<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED)
COMMON STOCKS -- 92.0%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Advertising -- 1.9%
-----------------------------------------------------------------------
Catalina Marketing Corp.(1) 12,000 $ 1,224,000
Specialized market research.
Harte-Hanks Communications, Inc. 45,000 1,125,000
Owns and operates an international
direct marketing company.
-----------------------------------------------------------------------
$ 2,349,000
-----------------------------------------------------------------------
Auto and Parts -- 0.8%
-----------------------------------------------------------------------
Gentex Corp.(1) 40,000 $ 1,005,000
Sells automotive related parts and
smoke detectors.
-----------------------------------------------------------------------
$ 1,005,000
-----------------------------------------------------------------------
Banks - Regional -- 0.8%
-----------------------------------------------------------------------
Cullen/Frost Bankers, Inc. 38,000 $ 999,875
The largest independent bank holding
company in Texas.
-----------------------------------------------------------------------
$ 999,875
-----------------------------------------------------------------------
Biotechnology -- 2.5%
-----------------------------------------------------------------------
Genzyme Transgenics Corp.(1) 12,000 $ 325,500
Biotechnology firm specializing in the
engineering of proteins.
Human Genome Sciences, Inc.(1) 5,000 666,875
Researches and develops pharmaceutical
and diagnostic products.
Transkaryotic Therapies, Inc.(1) 25,000 918,750
Biotechnology firm specializing in the
research of gene therapies.
Vertex Pharmaceuticals, Inc.(1) 11,000 1,159,125
Develops drugs for use in HIV, cancer
and other diseases.
-----------------------------------------------------------------------
$ 3,070,250
-----------------------------------------------------------------------
Broadcasting and Cable -- 1.0%
-----------------------------------------------------------------------
Entercom Communications Corp.(1) 25,000 $ 1,218,750
Radio station operator.
-----------------------------------------------------------------------
$ 1,218,750
-----------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Broadcasting and Radio -- 0.7%
-----------------------------------------------------------------------
Sirus Satelite Radio, Inc.(1) 20,000 $ 886,250
Developing a satellite radio system to
deliver news and music to vehicles.
-----------------------------------------------------------------------
$ 886,250
-----------------------------------------------------------------------
Business Products and Services -- 1.4%
-----------------------------------------------------------------------
Apollo Group, Inc.(1) 28,000 $ 784,000
Adult education services.
CompuCredit Corp.(1) 30,000 900,000
Originates and purchases
credit products.
-----------------------------------------------------------------------
$ 1,684,000
-----------------------------------------------------------------------
Business Services - Miscellaneous -- 7.5%
-----------------------------------------------------------------------
American Management Systems, Inc.(1) 25,000 $ 820,702
International consulting firm, designing
technology solutions.
Calico Commerce, Inc.(1) 40,000 650,000
E-commerce software and
services provider.
Diamond Technology Partners(1) 15,000 1,320,000
Management consulting firm.
Forrester Research, Inc.(1) 5,000 364,062
Market research firm focused on the
Internet and technology.
Heidrick and Struggles International,
Inc.(1) 25,000 1,578,125
Executive search firm.
Iron Mountain, Inc.(1) 50,000 1,700,000
Provides record and information
management services.
On Assignment, Inc.(1) 50,000 1,525,000
Places professionals in need of
temporary help.
Pegasus Systems, Inc.(1) 60,000 652,500
Transaction processing for the
hotel industry.
Plexus Corp.(1) 5,000 565,000
Contract developer and manufacturer of
electronic products.
-----------------------------------------------------------------------
$ 9,175,389
-----------------------------------------------------------------------
Communications Equipment -- 8.4%
-----------------------------------------------------------------------
BreezeCom Ltd.(1) 22,000 $ 957,000
International consulting firm designing
technology solutions.
