<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 60.9%
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Advertising and Marketing Services -- 1.6%
- -----------------------------------------------------------------------
Valassis Communications, Inc.(1) 120,000 $ 5,070,000
- -----------------------------------------------------------------------
$ 5,070,000
- -----------------------------------------------------------------------
Aerospace and Defense -- 3.0%
- -----------------------------------------------------------------------
General Motors Corp., Class H(1) 100,000 $ 9,600,000
- -----------------------------------------------------------------------
$ 9,600,000
- -----------------------------------------------------------------------
Auto and Parts -- 2.3%
- -----------------------------------------------------------------------
General Motors Corp. 60,000 $ 4,361,250
Magna International, Inc., Class A 75,000 3,178,125
- -----------------------------------------------------------------------
$ 7,539,375
- -----------------------------------------------------------------------
Banks - Regional -- 1.5%
- -----------------------------------------------------------------------
Wells Fargo & Co. 120,000 $ 4,852,500
- -----------------------------------------------------------------------
$ 4,852,500
- -----------------------------------------------------------------------
Banks and Money Services -- 0.5%
- -----------------------------------------------------------------------
Banco Latinoamericano de Exportaciones,
Class E(2) 75,000 $ 1,762,500
- -----------------------------------------------------------------------
$ 1,762,500
- -----------------------------------------------------------------------
Beverages -- 2.2%
- -----------------------------------------------------------------------
Anheuser-Busch Cos., Inc. 60,000 $ 4,252,500
PepsiCo, Inc. 80,000 2,820,000
- -----------------------------------------------------------------------
$ 7,072,500
- -----------------------------------------------------------------------
Broadcasting and Cable -- 1.1%
- -----------------------------------------------------------------------
Young Broadcasting, Inc., Class A(1) 70,000 $ 3,570,000
- -----------------------------------------------------------------------
$ 3,570,000
- -----------------------------------------------------------------------
Communications Services -- 4.8%
- -----------------------------------------------------------------------
Alltel Corp. 60,000 $ 4,961,250
GTE Corp. 75,000 5,292,187
SBC Communications, Inc. 106,459 5,189,876
- -----------------------------------------------------------------------
$ 15,443,313
- -----------------------------------------------------------------------
Drugs -- 7.8%
- -----------------------------------------------------------------------
American Home Products Corp. 100,000 $ 3,943,750
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Drugs (continued)
- -----------------------------------------------------------------------
Elan Corp., PLC ADR(1) 130,000 $ 3,835,000
Pfizer, Inc. 63,400 2,056,537
Sepracor, Inc.(1) 100,000 9,918,750
Warner-Lambert Co. 65,000 5,325,937
- -----------------------------------------------------------------------
$ 25,079,974
- -----------------------------------------------------------------------
Electric Utilities -- 1.0%
- -----------------------------------------------------------------------
The Southern Co. 140,000 $ 3,290,000
- -----------------------------------------------------------------------
$ 3,290,000
- -----------------------------------------------------------------------
Electronics - Semiconductors -- 1.5%
- -----------------------------------------------------------------------
Intel Corp. 60,000 $ 4,938,750
- -----------------------------------------------------------------------
$ 4,938,750
- -----------------------------------------------------------------------
Financial - Miscellaneous -- 3.9%
- -----------------------------------------------------------------------
Associates First Capital Corp. 170,000 $ 4,664,375
Fannie Mae 45,000 2,809,688
MBNA Corp. 80,000 2,180,000
MGIC Investment Corp. 50,000 3,009,375
- -----------------------------------------------------------------------
$ 12,663,438
- -----------------------------------------------------------------------
Foods -- 1.4%
