<PAGE>
Greater China Growth Portfolio as of February 28, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 93.9%
Shares Value
- ---------------------------------------------------------------------------
China -- 0.2%
Electrical Equipment -- 0.1%
- ---------------------------------------------------------------------------
Beijing Orient Elect. 426,100 $ 126,562
The company is mainly engaged in
the manufacture of electronics and
lighting products.
- ---------------------------------------------------------------------------
$ 126,562
- ---------------------------------------------------------------------------
Industrial / Manufacturing -- 0.1%
- ---------------------------------------------------------------------------
Shanghai Yaohua Pilkington 2,091,113 $ 397,311
Glass manufacturer.
- ---------------------------------------------------------------------------
$ 397,311
- ---------------------------------------------------------------------------
Total China
(identified cost $2,102,517) $ 523,873
- ---------------------------------------------------------------------------
Hong Kong -- 72.8%
Chemicals -- 1.4%
- ---------------------------------------------------------------------------
Shanghai Petrochemical 25,580,000 $ 4,228,372
A highly integrated petrochemical
complex which processes crude oil
into a broad range of synthetic
fibers, resins and plastics,
intermediate petrochemicals and
petroleum products.
- ---------------------------------------------------------------------------
$ 4,228,372
- ---------------------------------------------------------------------------
Communications Services -- 3.4%
- ---------------------------------------------------------------------------
China Telecom* 5,590,000 $ 10,142,636
Consists of the two largest
provincial mobile telephone
operators under the control of
the Ministry of Post &
Telecommunications.
- ---------------------------------------------------------------------------
$ 10,142,636
- ---------------------------------------------------------------------------
Diversified Trading -- 19.3%
- ---------------------------------------------------------------------------
China Everbright Pacific Ltd. 2,500,000 $ 2,405,243
Diversified company with interests
in retailing, property, investment
and development, hotels and
restaurant operations.
China Resources Enterprises 3,838,000 8,376,341
Property investment and
development.
Cosco Pacific Ltd. 3,640,000 3,408,020
Transportation, container
manufacturer (through JV),
owning and leasing.
- ---------------------------------------------------------------------------
Diversified Trading (continued)
- ---------------------------------------------------------------------------
Guang Nan Holdings Ltd. 6,000,000 $ 4,261,639
Trader of foodstuffs and non-
foodstuffs, processing and
distribution of foodstuffs.
Hutchison Whampoa 2,900,000 20,504,294
Diversified company with
interests in property
development, ports, retailing,
manufacturing,
telecommunications, media,
energy, finance
and investment.
Li & Fung Ltd. 2,312,000 3,493,304
Export trading of consumer
products.
NG Fung Hong Ltd. 7,540,000 7,984,503
Trader of foodstuffs and
non-foodstuffs.
Wharf Holdings Ltd. 3,501,200 7,302,173
Diversified company with
interests in property
development and investments,
terminals and warehousing,
public transportation
and communications.
- ---------------------------------------------------------------------------
$ 57,735,517
- ---------------------------------------------------------------------------
Electric Utilities -- 3.4%
- ---------------------------------------------------------------------------
Beijing Datang Power* 5,212,000 $ 2,658,669
Engaged in the operation of coal
fired electric power plants in
Northern China.
CLP Holdings, Ltd. 1,430,000 7,423,775
Is the monopolist power
supplier to Kowloon, the New
Territories and Lantau Island
which together account for
nearly 75% of Hong Kong's
6 million population.
- ---------------------------------------------------------------------------
$ 10,082,444
- ---------------------------------------------------------------------------
Engineering and Construction -- 1.0%
- ---------------------------------------------------------------------------
Sichuan Expressway Co. 20,000,000 $ 2,996,061
Is a toll road operator in Sichuan
province, China.
- ---------------------------------------------------------------------------
$ 2,996,061
- ---------------------------------------------------------------------------
Financial -- 13.8%
- ---------------------------------------------------------------------------
Hang Seng Bank 940,000 $ 8,891,974
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 1,060,900 30,689,172
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.
