<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
CORPORATE BONDS & NOTES -- 83.4%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.7%
--------------------------------------------------------------------------------
Dunlop Stand Aero Holdings, Sr. Notes,
11.875%, 5/15/09 $ 3,900 $ 3,900,000
Transdigm, Inc., 10.375%, 12/1/08 5,125 4,766,250
--------------------------------------------------------------------------------
$ 8,666,250
--------------------------------------------------------------------------------
APPAREL -- 0.7%
--------------------------------------------------------------------------------
Tropical Sportswear, 11.00%, 6/15/08 $ 200 $ 176,000
William Carter Co., Sr. Sub. Notes,
10.375%, 12/1/06 8,285 7,912,175
--------------------------------------------------------------------------------
$ 8,088,175
--------------------------------------------------------------------------------
AUTO AND PARTS -- 0.3%
--------------------------------------------------------------------------------
J.L. French Automative Casting,
11.50%, 6/1/09 $ 4,475 $ 2,662,625
Talon Automotive Group, Sr. Sub. Notes,
9.625%, 5/1/08 1,100 258,500
--------------------------------------------------------------------------------
$ 2,921,125
--------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 9.8%
--------------------------------------------------------------------------------
ACME Television Services, Inc.,
10.875%, (0% until 9/30/2000), 9/30/04 $ 2,750 $ 2,598,750
Diamond Cable Communications Co., Sr.
Disc. Notes, 11.75%, (0% until 2000),
12/15/05 3,000 2,805,000
EchoStar Broadband Corp., Sr. Notes,
10.375%, 10/1/07(1) 13,503 13,604,272
EchoStar DBS Corp., Sr. Notes,
9.375%, 2/1/09 1,000 987,500
Granite Broadcasting Corp., Sr. Sub.
Notes, 10.375%, 5/15/05 1,075 800,875
Muzak Holdings LLC, 9.875%, 3/15/09 3,400 3,009,000
Muzak Holdings LLC, Sr. Disc. Notes,
13.00%, (0% until 2004), 3/15/10 6,563 3,708,095
NTL Communications Corp.,
9.25%, 11/15/06 EUR 700 505,448
NTL Communications Corp., Sr. Notes,
11.875%, 10/1/10(1) 28,850 26,830,500
NTL, Inc., 5.75%, 12/15/09(1) 4,550 2,894,937
Ono Finance PLC, 13.00%, 5/1/09 5,470 4,239,250
Ono Finance PLC, 13.00%, 5/1/09 EUR 3,000 1,924,212
Pegasus Communications Corp., Sr. Notes,
9.75%, 12/1/06 775 759,500
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
BROADCASTING AND CABLE (CONTINUED)
--------------------------------------------------------------------------------
Pegasus Communications Corp., Sr. Notes,
12.50%, 8/1/07 $ 6,410 $ 6,890,750
RCN Corp., Sr. Disc. Notes, 9.80%, (0%
until 2003), 2/15/08 2,250 1,023,750
Telemundo Holdings, Inc., Sr. Disc.
Notes, 11.50%, (0% until 2003), 8/15/08 12,050 8,796,500
Telewest Communication PLC, 9.875%, (0%
until 2004), 4/15/09 GBP 3,575 2,265,906
Telewest Communication PLC, Debs.,
9.625%, 10/1/06 640 531,200
Telewest Communication PLC, Debs.,
11.00%, (0% until 2000), 10/1/07 12,125 10,609,375
Telewest Communication PLC, Sr. Disc.
Notes, 9.25%, (0% until 2004), 4/15/09 11,101 5,023,202
Telewest Communication PLC, Sr. Notes,
9.875%, 2/1/10 4,250 3,400,000
Telewest Communication PLC, Sr. Notes,
11.25%, 11/1/08 3,150 2,756,250
United Pan Europe Communications, Sr.
Disc. Notes, 13.375%, (0% until 2004),
11/1/09 4,500 1,777,500
United Pan Europe Communications, Sr.
