<PAGE>
[LOGO EATON Investing
VANCE MUTUAL for the [ARTWORK APPEARS HERE]
FUNDS APPEARS 21st
HERE] Century(R)
Annual Report December 31, 1998
[ARTWORK APPEARS HERE]
EATON VANCE
UTILITIES
FUND
Eaton Vance
Globe Management--Global Distribution
[ARTWORK APPEARS HERE]
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
LETTER TO SHAREHOLDERS
[PHOTO APPEARS HERE]
James B. Hawkes
President
For the year ended December 31, 1998, Eaton Vance Utilities Fund had a total
return of 23.8% for Class A shares.1 This return resulted from an increase in
net asset value (NAV) to $10.15 per share on December 31, 1998 from $8.45 per
share on December 31, 1997, and the reinvestment of $0.235 in income dividends
and $0.037 per share in capital gains distributions.
For Class B, the total return was 22.9% based on an increase in NAV from $9.67
to $11.61 and the reinvestment of $0.202 in income dividends and $0.037 per
share in capital gains distributions.1
For Class C, the total return was 22.9% based on an increase in NAV from $10.19
to $12.27 and the reinvestment of $0.185 in income dividends and $0.037 per
share in capital gains distributions.1
By comparison, the average total return for mutual funds in the Lipper Utility
Funds Category2 was 18.3% for the period.
This year saw unprecedented extremes in the stock market. After an impressive
rally in the first half of 1998, the market posted heavy losses from August to
early October, then performed strongly in the fourth quarter. Investor
confidence was bolstered by the Federal Reserve Board's interest rate cuts,
modest economic growth, and low inflation. Stock valuations remained relatively
high, despite the looming impeachment trial of President Clinton and signs of
weakness in corporate profits.
By year-end, all major indices had continued an impressive 4-year streak of
double-digit gains.
For utility stocks, 1998 was a year of managing the changes resulting from
deregulation of the telecommunications and electric utility industries. In
telecommunications, local and long-distance services continued to become more
competitive, as several major mergers took place. The electric utilities,
meanwhile, worked at passing deregulation measures at the state level. Eaton
Vance believes that both industries offer great challenges and opportunities for
the investor.
The stock market's increased volatility and the changing utility environment
illustrate the importance of maintaining a long-term investment outlook. By
staying with an investment through the inevitable market cycles, investors can
reduce the impact of any one downturn. Moreover, a diversified investment such
as a professionally managed mutual fund further reduces risk. In the pages that
follow, Portfolio Manager Timothy P. O'Brien discusses the utility industries
and the performance of Eaton Vance Utilities Fund in 1998.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
February 9, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
Performance 3 Class A Class B Class C
- --------------------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 23.8% 22.9% 22.9%
Five Years 11.5 10.6 10.0
Ten Years 12.8 N.A. N.A.
Life of Fund+ 14.2 10.2 9.8
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- --------------------------------------------------------------------------------------------
One Year 16.6% 17.9% 21.9%
Five Years 10.2 10.3 10.0
Ten Years 12.1 N.A. N.A.
Life of Fund+ 13.8 10.1 9.8
</TABLE>
+Inception Dates -- Class A: 12/18/81; Class B: 11/1/93; Class C: 11/1/93
Ten Largest Equity Holdings 4
- -------------------------------------------------------------
Energis PLC 17.0%
SBC Communications, Inc. 8.8
MCI Worldcom, Inc. 7.3
Ameritech Corp. 4.6
Pinnacle West Capital Corp. 4.4
NIPSCO Industries, Inc. 4.3
DQE, Inc. 4.3
GTE Corp. 4.2
National Grid Group PLC 4.2
Bell Atlantic Corp. 3.7
/1/ These returns do not include the 5.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC) for
Class B and Class C shares. 2 It is not possible to invest directly in an Index
or Lipper average. 3 Returns are historical and are calculated by determining
the percentage change in net asset value with all distributions reinvested. SEC
returns for Class A reflect the maximum 5.75% sales charge. SEC returns for
Class B reflect applicable CDSC based on the following schedule: 5% - 1st and
2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. SEC
1-Year return for Class C reflects 1% CDSC. 4 As of 12/31/98. Ten largest
holdings accounted for 62.8% of the Portfolio's net assets. Holdings are subject
to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
2
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
MANAGEMENT DISCUSSION
An interview with Timothy P.O'Brien, Vice President and Portfolio Manager of
Utilities Fund
[PHOTO OF TIMOTHY P. O'BRIEN APPEARS HERE]
Timothy P. O'Brien
Portfolio Manager
Q: Tim, the Portfolio significantly outperformed its Lipper fund category for
1998. What accounted for the returns this year?
A: This year we added substantially to our telecommunications positions, while
de-emphasizing income stocks with less potential for return. We took the
view that the telecom group was going to do well and moved into some
aggressive names, and it turns out we were right.
The other utilities were a bit more mixed. We never really had a big
position in natural gas stocks, but we significantly reduced what we did
have. The electric utilities have been relatively stable, roughly 26% of
the portfolio. We may have to modify the strategy for 1999, but I do expect
that we will remain relatively overweighted in the telecommunications
names, underweighted in electric utilities, and still on the fence in the
energy stocks.
Q: Would you elaborate on the significance of the telecommunications sector in
the Portfolio?
A: Telecommunications played a very important role in the Portfolio in 1998.
The sector represented approximately 61% of the Portfolio; four out of our
top five holdings were telecom stocks. It seems that the best-performing
utilities funds for 1998 were the ones that emphasized telecoms. We kept a
substantial position in Energis, a U.K. telephone company that is the
Fund's largest position, which has done quite well. We added substantially
to our positions in the Bell operating companies, which have been very good
performers for most of the year. And late in the year, we moved back into
some of the long-distance companies like AT&T and Sprint. They didn't have
a major effect on returns in 1998 because we added them so late in the
year, but we did hold them at year-end.
Q: Tim, you've downplayed the electric utilities sector this year. At the same
time, the Fund's dividend payout has decreased. Can you shed some light on
this?
A: As we discussed, over the past year, the Portfolio did, in fact, shift away
from what traditionally have been viewed as income stocks, and the dividend
payout has subsequently decreased. Part of the reason for the shift is that
many electric, gas, and other utilities have been lowering their dividends.
