N-CSRS 1 d348674dncsrs.htm EMERGING MARKETS LOCAL INCOME PORTFOLIO Emerging Markets Local Income Portfolio

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

Form N-CSR

 

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File Number: 811-22048

 

 

Emerging Markets Local Income Portfolio

(Exact Name of Registrant as Specified in Charter)

 

 

Two International Place, Boston, Massachusetts 02110

(Address of Principal Executive Offices)

 

 

Maureen A. Gemma

Two International Place, Boston, Massachusetts 02110

(Name and Address of Agent for Services)

 

 

(617) 482-8260

(Registrant’s Telephone Number)

October 31

Date of Fiscal Year End

April 30, 2016

Date of Reporting Period

 

 

 


Item 1. Reports to Stockholders

 


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited)

 

 

Foreign Government Bonds — 73.7%   
     
Security       

Principal

Amount

(000’s omitted)

    Value  

Albania — 0.8%

  

Albania Government Bond, 8.80%, 10/23/25

  ALL     27,500      $ 227,253   

Albania Government Bond, 8.93%, 4/23/25

  ALL     66,500        564,786   

Republic of Albania,
5.75%, 11/12/20(1)

  EUR     1,300        1,579,197   
                     

Total Albania

      $ 2,371,236   
                     

Angola — 0.9%

  

Republic of Angola Via Northern Lights III BV, 7.00%, 8/16/19(1)

  USD     2,569      $ 2,597,901   
                     

Total Angola

      $ 2,597,901   
                     

Argentina — 3.3%

  

Republic of Argentina, 0.75%, 2/22/17

  USD     2,348      $ 2,219,353   

Republic of Argentina, 0.75%, 6/9/17

  USD     2,397        2,233,501   

Republic of Argentina, 0.75%, 9/21/17

  USD     2,239        1,993,054   

Republic of Argentina, 1.75%, 10/28/16

  USD     2,228        2,154,253   

Republic of Argentina, 2.40%, 3/18/18

  USD     1,605        1,428,167   
                     

Total Argentina

      $ 10,028,328   
                     

Bangladesh — 1.2%

  

Bangladesh Treasury Bond, 11.37%, 4/4/17

  BDT     75,500      $ 1,017,411   

Bangladesh Treasury Bond, 11.40%, 5/9/17

  BDT     125,000        1,693,575   

Bangladesh Treasury Bond, 11.45%, 6/6/17

  BDT     47,100        640,857   

Bangladesh Treasury Bond, 11.72%, 2/6/18

  BDT     29,600        418,528   
                     

Total Bangladesh

      $ 3,770,371   
                     

Barbados — 1.3%

  

Barbados Government International Bond, 6.625%, 12/5/35(1)

  USD     3,841      $ 3,168,825   

Barbados Government International Bond, 6.625%, 12/5/35(2)

  USD     787        649,275   
                     

Total Barbados

      $ 3,818,100   
                     

Bosnia and Herzegovina — 1.2%

  

Republic of Srpska, 1.50%, 6/30/23

  BAM     260      $ 123,914   

Republic of Srpska, 1.50%, 10/30/23

  BAM     708        331,943   

Republic of Srpska, 1.50%, 12/15/23

  BAM     38        17,971   

Republic of Srpska, 1.50%, 5/31/25

  BAM     5,562        2,425,903   

Republic of Srpska, 1.50%, 6/9/25

  BAM     534        237,433   

Republic of Srpska, 1.50%, 12/24/25

  BAM     581        248,279   

Republic of Srpska, 1.50%, 9/25/26

  BAM     361        150,861   

Republic of Srpska, 1.50%, 9/26/27

  BAM     109        44,708   
                     

Total Bosnia and Herzegovina

      $ 3,581,012   
                     
Security       

Principal

Amount

(000’s omitted)

    Value  

Brazil — 3.4%

  

Federative Republic of Brazil, 6.00%, 1/17/17

  USD     3,922      $ 4,053,387   

Letra do Tesouro Nacional, 0.00%, 1/1/17

  BRL     18,400        4,907,007   

Nota do Tesouro Nacional, 10.00%, 1/1/21

  BRL     5,127        1,379,046   
                     

Total Brazil

      $ 10,339,440   
                     

Colombia — 3.4%

  

Republic of Colombia, 7.75%, 4/14/21

  COP     6,301,000      $ 2,269,403   

Titulos De Tesoreria B, 10.00%, 7/24/24

  COP     3,528,300        1,397,868   

Titulos De Tesoreria B, 11.25%, 10/24/18

  COP     17,661,000        6,747,211   
                     

Total Colombia

      $ 10,414,482   
                     

Costa Rica — 0.0%(3)

  

Titulo Propiedad UD,
1.00%, 1/12/22(4)

  CRC     61,787      $ 92,220   

Titulo Propiedad UD,
1.63%, 7/13/16(4)

  CRC     6,941        12,756   
                     

Total Costa Rica

      $ 104,976   
                     

Dominican Republic — 3.8%

  

Dominican Republic International Bond, 9.04%, 1/23/18(1)

  USD     446      $ 470,264   

Dominican Republic International Bond, 9.04%, 1/23/18(2)

  USD     1,486        1,568,202   

Dominican Republic International Bond, 10.40%, 5/10/19(1)

  DOP     224,800        5,029,852   

Dominican Republic International Bond, 13.50%, 8/4/17(1)

  DOP     3,000        68,926   

Dominican Republic International Bond, 14.00%, 6/8/18(1)

  DOP     1,800        42,822   

Dominican Republic International Bond, 15.00%, 4/5/19(1)

  DOP     165,600        4,067,140   

Dominican Republic International Bond, 16.00%, 2/10/17(1)

  DOP     12,000        275,480   
                     

Total Dominican Republic

      $ 11,522,686   
                     

Ecuador — 3.2%

  

Republic of Ecuador,
7.95%, 6/20/24(1)

  USD     4,334      $ 3,781,415   

Republic of Ecuador,
7.95%, 6/20/24(2)

  USD     600        523,500   

Republic of Ecuador,
10.50%, 3/24/20(2)

  USD     5,615        5,334,250   
                     

Total Ecuador

      $ 9,639,165   
                     

Fiji — 0.8%

  

Republic of Fiji, 6.625%, 10/2/20(1)

  USD     2,581      $ 2,547,124   
                     

Total Fiji

      $ 2,547,124   
                     
 

 

  14   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Security       

Principal

Amount

(000’s omitted)

    Value  

Georgia — 2.2%

  

Georgia Treasury Bond, 10.50%, 2/5/25

  GEL     2,934      $ 1,221,995   

Georgia Treasury Bond, 10.75%, 7/9/17

  GEL     100        45,764   

Georgia Treasury Bond, 11.75%, 4/28/21

  GEL     2,233        1,003,256   

Georgia Treasury Bond, 13.375%, 3/10/18

  GEL     3,580        1,717,595   

Georgia Treasury Bond, 14.375%, 7/16/20

  GEL     5,272        2,677,702   
                     

Total Georgia

      $ 6,666,312   
                     

India — 1.8%

  

India Government Bond, 8.40%, 7/28/24

  INR     350,000      $ 5,497,211   
                     

Total India

      $ 5,497,211   
                     

Indonesia — 7.6%

  

Indonesia Government Bond, 7.00%, 5/15/27

  IDR     31,377,000      $ 2,252,247   

Indonesia Government Bond, 7.875%, 4/15/19

  IDR     38,448,000        2,963,919   

Indonesia Government Bond, 8.25%, 7/15/21

  IDR     4,730,000        372,039   

Indonesia Government Bond, 8.25%, 6/15/32

  IDR     11,609,000        913,377   

Indonesia Government Bond, 8.375%, 3/15/24

  IDR     43,330,000        3,440,345   

Indonesia Government Bond, 8.375%, 9/15/26

  IDR     14,100,000        1,118,694   

Indonesia Government Bond, 9.00%, 3/15/29

  IDR     30,681,000        2,529,531   

Indonesia Government Bond, 9.50%, 7/15/31

  IDR     50,388,000        4,370,016   

Indonesia Government Bond, 9.50%, 5/15/41

  IDR     5,702,000        500,754   

Indonesia Government Bond, 10.00%, 9/15/24

  IDR     22,100,000        1,912,751   

Indonesia Government Bond, 10.00%, 2/15/28

  IDR     8,560,000        757,555   

Indonesia Government Bond, 10.25%, 7/15/27

  IDR     22,325,000        2,006,343   
                     

Total Indonesia

      $ 23,137,571   
                     

Iraq — 1.2%

  

Republic of Iraq, 5.80%, 1/15/28(1)

  USD     5,217      $ 3,730,155   
                     

Total Iraq

      $ 3,730,155   
                     

Kenya — 1.6%

  

Kenya Treasury Bond, 11.855%, 5/22/17

  KES     172,850      $ 1,683,184   

Republic of Kenya, 6.875%, 6/24/24(1)

  USD     3,181        3,006,045   
                     

Total Kenya

      $ 4,689,229   
                     

Lebanon — 0.2%

  

Lebanon Treasury Note, 6.18%, 7/28/16

  LBP     204,600      $ 136,235   

Lebanon Treasury Note, 6.18%, 12/29/16

  LBP     136,470        91,115   

Lebanon Treasury Note, 6.18%, 1/26/17

  LBP     362,500        242,108   
                     

Total Lebanon

      $ 469,458   
                     
Security       

Principal

Amount

(000’s omitted)

    Value  

Macedonia — 1.8%

  

Republic of Macedonia, 3.975%, 7/24/21(2)

  EUR     4,871      $ 5,398,278   
                     

Total Macedonia

      $ 5,398,278   
                     

Mexico — 5.3%

  

Mexican Bonos, 5.75%, 3/5/26

  MXN     151,219      $ 8,739,048   

Mexican Bonos, 8.50%, 5/31/29

  MXN     39,000        2,750,607   

Mexican Bonos, 8.50%, 11/18/38

  MXN     36,100        2,607,188   

Mexican Bonos, 10.00%, 11/20/36

  MXN     22,074        1,810,444   
                     

Total Mexico

      $ 15,907,287   
                     

Mongolia — 0.4%

  

Mongolia International Bond,
5.125%, 12/5/22(1)

  USD     1,650      $ 1,308,005   
                     

Total Mongolia

      $ 1,308,005   
                     

Nigeria — 0.3%

  

Republic of Nigeria,
5.125%, 7/12/18(1)

  USD     905      $ 900,747   
                     

Total Nigeria

      $ 900,747   
                     

Philippines — 2.9%

  

Republic of the Philippines, 4.95%, 1/15/21

  PHP     90,000      $ 1,991,162   

Republic of the Philippines, 6.25%, 1/14/36

  PHP     286,000        6,784,033   
                     

Total Philippines

      $ 8,775,195   
                     

Russia — 10.9%

  

Russia Government Bond, 6.40%, 5/27/20

  RUB     1,041,897      $ 14,806,688   

Russia Government Bond, 6.70%, 5/15/19

  RUB     90,979        1,325,234   

Russia Government Bond, 7.00%, 8/16/23

  RUB     126,860        1,790,114   

Russia Government Bond, 7.40%, 6/14/17

  RUB     37,974        576,008   

Russia Government Bond, 7.50%, 3/15/18(5)

  RUB     102,246        1,537,500   

Russia Government Bond, 7.50%, 2/27/19

  RUB     53,520        795,704   

Russia Government Bond, 7.60%, 4/14/21(5)

  RUB     283,826        4,173,729   

Russia Government Bond, 8.15%, 2/3/27

  RUB     293,141        4,372,964   

Russia Government Bond, 8.50%, 9/17/31

  RUB     247,204        3,736,754   
                     

Total Russia

      $ 33,114,695   
                     

Rwanda — 0.5%

  

Republic of Rwanda,
6.625%, 5/2/23(1)

  USD     1,640      $ 1,611,628   
                     

Total Rwanda

      $ 1,611,628   
                     

Serbia — 6.1%

  

Republic of Serbia, 5.25%, 11/21/17(1)

  USD     1,098      $ 1,136,705   

Republic of Serbia, 5.875%, 12/3/18(1)

  USD     4,570        4,822,721   
 

 

  15   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Security       

Principal

Amount

(000’s omitted)

    Value  

Serbia (continued)

  

Serbia Treasury Bond, 10.00%, 3/2/18

  RSD     28,730      $ 292,649   

Serbia Treasury Bond, 10.00%, 4/27/18

  RSD     441,500        4,518,448   

Serbia Treasury Bond, 10.00%, 6/5/21

  RSD     87,280        933,779   

Serbia Treasury Bond, 10.00%, 2/5/22

  RSD     628,610        6,747,157   
                     

Total Serbia

      $ 18,451,459   
                     

South Africa — 2.1%

  

Republic of South Africa, 10.50%, 12/21/26

  ZAR     80,000      $ 6,203,642   
                     

Total South Africa

      $ 6,203,642   
                     

Sri Lanka — 1.7%

  

Sri Lanka Government Bond, 10.00%, 10/1/22

  LKR     61,690      $ 383,993   

Sri Lanka Government Bond, 10.25%, 3/15/25

  LKR     390,590        2,360,082   

Sri Lanka Government Bond, 11.00%, 8/1/21

  LKR     106,340        693,951   

Sri Lanka Government Bond, 11.00%, 6/1/26

  LKR     192,450        1,222,038   

Sri Lanka Government Bond, 11.00%, 5/15/30

  LKR     55,000        337,111   

Sri Lanka Government Bond, 11.50%, 9/1/28

  LKR     27,000        170,550   
                     

Total Sri Lanka

      $ 5,167,725   
                     

Tanzania — 1.4%

  

United Republic of Tanzania, 6.892%, 3/9/20(1)(6)

  USD     4,252      $ 4,326,866   
                     

Total Tanzania

      $ 4,326,866   
                     

Venezuela — 1.3%

  

Bolivarian Republic of Venezuela, 9.25%, 9/15/27

  USD     5,539      $ 2,388,694   

Bolivarian Republic of Venezuela, 9.25%, 5/7/28(1)

  USD     4,096        1,597,284   
                     

Total Venezuela

      $ 3,985,978   
                     

Zambia — 1.1%

  

Republic of Zambia,
8.97%, 7/30/27(2)

  USD     1,507      $ 1,250,810   

Zambia Government Bond, 11.00%, 9/1/19

  ZMW     30,900        2,154,098   
                     

Total Zambia

      $ 3,404,908   
                     

Total Foreign Government Bonds
(identified cost $243,688,347)

   

  $ 223,481,170   
                     
Foreign Corporate Bonds — 7.9%   
     
Security       

Principal

Amount

(000’s omitted)

    Value  

Azerbaijan — 0.1%

                   

