[LOGO: HOUSE]
[PHOTO OF CITY AND BAY OMITTED]
EV Classic
Greater China
Growth Fund
Annual Shareholder Report
August 31, 1996
To Shareholders
EV Classic Greater China Growth Fund had a total return of 4.2% for
the year ended August 31, 1996. That performance was the result of a
rise in net asset value per share from $8.12 on August 31, 1995 to
$8.46 on August 31, 1996. It does not include the effect of the
Fund's 1% contingent deferred sales charge on shareholders redeeming
within the first year. By comparison, the Peregrine Asia 100* - an
unmanaged index of common stocks in the Greater China region - rose
6.1% during the same period.
The China markets were quite volatile during the year, influenced by
trade tensions between the U.S. and China, as well as political
tensions in Taiwan, Korea and Thailand. Nonetheless, the markets
moved generally higher as investors were drawn to the region's
strong corporate profit growth.
China announces the convertibility
of its currency...
On July 1, 1996, China reached an important economic milestone: the
convertibility of its currency, the yuan. Convertibility will allow
foreign companies to easily buy and sell foreign currency in Chinese
banks. The new procedure will be more liquid and convenient than the
cumbersome "swap" markets of the past. This move by the Chinese
government is significant because it now assures foreign companies
investing in China that they can reliably send their profits back
home. In addition, it adds a further degree of confidence for
foreign companies operating in China. Finally, a convertible
currency moves China one step closer to qualifying for membership in
the World Trade Organization.
* It is not possible to invest directly in the Index.
The China region markets look forward to 1997...
On July 1, 1997, political and legal jurisdiction over Hong Kong
will officially pass from Great Britain to China. With that transfer
of power, a new era for China and Hong Kong will begin. Hong Kong
will gain unprecedented access to China's vast markets, while China
will incorporate the valuable banking and financial infrastructure
needed to do business in the modern global economy.
The impact of Hong Kong's investment in China has already been felt
in some areas. In Guangdong province, for example, where many Hong
Kong manufacturers have already established plants, the monthly wage
is twice that of the average China wage. While the future will bring
many challenges and risks, the combination of Hong Kong and China is
likely to result in an economic powerhouse. We are very enthusiastic
about the growth prospects of the new China. We believe shareholders
of EV Classic Greater China Growth Fund will share in that growth.
Sincerely,
/S/James B. Hawkes
James B. Hawkes,
President
October 20, 1996
[PHOTO OF JAMES B. HAWKES OMITTED]
Management Discussion: Adaline M. Ko
An interview with Adaline M. Ko, Director of Lloyd George
Management, Ltd., the Investment Adviser to the Greater China Growth
Portfolio.
Q: Adaline, what were some of the factors in the Fund's performance
during its fiscal year?
A: The Fund again managed a positive return during a period marked
by continuing market volatility as well as the uncertainty that
characterized the U.S. economy. The latter was especially evident in
Hong Kong. By far the largest weighting in the Portfolio - Hong Kong
rose about 20% from mid-November 1995 through mid-February of this
year. However, soon thereafter, the Hong Kong market felt the impact
of rising U.S. interest rates, as long-term U.S. Treasury yields,
which stood at 5.95% in January, rose to the 7% level by the end of
August. With interest rate concerns increasing investors' caution,
the Hong Kong market fluctuated in a relatively narrow trading range
for the balance of the fiscal period.
Fund shares are not guaranteed by the FDIC and are not deposits or
other obligations of, or guaranteed by, any depository institution.
Shares are subject to investment risks, including possible loss of
principal invested.
Moreover, despite the political intrigue and market volatility, the
strong economic story of the China region remains intact. While some
political tensions remain, investors have focused increasingly on
fundamentals, which are strongly positive.
Q: How have the other Greater China markets performed in the past
year?
A: The other China region markets turned in a mixed showing. The
strongest performer has been Taiwan, which rose more than 30% in the
past year. That is especially noteworthy in light of Taiwan's
difficult relationship with mainland China for much of that period.
Taiwan got right back to business following its watershed
presidential elections in June and the market responded very well.
The Philippines was another strong performer, up 16%. Second quarter
1996 GDP growth reached 5.8%, the country's strongest economic
performance since 1990, while inflation slowed in August for the
fifth consecutive month. Elsewhere, Malaysia rose about 10% during
the period, supported by solid earnings gains.
Other China region markets fared less well during the year. Korea
suffered from political scandals and the jolt to investor confidence
stemming from the trials of the former presidents, while Thailand
continued to battle high inflation and interest rate pressures
[GRAPHIC VERTICAL BAR CHART OMITTED: 1996 Gross Domestic Product Growth*]
Caption reads: Despite a tight monetary policy and a continuing, successful
fight aganist inflation, China's economic growth continues to outpace that
of many industrialized powers.
[GRAPHICS OMITTED: each bar of the chart is topped with the flag of the
Country represented]
Germany +1.1%
United Kingdom +1.8%
United States +2.7%
Japan +3.4%
China +9.8%
Footnote reads:
*For 12 months ended June 30, 1996
Source: Bloomberg Financial
Q: Have you made any major changes to the Portfolio?
