<PAGE>
[E.V. LOGO] INVESTING
EATON VANCE-Registered Trademark- FOR THE
------------ 21ST
MUTUAL FUNDS CENTURY-Registered Trademark-
[GRAPHIC REPRESENTATION OF MONEY]
ANNUAL REPORT OCTOBER 31, 2000
[GRAPHIC REPRESENTATION OF MAN ON HORSE]
EATON VANCE
HIGH
INCOME
FUND
[GRAPHIC REPRESENTATION OF BUILDINGS]
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
LETTER TO SHAREHOLDERS
[PHOTO]
JAMES B. HAWKES
PRESIDENT
Eaton Vance High Income Fund, Class B shares, had a total return of -9.70%
for the seven-month period ended October 31, 2000.(1) That return was the
result of a decrease in net asset value per share (NAV) to $6.18 on October
31, 2000 from $7.27 on March 31, 2000, and the reinvestment of $0.418 in
dividends.
Class C shares had a total return of -9.70% for the seven-month period, the
result of a decrease in NAV to $8.13 from $9.56, and the reinvestment of $0.542
in dividends.(1)
Based on closing NAVs on October 31, 2000 of $6.18 for Class B shares and
$8.13 for Class C shares, the distribution rates were 11.81% and 11.75%,
respectively.(2) The SEC 30-day yields at October 31, 2000 were 12.28% and
12.27%, respectively.(3)
AMID SOME UNCERTAINTIES, HIGH-YIELD INVESTORS HAVE FACED A DIFFICULT ENVIRONMENT
IN 2000...
High-yield bond investors faced many uncertainties in 2000, including rising oil
prices, declines in technology company profits, difficulties in the telecom
sector and increasing stock market volatility. These factors created a
challenging climate and contributed to reduced market liquidity. The economy
showed further signs of slowing, as third quarter gross domestic product grew
just 2.2%, the slowest quarterly growth rate in more than a year. In addition,
orders for durable goods declined, combined with a slight rise in unemployment
and signs of a contraction in durable goods manufacturing activity. Stung by the
spike in energy costs and by prolonged decline in the stock market, consumers
have become less active at the retail level.
Meanwhile, despite continued high energy prices, inflation remained in check.
Consistent with the signs of a slowdown, 10-year Treasury bond yields fell to
5.47% at October 31 from 6.41% at the end of February.
WE BELIEVE THAT THIS YEAR'S MARKET WEAKNESS COULD REPRESENT A BUYING OPPORTUNITY
FOR HIGH-YIELD INVESTORS...
We believe that market corrections are healthy, ironing out excesses and
adjusting valuations. We feel that high-yield bonds will continue to be a major
financing component for industry, and the Fund will continue to pursue promising
opportunities in this sector. In the pages that follow, co-portfolio managers
Michael Weilheimer and Thomas Huggins review the past year in the high-yield
markets and offer their outlook for the coming year.
Sincerely,
/s/ James B. Hawkes
James B. Hawkes
President
December 7, 2000
--------------------------------------------------------------------------------
FUND INFORMATION
AS OF OCTOBER 31, 2000
<TABLE>
<CAPTION>
PERFORMANCE(4) CLASS B CLASS C
--------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
--------------------------------------------------------------------------------
<S> <C> <C>
One Year -4.89% -4.98%
Five Years 6.79 6.72
Ten Years 10.76 N.A.
Life of Fund+ 7.90 6.54
<CAPTION>
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
--------------------------------------------------------------------------------
One Year -9.19% -5.84%
Five Years 6.51 6.72
Ten Years 10.76 N.A.
Life of Fund+ 7.90 6.54
</TABLE>
+Inception dates: Class B: 8/19/86; Class C: 6/8/94
<TABLE>
<CAPTION>
TEN LARGEST HOLDINGS(5)
--------------------------------------------------------------------------------
<S> <C>
NTL Communications Corp. 2.6%
Exodus Communications, Inc. 2.1
Telewest Communications PLC 2.1
Spectrasite Holdings, Inc. 2.0
MGM Mirage, Inc. 1.7
Versatel Telecom B.V. 1.4
Hollywood Casino Corp. 1.4
Carrier1 International, Inc. 1.3
Chesapeake Energy Corp. 1.3
Nextlink Communications, Inc. 1.2
</TABLE>
(1) These returns do not include the applicable contingent deferred sales charge
(CDSC) for Class B or C shares. (2) The Fund's distribution rate represents
actual distributions paid to shareholders and is calculated by dividing the last
distribution per share (annualized) by the net asset value. (3) The Fund's SEC
yield is calculated by dividing the net investment income per share for the
30-day period by the offering price at the end of the period and annualizing the
result. (4) Returns are historical and are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
returns for Class B reflect applicable CDSC based on the following schedule: 5%
- 1st and 2nd years; 4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year.
Class C 1-year SEC return reflects 1% CDSC. (5) Ten largest holdings account for
17.1% of the Portfolio's investments, determined by dividing the total market
value of the holdings by the total investments of the Portfolio. Holdings are
subject to change.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
2
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
MANAGEMENT DISCUSSION
[PHOTO]
MICHAEL W. WEILHEIMER
CO-PORTFOLIO MANAGER
[PHOTO]
THOMAS HUGGINS
CO-PORTFOLIO MANAGER
AN INTERVIEW WITH MICHAEL W. WEILHEIMER AND THOMAS HUGGINS, CO-PORTFOLIO
MANAGERS OF HIGH INCOME PORTFOLIO.
Q: MIKE, THIS WAS A DIFFICULT PERIOD FOR THE HIGH-YIELD MARKET AND FOR THE
FUND. HOW WOULD YOU EVALUATE RECENT MARKET TRENDS?
A: MR. WEILHEIMER: In the first half of the fiscal year, the Fund was helped
by an overweighting in telecom bonds, which has historically been a
defensive sector. However, in the second half of the fiscal year, the
telecom sector came under severe pressure from falling equity prices. With
many telecom companies strapped for cash to complete the build-out of their
networks, telecom bond prices declined significantly. The Fund's
performance reflected the difficulties within the telecom sector.
We were able to temper the effect somewhat with a larger cash position and
an increase in the Fund's exposure to BB rated credits. The Fund was also
helped by its energy bonds, which responded to rising oil prices and by the
Fund's casino and resort bonds. But, generally there was simply no escaping
the impact of weaker corporate earnings and the downtrend in the overall
market.
Q: EVEN AMID ITS PROBLEMS, TELECOM REMAINS A DOMINANT SEGMENT OF THE MARKET.
WHERE DO YOU SEE OPPORTUNITIES AS THE MARKET SETTLES?
A: MR. HUGGINS: The excesses in the telecom sector will need ironing out, to
be sure. But over time, we believe that the companies that emerge will
benefit from the transition from voice orientation to data and bandwidth
services. Data traffic has doubled roughly every six months, while
broadband provides the capacity to offer a wide range of new services,
including Internet, messaging, e-commerce, audio/visual on demand, and
teleconferencing. These new services are likely to alter the way consumers
and businesses utilize phone services and represent major new revenue
opportunities for telecom companies.
In the domestic wireless sector, Nextel provides wireless phone services
throughout the U.S. The company has achieved very strong subscriber growth
in recent years, enrolling more than 540,000 new customers in the third
quarter alone. Historically, Nextel has consistently generated higher
revenues and cash flow per subscriber than its rivals. In addition, in an
industry characterized by increasing consolidation, we feel the company's
superior business model may make it an attractive partner.
PORTFOLIO CREDIT QUALITY RATINGS(1)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
AAA 2.5%
BBB 1.0%
BB 9.0%
B 64.6%
CCC 16.5%
NON-RATED 6.4%
</TABLE>
FIVE LARGEST SECTOR WEIGHTINGS(1)
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
Wireline Communications Services 17.3%
Broadcasting & Cable 13.1%
Wireless Communications Services 10.1%
Lodging & Gaming 8.6%
Information Technology Services 6.9%
</TABLE>
(1) Five largest Sector Weightings account for 56.0% of the Portfolio's
investments, determined by dividing the total market value of the holdings
by the total net assets of the Portfolio. Because the Portfolio is actively
managed, Credit Quality Ratings, Sector Weightings and individual holdings
are subject to change. Credit ratings are provided by Moody's, Inc., a
nationally recognized bond rating service.
--------------------------------------------------------------------------------
MUTUAL FUND SHARES ARE NOT INSURED BY THE FDIC AND ARE NOT DEPOSITS OR OTHER
OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION. SHARES ARE SUBJECT
TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED. YIELD WILL
VARY.
--------------------------------------------------------------------------------
3
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
MANAGEMENT DISCUSSION CONT'D
In Europe, Versatel Telecom BV is a fast-growing provider of voice, data
and Internet services in Belgium, The Netherlands, and northern Germany,
which has been underappreciated by the market. The company has
significantly increased its business and carrier product offerings, thus
expanding its customer base and revenue sources. Versatel's revenues for
the first half of 2000 quadrupled with the introduction of new data and
Internet services as well as two strategic acquisitions. In addition,
Versatel has prefunded its network build-out into 2002 and maintains more
than $1 billion in cash on its balance sheet.
Q: YOU MENTIONED THE FIERCE COMPETITION IN THE TELECOM INDUSTRY. IS THERE ANY
WAY TO TAKE ADVANTAGE OF THAT COMPETITION?
A: MR. HUGGINS: Yes. A related sector is the tower industry, a major provider
of network services. Spectrasite Holdings, Inc. is one of only three
nationwide providers of antennae sites for wireless telecom and broadcast
companies. These sites are a critical component of the wireless
infrastructure and operators may lease space on their towers to several
companies. Moreover, the growth of telecom services may require
significantly more tower sites in coming years.
Spectrasite's customers include AT&T, Nextel, Sprint and many others. The
company's prospects improved further with the recent announcement that it
purchased from SBC Communications 3,900 additional towers. This agreement
marks an important strategic alliance with one of the nation's
fastest-growing regional Bell operating companies. For the first half of
2000, Spectrasite's revenues rose nine-fold.
Q: THE FUND CONTINUED TO HAVE A LARGE EXPOSURE TO BROADCASTING AND CABLE. WHAT
COMPANIES DID YOU FIND ATTRACTIVE IN THE CABLE SECTOR?
A: MR. WEILHEIMER: The Fund maintained its exposure to European cable
operators that we began last year. For example, U.K.-based NTL, Ltd. is the
second largest cable operator in Europe, with a fiber optic network passing
8.2 million homes. NTL has a faster growth rate than U.S. companies and has
been able to package cable television service together with local telephone
services and Internet, providing the company with alternative sources of
income. The company received an equity infusion of $8 billion from France
Telecom and was among the few cable operators to be able to issue new bonds
in recent months. We believe that NTL may be a good candidate for a credit
upgrade in coming years.
Another U.K.-based operator, Telewest Communication PLC, delivers cable and
other services over a highly advanced broadband network. With 1.6 million
residential customers, Telewest is the U.K.'s second largest cable
operator. The company saw revenues rise 32% in the first half of 2000,
helped by growth in subscribers and the acquisition of Flextech, one of
Britain's leading pay-TV providers.
Q: YOU INDICATED THAT THE FUND HAD INVESTMENTS IN THE RESORT AND GAMING
SECTOR. WHAT ARE YOUR LARGEST INVESTMENTS THERE?
