<PAGE>
[LOGO] [Picture of Pen]
ANNUAL REPORT DECEMBER 31, 1999
EATON VANCE
[Picture SPECIAL
of EQUITIES
Flag] FUND
Global Management-Global Distribution
[Picture of Stock Market]
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
LETTER TO SHAREHOLDERS
[Picture] Eaton Vance Special Equities Fund Class A shares had a
total return of 42.30% for the year ended December 31,
James B. Hawkes 1999. That return was the result of an increase in net
President asset value per share (NAV) from $7.50 on December 31,
1998 to $9.39 on December 31, 1999, and the reinvestment
of $1.114 in capital gain distributions.(1)
Class B shares had a total return of 41.36% for the same period, the result
of an increase in NAV from $14.82 on December 31, 1998 to $19.67 on December
31, 1999, and the reinvestment of $1.114 in capital gain distributions.(1)
Class C shares had a total return of 40.90% for the same period, the result
of an increase in NAV from $11.00 on December 31, 1998 to $14.22 on December
31, 1999, and the reinvestment of $1.114 in capital gain distributions.(1)
A robust economy and tame inflation
provided an excellent backdrop for
the U.S. equity markets in 1999...
The U.S. economy continued to expand strongly in the past year, with gross
domestic product rising at a 5.8% pace in the fourth quarter. With
unemployment at a 30-year low, consumer confidence remained high, providing a
boost to retail activity. Interestingly, though, the robust economy and
ebullient consumer attitudes have not resulted in higher inflation. The
Federal Reserve raised its benchmark Federal Funds rate three times during
the year in a preemptive strike. However, continuing global competition,
increased productivity and the enhanced use of technology have generally
helped keep inflation pressures in check.
The new century promises
major opportunities in
emerging growth companies...
On the strength of innovation and technological advances, many small
companies generated strong revenue growth in 1999. Developments in the
Internet and biotechnology provided a glimpse of changes in store as the new
century approaches. With the integration of the world economy, small
companies now have a global market to cultivate, suggesting enormous
opportunities in emerging growth stocks. Eaton Vance Special Equities Fund
will continue to focus on those opportunities.
As we look ahead, we can certainly anticipate continued volatility in the
stock market. By historical standards, the valuations of many stocks and
certain market sectors are quite extended. Over the long-term, however, we
remain confident about the superior earnings potential of selected small-cap
stocks. In the following pages, portfolio manager Jack Smiley discusses the
past 12 months and offers his outlook for emerging growth companies in the
year ahead.
Sincerely,
JAMES B. HAWKES
James B. Hawkes
President
February 9, 2000
- -------------------------------------------------------------------------------
FUND INFORMATION
AS OF DECEMBER 31, 1999
Performance(2) Class A Class B Class C
- -------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- -------------------------------------------------------------------------------
One Year 42.30% 41.36% 40.90%
Five Years 23.49 21.26 20.96
Ten Years 15.83 N.A. N.A.
Life of Fund+ 10.18 19.27 20.14
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -------------------------------------------------------------------------------
One Year 34.07% 36.36% 39.90%
Five Years 22.03 21.08 20.96
Ten Years 15.15 N.A. N.A.
Life of Fund+ 9.98 19.19 20.14
+Inception dates: Class A: 4/22/68; Class B: 8/22/94; Class C: 11/17/94
Ten Largest Holdings(3)
- ------------------------------------------------------
Affiliated Computer Services, Inc. Class A 1.8%
BISYSGroup, Inc. (The) 1.8
The Men's Wearhouse, Inc. 1.7
Diamond Technology Partners 1.7
Great Plains Software, Inc. 1.7
Dallas Semiconductor Corp. 1.6
United Stationers 1.6
Waddell & Reed Financial, Inc. Class A 1.5
Pegasus Systems, Inc. 1.4
MiniMed, Inc. 1.3
(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 shares and Class C shares. (2) 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. 1-year SECreturn for Class C reflects 1%
CDSC. (3) As of 12/31/99, ten largest holdings account for 16.1% of the
Portfolio's investments, determined by dividing the total market value of the
holdings by the total investments of the Portfolio. 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.
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
MANAGEMENT DISCUSSION
[Picture] AN INTERVIEW WITH
EDWARD E. (JACK) SMILEY, JR.,
Edward E. (Jack) Smiley, Jr. PORTFOLIO MANAGER OF
Portfolio Manager EATON VANCE SPECIAL EQUITIES FUND
Q: Jack, 1999 was a remarkable
year for the U.S. equity markets. How would you characterize
the climate for emerging growth stocks?
A: The climate was vastly improved in 1999, as emerging growth
stocks gained ground on their large-cap counterparts. That
followed a period of several years during which the small-cap
universe has significantly underperformed large-caps. These
stocks were extremely undervalued, a discrepancy exaggerated
by the institutional trend toward indexing, which, of
necessity, resulted in a flow of investments toward large-cap
stocks.
That investment flow shifted somewhat in 1999. With large-cap
valuations at historical highs, investors started taking a
look at smaller stocks. Many smaller companies in technology,
communications and biotech have established strong earnings
momentum in recent years. At recent undervalued levels,
investors have taken notice.
Q: What is behind the earnings growth of these smaller
companies?
A: In many segments of the economy, smaller companies are
using technology to develop new products and services.
Technology has generally helped increase productivity
throughout the economy, making businesses more efficient,
improving inventory management and reducing the paperwork
logjam in areas such as health care. Companies that have
contributed to this growing trend have enjoyed strong demand
for their products. And, because they contribute to increased
productivity, product demand tends to be less impacted by
fluctuations in the economy.
Q: What was the main driver of the Fund's performance during
the past year?
A: One of the Fund's most successful themes in 1999 was the
"business-to-business" segment of the economy. Commerce One is
a good example of the Fund's investments in this area. Through
its Global Training Web, the company provides electronic
commerce capabilities that link business buyers with vendors
over the Internet. By automating the supply chain, businesses
can acquire goods more efficiently and at the best price
available. In addition to its customer base of utilities,
finance, telecom and transportation companies, Commerce One
recently reached an agreement to provide electronic commerce
solutions for auto giant General Motors.
Five Largest Industry Weightings(1)
- --------------------------------------------
Information Services 12.1%
Computer Software 8.6%
Business Services 8.0%
Seniconductors 6.8%
Oil & Gas Exploration 5.4%
(1)Because the Portfolio is actively managed, Industry
Weightings are subject to change.
- -------------------------------------------------------------------------------
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.
- -------------------------------------------------------------------------------
3
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
MANAGEMENT DISCUSSION CONT'D
Sapient Corp. uses client/server and web-based technologies to
help clients -- which include large multinationals as well as
start-ups -- to achieve their business goals. Sapient's
services include packaged software solutions, custom software
development and business consulting.
Q: Talk of the Internet seems to dominate the news these days.
What ways have you found to participate in the sector?
A: We've owned a number of companies that provide services to
companies doing business on the Internet. Diamond Technology
Partners is a good example. The company helps its clients
develop strategies for participating in e-commerce. Clearly,
there has been a rush to the Internet by companies across many
industries. But without good planning and strategy, these
companies risk becoming just another "dot.com." Diamond has
helped its customers fine-tune their Internet strategies and
optimize the Internet as a marketing tool. As a result, the
company enjoyed strong revenue growth, and a 46% jump in
earnings in the first half of 1999.
Q: Are semiconductors still part of the Fund's investment
strategy?