International Bank of Azerbaijan OJSC Via Rubrika Finance Co., Ltd., 6.17%, 5/10/17(1)(6)

  USD     400      $ 379,480   
                     

Total Azerbaijan

      $ 379,480   
                     

Brazil — 0.8%

  

Petrobras Global Finance BV, 3.50%, 2/6/17

  USD     1,195      $ 1,186,217   

Petrobras Global Finance BV, 6.25%, 3/17/24

  USD     1,435        1,255,625   
                     

Total Brazil

      $ 2,441,842   
                     

Colombia — 0.1%

  

Emgesa SA ESP, 8.75%, 1/25/21(1)

  COP     697,000      $ 237,904   
                     

Total Colombia

      $ 237,904   
                     

Finland — 0.3%

  

Municipality Finance PLC, 0.50%, 12/6/16

  TRY     2,961      $ 1,004,364   
                     

Total Finland

      $ 1,004,364   
                     

Georgia — 1.8%

  

Bank of Georgia JSC, 7.75%, 7/5/17(1)

  USD     5,051      $ 5,288,346   
                     

Total Georgia

      $ 5,288,346   
                     

India — 1.4%

  

Export-Import Bank of India, 8.87%, 10/30/29

  INR     15,000      $ 239,468   

Food Corp. of India, 9.95%, 3/7/22

  INR     50,000        815,277   

Mahanagar Telephone Nigam, Ltd., 8.29%, 11/28/24

  INR     35,000        536,002   

National Hydroelectric PC, Ltd., 8.85%, 2/11/26

  INR     15,000        236,424   

NTPC, Ltd., 9.17%, 9/22/24

  INR     35,000        562,854   

Power Finance Corp., Ltd., 9.32%, 9/17/19

  INR     50,000        783,647   

Power Grid Corp. of India, Ltd., 8.93%, 10/20/24

  INR     15,000        234,839   

Rural Electrification Corp., Ltd., 9.04%, 10/12/19

  INR     50,000        778,273   
                     

Total India

      $ 4,186,784   
                     

Mexico — 0.4%

  

America Movil SAB de CV, 6.00%, 6/9/19

  MXN     6,000      $ 348,185   

Petroleos Mexicanos,
7.19%, 9/12/24(2)

  MXN     10,630        545,622   

Petroleos Mexicanos, 7.65%, 11/24/21

  MXN     5,900        337,985   
                     

Total Mexico

      $ 1,231,792   
                     
 

 

  16   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Security       

Principal

Amount

(000’s omitted)

    Value  

Mongolia — 0.5%

  

Development Bank of Mongolia, LLC, 5.75%, 3/21/17(1)

  USD     1,668      $ 1,636,725   
                     

Total Mongolia

      $ 1,636,725   
                     

Russia — 1.0%

  

Gazprom PAO Via Gaz Capital SA, 5.136%, 3/22/17(1)

  EUR     2,665      $ 3,144,266   
                     

Total Russia

      $ 3,144,266   
                     

South Korea — 0.1%

  

Export-Import Bank of Korea, 0.50%, 1/25/17

  TRY     880      $ 292,180   
                     

Total South Korea

      $ 292,180   
                     

Supranational — 1.3%

  

Inter-American Development Bank, 7.35%, 9/12/18

  IDR     53,440,000      $ 4,011,931   
                     

Total Supranational

      $ 4,011,931   
                     

Sweden — 0.1%

  

Svensk Exportkredit AB, 0.50%, 2/27/17

  IDR     400,000      $ 28,401   

Svensk Exportkredit AB, 5.15%, 1/30/17(1)

  RUB     12,100        179,709   
                     

Total Sweden

      $ 208,110   
                     

Total Foreign Corporate Bonds
(identified cost $25,630,211)

   

  $ 24,063,724   
                     
Sovereign Loans — 0.8%   
     
Borrower       

Principal

Amount

(000’s omitted)

    Value  

Ethiopia — 0.8%

  

Ethiopian Railways Corporation (Federal Democratic Republic of Ethiopia guaranteed), Term Loan, 4.61%, Maturing August 1,
2021(7)(8)(9)

    $ 2,400      $ 2,245,825   
                     

Total Ethiopia

      $ 2,245,825   
                     

Total Sovereign Loans
(identified cost $2,210,587)

   

  $ 2,245,825   
                     
Short-Term Investments — 12.0%   
Foreign Government Securities — 2.6%   
     
Security       

Principal

Amount

(000’s omitted)

    Value  

Kenya — 0.9%

  

Kenya Treasury Bond, 19.06%, 9/26/16

  KES     260,350      $ 2,655,222   
                     

Total Kenya

      $ 2,655,222   
                     

Lebanon — 1.7%

  

Lebanon Treasury Bill, 0.00%, 5/5/16

  LBP     183,040      $ 121,406   

Lebanon Treasury Bill, 0.00%, 5/19/16

  LBP     320,330        212,105   

Lebanon Treasury Bill, 0.00%, 6/2/16

  LBP     111,610        73,780   

Lebanon Treasury Bill, 0.00%, 8/25/16

  LBP     6,495,330        4,249,376   

Lebanon Treasury Bill, 0.00%, 10/20/16

  LBP     295,240        191,556   

Lebanon Treasury Bill, 0.00%, 12/15/16

  LBP     113,840        73,272   

Lebanon Treasury Bill, 0.00%, 2/16/17

  LBP     371,100        236,701   
                     

Total Lebanon

      $ 5,158,196   
                     

Total Foreign Government Securities
(identified cost $7,617,961)

   

  $ 7,813,418   
                     
U.S. Treasury Obligations — 4.4%   
     
Security       

Principal

Amount

(000’s omitted)

    Value  

U.S. Treasury Bill, 0.00%, 6/16/16(10)

    $ 5,000      $ 4,999,130   

U.S. Treasury Bill, 0.00%, 9/22/16(10)

      8,300        8,290,878   
                     

Total U.S. Treasury Obligations
(identified cost $13,282,232)

   

  $ 13,290,008   
                     
Repurchase Agreements — 2.1%   
     
Description       

Principal

Amount

(000’s omitted)

    Value  

Bank of America, N.A.:

     

Dated 4/12/16 with a maturity date of 5/13/16, an interest rate of 0.75% payable by the Portfolio and repurchase proceeds of EUR 1,544,366, collateralized by EUR 1,500,000 Bundesrepublik Deutschland 0.50%, due 4/7/17 and a market value, including accrued interest, of $1,734,028.

  EUR     1,545      $ 1,769,447   
 

 

  17   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Description       

Principal

Amount

(000’s omitted)

    Value  

JPMorgan Chase Bank, N.A.:

     

Dated 4/25/16 with a maturity date of 5/4/16, an interest rate of 10.50% and repurchase proceeds of RUB 24,550,021, collateralized by RUB 25,000,000 Russia Government Bond 7.00%, due 8/16/23 and a market value, including accrued interest, of $373,409.

  RUB     24,500      $ 378,247   

Dated 4/29/16 with a maturity date of 5/11/16, an interest rate of 10.75% and repurchase proceeds of RUB 267,936,493, collateralized by RUB 280,000,000 Russia Government Bond 7.05%, due 1/19/28 and a market value, including accrued interest, of $3,893,775.

  RUB     267,378        4,127,949   
                     

Total Repurchase Agreements
(identified cost $6,255,800)

   

  $ 6,275,643   
                     
Other — 2.9%   
     
Description       

Interest

(000’s omitted)

    Value  

Eaton Vance Cash Reserves Fund, LLC, 0.53%(11)

    $ 8,962      $ 8,962,197   
                     

Total Other
(identified cost $8,962,197)

   

  $ 8,962,197   
                     

Total Short-Term Investments
(identified cost $36,118,190)

   

  $ 36,341,266   
                     

Total Investments — 94.4%
(identified cost $307,647,335)

   

  $ 286,131,985   
                     
Securities Sold Short — (0.6)%   
Foreign Government Bonds — (0.6)%   
     
Security       

Principal

Amount

(000’s omitted)

    Value  

Germany — (0.6)%

  

Bundesrepublik Deutschland, 0.50%, 4/7/17

  EUR     (1,500   $ (1,733,463
                     

Total Germany

  

  $ (1,733,463
                     

Total Foreign Government Bonds
(proceeds $1,825,714)

   

  $ (1,733,463
                     

Total Securities Sold Short
(proceeds $1,825,714)

   

  $ (1,733,463
                     

Other Assets, Less Liabilities — 6.2%

  

  $ 18,818,771   
                     

Net Assets — 100.0%

  

  $ 303,217,293   
                     

The percentage shown for each investment category in the Portfolio of Investments is based on net assets.

 

  (1) 

Security exempt from registration under Regulation S of the Securities Act of 1933, which exempts from registration securities offered and sold outside the United States. Security may not be offered or sold in the United States except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933. At April 30, 2016, the aggregate value of these securities is $56,935,532 or 18.8% of the Portfolio’s net assets.

 

  (2) 

Security exempt from registration pursuant to Rule 144A under the Securities Act of 1933, as amended. These securities may be sold in certain transactions in reliance on an exemption from registration (normally to qualified institutional buyers). At April 30, 2016, the aggregate value of these securities is $15,269,937 or 5.0% of the Portfolio’s net assets.

 

  (3) 

Amount is less than 0.05%.

 

  (4) 

Inflation-linked security whose principal is adjusted for inflation based on changes in a designated inflation index or inflation rate for the applicable country. Interest is calculated based on the inflation-adjusted principal.

 

  (5) 

Security (or a portion thereof) has been pledged for the benefit of the counterparty for reverse repurchase agreements.

 

  (6) 

Variable rate security. The stated interest rate represents the rate in effect at April 30, 2016.

 

  (7) 

Loan is subject to scheduled mandatory prepayments. Maturity date shown reflects the final maturity date.

 

  (8) 

Variable interest rate that updates semiannually based on changes to the London Interbank Offered Rate (LIBOR). The stated interest rate represents the rate in effect at April 30, 2016.

 

  (9) 

For fair value measurement disclosure purposes, security is categorized as Level 3 (see Note 9).

 

(10) 

Security (or a portion thereof) has been pledged to cover collateral requirements on open derivative contracts and/or securities sold short.

 

(11) 

Affiliated investment company, available to Eaton Vance portfolios and funds, which invests in high quality, U.S. dollar denominated money market instruments. The rate shown is the annualized seven-day yield as of April 30, 2016.

 

 

  18   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Forward Foreign Currency Exchange Contracts  
Currency Purchased     Currency Sold      Counterparty   

Settlement

Date

    

Unrealized

Appreciation

    

Unrealized

(Depreciation)

 
THB     141,083,000      USD     3,883,375       Deutsche Bank AG      5/3/16       $ 155,646       $   
THB     165,449,000      USD     4,554,060       Standard Chartered Bank      5/3/16         182,527           
USD     643,333      THB     23,145,000       Deutsche Bank AG      5/3/16                 (19,278
USD     3,246,745      THB     117,938,000       Deutsche Bank AG      5/3/16                 (129,665
USD     1,208,456      THB     43,444,000       Standard Chartered Bank      5/3/16                 (35,288
USD     3,364,727      THB     122,005,000       Standard Chartered Bank      5/3/16                 (128,116
USD     5,662,424      ZAR     81,589,872       Standard Chartered Bank      5/3/16                 (69,113
ZAR     81,589,872      USD     5,133,059       Barclays Bank PLC      5/3/16         598,479           
EUR     5,335,351      PLN     23,511,293       Morgan Stanley & Co. International PLC      5/4/16                 (50,285
EUR     809,536      PLN     3,576,584       Standard Chartered Bank      5/4/16                 (10,040
PLN     27,087,877      EUR     6,131,164       Standard Chartered Bank      5/4/16         76,040           
EUR     10,826,349      HUF     3,380,392,000       Citibank, N.A.      5/5/16                 (9,952
EUR     10,757,062      HUF     3,359,161,507       Deutsche Bank AG      5/5/16                 (11,369
HUF     482,302,323      EUR     1,544,665       Citibank, N.A.      5/5/16         1,420           
HUF     469,062,949      EUR     1,502,083       Deutsche Bank AG      5/5/16         1,587           
HUF     5,788,188,235      EUR     18,668,118       Standard Chartered Bank      5/5/16                 (132,219
MYR     53,364,000      USD     12,658,997       Goldman Sachs International      5/5/16         999,878           
INR     605,559,000      USD     8,825,268       BNP Paribas      5/9/16         291,186           
USD     2,001,764      INR     136,140,000       BNP Paribas      5/9/16                 (47,770
USD     5,282,592      INR     362,473,000       BNP Paribas      5/9/16                 (174,297
USD     980,865      GEL     2,256,332       Bank of Georgia      5/10/16                 (31,927
RUB     272,764,000      USD     3,805,567       Credit Suisse International      5/11/16         396,359           
RUB     13,055,040      USD     189,552       Credit Suisse International      5/11/16         11,560           
USD     3,533,763      RUB     235,500,540       Credit Suisse International      5/11/16                 (94,120
USD     7,400,453      RUB     530,427,475       Credit Suisse International      5/11/16                 (770,775
IDR     5,751,865,000      USD     420,458       Goldman Sachs International      5/12/16         14,996           
IDR     11,559,992,000      USD     844,720       JPMorgan Chase Bank, N.A.      5/12/16         30,447           
IDR     11,292,253,000      USD     826,363       BNP Paribas      5/16/16         27,933           
IDR     5,737,690,000      USD     420,498       Goldman Sachs International      5/16/16         13,578           
IDR     11,292,253,000      USD     826,787       Standard Chartered Bank      5/16/16         27,510           
TRY     34,281,512      USD     11,869,816       Deutsche Bank AG      5/18/16         329,799           
USD     193,259      TRY     558,155       Deutsche Bank AG      5/18/16                 (5,370
MXN     5,710,486      USD     322,272       BNP Paribas      5/19/16         9,125           
MXN     161,380,000      USD     8,551,973       JPMorgan Chase Bank, N.A.      5/19/16         813,393           
USD     1,149,590      MXN     21,693,345       JPMorgan Chase Bank, N.A.      5/19/16                 (109,340
USD     763,329      GEL     1,719,246       Bank of Georgia      5/23/16                 (6,564
USD     7,365,046      PHP     354,406,000       Bank of America, N.A.      5/23/16                 (165,584
IDR     20,179,509,000      USD     1,479,436       BNP Paribas      5/25/16         44,800           
IDR     61,273,900,000      USD     4,492,221       Goldman Sachs International      5/25/16         136,032           
IDR     10,395,504,000      USD     762,357       JPMorgan Chase Bank, N.A.      5/25/16         22,855           
USD     1,438,691      EUR     1,293,136       Deutsche Bank AG      5/25/16                 (42,950
USD     482,817      GEL     1,084,551       Bank of Georgia      5/25/16                 (2,679
BRL     92,842,770      USD     24,926,241       Standard Chartered Bank      6/2/16         1,804,260           
USD     5,259,643      EUR     4,760,655       Goldman Sachs International      6/2/16                    (196,246
USD     991,845      GEL     2,231,850       Bank of Georgia      6/3/16                 (5,607
USD     11,697,129      EUR     10,599,306       Standard Chartered Bank      6/8/16                 (452,424