We viewed the telecommunication stocks, which are considered utilities and
many of which pay dividends, as simply better investments. And while
monthly dividends may be somewhat lower, the overall return is far better.
Q: Would you update us on the status of the electric utility industry and the
future of some of these stocks?
A: The fundamental outlook for utilities stocks continues to improve. A few
years ago, these companies faced tremendous restructuring requirements.
Their competitive position was weak, and they had a great deal of stranded
cost exposure. However, by and large, most of that restructuring has
started to take place. The typical arrangement that has been made
Largest Equity Sectors+
- --------------------------------------------------------------------------------
As a percentage of total equities
[PIE CHART APPEARS HERE]
+ Sector allocation is subject to change due to active management.
3
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
MANAGEMENT DISCUSSION
calls for the utility companies to open up the power supply market to
competition. In most, but not all cases, they will divest the generating
business. In return for doing that, the customer receives an up-front rate
cut, and the utility is allowed the opportunity to recapture a part of its
stranded costs.
So a lot of the competitive and financial risk is in the process of being
removed, or reduced. Once the process has been completed, more companies
will be renting out their wires to competitive generating companies, and
that's a pretty low-risk business with relatively attractive financial
characteristics. As a result, the worst of the dividend cutting days may be
over.
Q: Last year in these pages, you stated your intent to reduce exposure to real
estate investment trusts (REITs) in 1998. Did you do this, and what effect
did it have?
A: Indeed, we did move out of REITs in 1998. The outlook for REIT stocks is
not bad; it's just that the utilities and telephone stocks are more
attractive. We went from a position of more than 25% to about 10% by the
end of the first quarter. By mid-year, we were down to mid-single digits
and we're pretty well out of the group now.
REITs tend to have higher dividend yields than utility stocks, so the
effect of this shift was to reduce the income component of the Portfolio.
But, again, it paid off for the shareholder in the form of vastly better
total returns.
Q: The largest holding in the Portfolio is Energis, a British telephone
company. What is attractive about this stock?
A: Energis PLC provides basic telephony and data services, as well as a range
of national and international telecommunications services, principally to
the U.K. business market. It is a leader in the very attractive European
telecom sector. The Portfolio's substantial position in foreign utilities
was concentrated in Europe, especially in the U.K. As a result, we avoided
the collapse of the Asian and Latin American markets in 1998.
The European telephone stocks have typically been growing at a rate in the
high single-digits, 8 or 9%. In the U.S., phone stocks on balance are
growing at 12-13%. On an absolute and relative basis, the U.S. telecom
sector is less expensive, and in 1999 so far, we have added to U.S.
telephone stocks and sold some European telcos.
Q: What do you see happening in the electric utility and telecommunications
sectors in 1999?
A: Our goal for the fund has always been, and will continue to be, to do well
relative to both the competition and the S&P Utilities Index. My guess for
1999 is that it will be somewhat tougher to make money than it was in 1998.
I am a little cautious near-term about the outlook for utilities, if only
because the bond market might be backing up a little bit.
It's very difficult for stocks in general to do well in an environment
where long-term interest rates are rising, but utility stocks are
especially sensitive to long-term interest rates. So I have recently cut
back a little bit on some of the electric utilities, and as a result have a
little more in short-term cash investments than I did in 1998, when I ran
most of the year nearly fully invested. I am not bearish long-term on the
bond market; I just think it's backing off a little bit and taking utility
stocks with it, so we will try to manage the Portfolio accordingly in 1999.
4
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
FUND PERFORMANCE
Comparison of Change in Value of a $10,000 Investment in
Eaton Vance Utilities Fund, Class A vs.
Standard & Poor's 500 and the Standard & Poor's Utility Index*
[LINE GRAPH APPEARS HERE]
Date Fund/NAV Fund/MOP S&P S&P Utilities
---- -------- -------- --- -------------
12/31/88 $10,000 $9,429 $10,000 $10,000
1/31/89 $10,240 $9,655 $10,711 $10,564
2/28/89 $10,063 $9,488 $10,401 $10,328
3/31/89 $10,190 $9,608 $10,708 $10,596
4/30/89 $10,665 $10,055 $11,244 $11,265
5/31/89 $11,191 $10,551 $11,639 $11,915
6/30/89 $11,487 $10,831 $11,651 $12,103
7/31/89 $12,125 $11,432 $12,680 $13,072
8/31/89 $12,047 $11,359 $12,877 $12,995
9/30/89 $12,113 $11,421 $12,896 $13,213
10/31/89 $12,245 $11,546 $12,572 $13,272
11/30/89 $12,602 $11,882 $12,780 $13,718
12/31/89 $13,346 $12,583 $13,159 $14,693
1/31/90 $12,514 $11,799 $12,253 $13,528
