<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
PORTFOLIO OF INVESTMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
CORPORATE BONDS & NOTES -- 82.5%
<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 $ 3,958,500
Transdigm, Inc., 10.375%, 12/1/08 4,800 3,864,000
--------------------------------------------------------------------------------
$ 7,822,500
--------------------------------------------------------------------------------
Apparel -- 0.7%
--------------------------------------------------------------------------------
Coyne International Enterprises, Sr.
Sub. Notes, 11.25%, 6/1/08 $ 2,525 $ 2,057,875
William Carter Co., Sr. Sub. Notes,
10.375%, 12/1/06 7,985 6,747,325
--------------------------------------------------------------------------------
$ 8,805,200
--------------------------------------------------------------------------------
Auto and Parts -- 0.6%
--------------------------------------------------------------------------------
J.L. French Automative Casting,
11.50%, 6/1/09 $ 6,225 $ 6,131,625
Talon Automotive Group, Sr. Sub. Notes,
9.625%, 5/1/08 1,100 544,500
--------------------------------------------------------------------------------
$ 6,676,125
--------------------------------------------------------------------------------
Broadcasting and Cable -- 10.9%
--------------------------------------------------------------------------------
Charter Communication Holdings LLC, Sr.
Disc. Notes, 11.75% (0% until 2005),
1/15/10(1) $ 5,250 $ 2,920,312
Charter Communication Holdings LLC, Sr.
Notes, 8.625%, 4/1/09 5,250 4,659,375
Diamond Cable Communications Co., Sr.
Disc. Notes, 11.75% (0% until 2000),
12/15/05 3,000 2,880,000
EchoStar DBS Corp., Sr. Notes,
9.375%, 2/1/09 3,250 3,152,500
Golden Sky DBS, Inc., Sr. Disc. Notes,
13.50% (0% until 2004), 3/1/07 11,445 7,725,375
Golden Sky Systems, 12.375%, 8/1/06 7,865 8,690,825
Muzak Holdings LLC, 9.875%, 3/15/09 3,400 3,281,000
Muzak Holdings LLC, Sr. Disc. Notes,
13.00% (0% until 2004), 3/15/10 6,563 3,740,910
NTL Communications Corp., Sr. Notes,
9.25%, 11/15/06(1) EUR 3,500 3,303,912
NTL Communications Corp., Sr. Notes,
9.875%, 11/15/09(1) EUR 5,900 5,512,908
NTL Communications Corp., Sr. Notes,
11.50%, 10/1/08 11,600 11,832,000
NTL Communications Corp., Sr. Notes,
12.375% (0% until 2003), 10/1/08 2,175 1,408,312
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Broadcasting and Cable (continued)
--------------------------------------------------------------------------------
Ono Finance PLC, 13.00%, 5/1/09(1) $ 10,870 $ 11,033,050
Ono Finance PLC, 13.00%, 5/1/09(1) EUR 3,800 3,823,816
Pegasus Communications Corp., Sr. Notes,
12.50%, 8/1/07(1) 6,410 6,954,850
RCN Corp., Sr. Disc. Notes, 9.80% (0%
until 2003), 2/15/08 2,250 1,316,250
Telemundo Holdings, Inc., Sr. Disc.
Notes, 11.50% (0% until 2003), 8/15/08 9,050 5,859,875
Telewest Communication PLC, Debs.,
9.625%, 10/1/06 640 620,800
Telewest Communication PLC, Debs.,
11.00% (0% until 2000), 10/1/07 9,390 8,826,600
Telewest Communication PLC, Sr. Disc.
Notes, 9.25% (0% until 2004), 4/15/09(1) 3,600 2,106,000
Telewest Communication PLC, Sr. Disc.
Notes, 9.875% (0% until 2004),
4/15/09(1) GBP 5,575 5,514,500
Telewest Communication PLC, Sr. Notes,
9.875%, 2/1/10(1) GBP 2,725 4,314,859
United Pan-Europe Communications, Sr.
Disc. Notes, 13.375% (0% until 2004),
11/1/09(1) 18,750 9,656,250
United Pan-Europe Communications, Sr.
Notes, 10.875%, 11/1/07(1) EUR 2,250 2,140,115
United Pan-Europe Communications, Sr.
Notes, 11.25%, 11/1/09(1) EUR 6,540 6,236,271
United Pan-Europe Communications, Sr.
Notes, 11.25%, 2/1/10(1) 2,125 2,050,625
--------------------------------------------------------------------------------
$ 129,561,290
--------------------------------------------------------------------------------
Business Services - Miscellaneous -- 1.7%
--------------------------------------------------------------------------------
AP Holdings, Inc., Sr. Disc. Notes,
11.25% (0% until 2003), 3/15/08 $ 8,550 $ 1,752,750
Apcoa, Inc., Guaranteed Sr. Sub. Notes,
9.25%, 3/15/08 3,320 1,846,750
Federal Data Corp., Sr. Sub. Notes,
10.125%, 8/1/05 4,740 3,092,850
Intertek Finance PLC, Sr. Sub. Notes,
10.25%, 11/1/06 5,600 4,676,000
Richmont Marketing Special,
10.125%, 12/15/07 17,770 9,329,250
--------------------------------------------------------------------------------
$ 20,697,600
--------------------------------------------------------------------------------
Business Services - Rental & Leasing -- 3.0%
--------------------------------------------------------------------------------
Anthony Crane Rental LP, Guaranteed Sr.
