<PAGE>
Balanced Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 66.0%
Security Shares Value
- -------------------------------------------------------------------------
Aerospace and Defense -- 0.9%
- -------------------------------------------------------------------------
General Motors Corp., Class H* 60,000 $ 2,827,500
Raytheon Co., Class A 3,826 220,473
- -------------------------------------------------------------------------
$ 3,047,973
- -------------------------------------------------------------------------
Auto and Parts -- 2.5%
- -------------------------------------------------------------------------
General Motors Corp. 60,000 $ 4,008,750
Magna International, Inc., Class A 75,000 5,146,875
- -------------------------------------------------------------------------
$ 9,155,625
- -------------------------------------------------------------------------
Banks - Regional -- 1.9%
- -------------------------------------------------------------------------
Norwest Corp. 180,000 $ 6,727,500
- -------------------------------------------------------------------------
$ 6,727,500
- -------------------------------------------------------------------------
Banks and Money Services -- 0.6%
- -------------------------------------------------------------------------
Banco Latinoamericano de
Exportaciones 75,000 $ 2,306,250
- -------------------------------------------------------------------------
$ 2,306,250
- -------------------------------------------------------------------------
Beverages -- 0.9%
- -------------------------------------------------------------------------
PepsiCo, Inc. 80,000 $ 3,295,000
- -------------------------------------------------------------------------
$ 3,295,000
- -------------------------------------------------------------------------
Chemicals -- 2.1%
- -------------------------------------------------------------------------
Monsanto Co. 65,000 $ 3,631,875
Praxair, Inc. 80,000 3,745,000
- -------------------------------------------------------------------------
$ 7,376,875
- -------------------------------------------------------------------------
Computers and Business Equipment -- 1.0%
- -------------------------------------------------------------------------
Hewlett-Packard Co. 60,000 $ 3,592,500
- -------------------------------------------------------------------------
$ 3,592,500
- -------------------------------------------------------------------------
Drugs -- 8.5%
- -------------------------------------------------------------------------
Elan Corp., PLC ADR* 75,000 $ 4,823,438
Lilly (Eli) & Co. 70,000 4,624,375
Pfizer, Inc. 37,800 4,108,388
Sepracor, Inc.* 80,000 3,320,000
SmithKline Beecham PLC ADR 70,000 4,235,000
- -------------------------------------------------------------------------
Warner-Lambert Co. 135,000 9,365,624
- -------------------------------------------------------------------------
$ 30,476,825
- -------------------------------------------------------------------------
Electric Utilities -- 1.1%
- -------------------------------------------------------------------------
The Southern Co. 140,000 $ 3,876,250
- -------------------------------------------------------------------------
$ 3,876,250
- -------------------------------------------------------------------------
Electronics - Semiconductors -- 2.2%
- -------------------------------------------------------------------------
Intel Corp. 70,000 $ 5,188,750
LSI Logic, Inc.* 120,000 2,767,500
- -------------------------------------------------------------------------
$ 7,956,250
- -------------------------------------------------------------------------
Environmental Services -- 1.2%
- -------------------------------------------------------------------------
U.S.A. Waste Services, Inc.* 90,000 $ 4,443,750
- -------------------------------------------------------------------------
$ 4,443,750
- -------------------------------------------------------------------------
Financial - Miscellaneous -- 3.4%
- -------------------------------------------------------------------------
Federal National Mortgage
Association 75,000 $ 4,556,250
MBNA Corp. 120,000 3,960,000
MGIC Investment Corp. 65,000 3,709,063
- -------------------------------------------------------------------------
$ 12,225,313
- -------------------------------------------------------------------------
Foods -- 3.0%
- -------------------------------------------------------------------------
Tyson Foods, Inc. 164,700 $ 3,571,931
Unilever ADR 92,000 7,262,250
- -------------------------------------------------------------------------