Exfo Electro-Optical Engineering,
Inc.(1) 5,800 254,475
Manufactures fiberoptic test,
measurement and monitoring instruments.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Communications Equipment (continued)
-----------------------------------------------------------------------
Glenayre Technologies, Inc.(1) 90,000 $ 950,625
Specializes in equipment used for
voice messaging.
InFocus Corp.(1) 25,000 804,687
Manufactures data and
video productions.
Newport Corp. 8,100 869,737
Produces automated assembly, measurement
and test equipment used for
fiber-optic communications.
Pinnacle Holdings, Inc.(1) 30,000 1,620,000
Owns towers used for
wireless communication.
Polycom, Inc.(1) 8,000 752,750
Makes long-distance audio and data-
conferencing products.
Proxim, Inc.(1) 6,000 593,813
Manufactures wireless local area
networking products.
Tekelec(1) 70,000 3,373,125
Enables networks to integrate
enhanced services.
-----------------------------------------------------------------------
$ 10,176,212
-----------------------------------------------------------------------
Computer Software -- 10.5%
-----------------------------------------------------------------------
Accrue Software, Inc.(1) 30,000 $ 1,065,000
Analyzes internet traffic
characteristics for websites.
Allaire Corp.(1) 15,000 551,250
Produces software that enables
organizations to link information
systems to the web.
Bluestone Software, Inc.(1) 15,000 385,312
Provides software for enterprise
interaction management.
Breakaway Solutions, Inc.(1) 15,000 405,000
Provides Internet business and customer
relationship services.
Exchange Applications, Inc.(1) 53,300 1,419,112
Marketing automation software.
HNC Software, Inc.(1) 15,000 926,250
Provides software which detects debit
and credit card fraud and manages
retail inventories.
Interwoven, Inc.(1) 15,000 1,649,766
Provides web content
management solutions.
National Computer System, Inc. 30,000 1,477,500
Creates, tests and scores tests,
applications and profiles.
Numerical Technologies, Inc.(1) 18,000 875,250
Produces technology and software for use
in semiconductor design and testing.
Razorfish, Inc.(1) 45,000 722,812
Specializes in Internet development
and consultation.
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Computer Software (continued)
-----------------------------------------------------------------------
SERENA Software, Inc.(1) 40,000 $ 1,816,252
Provides eBusiness infrastructure
software change management solutions.
TIBCO Software, Inc.(1) 3,000 321,703
Provides software for e-commerce and
information delivery over the internet.
WatchGuard Technologies, Inc.(1) 20,000 1,098,750
Provides internet security solutions.
-----------------------------------------------------------------------
$ 12,713,957
-----------------------------------------------------------------------
Distribution -- 1.2%
-----------------------------------------------------------------------
United Stationers(1) 45,000 $ 1,456,875
Wholesaler of office supplies
and equipment.
-----------------------------------------------------------------------
$ 1,456,875
-----------------------------------------------------------------------
Drugs -- 1.0%
-----------------------------------------------------------------------
Tanox, Inc.(1) 13,500 $ 638,719
Develops antibodies to treat infectious
diseases and cancer.
United Therapeutics(1) 5,000 541,875
Develops pharmaceuticals to treat
vascular diseases.
-----------------------------------------------------------------------
$ 1,180,594
-----------------------------------------------------------------------
Education -- 2.2%
-----------------------------------------------------------------------
Career Education Corp.(1) 22,000 $ 1,067,000
Operates and owns private, post
secondary institutions.
Devry, Inc.(1) 61,700 1,631,194
Higher education company.
-----------------------------------------------------------------------
$ 2,698,194
-----------------------------------------------------------------------
Electrical Equipment -- 1.1%
-----------------------------------------------------------------------
Micrel, Inc.(1) 30,000 $ 1,303,125
Designs and sells analog
integrated circuits.
-----------------------------------------------------------------------
$ 1,303,125
-----------------------------------------------------------------------
Electronics - Instruments -- 1.9%
-----------------------------------------------------------------------
Cognex Corp.(1) 22,000 $ 1,138,500
Provides machine vision systems which
are used to automate the
manufacturing process.
