<PAGE>
[LOGO OF EATON VANCE [PHOTO APPEARS HERE]
APPEARS HERE]
Annual Report August 31, 1997
EV
MARATHON
[PHOTO APPEARS HERE]
GREATER CHINA
GROWTH FUND
EATON VANCE
GLOBAL MANAGEMENT-GLOBAL DISTRIBUTION
[PHOTO APPEARS HERE]
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
LETTER TO SHAREHOLDERS
[PHOTO OF JAMES B. HAWKES, PRESIDENT APPEARS HERE]
EV Marathon Greater China Growth Fund had a total return of 30.2% for the year
ended August 31, 1997. That return was the result of a rise in net asset value
per share from $12.45 on August 31, 1996 to $16.13 on August 31, 1997, and the
reinvestment of $0.06 in dividends.1 By comparison, the Peregrine Asia 100 Index
- - an index composed of China region common stocks - had a return of - 7.2%./2/
The past year was an extremely volatile period for the China region markets.
That volatility increased in the weeks following the end of the Fund's fiscal
year as currency crises swept through Malaysia, Thailand, and Indonesia. While
the excellent long-term growth prospects have improved even further due to Hong
Kong's hand-over to China, market volatility and currency concerns were also
felt strongly in Hong Kong.
Hong Kong and China reach a historic moment of unity...
On July 1, 1997, political jurisdiction over Hong Kong was officially
transferred from Great Britain to China. The long-awaited handover was greeted
enthusiastically by investors and local business interests alike. Moreover, the
absorption of Hong Kong gives China an infusion of valuable financial and
business acumen. For Hong Kong-based companies, reunification opens vast new
markets on China's mainland. Naturally, there remain concerns about continued
political tolerance in democratic Hong Kong. But China has vowed to preserve
Hong Kong's unique status while leveraging its vitality to expand economic
growth.
"Reform is the inevitable road for China..." - Jiang Zemin
The year also marked the passing of Deng Xiaoping, the architect of China's
modern economy. Deng's successor, Jiang Zemin, has indicated his desire to
continue along the path of reform. During the recently-ended Fifteenth Chinese
Communist Party Congress, Jiang dedicated the Party to expanding economic growth
throughout mainland China. Among the Party proposals was a call to privatize the
remaining state-owned industries. That new resolve -- together with the reunion
with Hong Kong -- should add further momentum to China's growth. We believe that
the recent volatility in the region will pass, and that the shareholders of EV
Marathon Greater China Growth Fund will continue to share in that growth.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
October 9, 1997
- --------------------------------------------------------------------------------
Mutual fund shares are not insured 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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund Information
as of August 31, 1997
Performance/3/
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------
<S> <C>
One year 30.2%
Life of Fund (6/7/93) 12.3
SEC Average Annual Total Returns (including applicable CDSC)
- --------------------------------------------------------------------------------
One year 25.2%
Life of Fund (6/7/93) 12.0
Ten Largest Holdings4 By total net assets
- --------------------------------------------------------------------------------
HSBC Holdings 7.4%
China Merchants Holdings 6.3
Cheung Kong Holdings 5.9
Hutchison Whampoa 5.9
China Resources 5.0
China Everbright 4.4
New World Development 3.9
Shanghai Industrial Holdings 3.3
Hang Seng Bank 2.1
Nan Ya Plastic 2.1
</TABLE>
/1/ This return does not reflect the Fund's contingent deferred sales
charge(CDSC).
/2/ It is not possible to invest directly in the Index.
/3/ Average annual total returns are calculated by determining the percentage
change in net asset value with all distributions reinvested. SEC average
annual returns reflect applicable CDSC on following schedule: 5% - 1st year;
5% - 2nd year; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
/4/ Ten largest holdings account for 46.3% of the Portfolio's investments,
determined by dividing the total market value of the holdings by the total
net assets of the Portfolio. Holdings are subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
2
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
MANAGEMENT DISCUSSION
[PHOTO OF ADALINE M. KO, PORTFOLIO MANAGER APPEARS HERE]
An interview with Adaline M. Ko, Director, Lloyd George Management, and
investment advisor to the Greater China Growth Portfolio.
Q: Adaline, the Fund posted very strong performance during the fiscal year. To
what do you attribute the Fund's showing?
A: The Fund benefited primarily from its strong commitment to the Hong Kong
market, as well as from stock-picking that emphasized earnings momentum.
Following a year of uncertainty, the mood of investors in the China region
has changed markedly for the better, aided by the naming of a new Chief
Executive for Hong Kong, the easy passage to the post-Deng era, and of
course, the warm reception of investors to the handover.
I believe that the volatility that has characterized the Hong Kong market in
recent weeks is a temporary hurdle tied to the region's currency
fluctuations. In my view, the long-term potential of the Hong Kong-China
alliance is still likely to produce impressive economic momentum in coming
years.
Q: Is Hong Kong still the largest weighting in the Portfolio?
A: We increased our commitment in Hong Kong to 79.3% of the Portfolio since our
last report, from 45.9% a year ago. Hong Kong has been the natural gateway
for investment in China, and now that a peaceful handover has occurred, Hong
Kong is poised to grow further in importance. Hong Kong's Hang Seng Index
rose 31.9% in the year ended August 31./1/
Hong Kong has traditionally been viewed as a gateway to China. And with China
having eased its credit restrictions, Hong Kong companies should see a pick-
up in business, especially in the sale of consumer goods and revival of
infrastructure projects that had been delayed by the credit squeeze. From a
valuation standpoint, Hong Kong sells for approximately 12 times earnings.
That makes Hong Kong one of the most undervalued of the global markets,
despite its strong performance during the fiscal year.
Q: What were some of the Fund's best performing stocks?
A: The Portfolio focused its largest investments predominantly on Hong Kong-
based blue chip companies. Among the larger investments, HSBC Holdings, the
parent of Hong Kong &
- --------------------------------------------------------------------------------
Five Largest Industry Positions/2/
- --------------------------------------------------------------------------------
By total net assets
[BAR GRAPH APPEARS HERE]
<TABLE>
<S> <C>
Diversified Trading Companies 29.9%
Property 19.1%
Financial 13.8%
Transportation 9.0%
Manufacturing 9.0%
Regional Distribution/2/
- --------------------------------------------------------------------------------
By total investments
[PIE CHART APPEARS HERE]
Hong Kong 80.2%
Taiwan 8.1%
Singapore 3.5%
Other 2.7%
Malaysia 2.4%
Korea 2.0%
Thailand 1.1%
</TABLE>
/1/ it is not possible to invest directly in the Index.
/2/ Five largest sectors account for 76.0% of the Portfolio's investments,
determined by dividing the total market value of the holdings by the total
net assets of the Portfolio. Industry weightings and regional distribution
are subject to change.
3
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
MANAGEMENT DISCUSSION CONT'D
[PHOTO OF HONG KONG APPEARS HERE]
Union with Hong Kong puts China in Third Gear.
