<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 96.4%
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Advertising -- 3.9%
- -----------------------------------------------------------------------------------
Catalina Marketing Corp.(1) 12,000 $ 1,104,000
Specialized market research.
Harte-Hanks Communications, Inc. 35,000 949,375
Owns and operates an international direct
marketing company.
Outdoor Systems, Inc.(1) 31,000 1,131,500
Dominant operator of outdoor advertising.
- -----------------------------------------------------------------------------------
$ 3,184,875
- -----------------------------------------------------------------------------------
Banks - Regional -- 2.4%
- -----------------------------------------------------------------------------------
City National Corp. 23,000 $ 861,063
Offers a wide variety of personal and business
banking services.
Cullen/Frost Bankers, Inc. 40,000 1,102,500
The largest independent bank holding company
in Texas.
- -----------------------------------------------------------------------------------
$ 1,963,563
- -----------------------------------------------------------------------------------
Banks and Money Services -- 1.0%
- -----------------------------------------------------------------------------------
Bank United Corp. 21,000 $ 843,938
Operates 70 branch bank system in Texas.
- -----------------------------------------------------------------------------------
$ 843,938
- -----------------------------------------------------------------------------------
Biotechnology -- 1.9%
- -----------------------------------------------------------------------------------
Human Genome Sciences, Inc.(1) 11,000 $ 434,500
Researches and develops pharmaceutical and
diagnostic products.
Sepracor, Inc.(1) 14,000 1,137,500
Develops pharmaceutical drugs.
- -----------------------------------------------------------------------------------
$ 1,572,000
- -----------------------------------------------------------------------------------
Broadcasting and Cable -- 2.3%
- -----------------------------------------------------------------------------------
Emmis Broadcasting Corp., Class A(1) 9,000 $ 444,375
Diversified media company.
Entercom Communications Corp.(1) 14,000 598,500
Radio station operator.
Hispanic Broadcasting Corp.(1) 11,000 834,625
The largest Spanish-language radio
broadcasting company in the United States.
- -----------------------------------------------------------------------------------
$ 1,877,500
- -----------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Business Products and Services -- 3.5%
- -----------------------------------------------------------------------------------
Abacus Direct Corp.(1) 9,000 $ 823,500
Provider of specialized marketing programs.
Apollo Group, Inc.(1) 26,000 690,625
Adult education services.
CN Maximus, Inc.(1) 26,750 769,063
Management consulting group.
Sylvan Learning Systems, Inc.(1) 21,000 570,938
Operates specialized educational tutoring and
testing centers.
- -----------------------------------------------------------------------------------
$ 2,854,126
- -----------------------------------------------------------------------------------
Business Services - Miscellaneous -- 6.3%
- -----------------------------------------------------------------------------------
Diamond Technology Partners(1) 19,000 $ 425,125
Management consulting firm.
Exodus Communications, Inc.(1) 6,000 719,625
Offers services that allow businesses to
outsource the management of their internet
sites.
Iron Mountain, Inc.(1) 14,000 400,750
One of the largest record management
companies in the U.S.
National Data Corp. 27,000 1,154,249
Provides information services to health care
and electronic payment system markets.
On Assignment, Inc.(1) 17,000 444,125
Provides temporary scientific and
environmental professionals to laboratories.
Pegasus Systems, Inc.(1) 20,000 748,750
Transaction processing for the hotel industry.
Provant, Inc.(1) 30,000 466,875
Offers classroom instruction and training
programs.
Whittman-Hart, Inc.(1) 26,000 825,500
Information technology consulting and system
integration services.
- -----------------------------------------------------------------------------------
$ 5,184,999
- -----------------------------------------------------------------------------------
Business Services - Rental & Leasing -- 0.4%
- -----------------------------------------------------------------------------------
Superior Consultant Holdings(1) 13,000 $ 320,938
Provides consulting services to health care
organizations.
- -----------------------------------------------------------------------------------
$ 320,938
- -----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Communications Equipment -- 0.8%
- -----------------------------------------------------------------------------------
Comverse Technology, Inc.(1) 9,000 $ 679,500
Specialized communications products.