- -----------------------------------------------------------------------
Unilever ADR 82,142 $ 4,471,605
- -----------------------------------------------------------------------
$ 4,471,605
- -----------------------------------------------------------------------
Health Services -- 1.0%
- -----------------------------------------------------------------------
Health Management Associates, Inc.,
Class A(1) 250,000 $ 3,343,750
- -----------------------------------------------------------------------
$ 3,343,750
- -----------------------------------------------------------------------
Information Services -- 1.6%
- -----------------------------------------------------------------------
Reynolds & Reynolds, Inc., Class A 225,000 $ 5,062,500
- -----------------------------------------------------------------------
$ 5,062,500
- -----------------------------------------------------------------------
Insurance -- 3.8%
- -----------------------------------------------------------------------
American International Group, Inc. 52,437 $ 5,669,751
Berkshire Hathaway, Inc., Class B(1) 2,100 3,843,000
Mutual Risk Management Ltd. 162,800 2,737,075
- -----------------------------------------------------------------------
$ 12,249,826
- -----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Medical Products -- 1.7%
- -----------------------------------------------------------------------
Medtronic, Inc. 149,634 $ 5,452,289
- -----------------------------------------------------------------------
$ 5,452,289
- -----------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.6%
- -----------------------------------------------------------------------
Precision Drilling Corp.(1) 200,000 $ 5,137,500
- -----------------------------------------------------------------------
$ 5,137,500
- -----------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 1.5%
- -----------------------------------------------------------------------
Anadarko Petroleum Corp. 140,000 $ 4,777,500
- -----------------------------------------------------------------------
$ 4,777,500
- -----------------------------------------------------------------------
Oil and Gas - Integrated -- 3.0%
- -----------------------------------------------------------------------
Exxon Mobil Corp. 120,086 $ 9,674,428
- -----------------------------------------------------------------------
$ 9,674,428
- -----------------------------------------------------------------------
Paper and Forest Products -- 1.9%
- -----------------------------------------------------------------------
Longview Fibre Co. 285,500 $ 4,068,375
Plum Creek Timber Co., Inc. 90,000 2,250,000
- -----------------------------------------------------------------------
$ 6,318,375
- -----------------------------------------------------------------------
Publishing -- 1.1%
- -----------------------------------------------------------------------
Central Newspapers, Inc., Class A 90,000 $ 3,543,750
- -----------------------------------------------------------------------
$ 3,543,750
- -----------------------------------------------------------------------
Real Estate -- 2.2%
- -----------------------------------------------------------------------
Equity Residential Properties Trust 101,400 $ 4,328,513
Prologis Trust 150,000 2,887,500
- -----------------------------------------------------------------------
$ 7,216,013
- -----------------------------------------------------------------------
Retail - Food and Drug -- 2.7%
- -----------------------------------------------------------------------
CVS Corp. 100,000 $ 3,993,750
Safeway, Inc.(1) 130,000 4,623,125
- -----------------------------------------------------------------------
$ 8,616,875
- -----------------------------------------------------------------------
Retail - Specialty and Apparel -- 3.3%
- -----------------------------------------------------------------------
Circuit City Stores-Circuit City Group 120,000 $ 5,407,500
Home Depot, Inc. (The) 75,000 5,142,188
- -----------------------------------------------------------------------
$ 10,549,688
- -----------------------------------------------------------------------
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Specialty Chemicals and Materials -- 2.9%
- -----------------------------------------------------------------------
Corning, Inc. 50,000 $ 6,446,875
Millipore Corp. 80,000 3,090,000
- -----------------------------------------------------------------------