A new study shows that China is moving into the front ranks of the global
economies. If the U.S. continues its 3% growth rate and China grows by 7%
annually - less than its post-1978 rate - China will overtake the U.S. by 2020.
Source: Australia Dept of Foreign Affairs and Trade
Shanghai Bank, has risen more than 53% in 1997 alone. HSBC has avoided the
credit problems that have befallen many other banks in the region. The bank
continues to build stature as the premier lending institution in Hong Kong and
provides a growing network between China and other global regions.
New World Development is another successful core holding. The giant property
company is one of the largest investors in China, with $1.2 billion in China
projects, including hotels, power stations, roads, bridges, and an airport.
Recently, New World announced plans to invest an additional $400 million in low-
cost residential apartments and prime commercial office developments in major
cities like Beijing, Wuhan, and Guangzhou.
Another core blue chip holding, Cheung Kong Holdings, rose more than 24%. Cheung
Kong is Hong Kong's largest developer of residential properties and also
operates container terminals. The company also owns 40% of Hutchi-son Whampoa, a
leading trading company.
Q: Did the Portfolio have any investments in "red chip" companies?
A: Yes. Red chips - China-controlled companies that are traded on the Hong Kong
exchange - have accounted for an ever-increasing percentage of Hong Kong's
market volume in the past year. However, while they represent attractive
long-term opportunities, we have remained very selective. We have restricted
the Portfolio's red chip investments to companies that we deem to have the
very highest quality management and especially sound long-term growth
potential. Two such companies were China Overseas Land & Investment and Ng
Fund Hong Ltd.
China Overseas is controlled by the China Ministry of Construction and is
among the largest construction companies in Hong Kong. In addition to its
Hong Kong-based projects, China Overseas has developed properties in major
cities on the mainland. The company has low debt levels, trades at a modest
price-earnings multiple, and is well-positioned to identify worthwhile
projects and negotiate good terms.
Ng Fung Hong is a food distributor and supermarket operator. The company has
operated in Hong Kong for over 30 years and currently has a 30% market share
of the frozen meat market. Ng Fung has purchased stores from its parent
company, China Resources, and is expected to expand its chain to 300 stores
in Hong Kong and China by the year 2000.
Q: Where did you focus your investments outside of Hong Kong?
A: Taiwan (8%) was our largest commitment outside of Hong Kong. The Taiwan
economic picture has slowly showed signs of improvement, and the Taipei
market responded, up 47.4% during the year ended August 31.
4
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
MANAGEMENT DISCUSSION CONT'D
Exports grew across the board during the summer months, with strong demand
enjoyed by the electronics, chemical, and machinery sectors. Imports,
meanwhile, were also growing sharply, but the sharp rise in raw material and
machinery imports was interpreted as a sign that the economy is accelerating.
Despite the robust performance in the Taiwan market, low interest rates and
good earnings growth suggest that the market is still attractive for
investors. The country is also benefiting from its improving relations with
China.
Q: Could you give an example of a Taiwan-based investment?
A: Yes. Nan Ya Plastics is a blue chip Taiwan company and a long-time holding of
the Portfolio. Na Ya is a conglomerate with a wide array of business
interests, including plastics, polyesters, and electronics. In its polyester
business, the company has increased its plant capacity to meet growing
demand. Through its Na Ya Technology subsidiary, the company also
manufactures DRAMs, dynamic access memory chips. While the pricing of DRAMs
has been weak in the past year, Na Ya is a leader in the large Taiwan memory
chip industry. The company has raised its production capacity and improved
the yield rate of its memory products, and stands to be a major beneficiary
when chip pricing improves.
Q: Were there any countries in which you trimmed your exposure?
A: Yes. Interestingly, while the climate in Hong Kong and China was improving,
the mood in some other markets was less upbeat. While we fully expect that
the rapid growth of China will have a positive effect on the entire region in
coming years, countries like Malaysia, Thailand and Korea have been beset by
recent problems that have threatened their near-term economic growth and
frustrated investors.
We significantly reduced our investments in Thailand from over 9% a year ago
to around 1% at August 31. The country has suffered from a growing current
account deficit, a rise in consumer inflation from 4% to 9%, and a sharp
decline in estimates of GDP growth.
Similarly, we reduced our exposure to Malaysia. Although the economic
fundamentals are still quite strong in Malaysia, concerns over the currency
crisis have caused investors to reconsider their Malaysian commitments.
Investing in those countries must therefore be highly selective. One of the
Portfolio's Malaysian holdings is Sime Darby Berhad, a conglomerate with
business interests in financial services, plantations, chemical production,
and industrial products. The company saw profits rise sharply in 1996 and it
remains an economic force in Malaysia. The company's Sime Bank subsidiary has
been a powerful financial presence in Malaysia and an important link to other
Asian financial markets.
Q: You mentioned the warm reception given to the choice of a new Chief Executive
in Hong Kong. What is the significance of that move?
A: The Selection Committee's choice of Tung Chee-hwa was important from both a
practical and a psychological standpoint. Early in his career, Mr. Tung
worked for General Electric Company in the U.S. More recently, he ran his
family's global shipping company and has developed strong business ties on
the mainland. With a clearly pro-business stance and a prudent management
style, he has gained the confidence of the Hong Kong business and financial
community in Hong Kong and China. Moreover, he is viewed as someone who will
steer a steady course on Hong Kong's key economic issues. With his selection
and the turnover now completed, the markets are likely to focus less on
hurdles and more on fundamentals and opportunities.
Q: How is mainland China's economy faring in this momentous year?
A: In response to the government's inflation-fighting efforts, China's economy
expanded at its slowest rate in five years in 1996, 9.7%, and is aiming for
8% in 1997. That is good news for investors because it suggests that China
will be able to sustain a strong level of economic growth while keeping the
danger of inflation at
5
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
MANAGEMENT DISCUSSION CONT'D
bay. Inflation measured a manageable 6% in 1996, down from 14% in 1995, and a
record 21.7% in 1994. The government's goal remains to encourage steady
growth while avoiding the boom-and-bust cycles that have plagued the economy
in the past.
Q: Adaline, this has clearly been a remarkable year for Hong Kong and China.
What is your outlook for the markets?
A: Over the long-term, I'm very optimistic about the union of China and Hong
Kong. I believe their new relationship should have a favorable effect on the
mainland economy and provide a boost to corporate earnings. However, over the
near-term, we must navigate through this current volatility. The markets were
in a state of euphoria earlier in the year, but more recently, currency and
political concerns have taken a severe toll. While that is understandably
unnerving to investors, I believe the key is to focus on the longer-term.
Importantly, the soft landing of the Chinese economy and the slowing of
inflation has allowed an easing of credit restrictions by the Chinese central
bank. That is likely to spark an upturn for the country. We have already seen
an upturn within the property and retail sectors.
Of course, past trends do not guarantee future results. And, naturally, there
are risks with any foreign investment, especially when there are major
political changes afoot. But Hong Kong and China complement each other very
well. I believe that their partnership is likely to produce enormous
advantages and a bright future for both parties.
