<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
(Expressed in United States Dollars)
Corporate Bonds & Notes -- 91.3%
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
Apparel -- 2.2%
- --------------------------------------------------------------------------------
Cluett American Corp., Sr. Sub. Notes,
10.125%, 5/15/08/(1)/ $ 5,280 $ 4,857,600
Glenoit Corp., Sr. Sub. Notes,
11.00%, 4/15/07 8,600 8,428,000
William Carter Co., Sr. Sub. Notes,
10.375%, 12/1/06 6,275 6,588,750
- --------------------------------------------------------------------------------
$ 19,874,350
- --------------------------------------------------------------------------------
Auto and Parts -- 1.6%
- --------------------------------------------------------------------------------
Cambridge Industries, Inc., Sr. Sub.
Notes, 10.25%, 7/15/07 $ 2,520 $ 2,368,800
Key Plastics, Inc., Sr. Notes,
14.00%, 11/15/99 5,500 5,940,000
Talon Automotive Group, Sr. Sub. Notes,
9.625%, 5/1/08/(1)/ 6,100 5,764,500
- --------------------------------------------------------------------------------
$ 14,073,300
- --------------------------------------------------------------------------------
Banks - Regional -- 0.2%
- --------------------------------------------------------------------------------
First Nationwide Holdings, Inc., Sr.
Notes, 12.50%, 4/15/03 $ 1,600 $ 1,838,000
- --------------------------------------------------------------------------------
$ 1,838,000
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 10.0%
- --------------------------------------------------------------------------------
Adelphia Communications Corp., Sr. Notes,
9.875%, 3/1/07 $ 4,480 $ 4,838,400
Adelphia Communications Corp., Sr. Notes,
10.50%, 7/15/04 2,640 2,884,200
Century Communications, Sr. Notes,
8.75%, 10/1/07 2,400 2,526,000
Chancellor Media Corp., Sr. Sub. Notes,
9.00%, 10/1/08/(1)/ 7,200 7,272,000
Digital Television Services, Inc.,
Guaranteed Notes, 12.50%, 8/1/07 6,410 6,826,650
Echostar DBS Corp., Sr. Sec. Notes,
12.50%, 7/1/02 11,885 12,449,537
Golden Sky Systems, Sr. Sub. Notes,
12.375%, 8/1/06/(1)/ 5,360 5,386,800
Intermedia Capital Partners, Sr. Sub.
Notes, 11.25%, 8/1/06 2,625 2,926,875
Marcus Cable Co., Sr. Debs.,
11.875%, 10/1/05 2,800 2,954,000
Marcus Cable Co., Sr. Disc. Notes,
14.25%, (0% until 2000), 12/15/05 8,500 7,926,250
NTL, Inc., Sr. Notes, 9.75%, (0%
until 2003), 4/1/08/(1)/ 3,700 2,238,500
NTL, Inc., Sr. Notes, 10.00%, 2/15/07 4,400 4,477,000
Star Choice Communications, Sr. Sec.
Notes, 13.00%, 12/15/05 800 764,000
Telewest PLC, Debs., 9.625%, 10/1/06 6,260 6,322,600
Telewest PLC, Debs., 11.00%, (0% until
2002), 10/1/07 7,000 5,810,000
UIH Australia/Pacific, Inc., Sr. Disc.
Notes, Series B, 14.00%,
(0% until 2001), 5/15/06 1,600 680,000
UIH Australia/Pacific, Inc., Sr. Disc.
Notes, Series D, 14.00%,
(0% until 2001), 5/15/06 2,000 850,000
United International Holdings, Inc., Sr.
Disc. Notes, 10.75%, (0% until 2003),
2/15/08 22,300 10,815,500
- --------------------------------------------------------------------------------
$ 87,948,312
- --------------------------------------------------------------------------------
Business Services -- 3.7%
- --------------------------------------------------------------------------------
AP Holdings, Inc., Sr. Disc. Notes,
11.25%, (0% until 2003), 3/15/08 $ 8,550 $ 4,104,000
Apcoa, Inc., Sr. Sub. Notes,
9.25%, 3/15/08 1,200 1,086,000
Apcoa, Inc., Sr. Sub. Notes,
9.25%, 3/15/08 2,120 1,886,800
Federal Data Corp., Sr. Sub. Notes,
10.125%, 8/1/05 4,320 3,974,400
Geologistics Corp., Sr. Notes,
9.75%, 10/15/07 3,680 3,404,000
Intertek Finance PLC, Sr. Sub. Notes,
10.25%, 11/1/06 5,600 5,264,000
Spin Cycle, Inc., Sr. Disc. Notes,
12.75%, 3,400 1,836,000
(0% until 2001), 5/1/05/(1)/
Viasystems, Inc., Sr. Sub. Notes,
9.75%, 6/1/07 3,565 3,315,450
Viasystems, Inc., Sr. Sub. Notes, Series
B, 9.75%, 6/1/07 3,600 3,348,000
Wesco International, Inc., Sr. Disc.
Notes, 11.125%, (0% until 2003), 6/1/08 8,600 4,687,000
- --------------------------------------------------------------------------------
$ 32,905,650
- --------------------------------------------------------------------------------
Business Services - Miscellaneous -- 5.3%
- --------------------------------------------------------------------------------
Allied Waste Industries, Inc., Sr. Disc.
Notes, 11.30%, (0% until 2002), 6/1/07 $ 6,550 $ 4,879,750
Allied Waste North America, Inc., Sr. Sub
Notes, LOC, 10.25%, 12/1/06 8,200 8,979,000
Anthony Crane Rentals, Sr. Notes,
10.375%, 8/1/08/(1)/ 6,400 6,112,000
Crown Castle International Corp., Sr.
