<PAGE>
South Asia Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 92.4%
Bangladesh -- 0.3%
Shares Value
- --------------------------------------------------------------------------------
Textiles -- 0.3%
- --------------------------------------------------------------------------------
Apex Spinning & Knitting Mills 48,000 $ 161,210
Garment manufacturer.
- --------------------------------------------------------------------------------
$ 161,210
- --------------------------------------------------------------------------------
Total Bangladesh
(identified cost $311,535) $ 161,210
- --------------------------------------------------------------------------------
India -- 86.8%
Agricultural Equipment -- 4.5%
- --------------------------------------------------------------------------------
Punjab Tractors Ltd./(1)/ 138,900 $2,642,556
The only fully indigenously designed tractor
manufacturer in the country.
- --------------------------------------------------------------------------------
$2,642,556
- --------------------------------------------------------------------------------
Auto and Parts -- 4.1%
- --------------------------------------------------------------------------------
Bajaj Auto Ltd./(1)/ 130,000 $1,753,567
Leading manufacturer of two-wheelers
& three-wheelers.
IFB Industries Ltd./(1)/ 50 16
Manufacturer of high precision engineering tools
and domestic appliances.
Motor Industries 7,150 646,628
A subsidiary of Robert Bosch of Germany with
a presence in the auto components industry,
with products such as spark plugs & fuel
injection pumps.
- --------------------------------------------------------------------------------
$2,400,211
- --------------------------------------------------------------------------------
Banks and Money Services -- 1.6%
- --------------------------------------------------------------------------------
Industrial Credit and Investment Corp./(1)/ 500,550 $ 913,632
One of India's largest development finance
institutions, with assets over $7.39 billion,
involved in project financing &
investment banking.
Karur Vysya Bank/(1)/ 250 948
Private sector bank involved in
retail banking.
Kotak Mahindra Finance Ltd/(1)/ 1,400 769
Bill discounting & consumer financing.
Oriental Bank of Commerce/(1)/ 100 111
Public sector retail bank.
State Bank of India/(1)/ 670 $ 3,339
The largest public sector commercial bank in
India, with over 8000 branches. Engaged
in retail banking & a range of non-fund
based activities.
- --------------------------------------------------------------------------------
$ 918,799
- --------------------------------------------------------------------------------
Beverages -- 0.0%
- --------------------------------------------------------------------------------
Tata Tea Ltd./(1)/ 750 $ 5,363
Integrated tea company with substantial
presence in plantation as well as direct marketing
of branded tea.
- --------------------------------------------------------------------------------
$ 5,363
- --------------------------------------------------------------------------------
Building Materials -- 0.0%
- --------------------------------------------------------------------------------
Associated Cement Cos. Ltd./(1)/ 402 $ 11,566
India's largest & one of the world's largest
cement manufacturing companies; total capacity
of 9.96 million tons.
Murudeshwar Ceramics Ltd./(1)/ 7,800 938
Manufacturer of glazed ceramic wall and
floor tiles.
- --------------------------------------------------------------------------------
$ 12,504
- --------------------------------------------------------------------------------
Cable - Telecommunications -- 0.0%
- --------------------------------------------------------------------------------
Usha Beltron Ltd. GDR 290 $ 160
A medium-sized manufacturer of jelly filled
telecom cables.
- --------------------------------------------------------------------------------
$ 160
- --------------------------------------------------------------------------------
Chemicals -- 3.8%
- --------------------------------------------------------------------------------
Hoechst Schering Agrevo Ltd. 128,700 $2,245,914
A major company in the agrochemical &
pesticide business.
Reliance Industries Ltd./(1)/ 3,745 12,656
Integrated petrochemical company with world
size capacities and major presence in polyesters
and polymers.
Tata Chemicals/(1)/ 1,449 4,285
A diversified company with a major presence
in soda ash, caustic soda & fertilizers.