See notes to financial statements
10
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Shares Value
- --------------------------------------------------------------------------------
Financial (continued)
- --------------------------------------------------------------------------------
National Mutual Ltd. 2,018,000 $ 1,798,179
Banking, finance and insurance.
- --------------------------------------------------------------------------------
$ 41,379,325
- --------------------------------------------------------------------------------
Industrial/Manufacturing -- 7.4%
- --------------------------------------------------------------------------------
Chen Hsong Holdings 4,336,000 $ 1,595,865
Manufactures and sells plastic
injection moulding machines and
related products.
CIM Company Ltd.(1) 1,800,000 1,510,945
Diversified company with
interests in property and
investment, public
transportation, trading and
hotel operations.
Shanghai Industrial Holdings Ltd. 3,090,000 13,407,891
Manufacturer of cigarettes,
pharmaceuticals and carparts.
Siu Fung Ceramics Holdings Ltd.* 9,850,000 725,060
Manufacturer of a line of
ceramics, machinery and
equipment.
Varitronix International Ltd. 1,560,000 3,273,713
Designs, manufactures and sells
liquid crystal displays and
related products.
Zhenhai Refining & Chemical Co. 4,058,000 1,480,448
Producer of petroleum and
petrochemical products
- --------------------------------------------------------------------------------
$ 21,993,922
- --------------------------------------------------------------------------------
Metals - Industrial -- 0.5%
- --------------------------------------------------------------------------------
Angang New Steel Co., Ltd. 10,000,000 $ 1,640,085
Producer of steel products
comprising cold rolled sheets,
wire rods and thick plates, in
the PRC.
- --------------------------------------------------------------------------------
$ 1,640,085
- --------------------------------------------------------------------------------
Natural Gas Utilities -- 0.9%
Hong Kong and China Gas Company, 1,446,000 $ 2,595,648
Ltd.
Is the sole supplier of piped gas
in Hong Kong.
- --------------------------------------------------------------------------------
$ 2,595,648
- --------------------------------------------------------------------------------
Properties -- 15.2%
- --------------------------------------------------------------------------------
Cheung Kong Holdings, Ltd. 2,171,000 $ 15,209,757
Property development and
construction.
Cheung Kong Infrastructure 2,525,000 7,777,007
Property development and
construction.
China Resources Beijing Land 2,164,000 1,089,895
Property development.
Hong Kong Land Holdings Ltd. 3,095,000 5,540,050
Commercial property investment,
development, leasing and
management.
New World Development 3,980,000 14,674,114
Property investment and
development.
Sino Land Company 2,720,000 1,299,671
Property development.
- --------------------------------------------------------------------------------
$ 45,590,494
- --------------------------------------------------------------------------------
REITS -- 1.2%
- --------------------------------------------------------------------------------
Chinese Estates Holdings 2,000,000 $ 684,445
Property development and
investment company in Hong
Kong.
Hysan Development Company, Ltd. 1,600,000 3,047,717
Leading real estate investment
company in Hong Kong.
- --------------------------------------------------------------------------------
$ 3,732,162
- --------------------------------------------------------------------------------
Telecommunications -- 2.2%
- --------------------------------------------------------------------------------
Hong Kong Telecom 3,084,000 $ 6,491,793
Engaged in the provisional
telecommunication services,
the sale and rental of
telecommunications equipment.
- --------------------------------------------------------------------------------
$ 6,491,793
- --------------------------------------------------------------------------------
Transportation -- 2.7%
- --------------------------------------------------------------------------------
China Merchants Holdings 7,827,000 $ 8,136,805
Flagship of China Merchants
Group and engaged in the
Industrial and Infrastructure
business.
- --------------------------------------------------------------------------------
$ 8,136,805
- --------------------------------------------------------------------------------
Utilities -- 0.4%
- --------------------------------------------------------------------------------
Harbin Power Co. 6,900,000 $ 1,051,463
The largest manufacturer of power
equipment in China, which specializes
in major components for thermal power
generating stations such as boilers
and steam turbines.
