<PAGE>
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EV MARATHON
GREATER CHINA
GROWTH FUND
ANNUAL
SHAREHOLDER REPORT
AUGUST 31, 1995
[ARTWORK APPEARS HERE]
SPONSOR AND MANAGER OF
EV MARATHON GREATER CHINA GROWTH
FUND & ADMINISTRATOR OF GREATER CHINA
GROWTH PORTFOLIO
Eaton Vance Management
24 Federal Street
Boston, MA 02110
ADVISER OF
GREATER CHINA GROWTH PORTFOLIO
Lloyd George Management
(Hong Kong) Limited
3408 One Exchange Square
Central, Hong Kong
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV MARATHON
GREATER CHINA GROWTH FUND
24 FEDERAL STREET
BOSTON, MA 02110
M-CGSRC
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TO SHAREHOLDERS
EV Marathon Greater China Growth Fund had a total return of -9.1% for the year
ended August 31, 1995. That performance was the result of a decline in net asset
value per share from $13.16 on August 31, 1994, to $11.89 on August 31, 1995,
and the reinvestment of $0.065 in income dividends and $0.01 in capital gain
distributions. It does not include the effect of the Fund's contingent deferred
sales charge on certain redeeming shareholders. By comparison, the Peregrine
Asia 100 - an unmanaged index of common stocks in the Greater China region -
declined 13.5% during the same period. The China region markets were negatively
affected by the Mexican peso crisis, which rocked all emerging markets. The
region also suffered from China's trade tensions with the U.S. However, despite
the fallout from Mexico and the trade difficulties, corporate earnings continued
on a record setting pace.
CHINA MAKES MAJOR INROADS ON INFLATION...
The year brought significant progress in China's fight against inflation, with
retail inflation falling for the tenth consecutive month in August. Prices for
the year ended August 31 were just 12% higher than a year earlier. The downward
trend is a major victory in the government's goal to keep inflation below 15%
for 1995. As late as October 1994, the inflation rate was 25%, causing alarm for
investors and economic planners alike. The government credits its success in
fighting inflation to its efforts to impose credit restrictions and price
controls over commodities.
CHINA'S CURRENCY WILL SOON BE CONVERTIBLE TO OTHER CURRENCIES...
The Bank of China recently indicated that China's currency, the yuan, will be
fully convertible to foreign currency in 1997 or 1998. The recent progress
against inflation, as well as financial and lending reforms, have created a more
stable economic environment, which makes convertibility more likely in the near
future. A convertible currency is a requisite for China's expected entry into
the General Agreement on Tariffs and Trade (GATT), a key element in China's
strategy to join the global economy.
REMARKABLY, IN THE LAND OF MAO, CHINA LAUNCHES AN INVESTMENT BANK...
In September, China launched its first investment bank, the China International
Capital Corporation (CICC). CICC will play a large role in arranging mergers and
acquisitions and underwriting stocks and bonds. This event demonstrates
dramatically that China has come full circle, from doctrinaire communism to the
embrace of the capital markets. More importantly, it suggests that the
commitment to providing encouragement and capital investment for private
enterprise is lasting and real, an encouraging sign for investors in the China
region.
[PHOTO OF Sincerely,
JAMES B. HAWKES
APPEARS HERE] /s/ James B. Hawkes
James B. Hawkes,
President
October 20, 1995
1
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MANAGEMENT DISCUSSION: ROBERT LLOYD GEORGE
An interview with the Hon. Robert Lloyd George, President of Lloyd George
Management, and Investment Adviser to the Greater China Growth Portfolio.
Q: ROBERT, WHAT WERE SOME OF THE FACTORS IN THE FUND'S PERFORMANCE?
A: The Fund's performance for the fiscal year was dictated by an especially
difficult first half. That period was marked by unusual volatility in the
Greater China markets, and the Fund reflected that volatility. Rising U.S.
interest rates provided a difficult climate for the Hong Kong market, which
remains the Portfolio's largest country weighting. Trade tensions between
China and the U.S. also weighed heavily on the region's markets. Finally,
Mexico's currency crisis roiled most emerging markets in the first half.
[PHOTO OF HON. ROBERT LLOYD GEORGE APPEARS HERE]
HON. ROBERT
LLOYD GEORGE
Since February, however, the investment climate has improved significantly.
U.S. interest rates have declined sharply - always a favorable development -
while earnings for the region's companies have continued to show strong
momentum. While some political tensions remain, investors have focused
increasingly on fundamentals, which remain strongly positive.
Q: WHICH GREATER CHINA MARKETS HAVE BEEN THE BEST PERFORMERS?
A: Hong Kong, the China region's largest and most liquid market, fared best in
the region, followed by Malaysia, which managed slight gains. These countries
far outperformed smaller markets, such as Indonesia, the Philippines, Taiwan,
and China's B share market. For example, Hong Kong's unmanaged Hang Seng
Index rose 19% in the period from January 1 through August 31. The Colony's
investor sentiment remains healthy, and the news out of China continues to
improve. Recent economic statistics offer further evidence that an economic
soft landing in China is underway. We believe that China's economic growth
will slow to 10% by year-end and that the inflation rate will slow to the 15%
level in 1995.
Q: HAVE YOU MADE ANY MAJOR CHANGES TO THE PORTFOLIO?
A: Not many major changes. We continue to focus on countries and companies we
believe will post strong earnings growth. Hong Kong remains the largest
country weighting in the Portfolio, at 37.7%. Hong Kong has been riding a
rollercoaster in the past year along with other emerging markets. And, of
course, the Hong Kong market has been very sensitive to the fluctuations in
U.S. interest rates.
Recent quarterly earnings reports were mixed, but a number of large
conglomerates such as
2
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WITH A FAST-GROWING
ECONOMY, THAILAND IS
EMERGING AS A
[MAP APPEARS HERE] GATEWAY FOR GLOBAL
BUSINESS INTO
GREATER CHINA.
THAILAND: A PROFILE*
GDP GROWTH:............8.6%
INFLATION RATE:........5.0%
EXPORT GROWTH:........19.0%
THAI MARKET CAP:.....$132 B
LARGEST TRADE PARTNER: U.S.
