<PAGE>
Special Investment Portfolio as of June 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited)
Common Stocks -- 91.8%
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Advertising -- 1.5%
- --------------------------------------------------------------------------------
Catalina Marketing Corp. 14,000 $ 673,750
Specialized market research.
Outdoor Systems, Inc. 14,940 571,455
Dominant operator of outdoor advertising.
- --------------------------------------------------------------------------------
$ 1,245,205
- --------------------------------------------------------------------------------
Banks - Regional -- 0.6%
- --------------------------------------------------------------------------------
Colonial Bancgroup, Inc. 21,000 $ 509,250
Emerging banking company in the
Southeastern U.S.
- --------------------------------------------------------------------------------
$ 509,250
- --------------------------------------------------------------------------------
Banks and Money Services -- 1.6%
- --------------------------------------------------------------------------------
Bank United, Corp., Class A 12,000 $ 456,000
Operates 70 branch bank system in Texas.
First USA Paymentech, Inc./*/ 28,000 810,250
Payment processor of merchant credit
card transactions.
- --------------------------------------------------------------------------------
$ 1,266,250
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 2.7%
- --------------------------------------------------------------------------------
Emmis Broadcasting Corp., Class A/*/ 15,000 $ 654,375
Diversified media company.
Jacor Communications, Inc./*/ 16,500 631,125
Rapidly growing operator of radio
stations and syndicated programming.
Lin Television Corp./*/ 20,000 882,500
Commercial television broadcast company.
- --------------------------------------------------------------------------------
$ 2,168,000
- --------------------------------------------------------------------------------
Building Materials -- 0.9%
- --------------------------------------------------------------------------------
Texas Industries, Inc. 28,000 $ 743,750
Regional producer of building products in
the Southwest.
- --------------------------------------------------------------------------------
$ 743,750
- --------------------------------------------------------------------------------
Business Products and Services -- 5.4%
- --------------------------------------------------------------------------------
CN Maximus, Inc./*/ 950 $ 16,981
Management consulting group.
Ecolab, Inc. 9,000 $ 429,750
Producer of industrial cleaning products.
G and K Services, Inc. 23,000 856,750
Rents and launders uniforms and other textile
products.
Gartner Group, Inc. Class A/*/ 8,500 305,469
Leading consultant on high tech
equipment purchases.
Personnel Group of America, Inc./*/ 15,000 432,188
Temporary employment company.
Precision Response Corp./*/ 28,000 462,000
Inbound calling marketing company.
Teletech Holdings, Inc./*/ 26,000 682,500
Inbound calling marketing company.
Vanstar Corp./*/ 85,000 1,200,624
Value added reseller providing corporations
with computing solutions.
- --------------------------------------------------------------------------------
$ 4,386,262
- --------------------------------------------------------------------------------
Communication Services -- 2.0%
- --------------------------------------------------------------------------------
Sterling Commerce, Inc./*/ 25,000 $ 821,875
Provides electronic data interchange services.
Transition Systems, Inc./*/ 45,000 818,438
Healthcare information systems.
- --------------------------------------------------------------------------------
$ 1,640,313
- --------------------------------------------------------------------------------
Communications Equipment -- 4.2%
- --------------------------------------------------------------------------------
Ascend Communications, Inc./*/ 15,000 $ 590,625
Manufacturer of high speed telecommunications
products.
Brooktrout Technology, Inc./*/ 33,000 391,875
Provides telecom equipment specialty products.
Comverse Technology, Inc./*/ 8,000 416,000
Specialized communications products.
Davox Corp. 7,500 268,125
Designs and manufactures specialized
telecom products.
ECI Telecommunications 20,000 595,000
A company that produces advanced
telecommunications equipment.
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE>
Special Investment Portfolio as of June 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Communications Equipment -- (continued)
- --------------------------------------------------------------------------------
Glenayre Technologies, Inc. 27,010 $ 442,289
Leading supplier of wireless
communications equipment.
Mosaix, Inc.* 30,000 408,750
Manufacturer of specialized
telecommunications products.