- -----------------------------------------------------------------------------------
$ 679,500
- -----------------------------------------------------------------------------------
Computer Software -- 3.2%
- -----------------------------------------------------------------------------------
Brio Technology, Inc.(1) 20,500 $ 410,000
Produces software for information analysis.
Exchange Applications, Inc.(1) 8,000 326,000
Marketing automation software.
HNC Software, Inc.(1) 17,000 523,813
Provides software which detects debit and
credit card fraud and manages retail
inventories.
International Integration, Inc.(1) 29,000 652,500
Provides application migration and custom
software development services.
National Computer System, Inc. 20,000 675,000
Creates, tests and scores tests, applications and
profiles.
Razorfish, Inc.(1) 800 29,650
Specializes in high-end Internet development.
- -----------------------------------------------------------------------------------
$ 2,616,963
- -----------------------------------------------------------------------------------
Consumer Services -- 1.2%
- -----------------------------------------------------------------------------------
Strayer Education, Inc. 32,065 $ 983,995
Specialized supplemental education services.
- -----------------------------------------------------------------------------------
$ 983,995
- -----------------------------------------------------------------------------------
Distribution -- 1.3%
- -----------------------------------------------------------------------------------
United Stationers(1) 48,000 $ 1,056,000
Wholesaler of office supplies and equipment.
- -----------------------------------------------------------------------------------
$ 1,056,000
- -----------------------------------------------------------------------------------
Education -- 1.5%
- -----------------------------------------------------------------------------------
Career Education Corp.(1) 13,000 $ 439,563
Operates and owns private, post secondary
institutions.
Devry, Inc.(1) 36,000 805,500
Higher education company.
- -----------------------------------------------------------------------------------
$ 1,245,063
- -----------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Electrical Equipment -- 1.2%
- -----------------------------------------------------------------------------------
Micrel, Inc.(1) 13,000 $ 962,000
Designs and sells analog integrated circuits.
- -----------------------------------------------------------------------------------
$ 962,000
- -----------------------------------------------------------------------------------
Electronics - Instruments -- 2.5%
- -----------------------------------------------------------------------------------
Cognex Corp.(1) 27,000 $ 852,188
Provides machine vision systems which are
used to automate the manufacturing process.
Helix Technology Corp. 16,025 383,598
Develops technology used in the manufacturing
of electronic components.
Sanmina Corp.(1) 11,000 834,625
Operates contract manufacturing facilities for
high tech companies.
- -----------------------------------------------------------------------------------
$ 2,070,411
- -----------------------------------------------------------------------------------
Electronics - Semiconductors -- 7.8%
- -----------------------------------------------------------------------------------
Applied Micro Circuits Corp.(1) 15,000 $ 1,233,749
Provides semiconductor chips which move large
amounts of information at high speeds.
Dallas Semiconductor Corp. 20,000 1,010,000
Designs, manufactures, and markets electronic
chips and chip-based subsystems.
Linear Technologies Corp. 7,000 470,750
Designs and manufactures chips which
translate information from analog form.
Microchip Technology, Inc.(1) 22,000 1,042,250
Manufactures specialized semiconductors.
PMC-Sierra, Inc.(1) 7,000 412,563
Provides high speed internetworking
component solutions.
Qlogic Corp.(1) 7,000 924,000
Manufactures circuits and adapter boards.
Vitesse Semiconductor Corp.(1) 19,000 1,281,312
Provides digital circuits used for
communications products.
- -----------------------------------------------------------------------------------
$ 6,374,624
- -----------------------------------------------------------------------------------
Entertainment -- 2.2%
- -----------------------------------------------------------------------------------
Cinar Films, Inc., Class B(1) 21,000 $ 514,500
Develops, produces, and distributes educational
and entertainment TV shows and films for
children and families.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Entertainment (continued)
- -----------------------------------------------------------------------------------
MGM Grand, Inc.(1) 6,000 $ 294,000
Develops, owns, and runs hotels and casinos
worldwide.
