADR 6,500 236,844
Wine producer/exporter
----------------------------------------------------------------------
$ 814,844
----------------------------------------------------------------------
Broadcasting and Cable -- 5.0%
----------------------------------------------------------------------
Television Broadcasts Ltd. 67,000 $ 446,919
Hong Kong's dominant Chinese-language TV
program provider
TV Azteca SA 30,000 395,625
Mexico's second largest television
company
----------------------------------------------------------------------
$ 842,544
----------------------------------------------------------------------
Communications Equipment -- 2.1%
----------------------------------------------------------------------
Grupo Televisa GDR(1) 5,167 $ 356,200
Largest Spanish speaking media and
broadcast company in the world. Based in
Mexico
----------------------------------------------------------------------
$ 356,200
----------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Computer Software -- 2.8%
----------------------------------------------------------------------
Softline Ltd.(1) 252,085 $ 241,109
South Africa's top maker of small
business accounting software
Tecnomatix Technologies Ltd.(1) 16,907 230,358
Israeli company concentrating in
computer aided production equipment
technology
----------------------------------------------------------------------
$ 471,467
----------------------------------------------------------------------
Conglomerates -- 1.1%
----------------------------------------------------------------------
John Keells Holdings 3,061 $ 7,652
Sri Lankan conglomerate involved in tea,
hotels, and beverages
John Keells Holdings GDR 101,250 179,658
Sri Lankan conglomerate involved in tea,
hotels, and beverages
----------------------------------------------------------------------
$ 187,310
----------------------------------------------------------------------
Electrical / Electronics -- 3.9%
----------------------------------------------------------------------
Hyundai Electronics Industries Co.,
Ltd.(1) 16,000 $ 315,688
The world's largest DRAM manufacturer.
Based in Korea
Orbotech, Ltd.(1) 3,650 338,994
World leader in the manufacture of
automated optical inspection systems for
the printed circuit board industry.
Based in Israel
----------------------------------------------------------------------
$ 654,682
----------------------------------------------------------------------
Electronics - Semiconductors -- 5.3%
----------------------------------------------------------------------
Taiwan Semiconductor Manufacturing,
Co.(1) 125,952 $ 598,502
One of the world's largest contract
manufacturers of integrated circuits
(foundry) for third parties
Via Technologies, Inc.(1) 19,000 293,735
One of Taiwan's leading chipset
manufacturers
----------------------------------------------------------------------
$ 892,237
----------------------------------------------------------------------
Foods -- 5.9%
----------------------------------------------------------------------
Compania Brasileira de Distribuicao
Grupo Pao de Acurcar 18,500 $ 594,312
Supermarket chain
President Chain Store Corp. 106,200 397,494
Taiwanese operator of 7-11 convenience
stores and other consumer businesses
----------------------------------------------------------------------
$ 991,806
----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Insurance -- 1.0%
----------------------------------------------------------------------
Samsung Fire & Marine Insurance 6,250 $ 173,763
Korea's largest non-life insurance
company established in 1952 and
belonging to the Samsung Group
----------------------------------------------------------------------
$ 173,763
----------------------------------------------------------------------
Investment Services -- 7.0%
----------------------------------------------------------------------
Li & Fung, Ltd. 234,000 $ 1,170,660
Largest global intermediator between
garment suppliers and retailers
----------------------------------------------------------------------
$ 1,170,660
----------------------------------------------------------------------
Machinery -- 1.0%
----------------------------------------------------------------------
Siam Cement Co. Ltd.(1) 8,500 $ 159,694
Largest industrial and building material
producer in Thailand
----------------------------------------------------------------------
$ 159,694