 

  19   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Forward Foreign Currency Exchange Contracts (continued)  
Currency Purchased     Currency Sold      Counterparty   

Settlement

Date

    

Unrealized

Appreciation

    

Unrealized

(Depreciation)

 
COP     21,093,540,000      USD     6,438,810       Citibank, N.A.      6/14/16       $ 919,406       $   
MXN     263,877,201      USD     14,962,842       Morgan Stanley & Co. International PLC      6/20/16         302,994           
EUR     25,633,818      USD     28,773,704       Goldman Sachs International      6/22/16         622,864           
USD     318,289      LKR     46,899,954       Citibank, N.A.      7/5/16         1,451           
USD     85,544      LKR     12,647,683       Citibank, N.A.      7/5/16         101           
USD     311,417      LKR     46,354,360       Citibank, N.A.      7/5/16                 (1,736
USD     658,737      LKR     97,097,887       Citibank, N.A.      7/8/16         3,224           
USD     319,596      LKR     47,044,488       Citibank, N.A.      7/8/16         1,996           
USD     208,374      LKR     30,693,528       Citibank, N.A.      7/8/16         1,161           
IDR     6,864,504,000      USD     510,144       BNP Paribas      7/14/16         3,387           
IDR     10,246,131,000      USD     766,410       Deutsche Bank AG      7/14/16         101           
IDR     7,969,215,000      USD     596,097       Standard Chartered Bank      7/14/16         78           
IDR     16,906,308,000      USD     1,259,034       BNP Paribas      7/18/16         4,914           
IDR     17,620,965,000      USD     1,311,523       Deutsche Bank AG      7/18/16         5,854           
USD     421,644      LKR     62,255,777       Citibank, N.A.      7/18/16         2,296           
EUR     136,607      USD     154,974       Standard Chartered Bank      7/20/16         1,825           
RUB     415,039,000      USD     6,181,419       Deutsche Bank AG      7/20/16         103,418           
USD     3,157,338      EUR     2,790,201       Goldman Sachs International      7/20/16                 (45,276
USD     897,518      EUR     791,009       Standard Chartered Bank      7/20/16                 (10,408
USD     2,608,074      EUR     2,298,571       Standard Chartered Bank      7/20/16                 (30,244
USD     167,978      LKR     24,818,792       Citibank, N.A.      7/20/16         877           
USD     8,867,580      RUB     595,395,901       Deutsche Bank AG      7/20/16                 (148,359
USD     361,185      LKR     53,744,391       Citibank, N.A.      7/22/16                 (506
USD     372,245      LKR     55,390,115       Citibank, N.A.      7/22/16                 (522
PLN     61,756,130      USD     16,213,520       Deutsche Bank AG      7/25/16                 (58,187
USD     260,426      LKR     38,764,367       Citibank, N.A.      7/25/16                 (277
USD     361,347      LKR     53,786,506       Citibank, N.A.      7/25/16                 (385
USD     175,040      LKR     26,059,995       Citibank, N.A.      7/26/16                 (182
USD     894,897      LKR     133,321,753       Citibank, N.A.      7/28/16                 (1,133
ZAR     81,589,872      USD     5,558,083       Standard Chartered Bank      8/3/16         70,154           
PLN     23,511,293      EUR     5,311,595       Morgan Stanley & Co. International PLC      8/4/16         49,956           
USD     2,569,718      KES     302,532,912       Standard Chartered Bank      9/27/16                 (348,948
EUR     2,566,429      RSD     326,449,739       Citibank, N.A.      11/22/16                 (12,419
RSD     120,538,415      EUR     948,748       Citibank, N.A.      11/22/16         3,296           
USD     4,087,890      BRL     18,400,000       Citibank, N.A.      1/5/17                 (888,983
MXN     7,983,171      USD     435,667       Bank of America, N.A.      1/13/17         17,507           
USD     8,117,453      MXN     148,744,202       Bank of America, N.A.      1/13/17                 (326,204
RON     66,992,499      EUR     14,883,914       BNP Paribas      1/30/17                 (44,473
                                       $ 8,106,270       $ (4,619,220

 

  20   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

 

Non-deliverable Bond Forward Contracts*  

Settlement

Date

 

Notional

Amount

(000’s omitted)

     Reference Entity    Counterparty    Aggregate Cost     

Net Unrealized

Appreciation

 
5/4/16   COP     4,878,400      

Republic of Colombia,

5.00%, 11/21/18

   Deutsche Bank AG    $ 1,625,853       $ 10,785   
5/4/16   COP     1,651,300      

Republic of Colombia,

5.00%, 11/21/18

   Deutsche Bank AG      552,107         1,754   
5/4/16   COP     6,269,800      

Republic of Colombia,

6.00%, 4/28/28

   Deutsche Bank AG      1,799,710         43,395   
5/4/16   COP     9,581,100      

Republic of Colombia,

10.00%, 7/24/24

   Deutsche Bank AG      3,628,467         154,806   
5/4/16   COP     6,183,700      

Republic of Colombia,

10.00%, 7/24/24

   Deutsche Bank AG      2,428,859         15,923   
                                    $ 226,663   

 

* Represents a short-term forward contract to purchase the reference entity denominated in a non-deliverable foreign currency.

 

Futures Contracts  
Description   Contracts      Position   

Expiration

Month/Year

   Aggregate Cost      Value     

Net Unrealized

Depreciation

 

Interest Rate Futures

                
IMM 10-Year Interest Rate Swap     10       Long    Jun-16    $ 966,425       $ 952,785       $ (13,640
U.S. 5-Year Deliverable Interest Rate Swap     121       Short    Jun-16      (12,466,781      (12,517,828      (51,047
U.S. 10-Year Deliverable Interest Rate Swap     97       Short    Jun-16      (10,117,310      (10,157,719      (40,409
                                         $ (105,096

 

Centrally Cleared Interest Rate Swaps  
Counterparty  

Notional

Amount

(000’s omitted)

    

Portfolio

Pays/Receives

Floating Rate

  

Floating

Rate

 

Annual

Fixed Rate

   

Termination

Date

    

Net Unrealized

Appreciation

(Depreciation)

 
CME Group, Inc.   MXN     67,771       Pays    Mexico Interbank TIIE 28 Day     6.08     6/27/24       $ 53,745   
LCH.Clearnet(1)   EUR     2,209       Receives    6-month Euro Interbank Offered Rate     0.25 (2)      6/15/18         (1,440
LCH.Clearnet(1)   EUR     21,734       Receives    6-month Euro Interbank Offered Rate     0.50 (2)      6/15/21         (40,770
LCH.Clearnet(1)   EUR     3,440       Receives    6-month Euro Interbank Offered Rate     1.00 (2)      6/15/26         (3,481
LCH.Clearnet   PLN     16,000       Pays    6-month PLN WIBOR     3.44        5/9/19         320,705   
LCH.Clearnet   PLN     21,430       Pays    6-month PLN WIBOR     3.25        6/5/19         385,758   
LCH.Clearnet   PLN     4,106       Pays    6-month PLN WIBOR     1.78        2/27/20         (222
LCH.Clearnet   PLN     6,426       Pays    6-month PLN WIBOR     1.72        2/27/20         (3,779
LCH.Clearnet   PLN     4,400       Pays    6-month PLN WIBOR     2.19        10/28/21         24,635   
LCH.Clearnet   PLN     11,400       Pays    6-month PLN WIBOR     2.44        10/28/24         77,830   
LCH.Clearnet(1)   USD     2,104       Receives    3-month USD-LIBOR-BBA     1.25 (2)      6/15/18         420   

 

  21   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Centrally Cleared Interest Rate Swaps (continued)  
Counterparty  

Notional

Amount

(000’s omitted)

    

Portfolio

Pays/Receives

Floating Rate

  

Floating

Rate

 

Annual

Fixed Rate

   

Termination

Date

    

Net Unrealized

Appreciation

(Depreciation)

 
LCH.Clearnet   ZAR     72,130       Pays    3-month ZAR JIBAR     8.38 %       3/18/21       $ 49,739   
LCH.Clearnet   ZAR     68,770       Pays    3-month ZAR JIBAR     8.79        3/18/26         77,149   
                                           $ 940,289   

 

(1) 

Effective date, which represents the date on which the Portfolio and the counterparty to the interest rate swap begin interest payment accrual, is after April 30, 2016.

 

(2) 

Upfront payment is exchanged with the counterparty as a result of the standardized trading coupon.

 

Interest Rate Swaps  
Counterparty   Notional
Amount
(000’s omitted)
   

Portfolio

Pays/Receives

Floating Rate

 

Floating

Rate

 

Annual

Fixed Rate

   

Termination

Date

   

Net Unrealized

Appreciation

(Depreciation)

 
Bank of America, N.A.   BRL     12,953      Pays   Brazil CETIP Interbank Deposit Rate     13.10     1/2/23      $ 348,727   
Bank of America, N.A.   CNY     15,484      Pays   7-day China Fixing Repo Rates     2.22        3/30/18        (19,931
Bank of America, N.A.   MXN     26,000      Pays   Mexico Interbank TIIE 28 Day     6.46        9/24/20        78,074   
Bank of America, N.A.   PLN     3,600      Pays   6-month PLN WIBOR     4.95        9/14/20        148,571   
Bank of America, N.A.   PLN     8,765      Pays   6-month PLN WIBOR     5.45        6/7/21        485,822   
Barclays Bank PLC   BRL     22,098      Pays   Brazil CETIP Interbank Deposit Rate     11.72        1/4/21        (362,195
Barclays Bank PLC   MYR     21,700      Pays   3-month MYR KLIBOR     3.96        7/26/16        3,502   
Barclays Bank PLC   MYR     9,556      Pays   3-month MYR KLIBOR     3.90        11/26/19        22,913   
Barclays Bank PLC   MYR     10,000      Pays   3-month MYR KLIBOR     4.13        10/19/20        46,255   
Barclays Bank PLC   MYR     21,070      Pays   3-month MYR KLIBOR     4.14        11/26/24        61,059   
Barclays Bank PLC   PLN     2,300      Pays   6-month PLN WIBOR     5.36        7/30/20        107,291   
Credit Suisse International   MYR     25,230      Pays   3-month MYR KLIBOR     3.43        4/4/18        (15,733
Credit Suisse International   RUB     256,671      Pays   3-month Moscow Prime Offered Rate     11.56        10/16/18        296,435   
Credit Suisse International   RUB     85,557      Pays   3-month Moscow Prime Offered Rate     11.40        10/19/18        92,699   
Credit Suisse International   RUB     128,336      Pays   3-month Moscow Prime Offered Rate     11.30        10/20/18        133,975   
Credit Suisse International   RUB     83,880      Pays   3-month Moscow Prime Offered Rate     11.25        10/21/18        85,990   
Deutsche Bank AG   BRL     32,649      Pays   Brazil CETIP Interbank Deposit Rate     13.00        1/2/18        (31,527
Deutsche Bank AG   BRL     1,970      Pays   Brazil CETIP Interbank Deposit Rate     12.98        1/2/23        44,734   
Deutsche Bank AG   CNY     38,881      Pays   7-day China Fixing Repo Rates     2.22        3/30/18        (49,471
Deutsche Bank AG   CNY     185,584      Pays   7-day China Fixing Repo Rates     2.45        1/29/21        (637,207
Deutsche Bank AG   MXN     85,500      Pays   Mexico Interbank TIIE 28 Day     6.38        6/17/16        16,256   
Deutsche Bank AG   MYR     31,996      Pays   3-month MYR KLIBOR     3.80        11/18/16        5,704   
Deutsche Bank AG   MYR     10,800      Pays   3-month MYR KLIBOR     4.38        11/23/20        81,660   
Deutsche Bank AG   PLN     3,100      Pays   6-month PLN WIBOR     5.11        4/23/17        27,567   
Goldman Sachs International   BRL     20,110      Pays   Brazil CETIP Interbank Deposit Rate     13.18        1/2/18        6,460   
Goldman Sachs International   MYR     10,122      Pays   3-month MYR KLIBOR     4.04        11/18/21        35,966   
Goldman Sachs International   PLN     11,000      Pays   6-month PLN WIBOR     5.54        5/10/21        627,447   
Goldman Sachs International   RUB         802,075      Pays   3-month Moscow Prime Offered Rate     10.40        11/9/20        437,579   
HSBC Bank USA, N.A.   MXN     44,030      Pays   Mexico Interbank TIIE 28 Day     7.28        12/23/20        220,242   
HSBC Bank USA, N.A.   PLN     11,250      Pays   6-month PLN WIBOR     3.44        5/9/19        224,786   
JPMorgan Chase Bank, N.A.   MYR     4,750      Pays   3-month MYR KLIBOR     4.44        4/8/19        29,514   
JPMorgan Chase Bank, N.A.   PLN     9,900      Pays   6-month PLN WIBOR     4.91        10/11/18        267,589   

 

  22   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Interest Rate Swaps (continued)  
Counterparty   Notional
Amount
(000’s omitted)
   

Portfolio

Pays/Receives

Floating Rate

 

Floating

Rate

 

Annual

Fixed Rate

   

Termination

Date

   

Net Unrealized

Appreciation

(Depreciation)

 
Morgan Stanley & Co. International PLC   BRL     41,201      Pays   Brazil CETIP Interbank Deposit Rate     15.58 %       1/2/19      $ 1,007,716   
Morgan Stanley & Co. International PLC   MXN     29,200      Pays   Mexico Interbank TIIE 28 Day     7.95        12/3/31        239,165   
Nomura International PLC   BRL     2,006      Pays   Brazil CETIP Interbank Deposit Rate     12.90        1/2/23        39,497   
Nomura International PLC   BRL     4,440      Pays   Brazil CETIP Interbank Deposit Rate     12.83        1/2/23        76,862   
Nomura International PLC   MYR     7,320      Pays   3-month MYR KLIBOR     3.91        10/24/19        17,939   
Nomura International PLC   MYR     4,070      Pays   3-month MYR KLIBOR     4.19        10/24/24        15,782   
Standard Chartered Bank   CNY     45,078      Pays   7-day China Fixing Repo Rates     2.22        3/30/18        (58,025
The Bank of Nova Scotia   MXN     90,100      Pays   Mexico Interbank TIIE 28 Day     5.25        12/4/17        56,886   
                                        $ 4,216,575   