Disc. Notes, 10.625%, (0% until
2002), 11/15/07 5,400 3,375,000
See notes to financial statements
9
<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
Business Services - Miscellaneous (continued)
- --------------------------------------------------------------------------------
Pinnacle Holdings, Inc., Sr. Disc. Notes,
10.00%, (0% until 2003), 3/15/08 $ 4,020 $ 2,130,600
Richmont Marketing Special, Sr. Sub.
Notes, 10.125%, 12/15/07/(1)/ 10,970 9,873,000
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.00%, (0% until 2003), 7/15/08/(1)/ 12,800 6,080,000
Unisite, Inc., Sub. Notes, 13.00%, (0%
until 2000), 12/15/04/(1)/ 4,500 4,966,875
- --------------------------------------------------------------------------------
$ 46,396,225
- --------------------------------------------------------------------------------
Chemicals -- 1.3%
- --------------------------------------------------------------------------------
Huntsman Corp., Sr. Sub. Notes,
9.50%, 7/1/07/(1)/ $ 1,000 $ 965,000
NL Industries, Inc., Sr. Notes,
11.75%, 10/15/03 5,040 5,468,400
Sterling Chemicals Holdings, Inc., Sr.
Sub. Notes, 11.75%, 8/15/06 6,240 5,397,600
- --------------------------------------------------------------------------------
$ 11,831,000
- --------------------------------------------------------------------------------
Communications Equipment -- 0.6%
- --------------------------------------------------------------------------------
Jordan Telecom Products, Inc., Sr. Disc.
Notes, 11.75%, (0% until 2000), 8/1/07 $ 7,700 $ 5,698,000
- --------------------------------------------------------------------------------
$ 5,698,000
- --------------------------------------------------------------------------------
Computer Equipment -- 1.0%
- --------------------------------------------------------------------------------
Unisys Corp., Sr. Notes,
11.75%, 10/15/04 $ 2,600 $ 2,938,000
Unisys Corp., Sr. Notes, 12.00%, 4/15/03 5,600 6,272,000
- --------------------------------------------------------------------------------
$ 9,210,000
- --------------------------------------------------------------------------------
Containers and Packaging -- 1.6%
- --------------------------------------------------------------------------------
Applied Extrusion Inc., Sr. Notes,
11.50%, 4/1/02 $ 6,000 $ 6,090,000
Consumers International, Inc., Sr. Notes,
10.25%, 4/1/05 3,935 4,072,725
S.D. Warren Co., Sr. Sub. Notes,
12.00%, 12/15/04 3,800 4,132,500
- --------------------------------------------------------------------------------
$ 14,295,225
- --------------------------------------------------------------------------------
Electric Utilities -- 1.6%
- --------------------------------------------------------------------------------
Cal Energy Company, Inc., Sr. Notes,
9.50%, 9/15/06 $ 5,500 $ 6,130,795
Calpine Corp., Sr. Notes, 7.875%, 4/1/08 8,000 7,800,000
- --------------------------------------------------------------------------------
$ 13,930,795
- --------------------------------------------------------------------------------
Electrical Equipment -- 0.4%
- --------------------------------------------------------------------------------
Wavetek Corp., Sr. Sub. Notes,
10.125%, 6/15/07 $ 3,360 $ 3,192,000
- --------------------------------------------------------------------------------
$ 3,192,000
- --------------------------------------------------------------------------------
Engineering and Construction -- 1.4%
- --------------------------------------------------------------------------------
Level 3 Communications, Inc., Sr. Notes,
9.125%, 5/1/08 $ 13,260 $ 12,596,999
- --------------------------------------------------------------------------------
$ 12,596,999
- --------------------------------------------------------------------------------
Entertainment -- 4.2%
- --------------------------------------------------------------------------------
Australis Media Ltd., Sub. Disc. Notes,
15.75%, (0% until 2000), 5/15/03/(2)/ $ 4,490 $ 56,120
Cinemark USA, Inc., Sr. Sub. Notes,
8.50%, 8/1/08 6,640 6,374,400
Loews Cineplex Entertain, Sr. Sub. Notes,
8.875%, 8/1/08/(1)/ 6,800 6,757,500
Premier Parks, Inc., Sr. Disc. Notes,
10.00%, (0% until 2003), 4/1/08 4,800 3,012,000
Premier Parks, Inc., Sr. Notes,
9.25%, 4/1/06 5,600 5,551,000
Regal Cinemas, Inc., Sr. Sub. Notes,
9.50%, 6/1/08/(1)/ 8,280 8,404,200
SFX Entertainment, Inc., Sr. Sub. Notes,
9.125%, 2/1/08 1,480 1,383,800
Telemundo Holdings, Inc., Sr. Disc.
Notes, 11.50%, (0% until 2003), 8/15/08/(1)/ 9,800 5,194,000
- --------------------------------------------------------------------------------
$ 36,733,020
- --------------------------------------------------------------------------------
Foods -- 3.0%
- --------------------------------------------------------------------------------
B & G Foods, Inc., Sub. Notes,
9.625%, 8/1/07 $ 4,645 $ 4,412,750
Del Monte Corp., Sr. Notes,
12.25%, 4/15/07 4,400 4,818,000
Del Monte Foods Co., Sr. Disc. Notes,
12.50%, (0% until 2002), 12/15/07 5,400 3,078,000
Grupo Azucarero Mexico, Sr. Notes,
11.50%, 1/15/05 4,800 1,440,000
International Home Foods, Inc., Sr. Sub.