$ 9,536,875
- -----------------------------------------------------------------------
Total Common Stocks
(identified cost $124,481,960) $196,833,324
- -----------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS -- 0.7%
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Metals - Gold -- 0.7%
- -----------------------------------------------------------------------
Freeport McMoRan Copper & Gold, 5%
Series CV 125,000 $ 2,382,812
- -----------------------------------------------------------------------
$ 2,382,812
- -----------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $2,872,500) $ 2,382,812
- -----------------------------------------------------------------------
CORPORATE BONDS -- 19.2%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Air Products and Chemicals, Inc.,
7.34%, 6/15/26 $ 720 $ 710,942
Associates Corp., N.A., 5.96%, 5/15/37 4,280 4,275,420
Bellsouth Telecommunications, Inc.,
5.85%, 11/15/45 1,510 1,501,318
Commercial Credit Corp., 6.625%, 6/1/15 1,000 991,160
Commercial Credit Corp., 7.875%, 2/1/25 2,000 2,090,080
Dayton Hudson Medium Term Notes,
5.865%, 8/15/27 2,490 2,476,903
Grand Metropolitan Investments Corp.,
7.45%, 4/15/35 3,090 3,158,258
Intermediate American Development Bank,
6.95%, 8/1/26 220 221,476
Intermediate American Development Bank,
8.40%, 9/1/09 3,690 4,008,041
J.C. Penney, Inc., 7.40%, 4/1/37 3,500 3,340,505
Johnson Controls, 7.70%, 3/1/15 3,000 3,059,550
Lowe's Cos., Inc., 7.11%, 5/15/37 5,000 4,916,600
Mead Corp. (The), 6.84%, 3/1/37 2,000 1,910,760
Motorola, Inc., 6.50%, 9/1/25 3,000 2,896,080
Procter and Gamble Co., 8.00%, 9/1/24 3,000 3,222,240
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Seagram (Joseph) & Sons, Inc.,
9.65%, 8/15/18 $ 1,030 $ 1,176,981
State Street Bank, 7.35%, 6/15/26 2,450 2,457,546
TCI Communications, Inc.,
6.69%, 3/31/06 2,000 1,998,820
Tennessee Valley Power Authority,
5.88%, 4/1/36 3,350 3,139,051
Tennessee Valley Power Authority,
6.235%, 7/15/45 700 695,905
Times Mirror Co., 6.61%, 9/15/27 3,250 3,150,128
Tribune Co., 6.25%, 11/10/26 1,000 982,900
TRW, Inc., Medium Term Notes,
9.35%, 6/4/20 1,395 1,531,054
Willamette Industries, 7.35%, 7/1/26 4,000 3,982,080
Xerox Corp., 5.875%, 6/15/37 1,000 996,020
Xerox Corp., 5.90%, 5/5/37 3,000 2,997,570
- -----------------------------------------------------------------------
Total Corporate Bonds
(identified cost, $64,586,234) $ 61,887,388
- -----------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 2.0%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
FHLMC, PAC, CMO, Series 1627-PZ,
5.60%, 8/15/17 $ 3,067 $ 3,045,933
FHLMC, PAC, CMO, Series 1630-PE,
5.50%, 5/15/18 645 640,411
FHLMC, PAC, CMO, Series 41-F,
10.00%, 5/15/20 830 877,720
FNMA, PAC, CMO, Series 1990 24-E,
9.00%, 3/25/20 420 426,364
FNMA, PAC, CMO, Series 1992 64-H,
7.50%, 9/25/06 1,593 1,597,136
- -----------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost, $6,549,579) $ 6,587,564
- -----------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 14.2%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
U.S. Treasury Bond, 7.25%, 8/15/22 $ 3,000 $ 3,163,110
U.S. Treasury Bond, 7.50%, 11/15/16 7,500 8,024,925
U.S. Treasury Note, 5.75%, 11/30/02 18,000 17,741,160
U.S. Treasury Note, 6.125%, 9/30/00 4,000 4,001,560
U.S. Treasury Note, 6.25%, 2/15/07 3,000 2,952,660
U.S. Treasury Note, 6.625%, 4/30/02 10,000 10,078,100
- -----------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost, $48,021,090) $ 45,961,515
- -----------------------------------------------------------------------
COMMERCIAL PAPER -- 2.4%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Panasonic Finance, 5.45%, 1/5/00 $ 5,000 $ 4,996,972
SBC Communications, Inc., 4.70%, 1/3/00 2,744 2,743,284
- -----------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $7,740,256) $ 7,740,256
- -----------------------------------------------------------------------
Total Investments -- 99.4%
(identified cost $254,251,619) $321,392,859
- -----------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.6% $ 1,958,348
- -----------------------------------------------------------------------
Net Assets -- 100.0% $323,351,207
- -----------------------------------------------------------------------
</TABLE>
ADR - American Depositary Receipt
PAC - Planned Authorization Class
CMO - Collateralized Mortgage Obligations
(1) Non-income producing security.