$ 10,834,181
- -------------------------------------------------------------------------
Insurance -- 7.3%
- -------------------------------------------------------------------------
Allstate Corp. (The) 60,000 $ 5,493,750
General RE Corp. 30,000 7,605,000
Mutual Risk Management Ltd. 186,600 6,799,238
SunAmerica, Inc. 110,000 6,318,125
- -------------------------------------------------------------------------
$ 26,216,113
- -------------------------------------------------------------------------
Machinery -- 1.1%
- -------------------------------------------------------------------------
Deere and Co. 75,000 $ 3,965,625
- -------------------------------------------------------------------------
$ 3,965,625
- -------------------------------------------------------------------------
See notes to financial statements
10
<PAGE>
Balanced Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Security Shares Value
- -------------------------------------------------------------------------
Medical Products -- 4.7%
- -------------------------------------------------------------------------
Baxter International, Inc. 55,000 $ 2,959,688
Boston Scientific Corp.* 75,000 5,371,875
Sofamor Danek Group, Inc.* 100,300 8,682,218
- -------------------------------------------------------------------------
$ 17,013,781
- -------------------------------------------------------------------------
Metals and Minerals -- 2.1%
- -------------------------------------------------------------------------
J & L Specialty Steel, Inc. 200,000 $ 1,187,500
Potash Corp. of Saskatchewan** 55,000 4,155,938
Steel Dynamics Corp.* 150,000 2,081,250
- -------------------------------------------------------------------------
$ 7,424,688
- -------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.8%
- -------------------------------------------------------------------------
Rowan Companies, Inc.* 140,000 $ 2,721,250
- -------------------------------------------------------------------------
$ 2,721,250
- -------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 2.0%
- -------------------------------------------------------------------------
Anadarko Petroleum Corp. 60,000 $ 4,031,250
Triton Energy Ltd.* 90,000 3,211,875
- -------------------------------------------------------------------------
$ 7,243,125
- -------------------------------------------------------------------------
Oil and Gas - Integrated -- 2.2%
- -------------------------------------------------------------------------
Exxon Corp. 67,280 $ 4,797,905
Mobil Corp. 40,000 3,065,000
- -------------------------------------------------------------------------
$ 7,862,905
- -------------------------------------------------------------------------
Paper and Forest Products -- 0.8%
- -------------------------------------------------------------------------
Plum Creek Timber Co., L.P. 90,000 $ 2,705,625
- -------------------------------------------------------------------------
$ 2,705,625
- -------------------------------------------------------------------------
Publishing -- 2.6%
- -------------------------------------------------------------------------
Central Newspapers, Inc., Class A 70,000 $ 4,882,500
McGraw-Hill Companies, Inc. (The) 56,500 4,608,281
- -------------------------------------------------------------------------
$ 9,490,781
- -------------------------------------------------------------------------
REITS -- 3.3%
- -------------------------------------------------------------------------
Equity Office Properties Trust 110,000 $ 3,121,250
Equity Residential Properties Trust 101,400 4,810,163
Security Capital Group 6,982 2,400
Security Capital Industrial Trust 150,000 3,750,000
- -------------------------------------------------------------------------
$ 11,683,813
- -------------------------------------------------------------------------
Retail - Food and Drug -- 3.4%
- -------------------------------------------------------------------------
CVS Corp. 190,000 $ 7,398,125
Safeway, Inc.* 120,000 4,882,500
- -------------------------------------------------------------------------
$ 12,280,625
- -------------------------------------------------------------------------
Retail - Specialty and Apparel -- 4.0%
- -------------------------------------------------------------------------
Fastenal Co. 52,500 $ 2,437,969
Home Depot, Inc. (The) 100,000 8,306,249
Republic Industries, Inc.* 150,000 3,750,000
- -------------------------------------------------------------------------
$ 14,494,218
- -------------------------------------------------------------------------
