<PAGE>
Balanced Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Common Stocks 62.5%
Security Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Aerospace and Defense -- 1.5%
- --------------------------------------------------------------------------------
General Motors Corp., Class H(1) 130,000 $ 5,159,375
- --------------------------------------------------------------------------------
$ 5,159,375
- --------------------------------------------------------------------------------
Auto and Parts -- 2.5%
- --------------------------------------------------------------------------------
General Motors Corp. 60,000 $ 4,293,750
Magna International, Inc., Class A 75,000 4,650,000
- --------------------------------------------------------------------------------
$ 8,943,750
- --------------------------------------------------------------------------------
Banks - Regional -- 2.3%
- --------------------------------------------------------------------------------
BankBoston Corp. 90,000 $ 3,504,375
Wells Fargo & Co. 120,000 4,792,500
- --------------------------------------------------------------------------------
$ 8,296,875
- --------------------------------------------------------------------------------
Banks and Money Services -- 0.3%
- --------------------------------------------------------------------------------
Banco Latinoamericano de
Exportaciones(2) 75,000 $ 1,246,875
- --------------------------------------------------------------------------------
$ 1,246,875
- --------------------------------------------------------------------------------
Beverages -- 0.9%
- --------------------------------------------------------------------------------
PepsiCo, Inc. 80,000 $ 3,275,000
- --------------------------------------------------------------------------------
$ 3,275,000
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 1.2%
- --------------------------------------------------------------------------------
MediaOne Group, Inc.(1) 90,000 $ 4,230,000
- --------------------------------------------------------------------------------
$ 4,230,000
- --------------------------------------------------------------------------------
Chemicals -- 0.8%
- --------------------------------------------------------------------------------
Praxair, Inc. 80,000 $ 2,820,000
- --------------------------------------------------------------------------------
$ 2,820,000
- --------------------------------------------------------------------------------
Distribution Services -- 1.2%
- --------------------------------------------------------------------------------
Bergen Brunswig Corp., Class A 120,000 $ 4,185,000
- --------------------------------------------------------------------------------
$ 4,185,000
- --------------------------------------------------------------------------------
Drugs -- 6.8%
- --------------------------------------------------------------------------------
Elan Corp., PLC ADR(1)(2) 65,000 $ 4,521,563
Pfizer, Inc. 37,800 4,741,538
Sepracor, Inc.(1) 100,000 8,812,499
Warner-Lambert Co. 80,000 6,015,000
- --------------------------------------------------------------------------------
$ 24,090,600
- --------------------------------------------------------------------------------
Electric Utilities -- 1.1%
- --------------------------------------------------------------------------------
The Southern Co. 140,000 $ 4,068,750
- --------------------------------------------------------------------------------
$ 4,068,750
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 1.0%
- --------------------------------------------------------------------------------
Intel Corp. 30,000 $ 3,556,875
- --------------------------------------------------------------------------------
$ 3,556,875
- --------------------------------------------------------------------------------
Environmental Services -- 1.6%
- --------------------------------------------------------------------------------
Waste Management, Inc. 120,000 $ 5,595,000
- --------------------------------------------------------------------------------
$ 5,595,000
- --------------------------------------------------------------------------------
Financial - Miscellaneous -- 2.9%
- --------------------------------------------------------------------------------
Fannie Mae 45,000 $ 3,330,000
MBNA Corp. 180,000 4,488,750
MGIC Investment Corp. 65,000 2,587,813
- --------------------------------------------------------------------------------
$ 10,406,563
- --------------------------------------------------------------------------------
Foods -- 3.7%
- --------------------------------------------------------------------------------
Tyson Foods, Inc. 264,700 $ 5,624,875
Unilever ADR(2) 92,000 7,630,250
- --------------------------------------------------------------------------------
$ 13,255,125
- --------------------------------------------------------------------------------
Health Services -- 0.7%
- --------------------------------------------------------------------------------
HCR Manor Care, Inc.(1) 90,000 $ 2,643,750
- --------------------------------------------------------------------------------
$ 2,643,750
- --------------------------------------------------------------------------------
Information Services -- 1.5%
