<PAGE>
Utilities Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS
Common Stocks -- 85.1%
Security Shares Value
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 0.7%
- --------------------------------------------------------------------------------
Ovation, Inc.(1)(2) 285,787 $ 3,000,764
- --------------------------------------------------------------------------------
$ 3,000,764
- --------------------------------------------------------------------------------
Drugs -- 1.4%
- --------------------------------------------------------------------------------
Sepracor, Inc.(1) 70,000 $ 6,168,750
- --------------------------------------------------------------------------------
$ 6,168,750
- --------------------------------------------------------------------------------
Electric Utilities -- 26.6%
- --------------------------------------------------------------------------------
Cleco Corp. 300,000 $ 10,293,750
DPL, Inc. 750,000 16,218,750
DQE, Inc. 450,000 19,771,875
National Grid Group PLC(3) 2,400,000 19,157,040
NIPSCO Industries, Inc. 650,000 19,784,375
Pinnacle West Capital Corp. 475,000 20,128,125
PowerGen PLC(3) 600,000 7,886,400
Scottish and Southern Energy PLC(3) 300,000 3,379,170
Sierra Pacific Resources 150,000 5,700,000
- --------------------------------------------------------------------------------
$122,319,485
- --------------------------------------------------------------------------------
Information Services -- 1.0%
- --------------------------------------------------------------------------------
Mindspring Enterprises, Inc.(1) 75,000 $ 4,579,688
- --------------------------------------------------------------------------------
$ 4,579,688
- --------------------------------------------------------------------------------
REITS -- 1.9%
- --------------------------------------------------------------------------------
Annaly Mortgage, Inc. 144A 350,000 $ 2,887,500
Security Capital US Realty 600,000 5,940,000
Trust(1)
- --------------------------------------------------------------------------------
$ 8,827,500
- --------------------------------------------------------------------------------
Telephone Utilities -- 53.5%
- --------------------------------------------------------------------------------
Ameritech Corp. 335,000 $ 21,230,625
AT&T Corp. 75,000 5,643,750
Bell Atlantic Corp. 325,000 17,225,000
BellSouth Corp. 250,000 12,468,750
Energis(1)(3) 3,490,000 78,099,568
GTE Corp. 300,000 19,500,000
MCI Worldcom, Inc.(1) 465,000 33,363,750
Omnipoint Corp. 600,000 5,587,500
SBC Communications, Inc. 750,000 40,218,749
Sprint Corp. 100,000 8,412,500
Swisscom AG ADR(1)(3) 100,000 4,256,250
- --------------------------------------------------------------------------------
$246,006,442
- --------------------------------------------------------------------------------
Total Common Stocks
(identified cost $227,686,079) $390,902,629
- --------------------------------------------------------------------------------
Convertible Preferred Stocks -- 5.1%
Security Shares Value
- --------------------------------------------------------------------------------
Gas Utilities -- 3.1%
- --------------------------------------------------------------------------------
El Paso Energy Capital Trust 300,000 $ 14,362,500
- --------------------------------------------------------------------------------
$ 14,362,500
- --------------------------------------------------------------------------------
Telephone Utilities -- 2.0%
- --------------------------------------------------------------------------------
Omnipoint Corp. 180,000 $ 4,500,000
Qwest Trends Trust 100,000 4,687,500
- --------------------------------------------------------------------------------
$ 9,187,500
- --------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(identified cost $27,900,148) $ 23,550,000
- --------------------------------------------------------------------------------
Warrants -- 0.1%
Security Shares Value
- --------------------------------------------------------------------------------
REITS -- 0.1%
- --------------------------------------------------------------------------------
Walden Residential(1) 340,000 $ 340,000
- --------------------------------------------------------------------------------
$ 340,000
- --------------------------------------------------------------------------------
Total Warrants
(identified cost $0) $ 340,000
- --------------------------------------------------------------------------------
Convertible Bonds -- 2.4%
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
National Grid Co., 4.25%, 2/17/08(3) $ 800 $ 1,659,000
- --------------------------------------------------------------------------------
Ovation, Inc., 9.75%, 2/23/01(2) 2,500 2,500,000
Smartalk Teleservices, 144A,
5.75%, 9/15/04 25,000 6,812,500
- --------------------------------------------------------------------------------
Total Convertible Bonds
(identified cost $25,894,149) $ 10,971,500
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
Utilities Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Corporate Bonds -- 2.7%
Principal
Amount
Security (000's omitted) Value
- -------------------------------------------------------------------------------
Bank Plus Corp., 12.00%, 7/18/07 $10,625 $ 8,553,125
NTL, Inc., 7.00%, 12/15/08 3,500 3,806,250
- -------------------------------------------------------------------------------
Total Corporate Bonds
(identified cost $14,518,750) $ 12,359,375
- -------------------------------------------------------------------------------
Commercial Paper -- 3.7%
Principal
Amount
Security (000's omitted) Value