----------------------------------------------------------------------
Media & Leisure -- 1.7%
----------------------------------------------------------------------
Corporacion Interamericana de
Entretenimiento S.A.(1) 75,040 $ 293,527
Mexican fully integrated entertainment
company comprising 15 subsidiaries
operating in North America, South
America and Europe
----------------------------------------------------------------------
$ 293,527
----------------------------------------------------------------------
Metals - Industrial -- 1.6%
----------------------------------------------------------------------
Hindalco Industries Ltd. GDR 13,300 $ 262,675
India's second largest aluminum producer
and lowest cost producer in the world
----------------------------------------------------------------------
$ 262,675
----------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 2.2%
----------------------------------------------------------------------
Lukoil Oil Co. ADR 7,400 $ 377,529
Russia's largest oil producer
----------------------------------------------------------------------
$ 377,529
----------------------------------------------------------------------
Oil and Gas - Integrated -- 2.4%
----------------------------------------------------------------------
Surgutneftegaz ADR 30,000 $ 399,750
Russia's second largest oil company
----------------------------------------------------------------------
$ 399,750
----------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Publishing -- 2.8%
----------------------------------------------------------------------
Hurriyet Gazetecilik ve Matbaacilik
AS(1) 48,629,010 $ 470,266
Turkey's most widely read newspaper
----------------------------------------------------------------------
$ 470,266
----------------------------------------------------------------------
Semiconductors -- 3.4%
----------------------------------------------------------------------
Samsung Electronics 1,720 $ 569,207
World's biggest and most profitable
semiconductor company
----------------------------------------------------------------------
$ 569,207
----------------------------------------------------------------------
Telecommunications Services -- 5.9%
----------------------------------------------------------------------
China Unicom Limited(1) 160,000 $ 339,679
China's second largest
telecommunications provider
SK Telecom Co., Ltd. 2,000 654,694
South Korea's largest mobile telecom
firm
----------------------------------------------------------------------
$ 994,373
----------------------------------------------------------------------
Telephone Utilities -- 14.0%
----------------------------------------------------------------------
Embratel Partipacoes ADR 13,340 $ 315,157
Largest long distance and data telecom
company in Brazil
Korea Telecom Corp. ADR 9,070 438,761
Monopolistic telecom service provider
for South Korea
Magyar Tavkozlesi Rt 11,998 419,930
The leading Hungarian telecommunications
source provider
Tele Norte Leste Participacoes ADR 16,756 395,860
One of Brazil's three fixed line holding
companies, located in the northeast of
Brazil
Telefonos de Mexico ADR 8,000 457,000
Largest telecom operator with interests
in local and long distance
telecommunications
Videsh Sanchar Nigam Ltd., GDR 21,500 338,625
India's monopoly international telephone
service provider
----------------------------------------------------------------------
$ 2,365,333
----------------------------------------------------------------------
Total Common Stocks
(identified cost $11,110,113) $14,974,662
----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
CONVERTIBLE PREFERRED STOCKS -- 0.3%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Banks and Money Centers -- 0.3%
----------------------------------------------------------------------
Siam Commercial Bank(1) 90,000 $ 45,948
The fourth largest bank in Thailand
----------------------------------------------------------------------
$ 45,948
----------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $63,235) $ 45,948
----------------------------------------------------------------------
</TABLE>
PREFERRED STOCKS -- 0.0%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Electric Utilities -- 0.0%
----------------------------------------------------------------------
Centrais Geradoras do Sul do Brasil
S.A.(1) 7,000,000 $ 8,502
This company is an electricity
generator.