A: We made some small changes to the Portfolio, but continue to
focus on countries and companies that are registering strong
earnings growth. We've increased our weighting in Hong Kong to 46%
of the Portfolio's holdings. Hong Kong remains our favored avenue to
the China market. Hong Kong is highly leveraged to U.S. interest
rates and therefore remains very sensitive to the ebb and flow of
U.S. economic data. However, Hong Kong-based companies continue to
post impressive earnings growth, making them attractive to the
region's investors. Importantly, with the change in Hong Kong's
jurisdiction from Britain to China less than a year away, investors
are increasingly sanguine about the prospects for a peaceful and
orderly turnover.
We also increased our weightings slightly in Malaysia and Taiwan,
while trimming our commitments to Thailand and Singapore.
Q: How have the Fund's larger investments fared in the past year?
A: The Fund's large core holdings continued to do well. Hutchison
Whampoa, for example, saw earnings rise 75% in the first half of
1996 alone. The company grew all of its core businesses, but
benefited especially from strength in its retail and telecom
holdings. Hutchison's A.S. Watson retail group enjoyed brisk profit
growth despite a difficult retail climate for Hong Kong consumers.
Meanwhile, the successful flotation of Orange, the company's telecom
division, brought HK$4.1 billion into the company's coffers.
Another large core holding, HSBC, the parent of Hang Seng Bank, saw
profits rise more than 33% in the first half. The company enjoyed
wider net interest margins - the difference between what the bank
pays for deposits and what it earns from loans. The company's
impressive results reflect its commanding position among banks in
the Greater China economy.
Q. You mentioned increasing your investments in Taiwan. In light of
the recent saber-rattling between China and Taiwan, what is your
outlook for the Taiwan market?
A. The Taiwan market has done very well in 1996, although it's also
been among the region's most volatile markets. That volatility was
due in large part to Taiwan's precarious political relationship with
mainland China, but was also influenced by slowing export demand,
sluggish domestic demand, and falling prices for key products and
commodities.
Following the tensions with China early in the year, as Taiwan held
its first democratic elections, the two countries have established
an uneasy truce that should enable them to improve trade conditions.
There are already some modest signs of progress. For example,
Taiwan's indirect trade with China increased to $10.5 billion in the
first half of 1996. Separately, the Taiwan Ministry of Trade
recently approved $95 million in direct investment in China by
Taiwan companies.
[GRAPHIC PIE CHART OMITTED: Greater China Growth Portfolio: Asset Allocation]
Caption reads: Based on market value as of August 31, 1996
Indonesia 2.0%
Mainland China 0.6%
Hong Kong 45.9%
Malaysia 10.7%
Thailand 9.6%
Singapore 7.8%
Korea 7.7%
Philippines 6.6%
Taiwan 6.3%
Other 2.8%
Economically, it now appears that Taiwan is back on track. Fourth
quarter GDP is expected to rise to 6.5% from 4.9% a year ago,
according to a study by Hong Kong & Shanghai Bank. And reflecting
that growth, corporate earnings growth for Taiwanese companies in
1997 is expected to be in the 15%-to-20% range. That kind of
earnings growth is likely to generate strong momentum in the stock
market.
[GRAPHIC OF COUNTRY OF CHINA WITH OIL RIG & OIL STORAGE TANK, COAL CAR
FULL OF COAL AND UNIVERSAL NUCLEAR POWER SYMBOL OMITTED:]
Captions reads: China's energy needs*: Soaring demand for all sectors.
Oil & Natural Gas Exploration: 609 Mil. Tons
Coal Production: 1,252 Mil. Tons
Hydro/Nuclear: 79 Mil. Tons
Footnote reads:
*Estimated fuel needs by year 2015
Source: DRI/McGraw-Hill
[GRAPHIC OMITTED: China's Energy Needs:
A Twenty-Year, $1 Trillion
Building Program.]
China's Estimated Energy Expenditures
by the year 2015:
Fuel Energy Demand:
Electric power $550 billion
Oil 180 billion
Coal 180 billion
Natural Gas 90 billion
Footnote reads:
Source: DRI/McGraw-Hill
Q. Where have you been investing in Taiwan?
A. While Taiwan remains a fairly small portion of the Portfolio, at
6.3%, we have increased our commitments there since our last report.
We have focused on companies like Nan Ya Plastic and Formosa
Chemical Fiber, as these sectors, which have experienced weak
pricing in a sluggish economic climate, should strengthen with an
improving economy. Finally, the finance sector has offered some
attractive opportunities. The government's loose monetary policy
should boost business for financial companies such as Cathay
Insurance.
Q. You also indicated an increased interest in Malaysia.
A. Yes. Early in the year, there were concerns that the Malaysian
economy might be overheating. However, those fears have since proved
unwarranted. The Malaysia market has recently consolidated gains
made early in the year, but should be on firm footing for the rest
of the year. Moreover, we remain positive on the Malaysian market,
which is trading at a multiple of 18.8 times prospective 1997
earnings, close to its 6-year historic low of 18 times earnings.
Corporate earnings have been much stronger than anticipated.
Earnings reports, due out in the next few weeks, may add some
support to the market, since expectations are quite positive for the
half-year results.
Q. Where have you invested in Malaysia?
A. The Fund's largest Malaysian investment is Sime Darby. The
company has interests across a wide range of industries throughout
the China region. In addition to maintaining plantations throughout
Malaysia, Sime Darby also has an exposure in manufacturing, property
develop-ment, and the financial services industry. Interestingly, it
also owns auto dealer franchises for BMW, Ford, Alfa Romeo, and
Mitsubishi for certain parts of the China region.