A: MR. HUGGINS: The gaming sector has fared relatively well in the recent
economy, although we will monitor the economy for any impact a slower
economy might have on the group. Among the Portfolio's investments,
MGM Grand is among the largest hotel-casino operators in the U.S. MGM has
doubled revenues in 2000, due in part to the completion of its acquisition
of Mirage Resorts, the largest merger in industry history. MGM has
continued to sell off non-strategic assets - $200 million since May alone -
with the proceeds used to retire debt and strengthen the company's balance
sheet.
Elsewhere in the gaming sector, the Fund had an investment in Hollywood
Casinos, representing the increasing geographical diversity within the
gaming industry. Hollywood's Aurora casino benefits from its location close
to the affluent suburbs north of Chicago. The company also operates a
gaming and entertainment complex in Tunica County, Mississippi. Finally,
Hollywood is building a destination resort in the fast-growing gaming
market of Shreveport, Louisiana. The company posted record revenue growth
in the third quarter of 2000.
4
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
MANAGEMENT DISCUSSION CONT'D
Q: AND WHERE HAVE YOU INVESTED IN THE ENERGY SECTOR?
A: MR. WEILHEIMER: R&B Falcon has benefited from rising oil prices in 2000, as
exploration companies have increased their budgets. The company operates
139 mobile offshore drilling units and marine barges in facilities around
the world. In August, Falcon agreed to a merger with Transocean Sedco
Forex, a combination that would result in the world's third largest
oilfield services company. The merger is expected to result in significant
cost savings and a lower debt-to-capitalization ratio for the combined
company.
Universal Compression rents compression equipment to providers of natural
gas. The company has enjoyed strong revenue and cash flow growth amid
rising domestic demand for natural gas. Universal has also increased its
international business, including its first commitment in Mexico. The
recent acquisition of Weatherford Global Compression makes Universal the
world's second largest gas compression company and could enhance credit
quality dramatically.
Q: WHAT IS YOUR OUTLOOK FOR THE HIGH-YIELD BOND MARKET IN THE COMING YEAR?
A: MR. WEILHEIMER: Over the near-term, the high-yield market has some hurdles
to overcome, including softer corporate profits, weakness in the equity
markets and excesses in the telecom sector. Those issues will need
resolution for the market to make a sustained advance. However, we believe
that the market pullback has uncovered some promising opportunities.
Currently, high-yield bond spreads remain extraordinarily wide by
historical standards - over 800 basis points (8.0%) over similar maturity
Treasury bonds. As for the long-term outlook, we feel that high-yield bonds
will remain an important financing mechanism for key industries. We believe
that over time, the current hurdles will be overcome and that the Fund is
well-positioned to take advantage of opportunities in coming years.
[GRAPHIC]
EATON VANCE HIGH INCOME FUND CLASS B VS CS FIRST BOSTON HIGH YIELD BOND INDEX
<TABLE>
<CAPTION>
DATE High Income Fund SFB Index
<C> <C> <C>
10/30/1990 $10,000 $10,000
11/30/1990 $9,780 $10,201
12/31/1990 $9,657 $10,250
1/31/1991 $9,546 $10,530
2/28/1991 $10,106 $11,440
3/31/1991 $10,562 $12,148
4/30/1991 $11,351 $12,652
5/31/1991 $11,389 $12,716
6/30/1991 $11,762 $13,049
7/31/1991 $12,216 $13,490
8/31/1991 $12,362 $13,735
9/30/1991 $12,625 $14,048
10/31/1991 $13,082 $14,513
11/30/1991 $13,233 $14,629
12/31/1991 $13,359 $14,736
1/31/1992 $13,897 $15,335
2/29/1992 $14,258 $15,708
3/31/1992 $14,597 $15,941
4/30/1992 $14,755 $15,955
5/31/1992 $14,975 $16,172
6/30/1992 $15,181 $16,332
7/31/1992 $15,384 $16,584
8/31/1992 $15,582 $16,813
9/30/1992 $15,680 $16,922
10/31/1992 $15,448 $16,746
11/30/1992 $15,519 $16,997
12/31/1992 $15,735 $17,189
1/31/1993 $16,004 $17,659
2/28/1993 $16,356 $18,008
3/31/1993 $16,555 $18,388
4/30/1993 $16,687 $18,493
5/31/1993 $16,938 $18,763
6/30/1993 $17,266 $19,103
7/31/1993 $17,457 $19,301
8/31/1993 $17,498 $19,465
9/30/1993 $17,484 $19,576
10/31/1993 $17,868 $19,935
11/30/1993 $18,095 $20,186
12/31/1993 $18,398 $20,440
1/31/1994 $18,760 $20,804
2/28/1994 $18,878 $20,835
3/31/1994 $18,258 $20,223
4/30/1994 $18,043 $19,952
5/31/1994 $18,149 $20,065
6/30/1994 $18,193 $19,931
7/31/1994 $18,113 $20,025
8/31/1994 $18,088 $20,169
9/30/1994 $18,088 $20,249
10/31/1994 $18,093 $20,264
11/30/1994 $17,873 $20,029
12/31/1994 $18,066 $20,241
1/31/1995 $18,142 $20,453
2/28/1995 $18,607 $20,957
3/31/1995 $18,715 $21,193
4/30/1995 $19,230 $21,664
5/31/1995 $19,644 $22,275
6/30/1995 $19,665 $22,422
7/31/1995 $19,967 $22,769
8/31/1995 $19,865 $22,833
9/30/1995 $19,998 $23,096
10/31/1995 $20,019 $23,352
11/30/1995 $20,207 $23,462
12/31/1995 $20,570 $23,760
1/31/1996 $20,883 $24,211
2/29/1996 $21,193 $24,339
3/31/1996 $21,112 $24,274
4/30/1996 $21,280 $24,405
5/31/1996 $21,503 $24,603
6/30/1996 $21,503 $24,657
7/31/1996 $21,657 $24,879
8/31/1996 $21,980 $25,150
9/30/1996 $22,559 $25,582
10/31/1996 $22,594 $25,797
11/30/1996 $22,988 $26,200
12/31/1996 $23,405 $26,711
1/31/1997 $23,587 $26,906
2/28/1997 $24,038 $27,411
3/31/1997 $23,511 $27,104
4/30/1997 $23,778 $27,346
5/31/1997 $24,405 $27,895
6/30/1997 $24,882 $28,275
7/31/1997 $25,579 $28,874
8/31/1997 $25,722 $29,030
9/30/1997 $26,375 $29,605
10/31/1997 $26,307 $29,602
11/30/1997 $26,533 $29,812
12/31/1997 $26,997 $30,083
1/31/1998 $27,538 $30,595
2/28/1998 $27,907 $30,833
3/31/1998 $28,351 $30,987
4/30/1998 $28,463 $31,220
5/31/1998 $28,474 $31,314
6/30/1998 $28,533 $31,379
7/31/1998 $28,657 $31,599
8/31/1998 $26,467 $29,453
9/30/1998 $26,368 $29,450
10/31/1998 $25,650 $28,864
11/30/1998 $27,392 $30,328
12/31/1998 $27,475 $30,258
1/31/1999 $28,072 $30,542
2/28/1999 $28,407 $30,478
3/31/1999 $28,941 $30,756
4/30/1999 $29,776 $31,435
5/31/1999 $29,379 $31,096
6/30/1999 $29,351 $31,111
7/31/1999 $29,490 $31,127
8/31/1999 $29,214 $30,850
9/30/1999 $29,080 $30,612
10/31/1999 $29,227 $30,462
11/30/1999 $29,872 $30,877
12/31/1999 $30,495 $31,250
1/31/2000 $30,802 $31,125
2/29/2000 $31,526 $31,318
3/31/2000 $30,784 $30,848
4/30/2000 $30,539 $30,802
5/31/2000 $29,948 $30,309
6/30/2000 $30,241 $30,988
7/31/2000 $30,077 $31,280
8/31/2000 $30,243 $31,489
9/30/2000 $29,402 $31,199
10/31/2000 $27,797 $30,229
</TABLE>
<TABLE>
<CAPTION>
PERFORMANCE** CLASS B CLASS C
--------------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
--------------------------------------------------------------------------------
<S> <C> <C>
One Year -4.89% -4.98%
Five Years 6.79 6.72
Ten Years 10.76 N.A.
Life of Fund+ 7.90 6.54
<CAPTION>
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
--------------------------------------------------------------------------------
One Year -9.19% -5.84%
Five Years 6.51 6.72
Ten Years 10.76 N.A.
Life of Fund+ 7.90 6.54
</TABLE>
+ Inception Dates: Class B: 8/19/86; Class C: 6/8/94
* Source: TowersData, Bethesda, MD.; CSFirst Boston, Inc.
The chart compares the Fund's total return with that of the CS First Boston
High Yield Bond Index, a broad-based, unmanaged market index of high-yield
corporate bonds. The lines on the chart represent the total returns of $10,000
hypothetical investments in the Fund and the Index. The Index's total return
does not reflect commissions or expenses that would have been incurred if an
investor individually purchased or sold the securities represented in the
Index. It is not possible to invest directly in an Index. An investment in the
Fund's Class C shares on 6/8/94 at net asset value would have been worth
$15,003 on October 31, 2000.
**Returns are calculated by determining the percentage change in net asset value
(NAV) with all distributions reinvested. SEC returns for Class B reflect
applicable CDSC based on the following schedule: 5% - 1st and 2nd years;
4% - 3rd year; 3% - 4th year; 2% - 5th year; 1% - 6th year. SEC 1-Year
return for Class C reflects 1% CDSC.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth
more or less than their original cost.
