<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
<TABLE>
<S> <C> <C>
COMMON STOCKS -- 96.5%
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Advertising -- 2.0%
- -------------------------------------------------------------
Catalina Marketing Corp.(1) 10,000 $ 1,157,500
Specialized market
research.
Harte-Hanks Communications,
Inc. 45,000 978,750
Owns and operates an
international direct
marketing company.
- -------------------------------------------------------------
$ 2,136,250
- -------------------------------------------------------------
Auto and Parts -- 0.8%
- -------------------------------------------------------------
Gentex Corp.(1) 30,000 $ 832,500
Sells automotive related
parts and smoke detectors.
- -------------------------------------------------------------
$ 832,500
- -------------------------------------------------------------
Banks - Regional -- 3.1%
- -------------------------------------------------------------
City National Corp. 40,000 $ 1,317,500
Offers a wide variety of
personal and business
banking services.
Cullen/Frost Bankers, Inc. 43,000 1,107,250
The largest independent
bank holding company
in Texas.
Peoples Heritage Financial
Group, Inc. 60,000 903,750
Operates and manages banks
in the Northeast.
- -------------------------------------------------------------
$ 3,328,500
- -------------------------------------------------------------
Banks and Money Services -- 1.2%
- -------------------------------------------------------------
Bank United Corp. 25,000 $ 681,250
Operates 70 branch bank
systems in Texas.
Nextcard, Inc.(1) 22,000 635,250
Provides credit card
services over the Internet.
- -------------------------------------------------------------
$ 1,316,500
- -------------------------------------------------------------
Biotechnology -- 2.9%
- -------------------------------------------------------------
Genzyme Transgenics
Corp.(1) 30,000 $ 378,750
Biotechnology firm
specializing in the
engineering of proteins.
Human Genome Sciences,
Inc.(1) 8,000 1,221,000
Researches and develops
pharmaceutical and
diagnostic products.
Sepracor, Inc.(1) 8,000 793,500
Develops pharmaceutical
drugs.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Biotechnology (continued)
- -------------------------------------------------------------
Transkaryotic Therapies,
Inc.(1) 15,000 $ 577,500
Biotechnology firm
specializing in the
research of gene therapies.
Vertex Pharmaceuticals,
Inc.(1) 6,000 210,000
Develops drugs for use in
HIV, cancer and other
diseases.
- -------------------------------------------------------------
$ 3,180,750
- -------------------------------------------------------------
Broadcasting and Cable -- 2.0%
- -------------------------------------------------------------
Entercom Communications
Corp.(1) 18,000 $ 1,188,000
Radio station operator.
Hispanic Broadcasting
Corp.(1) 7,000 645,532
Spanish-language radio
broadcasting company
Radio Unica Communications
Corp.(1) 800 23,100
Operates and broadcasts
radio stations in Hispanic
markets.
Tivo, Inc.(1) 9,000 303,750
Provides a service that
allows customers to store
and record television
programs.
- -------------------------------------------------------------
$ 2,160,382
- -------------------------------------------------------------
Business Products and Services -- 1.8%
- -------------------------------------------------------------
Apollo Group, Inc.(1) 28,000 $ 561,750
Adult education services.
CN Maximus, Inc.(1) 40,000 1,357,500
Management consulting
group.
- -------------------------------------------------------------
$ 1,919,250
- -------------------------------------------------------------
Business Services - Miscellaneous -- 8.0%
- -------------------------------------------------------------
American Management
Systems, Inc.(1) 15,000 $ 470,625
International consulting
firm, designing
technological solutions.
Diamond Technology
Partners(1) 21,000 1,804,687
Management consulting firm.
DoubleClick, Inc.(1) 3,000 759,187
Gathers customer
information through the
Internet.
Freemarkets, Inc.(1) 80 27,305
Operates on-line auctions
for companies seeking
custom components.
Iron Mountain, Inc.(1) 31,000 1,218,687
One of the largest record
management companies in the
U.S.