Natural Microsystems Corp. 8,000 288,000
Manufacturer of specialized
telecommunications products.
- --------------------------------------------------------------------------------
$ 3,400,664
- --------------------------------------------------------------------------------
Consumer Services -- 1.3%
- --------------------------------------------------------------------------------
Strayer Education, Inc. 27,910 $ 1,060,580
Specialized supplemental education services.
- --------------------------------------------------------------------------------
$ 1,060,580
- --------------------------------------------------------------------------------
Drugs -- 5.2%
- --------------------------------------------------------------------------------
Curative Health Services, Inc.* 25,000 $ 718,750
Operator of specialty burn unit clinics.
Elan Corp., PLC ADR* 17,000 769,250
Specialty pharmaceutical.
Genzyme Corp.* 40,000 405,000
Leading researcher in gene therapy.
Genzyme Corp. Class A 43,000 1,193,249
Diversified biotechnology
pharmaceuticals.
Parexel International Corp. 23,000 730,250
Contract research services for large
drug companies.
Roberts Pharmaceutical Corp.* 40,000 447,500
Diversified health care products.
- --------------------------------------------------------------------------------
$ 4,263,999
- --------------------------------------------------------------------------------
Electrical Equipment -- 1.5%
- --------------------------------------------------------------------------------
Chicago Minature Lamp, Inc. 7,000 $ 174,125
Niche marketer of lighting products.
Level One Communications, Inc.* 8,000 307,500
Designs and sells integrated circuits.
Linear Technology Corp. 14,000 724,500
Manufacturer of high performance linear
integrated circuits.
- --------------------------------------------------------------------------------
$ 1,206,125
- --------------------------------------------------------------------------------
Electronics - Semiconductors -- 0.8%
- --------------------------------------------------------------------------------
Cypress Semiconductor Corp.* 45,000 $ 652,500
Innovative semiconductor manufacturer.
- --------------------------------------------------------------------------------
$ 652,500
- --------------------------------------------------------------------------------
Entertainment -- 3.4%
- --------------------------------------------------------------------------------
MGM Grand, Inc.* 31,000 $ 1,146,999
Operator of MGM Grand Hotel in Las Vegas.
Mirage Resorts, Inc. 32,000 808,000
Nevada based gaming resort operator.
Regal Cinemas 17,000 561,000
Rapidly growing theater chain.
Speedway Motorsports* 13,500 293,625
Large operator of NASCAR tracks.
- --------------------------------------------------------------------------------
$ 2,809,624
- --------------------------------------------------------------------------------
Financial - Miscellaneous -- 0.6%
- --------------------------------------------------------------------------------
Capital One Financial Corp. 12,000 $ 453,000
Leading credit card services specialists.
- --------------------------------------------------------------------------------
$ 453,000
- --------------------------------------------------------------------------------
Health Services -- 8.2%
- --------------------------------------------------------------------------------
American Retirement Corp.* 40,000 $ 710,000
Assisted living services.
Express Scripts, Inc., Class A* 15,000 626,250
Rapidly growing pharmacy
specialist.
Genesis Health Ventures, Inc.* 30,000 1,012,500
Nursing home chain.
Health Management Associates, Inc. Class A* 31,000 883,500
Hospital chain.
MiniMed, Inc.* 29,000 772,125
Developer and manufacturer of
medical devices focusing on
diabetics.
National Surgery Centers, Inc.* 12,000 424,500
Operator of independent surgery units.
Omnicare, Inc. 27,000 847,125
Provides pharmacy services to
retirement centers.
Pediatrix Medical Group, Inc.* 22,000 1,007,875
Operates pediatric care units.
PhyCor, Inc.* 13,000 447,688
Physicians practice management.
- --------------------------------------------------------------------------------
$ 6,731,563
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
9
<PAGE>
Special Investment Portfolio as of June 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Household Products -- 0.7%
- --------------------------------------------------------------------------------
Sola International* 17,000 $ 569,500
Specialty eye care products.
