<PAGE>
The Eaton Vance Mutual Funds Trust
For the High Income Portfolio
[LOGO]
Semi-Annual Shareholder Report
September 30, 1995
Investment Adviser of High Income Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator
Eaton Vance Management
24 Federal Street
Boston, MA 02110
(617)482-8260
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617)482-8260
Custodian
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
Transfer Agent
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
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-----------------------------------------
HIGH INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1995
(Expressed in United States Dollars)
- ----------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 95.7%
- ----------------------------------------------------------------------
FACE AMOUNT SECURITY VALUE
- ----------------------------------------------------------------------
AUTOMOTIVE/TRUCK - 5.4%
$ 2,770,000 Exide Corporation, Sr. Notes,
10.75%, 12/15/02 $ 2,950,050
6,750,000 JPS Automotive Prod. Corp., Sr. Notes,
11.125%, 6/15/01 6,817,500
3,800,000 Key Plastics, Sr. Notes, 14%, 11/15/99 3,876,000
5,035,000 Motor Wheel Corp., Senior Notes,
11.5%, 3/1/00 4,581,850
5,000,000 Terex Corp., Sr. Secured Notes,
13.75%, 5/15/02+ 4,100,000
4,000,000 Walbro Corp., Senior Notes,
9.875% 7/15/05+ 3,960,000
------------
$ 26,285,400
------------
BUILDING PRODUCTS - 5.0%
$ 3,500,000 American Standard, Sr. Notes,
11.375%, 5/15/04 $ 3,850,000
7,400,000 Building Materials Corp., Sr. Sub. Notes
11.75%, (0% until 2000), 7/1/04 4,588,000
7,100,000 Overhead Door Corp., Sr. Notes,
12.25%, 2/1/00 6,922,500
3,200,000 Schuller International Group Inc., Sr.
Notes, 10.875%, 12/15/04 3,520,000
1,750,000 Southdown Inc., Sr. Sub. Notes.,
14%, 10/15/01 1,933,750
3,600,000 Tarkett International, Sr. Sub. Notes,
9%, 3/1/02 3,672,000
------------
$ 24,486,250
------------
CHEMICALS - 7.2%
$ 5,000,000 Agricultural Minerals & Chemicals, Sr.
Notes, 10.75%, 9/30/03 $ 5,237,500
6,700,000 GI Holdings, Sr. Discount Notes,
11.125% (0% until 1995), 10/1/98 4,857,500
5,000,000 NL Industries Inc., Sr. Sec. Notes,
11.75%, 10/15/03 5,275,000
4,250,000 NL Industries Inc., Sr. Disc. Notes,
13% (0% until 1998), 10/15/05 3,145,000
7,000,000 Pioneer Americas Acq., Senior Notes,
13.625%, 4/1/05+ 7,175,000
1,800,000 Rexene Corp, Sr. Notes,
11.75%, 12/1/04 1,930,500
3,800,000 Terra Industries Inc., Senior Notes,
10.5%, 6/15/05 3,999,500
3,700,000 Uniroyal Chemical Corp., Senior Sub.
Notes, 11%, 5/1/03 3,783,250
------------
$ 35,403,250
------------
COMMUNICATIONS - 11.6%
$ 6,800,000 Australis Media LTD., Sub Disc. Notes, 14%
(0% until 2000), 5/13/03 $ 4,080,000
7,200,000 Dial Call Communications Inc., Sr. Red.
Notes, 12.25% (0% until 1998),
4/15/04 3,798,000
6,400,000 Diamond Cable Communications Co.,
Sr. Disc. Notes, 13.25% (0% until
1999), 9/30/04 4,256,000
5,000,000 Galaxy Telecom LP., Sr. Sub. Notes,
12.375%, 10/1/05 5,000,000
6,000,000 Granite Broadcasting Corp., Sr. Sub.