5
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 2000
<S> <C>
ASSETS
--------------------------------------------------------
Investment in High Income Portfolio, at
value
(identified cost, $1,076,952,117) $ 914,718,890
Receivable for Fund shares sold 4,165,126
--------------------------------------------------------
TOTAL ASSETS $ 918,884,016
--------------------------------------------------------
LIABILITIES
--------------------------------------------------------
Dividends payable $ 3,964,056
Payable for Fund shares redeemed 2,251,315
Payable to affiliate for Trustees' fees 331
Payable to affiliate for service fees 109,886
Accrued expenses 192,448
--------------------------------------------------------
TOTAL LIABILITIES $ 6,518,036
--------------------------------------------------------
NET ASSETS $ 912,365,980
--------------------------------------------------------
SOURCES OF NET ASSETS
--------------------------------------------------------
Paid-in capital $1,127,821,012
Accumulated net realized loss from
Portfolio (computed on the basis of
identified cost) (61,632,435)
Accumulated undistributed net
investment income 8,410,630
Net unrealized depreciation from
Portfolio (computed on the basis of
identified cost) (162,233,227)
--------------------------------------------------------
TOTAL $ 912,365,980
--------------------------------------------------------
CLASS B SHARES
--------------------------------------------------------
NET ASSETS $ 721,339,313
SHARES OUTSTANDING 116,760,896
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 6.18
--------------------------------------------------------
CLASS C SHARES
--------------------------------------------------------
NET ASSETS $ 191,026,667
SHARES OUTSTANDING 23,484,983
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 8.13
--------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
OCTOBER 31, 2000(1) MARCH 31, 2000
<S> <C> <C>
-----------------------------------------------------------------------------
INVESTMENT INCOME
-----------------------------------------------------------------------------
Interest allocated from Portfolio $ 60,093,280 $ 82,381,241
Dividends allocated from Portfolio 5,480,463 8,311,935
Miscellaneous income allocated from
Portfolio 1,178,612 1,175,160
Expenses allocated from Portfolio (3,680,879) (5,285,547)
-----------------------------------------------------------------------------
NET INVESTMENT INCOME FROM PORTFOLIO $ 63,071,476 $ 86,582,789
-----------------------------------------------------------------------------
EXPENSES
-----------------------------------------------------------------------------
Trustees fees and expenses $ 2,509 $ 4,724
Distribution and service fees
Class B 4,314,932 6,870,991
Class C 1,016,049 946,179
Transfer and dividend disbursing agent
fees 550,667 866,080
Registration fees 101,704 88,733
Printing and postage 49,592 75,280
Legal and accounting services 23,168 27,896
Custodian fee 17,159 31,016
Miscellaneous 49,611 77,195
-----------------------------------------------------------------------------
TOTAL EXPENSES $ 6,125,391 $ 8,988,094
-----------------------------------------------------------------------------
NET INVESTMENT INCOME $ 56,946,085 $ 77,594,695
-----------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) FROM PORTFOLIO
-----------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (35,100,200) $ 8,548,220
Foreign currency and forward foreign
currency exchange
contract transactions 6,003,111 4,240,787
-----------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) $ (29,097,089) $ 12,789,007
-----------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (123,838,485) $ (41,114,102)
Foreign currency and forward foreign
currency exchange contracts (912,424) 1,781,769
-----------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $ (124,750,909) $ (39,332,333)
-----------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (153,847,998) $ (26,543,326)
-----------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (96,901,913) $ 51,051,369
-----------------------------------------------------------------------------
</TABLE>
(1) For the seven months ended October 31, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 2000(1) MARCH 31, 2000 MARCH 31, 1999
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
From operations --
Net investment income $ 56,946,085 $ 77,594,695 $ 64,032,525
Net realized gain (loss) (29,097,089) 12,789,007 (5,306,735)
Net change in unrealized
appreciation (depreciation) (124,750,909) (39,332,333) (42,231,862)
--------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (96,901,913) $ 51,051,369 $ 16,493,928
--------------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class B $ (46,080,591) $ (68,703,356) $ (57,887,205)
Class C (10,428,144) (8,930,184) (3,801,298)
--------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO
SHAREHOLDERS $ (56,508,735) $ (77,633,540) $ (61,688,503)
--------------------------------------------------------------------------------------
Transactions in shares of
beneficial interest --
Proceeds from sale of shares
Class B $ 174,763,554 $ 240,920,128 $ 170,794,418
Class C 112,599,592 129,517,104 54,928,047
Issued in reorganization of EV
Classic High Income Fund
Class C -- -- 33,094,017
Net asset value of shares
issued to shareholders in
payment of distributions
declared
Class B 13,533,626 19,726,829 18,897,976
Class C 4,422,535 3,912,531 2,251,108
Cost of shares redeemed
Class B (101,767,904) (167,676,291) (151,322,234)
Class C (33,312,280) (55,080,525) (26,466,468)
--------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
FUND SHARE TRANSACTIONS $ 170,239,123 $ 171,319,776 $ 102,176,864
--------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 16,828,475 $ 144,737,605 $ 56,982,289
--------------------------------------------------------------------------------------
NET ASSETS
--------------------------------------------------------------------------------------
At beginning of period $ 895,537,505 $ 750,799,900 $ 693,817,611
--------------------------------------------------------------------------------------
AT END OF PERIOD $ 912,365,980 $ 895,537,505 $ 750,799,900
--------------------------------------------------------------------------------------
ACCUMULATED UNDISTRIBUTED NET INVESTMENT
INCOME INCLUDED IN NET ASSETS
--------------------------------------------------------------------------------------
AT END OF PERIOD $ 8,410,630 $ 6,315,589 $ 3,257,567
--------------------------------------------------------------------------------------
</TABLE>
(1) For the seven months ended October 31, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
7
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
-------------------------------------------------------------------------------
PERIOD ENDED
OCTOBER 31, YEAR ENDED MARCH 31,
------------ ---------------------------------------------------------------
2000(1)(2) 2000(2) 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning
of period $ 7.270 $ 7.510 $ 8.030 $ 7.220 $ 7.100 $ 6.920
-----------------------------------------------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
-----------------------------------------------------------------------------------------------------------------
Net investment income $ 0.418 $ 0.702 $ 0.685 $ 0.658 $ 0.652 $ 0.665
Net realized and unrealized
gain (loss) (1.090) (0.242) (0.543) 0.774 0.120 0.189
-----------------------------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.672) $ 0.460 $ 0.142 $ 1.432 $ 0.772 $ 0.854
-----------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-----------------------------------------------------------------------------------------------------------------
From net investment income $ (0.418) $ (0.700) $ (0.662) $ (0.622) $ (0.646) $ (0.665)
In excess of net investment
income -- -- -- -- (0.006) (0.009)
-----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.418) $ (0.700) $ (0.662) $ (0.622) $ (0.652) $ (0.674)
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD $ 6.180 $ 7.270 $ 7.510 $ 8.030 $ 7.220 $ 7.100
-----------------------------------------------------------------------------------------------------------------
TOTAL RETURN(3) (9.70)% 6.36% 2.08% 20.59% 11.37% 12.80%
-----------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $721,339 $758,686 $689,140 $693,818 $598,273 $496,966
Ratios (As a percentage of
average daily net assets):
Expenses(4) 1.78%(5) 1.74% 1.75% 1.73% 1.77% 1.78%
Net investment income 10.37%(5) 9.49% 9.13% 8.58% 8.97% 9.38%
Portfolio Turnover of the
Portfolio 41% 113% 150% 137% 78% 88%
-----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the seven-month period ended October 31, 2000.
(2) Net investment income per share was computed using average shares
outstanding.
(3) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(4) Includes the Fund's share of the Portfolio's allocated expenses.
(5) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
8
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS C
---------------------------------------
PERIOD ENDED
OCTOBER 31, YEAR ENDED MARCH 31,
------------ -----------------------
2000(1)(2) 2000(2) 1999
<S> <C> <C> <C>
-------------------------------------------------------------------------
Net asset value -- Beginning
of period $ 9.560 $ 9.880 $10.560
-------------------------------------------------------------------------
INCOME (LOSS) FROM OPERATIONS
-------------------------------------------------------------------------
Net investment income $ 0.551 $ 0.915 $ 0.901
Net realized and unrealized
loss (1.435) (0.321) (0.715)
-------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM
OPERATIONS $ (0.884) $ 0.594 $ 0.186
-------------------------------------------------------------------------
LESS DISTRIBUTIONS
-------------------------------------------------------------------------
From net investment income $ (0.546) $ (0.914) $(0.866)
-------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.546) $ (0.914) $(0.866)
-------------------------------------------------------------------------
NET ASSET VALUE -- END OF
PERIOD $ 8.130 $ 9.560 $ 9.880
-------------------------------------------------------------------------
TOTAL RETURN(3) (9.70)% 6.26% 2.08%
-------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------
Net assets, end of period
(000's omitted) $191,027 $136,851 $61,660
Ratios (As a percentage of
average daily net assets):
Expenses(4) 1.82%(5) 1.78% 1.79%
Net investment income 10.40%(5) 9.42% 9.18%
Portfolio Turnover of the
Portfolio 41% 113% 150%
-------------------------------------------------------------------------
</TABLE>
(1) For the seven-month period ended October 31, 2000.
(2) Net investment income per share was computed using average shares
outstanding.
(3) Total return is calculated assuming a purchase at the net asset value on
the first day and a sale at the net asset value on the last day of each
period reported. Dividends and distributions, if any, are assumed
reinvested at the net asset value on the reinvestment date. Total return
is not computed on an annualized basis.
(4) Includes the Fund's share of the Portfolio's allocated expenses.
(5) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS
1 SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------
Eaton Vance High Income Fund (the Fund) is a diversified series of Eaton
Vance Mutual Funds Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Fund offers two classes of shares. Class B shares and
Class C shares are sold at net asset value and are subject to a contingent
deferred sales charge (see Note 6). Each class represents a pro rata interest
in the Fund, but votes separately on class-specific matters and (as noted
below) is subject to different expenses. Realized and unrealized gains and
losses are allocated daily to each class of shares based on the relative net
assets of each class to the total net assets of the Fund. Net investment
income, other than class specific expenses, is allocated daily to each class
of shares based upon the ratio of the value of each class' paid shares to the
total value of all paid shares. Each class of shares differs in its
distribution plan and certain other class specific expenses. The Fund invests
all of its investable assets in interests in the High Income Portfolio (the
Portfolio), a New York Trust, having the same investment objective as the
Fund. The value of the Fund's investment in the Portfolio reflects the Fund's
proportionate interest in the net assets of the Portfolio (78.6% at
October 31, 2000). The performance of the Fund is directly affected by the
performance of the Portfolio. The financial statements of the Portfolio,
including the portfolio of investments, are included elsewhere in this report
and should be read in conjunction with the Fund's financial statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A INVESTMENT VALUATION -- Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with accounting
principles generally accepted in the United States of America.
C FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal
income or excise tax is necessary. At October 31, 2000, the Fund, for federal
income tax purposes, had a capital loss carryover of $59,442,801, which will
reduce the Fund's taxable income arising from future net realized gain on
investments, if any, to the extent permitted by the Internal Revenue Code and
thus will reduce the amount of distributions to shareholders which would
otherwise be necessary to relieve the Fund of any liability for federal
income or excise tax. Such capital loss carryover will expire on October 31,
2003 ($12,690,352), October 31, 2004 ($5,868,015), October 31, 2005
($7,020,394), October 31, 2007 ($3,342,613), and October 31, 2008
($30,521,427) respectively.
D OTHER -- Investment transactions are accounted for on a trade-date basis.
E USE OF ESTIMATES -- The preparation of the financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results could
differ from those estimates.
2 DISTRIBUTIONS TO SHAREHOLDERS
-----------------------------------------------------
The net income of the Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Such daily dividends are paid monthly.
Distributions of realized capital gains, if any, are made at least annually.
Shareholders may reinvest capital gain distributions in additional shares of
the Fund at the net asset value as of the ex-dividend date. Distributions are
paid in the form of additional shares of the Fund or, at the election of the
shareholder, in cash. The Fund distinguishes between distributions on a tax
basis and a financial reporting basis. Generally accepted accounting
principles require that only distributions in excess of tax basis earnings
and profits be reported in the financial statements as a return of capital.
Differences in the recognition or classification of income between the
financial statements and tax earnings and profits which result in over
distributions for financial statement purposes only are classified as
distributions in excess of net investment income or accumulated net realized
gains.
Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
10
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
3 SHARES OF BENEFICIAL INTEREST
-----------------------------------------------------
The Fund's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest (without par
value). Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
CLASS B OCTOBER 31, 2000(1) MARCH 31, 2000 MARCH 31, 1999
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------
Sales 25,342,824 32,600,657 22,874,813
Issued to shareholders electing to
receive payments of distributions in
Fund shares 1,969,057 2,667,731 2,521,238
Redemptions (14,873,671) (22,665,226) (20,058,915)
---------------------------------------------------------------------------------------------
NET INCREASE 12,438,210 12,603,162 5,337,136
---------------------------------------------------------------------------------------------
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
CLASS C OCTOBER 31, 2000(1) MARCH 31, 2000 MARCH 31, 1999
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------
Sales 12,416,801 13,334,738 5,574,324
Issued to shareholders electing to
receive payments of distributions in
Fund shares 494,892 403,015 228,574
Redemptions (3,738,563) (5,667,675) (2,696,157)
Issued to EV Classic High Income Fund
shareholders -- -- 3,135,034
---------------------------------------------------------------------------------------------
NET INCREASE 9,173,130 8,070,078 6,241,775
---------------------------------------------------------------------------------------------
</TABLE>
(1) For the seven-month period ended October 31, 2000.
4 TRANSACTIONS WITH AFFILIATES
-----------------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Except as to Trustees of the Fund and the
Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their services to the Fund out of such
investment adviser fee.
Certain officers and Trustees of the Fund and of the Portfolio are officers
of the above organizations.
5 DISTRIBUTION AND SERVICE PLANS
-----------------------------------------------------
The Fund has in effect distribution plans for Class B Shares (the Class B
Plan) and Class C Shares (Class C Plan) pursuant to Rule 12b-1 under the
Investment Company Act of 1940 (collectively, the Plans). The Class B and
Class C Plans require the Fund to pay Eaton Vance Distributors, Inc. (EVD)
amounts equal to 1/365 of 0.75% of the Fund's average daily net assets
attributable to Class B and Class C shares for providing ongoing distribution
services and facilities to the Fund. The Fund will automatically discontinue
payments to EVD during any period in which there are no outstanding Uncovered
Distribution Charges, which are equivalent to the sum of (i) 5% and 6.25% of
the aggregate amount received by the Fund for the Class B and Class C shares
sold, respectively, plus, (ii) interest calculated by applying the rate of 1%
over the prevailing prime rate to the outstanding balance of Uncovered
Distribution Charges of EVD of each respective class, reduced by the
aggregate amount of contingent deferred sales charges (see Note 6) and daily
amounts theretofore paid to EVD by each respective class. The Fund paid or
accrued $3,355,137 and $762,037 for Class B and Class C shares, respectively,
to or payable to EVD for the period from April 1, 2000 to October 31, 2000,
representing 0.75% (annualized) of the average daily net assets for Class B
and Class C shares. The Fund paid or accrued $5,426,918 and $709,634 for
Class B and Class C shares, respectively, to or payable to EVD for the year
ended March 31, 2000 representing 0.75% of the average daily net assets for
Class B and Class C shares. At October 31, 2000, the amount of Uncovered
Distribution Charges of EVD calculated under the Plan was approximately
$28,154,000 and $16,065,000 for Class B and Class C shares, respectively.
The Plans authorize the Fund to make payments of service fees to EVD,
investment dealers and other persons in amounts not exceeding 0.25% of the
Fund's average daily net assets attributable to Class B and Class C shares
for each fiscal year. Service fee payments will be made for personal services
and/or the maintenance of shareholder accounts. Service fees are separate and
distinct from the sales commissions and distribution fees payable by the Fund
to EVD and, as such are not subject to automatic discontinuance where there
are no outstanding Uncovered Distribution Charges of EVD. Service fee
payments for the seven months ended October 31, 2000 amounted to $959,795 and
$254,012 for Class B and Class C, respectively. Service fee payments for the
year ended March 31, 2000 amounted to $1,444,073 and $236,545 for Class B and
Class C, respectively.
Certain officers and Trustees of the Fund are officers or directors of EVD.
6 CONTINGENT DEFERRED SALES CHARGE
-----------------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions of
Class C shares
11
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
made within one year of purchase. Generally, the CDSC is based upon the lower
of the net asset value at date of redemption or date of purchase. No charge
is levied on shares acquired by reinvestment of dividends or capital gains
distributions. Class B CDSC is imposed at declining rates that begin at 5% in
the case of redemptions in the first and second year after purchase,
declining one percentage point each subsequent year. No CDSC is levied on
shares which have been sold to EVM or its affiliates or to their respective
employees or clients and may be waived under certain other limited
conditions. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plan. CDSC
charges received when no Uncovered Distribution Charges exist will be
retained by the Fund. EVD received approximately $1,165,000 and $56,000 of
CDSC paid by shareholders for Class B shares and Class C shares,
respectively, for the period from April 1, 2000 to October 31, 2000.
7 INVESTMENT TRANSACTIONS
-----------------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the
period from April 1, 2000 to October 31, 2000, aggregated $288,247,027 and
$180,170,527, respectively.
8 TRANSFER OF NET ASSETS
-----------------------------------------------------
On April 1, 1998, Eaton Vance High Income Fund acquired the net assets of the
EV Classic High Income Fund pursuant to an Agreement and Plan of
Reorganization dated June 23, 1997. In accordance with the agreement, Eaton
Vance High Income Fund, at the closing, issued 3,135,034 Class C shares of
the Fund having an aggregate value of $33,094,017. As a result, the Fund
issued one Class C share for each share of EV Classic High Income Fund. The
transaction was structured for tax purposes to qualify as a tax free
reorganization under the Internal Revenue Code. The EV Classic High Income
Fund's net assets at the date of the transaction were $33,094,017, including
$1,444,205 of unrealized appreciation. Directly after the merger, the
combined net assets of the Fund were $726,911,628 with a net asset value of
$8.03 and $10.56 for Class B shares and Class C shares, respectively.
9 FISCAL YEAR END CHANGE
-----------------------------------------------------
Effective April 1, 2000 the Fund changed its fiscal year-end to October 31.
12
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS
OF EATON VANCE HIGH INCOME FUND:
---------------------------------------------
We have audited the accompanying statement of assets and liabilities of Eaton
Vance High Income Fund (the Fund) as of October 31, 2000, and the related
statement of operations for the period from April 1, 2000 to October 31, 2000
and the year ended March 31, 2000, the statements of changes in net assets for
the period from April 1, 2000 to October 31, 2000, and the years ended
March 31, 2000 and 1999, and the financial highlights for the period from
April 1, 2000 to October 31, 2000 and for each of the years in the five-year
period ended March 31, 2000. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Eaton Vance High
Income Fund at October 31, 2000, the results of its operations, the changes in
its net assets and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 8, 2000
13
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
CORPORATE BONDS & NOTES -- 83.4%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.7%
--------------------------------------------------------------------------------
Dunlop Stand Aero Holdings, Sr. Notes,
11.875%, 5/15/09 $ 3,900 $ 3,900,000
Transdigm, Inc., 10.375%, 12/1/08 5,125 4,766,250
--------------------------------------------------------------------------------
$ 8,666,250
--------------------------------------------------------------------------------
APPAREL -- 0.7%
--------------------------------------------------------------------------------
Tropical Sportswear, 11.00%, 6/15/08 $ 200 $ 176,000
William Carter Co., Sr. Sub. Notes,
10.375%, 12/1/06 8,285 7,912,175
--------------------------------------------------------------------------------
$ 8,088,175
--------------------------------------------------------------------------------
AUTO AND PARTS -- 0.3%
--------------------------------------------------------------------------------
J.L. French Automative Casting,
11.50%, 6/1/09 $ 4,475 $ 2,662,625
Talon Automotive Group, Sr. Sub. Notes,
9.625%, 5/1/08 1,100 258,500
--------------------------------------------------------------------------------
$ 2,921,125
--------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 9.8%
--------------------------------------------------------------------------------
ACME Television Services, Inc.,
10.875%, (0% until 9/30/2000), 9/30/04 $ 2,750 $ 2,598,750
Diamond Cable Communications Co., Sr.
Disc. Notes, 11.75%, (0% until 2000),
12/15/05 3,000 2,805,000
EchoStar Broadband Corp., Sr. Notes,
10.375%, 10/1/07(1) 13,503 13,604,272
EchoStar DBS Corp., Sr. Notes,
9.375%, 2/1/09 1,000 987,500
Granite Broadcasting Corp., Sr. Sub.
Notes, 10.375%, 5/15/05 1,075 800,875
Muzak Holdings LLC, 9.875%, 3/15/09 3,400 3,009,000
Muzak Holdings LLC, Sr. Disc. Notes,
13.00%, (0% until 2004), 3/15/10 6,563 3,708,095
NTL Communications Corp.,
9.25%, 11/15/06 EUR 700 505,448
NTL Communications Corp., Sr. Notes,
11.875%, 10/1/10(1) 28,850 26,830,500
NTL, Inc., 5.75%, 12/15/09(1) 4,550 2,894,937
Ono Finance PLC, 13.00%, 5/1/09 5,470 4,239,250
Ono Finance PLC, 13.00%, 5/1/09 EUR 3,000 1,924,212
Pegasus Communications Corp., Sr. Notes,
9.75%, 12/1/06 775 759,500
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
BROADCASTING AND CABLE (CONTINUED)
--------------------------------------------------------------------------------
Pegasus Communications Corp., Sr. Notes,
12.50%, 8/1/07 $ 6,410 $ 6,890,750
RCN Corp., Sr. Disc. Notes, 9.80%, (0%
until 2003), 2/15/08 2,250 1,023,750
Telemundo Holdings, Inc., Sr. Disc.
Notes, 11.50%, (0% until 2003), 8/15/08 12,050 8,796,500
Telewest Communication PLC, 9.875%, (0%
until 2004), 4/15/09 GBP 3,575 2,265,906
Telewest Communication PLC, Debs.,
9.625%, 10/1/06 640 531,200
Telewest Communication PLC, Debs.,
11.00%, (0% until 2000), 10/1/07 12,125 10,609,375
Telewest Communication PLC, Sr. Disc.
Notes, 9.25%, (0% until 2004), 4/15/09 11,101 5,023,202
Telewest Communication PLC, Sr. Notes,
9.875%, 2/1/10 4,250 3,400,000
Telewest Communication PLC, Sr. Notes,
11.25%, 11/1/08 3,150 2,756,250
United Pan Europe Communications, Sr.
Disc. Notes, 13.375%, (0% until 2004),
11/1/09 4,500 1,777,500
United Pan Europe Communications, Sr.
Notes, 11.25%, 11/1/09 EUR 5,240 3,390,982
United Pan Europe Communications, Sr.
Notes, 11.25%, 2/1/10 3,655 2,796,075
--------------------------------------------------------------------------------
$ 113,928,829
--------------------------------------------------------------------------------
BUSINESS SERVICES - MISCELLANEOUS -- 1.3%
--------------------------------------------------------------------------------
AP Holdings, Inc., Sr. Disc. Notes,
11.25%, (0% until 2003), 3/15/08 $ 8,550 $ 651,937
Coinmach Corp., Sr. Notes,
11.75%, 11/15/05 2,275 2,263,625
Federal Data Corp., Sr. Sub. Notes,
10.125%, 8/1/05 5,575 5,825,875
Intertek Finance PLC, Sr. Sub. Notes,
Series B, 10.25%, 11/1/06 1,600 728,000
Richmont Marketing Specialists,
10.125%, 12/15/07 17,770 4,442,500
Tapco International Corp., Sr. Sub.