 

Centrally Cleared Credit Default Swaps — Buy Protection  

Reference

Entity

  Counterparty  

Notional

Amount

(000’s omitted)

   

Contract

Annual

Fixed Rate**

   

Termination

Date

   

Market

Value

   

Unamortized

Upfront

Payments

   

Net Unrealized

Appreciation

 
South Africa   ICE Clear Credit   $ 150        1.00 %(1)      12/20/19      $ 6,032      $ (3,326   $ 2,706   
South Africa   ICE Clear Credit     100        1.00 (1)      3/20/20        4,664        (2,423     2,241   

Total

                              $ 10,696      $ (5,749   $ 4,947   

 

Credit Default Swaps — Sell Protection  

Reference

Entity

  Counterparty  

Notional

Amount*

(000’s omitted)

   

Contract

Annual

Fixed Rate**

   

Termination

Date

 

Current

Market

Annual

Fixed Rate***

   

Market

Value

   

Unamortized

Upfront

Payments

Received

(Paid)

   

Net Unrealized

Appreciation

 
Nigeria   Citibank, N.A.   $ 1,890        3.50   6/20/16     2.89   $ 9,170      $      $ 9,170   
South Africa   Bank of America, N.A.     2,600        1.00 (1)    9/20/17     0.89        6,788        23,669        30,457   
South Africa   Bank of America, N.A.     3,040        1.00 (1)    9/20/17     0.89        7,937        10,865        18,802   
South Africa   Bank of America, N.A.     920        1.00 (1)    9/20/17     0.89        2,402        4,367        6,769   
South Africa   Bank of America, N.A.     680        1.00 (1)    9/20/17     0.89        1,776        2,877        4,653   
South Africa   Barclays Bank PLC     450        1.00 (1)    9/20/17     0.89        1,174        3,178        4,352   
South Africa   Barclays Bank PLC     431        1.00 (1)    9/20/17     0.89        1,125        2,838        3,963   
South Africa   BNP Paribas     1,140        1.00 (1)    9/20/17     0.89        2,977        7,058        10,035   
South Africa   BNP Paribas     750        1.00 (1)    9/20/17     0.89        1,959        5,488        7,447   
South Africa   Credit Suisse International     1,300        1.00 (1)    9/20/17     0.89        3,394        12,823        16,217   
South Africa   Deutsche Bank AG     2,000        1.00 (1)    9/20/17     0.89        5,222        18,207        23,429   
South Africa   Deutsche Bank AG     810        1.00 (1)    9/20/17     0.89        2,115        8,190        10,305   
South Africa   Goldman Sachs International     510        1.00 (1)    9/20/17     0.89        1,332        4,899        6,231   
South Africa   Nomura International PLC     5,000        1.00 (1)    9/20/17     0.89        13,054        21,205        34,259   
South Africa   Nomura International PLC     400        1.00 (1)    9/20/17     0.89        1,044        2,169        3,213   
Turkey   Bank of America, N.A.     6,387        1.00 (1)    12/20/17     0.97        10,123        49,674        59,797   

 

  23   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

Credit Default Swaps — Sell Protection (continued)  

Reference

Entity

  Counterparty  

Notional

Amount*

(000’s omitted)

   

Contract

Annual

Fixed Rate**

   

Termination

Date

 

Current

Market

Annual

Fixed Rate***

   

Market

Value

   

Unamortized

Upfront

Payments

Received

(Paid)

   

Net Unrealized

Appreciation

 
Turkey   Barclays Bank PLC   $ 7,630        1.00 %(1)    9/20/19     1.86 %     $ (205,500   $ 214,086      $ 8,586   
Turkey   Deutsche Bank AG     3,220        1.00 (1)    9/20/19     1.86        (86,724     89,162        2,438   

Total

      $ 39,158                          $ (220,632   $ 480,755      $ 260,123   

 

Credit Default Swaps — Buy Protection  
Reference Entity   Counterparty  

Notional

Amount

(000’s omitted)

   

Contract

Annual

Fixed Rate**

   

Termination

Date

   

Market

Value

   

Unamortized

Upfront

Payments

Received

(Paid)

   

Net Unrealized

Appreciation
(Depreciation)

 
Lebanon   Goldman Sachs International   $ 2,471        1.00 %(1)      6/20/18      $ 98,588      $ (142,395   $ (43,807
Lebanon   Goldman Sachs International     215        5.00 (1)      12/20/18        (10,163     6,402        (3,761
Lebanon   Goldman Sachs International     199        5.00 (1)      12/20/18        (9,408     5,481        (3,927
Lebanon   HSBC Bank USA, N.A.     1,250        1.00 (1)      12/20/17        33,160        (58,325     (25,165
South Africa   Bank of America, N.A.     300        1.00 (1)      12/20/19        11,938        (5,061     6,877   
South Africa   Bank of America, N.A.     775        1.00 (1)      12/20/20        52,114        (13,848     38,266   
South Africa   Bank of America, N.A.     525        1.00 (1)      12/20/20        35,303        (10,290     25,013   
South Africa   Barclays Bank PLC     300        1.00 (1)      12/20/19        11,939        (5,851     6,088   
South Africa   Barclays Bank PLC     100        1.00 (1)      3/20/20        4,604        (1,553     3,051   
South Africa   Barclays Bank PLC     750        1.00 (1)      12/20/20        50,433        (14,152     36,281   
South Africa   Barclays Bank PLC     565        1.00 (1)      12/20/20        37,992        (10,058     27,934   
South Africa   Credit Suisse International     100        1.00 (1)      3/20/20        4,604        (1,703     2,901   
South Africa   Credit Suisse International     100        1.00 (1)      3/20/20        4,604        (2,072     2,532   
South Africa   Credit Suisse International     775        1.00 (1)      12/20/20        52,114        (14,724     37,390   
South Africa   Credit Suisse International     790        1.00 (1)      12/20/20        53,123        (15,772     37,351   
South Africa   Credit Suisse International     840        1.00 (1)      12/20/20        56,485        (20,612     35,873   
South Africa   Deutsche Bank AG     500        1.00 (1)      9/20/20        29,929        (12,479     17,450   
South Africa   Deutsche Bank AG     610        1.00 (1)      12/20/20        41,019        (11,318     29,701   
South Africa   Goldman Sachs International     815        1.00 (1)      12/20/20        54,804        (15,426     39,378   
South Africa   Goldman Sachs International     820        1.00 (1)      12/20/20        55,141        (15,773     39,368   
South Africa   JPMorgan Chase Bank, N.A.     100        1.00 (1)      12/20/19        3,979        (2,312     1,667   
South Africa   JPMorgan Chase Bank, N.A.     100        1.00 (1)      12/20/19        3,980        (2,775     1,205   
South Africa   JPMorgan Chase Bank, N.A.     100        1.00 (1)      3/20/20        4,604        (1,673     2,931   
South Africa   JPMorgan Chase Bank, N.A.     100        1.00 (1)      3/20/20        4,604        (1,733     2,871   
South Africa   JPMorgan Chase Bank, N.A.     100        1.00 (1)      3/20/20        4,604        (2,395     2,209   

Total

                              $ 690,094      $ (370,417   $ 319,677   

 

* If the Portfolio is the seller of credit protection, the notional amount is the maximum potential amount of future payments the Portfolio could be required to make if a credit event, as defined in the credit default swap agreement, were to occur. At April 30, 2016, such maximum potential amount for all open credit default swaps in which the Portfolio is the seller was $39,158,000.

 

** The contract annual fixed rate represents the fixed rate of interest received by the Portfolio (as a seller of protection) or paid by the Portfolio (as a buyer of protection) on the notional amount of the credit default swap contract.

 

  24   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Portfolio of Investments (Unaudited) — continued

 

 

 

*** Current market annual fixed rates, utilized in determining the net unrealized appreciation or depreciation as of period end, serve as an indicator of the market’s perception of the current status of the payment/performance risk associated with the credit derivative. The current market annual fixed rate of a particular reference entity reflects the cost, as quoted by the pricing vendor, of selling protection against default of that entity as of period end and may include upfront payments required to be made to enter into the agreement. The higher the fixed rate, the greater the market perceived risk of a credit event involving the reference entity. A rate identified as “Defaulted” indicates a credit event has occurred for the reference entity.

 

(1) 

Upfront payment is exchanged with the counterparty as a result of the standardized trading coupon.

 

Cross-Currency Swaps  
Counterparty   Portfolio Receives*    Portfolio Pays*   

Termination

Date

  

Net Unrealized

Depreciation

 
    
Deutsche Bank AG
 

10.54% on TRY 21,450,000

plus USD 9,981,225

   3-month USD-LIBOR-BBA on USD 9,981,225 plus TRY 21,450,000    4/3/19    $ (2,050,574
    
JPMorgan Chase Bank, N.A.
  8.97% on TRY 8,196,576 plus USD 3,251,319    3-month USD-LIBOR-BBA on USD 3,251,319 plus TRY 8,196,576    3/3/20      (328,237
                   $ (2,378,811

 

* The Portfolio pays interest on the currency received and receives interest on the currency delivered. At the termination date, the notional amount of the currency received will be exchanged for the notional amount of the currency delivered.

Currency Abbreviations:

 

ALL     Albanian Lek
BAM     Bosnia-Herzegovina Convertible Mark
BDT     Bangladeshi Taka
BRL     Brazilian Real
CNY     Yuan Renminbi
COP     Colombian Peso
CRC     Costa Rican Colon
DOP     Dominican Peso
EUR     Euro
GEL     Georgian Lari
HUF     Hungarian Forint
IDR     Indonesian Rupiah
INR     Indian Rupee
KES     Kenyan Shilling
LBP     Lebanese Pound
LKR     Sri Lankan Rupee
MXN     Mexican Peso
MYR     Malaysian Ringgit
PHP     Philippine Peso
PLN     Polish Zloty
RON     Romanian Leu
RSD     Serbian Dinar
RUB     Russian Ruble
THB     Thai Baht
TRY     New Turkish Lira
USD     United States Dollar
ZAR     South African Rand
ZMW     Zambian Kwacha
 

 

  25   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Statement of Assets and Liabilities (Unaudited)

 

 

Assets   April 30, 2016  

Unaffiliated investments, at value (identified cost, $298,685,138)

  $ 277,169,788   

Affiliated investment, at value (identified cost, $8,962,197)

    8,962,197   

Cash

    2,471,299   

Restricted cash*

    2,766,599   

Foreign currency, at value (identified cost, $1,678,853)

    1,689,152   

Interest receivable

    5,507,261   

Interest receivable from affiliated investment

    6,172   

Due from broker for open reverse repurchase agreements

    4,127,949   

Receivable for investments sold

    6,580,072   

Receivable for variation margin on open centrally cleared swap contracts

    113,799   

Receivable for open forward foreign currency exchange contracts

    8,106,270   

Receivable for open swap contracts

    6,047,124   

Premium paid on open non-centrally cleared swap contracts

    382,300   

Receivable for open non-deliverable bond forward contracts

    226,663   

Tax reclaims receivable

    4,280   

Total assets

  $ 324,160,925   
Liabilities        

Cash collateral due to brokers

  $ 1,130,000   

Payable for reverse repurchase agreements, including accrued interest of $431

    4,506,627   

Payable for investments purchased

    4,127,949   

Payable for securities sold short, at value (proceeds, $1,825,714)

    1,733,463   

Payable for variation margin on open futures contracts

    12,966   

Payable for open forward foreign currency exchange contracts

    4,619,220   

Payable for open swap contracts

    3,629,560   

Payable for closed swap contracts

    33,928   

Premium received on open non-centrally cleared swap contracts

    492,638   

Payable to affiliates:

 

Investment adviser fee

    156,838   

Trustees’ fees

    1,312   

Interest payable on securities sold short

    558   

Accrued foreign capital gains taxes

    280,822   

Accrued expenses

    217,751   

Total liabilities

  $ 20,943,632   

Net Assets applicable to investors’ interest in Portfolio

  $ 303,217,293   
Sources of Net Assets        

Investors’ capital

  $ 317,720,233   

Net unrealized depreciation

    (14,502,940

Total

  $ 303,217,293   

 

* Represents restricted cash on deposit at the custodian and brokers for open derivative contracts.

 

  26   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Statement of Operations (Unaudited)

 

 

Investment Income  

Six Months Ended

April 30, 2016

 

Interest (net of foreign taxes, $314,393)

  $ 9,589,603   

Interest allocated from affiliated investment

    31,578   

Expenses allocated from affiliated investment

    (1,265

Total investment income

  $ 9,619,916   
Expenses        

Investment adviser fee

  $ 906,102   

Trustees’ fees and expenses

    7,570   

Custodian fee

    246,324   

Legal and accounting services

    49,355   

Interest expense and fees

    51,206   

Interest expense on securities sold short

    3,127   

Miscellaneous

    4,773   

Total expenses

  $ 1,268,457   

Net investment income

  $ 8,351,459   
Realized and Unrealized Gain (Loss)        

Net realized gain (loss) —

 

Investment transactions

  $ (16,375,519

Investment transactions allocated from affiliated investment

    55   

Futures contracts

    (1,389,978

Swap contracts

    1,698,382   

Foreign currency and forward foreign currency exchange contract transactions

    503,891   

Non-deliverable bond forward contracts

    (180,328

Net realized loss

  $ (15,743,497

Change in unrealized appreciation (depreciation) —

 

Investments (including net increase in accrued foreign capital gains taxes of $226,825)

  $ 24,936,115   

Securities sold short

    (65,956

Futures contracts

    409,058   

Swap contracts

    5,590,591   

Foreign currency and forward foreign currency exchange contracts

    5,993,793   

Non-deliverable bond forward contracts

    222,438   

Net change in unrealized appreciation (depreciation)

  $ 37,086,039   

Net realized and unrealized gain

  $ 21,342,542   

Net increase in net assets from operations

  $ 29,694,001   

 

  27   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Statements of Changes in Net Assets

 

 

Increase (Decrease) in Net Assets  

Six Months Ended

April 30, 2016

(Unaudited)

   

Year Ended

October 31,  2015(1)

 

From operations —

   

Net investment income

  $ 8,351,459      $ 18,896,153   

Net realized loss from investment transactions, futures contracts, swap contracts, foreign currency and forward foreign currency exchange contract transactions and non-deliverable bond forward contracts

    (15,743,497     (66,600,812

Net change in unrealized appreciation (depreciation) from investments, securities sold short, futures contracts, swap contracts, foreign currency, forward foreign currency exchange contracts and non-deliverable bond forward contracts

    37,086,039        (16,073,233

Net increase (decrease) in net assets from operations

  $ 29,694,001      $ (63,777,892

Capital transactions —

   

Contributions

  $ 27,503,662      $ 46,541,486   

Withdrawals

    (34,032,568     (126,243,214

Net decrease in net assets from capital transactions

  $ (6,528,906   $ (79,701,728

Net increase (decrease) in net assets

  $ 23,165,095      $ (143,479,620
Net Assets                

At beginning of period

  $ 280,052,198      $ 423,531,818   

At end of period

  $ 303,217,293      $ 280,052,198   

 

(1) 

Includes the accounts of the Subsidiary through March 27, 2015, as discussed in Note 1.