On Assignment, Inc.(1) 25,000 746,875
Places professionals in
need of temporary help.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Business Services - Miscellaneous (continued)
- -------------------------------------------------------------
Pegasus Systems, Inc.(1) 25,000 $ 1,507,813
Transaction processing for
the hotel industry.
Provant, Inc.(1) 45,000 1,136,250
Offers classroom
instruction and training
programs.
Whittman-Hart, Inc.(1) 18,000 965,250
Information technology
consulting and system
integration services.
- -------------------------------------------------------------
$ 8,636,679
- -------------------------------------------------------------
Communications Equipment -- 5.4%
- -------------------------------------------------------------
Ditech Communications
Co.(1) 7,000 $ 654,500
Provides equipment and
services for
communication enhancement.
Glenayre Technologies,
Inc.(1) 103,000 1,165,187
Specializes in equipment
used for voice messaging.
Pinnacle Holdings, Inc.(1) 30,000 1,271,250
Owns towers used for
wireless communication.
Polycom, Inc.(1) 8,000 509,500
Makes long-distance audio
and
data-conferencing products.
Tekelec(1) 50,000 1,125,000
Enables networks to
integrate enhanced
services.
Terayon Communications
System(1) 17,000 1,067,812
Speeds up and improves the
quality of
data transmissions.
- -------------------------------------------------------------
$ 5,793,249
- -------------------------------------------------------------
Communications Services -- 1.1%
- -------------------------------------------------------------
Sportsline USA, Inc.(1) 22,000 $ 1,102,750
Offers sports news and
information at its website
www.sportsline.com.
Z-Tel Technologies, Inc.(1) 2,850 115,069
Provides phone services
including Internet access.
- -------------------------------------------------------------
$ 1,217,819
- -------------------------------------------------------------
Computer Software -- 8.6%
- -------------------------------------------------------------
BindView Development
Corp.(1) 12,000 $ 596,250
Makes system management and
security software for
computer networks.
Breakaway Solutions,
Inc.(1) 300 21,900
Provides Internet business
and customer
relationship services.
Brio Technology, Inc.(1) 18,000 756,000
Produces software for
information analysis.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Computer Software (continued)
- -------------------------------------------------------------
Crossroads Systems, Inc.(1) 300 $ 25,350
Makes and distributes
routers for use in Storage
Area Networks.
CSG Systems International,
Inc.(1) 16,000 638,000
Helps automate billing and
customer
service transactions.
Exchange Applications,
Inc.(1) 18,000 1,005,750
Marketing automation
software.
HNC Software, Inc.(1) 8,000 846,000
Provides software which
detects debit and credit
card fraud and manages
retail inventories.
Micros Systems, Inc.(1) 14,000 1,036,000
Makes computer systems that
track business operations.
National Computer System,
Inc. 35,000 1,316,875
Creates, tests and scores
tests, applications
and profiles.
Razorfish, Inc.(1) 11,500 1,093,890
Specializes in Internet
development
and consultation.
Smartdisk Corp.(1) 13,000 425,750
Develops products that
enable data to be shared
over the Internet.
Tibco Software, Inc.(1) 7,000 1,071,000
Enables businesses to
connect resources with
customers over the
Internet.
Wind River Systems, Inc.(1) 13,000 476,532
Makes operating systems for
computer
intelligence products.
- -------------------------------------------------------------
$ 9,309,297
- -------------------------------------------------------------
Distribution -- 1.6%
- -------------------------------------------------------------
United Stationers(1) 60,000 $ 1,713,750
Wholesaler of office
supplies and equipment.
- -------------------------------------------------------------
$ 1,713,750
- -------------------------------------------------------------
Education -- 1.7%
- -------------------------------------------------------------
Career Education Corp.(1) 17,000 $ 652,375
Operates and owns private,
post
secondary institutions.
Devry, Inc.(1) 61,700 1,149,162
Higher education company.
- -------------------------------------------------------------
$ 1,801,537
- -------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Electrical Equipment -- 1.1%
- -------------------------------------------------------------
Micrel, Inc.(1) 20,000 $ 1,138,750
Designs and sells analog
integrated circuits.