Notes, 12.50%, 8/1/09(1) 1,300 1,267,500
--------------------------------------------------------------------------------
$ 15,179,437
--------------------------------------------------------------------------------
BUSINESS SERVICES - RENTAL & LEASING -- 2.7%
--------------------------------------------------------------------------------
Anthony Crane Rental LP, Guaranteed Sr.
Notes, Series B, 10.375%, 8/1/08 $ 4,000 $ 1,700,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
BUSINESS SERVICES - RENTAL & LEASING (CONTINUED)
--------------------------------------------------------------------------------
NationsRent, Inc., Guaranteed Sr. Sub.
Notes, 10.375%, 12/15/08 $ 4,600 $ 2,553,000
Neff Corp., 10.25%, 6/1/08 4,050 1,842,750
Neff Corp., Guaranteed Sr. Sub. Notes,
10.25%, 6/1/08 4,688 2,132,812
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 11.25%, (0% until 2004), 4/15/09 19,650 10,242,562
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.00%, (0% until 2003), 7/15/08 5,360 3,524,200
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.875%, (0% until 2005), 3/15/10 3,870 1,896,300
Spectrasite Holdings, Inc., Sr. Notes,
10.75%, 3/15/10 8,100 7,492,500
--------------------------------------------------------------------------------
$ 31,384,124
--------------------------------------------------------------------------------
CHEMICALS -- 1.3%
--------------------------------------------------------------------------------
Huntsman Corp., Sr. Sub. Notes,
9.50%, 7/1/07(1) $ 1,000 $ 585,000
Lyondell Chemical Co., 9.875%, 5/1/07 2,600 2,541,500
Lyondell Chemical Co., Sr. Sub. Notes,
10.875%, 5/1/09 450 433,125
PCI Chemicals Canada, Inc.,
9.25%, 10/15/07 3,500 1,347,500
Sterling Chemicals, Inc., Sr. Sub.
Notes, 11.25%, 4/1/07 250 138,750
Sterling Chemicals, Inc., Sr. Sub.
Notes, 11.75%, 8/15/06 9,000 4,995,000
Texas Petrochemical Corp., Sr. Sub.
Notes, 11.125%, 7/1/06 2,275 1,888,250
Vantico Group, 12.00%, 8/1/10(1) EUR 3,770 2,699,361
--------------------------------------------------------------------------------
$ 14,628,486
--------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 1.6%
--------------------------------------------------------------------------------
Amscan Holdings, Inc., Sr. Sub. Notes,
9.875%, 12/15/07 $ 4,480 $ 3,528,000
Glenoit Corp., Sr. Sub. Notes,
11.00%, 4/15/07(2) 9,000 945,000
Icon Health and Fitness, Inc.,
12.00%, 9/27/05(1) 1,421 852,480
Polaroid Corp., 6.75%, 1/15/02 3,250 2,920,284
Polaroid Corp., Sr. Notes,
11.50%, 2/15/06 3,000 2,355,000
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
CONSUMER PRODUCTS (CONTINUED)
--------------------------------------------------------------------------------
Tekni-Plex, Inc., Sr. Sub. Notes,
12.75%, 6/15/10(1) $ 9,040 $ 8,271,600
--------------------------------------------------------------------------------
$ 18,872,364
--------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 0.3%
--------------------------------------------------------------------------------
Consumers International, Inc., Sr.
Notes, 10.25%, 4/1/05 $ 3,935 $ 1,200,175
Riverwood International Corp.,
10.875%, 4/1/08 3,000 2,722,500
--------------------------------------------------------------------------------
$ 3,922,675
--------------------------------------------------------------------------------
DRUGS -- 1.4%
--------------------------------------------------------------------------------
King Pharmaceutical, Inc.,
10.75%, 2/15/09 $ 5,125 $ 5,432,500
Warner Chilcott, Inc.,
12.625%, 2/15/08(1) 10,275 10,429,125
--------------------------------------------------------------------------------
$ 15,861,625
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.7%
--------------------------------------------------------------------------------
AES Corp., Sr. Notes, 9.375%, 9/15/10 $ 4,350 $ 4,437,000
AES Corp., Sr. Notes, 9.50%, 6/1/09 1,000 1,022,500
Calpine Corp., Sr. Notes,
8.625%, 8/15/10 14,300 14,145,460
--------------------------------------------------------------------------------
$ 19,604,960
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.7%
--------------------------------------------------------------------------------
Viasystems, Inc., Sr. Sub. Notes,
9.75%, 6/1/07 $ 3,600 $ 3,222,000
Viasystems, Inc., Sr. Sub. Notes,
Series B, 9.75%, 6/1/07 5,490 4,913,550
--------------------------------------------------------------------------------
$ 8,135,550
--------------------------------------------------------------------------------
ENERGY SERVICES -- 0.5%
--------------------------------------------------------------------------------
RBF Finance Co., 11.00%, 3/15/06 $ 2,300 $ 2,627,750
RBF Finance Co., 11.375%, 3/15/09 2,900 3,320,500
--------------------------------------------------------------------------------
$ 5,948,250
--------------------------------------------------------------------------------
ENTERTAINMENT -- 0.7%
--------------------------------------------------------------------------------
Marvel Enterprise, Inc., 12.00%, 6/15/09 $ 12,725 $ 6,935,125
Premier Parks, Inc., Sr. Notes,
9.25%, 4/1/06 1,000 925,000
--------------------------------------------------------------------------------
$ 7,860,125
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.5%
--------------------------------------------------------------------------------
Willis Corroon Corp., 9.00%, 2/1/09 $ 6,400 $ 5,840,000
--------------------------------------------------------------------------------
$ 5,840,000
--------------------------------------------------------------------------------
FOODS -- 2.4%
--------------------------------------------------------------------------------
B & G Foods, Inc., Sub. Notes,
9.625%, 8/1/07 $ 3,845 $ 2,720,337
Del Monte Corp., Sr. Notes,
12.25%, 4/15/07 9,979 10,527,845
Del Monte Foods Co., Sr. Disc. Notes,
12.50%, (0% until 2002), 12/15/07 3,515 2,636,250
Luigino's, Inc., Sr. Sub. Notes,
10.00%, 2/1/06 3,675 2,921,625
Premier International Foods, Sr. Notes,
12.00%, 9/1/09 12,087 9,427,860
--------------------------------------------------------------------------------
$ 28,233,917
--------------------------------------------------------------------------------
HEALTH SERVICES -- 1.1%
--------------------------------------------------------------------------------
HCA - The Healthcare Co., 8.75%, 9/1/10 $ 7,800 $ 7,882,969
Lifepoint Hospitals Holding,
10.75%, 5/15/09 2,820 3,010,350
Tenet Healthcare Corp., Sr. Notes,
9.25%, 9/1/10(1) 2,000 2,105,000
--------------------------------------------------------------------------------
$ 12,998,319
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 6.9%
--------------------------------------------------------------------------------
Covad Communication Group, Sr. Disc.
Notes, 13.50%, (0% until 2003), 3/15/08 $ 8,170 $ 2,328,450
Covad Communication Group, Sr. Notes,
12.00%, 2/15/10 19,720 9,169,800
Covad Communication Group, Sr. Notes,
12.50%, 2/15/09 650 312,000
Cybernet Internet Services
International, Inc., Sr. Notes,
14.00%, 7/1/09 4,825 2,002,375
Diva Systems Corp., Sr. Notes,
12.625%, (0% until 2003), 3/1/08 12,575 5,627,312
Equinix, Inc., Sr. Notes,
13.00%, 12/1/07 4,500 3,600,000
Exodus Communications, Inc., Sr. Notes,
10.75%, 12/15/09 4,663 4,243,330
Exodus Communications, Inc., Sr. Notes,
11.25%, 7/1/08 5,305 4,960,175
Exodus Communications, Inc., Sr. Notes,
11.625%, 7/15/10(1) 16,540 15,382,200
Globix Corp., Sr. Notes, 12.50%, 2/1/10 12,400 6,882,000
IPCS, Inc., 14.00%, (0% until 2005),
7/15/10(1) 8,600 4,042,000
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES (CONTINUED)
--------------------------------------------------------------------------------
IPCS, Inc., 14.00%, (0% until 2005),
7/15/10(1) $ 2,400 $ 1,068,000
Northpoint Communications Group, Inc.,
Sr. Notes, 12.875%, 2/15/10 7,490 7,003,150
PSINet, Inc., Sr. Notes,
10.50%, 12/1/06 2,200 1,061,500
PSINet, Inc., Sr. Notes, 11.00%, 8/1/09 15,585 7,597,687
PSINet, Inc., Sr. Notes,
11.50%, 11/1/08 6,100 3,034,750
PSINet, Inc., Sr. Notes, Series B,
10.00%, 2/15/05 4,265 2,057,862
--------------------------------------------------------------------------------
$ 80,372,591
--------------------------------------------------------------------------------
LODGING AND GAMING -- 8.6%
--------------------------------------------------------------------------------
Anchor Gaming, Sr. Sub. Notes,
9.875%, 10/15/08(1) $ 7,320 $ 7,438,950
Hollywood Casino Corp., 12.414%, 5/1/06 6,925 7,202,000
Hollywood Casino Shreveport, First
Mortgage Bonds, 13.00%, 8/1/06 8,150 8,761,250
Majestic Star LLC, 10.875%, 7/1/06 4,500 3,982,500
Mandalay Resort Group, Sr. Notes,
9.50%, 8/1/08 3,575 3,668,844
Mandalay Resort Group, Sr. Sub Notes,
10.25%, 8/1/07 10,300 10,583,250
MGM Mirage, Inc., 8.50%, 9/15/10 11,600 11,405,178
MGM Mirage, Inc., 9.75%, 6/1/07 8,000 8,340,000
Park Place Entertainment, Sr. Sub.
Notes, 8.875%, 9/15/08 10,550 10,391,750
Sun International Hotels,
8.625%, 12/15/07 8,500 7,841,250
Sun International Hotels, Sr. Sub.
Notes, 9.00%, 3/15/07 6,325 5,929,688
Trump Atlantic City Associates, Inc.,
11.25%, 5/1/06 5,437 3,751,530
Waterford Gaming LLC, Sr. Notes,
9.50%, 3/15/10(1) 10,734 10,680,330
--------------------------------------------------------------------------------
$ 99,976,520
--------------------------------------------------------------------------------
MACHINERY -- 0.5%
--------------------------------------------------------------------------------
Flowserve Corp., 12.25%, 8/15/10(1) $ 6,260 $ 6,369,550
--------------------------------------------------------------------------------
$ 6,369,550
--------------------------------------------------------------------------------
MANUFACTURING -- 1.7%
--------------------------------------------------------------------------------
Insilco Corp., 12.00%, 8/15/07 $ 11,600 $ 11,426,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
MANUFACTURING (CONTINUED)
--------------------------------------------------------------------------------
Roller Bearing Holdings Co., Sr. Disc.