 

  28   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Supplementary Data

 

 

   

Six Months Ended

April 30, 2016

(Unaudited)

    Year Ended October 31,  
Ratios/Supplemental Data     2015     2014     2013     2012     2011  

Ratios (as a percentage of average daily net assets):

                                               

Expenses(1)(2)

    0.91 %(3)      0.95     0.92     0.97     0.97     0.92

Net investment income

    5.99 %(3)      5.88     5.53     5.25     5.53     4.90

Portfolio Turnover

    38 %(4)      47     97     27     24     16

Total Return

    11.06 %(4)      (17.07 )%      0.00 %(5)      (3.10 )%      7.78     0.13

Net assets, end of period (000’s omitted)

  $ 303,217      $ 280,052      $ 423,532      $ 564,863      $ 775,093      $ 803,386   

 

(1) 

Excludes the effect of custody fee credits, if any, of less than 0.005%.

 

(2) 

Includes interest and dividend expense, primarily on securities sold short and reverse repurchase agreements, of 0.04%, 0.07%, 0.06%, 0.14%, 0.15% and 0.08% for the six months ended April 30, 2016 and the years ended October 31, 2015, 2014, 2013, 2012 and 2011, respectively.

 

(3) 

Annualized.

 

(4) 

Not annualized.

 

(5) 

Amount is less than 0.005%.

 

  29   See Notes to Financial Statements.


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited)

 

 

1  Significant Accounting Policies

Emerging Markets Local Income Portfolio (the Portfolio) is a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a non-diversified, open-end management investment company. The Portfolio’s investment objective is total return. The Declaration of Trust permits the Trustees to issue interests in the Portfolio. At April 30, 2016, Eaton Vance Emerging Markets Local Income Fund, Eaton Vance Short Duration Strategic Income Fund, Eaton Vance International (Cayman Islands) Short Duration Strategic Income Fund and Eaton Vance International (Cayman Islands) Emerging Markets Local Income Fund held an interest of 78.6%, 14.2%, 4.8% and 2.3%, respectively, in the Portfolio.

Prior to March 28, 2015, the Portfolio sought to gain exposure to the commodity markets, in whole or in part, through investments in Eaton Vance EMLIP Commodity Subsidiary, Ltd. (the Subsidiary), a wholly-owned subsidiary of the Portfolio organized under the laws of the Cayman Islands with the same objective and investment policies and restrictions as the Portfolio. As of the close of business on March 27, 2015, the Portfolio fully redeemed its investment in the Subsidiary. Net assets of the Subsidiary at such date, consisting primarily of cash and securities, were transferred to the Portfolio with no gain or loss for financial reporting purposes. As of October 31, 2015, the Subsidiary had been dissolved with the Cayman Islands authorities. The accompanying financial statements include the accounts of the Subsidiary through March 27, 2015. Intercompany balances and transactions were eliminated in consolidation.

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 (U.S. GAAP). The Portfolio is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946.

A  Investment Valuation — The following methodologies are used to determine the market value or fair value of investments.

Debt Obligations. Debt obligations (including short-term obligations with a remaining maturity of more than sixty days) are generally valued on the basis of valuations provided by third party pricing services, as derived from such services’ pricing models. Inputs to the models may include, but are not limited to, reported trades, executable bid and asked prices, broker/dealer quotations, prices or yields of securities with similar characteristics, interest rates, anticipated prepayments, benchmark curves or information pertaining to the issuer, as well as industry and economic events. The pricing services may use a matrix approach, which considers information regarding securities with similar characteristics to determine the valuation for a security. Short-term obligations purchased with a remaining maturity of sixty days or less (excluding those that are non-U.S. dollar denominated, which typically are valued by a pricing service or dealer quotes) are generally valued at amortized cost, which approximates market value.

Derivatives. Financial and commodities futures contracts are valued at the closing settlement price established by the board of trade or exchange on which they are traded. Forward foreign currency exchange contracts are generally valued at the mean of the average bid and average asked prices that are reported by currency dealers to a third party pricing service at the valuation time. Such third party pricing service valuations are supplied for specific settlement periods and the Portfolio’s forward foreign currency exchange contracts are valued at an interpolated rate between the closest preceding and subsequent settlement period reported by the third party pricing service. Non-deliverable bond forward contracts are generally valued based on the current price of the underlying bond as provided by a third party pricing service and current interest rates. Swaps (other than centrally cleared) are normally valued using valuations provided by a third party pricing service. Such pricing service valuations are based on the present value of fixed and projected floating rate cash flows over the term of the swap contract, and in the case of credit default swaps, based on credit spread quotations obtained from broker/dealers and expected default recovery rates determined by the pricing service using proprietary models. Future cash flows on swaps are discounted to their present value using swap rates provided by electronic data services or by broker/dealers. Centrally cleared swaps are valued at the daily settlement price provided by the central clearing counterparty.

Foreign Securities and Currencies. Foreign securities and currencies are valued in U.S. dollars, based on foreign currency exchange rate quotations supplied by a third party pricing service. The pricing service uses a proprietary model to determine the exchange rate. Inputs to the model include reported trades and implied bid/ask spreads.

Affiliated Fund. The Portfolio may invest in Eaton Vance Cash Reserves Fund, LLC (Cash Reserves Fund), an affiliated investment company managed by Eaton Vance Management (EVM). The value of the Portfolio’s investment in Cash Reserves Fund reflects the Portfolio’s proportionate interest in its net assets. Cash Reserves Fund generally values its investment securities utilizing the amortized cost valuation technique in accordance with Rule 2a-7 under the 1940 Act. This technique involves initially valuing a portfolio security at its cost and thereafter assuming a constant amortization to maturity of any discount or premium. If amortized cost is determined not to approximate fair value, Cash Reserves Fund may value its investment securities in the same manner as debt obligations described above.

Fair Valuation. Investments for which valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Portfolio in a manner that fairly reflects the security’s value, or the amount that the Portfolio might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.

 

  30  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

B  Investment Transactions — Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of identified cost.

C  Income — Interest income is recorded on the basis of interest accrued, adjusted for amortization of premium or accretion of discount. Fees associated with loan amendments are recognized immediately. Inflation adjustments to the principal amount of inflation-adjusted bonds and notes are reflected as interest income. Withholding taxes on foreign interest and capital gains have been provided for in accordance with the Portfolio’s understanding of the applicable countries’ tax rules and rates.

D  Federal and Other 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 ultimately responsible for the payment of any taxes on its share of taxable income. Since at least one of the Portfolio’s investors is a regulated investment company that invests all or substantially all of its 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 losses and any other items of income, gain, loss, deduction or credit.

In addition to the requirements of the Internal Revenue Code, the Portfolio may also be subject to local taxes on the recognition of capital gains in certain countries. In determining the daily net asset value, the Portfolio estimates the accrual for such taxes, if any, based on the unrealized appreciation on certain portfolio securities and the related tax rates. Taxes attributable to unrealized appreciation are included in the change in unrealized appreciation (depreciation) on investments. Capital gains taxes on securities sold are included in net realized gain (loss) on investments.

As of April 30, 2016, the Portfolio had no uncertain tax positions that would require financial statement recognition, de-recognition, or disclosure. The Portfolio files a U.S. federal income tax return annually after its fiscal year-end, which is subject to examination by the Internal Revenue Service for a period of three years from the date of filing.

E  Expense Reduction — State Street Bank and Trust Company (SSBT) serves as custodian of the Portfolio. Pursuant to the custodian agreement, SSBT receives a fee that may be reduced by credits, which are determined based on the average daily cash balance the Portfolio maintains with SSBT. All credit balances, if any, used to reduce the Portfolio’s custodian fees are reported as a reduction of expenses in the Statement of Operations. Effective September 1, 2015, SSBT began imposing fees on certain uninvested cash balances and discontinued credits on cash deposit balances.

F  Foreign Currency Translation — Investment valuations, other assets, and liabilities initially expressed in foreign currencies are translated each business day into U.S. dollars based upon current exchange rates. Purchases and sales of foreign investment securities and income and expenses denominated in foreign currencies are translated into U.S. dollars based upon currency exchange rates in effect on the respective dates of such transactions. Recognized gains or losses on investment transactions attributable to changes in foreign currency exchange 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 results from fluctuations in foreign currency exchange rates is not separately disclosed.

G  Unfunded Loan Commitments — The Portfolio may enter into certain loan agreements all or a portion of which may be unfunded. The Portfolio is obligated to fund these commitments at the borrower’s discretion. These commitments, if any, are disclosed in the accompanying Portfolio of Investments.

H  Use of Estimates — The preparation of the financial statements in conformity with U.S. GAAP 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.

I  Indemnifications — Under the Portfolio’s organizational documents, its officers and Trustees may be indemnified against certain liabilities and expenses arising out of the performance of their duties to the Portfolio. Under Massachusetts law, if certain conditions prevail, interestholders in the Portfolio could be deemed to have personal liability for the obligations of the Portfolio. However, the Portfolio’s Declaration of Trust contains an express disclaimer of liability on the part of Portfolio interestholders and the By-laws provide that the Portfolio shall assume the defense on behalf of any Portfolio interestholder. Moreover, the By-laws also provide for indemnification out of Portfolio property of any interestholder held personally liable solely by reason of being or having been an interestholder for all loss or expense arising from such liability. Additionally, in the normal course of business, the Portfolio enters into agreements with service providers that may contain indemnification clauses. The Portfolio’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Portfolio that have not yet occurred.

J  Financial and Commodities Futures Contracts — Upon entering into a financial or commodities futures contract, the Portfolio is required to deposit with the broker, either in cash or securities, an amount equal to a certain percentage of the contract amount (initial margin). Subsequent payments, known as variation margin, are made or received by the Portfolio each business day, depending on the daily fluctuations in the value of the underlying security, index or commodity and are recorded as unrealized gains or losses by the Portfolio. Gains (losses) are realized upon the expiration or closing of the financial or commodities futures contracts. Should market conditions change unexpectedly, the Portfolio may not achieve the anticipated benefits of the financial or commodities futures contracts and may realize a loss. Futures contracts have minimal counterparty risk as they are exchange traded and the clearinghouse for the exchange is substituted as the counterparty, guaranteeing counterparty performance.

 

  31  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

K  Forward Foreign Currency Exchange and Non-Deliverable Bond Forward 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. The forward foreign currency exchange contracts are adjusted by the daily exchange rate of the underlying currency and any gains or losses are recorded as unrealized until such time as the contracts have been closed. The Portfolio may also enter into non-deliverable bond forward contracts for the purchase or sale of a bond denominated in a non-deliverable foreign currency at a fixed price on a future date. For non-deliverable bond forward contracts, unrealized gains and losses, based on changes in the value of the contract, and realized gains and losses are accounted for as described above. 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.

L  Interest Rate Swaps — Swap contracts are privately negotiated agreements between the Portfolio and a counterparty. Certain swap contracts may be centrally cleared (“centrally cleared swaps”), whereby all payments made or received by the Portfolio pursuant to the contract are with a central clearing party (CCP) rather than the original counterparty. The CCP guarantees the performance of the original parties to the contract. Upon entering into centrally cleared swaps, the Portfolio is required to deposit with the CCP, either in cash or securities, an amount of initial margin determined by the CCP, which is subject to adjustment.

Pursuant to interest rate swap agreements, the Portfolio either makes floating-rate payments to the counterparty (or CCP in the case of centrally cleared swaps) based on a benchmark interest rate in exchange for fixed-rate payments or the Portfolio makes fixed-rate payments to the counterparty (or CCP in the case of a centrally cleared swap) in exchange for payments on a floating benchmark interest rate. Payments received or made are recorded as realized gains or losses. During the term of the outstanding swap agreement, changes in the underlying value of the swap are recorded as unrealized gains or losses. For centrally cleared swaps, the daily change in valuation is recorded as a receivable or payable for variation margin and settled in cash with the CCP daily. The value of the swap is determined by changes in the relationship between two rates of interest. The Portfolio is exposed to credit loss in the event of non-performance by the swap counterparty. In the case of centrally cleared swaps, counterparty risk is minimal due to protections provided by the CCP. Risk may also arise from movements in interest rates.

M  Cross-Currency Swaps — Cross-currency swaps are interest rate swaps in which interest cash flows are exchanged between two parties based on the notional amounts of two different currencies. The notional amounts are typically determined based on the spot exchange rates at the inception of the trade. Cross-currency swaps also involve the exchange of the notional amounts at the start of the contract at the current spot rate with an agreement to re-exchange such amounts at a later date at either the same exchange rate, a specified rate or the then current spot rate. The entire principal value of a cross-currency swap is subject to the risk that the counterparty to the swap will default on its contractual delivery obligations.