- -------------------------------------------------------------------------------
General Electric Capital Corp., $17,224 $ 17,216,106
5.50%, 1/4/99
- -------------------------------------------------------------------------------
Total Commercial Paper
(amortized cost $17,216,106) $ 17,216,106
- -------------------------------------------------------------------------------
Total Investments -- 99.1%
(identified cost $313,215,232) $455,339,610
- -------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.9% $ 4,276,475
- -------------------------------------------------------------------------------
Net Assets -- 100% $459,616,085
- -------------------------------------------------------------------------------
ADR - American Depositary Receipt
(1) Non-income producing security.
(2) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
(3) Foreign security.
See notes to financial statements
14
<PAGE>
Utilities Portfolio as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value
(identified cost, $313,215,232) $455,339,610
Cash 11,318
Receivable for investments sold 2,053,866
Dividends and interest receivable 2,166,894
Miscellaneous receivable 15,213
Tax reclaim receivable 64,282
- --------------------------------------------------------------------------------
Total assets $459,651,183
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable to affiliate for Trustees' fees $ 5,400
Other accrued expenses 29,698
- --------------------------------------------------------------------------------
Total liabilities $ 35,098
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $459,616,085
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $317,490,185
Net unrealized appreciation (computed on the basis
of identified cost) 142,125,900
- --------------------------------------------------------------------------------
Total $459,616,085
- --------------------------------------------------------------------------------
Statements of Operations
For the Year Ended
December 31, 1998
Investment Income
- --------------------------------------------------------------------------------
Dividends (net of foreign taxes, $617,760) $ 13,962,407
Interest 3,278,743
- --------------------------------------------------------------------------------
Total investment income $ 17,241,150
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 2,793,965
Trustees fees and expenses 25,859
Interest expense 678,374
Custodian fee 231,351
Legal and accounting services 51,349
Amortization of organization expenses 2,592
- --------------------------------------------------------------------------------
Total expenses $ 3,783,490
- --------------------------------------------------------------------------------
Net investment income $ 13,457,660
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 5,496,123
Foreign currency transactions 683
- --------------------------------------------------------------------------------
Net realized gain $ 5,496,806
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)--
Investments (identified cost basis) $ 75,247,697
Foreign currency (18,704)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 75,228,993
- --------------------------------------------------------------------------------
Net realized and unrealized gain $ 80,725,799
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 94,183,459
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Utilities Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 13,457,660 $ 18,943,635
Net realized gain 5,496,806 34,486,025
Net change in unrealized
appreciation (depreciation) 75,228,993 12,004,904
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 94,183,459 $ 65,434,564
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 17,840,966 $ 47,969,480
Withdrawals (65,817,239) (155,062,140)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (47,976,273) $(107,092,660)
- --------------------------------------------------------------------------------
Net increase (decrease) in $ 46,207,186 $ (41,658,096)
net assets
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 413,408,899 $ 455,066,995
- --------------------------------------------------------------------------------
At end of year $ 459,616,085 $ 413,408,899
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Utilities Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses 0.88% 0.75% 0.85% 0.84% 0.85%
Net investment income 3.13% 4.42% 5.94% 4.83% 5.22%
Portfolio turnover 78% 169% 166% 103% 107%
- ------------------------------------------------------------------------------------------------------------------------------------
Borrowing Analysis:
- ------------------------------------------------------------------------------------------------------------------------------------
Average daily balance of debt outstanding during
year (000's omitted) $ 10,594 $ 922 $ 217 $ 232 $ 3,137
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $459,616 $413,409 $455,067 $521,670 $ 505,567
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
Utilities Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
------------------------------------------------------------------------------
Utilities Portfolio (the Portfolio), (formerly the Total Return Portfolio), is
registered under the Investment Company Act of 1940 as a diversified open-end
management investment company which was organized as a trust under the laws of
the State of New York on May 1, 1992. The Declaration of Trust permits the
Trustees to issue beneficial interests in the Portfolio. The following is a
summary of significant accounting policies of the Portfolio. The policies are
in conformity with generally accepted accounting principles.