- --------------------------------------------------------------------------------
$2,262,855
- --------------------------------------------------------------------------------
See notes to financial statements
10
<PAGE>
South Asia Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Shares Value
- --------------------------------------------------------------------------------
Chemicals - Specialty -- 0.9%
- --------------------------------------------------------------------------------
ICI India Ltd. 108,800 $ 510,581
A 51% subsidiary of ICI PLC, UK, having
major presence in paints, explosives and
specialty chemicals
- --------------------------------------------------------------------------------
$ 510,581
- --------------------------------------------------------------------------------
Computer Software -- 18.5%
- --------------------------------------------------------------------------------
Cybertech Systems and Software Ltd. 50,000 $ 307,157
Specializes in providing training to professionals
in SAP, an enterprise resource planning
(ERP) package.
Digital Equipments (India) Ltd. 250,000 785,874
A total solutions provider in the information
technology industry, with major revenues from
sales of Intel based systems and high end
proprietary Alpha products. Software exports
& systems integration are other major areas
of business.
Infosys Technologies Ltd. 143,700 7,532,346
One of India's leading companies in the
computer software sector. Provides specialized
software for banking & retail distribution sector -
major clients include Reebok and Levi Straus.
NIIT Ltd. 55,000 1,842,412
India's leading information technology education
company and the third largest exporter
of software.
Tata Infotech Ltd./(1)/ 12,400 386,650
One of the largest information technology service
& solution providers in India with interest in
software development, distribution, networking,
maintenance, support and training.
- --------------------------------------------------------------------------------
$10,854,439
- --------------------------------------------------------------------------------
Conglomerates -- 1.2%
- --------------------------------------------------------------------------------
Indian Rayon & Industries Ltd./(1)/ 448 $ 2,166
Diversified company with interests in cement,
textiles, rayon and carbon black
Ramco Industries Ltd. 52,300 599,467
Ramco Industries Ltd. 11,000 126,083
Diversified company with interests in building
materials, textiles and computer software.
- --------------------------------------------------------------------------------
$ 727,716
- --------------------------------------------------------------------------------
Consumer Products -- 7.1%
- --------------------------------------------------------------------------------
ITC Ltd. 188,600 $ 2,899,828
Manufacturer of
cigarettes/tobacco with market
leadership in all cigarette segments.
Marico Industries Ltd. 99,200 561,443
A consumer product company, with presence in
coconut/edible oil and hair care oil.
Ponds (India) Ltd./(1)/ 27,900 697,418
51% subsidiary of Unilever PLC, UK (to be
merged with another giant Unilever company in
India - Hindustand Lever) has presence in
personal care products.
- --------------------------------------------------------------------------------
$ 4,158,689
- --------------------------------------------------------------------------------
Diversified Industry -- 2.4%
- --------------------------------------------------------------------------------
Enkay Texofood Industries Ltd./(1)/ 786 $ 473
Has business interests in the manufacturing of
synthetic yarns & the export of processed foods.
Larsen & Toubro Ltd./(1)/ 480 2,596
India's largest company in the engineering &
construction sector.
Larsen & Toubro Ltd. GDR 155,000 1,406,625
Diversified conglomerate with interests in the
manufacturing of cement, electrical &
electronics, as well as the undertaking of
turnkey projects in infrastructure.
Thiru Arooran Sugars/(1)/ 500 637
A manufacturer of sugar & industrial alcohol
Has also made foray into cogeneration of power
through bagasse.
- --------------------------------------------------------------------------------
$1,410,331
- --------------------------------------------------------------------------------
Electric Utilities -- 2.5%
- --------------------------------------------------------------------------------
BSES Ltd./(1)/ 401,088 $1,475,527
A monopoly distributor of power in suburbs
of Bombay.