- --------------------------------------------------------------------------------
$ 1,051,463
- --------------------------------------------------------------------------------
Total Hong Kong
(identified cost $192,285,136) $ 217,796,727
- --------------------------------------------------------------------------------
See notes to financial statements
11
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Shares Value
- ---------------------------------------------------------------------------
Malaysia -- 1.8%
Conglomerates -- 0.8%
- ---------------------------------------------------------------------------
United Engineers, Ltd. 2,050,000 $ 2,487,891
Is the biggest integrated civil
engineering construction and design
company in Malaysia.
- ---------------------------------------------------------------------------
$ 2,487,891
- ---------------------------------------------------------------------------
Diversified Trading -- 0.3%
- ---------------------------------------------------------------------------
Sime Darby Bhd 700,000 $ 914,286
Diversified company with interests
in plantation operation, chemical
manufacturing, heavy equipment and
auto distribution.
- ---------------------------------------------------------------------------
$ 914,286
- ---------------------------------------------------------------------------
Investment Services -- 0.7%
- ---------------------------------------------------------------------------
Malayan Banking Bhd 517,000 $ 2,011,728
- ---------------------------------------------------------------------------
Is a leading banking group in Malaysia.
- ---------------------------------------------------------------------------
$ 2,011,728
- ---------------------------------------------------------------------------
Total Malaysia
(identified cost $5,125,125) $ 5,413,905
- ---------------------------------------------------------------------------
Republic of Korea -- 0.0%
Electronics - Instruments -- 0.0%
- ---------------------------------------------------------------------------
Samsung Electronics 2 $ 116
Manufacturer of home appliances,
telecommunications products,
computers and semiconductors.
- ---------------------------------------------------------------------------
$ 116
- ---------------------------------------------------------------------------
Total Republic of Korea
(identified cost $105) $ 116
- ---------------------------------------------------------------------------
Singapore -- 3.0%
Financial -- 0.9%
- ---------------------------------------------------------------------------
Overseas Union Bank (Foreign) 700,000 $ 2,638,245
Commercial banking.
- ---------------------------------------------------------------------------
$ 2,638,245
- ---------------------------------------------------------------------------
Industrial / Manufacturing -- 1.6%
- ---------------------------------------------------------------------------
Clipsal Industries Holdings Ltd. 2,324,000 $ 4,508,560
Develops, manufactures, and markets
electric installation products.
- ---------------------------------------------------------------------------
Industrial / Manufacturing (continued)
- ---------------------------------------------------------------------------
Clipsal Industries Holdings 234,000 $ 210,600
Ltd. Warrants*
Develops, manufactures, and markets
electric installation products.
- ---------------------------------------------------------------------------
$ 4,719,160
- ---------------------------------------------------------------------------
Transportation -- 0.5%
- ---------------------------------------------------------------------------
Keppel Land Limited 1,500,000 $ 1,594,069
Shipping company.
Keppel Land Limited Warrants* 508,000 120,840
Shipping company.
- ---------------------------------------------------------------------------
$ 1,714,909
- ---------------------------------------------------------------------------
Total Singapore
(identified cost $14,605,555) $ 9,072,314
- ---------------------------------------------------------------------------
Taiwan -- 9.2%
Banks and Money Services -- 1.0%
- ---------------------------------------------------------------------------
Bank Sinopac 4,032,268 $ 3,006,902
One of the best new banks in
Taiwan listed on the OTC market.
- ---------------------------------------------------------------------------
$ 3,006,902
- ---------------------------------------------------------------------------
Business Services - Miscellaneous -- 1.0%
- ---------------------------------------------------------------------------
Far Eastern Silo and Shipping Corp. 3,392,000 $ 2,878,702
Is engaged in the cable television
business as well as shipping and
warehousing.
- ---------------------------------------------------------------------------
$ 2,878,702
- ---------------------------------------------------------------------------
Computer Equipment -- 0.5%
- ---------------------------------------------------------------------------
Asustek Computer, Inc. 65,000 $ 1,521,061
Highly profitable motherboard
producer in Taiwan supplying to Intel.
- ---------------------------------------------------------------------------
$ 1,521,061
- ---------------------------------------------------------------------------
Computers and Business Equipment -- 3.3%
- ---------------------------------------------------------------------------
Chuntex Electronic Corp. 1,375,000 $ 2,617,005
Manufactures and sells
computer monitors.