Notes, 10.375%, 8/1/08 $ 4,000 $ 3,220,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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 $ 4,128,500
Neff Corp., 10.25%, 6/1/08 4,050 3,594,375
Neff Corp., Guaranteed Sr. Sub. Notes,
10.25%, 6/1/08 6,150 5,458,125
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 11.25% (0% until 2004), 4/15/09 13,700 7,124,000
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.00% (0% until 2003), 7/15/08 6,350 3,841,750
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.875% (0% until 2005),
3/15/10(1) 6,870 3,589,575
Spectrasite Holdings, Inc., Sr. Notes,
10.75%, 3/15/10(1) 5,100 4,857,750
--------------------------------------------------------------------------------
$ 35,814,075
--------------------------------------------------------------------------------
Chemicals -- 0.8%
--------------------------------------------------------------------------------
Huntsman Corp., Sr. Sub. Notes,
9.50%, 7/1/07(1) $ 1,000 $ 917,500
PCI Chemicals Canada, Inc.,
9.25%, 10/15/07 3,500 2,887,500
Sterling Chemicals Holdings, Inc., Sr.
Sub. Notes, 11.25%, 4/1/07 250 204,375
Sterling Chemicals Holdings, Inc., Sr.
Sub. Notes, 11.75%, 8/15/06 5,750 4,887,500
--------------------------------------------------------------------------------
$ 8,896,875
--------------------------------------------------------------------------------
Consumer Products -- 0.8%
--------------------------------------------------------------------------------
Amscan Holdings, Inc., Sr. Sub. Notes,
9.875%, 12/15/07 $ 4,480 $ 3,920,000
Glenoit Corp., Sr. Sub. Notes,
11.00%, 4/15/07 9,000 2,565,000
Icon Health and Fitness, Inc.,
12.00%, 9/27/05(1) 1,421 781,440
Polaroid Corp., Sr. Notes,
11.50%, 2/15/06 2,500 2,562,500
--------------------------------------------------------------------------------
$ 9,828,940
--------------------------------------------------------------------------------
Containers and Packaging -- 0.2%
--------------------------------------------------------------------------------
Consumers International, Inc., Sr.
Notes, 10.25%, 4/1/05 $ 3,935 $ 2,695,475
--------------------------------------------------------------------------------
$ 2,695,475
--------------------------------------------------------------------------------
Drugs -- 1.3%
--------------------------------------------------------------------------------
King Pharmaceutical, Inc.,
10.75%, 2/15/09 $ 4,750 $ 4,726,250
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Drugs (continued)
--------------------------------------------------------------------------------
Warner Chilcott, Inc.,
12.625%, 2/15/08(1) $ 10,275 $ 10,146,562
--------------------------------------------------------------------------------
$ 14,872,812
--------------------------------------------------------------------------------
Electronic Equipment -- 1.2%
--------------------------------------------------------------------------------
Cherokee International, Sr. Sub. Notes,
10.50%, 5/1/09 $ 4,875 $ 4,034,062
Viasystems, Inc., Sr. Sub. Notes,
9.75%, 6/1/07 3,600 3,042,000
Viasystems, Inc., Sr. Sub. Notes, Series
B, 9.75%, 6/1/07 3,565 3,012,425
Wavetek Corp., Sr. Sub. Notes,
10.125%, 6/15/07 3,360 3,712,800
--------------------------------------------------------------------------------
$ 13,801,287
--------------------------------------------------------------------------------
Entertainment -- 1.7%
--------------------------------------------------------------------------------
Loews Cineplex Entertainment Corp., Sr.
Sub. Notes, 8.875%, 8/1/08 $ 1,000 $ 635,000
Marvel Enterprise, Inc.,
12.00%, 6/15/09 12,725 10,879,875
Premier Parks, Inc., Sr. Notes,
9.75%, 6/15/07 1,625 1,529,531
Regal Cinemas, Inc., Sr. Sub. Notes,
8.875%, 12/15/10 10,905 4,089,375
Regal Cinemas, Inc., Sr. Sub. Notes,
9.50%, 6/1/08 7,925 3,368,125
--------------------------------------------------------------------------------
$ 20,501,906
--------------------------------------------------------------------------------
Financial Services -- 0.4%
--------------------------------------------------------------------------------
Willis Corroon Corp., 9.00%, 2/1/09 $ 6,400 $ 4,768,000
--------------------------------------------------------------------------------
$ 4,768,000
--------------------------------------------------------------------------------
Foods -- 2.8%
--------------------------------------------------------------------------------
B & G Foods, Inc., Sub. Notes,
9.625%, 8/1/07 $ 7,445 $ 6,067,675
Del Monte Corp., Sr. Notes,
12.25%, 4/15/07 9,979 10,477,950
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 3,175 2,651,125
Premier International Foods, Sr. Notes,
12.00%, 9/1/09(1) 12,562 11,871,090
--------------------------------------------------------------------------------
$ 33,704,090
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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>
--------------------------------------------------------------------------------
Health Services -- 0.2%
--------------------------------------------------------------------------------
Lifepoint Hospitals Holding,
10.75%, 5/15/09 $ 2,820 $ 2,834,100
--------------------------------------------------------------------------------
$ 2,834,100
--------------------------------------------------------------------------------
Information Technology Services -- 8.9%
--------------------------------------------------------------------------------
Covad Communication Group, Sr. Notes,
12.00%, 2/15/10(1) $ 14,375 $ 13,153,124
Cybernet Internet Services
International, Inc., Sr. Notes,
14.00%, 7/1/09 4,825 3,787,625
Diva Systems Corp., Sr. Notes, 12.625%
(0% until 2003), 3/1/08 9,000 5,175,000
Equinix, Inc., 13.00%, 12/1/07 4,500 4,702,500
Exodus Communications, Inc., Sr. Notes,
10.75%, 12/15/09 2,938 2,923,310
Exodus Communications, Inc., Sr. Notes,
10.75%, 12/15/09(1) EUR 1,156 1,152,167
Exodus Communications, Inc., Sr. Notes,
11.25%, 7/1/08 9,835 9,835,000
Globix Corp., Sr. Notes,
12.50%, 2/1/10(1) 10,600 9,805,000
IPC Information Systems, Sr. Disc.