- --------------------------------------------------------------------------------
$1,475,527
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.0%
- --------------------------------------------------------------------------------
Asea Brown Boveri (India) Ltd./(1)/ 1,950 $ 19,555
Indian subsidiary of Swedish-Swiss multinational
ABB & one of the largest manufacturers of
electrical power equipment.
- --------------------------------------------------------------------------------
$ 19,555
- --------------------------------------------------------------------------------
See notes to financial statements
11
<PAGE>
South Asia Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Shares Value
- --------------------------------------------------------------------------------
Household Products -- 17.0%
- --------------------------------------------------------------------------------
Hindustan Lever Ltd./(1)/ 280,250 $ 9,976,119
A diversified multinational of the Unilever group
and a market leader in soap & detergents,
personal care & food processing industries.
Reckitt and Colman of India Ltd./(1)/ 4,000 27,119
Manufacturer of household products such as
mosquito repellent, surface cleaning agents and
antiseptic lotions.
- --------------------------------------------------------------------------------
$10,003,238
- --------------------------------------------------------------------------------
Industrial Equipment -- 0.0%
- --------------------------------------------------------------------------------
Thermax Ltd. 1,800 $ 5,590
Diversified company with three major divisions -
energy, environment & chemicals, manufacturing
industrial boilers, process heat equipment &
chillers, and pollution control equipment.
Triveni Engineering 33 33
Manufacturer of sugar, sugar machinery
& turbines.
- --------------------------------------------------------------------------------
$ 5,623
- --------------------------------------------------------------------------------
Lodging and Gaming -- 0.0%
- --------------------------------------------------------------------------------
Hotel Leela Venture Ltd./(1)/ 750 $ 785
Operates business hotels & a beach resort in
Bombay & Goa, respectively.
- --------------------------------------------------------------------------------
$ 785
- --------------------------------------------------------------------------------
Machinery -- 1.3%
- --------------------------------------------------------------------------------
Ingersoll Rand of India 61,400 $ 531,033
Manufacturer of compressors, process pumps and
mining equipment.
Otis Elevator Co. (India) Ltd. 41,100 257,814
Manufacturer of elevators and escalators with
dominant market share.
- --------------------------------------------------------------------------------
$ 788,847
- --------------------------------------------------------------------------------
Medical Products -- 8.6%
- --------------------------------------------------------------------------------
Cipla Ltd./(1)/ 50 $ 815
Market leader in anti-bacterial, anti-asthmatic,
and anti-cancer products and entering into
segments of cardiovascular and dermatology.
Hoechst Marion Roussel Ltd. 382,000 3,567,315
The fourth largest company in the Indian
pharmaceutical industry with major presence in
therapeutical segments of analgesic, antihistemic,
cardiovascular drugs. Also manufactures animal
health care.
Ranbaxy Laboratories Ltd./(1)/ 115,928 1,496,771
Presence in anti-bacterial and antibiotics
segments, and a major exporter of bulk drugs
and formulations.
- --------------------------------------------------------------------------------
$ 5,064,901
- --------------------------------------------------------------------------------
Metals - Industrial -- 0.0%
- --------------------------------------------------------------------------------
Bellary Steels & Alloys/(1)/ 400 $ 94
An integrated private sector steel company
with capacity slated to increase from 0.5 to 2
million tons.
Essar Steel Ltd./(1)/ 100 38
Manufacturer of sponge iron & hot rolled coils.
Tata Iron & Steel Co. Ltd./(1)/ 203 603
The largest private sector integrated steel
manufacturer in the country, with a total capacity
of 2.7 million tons.
- --------------------------------------------------------------------------------
$ 735
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.0%
- --------------------------------------------------------------------------------
Hi-tech Drilling Services India Ltd./(1)/ 285,000 $ 560,860
A company engaged in offshore oil drilling.
- --------------------------------------------------------------------------------
$ 560,860
- --------------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 5.3%
- --------------------------------------------------------------------------------
Hindustan Petroleum Corp./(1)/ 340,900 $ 3,139,287
Petroleum company with the second largest
10.25 MMT refining capacity in the country with
strong marketing network.