2/28/90 $12,500 $11,786 $12,358 $13,378
3/31/90 $12,582 $11,863 $12,761 $13,624
4/30/90 $12,146 $11,452 $12,418 $13,098
5/31/90 $12,663 $11,940 $13,560 $13,990
6/30/90 $12,500 $11,786 $13,560 $13,696
7/31/90 $12,638 $11,916 $13,489 $13,649
8/31/90 $11,975 $11,291 $12,217 $12,566
9/30/90 $12,253 $11,553 $11,705 $13,080
10/31/90 $13,094 $12,346 $11,627 $13,940
11/30/90 $13,276 $12,518 $12,324 $14,215
12/31/90 $13,366 $12,603 $12,749 $14,344
1/31/91 $13,116 $12,366 $13,278 $13,905
2/28/91 $13,587 $12,811 $14,172 $14,384
3/31/91 $13,931 $13,134 $14,594 $14,662
4/30/91 $13,886 $13,092 $14,599 $14,429
5/31/91 $13,617 $12,839 $15,162 $14,246
6/30/91 $13,482 $12,711 $14,562 $14,051
7/31/91 $14,043 $13,240 $15,216 $14,484
8/31/91 $14,483 $13,655 $15,515 $14,860
9/30/91 $15,143 $14,277 $15,340 $15,160
10/31/91 $15,342 $14,466 $15,522 $15,467
11/30/91 $15,573 $14,683 $14,840 $15,319
12/31/91 $16,522 $15,578 $16,617 $16,447
1/31/92 $15,726 $14,827 $16,286 $15,569
2/28/92 $15,556 $14,667 $16,442 $15,147
3/31/92 $15,318 $14,443 $16,199 $14,933
4/30/92 $15,748 $14,848 $16,651 $15,895
5/31/92 $16,126 $15,204 $16,667 $15,872
6/30/92 $16,143 $15,221 $16,507 $16,097
7/31/92 $17,172 $16,191 $17,157 $17,368
8/31/92 $17,050 $16,076 $16,745 $17,239
9/30/92 $17,140 $16,161 $17,027 $17,365
10/31/92 $16,999 $16,027 $17,063 $17,206
11/30/92 $17,122 $16,144 $17,580 $17,184
12/31/92 $17,612 $16,605 $17,881 $17,804
1/31/92 $18,101 $17,067 $18,007 $18,080
2/28/93 $19,268 $18,167 $18,196 $19,378
3/31/93 $19,459 $18,347 $18,659 $19,724
4/30/93 $19,383 $18,275 $18,185 $19,311
5/31/93 $19,249 $18,149 $18,598 $19,298
6/30/93 $19,808 $18,676 $18,748 $20,191
7/31/93 $20,289 $19,130 $18,648 $20,648
8/31/93 $20,925 $19,729 $19,290 $21,647
9/30/93 $20,807 $19,618 $19,230 $21,604
10/31/93 $20,398 $19,233 $19,603 $21,564
11/30/93 $19,054 $17,965 $19,350 $20,476
12/31/93 $19,283 $18,182 $19,675 $20,373
1/31/94 $18,978 $17,894 $20,314 $20,516
2/28/94 $18,204 $17,164 $19,704 $19,348
3/31/94 $17,809 $16,791 $18,935 $18,689
4/30/94 $18,117 $17,081 $19,153 $19,152
5/31/94 $17,374 $16,381 $19,391 $18,642
6/30/94 $16,882 $15,917 $19,016 $18,684
7/31/94 $17,127 $16,148 $19,615 $19,314
8/31/94 $17,002 $16,031 $20,353 $19,261
9/30/94 $16,700 $15,746 $19,946 $18,772
10/31/94 $16,719 $15,764 $20,362 $18,933
11/30/94 $16,697 $15,742 $19,558 $18,656
12/31/94 $16,915 $15,948 $19,942 $18,752
1/31/95 $17,402 $16,407 $20,426 $20,207
2/28/95 $17,266 $16,279 $21,163 $20,173
3/31/95 $17,242 $16,257 $21,878 $20,046
4/30/95 $17,509 $16,509 $22,490 $20,777
5/31/95 $18,364 $17,314 $23,306 $21,435
6/30/95 $18,475 $17,419 $23,959 $21,534
7/31/95 $18,950 $17,867 $24,721 $22,078
8/31/95 $19,199 $18,102 $24,713 $22,518
9/30/95 $20,111 $18,962 $25,858 $23,949
10/31/95 $20,315 $19,154 $25,729 $24,525
11/30/95 $20,635 $19,456 $26,785 $24,865
12/31/95 $21,573 $20,340 $27,409 $26,630
1/31/96 $22,092 $20,829 $28,303 $26,968
2/28/96 $21,945 $20,691 $28,500 $25,896
3/31/96 $21,849 $20,601 $28,879 $25,364
4/30/96 $21,681 $20,442 $29,267 $25,643
5/31/96 $22,251 $20,979 $29,936 $25,579
6/30/96 $22,632 $21,338 $30,172 $26,642
7/31/96 $21,542 $20,312 $28,791 $24,881
8/31/96 $22,287 $21,013 $29,333 $25,501
9/30/96 $22,451 $21,168 $31,097 $25,746
10/31/96 $22,788 $21,486 $31,910 $27,056
11/30/96 $23,100 $21,780 $34,251 $27,627
12/31/96 $23,083 $21,764 $33,686 $27,464
1/31/97 $23,499 $22,156 $35,752 $27,641
2/28/97 $23,625 $22,275 $35,964 $27,370
3/31/97 $22,948 $21,637 $34,595 $26,539
4/30/97 $22,539 $21,251 $36,616 $26,141
5/31/97 $23,688 $22,334 $38,761 $27,246
6/30/97 $24,357 $22,965 $40,622 $28,099
7/31/97 $25,226 $23,785 $43,795 $28,748
8/31/97 $24,841 $23,421 $41,279 $28,225
9/30/97 $26,377 $24,870 $43,660 $29,449
10/31/97 $25,382 $23,931 $42,154 $29,737
11/30/97 $26,147 $24,652 $44,034 $31,842
12/31/97 $26,816 $25,284 $44,909 $34,193
1/31/98 $27,595 $26,018 $45,365 $32,878
2/28/98 $28,578 $26,945 $48,560 $33,987
3/31/98 $30,486 $28,744 $51,160 $36,163
4/30/98 $30,190 $28,465 $51,624 $35,468
5/31/98 $30,443 $28,703 $50,652 $35,294
6/30/98 $30,859 $29,095 $52,844 $36,601
7/31/98 $30,397 $28,660 $52,230 $34,791
8/31/98 $27,629 $26,050 $44,615 $35,345
9/30/98 $29,022 $27,364 $47,598 $38,295
10/31/98 $28,985 $27,329 $51,419 $37,663
11/30/98 $30,759 $29,001 $54,460 $38,168
12/31/98 $33,195 $31,298 $57,717 $39,297
<TABLE>
<CAPTION>
Performance+ Class A Class B Class C
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Average Annual Total Returns (at net asset value)
- -----------------------------------------------------------------------------------------
One Year 23.8% 22.9% 22.9%
Five Years 11.5 10.6 10.0
Ten Years 12.8 N.A. N.A.
Life of Fund 14.2 10.2 9.8
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -----------------------------------------------------------------------------------------
One Year 16.6% 17.9% 21.9%
Five Years 10.2 10.3 10.0
Ten Years 12.1 N.A. N.A.
Life of Fund 13.8 10.1 9.8
</TABLE>
+Inception Dates - Class A:12/18/81; Class B: 11/1/93; Class C: 11/1/93
* Source: Towers Data Systems, Bethesda, MD. Investment operations commenced
12/18/81. Index information is available only at month-end; therefore, the
line comparison begins at the next month-end following the commencement of
the Fund's investment operations.