Notes, 13.00%, (0% until 2002),
6/15/09(3) $ 12,875 $ 8,240,000
--------------------------------------------------------------------------------
$ 19,666,000
--------------------------------------------------------------------------------
OIL -- 0.7%
--------------------------------------------------------------------------------
Golden Sky DBS, Inc., Sr. Disc. Notes,
13.50%, (0% until 2004), 3/1/07 $ 11,445 $ 8,068,725
--------------------------------------------------------------------------------
$ 8,068,725
--------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 1.0%
--------------------------------------------------------------------------------
Cliffs Drilling, 10.25%, 5/15/03 $ 750 $ 770,625
Grant Geophysical, Inc., Sr. Notes,
Series B, 9.75%, 2/15/08 4,000 2,300,000
R&B Falcon Corp., 9.50%, 12/15/08 90 96,525
R&B Falcon Corp., 10.25%, 5/15/03 950 976,125
Universal Compression, Inc., Sr. Disc.
Notes, 9.875%, (0% until 2003), 2/15/08 9,575 7,803,625
--------------------------------------------------------------------------------
$ 11,946,900
--------------------------------------------------------------------------------
OIL AND GAS - EXPLORATION AND PRODUCTION -- 3.7%
--------------------------------------------------------------------------------
Chesapeake Energy Corp., 9.125%, 4/15/06 $ 4,000 $ 3,900,000
Chesapeake Energy Corp., 9.625%, 5/1/05 1,875 1,891,406
Chesapeake Energy Corp., Sr. Notes,
7.875%, 3/15/04 1,320 1,260,600
Chesapeake Energy Corp., Sr. Notes,
8.50%, 3/15/12 8,480 7,716,800
Comstock Resources, Inc.,
11.25%, 5/1/07 5,850 6,171,750
Energy Corp. of America, Sr. Sub. Notes,
9.50%, 5/15/07 2,340 1,813,500
Gothic Production Corp.,
11.125%, 5/1/05 7,150 7,543,250
Gothic Production Corp.,
12.375%, 8/1/06 7,865 8,533,525
Plains Resources, Inc., Sr. Sub. Notes,
10.25%, 3/15/06 750 757,500
Plains Resources, Inc., Sr. Sub. Notes,
10.25%, 3/15/06(1) 3,750 3,787,500
--------------------------------------------------------------------------------
$ 43,375,831
--------------------------------------------------------------------------------
OIL AND GAS - REFINING -- 0.1%
--------------------------------------------------------------------------------
Western Gas Resources, 10.00%, 6/15/09 $ 1,050 $ 1,097,250
--------------------------------------------------------------------------------
$ 1,097,250
--------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.2%
--------------------------------------------------------------------------------
Indah Kiat Finance Mauritius, Sr. Unsec.
Notes, 10.00%, 7/1/07 $ 3,400 $ 1,402,500
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS (CONTINUED)
--------------------------------------------------------------------------------
Pindo Deli Finance Mauritius, Ltd.,
Guaranteed Sr. Notes, 10.75%, 10/1/07 2,400 966,000
--------------------------------------------------------------------------------
$ 2,368,500
--------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 1.5%
--------------------------------------------------------------------------------
MDC Communications Corp., Sr. Sub.
Notes, 10.50%, 12/1/06 $ 15,600 $ 14,274,000
Merrill Corp., Series B, 12.00%, 5/1/09 5,250 3,176,250
--------------------------------------------------------------------------------
$ 17,450,250
--------------------------------------------------------------------------------
PUBLISHING -- 1.3%
--------------------------------------------------------------------------------
American Lawyer Media Corp., Sr. Disc.
Notes, 12.25%, (0% to 2002), 12/15/08 $ 2,920 $ 1,912,600
Von Hoffman Press, Inc., Sr. Sub. Notes,
10.875%, 5/15/07(3) 5,095 4,610,975
Ziff Davis Media, Inc., Sr. Sub. Notes,
12.00%, 7/15/10(1) 8,800 8,052,000
--------------------------------------------------------------------------------
$ 14,575,575
--------------------------------------------------------------------------------
RESTAURANTS -- 1.3%
--------------------------------------------------------------------------------
AFC Enterprises, Inc., Sr. Sub Notes,
10.25%, 5/15/07 $ 9,600 $ 9,216,000
Sbarro, Inc., 11.00%, 9/15/09 6,000 6,090,000
--------------------------------------------------------------------------------
$ 15,306,000
--------------------------------------------------------------------------------
RETAIL - FOOD AND DRUG -- 0.8%
--------------------------------------------------------------------------------
Pantry, Inc., Sr. Sub. Notes,
10.25%, 10/15/07 $ 10,230 $ 9,462,750
--------------------------------------------------------------------------------
$ 9,462,750
--------------------------------------------------------------------------------
RETAIL - GENERAL -- 0.4%
--------------------------------------------------------------------------------
Advance Holding Corp., Sr. Debs.,
12.875%, (0% until 2003), 4/15/09 $ 4,000 $ 1,500,000
Ames Department Stores, Sr. Notes,
10.00%, 4/15/06 850 310,250
Tuesday Morning Corp., Sr. Sub. Notes,
11.00%, 12/15/07 3,599 3,437,045
--------------------------------------------------------------------------------
$ 5,247,295
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.0%
--------------------------------------------------------------------------------
Amkor Technologies, Inc., Sr. Notes,
9.25%, 5/1/06 $ 600 $ 588,000
Asat Finance LLC, Sub. Notes,
12.50%, 11/1/06(1) 4,518 4,585,263
Intersil Corp., 13.25%, 8/15/09 815 925,025
SCG Holding Corp., 12.00%, 8/1/09 5,365 5,351,588
--------------------------------------------------------------------------------
$ 11,449,876
--------------------------------------------------------------------------------
SERVICES -- 0.8%
--------------------------------------------------------------------------------
Coyne International Enterprises, Sr.
Sub. Notes, 11.25%, 6/1/08 $ 2,525 $ 2,029,469
Kindercare Learning Centers, Inc., Sr.
Sub. Notes, 9.50%, 2/15/09 7,900 7,228,500
--------------------------------------------------------------------------------
$ 9,257,969
--------------------------------------------------------------------------------
TRANSPORTATION -- 1.5%
--------------------------------------------------------------------------------
Budget Group, Inc., Sr. Notes,
9.125%, 4/1/06 $ 2,373 $ 889,688
CHC Helicopter Corp., 11.75%, 7/15/07 EUR 4,400 3,831,670
Kansas City Southern, Sr. Notes,
9.50%, 10/1/08(1) 4,000 4,080,000
MTL, Inc., Variable Rate, 6/15/06 1,600 1,096,000
Pacer International, Inc.,
11.75%, 6/1/07 7,544 7,430,840
--------------------------------------------------------------------------------
$ 17,328,198
--------------------------------------------------------------------------------
WASTE MANAGEMENT -- 1.7%
--------------------------------------------------------------------------------
Allied Waste, 10.00%, 8/1/09 $ 15,975 $ 13,738,500
Stericycle, Inc., 12.375%, 11/15/09 5,400 5,724,000
--------------------------------------------------------------------------------
$ 19,462,500
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 7.6%
--------------------------------------------------------------------------------
Alamosa PCS Holdings, Inc., 12.875%, (0%
until 2005), 2/15/10 $ 4,200 $ 2,037,000
Clearnet Communications, Inc.,
10.125%, 7/7/07(1) 4,500 4,680,000
Dobson Communications, Sr. Notes,
10.875%, 7/1/10 6,875 6,634,375
Dolphin Telecom PLC, Sr. Disc. Notes,
14.00%, (0% until 2004), 5/15/09 13,375 2,474,375
Leap Wireless International, Inc.,
12.50%, 4/15/10 5,875 4,318,125
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES (CONTINUED)
--------------------------------------------------------------------------------
Nextel Communications, Inc., Sr. Disc.
Notes, 10.65%, (0% until 2002), 9/15/07 $ 4,540 $ 3,666,050
Nextel Communications, Inc., Sr. Notes,
9.375%, 11/15/09 9,785 9,466,988
Nextel International, Sr. Notes,
12.75%, 8/1/10(1) 8,450 7,879,625
Nextel Partners Inc., Sr. Notes,
11.00%, 3/15/10(1) 10,875 10,847,813
PF.Net Communications, Sr. Notes,
13.75%, 5/15/10 7,800 7,683,000
PTC International Finance II SA,
11.25%, 12/1/09 1,875 1,696,875
PTC International Finance II SA,
11.25%, 12/1/09 EUR 3,375 2,581,659
Telecorp PCS Inc., 10.625%, 7/15/10 11,585 11,613,963
TeleCorp PCS, Inc., 8.50%, 10/23/09(1) 6,500 4,940,000
Ubiquitel Operating Co., 14.00%, (0%
until 2005), 4/15/10 17,075 7,769,125
--------------------------------------------------------------------------------
$ 88,288,973
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 14.4%
--------------------------------------------------------------------------------
360 Networks, Inc., Sr. Notes,
13.00%, 5/1/08 $ 13,040 $ 10,497,200
Allegiance Telecom, Inc., Sr. Notes,
12.875%, 5/15/08 6,780 6,746,100
Call-Net Enterprises, Inc., Sr. Notes,
8.00%, 8/15/08 5,065 2,051,325
Carrier1 International SA, Sr. Notes,
13.25%, 2/15/09 16,375 15,146,875
Completel Europe NV, 14.00%, (0% until
2004), 2/15/09 7,840 3,724,000
Esprit Telecom Group PLC, Sr. Notes,
10.875%, 6/15/08 8,825 1,809,125
Esprit Telecom Group PLC, Sr. Notes,
11.50%, 12/15/07 12,600 2,583,000
FLAG Telecom Holdings Ltd., Sr. Notes,
11.625%, 3/30/10 8,000 6,760,000
Global Crossing Holding Ltd.,
9.125%, 11/15/06 7,015 6,725,631
Global TeleSystems Group, Inc.,
11.00%, 12/1/09 EUR 3,750 1,528,819
GST Telecommunications, Sr. Sub. Notes,
12.75%, 11/15/07(2) 3,700 27,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES (CONTINUED)
--------------------------------------------------------------------------------
GT Group Telecom, Sr. Disc. Notes,
13.25%, (0% until 2005), 2/1/10 $ 13,250 $ 4,902,500
ICG Holdings, Inc., 12.50%, (0% until
2001), 5/1/06 7,345 1,248,650
Intermedia Communications, Inc., Sr.
Disc. Notes, 11.25%, (0% until 2002),
7/15/07 11,538 9,547,695
Intermedia Communications, Sr. Notes,
8.50%, 1/15/08 1,250 1,181,250
Jazztel PLC, Sr. Notes,
13.25%, 12/15/09 EUR 3,813 2,356,339
Jazztel PLC, Sr. Notes, 14.00%, 4/1/09 10,757 7,906,395
Level 3 Communications, Inc., Sr. Notes,
9.125%, 5/1/08 6,250 5,078,125
Level 3 Communications, Inc., Sr. Notes,
11.25%, 3/15/10 2,950 2,669,750
MGC Communications, Inc., Sr. Notes,
13.00%, 4/1/10 5,062 2,860,030
Nextlink Communications, Inc., Sr.
Notes, 12.50%, 4/15/06 8,720 8,240,400
Nextlink Communications, Sr. Disc.
Notes, 12.125%, (0% until 2004), 12/1/09 11,025 5,374,688
Nextlink Communications, Sr. Disc.