Notes, 10.875% (0% until 2001), 5/1/08 7,000 6,116,250
Northpoint Communication Group, Inc.,
12.875%, 2/15/10(1) 14,625 13,089,375
PSINet, Inc., Sr. Notes,
10.50%, 12/1/06(1) 1,500 1,440,000
PSINet, Inc., Sr. Notes,
10.50%, 12/1/06(1) EUR 2,850 2,758,610
PSINet, Inc., Sr. Notes, 11.00%, 8/1/09 8,200 7,995,000
PSINet, Inc., Sr. Notes, 11.00%, 8/1/09 EUR 3,000 2,903,800
PSINet, Inc., Sr. Notes,
11.50%, 11/1/08 6,100 6,130,500
Rhythms NetConnections, Sr. Notes,
14.00%, 2/15/10(1) 6,000 5,190,000
Verio, Inc., Sr. Notes,
10.625%, 11/15/09(1) 5,500 5,362,500
Verio, Inc., Sr. Notes, 11.25%, 12/1/08 1,000 995,000
Verio, Inc., Sr. Notes, 13.50%, 6/15/04 3,200 3,452,000
--------------------------------------------------------------------------------
$ 105,966,761
--------------------------------------------------------------------------------
Lodging and Gaming -- 5.1%
--------------------------------------------------------------------------------
HMH Properties, 7.875%, 8/1/08 $ 3,988 $ 3,379,830
Hollywood Casino Corp., 11.25%, 5/1/07 3,350 3,366,750
Hollywood Casino Corp., 12.414%, 5/1/06 6,925 7,167,375
Hollywood Casino Corp., First Mortgage
Bonds, 13.00%, 8/1/06(1) 8,150 8,679,750
Horseshoe Gaming Holding Corp.,
8.625%, 5/15/09 63 57,803
Majestic Star LLC, 10.875%, 7/1/06 7,000 6,545,000
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Lodging and Gaming (continued)
--------------------------------------------------------------------------------
Mandalay Resort Group, Sr. Sub. Notes,
9.25%, 12/1/05 $ 3,250 $ 3,103,750
Sun International Hotels,
8.625%, 12/15/07 8,500 7,777,500
Sun International Hotels, Sr. Sub.
Notes, 9.00%, 3/15/07 6,975 6,312,375
Trump Atlantic City Associates, Inc.,
11.25%, 5/1/06 5,437 3,656,383
Waterford Gaming LLC, Sr. Notes,
9.50%, 3/15/10(1) 10,252 9,790,660
--------------------------------------------------------------------------------
$ 59,837,176
--------------------------------------------------------------------------------
Manufacturing -- 0.6%
--------------------------------------------------------------------------------
Roller Bearing Holdings Co., Sr. Disc.
Notes, 13.00% (0% until 2002),
6/15/09(1) $ 12,875 $ 6,727,188
--------------------------------------------------------------------------------
$ 6,727,188
--------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 1.9%
--------------------------------------------------------------------------------
DI Industries, Inc., (Grey Wolf, Inc.),
Sr. Notes, 8.875%, 7/1/07 $ 8,524 $ 7,756,840
Grant Geophysical, Inc., Sr. Notes,
9.75%, 2/15/08 4,000 2,540,000
R&B Falcon Corp., 9.50%, 12/15/08 840 810,600
R&B Falcon Corp., 10.25%, 5/15/03 3,250 3,217,500
RBF Finance Co., 11.375%, 3/15/09 2,900 3,088,500
Universal Compression, Inc., Sr. Disc.