- -------------------------------------------------------------
$ 1,138,750
- -------------------------------------------------------------
Electronics - Instruments -- 1.6%
- -------------------------------------------------------------
Cognex Corp.(1) 27,000 $ 1,053,000
Provides machine vision
systems which are used to
automate the manufacturing
process.
Helix Technology Corp. 16,025 718,120
Develops technology used in
the manufacturing of
electronic components.
- -------------------------------------------------------------
$ 1,771,120
- -------------------------------------------------------------
Electronics - Semiconductors -- 6.8%
- -------------------------------------------------------------
Applied Micro Circuits
Corp.(1) 5,000 $ 636,250
Provides semiconductor
chips which move large
amounts of information at
high speeds.
Dallas Semiconductor Corp. 27,000 1,739,812
Designs, manufactures, and
markets electronic chips
and chip-based subsystems.
Dupont Photomasks, Inc.(1) 20,000 965,000
Provides equipment to
semiconductor manufacturers.
Microchip Technology,
Inc.(1) 15,000 1,026,562
Manufactures specialized
semiconductors.
Millipore Corp. 35,000 1,351,875
Makes products that analyze
and purify fluids.
PMC-Sierra, Inc.(1) 3,000 480,937
Provides high speed
internetworking
component solutions.
Qlogic Corp.(1) 7,000 1,119,125
Manufactures circuits and
adapter boards.
- -------------------------------------------------------------
$ 7,319,561
- -------------------------------------------------------------
Entertainment -- 0.7%
- -------------------------------------------------------------
Speedway Motorsports,
Inc.(1) 27,000 $ 750,937
Owns and operates "Atlanta
Motor Speedway", "Bristol
Motor Speedway", "Charlotte
Motor Speedway", "Texas
Motor Speedway", and
"600 Racing".
- -------------------------------------------------------------
$ 750,937
- -------------------------------------------------------------
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Financial - Specialty -- 0.1%
- -------------------------------------------------------------
Profit Recovery Group
International(1) 5,000 $ 132,813
Provides recovery audit
services to
large corporations.
- -------------------------------------------------------------
$ 132,813
- -------------------------------------------------------------
Health Services -- 2.4%
- -------------------------------------------------------------
MedicaLogic, Inc.(1) 1,300 $ 27,300
Provides software that
stores medical records on
the Internet.
MedQuist, Inc.(1) 20,000 516,250
Provides electronic
transcription and data
management services to the
healthcare industry.
MiniMed, Inc.(1) 19,800 1,450,350
Developer and manufacturer
of medical devices focusing
on diabetics.
Province Healthcare Co.(1) 32,000 608,000
Acquires and operates rural
hospitals.
- -------------------------------------------------------------
$ 2,601,900
- -------------------------------------------------------------
Information Services -- 12.1%
- -------------------------------------------------------------
Acxiom Corp.(1) 50,000 $ 1,200,000
Database information
services.
Affiliated Computer
Services, Inc., Class A(1) 41,850 1,925,100
Nationwide provider of
information
processing services.
BISYS Group, Inc. (The)(1) 29,000 1,892,250
Services financial
institutions with computer,
administrative and
marketing support data
processing services.
Dendrite International(1) 10,000 338,750
Produces marketing
software.
Eclipsys Corp.(1) 11,000 281,875
Markets healthcare
information.
Hooper Holmes, Inc. 22,000 566,500
Provides health information
services.
IDX Systems Corp.(1) 36,000 1,125,000
Healthcare information
systems.
Jupiter Communication(1) 15,000 453,750
Provides analysis and data
about the Internet.
Marimba Software(1) 5,000 230,312
Makes software that allows
companies to install and
update software
applications.
Peregrine Systems, Inc.(1) 12,000 991,500
Creates software to aid in
managing and monitoring
business through the use of
a network.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Information Services (continued)
- -------------------------------------------------------------
Phoenix Technology Ltd.(1) 65,000 $ 1,027,813
Provider of software that
controls the communication
between computer hardware
and operating systems.