Mitac International Corp. 1,072,000 2,441,685
Is a manufacturer and distributor
of mainly PCs and notebooks. It has
a world wide network of manufacturing
and logistics centers and is exposed
to the component distribution business.
See notes to financial statements
12
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Shares Value
- --------------------------------------------------------------------------------
Computers and Business Equipment (continued)
- --------------------------------------------------------------------------------
Unitech Electronics Co., Ltd. 1,110,000 $ 4,831,357
Manufactures and markets double
sided and multi-layer printed
circuit boards.
- --------------------------------------------------------------------------------
$ 9,890,047
- --------------------------------------------------------------------------------
Construction -- 1.0%
- --------------------------------------------------------------------------------
Bes Engineering Corp. 2,843,000 $ 2,927,270
Second largest contractor in Taiwan
active in public works.
- --------------------------------------------------------------------------------
$ 2,927,270
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 1.4%
- --------------------------------------------------------------------------------
Taiwan Semiconductor 800,000 $ 4,168,487
Manufacturing, Co.
Is one of the world's largest IC
foundry with a 20% global market share.
- --------------------------------------------------------------------------------
$ 4,168,487
- --------------------------------------------------------------------------------
Insurance -- 1.0%
- --------------------------------------------------------------------------------
Cathay Life Insurance 707,442 $ 3,112,303
Underwrites endowment, life, accident
and medical policies through a service
network of 22 branches, 341 operating
units and over 29,000 agents.
- --------------------------------------------------------------------------------
$ 3,112,303
- --------------------------------------------------------------------------------
Total Taiwan
(identified cost $25,965,503) $ 27,504,772
- --------------------------------------------------------------------------------
Thailand -- 3.7%
Banks and Money Services -- 0.8%
- --------------------------------------------------------------------------------
Siam Commercial Bank Public Co., Ltd. 400,000 $ 645,905
Is a leading commercial bank in
Thailand.
Thai Farmers Bank Public Co., Ltd. 604,200 1,797,965
Is a leading commercial bank in
Thailand.
- --------------------------------------------------------------------------------
$ 2,443,870
- --------------------------------------------------------------------------------
Utilities -- 2.9%
- --------------------------------------------------------------------------------
Electricity Generating (Foreign) 3,352,770 $ 8,739,631
EGCOMP was set up in 1992 for
the purpose of partly
privatizing electricity in
Thailand.
- --------------------------------------------------------------------------------
$ 8,739,631
- --------------------------------------------------------------------------------
Total Thailand
(identified cost $9,140,867) $ 11,183,501
- --------------------------------------------------------------------------------
United States -- 3.2%
Conglomerates -- 1.4%
- --------------------------------------------------------------------------------
Citic Pacific Ltd. 1,100,000 $ 4,261,639
Diversified company engaged in
infrastructure, trading, and
distribution, property and industrial
manufacturing.
- --------------------------------------------------------------------------------
$ 4,261,639
- --------------------------------------------------------------------------------
Electric Utilities -- 1.8%
- --------------------------------------------------------------------------------
AES Corp. 121,800 $ 5,359,200
Electric generating facility.
- --------------------------------------------------------------------------------
$ 5,359,200
- --------------------------------------------------------------------------------
Total United States
(identified cost $9,563,022) $ 9,620,839
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $258,787,830) $ 281,116,047
- --------------------------------------------------------------------------------
Total Investments -- 93.9%
(identified cost $258,787,830) $ 281,116,047
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 6.1% $ 18,146,491
- --------------------------------------------------------------------------------
Net Assets -- 100% $ 299,262,538
- --------------------------------------------------------------------------------
* Non-income producing security.
(1) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
See notes to financial statements.