----------------------------------------------------------------------
$ 8,502
----------------------------------------------------------------------
Total Preferred Stocks
(identified cost $25,810) $ 8,502
----------------------------------------------------------------------
</TABLE>
WARRANTS -- 0.1%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
----------------------------------------------------------------------
Banks and Money Services -- 0.1%
----------------------------------------------------------------------
Siam Commercial Bank(1) 90,000 $ 10,568
The fourth largest bank in Thailand
----------------------------------------------------------------------
$ 10,568
----------------------------------------------------------------------
Total Warrants
(identified cost $0) $ 10,568
----------------------------------------------------------------------
Total Investments -- 89.3%
(identified cost $11,199,158) $15,039,680
----------------------------------------------------------------------
Other Assets, Less Liabilities -- 10.7% $ 1,807,600
----------------------------------------------------------------------
Net Assets -- 100.0% $16,847,280
----------------------------------------------------------------------
</TABLE>
ADR-American Depositary Receipt
GDR-Global Depository Receipt
(1) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED)
COUNTRY CONCENTRATION OF PORTFOLIO
<TABLE>
<CAPTION>
PERCENTAGE
COUNTRY OF NET ASSETS VALUE
<S> <C> <C>
-------------------------------------------------------------------
Brazil 15.5% $2,604,284
Chile 1.4 236,844
China 1.4 237,878
Hong Kong 11.6 1,957,258
Hungary 6.1 1,027,887
India 3.6 601,300
Israel 3.4 569,352
Mexico 11.4 1,922,977
Republic of Korea 12.8 2,152,113
Russia 4.6 777,279
South Africa 2.1 347,514
Sri Lanka 1.1 187,310
Taiwan 7.6 1,289,731
Thailand 1.3 216,209
Turkey 5.4 911,744
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
<S> <C>
Assets
-----------------------------------------------------
Investments, at value
(identified cost, $11,199,158) $15,039,680
Cash 1,810,766
Foreign currency, at value
(identified cost, $9,154) 9,162
Dividends receivable 10,723
-----------------------------------------------------
TOTAL ASSETS $16,870,331
-----------------------------------------------------
Liabilities
-----------------------------------------------------
Payable to affiliate for Trustees' fees $ 106
Accrued expenses 22,945
-----------------------------------------------------
TOTAL LIABILITIES $ 23,051
-----------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $16,847,280
-----------------------------------------------------
Sources of Net Assets
-----------------------------------------------------
Net proceeds from capital contributions
and withdrawals $13,006,864
Net unrealized appreciation (computed on
the basis of identified cost) 3,840,416
-----------------------------------------------------
TOTAL $16,847,280
-----------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
<S> <C>
Investment Income
-----------------------------------------------------
Dividends (net of foreign taxes, $3,854) $ 63,303
-----------------------------------------------------
TOTAL INVESTMENT INCOME $ 63,303
-----------------------------------------------------
Expenses
-----------------------------------------------------
Investment adviser fee $ 60,825
Administration fee 20,274
Trustees fees and expenses 2,818
Custodian fee 34,902
Legal and accounting services 16,900
Miscellaneous 334
-----------------------------------------------------
TOTAL EXPENSES $ 136,053
-----------------------------------------------------
Deduct --
Reduction of custodian fee $ 17,979
Preliminary reduction of investment
adviser fee 8,588
Preliminary reduction of
administration fee 1,976
-----------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 28,543
-----------------------------------------------------
NET EXPENSES $ 107,510
-----------------------------------------------------
NET INVESTMENT LOSS $ (44,207)
-----------------------------------------------------
Realized and Unrealized Gain (Loss)
-----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 206,333
Foreign currency and forward foreign
currency exchange
contract transactions (5,102)
-----------------------------------------------------
NET REALIZED GAIN $ 201,231
-----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(1,288,170)
Foreign currency and forward foreign
currency exchange contracts (473)
-----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(1,288,643)
-----------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(1,087,412)
-----------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $(1,131,619)
-----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 2000 YEAR ENDED
IN NET ASSETS (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
From operations --
Net investment income (loss) $ (44,207) $ 42,713
Net realized gain 201,231 850,084
Net change in unrealized
appreciation (depreciation) (1,288,643) 5,616,042
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (1,131,619) $ 6,508,839
-----------------------------------------------------------------------------
Capital transactions --
Contributions $ 6,700,923 $ 6,286,238
Withdrawals (3,194,263) (6,199,686)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 3,506,660 $ 86,552
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 2,375,041 $ 6,595,391
-----------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------
At beginning of period $ 14,472,239 $ 7,876,848
-----------------------------------------------------------------------------
AT END OF PERIOD $ 16,847,280 $ 14,472,239
-----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
--------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Net expenses 1.54%(1) 1.42% 1.71% 1.53% 1.54% 2.58%
Net expenses after
custodian fee reduction 1.32%(1) 1.35% 1.41% 1.35% 1.32% 2.58%
Net investment income
(loss) (0.54)%(1) 0.45% 0.37% 0.08% 0.14% (1.00)%
Portfolio Turnover 28% 95% 117% 160% 125% 98%
--------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $16,847 $14,472 $ 7,877 $18,554 $10,659 $ 3,587
--------------------------------------------------------------------------------------------------------------
+ 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:
Ratios (As a percentage of
average daily net assets):
Expenses 1.67%(1) 2.42% 1.87% 1.81% 2.24% 5.24%
Expenses after custodian
fee reduction 1.45%(1) 2.35% 1.57% 1.63% 2.02% 5.24%
Net investment income
(loss) (0.67)%(1) (0.55)% 0.21% (0.20)% (0.56)% (3.66)%
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
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 Portfolio's objective is to achieve long-term capital
appreciation. The Portfolio seeks to achieve its objective by investing in
equity securities (primarily common stocks) of companies located in emerging
market countries, which are those considered to be developing. 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 of America.