Q. You mentioned having trimmed your investments in Thailand. What
occasioned that change?
A. We've scaled back our investments in Thailand because of
increasing concerns over high inflation. Market conditions have been
further aggravated by disappointing first quarter earnings. Domestic
interest rates are not likely to come down by the desired 1%-2%
unless there is a significant reduction in the current account
deficit, which is likely to remain a problem well into the fourth
quarter. Given recent conditions, the Bank of Thailand has indicated
a reluctance to ease its recent tight monetary policies. Finally,
investors have been fixated on the stability of the present Thai
government. So there have been ample reasons to exercise caution in
Thailand.
Q. What sort of Thai companies have you retained as investments?
A. We've generally focused on blue chip companies that should
maintain strong earnings momentum despite the questions over
politics and the economy. The economy has continued to weaken due to
a tight monetary policy, and it is less likely now that the economy
will hit its economic targets for 1996. An interest rate decline
could set the stage for an earnings recovery. But until we see
confirmation of that, we are staying with reliable blue chips like
Electricity Generating Company and Siam Commercial Bank. Electricity
Generating is the holding company that is the among the key players
in Thailand's efforts to privatize its electric utility industry,
while Siam Commercial is among Thailand's leading financial services
companies.
Q. Turning to mainland China, how is the economy doing?
A. The Chinese government recently announced a cut in interest
rates, the second such reduction this year. The move was aimed at
continuing strong economic growth. Importantly, the government took
pains to emphasize that it was not abandoning its "appropriately
tight monetary policies." Thus, China will keep a close watch on
inflation, and that should be very reassuring to investors.
Recent U.S. Investments* in China:
(bullet) Revlon, Inc. - the U.S. cosmetics giant has formed a joint
venture with Sunstar Group, a Beijing-based investment firm. The new
company will be based in Shanghai and will represent Revlon's first
manufacturing facility in China.
(bullet) Wal-Mart - the Arkansas-based discount retailer has opened
Supercenter and Sam's outlets in Shenzhen at a cost of $50 million.
The company plans to open 35 stores in China by the year 2000.
(bullet) Freightliner, Inc. - the U.S. truck manufac-turer is
creating a joint venture with Chinese public sector authorities. The
new company, Shanghai Freightliner Truck, is scheduled to start
production in 1997 and is expected to assemble 4,000 vehicles
annually.
Footnote reads:
* These U.S. companies are not investments of the
Portfolio.
China imposed a credit squeeze in mid-1993 to help curb inflation,
and the results have been most impressive. The government expects
that inflation will fall below its target of 10% for 1996, while
economic growth is expected to be in the 9%-to-10% range. The
Portfolio maintains a very modest exposure to mainland companies at
present. As I indicated earlier, we continue to favor Hong Kong as
the most liquid and convenient investment vehicle into China.
Q. Adaline, what do you anticipate in the year ahead for Hong Kong
and China?
A. Happily, there is an increasing sense of calm regarding the
transfer of Hong Kong to China's jurisdiction, now less than a year
away. I believe that China clearly recognizes what a valuable asset
it will have in Hong Kong. And, for their part, the Hong Kong
business establishment is committed to making the most of this great
opportunity. Of course there will be the usual political
gamesmanship, which is to be expected. As I have reminded share-
holders in the past, political change is among the risks of
investing in a foreign country.
But in the final analysis, the potential benefits for Hong Kong and
China, following the transfer, are too vast to ignore. China has
made tremendous progress in fighting inflation and is gradually
spreading economic liberalism to the interior of the country. Hong
Kong will bring needed expertise and many decades of professional
management. It should prove to be an exciting partnership.
[GRAPHIC WORM CHART OMITTED: Comparison of change in Value of a $10,000
Investment in EV Classic Greater China Growth Fund and the Peregrine
Asia 100 Index]
Caption reads: From December 31, 1993 through August 31, 1996
Inset box info reads:
- ----------------------------------------------------------------
AVERAGE Value of
ANNUAL 1 Life Investment at
RETURNS Year of Fund* 8/31
- ----------------------------------------------------------------
With CDSC 3.2% -6.09% $8,481
- ----------------------------------------------------------------
Without CDSC 4.2% -6.09% $8,481
- ----------------------------------------------------------------
Data from worm chart reads:
Date Fund Index
-------- ------- -------
12/31/93 $10,000 $10,000
1/31/94 $9,440 $9,702
2/28/94 $9,000 $9,169
3/31/94 $7,940 $8,360
4/30/94 $8,040 $8,556
5/31/94 $8,400 $8,916
6/30/94 $7,900 $8,495
7/31/94 $8,410 $8,920
8/31/94 $9,030 $9,527
9/30/94 $8,960 $9,970
10/31/94 $8,910 $9,529
11/30/94 $8,080 $8,798
12/31/94 $8,000 $8,729
1/31/95 $7,118 $7,881
2/28/95 $7,720 $8,299
3/31/95 $7,820 $8,389
4/30/95 $7,710 $8,200
5/31/95 $8,401 $8,813
6/30/95 $8,261 $8,646
7/31/95 $8,502 $8,735
8/31/95 $8,141 $8,243
9/30/95 $8,261 $8,343
10/31/95 $8,070 $8,193
11/30/95 $7,880 $7,962
12/31/95 $8,191 $8,282
1/31/96 $8,983 $8,668
2/28/96 $8,832 $8,751
3/31/96 $8,722 $8,866
4/30/96 $8,913 $9,401
5/31/96 $8,983 $9,235
6/30/96 $8,742 $9,186
7/31/96 $8,191 $8,486
8/31/96 $8,481 $8,746
Footnote reads:
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 12/28/93
+ 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 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 Classic Greater China Growth Fund,
and the unmanaged Peregrine Asia 100 Index.