The chart compares the Fund's total return with that of the S&P 500 Index,
an unmanaged index of 500 stocks commonly used as a measure of U.S. stock
performance. Returns are calculated by determining the percentage change in
net asset value with all distributions reinvested. The lines on the chart
represent the total returns of $10,000 hypothetical investments in the Fund
and the S&P 500 Index. An investment in the Fund's Class B shares on
11/30/93 would have been worth $16,769 on December 31, 1998. An investment
in the Fund's Class C shares on 11/30/93 would have been worth $16,287 on
December 31, 1998. The Index's total return does not reflect any
commissions or expenses that would have been incurred if an investor
individually purchased or sold the securities represented in the Index. It
is not possible to invest directly in an Index.
+ Returns are historical and are calculated by determining the percentage
change in net asset value with all distributions reinvested. SEC returns
for Class A reflect the maximum 5.75% sales charge. SEC returns for Class B
reflect applicable CDSC based on the following schedule: 5% - 1st and 2nd
years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. SEC
1-Year return for Class C reflects 1% CDSC. Past performance is no
guarantee of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than
their original cost.
5
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
- --------------------------------------------------------------------------------
Investment in Utilities Portfolio, at value
(identified cost, $317,490,165) $459,616,060
Receivable for Fund shares sold 36,875
Deferred organization expenses 7,906
- --------------------------------------------------------------------------------
Total assets $459,660,841
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for Fund shares redeemed $ 425,049
Payable to affiliate for Trustees' fees 970
Other accrued expenses 363,202
- --------------------------------------------------------------------------------
Total liabilities $ 789,221
- --------------------------------------------------------------------------------
Net Assets $458,871,620
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Paid-in capital $260,418,634
Accumulated undistributed net realized gain from
Portfolio (computed on the basis of 3,375,387
identified cost)
Accumulated undistributed net investment income 52,951,704
Net unrealized appreciation from Portfolio (computed
on the basis of identified cost) 142,125,895
- --------------------------------------------------------------------------------
Total $458,871,620
- --------------------------------------------------------------------------------
Class A Shares
- --------------------------------------------------------------------------------
Net Assets $409,178,428
Shares Outstanding 40,293,378
Net Asset Value and Redemption Price Per Share
(net assets / shares of beneficial interest $ 10.15
outstanding)
Maximum Offering Price Per Share
(100 / 94.25 of $10.15) $ 10.77
- --------------------------------------------------------------------------------
Class B Shares
- --------------------------------------------------------------------------------
Net Assets $ 45,957,604
Shares Outstanding 3,958,288
Net Asset Value, Offering Price and Redemption Price
Per Share
(net assets / shares of beneficial interest
outstanding) $ 11.61
- --------------------------------------------------------------------------------
Class C Shares
- --------------------------------------------------------------------------------
Net Assets $ 3,735,588
Shares Outstanding 304,462
Net Asset Value, Offering Price and Redemption Price
Per Share
(net assets / shares of beneficial interest
outstanding) $ 12.27
- --------------------------------------------------------------------------------
On sales of $50,000 or more, the offering price of Class A shares is reduced.
Statement of Operations
For the Year Ended
December 31, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends allocated from
Portfolio (net of foreign taxes, $617,760) $ 13,962,407
Interest allocated from Portfolio 3,278,743
Expenses allocated from Portfolio (3,783,490)
- --------------------------------------------------------------------------------
Net investment income from Portfolio $ 13,457,660
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Trustees fees and expenses $ 1,990
Distribution and service fees
Class A 834,198
Class B 416,059
Class C 36,346
Transfer and dividend disbursing agent fees 571,914
Custodian fee 33,548
Registration fees 29,346
Amortization of organization expenses 16,016
Printing and postage 11,493
Legal and accounting services 21,977
Miscellaneous 39,441
- --------------------------------------------------------------------------------
Total expenses $ 2,012,328
- --------------------------------------------------------------------------------
Net investment income $ 11,445,332
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 5,496,123
Foreign currency transactions 683
- --------------------------------------------------------------------------------
Net realized gain $ 5,496,806
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)--
Investments $ 75,247,692
Foreign currency (18,704)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 75,228,988
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 80,725,794
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 92,171,126
- --------------------------------------------------------------------------------
See notes to financial statements
6
<PAGE>
Eaton Vance Utilities Fund 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 $ 11,445,332 $ 15,333,965
Net realized gain 5,496,806 30,231,475
Net change in unrealized
appreciation (depreciation) 75,228,988 10,978,552
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 92,171,126 $ 56,543,992
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (9,905,578) $ (14,226,568)
Class B (845,623) --
Class C (61,649) --
In excess of net investment income
From net realized gain
Class A (1,582,078) (52,023,235)
Class B (157,576) --
Class C (12,962) --
In excess of net realized gain
Class A -- (1,753,904)
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (12,565,466) $ (68,003,707)
- --------------------------------------------------------------------------------
Transactions in shares of
beneficial interest --
Proceeds from sale of shares
Class A $ 4,777,604 $ 35,611,098
Class B 3,716,353 --
Class C 610,654 --
Issued in reorganization of EV
Classic and Marathon Total
Return Funds
Class B 42,228,739 --
Class C 3,724,892 --
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 8,677,027 53,794,284
Class B 805,844 --
Class C 62,598 --
Cost of shares redeemed
Class A (45,654,104) (109,462,155)
Class B (8,794,964) --
Class C (1,346,110) --
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets from Fund
share transactions $ 8,808,533 $ (20,056,773)
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets $ 88,414,193 $ (31,516,488)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 370,457,427 $ 401,973,915
- --------------------------------------------------------------------------------
At end of year $ 458,871,620 $ 370,457,427
- --------------------------------------------------------------------------------
Accumulated undistributed net
investment income included in net
assets
- --------------------------------------------------------------------------------
At end of year $ 52,951,704 $ 53,129,951
- --------------------------------------------------------------------------------
See notes to financial Statements
7
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1998(1) 1997 1996 1995 1994
----------------------------- ----------------------------------------------
Class A Class B Class C Class A Class A Class A Class A
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 8.450 $ 9.670 $10.190 $ 8.770 $ 9.130 $ 7.630 $ 9.140
- ------------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.251 $ 0.209 $ 0.220 $ 0.409 $ 0.626 $ 0.523 $ 0.545
Net realized and unrealized gain (loss) 1.721 1.970 2.082 0.887 (0.014)(2) 1.520 (1.667)
- ------------------------------------------------------------------------------------------------------------------------------------
Total income (loss) from operations $ 1.972 $ 2.179 $ 2.302 $ 1.296 $ 0.612 $ 2.043 $ (1.122)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ------------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.235) $(0.202) $ (0.185) $ (0.331) $ (0.522) $ (0.364) $ (0.388)
In excess of net investment income -- -- -- -- -- (0.039) --
From net realized gain (0.037) (0.037) (0.037) (1.243) (0.450) (0.078)
In excess of net realized gain -- -- -- (0.042) -- (0.062) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.272) $(0.239) $ (0.222) $ (1.616) $ (0.972) $ (0.543) $ (0.388)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 10.150 $11.610 $ 12.270 $ 8.450 $ 8.770 $ 9.130 $ 7.630
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (3) 23.78% 22.89% 22.88% 16.18% 7.00% 27.52% (12.28)%
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $409,178 $45,958 $ 3,736 $370,457 $401,974 $457,879 $445,133
Ratios (As a percentage of average daily net assets):
Expenses (4) 1.27% 2.01% 2.05% 1.13% 1.23% 1.19% 1.18%
Net investment income 2.75% 2.01% 1.99% 4.06% 5.59% 4.49% 4.90%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) The per share amounts are not in accord with the net realized and unrealized
gain (loss) for the period because of the timing of sales of Fund shares and
the amount of the per share realized and unrealized gains and losses at such
time.