Notes, 11.25%, 11/1/09 EUR 5,240 3,390,982
United Pan Europe Communications, Sr.
Notes, 11.25%, 2/1/10 3,655 2,796,075
--------------------------------------------------------------------------------
$ 113,928,829
--------------------------------------------------------------------------------
BUSINESS SERVICES - MISCELLANEOUS -- 1.3%
--------------------------------------------------------------------------------
AP Holdings, Inc., Sr. Disc. Notes,
11.25%, (0% until 2003), 3/15/08 $ 8,550 $ 651,937
Coinmach Corp., Sr. Notes,
11.75%, 11/15/05 2,275 2,263,625
Federal Data Corp., Sr. Sub. Notes,
10.125%, 8/1/05 5,575 5,825,875
Intertek Finance PLC, Sr. Sub. Notes,
Series B, 10.25%, 11/1/06 1,600 728,000
Richmont Marketing Specialists,
10.125%, 12/15/07 17,770 4,442,500
Tapco International Corp., Sr. Sub.
Notes, 12.50%, 8/1/09(1) 1,300 1,267,500
--------------------------------------------------------------------------------
$ 15,179,437
--------------------------------------------------------------------------------
BUSINESS SERVICES - RENTAL & LEASING -- 2.7%
--------------------------------------------------------------------------------
Anthony Crane Rental LP, Guaranteed Sr.
Notes, Series B, 10.375%, 8/1/08 $ 4,000 $ 1,700,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
BUSINESS SERVICES - RENTAL & LEASING (CONTINUED)
--------------------------------------------------------------------------------
NationsRent, Inc., Guaranteed Sr. Sub.
Notes, 10.375%, 12/15/08 $ 4,600 $ 2,553,000
Neff Corp., 10.25%, 6/1/08 4,050 1,842,750
Neff Corp., Guaranteed Sr. Sub. Notes,
10.25%, 6/1/08 4,688 2,132,812
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 11.25%, (0% until 2004), 4/15/09 19,650 10,242,562
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.00%, (0% until 2003), 7/15/08 5,360 3,524,200
Spectrasite Holdings, Inc., Sr. Disc.
Notes, 12.875%, (0% until 2005), 3/15/10 3,870 1,896,300
Spectrasite Holdings, Inc., Sr. Notes,
10.75%, 3/15/10 8,100 7,492,500
--------------------------------------------------------------------------------
$ 31,384,124
--------------------------------------------------------------------------------
CHEMICALS -- 1.3%
--------------------------------------------------------------------------------
Huntsman Corp., Sr. Sub. Notes,
9.50%, 7/1/07(1) $ 1,000 $ 585,000
Lyondell Chemical Co., 9.875%, 5/1/07 2,600 2,541,500
Lyondell Chemical Co., Sr. Sub. Notes,
10.875%, 5/1/09 450 433,125
PCI Chemicals Canada, Inc.,
9.25%, 10/15/07 3,500 1,347,500
Sterling Chemicals, Inc., Sr. Sub.
Notes, 11.25%, 4/1/07 250 138,750
Sterling Chemicals, Inc., Sr. Sub.
Notes, 11.75%, 8/15/06 9,000 4,995,000
Texas Petrochemical Corp., Sr. Sub.
Notes, 11.125%, 7/1/06 2,275 1,888,250
Vantico Group, 12.00%, 8/1/10(1) EUR 3,770 2,699,361
--------------------------------------------------------------------------------
$ 14,628,486
--------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 1.6%
--------------------------------------------------------------------------------
Amscan Holdings, Inc., Sr. Sub. Notes,
9.875%, 12/15/07 $ 4,480 $ 3,528,000
Glenoit Corp., Sr. Sub. Notes,
11.00%, 4/15/07(2) 9,000 945,000
Icon Health and Fitness, Inc.,
12.00%, 9/27/05(1) 1,421 852,480
Polaroid Corp., 6.75%, 1/15/02 3,250 2,920,284
Polaroid Corp., Sr. Notes,
11.50%, 2/15/06 3,000 2,355,000
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
CONSUMER PRODUCTS (CONTINUED)
--------------------------------------------------------------------------------
Tekni-Plex, Inc., Sr. Sub. Notes,
12.75%, 6/15/10(1) $ 9,040 $ 8,271,600
--------------------------------------------------------------------------------
$ 18,872,364
--------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 0.3%
--------------------------------------------------------------------------------
Consumers International, Inc., Sr.