*1995 estimates
Source: Bank of Thailand
- --------------------------------------------------------------------------------
Cheung Kong Holdings, Hutchison Whampoa, and HSBC - each a large investment
of the Portfolio - reported profits well above expectations. That lifted the
market and raised the spirits of investors. In addition, in recent months
there have been signs that the property market - a key measure of the
investment climate in Hong Kong - has strengthened. Very importantly, Hong
Kong is the most liquid of the emerging Asian markets and is among the first
places U.S. investors may look to recycle investments if the U.S. market
slows from its torrid pace of the summer.
Q: HONG KONG IS THE MARKET OF CHOICE FOR MANY U.S. INVESTORS. COULD YOU GIVE AN
EXAMPLE OF ONE OF THE PORTFOLIO'S LARGE CORE HOLDINGS IN HONG KONG?
A: One of the Portfolio's largest Hong Kong investments, and a long-term core
holding, is HSBC, Hong Kong and Shanghai Bank. As a big lender to the
property sector, the bank benefits from the ongoing building of
infrastructure in the region. Property stocks directly account for roughly
30% of the Hang Seng index, while indirectly making up another 15% or so.
Increasingly, there is anecdotal evidence - such as rising residential real
estate prices and higher commercial rents - that the property market is
showing signs of
3
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improvement. Historically, the property market has been an important
barometer for the Hong Kong stock market. Although past trends don't
necessarily predict the future, when the property market improves, the stock
market usually follows over time.
HSBC is the leader in the Hong Kong banking establishment, and, with assets
of $270 billion, ranks among the ten largest banks in the world. Moreover, it
is among the most active foreign bank doing business today in mainland China.
With all of its strengths and growth prospects, the stock sells at a modest 8
times its expected 1996 earnings.
Q: WHERE ELSE HAVE YOU BEEN INVESTING?
A: Thailand was the second largest weighting of the Portfolio, at 12.2%. On pure
fundamentals, the Thai market represents a very good value. Thailand is
expected to post economic growth in the 9% range in 1995, making it one of
the fastest growing economies in the world. It's expected that Thai corporate
earnings growth could reach 20% in 1996, according to the Bank of Thailand.
While generating fast growth, the country has done a good job of containing
inflation, which is running at a 6.2% annual rate. While that is somewhat
higher than the government's official target of 5.2%, it still represents
impressive performance. The primary engine behind the Thai economy has been
rapid export growth, which in turn has led to a sharp rise in the
manufacturing sector. Manufacturing now
Greater China Growth Portfolio: Asset Allocation Based on market value as of
August 31, 1995.
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Hong Kong 37.7%
Thailand 12.2%
Singapore 9.9%
Malaysia 9.6%
Philippines 9.5%
Republic of Korea 7.3%
Taiwan 3.7%
Indonesia 2.8%
China 2.4%
Other 0.6%
</TABLE>
represents about 80% of Thailand's exports, according to the Bank of
Thailand, and is attracting an increasing amount of foreign investment. The
country has already developed a growing auto components industry and is
focusing increasingly on the biotechnology and agribusiness sectors for
development. Elsewhere, the country is a strong provider of financial
services, with several large banks offering a wide variety of banking
services to companies hoping to penetrate the China region. With the help of
private investment and government tax incentives, the government hopes that
Thailand will emerge as a gateway to Greater China.
Q: AND WHAT KIND OF STOCKS HAVE YOU BEEN BUYING IN THAILAND?
4
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IN ITS PUSH FOR GROWTH,
CHINA NEEDS INVESTMENT
TO FUEL ITS INFRASTRUCTURE
[MAP APPEARS HERE] EXPANSION.
CHINA'S INFRASTRUCTURE
INVESTMENT NEEDS:
SECTOR INVESTMENT ESTIMATES:
Power $200 billion
Telecom $141 billion
Transport $302 billion
Water & Sewer $101 billion
Source: World Bank
- --------------------------------------------------------------------------------
A: Not surprisingly, the two major themes in Thailand have been banks and
infrastructure. Infrastructure offers a good deal of potential to investors,
with a special emphasis on telecommunications, power generation, and
transportation facilities. Siam Cement is the largest building materials
company in Southeast Asia and remains the Portfolio's largest holding. The
company enjoys a growing business selling construction supplies and cement
for projects in mainland China.
In the banking sector, the Portfolio has two large investments, Bangkok Bank,
the country's largest bank, and Siam Commercial Bank. Thailand's banking
industry in recent years has averaged earnings growth of more than 25%
annually. With the backing of the Bangkok International Banking Facility, the
country's banking sector is taking steps to become global participants and
serve as a springboard to the China region for foreign investors.
Q: THE PHILIPPINES HAS BOASTED ONE OF THE FASTEST GROWING MARKETS OVER THE PAST
TWO YEARS. WHAT ARE YOU FOCUSING ON THERE?
A: The Philippines has reduced inflation to an annual rate below 10%, while
posting GDP growth over 5% for two years running, according to the World
Bank. That suggests that the government is intent on keeping growth strong,
but manageable. The country has traditionally suffered from an inefficient
public sector, which has been reflected in a subpar infrastructure.
Therefore, the Portfolio has focused much of its investment in the
Philippines on companies that are participating in the infrastructure
build-up. They include
5
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Philippines Long Distance Telephone, which is the country's dominant supplier
of phone equipment. Long a core holding of the Portfolio, PLDT receives only
about 25% of its revenues from local calls. With only 2 phones per 100
people, the growth potential for providers of phone services in the China
region is staggering.
Another large holding is Ayala Corp., the country's largest commercial and
residential property developer. Property sales have risen sharply in the past
year, as the strong economy and growing demand for space from China region
companies have pushed commercial rents higher. Mean-while, a growing
affluence has boosted demand for residential property. Together, that demand
has increased the value of Ayala's land holdings, leaving the company with a
large cash horde.
Q: HAVE YOU CUT BACK IN ANY AREAS?
A: Yes. We've slightly scaled back our investments in Taiwan. Taiwan has been
the weakest performer in the region, declining nearly 10% in July alone. The
most compelling reason for the poor Taiwan market was the continuing
deterioration in relations between China and the U.S. following the visit by
Taiwan's president to the U.S. in June. Although it is likely that relations
between the parties will improve in coming months, the uncertainty created by
the rift has been very negative for the Taiwan stock market. Therefore, we've
been increasingly selective about our investments there, favoring large blue
chips like China Steel and Nan Ya Plastic.
Q: THE POWER GENERATION SECTOR HAS GROWN RAPIDLY IN GREATER CHINA. IS THAT
SECTOR REPRESENTED IN THE PORTFOLIO?