Quotesmith.Com, Inc.(1) 45,000 511,875
Provides quotes for
insurance related purposes
over the Internet.
Remedy Corp.(1) 18,000 852,750
Help desk management
software.
Sapient Corp.(1) 4,000 563,750
Provides custom based
software.
Scient Corp.(1) 12,000 1,037,250
Provides Internet and
technology
consulting services.
- -------------------------------------------------------------
$ 12,998,475
- -------------------------------------------------------------
Insurance -- 0.6%
- -------------------------------------------------------------
Reinsurance Group of
America, Inc. 25,370 $ 704,018
Provides life insurance in
North America.
- -------------------------------------------------------------
$ 704,018
- -------------------------------------------------------------
Lodging and Gaming -- 0.6%
- -------------------------------------------------------------
Mandalay Resort Group(1) 32,000 $ 644,000
Owns and operates casinos
and hotels.
- -------------------------------------------------------------
$ 644,000
- -------------------------------------------------------------
Machinery -- 0.5%
- -------------------------------------------------------------
Varco International,
Inc.(1) 52,000 $ 529,750
International manufacturer
of oil and gas equipment.
- -------------------------------------------------------------
$ 529,750
- -------------------------------------------------------------
Medical Products -- 3.7%
- -------------------------------------------------------------
Arthocare Corp.(1) 5,000 $ 305,000
Provides equipment used for
ease in
performing surgeries.
Haemonetics Corp.(1) 60,000 1,428,750
Designs and manufactures
equipment for the
collection, processing and
surgical salvage of blood.
Novoste Corp.(1) 41,798 689,667
Provides equipment for use
in medical procedures.
Resmed, Inc.(1) 22,000 918,500
Makes devices that help
diagnose and treat
obstructive sleep apnea.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Medical Products (continued)
- -------------------------------------------------------------
Steris Corp.(1) 60,000 $ 618,750
Allows healthcare
professionals to sterilize
surgical devices.
- -------------------------------------------------------------
$ 3,960,667
- -------------------------------------------------------------
Metals - Industrial -- 1.3%
- -------------------------------------------------------------
Steel Dynamics, Inc.(1) 15,000 $ 239,063
Owns and operates a steel
minimill that produces
thin-slab/flat-rolled
steel.
Stillwater Mining Co.(1) 35,000 1,115,625
Explores, develops and
mines platinum
and palladium.
- -------------------------------------------------------------
$ 1,354,688
- -------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.6%
- -------------------------------------------------------------
Core Laboratories NV(1) 30,000 $ 601,875
Analyzes petroleum fluids
for oil companies.
- -------------------------------------------------------------
$ 601,875
- -------------------------------------------------------------
Oil and Gas - Exploration and Production -- 5.4%
- -------------------------------------------------------------
Cross Timbers Oil Co. 85,000 $ 770,313
Emerging growth energy
company with good
exploration track record.
EOG Resources, Inc. 15,000 263,438
Oil & gas exploration
company.
Louis Dreyfus Natural
Gas(1) 45,940 832,663
Niche developer and driller
of gas properties.
Newfield Exploration Co.(1) 40,000 1,070,000
Acquires and develops
energy properties in
domestic U.S.
Noble Affiliates, Inc. 32,000 686,000
Explores and produces oil
and gas in the United
States, Canada and Africa.
Nuevo Energy Co.(1) 50,000 937,500
Explores and produces
natural gas and oil.
Santa Fe Snyder Corp.(1) 28,700 229,600
Explores and develops oil
and gas fields in the
United States and Mexico.
Stone Energy Corp.(1) 14,000 498,750
Acquires and develops oil
and natural gas in the Gulf
Coastal basin.
Titan Exploration, Inc.(1) 24,500 133,219
Operates oil & gas
properties.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Oil and Gas - Exploration and Production (continued)
- -------------------------------------------------------------
Vintage Petroleum, Inc.(1) 31,000 $ 373,938
Buys oil producing
properties in the U.S. and
South America.