Notes, 10.375%, 5/15/05 6,120,000
2,400,000 Imax Corp., Sr. Notes, 7%, 3/1/01 2,268,000
6,000,000 In-Flight Phone Corp., Sr. Disc. Notes, 14%
(0% until 1998), 5/15/02+ 2,460,000
4,100,000 IXC Communications Inc., Senior
Notes 13%, 10/1/05+ 4,038,500
8,500,000 Marcus Cable Co., Sr. Disc. Notes,
14.25% (0% until 2000), 12/15/05 4,930,000
2,800,000 Marcus Cable Co., Senior Debs.,
11.875%, 10/1/05 2,828,000
3,700,000 Pricellular Wireless Comm., Sr. Sub.
Disc. Nts. 12.25% (0% until 1998),
10/1/03 2,627,000
9,340,000 United International Holdings Inc., Sr.
Sec. Disc. Notes, 0%, 11/15/99 5,697,400
8,400,000 Videotron Holdings, Sr. Disc. Notes,
11% (0% until 2000), 8/15/05 4,851,000
4,000,000 Young Broadcasting Corp., Sr. Sub.
Notes, 10.125%, 2/15/05+ 4,200,000
------------
$ 57,153,900
------------
ENERGY - 5.8%
$ 7,200,000 Gulf Canada Resources Ltd., Sr. Sub.
Notes, 9.25%, 1/15/04 $ 7,128,000
6,200,000 MCV Subordinated Secured Lease
Obligations, 11.75%, 7/23/05 6,479,000
4,800,000 Mesa Capital Corp., Sec. Disc. Notes,
12.75%, 6/30/98 4,428,000
3,216,364 Midland Cogeneration Venture, Sr. Sec.
Lease Oblig., 10.33%, 7/23/02 3,357,080
4,150,000 Trans Texas Gas Corp., Sr. Sec. Notes,
11.5%, 6/15/02 4,347,125
2,420,000 Tuboscope Vetco, Sr. Sub. Debs.,
10.75%, 4/15/03 2,468,400
------------
$ 28,207,605
------------
FOOD/RESTAURANTS/HOTELS - 7.8%
$ 4,000,000 American Restaurant Group Inc., Sr.
Sec. Notes, 12%, 9/15/98 $ 2,940,000
7,255,000 BFI Acquisition Corp., Sr. Sub. Notes
(Series A) 12%, 12/1/01 5,078,500
9,850,000 Flagstar Corp., Sub. Debs.,
10.75%, 9/15/01 9,259,000
5,200,000 Purina Mills, Sr. Sec. Sub. Notes,
10.25%, 9/1/03 5,330,000
5,735,000 Seven Up/RC Bottling Co., Sr. Sec.
Notes, 11.5%, 8/1/99* 2,466,050
2,050,000 Specialty Foods Corp., Sr. Disc. Debs.,
13%, (0% until 1999) 8/15/05 1,086,500
2,000,000 Specialty Foods Corp., Sr. Notes,
10.25%, 8/15/01 1,905,000
6,500,000 Specialty Foods Corp., Sr. Notes,
11.125%, 10/1/02+ 6,467,500
3,650,000 Van De Kamps, Inc., Sr. Sub. Notes,
12%, 9/15/05+ 3,704,750
------------
$ 38,237,300
------------
HEALTHCARE - 3.6%
$ 6,800,000 Dade International Inc., Sr. Sub. Notes,
13%, 2/1/05 $ 7,276,000
2,550,000 Genesis Health Ventures, Sr. Sub. Notes,
9.75%, 6/15/05 2,658,375
6,100,000 Ordna Health Corp., Sr. Sub. Notes,
11.375%, 8/15/04 6,786,250
1,000,000 Universal Health Services Corp., Sr.