Notes, 10.375%, 11/1/06 9,000 9,540,000
RAB Enterprises, Inc., Sr. Notes,
10.50%, 5/1/05/(1)/ 3,840 3,628,800
- --------------------------------------------------------------------------------
$ 26,917,550
- --------------------------------------------------------------------------------
See notes to financial statements
10
<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
Health Services -- 0.6%
- --------------------------------------------------------------------------------
Dade International, Inc., Sr. Sub. Notes,
11.125%, 5/1/06 $ 4,800 $ 5,184,000
- --------------------------------------------------------------------------------
$ 5,184,000
- --------------------------------------------------------------------------------
Household Products -- 2.0%
- --------------------------------------------------------------------------------
Amscan Holdings, Inc., Sr. Sub. Notes,
9.875%, 12/15/07 $ 4,480 $ 4,032,000
Corning Consumer Product, Inc., Sr. Sub.
Notes, 9.625%, 5/1/08/(1)/ 2,785 2,269,775
Diamond Brands, Inc., Debs., 12.875%, (0%
until 2003), 4/15/09/(1)/ 2,800 1,176,000
Diamond Brands, Inc., Sr. Sub. Notes,
10.125%, 4/15/08/(1)/ 4,480 4,166,400
Icon Health and Fitness, Inc., Sr. Sub.
Notes, 13.00%, 7/15/02 4,000 2,080,000
Jafra Cosmetics International, Inc., Sr.
Sub. Notes, 11.75%, 5/1/08/(1)/ 4,000 3,680,000
- --------------------------------------------------------------------------------
$ 17,404,175
- --------------------------------------------------------------------------------
Information Services -- 3.6%
- --------------------------------------------------------------------------------
Cellnet Data Systems, Inc., Sr. Disc.
Notes, 14.00%, (0% until 2002), 10/1/07 $ 10,400 $ 4,160,000
Diva Systems Corp., Sr. Disc. Notes,
12.625%, (0% until 2003), 3/1/08/(1)/ 6,000 2,160,000
Orbital Imaging Corp., Sr. Notes,
11.625%, 3/1/05 3,760 3,384,000
Psinet, Inc., Sr. Notes, 10.00%, 2/15/05 9,800 9,849,000
Splitrock Services, Inc., Sr. Notes,
11.75%, 7/15/08/(1)/ 4,000 3,660,000
Verio, Inc., Sr. Notes, 10.375%, 4/1/05 5,360 5,333,200
Verio, Inc., Sr. Notes, 13.50%, 6/15/04 3,200 3,536,000
- --------------------------------------------------------------------------------
$ 32,082,200
- --------------------------------------------------------------------------------
Lodging and Gaming -- 5.9%
- --------------------------------------------------------------------------------
Aztar Corp., Sr. Sub. Notes,
13.75%, 10/1/04 $ 5,000 $ 5,425,000
Empress Entertainment, Sr. Sub. Notes,
8.125%, 7/1/06/(1)/ 2,000 1,990,000
Extended Stay America, Sr. Sub. Notes,
9.15%, 3/15/08 10,950 10,238,250
Harvey Casinos Resorts, Sr. Sub. Notes,
10.625%, 6/1/06 8,550 9,105,750
HMH Properties, Sr. Notes,
7.875%, 8/1/05 3,700 3,718,500
HMH Properties, Sr. Notes,
7.875%, 8/1/08 8,000 7,940,000
Horseshoe Gaming L.L.C., Sr. Sub. Notes,
9.375%, 6/15/07 $ 6,800 $ 6,664,000
Showboat Marina Casino, 1st Mtg. Notes,
13.50%, 3/15/03 6,000 6,570,000
- --------------------------------------------------------------------------------
$ 51,651,500
- --------------------------------------------------------------------------------
Machinery -- 0.3%
- --------------------------------------------------------------------------------
Alvey Systems, Inc., Sr. Sub. Notes,
11.375%, 1/31/03 $ 2,400 $ 2,502,000
- --------------------------------------------------------------------------------
$ 2,502,000
- --------------------------------------------------------------------------------
Manufacturing -- 3.7%
- --------------------------------------------------------------------------------
GSI Group, Inc., Sr. Sub. Notes,
10.25%, 11/1/07 $ 3,680 $ 3,128,000
IMO Industries, Sr. Sub. Notes,
11.75%, 5/1/06 4,680 5,054,400
Iron Age Corp., Sr. Sub. Notes,
9.875%, 5/1/08/(1)/ 5,000 4,375,000
MCMS, Inc., Sr. Sub. Notes,
9.75%, 3/1/08 3,330 1,998,000
P & L Coal Holdings Corp., Sr. Sub.
Notes, 9.625%, 5/15/08/(1)/ 9,920 9,920,000
Roller Bearing Holdings Co., Sr. Disc.