- -------------------------------------------------------------
$ 5,795,421
- -------------------------------------------------------------
Other Financial -- 1.5%
- -------------------------------------------------------------
Waddell & Reed Financial,
Inc., Class A 60,000 $ 1,627,500
Asset management services.
- -------------------------------------------------------------
$ 1,627,500
- -------------------------------------------------------------
Publishing -- 0.6%
- -------------------------------------------------------------
Central Newspapers, Inc.,
Class A 16,600 $ 653,625
Publishes the Arizona
Republic, the Arizona
Business Gazette, the
Indianapolis Star, the
Indianapolis News, and
community newspapers in
Indiana and Louisiana.
- -------------------------------------------------------------
$ 653,625
- -------------------------------------------------------------
Retail - Food and Drug -- 4.1%
- -------------------------------------------------------------
Applebees International,
Inc. 35,000 $ 1,032,500
Casual dining restaurant
chain.
Duane Reade, Inc.(1) 30,000 826,875
Drug store chain.
Papa John's International,
Inc.(1) 30,000 781,875
Rapidly growing restaurant
chain.
Sonic Corp.(1) 30,000 855,000
Largest chain of service
drive-ins in the U.S.
Wild Oats Markets, Inc.(1) 40,000 887,500
Natural foods supermarket
chain.
- -------------------------------------------------------------
$ 4,383,750
- -------------------------------------------------------------
Retail - Specialty and Apparel -- 4.2%
- -------------------------------------------------------------
American Eagle
Outfitters(1) 12,000 $ 540,000
Sells collegiate-style
casual apparel.
Cutter & Buck, Inc.(1) 11,000 167,063
Sells golf-related apparel.
Ethan Allen Interiors, Inc. 30,000 961,875
Manufactures home
furnishings.
Mens Wearhouse, Inc.
(The)(1) 62,000 1,821,250
Specialty apparel chain.
O'Reilly Automotive,
Inc.(1) 22,000 473,000
Supplier of automotive
equipment and accessories.
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Retail - Specialty and Apparel (continued)
- -------------------------------------------------------------
Talbots, Inc. 13,000 $ 580,125
Sells classic-style apparel
and accessories.
- -------------------------------------------------------------
$ 4,543,313
- -------------------------------------------------------------
Semiconductor Equipment -- 0.3%
- -------------------------------------------------------------
PRI Automation, Inc.(1) 5,000 $ 335,625
Material handling equipment
for high cost semiconductor
wafers.
- -------------------------------------------------------------
$ 335,625
- -------------------------------------------------------------
Software Services -- 5.0%
- -------------------------------------------------------------
Advent Software, Inc.(1) 10,500 $ 676,594
Provides software
integrating the investment
management process.
Art Technology Group,
Inc.(1) 200 26,000
Helps businesses manage and
build e-commerce Web sites.
Broadbase Software, Inc.(1) 10,000 1,125,000
Makes software that
integrates and analyzes
customer information.
Commerce One, Inc.(1) 2,900 569,850
Offers software and
services for e-commerce.
E.piphany, Inc.(1) 2,400 535,500
Makes software for use in
company analysis, database
marketing and e-commerce.
E-Stamp Corp.(1) 300 6,675
Provides Internet postage
software for
small businesses.
Great Plains Software,
Inc.(1) 24,000 1,794,000
Manufactures accounting
programs for small to
midsized companies.
Proxicom, Inc.(1) 1,700 211,331
Provides software and
services for e-commerce.
Verity, Inc.(1) 10,900 463,931
Makes software for
accessing information in
multiple formats.
- -------------------------------------------------------------
$ 5,408,881
- -------------------------------------------------------------
Solid Waste -- 0.5%
- -------------------------------------------------------------
Casella Waste Systems,
Inc., Class A(1) 30,000 $ 566,250
Collects non-hazardous
waste.