- --------------------------------------------------------------------------------
$ 569,500
- --------------------------------------------------------------------------------
Information Services -- 19.3%
- --------------------------------------------------------------------------------
Acxiom Corp. 23,000 $ 471,500
Database information services.
Affiliated Computer Services, Inc. 30,000 840,000
Class A
Nationwide provider of information
processing services.
Aspect Development, Inc.* 5,988 156,062
Information processing services
specialist.
Aspen Technologies, Inc. 27,000 1,015,875
Specialty software for upgrading
manufacturing plants.
BISYS Group, Inc.* 28,000 1,168,999
Services financial institutions
with computer, administrative and
marketing support data processing
services.
Cambridge Technology Partners,
Inc.* 31,000 992,000
Software consulting company.
CCC Information Services Group* 37,000 721,500
Automotive repair information
specialist.
Claremont Technology Group, Inc.* 17,000 403,750
Management consulting services.
Cognos, Inc.* 30,000 933,750
Computer tool developer and supporter.
FIserv, Inc.* 22,300 995,138
Provider of data processing services
to banks and savings institutions,
benefiting from outsourcing trend.
Harbinger, Corp. 27,000 756,000
Electronic Data Interchange products
and services.
IDX Systems Corp.* 21,000 724,500
Healthcare information systems.
Medic Computer Systems, Inc. 24,000 534,000
Physicians information company.
National Data Corp. 10,000 433,125
Information technology services
provider.
Nova Corp. Georgia* 36,000 933,750
Nation's largest bankcard processor
Paychex, Inc. 27,000 1,026,000
Payroll and corporate information
services.
Pegasystems, Inc.* 26,000 815,750
Marketing information specialist.
PRI Automation, Inc. 14,000 $ 531,125
Material handling equipment for high
cost semiconductor wafers.
Scopus Technology, Inc. 35,018 783,528
A leading provider of software.
SunGard Data Systems, Inc.* 20,000 930,000
Data storage and emergency back up
products.
Veritas Software Co. 12,000 603,000
Provides communications companies
with software measuring systems.
- --------------------------------------------------------------------------------
$15,769,352
- --------------------------------------------------------------------------------
Insurance -- 3.3%
- --------------------------------------------------------------------------------
CRA Managed Care, Inc.* 15,000 $ 782,813
Workers compensation company.
HCC Insurance Holdings, Inc. 30,000 800,625
Emerging specialty insurance
provider.
Mutual Risk Management Ltd. 24,003 1,101,151
Specialty insurer focusing on
workmen's compensation.
- --------------------------------------------------------------------------------
$ 2,684,589
- --------------------------------------------------------------------------------
Investment Services -- 3.7%
- --------------------------------------------------------------------------------
Centura Banks, Inc. 17,500 $ 802,813
Growing Southeastern bankers.
PMI Group, Inc. 15,000 935,625
Specialty financial products.
Sovereign Bancorp, Inc. 50,000 762,500
A thrift holding company.
The Money Store, Inc. 18,000 516,375
Diversified finance specialist.
- --------------------------------------------------------------------------------
$ 3,017,313
- --------------------------------------------------------------------------------
Leisure Equipment -- 0.4%
- --------------------------------------------------------------------------------
Cannondale Corp.* 17,000 $ 301,750
Designer and manufacturer of
high end bikes.
- --------------------------------------------------------------------------------
$ 301,750
- --------------------------------------------------------------------------------
Lodging and Gaming -- 1.6%
- --------------------------------------------------------------------------------
Promus Hotel Corp.* 23,000 $ 891,250
Owner and operator of Embassy Suite
and Hampton Inn hotels.
</TABLE>
See notes to financial statements
10
<PAGE>
Special Investment Portfolio as of June 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Lodging and Gaming (continued)
- --------------------------------------------------------------------------------
Station Casinos, Inc.* 50,000 $ 418,750
Operates casinos in Nevada and Kansas City.
- --------------------------------------------------------------------------------
$ 1,310,000
- --------------------------------------------------------------------------------
Machinery -- 0.9%
- --------------------------------------------------------------------------------
Camco International, Inc. 14,000 $ 766,500
Oilfield services.