A: Absolutely. The power generation industry in Greater China is experiencing
major growth. According to a new study by McGraw-Hill, the annual demand for
power in China will rise to 1.9 billion tons of oil equivalent (TOE) by the
year 2015 from just 750 million TOE in 1993. The cost of meeting this demand
could reach $1 trillion, most of which will be spent on electric power
generation.
The Portfolio's investments in the power-generating sector are varied. In
Hong Kong, the Portfolio has investments in Consolidated Electric Power Co.
of Asia (CEPA). The company has been building an impressive portfolio of
generating projects across the China region. Another Hong Kong investment,
New World Development, is a diversified property company that is constructing
a thermal power station in Zhujiang. In South Korea, the Portfolio owns
shares in Korea Electric Power Corporation (KEPCO), the country's sole
electricity generator. To meet surging demand, KEPCO plans to invest $6
billion annually over the next six years in new power generating equipment.
Finally, Electricity Generating (EGCOMP) is a
6
<PAGE>
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- --------------------------------------------------------------------------------
RECENT U.S. INVESTMENTS* IN CHINA:
. LEVI STRAUSS - the U.S. jeans manufacturer opened its regional headquarters in
Singapore in September. The company has distributorships in Singapore,
Indonesia and Thailand, and expects its annual Greater China revenues to reach
$1 billion in the near future.
. MICROSOFT - the software giant signed an agreement with China in September to
set language standards for the local version of Windows 95. The Chinese
version of Windows goes on sale in December.
. FORD MOTOR COMPANY - has agreed to acquire a 20% stake in Jiangling Motors, a
leading Chinese auto maker. Plans are to build 60,000 light trucks in the
first year of the joint venture. In coming years, the venture will target a
mini-van for the China market.
* These U.S. companies are not investments of the Portfolio.
- --------------------------------------------------------------------------------
recently privatized holding company that will oversee the development of
electricity generating plants in Thailand.
Q: WHAT PROGRESS HAS CHINA MADE IN ITS ONGOING FIGHT AGAINST INFLATION?
A: In the period since China implemented its austerity program in 1993,
inflation has fallen to an annualized rate below 15%, but those gains remain
relatively fragile. Inflationary pressures have been especially intense
because of the large investment in fixed assets and the surge in consumer
spending. While the government is happy with the progress made, the economy
continues to eclipse its growth targets, making the inflation fight even more
difficult. Recently, Dai Xianglong, the governor of China's central bank,
urged a continuing tight money policy, a very encouraging sign for foreign
investors.
Q: ROBERT, WHAT IS YOUR CURRENT OUTLOOK FOR THE GREATER CHINA MARKETS?
A: The Greater China markets have been volatile so far in 1995, which is to be
expected in these emerging markets. Volatility is consistent with the rapid
economic growth, inflationary patterns, and uncertain political trends. I
believe investors can expect more volatility in the future, and that is a
risk they should be prepared to face. However, having said that, I'm
encouraged by the progress made against inflation and by the relatively calm
discourse on the future of Hong Kong. In addition, China is addressing some
of its internal questions, a sign that the current regime is facing the
future with resolve. China continues to lure foreign investment and to open
up industry to private hands. While future market trends are certainly not
guaranteed, I believe the China market presents a unique opportunity for
long-term patient investors.
7
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Comparison of Change in Value of a $10,000 Investment in
EV Marathon Greater China Growth Fund and the Peregrine Asia 100 Index
From June 30, 1993 through August 31, 1995
<TABLE>
<CAPTION>
--------------------------------------------------------------------
AVERAGE 1 Life Value of
ANNUAL RETURNS Year of Fund* Investment at 8/31
--------------------------------------------------------------------
<S> <C> <C> <C>
With CDSC -13.6% 6.8% $11,735
--------------------------------------------------------------------
Without CDSC -9.1% 8.4% $12,135
--------------------------------------------------------------------
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Marathon China Peregrine Asia
-------------- --------------
<S> <C> <C>
06/93+ $10,000 $10,000
07/93 10,010 10,067
08/93 10,668 10,713
09/93 10,891 10,955
10/93 12,389 12,814
11/93 12,551 12,865
12/93 14,946 16,030
01/94 13,972 15,552
02/94 13,283 14,697
03/94 11,701 13,401
04/94 11,863 13,716
05/94 12,401 14,292
06/94 11,640 13,617
07/94 12,421 14,299
08/94 13,344 15,272
09/94 13,242 15,982
10/94 13,182 15,276
11/94 11,965 14,102
12/94 11,859 13,992
01/95 10,583 12,633
02/95 11,482 13,304
03/95 11,635 13,447
04/95 11,482 13,144
05/95 12,502 14,127
06/95 12,308 13,860
07/95 12,665 14,002
08/95 12,135 13,214
</TABLE>
Past performance is not indicative of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
* Investment operations commenced on 6/7/93.
+ Index information is available only at month-end; therefore, the line
comparison begins at the next month-end following the commencement of the
Fund's investment operations.
- --------------------------------------------------------------------------------
FUND PERFORMANCE
In accordance with new guidelines issued by the Securities and Exchange
Commission, we are including a performance chart that compares your Fund's total
return with that of a broad-based investment index. The lines on the chart
represent the total returns of $10,000 hypothetical investments in EV Marathon
Greater China Growth Fund, and the unmanaged Peregrine Asia 100 Index.
THE TOTAL RETURN FIGURES
The blue line on the chart represents the Fund's performance at net asset value.
The Fund's total return figure reflects Fund expenses and transaction costs, and
assumes the reinvestment of income dividends and capital gain distributions. The
second dollar figure for the Fund reflects the Fund's maximum applicable
deferred sales charge (CDSC), deducted at redemption as follows: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
The black line represents the performance of the Peregrine Asia 100 Index, a
broad-based, widely recognized unmanaged index of 100 common stocks traded on
the major markets of the China region. The Index is not strictly a China index
and may be an imperfect benchmark for the Fund. The Index's total return does
not reflect any commissions or expenses that would be incurred if an investor
individually purchased or sold the securities represented in the Index.