- -------------------------------------------------------------
$ 566,250
- -------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
SECURITY SHARES VALUE
<S> <C> <C>
- -------------------------------------------------------------
Telecommunication Equipment -- 0.1%
- -------------------------------------------------------------
Next Level Communications,
Inc.(1) 800 $ 59,900
Offers technology that
speeds the transmission of
voice and data.
- -------------------------------------------------------------
$ 59,900
- -------------------------------------------------------------
Telecommunications Services -- 1.3%
- -------------------------------------------------------------
Adelphia Business
Solutions, Inc.(1) 25,000 $ 1,200,000
Telecommunication service
provider.
GRIC Communications,
Inc.(1) 10,200 258,825
Internet service provider.
- -------------------------------------------------------------
$ 1,458,825
- -------------------------------------------------------------
Transportation -- 1.2%
- -------------------------------------------------------------
Swift Transportation Co.,
Inc.(1) 75,000 $ 1,321,875
Regional truckload carrier
offering computerized
tracking services.
- -------------------------------------------------------------
$ 1,321,875
- -------------------------------------------------------------
Total Common Stocks
(identified cost $75,127,967) $104,009,982
- -------------------------------------------------------------
COMMERCIAL PAPER -- 3.6%
PRINCIPAL
AMOUNT
(000'S
SECURITY OMITTED) VALUE
<S> <C> <C>
- -------------------------------------------------------------
SBC Communications, Inc.,
4.70%, 1/3/00 $ 3,892 $ 3,890,984
- -------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $3,890,984) $ 3,890,984
- -------------------------------------------------------------
Total Investments -- 100.1%
(identified cost $79,018,951) $107,900,966
- -------------------------------------------------------------
Other Assets, Less Liabilities -- (0.1)% $ (77,584)
- -------------------------------------------------------------
Net Assets -- 100.0% $107,823,382
- -------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Company descriptions are unaudited.
(1) Non-income producing security.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- -----------------------------------------------------------
Investments, at value
(identified cost, $79,018,951) $107,900,966
Cash 1,971
Receivable for investments sold 197,493
Dividends receivable 12,108
- -----------------------------------------------------------
TOTAL ASSETS $108,112,538
- -----------------------------------------------------------
Liabilities
- -----------------------------------------------------------
Payable for investments purchased $ 259,766
Accrued expenses 29,390
- -----------------------------------------------------------
TOTAL LIABILITIES $ 289,156
- -----------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $107,823,382
- -----------------------------------------------------------
Sources of Net Assets
- -----------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $ 78,941,367
Net unrealized appreciation (computed on
the basis of identified cost) 28,882,015
- -----------------------------------------------------------
TOTAL $107,823,382
- -----------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1999
<S> <C>
Investment Income
- -----------------------------------------------------------
Dividends $ 215,434
Interest 144,329
- -----------------------------------------------------------
TOTAL INVESTMENT INCOME $ 359,763
- -----------------------------------------------------------
Expenses
- -----------------------------------------------------------
Investment adviser fee $ 511,023
Trustees fees and expenses 7,456
Custodian fee 68,804
Legal and accounting services 30,050
Amortization of organization expenses 1,855
Miscellaneous 3,781
- -----------------------------------------------------------
TOTAL EXPENSES $ 622,969
- -----------------------------------------------------------
NET INVESTMENT LOSS $ (263,206)
- -----------------------------------------------------------
Realized and Unrealized Gain (Loss)
- -----------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost
basis) $23,608,135
- -----------------------------------------------------------
NET REALIZED GAIN $23,608,135
- -----------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 8,998,971
- -----------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ 8,998,971
- -----------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $32,607,106
- -----------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $32,343,900
- -----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
in Net Assets DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- -----------------------------------------------------------------
From operations --
Net investment loss $ (263,206) $ (198,515)
Net realized gain 23,608,135 8,602,338
Net change in
unrealized
appreciation
(depreciation) 8,998,971 3,223,464
- -----------------------------------------------------------------
NET INCREASE IN NET
ASSETS FROM OPERATIONS $ 32,343,900 $ 11,627,287