(3) Total return is calculated assuming a purchase at the net asset value on the
first day and a sale at the net asset value on the last day of each period
reported. Dividends and distributions, if any, are assumed reinvested at the
net asset value on the reinvestment date. Total return is not computed on an
annualized basis.
(4) Includes the Fund's share of the Portfolio's allocated expenses.
See notes to financial statements
8
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
Eaton Vance Utilities Fund (the Fund), (formerly Eaton Vance Total Return
Fund), is a non-diversified entity of the type commonly known as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, as amended, as an open-end management investment company. The
Fund is a series of the Eaton Vance Special Investment Trust (the Trust). The
Fund offers three classes of shares. Class A shares are sold subject to a
sales charge imposed at the time of purchase. Class B and Class C shares are
sold at net asset value and are subject to a contingent deferred sales charge
(see Note 6). All classes of shares have equal rights to assets and voting
privileges. Realized and unrealized gains and losses and net investment
income, other than class specific expenses, are allocated daily to each class
of shares based on the relative net assets of each class to the total net
assets of the Fund. Each class of shares differs in its distribution plan and
certain other class specific expenses. The Fund invests all of its investable
assets in interests in the Utilities Portfolio (the Portfolio), a New York
Trust, having the same investment objective as the Fund. The value of the
Fund's investment in the Portfolio reflects the Fund's proportionate interest
in the net assets of the Portfolio (100% at December 31, 1998). The
performance of the Fund is directly affected by the performance of the
Portfolio. The financial statements of the Portfolio, including the portfolio
of investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuations -- Valuation of securities by the Portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal income
or excise tax is necessary. Pursuant to Section 852 of the Internal Revenue
Code, the Fund designates $1,752,616 as a long-term capital gain distribution
for its taxable year ended December 31, 1998.
D Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, including registration costs are being amortized on the
straight-line basis over five years.
E Other -- Investment transactions are accounted for on a trade date basis.
F Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
2 Distributions to Shareholders
------------------------------------------------------------------------------
The Fund's policy is to distribute monthly substantially all of the net
investment income allocated to the Fund by the Portfolio (less the Fund's
direct expenses) and to distribute at least annually substantially all of its
net realized capital gains. Distributions are paid in the form of additional
shares of the Fund or, at the election of the shareholder, in cash. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in over distributions only for financial statement
purposes are classified as distributions in excess of net investment income or
net realized gain on investments. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
9
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
3 Shares of Beneficial Interest
----------------------------------------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (with no par
value). Transactions in Fund shares were as follows:
Year Ended December 31,
---------------------------
Class A 1998 1997
----------------------------------------------------------------------------
Sales 513,278 4,081,005
Issued to shareholders electing to
receive payment of distributions in
Fund shares 961,346 6,457,940
Redemptions (5,003,117) (12,559,429)
----------------------------------------------------------------------------
Net decrease (3,528,493) (2,020,484)
----------------------------------------------------------------------------
Year Ended
Class B December 31, 1998
----------------------------------------------------------------------------
Sales 354,812
Issued to shareholders electing to receive payment
of distributions in Fund shares 78,426
Redemptions (839,996)
Issued to EV Marathon Total Return
Fund shareholders 4,365,046
----------------------------------------------------------------------------
Net increase 3,958,288
----------------------------------------------------------------------------
Year Ended
Class C December 31, 1998
----------------------------------------------------------------------------
Sales 54,891
Issued to shareholders electing to receive payment
of distributions in Fund shares 5,721
Redemptions (121,642)
Issued to EV Classic Total Return
Fund shareholders 365,492
----------------------------------------------------------------------------
Net increase 304,462
----------------------------------------------------------------------------
4 Transactions with Affiliates
----------------------------------------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Except as to Trustees of the Fund and the
Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
investment adviser fee. Eaton Vance Distributors, Inc. (EVD), a subsidiary
of EVM and the Fund's principal underwriter, received $18,943 from the Eaton
Vance Utilities Fund as its portion of the sales charge on sales of Class A
shares for the year ended December 31, 1998. Certain of the officers and
Trustees of the Fund and the Portfolio are officers and directors/trustees
of the above organizations.