- --------------------------------------------------------------------------------
$ 766,500
- --------------------------------------------------------------------------------
Medical Products -- 4.4%
- --------------------------------------------------------------------------------
Acuson Corp.* 25,000 $ 575,000
Medical testing equipment.
Arterial Vascular Engineering, Inc.* 25,000 804,688
Growing provider of stents in Europe.
Heartstream, Inc.* 39,000 341,250
Portable defibrillator products.
Invacare Corp. 19,000 444,125
Provider of diverse medical products.
Physio-Control International Corp.* 22,000 330,000
Portable defibrillator products.
Sofamor Danek Group, Inc.* 24,000 1,098,000
Leading developer/manufacturer of
spinal implant devices. Company
markets products internationally.
- --------------------------------------------------------------------------------
$ 3,593,063
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.6%
- --------------------------------------------------------------------------------
Ensco International, Inc.* 10,000 $ 527,500
Largest operator of premium jackup oil rigs.
- --------------------------------------------------------------------------------
$ 527,500
- --------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 7.3%
- --------------------------------------------------------------------------------
Abacan Resources Corp. 50,000 $ 159,375
International oil exploration.
American Exploration Co. 37,000 541,125
Merging with Louis Dreyfus Natural Gas.
Anadarko Petroleum Corp. 11,000 660,000
A leading independent company in
oil and gas exploration,
development and production.
Cairn Energy USA, Inc. 43,000 564,375
Energy company that is exploring sale
of company.
Louisiana Land & Exploration Corp. 14,000 799,750
Undervalued medium sized diversified
energy exploration.
Noble Affiliates, Inc. 17,000 657,688
An independent energy company that
specializes in oil and gas exploration
and production.
Noble Drilling, Inc. 33,000 744,563
Oil and gas well drilling.
Nuevo Energy Co. 14,000 574,000
Diversified energy exploration with
aggressive drilling program.
Swift Energy Co. 24,000 573,000
Emerging energy exploration company
focusing on Texas properties.
Triton Energy Ltd. 15,000 687,188
International oil and gas exploration
and development.
- --------------------------------------------------------------------------------
$ 5,961,064
- --------------------------------------------------------------------------------
Publishing -- 2.0%
- --------------------------------------------------------------------------------
A.H. Belo Corp. 31,927 $ 1,328,969
Publishes Dallas Morning News and
Providence Journal; also operates
T.V. and radio properties.
Franklin Covey Co.* 13,000 329,063
Time management seminars and products.
- --------------------------------------------------------------------------------
$ 1,658,032
- --------------------------------------------------------------------------------
Retail - Food and Drug -- 2.3%
- --------------------------------------------------------------------------------
Papa John's International, Inc. 25,000 $ 918,750
Rapidly growing restaurant chain.
Starbucks Corp. 25,000 973,438
High quality specialty retailer.
- --------------------------------------------------------------------------------
$ 1,892,188
- --------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 4.2%
- --------------------------------------------------------------------------------
Ann Taylor Stores Corp.* 16,000 $ 312,000
Leading vendor of women's apparel.
Bed Bath and Beyond, Inc.* 35,000 1,063,125
Specialty retailer.
Claires Stores, Inc. 40,000 700,000
Fashion items for teenagers.
Gadzooks, Inc.* 12,000 234,000
Specialty retailer of teenage apparel.
</TABLE>
See notes to financial statements
11
<PAGE>
Special Investment Portfolio as of June 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Security Shares Value
- --------------------------------------------------------------------------------
Retail - Specialty and Apparel (continued)
- --------------------------------------------------------------------------------
<S> <C> <C>
K&G Mens Center, Inc. 9,000 $ 195,750
Innovative retailer of men's
clothing
Pacific Sunwear of California, Inc. 5,000 161,250
Specialty retailer of teenage apparel.
Polo Ralph Lauren Corp., Class A* 3,700 101,288
A designer of men's and women's clothing.
The Mens Wearhouse, Inc.* 21,000 661,500
Specialty apparel chain.