Notes, 9.875% (0% until 2003), 2/15/08 9,400 5,405,000
--------------------------------------------------------------------------------
$ 22,818,440
--------------------------------------------------------------------------------
Oil and Gas - Exploration and Development -- 0.5%
--------------------------------------------------------------------------------
Comstock Resources, Inc., 11.25%, 5/1/07 $ 5,850 $ 5,703,750
--------------------------------------------------------------------------------
$ 5,703,750
--------------------------------------------------------------------------------
Oil and Gas - Exploration and Production -- 2.0%
--------------------------------------------------------------------------------
Chesapeake Energy Corp., 9.125%, 4/15/06 $ 4,000 $ 3,560,000
Chesapeake Energy Corp., Sr. Notes,
7.875%, 3/15/04 1,320 1,181,400
Chesapeake Energy Corp., Sr. Notes,
8.50%, 3/15/12 8,480 6,911,200
Energy Corp. of America, Sr. Sub. Notes,
9.50%, 5/15/07 2,340 1,696,500
Gothic Production Corp.,
11.125%, 5/1/05 6,500 5,557,500
Plains Resources, Inc., Sr. Sub. Notes,
10.25%, 3/15/06 750 723,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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>
--------------------------------------------------------------------------------
Oil and Gas - Exploration and Production (continued)
--------------------------------------------------------------------------------
Plains Resources, Inc., Sr. Sub. Notes,
10.25%, 3/15/06(1) $ 3,750 $ 3,618,750
--------------------------------------------------------------------------------
$ 23,249,100
--------------------------------------------------------------------------------
Oil and Gas - Refining -- 0.1%
--------------------------------------------------------------------------------
Western Gas Resources, 10.00%, 6/15/09 $ 1,050 $ 1,065,750
--------------------------------------------------------------------------------
$ 1,065,750
--------------------------------------------------------------------------------
Packaging -- 0.5%
--------------------------------------------------------------------------------
Clondalkin Industries, Sr. Notes,
10.625%, 1/15/10(1) EUR 375 $ 368,366
IFCO Systems NV, Sr. Sub. Notes,
10.625%, 3/15/10(1) EUR 3,022 2,983,018
Kappa Beheer BV, 10.625%, 7/15/09 EUR 2,500 2,560,591
--------------------------------------------------------------------------------
$ 5,911,975
--------------------------------------------------------------------------------
Paper and Forest Products -- 0.3%
--------------------------------------------------------------------------------
Indah Kiat Finance Mauritius, Sr. Unsec.
Notes, 10.00%, 7/1/07 $ 3,400 $ 2,380,000
Pindo Deli Finance Mauritius, Ltd.,
Guaranteed Sr. Notes, 10.75%, 10/1/07 2,400 1,722,000
--------------------------------------------------------------------------------
$ 4,102,000
--------------------------------------------------------------------------------
Printing and Business Products -- 1.7%
--------------------------------------------------------------------------------
MDC Communications Corp., Sr. Sub.
Notes, 10.50%, 12/1/06 $ 15,600 $ 14,976,000
Merrill Corp., 12.00%, 5/1/09(1) 5,250 5,066,250
--------------------------------------------------------------------------------
$ 20,042,250
--------------------------------------------------------------------------------
Publishing -- 0.6%
--------------------------------------------------------------------------------
American Lawyer Media Corp., Sr. Disc.
Notes, 12.25% (0% to 2002), 12/15/08 $ 2,920 $ 1,876,100
Von Hoffman Press, Inc., Sr. Sub. Notes,
10.875%, 5/15/07(1) 5,095 4,814,775
--------------------------------------------------------------------------------
$ 6,690,875
--------------------------------------------------------------------------------
Restaurants -- 0.8%
--------------------------------------------------------------------------------
AFC Enterprises, Inc., Sr. Sub Notes,
10.25%, 5/15/07 $ 9,600 $ 9,360,000
--------------------------------------------------------------------------------
$ 9,360,000
--------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Retail - Food and Drug -- 1.5%
--------------------------------------------------------------------------------
Pantry, Inc., Sr. Sub. Notes,
10.25%, 10/15/07 $ 13,105 $ 11,597,925
Pathmark Stores, Inc., Sr. Sub. Notes,
9.625%, 5/1/03 9,000 6,525,000
--------------------------------------------------------------------------------
$ 18,122,925
--------------------------------------------------------------------------------
Retail - General -- 2.2%
--------------------------------------------------------------------------------
Advance Holding Corp., Sr. Debs.,
12.875% (0% until 2003), 4/15/09 $ 4,000 $ 1,985,000
Advance Stores Co., Inc., Sr. Sub.
Notes, 10.25%, 4/15/08 8,400 6,678,000
Ames Department Stores, Sr. Notes,
10.00%, 4/15/06 6,400 6,016,000
Kindercare Learning Ctrs., Inc., Sr.
Sub. Notes, 9.50%, 2/15/09 7,900 7,228,500
Tuesday Morning Corp., Sr. Sub. Notes,
11.00%, 12/15/07 4,057 4,036,715
--------------------------------------------------------------------------------
$ 25,944,215
--------------------------------------------------------------------------------
Semiconductors -- 1.8%
--------------------------------------------------------------------------------
Amkor Technologies, Inc., Sr. Notes,
9.25%, 5/1/06 $ 1,600 $ 1,552,000
Asat Finance LLC, 12.50%, 11/1/06(1) 2,350 2,479,250
Asat Finance LLC, 12.50%, 11/1/06(1) 6,350 7,588,250
Intersil Corp., 13.25%, 8/15/09 815 929,100
SCG Holding Corp., 12.00%, 8/1/09 8,250 8,868,750
--------------------------------------------------------------------------------
$ 21,417,350
--------------------------------------------------------------------------------
Transportation -- 1.3%
--------------------------------------------------------------------------------
Budget Group, Inc., Sr. Notes,
9.125%, 4/1/06 $ 7,760 $ 6,246,800
MTL, Inc., Variable rate, 6/15/06 1,600 1,336,000
Pacer International, Inc.,
11.75%, 6/1/07 7,544 7,506,280
--------------------------------------------------------------------------------
$ 15,089,080
--------------------------------------------------------------------------------
Waste Management -- 0.4%
--------------------------------------------------------------------------------
Stericycle, Inc., 12.375%, 11/15/09 $ 4,400 $ 4,532,000
--------------------------------------------------------------------------------
$ 4,532,000
--------------------------------------------------------------------------------
Wireless Communication Services -- 7.3%
--------------------------------------------------------------------------------
Airgate PCS, Inc., 13.50% (0% until
2004), 10/1/09 $ 2,000 $ 1,110,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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>
--------------------------------------------------------------------------------
Wireless Communication Services (continued)
--------------------------------------------------------------------------------
Alamosa PCS Holdings, Inc., 12.875% (0%
until 2005), 2/15/10 $ 11,625 $ 5,696,250
Clearnet Communications, Inc.,
10.125%, 7/7/07(1) 4,500 4,500,000
Dolphin Telecom PLC, Sr. Disc. Notes,
14.00% (0% until 2004), 5/15/09 13,375 5,015,625
Leap Wireless, 12.50%, 4/15/10(1) 7,500 7,537,500
Nextel Communications, Inc., Sr. Disc.