8
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EV MARATHON GREATER CHINA GROWTH FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investment in Greater China Growth Portfolio, at value (Note 1A)
(identified cost, $301,527,345) $325,090,135
Receivable for Fund shares sold 150,017
Deferred organization expenses (Note 1D) 27,167
------------
Total assets $325,267,319
LIABILITIES:
Payable for Fund shares redeemed $ 844,642
Payable to affiliates -
Trustees' fees 1,250
Custodian fee 1,144
Accrued expenses 162,512
----------
Total liabilities 1,009,548
------------
NET ASSETS for 27,276,927 shares of beneficial interest outstanding $324,257,771
============
SOURCES OF NET ASSETS:
Paid-in capital $334,564,189
Accumulated net realized loss on investment transactions
from the Portfolio (31,372,291)
Accumulated distributions in excess of net investment income (2,496,917)
Unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 23,562,790
------------
Total net assets $324,257,771
============
NET ASSET VALUE, OFFERING, AND REDEMPTION PRICE (NOTE 6) PER SHARE
($324,257,771 / 27,276,927 shares of beneficial interest) $11.89
======
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Investment income allocated from Portfolio (net of foreign taxes of $596,805) $ 8,589,033
Expenses allocated from Portfolio (3,869,597)
-------------
Net investment income from Portfolio $ 4,719,436
Expenses -
Management fee (Note 3) $ 876,239
Compensation of Trustees not members of the
Administrator's organization (Note 3) 2,523
Custodian fee (Note 3) 58,191
Distribution fees (Note 5) 3,090,984
Transfer and dividend disbursing agent fees 454,671
Printing and postage 162,556
Legal and accounting services 16,968
Amortization of organization expenses (Note 1D) 9,786
Miscellaneous 103,355
-------------
Total expenses 4,775,273
-------------
Net investment loss $ (55,837)
-------------
REALIZED AND UNREALIZED LOSS FROM PORTFOLIO:
Net realized loss from Portfolio (identified cost basis) -
Investment transactions (net of foreign capital gains taxes of $620,600) $ (20,110,632)
Foreign currency (417,268)
-------------
Net realized loss $ (20,527,900)
Change in unrealized appreciation of investments (16,595,613)
-------------
Net realized and unrealized loss $ (37,123,513)
-------------
Net decrease in net assets from operations $ (37,179,350)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
- --------------------------------------------------------------------------------
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
For the year ended August 31,
----------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment loss $ (55,837) $ (1,540,352)
Net realized loss from Portfolio (20,527,900) (11,727,498)
Change in unrealized appreciation (depreciation) from Portfolio (16,595,613) 37,116,048
------------- -------------
Net increase (decrease) in net assets from operations $ (37,179,350) $ 23,848,198
------------- -------------
Distributions to shareholders -
In excess of net investment income $ (1,966,526) $ --
In excess of realized gain on investment transactions (302,624) (456,955)
------------- -------------
Total distributions $ (2,269,150) $ (456,955)
------------- -------------
Transactions in shares of beneficial interest (Note 4) -
Proceeds from sale of shares $ 65,409,471 $ 370,568,876
Net asset value of shares issued to shareholders in payment
of distributions declared 1,996,823 405,243
Cost of shares redeemed (96,178,731) (65,558,628)
------------- -------------
Increase (decrease) in net assets from Fund share transactions $ (28,772,437) $ 305,415,491
------------- -------------
Net increase (decrease) in net assets $ (68,220,937) $ 328,806,734
NET ASSETS:
At beginning of year 392,478,708 63,671,974
------------- -------------
At end of year (including undistributed (distributions in excess of)
net investment income of ($2,496,917) and $463,526, respectively) $ 324,257,771 $ 392,478,708
============= =============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
Year Ended August 31,
------------------------------------------------------
1995 1994 1993*
------------ ------------ ------------
<S> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 13.160 $ 10.540 $ 10.000
--------- --------- ---------
Income (loss) from Investment Operations -
Net investment loss $ (0.038) $ (0.039) $ (0.015)
Net realized and unrealized gain (loss) on investments (1.157) 2.684 0.555
--------- --------- ---------
Total income (loss) from operations $ (1.195) $ 2.645 $ 0.540
--------- --------- ---------
Less distributions -
In excess of net investment income $ (0.065) $ -- $ --
In excess of net realized gain on investment transactions (0.010) (0.025) --
--------- --------- ---------
Total distributions $ (0.075) $ (0.025) $ --
--------- --------- ---------
NET ASSET VALUE, end of year $ 11.890 $ 13.160 $ 10.540
========= ========= =========
TOTAL RETURN (2) (9.06%) 25.08% 5.40%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000 omitted) $ 324,258 $ 392,479 $ 63,672
Ratio of net expenses to average daily net assets (1) 2.47% 2.38% 2.21%+
Ratio of net investment loss to average daily net assets (0.02%) (0.55%) (1.44%)+
</TABLE>
+ Computed on an annualized basis.
(1) Includes the Fund's share of Greater China Growth Portfolio's allocated
expenses.
(2) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the record date.
* For the period from the start of business, June 7, 1993, to
August 31, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
12
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NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Marathon Greater China Growth Fund (the Fund) is a diversified series of
Eaton Vance Growth Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund invests all of its investable assets in interests
in Greater China Growth Portfolio (the Portfolio), a New York Trust, having the
same investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (55.1% at August 31, 1995). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the Portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS - Valuation of securities by the Portfolio is discussed
in Note 1 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INCOME - The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund determined in accordance with generally accepted accounting
principles.
C. FEDERAL TAXES - The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its net investment income, and any
net realized capital gains. Accordingly, no provision for federal income or
excise tax is necessary. At August 31, 1995 the Fund, for federal income tax
purposes had a capital loss carryover of $13,887,568, which will reduce the
taxable income arising from future net realized gain on investments, if any, to
the extent permitted by the Internal Revenue Code and thus will reduce the
amount of distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income or excise tax. Such capital
loss carryover will expire on August 31, 2003. Net capital losses of $15,499,068
attributable to security and currency transactions incurred after October 31,
1994, are treated as arising on the first day of the Fund's next taxable year.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on the
straight-line basis over five years.
E. DISTRIBUTION COSTS - For book purposes, commissions paid on the sale of Fund
shares and other distribution costs are charged to operations. For tax purposes,
commissions paid were charged to paid-in capital prior to November 16, 1994 and
subsequently charged to operations. The change in the tax accounting practice
was prompted by a recent Internal Revenue Service ruling and has no effect on
either the Fund's current yield or total return (Note 5).