Notes, 10.25%, 4/1/05 $ 3,935 $ 1,200,175
Riverwood International Corp.,
10.875%, 4/1/08 3,000 2,722,500
--------------------------------------------------------------------------------
$ 3,922,675
--------------------------------------------------------------------------------
DRUGS -- 1.4%
--------------------------------------------------------------------------------
King Pharmaceutical, Inc.,
10.75%, 2/15/09 $ 5,125 $ 5,432,500
Warner Chilcott, Inc.,
12.625%, 2/15/08(1) 10,275 10,429,125
--------------------------------------------------------------------------------
$ 15,861,625
--------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT -- 1.7%
--------------------------------------------------------------------------------
AES Corp., Sr. Notes, 9.375%, 9/15/10 $ 4,350 $ 4,437,000
AES Corp., Sr. Notes, 9.50%, 6/1/09 1,000 1,022,500
Calpine Corp., Sr. Notes,
8.625%, 8/15/10 14,300 14,145,460
--------------------------------------------------------------------------------
$ 19,604,960
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.7%
--------------------------------------------------------------------------------
Viasystems, Inc., Sr. Sub. Notes,
9.75%, 6/1/07 $ 3,600 $ 3,222,000
Viasystems, Inc., Sr. Sub. Notes,
Series B, 9.75%, 6/1/07 5,490 4,913,550
--------------------------------------------------------------------------------
$ 8,135,550
--------------------------------------------------------------------------------
ENERGY SERVICES -- 0.5%
--------------------------------------------------------------------------------
RBF Finance Co., 11.00%, 3/15/06 $ 2,300 $ 2,627,750
RBF Finance Co., 11.375%, 3/15/09 2,900 3,320,500
--------------------------------------------------------------------------------
$ 5,948,250
--------------------------------------------------------------------------------
ENTERTAINMENT -- 0.7%
--------------------------------------------------------------------------------
Marvel Enterprise, Inc., 12.00%, 6/15/09 $ 12,725 $ 6,935,125
Premier Parks, Inc., Sr. Notes,
9.25%, 4/1/06 1,000 925,000
--------------------------------------------------------------------------------
$ 7,860,125
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.5%
--------------------------------------------------------------------------------
Willis Corroon Corp., 9.00%, 2/1/09 $ 6,400 $ 5,840,000
--------------------------------------------------------------------------------
$ 5,840,000
--------------------------------------------------------------------------------
FOODS -- 2.4%
--------------------------------------------------------------------------------
B & G Foods, Inc., Sub. Notes,
9.625%, 8/1/07 $ 3,845 $ 2,720,337
Del Monte Corp., Sr. Notes,
12.25%, 4/15/07 9,979 10,527,845
Del Monte Foods Co., Sr. Disc. Notes,
12.50%, (0% until 2002), 12/15/07 3,515 2,636,250
Luigino's, Inc., Sr. Sub. Notes,
10.00%, 2/1/06 3,675 2,921,625
Premier International Foods, Sr. Notes,
12.00%, 9/1/09 12,087 9,427,860
--------------------------------------------------------------------------------
$ 28,233,917
--------------------------------------------------------------------------------
HEALTH SERVICES -- 1.1%
--------------------------------------------------------------------------------
HCA - The Healthcare Co., 8.75%, 9/1/10 $ 7,800 $ 7,882,969
Lifepoint Hospitals Holding,
10.75%, 5/15/09 2,820 3,010,350
Tenet Healthcare Corp., Sr. Notes,
9.25%, 9/1/10(1) 2,000 2,105,000
--------------------------------------------------------------------------------
$ 12,998,319
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 6.9%
--------------------------------------------------------------------------------
Covad Communication Group, Sr. Disc.