Notes, 10.65% (0% until 2002), 9/15/07 4,540 3,325,550
Nextel Communications, Inc., Sr. Notes,
9.375%, 11/15/09 15,285 14,138,625
Nextel International, Inc., Sr. Disc.
Notes, 12.125% (0% until 2003), 4/15/08 2,250 1,400,625
Nextel Partners, Inc., Sr. Notes,
11.00%, 3/15/10(1) 7,925 7,707,063
PTC International Finance II SA,
11.25%, 12/1/09(1) 1,875 1,912,500
PTC International Finance II SA,
11.25%, 12/1/09(1) EUR 3,375 3,426,093
TeleCorp PCS, Inc., 8.50%, 10/15/09 6,500 5,070,000
Teligent, Inc., Sr. Notes,
11.50%, 12/1/07 11,750 10,633,750
US Unwired, Inc., Sr. Disc. Notes,
13.375% (0% until 2004), 11/1/09(1) 4,400 2,365,000
Winstar Communications, Inc., Sr. Disc.
Notes, 14.00% (0% until 2000), 10/15/05 12,150 12,453,750
--------------------------------------------------------------------------------
$ 86,292,331
--------------------------------------------------------------------------------
Wireline Communication Services -
International -- 12.9%
--------------------------------------------------------------------------------
Call-Net Enterprises, Inc., Sr. Notes,
8.00%, 8/15/08 $ 4,000 $ 2,820,000
Call-Net Enterprises, Inc., Sr. Notes,
9.375%, 5/15/09 1,062 801,810
Carrier1 International SA, Sr. Notes,
13.25%, 2/15/09 16,375 17,070,942
Completel Europe NV, 14.00% (0% until
2004), 2/15/09 7,840 3,959,200
Esat Telecom Group PLC, Sr. Notes,
11.875%, 12/1/08 2,200 2,574,000
Esat Telecom Group PLC, Sr. Notes,
12.50% (0% until 2002), 2/1/07 1,440 1,303,200
Esprit Telecom Group PLC, Sr. Notes,
10.875%, 6/15/08 8,825 7,898,375
Esprit Telecom Group PLC, Sr. Notes,
11.50%, 12/15/07 12,600 11,529,000
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Wireline Communication Services -
International (continued)
--------------------------------------------------------------------------------
Flag Telecom Holdings Ltd., Sr. Notes,
11.625%, 3/30/10(1) EUR $ 5,895 $ 5,479,989
Global Crossing Holding Ltd., Sr. Notes,
9.125%, 11/15/06(1) 10,500 10,027,500
Global TeleSystems Group, Inc.,
11.00%, 12/1/09 EUR 3,750 3,439,185
Globenet Communication Group Ltd., Sr.
Notes, 13.00%, 7/15/07 6,625 6,558,750
GT Group Telecom, 13.25% (0% until
2005), 2/1/10(1) 13,900 7,714,500
Jazztel PLC, 14.00%, 4/1/09 2,000 2,050,000
Jazztel PLC, Sr. Notes,
13.25%, 12/15/09(1) EUR 5,813 5,765,870
Level 3 Communications, Inc., Sr. Disc.
Notes, 12.875% (0% until 2005),
3/15/10(1) 2,250 1,130,625
Level 3 Communications, Inc., Sr. Notes,
10.75%, 3/15/08(1) EUR 7,000 6,514,046
Primus Telecom Group, Sr. Notes,
11.25%, 1/15/09 3,750 3,543,750
Primus Telecom Group, Sr. Notes,
11.75%, 8/1/04 4,600 4,393,000
RSL Communications PLC, Guaranteed Sr.
Notes, 10.50%, 11/15/08 2,000 1,700,000
RSL Communications PLC, Sr. Notes,
12.25%, 11/15/06 4,190 4,148,100
Tele1 Europe BV, Sr. Notes,
11.875%, 12/1/09(1) EUR 7,406 7,310,466
Tele1 Europe BV, Sr. Notes,
13.00%, 5/15/09 3,050 3,141,500
Versatel Telecom BV, Sr. Notes,
11.875%, 7/15/09 2,045 2,039,888
Versatel Telecom BV, Sr. Notes,
13.25%, 5/15/08 9,010 9,392,925
Versatel Telecom BV, Sr. Notes,
13.25%, 5/15/08 6,160 6,421,800
Viatel, Inc., Sr. Disc. Notes, 12.50%
(0% until 2003), 4/15/08 6,415 3,544,288
Viatel, Inc., Sr. Notes,
11.25%, 4/15/08 1,805 1,669,625
Viatel, Inc., Sr. Notes,
11.50%, 3/15/09 9,550 8,977,000
--------------------------------------------------------------------------------
$ 152,919,334
--------------------------------------------------------------------------------
Wireline Communication Services -
North America -- 5.1%
--------------------------------------------------------------------------------
Allegiance Telecom, Inc., Sr. Notes,
12.875%, 5/15/08 $ 10,755 $ 11,830,500
Focal Communications Corp., Sr. Notes,
11.875%, 1/15/10(1) 3,275 3,291,375
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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 -
North America (continued)
--------------------------------------------------------------------------------
GST Equipment Funding, Sr. Notes,
13.25%, 5/1/07 $ 4,125 $ 2,887,500
GST Telecommunications, Sr. Sub. Notes,
12.75%, 11/15/07 3,700 3,089,500
ICG Holdings, Inc., 12.50% (0% until
2001), 5/1/06 6,325 5,170,688
Intermedia Communications, Inc., Sr.