A: Yes. The semiconductor sector has been a major beneficiary
of the continuing fast growth in communications, business
networking and the Internet, and the Fund has had a
significant exposure to chip manufacturers. Applied Micro
Circuits Corp. is a leading manufacturer of high-bandwidth
silicon for fiber optic networks. Through the use of new
process technologies, the company is able to produce
integrated circuits that enable telecom service providers to
transport increased volumes of voice and data through the
fiber optic networks. The company enjoyed strong revenue
growth and improving margins in its second quarter and saw
earnings rise 29.8% over the same period a year ago.
Elsewhere in the semiconductor industry, Dallas Semiconductor
Corp. makes high-performance integrated circuits. With a
customer base that includes the telecom, industrial, medical
and consumer markets, the company's products have applications
in areas such as wireless handsets, networking, data storage,
servers and a wide range of industrial equipment.
Q: What other areas have you found attractive for emerging
companies?
A: Millipore Corp. makes products that employ membrane, or
separation, technology. The company is enjoying accelerating
earnings growth from their semiconductor supply products as
well as for their specialty products for biotech and
pharmaceutical manufacturers. To date, the market has not
given full credit for these growth engines. Management
continues to improve operating margins by focusing on
end-markets with excellent growth potential.
In the advertising area, Catalina Marketing Corp. performs
marketing services for retailers. In addition to advertising,
in-store promotions and discount coupons, the company provides
retail stores and manufacturers with increasingly
sophisticated marketing data on the buying habits of shoppers.
Q: Were there any sectors of the Fund that underperformed in
1999?
A: Yes. Financial stocks lagged the market considerably,
finding it difficult to advance in an environment of rising
interest rates. However, we did find some selected
opportunities in the financial area. City National Corp. is
the largest independent bank operating in Southern California.
With 47 offices throughout the area and $6.7 billion in
assets, City National has benefited from the strong California
economy. Recently the bank introduced its eLink product, which
offers online banking, brokerage, bill payment and customer
access to accounts and services.
4
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
MANAGEMENT DISCUSSION CONT'D
The energy sector had a very good year in absolute terms, but,
like many value areas, trailed the stampede to technology.
Some of our energy holdings turned in solid performances in
1999 and should continue to benefit from higher energy prices.
Newfield Exploration Co., for example, is an independent oil
and gas company involved in exploration and acquisition of
energy properties, primarily in the Gulf of Mexico. The
company has benefited in 1999 from a 31% increase in
production and higher prices for gas and oil. The company also
began to expand international ventures in 1999.
Q: Jack, what is your outlook for emerging growth stocks in
the coming year?
A: Although emerging growth stocks continued the recovery
started late in 1998, I believe they still have a good deal of
ground to make up relative to large-cap stocks. According to
historical standards, I believe that the gap that has existed
in recent years is very likely to narrow. And, while I believe
that technology and Internet-related companies should continue
to register strong revenue growth, it's likely that some of
the heretofore neglected areas of the market -- such as
retailing, energy and financial services -- may begin to
emerge.
The current economic expansion has now lasted longer than any
other post war recovery. Through much of that recovery, the
market has been dominated by large-cap stocks. As I indicated,
I believe that we have entered the early stages of a recovery
in smaller stocks. Small-cap companies with exciting new
products and services have the potential to be the industry
leaders of the future. I'm confident that the Fund is
positioned to share in their future long-term growth.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EATON VANCE SPECIAL EQUITIES FUND, CLASS A VS.
STANDARD & POOR'S SMALL CAP 600
FUND/NAVFUND/MOPS&P SC 600
12/31/89 $10,000 $9,421 $10,000
1/31/90 $9,224 $8,690 $9,078
2/28/90 $9,636 $9,078 $9,301
3/31/90 $10,071 $9,488 $9,591
4/30/90 $9,820 $9,251 $9,192
5/31/90 $11,174 $10,527 $9,841
6/30/90 $11,458 $10,795 $9,834
7/31/90 $11,061 $10,420 $9,313
8/31/90 $9,858 $9,287 $8,165
9/30/90 $9,115 $8,587 $7,405
10/31/90 $8,840 $8,328 $6,883
11/30/90 $9,650 $9,091 $7,381
12/31/90 $10,250 $9,656 $7,631
1/31/91 $11,289 $10,635 $8,179
2/28/91 $12,278 $11,567 $9,105
3/31/91 $13,006 $12,253 $9,678
4/30/91 $12,720 $11,983 $9,700
5/31/91 $13,583 $12,796 $10,082
6/30/91 $12,700 $11,964 $9,648
7/31/91 $13,709 $12,915 $10,028
8/31/91 $14,070 $13,255 $10,467
9/30/91 $13,884 $13,080 $10,555
10/31/91 $14,472 $13,633 $10,927
11/30/91 $14,020 $13,208 $10,436
12/31/91 $16,126 $15,192 $11,332
1/31/92 $15,991 $15,064 $12,193
2/28/92 $16,177 $15,240 $12,449
3/31/92 $15,245 $14,362 $12,101
4/30/92 $14,585 $13,740 $11,614
5/31/92 $14,517 $13,676 $11,747
6/30/92 $13,941 $13,133 $11,297
7/31/92 $14,703 $13,851 $11,718
8/31/92 $14,432 $13,596 $11,384
9/30/92 $14,720 $13,867 $11,708
10/31/92 $15,110 $14,234 $12,195
11/30/92 $16,296 $15,352 $13,244
12/31/92 $16,563 $15,604 $13,715
1/31/93 $16,914 $15,934 $14,083
2/28/93 $15,698 $14,788 $13,682
3/31/93 $16,011 $15,083 $14,204
4/30/93 $14,721 $13,868 $13,687
5/31/93 $15,734 $14,823 $14,422
6/30/93 $15,679 $14,771 $14,513
7/31/93 $15,421 $14,528 $14,663
8/31/93 $16,213 $15,274 $15,437
9/30/93 $16,692 $15,725 $15,997
10/31/93 $16,858 $15,882 $16,304
11/30/93 $16,490 $15,534 $15,721
12/31/93 $16,752 $15,782 $16,290
1/31/94 $16,971 $15,988 $16,674
2/28/94 $16,872 $15,894 $16,626
3/31/94 $15,401 $14,509 $15,432
4/30/94 $15,401 $14,509 $15,664
5/31/94 $14,984 $14,116 $15,353
6/30/94 $14,189 $13,367 $14,784
7/31/94 $14,388 $13,554 $14,969
8/31/94 $15,699 $14,790 $15,988
9/30/94 $15,222 $14,340 $15,905
10/31/94 $15,520 $14,621 $15,746
11/30/94 $14,884 $14,022 $15,144
12/31/94 $15,144 $14,267 $15,511
1/31/95 $14,990 $14,122 $15,292
2/28/95 $15,629 $14,723 $15,922
3/31/95 $16,003 $15,076 $16,244
4/30/95 $16,003 $15,076 $16,606
5/31/95 $16,179 $15,242 $16,867
6/30/95 $16,553 $15,594 $17,791
7/31/95 $17,544 $16,527 $19,152
8/31/95 $18,028 $16,984 $19,568
9/30/95 $17,984 $16,942 $20,067
10/31/95 $17,324 $16,320 $19,077
11/30/95 $18,050 $17,004 $19,831
12/31/95 $18,675 $17,593 $20,158
1/31/96 $18,628 $17,549 $20,200
2/28/96 $19,330 $18,210 $20,863
3/31/96 $19,424 $18,298 $21,309
4/30/96 $20,290 $19,114 $22,533
5/31/96 $21,132 $19,908 $23,332
6/30/96 $20,945 $19,731 $22,418
7/31/96 $19,353 $18,232 $20,875
8/31/96 $20,290 $19,114 $22,166
9/30/96 $21,858 $20,591 $23,139
10/31/96 $22,185 $20,900 $22,979
11/30/96 $23,168 $21,826 $24,172
12/31/96 $23,112 $21,773 $24,454
1/31/97 $23,758 $22,381 $24,860
2/28/97 $21,872 $20,605 $24,346
3/31/97 $20,323 $19,146 $23,097
4/30/97 $20,323 $19,146 $23,381
5/31/97 $23,349 $21,996 $26,128
6/30/97 $24,357 $22,946 $27,283
7/31/97 $25,366 $23,897 $28,999
8/31/97 $25,213 $23,753 $29,730
9/30/97 $26,405 $24,875 $31,695
10/31/97 $25,733 $24,242 $30,326
11/30/97 $25,488 $24,012 $30,104
12/31/97 $26,388 $24,859 $30,713
1/31/98 $26,350 $24,824 $30,114
2/28/98 $28,502 $26,851 $32,857
3/31/98 $29,873 $28,142 $34,112
4/30/98 $30,402 $28,640 $34,313
5/31/98 $28,324 $26,684 $32,495
6/30/98 $29,684 $27,964 $32,586
7/31/98 $27,720 $26,114 $30,096
8/31/98 $22,282 $20,991 $24,288
9/30/98 $24,661 $23,232 $25,774
10/31/98 $25,794 $24,300 $26,970
11/30/98 $27,569 $25,972 $28,488
12/31/98 $30,563 $28,792 $30,306
1/31/99 $30,808 $29,023 $29,927
2/28/99 $28,200 $26,566 $27,231
3/31/99 $29,119 $27,432 $27,582
4/30/99 $29,370 $27,668 $29,405
5/31/99 $30,123 $28,378 $30,120
6/30/99 $32,758 $30,861 $31,834
7/31/99 $32,382 $30,506 $31,553
8/31/99 $32,131 $30,269 $30,165
9/30/99 $33,470 $31,531 $30,292
10/31/99 $35,436 $33,383 $30,216
11/30/99 $38,574 $36,339 $31,488
12/31/99 $43,490 $40,970 $34,067
Performance** Class A Class B Class C
- -------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- -------------------------------------------------------------------------------
One Year 42.30% 41.36% 40.90%
Five Years 23.49 21.26 20.96
Ten Years 15.83 N.A. N.A.