- --------------------------------------------------------------------------------
$ 3,139,287
- --------------------------------------------------------------------------------
Packaging -- 0.0%
- --------------------------------------------------------------------------------
Flex Industries (wts)/(2)/ 4,274 $ 247
Leading integrated company in the
packaging industry.
- --------------------------------------------------------------------------------
$ 247
- --------------------------------------------------------------------------------
See notes to financial statements
12
<PAGE>
South Asia Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Shares Value
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.0%
- --------------------------------------------------------------------------------
Tamil Nadu Newsprint and Paper/(1)/ 300 $ 123
The world's largest begasse based paper
manufacturer in the public sector.
- --------------------------------------------------------------------------------
$ 123
- --------------------------------------------------------------------------------
Telecommunications -- 5.4%
- --------------------------------------------------------------------------------
Mahanger Telephone Nigam Ltd./(1)/ 366,500 $ 1,541,884
Government owned monopoly provider of fixed
wire telephone services in India's major cities of
Bombay & Delhi.
Videsh Sanchar Nigam Ltd., GDR 150,000 1,605,000
India's monopoly international telephone
service provider.
- --------------------------------------------------------------------------------
$ 3,146,884
- --------------------------------------------------------------------------------
Transportation -- 1.6%
- --------------------------------------------------------------------------------
Great Eastern Shipping/(1)/ 1,270,100 $ 925,506
Diversified company with interests in shipping
and property development.
- --------------------------------------------------------------------------------
$ 925,506
- --------------------------------------------------------------------------------
Total India
(identified cost $47,539,977) $51,036,322
- --------------------------------------------------------------------------------
Pakistan -- 4.0%
Electric Utilities -- 0.0%
- --------------------------------------------------------------------------------
Karachi Electric Supply Co./(1)/ 50 $ 9
Electric distributor for Karachi.
- --------------------------------------------------------------------------------
$ 9
- --------------------------------------------------------------------------------
Household Products -- 3.9%
- --------------------------------------------------------------------------------
Lever Brothers Pakistan Ltd. 120,000 $ 2,261,794
Leading manufacturer and retailer of
consumer products.
- --------------------------------------------------------------------------------
$ 2,261,794
- --------------------------------------------------------------------------------
Insurance -- 0.0%
- --------------------------------------------------------------------------------
Adamjee Insurance Co./(1)/ 1 $ 1
Leading supplier of general insurance in Pakistan.
- --------------------------------------------------------------------------------
$ 1
- --------------------------------------------------------------------------------
Medical Products -- 0.0%
- --------------------------------------------------------------------------------
Searle Pakistan 23,711 $ 7,071
Major player in the pharmaceutical industry.
- --------------------------------------------------------------------------------
$ 7,071
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.1%
- --------------------------------------------------------------------------------
Pakistan State Oil Co. Ltd. 48,744 $ 78,182
Principal distributor of fuel, oil and petroleum.
- --------------------------------------------------------------------------------
$ 78,182
- --------------------------------------------------------------------------------
Total Pakistan
(identified cost $2,728,859) $ 2,347,057
- --------------------------------------------------------------------------------
Sri Lanka -- 1.3%
Banks and Money Services -- 0.4%
- --------------------------------------------------------------------------------
Development Finance Corp. 2 $ 5
One of Sri Lanka's largest development financial
institutions involved in project financing &
investment banking.
National Development Bank 135,600 259,174
A premier development financial institution
involved in project financing, merchant banking &
commercial leasing.
- --------------------------------------------------------------------------------
$ 259,179
- --------------------------------------------------------------------------------
Conglomerates -- 0.9%
- --------------------------------------------------------------------------------
Hayleys Ltd. 1 $ 3
Has interest in diversified business of shipping,
agriculture, textiles & hotels.