Digimarc Corp.(1) 20,000 770,000
Provides digital
watermarking technologies.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Electronics - Instruments (continued)
-----------------------------------------------------------------------
Helix Technology Corp. 10,000 $ 390,000
Develops technology used in the
manufacturing of electronic components.
-----------------------------------------------------------------------
$ 2,298,500
-----------------------------------------------------------------------
Electronics - Semiconductors -- 5.8%
-----------------------------------------------------------------------
Dallas Semiconductor Corp. 44,000 $ 1,793,000
Designs, manufactures, and markets
electronic chips and
chip-based subsystems.
Dupont Photomasks, Inc.(1) 8,000 548,000
Provides equipment to
semiconductor manufacturers.
Elantec Semiconductor, Inc.(1) 15,000 1,044,375
Manufactures circuits for use in
communications markets.
Exar Corp.(1) 10,000 871,875
Designs and sells semiconductors for use
in communications and video and
imaging products.
Microchip Technology, Inc.(1) 10,500 611,789
Manufactures
specialized semiconductors.
Millipore Corp. 15,000 1,130,625
Makes purification and filtration
products for semiconductor
equipment manufacturers.
PMC-Sierra, Inc.(1) 2,000 355,375
Provides high speed internetworking
component solutions.
Qlogic Corp.(1) 10,500 693,656
Manufactures circuits and
adapter boards.
-----------------------------------------------------------------------
$ 7,048,695
-----------------------------------------------------------------------
Entertainment -- 0.4%
-----------------------------------------------------------------------
Callaway Golf Co. 30,000 $ 489,375
Manufactures and markets premium priced
golf clubs and apparel.
-----------------------------------------------------------------------
$ 489,375
-----------------------------------------------------------------------
Financial Services -- 0.3%
-----------------------------------------------------------------------
Profit Recovery Group International,
Inc.(1) 20,000 $ 332,500
Provides recovery audit services to
large corporations.
-----------------------------------------------------------------------
$ 332,500
-----------------------------------------------------------------------
Health Services -- 4.1%
-----------------------------------------------------------------------
MedQuist, Inc.(1) 21,960 $ 746,640
Provides electronic transcription and
data management services to the
healthcare industry.
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Health Services (continued)
-----------------------------------------------------------------------
MiniMed, Inc.(1) 14,000 $ 1,652,000
Developer and manufacturer of medical
devices focusing on diabetics.
Province Healthcare Co.(1) 27,000 975,375
Acquires and operates rural hospitals.
Renal Care Group, Inc.(1) 38,300 936,554
Provides dialysis to patients with
chronic kidney failure.
Thermo Cardiosystems, Inc.(1) 70,000 700,000
Manufactures implantable left
ventricular-assist systems.
-----------------------------------------------------------------------
$ 5,010,569
-----------------------------------------------------------------------
Information Services -- 3.5%
-----------------------------------------------------------------------
Acxiom Corp.(1) 15,000 $ 408,750
Database information services.
BISYS Group, Inc. (The)(1) 20,000 1,230,000
Services financial institutions with
computer, administrative and marketing
support data processing services.
Cerner Corp.(1) 10,000 272,500
Designs information systems for
hospitals, clinics and physicians.
Peregrine Systems, Inc.(1) 6,000 208,125
Creates software to aid in managing and
monitoring business through the use of
a network.
Remedy Corp.(1) 30,000 1,672,500
Help desk management software.
Scient Corp.(1) 10,000 441,250
Provides Internet and technology
consulting services.
-----------------------------------------------------------------------
$ 4,233,125
-----------------------------------------------------------------------
Investment Services -- 0.6%
-----------------------------------------------------------------------
National Discount Brokers Group, Inc.(1) 23,000 $ 733,125
Online retail brokerage firm.
-----------------------------------------------------------------------
$ 733,125
-----------------------------------------------------------------------
Machinery -- 0.4%
-----------------------------------------------------------------------
Ionics, Inc.(1) 15,000 $ 459,375
Supplier of water-treatment and water-
purification systems.