5 Distribution and Service Plans
----------------------------------------------------------------------------
The Fund has adopted distribution plans (Class B Plan and Class C Plan)
pursuant to Rule 12b-1 under the Investment Company Act of 1940 and a
service plan (Class A Plan), (collectively, the Plans). The Plans require
the Fund to pay the Principal Underwriter, EVD amounts equal to 1/365 of
0.75% of the Fund's average daily net assets attributable to Class B and
Class C shares for providing ongoing distribution services and facilities
to the Fund. The Fund will automatically discontinue payments to EVD during
any period in which there are no outstanding Uncovered Distribution
Charges, which are equivalent to the sum of (i) 5.00% and 6.25% of the
aggregate amount received by the Fund for the Class B and Class C shares
sold, respectively, plus (ii) interest calculated by applying the rate of
1% over the prevailing prime rate to the outstanding balance of Uncovered
Distribution Charges of EVD of each respective class reduced by the
aggregate amount of contingent deferred sales charges (see Note 6) and
daily amounts theretofore paid to EVD by each respective class. The Fund
paid or accrued $323,601 and $27,260 for Class B and Class C shares,
respectively, to EVD for the year ended December 31, 1998 representing
0.75% of the average daily net assets for Class B and Class C shares. At
December 31, 1998, the amount of Uncovered Distribution Charges of EVD
calculated under the Plan was approximately $408,000 and $787,000 for Class
B and Class C shares, respectively.
10
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
In addition, the Plans also authorize each Class to make payments of service
fees to EVD, Authorized Firms and other persons in amounts not exceeding
0.25% of the Fund's average daily net assets attributable to Class A
(Service Plan), Class B and Class C shares for each fiscal year. The
Trustees have initially implemented the Plans by authorizing the Fund to
make quarterly payments of service fees to EVD and Authorized Firms in
amounts not expected to exceed 0.25% per annum of the Fund's average daily
net assets attributable to Class A and Class B shares based on the value of
Fund shares sold by such persons and remaining outstanding for at least
twelve months. The Class C Plan requires the Fund to make monthly payments
of service fees in amounts not expected to exceed 0.25% of the Fund's
average daily net assets attributable to Class C shares for any fiscal year.
Service fee payments are made for personal services and/or the maintenance
of shareholder accounts. Service fees are separate and distinct from the
sales commissions and distribution fees payable by the Fund to EVD, and as
such are not subject to automatic discontinuance when there are no
outstanding Uncovered Distribution Charges of EVD. Service fee payments for
the year ended December 31, 1998 amounted to $834,198, $92,458 and $9,086
for Class A, Class B and Class C shares, respectively.
6 Contingent Deferred Sales Charge
----------------------------------------------------------------------------
A contingent deferred sales charge (CDSC) is imposed on any redemption of
Class B shares made within six years of purchase. A CDSC of 1% is imposed
on any redemption of Class C shares made within one year of purchase. A
CDSC of 1% is imposed on any redemption of Class A shares made within 12
months of purchase that were acquired at net asset value because the
purchase amount was $1 million or more. Generally, the CDSC is based upon
the lower of the net asset value at date of redemption or date of purchase.
No charge is levied on shares acquired by reinvestment of dividends or
capital gains distributions. Class B CDSC is imposed at declining rates
that begin at 5% in the case of redemptions in the first and second year
after purchase, declining one percentage point each subsequent year. No
CDSC is levied on shares which have been sold to EVM or its affiliates or
to their respective employees or clients. CDSC charges are paid to EVD to
reduce the amount of Uncovered Distribution Charges calculated under each
Fund's Distribution Plan (See Note 5). CDSC charges received when no
Uncovered Distribution Charges exist will be retained by the Fund. EVD
received approximately $72,000 and $3,000 of CDSC paid by shareholders for
Class B and Class C shares, respectively, for the year ended December, 31
1998.
7 Investment Transactions
----------------------------------------------------------------------------
Increases and decreases in the Fund's investments in the Portfolio for the
year ended December 31, 1998, aggregated $17,840,966 and $65,817,239,
respectively.
8 Transfer of Net Assets
----------------------------------------------------------------------------
On January 1, 1998, EV Traditional Total Return Fund acquired the net assets
of EV Marathon Total Return Fund and EV Classic Total Return Fund pursuant
to an Agreement and Plan of Reorganization dated June 23, 1997.
In accordance with the agreement, EV Traditional Total Return Fund, at the
closing, issued 4,365,046 Class B shares and 365,492 Class C shares of the
Fund having an aggregate value of $42,228,739 and $3,724,892 respectively.
As a result, the Fund issued one Class B share for each share of EV Marathon
Total Return Fund and one Class C share for each share of EV Classic Total
Return Fund. The transaction was structured for tax purposes to qualify as a
tax free reorganization under the Internal Revenue Code. The EV Marathon
Total Return Fund's and EV Classic Total Return Fund's net assets at the
date of the transaction were $42,228,739 and $3,724,892, respectively,
including $6,799,057 and $627,601 of unrealized appreciation. Directly after
the merger, the combined net assets of the Eaton Vance Utilities Fund
(formerly "EV Traditional Total Return Fund") were $416,411,058 with a net
asset value of $8.45, $9.67, and $10.19 for Class A, Class B and Class C
shares, respectively.
9 Name Change
----------------------------------------------------------------------------
Effective January 1, 1998, EV Traditional Total Return Fund changed its name
to Eaton Vance Total Return Fund. Effective May 1, 1998, Eaton Vance Total
Return Fund changed its name to Eaton Vance Utilities Fund.