Notes, 8.75%, 8/15/05 991,760
------------
$ 17,712,385
------------
HIGH TECH - 2.1%
$ 2,719,000 Blue Bell Funding Inc., Sec. Ext. Notes,
11.85%, 5/1/99 $ 2,861,748
4,000,000 GS Technologies Corp., Sr. Notes,
12.25%, 10/1/05 4,050,000
3,100,000 Unisys Corp., Sr. Notes, 13.5%, 7/1/97 3,355,750
------------
$ 10,267,498
------------
METALS - 5.4%
$ 3,500,000 Acme Metals Inc., Sr. Notes,
12.5%, 8/1/02 $ 3,465,000
2,000,000 Algoma Steel Corp., Sr. Secured Notes,
12.375%, 7/15/05 1,830,000
4,000,000 Gulf States Steel, First Mtg. Notes,
13.5%, 4/15/03 3,840,000
2,250,000 Inland Steel Corp., First Mtg. Bonds,
12%, 12/1/98 2,452,500
2,000,000 Kaiser Aluminum, Sr. Sub. Notes,
12.75%, 2/1/03 2,165,000
2,400,000 Maxxam Group Inc., Sr. Sec. Notes,
11.250%, 8/1/03 2,346,000
2,800,000 Maxxam Group Inc., Sr. Sec. Disc.
Notes, 12.25% (0% until 1998), 8/1/03 1,827,000
4,525,000 Republic Engineered Steels Inc., First
Mtg., 9.875%, 12/15/01 4,219,562
2,353,280 Stelco Inc., SF Debentures,
13.5%, 10/1/00 (CAD) 1,760,253
2,105,000 Ucar Global Enterprises, Sr. Sub. Notes,
12% 1/15/05 2,347,075
------------
$ 26,252,390
------------
MANUFACTURING/MACHINERY - 8.6%
$ 4,200,000 Applied Extrusion Inc., Sr. Notes,
11.5%, 4/1/02 $ 4,494,000
3,300,000 Day International Group, Inc., Sr. Sub.
Notes, 11.125%, 6/1/05+ 3,423,750
3,500,000 Dictaphone Corp., Sr. Sub. Notes,
11.75%, 8/1/05 3,447,500
4,225,000 Essex Group, Inc., Sr. Notes,
10%, 5/1/03 4,098,250
4,100,000 Graphic Controls Corp., Sr. Sub. Notes,
12%, 9/15/05+ 4,171,750
5,300,000 Monarch Acquisition Corp., Senior
Notes, 12.5%, 7/1/03+ 5,432,500
5,500,000 Newflo Corp., Sub. Notes,
13.25%, 11/15/02 5,665,000
4,000,000 Plastic Specialties & Tech, Sr. Sec.
Notes, 11.25%, 12/1/03 3,660,000
7,000,000 Waters Corp., Sr. Sub. Notes,
12.75%, 9/30/04 7,595,000
------------
$ 41,987,750
------------
MISCELLANEOUS - 5.5%
$ 4,100,000 Alliance Entertainment Corp., Sr. Sub.
Notes, 11.25%, 7/15/05+ $ 4,089,750
4,000,000 Alliant Tech Systems Inc., Sr. Sub.
Notes, 11.75%, 3/1/03 4,340,000
2,000,000 American Safety Razor Corp., Sr. Notes,
9.875%, 8/1/05+ 2,000,000
8,600,000 Corporate Express Inc., Sr. Sub. Notes,
9.125%, 3/15/04 8,557,000
6,400,000 Roadmaster Industries Inc., Sr. Sub.
Notes, 11.75%, 7/15/02 4,160,000
4,100,000 Selmer Company, Inc., Sr. Sub. Notes, 11%,
5/15/05 3,977,000
------------
$ 27,123,750
------------
PAPER/PACKAGING - 10.1%
$ 2,400,000 Container Corp., Sr. Notes (Ser. B),
10.75%, 5/1/02 $ 2,526,000
4,027,459 Fort Howard Corp., Sr. Sec. Notes,
11%, 1/2/02 4,188,557
4,100,000 Gaylord Container Corp., Sr. Sub. Disc.