Notes, 13.50%, (0% until 2003), 3/15/08 $ 8,170 $ 2,328,450
Covad Communication Group, Sr. Notes,
12.00%, 2/15/10 19,720 9,169,800
Covad Communication Group, Sr. Notes,
12.50%, 2/15/09 650 312,000
Cybernet Internet Services
International, Inc., Sr. Notes,
14.00%, 7/1/09 4,825 2,002,375
Diva Systems Corp., Sr. Notes,
12.625%, (0% until 2003), 3/1/08 12,575 5,627,312
Equinix, Inc., Sr. Notes,
13.00%, 12/1/07 4,500 3,600,000
Exodus Communications, Inc., Sr. Notes,
10.75%, 12/15/09 4,663 4,243,330
Exodus Communications, Inc., Sr. Notes,
11.25%, 7/1/08 5,305 4,960,175
Exodus Communications, Inc., Sr. Notes,
11.625%, 7/15/10(1) 16,540 15,382,200
Globix Corp., Sr. Notes, 12.50%, 2/1/10 12,400 6,882,000
IPCS, Inc., 14.00%, (0% until 2005),
7/15/10(1) 8,600 4,042,000
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES (CONTINUED)
--------------------------------------------------------------------------------
IPCS, Inc., 14.00%, (0% until 2005),
7/15/10(1) $ 2,400 $ 1,068,000
Northpoint Communications Group, Inc.,
Sr. Notes, 12.875%, 2/15/10 7,490 7,003,150
PSINet, Inc., Sr. Notes,
10.50%, 12/1/06 2,200 1,061,500
PSINet, Inc., Sr. Notes, 11.00%, 8/1/09 15,585 7,597,687
PSINet, Inc., Sr. Notes,
11.50%, 11/1/08 6,100 3,034,750
PSINet, Inc., Sr. Notes, Series B,
10.00%, 2/15/05 4,265 2,057,862
--------------------------------------------------------------------------------
$ 80,372,591
--------------------------------------------------------------------------------
LODGING AND GAMING -- 8.6%
--------------------------------------------------------------------------------
Anchor Gaming, Sr. Sub. Notes,
9.875%, 10/15/08(1) $ 7,320 $ 7,438,950
Hollywood Casino Corp., 12.414%, 5/1/06 6,925 7,202,000
Hollywood Casino Shreveport, First
Mortgage Bonds, 13.00%, 8/1/06 8,150 8,761,250
Majestic Star LLC, 10.875%, 7/1/06 4,500 3,982,500
Mandalay Resort Group, Sr. Notes,
9.50%, 8/1/08 3,575 3,668,844
Mandalay Resort Group, Sr. Sub Notes,
10.25%, 8/1/07 10,300 10,583,250
MGM Mirage, Inc., 8.50%, 9/15/10 11,600 11,405,178
MGM Mirage, Inc., 9.75%, 6/1/07 8,000 8,340,000
Park Place Entertainment, Sr. Sub.
Notes, 8.875%, 9/15/08 10,550 10,391,750
Sun International Hotels,
8.625%, 12/15/07 8,500 7,841,250
Sun International Hotels, Sr. Sub.