Specialty Chemicals and Materials -- 1.4%
- -------------------------------------------------------------------------
Corning, Inc. 80,000 $ 2,780,000
Millipore Corp. 80,000 2,180,000
- -------------------------------------------------------------------------
$ 4,960,000
- -------------------------------------------------------------------------
Telephone Utilities -- 1.0%
- -------------------------------------------------------------------------
Ameritech Corp. 80,896 $ 3,630,208
- -------------------------------------------------------------------------
$ 3,630,208
- -------------------------------------------------------------------------
Total Common Stocks
(identified cost $146,306,236) $237,007,049
- -------------------------------------------------------------------------
Convertible Preferred Stock -- 0.7%
Security Shares Value
- -------------------------------------------------------------------------
Metals - Gold -- 0.7%
- -------------------------------------------------------------------------
Freeport McMoRan Copper & Gold,
5% Series CV 125,000 $ 2,437,500
- -------------------------------------------------------------------------
$ 2,437,500
- -------------------------------------------------------------------------
Total Convertible Preferred Stock
(identified cost $2,872,500) $ 2,437,500
- -------------------------------------------------------------------------
See notes to financial statements
11
<PAGE>
Balanced Portfolio as of June 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
Corporate Bonds -- 18.7%
Principal
Amount
Security (000's Omitted) Value
- -------------------------------------------------------------------------
Air Products and Chemicals, Inc.,
7.34%, 6/15/26 $ 720 $ 796,010
Associates Corp., N.A., 5.96%,
5/15/37 4,000 4,162,400
Bell Telephone Co., 8.35%, 12/15/30 3,000 3,795,030
Chesapeake Potomac Telephone Co.,
8.375%, 10/1/29 2,850 3,582,650
Commercial Credit Corp., 7.875%,
2/1/25 2,000 2,345,640
Commercial Credit Corp., 6.625%,
6/1/15 1,350 1,416,731
Connecticut Light and Power Co.,
7.875%, 10/1/24 3,775 4,523,469
General Motors Corp., 9.45%, 11/1/11 3,000 3,801,720
Grand Metropolitan Investments
Corp., 7.45%, 4/15/35 3,090 3,501,372
Intermediate American Development
Bank, 8.40%, 9/1/09 3,690 4,426,967
Intermediate American Development
Bank, 6.95%, 8/1/26 220 248,919
J.C. Penney, Inc., 7.40%, 4/1/37 2,075 2,322,195
Johnson Controls, Inc., 7.70%, 1,360 1,562,150
3/1/15
Lowe's Cos., Inc., 7.11%, 5/15/37 5,000 5,405,700
Mead Corp. (The), 6.84%, 3/1/37 2,000 2,106,500
Proctor and Gamble Co., 8.00%,
9/1/24 3,000 3,678,840
Seagram (Joseph) & Sons, Inc.,
9.65%, 8/15/18 1,030 1,362,875
State Street Bank, 7.35%, 6/15/26 2,450 2,720,799
Tennessee Valley Power Authority,
6.235%, 7/15/45 700 727,090
Tennessee Valley Power Authority,
5.88%, 4/1/36 3,350 3,496,429
Times Mirror Co., 6.61%, 9/15/27 3,250 3,415,328
Tribune Co., 6.25%, 11/10/26 1,000 1,027,690
TRW, Inc., MTN, 9.35%, 6/4/20 900 1,197,135
Willamette Industries, 7.35%, 7/1/26 1,200 1,325,664
Xerox Corp., 5.90%, 5/5/37 3,000 3,105,630
Xerox Corp., 5.875%, 6/15/37 1,000 1,037,830
- -------------------------------------------------------------------------
Total Corporate Bonds
(identified cost $62,917,215) $ 67,092,763
- -------------------------------------------------------------------------
U.S. Treasury Obligations -- 14.0%
Principal
Amount
Security (000's Omitted) Value
- -------------------------------------------------------------------------
FHLMC, PAC, CMO, Series 1206-GA,
7.00%, 3/15/18 $ 1,740 $ 1,736,918
FHLMC, PAC, CMO, Series 1258-D,
8.00%, 9/15/05 2,131 2,134,999
FHLMC, PAC, CMO, Series 34-C,
9.00%, 11/15/19 203 206,194
FHLMC, PAC, CMO, Series 41-F,
10.00%, 5/15/20 1,470 1,596,716
FNMA, PAC, CMO, Series 1990 24-E,
9.00%, 3/25/20 1,279 1,332,672
U.S. Treasury Note, 5.75%, 11/30/02 10,000 10,084,299
U.S. Treasury Note, 7.125%, 9/30/99 10,000 10,192,099
U.S. Treasury Note, 6.125%, 9/30/00 4,000 4,049,960
U.S. Treasury Note, 8.50%, 2/15/00 15,000 15,684,299
U.S. Treasury Note, 6.125%, 8/31/98 3,500 3,505,180
- -------------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost $50,715,018) $ 50,523,336
- -------------------------------------------------------------------------
Commercial Paper -- 1.6%
Principal
Amount
Security (000's Omitted) Value
- -------------------------------------------------------------------------
General Electric Capital Corp., $5,712 $ 5,712,000
6.10%, 7/1/98
- -------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $5,712,000) $ 5,712,000
- -------------------------------------------------------------------------