Life of Fund+ 10.18 19.27 20.14
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- -------------------------------------------------------------------------------
One Year 34.07% 36.36% 39.90%
Five Years 22.03 21.08 20.96
Ten Years 15.15 N.A. N.A.
Life of Fund+ 9.98 19.19 20.14
+Inception dates: Class A: 4/22/68; Class B: 8/22/94; Class C: 11/17/94
*Source: TowersData, Bethesda, MD.
The chart compares the Fund's total return with that of the S&P 600
SmallCap Index, a broad-based, unmanaged market index of small-capitalization
stocks. Returns are calculated by determining the percentage change in net
asset value (NAV) with all distributions reinvested. The lines on the chart
represent the total returns of $10,000 hypothetical investments in the Fund
and the Index. The Index's total return does not reflect commissions or
expenses that would have been incurred if an investor individually purchased
or sold the securities represented in the Indices. It is not possible to
invest directly in an Index. An investment in the Fund's Class B shares on
8/22/94 at net asset value would have been worth $25,721 on December 31,
1999; $25,621 including applicable CDSC. An investment in the Fund's Class C
shares on 11/17/94 at net asset value would have been worth $25,589 on
December 31, 1999.
**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 SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------
Investment in Special Equities Portfolio,
at value (identified cost, $78,941,339) $107,823,348
Receivable for Fund shares sold 30,515
- -----------------------------------------------------------
TOTAL ASSETS $107,853,863
- -----------------------------------------------------------
Liabilities
- -----------------------------------------------------------
Payable to affiliate for service fees $ 16,270
Payable for Fund shares redeemed 22,343
Accrued expenses 79,295
- -----------------------------------------------------------
TOTAL LIABILITIES $ 117,908
- -----------------------------------------------------------
NET ASSETS $107,735,955
- -----------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------
Paid-in capital $ 65,564,767
Accumulated undistributed net realized gain
from Portfolio (computed on the basis of
identified cost) 13,289,179
Net unrealized appreciation from Portfolio
(computed on the basis of
identified cost) 28,882,009
- -----------------------------------------------------------
TOTAL $107,735,955
- -----------------------------------------------------------
Class A Shares
- -----------------------------------------------------------
NET ASSETS $100,008,879
SHARES OUTSTANDING 10,656,147
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(Net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.39
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 94.25 of $9.39) $ 9.96
- -----------------------------------------------------------
Class B Shares
- -----------------------------------------------------------
NET ASSETS $ 6,507,986
SHARES OUTSTANDING 330,826
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE (NOTE 6)
(Net assets DIVIDED BY shares of
beneficial interest outstanding) $ 19.67
- -----------------------------------------------------------
Class C Shares
- -----------------------------------------------------------
NET ASSETS $ 1,219,090
SHARES OUTSTANDING 85,701
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE (NOTE 6)
(Net assets DIVIDED BY shares of
beneficial interest outstanding) $ 14.22
- -----------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
On sales of $50,000 or more, the offering price of Class A
shares is reduced.
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
<S> <C>
Investment Income
- -----------------------------------------------------------
Dividends allocated from Portfolio $ 215,434
Interest allocated from Portfolio 144,329
Expenses allocated from Portfolio (622,968)
- -----------------------------------------------------------
NET INVESTMENT LOSS FROM PORTFOLIO $ (263,205)
- -----------------------------------------------------------
Expenses
- -----------------------------------------------------------
Trustees fees and expenses $ 1,822
Distribution and service fees
Class A 119,057
Class B 38,391
Class C 9,041
Transfer and dividend disbursing agent fees 104,606
Registration fees 38,475
Legal and accounting services 29,753
Printing and postage 20,427
Amortization of organization expenses 13,754
Custodian fee 16,139
Miscellaneous 17,565
- -----------------------------------------------------------
TOTAL EXPENSES $ 409,030
- -----------------------------------------------------------
NET INVESTMENT LOSS $ (672,235)
- -----------------------------------------------------------
Realized and Unrealized Gain (Loss) from Portfolio
- -----------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $23,608,127
- -----------------------------------------------------------
NET REALIZED GAIN $23,608,127
- -----------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 8,998,968
- -----------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 8,998,968
- -----------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $32,607,095
- -----------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $31,934,860
- -----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- -----------------------------------------------------------------
From operations --
Net investment loss $ (672,235) $ (600,344)
Net realized gain 23,608,127 8,602,335
Net change in
unrealized
appreciation (depreciation) 8,998,968 3,223,462
- -----------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $ 31,934,860 $ 11,225,453
- -----------------------------------------------------------------
Distributions to
shareholders --
From net realized gain
Class A $ (10,854,787) $ (5,187,831)
Class B (322,759) (142,469)
Class C (82,724) (33,753)
- -----------------------------------------------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ (11,260,270) $ (5,364,053)
- -----------------------------------------------------------------
Transactions in shares of beneficial
interest --
Proceeds from sale of
shares
Class A $ 6,150,129 $ 1,893,610
Class B 2,077,454 1,665,734
Class C 656,838 1,827,760
Issued in
reorganization of
EV Marathon and EV
Classic Special
Equities Funds
Class B -- 3,498,869
Class C -- 1,401,510
Net asset value of
shares issued to
shareholders in
payment of
distributions declared
Class A 9,699,962 4,613,846
Class B 294,993 130,570
Class C 82,601 33,747
Cost of shares
redeemed
Class A (8,810,063) (11,222,902)
Class B (1,140,585) (1,730,770)
Class C (500,354) (2,566,571)
- -----------------------------------------------------------------
NET INCREASE (DECREASE)
IN NET ASSETS FROM
FUND
SHARE TRANSACTIONS $ 8,510,975 $ (454,597)
- -----------------------------------------------------------------
NET INCREASE IN NET
ASSETS $ 29,185,565 $ 5,406,803
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- -----------------------------------------------------------------
At beginning of year $ 78,550,390 $ 73,143,587
- -----------------------------------------------------------------
AT END OF YEAR $ 107,735,955 $ 78,550,390
- -----------------------------------------------------------------
Accumulated undistributed
net investment income
included in net assets
- -----------------------------------------------------------------
AT END OF YEAR $ -- $ --
- -----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------
1999(1) 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of
year $ 7.500 $ 6.990 $ 8.950 $ 7.980 $ 6.880
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment loss $ (0.060) $(0.055) $(0.032) $(0.009) $(0.009)
Net realized and unrealized gain 3.064 1.126 0.922 1.874 1.599
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 3.004 $ 1.071 $ 0.890 $ 1.865 $ 1.590
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------------
From net realized gain $ (1.114) $(0.561) $(2.706) $(0.895) $(0.490)
In excess of net realized gain -- -- (0.144) -- --
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (1.114) $(0.561) $(2.850) $(0.895) $(0.490)
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $ 9.390 $ 7.500 $ 6.990 $ 8.950 $ 7.980
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(2) 42.30% 15.82% 14.18% 23.76% 23.31%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year
(000's omitted) $100,009 $73,896 $73,144 $76,999 $70,456
Ratios (As a percentage of average
daily net assets):
Expenses(3) 1.21% 1.23% 1.12% 1.04% 1.08%
Net investment loss (0.77)% (0.76)% (0.46)% (0.10)% (0.12)%
Portfolio Turnover of the
Portfolio 103% 116% 156% 91% 81%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) Net investment loss per share was computed using average
shares outstanding.