[LINE GRAPH APPEARS HERE]
Performance+
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Average Annual Total Returns (At Net Asset Value)
- --------------------------------------------------------------------------------
<S> <C>
One year 30.2%
Life of Fund 12.3
Value at 8/31/97 $16,537
<CAPTION>
SEC Average Annual Total Returns (Including Applicable CDSC)
- --------------------------------------------------------------------------------
<S> <C>
One year 25.2%
Life of Fund 12.0
Value at 8/31/97 $16,337
</TABLE>
* Past performance is no guarantee of future results. Investment return and
principal will fluctuate so that shares, when redeemed, are worth more or less
their original cost. Source: Towers Data Systems, Bethesda, MD. Investment
operations commenced 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. It is not possible to invest
directly in an index.
The performance chart above compares the Fund's total return with that of a
broad-based securities market index. The lines on the chart represent the
total returns of $10,000 hypothetical investments in the Fund and the
Peregrine Asia 100 Index, a broad-based, widely recognized, unmanaged index of
100 common stocks traded in the China region.
The bold colored line on the chart represents the Fund's performance at net
asset value. The Fund's total return figure reflects fund expenses and
portfolio transaction costs and assumes reinvestment of income dividends and
capital gain distributions. The black line represents the performance of the
Peregrine Asia 100 Index. In contrast to the Fund, whose investment focus is
targeted toward selected growth stocks with specific characteristics, the
stocks in the Index represent a diversified portfolio spanning all sectors of
the economy. The Index's total return does not reflect any commissions or
expenses that would have been incurred if an investor individually purchased
or sold the securities represented in the Index.
**This figure reflects the Fund's maximum applicable contingent deferred sales
charge (CDSC) deducted at redemption as follows: 5% - 1st and 2nd years; 4% -
3rd year; 3% - 4th year; 2% - 5th year; and 1% - 6th year.
+ Returns are calculated by determining the percentage change in net asset value
(NAV) with all distributions reinvested. SEC average annual returns reflect
applicable CDSC deducted at redemption according to above schedule.
6
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of August 31, 1997
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investment in Greater China Growth Portfolio, at value
(Note 1A) (identified cost, $200,177,783) $299,037,825
Receivable for Fund shares sold 270,272
Deferred organization expenses (Note 1E) 7,569
- --------------------------------------------------------------------------------
Total assets $299,315,666
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 2,550,322
Accrued expenses 178,863
- --------------------------------------------------------------------------------
Total liabilities $ 2,729,185
- --------------------------------------------------------------------------------
Net Assets for 18,389,645 shares of beneficial interest
outstanding $296,586,481
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $214,733,550
Accumulated net realized loss on investments (computed on
basis of identified cost) (12,025,168)
Accumulated distributions in excess of net
investment income (4,981,943)
Net unrealized appreciation of investments (computed on
the basis of identified cost) 98,860,042
- --------------------------------------------------------------------------------
Total $296,586,481
- --------------------------------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share (Note 6)
- --------------------------------------------------------------------------------
($296,586,481 / 18,389,645 shares of
beneficial interest outstanding) $ 16.13
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the Year Ended
August 31, 1997
Investment Income (Note 1B)
- --------------------------------------------------------------------------------
<S> <C>
Dividend income allocated from Portfolio
(net of foreign taxes, $325,180) $ 5,424,541
Interest income allocated from Portfolio 26,490
Expenses allocated from Portfolio (3,362,307)
- --------------------------------------------------------------------------------
Total investment income from Portfolio $ 2,088,724
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Management fee (Note 3) $ 722,858
Compensation of Trustees not members of the
Administrator's organization (Note 3) 2,749
Distribution and service fees (Note 5) 2,826,885
Transfer and dividend disbursing agent fees 302,991
Printing and postage 194,781
Custodian fee 42,204
Legal and accounting services 22,836
Registration fees 26,434
Amortization of organization expenses (Note 1E) 9,786
Miscellaneous 91,691
- --------------------------------------------------------------------------------
Total expenses $ 4,243,215
- --------------------------------------------------------------------------------
Net investment loss $ (2,154,491)
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 16,899,229
Foreign currency and forward foreign currency
exchange contract transactions (337,455)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions $ 16,561,774
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investment transactions $ 62,008,498
Foreign currency and forward foreign currency
exchange contract transactions (1,384)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 62,007,114
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 78,568,888
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 76,414,397
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
7
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended Year Ended
Increase (Decrease) in Net Assets August 31, 1997 August 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment loss $ (2,154,491) $ (1,591,252)
Net realized gain on investment
transactions 16,561,774 3,565,445
Net change in unrealized appreciation
(depreciation) of investments 62,007,114 13,290,138
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations $ 76,414,397 $ 15,264,331
- --------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
In excess of net investment income $ (1,268,020) $ --
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (1,268,020) $ --
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest (Note 4) --
Proceeds from sale of shares $ 103,762,855 $ 96,216,599
Net asset value of shares issued to
shareholders in payment of
distributions declared 1,092,347 --
Cost of shares redeemed (167,989,794) (151,164,005)
- --------------------------------------------------------------------------------
Net decrease in net assets from Fund
share transactions $ (63,134,592) $ (54,947,406)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 12,011,785 $ (39,683,075)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 284,574,696 $ 324,257,771
- --------------------------------------------------------------------------------
At end of year $ 296,586,481 $ 284,574,696
- --------------------------------------------------------------------------------
Accumulated distributions in excess of net
investment income included in net assets
- --------------------------------------------------------------------------------
At end of year $ (4,981,943) $ (5,128,545)
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993 *
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value--Beginning of year $ 12.450 $ 11.890 $ 13.160 $ 10.540 $ 10.000
- ----------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (0.181) $ (0.087) $ (0.038) $ (0.039) $ (0.015)
Net realized and unrealized gain (loss) on investments 3.921 0.647 (1.157) 2.684 0.555
- ----------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 3.740 $ 0.560 $ (1.195) $ 2.645 $ 0.540
- ----------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------------
In excess of net investment income $ (0.060) $ -- $ (0.065) $ -- $ --
In excess of net realized gain on investments -- -- (0.010) (0.025) --
- ----------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.060) $ -- $ (0.075) $ (0.025) $ --
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 16.130 $ 12.450 $ 11.890 $ 13.160 $ 10.540
- ----------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 30.15% 4.71% (9.06)% 25.08% 5.40%
- ----------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $296,586 $284,575 $324,258 $392,479 $63,672
Ratio of net expenses to average net assets/(2)(3)/ 2.66% 2.63% 2.47% 2.38% 2.21%+
Ratio of net expenses to average net assets after
custodian fee reduction/(2)(3)/ 2.63% 2.57% -- -- --
Ratio of net investment loss to average net assets (0.75)% (0.51)% (0.02)% (0.55)% (1.44)%+
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, June 7, 1993, to August 31,
1993.