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 or are considered unreliable 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.
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
balance the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
total expenses in the Statement of Operations.
E 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.
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
17
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
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.
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. 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.
H Other -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed based on the specific identification
of the securities sold.
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 income and expense during the reporting period. Actual results could
differ from those estimates.
J Interim Financial Statements -- The interim financial statements relating to
June 30, 2000 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, 2000,
the adviser fee was 0.75% (annualized) of average daily net assets and
amounted to $60,825. To reduce the net operating loss of the Portfolio, the
Adviser made a reduction of the investment adviser fee of $8,588. 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, 2000, the administration fee was 0.25%
(annualized) of average daily net assets and amounted to $20,274. To reduce
the net operating loss of the Portfolio, EVM made a reduction of the
administrative fee of $1,976. 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 $5,919,555 and $4,033,440, respectively, for the six months ended
June 30, 2000.
4 Federal Income Tax Basis of Investments
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 2000, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $11,199,158
-----------------------------------------------------
Gross unrealized appreciation $ 4,374,741
Gross unrealized depreciation (534,219)
-----------------------------------------------------
NET UNREALIZED APPRECIATION $ 3,840,522
-----------------------------------------------------
</TABLE>
5 Line of Credit
-------------------------------------------
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $150 million unsecured line of credit agreement with a
group of banks. 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 participating portfolio or fund based on its
borrowings at an amount above either the Eurodollar rate or federal funds
rate. In addition, a fee computed at an annual rate of 0.10% on
18
<PAGE>
EMERGING MARKETS PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
the daily unused portion of the line of credit is allocated among the
participating portfolios and funds at the end of each quarter. The Portfolio
did not have any significant borrowings or allocated fees during the six
months ended June 30, 2000.
6 Risks Associated with Foreign Investments
-------------------------------------------
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. 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 in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is
less overall governmental supervision and regulation of foreign securities
markets, broker-dealers, and issuers than in the United States.
7 Financial Instruments
-------------------------------------------
The Portfolio may trade 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, 2000, there were no obligations
under these financial instruments outstanding.
8 Subsequent Event
-------------------------------------------
Effective August 21, 2000, Jacob Rees-Mogg will assume sole responsibility
for managing the Emerging Markets Portfolio. Mr. Rees-Mogg is currently
co-portfolio manager of the Emerging Markets Portfolio.
19
<PAGE>
EATON VANCE EMERGING MARKETS FUND AS OF JUNE 30, 2000
INVESTMENT MANAGEMENT
EMERGING MARKETS PORTFOLIO
Officers
Hon. Robert Lloyd George
President and Trustee
James B. Hawkes
Vice President and Trustee
Scobie Dickinson Ward
Vice President, Assistant
Secretary and Assistant Treasurer
William Walter Raleigh Kerr
Vice President and
Assistant Treasurer
James L. O'Connor
Vice President and 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 of the Board,
United Asset Management Corporation
20