- --------------------------------------------------------------------------------
Reynolds & Reynolds, Inc., Class A 225,000 $ 5,160,938
- --------------------------------------------------------------------------------
$ 5,160,938
- --------------------------------------------------------------------------------
Insurance -- 7.6%
- --------------------------------------------------------------------------------
Allstate Corp. (The) 80,000 $ 3,090,000
Berkshire Hathaway, Inc., Class B(1) 2,100 4,935,000
</TABLE>
See notes to financial statements
13
<PAGE>
Balanced Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Insurance (continued)
- --------------------------------------------------------------------------------
Mercury General Corp. 100,000 $ 4,381,250
Mutual Risk Management Ltd. 186,600 7,300,725
SunAmerica, Inc. 90,000 7,301,250
- --------------------------------------------------------------------------------
$ 27,008,225
- --------------------------------------------------------------------------------
Medical Products -- 4.2%
- --------------------------------------------------------------------------------
Baxter International, Inc. 55,000 $ 3,537,188
Boston Scientific Corp.(1) 150,000 4,021,875
Sofamor Danek Group, Inc.(1) 60,300 7,341,525
- --------------------------------------------------------------------------------
$ 14,900,588
- --------------------------------------------------------------------------------
Metals and Minerals -- 1.5%
- --------------------------------------------------------------------------------
Potash Corp. of Saskatchewan(2) 55,000 $ 3,513,125
Steel Dynamics Corp.(1) 150,000 1,762,500
- --------------------------------------------------------------------------------
$ 5,275,625
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.4%
- --------------------------------------------------------------------------------
Rowan Companies, Inc.(1) 140,000 $ 1,400,000
- --------------------------------------------------------------------------------
$ 1,400,000
- --------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.0%
- --------------------------------------------------------------------------------
Anadarko Petroleum Corp. 70,000 $ 2,161,250
Triton Energy, Ltd.(1)(2) 190,000 1,508,125
- --------------------------------------------------------------------------------
$ 3,669,375
- --------------------------------------------------------------------------------
Oil and Gas - Integrated -- 2.4%
- --------------------------------------------------------------------------------
Exxon Corp. 67,280 $ 4,919,850
Mobil Corp. 40,000 3,485,000
- --------------------------------------------------------------------------------
$ 8,404,850
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.7%
- --------------------------------------------------------------------------------
Plum Creek Timber Co., L.P. 90,000 $ 2,345,625
- --------------------------------------------------------------------------------
$ 2,345,625
- --------------------------------------------------------------------------------
Publishing -- 1.4%
- --------------------------------------------------------------------------------
Central Newspapers, Inc., Class A 70,000 $ 5,000,625
- --------------------------------------------------------------------------------
$ 5,000,625
- --------------------------------------------------------------------------------
REITS -- 2.8%
- --------------------------------------------------------------------------------
Equity Office Properties Trust 110,000 $ 2,640,000
Equity Residential Properties Trust 101,400 4,100,363
Prologis Trust 150,000 3,112,500
- --------------------------------------------------------------------------------
$ 9,852,863
- --------------------------------------------------------------------------------
Retail - Food and Drug -- 4.0%
- --------------------------------------------------------------------------------
Albertson's, Inc. 80,000 $ 5,095,000
CVS Corp. 100,000 5,500,000
Safeway, Inc.(1) 60,000 3,656,250
- --------------------------------------------------------------------------------
$ 14,251,250
- --------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 2.0%
- --------------------------------------------------------------------------------
Home Depot, Inc. (The) 50,000 $ 3,059,375
Republic Industries, Inc.(1) 270,000 3,982,500
- --------------------------------------------------------------------------------
$ 7,041,875
- --------------------------------------------------------------------------------
Specialty Chemicals and Materials -- 1.7%
- --------------------------------------------------------------------------------
Corning, Inc. 80,000 $ 3,600,000
Millipore Corp. 80,000 2,275,000
- --------------------------------------------------------------------------------
$ 5,875,000
- --------------------------------------------------------------------------------
Telecommunications Services -- 2.8%
- --------------------------------------------------------------------------------
Ameritech Corp. 80,896 $ 5,126,784
GTE Corp. 75,000 4,875,000
- --------------------------------------------------------------------------------
$ 10,001,784
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $152,703,403) $221,962,161