11
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees and Shareholders of Eaton
Vance Utilities Fund:
- --------------------------------------------------------------------------------
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and financial
highlights present fairly, in all material respects, the financial position of
Eaton Vance Utilities Fund (the "Fund") (formerly EV Traditional Total Return
Fund) at December 31, 1998, the results of its operations for the year then
ended, the changes in its net assets for each of the two years in the period
then ended and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund'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 generally accepted
auditing standards 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 provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
12
<PAGE>
Utilities Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS
Common Stocks -- 85.1%
Security Shares Value
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 0.7%
- --------------------------------------------------------------------------------
Ovation, Inc.(1)(2) 285,787 $ 3,000,764
- --------------------------------------------------------------------------------
$ 3,000,764
- --------------------------------------------------------------------------------
Drugs -- 1.4%
- --------------------------------------------------------------------------------
Sepracor, Inc.(1) 70,000 $ 6,168,750
- --------------------------------------------------------------------------------
$ 6,168,750
- --------------------------------------------------------------------------------
Electric Utilities -- 26.6%
- --------------------------------------------------------------------------------
Cleco Corp. 300,000 $ 10,293,750
DPL, Inc. 750,000 16,218,750
DQE, Inc. 450,000 19,771,875
National Grid Group PLC(3) 2,400,000 19,157,040
NIPSCO Industries, Inc. 650,000 19,784,375
Pinnacle West Capital Corp. 475,000 20,128,125
PowerGen PLC(3) 600,000 7,886,400
Scottish and Southern Energy PLC(3) 300,000 3,379,170
Sierra Pacific Resources 150,000 5,700,000
- --------------------------------------------------------------------------------
$122,319,485
- --------------------------------------------------------------------------------
Information Services -- 1.0%
- --------------------------------------------------------------------------------
Mindspring Enterprises, Inc.(1) 75,000 $ 4,579,688
- --------------------------------------------------------------------------------
$ 4,579,688
- --------------------------------------------------------------------------------
REITS -- 1.9%
- --------------------------------------------------------------------------------
Annaly Mortgage, Inc. 144A 350,000 $ 2,887,500
Security Capital US Realty 600,000 5,940,000
Trust(1)
- --------------------------------------------------------------------------------
$ 8,827,500
- --------------------------------------------------------------------------------
Telephone Utilities -- 53.5%
- --------------------------------------------------------------------------------
Ameritech Corp. 335,000 $ 21,230,625
AT&T Corp. 75,000 5,643,750
Bell Atlantic Corp. 325,000 17,225,000
BellSouth Corp. 250,000 12,468,750
Energis(1)(3) 3,490,000 78,099,568
GTE Corp. 300,000 19,500,000
MCI Worldcom, Inc.(1) 465,000 33,363,750
Omnipoint Corp. 600,000 5,587,500
SBC Communications, Inc. 750,000 40,218,749
Sprint Corp. 100,000 8,412,500
Swisscom AG ADR(1)(3) 100,000 4,256,250
- --------------------------------------------------------------------------------
$246,006,442
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $227,686,079) $390,902,629
- --------------------------------------------------------------------------------
Convertible Preferred Stocks -- 5.1%
Security Shares Value
- --------------------------------------------------------------------------------
Gas Utilities -- 3.1%
- --------------------------------------------------------------------------------
El Paso Energy Capital Trust 300,000 $ 14,362,500
- --------------------------------------------------------------------------------
$ 14,362,500
- --------------------------------------------------------------------------------
Telephone Utilities -- 2.0%
- --------------------------------------------------------------------------------
Omnipoint Corp. 180,000 $ 4,500,000
Qwest Trends Trust 100,000 4,687,500
- --------------------------------------------------------------------------------
$ 9,187,500
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $27,900,148) $ 23,550,000
- --------------------------------------------------------------------------------
Warrants -- 0.1%
Security Shares Value
- --------------------------------------------------------------------------------
REITS -- 0.1%
- --------------------------------------------------------------------------------
Walden Residential(1) 340,000 $ 340,000
- --------------------------------------------------------------------------------
$ 340,000
- --------------------------------------------------------------------------------
Total Warrants
(identified cost $0) $ 340,000
- --------------------------------------------------------------------------------
Convertible Bonds -- 2.4%
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
National Grid Co., 4.25%, 2/17/08(3) $ 800 $ 1,659,000
- --------------------------------------------------------------------------------
Ovation, Inc., 9.75%, 2/23/01(2) 2,500 2,500,000
Smartalk Teleservices, 144A,
5.75%, 9/15/04 25,000 6,812,500
- --------------------------------------------------------------------------------
Total Convertible Bonds
(identified cost $25,894,149) $ 10,971,500
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Utilities Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Corporate Bonds -- 2.7%
Principal
Amount
Security (000's omitted) Value
- -------------------------------------------------------------------------------
Bank Plus Corp., 12.00%, 7/18/07 $10,625 $ 8,553,125
NTL, Inc., 7.00%, 12/15/08 3,500 3,806,250
- -------------------------------------------------------------------------------
Total Corporate Bonds
(identified cost $14,518,750) $ 12,359,375
- -------------------------------------------------------------------------------
Commercial Paper -- 3.7%
Principal
Amount
Security (000's omitted) Value
- -------------------------------------------------------------------------------
General Electric Capital Corp., $17,224 $ 17,216,106
5.50%, 1/4/99
- -------------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $17,216,106) $ 17,216,106
- -------------------------------------------------------------------------------
Total Investments -- 99.1%
(identified cost $313,215,232) $455,339,610
- -------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.9% $ 4,276,475
- -------------------------------------------------------------------------------
Net Assets -- 100% $459,616,085
- -------------------------------------------------------------------------------
ADR - American Depositary Receipt
(1) Non-income producing security.
(2) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
(3) Foreign security.
See notes to financial statements
14
<PAGE>
Utilities Portfolio as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value
(identified cost, $313,215,232) $455,339,610
Cash 11,318
Receivable for investments sold 2,053,866
Dividends and interest receivable 2,166,894
Miscellaneous receivable 15,213
Tax reclaim receivable 64,282
- --------------------------------------------------------------------------------
Total assets $459,651,183
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable to affiliate for Trustees' fees $ 5,400
Other accrued expenses 29,698
- --------------------------------------------------------------------------------
Total liabilities $ 35,098
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $459,616,085
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $317,490,185
Net unrealized appreciation (computed on the basis
of identified cost) 142,125,900
- --------------------------------------------------------------------------------
Total $459,616,085
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended
December 31, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $617,760) $ 13,962,407
Interest 3,278,743
- --------------------------------------------------------------------------------
Total investment income $ 17,241,150
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 2,793,965
Trustees fees and expenses 25,859
Interest expense 678,374
Custodian fee 231,351
Legal and accounting services 51,349
Amortization of organization expenses 2,592
- --------------------------------------------------------------------------------
Total expenses $ 3,783,490
- --------------------------------------------------------------------------------
Net investment income $ 13,457,660
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 5,496,123
Foreign currency transactions 683
- --------------------------------------------------------------------------------
Net realized gain $ 5,496,806
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)--
Investments (identified cost basis) $ 75,247,697
Foreign currency (18,704)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 75,228,993
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 80,725,799
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 94,183,459
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Utilities 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 $ 13,457,660 $ 18,943,635
Net realized gain 5,496,806 34,486,025
Net change in unrealized
appreciation (depreciation) 75,228,993 12,004,904
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 94,183,459 $ 65,434,564
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 17,840,966 $ 47,969,480
Withdrawals (65,817,239) (155,062,140)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (47,976,273) $(107,092,660)
- --------------------------------------------------------------------------------
Net increase (decrease) in $ 46,207,186 $ (41,658,096)
net assets
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 413,408,899 $ 455,066,995
- --------------------------------------------------------------------------------
At end of year $ 459,616,085 $ 413,408,899
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Utilities Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.88% 0.75% 0.85% 0.84% 0.85%
Net investment income 3.13% 4.42% 5.94% 4.83% 5.22%
Portfolio turnover 78% 169% 166% 103% 107%
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing Analysis:
- ------------------------------------------------------------------------------------------------------------------------------------
Average daily balance of debt outstanding during
year (000's omitted) $ 10,594 $ 922 $ 217 $ 232 $ 3,137
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $459,616 $413,409 $455,067 $521,670 $ 505,567
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
Utilities Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
Utilities Portfolio (the Portfolio), (formerly the Total Return 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 on May 1, 1992. The Declaration of Trust permits the
Trustees to issue beneficial 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 -- Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there has
been no sale, at the mean between the closing bid and asked prices. Unlisted
securities are valued at the mean between the latest available bid and asked
prices. Options and financial futures contracts are valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
options or contracts are traded or, in the absence of a sale, the mean between
the last bid and asked prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value. 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 are appraised at their fair value as 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
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.