Notes, 9.00%, 3/15/07 6,325 5,929,688
Trump Atlantic City Associates, Inc.,
11.25%, 5/1/06 5,437 3,751,530
Waterford Gaming LLC, Sr. Notes,
9.50%, 3/15/10(1) 10,734 10,680,330
--------------------------------------------------------------------------------
$ 99,976,520
--------------------------------------------------------------------------------
MACHINERY -- 0.5%
--------------------------------------------------------------------------------
Flowserve Corp., 12.25%, 8/15/10(1) $ 6,260 $ 6,369,550
--------------------------------------------------------------------------------
$ 6,369,550
--------------------------------------------------------------------------------
MANUFACTURING -- 1.7%
--------------------------------------------------------------------------------
Insilco Corp., 12.00%, 8/15/07 $ 11,600 $ 11,426,000
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
MANUFACTURING (CONTINUED)
--------------------------------------------------------------------------------
Roller Bearing Holdings Co., Sr. Disc.
Notes, 13.00%, (0% until 2002),
6/15/09(3) $ 12,875 $ 8,240,000
--------------------------------------------------------------------------------
$ 19,666,000
--------------------------------------------------------------------------------
OIL -- 0.7%
--------------------------------------------------------------------------------
Golden Sky DBS, Inc., Sr. Disc. Notes,
13.50%, (0% until 2004), 3/1/07 $ 11,445 $ 8,068,725
--------------------------------------------------------------------------------
$ 8,068,725
--------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 1.0%
--------------------------------------------------------------------------------
Cliffs Drilling, 10.25%, 5/15/03 $ 750 $ 770,625
Grant Geophysical, Inc., Sr. Notes,
Series B, 9.75%, 2/15/08 4,000 2,300,000
R&B Falcon Corp., 9.50%, 12/15/08 90 96,525
R&B Falcon Corp., 10.25%, 5/15/03 950 976,125
Universal Compression, Inc., Sr. Disc.
Notes, 9.875%, (0% until 2003), 2/15/08 9,575 7,803,625
--------------------------------------------------------------------------------
$ 11,946,900
--------------------------------------------------------------------------------
OIL AND GAS - EXPLORATION AND PRODUCTION -- 3.7%
--------------------------------------------------------------------------------
Chesapeake Energy Corp., 9.125%, 4/15/06 $ 4,000 $ 3,900,000
Chesapeake Energy Corp., 9.625%, 5/1/05 1,875 1,891,406
Chesapeake Energy Corp., Sr. Notes,
7.875%, 3/15/04 1,320 1,260,600
Chesapeake Energy Corp., Sr. Notes,
8.50%, 3/15/12 8,480 7,716,800
Comstock Resources, Inc.,
11.25%, 5/1/07 5,850 6,171,750
Energy Corp. of America, Sr. Sub. Notes,
9.50%, 5/15/07 2,340 1,813,500
Gothic Production Corp.,
11.125%, 5/1/05 7,150 7,543,250
Gothic Production Corp.,
12.375%, 8/1/06 7,865 8,533,525
Plains Resources, Inc., Sr. Sub. Notes,
10.25%, 3/15/06 750 757,500
Plains Resources, Inc., Sr. Sub. Notes,
10.25%, 3/15/06(1) 3,750 3,787,500
--------------------------------------------------------------------------------
$ 43,375,831
--------------------------------------------------------------------------------
OIL AND GAS - REFINING -- 0.1%
--------------------------------------------------------------------------------
Western Gas Resources, 10.00%, 6/15/09 $ 1,050 $ 1,097,250
--------------------------------------------------------------------------------
$ 1,097,250
--------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 0.2%
--------------------------------------------------------------------------------
Indah Kiat Finance Mauritius, Sr. Unsec.
Notes, 10.00%, 7/1/07 $ 3,400 $ 1,402,500
Pindo Deli Finance Mauritius, Ltd.,
Guaranteed Sr. Notes, 10.75%, 10/1/07 2,400 966,000
--------------------------------------------------------------------------------
$ 2,368,500
--------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 1.5%
--------------------------------------------------------------------------------
MDC Communications Corp., Sr. Sub.