A Investment Valuations -- Securities listed on securities exchanges or in the
NASDAQ National Market are valued at closing sales prices or, if there has
been no sale, at the mean between the closing bid and asked prices. Unlisted
securities are valued at the mean between the latest available bid and asked
prices. Options and financial futures contracts are valued at the last sale
price, as quoted on the principal exchange or board of trade on which such
options or contracts are traded or, in the absence of a sale, the mean between
the last bid and asked prices. Short-term obligations, maturing in 60 days or
less, are valued at amortized cost, which approximates value. Other fixed
income and debt securities, including listed securities and securities for
which price quotations are available, will normally be valued on the basis of
valuations furnished by a pricing service. Securities for which market
quotations are unavailable are appraised at their fair value as determined in
good faith by or at the direction of the Trustees.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date for
dividends received in cash and/or securities. However, if the ex-dividend date
has passed, certain dividends from foreign securities are recorded as the
Portfolio is informed of the ex-dividend date. Dividend income may include
dividends that represent returns of capital for federal income tax purposes.
C Income Taxes -- The Portfolio has elected to be treated as a partnership for
federal tax purposes. No provision is made by the Portfolio for federal or
state taxes on any taxable income of the Portfolio because each investor in
the Portfolio is ultimately responsible for the payment of any taxes. Since
some of the Portfolio's investors are regulated investment companies that
invest all or substantially all of their assets in the Portfolio, the
Portfolio normally must satisfy the applicable source of income and
diversification requirements (under the Internal Revenue Code) in order for
its investors to satisfy them. The Portfolio will allocate at least annually
among its investors each investor's distributive share of the Portfolio's net
investment income, net realized capital gains, and any other items of income,
gain, loss, deduction or credit.
D Foreign Currency Translation -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to foreign currency rates are recorded
for financial statement purposes as net realized gains and losses on
investments. That portion of unrealized gains and losses on investments that
result from fluctuations in foreign currency exchange rates are not separately
disclosed.
E Option Accounting Principles -- Upon the writing of a covered call option,
an amount equal to the premium received by the Portfolio is included in the
Statement of Assets and Liabilities as a liability. The amount of the
liability is subsequently marked-to-market to reflect the current market value
of the option written in accordance with the Portfolio's policies on
investment valuations discussed above. Premiums received from writing call
options which expire are treated as realized gains. Premiums received from
writing call options which are exercised or are closed are added to or offset
against the proceeds or amount paid on the transaction to determine the
realized gain or loss. The Portfolio, as writer of a call option, may have no
control over whether the underlying securities may be sold and, as a result,
bears the market risk for an unfavorable change in the price of the securities
underlying the written option.
F Financial Futures Contracts -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio
18
<PAGE>
Utilities Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
("margin maintenance") each day, dependent on the daily fluctuations in the
value of the underlying security, and are recorded for book purposes as
unrealized gains or losses by the Portfolio. The Portfolio's investment in
financial futures contracts is designed only to hedge against anticipated
future changes in interest rates, security prices, commodity prices or
currency exchange rates. Should interest rates, security prices, commodity
prices or currency exchange rates move unexpectedly, the Portfolio may not
achieve the anticipated benefits of the financial futures contracts and may
realize a loss. If the Portfolio enters into a closing transaction, the
Portfolio will realize for book purposes a gain or loss equal to the
difference between the value of the financial futures contract to sell and
the financial futures contract to buy.