N  Credit Default Swaps — When the Portfolio is the buyer of a credit default swap contract, the Portfolio is entitled to receive the par (or other agreed-upon) value of a referenced debt obligation (or basket of debt obligations) from the counterparty (or CCP in the case of a centrally cleared swap) to the contract if a credit event by a third party, such as a U.S. or foreign corporate issuer or sovereign issuer, on the debt obligation occurs. In return, the Portfolio pays the counterparty a periodic stream of payments over the term of the contract provided that no credit event has occurred. If no credit event occurs, the Portfolio would have spent the stream of payments and received no proceeds from the contract. When the Portfolio is the seller of a credit default swap contract, it receives the stream of payments, but is obligated to pay to the buyer of the protection an amount up to the notional amount of the swap and in certain instances take delivery of securities of the reference entity upon the occurrence of a credit event, as defined under the terms of that particular swap agreement. Credit events are contract specific but may include bankruptcy, failure to pay, restructuring, obligation acceleration and repudiation/moratorium. If the Portfolio is a seller of protection and a credit event occurs, the maximum potential amount of future payments that the Portfolio could be required to make would be an amount equal to the notional amount of the agreement. This potential amount would be partially offset by any recovery value of the respective referenced obligation, or net amount received from the settlement of a buy protection credit default swap agreement entered into by the Portfolio for the same referenced obligation. As the seller, the Portfolio may create economic leverage to its portfolio because, in addition to its total net assets, the Portfolio is subject to investment exposure on the notional amount of the swap. The interest fee paid or received on the swap contract, which is based on a specified interest rate on a fixed notional amount, is accrued daily as a component of unrealized appreciation (depreciation) and is recorded as realized gain upon receipt or realized loss upon payment. The Portfolio also records an increase or decrease to unrealized appreciation (depreciation) in an amount equal to the daily valuation. For centrally cleared swaps, the daily change in valuation is recorded as a receivable or payable for variation margin and settled in cash with the CCP daily. All upfront payments, if any, are amortized over the life of the swap contract as realized gains or losses. Those upfront payments that are paid or received, typically for non-centrally cleared swaps, are recorded as other assets or other liabilities, respectively, net of amortization. For financial reporting purposes, unamortized upfront payments, if any, are netted with unrealized appreciation or depreciation on swap contracts to determine the market value of swaps as presented in Notes 5 and 9. The Portfolio segregates assets in the form of cash or liquid securities in an amount equal to the notional amount of the credit default swaps of which it is the seller. The Portfolio segregates assets in the form of cash or liquid securities in an amount equal to any unrealized depreciation of the credit default swaps of which it is the buyer, marked-to-market on a daily basis. These transactions involve certain risks, including the risk that the seller may be unable to fulfill the transaction. In the case of centrally cleared swaps, counterparty risk is minimal due to protections provided by the CCP.

O  Repurchase Agreements — A repurchase agreement is the purchase by the Portfolio of securities from a counterparty in exchange for cash that is coupled with an agreement to resell those securities to the counterparty at a specified date and price. When a repurchase agreement is entered, the Portfolio typically receives securities with a value that equals or exceeds the repurchase price, including any accrued interest earned on the agreement. The value of such securities will be marked-to-market daily, and cash or additional securities will be exchanged between the parties as needed. Except in the case of a repurchase agreement entered to settle a short sale, the value of the securities delivered to the Portfolio will be at least equal to 90% of the repurchase price during the term of the repurchase agreement. The terms of a repurchase agreement entered to settle a short sale may provide that the

 

  32  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

cash purchase price paid by the Portfolio is more than the value of purchased securities that effectively collateralize the repurchase price payable by the counterparty. Since in such a transaction, the Portfolio normally will have used the purchased securities to settle the short sale, the Portfolio will segregate liquid assets equal to the marked-to-market value of the purchased securities that it is obligated to return to the counterparty under the repurchase agreement. In the event of insolvency of the counterparty to a repurchase agreement, recovery of the repurchase price owed to the Portfolio may be delayed. Such an insolvency also may result in a loss to the extent that the value of the purchased securities decreases during the delay or that value has otherwise not been maintained at an amount at least equal to the repurchase price.

P  Reverse Repurchase Agreements — Under a reverse repurchase agreement, the Portfolio temporarily transfers possession of a portfolio security to another party, such as a bank or broker/dealer, in return for cash. At the same time, the Portfolio agrees to repurchase the security at an agreed upon time and price, which reflects an interest payment. In periods of increased demand for a security, the Portfolio may receive a payment from the counterparty for the use of the security, which is recorded as interest income. Because the Portfolio retains effective control over the transferred security, the transaction is accounted for as a secured borrowing. The Portfolio may enter into such agreements when it believes it is able to invest the cash acquired at a rate higher than the cost of the agreement, which would increase earned income. When the Portfolio enters into a reverse repurchase agreement, any fluctuations in the market value of either the securities transferred to another party or the securities in which the proceeds may be invested would affect the market value of the Portfolio’s assets. Because reverse repurchase agreements may be considered to be the practical equivalent of borrowing funds (and the counterparty making a loan), they constitute a form of leverage. The Portfolio segregates cash or liquid assets equal to its obligation to repurchase the security. During the term of the agreement, the Portfolio may also be obligated to pledge additional cash and/or securities in the event of a decline in the fair value of the transferred security. In the event the counterparty to a reverse repurchase agreement becomes insolvent, recovery of the security transferred by the Portfolio may be delayed or the Portfolio may incur a loss equal to the amount by which the value of the security transferred by the Portfolio exceeds the repurchase price payable by the Portfolio.

Q  Securities Sold Short — A short sale is a transaction in which the Portfolio sells a security it does not own in anticipation of a decline in the market value of that security. To complete such a transaction, the Portfolio must borrow the security to make delivery to the buyer with an obligation to replace such borrowed security at a later date. When making a short sale, the Portfolio segregates liquid assets with the custodian equal to its obligations under the short sale. Until the security is replaced, the Portfolio is required to repay the lender any dividends or interest, which accrue during the period of the loan. The proceeds received from a short sale are recorded as a liability and the Portfolio records an unrealized gain or loss to the extent of the difference between the proceeds received and the value of the open short position on the day of determination. A gain, limited to the price at which the Portfolio sold the security short, or a loss, potentially unlimited as there is no upward limit on the price of a security, is recorded when the short position is terminated. Interest and dividends payable on securities sold short are recorded as an expense.

R  Interim Financial Statements — The interim financial statements relating to April 30, 2016 and for the six months then ended have not been audited by an independent registered public accounting firm, 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 Boston Management and Research (BMR), a subsidiary of EVM, as compensation for investment advisory services rendered to the Portfolio. The fee is computed at an annual rate of 0.650% of the Portfolio’s average daily net assets up to $1 billion, 0.625% from $1 billion but less than $2 billion, 0.600% from $2 billion but less than $5 billion, and 0.575% of average daily net assets of $5 billion or more, and is payable monthly. For the six months ended April 30, 2016, the Portfolio’s investment adviser fee amounted to $906,102 or 0.65% (annualized) of the Portfolio’s average daily net assets. The Portfolio invests its cash in Cash Reserves Fund. EVM does not currently receive a fee for advisory services provided to Cash Reserves Fund.

Trustees and officers of the Portfolio who are members of EVM’s or BMR’s organizations receive remuneration for their services to the Portfolio out of the investment adviser fee. Trustees of the Portfolio who are not affiliated with the investment adviser may elect to defer receipt of all or a percentage of their annual fees in accordance with the terms of the Trustees Deferred Compensation Plan. For the six months ended April 30, 2016, no significant amounts have been deferred. Certain officers and Trustees of the Portfolio are officers of the above organizations.

3  Purchases and Sales of Investments

Purchases and sales of investments, other than short-term obligations and including maturities, aggregated $86,212,252 and $92,766,978, respectively, for the six months ended April 30, 2016.

 

  33  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

4   Federal Income Tax Basis of Investments

The cost and unrealized appreciation (depreciation) of investments of the Portfolio at April 30, 2016, as determined on a federal income tax basis, were as follows:

 

Aggregate cost

  $ 307,814,743   

Gross unrealized appreciation

  $ 7,421,897   

Gross unrealized depreciation

    (29,104,655

Net unrealized depreciation

  $ (21,682,758

5  Financial Instruments

The Portfolio may trade in financial instruments with off-balance sheet risk in the normal course of its investing activities. These financial instruments may include forward foreign currency exchange contracts, non-deliverable bond forward contracts, futures contracts and swap 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 do 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. A summary of obligations under these financial instruments at April 30, 2016 is included in the Portfolio of Investments. At April 30, 2016, the Portfolio had sufficient cash and/or securities to cover commitments under these contracts.

In the normal course of pursuing its investment objective, the Portfolio is subject to the following risks:

Credit Risk: The Portfolio enters into credit default swap contracts to manage certain investment risks and/or to enhance total return.

Foreign Exchange Risk: The Portfolio engages in forward foreign currency exchange contracts and cross-currency swaps to enhance total return, to seek to hedge against fluctuations in currency exchange rates and/or as a substitute for the purchase or sale of securities or currencies.

Interest Rate Risk: The Portfolio utilizes various interest rate derivatives including non-deliverable bond forward contracts, interest rate futures contracts, interest rate swaps and cross-currency swaps to enhance total return, to seek to hedge against fluctuations in interest rates and/or to change the effective duration of its portfolio.

The Portfolio enters into over-the-counter (OTC) derivatives that may contain provisions whereby the counterparty may terminate the contract under certain conditions, including but not limited to a decline in the Portfolio’s net assets below a certain level over a certain period of time, which would trigger a payment by the Portfolio for those derivatives in a liability position. At April 30, 2016, the fair value of derivatives with credit-related contingent features in a net liability position was $8,437,138. The aggregate fair value of assets pledged as collateral by the Portfolio for such liability was $3,674,360 at April 30, 2016.

The OTC derivatives in which the Portfolio invests are subject to the risk that the counterparty to the contract fails to perform its obligations under the contract. To mitigate this risk, the Portfolio has entered into an International Swaps and Derivatives Association, Inc. Master Agreement (“ISDA Master Agreement”) or similar agreement with substantially all its derivative counterparties. An ISDA Master Agreement is a bilateral agreement between the Portfolio and a counterparty that governs certain OTC derivatives and typically contains, among other things, set-off provisions in the event of a default and/or termination event as defined under the relevant ISDA Master Agreement. Under an ISDA Master Agreement, the Portfolio may, under certain circumstances, offset with the counterparty certain derivative financial instruments’ payables and/or receivables with collateral held and/or posted and create one single net payment. The provisions of the ISDA Master Agreement typically permit a single net payment in the event of default including the bankruptcy or insolvency of the counterparty. However, bankruptcy or insolvency laws of a particular jurisdiction may impose restrictions on or prohibitions against the right of offset in bankruptcy or insolvency. Certain ISDA Master Agreements allow counterparties to OTC derivatives to terminate derivative contracts prior to maturity in the event the Portfolio’s net assets decline by a stated percentage or the Portfolio fails to meet the terms of its ISDA Master Agreements, which would cause the counterparty to accelerate payment by the Portfolio of any net liability owed to it.

The collateral requirements for derivatives traded under an ISDA Master Agreement are governed by a Credit Support Annex to the ISDA Master Agreement. Collateral requirements are determined at the close of business each day and are typically based on changes in market values for each transaction under an ISDA Master Agreement and netted into one amount for such agreement. Generally, the amount of collateral due from or to a counterparty is subject to a minimum transfer threshold amount before a transfer is required, which may vary by counterparty. Collateral pledged for the benefit of the Portfolio and/or counterparty is held in segregated accounts by the Portfolio’s custodian and cannot be sold, re-pledged, assigned or otherwise used while pledged. The portion of such collateral representing cash, if any, is reflected as restricted cash and, in the case of cash pledged by a counterparty for the benefit of the Portfolio, a corresponding liability on the Statement of Assets and Liabilities. Securities pledged by the Portfolio as collateral, if any, are identified as

 

  34  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

such in the Portfolio of Investments. The carrying amount of the liability for cash collateral due to brokers at April 30, 2016 approximated its fair value. If measured at fair value, such liability would have been considered as Level 2 in the fair value hierarchy (see Note 9) at April 30, 2016.

The fair value of open derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) by risk exposure at April 30, 2016 was as follows:

 

    Fair Value  
Statement of Assets and Liabilities Caption   Credit     

Foreign

Exchange

    

Interest

Rate

     Total  

Net unrealized depreciation*

  $ 4,947       $       $ 989,981       $ 994,928   

Receivable for open forward foreign currency exchange contracts

            8,106,270                 8,106,270   

Receivable/payable for open swap contracts; Premium paid/received on open non-centrally cleared swap contracts

    781,257                 5,390,664         6,171,921   

Receivable for open non-deliverable bond forward contracts

                    226,663         226,663   

Total Asset Derivatives

  $ 786,204       $ 8,106,270       $ 6,607,308       $ 15,499,782   

Derivatives not subject to master netting or similar agreements

  $ 4,947       $       $ 989,981       $ 994,928   

Total Asset Derivatives subject to master netting or similar agreements

  $ 781,257       $ 8,106,270       $ 5,617,327       $ 14,504,854   

Net unrealized depreciation*

  $       $       $ (154,788    $ (154,788

Payable for open forward foreign currency exchange contracts

            (4,619,220              (4,619,220

Payable/receivable for open swap contracts; Premium paid/received on open non-centrally cleared swap contracts

    (311,795              (3,552,900      (3,864,695

Total Liability Derivatives

  $ (311,795    $ (4,619,220    $ (3,707,688    $ (8,638,703

Derivatives not subject to master netting or similar agreements

  $       $ (46,777    $ (154,788    $ (201,565

Total Liability Derivatives subject to master netting or similar agreements

  $ (311,795    $ (4,572,443    $ (3,552,900    $ (8,437,138

 

* Amount represents cumulative unrealized appreciation or (depreciation) on futures contracts and centrally cleared swap contracts. Only the current day’s variation margin on open futures contracts and centrally cleared swap contracts is reported within the Statement of Assets and Liabilities as Receivable or Payable for variation margin, as applicable.

 

  35  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

The Portfolio’s derivative assets and liabilities at fair value by risk, which are reported gross in the Statement of Assets and Liabilities, are presented in the table above. The following tables present the Portfolio’s derivative assets and liabilities by counterparty, net of amounts available for offset under a master netting agreement and net of the related collateral received by the Portfolio for such assets and pledged by the Portfolio for such liabilities as of April 30, 2016.

 

Counterparty  

Derivative

Assets Subject to

Master Netting

Agreement

    

Derivatives

Available

for Offset

    

Non-cash

Collateral

Received(a)

    

Cash

Collateral

Received(a)

    

Net Amount

of Derivative

Assets(b)

 

Bank of America, N.A.

  $ 1,207,082       $ (511,719    $       $       $ 695,363   

Barclays Bank PLC

    946,766         (567,695              (260,000      119,071   

BNP Paribas

    386,281         (266,540                      119,741   

Citibank, N.A.

    944,398         (916,095                      28,303   

Credit Suisse International

    1,191,342         (880,628      (310,714                

Deutsche Bank AG

    1,077,274         (1,077,274                        

Goldman Sachs International

    3,104,665         (261,093      (2,496,144              347,428   

HSBC Bank USA, N.A.

    478,188                 (478,188                

JPMorgan Chase Bank, N.A.

    1,185,569         (437,577              (500,000      247,992   

Morgan Stanley & Co. International PLC

    1,599,831         (50,285      (1,374,000              175,546   

Nomura International PLC

    164,178                                 164,178   

Standard Chartered Bank

    2,162,394         (1,274,825              (370,000      517,569   

The Bank of Nova Scotia

    56,886                                 56,886   
    $ 14,504,854       $ (6,243,731    $ (4,659,046    $ (1,130,000    $ 2,472,077   
             
Counterparty  

Derivative

Liabilities Subject to

Master Netting

Agreement

    

Derivatives

Available

for Offset

    

Non-cash

Collateral

Pledged(a)

    

Cash

Collateral

Pledged(a)

    

Net Amount

of Derivative

Liabilities(c)

 

Bank of America, N.A.