Notes, 13.00%, (0% until 2002), 6/15/09/(1)/ 12,875 7,918,125
- --------------------------------------------------------------------------------
$ 32,393,525
- --------------------------------------------------------------------------------
Medical Products -- 0.3%
- --------------------------------------------------------------------------------
Alliance Imaging, Sr. Sub Notes,
9.625%, 12/15/05 $ 2,700 $ 2,598,750
- --------------------------------------------------------------------------------
$ 2,598,750
- --------------------------------------------------------------------------------
Metals - Industrial -- 0.6%
- --------------------------------------------------------------------------------
GS Technologies Corp., Sr. Notes,
12.25%, 10/1/05 $ 5,500 $ 5,005,000
- --------------------------------------------------------------------------------
$ 5,005,000
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 2.4%
- --------------------------------------------------------------------------------
Dailey International, Inc., Sr. Notes,
9.50%, 2/15/08 $ 9,120 $ 5,563,200
Grant Geophysical, Inc., Sr. Notes,
9.75%, 2/15/08 5,600 4,480,000
Ocean Energy, Inc., Sr. Sub. Notes,
8.875%, 7/15/07 1,000 1,005,000
See notes to financial statements
11
<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
Oil and Gas - Equipment and Services
(continued)
- --------------------------------------------------------------------------------
Ocean Energy, Inc., Sr. Sub. Notes,
10.375%, 10/15/05 $ 3,950 $ 4,167,250
Universal Compression, Inc., Sr. Disc.
Notes, 9.875%, (0% until 2003), 2/15/08/(1)/ 9,400 5,546,000
- --------------------------------------------------------------------------------
$ 20,761,450
- --------------------------------------------------------------------------------
Oil and Gas - Exploration
and Production -- 1.1%
- --------------------------------------------------------------------------------
Coho Energy, Inc., Sr. Sub. Notes,
8.875%, 10/15/07 $ 4,000 $ 3,740,000
Energy Corp. of America, Sr. Sub. Notes,
9.50%, 5/15/07 3,600 3,258,000
United Refining Co., Sr. Notes,
10.75%, 6/15/07 3,200 2,624,000
- --------------------------------------------------------------------------------
$ 9,622,000
- --------------------------------------------------------------------------------
Paper and Forest Products -- 0.8%
- --------------------------------------------------------------------------------
Asia Pulp and Paper, Debs,
12.00%, 12/29/49 $ 6,000 $ 3,012,660
Indah Kiat Finance Mauritius, Sr. Unsec.
Notes, 10.00%, 7/1/07 3,400 1,479,000
Pindo Deli Finance Mauritius, Ltd.,
Guaranteed Sr. Notes, 10.75%, 10/1/07 2,400 1,056,000
Tjiwi Kimia Finance Mauritus, Ltd.,
Guaranteed Sr. Sub. Notes, 10.00%, 8/1/04 3,800 1,634,000
- --------------------------------------------------------------------------------
$ 7,181,660
- --------------------------------------------------------------------------------
Printing and Business Products -- 1.0%
- --------------------------------------------------------------------------------
MDC Communications Corp., Sr. Sub. Notes,
10.50%, 12/1/06 $ 6,600 $ 6,501,000
US Office Products Co., Sr. Sub. Notes,
9.75%, 6/15/08/(1)/ 3,000 2,520,000
- --------------------------------------------------------------------------------
$ 9,021,000
- --------------------------------------------------------------------------------
Publishing -- 1.4%
- --------------------------------------------------------------------------------
American Lawyer Media Corp., Sr. Disc.
Notes, 12.25%, (0% until 2002), 12/15/08 $ 2,920 $ 1,781,200
Newsquest Capital Corp., Sr. Sub. Notes,
11.00%, 5/1/06 4,441 5,007,228
Newsquest Capital Corp., Sr. Sub. Notes,
11.00%, 5/1/06 605 683,650
Von Hoffman Press, Inc., Sr. Sub Notes,
10.375%, 5/15/07/(1)/ 4,800 4,848,000
- --------------------------------------------------------------------------------
$ 12,320,078
- --------------------------------------------------------------------------------
Retail - Food and Drug -- 2.9%
- --------------------------------------------------------------------------------
AFC Enterprises, Inc., Sr. Sub Notes,
10.25%, 5/15/07 $ 9,600 $ 9,792,000
Pantry, Inc., Sr. Sub. Notes,
10.25%, 10/15/07 8,745 8,613,825
Star Markets Co., Sr. Sub. Notes,
13.00%, 11/1/04 6,200 6,804,500
- --------------------------------------------------------------------------------
$ 25,210,325
- --------------------------------------------------------------------------------
Retail - General -- 2.8%
- --------------------------------------------------------------------------------
Advance Holding Corp., Debs., 12.875%,
(0% until 2003), 4/15/09/(1)/ $ 4,000 $ 2,300,000
Advance Stores Co., Inc., Sr. Sub. Notes,
10.25%, 4/15/08/(1)/ 8,400 8,190,000
Franks Nursery and Crafts, Sr. Sub.
Notes, 10.25%, 3/1/08 4,000 3,940,000
Kindercare Learning Ctrs., Inc., Sr. Sub.
Notes, 9.50%, 2/15/09 8,100 7,654,500
Tuesday Morning Corp., Sr. Sub. Notes,
11.00%, 12/15/07 3,000 3,045,000
- --------------------------------------------------------------------------------
$ 25,129,500
- --------------------------------------------------------------------------------
Transportation -- 0.2%
- --------------------------------------------------------------------------------
MTL, Inc., Sr. Sub. Notes, Variable
Rate, 6/15/06/(1)/ $ 1,600 $ 1,520,000
- --------------------------------------------------------------------------------
$ 1,520,000
- --------------------------------------------------------------------------------
Wireless Communication Services -- 7.2%
- --------------------------------------------------------------------------------
America Mobile/ AMSC Acquisition Corp.,
Sr. Notes, 12.25%, 4/1/08 $ 4,100 $ 2,480,500
Dobson Communications Corp., Sr. Notes,
11.75%, 4/15/07 7,830 7,869,150
Exodus Communications, Inc., Sr. Notes,
11.25%, 7/1/08/(1)/ 6,800 6,120,000
Ionica PLC, Sr. Notes, 13.50%, 8/15/06 1,600 512,000
Millicom International Cellular, Sr. Disc
Notes, 13.50%, (0% until 2001), 6/1/06 7,200 4,644,000
Mobile Telecom Technology, Sr. Notes,
13.50%, 12/15/02 4,000 4,500,000
Nextel Communications, Inc., Sr. Disc.