/(1)/ 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 ex date. Total return is not
computed on an annualized basis.
/(2)/ Includes the Fund's share of its corresponding Portfolio's allocated
expenses.
/(3)/ The expense ratios for the year ended August 31, 1996 and the periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund 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
9
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
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 (55.6% at August 31, 1997). 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.
On June 23, 1997, the Board of Trustees of the Trust adopted a multiple
class plan for the Fund which permits the Fund to issue more than one class
of shares. Initially, the Fund will offer three classes of shares and,
effective as of September 1, 1997, the existing shares of the Fund will be
designated as Class B shares. On June 23, 1997, the Board of Trustees also
approved a Plan of Reorganization (the "Plan") for the Trust. Under the
terms of the Plan, the Fund will acquire substantially all of the assets and
liabilities of the EV Traditional Greater China Growth Fund and EV Classic
Greater China Growth Fund (the Acquired Funds). The transactions will be
structured for tax purposes to qualify as a tax-free reorganization under
the Internal Revenue Code. As a result of the reorganization, shareholders
of the Traditional Fund and the Classic Fund will receive Class A shares and
Class C shares of the Fund, respectively. The reorganization will occur
after the close of business, August 31, 1997.
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 -- Investors Bank & Trust Company (IBT) 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
balance the Fund maintains with IBT. All significant credit balances used to
reduce the Fund's custodian fees are reported as a reduction of expenses in
the Statement of Operations.
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, 1997, 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
expiration date of the capital loss carryover of $9,593,942 is 8/31/04.
Additionally, net capital losses of $288,934 attributable to currency
included after October 31, 1996 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 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.
10
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
2 Distributions to Shareholders
----------------------------------------------------------------------------
It is 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 ex-dividend
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.
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, 1997 the fee was equivalent to 0.25% of the Fund's average net
assets for such period and amounted to $722,858. 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
directors/trustees of the above organization. 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:
<TABLE>
<CAPTION>
Year Ended
August 31,
-----------------------------------------------------------------------
1997 1996
-----------------------------------------------------------------------
<S> <C> <C>
Sales 7,421,637 7,688,643
Issued to shareholders electing to
receive payments of
distributions in Fund shares 82,879 --
Redemptions (11,978,067) (12,102,374)
-----------------------------------------------------------------------
Net decrease (4,473,551) (4,413,731)
-----------------------------------------------------------------------
</TABLE>
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 Fund accrued $2,168,574 as payable to EVD for the year ended August
31, 1997, representing 0.75% of average daily net assets. At August 31,
1997, the amount of Uncovered Distribution Charges EVD calculated under the
Plan was approximately $6,284,000.
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
11
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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 when there are no outstanding
Uncovered Distribution Charges of EVD. Service fee payments for the period
ended August 31, 1997 amounted to $658,311.
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
gains distributions. The CDSC is imposed at declining rates that begin at 5%
in the case of redemptions in the first and second year after purchase,
declining one percentage point each subsequent year. 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 each Fund's Distribution Plan
(See Note 5). CDSC charges received when no Uncovered Distribution Charges
exist will be credited to the Fund. EVD received approximately $1,703,000 of
CDSC paid by shareholders, for the year ended August 31, 1997.
7 Investment Transactions
------------------------------------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio aggregated
$103,903,344 and $170,573,241, respectively.
8 Subsequent Event
------------------------------------------------------------------------------
Effective September 1, 1997, the EV Marathon Greater China Growth Fund will
change its name to the Eaton Vance Greater China Growth Fund and shares of the
Fund will be designated Class B shares. Two additional classes of shares will
also be offered.
12
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
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, 1997, and the related statement of operations for
the year then ended, the statements of changes in net assets for the years ended
August 31, 1997 and 1996 and the financial highlights for each of the years in
the four year period ended August 31, 1997 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 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 Marathon
Greater China Growth Fund series of Eaton Vance Growth Trust at August 31, 1997,
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 10, 1997
13
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS
(Expressed in United States Dollars)
Common Stocks -- 98.9%
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
China -- 0.2%
Electrical Equipment -- 0.1%
- --------------------------------------------------------------------------------
Beijing Orient Elect. 480,000 $ 308,538
The company is mainly engaged
in the manufacture of electronics
and lighting products.
- --------------------------------------------------------------------------------
$ 308,538
- --------------------------------------------------------------------------------
Industrial / Manufacturing -- 0.1%
- --------------------------------------------------------------------------------
Shanghai Yaohua Pilkington 2,091,113 $ 706,796
Glass manufacturer.
- --------------------------------------------------------------------------------
$ 706,796
- --------------------------------------------------------------------------------
Lodging and Gaming -- 0.0%
- --------------------------------------------------------------------------------
Shanghai New Asia Group, Ltd. 25,600 $ 11,725
The company is mainly engaged
in hotel, food and tourism.
- --------------------------------------------------------------------------------
$ 11,725
- --------------------------------------------------------------------------------
Total China
(identified cost $2,175,957) $ 1,027,059
- --------------------------------------------------------------------------------
Hong Kong -- 79.3%
Banks and Money Services -- 2.2%
- --------------------------------------------------------------------------------
Bank of East Asia Hong Kong 500,000 $ 1,784,447
Engaged in the banking
related financial services.
Ka Wah Bank 1,860,000 5,557,793
Engaged in the provision of
general banking and related
financial service, primarily in
Hong Kong and China.
Union Bank of Hong Kong 1,424,000 4,319,329
The bank is engaged in the
provision of commercial banking
services.
- --------------------------------------------------------------------------------
$ 11,661,569
- --------------------------------------------------------------------------------
Beverages -- 0.0%
- --------------------------------------------------------------------------------
Guangdong Brewery Holdings Ltd. 500,000 $ 175,863
Engaged in the production,
distribution and sale of
Kingway beer, dominates the
market in Shenzhen.
- --------------------------------------------------------------------------------
$ 175,863
- --------------------------------------------------------------------------------
Chemicals -- 2.0%
- --------------------------------------------------------------------------------
Shanghai Petrochemical 25,580,000 $ 10,565,473
A highly integrated petrochemical
complex which processes crude oil
into a broad range of synthetic
fibers, resins and plastics,
intermediate petrochemicals and
petroleum products.
- --------------------------------------------------------------------------------
$ 10,565,473
- --------------------------------------------------------------------------------
Computer Equipment -- 0.1%
- --------------------------------------------------------------------------------
Stone Electronic Technology, Ltd. 1,000,000 $ 290,416
Engaged in manufacture,
distribution and sale of
computers and related products.
- --------------------------------------------------------------------------------
$ 290,416
- --------------------------------------------------------------------------------
Diversified Trading -- 28.6%
- --------------------------------------------------------------------------------
Beijing Enterprises 500,000 $ 3,775,411
Diversified conglomerates
engaged in infrastructure, sale
of consumer products, tourism
services and industrial
manufacturing.