  $ (511,719    $ 511,719       $       $       $   

Barclays Bank PLC

    (567,695      567,695                           

BNP Paribas

    (266,540      266,540                           

Citibank, N.A.

    (916,095      916,095                           

Credit Suisse International

    (880,628      880,628                           

Deutsche Bank AG

    (3,270,681      1,077,274         2,193,407                   

Goldman Sachs International

    (261,093      261,093                           

JPMorgan Chase Bank, N.A.

    (437,577      437,577                           

Morgan Stanley & Co. International PLC

    (50,285      50,285                           

Standard Chartered Bank

    (1,274,825      1,274,825                           
    $ (8,437,138    $ 6,243,731       $ 2,193,407       $       $   

 

(a) 

In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization.

 

(b) 

Net amount represents the net amount due from the counterparty in the event of default.

 

(c) 

Net amount represents the net amount payable to the counterparty in the event of default.

Information with respect to repurchase and reverse repurchase agreements at April 30, 2016 is included at Note 7.

 

  36  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

The effect of derivative instruments (not considered to be hedging instruments for accounting disclosure purposes) on the Statement of Operations by risk exposure for the six months ended April 30, 2016 was as follows:

 

Statement of Operations Caption   Credit      Foreign
Exchange
    

Interest

Rate

 

Net realized gain (loss) —

       

Futures contracts

  $       $       $ (1,389,978

Swap contracts

    (256,785              1,955,167   

Foreign currency and forward foreign currency exchange contract transactions

            507,564           

Non-deliverable bond forward contracts

                    (180,328

Total

  $ (256,785    $ 507,564       $ 384,861   

Change in unrealized appreciation (depreciation) —

       

Futures contracts

  $       $       $ 409,058   

Swap contracts

    802,954                 4,787,637   

Foreign currency and forward foreign currency exchange contracts

            5,644,251           

Non-deliverable bond forward contracts

                    222,438   

Total

  $ 802,954       $ 5,644,251       $ 5,419,133   

The average notional amounts of derivative contracts outstanding during the six months ended April 30, 2016, which are indicative of the volume of these derivative types, were as follows:

 

Futures

Contracts — Long

   

Futures

Contracts — Short

   

Forward

Foreign Currency

Exchange Contracts

   

Non-deliverable

Bond Forward

Contracts

   

Swap

Contracts

 
  $972,000      $ 31,827,000      $ 460,489,000      $ 9,094,000      $ 304,090,000   

6  Line of Credit

The Portfolio participates with other portfolios and funds managed by EVM and its affiliates in a $625 million unsecured line of credit agreement with a group of banks, which is in effect through September 2, 2016. Borrowings are made by the Portfolio solely to facilitate the handling of unusual and/or unanticipated short-term cash requirements. Interest is charged to the Portfolio 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 the daily unused portion of the line of credit is allocated among the participating portfolios and funds at the end of each quarter. Because the line of credit is not available exclusively to the Portfolio, it may be unable to borrow some or all of its requested amounts at any particular time. The Portfolio did not have any significant borrowings or allocated fees during the six months ended April 30, 2016.

 

  37  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

7  Reverse Repurchase Agreements

Reverse repurchase agreements outstanding as of April 30, 2016 were as follows:

 

Counterparty  

Trade

Date

    

Maturity

Date

    

Interest

Rate Paid

(Received)

    

Principal

Amount

    

Value

including

Accrued

Interest

    

Non-U.S.

Sovereign Debt

Securities

Pledged as

Collateral

 

JPMorgan Chase Bank, N.A.

    4/25/16         5/4/16         10.30    RUB 24,500,000       $ 378,678       $ 379,373   

JPMorgan Chase Bank, N.A.

    4/29/16         5/11/16         10.50       RUB     267,377,600         4,127,949         4,127,202   

Total

                                      $ 4,506,627       $ 4,506,575   

 

RUB     Russian Ruble

At April 30, 2016, the remaining contractual maturity of all reverse repurchase agreements was less than 30 days.

For the six months ended April 30, 2016, the average borrowings under settled reverse repurchase agreements and the average annual interest rate were approximately $6,780,766 and 0.44%, respectively. Based on the short-term nature of the borrowings under the reverse repurchase agreements, the carrying value of the payable for reverse repurchase agreements approximated its fair value at April 30, 2016. If measured at fair value, borrowings under the reverse repurchase agreements would have been considered as Level 2 in the fair value hierarchy (see Note 9) at April 30, 2016.

Repurchase agreements and reverse repurchase agreements entered into by the Portfolio are subject to Master Repurchase Agreements (MRA), which permit the Portfolio, under certain circumstances, including an event of default (such as bankruptcy or insolvency), to offset payables and/or receivables under the MRA with collateral held and/or posted to the counterparty and create one single net payment due to or from the Portfolio.

The following tables present the Portfolio’s repurchase and reverse repurchase agreements net of amounts available for offset under an MRA and net of the related collateral received and/or pledged by the Portfolio as of April 30, 2016.

 

Counterparty  

Repurchase

Agreements

    

Liabilities

Available for

Offset

    

Securities

Collateral

Received(a)

    

Net

Amount(b)

 

Bank of America, N.A.

  $ 1,769,447       $       $ (1,734,028    $ 35,419   

JPMorgan Chase Bank, N.A.

    4,506,196         (4,506,196                
    $ 6,275,643       $ (4,506,196    $ (1,734,028    $ 35,419   
          
Counterparty  

Reverse

Repurchase
Agreements*

    

Assets

Available for

Offset

    

Securities

Collateral

Pledged(a)

    

Net

Amount(c)

 

JPMorgan Chase Bank, N.A.

  $ (4,506,627    $ 4,506,196       $ 431       $   
    $ (4,506,627    $ 4,506,196       $ 431       $   

 

(a) 

In some instances, the actual collateral received and/or pledged may be more than the amount shown due to overcollateralization.

 

(b) 

Net amount represents the net amount due from the counterparty in the event of a default.

 

(c) 

Net amount represents the net amount payable to the counterparty in the event of a default.

 

* Including accrued interest.

8  Risks Associated with Foreign Investments

The Portfolio’s investments in foreign instruments can be adversely affected by changes in currency exchange rates and political, economic and market developments abroad. In emerging or less developed countries, these risks can be more significant. Investment markets in emerging market countries are

 

  38  


Emerging Markets Local Income Portfolio

April 30, 2016

 

Notes to Financial Statements (Unaudited) — continued

 

 

typically substantially smaller, less liquid and more volatile than the major markets in developed countries. Emerging market countries may have relatively unstable governments and economies. Emerging market investments often are subject to speculative trading, which typically contributes to volatility.

The Portfolio may have difficulties enforcing its legal or contractual rights in a foreign country. Economic data as reported by foreign governments and other issuers may be delayed, inaccurate or fraudulent. In the event of a default by a sovereign entity, there are typically no assets to be seized or cash flows to be attached. Furthermore, the willingness or ability of a foreign government to renegotiate defaulted debt may be limited.

9  Fair Value Measurements

Under generally accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

 

 

Level 1 – quoted prices in active markets for identical investments

 

 

Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

 

Level 3 – significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)

In cases where the inputs used to measure fair value fall in different levels of the fair value hierarchy, the level disclosed is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

At April 30, 2016, the hierarchy of inputs used in valuing the Portfolio’s investments and open derivative instruments, which are carried at value, were as follows:

 

Asset Description   Level 1      Level 2      Level 3*      Total  

Foreign Government Bonds

  $       $ 223,481,170       $       $ 223,481,170   

Foreign Corporate Bonds

            24,063,724                 24,063,724   

Sovereign Loans

                    2,245,825         2,245,825   

Short-Term Investments —

          

Foreign Government Securities

            7,813,418                 7,813,418   

U.S. Treasury Obligations

            13,290,008                 13,290,008   

Repurchase Agreements

            6,275,643                 6,275,643   

Other

            8,962,197                 8,962,197   

Total Investments

  $       $ 283,886,160       $ 2,245,825       $ 286,131,985   

Forward Foreign Currency Exchange Contracts

  $       $ 8,106,270       $       $ 8,106,270   

Non-deliverable Bond Forward Contracts

            226,663                 226,663   

Swap Contracts

            7,172,598                 7,172,598   

Total

  $       $ 299,391,691       $ 2,245,825       $ 301,637,516   

Liability Description

                                  

Securities Sold Short

  $       $ (1,733,463    $       $ (1,733,463

Forward Foreign Currency Exchange Contracts

            (4,619,220              (4,619,220

Futures Contracts

    (105,096                      (105,096

Swap Contracts

            (3,914,387              (3,914,387

Total

  $ (105,096    $ (10,267,070    $       $ (10,372,166

 

* None of the unobservable inputs for Level 3 assets, individually or collectively, had a material impact on the Portfolio.

Level 3 investments at the beginning and/or end of the period in relation to net assets were not significant and accordingly, a reconciliation of Level 3 assets for the six months ended April 30, 2016 is not presented. At April 30, 2016, there were no investments transferred between Level 1 and Level 2 during the six months then ended.

 

  39  


Eaton Vance

Emerging Markets Local Income Fund

April 30, 2016

 

Board of Trustees’ Contract Approval

 

 

Overview of the Contract Review Process

The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a fund and its investment adviser will continue in effect from year to year only if its continuation is approved at least annually by the fund’s board of trustees, including by a vote of a majority of the trustees who are not “interested persons” of the fund (“Independent Trustees”), cast in person at a meeting called for the purpose of considering such approval.

At a meeting of the Boards of Trustees (each a “Board”) of the registered investment companies advised, administered and/or distributed by Eaton Vance Management or its affiliates (the “Eaton Vance Funds”) held on April 26, 2016, the Board, including a majority of the Independent Trustees, voted to approve continuation of existing investment advisory and sub-advisory agreements for the Eaton Vance Funds for an additional one-year period. In voting its approval, the Board relied upon the affirmative recommendation of its Contract Review Committee, which is a committee comprised exclusively of Independent Trustees. Prior to making its recommendation, the Contract Review Committee reviewed information furnished by each adviser to the Eaton Vance Funds (including information specifically requested by the Board) for a series of meetings of the Contract Review Committee held between February and April 2016. The Contract Review Committee also considered information received at prior meetings of the Board and its committees, as relevant to its annual evaluation of the investment advisory and sub-advisory agreements.

The information that the Board considered included, among other things, the following (for funds that invest through one or more underlying portfolio(s), references to “each fund” in this section may include information that was considered at the portfolio-level):

Information about Fees, Performance and Expenses

 

 

A report from an independent data provider comparing the advisory and related fees paid by each fund with fees paid by comparable funds as identified by the independent data provider (“comparable funds”);

 

 

A report from an independent data provider comparing each fund’s total expense ratio and its components to comparable funds;

 

 

A report from an independent data provider comparing the investment performance of each fund (including, where relevant, yield data, Sharpe ratios and information ratios) to the investment performance of comparable funds over various time periods;

 

 

Data regarding investment performance in comparison to benchmark indices and customized groups of peer funds identified by the adviser in consultation with the Board;

 

 

For each fund, comparative information concerning the fees charged and the services provided by each adviser in managing other accounts (including mutual funds, other collective investment funds and institutional accounts) using investment strategies and techniques similar to those used in managing such fund;

 

 

Profitability analyses for each adviser with respect to each fund;

Information about Portfolio Management and Trading

 

 

Descriptions of the investment management services provided to each fund, including the investment strategies and processes it employs;

 

 

The procedures and processes used to determine the fair value of fund assets and actions taken to monitor and test the effectiveness of such procedures and processes;

 

 

Information about each adviser’s policies and practices with respect to trading, including each adviser’s processes for monitoring best execution of portfolio transactions;

 

 

Information about the allocation of brokerage transactions and the benefits received by each adviser as a result of brokerage allocation, including information concerning the acquisition of research through client commission arrangements and policies with respect to “soft dollars”;

 

 

Data relating to portfolio turnover rates of each fund;

Information about each Adviser

 

 

Reports detailing the financial results and condition of each adviser;

 

 

Descriptions of the qualifications, education and experience of the individual investment professionals whose responsibilities include portfolio management and investment research for the funds, and information relating to their compensation and responsibilities with respect to managing other mutual funds and investment accounts;

 

 

The Code of Ethics of each adviser and its affiliates, together with information relating to compliance with and the administration of such codes;

 

 

Policies and procedures relating to proxy voting and the handling of corporate actions and class actions;

 

 

Information concerning the resources devoted to compliance efforts undertaken by each adviser and its affiliates (including descriptions of various compliance programs) and their record of compliance;

 

 

Information concerning the business continuity and disaster recovery plans of each adviser and its affiliates;

 

 

A description of Eaton Vance Management’s procedures for overseeing third party advisers and sub-advisers, including with respect to regulatory and compliance issues, investment management and other matters;

 

  40  


Eaton Vance

Emerging Markets Local Income Fund

April 30, 2016

 

Board of Trustees’ Contract Approval — continued

 

 

Other Relevant Information

 

 

Information concerning the nature, cost and character of the administrative and other non-investment advisory services provided by Eaton Vance Management and its affiliates;

 

 

Information concerning management of the relationship with the custodian, subcustodians and fund accountants by each adviser or the funds’ administrator; and

 

 

The terms of each investment advisory agreement.

Over the course of the twelve-month period ended April 30, 2016, with respect to one or more funds, the Board met ten times and the Contract Review Committee, the Audit Committee, the Governance Committee, the Portfolio Management Committee and the Compliance Reports and Regulatory Matters Committee, each of which is a Committee comprised solely of Independent Trustees, met seven, sixteen, four, nine and eleven times, respectively. At such meetings, the Trustees participated in investment and performance reviews with the portfolio managers and other investment professionals of each investment adviser relating to each fund, and considered various investment and trading strategies used in pursuing each fund’s investment objective, such as the use of derivative instruments, as well as risk management techniques. The Board and its Committees also evaluated issues pertaining to industry and regulatory developments, compliance procedures, fund governance and other issues with respect to the funds, and received and participated in reports and presentations provided by Eaton Vance Management and other fund advisers with respect to such matters. In addition to the formal meetings of the Board and its Committees, the Independent Trustees hold regular teleconferences in between meetings to discuss, among other topics, matters relating to the continuation of investment advisory and sub-advisory agreements.

For funds that invest through one or more underlying portfolios, the Board considered similar information about the portfolio(s) when considering the approval of investment advisory agreements. In addition, in cases where the fund’s investment adviser has engaged a sub-adviser, the Board considered similar information about the sub-adviser when considering the approval of any sub-advisory agreement.