Total Investments -- 101.0%
(identified cost $268,522,969) $362,772,648
- -------------------------------------------------------------------------
Other Assets, Less Liabilities -- (1.0)% $ (3,479,649)
- -------------------------------------------------------------------------
Net Assets -- 100% $359,292,999
- -------------------------------------------------------------------------
ADR - American Depositary Receipt
PAC - Planned Authorization Class
CMO - Collateralized Mortgage Obligations
REIT- Real Estate Investment Trust * Non-income producing security.
** Foreign security.
See notes to financial statements
12
<PAGE>
Balanced Portfolio as of June 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of June 30, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost, $268,522,969) $362,772,648
Cash 1,648
Receivable for investments sold 89,394
Interest and dividends receivable 2,243,532
Tax reclaim receivable 3,377
Deferred organization expenses 520
- --------------------------------------------------------------------------------
Total assets $365,111,119
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 5,778,740
Payable to affiliate for Trustees' fees 9,950
Other accrued expenses 29,430
- --------------------------------------------------------------------------------
Total liabilities $ 5,818,120
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $359,292,999
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $265,043,320
Net unrealized appreciation (computed on the basis
of identified cost) 94,249,679
- --------------------------------------------------------------------------------
Total $359,292,999
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
June 30, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $39,230) $ 2,512,480
Interest 3,557,199
- --------------------------------------------------------------------------------
Total investment income $ 6,069,679
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 1,070,461
Trustees fees and expenses 14,977
Custodian fee 84,426
Legal and accounting services 17,100
Amortization of organization expenses 1,593
Miscellaneous 2,759
- --------------------------------------------------------------------------------
Total expenses $ 1,191,316
- --------------------------------------------------------------------------------
Net investment income $ 4,878,363
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 29,860,210
- --------------------------------------------------------------------------------
Net realized gain $ 29,860,210
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 316,120
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 316,120
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 30,176,330
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 35,054,693
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Balanced Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Six Months Ended
Increase (Decrease) June 30, 1998 Year Ended
in Net Assets (Unaudited) December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 4,878,363 $ 8,365,076
Net realized gain 29,860,210 24,802,364
Net change in unrealized
appreciation (depreciation) 316,120 29,330,948
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 35,054,693 $ 62,498,388
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 16,165,337 $ 27,019,040
Withdrawals (21,634,273) (61,370,968)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (5,468,936) $ (34,351,928)
- --------------------------------------------------------------------------------
Net increase in net assets $ 29,585,757 $ 28,146,460
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $329,707,242 $ 301,560,782
- --------------------------------------------------------------------------------
At end of period $359,292,999 $ 329,707,242
- --------------------------------------------------------------------------------
See notes to financial statements
14
<PAGE>
Balanced Portfolio as of June 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31, Year Ended January 31,
June 30, 1998 -------------------------------------- ------------------------
(Unaudited) 1997 1996 1995* 1995 1994**
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------
Expenses 0.68%+ 0.69% 0.70% 0.71%+ 0.70% 0.69%+
Net investment income 2.80%+ 2.62% 3.23% 3.83%+ 4.25% 3.69%+
Portfolio Turnover 25% 37% 64% 47% 28% 15%
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $359,293 $329,707 $301,561 $276,375 $217,157 $230,334
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the eleven month period ended December 31, 1995.