(2) 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.
(3) Includes the Fund's share of the Portfolio's allocated
expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1999(1) 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value -- Beginning of year $14.820 $13.320
- -----------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------
Net investment loss $(0.245) $(0.162)
Net realized and unrealized gain 6.209 2.223
- -----------------------------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 5.964 $ 2.061
- -----------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------
From net realized gain $(1.114) $(0.561)
- -----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(1.114) $(0.561)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $19.670 $14.820
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN(2) 41.36% 15.74%
- -----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 6,508 $ 3,946
Ratios (As a percentage of average daily net assets):
Expenses(3) 2.01% 2.09%
Net investment loss (1.57)% (1.25)%
Portfolio Turnover of the Portfolio 103% 116%
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) Net investment loss per share was computed using average
shares outstanding.
(2) 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.
(3) Includes the Fund's share of the Portfolio's allocated
expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
-----------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------------
1999(1) 1998
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------
Net asset value -- Beginning of year $11.000 $ 9.960
- -----------------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------------
Net investment loss $(0.183) $(0.241)
Net realized and unrealized gain 4.517 1.842
- -----------------------------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 4.334 $ 1.601
- -----------------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------------
From net realized gain $(1.114) $(0.561)
- -----------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $(1.114) $(0.561)
- -----------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF YEAR $14.220 $11.000
- -----------------------------------------------------------------------------------------------------
TOTAL RETURN(2) 40.90% 16.44%
- -----------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $ 1,219 $ 709
Ratios (As a percentage of average daily net assets):
Expenses(3) 2.04% 2.11%
Net investment loss (1.61)% (1.24)%
Portfolio Turnover of the Portfolio 103% 116%
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
(1) Net investment loss per share was computed using average
shares outstanding.
(2) 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.
(3) Includes the Fund's share of the Portfolio's allocated
expenses.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance Special Equities Fund (the Fund), is a diversified fund which is
a series of Eaton Vance Special Investment Trust (the Trust). The Trust is an
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 offers three classes of
shares: Class A, Class B and Class C shares. Class A shares are generally
sold subject to a sales charge imposed at 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). Each class represents a pro rata interest
in the Fund, but votes separately on class-specific matters and (as noted
below) is subject to different expenses. 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 Special Equities
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
(99.9% at December 31, 1999). 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 Valuation -- 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 $11,260,270 as long-term taxable gain
distribution for its taxable year ended December 31, 1999.
D Deferred Organization Expenses -- Costs incurred by the Fund in connection
with its organization, including registration costs, were amortized on the
straight-line basis over five years and are fully amortized at December 31,
1999.
E Other -- Investment transactions are accounted for on a trade-date basis.
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 Distributions to Shareholders
- -------------------------------------------
The Fund's policy is to make a distribution at least annually of the net
investment income allocated to the Fund by the Portfolio (less the Fund's
direct and allocated expenses) and to distribute at least annually
substantially all of the net realized capital gains so allocated.
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
temporary over-distributions 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.
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
11
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
beneficial interest (without par value). Such shares may be issued in a
number of different series (such as the Fund) and classes. Transactions in
Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CLASS A 1999 1998
<S> <C> <C>
------------------------------------------------------------
Sales 779,005 256,223
Issued to shareholders electing
to receive payments of
distributions in Fund shares 1,165,040 653,229
Redemptions (1,136,580) (1,529,766)
------------------------------------------------------------
NET INCREASE (DECREASE) 807,465 (620,314)
------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CLASS B 1999 1998
<S> <C> <C>
------------------------------------------------------------
Sales 126,080 120,423
Issued to shareholders electing
to receive payments of
distributions in Fund shares 16,893 9,385
Redemptions (78,434) (126,187)
Issued to EV Marathon Special
Equities Fund shareholders -- 262,666
------------------------------------------------------------
NET INCREASE 64,539 266,287
------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
CLASS C 1999 1998
<S> <C> <C>
------------------------------------------------------------
Sales 57,804 172,684
Issued to shareholders electing
to receive payments of
distributions in Fund shares 6,583 3,262
Redemptions (43,151) (252,164)
Issued to EV Classic Special
Equities Fund shareholders -- 140,683
------------------------------------------------------------
NET INCREASE 21,236 64,465
------------------------------------------------------------
</TABLE>
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 organizations, officers and
Trustees receive remuneration for their services to the Fund out of such
investment adviser fee. The Fund was informed that Eaton Vance Distributors,
Inc. (EVD), a subsidiary of EVM and the Fund's principal underwriter,
received $4,219 from the Fund as its portion of the sales charge on sales of
Class A shares for the year ended December 31, 1999.
Certain officers and Trustees of the Fund and of the Portfolio are officers
of the above organizations.
5 Distribution and Service Plans
- -------------------------------------------
The Fund has in effect distribution plans for Class B shares (Class B Plan)
and Class C shares (Class C Plan) pursuant to Rule 12b-1 under the Investment
Company Act of 1940 and a service plan for Class A shares (Class A Plan)
(collectively, the Plans). The Class B and Class C Plans require the Fund to
pay 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% 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 amounts theretofore paid to EVD by each respective class. The
Fund paid or accrued $30,049 and $6,888 for Class B and Class C shares,
respectively, to or payable to EVD for the year ended December 31, 1999,
representing 0.75% of the average daily net assets for Class B and Class C
shares. At December 31, 1999, the amount of Uncovered Distribution Charges of
EVD calculated under the Class B and Class C Plans were approximately $88,000
and $317,000 for Class B and Class C shares, respectively.
The Plans authorize the Fund to make payments of service fees to EVD,
investment dealers and other persons in amounts not exceeding 0.25% of the
Fund's average daily net assets attributable to Class A, Class B and Class C
shares for each fiscal year. The Trustees initially implemented the Plans by
authorizing the Fund to make quarterly payments of service fees to EVD and
investment dealers equal to 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 the
Fund shares sold by such persons and remaining outstanding for at least one
year. On October 4, 1999, the Trustees approved service fee payments, equal
to 0.25% per annum of the Fund's average daily net assets attributable to
Class A and Class B shares for any fiscal year on shares of the Fund sold on
or
12
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
after October 12, 1999. The Class C Plan permits 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, 1999 amounted to $119,057, $8,342, and $2,153 for
Class A, Class B, and Class C shares, respectively.