Speedway Motorsports, Inc.(1) 25,000 982,813
Owns and operates "Atlanta Motor
Speedway", "Bristol Motor Speedway,"
"Charlotte Motor Speedway", "Texas Motor
Speedway", and "600 Racing".
- -----------------------------------------------------------------------------------
$ 1,791,313
- -----------------------------------------------------------------------------------
Financial - Miscellaneous -- 0.1%
- -----------------------------------------------------------------------------------
E*Trade Group, Inc.(1) 2,000 $ 79,875
Innovative, high quality electronic internet
stock brokerage firm.
- -----------------------------------------------------------------------------------
$ 79,875
- -----------------------------------------------------------------------------------
Foods -- 0.5%
- -----------------------------------------------------------------------------------
Lance, Inc. 25,249 $ 394,516
Produces single-serve packages of snack foods
and bakery products.
- -----------------------------------------------------------------------------------
$ 394,516
- -----------------------------------------------------------------------------------
Health Services -- 7.0%
- -----------------------------------------------------------------------------------
Biomatrix, Inc.(1) 17,000 $ 367,625
Develops and manufactures products used for
orthopedics and ophthalmology.
Express Scripts, Inc., Class A(1) 7,900 475,481
Rapidly growing pharmacy specialist.
MedQuist, Inc.(1) 24,500 1,071,875
Provides electronic transcription and data
management services to the healthcare
industry.
MiniMed, Inc.(1) 20,100 1,546,443
Developer and manufacturer of medical devices
focusing on diabetics.
Province Healthcare Co.(1) 27,000 526,500
Acquires and operates rural hospitals.
Renal Care Group, Inc.(1) 44,000 1,138,500
One of the largest providers of renal
treatment centers.
Sunrise Assisted Living, Inc.(1) 18,000 627,750
One of the leading operators of assisted care
facilities for senior citizens.
- -----------------------------------------------------------------------------------
$ 5,754,174
- -----------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Information Services -- 14.6%
- -----------------------------------------------------------------------------------
Acxiom Corp.(1) 49,000 $ 1,221,937
Database information services.
Affiliated Computer Services, Inc., Class A(1) 28,000 1,417,499
Nationwide provider of information
processing services.
BISYS Group, Inc. (The)(1) 19,000 1,111,500
Services financial institutions with computer,
administrative and marketing support data
processing services.
Brocade Communications Systems, Inc.(1) 8,400 810,075
Network storage specialist.
CAIS Internet, Inc.(1) 3,500 64,313
Producer of phone jacks which allow internet
connections for multiple dwellers.
Cambridge Technology Partners, Inc.(1) 35,000 614,688
Software consulting company.
Dendrite International(1) 23,000 830,875
Produces marketing software.
Digital Island, Inc.(1) 12,900 231,394
Network service provider.
Eclipsys Corp.(1) 10,000 239,375
Markets healthcare information.
IDX Systems Corp.(1) 25,000 564,063
Healthcare information systems.
Marimba Software(1) 200 10,538
Makes software that allows companies to
install and update software applications.
Medical Manager Corp.(1) 17,150 758,888
Provides the Medical Manager physician
practice management system.
Mobius Management Systems, Inc.(1) 10,000 82,500
Makes data management software for
financial, health care and retail markets.
Peregrine Systems, Inc.(1) 23,000 590,813
Creates software to aid in managing and
monitoring business through the use
of a network.
Phoenix Technology Ltd.(1) 15,000 268,125
Provider of software that controls the
communication between computer hardware
and operating systems.
Remedy Corp.(1) 8,300 223,063
Help desk management software.
Sapient Corp.(1) 7,000 396,375
Provides custom based software.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Information Services (continued)
- -----------------------------------------------------------------------------------
Siebel Systems, Inc.(1) 16,000 $ 1,062,000
Supplies sales, marketing, and customer
service information systems.
Veritas Software Co.(1) 15,250 1,447,796
Provides communications companies with
software measuring systems.