- -----------------------------------------------------------------
Capital transactions --
Contributions $ 9,273,480 $ 5,783,708
Withdrawals (12,544,323) (16,629,759)
- -----------------------------------------------------------------
NET DECREASE IN NET
ASSETS FROM
CAPITAL TRANSACTIONS $ (3,270,843) $ (10,846,051)
- -----------------------------------------------------------------
NET INCREASE IN NET
ASSETS $ 29,073,057 $ 781,236
- -----------------------------------------------------------------
Net Assets
- -----------------------------------------------------------------
At beginning of year $ 78,750,325 $ 77,969,089
- -----------------------------------------------------------------
AT END OF YEAR $ 107,823,382 $ 78,750,325
- -----------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ---------------------------------------------------------------------------------------------------------
Expenses 0.76% 0.76% 0.75% 0.76% 0.77%
Net investment income (loss) (0.32)% (0.26)% (0.10)% 0.18% 0.19%
Portfolio Turnover 103% 116% 156% 91% 81%
- ---------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR
(000'S OMITTED) $107,823 $78,750 $77,969 $82,947 $73,940
- ---------------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
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Special Equities Portfolio (formerly Special Investment Portfolio) (the
Portfolio) is registered under the Investment Company Act of 1940 as a
diversified open-end management investment company which was organized as a
trust under the laws of the State of New York on May 1, 1992. The Declaration
of Trust permits the Trustees to issue interests in the Portfolio. The
following is a summary of significant accounting policies of the Portfolio.
The policies are in conformity with generally accepted
accounting principles.
A Investment Valuations -- Securities listed on foreign or U.S. securities
exchanges or in the NASDAQ National Market System generally are valued at
closing sales prices or, if there were no sales, at the mean between the
closing bid and asked prices on the exchange where such securities are
principally traded or on such National Market System. Unlisted or listed
securities for which closing sales prices are not available are valued at the
mean between the latest bid and asked prices. An option is valued at the last
sale price as quoted on the principal exchange or board of trade on which
such option or contract is traded or, in the absence of a sale, at the mean
between the last bid and asked prices. Futures positions on securities or
currencies are generally valued at closing settlement prices. Short-term debt
securities with a remaining maturity of 60 days or less are valued at
amortized cost. If securities were acquired with a remaining maturity of more
than 60 days, their amortized cost value will be based on their value on the
sixty-first day prior to maturity. Other fixed income and debt securities,
including listed securities and securities for which price quotations are
available, will normally be valued on the basis of valuations furnished by a
pricing service. Securities for which market quotations are unavailable and
other assets will be appraised at their fair market value as determined in
good faith by or at the direction of the Trustees of the Portfolio.
B Income -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or accretion of discount when required
for federal income tax purposes. Dividend income is recorded on the ex-
dividend date for dividends received in cash and/or securities. However, if
the ex-dividend date has passed, certain dividends from foreign securities
are recorded as the Portfolio is informed of the ex-dividend date.
C Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since one of the
Portfolio's investors is a regulated investment company that invests all or
substantially all of its assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements
(under the Internal Revenue Code) in order for its investors to satisfy them.
The Portfolio will allocate at least annually among its investors each
investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit. Withholding taxes on foreign dividends and capital gains have been
provided for in accordance with the Portfolio's understanding of the
applicable countries' tax rules and rates.
D Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Portfolio. Pursuant to the respective custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Portfolio maintains with IBT. All significant credit
balances used to reduce the Portfolio's custodian fees are reported as a
reduction of expenses on the Statement of Operations. For the year ended
December 31, 1999, $229 credit balances were used to reduce the Portfolio's
custodian fee.
E Other -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed on the specific identification of the
securities sold.
F Deferred Organization Expenses -- Costs incurred by the Portfolio in
connection with its organization were amortized on the straight-line basis
over five years and are fully amortized at December 31, 1999.
G Use of Estimates -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results could
differ from those estimates.