The Total Return Figures
The solid 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 the reinvestment of dividends
and capital gains.
The black line represents the performance of the Peregrine Asia 100
Index, a broad-based, widely recognized unmanaged index of 100
common stocks traded in the China region. 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. It is not possible to invest directly in
the Index.
EV Classic Greater China Growth Fund
Financial Statements
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
August 31, 1996
<S> <C> <C>
Assets:
Investment in Greater China Growth Portfolio, at value (Note 1A)
(identified cost, $17,115,339) $ 18,800,618
Receivable for Fund shares sold 57,588
Deferred organization expenses (Note 1E) 23,360
-------------
Total assets $ 18,881,566
Liabilities:
Payable for Fund shares redeemed $ 64,687
Payable to affiliate --
Trustees' fees (Note 3) 30
Accrued expenses 14,455
-------------
Total liabilities 79,172
-------------
Net Assets for 2,222,320 shares of beneficial interest outstanding $ 18,802,394
=============
Sources of Net Assets:
Paid-in capital $ 21,069,525
Accumulated net realized loss on investment transactions from the Portfolio (3,568,146)
Accumulated distributions in excess of net investment income (384,264)
Unrealized appreciation of investments from Portfolio
(computed on the basis of identified cost) 1,685,279
-------------
Total $ 18,802,394
=============
Net Asset Value, Offering Price, and Redemption Price Per Share (Note 7)
($18,802,394 (divided by) 2,222,320 shares of beneficial interest outstanding) $ 8.46
=======
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended August 31, 1996
<S> <C> <C>
Investment Income (Note 1B):
Investment income allocated from Portfolio (net of foreign taxes of $37,625) $ 420,054
Expenses allocated from Portfolio (228,941)
-------------
Net investment income from Portfolio $ 191,113
Expenses --
Management fee (Note 3) $ 50,917
Compensation of Trustees not members of the
Administrator's organization (Note 3) 611
Custodian fee (Note 1C) 2,618
Distribution fees (Note 6) 203,664
Transfer and dividend disbursing agent fees 28,150
Printing and postage 33,885
Legal and accounting services 10,090
Registration fees 29,735
Amortization of organization expenses (Note 1E) 10,028
Miscellaneous 6,103
-------------
Total expenses 375,801
-------------
Net investment loss $ (184,688)
-------------
Realized and Unrealized Gain (Loss) from Portfolio:
Net realized gain (loss) from Portfolio (identified cost basis) --
Investment transactions (net of foreign capital gains taxes of $65,567) $ (168,619)
Foreign currency and forward foreign currency exchange contract (46,622)
-------------
Net realized loss $ (215,241)
Change in unrealized appreciation 1,317,029
-------------
Net realized and unrealized gain $ 1,101,788
-------------
Net increase in net assets from operations $ 917,100
=============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
Year Ended August 31,
------------------------------------
1996 1995
-------------- --------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment loss $ (184,688) $ (135,671)
Net realized loss (215,241) (2,187,569)
Change in unrealized appreciation (depreciation)
from Portfolio (1,317,029) (194,248)
------------- -------------
Net increase (decrease) in net assets from operations $ 917,100 $ (2,517,488)
------------- -------------
Distributions to shareholders -- (Note 2)
In excess of net investment income $ -- $ (59,285)
------------- -------------
Transactions in shares of beneficial interest (Note 4) --
Proceeds from sale of shares $ 13,070,195 $ 15,194,416
Net asset value of shares issued to shareholders
in payment of distributions declared -- 54,632
Cost of shares redeemed (16,392,547) (17,894,214)
------------- -------------
Decrease in net assets from Fund share transactions $ (3,322,352) $ (2,645,166)
------------- -------------
Net decrease in net assets $ (2,405,252) $ (5,221,939)
Net Assets:
At beginning of year 21,207,646 26,429,585
------------- -------------
At end of year (including distributions in excess of net
investment income of $384,264 and
$139,381, respectively) $ 18,802,394 $ 21,207,646
============= =============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Financial Highlights
Year Ended August 31,
--------------------------------------------
1996 1995 1994*
-------- -------- --------
<S> <C> <C> <C>
Net Asset Value, beginning of year $ 8.120 $ 9.030 $ 10.000
-------- -------- --------
Income (Loss) from operations:
Net investment loss $ (0.092) $ (0.037) $ (0.033)
Net realized and unrealized gain
(loss) on investments 0.432 (0.853) (0.937)
-------- -------- --------
Total income (loss) from operations $ 0.340 $ (0.890) $ (0.970)
-------- -------- --------
Less distributions:
In excess of net investment income $ -- $ (0.020) $ --
-------- -------- --------
Net Asset Value, end of year $ 8.460 $ 8.120 $ 9.030
======== ======== ========
Total Return (2) 4.19% (9.85%) (9.70%)
Ratios/Supplemental Data:
Net assets, end of year (000 omitted) $ 18,802 $ 21,208 $ 26,430
Ratio of net expenses to average daily net assets (1)(3) 3.03% 3.04% 2.75%+
Ratio of net expenses to average daily net assets
after custodian fee reduction (1)(3) 2.97% -- --
Ratio of net investment loss to average daily net assets (0.91%) (0.59%) (0.74%)+
+ Computed on an annualized basis.