Certain officers and Trustees of the Fund are officers of the above
organization.
6 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions 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 if 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. The 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. Class C shares will be subject to a 1% CDSC if redeemed
within one year of purchase. No CDSC is levied on shares which have been sold
to EVM or its affiliates or to their respective employees or clients and may
be waived under certain other limited conditions. CDSC charges are paid to
EVD to reduce the amount of Uncovered Distribution Charges calculated under
the Fund's Class B and Class C Distribution Plans (see Note 5). CDSC charges
received when no Uncovered Distribution Charges exist will be retained by the
Fund. The Fund was informed that EVD received approximately $20,000 and $300
of CDSC paid by shareholders for Class B shares and Class C shares,
respectively, for the year ended December 31, 1999.
7 Investment Transactions
- -------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio aggregated
$9,273,480 and $12,544,323, respectively, for the year ended December 31,
1999.
8 Transfer of Net Assets
- -------------------------------------------
On January 1, 1998, the Fund, formerly known as the EV Traditional Special
Equities Fund, acquired the net assets of the EV Marathon Special Equities
Fund and the EV Classic Special Equities Fund pursuant to an Agreement and
Plan of Reorganization dated June 23, 1997. In accordance with the agreement,
the Fund, at the closing, issued 262,666 Class B shares and 140,683 Class C
shares of the Fund having an aggregate value of $3,498,869 and $1,401,510,
respectively. As a result, the Fund issued one Class B share and one Class C
share for each share of EV Marathon Special Equities Fund and EV Classic
Special Equities Fund, respectively. The transaction was structured for tax
purposes to qualify as a tax free reorganization under the Internal Revenue
Code. The EV Marathon Special Equities Fund's and EV Classic Special Equities
Fund's net assets at the date of the transaction were $3,498,869 and
$1,401,510, respectively, including $605,373 and $372,397 of unrealized
appreciation. Directly after the merger, the combined net assets of the Fund
were $78,043,966 with a net asset value of $6.99, $13.32 and $9.96 for
Class A, Class B and Class C shares, respectively.
13
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
INDEPENDENT ACCOUNTANTS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF EATON VANCE SPECIAL EQUITIES 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 Special Equities Fund (the "Fund") at December 31, 1999, and the
results of its operations, the changes in its net assets and the financial
highlights for the periods indicated, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 31, 2000
14
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 96.5%
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Advertising -- 2.0%
- -------------------------------------------------------------
Catalina Marketing Corp.(1) 10,000 $ 1,157,500
Specialized market
research.
Harte-Hanks Communications,
Inc. 45,000 978,750
Owns and operates an
international direct
marketing company.
- -------------------------------------------------------------
$ 2,136,250
- -------------------------------------------------------------
Auto and Parts -- 0.8%
- -------------------------------------------------------------
Gentex Corp.(1) 30,000 $ 832,500
Sells automotive related
parts and smoke detectors.
- -------------------------------------------------------------
$ 832,500
- -------------------------------------------------------------
Banks - Regional -- 3.1%
- -------------------------------------------------------------
City National Corp. 40,000 $ 1,317,500
Offers a wide variety of
personal and business
banking services.
Cullen/Frost Bankers, Inc. 43,000 1,107,250
The largest independent
bank holding company
in Texas.
Peoples Heritage Financial
Group, Inc. 60,000 903,750
Operates and manages banks
in the Northeast.
- -------------------------------------------------------------
$ 3,328,500
- -------------------------------------------------------------
Banks and Money Services -- 1.2%
- -------------------------------------------------------------
Bank United Corp. 25,000 $ 681,250
Operates 70 branch bank
systems in Texas.
Nextcard, Inc.(1) 22,000 635,250
Provides credit card
services over the Internet.
- -------------------------------------------------------------
$ 1,316,500
- -------------------------------------------------------------
Biotechnology -- 2.9%
- -------------------------------------------------------------
Genzyme Transgenics
Corp.(1) 30,000 $ 378,750
Biotechnology firm
specializing in the
engineering of proteins.
Human Genome Sciences,
Inc.(1) 8,000 1,221,000
Researches and develops
pharmaceutical and
diagnostic products.
Sepracor, Inc.(1) 8,000 793,500
Develops pharmaceutical
drugs.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Biotechnology (continued)
- -------------------------------------------------------------
Transkaryotic Therapies,
Inc.(1) 15,000 $ 577,500
Biotechnology firm
specializing in the
research of gene therapies.
Vertex Pharmaceuticals,
Inc.(1) 6,000 210,000
Develops drugs for use in
HIV, cancer and other
diseases.
- -------------------------------------------------------------
$ 3,180,750
- -------------------------------------------------------------
Broadcasting and Cable -- 2.0%
- -------------------------------------------------------------
Entercom Communications
Corp.(1) 18,000 $ 1,188,000
Radio station operator.
Hispanic Broadcasting
Corp.(1) 7,000 645,532
Spanish-language radio
broadcasting company
Radio Unica Communications
Corp.(1) 800 23,100
Operates and broadcasts
radio stations in Hispanic
markets.
Tivo, Inc.(1) 9,000 303,750
Provides a service that
allows customers to store
and record television
programs.
- -------------------------------------------------------------
$ 2,160,382
- -------------------------------------------------------------
Business Products and Services -- 1.8%
- -------------------------------------------------------------
Apollo Group, Inc.(1) 28,000 $ 561,750
Adult education services.
CN Maximus, Inc.(1) 40,000 1,357,500
Management consulting
group.
- -------------------------------------------------------------
$ 1,919,250
- -------------------------------------------------------------
Business Services - Miscellaneous -- 8.0%
- -------------------------------------------------------------
American Management
Systems, Inc.(1) 15,000 $ 470,625
International consulting
firm, designing
technological solutions.
Diamond Technology
Partners(1) 21,000 1,804,687
Management consulting firm.
DoubleClick, Inc.(1) 3,000 759,187
Gathers customer
information through the
Internet.
Freemarkets, Inc.(1) 80 27,305
Operates on-line auctions
for companies seeking
custom components.
Iron Mountain, Inc.(1) 31,000 1,218,687
One of the largest record
management companies in the
U.S.
On Assignment, Inc.(1) 25,000 746,875
Places professionals in
need of temporary help.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Business Services - Miscellaneous (continued)
- -------------------------------------------------------------
Pegasus Systems, Inc.(1) 25,000 $ 1,507,813
Transaction processing for
the hotel industry.
Provant, Inc.(1) 45,000 1,136,250
Offers classroom
instruction and training
programs.
Whittman-Hart, Inc.(1) 18,000 965,250
Information technology
consulting and system
integration services.
- -------------------------------------------------------------
$ 8,636,679
- -------------------------------------------------------------
Communications Equipment -- 5.4%
- -------------------------------------------------------------
Ditech Communications
Co.(1) 7,000 $ 654,500
Provides equipment and
services for
communication enhancement.
Glenayre Technologies,
Inc.(1) 103,000 1,165,187
Specializes in equipment
used for voice messaging.
Pinnacle Holdings, Inc.(1) 30,000 1,271,250
Owns towers used for
wireless communication.
Polycom, Inc.(1) 8,000 509,500
Makes long-distance audio
and
data-conferencing products.
Tekelec(1) 50,000 1,125,000
Enables networks to
integrate enhanced
services.