Debs., 12.75% (0% until 1996), 5/15/05 4,038,500
2,500,000 Owens Illinois Inc., Sr. Notes,
9.95%, 10/15/04 2,568,750
1,500,000 Portola Packaging Corp., Senior Notes,
10.75%, 10/1/05 1,516,875
3,665,000 Repap New Brunswick, 2nd Party Sr. Sec.
Notes, 9.875%, 5/1/06 3,518,400
2,500,000 Repap New Brunswick, Sr. Sec. Notes,
10.625%, 4/15/05 2,537,500
2,400,000 Riverwood International, Sr. Sub.
Notes, 10.375%, 6/30/04 2,640,000
3,000,000 S.D. Warren Company Inc., Sr. Sub.
Notes, 12%, 12/15/04 3,315,000
5,000,000 Silgan Corp., Sr. Notes,
13.25% (0% until 1996), 12/15/02 4,675,000
1,500,000 Silgan Corp., Sr. Sub. Notes,
11.75%, 6/15/02 1,582,500
2,000,000 Stone Container Corp., First Mtg.
Notes, 10.75%, 10/1/02 2,075,000
3,200,000 Stone Container Corp., Sr. Notes,
12.625%, 7/15/98 3,472,000
2,400,000 Tembec Finance Corp., Sr. Notes,
9.875%, 9/30/05 2,376,000
2,950,000 U.S. Can Company, Sr. Sub. Notes,
13.5%, 1/15/02 3,237,625
5,150,000 Williamhouse-Regency of Del., Sr.
Sub. Deb., 11.5%, 6/15/05 5,098,500
------------
$ 49,366,207
------------
RECREATION - 3.2%
$ 5,000,000 Aztar Corp., Sr. Sub. Notes,
13.75%, 10/1/04 $ 5,381,250
1,700,000 Trump Holdings & Funding, Senior
Notes, 15.50%, 6/15/05 1,683,000
3,100,000 Trump Plaza Funding, First Mtg. Notes,
10.875%, 6/15/01 2,840,375
6,558,515 Trump Taj Mahal, First Mtg. Bonds,
11.35%, 11/15/99 5,820,682
------------
$ 15,725,307
------------
RETAILING - 9.7%
$ 5,600,000 Apparel Retailers Inc., Sr. Disc. Debs.,
12.75% (0% until 1998), 8/15/05 $ 3,416,000
6,575,000 Brunos, Inc., Sr. Sub. Notes,
10.5%, 8/1/05 6,377,750
4,000,000 Dominick's Finer Foods, Inc., Sr. Sub.
Notes, 10.875%, 5/1/05+ 4,060,000
4,200,000 Duane Reade, G.P., Sr. Notes,
12%, 9/15/02 3,843,000
4,700,000 Levitz Furniture Corp., Sr. Sub. Notes,
9.625%, 7/15/03 3,736,500
2,000,000 Pathmark Stores Inc., Jr. Sub., Disc.
Notes, 9.625%, 5/1/03 1,970,000
8,500,000 Pathmark Stores Inc., Jr. Sub., Disc.
Notes, 10.75% (0% until 1999),
11/1/03 5,503,750
5,550,000 Purity Supreme, Sr. Sec. Notes,
11.75%, 8/1/99 6,063,375
2,000,000 Ralphs Grocery Company, Inc., Sr. Sub.