John Keells Holdings GDR 94,795 521,373
A diversified conglomerate operating in tourism,
food & beverages, property development sectors.
- --------------------------------------------------------------------------------
$ 521,376
- --------------------------------------------------------------------------------
Total Sri Lanka
(identified cost $1,138,562) $ 780,555
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $51,718,933) $54,325,144
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
South Asia Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Bonds -- 0.0%
Principal
Amount
(000's omitted) Value
- --------------------------------------------------------------------------------
Flex Industries, 13.50%, 12/31/99 $ 812 $ 13,707
Hotel Leela Venture Ltd. NCD,
14.00%, 4/8/03 15 325
- --------------------------------------------------------------------------------
Total Bonds
(identified cost $26,599) $ 14,032
- --------------------------------------------------------------------------------
Total Investments -- 92.4%
(identified cost $51,745,532) $54,339,176
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 7.6% $ 4,474,685
- --------------------------------------------------------------------------------
Net Assets -- 100% $58,813,861
- --------------------------------------------------------------------------------
GDR -- Global Depositary Receipt
/(1)/ The above securities held by the Portfolio on June 30, 1998 are
unrestricted securities valued at market prices. Because of the length of
the registration process, the Portfolio would temporarily be unable to
sell certain of these securities. At June 30, 1998, the aggregate value of
these securities amounted to $4,725,013 representing 8.0% of the
Portfolio's net assets (Note 5).
/(2)/ Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
See notes to financial statements
14
<PAGE>
South Asia Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Top Ten Holdings Industry concentration -- Below are the
top ten industry sectors represented in the
Portfolio of Investments
Percentage Percentage
Industry of Net of Net
Company Sector Assets Value Industry Sector Assets Value
- ----------------------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hindustan Lever Ltd. Household Products 17.0% $9,976,119 Household Products 20.9% $12,265,032
Infosys Technologies Ltd. Computer Software 12.8 7,532,346 Computer Software 18.5 10,854,439
Hoechst Marion Roussel Ltd. Medical Products 6.1 3,567,315 Medical Products 8.6 5,071,972
Hindustan Petroleum Corp. Oil and Gas - Exploration 5.3 3,139,287 Consumer Products 7.1 4,158,689
and Production Telecommunications 5.4 3,146,884
ITC Ltd. Consumer Products 4.9 2,899,828 Oil and Gas - Exploration and
Production 5.3 3,139,287
Punjab Tractors Ltd. Agricultural Equipment 4.5 2,642,556 Agricultural Equipment 4.5 2,642,556
Lever Brothers Pakistan Ltd. Household Products 3.8 2,261,794 Auto and Parts 4.1 2,400,211
Hoechst Schering Agrevo Ltd. Chemicals 3.8 2,245,914 Chemicals 3.8 2,262,855
NIIT Ltd. Computer Software 3.1 1,842,412 Electric Utilities 2.5 1,475,536
Bajaj Auto Ltd. Auto and Parts 3.0 1,753,567
</TABLE>
See notes to financial statements
15
<PAGE>
South Asia Portfolio as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value
(identified cost, $51,745,532) $ 54,339,176
Cash 3,339,561
Foreign currency, at value
(identified cost, $1,036,536) 1,039,511
Receivable for investments sold 419,075
Dividends and interest receivable 271,290
Miscellaneous receivable 82
Tax reclaim receivable 2,593
Deferred organization expenses 14,218
- --------------------------------------------------------------------------------
Total assets $ 59,425,506
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 260,348
Payable to affiliate for Trustees' fees 1,758
Other accrued expenses 349,539
- --------------------------------------------------------------------------------
Total liabilities $ 611,645
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 58,813,861
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 56,239,408
Net unrealized appreciation (computed on the basis of
identified cost) 2,574,453
- --------------------------------------------------------------------------------
Total $ 58,813,861
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months
Ended June 30, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $5,693) $ 732,589
- --------------------------------------------------------------------------------
Total investment income $ 732,589
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 291,209
Administration fee 97,070
Trustees fees and expenses 4,839
Custodian fee 262,785
Legal and accounting services 64,300
Amortization of organization expenses 8,630
Miscellaneous 62,222
- --------------------------------------------------------------------------------