Disc. Notes, 12.25% (0% until 2004),
3/1/09 6,750 4,083,750
MGC Communications, Inc., Sr. Notes,
13.00%, 4/1/10(1) 10,550 10,233,500
Nextlink Communications, Inc., Sr. Disc.
Notes, 12.125% (0% until 2004),
12/1/09(1) 16,900 8,957,000
Nextlink Communications, Inc., Sr.
Notes, 12.50%, 4/15/06 6,720 6,955,200
Nextlink Communications, Sr. Notes,
10.50%, 12/1/09(1) 250 238,125
World Access, Inc., Sr. Notes,
13.25%, 1/15/08 3,845 3,364,375
--------------------------------------------------------------------------------
$ 60,101,513
--------------------------------------------------------------------------------
Total Corporate Bonds & Notes
(identified cost, $1,064,263,641) $ 977,174,288
--------------------------------------------------------------------------------
</TABLE>
COMMON STOCKS, WARRANTS AND RIGHTS -- 2.8%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Broadcasting and Cable -- 0.1%
--------------------------------------------------------------------------------
Ono Finance PLC, Warrants(2)(3) 10,870 $ 0
Ono Finance PLC, Warrants(2)(3) 3,800 0
Pegasus Communications Corp., Common 10,919 1,535,823
UIH Australia/Pacific, Inc.,
Warrants(2)(3) 3,600 $ 115,200
--------------------------------------------------------------------------------
$ 1,651,023
--------------------------------------------------------------------------------
Chemicals -- 0.0%
--------------------------------------------------------------------------------
Sterling Chemicals Holdings, Inc.,
Common(2) 9,600 $ 53,991
--------------------------------------------------------------------------------
$ 53,991
--------------------------------------------------------------------------------
Consumer Products -- 0.0%
--------------------------------------------------------------------------------
HF Holdings, Inc., Warrants(2)(3) 13,600 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Electronic Equipment -- 0.0%
--------------------------------------------------------------------------------
Jordan Telecommunications, Deferred
Contingent Cash Rights(2)(3) 2,500 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
Information Technology Services -- 0.0%
--------------------------------------------------------------------------------
Cybernet Internet Services
International, Inc., Warrants(2)(3) 4,825 $ 57,900
Diva Systems Corp., Warrants(2)(3) 27,000 0
Verio, Inc., Common(2) 9,134 411,601
--------------------------------------------------------------------------------
$ 469,501
--------------------------------------------------------------------------------
Lodging and Gaming -- 0.0%
--------------------------------------------------------------------------------
Peninsula Gaming LLC, Warrants(2)(3) 25,351 $ 152,107
--------------------------------------------------------------------------------
$ 152,107
--------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.2%
--------------------------------------------------------------------------------
Key Energy Services, Inc.,
Warrants(2)(3) 1,900 $ 171,000
R&B Falcon Corp., Warrants(2) 5,400 1,728,000
--------------------------------------------------------------------------------
$ 1,899,000
--------------------------------------------------------------------------------
Semiconductors -- 0.1%
--------------------------------------------------------------------------------
Intersil Corp., Warrants(2)(3)(4) 1,250 $ 717,151
--------------------------------------------------------------------------------
$ 717,151
--------------------------------------------------------------------------------
Wireline Communication Services -
International -- 2.2%
--------------------------------------------------------------------------------
Carrier1 International SA,
Warrants(2)(3)(4) 16,375 $ 8,339,607
Completel Europe NV, Warrants(2)(3) 78,400 5,488,000
Esat Telecom Group PLC, Common 16,552 712,925
Jazztel PLC, Warrants(3)(4) 10,000 2,479,930
Primus Telecom Group, Warrants, Exp.
8/1/04(2)(3) 4,600 325,993
Tele1 Europe Holding AB-ADR, Common 56,270 1,076,164
Versatel Telecom BV, Warrants(2)(3)(4) 14,000 7,962,533
--------------------------------------------------------------------------------
$ 26,385,152
--------------------------------------------------------------------------------
Wireline Communication Services -
North America -- 0.2%
--------------------------------------------------------------------------------
MGC Communications, Inc., Warrants, Exp.