** For the period from the start of business, October 28, 1993, to January 31,
1994.
See notes to financial statements
15
<PAGE>
Balanced Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Balanced Portfolio (the "Portfolio") (formerly Investors Portfolio) is
registered under the Investment Company Act of 1940, as a diversified, open-
end, management investment company which was organized as a trust under the
laws of the State of New York in 1992. The Declaration of Trust permits the
Trustees to issue interests in the Portfolio. The following is a summary of
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. Listed or unlisted securities for which
closing sale prices are not available are valued at the mean between latest
bid and asked prices. Debt securities (other than mortgage-backed "pass
through" securities and short-term obligations maturing in sixty days or
less), including listed securities and securities for which price quotations
are available and forward contracts, will normally be valued on the basis of
market valuations furnished by pricing services. Mortgage-backed "pass
through" securities are valued using a matrix pricing system which takes into
account yield differentials, anticipated prepayments and interest rates.
Short-term obligations and money market securities maturing in 60 days or
less are valued at amortized cost which approximates value. Non-U.S. dollar
denominated short-term obligations are valued at amortized cost as calculated
in the base currency and translated to U.S. dollars at the current exchange
rate. 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 Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date for
dividends received in cash and/or securities. 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. Dividend income may
include dividends that represent returns of capital for federal income tax
purposes.
C Income Taxes -- The Portfolio has elected to be treated as a partnership
for United States Federal tax purposes. No provision is made by the Portfolio
for federal or state taxes on any taxable income of the Portfolio because
each investor in the Portfolio is ultimately responsible for the payment of
any taxes. 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.
D 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.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives
a fee reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations.
F Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on a straight-line basis
over five years.
G Other -- Investment transactions are accounted for on a trade date basis.
16
<PAGE>
Balanced Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
H Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of income and expense during the reporting period. Actual results
could differ from those estimates.
I Interim Financial Statements -- The interim financial statements relating
to June 30, 1998 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Investment Adviser Fee and Other Transactions with Affiliates
-----------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is computed at the monthly rate of 5/96 of 1% (0.625% annually) of
the Portfolio's average daily net assets up to $300 million and at reduced
rates as daily net assets exceed that level. For the six months ended
June 30, 1998 the fee was equivalent to 0.61% (annualized) of the Portfolio's
average net assets for such period and amounted to $1,070,461. Except as to
Trustees of the Portfolio who are not members of EVM's or BMR's organization,
officers and Trustees receive remuneration for their service to the Portfolio
out of such investment adviser fee. Certain of the officers and Trustees of
the Portfolio are officers and directors/trustees of the above organizations.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a portion of their annual fees in
accordance with the terms of the Trustees Deferred Compensation Plan. For the
six months ended June 30, 1998, no significant amounts have been deferred.
3 Investments Transaction
-----------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $55,963,740 and $59,807,945, respectively.
Purchases and sales of U.S. Government/agency securities aggregated
$30,685,430 and $26,012,777, respectively.
4 Federal Income Tax Basis of Investments
-----------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in the value of
investments owned at June 30, 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $268,522,969
-----------------------------------------------------------------------------
Gross unrealized appreciation $104,138,145
Gross unrealized depreciation (9,888,466)
-----------------------------------------------------------------------------
Net unrealized appreciation $ 94,249,679
-----------------------------------------------------------------------------
5 Line of Credit
-----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $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 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 period.
6 Risk 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
17
<PAGE>
Balanced Portfolio as of June 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
(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.
7 Name Change
-----------------------------------------------------------------------------
Effective May 1, 1998, the Investors Portfolio changed its name to the
Balanced Portfolio.
18
<PAGE>
Balanced Portfolio as of June 30, 1998
INVESTMENT MANAGEMENT
Balanced Portfolio
Officers
M. Dozier Gardner
President and Trustee
James B. Hawkes
Vice President and Trustee
Thomas E. Faust, Jr.
Vice President and
Portfolio Manager
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
19