Total expenses $ 791,055
- --------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 32,966
- --------------------------------------------------------------------------------
Total expense reductions $ 32,966
- --------------------------------------------------------------------------------
Net expenses $ 758,089
- --------------------------------------------------------------------------------
Net investment loss $ (25,500)
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (9,730,221)
Foreign currency transactions (243,010)
- --------------------------------------------------------------------------------
Net realized loss $ (9,973,231)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 1,339,336
Foreign currency (5,172)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 1,334,164
- --------------------------------------------------------------------------------
Net realized and unrealized loss $ (8,639,067)
- --------------------------------------------------------------------------------
Net decrease in net assets from operations $ (8,664,567)
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
South Asia Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment loss $ (25,500) $ (222,946)
Net realized loss (9,973,231) (6,059,884)
Net change in unrealized
appreciation (depreciation) 1,334,164 15,208,670
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from operations $ (8,664,567) $ 8,925,840
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 3,891,327 $ 42,091,228
Withdrawals (20,587,648) (70,765,712)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (16,696,321) $ (28,674,484)
- --------------------------------------------------------------------------------
Net decrease in net assets $ (25,360,888) $ (19,748,644)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 84,174,749 $ 103,923,393
- --------------------------------------------------------------------------------
At end of period $ 58,813,861 $ 84,174,749
- --------------------------------------------------------------------------------
Statement of Cash Flows
Six Months Ended
June 30,1998
Increase (Decrease) in Cash (Unaudited)
- --------------------------------------------------------------------------------
Cash Flows From (For) Operating Activities --
Purchase of investments $(23,382,999)
Proceeds from sale of investments 37,285,910
Dividends, interest and tax reclaims received 599,634
Operating expenses paid (635,518)
Foreign currency transactions 4,397,010
- --------------------------------------------------------------------------------
Net cash from operating activities $ 18,264,037
- --------------------------------------------------------------------------------
Cash Flows From (For) Financing Activities --
Proceeds from capital contributions $ 3,891,327
Payments for capital withdrawals (20,587,648)
- --------------------------------------------------------------------------------
Net cash used for financing activities $(16,696,321)
- --------------------------------------------------------------------------------
Net increase in cash $ 1,567,716
- --------------------------------------------------------------------------------
Cash at Beginning of Period $ 1,771,845
- --------------------------------------------------------------------------------
Cash at End of Period $ 3,339,561
- --------------------------------------------------------------------------------
Reconciliation of Net Decrease in Net Assets
From Operations to Net Cash From
Operating Activities
- --------------------------------------------------------------------------------
Net decrease in net assets from operations $ (8,664,567)
Decrease in receivable for investments sold 1,402,045
Decrease in foreign currency 4,645,192
Increase in dividends, interest and other receivables (132,955)
Decrease in deferred organizational expense 8,630
Increase in payable for investments purchased 259,346
Increase in payable to affiliate 445
Increase in accrued expenses and other liabilities 113,496
Net decrease in investments 20,632,405
- --------------------------------------------------------------------------------
Net cash from operating activities $ 18,264,037
- --------------------------------------------------------------------------------
See notes to financial statements
17
<PAGE>
South Asia Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1998 -----------------------------------------------------
(Unaudited) 1997 1996 1995 1994*
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 2.04%+ 1.61% 1.51% 1.76% 1.16%+
Expenses after custodian fee reduction /(1)/ 1.96%+ 1.58% 1.28% 1.35% --
Net investment income (loss) (0.07)%+ (0.20)% (0.11)% (0.18)% 0.01%+
Portfolio Turnover 33% 48% 46% 38% 1%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, May 2, 1994, to December 31,
1994.