10/1/04(2)(4) 5,680 $ 1,900,653
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Wireline Communication Services -
North America (continued)
--------------------------------------------------------------------------------
World Access, Inc., Common $ 11,579 $ 221,448
--------------------------------------------------------------------------------
$ 2,122,101
--------------------------------------------------------------------------------
Total Common Stocks, Warrants and Rights
(identified cost, $3,405,998) $ 33,450,026
--------------------------------------------------------------------------------
</TABLE>
PREFERRED STOCKS -- 8.9%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Apparel -- 0.0%
--------------------------------------------------------------------------------
Cluett American Corp., 12.50% 337 $ 6,730
--------------------------------------------------------------------------------
$ 6,730
--------------------------------------------------------------------------------
Broadcasting and Cable -- 3.1%
--------------------------------------------------------------------------------
Adelphia Communications Corp., 13% 48,000 $ 5,136,000
CSC Holdings, Inc., Series M, 11.125%
(PIK) 137,790 14,605,740
Granite Broadcasting Corp., 12.75% (PIK) 7,125 7,125,000
Pegasus Communications Corp., 12.75%
(PIK) 9,737 10,321,220
--------------------------------------------------------------------------------
$ 37,187,960
--------------------------------------------------------------------------------
Business Services - Rental & Leasing -- 0.8%
--------------------------------------------------------------------------------
Crown Castle International Corp., 12.75%
(PIK) 9,358 $ 9,358,000
--------------------------------------------------------------------------------
$ 9,358,000
--------------------------------------------------------------------------------
Machinery -- 0.0%
--------------------------------------------------------------------------------
MMH Holdings, Inc., 12% (PIK) 1,940 $ 19,400
--------------------------------------------------------------------------------
$ 19,400
--------------------------------------------------------------------------------
Oil and Gas - Equipment and Services -- 0.9%
--------------------------------------------------------------------------------
R&B Falcon Corp., 13.875% (PIK) 9,881 $ 10,869,100
--------------------------------------------------------------------------------
$ 10,869,100
--------------------------------------------------------------------------------
Wireless Communication Services -- 1.7%
--------------------------------------------------------------------------------
Dobson Communications Corp., 12.25%
(PIK) 1,839 $ 1,820,610
Nextel Communications, Inc., 11.125%
(PIK) 5,982 5,742,720
Rural Cellular Corp., 11.375% (PIK) 7,264 7,336,640
Rural Cellular Corp., 12.25% 4,800 4,800,000
--------------------------------------------------------------------------------
$ 19,699,970
--------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
Wireline Communication Services -
International -- 1.0%
--------------------------------------------------------------------------------
Global Crossing Holding Ltd., 10.5%
(PIK) 11,700 $ 11,700,000
--------------------------------------------------------------------------------
$ 11,700,000
--------------------------------------------------------------------------------
Wireline Communication Services -
North America -- 1.4%
--------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% 135,000 $ 6,480,000
IXC Communications, Inc., Series B,
12.5% 9,547 10,119,820
Nextlink Communications, Inc., 14% (PIK) 868 45,136
--------------------------------------------------------------------------------
$ 16,644,956
--------------------------------------------------------------------------------
Total Preferred Stocks
(identified cost, $104,258,666) $ 105,486,116
--------------------------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 3.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
CIT Group Holdings, Inc., 6.28%, 4/3/00 $ 13,217 $ 13,212,389
Prudential Funding Corp., 5.91%, 4/4/00 25,000 24,987,687
--------------------------------------------------------------------------------
Total Commercial Paper
(at amortized cost, $38,200,075) $ 38,200,076
--------------------------------------------------------------------------------
Total Investments -- 97.4%
(identified cost, $1,210,128,380) $1,154,310,506
--------------------------------------------------------------------------------
Other Assets, Less Liabilities -- 2.6% $ 30,687,429
--------------------------------------------------------------------------------
Net Assets -- 100.0% $1,184,997,935
--------------------------------------------------------------------------------
</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) Non-income producing security.
(3) Restricted security.
(4) Security valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF MARCH 31, 2000
(EXPRESSED IN UNITED STATES DOLLARS)
<S> <C>
Assets
--------------------------------------------------------
Investments, at value (identified cost,
$1,210,128,380) $1,154,310,506
Cash 6,958
Foreign currency, at value (identified
cost, $1,174,207) 1,105,349
Receivable for investments sold 12,161,356
Interest receivable 27,393,984
Receivable for open forward foreign
currency contracts 2,591,729
--------------------------------------------------------
TOTAL ASSETS $1,197,569,882
--------------------------------------------------------
Liabilities
--------------------------------------------------------
Payable for investments purchased $ 12,497,495
Accrued expenses 74,452
--------------------------------------------------------
TOTAL LIABILITIES $ 12,571,947
--------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $1,184,997,935
--------------------------------------------------------
Sources of Net Assets
--------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $1,238,453,366
Net unrealized depreciation (computed on
the basis of identified cost) (53,455,431)
--------------------------------------------------------
TOTAL $1,184,997,935
--------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31, 2000
(EXPRESSED IN UNITED STATES DOLLARS)
<S> <C>
Investment Income
------------------------------------------------------
Interest $111,585,707
Dividends 11,271,175
Miscellaneous 1,579,587
------------------------------------------------------
TOTAL INVESTMENT INCOME $124,436,469
------------------------------------------------------
Expenses
------------------------------------------------------
Investment adviser fee $ 6,676,593
Trustees fees and expenses 32,571
Custodian fee 315,994
Legal and accounting services 125,602
Amortization of organization expenses 736
Miscellaneous 10,884
------------------------------------------------------
TOTAL EXPENSES $ 7,162,380
------------------------------------------------------
NET INVESTMENT INCOME $117,274,089
------------------------------------------------------
Realized and Unrealized Gain (Loss)
------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 9,220,755
Foreign currency and forward foreign
currency exchange
contract transactions 5,668,832
------------------------------------------------------
NET REALIZED GAIN $ 14,889,587
------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(53,816,671)
Foreign currency and forward foreign
currency exchange contracts 2,362,443
------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(51,454,228)
------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(36,564,641)
------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 80,709,448
------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS MARCH 31, 2000 MARCH 31, 1999
<S> <C> <C>
------------------------------------------------------------------------
From operations --
Net investment income $ 117,274,089 $ 99,349,959
Net realized gain (loss) 14,889,587 (13,513,235)
Net change in unrealized
appreciation (depreciation) (51,454,228) (53,977,702)
------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 80,709,448 $ 31,859,022
------------------------------------------------------------------------
Capital transactions --
Contributions $ 465,123,511 $ 376,878,683
Withdrawals (400,057,623) (330,015,816)
------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 65,065,888 $ 46,862,867
------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 145,775,336 $ 78,721,889
------------------------------------------------------------------------
Net Assets
------------------------------------------------------------------------
At beginning of year $1,039,222,599 $ 960,500,710
------------------------------------------------------------------------
AT END OF YEAR $1,184,997,935 $1,039,222,599
------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
-------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.64% 0.65% 0.63% 0.67% 0.71%
Net investment income 10.54% 10.23% 9.63% 10.02% 10.41%
Portfolio Turnover 113% 150% 137% 78% 88%
-------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S
OMITTED) $1,184,998 $1,039,223 $960,501 $706,711 $511,347
-------------------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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 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 were amortized on the straight-line basis
over five years and are fully amortized at March 31, 2000
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 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.