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
Balanced Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Convertible Preferred Stock -- 0.5%
Security Shares Value
- --------------------------------------------------------------------------------
Metals - Gold -- 0.5%
- --------------------------------------------------------------------------------
Freeport McMoRan Copper & Gold,
5% Series CV 125,000 $ 1,859,375
- --------------------------------------------------------------------------------
$ 1,859,375
- --------------------------------------------------------------------------------
Total Convertible Preferred Stock
(identified cost $2,872,498) $ 1,859,375
- --------------------------------------------------------------------------------
Rights -- 0.0%
Security Shares Value
- --------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 0.0%
- --------------------------------------------------------------------------------
Triton Energy, Ltd.(1)(2) 13,680 $ 0
- --------------------------------------------------------------------------------
Total Rights
(identified cost $0) $ 0
- --------------------------------------------------------------------------------
Corporate Bonds -- 22.4%
Principal
Amount
(000's
Security Omitted) Value
- --------------------------------------------------------------------------------
Air Products and Chemicals, Inc., 7.34%,
6/15/26 $ 720 $ 808,078
Associates Corp., N.A., 5.96%,
5/15/37 4,280 4,277,988
Bell Telephone Co., 8.35%, 12/15/30 3,000 3,905,550
Chesapeake Potomac Telephone Co.,
8.375%, 10/1/29 2,850 3,700,098
Commercial Credit Corp., 7.875%,
2/1/25 2,000 2,359,540
Commercial Credit Corp., 6.625%,
6/1/15 1,350 1,431,081
Connecticut Light and Power Co., 7.875%,
10/1/24 3,775 4,565,447
Dayton Hudson, MTN, 5.865%, 8/15/27 2,490 2,579,018
General Motors Corp., 9.45%, 11/1/11 3,000 3,932,250
Grand Metropolitan Investments
Corp.,
7.45%, 4/15/35 3,090 3,574,728
Intermediate American Development
Bank, 8.40%, 9/1/09 3,690 4,543,755
Intermediate American Development
Bank, 6.95%, 8/1/26 220 246,640
International Finance Corp., MTN,
5.067%, 4/20/03 5,000 4,944,450
J.C. Penney, Inc., 7.40%, 4/1/37 3,500 3,805,060
Johnson Controls, Inc., 7.70%,
3/1/15 1,360 1,508,226
Lowe's Cos., Inc., 7.11%, 5/15/37 5,000 5,472,350
Mead Corp. (The), 6.84%, 3/1/37 2,000 2,083,040
Proctor and Gamble Co., 8.00%,
9/1/24 3,000 3,770,580
Seagram (Joseph) & Sons, Inc., 9.65%,
8/15/18 1,030 1,238,287
State Street Bank, 7.35%, 6/15/26 2,450 2,734,543
Tennessee Valley Power Authority,
6.235%, 7/15/45 700 733,439
Tennessee Valley Power Authority, 5.88%,
4/1/36 3,350 3,554,819
Times Mirror Co., 6.61%, 9/15/27 3,250 3,244,703
Tribune Co., 6.25%, 11/10/26 1,000 994,960
TRW, Inc., MTN, 9.35%, 6/4/20 995 1,307,370
Willamette Industries, 7.35%, 7/1/26 4,000 4,250,560
Xerox Corp., 5.90%, 5/5/37 3,000 3,077,610
Xerox Corp., 5.875%, 6/15/37 1,000 1,024,620
- --------------------------------------------------------------------------------
Total Corporate Bonds
(identified cost $75,378,545) $ 79,668,790
- --------------------------------------------------------------------------------
Mortgage Pass-Throughs -- 1.1%
Principal
Amount
(000's
Security Omitted) Value
- --------------------------------------------------------------------------------
FHLMC, PAC, CMO, Series 1630-PE,
5.50%, 5/15/18 $ 1,407 $ 1,404,417
FHLMC, PAC, CMO, Series 34-C, 9.00%,
11/15/19 125 126,008
FHLMC, PAC, CMO, Series 41-F, 10.00%,
5/15/20 1,279 1,388,475
FNMA, PAC, CMO, Series 1990 24-E,
9.00%, 3/25/20 941 973,538
- --------------------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost $3,710,787) $ 3,892,438
- --------------------------------------------------------------------------------
U.S. Treasury Obligations -- 11.7%
Principal
Amount
(000's
Security Omitted) Value
- --------------------------------------------------------------------------------
U.S. Treasury Note, 5.75%, 11/30/02 $18,000 $ 18,660,959
U.S. Treasury Note, 7.125%, 9/30/99 3,000 3,053,430
U.S. Treasury Note, 6.125%, 9/30/00 4,000 4,098,120
U.S. Treasury Note, 8.50%, 2/15/00 15,000 15,616,349
- --------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost $41,187,131) $ 41,428,858
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Balanced Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Commercial Paper -- 1.1%
Principal
Amount
(000's
Security Omitted) Value
- --------------------------------------------------------------------------------
General Electric Capital Corp.,
5.50%, 1/4/99 $ 3,891 $ 3,889,217
- --------------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $3,889,217) $ 3,889,217
- --------------------------------------------------------------------------------
Total Investments -- 99.3%
(identified cost $279,741,581) $352,700,839
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.7% $ 2,652,219
- --------------------------------------------------------------------------------
Net Assets -- 100% $355,353,058
- --------------------------------------------------------------------------------
ADR - American Depositary Receipt
PAC - Planned Authorization Class
CMO - Collateralized Mortgage Obligations
REIT - Real Estate Investment Trust
(1) Non-income producing security.