- --------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
It is the present policy of the Fund to make at least one distribution annually
(normally in December) of all or substantially all of the investment income
allocated to the Fund by the Portfolio, less the Fund's direct and allocated
expenses and at least one distribution annually of all or substantially all of
the net realized capital gains (reduced by any available capital loss
carryforwards from prior years) allocated by the Portfolio to the Fund, if any.
Shareholders may reinvest all distributions in shares of the Fund at the per
share net asset value as of the close of business on the record date. The Fund
distinguishes
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
between distributions on a tax basis and a financial reporting basis. Generally
accepted accounting principles require that only distributions in excess of tax
basis earnings and profits be reported in the financial statements as a return
of capital. Differences in the recognition or classification of income between
the financial statements and tax earnings and profits which result in temporary
over distributions for financial statement purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital. During the year ended August
31, 1995, $938,080 was reclassified from paid-in capital to accumulated
distributions in excess of net investment income, and $1,642,112 was
reclassified from accumulated net realized loss on investments to paid-in
capital due to differences between book and tax accounting for distribution
costs, currency gains and losses and foreign taxes being considered as permanent
differences. Net investment income, net realized gains and net assets were not
affected by this reclassification.
- --------------------------------------------------------------------------------
(3) MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The management fee is earned by Eaton Vance Management (EVM) as compensation for
management and administration of the business affairs of the Fund. The fee is
based on a percentage of average daily net assets. For the year ended August 31,
1995 the fee was equivalent to 0.25% of the Fund's average net assets for such
period and amounted to $876,239. Except as to Trustees of the Fund who are not
members of EVM's organization, officers and Trustees receive remuneration for
their services to the Fund out of such management fee. Investors Bank & Trust
Company (IBT), an affiliate of EVM, serves as custodian of the Fund. Pursuant to
the custodian agreement, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Fund maintains with IBT.
Certain officers and Trustees of the Fund and the Portfolio are officers and
directors/trustees of the above organizations. In addition, investment adviser,
administrative fees, and custodian fees are paid by the Portfolio to EVM and its
affiliates. See Note 2 of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------
August 31, 1995 August 31, 1994
--------------- ---------------
<S> <C> <C>
Sales 5,441,956 28,933,950
Issued to shareholders electing to
receive payments of distributions
in Fund shares 173,957 29,118
Redemptions (8,172,241) (5,170,232)
---------- ----------
Net increase (decrease) (2,556,328) 23,792,836
========== ==========
</TABLE>
14
<PAGE>
- --------------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay the
Principal Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal to
1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no outstanding
Uncovered Distribution Charges, which are equivalent to the sum of (i) 5% of the
aggregate amount received by the Fund for the shares sold plus, (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD
reduced by the aggregate amount of contingent deferred sales charges (see Note
6) and daily amounts theretofore paid to EVD. The amount payable to EVD with
respect to each day is accrued on such day as a liability of the Fund and,
accordingly, reduces the Fund's net assets. The Fund accrued $2,628,719 as
payable to EVD for the year ended August 31, 1995, representing 0.75% of average
daily net assets. At August 31, 1995, the amount of Uncovered Distribution
Charges of EVD calculated under the Plan was approximately $2,898,000.
In addition, the Plan authorizes the Fund to make payments of service fees to
the Principal Underwriter, Authorized Firms and other persons in amounts not
exceeding 0.25% of the Fund's average daily net assets for each fiscal year. The
Trustees have initially implemented the Plan by authorizing the Fund to make
quarterly payments of service fees to the Principal Underwriter and Authorized
Firms in amounts not expected to exceed 0.25% per annum of the Fund's average
daily net assets based on the value of Fund shares sold by such persons and
remaining outstanding for at least one year. Service fee payments will be made
for personal services and/or the maintenance of shareholder accounts. Service
fees are separate and distinct from the sales commissions and distribution fees
payable by the Fund to EVD, and, as such, are not subject to automatic
discontinuance where there are no outstanding Uncovered Distribution Charges of
EVD. Service fee payments for the year ended August 31, 1995 amounted to
$462,265.
Certain officers and Trustees of the Fund are officers or directors of EVD.
- --------------------------------------------------------------------------------
(6) CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge (CDSC) is imposed on any redemption of Fund
shares made within six years of purchase. Generally, the CDSC is based upon the
lower of the net asset value at date of redemption or date of purchase. No
charge is levied on shares acquired by reinvestment of dividends or capital gain
distributions. The CDSC is imposed at declining rates that begin at 5% in the
first and second year of redemption after purchase, (6% and 5% respectively for
shares purchased prior to August 1, 1994) declining one percentage point each
year thereafter. No CDSC is levied on shares which have been sold to EVM or its
affiliates or to their respective employees or clients. CDSC charges are paid to
EVD to reduce the amount of Uncovered Distribution Charges calculated under the
Fund's Distribution Plan. CDSC charges received when no Uncovered Distribution
Charges exist will be retained by the Fund. EVD received approximately
$2,374,000 of CDSC paid by shareholders for the year ended August 31, 1995.
- --------------------------------------------------------------------------------
(7) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$68,185,959 and $101,505,200, respectively.