China Everbright Pacific Ltd. 8,311,000 23,439,219
Diversified company with
interests in retailing,
property, investment and
development, hotels and
restaurant operations.
China Resources Enterprises 6,394,000 26,822,201
Property investment and
development.
China Travel International Ltd. 10,400,000 7,718,619
Provides freight forwarding and
transportation services between
China and Hong Kong, express
air freight services in China.
Also operates three scenic
parks in Shenzhen, China.
Cosco Pacific Ltd. 4,640,000 9,013,488
Transportation, container
manufacturer (through JV),
owning and leasing.
Gold Lion Holdings Ltd. 2,958,000 1,641,743
Markets and distributes men's
apparel and accessories, ladies
handbags and shoes, cosmetic
products and tobacco products.
Guang Nan Holdings Ltd. 6,450,000 8,658,277
Trader of foodstuffs and
non-foodstuffs, processing and
distribution of foodstuffs.
Guangdong Investment Ltd. 4,000,000 4,827,364
Securities investment, travel
and transportation services.
Guangdong Investment Warrants 400,000 232,333
Securities investment, travel
and transportation services.
</TABLE>
See notes to financial statements
14
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Diversified Trading (continued)
- --------------------------------------------------------------------------------
Hutchison Whampoa 3,800,000 $ 31,636,012
Diversified company with
interests in property
development, ports, retailing,
manufacturing, telecommunications,
media, energy, finance
and investment.
Li & Fung Ltd. 2,312,000 2,357,509
Export trading of consumer
products.
Moulin International Holdings 17,745,000 4,305,983
Industrial, optical products.
NG Fung Hong Ltd. 7,940,000 10,709,648
Trader of foodstuffs and
non-foodstuffs.
Pacific Concord Holdings 8,416,000 5,105,544
Engaged in the sale of watches
and related products, cosmetic
products, telecommunications
components, property
development and operation of
department stores.
Shougang Concord
International Enterprises Co. 14,000,000 4,246,531
Trader of building and
construction materials.
Manufactures and installs
kitchen equipment. Sells
steel, electrical and
electronic products.
Wharf Holdings Ltd. 2,581,200 9,345,293
Diversified company with
interests in property
development and investments,
terminals and warehousing,
public transportation
and communications.
- --------------------------------------------------------------------------------
$ 153,835,175
- --------------------------------------------------------------------------------
Electric Utilities -- 1.3%
- --------------------------------------------------------------------------------
Beijing Datang Power 4,500,000 $ 2,424,976
Engaged in the operation of coal
fired electric power plants in the
Northern China.
China Light & Power Co. 930,000 4,309,390
Generates and supplies
electricity to the New
Territories and also has
investment in China and other
Asian countries.
- --------------------------------------------------------------------------------
$ 6,734,366
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.6%
- --------------------------------------------------------------------------------
China Aerospace International
Holding 4,930,200 $ 3,404,527
The company is an electronics
manufacturer.
- --------------------------------------------------------------------------------
$ 3,404,527
- --------------------------------------------------------------------------------
Financial -- 9.8%
- --------------------------------------------------------------------------------
Hang Seng Bank 940,000 $ 11,344,305
Provides a full range of banking
and related financial services
and compilation of Hang Seng Index
of 33 selected stocks listed on the
HK Stock Exchange.
HSBC Holdings PLC 1,300,000 39,599,870
Provides a comprehensive range
of banking and related
financial services through an
international network of more
than 3,000 offices in 71
countries in Europe, the Asia
Pacific region, the Middle East
and the Americas.
National Mutual Ltd. 2,018,000 1,640,968
Banking, finance and insurance.
- --------------------------------------------------------------------------------
$ 52,585,143
- --------------------------------------------------------------------------------
Household Products -- 0.3%
- --------------------------------------------------------------------------------
CCT Telecom Holdings, Ltd. 5,000,000 $ 1,823,169
Engaged in the telecommunications
related business.
- --------------------------------------------------------------------------------
$ 1,823,169
- --------------------------------------------------------------------------------
Industrial / Manufacturing -- 5.1%
- --------------------------------------------------------------------------------
Chen Hsong Holdings 4,586,000 $ 2,634,101
Manufactures and sells plastic
injection moulding machines and
related products.
CIM Company Ltd.(1) 1,800,000 1,510,165
Diversified company with
interests in property and
investment, public
transportation, trading and
hotel operations.
Shanghai Industrial Holdings Ltd. 2,707,000 17,819,555
Manufacturer of cigarettes,
pharmaceuticals and carparts.
Siu Fung Ceramics Holdings 9,850,000 724,685
Ltd.(1)
Manufacturer of a line of
ceramics, machinery and equipment.
Varitronix International Ltd. 1,560,000 2,154,501
Designs, manufactures and sells
liquid crystal displays and
related products.
VTECH Holdings Ltd. 151,000 284,556
Designs, manufactures and
distributes electronic toys and
games, personal computers,
satellite receivers, modems,
telephones and other electronic
products.
Zhenhai Refining & Chemical Co. 3,858,000 2,228,403
Producer of petroleum and
petrochemical products
- --------------------------------------------------------------------------------
$ 27,355,966
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
15
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Machinery -- 0.1%
- --------------------------------------------------------------------------------
First Tractor Co./(a)/ 952,000 $ 724,982
Principally engaged in the manufacture of
agricultural tractors.
- --------------------------------------------------------------------------------
$ 724,982
- --------------------------------------------------------------------------------
Metals - Industrial -- 2.0%
- --------------------------------------------------------------------------------
Angang New Steel Co., Ltd. 19,264,000 $ 6,464,847
Producer of steel products comprising cold
rolled sheets, wire rods and thick plates,
in the PRC.
Maanshan Iron & Steel Co. 14,000,000 4,427,235
Engaged in the coking, iron smelting, steel
smelting and steel rolling.
- --------------------------------------------------------------------------------
$ 10,892,082
- --------------------------------------------------------------------------------
Properties -- 18.6%
- --------------------------------------------------------------------------------
Cheung Kong Holdings, Ltd. 3,000,000 $ 31,752,177
Property development and construction.
Cheung Kong Infrastructure 2,525,000 7,398,193
Property development and construction.
China Overseas Land & Investment 11,744,000 8,640,310
Property development and investment, civil
engineering, foundation works, project
management and general trading.
China Resources Beijing Land 2,900,000 1,871,571
Property development.
Hong Kong Land Holdings Ltd. 3,095,000 8,944,550
Commercial property investment, development,
leasing and management.
New World Development 3,400,000 21,196,515
Property investment and development.
Sino Land Company 3,500,000 3,320,426
Property development.
Sun Hung Kai Properties Ltd. 871,000 9,893,256
Property development and investment,
hotel ownership.
Top Glory International Holdings 15,350,000 7,231,688
Principally engaged in property investment
and development.
- --------------------------------------------------------------------------------
$100,248,686
- --------------------------------------------------------------------------------
Telecommunications -- 1.1%
- --------------------------------------------------------------------------------
Hong Kong Telecom 2,684,000 $ 5,646,880
Engaged in the provisional telecommunication
services, the sale and rental of
telecommunications equipment.