Notes, 11%, 6/15/05 1,870,000
5,500,000 Ralphs Grocery Co., Sr. Sub. Notes,
13.75%, 6/15/05 5,802,500
4,980,000 Specialty Retailers, Inc., Sr. Sub. Notes,
11%, 8/15/03 4,681,200
------------
$ 47,324,075
------------
TEXTILES - 3.8%
$ 2,000,000 CMI Industries Inc., Sr. Sub. Notes,
9.5%, 10/1/03 $ 1,840,000
5,800,000 Dan River Inc., Sr. Sub. Notes,
10.125%, 12/15/03 5,843,500
3,596,000 JPS Textile Group, Sr. Sub. Notes,
10.25%, 6/1/99 3,164,480
8,200,000 Westpoint Stevens, Sr. Sub. Debs.,
9.375%, 12/15/05 7,974,500
------------
$ 18,822,480
------------
TRANSPORTATION - 0.9%
$ 4,800,000 Moran Transportation, 1st Mtg. Notes,
11.75%, 7/15/04 $ 4,488,000
------------
TOTAL CORPORATE BONDS AND NOTES
(identified cost, $475,139,450) $468,843,547
------------
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PREFERRED STOCKS - 0.4%
- ----------------------------------------------------------------------
SHARES SECURITY VALUE
- ----------------------------------------------------------------------
48,000 SD Warren Company W/Warrants,
14%, 12/15/06* $ 1,464,000
32,000 Terex Corp., 13% CV Pfd. (144A)
W/Warrants+* 416,000
------------
TOTAL PREFERRED STOCKS
(identified cost, $2,041,600) $ 1,880,000
-----------
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COMMON STOCKS, WARRANTS AND RIGHTS - 0.8%
- ----------------------------------------------------------------------
SHARES/
WARRANTS SECURITY VALUE
- ----------------------------------------------------------------------
AUTO/TRUCK - 0.4%
214,839 Bucyrus - Erie Company, Common* $ 1,906,696
------------
CHEMICALS - 0.0%
9,908 UCC Invt. Hldgs., Cl A Common+* $ 111,465
------------
COMMUNICATIONS - 0.0%
7,200 Dial Call Communications, Wts.+* $ 1,800
7,840 United International Hldg. Inc.,
Warrants+* 235,200
------------
$ 237,000
------------
ENERGY - 0.0%
5,520 Empire Gas Corp., Wts.+* $ 5,520
------------
FOOD - 0.0%
1,380 Servam Corp., Common* $ 0
12,276 Servam Corp., $2.00 Wts. Exp.
4/1/01+* 0
2,760 Servam Corp., $4.50 Wts. Exp.
4/1/01+* 0
48,000 Specialty Foods Acquisition,
Common+* 84,000
------------
$ 84,000
------------
INDUSTRIAL - 0.0%
1,814 Thermadyne Holdings Corp.,
Common+* $ 32,652
40,000 Thermadyne Holdings Corp.,
Common+* 400
------------
$ 33,052
------------
MANUFACTURING - 0.3%
101,973 Pullman Company, Common Stock+* $ 815,784
22,500 Southdown Inc., Wts.+* 95,625
9,300 Terex Corp., Rights, Exp. 8/1/96+* 4,650
1,125 Terex Corp., Rights, Exp. 8/1/96+* 563
5,371 Terex Corp., Rights, Exp. 7/1/97+* 4,028
32,000 Terex Corp., Wts.+* 304,000
95,000 Triangle Wire & Cable, Common+* 237,500
22,500 Triangle Wire and Cable, Wts.+* 0
------------
$ 1,462,150
------------
METALS - 0.0%
4,000 Gulf States Steel, Warrants+* $ 200
------------
MISCELLANEOUS - 0.0%
6,800 Australis Media, Warrants+* $ 0
------------
PAPER/PACKAGING - 0.1%
48,000 SD Warren Company, Warrants* $ 288,000
------------
RETAILING - 0.0%
5,198 Purity Supreme, Wts., Exp. 8/1/99+* $ 4,002
6,000 Waxman Industries, Inc., Warrants* 300
------------
$ 4,302
------------
TOTAL COMMON STOCKS,
WARRANTS AND RIGHTS
(IDENTIFIED COST, $9,334,423) $ 4,132,385
------------
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SHORT-TERM OBLIGATION - 2.3%
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FACE AMOUNT SECURITY VALUE
- ----------------------------------------------------------------------
COMMERCIAL PAPER
Melville Corp.,
$11,123,000 6.60%, 10/2/95, at amortized cost $ 11,124,920
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $497,640,393) $485,980,852
OTHER ASSETS,
LESS LIABILITIES - 0.8% 3,756,680
-------------
NET ASSETS - 100% $489,737,532
============
* Non-income producing security.