G 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
24
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
gains or losses are recorded for financial statement purposes as unrealized
until such time as the contracts have been closed.
H 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 estimated.
I 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.
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 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 year ended
March 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 $1,342,179,050 and $1,190,195,622,
respectively, for the year ended
March 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 year
ended March 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 March 31, 2000 is as
follows:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
SALES
-------------------------------------------------------------------------
SETTLEMENT IN EXCHANGE FOR NET UNREALIZED
DATE(S) DELIVER (IN U.S. DOLLARS) APPRECIATION
<S> <C> <C> <C>
-------------------------------------------------------------------------
4/17/00 - British Pound Sterling
5/22/00 11,831,425 19,320,911 442,324
4/17/00 - Euro Dollar
6/19/00 75,928,930 75,149,088 2,192,421
-------------------------------------------------------------------------
$94,469,999 $2,634,745
-------------------------------------------------------------------------
</TABLE>
25
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PURCHASES
-------------------------------------------------------------------------
SETTLEMENT DELIVER NET UNREALIZED
DATE(S) IN EXCHANGE FOR (IN U.S. DOLLARS) DEPRECIATION
<S> <C> <C> <C>
-------------------------------------------------------------------------
4/17/00 British Pound Sterling
5,646,781 9,043,212 (33,522)
4/17/00 Euro Dollar
4,301,833 4,136,922 (9,494)
-------------------------------------------------------------------------
$13,180,134 $ (43,016)
-------------------------------------------------------------------------
</TABLE>
6 Federal Income Tax Basis of Investments
-------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at March 31, 2000 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $1,210,555,535
--------------------------------------------------------
Gross unrealized appreciation $ 47,379,868
Gross unrealized depreciation (103,698,771)
--------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (56,318,903)
--------------------------------------------------------
</TABLE>
7 Restricted Securities
-------------------------------------------
At March 31, 2000, the Portfolio owned the following securities (representing
2.18% 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>
------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS
------------------------------------------------------------------------
Carrier1 9/09/99 - 16,375 $1,593,750 $ 8,339,607
International SA, 2/25/00
Warrants
Completel Europe NV, 10/19/99 78,400 0 5,488,000
Warrants
Cybernet Internet 10/20/99 - 4,825 195,000 57,900
Services 10/28/99
International,
Inc., Warrants
Diva Systems Corp., 12/30/98 - 27,000 90 0
Warrants 9/21/99
HF Holdings, Inc., 9/24/97 - 13,600 730,314 0
Warrants 8/04/98
Intersil Corp., 12/10/99 1,250 0 717,151
Warrants
Jazztel PLC, 5/19/99 10,000 0 2,479,930
Warrants
Jordan 3/22/00 2,500 0 0
Telecommunications,
Deferred Contingent
Cash Rights
Key Energy Services, 7/22/99 1,900 28,500 171,000
Inc., Warrants
Ono Finance PLC, 10/12/99 - 14,670 0 0
Warrants 11/5/99
Peninsula Gaming 7/08/99 25,351 0 152,107
LLC, Warrants
Primus Telecom 10/31/97 4,600 0 325,993
Group, Warrants,
Exp. 8/1/04
UIH 3/05/98 3,600 0 115,200
Australia/Pacific,
Inc., Warrants
Versatel Telecom BV, 8/11/98 - 14,000 0 7,962,533
Warrants 1/29/99
------------------------------------------------------------------------
$2,547,654 $25,809,421
------------------------------------------------------------------------
</TABLE>
26
<PAGE>
HIGH INCOME PORTFOLIO AS OF MARCH 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
March 31, 2000, and the related statement of operations for the year then ended,
the statements of changes in net assets for the years ended March 31, 2000 and
1999 and the supplementary data for each of the years in the five-year period
ended (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 March 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 Portfolio at March 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
April 28, 2000
27
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF MARCH 31, 2000
INVESTMENT MANAGEMENT
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 Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
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