Notes, 9.75%, (0% until 1999), 8/15/04 8,345 8,032,063
Nextel Communications, Inc., Sr. Disc.
Notes, 9.75%, (0% until 2002), 10/31/07 4,800 2,892,000
See notes to financial statements
12
<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
Wireless Communication Services (continued)
- --------------------------------------------------------------------------------
Nextel Communications, Inc., Sr. Disc.
Notes, 10.65%, (0% until 2002), 9/15/07 $ 250 $ 158,125
Nextel International, Inc., Sr. Disc.
Notes, 12.125%, (0% until 2003), 4/15/08 15,000 6,825,000
Omnipoint Corp., Sr. Notes,
11.625%, 8/15/06 2,580 1,612,500
Orange PLC, Sr. Notes, 8.00%, 8/1/08 1,200 1,176,000
Orion Network Systems, Inc., Sr. Disc.
Notes, 12.50%, (0% until 2002), 1/15/07 1,600 1,128,000
Orion Network Systems, Inc., Sr. Notes,
11.25%, 1/15/07 5,600 5,432,000
USA Mobile Communications, Sr. Notes,
9.50%, 2/1/04 1,500 1,350,000
Viatel, Inc., Sr. Disc. Notes, 12.50%,
(0% until 2003), 4/15/08 5,050 2,424,000
Viatel, Inc., Sr. Notes, 11.25%, 4/15/08 7,525 6,810,125
- --------------------------------------------------------------------------------
$ 63,965,463
- --------------------------------------------------------------------------------
Wireline Communication Services -- 16.4%
- --------------------------------------------------------------------------------
Allegiance Telecom, Inc., Sr. Disc.
Notes, 11.75%, (0% until 2003), 2/15/08 $ 17,125 $ 7,535,000
Allegiance Telecom, Inc., Sr. Notes,
12.875%, 5/15/08 12,375 11,756,250
Call-Net Enterprises, Inc., Sr. Disc.
Notes, 8.94%, (0% until 2003), 8/15/08 11,720 6,856,200
Call-Net Enterprises, Inc., Sr. Notes,
8.00%, 8/15/08 720 684,000
Esat Telecom Group PLC, Sr. Deferred
Coupon Notes, 12.50%, (0% until 2002),
2/1/07 3,875 2,480,000
Esat Telecom Group PLC, Sr. Deferred
Coupon Notes, 12.50%, (0% until 2002),
2/1/07 3,600 2,304,000
Esprit Telecom Group PLC, Sr. Notes,
10.875%, 6/15/08/(1)/ 8,900 8,054,500
Esprit Telecom Group PLC, Sr. Notes,
11.50%, 12/15/07 10,200 9,562,500
Facilicom International, Sr. Notes,
10.50%, 1/15/08 4,640 4,036,800
Global Crossing Holding Ltd., Sr. Notes,
9.625%, 5/15/08/(1)/ 11,630 11,368,325
GST Telecommunications, Sr. Sub. Notes,
12.75%, 11/15/07 3,700 3,478,000
Hyperion Telecommunications, Inc., Sr.
Notes, 12.25%, 9/1/04 13,100 12,936,249
Icg Holdings, Inc., Sr. Disc. Notes,
12.50%, (0% until 2001), 5/1/06 8,755 6,281,713
Intermedia Communications, Inc., Sr.
Notes, 8.60%, 6/1/08 7,915 7,875,425
Metronet Communications, Sr. Disc. Notes,
10.75%, (0% until 2002), 11/1/07 4,800 2,928,000
Metronet Communications, Sr. Notes,
12.00%, 8/15/07 5,000 5,350,000
MGC Communications, Inc., Sr. Notes,
13.00%, 10/1/04 2,100 1,785,000
Netia Holdings B.V., Sr. Disc. Notes,
11.25%, (0% until 2001), 11/1/07 1,200 492,000
Nextlink Communications, Inc., Sr. Notes,
9.625%, 10/1/07 6,280 6,154,400
Nextlink Communications, Inc., Sr. Notes,
12.50%, 4/15/06 6,720 7,274,400
Primus Telecom Group, Sr. Notes,
9.875%, 5/15/08 2,400 2,100,000
Primus Telecom Group, Sr. Notes,
11.75%, 8/1/04 4,600 4,462,000
RSL Commerce, Ltd., Sr. Notes,
12.25%, 11/15/06 4,565 4,724,775
SBA Communications Corp., Sr. Disc.