- -----------------------------------------------------------------------------------
$ 11,945,817
- -----------------------------------------------------------------------------------
Insurance -- 2.3%
- -----------------------------------------------------------------------------------
Mutual Risk Management Ltd. 34,506 $ 1,151,637
Specialty insurer focusing on
workmen's compensation.
Reinsurance Group of America, Inc. 21,000 703,500
Provides life reinsurance in North America.
- -----------------------------------------------------------------------------------
$ 1,855,137
- -----------------------------------------------------------------------------------
Investment Services -- 0.8%
- -----------------------------------------------------------------------------------
Centura Banks, Inc. 10,000 $ 563,750
Growing Southeastern bankers.
PIMCO Advisors Holdings L.P. 3,000 89,250
Provides investment management services.
- -----------------------------------------------------------------------------------
$ 653,000
- -----------------------------------------------------------------------------------
Machinery -- 0.7%
- -----------------------------------------------------------------------------------
Varco International, Inc.(1) 52,000 $ 568,750
International manufacturer of oil and gas
equipment.
- -----------------------------------------------------------------------------------
$ 568,750
- -----------------------------------------------------------------------------------
Medical Products -- 3.3%
- -----------------------------------------------------------------------------------
Entremed, Inc.(1) 7,000 $ 157,500
Develops drugs which inhibit the abnormal
growth of new blood vessels.
Haemonetics Corp.(1) 36,000 722,250
Designs and manufactures equipment for the
collection, processing and surgical salvage
of blood.
Millennium Pharmaceuticals(1) 7,000 252,000
Develops treatments and diagnostics for such
conditions as obesity, diabetes, asthma and
cancer.
Osteotech, Inc.(1) 9,425 270,969
Markets products to facilitate in the healing of
the bones and muscles.
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Medical Products (continued)
- -----------------------------------------------------------------------------------
Resmed, Inc.(1) 18,000 $ 597,375
Makes devices that help diagnose and treat
obstructive sleep apnea.
Xomed Surgical Products, Inc.(1) 15,000 730,313
Provides surgical products for the ear, nose and
throat market.
- -----------------------------------------------------------------------------------
$ 2,730,407
- -----------------------------------------------------------------------------------
Metals - Industrial -- 0.5%
- -----------------------------------------------------------------------------------
Stillwater Mining Co.(1) 12,000 $ 392,250
Explores, develops and mines platinum
and palladium.
- -----------------------------------------------------------------------------------
$ 392,250
- -----------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 7.2%
- -----------------------------------------------------------------------------------
Cross Timbers Oil Co. 80,000 $ 1,189,999
Emerging growth energy company with good
exploration track record.
Louis Dreyfus Natural Gas(1) 45,940 990,581
Niche developer and driller of gas properties.
Newfield Exploration Co.(1) 38,000 1,080,625
Acquires and develops energy properties in
domestic U.S.
Noble Affiliates, Inc. 32,000 902,000
Explores and produces oil and gas in the United
States, Canada and Africa.
Nuevo Energy Co.(1) 45,000 596,250
Explores and produces natural gas and oil.
Santa Fe Snyder Corp.(1) 28,700 218,838
Explores and develops oil and gas fields in the
United States and Mexico.
Stone Energy Corp.(1) 14,000 593,250
Acquires and develops oil and natural gas in the
Gulf Coastal basin.
Vintage Petroleum, Inc. 31,000 333,250
Buys oil producing properties in the U.S. and
South America.
- -----------------------------------------------------------------------------------
$ 5,904,793
- -----------------------------------------------------------------------------------
Other Financial -- 1.0%
- -----------------------------------------------------------------------------------
Waddell & Reed Financial, Inc., Class A 30,000 $ 823,125
Asset management services.
- -----------------------------------------------------------------------------------
$ 823,125
- -----------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
- -----------------------------------------------------------------------------------
<S> <C> <C>
Publishing -- 1.5%
- -----------------------------------------------------------------------------------
Central Newspapers, Inc., Class A 31,600 $ 1,188,949
Publishes the Arizona Republic, the Arizona
Business Gazette, the Indianapolis Star, the
Indianapolis News, and community newspapers
in Indiana and Louisiana.