Notes, 10.50%, 12/1/06 $ 15,600 $ 14,274,000
Merrill Corp., Series B, 12.00%, 5/1/09 5,250 3,176,250
--------------------------------------------------------------------------------
$ 17,450,250
--------------------------------------------------------------------------------
PUBLISHING -- 1.3%
--------------------------------------------------------------------------------
American Lawyer Media Corp., Sr. Disc.
Notes, 12.25%, (0% to 2002), 12/15/08 $ 2,920 $ 1,912,600
Von Hoffman Press, Inc., Sr. Sub. Notes,
10.875%, 5/15/07(3) 5,095 4,610,975
Ziff Davis Media, Inc., Sr. Sub. Notes,
12.00%, 7/15/10(1) 8,800 8,052,000
--------------------------------------------------------------------------------
$ 14,575,575
--------------------------------------------------------------------------------
RESTAURANTS -- 1.3%
--------------------------------------------------------------------------------
AFC Enterprises, Inc., Sr. Sub Notes,
10.25%, 5/15/07 $ 9,600 $ 9,216,000
Sbarro, Inc., 11.00%, 9/15/09 6,000 6,090,000
--------------------------------------------------------------------------------
$ 15,306,000
--------------------------------------------------------------------------------
RETAIL - FOOD AND DRUG -- 0.8%
--------------------------------------------------------------------------------
Pantry, Inc., Sr. Sub. Notes,
10.25%, 10/15/07 $ 10,230 $ 9,462,750
--------------------------------------------------------------------------------
$ 9,462,750
--------------------------------------------------------------------------------
RETAIL - GENERAL -- 0.4%
--------------------------------------------------------------------------------
Advance Holding Corp., Sr. Debs.,
12.875%, (0% until 2003), 4/15/09 $ 4,000 $ 1,500,000
Ames Department Stores, Sr. Notes,
10.00%, 4/15/06 850 310,250
Tuesday Morning Corp., Sr. Sub. Notes,
11.00%, 12/15/07 3,599 3,437,045
--------------------------------------------------------------------------------
$ 5,247,295
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.0%
--------------------------------------------------------------------------------
Amkor Technologies, Inc., Sr. Notes,
9.25%, 5/1/06 $ 600 $ 588,000
Asat Finance LLC, Sub. Notes,
12.50%, 11/1/06(1) 4,518 4,585,263
Intersil Corp., 13.25%, 8/15/09 815 925,025
SCG Holding Corp., 12.00%, 8/1/09 5,365 5,351,588
--------------------------------------------------------------------------------
$ 11,449,876
--------------------------------------------------------------------------------
SERVICES -- 0.8%
--------------------------------------------------------------------------------
Coyne International Enterprises, Sr.
Sub. Notes, 11.25%, 6/1/08 $ 2,525 $ 2,029,469
Kindercare Learning Centers, Inc., Sr.
Sub. Notes, 9.50%, 2/15/09 7,900 7,228,500
--------------------------------------------------------------------------------
$ 9,257,969
--------------------------------------------------------------------------------
TRANSPORTATION -- 1.5%
--------------------------------------------------------------------------------
Budget Group, Inc., Sr. Notes,
9.125%, 4/1/06 $ 2,373 $ 889,688
CHC Helicopter Corp., 11.75%, 7/15/07 EUR 4,400 3,831,670
Kansas City Southern, Sr. Notes,
9.50%, 10/1/08(1) 4,000 4,080,000
MTL, Inc., Variable Rate, 6/15/06 1,600 1,096,000
Pacer International, Inc.,
11.75%, 6/1/07 7,544 7,430,840
--------------------------------------------------------------------------------
$ 17,328,198
--------------------------------------------------------------------------------
WASTE MANAGEMENT -- 1.7%
--------------------------------------------------------------------------------
Allied Waste, 10.00%, 8/1/09 $ 15,975 $ 13,738,500
Stericycle, Inc., 12.375%, 11/15/09 5,400 5,724,000
--------------------------------------------------------------------------------
$ 19,462,500
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 7.6%
--------------------------------------------------------------------------------
Alamosa PCS Holdings, Inc., 12.875%, (0%
until 2005), 2/15/10 $ 4,200 $ 2,037,000
Clearnet Communications, Inc.,
10.125%, 7/7/07(1) 4,500 4,680,000
Dobson Communications, Sr. Notes,
10.875%, 7/1/10 6,875 6,634,375
Dolphin Telecom PLC, Sr. Disc. Notes,
14.00%, (0% until 2004), 5/15/09 13,375 2,474,375
Leap Wireless International, Inc.,
12.50%, 4/15/10 5,875 4,318,125
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES (CONTINUED)
--------------------------------------------------------------------------------
Nextel Communications, Inc., Sr. Disc.