13
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Top Ten Holdings
<TABLE>
<CAPTION>
Percentage
Industry of Net
Company Sector Assets Value
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
HSBC Holdings PLC Financial 10.25% $30,689,172
Hutchison Whampoa Diversified Trading 6.85 20,504,294
Cheung Kong Holdings, Ltd. Properties 5.08 15,209,757
New World Development Properties 4.90 14,674,114
Shanghai Industrial Holdings Ltd. Industrial/Manufacturing 4.48 13,407,891
China Telecom* Communications Services 3.39 10,142,636
Hang Seng Bank Financial 2.97 8,891,974
Electricity Generating (Foreign) Utilities 2.92 8,739,631
China Resources Enterprises Diversified Trading 2.80 8,376,341
China Merchants Holdings Transportation 2.72 8,136,805
</TABLE>
Top Ten Industry Sectors
Percentage
of Net
Industry Sector Assets Value
- --------------------------------------------------------------------
Diversified Trading 19.60% $58,649,803
Properties 15.23 45,590,494
Financial 14.71 44,017,570
Industrial/Manufacturing 9.06 27,110,393
Electric Utilities 5.16 15,441,644
Communications Services 3.39 10,142,636
Computers and Business Equipment 3.30 9,890,047
Transportation 3.29 9,851,714
Utilities 3.27 9,791,094
Conglomerates 2.26 6,749,530
* Non-income producing security.
See notes to financial statements
14
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of February 28, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $258,787,830) $ 281,116,047
Cash 13,017,205
Foreign currency, at value
(identified cost, $8,114,006) 8,531,027
Receivable for investments sold 889,413
Interest and dividends receivable 123,201
- --------------------------------------------------------------------------------
Total assets $ 303,676,893
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 3,871,222
Foreign capital gains tax payable 520,365
Payable to affiliate for Trustees' fees (Note 2) 920
Accrued expenses 21,848
- --------------------------------------------------------------------------------
Total liabilities $ 4,414,355
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $ 299,262,538
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 276,517,305
Net unrealized appreciation of investments
(computed on the basis of identified cost) 22,745,233
- --------------------------------------------------------------------------------
Total $ 299,262,538
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
February 28, 1998
Investment Income (Note 11)
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $38,246) $ 2,199,324
Interest income 89,794
- --------------------------------------------------------------------------------
Total income $ 2,289,118
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 1,286,023
Administration fee (Note 2) 426,089
Compensation of Trustees not members of the
Administrator's organization (Note 2) 920
Custodian fee (Note 1D) 231,222
Legal and accounting services 22,885
Amortization of organization expenses (Note 1C) 5,877
Miscellaneous 20,893
- --------------------------------------------------------------------------------
Total expenses $ 1,993,909
- --------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1D) $ 163,589
- --------------------------------------------------------------------------------
Total expense reductions $ 163,589
- --------------------------------------------------------------------------------
Net expenses $ 1,830,320
- --------------------------------------------------------------------------------
Net investment income $ 458,798
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (4,716,322)
Foreign currency transactions (1,653,226)
- --------------------------------------------------------------------------------
Net realized loss on investment transactions $ (6,369,548)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(157,541,733)
Foreign currency 436,561
- --------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments $(157,105,172)
- --------------------------------------------------------------------------------
Net realized and unrealized loss on investments $(163,474,720)
- --------------------------------------------------------------------------------
Net decrease in net assets from operations $(163,015,922)
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) February 28, 1998 Year Ended
in Net Assets (Unaudited) August 31, 1997
- ---------------------------------------------------------------------------
From operations --
Net investment income $ 458,798 $ 3,730,525
Net realized gain (loss)
on investment transactions (6,369,548) 33,933,253
Net change in unrealized
appreciation (depreciation)
of investments (157,105,172) 106,260,389
- ---------------------------------------------------------------------------
Net increase (decrease) in
net assets from operations $(163,015,922) $ 143,924,167
- ---------------------------------------------------------------------------
Capital transactions --
Contributions $ 87,917,625 $ 259,385,555
Withdrawals (163,421,043) (375,825,403)
- ---------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (75,503,418) $(116,439,848)
- ---------------------------------------------------------------------------
Net increase (decrease) in
net assets $(238,519,340) $ 27,484,319
- ---------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------
At beginning of period $ 537,781,878 $ 510,297,559
- ---------------------------------------------------------------------------
At end of period $ 299,262,538 $ 537,781,878
- ---------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1998 Year Ended August 31,
------------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993*
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses (1) 1.17%+ 1.19% 1.19% 1.10% 1.15% 1.38%+
Expenses after custodian fee reduction 1.08%+ 1.16% 1.12% -- -- --
Net investment income 0.27%+ 0.72% 0.94% 1.35% 0.73% 0.38%+
Portfolio Turnover 26% 48% 42% 32% 36% 18%
- ------------------------------------------------------------------------------------------------------------------------------------
Average commission rate (per share) (2) $ 0.0024 $ 0.0412 $ 0.0070 -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $299,263 $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 periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolio to increase its expense ratio by
the effect of any expense offset arrangements with its service providers.