Notes, 12.25%, (0% until 2004), 6/1/09 1,000 527,500
Nextlink Communications, Sr. Notes,
10.50%, 12/1/09 250 217,500
Primus Telecommunications Group, Sr.
Notes, 11.25%, 1/15/09 3,750 1,856,250
Primus Telecommunications Group, Sr.
Notes, 11.75%, 8/1/04 4,600 2,277,000
RSL Communications PLC, 9.125%, 3/1/08 3,920 612,500
RSL Communications PLC, 10.125%, (0%
until 2003), 3/1/08 6,500 666,250
RSL Communications PLC, 12.875%, 3/1/10 1,810 371,050
RSL Communications PLC, Sr. Notes,
12.25%, 11/15/06 4,190 775,150
Tele1 Europe BV, Sr. Notes,
13.00%, 5/15/09 8,460 7,148,700
Teligent, Inc., Sr. Disc. Notes,
11.50%, (0% until 2003), 3/1/08 3,400 833,000
Teligent, Inc., Sr. Notes,
11.50%, 12/1/07 14,025 6,100,875
Versatel Telecom BV, 4.00%, 3/30/05(1) 3,960 2,348,854
Versatel Telecom BV, Sr. Notes,
11.875%, 7/15/09 1,091 801,885
Versatel Telecom BV, Sr. Notes,
13.25%, 5/15/08 11,710 8,958,150
Versatel Telecom BV, Sr. Notes,
13.25%, 5/15/08 $ 6,160 $ 4,712,400
Viatel, Inc., Sr. Disc. Notes,
12.50%, (0% until 2003), 4/15/08 6,415 1,924,500
Viatel, Inc., Sr. Notes,
11.25%, 4/15/08 1,805 911,525
Viatel, Inc., Sr. Notes,
11.50%, 3/15/09 1,675 845,875
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES (CONTINUED)
--------------------------------------------------------------------------------
Viatel, Inc., Sr. Notes, 11.50%, 3/15/09 10,120 5,110,600
Winstar Communications, Sr. Notes,
12.75%, 4/15/10(1) 6,300 4,473,000
World Access, Inc., Sr. Notes,
13.25%, 1/15/08 3,845 2,710,725
Worldwide Fiber, Inc., Sr. Notes,
12.00%, 8/1/09 6,000 4,770,000
--------------------------------------------------------------------------------
$ 167,918,936
--------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(IDENTIFIED COST $1,190,620,393) $ 971,064,400
--------------------------------------------------------------------------------
</TABLE>
COMMON STOCKS, WARRANTS AND RIGHTS -- 2.0%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 0.2%
--------------------------------------------------------------------------------
Ono Finance PLC, Warrants(3)(4) 10,870 $ 760,900
Ono Finance PLC, Warrants, Exp.
5/31/09(3)(4) 3,800 225,395
Pegasus Communications Corp., Common(4) 21,838 776,614
UIH Australia/Pacific, Inc.,
Warrants(3)(4) 3,600 6,710
--------------------------------------------------------------------------------
$ 1,769,619
--------------------------------------------------------------------------------
CHEMICALS -- 0.0%
--------------------------------------------------------------------------------
Sterling Chemicals, Inc., Common(4) 9,600 $ 15,600
--------------------------------------------------------------------------------
$ 15,600
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.0%
--------------------------------------------------------------------------------
Jordan Telecommunications, Deferred
Cash Rights(4) 2,500 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 0.0%
--------------------------------------------------------------------------------
Cybernet Internet Services
International, Inc., Warrants(3)(4) 4,825 $ 24,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES (CONTINUED)
--------------------------------------------------------------------------------
Diva Systems Corp., Warrants(4) $ 37,725 $ 0
Equinix, Inc., Warrants(3)(4) 4,500 495,000
--------------------------------------------------------------------------------
$ 519,125
--------------------------------------------------------------------------------
LODGING AND GAMING -- 0.0%
--------------------------------------------------------------------------------
Peninsula Gaming LLC, Convertible
Preferred Membership Interests(3)(4) 25,351 $ 152,107
--------------------------------------------------------------------------------
$ 152,107
--------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 0.3%
--------------------------------------------------------------------------------
Key Energy Services, Inc., Warrants(4) 1,900 $ 114,000
R&B Falcon Corp., Warrants(4) 5,400 2,970,000
--------------------------------------------------------------------------------
$ 3,084,000
--------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 0.0%
--------------------------------------------------------------------------------
Merrill Corp., Warrants(3)(4) 5,250 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
RETAIL - FOOD AND DRUG -- 0.7%
--------------------------------------------------------------------------------
Pathmark Stores Inc., Common 480,119 $ 7,576,902
--------------------------------------------------------------------------------
$ 7,576,902
--------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.0%
--------------------------------------------------------------------------------
Asat Finance, Warrants(3) 6,350 $ 511,175
--------------------------------------------------------------------------------
$ 511,175
--------------------------------------------------------------------------------
Services -- 0.0%
--------------------------------------------------------------------------------
HF Holdings, Inc., Warrants(4) 13,600 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.1%
--------------------------------------------------------------------------------
Jazztel PLC, ADR(4) 38,264 $ 675,601
Leap Wireless International,
Warrants(3)(4) 5,875 2,938
PF.Net Communications, Warrants(3)(4) 7,800 0
Ubiquitel Operating Co., Warrants,
Exp. 4/15/10(4) 11,225 280,625
--------------------------------------------------------------------------------
$ 959,164
--------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 0.7%
--------------------------------------------------------------------------------
Carrier1 International SA,
Warrants(3)(4)(5) 16,375 $ 1,908,179
Completel Europe NV, Common(3)(4) 392,000 2,205,000
GT Group Telecom, Warrants (3)(4) 13,250 563,125
Intermedia Communications, Inc.,
Common(4) 2,090 46,241
Primus Telecommunications Group,
Warrants,
Exp. 8/1/04(4) 4,600 7,039
Tele1 Europe Holding AB-ADR, Common(4) 56,270 443,126
Versatel Telecom BV, Warrants(4)(5) 14,000 3,195,137
World Access, Inc., Common(4) 11,579 56,448
--------------------------------------------------------------------------------
$ 8,424,295
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS
(IDENTIFIED COST $10,912,900) $ 23,011,987
--------------------------------------------------------------------------------
</TABLE>
PREFERRED STOCKS -- 9.9%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
APPAREL -- 0.0%
--------------------------------------------------------------------------------
Cluett American Corp., 12.50% (PIK) 190 $ 6,382
--------------------------------------------------------------------------------
$ 6,382
--------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 3.1%
--------------------------------------------------------------------------------
Adelphia Communications Corp., 13% 48,000 $ 4,608,000
CSC Holdings, Inc., Series M, 11.125%
(PIK) 149,608 15,933,252
Granite Broadcasting Corp., 12.75% (PIK) 8,062 4,837,200
Pegasus Communications Corp., Series A,
12.75% (PIK) 10,357 10,823,065
--------------------------------------------------------------------------------
$ 36,201,517
--------------------------------------------------------------------------------
BUSINESS SERVICES - RENTAL & LEASING -- 0.9%
--------------------------------------------------------------------------------
Crown Castle International Corp., 12.75%
(PIK) 9,964 $ 9,964,000
--------------------------------------------------------------------------------
$ 9,964,000
--------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 1.3%
--------------------------------------------------------------------------------
R&B Falcon Corp., 13.875% (PIK) 11,327 $ 14,725,100
--------------------------------------------------------------------------------
$ 14,725,100
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 2.4%
--------------------------------------------------------------------------------
Dobson Communications Corp., 12.25%
(PIK) 3,351 $ 2,999,145
Nextel Communications Corp., 13.0% (PIK) 8,875 8,919,375
Nextel Communications, Inc., 11.125%
(PIK) 6,318 5,780,970
Rural Cellular Corp., 11.375% (PIK) 7,682 6,145,600
Rural Cellular Corp., 12.25% 5,099 4,079,200
--------------------------------------------------------------------------------
$ 27,924,290
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 2.2%
--------------------------------------------------------------------------------
Broadwing Communications, Series B,
12.50% (PIK) 9,547 $ 9,547,000
Global Crossing Holding Ltd., 10.5%
(PIK) 117,000 11,232,000
Global Crossing Holding Ltd., 6.75% 20,700 4,230,565
Intermedia Communications, Inc., 7%(3) 36,250 743,125
Nextlink Communications, 14% (PIK) 929 41,805
--------------------------------------------------------------------------------
$ 25,794,495
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $121,360,938) $ 114,615,784
--------------------------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 1.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
General Electric Capital Corp., 6.65%,
11/1/00 $ 14,124 $ 14,124,000
--------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(AT AMORTIZED COST, $14,124,000) $ 14,124,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 96.5%
(IDENTIFIED COST $1,337,018,231) $1,122,816,171
--------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- 3.5%
$ 40,989,896
--------------------------------------------------------------------------------
NET ASSETS -- 100.0% $1,163,806,067
--------------------------------------------------------------------------------
</TABLE>
(PIK) - Payment in kind.
EUR - Euro Dollar
GBP - British Pound
(1) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Defaulted security.
(3) Restricted security.
(4) Non-income producing security.
(5) Security valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 2000
(EXPRESSED IN UNITED STATES DOLLARS)
<S> <C>
ASSETS
--------------------------------------------------------
Investments, at value
(identified cost, $1,337,018,231) $1,122,816,171
Cash 117,965
Receivable for investments sold 16,484,793
Interest receivable 32,762,306
Receivable for open forward foreign
currency contracts 1,365,370
Prepaid expenses 11,439
--------------------------------------------------------
TOTAL ASSETS $1,173,558,044
--------------------------------------------------------
LIABILITIES
--------------------------------------------------------
Payable for investments purchased $ 9,619,549
Payable to affiliate for Trustees' fees 2,258
Accrued expenses 130,170
--------------------------------------------------------
TOTAL LIABILITIES $ 9,751,977
--------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $1,163,806,067
--------------------------------------------------------
SOURCES OF NET ASSETS
--------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $1,376,859,198
Net unrealized depreciation (computed on
the basis of identified cost) (213,053,131)
--------------------------------------------------------
TOTAL $1,163,806,067
--------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
(EXPRESSED IN UNITED STATES DOLLARS) OCTOBER 31, 2000(1) MARCH 31, 2000
<S> <C> <C>
-----------------------------------------------------------------------------------
INVESTMENT INCOME
-----------------------------------------------------------------------------------
Interest $ 77,510,657 $ 111,585,707
Dividends 7,082,923 11,271,175
Miscellaneous 1,525,895 1,579,587
-----------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 86,119,475 $ 124,436,469
-----------------------------------------------------------------------------------
EXPENSES
-----------------------------------------------------------------------------------
Investment adviser fee $ 4,416,424 $ 6,676,593
Trustees fees and expenses 17,520 32,571
Custodian fee 182,430 315,994
Legal and accounting services 70,440 125,602
Amortization of organization expenses -- 736
Miscellaneous 61,417 10,884
-----------------------------------------------------------------------------------
TOTAL EXPENSES $ 4,748,231 $ 7,162,380
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 81,371,244 $ 117,274,089
-----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
-----------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (46,454,100) $ 9,220,755
Foreign currency and forward foreign
currency exchange
contract transactions 7,806,170 5,668,832
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) $ (38,647,930) $ 14,889,587
-----------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (158,384,186) $ (53,816,671)
Foreign currency and forward foreign
currency exchange contracts (1,213,514) 2,362,443
-----------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $ (159,597,700) $ (51,454,228)
-----------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (198,245,630) $ (36,564,641)
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (116,874,386) $ 80,709,448
-----------------------------------------------------------------------------------
</TABLE>
(1) For the seven months ended October 31, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 2000(1) MARCH 31, 2000 MARCH 31, 1999
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------
From operations --
Net investment income $ 81,371,244 $ 117,274,089 $ 99,349,959
Net realized gain (loss) (38,647,930) 14,889,587 (13,513,235)
Net change in unrealized
appreciation (depreciation) (159,597,700) (51,454,228) (53,977,702)
-----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (116,874,386) $ 80,709,448 $ 31,859,022
-----------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 349,093,037 $ 465,123,511 $ 376,878,683
Withdrawals (253,410,519) (400,057,623) (330,015,816)
-----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 95,682,518 $ 65,065,888 $ 46,862,867
-----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS $ (21,191,868) $ 145,775,336 $ 78,721,889
-----------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------
At beginning of period $1,184,997,935 $1,039,222,599 $ 960,500,710
-----------------------------------------------------------------------------------------
AT END OF PERIOD $1,163,806,067 $1,184,997,935 $1,039,222,599
-----------------------------------------------------------------------------------------
</TABLE>
(1) For the seven months ended October 31, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, YEAR ENDED MARCH 31,
------------ -----------------------------------------------------------------
2000(1) 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.67%(2) 0.64% 0.65% 0.63% 0.67% 0.71%
Net investment income 11.46%(2) 10.54% 10.23% 9.63% 10.02% 10.41%
Portfolio Turnover 41% 113% 150% 137% 78% 88%
-------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $1,163,806 $1,184,998 $1,039,223 $960,501 $706,711 $511,347
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the seven-month period ended October 31, 2000.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1 SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------
High Income 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 accounting
principles generally accepted in the United States of America.