- -----------------------------------------------------------------------------------
$ 1,188,949
- -----------------------------------------------------------------------------------
Retail - Food and Drug -- 3.5%
- -----------------------------------------------------------------------------------
Applebees International, Inc. 25,000 $ 753,125
Casual dining restaurant chain.
Papa John's International, Inc.(1) 24,000 1,072,500
Rapidly growing restaurant chain.
Sonic Corp.(1) 24,000 783,000
Largest chain of service drive-ins in the U.S.
Wild Oats Markets, Inc.(1) 7,000 212,407
Natural foods supermarket chain.
- -----------------------------------------------------------------------------------
$ 2,821,032
- -----------------------------------------------------------------------------------
Retail - Specialty and Apparel -- 6.8%
- -----------------------------------------------------------------------------------
99 Cents Only Stores(1) 10,000 $ 499,375
Discount retailer.
Bed Bath and Beyond, Inc.(1) 26,000 1,001,000
Specialty retailer.
Childrens Place(1) 15,000 607,500
Children's clothing retailer.
Ethan Allen Interiors, Inc. 37,500 1,415,624
Manufactures home furnishings.
O'Reilly Automotive, Inc.(1) 16,000 806,000
Supplier of automotive equipment and accessories.
The Buckle, Inc.(1) 15,000 431,250
Specialty apparel retailer to the 12 to 25 year
old age group.
The Mens Wearhouse, Inc.(1) 32,000 816,000
Specialty apparel chain.
- -----------------------------------------------------------------------------------
$ 5,576,749
- -----------------------------------------------------------------------------------
Semiconductor Equipment -- 0.4%
- -----------------------------------------------------------------------------------
PRI Automation, Inc.(1) 10,000 $ 362,500
Material handling equipment for high cost
semiconductor wafers.
- -----------------------------------------------------------------------------------
$ 362,500
- -----------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Software Services -- 0.6%
- -----------------------------------------------------------------------------------
Great Plains Software, Inc.(1) 11,000 $ 519,063
Manufactures accounting programs for small to
midsized companies.
- -----------------------------------------------------------------------------------
$ 519,063
- -----------------------------------------------------------------------------------
Solid Waste -- 0.5%
- -----------------------------------------------------------------------------------
Casella Waste Systems, Inc., Class A(1) 15,000 $ 390,000
Collects non-hazardous waste.
- -----------------------------------------------------------------------------------
$ 390,000
- -----------------------------------------------------------------------------------
Transportation -- 1.7%
- -----------------------------------------------------------------------------------
Swift Transportation Co., Inc.(1) 64,800 $ 1,425,599
Regional truckload carrier offering
computerized tracking services.
- -----------------------------------------------------------------------------------
$ 1,425,599
- -----------------------------------------------------------------------------------
Total Common Stocks
(identified cost $55,510,340) $ 78,967,544
- -----------------------------------------------------------------------------------
COMMERCIAL PAPER -- 3.3%
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------------------
Associates Corp., 5.75%, 7/1/99 $ 2,708 $ 2,708,000
- -----------------------------------------------------------------------------------
Total Commercial Paper
(identified cost $2,708,000) $ 2,708,000
- -----------------------------------------------------------------------------------
Total Investments -- 99.7%
(identified cost $58,218,340) $ 81,675,544
- -----------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 0.3% $ 239,172
- -----------------------------------------------------------------------------------
Net Assets -- 100% $ 81,914,716
- -----------------------------------------------------------------------------------
</TABLE>
(1) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $58,218,340) $ 81,675,544
Cash 712
Receivable for investments sold 3,337,313
Interest and dividends receivable 6,332
Deferred organization expenses 272
- ------------------------------------------------------
TOTAL ASSETS $ 85,020,173
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for investments purchased $ 3,090,520
Payable to affiliate for Trustees' fees 1,172
Other accrued expenses 13,765
- ------------------------------------------------------
TOTAL LIABILITIES $ 3,105,457
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $ 81,914,716
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $ 58,457,512
Net unrealized appreciation (computed on
the basis of identified cost) 23,457,204
- ------------------------------------------------------
TOTAL $ 81,914,716
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- -----------------------------------------------------
Dividends $ 113,569
Interest 53,856
- -----------------------------------------------------
TOTAL INVESTMENT INCOME $ 167,425
- -----------------------------------------------------