* For the period from December 28, 1993 (start of business) to August 31, 1994.
(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. Total return is computed on a non-annualized basis.
(3) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require each Fund, as well as its corresponding Portfolio, to increase
its expense ratio by the effect of any expense offset arrangements with its service providers. The expense ratios
for each of the periods ended on or before August 31, 1995 have not been adjusted to reflect this change.
See notes to financial statements
</TABLE>
Notes to Financial Statements
(1) Significant Accounting Policies
EV Classic 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 (3.7% at August 31, 1996). 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 1A 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. Expense Reduction - The Fund has entered into an arrangement with
its custodian agent whereby interest earned on uninvested cash
balances are used to offset custodian fees. All significant
reductions are reported as a reduction of expenses in the statement
of operations. Prior to November 10, 1995, Investors Bank & Trust
Company (the custodian) was an affiliate of Eaton Vance Management.
D. 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, 1996, the Fund, for federal income tax
purposes, had capital loss carryovers 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. The amounts and expiration dates of
the capital loss carryovers are as follows:
Amounts Expires
---------------- ----------------
$1,396,831 8/31/04
337,254 8/31/03
834,707 8/31/02
Additionally, net capital losses of $38,736 attributable to security
and currency transactions included after October 31, 1995, are
treated as arising on the first day of the Fund's next taxable year.
E. 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.
F. Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates.
G. Other - Investment transactions are accounted for on a trade-date
basis.
(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 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, 1996, $95,378 was reclassified from
accumulated net investment loss to accumulated distributions in
excess of net investment income ($60,195) and paid-in capital
($35,180), due to permanent differences between book and tax
accounting for currency gains and losses, foreign taxes and net
operating loss. Net investment income, net realized losses and net
assets were not affected by those reclassifications.
(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, 1996 the fee was
equivalent to .25% of the Fund's average daily net assets for such
period and amounted to $50,917. 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.
Certain officers and Trustees of the Fund and the Portfolio are officers
and directors/trustees of the above organizations. In addition, investment
adviser and administrative 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:
For the Year Ended
--------------------------------------
August 31, 1996 August 31, 1995
--------------------------------------
Sales 1,541,301 1,851,528
Issued to shareholders
electing to receive payments
of distributions in Fund shares -- 6,929
Redemptions (1,930,989) (2,173,165)
---------- ----------
Net decrease (389,688) (314,708)
========== ==========
(5) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio
aggregated $13,027,315 and $16,842,938, respectively.
(6) 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) 6.25% of the aggregate amount received by the Fund for 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 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 paid or accrued $152,748 to
or payable to EVD for the year ended August 31, 1996, representing
0.75% of average daily net assets. At August 31, 1996 the amount of
Uncovered Distribution Charges of EVD calculated under the Plan was
approximately $2,909,659.
In addition, the Plan permits the Fund to make monthly payments of
service fees to the Principal Underwriter in amounts not expected to
exceed 0.25% of the Fund's average daily net assets for any fiscal
year. The Fund paid or accrued service fees to or payable to EVD for
the year ended August 31, 1996 in the amount of $50,916. During the
first year after a purchase of Fund shares, EVD will retain the
service fee as reimbursement for the service fee payment made to the
Authorized Firm at the time of sale. EVD made monthly service fee
payments to Authorized Firms in amounts anticipated to be equivalent
to 0.25%, annualized, of the assets maintained in the Fund by their
customers. EVD currently expects to pay to an Authorized Firm a
service fee at the time of sale equal to 0.25% of the purchase price
of the shares sold by such Firm and monthly payments of service fees
in amounts not expecting to exceed 0.25% per annum of the Funds'
average daily net assets based on a value of Fund shares sold by
such Firm and remaining outstanding for at least one year. During
the first year after a purchase of Fund shares, EVD will retain the
service fee as reimbursement for the service fee payment made to an
Authorized Firm at the time of sale. Service fee payments are made
for personal services and/or the maintenance of shareholder
accounts. Service fees paid to EVD and Authorized Firms 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 when there are no outstanding Uncovered Distribution
Charges of EVD.
Certain officers and Trustees of the Fund are officers or directors
of EVD.
(7) Contingent Deferred Sales Charge
Shares purchased on or after January 30, 1995 and redeemed during
the first year after purchase (except shares acquired through the
reinvestment of distributions) generally will be subject to a
contingent deferred sales charge (CDSC) at a rate of one percent of
redemption proceeds, exclusive of all reinvestments and capital
appreciation in the account. No contingent deferred sales charge is
imposed on exchanges for shares of other funds in the Eaton Vance
Classic Group of Funds or Eaton Vance Money Market Fund which are
distributed with a contingent deferred sales charge. EVD received
approximately $2,512 of CDSC for the year ended August 31, 1996.