The expense ratios for each of the prior periods 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
17
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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.
See notes to financial statements
18
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
G Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to foreign currency rates are recorded
for financial statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on investments that
result from fluctuations in foreign currency exchange rates are not
separately disclosed.
H Forward Foreign Currency Exchange Contracts -- The Portfolio may enter
into forward foreign currency exchange contracts for the purchase or sale of
a specific foreign currency at a fixed price on a future date. Risks may
arise upon entering these contracts from the potential inability of
counterparties to meet the terms of their contracts and from movements in
the value of a foreign currency relative to the U.S. dollar. The Portfolio
will enter into forward contracts for hedging purposes as well as non-
hedging purposes. The forward foreign currency exchange contracts are
adjusted by the daily exchange rate of the underlying currency and any gains
or losses are recorded for financial statement purposes as unrealized until
such time as the contracts have been closed or offset.
I Other -- Investment transactions are accounted for on 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.
J Interim Financial Information -- The interim financial statements relating
to February 28, 1998 and for the six-month period then ended have not been
audited by independent certified public accountants, but in the opinion of
the Portfolio's management, reflect all adjustments, consisting only of
normal recurring adjustments necessary for the fair presentation of the
financial statements.
2 Investment Adviser Fee and Other Transactions with Affiliates
----------------------------------------------------------------------------
The investment adviser fee is earned by 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 six months ended February 28, 1998 the adviser fee was equivalent to
0.75% of average daily 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% (0.25% annually) of the
average daily net assets of the Portfolio up to $500,000,000, and at reduced
rates as daily net assets exceed that level. For the six months ended
February 28, 1998, the administrative fee was 0.25% of average daily 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 $81,848,584 and $170,156,489, respectively.
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at February 28, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 258,787,830
---------------------------------------------------------------------------
Gross unrealized appreciation $ 53,192,452
Gross unrealized depreciation (30,864,235)
---------------------------------------------------------------------------
Net unrealized appreciation $ 22,328,217
---------------------------------------------------------------------------
19
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
5 Risks Associated with Foreign Investments
----------------------------------------------------------------------------
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the
Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed
as those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and
more volatile than securities of comparable U.S. companies. In general,
there is less overall governmental supervision and regulation of foreign
securities markets, broker-dealers and issuers than in the United States.
6 Financial Instruments
----------------------------------------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options, forward foreign currency exchange contracts and
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 February 28, 1998.
7 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a committed $100 million unsecured line of
credit agreement with a group of banks. The Portfolio may temporarily borrow
from the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each participating portfolio or fund
based on its borrowings at an amount above the Eurodollar rate or federal
funds rate. In addition, a fee computed at an annual rate of 0.10% on the
daily unused portion of the line of credit is allocated among the
participating portfolios and funds at the end of each quarter. The Portfolio
did not have any significant borrowings or allocated fees during the six
months ended February 28, 1998.
20
<PAGE>
Greater China Growth Portfolio as of February 28, 1998
INVESTMENT MANAGEMENT
<TABLE>
<CAPTION>
Greater China Growth Portfolio
Officers Independent Trustees
<S> <C>
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.
Scobie Dickinson Ward Samuel L. Hayes, III
Vice President, Assistant Jacob H. Schiff Professor of Investment Banking,
Secretary, Assistant Harvard University Graduate School of
Treasurer,and Co-Portfolio Business Administration
Manager
Norton H. Reamer
William Walter Raleigh Kerr President and Director, United Asset
Vice President and Management Corporation
Assistant Treasurer
James L. O'Connor
Vice President and Treasurer
Alan R. Dynner
Secretary
</TABLE>
21