Notes, 12.00%, (0% until 2003), 3/1/08 11,705 6,262,175
Versatel Telecom B.V., Sr. Notes,
13.25%, 5/15/08/(1)/ 7,840 7,604,800
- --------------------------------------------------------------------------------
$ 144,346,512
- --------------------------------------------------------------------------------
Total Corporate Bonds & Notes
(identified cost $868,591,913) $ 805,339,564
- --------------------------------------------------------------------------------
Common Stocks, Warrants and
Rights-- 0.4%
Security Shares Value
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 0.0%
- --------------------------------------------------------------------------------
21st Century Telecom Group, Warrants/(2)//(3)/ 800 $ --
Star Choice Communications, Warrants/(2)//(3)/ 18,528 --
UIH Australia/Pacific, Inc.,
Warrants/(2)//(3)/ 3,600 36
United International Holdings, Inc.,
Warrants Exp. 11/15/99/(2)//(3)/ 7,840 19,600
- --------------------------------------------------------------------------------
$ 19,636
- --------------------------------------------------------------------------------
Business Services - Miscellaneous -- 0.0%
- --------------------------------------------------------------------------------
Unisite, Inc., Warrants/(2)//(3)/ 2,252 $ --
- --------------------------------------------------------------------------------
$ --
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Security Shares Value
- --------------------------------------------------------------------------------
Chemicals -- 0.0%
- --------------------------------------------------------------------------------
Sterling Chemicals Holdings, Common/(2)//(3)/ 9,600 $ 85,200
- --------------------------------------------------------------------------------
$ 85,200
- --------------------------------------------------------------------------------
Communications Equipment -- 0.0%
- --------------------------------------------------------------------------------
Jordan Telecom Products, Inc., Common/(2)//(3)/ 2,500 $ --
- --------------------------------------------------------------------------------
$ --
- --------------------------------------------------------------------------------
Foods -- 0.0%
- --------------------------------------------------------------------------------
Specialty Foods Acquisition
Corp., Common/(2)//(3)/ 48,000 $ 480
- --------------------------------------------------------------------------------
$ 480
- --------------------------------------------------------------------------------
Information Services -- 0.1%
- --------------------------------------------------------------------------------
Cellnet Data Systems, Inc., Warrants
Exp. 10/1/07/(2)//(3)/ 8,000 $ 80
Concentric Network Corp., Warrants/(2)//(3)/ 3,200 169,184
Orbital Imaging Corp., Warrants/(2)//(3)/ 3,760 --
Verio, Inc., Warrants/(2)//(3)/ 25,600 1,003,776
- --------------------------------------------------------------------------------
$ 1,173,040
- --------------------------------------------------------------------------------
Metals - Industrial -- 0.0%
- --------------------------------------------------------------------------------
Gulf States Steel, Warrants/(2)//(3)/ 2,400 $ 120
- --------------------------------------------------------------------------------
$ 120
- --------------------------------------------------------------------------------
Wireless Communication Services -- 0.1%
- --------------------------------------------------------------------------------
America Mobile, Warrants
Exp. 4/01/08/(2)//(3)/ 4,100 $ --
Loral Space and Communications
Ltd., Common/(2)//(3)/ 4,149 63,791
Microcell Telecommunication, 58,400 782,428
Warrants/(2)//(3)/
Nextel Communications, Inc.,
Class A, Common/(2)//(3)/ 11,154 224,463
Nextel Communications, Inc., Warrants
Exp. 4/25/99/(2)//(3)/ 7,200 4,320
- --------------------------------------------------------------------------------
$ 1,075,002
- --------------------------------------------------------------------------------
Wireline Communication Services -- 0.2%
- --------------------------------------------------------------------------------
Allegiance Telecom, Inc., Warrants
Exp. 2/15/08/(2)//(3)/ 26,555 $ 289,184
Esat Holdings, Ltd., Warrants/(2)//(3)/ 3,600 126,000
Hyperion Telecommunications,
Inc., Common/(2)//(3)/ 24,240 133,562
Intermedia Communications,
Inc., Common/(2)//(3)/ 6,788 $ 166,926
Metronet Communications
Corp., Common/(2)//(3)/ 3,086 55,164
MGC Communications, Inc., Warrants
Exp. 10/01/04/(2)/ 5,680 247,932
Optel, Inc., Common/(2)/ 5,840 116,800
Primus Telecom Group, Warrants
Exp. 8/1/04/(2)//(3)/ 4,600 161,000
Versatel Telecom B.V., Warrants/(2)//(3)/ 7,840 --
- --------------------------------------------------------------------------------
$ 1,296,568
- --------------------------------------------------------------------------------
Total Common Stocks, Warrants and Rights
(identified cost $2,381,027) $ 3,650,046
- --------------------------------------------------------------------------------
Preferred Stocks-- 7.4%
Security Shares Value
- --------------------------------------------------------------------------------
Apparel -- 0.4%
- --------------------------------------------------------------------------------
Cluett American Corp., 12.50% (PIK)/(1)/ 4,000 $ 3,720,000
- --------------------------------------------------------------------------------
$ 3,720,000
- --------------------------------------------------------------------------------
Broadcasting and Cable -- 2.6%
- --------------------------------------------------------------------------------
21st Century Telecom Group, 13.75% (PIK) 829 $ 663,200
Adelphia Communications Corp., 13% (PIK) 48,000 5,580,000
CSC Holdings, Inc., Series M, 11.125% (PIK) 116,881 12,915,350
Echostar Communications, 12.125% (PIK) 3,498 3,323,014
- --------------------------------------------------------------------------------
$ 22,481,564
- --------------------------------------------------------------------------------
Business Services - Miscellaneous -- 0.2%
- --------------------------------------------------------------------------------
Unisite, Inc., 8.5% (PIK)/(3)/ 3,239 $ 1,603,058
- --------------------------------------------------------------------------------
$ 1,603,058
- --------------------------------------------------------------------------------
Communications Equipment -- 0.3%
- --------------------------------------------------------------------------------
Jordan Telecom Products, Inc., 13.25% (PIK)/(1)/ 2,500 $ 2,875,000
- --------------------------------------------------------------------------------
$ 2,875,000
- --------------------------------------------------------------------------------
Machinery -- 0.2%
- --------------------------------------------------------------------------------
MMH Holdings, Inc., 12% (PIK) 1,630 $ 1,393,650
- --------------------------------------------------------------------------------
$ 1,393,650