The Contract Review Committee was assisted throughout the contract review process by Goodwin Procter LLP, independent legal counsel for the Independent Trustees. The members of the Contract Review Committee relied upon the advice of such counsel and their own business judgment in determining the material factors to be considered in evaluating each investment advisory and sub-advisory agreement and the weight to be given to each such factor. The conclusions reached with respect to each investment advisory and sub-advisory agreement were based on a comprehensive evaluation of all the information provided and not any single factor. Moreover, each member of the Contract Review Committee may have placed varying emphasis on particular factors in reaching conclusions with respect to each investment advisory and sub-advisory agreement. In evaluating each investment advisory and sub-advisory agreement, including the specific fee structures and other terms of the agreements, the Contract Review Committee was informed by multiple years of analysis and discussion among the Independent Trustees and the Eaton Vance Funds’ advisers and sub-advisers.

Results of the Process

Based on its consideration of the foregoing, and such other information as it deemed relevant, including the factors and conclusions described below, the Contract Review Committee concluded that the continuation of the investment advisory agreement of Eaton Vance Emerging Markets Local Income Fund (the “Fund”) with Eaton Vance Management (“EVM”), as well as the investment advisory agreement of Emerging Markets Local Income Portfolio (the “Portfolio”), the portfolio in which the Fund invests, with Boston Management and Research (“BMR”), an affiliate of EVM (EVM, with respect to the Fund, and BMR, with respect to the Portfolio, are each referred to herein as the “Adviser”), including their fee structures, is in the interests of shareholders and, therefore, the Contract Review Committee recommended to the Board approval of each agreement. The Board accepted the recommendation of the Contract Review Committee based on the material factors considered and conclusions reached by the Contract Review Committee with respect to the agreements. Accordingly, the Board, including a majority of the Independent Trustees, voted to approve continuation of the investment advisory agreements for the Fund and the Portfolio.

Nature, Extent and Quality of Services

In considering whether to approve the investment advisory agreements of the Fund and the Portfolio, the Board evaluated the nature, extent and quality of services provided to the Fund and the Portfolio by the applicable Adviser.

The Board considered each Adviser’s management capabilities and investment process with respect to the types of investments held by the Fund and the Portfolio, including the education, experience and number of its investment professionals and other personnel who provide portfolio management, investment research, and similar services to the Fund and the Portfolio. The Board considered the Adviser’s expertise with respect to emerging markets and in-house research capabilities. The Board also took into account the resources dedicated to portfolio management and other services, as well as the compensation methods of each Adviser and other factors, such as the reputation and resources of the Adviser to recruit and retain highly qualified research, advisory and supervisory investment professionals. In addition, the Board considered the time and attention devoted to the Eaton Vance Funds, including the Fund and the Portfolio, by senior management, as well as the infrastructure, operational capabilities and support staff in place to assist in the portfolio management and operations of the Fund and the Portfolio, including the provision of administrative services.

The Board noted that under the terms of the investment advisory agreement of the Fund, EVM may invest assets of the Fund directly in securities, for which it would receive a fee, or in the Portfolio, for which it receives no separate fee but for which BMR receives an advisory fee from the Portfolio.

 

  41  


Eaton Vance

Emerging Markets Local Income Fund

April 30, 2016

 

Board of Trustees’ Contract Approval — continued

 

 

The Board considered the compliance programs of each Adviser and relevant affiliates thereof. Among other matters, the Board considered compliance and reporting matters relating to personal trading by investment professionals, selective disclosure of portfolio holdings, late trading, frequent trading, portfolio valuation, business continuity and the allocation of investment opportunities. The Board also considered the responses of each Adviser and its affiliates to requests in recent years from regulatory authorities such as the Securities and Exchange Commission and the Financial Industry Regulatory Authority.

The Board considered shareholder and other administrative services provided or managed by Eaton Vance Management and its affiliates, including transfer agency and accounting services. The Board evaluated the benefits to shareholders of investing in a fund that is a part of a large fund complex offering exposure to a variety of asset classes and investment disciplines, as well as the ability, in many cases, to exchange an investment among different funds without incurring additional sales charges.

After consideration of the foregoing factors, among others, the Board concluded that the nature, extent and quality of services provided by each Adviser, taken as a whole, are appropriate and consistent with the terms of the applicable investment advisory agreement.

Fund Performance

The Board compared the Fund’s investment performance to that of comparable funds and appropriate benchmark indices, as well as a customized peer group of similarly managed funds. The Board’s review included comparative performance data for the one-, three- and five-year periods ended September 30, 2015 for the Fund. The Board concluded that the performance of the Fund was satisfactory.

Management Fees and Expenses

The Board considered contractual fee rates payable by the Portfolio and by the Fund for advisory and administrative services (referred to collectively as “management fees”). As part of its review, the Board considered the Fund’s management fees and total expense ratio for the one year period ended September 30, 2015, as compared to those of comparable funds, before and after giving effect to any undertaking to waive fees or reimburse expenses. The Board also considered factors that had an impact on Fund expense ratios, as identified by management in response to inquiries from the Contract Review Committee.

After considering the foregoing information, and in light of the nature, extent and quality of the services provided by each Adviser, the Board concluded that the management fees charged for advisory and related services are reasonable.

Profitability and Other “Fall-Out” Benefits

The Board considered the level of profits realized by each Adviser and relevant affiliates thereof in providing investment advisory and administrative services to the Fund, to the Portfolio and to all Eaton Vance Funds as a group. The Board considered the level of profits realized without regard to marketing support or other payments by each Adviser and its affiliates to third parties in respect of distribution services. The Board also considered other direct or indirect fall-out benefits received by each Adviser and its affiliates in connection with their relationships with the Fund and the Portfolio, including the benefits of research services that may be available to each Adviser as a result of securities transactions effected for the Fund and the Portfolio and other investment advisory clients.

The Board concluded that, in light of the foregoing factors and the nature, extent and quality of the services rendered, the profits realized by each Adviser and its affiliates are deemed not to be excessive.

Economies of Scale

In reviewing management fees and profitability, the Board also considered the extent to which the applicable Adviser and its affiliates, on the one hand, and the Fund and the Portfolio, on the other hand, can expect to realize benefits from economies of scale as the assets of the Fund and the Portfolio increase. The Board acknowledged the difficulty in accurately measuring the benefits resulting from economies of scale, if any, with respect to the management of any specific fund or group of funds. The Board reviewed data summarizing the increases and decreases in the assets of the Fund and of all Eaton Vance Funds as a group over various time periods, and evaluated the extent to which the total expense ratio of the Fund and the profitability of each Adviser and its affiliates may have been affected by such increases or decreases. Based upon the foregoing, the Board concluded that the Fund currently shares in any benefits from economies of scale. The Board also concluded that, assuming reasonably foreseeable increases in the assets of the Fund and the Portfolio, the structure of the advisory fees, which include breakpoints at several asset levels, will allow the Fund and the Portfolio to continue to benefit from any economies of scale in the future.

 

  42  


Eaton Vance

Emerging Markets Local Income Fund

April 30, 2016

 

Officers and Trustees

 

 

Officers of Eaton Vance Emerging Markets Local Income Fund

 

 

Payson F. Swaffield

President

Maureen A. Gemma

Vice President, Secretary and

Chief Legal Officer

James F. Kirchner

Treasurer

Paul M. O’Neil

Chief Compliance Officer

 

 

Officers of Emerging Markets Local Income Portfolio

 

 

Michael A. Cirami

President

Payson F. Swaffield

Vice President

Maureen A. Gemma

Vice President, Secretary and

Chief Legal Officer

James F. Kirchner

Treasurer

Paul M. O’Neil

Chief Compliance Officer

 

 

Trustees of Eaton Vance Emerging Markets Local Income Fund and Emerging Markets Local Income Portfolio

 

 

Ralph F. Verni

Chairperson

William H. Park

Vice-Chairperson

Scott E. Eston

Thomas E. Faust Jr.*

Cynthia E. Frost

George J. Gorman

Valerie A. Mosley

Helen Frame Peters

Susan J. Sutherland

Harriett Tee Taggart

 

 

* Interested Trustee

 

  43  


Eaton Vance Funds

 

IMPORTANT NOTICES

 

 

Privacy.  The Eaton Vance organization is committed to ensuring your financial privacy. Each of the financial institutions identified below has in effect the following policy (“Privacy Policy”) with respect to nonpublic personal information about its customers:

 

 

Only such information received from you, through application forms or otherwise, and information about your Eaton Vance fund transactions will be collected. This may include information such as name, address, social security number, tax status, account balances and transactions.

 

 

None of such information about you (or former customers) will be disclosed to anyone, except as permitted by law (which includes disclosure to employees necessary to service your account). In the normal course of servicing a customer’s account, Eaton Vance may share information with unaffiliated third parties that perform various required services such as transfer agents, custodians and broker-dealers.

 

 

Policies and procedures (including physical, electronic and procedural safeguards) are in place that are designed to protect the confidentiality of such information.

 

 

We reserve the right to change our Privacy Policy at any time upon proper notification to you. Customers may want to review our Privacy Policy periodically for changes by accessing the link on our homepage: www.eatonvance.com.

Our pledge of privacy applies to the following entities within the Eaton Vance organization: the Eaton Vance Family of Funds, Eaton Vance Management, Eaton Vance Investment Counsel, Eaton Vance Distributors, Inc., Eaton Vance Trust Company, Eaton Vance Management (International) Limited, Eaton Vance Management’s Real Estate Investment Group and Boston Management and Research. In addition, our Privacy Policy applies only to those Eaton Vance customers who are individuals and who have a direct relationship with us. If a customer’s account (i.e., fund shares) is held in the name of a third-party financial advisor/broker-dealer, it is likely that only such advisor’s privacy policies apply to the customer. This notice supersedes all previously issued privacy disclosures. For more information about Eaton Vance’s Privacy Policy, please call 1-800-262-1122.

Delivery of Shareholder Documents.  The Securities and Exchange Commission (SEC) permits funds to deliver only one copy of shareholder documents, including prospectuses, proxy statements and shareholder reports, to fund investors with multiple accounts at the same residential or post office box address. This practice is often called “householding” and it helps eliminate duplicate mailings to shareholders. Eaton Vance, or your financial advisor, may household the mailing of your documents indefinitely unless you instruct Eaton Vance, or your financial advisor, otherwise. If you would prefer that your Eaton Vance documents not be householded, please contact Eaton Vance at 1-800-262-1122, or contact your financial advisor. Your instructions that householding not apply to delivery of your Eaton Vance documents will be effective within 30 days of receipt by Eaton Vance or your financial advisor.

Portfolio Holdings.  Each Eaton Vance Fund and its underlying Portfolio(s) (if applicable) will file a schedule of portfolio holdings on Form N-Q with the SEC for the first and third quarters of each fiscal year. The Form N-Q will be available on the Eaton Vance website at www.eatonvance.com, by calling Eaton Vance at 1-800-262-1122 or in the EDGAR database on the SEC’s website at www.sec.gov. Form N-Q may also be reviewed and copied at the SEC’s public reference room in Washington, D.C. (call 1-800-732-0330 for information on the operation of the public reference room).

Proxy Voting.  From time to time, funds are required to vote proxies related to the securities held by the funds. The Eaton Vance Funds or their underlying Portfolios (if applicable) vote proxies according to a set of policies and procedures approved by the Funds’ and Portfolios’ Boards. You may obtain a description of these policies and procedures and information on how the Funds or Portfolios voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge, upon request, by calling 1-800-262-1122 and by accessing the SEC’s website at www.sec.gov.

 

  44  


Investment Adviser of Emerging Markets Local
Income Portfolio

Boston Management and Research

Two International Place

Boston, MA 02110

Investment Adviser and Administrator of Eaton Vance Emerging Markets Local Income Fund

Eaton Vance Management

Two International Place

Boston, MA 02110

Principal Underwriter*

Eaton Vance Distributors, Inc.

Two International Place

Boston, MA 02110

(617) 482-8260

Custodian

State Street Bank and Trust Company

State Street Financial Center, One Lincoln Street

Boston, MA 02111

Transfer Agent

BNY Mellon Investment Servicing (US) Inc.

Attn: Eaton Vance Funds

P.O. Box 9653

Providence, RI 02940-9653

(800) 262-1122

Fund Offices

Two International Place

Boston, MA 02110

 
* FINRA BrokerCheck.  Investors may check the background of their Investment Professional by contacting the Financial Industry Regulatory Authority (FINRA). FINRA BrokerCheck is a free tool to help investors check the professional background of current and former FINRA-registered securities firms and brokers. FINRA BrokerCheck is available by calling 1-800-289-9999 and at www.FINRA.org. The FINRA BrokerCheck brochure describing this program is available to investors at www.FINRA.org.


LOGO

7756    4.30.16


Item 2. Code of Ethics

Not required in this filing.    

Item 3. Audit Committee Financial Expert

Not required in this filing.    

Item 4. Principal Accountant Fees and Services

Not required in this filing.

Item 5. Audit Committee of Listed Registrants

Not applicable.

Item 6. Schedule of Investments

Please see schedule of investments contained in the Report to Stockholders included under Item 1 of this Form N-CSR.

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies

Not applicable.

Item 8. Portfolio Managers of Closed-End Management Investment Companies

Not applicable.

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers

Not applicable.

Item 10. Submission of Matters to a Vote of Security Holders

No material changes.

Item 11. Controls and Procedures

(a) It is the conclusion of the registrant’s principal executive officer and principal financial officer that the effectiveness of the registrant’s current disclosure controls and procedures (such disclosure controls and procedures having been evaluated within 90 days of the date of this filing) provide reasonable assurance that the information required to be disclosed by the registrant has been recorded, processed, summarized and reported within the time period specified in the Commission’s rules and forms and that the information required to be disclosed by the registrant has been accumulated and communicated to the registrant’s principal executive officer and principal financial officer in order to allow timely decisions regarding required disclosure.

(b) There have been no changes in the registrant’s internal controls over financial reporting during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.


Item 12. Exhibits

 

(a)(1) Registrant’s Code of Ethics – Not applicable (please see Item 2).

 

(a)(2)(i) Treasurer’s Section 302 certification.

 

(a)(2)(ii) President’s Section 302 certification.

 

(b) Combined Section 906 certification.


Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Emerging Markets Local Income Portfolio

 

By:  

/s/ Michael A. Cirami

  Michael A. Cirami
  President
Date:   June 21, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By:  

/s/ James F. Kirchner

  James F. Kirchner
  Treasurer
Date:   June 21, 2016
By:  

/s/ Michael A. Cirami

  Michael A. Cirami
  President
Date:   June 21, 2016