- --------------------------------------------------------------------------------
$ 5,646,880
- --------------------------------------------------------------------------------
Transportation -- 7.2%
- --------------------------------------------------------------------------------
China Eastern Airlines/(a)/ 15,000,000 $ 5,324,298
Operates airlines in China.
China Merchants Holdings 10,636,000 33,634,333
Flagship of China Merchants Group and
engaged in the Industrial and Infrastructure
business.
- --------------------------------------------------------------------------------
$ 38,958,631
- --------------------------------------------------------------------------------
Utilities -- 0.3%
- --------------------------------------------------------------------------------
Harbin Power Co. 4,600,000 $ 1,528,880
The largest manufacturer of power equipment
in China, which specializes in major
components for thermal power generating
stations such as boilers and steam turbines.
- --------------------------------------------------------------------------------
$ 1,528,880
- --------------------------------------------------------------------------------
Total Hong Kong
(identified cost $244,323,116) $426,431,808
- --------------------------------------------------------------------------------
Malaysia -- 2.4%
Consumer Products -- 0.0%
- --------------------------------------------------------------------------------
Hong Leong Industry Warrants/(a)/ 65,500 $ 35,181
Manufacturer and distributor of building
materials, motorcycles and manufacturer of
packaging products, integrated circuits and
semiconductors.
- --------------------------------------------------------------------------------
$ 35,181
- --------------------------------------------------------------------------------
Diversified Trading -- 1.3%
- --------------------------------------------------------------------------------
Advance Synergy Bhd 1,600,000 $ 875,813
Diversified company with interests in
property development, the quarrying and
marketing of marble and the operation of
sawmills and trading of sawn wood.
Kumpulan Guthrie Bhd 1,415,000 1,491,002
Plantation and property development.
Magnum Corp. Bhd 1,200,000 1,112,556
Operates the forecast betting game,
investment holding company (property
development).
Sime Darby Bhd 1,568,000 3,701,403
Diversified company with interests in
plantation operation, chemical
manufacturing, heavy equipment and auto
distribution.
- --------------------------------------------------------------------------------
$ 7,180,774
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
16
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Entertainment and Leisure -- 0.4%
- --------------------------------------------------------------------------------
Berjaya Sports Toto Bhd 815,000 $ 2,230,585
Runs Toto betting operations, provides computer
support services for betting operations.
- --------------------------------------------------------------------------------
$ 2,230,585
- --------------------------------------------------------------------------------
Environmental Services -- 0.2%
- --------------------------------------------------------------------------------
Puncak Niaga Holdings Bhd 805,000 $ 817,944
Water treatment services in Selangor state,
Maylasia.
- --------------------------------------------------------------------------------
$ 817,944
- --------------------------------------------------------------------------------
Properties -- 0.5%
- --------------------------------------------------------------------------------
S P Setia Bhd 1,500,000 $ 2,565,857
Prime developer with projects located in fast
growing areas such as Selangor, Johor and
Kuala Lumpur.
- --------------------------------------------------------------------------------
$ 2,565,857
- --------------------------------------------------------------------------------
Total Malaysia
(identified cost $21,116,564) $ 12,830,341
- --------------------------------------------------------------------------------
Republic of Korea -- 2.0%
Construction -- 0.4%
- --------------------------------------------------------------------------------
Tae Young Corp. 49,410 $ 1,998,299
Korean construction firm with controlling stake
in a private broadcasting company Seoul.
- --------------------------------------------------------------------------------
$ 1,998,299
- --------------------------------------------------------------------------------
Electric Utilities -- 0.7%
- --------------------------------------------------------------------------------
Korea Electric Power Corp. 155,000 $ 4,053,186
State run electric power supplier.
- --------------------------------------------------------------------------------
$ 4,053,186
- --------------------------------------------------------------------------------
Electronics - Instruments -- 0.6%
- --------------------------------------------------------------------------------
Samsung Electronics 27,352 $ 3,075,540
Manufacturer of home appliances,
telecommunications products, computers and
semiconductors.
- --------------------------------------------------------------------------------
$ 3,075,540
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 0.2%
- --------------------------------------------------------------------------------
LG Semicon 22,000 $ 977,507
One of the three Korean memory chip producers.
- --------------------------------------------------------------------------------
$ 977,507
- --------------------------------------------------------------------------------
Insurance -- 0.1%
- --------------------------------------------------------------------------------
Samsung Fire & Marine Insurance 2,120 $ 555,546
Fire and marine, auto and individual pension
insurance.
- --------------------------------------------------------------------------------
$ 555,546
- --------------------------------------------------------------------------------
Total Republic of Korea
(identified cost $11,053,783) $ 10,660,078
- --------------------------------------------------------------------------------
Singapore -- 3.5%
Consumer - Retail -- 0.2%
- --------------------------------------------------------------------------------
Cerebos Pacific Ltd. 386,000 $ 1,039,868
Manufacturer and distributor of food products.
- --------------------------------------------------------------------------------
$ 1,039,868
- --------------------------------------------------------------------------------
Financial -- 0.7%
- --------------------------------------------------------------------------------
Overseas Union Bank (Foreign) 869,000 $ 3,930,439
Commercial banking.
- --------------------------------------------------------------------------------
$ 3,930,439
- --------------------------------------------------------------------------------
Industrial / Manufacturing -- 1.6%
- --------------------------------------------------------------------------------
Clipsal Industries Holdings Ltd. 2,400,000 $ 7,920,000
Develops, manufactures, and markets electric
installation products.
Clipsal Industries Holdings Ltd. Warrants/(a)/ 234,000 407,160
Develops, manufactures, and markets electric
installation products.
- --------------------------------------------------------------------------------
$ 8,327,160
- --------------------------------------------------------------------------------
Transportation -- 1.0%
- --------------------------------------------------------------------------------
Keppel Land Limited 1,969,000 $ 5,122,390
Keppel Land Limited Warrants/(a)/ 508,000 402,509
Shipping company.
- --------------------------------------------------------------------------------
$ 5,524,899
- --------------------------------------------------------------------------------
Total Singapore
(identified cost $18,405,321) $ 18,822,366
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
Taiwan -- 8.0%
Banks and Money Services -- 1.1%
- --------------------------------------------------------------------------------
<S> <C> <C>
Bank Sinopac 2,484,531 $ 2,145,417
One of the best new banks in
Taiwan listed on the OTC
market.
Bank Sinopac Rights/(a)/ 163,737 21,664
One of the best new banks in
Taiwan listed on the OTC market.
International Commercial Bank
China 1,792,000 3,587,744
International bank in Taiwan
with strong asset quality.
- --------------------------------------------------------------------------------
$ 5,754,825
- --------------------------------------------------------------------------------
Computer Equipment -- 2.1%
- --------------------------------------------------------------------------------
Asustek Computer, Inc. 450,000 $ 10,137,535
Highly profitable motherboard
producer in Taiwan supplying to
Intel.