Terayon Communications
System(1) 17,000 1,067,812
Speeds up and improves the
quality of
data transmissions.
- -------------------------------------------------------------
$ 5,793,249
- -------------------------------------------------------------
Communications Services -- 1.1%
- -------------------------------------------------------------
Sportsline USA, Inc.(1) 22,000 $ 1,102,750
Offers sports news and
information at its website
www.sportsline.com.
Z-Tel Technologies, Inc.(1) 2,850 115,069
Provides phone services
including Internet access.
- -------------------------------------------------------------
$ 1,217,819
- -------------------------------------------------------------
Computer Software -- 8.6%
- -------------------------------------------------------------
BindView Development
Corp.(1) 12,000 $ 596,250
Makes system management and
security software for
computer networks.
Breakaway Solutions,
Inc.(1) 300 21,900
Provides Internet business
and customer
relationship services.
Brio Technology, Inc.(1) 18,000 756,000
Produces software for
information analysis.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Computer Software (continued)
- -------------------------------------------------------------
Crossroads Systems, Inc.(1) 300 $ 25,350
Makes and distributes
routers for use in Storage
Area Networks.
CSG Systems International,
Inc.(1) 16,000 638,000
Helps automate billing and
customer
service transactions.
Exchange Applications,
Inc.(1) 18,000 1,005,750
Marketing automation
software.
HNC Software, Inc.(1) 8,000 846,000
Provides software which
detects debit and credit
card fraud and manages
retail inventories.
Micros Systems, Inc.(1) 14,000 1,036,000
Makes computer systems that
track business operations.
National Computer System,
Inc. 35,000 1,316,875
Creates, tests and scores
tests, applications
and profiles.
Razorfish, Inc.(1) 11,500 1,093,890
Specializes in Internet
development
and consultation.
Smartdisk Corp.(1) 13,000 425,750
Develops products that
enable data to be shared
over the Internet.
Tibco Software, Inc.(1) 7,000 1,071,000
Enables businesses to
connect resources with
customers over the
Internet.
Wind River Systems, Inc.(1) 13,000 476,532
Makes operating systems for
computer
intelligence products.
- -------------------------------------------------------------
$ 9,309,297
- -------------------------------------------------------------
Distribution -- 1.6%
- -------------------------------------------------------------
United Stationers(1) 60,000 $ 1,713,750
Wholesaler of office
supplies and equipment.
- -------------------------------------------------------------
$ 1,713,750
- -------------------------------------------------------------
Education -- 1.7%
- -------------------------------------------------------------
Career Education Corp.(1) 17,000 $ 652,375
Operates and owns private,
post
secondary institutions.
Devry, Inc.(1) 61,700 1,149,162
Higher education company.
- -------------------------------------------------------------
$ 1,801,537
- -------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Electrical Equipment -- 1.1%
- -------------------------------------------------------------
Micrel, Inc.(1) 20,000 $ 1,138,750
Designs and sells analog
integrated circuits.
- -------------------------------------------------------------
$ 1,138,750
- -------------------------------------------------------------
Electronics - Instruments -- 1.6%
- -------------------------------------------------------------
Cognex Corp.(1) 27,000 $ 1,053,000
Provides machine vision
systems which are used to
automate the manufacturing
process.
Helix Technology Corp. 16,025 718,120
Develops technology used in
the manufacturing of
electronic components.
- -------------------------------------------------------------
$ 1,771,120
- -------------------------------------------------------------
Electronics - Semiconductors -- 6.8%
- -------------------------------------------------------------
Applied Micro Circuits
Corp.(1) 5,000 $ 636,250
Provides semiconductor
chips which move large
amounts of information at
high speeds.
Dallas Semiconductor Corp. 27,000 1,739,812
Designs, manufactures, and
markets electronic chips
and chip-based subsystems.
Dupont Photomasks, Inc.(1) 20,000 965,000
Provides equipment to
semiconductor manufacturers.
Microchip Technology,
Inc.(1) 15,000 1,026,562
Manufactures specialized
semiconductors.
Millipore Corp. 35,000 1,351,875
Makes products that analyze
and purify fluids.
PMC-Sierra, Inc.(1) 3,000 480,937
Provides high speed
internetworking
component solutions.
Qlogic Corp.(1) 7,000 1,119,125
Manufactures circuits and
adapter boards.
- -------------------------------------------------------------
$ 7,319,561
- -------------------------------------------------------------
Entertainment -- 0.7%
- -------------------------------------------------------------
Speedway Motorsports,
Inc.(1) 27,000 $ 750,937
Owns and operates "Atlanta
Motor Speedway", "Bristol
Motor Speedway", "Charlotte
Motor Speedway", "Texas
Motor Speedway", and
"600 Racing".
- -------------------------------------------------------------
$ 750,937
- -------------------------------------------------------------
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Financial - Specialty -- 0.1%
- -------------------------------------------------------------
Profit Recovery Group
International(1) 5,000 $ 132,813
Provides recovery audit
services to
large corporations.
- -------------------------------------------------------------
$ 132,813
- -------------------------------------------------------------
Health Services -- 2.4%
- -------------------------------------------------------------
MedicaLogic, Inc.(1) 1,300 $ 27,300
Provides software that
stores medical records on
the Internet.
MedQuist, Inc.(1) 20,000 516,250
Provides electronic
transcription and data
management services to the
healthcare industry.
MiniMed, Inc.(1) 19,800 1,450,350
Developer and manufacturer
of medical devices focusing
on diabetics.
Province Healthcare Co.(1) 32,000 608,000
Acquires and operates rural
hospitals.
- -------------------------------------------------------------
$ 2,601,900
- -------------------------------------------------------------
Information Services -- 12.1%
- -------------------------------------------------------------
Acxiom Corp.(1) 50,000 $ 1,200,000
Database information
services.
Affiliated Computer
Services, Inc., Class A(1) 41,850 1,925,100
Nationwide provider of
information
processing services.
BISYS Group, Inc. (The)(1) 29,000 1,892,250
Services financial
institutions with computer,
administrative and
marketing support data
processing services.
Dendrite International(1) 10,000 338,750
Produces marketing
software.
Eclipsys Corp.(1) 11,000 281,875
Markets healthcare
information.
Hooper Holmes, Inc. 22,000 566,500
Provides health information
services.
IDX Systems Corp.(1) 36,000 1,125,000
Healthcare information
systems.
Jupiter Communication(1) 15,000 453,750
Provides analysis and data
about the Internet.
Marimba Software(1) 5,000 230,312
Makes software that allows
companies to install and
update software
applications.
Peregrine Systems, Inc.(1) 12,000 991,500
Creates software to aid in
managing and monitoring
business through the use of
a network.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Information Services (continued)
- -------------------------------------------------------------
Phoenix Technology Ltd.(1) 65,000 $ 1,027,813
Provider of software that
controls the communication
between computer hardware
and operating systems.
Quotesmith.Com, Inc.(1) 45,000 511,875
Provides quotes for
insurance related purposes
over the Internet.
Remedy Corp.(1) 18,000 852,750
Help desk management
software.
Sapient Corp.(1) 4,000 563,750
Provides custom based
software.
Scient Corp.(1) 12,000 1,037,250
Provides Internet and
technology
consulting services.
- -------------------------------------------------------------
$ 12,998,475
- -------------------------------------------------------------
Insurance -- 0.6%
- -------------------------------------------------------------
Reinsurance Group of
America, Inc. 25,370 $ 704,018
Provides life insurance in
North America.
- -------------------------------------------------------------
$ 704,018
- -------------------------------------------------------------
Lodging and Gaming -- 0.6%
- -------------------------------------------------------------
Mandalay Resort Group(1) 32,000 $ 644,000
Owns and operates casinos
and hotels.