(2) Foreign security.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $254,251,619) $321,392,859
Interest and dividends receivable 1,990,602
Tax reclaim receivable 5,289
- ------------------------------------------------------
TOTAL ASSETS $323,388,750
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable to affiliate for Trustees' fees $ 6,518
Due to bank 1,807
Accrued expenses 29,218
- ------------------------------------------------------
TOTAL LIABILITIES $ 37,543
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $323,351,207
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $256,209,967
Net unrealized appreciation (computed on
the basis of identified cost) 67,141,240
- ------------------------------------------------------
TOTAL $323,351,207
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
<S> <C>
Investment Income
- -----------------------------------------------------
Interest $ 8,154,087
Dividends (net of foreign taxes,
$123,380) 3,523,513
- -----------------------------------------------------
TOTAL INVESTMENT INCOME $11,677,600
- -----------------------------------------------------
Expenses
- -----------------------------------------------------
Investment adviser fee $ 2,085,975
Trustees fees and expenses 27,423
Custodian fee 158,339
Legal and accounting services 43,941
Miscellaneous 5,117
- -----------------------------------------------------
TOTAL EXPENSES $ 2,320,795
- -----------------------------------------------------
NET INVESTMENT INCOME $ 9,356,805
- -----------------------------------------------------
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 2,306,741
- -----------------------------------------------------
NET REALIZED GAIN $ 2,306,741
- -----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(5,818,018)
- -----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(5,818,018)
- -----------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(3,511,277)
- -----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 5,845,528
- -----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
From operations --
Net investment income $ 9,356,805 $ 9,645,705
Net realized gain 2,306,741 56,088,137
Net change in unrealized
appreciation (depreciation) (5,818,018) (20,974,301)
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 5,845,528 $ 44,759,541
- ------------------------------------------------------------------------------
Capital transactions --
Contributions $ 31,424,526 $ 38,451,067
Withdrawals (69,271,905) (57,564,792)
- ------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ (37,847,379) $ (19,113,725)
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (32,001,851) $ 25,645,816
- ------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------
At beginning of year $ 355,353,058 $ 329,707,242
- ------------------------------------------------------------------------------
AT END OF YEAR $ 323,351,207 $ 355,353,058
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, YEAR ENDED JANUARY 31,
------------------------------------------------------------- ----------------------
1999 1998 1997 1996 1995(1) 1995
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- -------------------------------------------------------------------------------------------------------------------------
Expenses 0.68% 0.67% 0.69% 0.70% 0.71%(2) 0.70%
Net investment income 2.73% 2.75% 2.62% 3.23% 3.83%(2) 4.25%
Portfolio Turnover 33% 49% 37% 64% 47% 28%
- -------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S OMITTED) $323,351 $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
20
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Balanced Portfolio (the 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. 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 one of the Portfolio's investors is a regulated investment
company that invests all or substantially all of its 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 changes in foreign currency exchange
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 results from fluctuations in foreign currency exchange rates
is not separately disclosed.
E 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.
F Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Portfolio. Pursuant to the respective custodian agreements, 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. For the year ended
December 31, 1999, $1,440 credit balances were used to reduce the Portfolio's
custodian fee.
G Other -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed based on the specific identification
of the security sold.
21
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
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 1/24 of 1%
(0.50% annually) of average daily net assets of $300 million and more. For
the year ended December 31, 1999 the fee was equivalent to 0.61% of the
Portfolio's average net assets for such period and amounted to $2,085,975.
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 officers and
Trustees of the Portfolio are officers 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, 1999, no significant amounts have been deferred.
3 Investment Transactions
- -------------------------------------------
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $67,861,196 and $109,103,915,
respectively. Purchases and sales of U.S. Government/agency securities
aggregated $44,154,537 and $30,836,386, respectively.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1999 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $253,677,933
------------------------------------------------------
Gross unrealized appreciation $ 82,523,753
Gross unrealized depreciation (14,808,827)
------------------------------------------------------
NET UNREALIZED APPRECIATION $ 67,714,926
------------------------------------------------------
</TABLE>
5 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 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 year ended December 31, 1999
6 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.
22
<PAGE>
BALANCED PORTFOLIO AS OF DECEMBER 31, 1999
INDEPENDENT ACCOUNTANTS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF BALANCED PORTFOLIO:
- ---------------------------------------------
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and supplementary data present fairly, in all material
respects, the financial position of Balanced Portfolio (the "Portfolio") at
December 31, 1999, and the results of its operations, the changes in its net
assets and the supplementary data for the periods indicated, in conformity with
accounting principles generally accepted in the United States. These financial
statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States which require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included confirmation
of securities at December 31, 1999 by correspondence with the custodian, provide
a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000
23
<PAGE>
EATON VANCE BALANCED FUND AS OF DECEMBER 31, 1999
INVESTMENT MANAGEMENT
BALANCED PORTFOLIO
Officers
James B. Hawkes
President and Trustee
Arieh Coll
Vice President and Portfolio Manager
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University 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
Jack L. Treynor
Investment Adviser and Consultant
24