15
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
EATON VANCE GROWTH TRUST:
We have audited the accompanying statement of assets and liabilities of EV
Marathon Greater China Growth Fund (one of the series constituting Eaton Vance
Growth Trust) as of August 31, 1995, and the related statement of operations for
the year then ended, the statements of changes in net assets for the years ended
August 31, 1995 and 1994, and the financial highlights for the years ended
August 31, 1995 and 1994, and for the period from the start of business, June 7,
1993 to August 31, 1993. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the EV Marathon
Greater China Growth Fund series of the Eaton Vance Growth Trust at August 31,
1995, the results of its operations, the changes in its net assets and its
financial highlights for the respective stated periods in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
OCTOBER 6, 1995
16
<PAGE>
================================================================================
GREATER CHINA GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
August 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS - 95.7%
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
CHINA, 2.4%
Dazhong Taxi 1,106,105 $ 929,128
Shanghai Diesel Engineering 1,960,000 1,270,080
Shanghai Erfangji Co. Ltd. 6,154,676 1,070,914
Shanghai Phoenix Bicycle Co. 2,615,000 549,150
Shanghai Tyre and Rubber 5,717,600 1,989,724
Shanghai Yaohua Pilkington 4,770,500 5,152,140
Shenzhen China Bicycles Co. 8,745,000 3,050,256
-------------
$ 14,011,392
-------------
HONG KONG, 37.7%
Chen Hsong Holdings 10,820,000 $ 7,687,610
Cheung Kong Holdings Ltd. 4,130,000 20,488,104
China - HK Photo Product Hld. 5,758,000 2,547,915
CIM Company Ltd. (1) 1,800,000 3,022,983
Consolidated Electric Power Asia 2,938,180 6,054,120
Giordano Holdings Ltd. 2,500,000 2,050,750
Hong Kong Electric Co. 2,605,000 9,035,964
Hong Kong Land Holdings Ltd. 3,020,000 5,496,400
Hong Kong Telecommunications Ltd. 6,273,000 11,345,348
HSBC Holdings PLC 1,632,600 21,934,798
Hutchison Whampoa 4,573,000 22,035,915
Jardine Matheson Holdings 790,800 5,693,760
Johnson Electric Holdings 1,401,500 2,788,285
Li & Fung Ltd. 7,184,000 5,336,275
Maanshan Iron & Steel Co. 3,620,000 603,454
Ming Pao Enterprises 10,048,000 4,088,531
National Mutual Ltd. 16,544,000 11,862,048
New World Development 4,498,000 16,386,664
CP Pokphand Co. Ltd. 22,586,000 8,898,884
San Miguel Brewery Ltd. 3,170,000 1,842,721
Shanghai Haixing Shipping 10,230,000 1,123,254
Shanghai Petrochemical 27,284,000 8,900,040
Siu Fung Ceramics Holdings 31,284,000 6,869,966
Sun Hung Kai Properties Ltd. 1,654,000 12,019,287
Swire Pacific Ltd. (A Shares) 1,121,000 8,399,541
Tem Fat Hing Fung 8,818,000 808,610
Varitronix International Ltd. 3,782,000 7,011,072
VTECH Holdings Ltd. 1,996,000 2,088,614
</TABLE>
17
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
HONG KONG - (continued)
Wharf Holdings 941,200 $ 2,705,385
Yizheng Chemical Fibre Co. 8,116,000 2,411,264
Zhenhai Refining & Chemical Co. 4,722,000 1,201,749
-------------
$ 222,739,311
-------------
INDONESIA, 2.8%
PT HM Sampoerna (Foreign) 821,000 $ 7,788,007
PT Indah Kiat Pulp & Paper. 6,434,400 8,871,750
-------------
$ 16,659,757
-------------
REPUBLIC OF KOREA, 7.3%
Daewoo Corp.* 100 $ 1,409
Daewoo Heavy Industries 3,904 47,462
Dong Chang Paper Mfg.* 80,008 1,076,155
Korea Electric Power Corp. 411,200 15,839,588
Korea Exchange Bank 865,999 10,248,145
Pohang Iron & Steel Co. Ltd. 52,630 5,088,236
Samsung Electronics (New)* 8,290 1,479,590
Samsung Electronics 41,893 8,710,526
Samsung Fire & Marine Insurance 3,920 537,678
-------------
$ 43,028,789
-------------
MALAYSIA, 9.6%
DCB Holdings Berhad 816,000 $ 2,421,398
Land & General Berhard 4,943,000 15,857,146
Genting Berhad 1,029,000 9,118,998
Hong Leong Industries Berhad 1,667,000 8,957,291
Kim Hin Industry Berhad 1,305,000 4,552,753
Kim Hin Industry Berhad Warrants* 221,000 195,850
Leader Universal Holdings Ltd. 717,666 2,374,182
Perlis Plantations Berhad 770,000 2,531,914
Sime Darby Berhad 4,180,000 10,643,534
-------------
$ 56,653,066
-------------
THE PHILIPPINES, 9.5%
Ayala Corp. Class B* 2,236,404 $ 2,782,379
Bacnotan Consolidated Industries 602,201 4,205,169
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Belle Corp. Class B* 61,650,000 $ 11,651,850
Filipino Telephone 8,000,000 7,716,000
Philippine Long Distance Telephone 231,700 14,568,137
San Miguel Corporation 2,337,140 8,160,126
SM Prime Holdings* 22,389,900 7,169,245
-------------
$ 56,252,906
-------------
SINGAPORE, 9.9%
Cerebos Pacific Ltd. 1,129,000 $ 6,404,817
City Developments 924,000 5,567,469
Clipsal Industries Holdings Ltd. 2,400,000 6,000,000
Clipsal Industries Warrants* 234,000 173,160
Development Bank of Singapore 470,000 5,365,755
Overseas Union Bank 1,716,000 10,641,945
Sembawang Maritime 2,266,000 7,856,675
Singapore Airlines Ltd. 1,125,000 9,513,787
Straits Steamship Land 2,452,500 6,947,932
United Overseas Bank 800 6,937
-------------
$ 58,478,477
-------------
TAIWAN, 3.7%
China Steel 5,862,000 $ 4,476,809
CIS Technology Inc.* 1,018,000 1,474,379
Formosa Chemical 1,477,538 1,386,374
Formosa Plastics 876,900 1,425,488
Fuh HWA Secs 994,480 1,287,453
Nan Ya Plastic 3,419,799 5,782,881
Taiwan Polpropylene 814,800 1,054,840
Taiwan Semiconductor* 723,600 2,776,167
Victor Taichung Machinery 1,091,584 1,441,000
Yang Ming Marine Transport 985,000 1,028,044
-------------
$ 22,133,435
-------------
THAILAND, 12.2%
Bangkok Bank 518,200 $ 5,794,564
Electricity Generating (Foreign)* 4,241,700 13,297,729
Electricity Generating (Foreign) (Rights)* 424,170 821,575
Krung Thai Bank Ltd. (Foreign) 1,298,000 5,028,192
</TABLE>
19
<PAGE>
PORTFOLIO OF INVESTMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
THAILAND (Continued)
Saha Union Corp. Ltd. (Local) 2,314,500 $ 2,819,292
Siam Cement (Local) 234,400 13,629,660
Siam Cement (Foreign) 139,900 9,542,704
Siam Commercial Bank 1,591,300 17,158,510
Thailand Military Bank (Foreign) 967,000 4,016,338
-------------
$ 72,108,564
=============
UNITED STATES, 0.6%
AES China Generating Co. Ltd. 210,000 $ 1,890,000
Pacific Basin Bulk Shipping 84,500 1,214,687
Pacific Basin Bulk Shipping (Warrants)* 84,500 63,375
-------------
$ 3,168,062
-------------
Total Common Stocks and Warrants (Identified
cost, $507,528,635) $ 565,233,759
Other Assets - 4.3% 25,183,299
-------------
Net Assets - 100.0% $ 590,417,058
=============
</TABLE>
* Non-income producing security.