+ Restricted Security (Note 6).
CAD -- The principal amount of these securities is stated in Canadian Dollars,
the currency in which the security is denominated.
See notes to financial statements
<PAGE>
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FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------
September 30, 1995
(Expressed in United States Dollars)
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$497,640,393) $485,980,852
Cash 6,240
Receivable for investments sold 6,824,052
Interest receivable 12,139,700
Deferred organization expenses (Note 1D) 16,570
------------
Total assets $504,967,414
LIABILITIES:
Payable for investments purchased $15,216,905
Payable to affiliates --
Trustees' fees 4,467
Custodian fee 8,510
-----------
Total liabilities 15,229,882
------------
NET ASSETS applicable to investors' interest in Portfolio $489,737,532
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and
withdrawals $501,405,114
Unrealized depreciation of investments (computed
on the basis of identified cost) (11,667,582)
------------
Total $489,737,532
============
See notes to financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Six Months Ended September 30, 1995
(Expressed in United States Dollars)
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income $26,711,639
Expenses --
Investment adviser fee (Note 2) $1,501,871
Compensation of Trustees not members of the
Investment Adviser's organization 9,071
Custodian fee (Note 2) 107,886
Legal and accounting services 53,380
Printing and postage 2,929
Amortization of organization expenses (Note 1D) 1,920
Miscellaneous 15,647
----------
Total expenses 1,692,704
-----------
Net investment income $25,018,935
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions
(identified cost basis) $ (146,502)
Decrease in unrealized depreciation of
investments 8,213,798
----------
Net realized and unrealized gain on
investments $ 8,067,296
-----------
Net increase in net assets from operations $33,086,231
===========
See notes to financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
(Expressed in United States Dollars)
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
------------- ----------
1995 1995*
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 25,018,935 $ 37,644,090
Net realized loss on investment transactions (146,502) (13,221,664)
Change in unrealized appreciation
(depreciation) of investments 8,213,798 (7,038,030)
------------ ------------
Net increase in net assets from operations $ 33,086,231 $ 17,384,396
------------ ------------
Capital transactions --
Contributions $ 89,303,785 $575,199,203
Withdrawals (75,204,299) (150,131,814)
------------ ------------
Increase in net assets resulting from
capital transactions $ 14,099,486 $425,067,389
------------ ------------
Total increase in net assets $ 47,185,717 $442,451,785
NET ASSETS:
At beginning of period 442,551,815 100,030
------------ ------------
At end of period $489,737,532 $442,551,815
============ ============
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SUPPLEMENTARY DATA
- ------------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED
SEPTEMBER 30, MARCH 31,
------------- ----------
1995 1995*
RATIOS (As a percentage of average daily net assets):
Expenses 0.71%+ 0.70%+
Net investment income 10.53%+ 10.63%+
PORTFOLIO TURNOVER 42% 53%
+ Computed on an annualized basis.
*For the period from the start of business, June 1, 1994, to March 31, 1995.
See notes to financial statements
<PAGE>
-----------------------------------------
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 value. Investments for which there is no quotation or
valuation 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
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 Code), in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investor's distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
E. 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.
F. OTHER -- Investment transactions are accounted for on a trade date basis.
- --------------------------------------------------------------------------------
(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 six months ended September 30, 1995, the fee was equivalent to 0.63%
(annualized) of the Portfolio's average daily net assets for such period and
amounted to $1,501,871. 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 Fund out of such investment adviser fee.
Investors Bank & Trust Company (IBT), an affiliate of EVM and BMR, serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT receives a
fee reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. Certain of the officers and Trustees
of the Portfolio are officers and directors/trustees of the above organizations.