Compal Electronics 269,700 1,295,912
Dedicated notebook PC maker in
Taiwan supplying to Dell and
Compaq.
- --------------------------------------------------------------------------------
$ 11,433,447
- --------------------------------------------------------------------------------
Construction -- 0.4%
- --------------------------------------------------------------------------------
BES Engineering Corp. 1,843,000 $ 2,310,167
Second largest contractor in Taiwan
active in public works.
- --------------------------------------------------------------------------------
$ 2,310,167
- --------------------------------------------------------------------------------
Industrial / Manufacturing -- 2.1%
- --------------------------------------------------------------------------------
China Motor Co. Ltd. 10 $ 34
Car manufacturer.
Formosa Chemical Fiber 55,075 72,296
Second largest global nylon
fiber manufacturer.
Formosa Plastics 86,813 188,921
Principal supplier of
intermediate resins and fiber
to other group members of the
Formosa Plastics Group.
Producer of high density
polyethylene and polyvinyl
chloride.
Grand Pacific Petrochemicals 15 13
The company is the second
largest styrene monomer
producer.
Nan Ya Plastic 4,232,513 11,052,872
Largest global downstream
plastics manufacturer and
Taiwan's largest polyester fiber producer.
- --------------------------------------------------------------------------------
$ 11,314,136
- --------------------------------------------------------------------------------
Insurance -- 1.1%
- --------------------------------------------------------------------------------
Cathay Life Insurance 1,207,443 $ 5,969,946
Underwrites endowment, life, accident
and medical policies through a service
network of 22 branches, 341 operating
units and over 29,000 agents.
- --------------------------------------------------------------------------------
$ 5,969,946
- --------------------------------------------------------------------------------
Metals - Industrial -- 0.1%
- --------------------------------------------------------------------------------
Yieh Phui Enterprise 276,750 $ 284,266
A specialty steel producer in Taiwan.
- --------------------------------------------------------------------------------
$ 284,266
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.3%
- --------------------------------------------------------------------------------
Cheng Loong 2,700,000 $ 1,767,409
Taiwan's largest corrugated carton producer.
- --------------------------------------------------------------------------------
$ 1,767,409
- --------------------------------------------------------------------------------
Transportation -- 0.8%
- --------------------------------------------------------------------------------
Wan Hai Lines Ltd. 2,086,137 $ 4,031,358
Shipping company.
- --------------------------------------------------------------------------------
$ 4,031,358
- --------------------------------------------------------------------------------
Total Taiwan
(identified cost $35,155,162) $ 42,865,554
- --------------------------------------------------------------------------------
Thailand -- 1.1%
Utilities -- 1.1%
- --------------------------------------------------------------------------------
Electricity Generating (Foreign) 3,352,770 $ 5,886,356
EGCOMP was set up in 1992 for
the purpose of partly privatizing
electricity in Thailand.
- --------------------------------------------------------------------------------
$ 5,886,356
- --------------------------------------------------------------------------------
Total Thailand
(identified cost $7,024,820) $ 5,886,356
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
18
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
The Philippines -- 0.0%
Industrial/Manufacturing -- 0.0%
- --------------------------------------------------------------------------------
Bacnotan Consolidated Industries 272 $ 409
Owner of companies that produce
building materials, primarily cement.
Fortune Cement Corp. 665,000 76,062
Manufactures and distributes
cement.
- --------------------------------------------------------------------------------
$ 76,471
- --------------------------------------------------------------------------------
Total The Philippines
(identified cost $267,123) $ 76,471
- --------------------------------------------------------------------------------
United States -- 2.4%
Conglomerates -- 1.6%
- --------------------------------------------------------------------------------
Citic Pacific Ltd. 1,600,000 $ 8,529,203
Diversified company engaged in
infrastructure, trading, and
distribution, property and industrial
manufacturing.
- --------------------------------------------------------------------------------
$ 8,529,203
- --------------------------------------------------------------------------------
Electric Utilities -- 0.8%
- --------------------------------------------------------------------------------
AES Corp. 121,800 $ 4,506,600
Electric generating facility.
- --------------------------------------------------------------------------------
$ 4,506,600
- --------------------------------------------------------------------------------
Total United States
(identified cost $12,244,040) $ 13,035,803
- --------------------------------------------------------------------------------
Total Stocks and Warrants
(identified cost $351,765,886) $ 531,635,836
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 1.1%
$ 6,146,042
- --------------------------------------------------------------------------------
Net Assets -- 100% $ 537,781,878
- --------------------------------------------------------------------------------
</TABLE>
Investment descriptions are unaudited.
(1) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
(a) Non-income producing security.
See notes to financial statements
19
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Top Ten Holdings Top Ten Industry Sectors
Percentage Percentage
Industry of Net of Net
Company Sector Assets Value Industry Sector Assets Value
- ---------------------------------------------------------------------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
HSBC Holdings PLC Financial 7.36% $39,599,870 Diversified Trading 29.94% $ 161,015,949
China Merchants Holdings Transportation 6.25 33,634,333 Properties 19.12 102,814,543
Cheung Kong Holdings, Ltd. Properties 5.90 31,752,177 Financial 10.51 56,515,582
Hutchison Whampoa Diversified Trading 5.88 31,636,012 Transportation 9.02 48,514,888
China Resources Enterprises Diversified Trading 4.99 26,822,201 Industrial / Manufacturing 8.89 47,780,529
China Everbright Pacific Ltd. Diversified Trading 4.36 23,439,219 Banks and Money Services 3.24 17,416,394
New World Development Properties 3.94 21,196,515 Electric Utilities 2.84 15,294,152
Shanghai Industrial
Holdings Ltd. Industrial/Manufacturing 3.31 17,819,555 Computer Equipment 2.18 11,723,863
Hang Seng Bank Financial 2.11 11,344,305 Metals - Industrial 2.08 11,176,348
Nan Ya Plastic Industrial/Manufacturing 2.06 11,052,872 Chemicals 1.96 10,565,473
</TABLE>
See notes to financial statements
20
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of August 31, 1997
(Expressed in United States Dollars)
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investments, at value (Note 1A)
(identified cost, $351,765,886) $531,635,836
Cash 4,780,012
Foreign currency, at value
(identified cost, $1,182,161) 1,165,975
Dividends and interest receivable 843,814
Deferred organization expenses (Note 1C) 5,877
- --------------------------------------------------------------------------------
Total assets $538,431,514
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Foreign capital gains tax payable $ 520,365
Accrued expenses 129,271
- --------------------------------------------------------------------------------
Total liabilities $ 649,636
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $537,781,878
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $357,931,473
Net unrealized appreciation of investments and foreign
currency (computed on the basis of identified cost) 179,850,405
- --------------------------------------------------------------------------------
Total $537,781,878
- --------------------------------------------------------------------------------
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
For the Year Ended
August 31, 1997
(Expressed in United States Dollars)
Investment Income (Note 1I)
- --------------------------------------------------------------------------------
<S> <C>
Dividends (net of foreign taxes, $583,182) $ 9,710,430
Interest 47,423
- --------------------------------------------------------------------------------
Total income $ 9,757,853
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 3,890,037
Administration fee (Note 2) 1,295,045
Compensation of Trustees not members of the
Administrator's organization (Note 2) 14,682
Custodian fee (Note 1D) 815,088
Legal and accounting services 100,196
Amortization of organization expenses (Note 1C) 28,638
Miscellaneous 56,657
- --------------------------------------------------------------------------------
Total expenses $ 6,200,343
- --------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1D) $ 173,015
- --------------------------------------------------------------------------------