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 Classic Greater China Growth Fund (one of the series
constituting Eaton Vance Growth Trust) as of August 31, 1996, and
the related statement of operations for the year ended, the
statements of changes in net assets for the years ended August 31,
1996 and 1995, and the financial highlights for the years ended
August 31, 1996 and 1995 and for the period from the start of
business, December 28, 1993, to August 31, 1994. 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
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 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 Classic Greater China Growth Fund series of the Eaton Vance
Growth Trust at August 31, 1996, 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 4, 1996
<TABLE>
<CAPTION>
Portfolio of Investments
August 31, 1996
STOCKS AND WARRANTS -- 97.8%
- ---------------------------------------------------------------------------------------
Shares Value
- ---------------------------------------------------------------------------------------
<S> <C> <C>
China -- 0.6%
Shanghai Yaohua Pilkington 5,683,563 $2,841,782
------------
Hong Kong -- 45.9%
Chen Hsong Holdings 10,820,000 $6,227,076
Cheung Kong Holdings Ltd. 3,650,000 25,608,818
Cheung Kong Infrastructure 1,482,000 2,424,575
China Merchants Hai Hong Holdings 8,000,000 2,741,781
China Overseas Land & Investment 20,000,000 6,272,471
China Resources Enterprises 7,672,000 6,895,890
China Travel International 8,322,000 2,394,720
China Travel International Warrants * 2,064,400 170,872
CIM Company Ltd. (1) 1,800,000 3,026,306
Cosco Pacific Ltd. 7,000,000 5,386,565
Giordano Holdings Ltd. 1,500,000 1,241,561
Guangnan Holdings Ltd. 8,980,000 5,516,541
Hang Seng Bank 760,000 7,789,504
Hong Kong Land Holdings Ltd. 2,020,000 4,585,400
Hong Kong Telecommunications Ltd. 2,773,000 4,644,260
HSBC Holdings PLC 1,500,000 25,898,192
Hutchison Whampoa 4,400,000 26,631,489
Jardine Matheson Holdings 590,800 3,722,040
Li & Fung Ltd. 7,184,000 6,503,712
National Mutual Ltd. 14,694,000 12,257,352
New World Development 4,000,000 19,399,395
Ng Fung Hong Ltd. 8,752,000 4,244,588
Oriental Press Group Ltd. 8,200,000 4,215,488
CP Pokphand Co. Ltd. 17,338,000 5,886,067
San Miguel Brewery Ltd. 3,170,000 1,240,171
Siu Fung Ceramics Holdings 28,284,000 4,389,540
Sun Hung Kai Properties Ltd. 1,427,000 13,933,745
Tingyi (Cayman Island) Holding Co. 8,696,000 2,035,612
Varitronix International Ltd. 3,282,000 6,197,098
VTECH Holdings Ltd. 3,000,000 5,528,828
Wharf Holdings Ltd. 1,581,200 5,971,268
Zhenhai Refining & Chemical Co. 3,158,000 959,793
------------
$233,940,718
------------
Indonesia -- 2.0%
PT HM Sampoerna (Foreign) 571,500 $ 5,502,701
PT Lippo Bank (Foreign) (2) 3,200,000 4,918,873
------------
$10,421,574
------------
Republic of Korea -- 7.7%
Haitai Electronics Co. 188,750 3,432,865
Hansol Paperboard Co. Ltd. 8 70
Korea Electric Power Corp. 301,200 10,830,424
Korea Exchange Bank 999,499 12,218,812
Korea Mobile Telecom Corp. 230 255,740
Pohang Iron & Steel Co. Ltd. 52,630 4,089,090
Samsung Electronics (New) 18,996 1,412,092
Samsung Electronics (Ord) 38,146 2,970,662
Samsung Fire & Marine Insurance 4,510 2,698,576
Samsung Fire & Marine Insurance Pfd. 3,920 1,123,438
------------
$39,031,769
------------
Malaysia -- 10.7%
Berjaya Sports Toto Bhd 1,200,000 $4,451,574
Ekran Bhd 830,000 3,528,374
Hong Leong Industries Bhd 312,000 1,438,941
Konsortium Perkapalan Bhd 375,000 2,361,139
Kumpulan Guthrie Bhd (2) 2,350,000 3,769,801
Land & General Bhd 3,580,000 6,546,942
Magnum Corp. Bhd 1,700,000 2,754,361
Malayan Banking Bhd 400,000 3,801,885
MBF Capital Bhd 3,800,000 5,425,306
RJ Reynolds Bhd 1,000,000 2,887,508
Sime Darby Bhd 3,300,000 11,183,076
Tan Chong Motor Holdings Bhd 3,494,000 6,193,495
------------
$54,342,402
------------
The Philippines -- 6.6%
Bacnotan Consolidated Industries 544,272 $2,659,546
Belle Corp. 30,591,000 8,174,728
Fortune Cement Corp. 7,000,000 3,607,559
Philippine Long Distance Telephone ADR ** 144,700 8,663,913
Pilipino Telephone 7,200,000 9,482,726
San Miguel Corp. Class B 23,199 75,721
SM Prime Holdings 4,598,280 1,105,904
------------
$33,770,097
------------
Singapore -- 7.8%
Cerebos Pacific Ltd. 1,129,000 $9,388,273
Clipsal Industries Holdings Ltd. 2,400,000 6,696,000
Clipsal Industries Holdings Ltd. Warrants 234,000 181,350
Overseas Union Bank (Foreign) 1,640,000 11,422,886
Sembawang Maritime 1,799,000 4,628,557
Straits Steamship Land 2,000,000 6,851,457
Straits Steamship Land Warrants * 613,125 797,455
------------
$39,965,978
------------
Taiwan -- 6.3%
Cathay Life Insurance 1,049,950 $6,421,829
China Motor Co. Ltd. 1,688,200 2,194,184
China Steel 7,935,000 7,742,168
Formosa Chemical Fiber 1,573,578 1,901,985
Formosa Plastics 964,590 2,036,815
Grand Pacific Petrochemical 1,736,500 1,681,656
Nan Ya Plastic 3,813,076 7,218,711
Standard Foods Taiwan Ltd. 1,024,000 2,180,905
Wan Hai Lines Ltd. 428,750 991,194
------------
$32,369,447
------------
Thailand -- 9.6%
Bangkok Bank Co. Ltd. (Foreign) 291,200 $3,682,434
Bangkok Bank Co. Ltd. (Public) (2) 250,000 2,153,725
Dhana Siam Finance 1,205,800 5,765,730
Electricity Generating (Foreign) 3,965,970 11,754,505
Krung Thai Bank Ltd. (Foreign) 1,548,000 6,667,931