(1) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
================================================================================
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
August 31, 1995
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (Identified cost, $507,528,635) $ 565,233,759
Cash denominated in foreign currencies (cost, $10,504,108) 9,755,251
Cash 15,529,283
Receivable for investments sold 361,620
Dividends and interest receivable 937,884
Deferred organization expenses (Note 1C) 63,231
-------------
Total assets $ 591,881,028
LIABILITIES:
Payable for investments purchased $ 1,436,747
Payable to affiliate -
Custodian fee 20,258
Accrued expenses 6,965
-----------
Total liabilities 1,463,970
-------------
NET ASSETS applicable to investors' interest in Portfolio $ 590,417,058
=============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $ 533,468,333
Net unrealized appreciation of investments (computed on the
basis of identified cost) 57,705,124
Net unrealized depreciation of foreign currencies (756,399)
-------------
TOTAL $ 590,417,058
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended August 31, 1995
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Income --
Dividends (net of foreign taxes of $1,097,188) $ 15,724,962
Interest 58,676
-------------
Total income $ 15,783,638
Expenses --
Investment adviser fee (Note 2) $ 4,763,655
Administration fee (Note 2) 1,571,184
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 13,750
Custodian fee (Note 2) 661,381
Legal & audit fees 50,438
Amortization of organization expense (Note 1C) 28,638
Miscellaneous 21,711
-------------
Total expenses 7,110,757
-------------
Net investment income $ 8,672,881
-------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss --
Investment transactions computed (net of foreign capital gains
taxes of $1,140,389) $ (28,329,489)
Foreign currency (765,756)
-------------
Net realized loss $ (29,095,245)
Change in unrealized appreciation --
Investments (identified cost basis) $ (39,634,897)
Foreign currency (759,651)
-------------
Decrease in net unrealized appreciation (40,394,548)
-------------
Net realized and unrealized loss on investments $ (69,489,793)
-------------
Net decrease in net assets from operations $ (60,816,912)
=============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
For the year ended August 31,
-------------------------------------------------
1995 1994
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations -
Net investment income $ 8,672,881 $ 4,024,714
Net realized loss on investment transactions (29,095,245) (11,068,453)
Change in unrealized appreciation (depreciation)
of investments and foreign currency (40,394,548) 79,236,629
---------------- ----------------
Increase (decrease) in net assets from operations $ (60,816,912) $ 72,192,890
---------------- ----------------
Capital transactions:
Contributions $ 129,870,307 $ 636,873,995
Withdrawals (211,249,014) (184,497,094)
---------------- ----------------
Increase (decrease) in net assets resulting from capital transactions $ (81,378,707) $ 452,376,901
---------------- ----------------
Total increase (decrease) in net assets $ (142,195,619) $ 524,569,791
NET ASSETS:
At beginning of year 732,612,677 208,042,886
---------------- ----------------
At end of year $ 590,417,058 $ 732,612,677
================ ================
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------------
1995 1994 1993*
-------- -------- --------
<S> <C> <C> <C>
RATIOS (As a percentage of average net assets):
Expenses 1.10% 1.15% 1.38%+
Net investment income 1.35% 0.73% 0.38%+
PORTFOLIO TURNOVER 32% 36% 18%
NET ASSETS, end of period (000 omitted) $590,417 $732,613 $208,043
</TABLE>
+ Computed on an annualized basis.
* For the period from the start of business, October 28, 1992, to
August 31, 1993.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Greater China Growth Portfolio (the "Portfolio") is registered under the
Investment Company Act of 1940 as a diversified, open-end investment company
which was organized as a trust under the laws of the State of New York on
September 1, 1992. The Declaration of Trust permits the Trustees to issue
interests in the Portfolio. The following is a summary of the significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS - Marketable securities, including options, that are
listed on foreign or U.S. securities exchanges or in the NASDAQ National Market
System are valued at closing sale prices, on the exchange where such securities
are principally traded. Futures positions on securities or currencies are
generally valued at closing settlement prices. Unlisted or listed securities for
which closing sale prices are not available are valued at the mean between the
latest bid and asked prices. Short-term debt securities with a remaining
maturity of 60 days or less are valued at amortized cost. Other fixed income and
debt securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined in
good faith by or at the direction of the Trustees.
B. FEDERAL TAXES - The Portfolio has elected to be treated as a partnership for
Federal tax purposes. No provision is made by the Portfolio for federal or state
taxes on any taxable income of the Portfolio because each investor in the
Portfolio is individually responsible for the payment of any taxes on its share
of such income. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements, (under the Internal Revenue Code), in order for
its investors to satisfy them. The Portfolio will allocate, at least annually
among its investors, each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit. Withholding taxes on foreign dividends and
capital gains have been provided for in accordance with the Trust's
understanding of the applicable countries' tax rules and rates.
C. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
D. FUTURES CONTRACTS - Upon the entering of a financial futures contract, the
Portfolio is required to deposit ("initial margin") either in cash or securities
an amount equal to a certain percentage of the purchase price indicated in the
financial futures contract. Subsequent payments are made or received by the
Portfolio ("margin maintenance") each day, dependent on daily fluctuations in
the value of the underlying security, and are recorded for book purposes as
unrealized gains or losses by the Portfolio. The Portfolio's investment in
financial futures contracts is designed only to hedge against anticipated future
changes in interest or currency exchange rates. Should interest or currency
exchange rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss. If the
Portfolio enters into a closing transaction, the Portfolio will realize, for
book purposes, a gain or loss equal to the difference between the value of the
financial futures contract to sell and financial futures contract to buy.
25
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
E. FOREIGN CURRENCY TRANSLATION - Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases and
sales of foreign investment securities and income and expenses are converted
into U.S. dollars based upon currency exchange rates prevailing on the
respective dates of such transactions. Recognized gains or losses on investment
transactions attributable to foreign currency rates are recorded for financial
statement purposes as net realized gains and losses on investments. That portion
of unrealized gains and losses on investments that result from fluctuations in
foreign currency exchange rates are not separately disclosed.
F. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS - The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties to
meet the terms of their contracts and from movements in the value of a foreign
currency relative to the U.S. dollar. The Portfolio will enter into forward
contracts for hedging purposes as well as non-hedging purposes. The forward
foreign currency exchange contracts are adjusted by the daily exchange rate of
the underlying currency and any gains or losses are recorded for financial
statement purposes as unrealized until such time as the contracts have been
closed or offset.
G. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold. Dividend income is recorded on the ex-dividend date.
However, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as the Portfolio is informed of the ex-dividend date.
Interest income is recorded on the accrual basis.
- --------------------------------------------------------------------------------
(2) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Lloyd George Management (Hong Kong)
Limited (the Adviser), an affiliate of Eaton Vance, as compensation for
management and investment advisory services rendered to the Portfolio. Under the
advisory agreement, the Adviser receives a monthly fee of 0.0625% (0.75%
annually) of the average daily net assets of the Portfolio up to $500,000,000,
and at reduced rates as daily net assets exceed that level. For the year ended
August 31, 1995 the adviser fee was 0.74% of average net assets. In addition, an
administrative fee is earned by Eaton Vance Management (EVM) for managing and
administering the business affairs of the Portfolio. Under the administration
agreement, EVM earns a monthly fee in the amount of 1/48th of 1% (equal to 0.25%
annually) of the average daily net assets of the Portfolio up to $500,000,000,
and at reduced rates as daily net assets exceed that level. For the year ended
August 31, 1995, the administration fee was 0.24% of average net assets. Except
as to Trustees of the Portfolio who are not members of the Adviser or EVM's
organization, officers and Trustees receive remuneration for their services to
the Portfolio out of such investment adviser and administrative fees. Investors
Bank & Trust Company (IBT), an affiliate of EVM, serves as custodian of the
Portfolio. Pursuant to the custodian agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balances the
Portfolio maintains with IBT. Certain of the officers and Trustees of the
Portfolio are officers or directors/trustees of the above organizations.
26
<PAGE>
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(3) INVESTMENT TRANSACTIONS
Purchases and sales of investments, other than short-term obligations,
aggregated $200,189,314 and $293,436,289, respectively.
- --------------------------------------------------------------------------------
(4) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investments
owned at August 31, 1995, as computed on a federal income tax basis, are as
follows:
<TABLE>
<S> <C>
Aggregate cost $ 507,528,635
=============
Gross unrealized appreciation $ 99,177,974
Gross unrealized depreciation 41,472,850
-------------
Net unrealized appreciation $ 57,705,124
=============
</TABLE>
- --------------------------------------------------------------------------------
(5) RISKS ASSOCIATED WITH FOREIGN INVESTMENTS
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in
domestic investments. For example, there is generally less publicly available
information about foreign companies, particularly those not subject to the
disclosure and reporting requirements of the U.S. securities laws. Foreign
issuers are generally not bound by uniform accounting, auditing, and financial
reporting requirements and standards of practice comparable to those applicable
to domestic issuers. Investments in foreign securities also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Portfolio, political or financial instability or diplomatic
and other developments which could affect such investments. Foreign stock
markets, while growing in volume and sophistication, are generally not as
developed as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and more
volatile than securities of comparable U.S. companies. In general, there is less
overall governmental supervision and regulation of foreign securities markets,
broker-dealers, and issuers than in the United States.
27
<PAGE>
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
(6) FINANCIAL INSTRUMENTS
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
- --------------------------------------------------------------------------------
(7) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by EVM and
its affiliates in a $120 million unsecured line of credit agreement with a bank.
The line of credit consists of a $20 million committed facility and a $100
million discretionary facility. Borrowings will be made by the Portfolio solely
to facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each portfolio based on its borrowings at
an amount above either the bank's adjusted certificate of deposit rate, a
variable adjusted certificate of deposit rate, or a federal funds effective
rate. In addition, a fee computed at an annual rate of 1/4 of 1% on the $20
million committed facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and portfolios
at the end of each quarter. The Portfolio did not have any significant
borrowings or allocated fees during the period.
28
<PAGE>
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS OF
GREATER CHINA GROWTH PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Greater China Growth Portfolio as of August 31,
1995, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended August 31, 1995 and
1994, and the supplementary data for the years ended August 31, 1995 and 1994,
and for the period from the start of business, October 28, 1992 to August 31,
1993. These financial statements and supplementary data are the responsibility
of the Portfolio's management. Our responsibility is to express an opinion on
these financial statements and supplementary data based upon our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
August 31, 1995, by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of Greater China Growth
Portfolio at August 31, 1995, the results of its operations, the changes in its
net assets and its supplementary data for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
BOSTON, MASSACHUSETTS
OCTOBER 6, 1995
29
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<PAGE>
================================================================================
EV MARATHON
GREATER CHINA
GROWTH FUND
OFFICERS
- ------------------------------
JAMES B. HAWKES
President, Trustee
LANDON T. CLAY
Vice President, Trustee
M. DOZIER GARDNER
Vice President
WILLIAM D. BURT
Vice President
BARCLAY TITTMANN
Vice President
JAMES L. O'CONNOR
Treasurer
THOMAS OTIS
Secretary
INDEPENDENT TRUSTEES
- ------------------------------
DONALD R. DWIGHT
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
SAMUEL L. HAYES, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of Business Administration
NORTON H. REAMER
President and Director, United Asset
Management Company
JOHN L. THORNDIKE
Director, Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
GREATER CHINA
GROWTH PORTFOLIO
OFFICERS
- ------------------------------
HON. ROBERT LLOYD GEORGE
President, Trustee and Portfolio Co-Manager
JAMES B. HAWKES
Vice President and Trustee
SCOBIE DICKINSON WARD
Vice President, Assistant Secretary,
Assistant Treasurer and Portfolio Co-Manager
WILLIAM WALTER RALEIGH KERR
Vice President, Secretary and
Assistant Treasurer
JAMES L. O'CONNOR
Vice President and Treasurer
THOMAS OTIS
Vice President and Assistant Secretary
INDEPENDENT TRUSTEES
- ------------------------------
SAMUEL L. HAYES, III
Jacob H. Schiff Professor of Investment Banking,
Harvard University Graduate School of Business Administration
STUART HAMILTON LECKIE
Managing Director and Actuary, Wyatt Company,
Hong Kong
HON. EDWARD K.Y. CHEN
Professor and Director, Center for Asian Studies,
University of Hong Kong
31