Total expense reductions $ 173,015
- --------------------------------------------------------------------------------
Net expenses $ 6,027,328
- --------------------------------------------------------------------------------
Net investment income $ 3,730,525
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (net of foreign capital
gains taxes $442,815) $ 34,537,994
Foreign currency and forward foreign currency
exchange contract transactions (604,741)
- --------------------------------------------------------------------------------
Net realized gain on investment transactions $ 33,933,253
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $106,262,008
Foreign currency and forward foreign currency
exchange contract transactions (1,619)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $106,260,389
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $140,193,642
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $143,924,167
- -------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
21
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets (Expressed in United States Dollars)
<TABLE>
<CAPTION>
Increase (Decrease) Year Ended Year Ended
in Net Assets August 31, 1997 August 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 3,730,525 $ 5,301,525
Net realized gain on
investment
transactions 33,933,253 13,787,497
Net change in unrealized
appreciation
(depreciation) 106,260,389 16,641,291
- --------------------------------------------------------------------------------
Net increase in net assets
resulting from operations $ 143,924,167 $ 35,730,313
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 259,385,555 $ 135,099,898
Withdrawals (375,825,403) (250,949,710)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $(116,439,848) $(115,849,812)
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets $ 27,484,319 $ (80,119,499)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 510,297,559 $ 590,417,058
- --------------------------------------------------------------------------------
At end of year $ 537,781,878 $ 510,297,559
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
22
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data (Expressed in United States Dollars)
<TABLE>
<CAPTION>
Year Ended August 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993*
- --------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 1.19% 1.19% 1.10% 1.15% 1.38%+
Expenses after custodian fee reduction 1.16% 1.12% -- -- --
Net investment income 0.72% 0.94% 1.35% 0.73% 0.38%+
Portfolio Turnover 48% 42% 32% 36% 18%
- --------------------------------------------------------------------------------------------------------------------------
Average Commission Rate Paid /(2)/ $ 0.0412 $ 0.0070 $ -- $ -- $ --
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000s omitted) $537,782 $510,298 $590,417 $732,613 $ 208,043
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, October 28, 1992, to August 31,
1993.
/(1)/ The expense ratios for the year ended August 31, 1996 and the periods
thereafter have been adjusted to reflect a change in reporting
requirements. The new reporting guidelines require the Fund 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.
/(2)/ 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 were charged.
See notes to financial statements
23
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS
(Expressed in United States Dollars)
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 is 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 Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
D Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian to the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balance the Portfolio maintains with IBT. All significant credit balances used
to reduce the Portfolio's custodian fees are reflected as a reduction of
operating expense in the Statement of Operations.
E Financial 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 the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio. The
Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest or currency exchange
rates. Should interest or currency exchange rates move unexpectedly, the
Portfolio may not achieve the anticipated benefits of the financial futures
contracts and may realize a loss. If the Portfolio enters into a closing
transaction, the Portfolio will realize, for book purposes, a gain or loss
equal to the difference between the value of the financial futures contract to
sell and financial futures contract to buy.
F Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
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
24
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
(Expressed in United States Dollars)
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 a trade date basis.
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, 1997 the adviser fee was equivalent to 0.75% 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, 1997, the administrative fee was
0.25% 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 $248,774,611 and $357,681,961, respectively.
4 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned at August 31, 1997, as computed on a federal income tax basis, were as
follows:
<TABLE>
<CAPTION>
<S> <C>
Aggregate cost $351,765,886
------------------------------------------------------------
Gross unrealized appreciation $204,021,361
Gross unrealized depreciation (24,151,411)
------------------------------------------------------------
Net unrealized appreciation $179,869,950
------------------------------------------------------------
</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
25
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
(Expressed in United States Dollars)
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 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. There were no obligations under these
financial instruments at August 31, 1997.
7 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a committed $120 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from the
line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the banks' adjusted certificate of deposit rate,
eurodollar rate or federal funds rate. In addition, a fee computed at an
annual rate of 0.15% on the daily unused portion of the line of credit is
allocated among the participating portfolios and funds at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the year.
26
<PAGE>
Greater China Growth Portfolio as of August 31, 1997
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, 1997, and the related statement of operations for the year then ended, the
statements of changes in net assets for the years ended August 31, 1997 and
1996 and the supplementary data for each of the years in the four year period
ended August 31, 1997, 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
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, 1997 by correspondence with the custodian. 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, 1997, the results of its operations, the changes in its
net assets and supplementary data for the respective stated periods, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 10, 1997
27
<PAGE>
EV Marathon Greater China Growth Fund as of August 31, 1997
INVESTMENT MANAGEMENT
<TABLE>
<CAPTION>
EV Marathon Greater China Growth Fund
<S> <C>
Officers Independent Trustees
James B. Hawkes Donald R. Dwight
President and Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
M. Dozier Gardner
Vice President Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
William D. Burt Banking, Harvard University Graduate School
Vice President of Business Administration
Barclay Tittmann Norton H. Reamer
Vice President President and Director, United Asset
Management Corporation
James L. O'Connor
Treasurer John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Alan R. Dynner
Secretary Jack L. Treynor
Investment Adviser and Consultant
<CAPTION>
Greater China Growth Portfolio
<S> <C>
Officers Independent Trustees
Hon. Robert Lloyd George Hon. Edward K.Y. Chen
President, Trustee and Professor and Director, Center for Asian Studies,
Co-Portfolio Manager University of Hong Kong
James B. Hawkes Donald R. Dwight
Vice President and Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Scobie Dickinson Ward
Vice President, Assistant Samuel L. Hayes, III
Secretary, Assistant Treasurer, Jacob H. Schiff Professor of Investment Banking,
and Co-Portfolio Manager Harvard University Graduate School of
Business Administration
William Walter Raleigh Kerr
Vice President and Norton H. Reamer
Assistant Treasurer President and Director, United Asset
Management Corporation
James L. O'Connor
Vice President and Treasurer
Alan R. Dynner
Vice President and Secretary
</TABLE>
28
<PAGE>
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<PAGE>
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<PAGE>
This Page Intentionally Left Blank
<PAGE>
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 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
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
(800) 262-1122
EV Marathon Greater China Growth Fund
24 Federal 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.
- --------------------------------------------------------------------------------
M-CGSRC-10/97