Trustees of the Portfolio that are not affiliated with the Investment Adviser
may elect to defer receipt of all or a portion of their annual fees in
accordance with the terms of the Trustee Deferred Compensation Plan. For the six
months ended September 30, 1995, 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 $226,648,137 and $186,595,718, respectively.
- --------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR and
EVM in a $120 million unsecured line of credit agreement with a bank. The line
of credit consists of a $20 million committed facility and a $100 million
discretionary facility. 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 portfolio based on its borrowings at
an amount above either the bank's adjusted certificate of deposit rate, a
variable adjusted certificate of deposit rate, or a federal funds effective
rate. In addition, a fee computed at an annual rate of 1/4 of 1% on the $20
million committed facility and on the daily unused portion of the $100 million
discretionary facility is allocated among the participating funds and portfolios
at the end of each quarter. The Portfolio did not have any significant
borrowings or allocated fees during the period.
- --------------------------------------------------------------------------------
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized depreciation/appreciation in value of the investments
owned at September 30, 1995, as computed on a federal income tax basis, were as
follows:
Aggregate cost $497,640,393
============
Gross unrealized depreciation $ 24,353,994
Gross unrealized appreciation 12,694,453
------------
Net unrealized depreciation $ 11,659,541
============
<PAGE>
- --------------------------------------------------------------------------------
(6) NOT READILY MARKETABLE SECURITIES
At September 30, 1995, the Portfolio owned the following securities
(constituting 12.6% of net assets) which were not readily marketable at such
date. The Portfolio has various registration rights (exercisable under a variety
of circumstances) with respect to certain of 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>
CORPORATE BONDS AND NOTES
- -------------------------
DESCRIPTION DATES OF ACQUISITION SHARES/FACE COST FAIR VALUE
- ----------- -------------------- ----------- ---- ----------
(EXPRESSED IN U.S. DOLLARS)
<S> <C> <C> <C> <C>
Alliance Entertainment
Corp., Sr. Sub. Notes,
11.25%, 7/15/05 7/18/95 4,100,000 $ 4,127,125 $ 4,089,750
American Safety Razor
Corp., Sr. Notes,
9.875%, 8/1/05 7/27/95 2,000,000 2,000,000 2,000,000
Day International Group,
Inc., Sr. Sub. Notes,
11.125%, 6/1/05 5/26/95-6/2/95 3,300,000 3,336,000 3,423,750
Dominick's Finer Foods,
Inc., Sr. Sub Notes,
10.875%, 5/1/05 4/27/95-6/15/95 4,000,000 4,000,000 4,060,000
Graphic Controls Corp.,
Sr. Sub. Notes, 12%, 9/
15/05 9/21/95 4,100,000 4,100,000 4,171,750
In-Flight Phone Corp., Sr.
Disc. Notes, 14%
(0% until 1998), 5/15/02 4/28/95 6,000,000 3,989,040 2,460,000
IXC Communications Inc.,
Sr. Notes, 13%, 10/1/05 9/25/95 4,100,000 3,987,045 4,038,500
Monarch Acquisition Corp.,
Sr. Notes,
12.5%, 7/1/03 6/23/95 5,300,000 5,300,000 5,432,500
Pioneer Americas Acq.,
Senior Notes,
13.625%, 4/1/05 4/13/95-7/13/95-8/24/95 7,000,000 7,139,500 7,175,000
Specialty Foods Corp., Sr.
Notes, 11.125%, 10/1/02 7/12/95-8/22/95 6,500,000 6,485,000 6,467,500
Terex Corp., Sr. Secured
Notes, 13.75%, 5/15/02 4/27/95 5,000,000 5,000,000 4,100,000
Van De Kamps, Inc., Sr.