-----------------------------------------------------------------------
$ 459,375
-----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Medical Products -- 4.7%
-----------------------------------------------------------------------
Aspect Medical Systems, Inc.(1) 19,800 $ 534,600
Produces anesthesia-monitoring systems.
Cytyc Corp.(1) 15,000 800,625
Manufactures sample-preparation systems
for use in medical testing.
Haemonetics Corp.(1) 35,000 735,000
Designs and manufactures equipment for
the collection, processing and surgical
salvage of blood.
Novoste Corp.(1) 31,798 1,939,678
Provides equipment for the use in
medical procedures.
Resmed, Inc.(1) 64,400 1,722,700
Makes devices that help diagnose and
treat obstructive sleep apnea.
-----------------------------------------------------------------------
$ 5,732,603
-----------------------------------------------------------------------
Metals - Industrial -- 0.6%
-----------------------------------------------------------------------
Stillwater Mining Co.(1) 25,000 $ 696,875
Explores, develops and mines platinum
and palladium.
-----------------------------------------------------------------------
$ 696,875
-----------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 2.9%
-----------------------------------------------------------------------
Core Laboratories NV(1) 45,000 $ 1,305,000
Analyzes petroleum fluids for
oil companies.
Global Industries Ltd.(1) 30,000 566,250
Provides oil field
construction services.
Varco International, Inc.(1) 37,050 861,412
Provider of oil field products
and services.
Veritas DGC, Inc.(1) 30,000 780,000
Gathers seismic data for oil and
gas companies.
-----------------------------------------------------------------------
$ 3,512,662
-----------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 5.3%
-----------------------------------------------------------------------
Cross Timbers Oil Co. 65,000 $ 1,438,125
Emerging growth energy company with good
exploration track record.
Louis Dreyfus Natural Gas(1) 15,940 499,121
Niche developer and driller of gas
properties.
Newfield Exploration Co.(1) 20,000 782,500
Acquires and develops energy properties
in domestic U.S.
Noble Affiliates, Inc. 35,000 1,303,750
Explores and produces oil and gas in the
United States, Canada and Africa.
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Oil and Gas - Exploration and Production (continued)
-----------------------------------------------------------------------
Nuevo Energy Co.(1) 40,000 $ 755,000
Explores and produces natural gas
and oil.
Santa Fe Snyder Corp.(1) 28,700 326,463
Explores and develops oil and gas fields
in the United States and Mexico.
Stone Energy Corp.(1) 10,000 597,500
Acquires and develops oil and natural
gas in the Gulf Coastal basin.
Vintage Petroleum, Inc. 31,000 699,438
Buys oil producing properties in the
U.S. and South America.
-----------------------------------------------------------------------
$ 6,401,897
-----------------------------------------------------------------------
Other Financial -- 1.4%
-----------------------------------------------------------------------
Waddell & Reed Financial, Inc., Class A 52,000 $ 1,706,250
Asset management services.
-----------------------------------------------------------------------
$ 1,706,250
-----------------------------------------------------------------------
Publishing -- 1.2%
-----------------------------------------------------------------------
Belo (A.H.) Corp. 85,000 $ 1,471,563
Newspaper publisher and TV
station owner.
-----------------------------------------------------------------------
$ 1,471,563
-----------------------------------------------------------------------
Retail - Food and Drug -- 2.8%
-----------------------------------------------------------------------
Applebees International, Inc. 45,000 $ 1,364,063
Casual dining restaurant chain.
Duane Reade, Inc.(1) 45,000 1,158,750
Drug store chain.
Sonic Corp.(1) 30,000 881,250
Largest chain of service drive-ins in
the U.S.
-----------------------------------------------------------------------
$ 3,404,063
-----------------------------------------------------------------------
Retail - Specialty and Apparel -- 0.7%
-----------------------------------------------------------------------
Mens Wearhouse, Inc. (The)(1) 40,000 $ 892,500
Specialty apparel chain.