Expenses
- -----------------------------------------------------
Investment adviser fee $ 237,170
Trustees fees and expenses 3,982
Custodian fee 32,707
Legal and accounting services 11,222
Amortization of organization expenses 1,583
Miscellaneous 3,363
- -----------------------------------------------------
TOTAL EXPENSES $ 290,027
- -----------------------------------------------------
NET INVESTMENT LOSS $ (122,602)
- -----------------------------------------------------
Realized and Unrealized
Gain (Loss)
- -----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 2,085,187
- -----------------------------------------------------
NET REALIZED GAIN $ 2,085,187
- -----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 3,574,160
- -----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 3,574,160
- -----------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 5,659,347
- -----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 5,536,745
- -----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment loss $ (122,602) $ (198,515)
Net realized gain 2,085,187 8,602,338
Net change in unrealized appreciation
(depreciation) 3,574,160 3,223,464
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 5,536,745 $ 11,627,287
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 4,417,349 $ 5,783,708
Withdrawals (6,789,703) (16,629,759)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (2,372,354) $ (10,846,051)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 3,164,391 $ 781,236
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 78,750,325 $ 77,969,089
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 81,914,716 $ 78,750,325
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 ----------------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994(1)
<S> <C> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ---------------------------------------------------------------------------------------------------------------------------------
Expenses 0.77%(2) 0.76% 0.75% 0.76% 0.77% 0.74%(2)
Net investment income (loss) (0.33)%(2) (0.26)% (0.10)% 0.18% 0.19% 0.20%(2)
Portfolio Turnover 41% 116% 156% 91% 81% 19%
- ---------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S
OMITTED) $ 81,915 $ 78,750 $ 77,969 $ 82,947 $ 73,940 $ 64,442
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, August 1, 1994, to December 31,
1994.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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,
including any security the disposition of which is restricted under the
Securities Act of 1933, and other assets will be appraised at their fair
market value as determined in good faith by or at the direction of the
Trustees of the Portfolio.
B Income -- 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.
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. 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 Other -- Investment transactions are accounted for on a trade date basis.
E Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
F Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expense during the reporting period. Actual results could
differ from those estimates.
G Interim Financial Statements -- The interim financial statements relating to
June 30, 1999 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the
Portfolio's management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
17
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
2 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is at the annual rate of 5/8 of 1% of average daily net assets. For
the six months ended June 30, 1999, the fee was equivalent to 0.625%
(annualized) of the Portfolio's average net assets for such period and
amounted to $237,170. 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 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 six months ended June 30, 1999, no
significant amounts have been deferred.
3 Investment Transactions
- -------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $30,815,289 and $34,203,443, respectively.
4 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned at June 30, 1999, as computed on a federal income tax basis, were as
follows:
<TABLE>
<S> <C>
AGGREGATE COST $ 58,218,340
- ------------------------------------------------------
Gross unrealized appreciation $ 24,291,444
Gross unrealized depreciation (834,240)
- ------------------------------------------------------
NET UNREALIZED APPRECIATION $ 23,457,204
- ------------------------------------------------------
</TABLE>
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 the participating Portfolios and funds at the
end of each quarter. The Portfolio did not have any significant borrowings or
allocated fees during the six months ended June 30, 1999.
6 Risk 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 June 30, 1999
there were no outstanding obligations under these financial instruments.
8 Name Change
- -------------------------------------------
On May 1, 1999, Special Investment Portfolio changed its name to Special
Equities Portfolio.
18
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF JUNE 30, 1999
INVESTMENT MANAGEMENT
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
19