Sub. Notes, 12%, 9/19/05 9/14/95-9/15/95 3,650,000 3,678,875 3,704,750
Walbro Corp., Sr. Notes,
9.875%, 7/15/05 7/21/95-7/24/95-7/28/95 4,000,000 4,003,338 3,960,000
Young Broadcasting Corp.,
Sr. Sub. Notes,
10.125%, 2/15/05 6/7/95 4,000,000 4,000,000 4,200,000
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
CORPORATE STOCKS, WARRANTS AND RIGHTS
- -------------------------------------
DESCRIPTION DATES OF ACQUISITION SHARES/FACE COST FAIR VALUE
- ----------- -------------------- ----------- ---- ----------
(EXPRESSED IN U.S. DOLLARS)
<S> <C> <C> <C> <C>
Australis Media, Warrants 5/26/95 6,800 $ 0 $ 0
Dial Call Communications,
Warrants 10/4/94 7,200 0 1,800
Empire Gas Corp., Warrants 1/27/95 5,520 0 5,520
Gulf States Steel,
Warrants 8/22/95 4,000 0 200
Pullman Company, Common 2/22/95 101,973 2,949,328 815,784
Purity Supreme, Wts., Exp.
8/1/99 7/29/92 5,198 0 4,002
Servam Corp., $2.00 Wts.
4/1/01 12/15/87 12,276 0 0
Servam Corp., $4.50 Wts.
4/1/01 12/15/87 2,760 0 0
Southdown, Inc., Warrants 10/28/91 22,500 67,500 95,625
Specialty Foods
Acquisition, Common 8/10/93 48,000 34,886 84,000
Terex, CV Preferred 12/15/93 32,000 793,600 416,000
Terex Corp., Rights, 8/1/
96 7/24/92 9,300 0 4,650
Terex Corp., Rights 11/7/94 5,371 0 4,028
Terex Corp., Rights 8/20/92-7/1/94-8/2/94 1,125 0 563
Terex Corp., Warrants 12/15/93 32,000 6,400 304,000
Thermadyne Holdings Corp.,
Common 5/17/94 1,814 44,100 32,652
Thermadyne Holdings Corp.,
Common 4/3/89 40,000 28,800 400
Triangle Wire & Cable,
Inc., Common 3/17/94 95,000 2,250,000 237,500
Triangle Wire & Cable,
Inc., Warrants 10/28/91 22,500 0 0
UCC Invt. Holdings, Class
A Common 10/24/86 9,908 9,834 111,465
United International
Holdings Inc., Warrants 10/1/91 7,840 222,186 235,200
Waxman Industries, Inc.,
Warrants 10/1/91 6,000 6,000 300
----------- -----------
$67,558,557 $61,637,189
=========== ===========
</TABLE>
<PAGE>
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 as of September 30, 1995,
and the related statement of operations for the six months then ended and the
statements of changes in net assets and the supplementary data for the six
months then ended and for the period from the start of business, June 1, 1994,
to March 31, 1995 (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 owned at September 30, 1995 by correspondence with the custodian and
brokers; where replies were not received from brokers we performed other
auditing 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 High Income Portfolio at
September 30, 1995, the results of its operations, changes in its net assets,
and its supplementary data for the respective stated periods, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE
GRAND CAYMAN, CAYMAN ISLANDS
BRITISH WEST INDIES
OCTOBER 31, 1995
<PAGE>
INVESTMENT MANAGEMENT FOR HIGH INCOME PORTFOLIO
OFFICERS INDEPENDENT TRUSTEES
M. DOZIER GARDNER DONALD R. DWIGHT
President, Trustee President, Dwight Partners, Inc.
Chairman, Newspapers of New England, Inc.
JAMES B. HAWKES
Vice President, Trustee SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
HOOKER TALCOTT, JR. Investment Banking,
Vice President and Harvard University Graduate School
Portfolio Manager of Business Administration
JAMES L. O'CONNOR NORTON H. REAMER
Treasurer President and Director, United Asset
Management Corporation
THOMAS OTIS
Secretary JOHN L. THORNDIKE
Vice President and Director,
Fiduciary Company Incorporated
JACK L. TREYNOR
Investment Adviser and Consultant