(2) Foreign security.
See notes to financial statements
16
<PAGE>
Balanced Portfolio as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost, $279,741,581) $352,700,839
Cash 392,256
Interest and dividends receivable 2,282,453
Tax reclaim receivable 4,163
- --------------------------------------------------------------------------------
Total assets $355,379,711
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable to affiliate for Trustees' fees $ 4,881
Other accrued expenses 21,772
- --------------------------------------------------------------------------------
Total liabilities $ 26,653
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $355,353,058
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $282,393,800
Net unrealized appreciation (computed on the basis
of identified cost) 72,959,258
- --------------------------------------------------------------------------------
Total $355,353,058
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $48,178) $ 4,082,039
Interest 7,922,884
- --------------------------------------------------------------------------------
Total investment income $ 12,004,923
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 2,132,133
Trustees fees and expenses 19,251
Custodian fee 171,124
Legal and accounting services 30,398
Amortization of organization expenses 2,113
Miscellaneous 4,199
- --------------------------------------------------------------------------------
Total expenses $ 2,359,218
- --------------------------------------------------------------------------------
Net investment income $ 9,645,705
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 56,088,137
- --------------------------------------------------------------------------------
Net realized gain $ 56,088,137
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(20,974,301)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(20,974,301)
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 35,113,836
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 44,759,541
- --------------------------------------------------------------------------------
See notes to financial statements
17
<PAGE>
Balanced Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 9,645,705 $ 8,365,076
Net realized gain 56,088,137 24,802,364
Net change in unrealized
appreciation (20,974,301) 29,330,948
(depreciation)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 44,759,541 $ 62,498,388
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 38,451,067 $ 27,019,040
Withdrawals (57,564,792) (61,370,968)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $(19,113,725) $(34,351,928)
- --------------------------------------------------------------------------------
Net increase in net assets $ 25,645,816 $ 28,146,460
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $329,707,242 $301,560,782
- --------------------------------------------------------------------------------
At end of year $355,353,058 $329,707,242
- --------------------------------------------------------------------------------
See notes to financial statements
18
<PAGE>
Balanced Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended
Year Ended December 31, January 31,
----------------------------------------------------------------- ----------------
1998 1997 1996 1995(1) 1995
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses 0.67% 0.69% 0.70% 0.71%(2) 0.70%
Net investment income 2.75% 2.62% 3.23% 3.83%(2) 4.25%
Portfolio Turnover 49% 37% 64% 47% 28%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $355,353 $329,707 $301,561 $276,375 $ 217,157
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the eleven-month period ended December 31, 1995.
(2) Annualized.
See notes to financial statements
19
<PAGE>
Balanced Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS
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 an independent matrix pricing system
applied by the adviser which takes into account closing bond valuations,
yield differentials, anticipated prepayments and interest rates provided by
dealers. 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 Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on a straight-line
basis over five years.
F Other -- Investment transactions are accounted for on a trade date basis.
G 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.
20
<PAGE>
Balanced Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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 year ended
December 31, 1998 the fee was equivalent to 0.61% of the Portfolio's average
net assets for such period and amounted to $2,132,133. 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 year ended December 31, 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 $108,317,908 and $119,710,077,
respectively. Purchases and sales of U.S. Government/agency securities
aggregated $56,534,907 and $57,471,292, respectively.
4 Federal Income Tax Basis of Investments
- --------------------------------------------------------------------------------
The cost and unrealized appreciation (depreciation) in the value of
investments owned at December, 31 1998, as computed on a federal income tax
basis, are as follows:
Aggregate cost $279,741,581
----------------------------------------------------------------------------
Gross unrealized appreciation
$91,503,496
Gross unrealized depreciation (18,544,238)
----------------------------------------------------------------------------
Net unrealized appreciation $72,959,258
----------------------------------------------------------------------------
5 Line of Credit
- --------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $130 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
(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.
21
<PAGE>
Balanced Portfolio as of December 31, 1998
INVESTMENT MANAGEMENT
Balanced Portfolio
Officers Independent Trustees
James B. Hawkes Jessica M. Bibliowicz
President and Trustee President and Chief Operating Officer,
John A. Levin & Co.
Thomas E. Faust, Jr. Director, Baker, Fentress & Company
Vice President and
Portfolio Manager Donald R. Dwight
President, Dwight Partners, Inc.
James L. O'Connor
Treasurer Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Alan R. Dynner Banking, Emeritus, Harvard University
Secretary Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law, Georgetown
University Law Center
John L. Thorndike
Formerly Director, Fiduciary Company
Incorporated
Jack L. Treynor
Investment Adviser and Consultant
23