- -------------------------------------------------------------
$ 644,000
- -------------------------------------------------------------
Machinery -- 0.5%
- -------------------------------------------------------------
Varco International,
Inc.(1) 52,000 $ 529,750
International manufacturer
of oil and gas equipment.
- -------------------------------------------------------------
$ 529,750
- -------------------------------------------------------------
Medical Products -- 3.7%
- -------------------------------------------------------------
Arthocare Corp.(1) 5,000 $ 305,000
Provides equipment used for
ease in
performing surgeries.
Haemonetics Corp.(1) 60,000 1,428,750
Designs and manufactures
equipment for the
collection, processing and
surgical salvage of blood.
Novoste Corp.(1) 41,798 689,667
Provides equipment for use
in medical procedures.
Resmed, Inc.(1) 22,000 918,500
Makes devices that help
diagnose and treat
obstructive sleep apnea.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Medical Products (continued)
- -------------------------------------------------------------
Steris Corp.(1) 60,000 $ 618,750
Allows healthcare
professionals to sterilize
surgical devices.
- -------------------------------------------------------------
$ 3,960,667
- -------------------------------------------------------------
Metals - Industrial -- 1.3%
- -------------------------------------------------------------
Steel Dynamics, Inc.(1) 15,000 $ 239,063
Owns and operates a steel
minimill that produces
thin-slab/flat-rolled
steel.
Stillwater Mining Co.(1) 35,000 1,115,625
Explores, develops and
mines platinum
and palladium.
- -------------------------------------------------------------
$ 1,354,688
- -------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.6%
- -------------------------------------------------------------
Core Laboratories NV(1) 30,000 $ 601,875
Analyzes petroleum fluids
for oil companies.
- -------------------------------------------------------------
$ 601,875
- -------------------------------------------------------------
Oil and Gas - Exploration and Production -- 5.4%
- -------------------------------------------------------------
Cross Timbers Oil Co. 85,000 $ 770,313
Emerging growth energy
company with good
exploration track record.
EOG Resources, Inc. 15,000 263,438
Oil & gas exploration
company.
Louis Dreyfus Natural
Gas(1) 45,940 832,663
Niche developer and driller
of gas properties.
Newfield Exploration Co.(1) 40,000 1,070,000
Acquires and develops
energy properties in
domestic U.S.
Noble Affiliates, Inc. 32,000 686,000
Explores and produces oil
and gas in the United
States, Canada and Africa.
Nuevo Energy Co.(1) 50,000 937,500
Explores and produces
natural gas and oil.
Santa Fe Snyder Corp.(1) 28,700 229,600
Explores and develops oil
and gas fields in the
United States and Mexico.
Stone Energy Corp.(1) 14,000 498,750
Acquires and develops oil
and natural gas in the Gulf
Coastal basin.
Titan Exploration, Inc.(1) 24,500 133,219
Operates oil & gas
properties.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Oil and Gas - Exploration and Production (continued)
- -------------------------------------------------------------
Vintage Petroleum, Inc.(1) 31,000 $ 373,938
Buys oil producing
properties in the U.S. and
South America.
- -------------------------------------------------------------
$ 5,795,421
- -------------------------------------------------------------
Other Financial -- 1.5%
- -------------------------------------------------------------
Waddell & Reed Financial,
Inc., Class A 60,000 $ 1,627,500
Asset management services.
- -------------------------------------------------------------
$ 1,627,500
- -------------------------------------------------------------
Publishing -- 0.6%
- -------------------------------------------------------------
Central Newspapers, Inc.,
Class A 16,600 $ 653,625
Publishes the Arizona
Republic, the Arizona
Business Gazette, the
Indianapolis Star, the
Indianapolis News, and
community newspapers in
Indiana and Louisiana.
- -------------------------------------------------------------
$ 653,625
- -------------------------------------------------------------
Retail - Food and Drug -- 4.1%
- -------------------------------------------------------------
Applebees International,
Inc. 35,000 $ 1,032,500
Casual dining restaurant
chain.
Duane Reade, Inc.(1) 30,000 826,875
Drug store chain.
Papa John's International,
Inc.(1) 30,000 781,875
Rapidly growing restaurant
chain.
Sonic Corp.(1) 30,000 855,000
Largest chain of service
drive-ins in the U.S.
Wild Oats Markets, Inc.(1) 40,000 887,500
Natural foods supermarket
chain.
- -------------------------------------------------------------
$ 4,383,750
- -------------------------------------------------------------
Retail - Specialty and Apparel -- 4.2%
- -------------------------------------------------------------
American Eagle
Outfitters(1) 12,000 $ 540,000
Sells collegiate-style
casual apparel.
Cutter & Buck, Inc.(1) 11,000 167,063
Sells golf-related apparel.
Ethan Allen Interiors, Inc. 30,000 961,875
Manufactures home
furnishings.
Mens Wearhouse, Inc.
(The)(1) 62,000 1,821,250
Specialty apparel chain.
O'Reilly Automotive,
Inc.(1) 22,000 473,000
Supplier of automotive
equipment and accessories.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Retail - Specialty and Apparel (continued)
- -------------------------------------------------------------
Talbots, Inc. 13,000 $ 580,125
Sells classic-style apparel
and accessories.
- -------------------------------------------------------------
$ 4,543,313
- -------------------------------------------------------------
Semiconductor Equipment -- 0.3%
- -------------------------------------------------------------
PRI Automation, Inc.(1) 5,000 $ 335,625
Material handling equipment
for high cost semiconductor
wafers.
- -------------------------------------------------------------
$ 335,625
- -------------------------------------------------------------
Software Services -- 5.0%
- -------------------------------------------------------------
Advent Software, Inc.(1) 10,500 $ 676,594
Provides software
integrating the investment
management process.
Art Technology Group,
Inc.(1) 200 26,000
Helps businesses manage and
build e-commerce Web sites.
Broadbase Software, Inc.(1) 10,000 1,125,000
Makes software that
integrates and analyzes
customer information.
Commerce One, Inc.(1) 2,900 569,850
Offers software and
services for e-commerce.
E.piphany, Inc.(1) 2,400 535,500
Makes software for use in
company analysis, database
marketing and e-commerce.
E-Stamp Corp.(1) 300 6,675
Provides Internet postage
software for
small businesses.
Great Plains Software,
Inc.(1) 24,000 1,794,000
Manufactures accounting
programs for small to
midsized companies.
Proxicom, Inc.(1) 1,700 211,331
Provides software and
services for e-commerce.
Verity, Inc.(1) 10,900 463,931
Makes software for
accessing information in
multiple formats.
- -------------------------------------------------------------
$ 5,408,881
- -------------------------------------------------------------
Solid Waste -- 0.5%
- -------------------------------------------------------------
Casella Waste Systems,
Inc., Class A(1) 30,000 $ 566,250
Collects non-hazardous
waste.
- -------------------------------------------------------------
$ 566,250
- -------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Telecommunication Equipment -- 0.1%
- -------------------------------------------------------------
Next Level Communications,
Inc.(1) 800 $ 59,900
Offers technology that
speeds the transmission of
voice and data.
- -------------------------------------------------------------
$ 59,900
- -------------------------------------------------------------
Telecommunications Services -- 1.3%
- -------------------------------------------------------------
Adelphia Business
Solutions, Inc.(1) 25,000 $ 1,200,000
Telecommunication service
provider.
GRIC Communications,
Inc.(1) 10,200 258,825
Internet service provider.
- -------------------------------------------------------------
$ 1,458,825
- -------------------------------------------------------------
Transportation -- 1.2%
- -------------------------------------------------------------
Swift Transportation Co.,
Inc.(1) 75,000 $ 1,321,875
Regional truckload carrier
offering computerized
tracking services.