- --------------------------------------------------------------------------------
See notes to financial statements
14
<PAGE>
High Income Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Security Shares Value
- --------------------------------------------------------------------------------
Wireless Communication Services -- 1.8%
- --------------------------------------------------------------------------------
Dobson Communications Corp., 12.25% (PIK) 4,027 $ 3,624,300
E.spire Communications, Inc., 12.75% (PIK) 4,422 3,669,915
Nextel Communications, Inc., 11.125% (PIK) 5,076 4,568,400
Rural Cellular Corp., 11.375% (PIK) 4,114 3,702,320
Viatel, Inc., 10% (PIK) 6,273 439,110
- --------------------------------------------------------------------------------
$ 16,004,045
- --------------------------------------------------------------------------------
Wireline Communication Services -- 1.9%
- --------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% (PIK) 185,000 $ 4,497,813
IXC Communications, Inc., Series B,
12.5% (PIK) 10,770 11,470,050
Nextlink Communications, 14% (PIK) 20,897 1,086,644
- --------------------------------------------------------------------------------
$ 17,054,507
- --------------------------------------------------------------------------------
Total Preferred Stocks
(identified cost $67,407,932) $ 65,131,824
- --------------------------------------------------------------------------------
Short-Term Investments -- 0.9%
Principal
Amount
Security (000's omitted) Value
- --------------------------------------------------------------------------------
Corporate Recreation Corp., 5.75%, 10/1/98 $ 7,514 $ 7,514,000
- --------------------------------------------------------------------------------
Total Short-Term Investments
(at amortized cost $7,514,000) $ 7,514,000
- --------------------------------------------------------------------------------
Total Investments -- 100.0%
(identified cost $945,894,872) $ 881,635,434
- --------------------------------------------------------------------------------
(PIK) Payment-in-kind.
(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. It is the
Portfolio's intention to hold this security until maturity.
(2) Non-income producing security.
(3) Restricted security.
See notes to financial statements
15
<PAGE>
High Income Portfolio as of September 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
As of September 30, 1998
(Expressed in United States Dollars)
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost,
$945,894,872) $ 881,635,434
Cash 1,894
Receivable for investments sold 412,400
Interest and dividends receivable 22,428,742
Deferred organization expenses 2,989
- --------------------------------------------------------------------------------
Total assets $ 904,481,459
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for investments purchased $ 2,744,060
Payable to affiliate for Trustees' fees 1,040
Other accrued expenses 41,011
- --------------------------------------------------------------------------------
Total liabilities $ 2,786,111
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $ 901,695,348
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $ 965,954,786
Net unrealized depreciation (computed on the basis
of identified cost) (64,259,438)
- --------------------------------------------------------------------------------
Total $ 901,695,348
- --------------------------------------------------------------------------------
Statement of Operations
For the Six Months Ended
September 30, 1998
(Expressed in United States Dollars)
Investment Income
- --------------------------------------------------------------------------------
Interest $ 46,919,855
Dividends 3,929,786
Miscellaneous 556,577
- --------------------------------------------------------------------------------
Total investment income $ 51,406,218
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 2,931,571
Trustees fees and expenses 12,643
Custodian fee 146,395
Legal and accounting services 52,728
Amortization of organization expenses 2,265
Miscellaneous 2,175
- --------------------------------------------------------------------------------
Total expenses $ 3,147,777
- --------------------------------------------------------------------------------
Net investment income $ 48,258,441
- --------------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 3,257,760
Foreign currency transactions 4,653
- --------------------------------------------------------------------------------
Net realized gain $ 3,262,413
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(116,235,937)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) $(116,235,937)
- --------------------------------------------------------------------------------
Net realized and unrealized loss $(112,973,524)
- --------------------------------------------------------------------------------
Net decrease in net assets from operations $ (64,715,083)
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
High Income Portfolio as of September 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
(Expressed in United States Dollars)
Six Months Ended
Increase (Decrease) September 30, 1998 Year Ended
in Net Assets (Unaudited) March 31, 1998
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 48,258,441 $ 78,751,905
Net realized gain 3,262,413 40,197,991
Net change in unrealized
appreciation (depreciation) (116,235,937) 41,198,260
- --------------------------------------------------------------------------------
Net increase (decrease) in net
assets from operations $ (64,715,083) $ 160,148,156
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 174,851,243 $ 306,797,835
Withdrawals (168,941,522) (213,156,743)
- --------------------------------------------------------------------------------
Net increase in net assets from
capital transactions $ 5,909,721 $ 93,641,092
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets $ (58,805,362) $ 253,789,248
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 960,500,710 $ 706,711,462
- --------------------------------------------------------------------------------
At end of period $ 901,695,348 $ 960,500,710
- --------------------------------------------------------------------------------
See notes to financial statements
17
<PAGE>
High Income Portfolio as of September 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
(Expressed in United States Dollars)
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31,
September 30, 1998 ---------------------------------------------------------
(Unaudited) 1998 1997 1996 1995/(1)/
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------------
Expenses 0.64%/(2)/ 0.63% 0.67% 0.71% 0.70%/(2)/
Net investment income 9.82%/(2)/ 9.63% 10.02% 10.41% 10.63%/(2)/
Portfolio Turnover 65% 137% 78% 88% 53%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $901,695 $960,501 $706,711 $511,347 $442,552
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ For the period from the start of business, June 1, 1994, to March 31,
1995.