- --------------------------------------------------------------------------------
$ 3,428,913
- --------------------------------------------------------------------------------
Transportation -- 1.2%
- --------------------------------------------------------------------------------
Comair Holdings, Inc. 36,000 $ 996,750
Regional airline holding company.
- --------------------------------------------------------------------------------
$ 996,750
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $61,601,380) $75,013,599
- --------------------------------------------------------------------------------
<CAPTION>
Commercial Paper -- 7.4%
Principal
Amount
Security (000 Omitted) Value
- --------------------------------------------------------------------------------
<S> <C> <C>
Cut Group, 6.25%, 7/1/97 $2,524 $ 2,523,562
Ford Motor Credit Co., 5.56%, 7/9/97 3,500 3,492,432
- --------------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $6,015,994) $ 6,015,994
- ----------------------------------------=---------------------------------------
Total Investments -- 99.2%
(identified cost $67,617,374) $81,029,593
- --------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.8% $ 659,157
- --------------------------------------------------------------------------------
Net Assets -- 100% $81,688,750
- --------------------------------------------------------------------------------
</TABLE>
ADR -- American Depositary Receipt
* Non-income producing security.
See notes to financial statements
12
<PAGE>
Special Investment Portfolio as of June 30, 1997
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of June 30, 1997
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investments, at value (Note 1A)
(identified cost, $67,617,374) $81,029,593
Cash 1,219
Receivable for investments sold 801,973
Interest and dividends receivable 7,009
Deferred organization expenses (Note 1E) 6,604
- --------------------------------------------------------------------------------
Total assets $81,846,398
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 141,972
Payable to affiliate for Trustees' fees (Note 3) 1,700
Accrued expenses 13,976
- --------------------------------------------------------------------------------
Total liabilities $ 157,648
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $81,688,750
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $68,276,531
Net unrealized appreciation of investments
(computed on the basis of identified cost) 13,412,219
- --------------------------------------------------------------------------------
Total $81,688,750
- --------------------------------------------------------------------------------
<CAPTION>
Statement of Operations
For the Six Months Ended
June 30, 1997
Investment Income (Note 1B & 1D)
- --------------------------------------------------------------------------------
<S> <C>
Dividend income $ 52,062
Interest income 211,694
- --------------------------------------------------------------------------------
Total income $ 263,756
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee (Note 3) $ 237,360
Compensation of Trustees not members of the
Investment Adviser's organization (Note 3) 2,632
Custodian fee (Note 1C) 33,133
Legal and accounting services 9,020
Amortization of organization expenses (Note 1E) 1,549
Miscellaneous 1,679
- --------------------------------------------------------------------------------
Total expenses $ 285,373
- --------------------------------------------------------------------------------
Net investment loss $ (21,617)
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------
Net realized gain --
Investment transactions (identified cost basis) $ 9,737,492
- --------------------------------------------------------------------------------
Net realized gain on investments $ 9,737,492
- --------------------------------------------------------------------------------
Change in unrealized appreciation --
Investments (identified cost basis) $(5,492,823)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation $(5,492,823)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 4,244,669
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 4,223,052
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
Special Investment Portfolio as of June 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) June 30, 1997 Year Ended
in Net Assets (Unaudited) December 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income (loss) $ (21,617) $ 135,724
Net realized gain on investments 9,737,492 18,226,741
Net change in unrealized appreciation
of investments (5,492,823) (1,762,538)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 4,223,052 $ 16,599,927
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 13,232,554 $ 10,738,468
Withdrawals (18,714,130) (18,331,396)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (5,481,576) $ (7,592,928)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets $ (1,258,524) $ 9,006,999
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 82,947,274 $ 73,940,275
- --------------------------------------------------------------------------------
At end of period $ 81,688,750 $ 82,947,274
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial Statements
14
<PAGE>
Special Investment Portfolio as of June 30, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended December 31,
June 30, 1997 ----------------------------------------------
(Unaudited) 1996 1995 1994*
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------------
Expenses 0.76%+ 0.76% 0.77% 0.74%+
Net investment income (loss) (0.06)%+ 0.18% 0.19% 0.20%+
Portfolio Turnover 110% 91% 81% 19%
- ----------------------------------------------------------------------------------------------------------------------------
Average commission rate (per share)/(1)/ $ 0.0590 $ 0.0579 $ -- $ --
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $ 81,689 $ 82,947 $ 73,940 $ 64,442
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, August 1, 1994, to December 31,
1994.