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 Option Accounting Principles -- Upon the writing of a covered call option,
an amount equal to the premium received by the Portfolio is included in the
Statement of Assets and Liabilities as a liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option written in accordance with the Portfolio's policies on
investment valuations discussed above. Premiums received from writing call
options which expire are treated as realized gains. Premiums received from
writing call options which are exercised or are closed are added to or offset
against the proceeds or amount paid on the transaction to determine the
realized gain or loss. The Portfolio, as writer of a call option, may have no
control over whether the underlying securities may be sold and, as a result,
bears the market risk for an unfavorable change in the price of the securities
underlying the written option.
F Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio
18
<PAGE>
Utilities Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
("margin maintenance") each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for book purposes as
unrealized gains or losses by the Portfolio. The Portfolio's investment in
financial futures contracts is designed only to hedge against anticipated
future changes in interest rates, security prices, commodity prices or
currency exchange rates. Should interest rates, security prices, commodity
prices or currency exchange rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. If the Portfolio enters into a closing transaction, the
Portfolio will realize for book purposes a gain or loss equal to the
difference between the value of the financial futures contract to sell and
the financial futures contract to buy.
G Delayed Delivery Transactions -- The Portfolio may purchase or sell
securities on a when-issued or forward commitment basis. Payment and
delivery may take place at a period in time after the date of the
transaction. At the time the transaction is negotiated, the price of the
security that will be delivered and paid for is fixed. Losses may arise due
to changes in the market value of the underlying securities if the
counterparty does not perform under the contract.
H Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
I Other -- Investment transactions are accounted for on a trade date basis.
J 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 revenue and expense during the reporting period. Actual results
could differ from those estimates.
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 based upon a percentage of average daily net
assets. For the year ended December 31, 1998, the fee was equivalent to
0.65% of the Portfolio's average daily net assets for such period and
amounted to $2,793,965. 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 year
ended December 31, 1998, no significant amounts have been deferred.
3 Investment Transactions
----------------------------------------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $339,994,859 and $414,843,659, respectively.
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at December 31, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 316,110,239
----------------------------------------------------------------------------
Gross unrealized appreciation $ 165,379,805
Gross unrealized depreciation (26,150,434)
----------------------------------------------------------------------------
Net unrealized appreciation $ 139,229,371
----------------------------------------------------------------------------
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
19
<PAGE>
Utilities Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
the participating portfolios and funds at the end of each quarter. The
average daily loan balance for the year ended December 31, 1998 was
$10,954,362 and the average interest rate was 6.19%. The maximum borrowing
outstanding at any time during the year ended December 31, 1998 was
$52,040,000. At December 31, 1998 the Portfolio did not have a loan
outstanding under this agreement.
6 Financial Instruments
----------------------------------------------------------------------------
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include
written options, forward foreign currency exchange contracts, and financial
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. The
notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered. At
December 31, 1998 there were no outstanding obligations under these
financial instruments.
7 Name Change
----------------------------------------------------------------------------
Effective May 1, 1998, the Total Return Portfolio changed its name to the
Utilities Portfolio.
20
<PAGE>
Utilities Portfolio as of December 31, 1998
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees and Investors
of Utilities Portfolio:
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In our opinion, the accompanying statement of assets and liabilities, including
the schedule 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 Utilities Portfolio (the "Portfolio")
(formerly Total Return Portfolio) at December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the supplementary data for each of
the five years then ended, in conformity with generally accepted accounting
principles. 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 generally accepted auditing standards 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, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
21
<PAGE>
Eaton Vance Utilities Fund as of December 31, 1998
INVESTMENT MANAGEMENT
Eaton Vance Utilities Fund
Officers Trustees
James B. Hawkes Jessica M. Bibliowicz
President and Trustee President and Chief Operating Officer,
John A. Levin & Co.
Edward E. Smiley, Jr. Director, Baker, Fentress & Company
Vice President
Donald R. Dwight
Michael B. Terry President, Dwight Partners, Inc.
Vice President
Samuel L. Hayes, III
James L. O'Connor Jacob H. Schiff Professor of Investment Banking,
Treasurer Emeritus, Harvard University Graduate School of
Business Administration
Alan R. Dynner
Secretary 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
Utilities Portfolio
Officers Independent Trustees
James B. Hawkes Jessica M. Bibliowicz
President and Trustee President and Chief Operating Officer,
John A. Levin & Co.
Timothy O'Brien 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 Banking,
Alan R. Dynner Emeritus, Harvard University Graduate School of
Secretary 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
22
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<PAGE>
Investment Adviser of
Utilities Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of
Eaton Vance Utilities Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Accountants
PricewaterhouseCoopers LLP
One Post Office Square
Boston, MA 02109
Eaton Vance Utilities Fund
24 Federal Street
Boston, MA 02110
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