A INVESTMENT VALUATIONS -- Investments listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. Fixed income investments (other
than short-term obligations), including listed investments and investments
for which price quotations are available, will normally be valued on the
basis of market valuations furnished by a pricing service. Financial futures
contracts listed on commodity exchanges are valued at closing settlement
prices. Short-term obligations, maturing in sixty days or less, are valued at
amortized cost, which approximates fair value. Investments for which there
are no quotations or valuations are valued at fair value using methods
determined in good faith by or at the direction of the Trustees.
B INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date for
dividends received in cash and/or securities.
C INCOME TAXES -- The Portfolio has elected to be treated as a partnership for
United States 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 taxable investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
D FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit (initial margin) either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio (margin maintenance) each day, dependent on
the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
The Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
E FOREIGN CURRENCY TRANSLATION -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to changes in foreign currency exchange
rates are recorded for financial statement purposes as net realized gains and
losses on investments. That portion of unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates
is not separately disclosed.
F FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from movements in the value of a
foreign currency relative to the U.S. dollar. The Portfolio will enter into
forward contracts for hedging purposes as well as non-hedging purposes. The
forward foreign currency exchange contracts are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until such time as the
contracts have been closed.
G USE OF ESTIMATES -- The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
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 amount of revenue and expense during the
reporting period. Actual results could differ from those estimates.
H OTHER -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed based on the specific identification
of the securities sold.
25
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
2 INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
-----------------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sale of
securities). For the period from April 1, 2000 to October 31, 2000, the fee
was equivalent to 0.62% (annualized) of the Portfolio's average daily net
assets and amounted to $4,416,424. For the year ended March 31, 2000, the fee
was equivalent to 0.60% of the Portfolio's average daily net assets and
amounted to $6,676,593. 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 portion of
their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the period from April 1, 2000 to October 31, 2000, no
significant amounts have been deferred.
3 INVESTMENTS
-----------------------------------------------------
The Portfolio invests primarily in debt securities. The ability of the
issuers of the debt securities held by the Portfolio to meet their
obligations may be affected by economic developments in a specific industry.
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $665,793,918 and $492,469,628,
respectively, for the period from April 1, 2000 to October 31, 2000.
4 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. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each participating portfolio or fund
based on its borrowings at an amount above either 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 period
from April 1, 2000 to October 31, 2000.
5 FINANCIAL INSTRUMENTS
-----------------------------------------------------
The Portfolio regularly trades 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 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. A summary of
obligations under these financial instruments at October 31, 2000 is as
follows:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
SALES
----------------------------------------------------------------------------------------
NET UNREALIZED
SETTLEMENT IN EXCHANGE FOR APPRECIATION
DATE(S) DELIVER (IN U.S. DOLLARS) (DEPRECIATION)
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
11/27/00 British Pound Sterling
1,684,966 $ 2,447,952 $ (346)
11/2/00- Euro Dollar
12/4/00 54,553,143 47,775,304 1,502,500
----------------------------------------------------------------------------------------
$ 50,223,256 $ 1,502,154
----------------------------------------------------------------------------------------
<CAPTION>
PURCHASES
----------------------------------------------------------------------------------------
NET UNREALIZED
SETTLEMENT DELIVER APPRECIATION
DATE(S) IN EXCHANGE FOR (IN U.S. DOLLARS) (DEPRECIATION)
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
11/27/00 British Pound Sterling
165,281 $ 239,715 $ 442
11/13/00 Euro Dollar
13,957,239 11,971,301 (137,226)
----------------------------------------------------------------------------------------
$ 12,211,016 $ (136,784)
----------------------------------------------------------------------------------------
</TABLE>
6 FEDERAL INCOME TAX BASIS OF INVESTMENTS
-----------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 2000 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $1,340,497,185
--------------------------------------------------------
Gross unrealized appreciation $ 26,277,750
Gross unrealized depreciation (243,958,764)
--------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (217,681,014)
--------------------------------------------------------
</TABLE>
26
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
7 RESTRICTED SECURITIES
-----------------------------------------------------
At October 31, 2000, the Portfolio owned the following securities
(representing 1.76% of net assets) which were restricted as to public resale
and not registered under the Securities Act of 1933 (excluding Rule 144A
securities). The Portfolio has various registration rights (exercisable under
a variety of circumstances) with respect to these securities. The fair value
of these securities is determined based on valuations provided by brokers
when available, or if not available, they are valued at fair value using
methods determined in good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF
DESCRIPTION ACQUISITION SHARES/FACE COST FAIR VALUE
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES
---------------------------------------------------------------------------------------------
Roller Bearing Holdings Co., Sr. Disc. 8/01/97-
Notes, 13.00%, (0% until 2002), 6/15/09 10/09/97 12,875,000 $11,142,480 $ 8,240,000
Von Hoffman Press, Inc., Sr. Sub. Notes, 5/15/97-
10.875%, 5/15/07 11/04/98 5,095,000 5,106,900 4,610,975
---------------------------------------------------------------------------------------------
$16,249,380 $12,850,975
---------------------------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS
---------------------------------------------------------------------------------------------
Asat Finance, Warrants 10/20/00 6,350 $ 0 $ 511,175
9/09/99-
Carrier1 International SA, Warrants 2/25/00 16,375 1,593,750 1,908,179
Completel Europe NV, Common 9/12/00 392,000 0 2,205,000
Cybernet Internet Services 10/20/99-
International, Inc., Warrants 10/28/99 4,825 195,000 24,125
Equinix, Inc., Warrants 6/01/00 4,500 0 495,000
GT Group Telecom, Warrants 9/15/00 13,250 0 563,125
Leap Wireless International, Warrants 7/12/00 5,875 0 2,938
Merrill Corp., Warrants 6/02/00 5,250 0 0
Ono Finance PLC, Warrants 10/12/99 10,870 0 760,900
Ono Finance PLC, Warrants, Exp. 5/31/09 11/05/99 3,800 0 225,395
Peninsula Gaming LLC, Convertible
Preferred Membership Interests 7/08/99 25,351 0 152,107
PF.Net Communications, Warrants 7/21/00 7,800 0 0
UIH Australia/Pacific, Inc., Warrants 3/05/98 3,600 0 6,710
---------------------------------------------------------------------------------------------
$ 1,788,750 $ 6,854,654
---------------------------------------------------------------------------------------------
PREFERRED STOCKS
---------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% 10/24/97 36,250 $ 906,250 $ 743,125
---------------------------------------------------------------------------------------------
$18,944,380 $20,448,754
---------------------------------------------------------------------------------------------
</TABLE>
8 FISCAL YEAR END CHANGE
-----------------------------------------------------
Effective April 1, 2000, the Portfolio changed its fiscal year-end to
October 31.
27
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS
OF HIGH INCOME PORTFOLIO:
---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of High Income Portfolio (the Portfolio) as of
October 31, 2000, and the related statement of operations for the period from
April 1, 2000 to October 31, 2000 and for the year ended March 31, 2000, the
statements of changes in net assets for the period from April 1, 2000 to
October 31, 2000 and for the years ended March 31, 2000 and 1999 and the
supplementary data for the period from April 1, 2000 to October 31, 2000 and for
each of the years in the five-year period ended March 31, 2000 (all expressed in
United States dollars). These financial statements and supplementary data are
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and supplementary data based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and supplementary data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities held as of October 31, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of the High Income Portfolio at
October 31, 2000, the results of its operations, the changes in its net assets
and the supplementary data for the respective stated periods in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 8, 2000
28
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
INVESTMENT MANAGEMENT
EATON VANCE HIGH INCOME FUND
OFFICERS
James B. Hawkes
President and Trustee
Willam H. Ahern, Jr.
Vice President
Thomas J. Fetter
Vice President
Armin J. Lang
Vice President
Michael R. Mach
Vice President
Robert B. MacIntosh
Vice President
Edward E. Smiley, Jr.
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
TRUSTEES
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking Emeritus, Harvard University
Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Operating Officer,
Hellman, Jordan Management Co., Inc.
President, Jordan Simmons Capital LLC and Unicorn Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
HIGH INCOME PORTFOLIO
OFFICERS
James B. Hawkes
President and Trustee
Thomas P. Huggins
Vice President and
Co-Portfolio Manager
Michael W. Weilheimer
Vice President and
Co-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 Operating Officer,
Hellman, Jordan Management Co., Inc.
President, Jordan Simmons Capital LLC and Unicorn Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
29
<PAGE>
INVESTMENT ADVISER OF HIGH INCOME PORTFOLIO
BOSTON MANAGEMENT AND RESEARCH
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF EATON VANCE HIGH INCOME FUND
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
PFPC, INC.
Attn: Eaton Vance Funds
P.O. Box 9653
Providence, RI 02904-9653
(800) 262-1122
INDEPENDENT AUDITORS
DELOITTE & TOUCHE LLP
200 Berkeley Street
Boston, MA 02116-5022
EATON VANCE HIGH INCOME FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
--------------------------------------------------------------------------------
THIS REPORT MUST BE PRECEDED OR ACCOMPANIED BY A CURRENT PROSPECTUS WHICH
CONTAINS MORE COMPLETE INFORMATION ON THE FUND, INCLUDING ITS SALES CHARGES AND
EXPENSES. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST OR SEND MONEY.
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HISRC
446-12/00