-----------------------------------------------------------------------
$ 892,500
-----------------------------------------------------------------------
Semiconductor Equipment -- 0.8%
-----------------------------------------------------------------------
Pericom Semiconductor Corp.(1) 15,000 $ 1,020,000
Develops semiconductors for notebook
computing and networking.
-----------------------------------------------------------------------
$ 1,020,000
-----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Semiconductors -- 1.5%
-----------------------------------------------------------------------
Actel Corp.(1) 25,000 $ 1,140,625
Integrated circuits producer.
QuickLogic Corp.(1) 33,000 734,250
Produces semiconductors and software
used to save time manufacturing
semiconductor chips.
-----------------------------------------------------------------------
$ 1,874,875
-----------------------------------------------------------------------
Software Services -- 7.0%
-----------------------------------------------------------------------
About.com, Inc.(1) 9,000 $ 283,500
Internet information provider.
Advent Software, Inc.(1) 21,000 1,354,500
Provides software intergrating the
investment management process.
Broadbase Software, Inc.(1) 35,000 1,071,875
Makes software that integrates and
analyzes customer information.
Corillian Corp.(1) 30,000 498,750
Provides internet financial solutions.
Cysive, Inc.(1) 20,000 477,500
Develops e-commerce sites.
Internet.com Corp.(1) 35,000 689,063
Publisher of internet industry news and
product reviews.
NetIQ Corp.(1) 20,000 1,192,500
Provides performance and availability
management software for Windows
NT-based systems.
Proxicom, Inc.(1) 16,000 766,000
Provides software and services
for e-commerce.
SilverStream Software, Inc.(1) 10,000 577,500
Provides application server software
and services.
SonicWALL, Inc.(1) 13,000 1,144,813
Provides internet security solutions.
Verity, Inc.(1) 13,000 494,000
Makes software for accessing information
in multiple formats.
-----------------------------------------------------------------------
$ 8,550,001
-----------------------------------------------------------------------
Telecommunications Services -- 4.3%
-----------------------------------------------------------------------
Adelphia Business Solutions, Inc.(1) 5,000 $ 115,938
Telecommunication service provider.
Celeritek, Inc.(1) 20,000 816,250
Produces radio products for
wireless communications.
iBasis, Inc.(1) 10,000 430,625
Provides internet telephony services.
MCK Communications, Inc.(1) 36,000 832,500
Provides remote voice access products.
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Telecommunications Services (continued)
-----------------------------------------------------------------------
Media Metrix, Inc.(1) 12,400 $ 315,425
Provides internet audience measurement
products and services.
MGC Communications, Inc.(1) 27,000 1,618,313
Provides facilities-based integrated
communication services.
Predictive Systems, Inc.(1) 30,000 1,078,125
Offers network design, management and
security services.
-----------------------------------------------------------------------
$ 5,207,176
-----------------------------------------------------------------------
Transportation -- 0.8%
-----------------------------------------------------------------------
Swift Transportation Co., Inc.(1) 70,000 $ 980,000
Regional truckload carrier offering
computerized tracking services.