/(1)/ Average commission rate paid is computed by dividing the total dollar
amount of commissions paid during the fiscal year by the total number of
shares purchased and sold during the fiscal year for which commissions
were charged. For fiscal years beginning on or after September 1, 1995, a
Portfolio is required to disclose its average commission rate per share
for security trades on which commissions were charged.
See notes to financial statements
15
<PAGE>
Special Investment Portfolio as of June 30, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 Significant Accounting Policies
----------------------------------------------------------------------------
Special Investment Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end investment company
which was organized as a trust under the laws of the State of New York on
May 1, 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 Security Valuations -- Securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sales prices or, if there were no sales, at the mean between the
closing bid and asked prices therefor on the exchange where such securities
are principally traded or on such National Market System. Unlisted or listed
securities for which closing sales prices are not available are valued at
the mean between the latest available bid and asked prices on the principal
market where the security was traded. An option is valued at the last sale
price as quoted on the principal exchange or board of trade on which such
option or contract is traded or, in the absence of a sale, at the mean
between the last bid and asked prices. Futures positions on securities or
currencies are generally valued at closing settlement prices. Short-term
debt securities with a remaining maturity of 60 days or less are valued at
amortized cost. If securities were acquired with a remaining maturity of
more than 60 days, their amortized cost value will be based on their value
on the sixty-first day prior to maturity. Other fixed income and debt
securities, including listed securities and securities for which price
quotations are available, will normally be valued on the basis of valuations
furnished by a pricing service. Securities for which market quotations are
unavailable, including any security the disposition of which is restricted
under the Securities Act of 1933, and other assets will be appraised at
their fair market value as determined in good faith by or at the direction
of the Trustees of the Portfolio.
B Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes
on any taxable income of the Portfolio because each investor in the
Portfolio is 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 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.
C 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.
D Other -- Investment transactions are accounted for on the date the
investments are purchased and sold. Dividend income is recorded on
ex-dividend date. Realized gains and losses on the sale of investments are
determined on the identified cost basis.
E Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization, including registration costs, are being
amortized on the straight-line basis over five years.
F Use of Estimates -- The preparation of 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.
2 Investment Transactions
----------------------------------------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $76,640,196 and $74,324,273, respectively.
3 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 at the annual
16
<PAGE>
Special Investment Portfolio as of June 30, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
rate of 5/8 of 1% of average daily net assets. For the six months ended June
30, 1997, the fee was equivalent to 0.625% (annualized) of the Portfolio's
average net assets for such period and amounted to $237,360. 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 services
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 percentage of
their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the period ended June 30, 1997, no significant
amounts have been deferred.
4 Line of Credit
------------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a committed $120 million unsecured line of
credit agreement with a group of banks. The Portfolio may temporarily borrow
from the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the bank's adjusted certificate of deposit
rate, Eurodollar rate or federal funds rate. In addition, a fee computed at
an annual rate of 0.15% on the daily unused portion of the line of credit is
allocated among the participating Portfolios and funds at the end of each
quarter. The Portfolio did not have any significant borrowings or allocated
fees during the period.
5 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at June 30, 1997, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
Aggregate cost $67,617,374
------------------------------------------------------------------------------
Gross unrealized appreciation $15,042,798
Gross unrealized depreciation 1,630,579
------------------------------------------------------------------------------
Net unrealized appreciation $13,412,219
------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
Special Investment Portfolio as of June 30, 1997
INVESTMENT MANAGEMENT
Special Investment Portfolio
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr.
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
M. Dozier Gardner
Vice Chairman, Eaton Vance
Management
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
18