Saha Union Corp. Ltd. (Local) (2) 1,555,300 2,089,713
Siam Cement (Local) (2) 163,210 6,011,133
Siam Commercial Bank 850,000 10,681,683
Thailand Military Bank (Foreign) 99,000 367,753
------------
$49,174,607
------------
United States -- 0.6%
AES China Generating Co. Ltd. 210,000 $1,837,500
Pacific Basin Bulk Shipping 84,500 1,309,750
Pacific Basin Bulk Shipping Warrants * 84,500 79,219
------------
$3,226,469
------------
Total Stocks and Warrants (Identified cost, $425,476,900) $499,084,843
Other Assets Less Liabilities -- 2.2% 11,212,716
------------
Net Assets -- 100.0% $510,297,559
============
* Non-income producing security
** ADR -- American Depository Receipt
(1) Security valued at fair value using methods determined in good faith by or at the
direction of the Trustees.
(2) The above securities held by the Portfolio on August 31, 1996, are unrestricted
securities valued at market prices. Because of the length of the registration process,
the Portfolio would temporarily be unable to sell these securities. At August 31, 1996,
the aggregate value of these securities amounted to $18,943,245 representing 3.7% of
the net assests (Note 5).
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
August 31, 1996
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (Identified cost, $425,476,900) $ 499,084,843
Cash denominated in foreign currencies (cost, $3,755,508) 3,740,380
Cash 7,041,766
Receivable for investments sold 273,004
Dividends and interest receivable 1,369,810
Deferred organization expenses (Note 1D) 34,515
------------
Total assets $511,544,318
Liabilities:
Payable for investments purchased $608,312
Payable for foreign capital gains tax 507,411
Payable for forward foreign currency exchange contracts 400
Payable to affiliate --
Trustees' fees (Note 2) 2,500
Accrued expenses 128,136
--------
Total liabilities 1,246,759
------------
Net Assets applicable to investors' interest in Portfolio $510,297,559
============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $436,707,543
Net unrealized appreciation of investments 73,590,016
(computed on the basis of identified cost ------------
Total $510,297,559
============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended August 31, 1996
<S> <C> <C>
Investment Income:
Income --
Dividends (net of foreign taxes of $1,044,675) $11,539,535
Interest 116,558
-----------
Total income $11,656,093
Expenses --
Investment adviser fee (Note 2) $ 4,211,398
Administration fee (Note 2) 1,404,681
Compensation of Trustees not members of the
Investment Adviser's or Administrator's organizations (Note 2) 20,833
Custodian fee (Note 1C) 962,477
Legal and audit fees 43,767
Amortization of organization expenses (Note 1D) 28,716
Miscellaneous 29,564
-----------
Total expenses $ 6,701,436
Deduct reduction of custodian fee (Note 1C) 346,868
-----------
Net expenses 6,354,568
-----------
Net investment income $ 5,301,525
-----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) --
Investment transactions computed (net of foreign capital gains
taxes of $1,805,874) $15,071,040
Foreign currency (1,283,543)
-----------
Net realized gain $13,787,497
Change in unrealized appreciation --
Investments (identified cost basis) $15,902,819
Foreign currency 738,472
-----------
Increase in unrealized appreciation 16,641,291
-----------
Net realized and unrealized gain on investments $30,428,788
-----------
Net increase in net assets from operations $35,730,313
===========
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Statements of Changes in Net Assets
For the Year Ended August 31,
------------------------------------
1996 1995
---------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations --
Net investment income $ 5,301,525 $ 8,672,881
Net realized gain (loss) on investment transactions 13,787,497 (29,095,245)
Change in unrealized appreciation (depreciation)
of investments and foreign currency 16,641,291 (40,394,548)
------------- -------------
Increase (decrease) in net assets from operations $ 35,730,313 $ (60,816,912)
------------- -------------
Capital transactions --
Contributions $ 135,099,898 $ 129,870,307
Withdrawals (250,949,710) (211,249,014)
------------- -------------
Decrease in net assets resulting from capital transactions $(115,849,812) $ (81,378,707)
------------- -------------
Total decrease in net assets $ (80,119,499) $(142,195,619)
Net Assets:
At beginning of year 590,417,058 732,612,677
------------- -------------
At end of year $ 510,297,559 $ 590,417,058
============= =============
See notes to financial statements
</TABLE>
<TABLE>
<CAPTION>
Supplementary Data
- ------------------------------------------------------------------------------------------------------------
Year Ended August 31,
--------------------------------------------------------
1996 1995 1994 1993*
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Ratios (As a percentage of average net assets):
Expenses (1) 1.19% 1.10% 1.15% 1.38%+
Expenses after custodian fee reduction 1.12% -- -- --
Net investment income 0.94% 1.35% 0.73% 0.38%+
Portfolio Turnover 42% 32% 36% 18%
Average Commission Rate Paid ** $0.0070 -- -- --
Net Assets, end of period (000 omitted) $510,298 $590,417 $732,613 $208,043
+ Computed on an annualized basis.