/(2)/ Annualized.
See notes to financial statements
18
<PAGE>
High Income Portfolio as of September 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited)
(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 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 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 Use of Estimates -- The preparation of 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 amounts of revenue and expense during the
reporting period. Actual results could differ from those estimates.
G Other -- Investment transactions are accounted for on a trade date basis.
H Interim Financial Information -- The interim financial statements relating
to September 30, 1998 and for the six-month period then ended have not been
audited by independent certified public accountants, but in the opinion of
the Fund's management, reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
19
<PAGE>
High Income Portfolio as of September 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) 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 six months ended September 30, 1998, the fee
was equivalent to 0.60% (annualized) of the Portfolio's average daily net
assets and amounted to $2,931,571. Except as to Trustees of the Portfolio
who are not members of EVM's or BMR's organization, officers and Trustees
receive remuneration for their services to the Portfolio out of such
investment adviser fee. Certain of the officers and Trustees of the
Portfolio are officers 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 Trustees Deferred Compensation Plan. For
the six months ended September 30, 1998, 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 $635,779,620 and $607,445,913,
respectively, for the six months ended September 30, 1998.
4 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $100 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above 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 six months ended
September 30, 1998.
5 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at September 30, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 945,894,872
----------------------------------------------------------------------------
Gross unrealized appreciation $ 79,222,579
Gross unrealized depreciation (143,482,017)
----------------------------------------------------------------------------
Net unrealized depreciation $ (64,259,438)
----------------------------------------------------------------------------
6 Restricted Securities
----------------------------------------------------------------------------
At September 30, 1998, the Portfolio owned the following securities
(constituting 0.54% 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 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.
Date of
Description Acquisition Shares/Face Cost Fair Value
----------------------------------------------------------------------------
Common Stocks, Warrants, and Rights
----------------------------------------------------------------------------
Allegiance Telecom, Inc.,
Wts., Exp. 2/15/08 1/29/98 26,555 $ 0 $ 289,184
America Mobile, Wts., 3/26/98 4,100 0 0
Exp. 4/1/08
Cellnet Data Systems, Inc.,
Wts., Exp. 10/1/07 9/24/98 8,000 0 80
Concentric Network
Corp., Wts. 7/16/98 3,200 0 169,184
Esat Holdings, Ltd., Wts. 6/19/97 3,600 0 126,000
Gulf States Steel, Wts. 8/22/95 2,400 0 120
Hyperion
Telecommunications,
Inc., Common 6/24/98 24,240 75 133,562
Intermedia Communications,
Inc., Common 5/21/98 6,788 231,907 166,926
Jordan Telecom Products,
Inc., Common 1/9/98 2,500 0 0
20
<PAGE>
High Income Portfolio as of September 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
(Expressed in United States Dollars)
Date of
Description Acquisition Shares/Face Cost Fair Value
----------------------------------------------------------------------------
Common Stocks, Warrants, and Rights (continued)
----------------------------------------------------------------------------
Loral Space &
Communications
Ltd., Common 6/23/98 4,149 $ 101 $ 63,791
Metronet Communications,
Common 6/04/98 3,086 36 55,164
Microcell Telecommunication,
Wts. 10/30/96 58,400 647,700 782,428
Nextel Communications,
Inc., Common 8/25/98 11,154 180,000 224,463
Nextel Communications, Inc.,
Wts., Exp.4/25/99 10/04/96 7,200 0 4,320
Orbital Imaging Corp., Wts. 5/28/98 3,760 0 0
Primus Telecommunications,
Wts., Exp. 8/1/04 5/14/98 4,600 0 161,000
Specialty Foods Acq.
Corp., Common 8/10/93 48,000 34,886 480
Star Choice
Communication, Wts. 4/29/98 18,528 0 0
Sterling Chemicals
Hldgs., Inc., Common 10/07/96 9,600 96 85,200
21st Century Telecom
Grp., Wts. 2/02/98 800 0 0
UIH Australia/Pacific,
Inc., Wts. 2/05/98 3,600 0 36
Unisite, Inc., Wts. 12/9/97 2,252 0 0
United International Holdings,
Inc., Wts.,
Exp. 11/15/99 11/16/94 7,840 222,186 19,600
Verio, Inc., Wts. 5/5/98 25,600 1,064,000 1,003,776
Versatel Telecom B.V., Wts. 5/20/98 7,840 0 0
----------------------------------------------------------------------------
$2,380,987 $3,285,314
Preferred Stock
----------------------------------------------------------------------------
Unisite, Inc., 8.5% (PIK) 12/9/97 3,239 1,499,847 1,603,058
----------------------------------------------------------------------------
$3,880,834 $4,888,372
----------------------------------------------------------------------------
21
<PAGE>
High Income Portfolio as of September 30, 1998
INVESTMENT MANAGEMENT
High Income Portfolio
<TABLE>
<S> <C>
Officers Independent Trustees
M. Dozier Gardner Donald R. Dwight
President and Trustee President, Dwight Partners, Inc.
James B. Hawkes Samuel L. Hayes, III
Vice President and Trustee Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of
Michael W. Weilheimer Business Administration
Vice President and
Portfolio Manager Norton H. Reamer
Chairman and Chief Executive Officer, United Asset
Raymond O'Neill Management Corporation
Vice President
John L. Thorndike
Michel Normandeau Formerly Director, Fiduciary Company Incorporated
Vice President
Jack L. Treynor
James L. O'Connor Investment Adviser and Consultant
Treasurer
Alan R. Dynner
Secretary
</TABLE>
22