G Delayed Delivery Transactions -- The Portfolio may purchase or sell
securities on a when-issued or forward commitment basis. Payment and
delivery may take place at a period in time after the date of the
transaction. At the time the transaction is negotiated, the price of the
security that will be delivered and paid for is fixed. Losses may arise due
to changes in the market value of the underlying securities if the
counterparty does not perform under the contract.
H Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
I Other -- Investment transactions are accounted for on a trade date basis.
J Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements and the reported
amounts of revenue and expense during the reporting period. Actual results
could differ from those estimates.
2 Investment Adviser Fee and Other Transactions with Affiliates
----------------------------------------------------------------------------
The investment adviser fee is earned by Boston Management and Research
(BMR), a wholly-owned subsidiary of Eaton Vance Management (EVM), as
compensation for management and investment advisory services rendered to
the Portfolio. The fee is based upon a percentage of average daily net
assets. For the year ended December 31, 1998, the fee was equivalent to
0.65% of the Portfolio's average daily net assets for such period and
amounted to $2,793,965. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment
adviser fee. Certain of the officers and Trustees of the Portfolio are
officers and directors/trustees of the above organizations. Trustees of the
Portfolio that are not affiliated with the Investment Adviser may elect to
defer receipt of all or a percentage of their annual fees in accordance
with the terms of the Trustees Deferred Compensation Plan. For the year
ended December 31, 1998, no significant amounts have been deferred.
3 Investment Transactions
----------------------------------------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $339,994,859 and $414,843,659, respectively.
4 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at December 31, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 316,110,239
----------------------------------------------------------------------------
Gross unrealized appreciation $ 165,379,805
Gross unrealized depreciation (26,150,434)
----------------------------------------------------------------------------
Net unrealized appreciation $ 139,229,371
----------------------------------------------------------------------------
5 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $130 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the Eurodollar rate or Federal Funds rate. In
addition, a fee computed at an annual rate of 0.10% on the daily unused
portion of the line of credit is allocated among
19
<PAGE>
Utilities Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
the participating portfolios and funds at the end of each quarter. The
average daily loan balance for the year ended December 31, 1998 was
$10,954,362 and the average interest rate was 6.19%. The maximum borrowing
outstanding at any time during the year ended December 31, 1998 was
$52,040,000. At December 31, 1998 the Portfolio did not have a loan
outstanding under this agreement.
6 Financial Instruments
----------------------------------------------------------------------------
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include
written options, forward foreign currency exchange contracts, and financial
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. The
notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments
and does not necessarily represent the amounts potentially subject to risk.
The measurement of the risks associated with these instruments is meaningful
only when all related and offsetting transactions are considered. At
December 31, 1998 there were no outstanding obligations under these
financial instruments.
7 Name Change
----------------------------------------------------------------------------
Effective May 1, 1998, the Total Return Portfolio changed its name to the
Utilities Portfolio.
20
<PAGE>
Utilities Portfolio as of December 31, 1998
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees and Investors
of Utilities Portfolio:
- --------------------------------------------------------------------------------
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and supplementary data present fairly, in all material
respects, the financial position of Utilities Portfolio (the "Portfolio")
(formerly Total Return Portfolio) at December 31, 1998, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the supplementary data for each of
the five years then ended, in conformity with generally accepted accounting
principles. These financial statements and supplementary data (hereafter
referred to as "financial statements") are the responsibility of the Portfolio's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with the
custodian and brokers, provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
21
<PAGE>
Utilities Portfolio as of December 31, 1998
INVESTMENT MANAGEMENT
Utilities Portfolio
Officers Independent Trustees
James B. Hawkes Jessica M. Bibliowicz
President and Trustee President and Chief Operating Officer,
John A. Levin & Co.
Timothy O'Brien Director, Baker, Fentress & Company
Vice President and
Portfolio Manager Donald R. Dwight
President, Dwight Partners, Inc.
James L. O'Connor
Treasurer Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking,
Alan R. Dynner Emeritus, Harvard University Graduate School of
Secretary Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
22