* For the period from the start of business, October 28, 1992, to August 31, 1993.
** Average commission rate paid is computed by dividing the total dollar amount of commissions paid
during the fiscal year by the total number of shares purchased and sold during the fiscal year for
which commissions were charged. For fiscal years beginning on or after September 1, 1995, a Fund is
required to disclose its average commission rate per share for security trades on which commissions
are charged.
(1) The expense ratios for the year ended August 31, 1996 have been adjusted to reflect a change in
reporting requirements. The new reporting guidelines require each Portfolio to increase its expense
ratio by the effect of any offset arrangements with its service providers. The expense ratios for
each of the three periods ended on or before August 31, 1995 have not been adjusted to reflect this
change.
See notes to financial statements
</TABLE>
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 Portfolio's understanding of the applicable
countries' tax rules and rates.
C. Expense Reduction - The Portfolio has entered into an arrangement
with its custodian agent whereby interest earned on uninvested cash
balances are used to offset custodian fees. All significant
reductions are reported as a reduction of expenses in the statement
of operations. Prior to November 10, 1995, Investors Bank & Trust
Company (the custodian) was an affiliate of Eaton Vance Management.
D. Deferred Organization Expenses -- Costs incurred by the Portfolio
in connection with its organization, including registration costs,
are being amortized on the straight-line basis over five years.
E. Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin")
either in cash or securities an amount equal to a certain percentage
of the purchase price indicated in the financial futures contract.
Subsequent payments are made or received by the Portfolio ("margin
maintenance") each day, dependent on daily fluctuations in the value
of the underlying security, and are recorded for book purposes as
unrealized gains or losses by the Portfolio. The Portfolio's
investment in financial futures contracts is designed only to hedge
against anticipated future changes in interest or currency exchange
rates. Should interest or currency exchange rates move unexpectedly,
the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. If the Portfolio
enters into a closing transaction, the Portfolio will realize, for
book purposes, a gain or loss equal to the difference between the
value of the financial futures contract to sell and financial
futures contract to buy.
F. Use of Estimates - The preparation of the financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expense
during the reporting period. Actual results could differ from those
estimates.
G. 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.
H. 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.
I. 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
(Bermuda) 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, 1996 the adviser fee was.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, 1996, the administration fee was .25% 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. Certain of the officers
and Trustees of the Portfolio are officers or directors/trustees of
the above organizations.
(3) Investment Transactions
Purchases and sales of investments, other than short-term
obligations, aggregated $232,081,781 and $331,006,372, respectively.
(4) Federal Income Tax Basis of Investments
The cost and unrealized appreciation (depreciation) in value of the
investments owned at August 31, 1996, as computed on a federal
income tax basis, are as follows:
Aggregate cost $425,476,900
============
Gross unrealized appreciation $101,645,054
Gross unrealized depreciation 28,037,111
------------
Net unrealized appreciation $73,607,943
============
(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.
(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.
A summary of obligations under these financial instruments at August
31, 1996 is as follows:
Forward Foreign Currency Exchange Contracts
Purchases
- -------------------------------------------
Deliver
Settlement (in United Net Unrealized
Date In Exchange for States Dollars) Appreciation
- ---------- ------------------ ---------------- ----------------
9/3/96 Malaysian Ringgit $415,865 $400
(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 year.
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, 1996, and the related
statement of operations for the year then ended, and the statements
of changes in net assets for the years ended August 31, 1996 and
1995, and the supplementary data for each of the years in the three
year period ended August 31, 1996, and for the period from the start
of business, October 28, 1992 to August 31, 1993. These financial
statements and financial highlights are the responsibility of the
Portfolio's management. Our responsibility is to express an opinion
on these financial statements and supplementary data based on 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, 1996, 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, the financial statements and supplementary data
present fairly, in all material respects, the financial position of
Greater China Growth Portfolio at August 31, 1996, 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 4, 1996
EV Classic
Greater China
Growth Fund
Officers
Officers
- --------------------
James B. Hawkes
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 Corporation
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 Co-Portfolio Manager
James B. Hawkes
Vice President and Trustee
Scobie Dickinson Ward
Vice President, Assistant Secretary,
Assistant Treasurer and Co-Portfolio Manager
William Walter Raleigh Kerr
Vice President and Assistant Treasurer
James L. O'Connor
Vice President and Treasurer
Thomas Otis
Vice President and Secretary
Independent Trustees
- --------------------
Hon. Edward K.Y. Chen
Professor and Director, Center for Asian Studies,
University of Hong Kong
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 Corporation
Sponsor and Manager of
EV Classic 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 Investment Management
(Bermuda) Limited
3808 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
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
Transfer Agent
First Data Investor Services Group
P.O. Box 5123
Westborough, MA 01581-5123
Independent 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 Classic
Greater China Growth Fund
24 Federal Street
Boston, MA 02110 C-CGSRC-10/96