/(1)/ The expense ratios for the year ended December 31, 1995 and periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Portfolio to
increase its expense ratio by the effect of any expense offset
arrangements with its service providers. The expense ratio for the period
ended December 31, 1994 has not been adjusted to reflect this change.
See notes to financial statements
18
<PAGE>
South Asia Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
----------------------------------------------------------------------------
South Asia 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 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 or, if there were no sales,
at the mean between the closing bid and asked 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 is treated as a partnership for U.S.
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 U.S. 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.
C Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on a straight-line basis over five years.
D Financial 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 daily fluctuations in the value of the underlying
security, and are recorded for book purposes as unrealized gains or losses
by the Portfolio. 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.
E 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.
F 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. 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.
19
<PAGE>
South Asia Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
G 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 in the Statement of Operations.
H 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.
I Other -- Investment transactions are accounted for on the date the
securities 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.
J Interim Financial Statements -- The interim financial statements relating
to June 30, 1998 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 Investment Adviser Fee and Other Transactions
with Affiliates
----------------------------------------------------------------------------
The investment adviser fee is earned by Lloyd George Investment Management
(Bermuda) Limited (the Adviser) as compensation for management and
investment advisory services rendered to the Portfolio. Under the advisory
agreement, the Adviser receives a monthly fee of 0.0625% (0.75% annually) of
the average daily net assets of the Portfolio up to $500,000,000, and at
reduced rates as daily net assets exceed that level. For the six months
ended June 30, 1998, the annualized adviser fee was 0.75% of average daily
net assets and amounted to $291,209. In addition, an administration 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, 1998, the administration fee was 0.25% of average net assets
and amounted to $97,070. 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 trustees of the above organizations.
3 Investment Transactions
----------------------------------------------------------------------------
For the six months ended June 30, 1998, purchases and sales of investments,
other than short-term obligations, aggregated $23,642,345 and $35,883,865
respectively.
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $ 51,745,532
----------------------------------------------------------------------------
Gross unrealized appreciation $ 12,599,035
Gross unrealized depreciation (10,005,391)
----------------------------------------------------------------------------
Net unrealized appreciation $ 2,593,644
----------------------------------------------------------------------------
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
20
<PAGE>
South Asia Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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.
Settlement of securities transactions in the Indian subcontinent may be
delayed and is generally less frequent than in the United States, which
could affect the liquidity of the Portfolio's assets. The Portfolio may be
unable to sell securities where the registration process is incomplete and
may experience delays in receipt of dividends.
6 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by EVM
and its affiliates in a committed $100 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the eurodollar rate or federal funds rate. In
addition, a fee computed at an annual rate of 0.10% on the daily unused
portion of the line of credit is allocated among the participating
portfolios and funds at the end of each quarter. The Portfolio did not have
any significant borrowings or allocated fees during the six months ended
June 30, 1998.
21
<PAGE>
South Asia Portfolio as of June 30, 1998
INVESTMENT MANAGEMENT
<TABLE>
<CAPTION>
South Asia Portfolio
<S> <C>
Officers Trustees
Hon. Robert Lloyd George Hon. Edward K.Y. Chen
President and Trustee Professor and Director, Center for Asian Studies,
University of Hong Kong
James B. Hawkes
Vice President and Trustee Donald R. Dwight
President, Dwight Partners, Inc.
Scobie Dickinson Ward
Vice President, Assistant Samuel L. Hayes, III
Secretary and Jacob H. Schiff Professor of Investment
Assistant Treasurer Banking, Harvard University Graduate School of
Business Administration
William Walter Raleigh Kerr
Vice President and Norton H. Reamer
Assistant Treasurer Chairman and Chief Executive Officer, United Asset
Management Corporation
James L. O'Connor
Vice President and Treasurer
Alan R. Dynner
Secretary
</TABLE>
22