- -------------------------------------------------------------
$ 1,321,875
- -------------------------------------------------------------
Total Common Stocks
(identified cost $75,127,967) $104,009,982
- -------------------------------------------------------------
COMMERCIAL PAPER -- 3.6%
PRINCIPAL
AMOUNT
(000'S
SECURITY OMITTED) VALUE
<S> <C> <C>
- -------------------------------------------------------------
SBC Communications, Inc.,
4.70%, 1/3/00 $ 3,892 $ 3,890,984
- -------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $3,890,984) $ 3,890,984
- -------------------------------------------------------------
Total Investments -- 100.1%
(identified cost $79,018,951) $107,900,966
- -------------------------------------------------------------
Other Assets, Less Liabilities -- (0.1)% $ (77,584)
- -------------------------------------------------------------
Net Assets -- 100.0% $107,823,382
- -------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Company descriptions are unaudited.
(1) Non-income producing security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------
Investments, at value
(identified cost, $79,018,951) $107,900,966
Cash 1,971
Receivable for investments sold 197,493
Dividends receivable 12,108
- -----------------------------------------------------------
TOTAL ASSETS $108,112,538
- -----------------------------------------------------------
Liabilities
- -----------------------------------------------------------
Payable for investments purchased $ 259,766
Accrued expenses 29,390
- -----------------------------------------------------------
TOTAL LIABILITIES $ 289,156
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $107,823,382
- -----------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $ 78,941,367
Net unrealized appreciation (computed on
the basis of identified cost) 28,882,015
- -----------------------------------------------------------
TOTAL $107,823,382
- -----------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
<S> <C>
Investment Income
- -----------------------------------------------------------
Dividends $ 215,434
Interest 144,329
- -----------------------------------------------------------
TOTAL INVESTMENT INCOME $ 359,763
- -----------------------------------------------------------
Expenses
- -----------------------------------------------------------
Investment adviser fee $ 511,023
Trustees fees and expenses 7,456
Custodian fee 68,804
Legal and accounting services 30,050
Amortization of organization expenses 1,855
Miscellaneous 3,781
- -----------------------------------------------------------
TOTAL EXPENSES $ 622,969
- -----------------------------------------------------------
NET INVESTMENT LOSS $ (263,206)
- -----------------------------------------------------------
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost
basis) $23,608,135
- -----------------------------------------------------------
NET REALIZED GAIN $23,608,135
- -----------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 8,998,971
- -----------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 8,998,971
- -----------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $32,607,106
- -----------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $32,343,900
- -----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- -----------------------------------------------------------------
From operations --
Net investment loss $ (263,206) $ (198,515)
Net realized gain 23,608,135 8,602,338
Net change in
unrealized
appreciation
(depreciation) 8,998,971 3,223,464
- -----------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $ 32,343,900 $ 11,627,287
- -----------------------------------------------------------------
Capital transactions --
Contributions $ 9,273,480 $ 5,783,708
Withdrawals (12,544,323) (16,629,759)
- -----------------------------------------------------------------
NET DECREASE IN NET
ASSETS FROM
CAPITAL TRANSACTIONS $ (3,270,843) $ (10,846,051)
- -----------------------------------------------------------------
NET INCREASE IN NET
ASSETS $ 29,073,057 $ 781,236
- -----------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------
At beginning of year $ 78,750,325 $ 77,969,089
- -----------------------------------------------------------------
AT END OF YEAR $ 107,823,382 $ 78,750,325
- -----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ---------------------------------------------------------------------------------------------------------
Expenses 0.76% 0.76% 0.75% 0.76% 0.77%
Net investment income (loss) (0.32)% (0.26)% (0.10)% 0.18% 0.19%
Portfolio Turnover 103% 116% 156% 91% 81%
- ---------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S OMITTED) $107,823 $78,750 $77,969 $82,947 $73,940
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
Special Equities Portfolio (formerly Special Investment Portfolio) (the
Portfolio) is registered under the Investment Company Act of 1940 as a
diversified open-end management investment company which was organized as a
trust under the laws of the State of New York 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 Investment 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 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 bid and asked prices. 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 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 -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or accretion of 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.
C 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 one of the
Portfolio's investors is a regulated investment company that invests all or
substantially all of its assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. Withholding taxes on foreign dividends and capital gains have been
provided for in accordance with the Portfolio's understanding of the
applicable countries' tax rules and rates.
D Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Portfolio. Pursuant to the respective custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Portfolio maintains with IBT. All significant credit
balances used to reduce the Portfolio's custodian fees are reported as a
reduction of expenses on the Statement of Operations. For the year ended
December 31, 1999, $229 credit balances were used to reduce the Portfolio's
custodian fee.
E Other -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed on the specific identification of the
securities sold.
F Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization were amortized on the straight-line basis
over five years and are fully amortized at December 31, 1999.
G Use of Estimates -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results could
differ from those estimates.
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
24
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
services rendered to the Portfolio. The fee is at the annual rate of 0.625%
of the Portfolio's average daily net assets. For the year ended December 31,
1999, the fee amounted to $511,023. 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 officers and Trustees of the Portfolio are
officers of the above organizations. Trustees of the Portfolio that are not
affiliated with the investment adviser may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the year ended December 31, 1999, no
significant amounts have been deferred.
3 Investment Transactions
- -------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $82,627,410 and $87,883,679, respectively.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1999 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $79,318,671
--------------------------------------------------------
Gross unrealized appreciation $30,634,093
Gross unrealized depreciation (2,051,798)
--------------------------------------------------------
NET UNREALIZED APPRECIATION $28,582,295
--------------------------------------------------------
</TABLE>
5 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at an
amount above the Eurodollar rate or Federal Funds rate. In addition, a fee
computed at an annual rate of 0.10% on the daily unused portion of the line
of credit is allocated among the participating Portfolios and funds at the
end of each quarter. The Portfolio did not have any significant borrowings or
allocated fees during the year ended December 31, 1999.
6 Risks Associated with Foreign Investments
- -------------------------------------------
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the
Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and
more volatile than securities of comparable U.S. companies. In general, there
is less overall governmental supervision and regulation of foreign securities
markets, broker-dealers, and issuers than in the United States.
7 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,
1999 there were no outstanding obligations under these financial instruments.
8 Name Change
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On May 1, 1999, Special Investment Portfolio changed its name to Special
Equities Portfolio.
25
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
INDEPENDENT ACCOUNTANTS' REPORT
TO THE TRUSTEES AND INVESTORS
OF SPECIAL EQUITIES PORTFOLIO
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In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and supplementary data present fairly, in all material
respects, the financial position of Special Equities Portfolio, formerly the
Special Investment Portfolio (the "Portfolio") at December 31, 1999, and the
results of its operations, the changes in its net assets and the supplementary
data for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 31, 2000
26
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
INVESTMENT MANAGEMENT
EATON VANCE SPECIAL EQUITIES FUND
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr.
Vice President
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking Emeritus, Harvard University
Graduate School Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
SPECIAL EQUITIES 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
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking Emeritus, Harvard University
Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
27
<PAGE>
INVESTMENT ADVISER OF
SPECIAL EQUITIES PORTFOLIO
Boston Management and Research
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF
EATON VANCE SPECIAL EQUITIES FUND
Eaton Vance Management
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street
Boston, MA 02116
TRANSFER AND DIVIDEND DISBURSING AGENT
PFPC Global Fund Services
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
EATON VANCE SPECIAL EQUITIES FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
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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 distribution
plan, sales charges and expenses. Please read the prospectus carefully before
you invest or send money.
- -------------------------------------------------------------------------------
172-12/99 SESRC-12/99