2 Investment Adviser Fee and Other Transactions with Affiliates
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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
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SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
services rendered to the Portfolio. The fee is at the annual rate of 0.625%
of the Portfolio's average daily net assets. For the year ended December 31,
1999, the fee amounted to $511,023. Except as to Trustees of the Portfolio
who are not members of EVM's or BMR's organization, officers and Trustees
receive remuneration for their services to the Portfolio out of such
investment adviser fee. Certain officers and Trustees of the Portfolio are
officers of the above organizations. Trustees of the Portfolio that are not
affiliated with the investment adviser may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the year ended December 31, 1999, no
significant amounts have been deferred.
3 Investment Transactions
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Purchases and sales of investments, other than short-term obligations,
aggregated $82,627,410 and $87,883,679, respectively.
4 Federal Income Tax Basis of Investments
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The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1999 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $79,318,671
--------------------------------------------------------
Gross unrealized appreciation $30,634,093
Gross unrealized depreciation (2,051,798)
--------------------------------------------------------
NET UNREALIZED APPRECIATION $28,582,295
--------------------------------------------------------
</TABLE>
5 Line of Credit
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The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. The Portfolio may temporarily borrow from the line of
credit to satisfy redemption requests or settle investment transactions.
Interest is charged to each portfolio or fund based on its borrowings at an
amount above the Eurodollar rate or Federal Funds rate. In addition, a fee
computed at an annual rate of 0.10% on the daily unused portion of the line
of credit is allocated among the participating Portfolios and funds at the
end of each quarter. The Portfolio did not have any significant borrowings or
allocated fees during the year ended December 31, 1999.
6 Risks Associated with Foreign Investments
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Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in domestic investments. For example, there is generally less
publicly available information about foreign companies, particularly those
not subject to the disclosure and reporting requirements of the U.S.
securities laws. Foreign issuers are generally not bound by uniform
accounting, auditing, and financial reporting requirements and standards of
practice comparable to those applicable to domestic issuers. Investments in
foreign securities also involve the risk of possible adverse changes in
investment or exchange control regulations, expropriation or confiscatory
taxation, limitation on the removal of funds or other assets of the
Portfolio, political or financial instability or diplomatic and other
developments which could affect such investments. Foreign stock markets,
while growing in volume and sophistication, are generally not as developed as
those in the United States, and securities of some foreign issuers
(particularly those located in developing countries) may be less liquid and
more volatile than securities of comparable U.S. companies. In general, there
is less overall governmental supervision and regulation of foreign securities
markets, broker-dealers, and issuers than in the United States.
7 Financial Instruments
- -------------------------------------------
The Portfolio may trade in financial instruments with off-balance sheet risk
in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts, and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes. The notional or
contractual amounts of these instruments represent the investment the
Portfolio has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. At December 31,
1999 there were no outstanding obligations under these financial instruments.
8 Name Change
- -------------------------------------------
On May 1, 1999, Special Investment Portfolio changed its name to Special
Equities Portfolio.
25
<PAGE>
SPECIAL EQUITIES PORTFOLIO AS OF DECEMBER 31, 1999
INDEPENDENT ACCOUNTANTS' REPORT
TO THE TRUSTEES AND INVESTORS
OF SPECIAL EQUITIES PORTFOLIO
- ---------------------------------------------
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and supplementary data present fairly, in all material
respects, the financial position of Special Equities Portfolio, formerly the
Special Investment Portfolio (the "Portfolio") at December 31, 1999, and the
results of its operations, the changes in its net assets and the supplementary
data for the periods indicated, in conformity with accounting principles
generally accepted in the United States. These financial statements and
supplementary data (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of securities at
December 31, 1999 by correspondence with the custodian and brokers, provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
January 31, 2000
26
<PAGE>
EATON VANCE SPECIAL EQUITIES FUND AS OF DECEMBER 31, 1999
INVESTMENT MANAGEMENT
SPECIAL EQUITIES PORTFOLIO
Officers
James B. Hawkes
President and Trustee
Edward E. Smiley, Jr.
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking Emeritus, Harvard University
Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
27