-----------------------------------------------------------------------
$ 980,000
-----------------------------------------------------------------------
Total Common Stocks
(identified cost $82,241,289) $111,973,200
-----------------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 6.5%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Associates Corp. of North America,
6.89%, 7/3/00 $ 2,852 $ 2,850,909
Ford Motor Credit Corp.,
6.59%, 7/3/00 5,036 5,034,156
-----------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $7,885,065) $ 7,885,065
-----------------------------------------------------------------------
Total Investments -- 98.5%
(identified cost $90,126,354) $119,858,265
-----------------------------------------------------------------------
Other Assets, Less Liabilities -- 1.5% $ 1,774,326
-----------------------------------------------------------------------
Net Assets -- 100.0% $121,632,591
-----------------------------------------------------------------------
</TABLE>
(1) Non-income producing security.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
<S> <C>
Assets
------------------------------------------------------
Investments, at value (identified cost,
$90,126,354) $119,858,265
Cash 2,352
Receivable for investments sold 1,940,040
Dividends receivable 3,311
------------------------------------------------------
TOTAL ASSETS $121,803,968
------------------------------------------------------
Liabilities
------------------------------------------------------
Payable for investments purchased $ 150,800
Payable to affiliate for Trustees' fees 2,250
Accrued expenses 18,327
------------------------------------------------------
TOTAL LIABILITIES $ 171,377
------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $121,632,591
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $ 91,900,680
Net unrealized appreciation (computed on
the basis of identified cost) 29,731,911
------------------------------------------------------
TOTAL $121,632,591
------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
<S> <C>
Investment Income
-----------------------------------------------------
Interest $ 182,216
Dividends 107,213
-----------------------------------------------------
TOTAL INVESTMENT INCOME $ 289,429
-----------------------------------------------------
Expenses
-----------------------------------------------------
Investment adviser fee $ 364,039
Trustees fees and expenses 6,751
Custodian fee 36,582
Legal and accounting services 12,978
Miscellaneous 733
-----------------------------------------------------
TOTAL EXPENSES $ 421,083
-----------------------------------------------------
NET INVESTMENT LOSS $ (131,654)
-----------------------------------------------------
Realized and Unrealized Gain (Loss)
-----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $13,254,751
-----------------------------------------------------
NET REALIZED GAIN $13,254,751
-----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 849,896
-----------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 849,896
-----------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $14,104,647
-----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $13,972,993
-----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
INCREASE (DECREASE) JUNE 30, 2000 YEAR ENDED
IN NET ASSETS (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
From operations --
Net investment loss $ (131,654) $ (263,206)
Net realized gain 13,254,751 23,608,135
Net change in unrealized
appreciation (depreciation) 849,896 8,998,971
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 13,972,993 $ 32,343,900
-----------------------------------------------------------------------------
Capital transactions --
Contributions $ 10,152,986 $ 9,273,480
Withdrawals (10,316,770) (12,544,323)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ (163,784) $ (3,270,843)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 13,809,209 $ 29,073,057
-----------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------
At beginning of period $ 107,823,382 $ 78,750,325
-----------------------------------------------------------------------------
AT END OF PERIOD $ 121,632,591 $ 107,823,382
-----------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ----------------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
----------------------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.73%(1) 0.76% 0.76% 0.75% 0.76% 0.77%
Net investment income
(loss) (0.23)%(1) (0.32)% (0.26)% (0.10)% 0.18% 0.19%
Portfolio Turnover 77% 103% 116% 156% 91% 81%
----------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $121,633 $107,823 $ 78,750 $77,969 $82,947 $73,940
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
-------------------------------------------
Special Equities Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as amended, 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 Portfolio seeks to achieve growth of capital
by investing primarily in common stocks of emerging growth companies. 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 at least 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 custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations. For six months ended June 30, 2000,
$454 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 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.
G Interim Financial Statements -- The interim financial statements relating to
June 30, 2000 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.
19
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF JUNE 30, 2000
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 0.625% (annualized) of the Portfolio's
average daily net assets. For the six months ended June 30, 2000, the fee
amounted to $364,039. 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 six months ended June 30, 2000, no significant
amounts have been deferred.
3 Investment Transactions
-------------------------------------------
Purchases and sales of investments, other than short-term obligations,
aggregated $84,695,008 and $91,257,035, respectively.
4 Federal Income Tax Basis of Investments
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at June 30, 2000, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $90,126,354
-----------------------------------------------------
Gross unrealized appreciation $32,526,629
Gross unrealized depreciation (2,794,718)
-----------------------------------------------------
NET UNREALIZED APPRECIATION $29,731,911
-----------------------------------------------------
</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 six months ended June 30, 2000.
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 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, 2000
there were no outstanding obligations under these financial instruments.
20
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF JUNE 30, 2000
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 of the Board,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
21