Notes, 10.65%, (0% until 2002), 9/15/07 $ 4,540 $ 3,666,050
Nextel Communications, Inc., Sr. Notes,
9.375%, 11/15/09 9,785 9,466,988
Nextel International, Sr. Notes,
12.75%, 8/1/10(1) 8,450 7,879,625
Nextel Partners Inc., Sr. Notes,
11.00%, 3/15/10(1) 10,875 10,847,813
PF.Net Communications, Sr. Notes,
13.75%, 5/15/10 7,800 7,683,000
PTC International Finance II SA,
11.25%, 12/1/09 1,875 1,696,875
PTC International Finance II SA,
11.25%, 12/1/09 EUR 3,375 2,581,659
Telecorp PCS Inc., 10.625%, 7/15/10 11,585 11,613,963
TeleCorp PCS, Inc., 8.50%, 10/23/09(1) 6,500 4,940,000
Ubiquitel Operating Co., 14.00%, (0%
until 2005), 4/15/10 17,075 7,769,125
--------------------------------------------------------------------------------
$ 88,288,973
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 14.4%
--------------------------------------------------------------------------------
360 Networks, Inc., Sr. Notes,
13.00%, 5/1/08 $ 13,040 $ 10,497,200
Allegiance Telecom, Inc., Sr. Notes,
12.875%, 5/15/08 6,780 6,746,100
Call-Net Enterprises, Inc., Sr. Notes,
8.00%, 8/15/08 5,065 2,051,325
Carrier1 International SA, Sr. Notes,
13.25%, 2/15/09 16,375 15,146,875
Completel Europe NV, 14.00%, (0% until
2004), 2/15/09 7,840 3,724,000
Esprit Telecom Group PLC, Sr. Notes,
10.875%, 6/15/08 8,825 1,809,125
Esprit Telecom Group PLC, Sr. Notes,
11.50%, 12/15/07 12,600 2,583,000
FLAG Telecom Holdings Ltd., Sr. Notes,
11.625%, 3/30/10 8,000 6,760,000
Global Crossing Holding Ltd.,
9.125%, 11/15/06 7,015 6,725,631
Global TeleSystems Group, Inc.,
11.00%, 12/1/09 EUR 3,750 1,528,819
GST Telecommunications, Sr. Sub. Notes,
12.75%, 11/15/07(2) 3,700 27,750
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES (CONTINUED)
--------------------------------------------------------------------------------
GT Group Telecom, Sr. Disc. Notes,
13.25%, (0% until 2005), 2/1/10 $ 13,250 $ 4,902,500
ICG Holdings, Inc., 12.50%, (0% until
2001), 5/1/06 7,345 1,248,650
Intermedia Communications, Inc., Sr.
Disc. Notes, 11.25%, (0% until 2002),
7/15/07 11,538 9,547,695
Intermedia Communications, Sr. Notes,
8.50%, 1/15/08 1,250 1,181,250
Jazztel PLC, Sr. Notes,
13.25%, 12/15/09 EUR 3,813 2,356,339
Jazztel PLC, Sr. Notes, 14.00%, 4/1/09 10,757 7,906,395
Level 3 Communications, Inc., Sr. Notes,
9.125%, 5/1/08 6,250 5,078,125
Level 3 Communications, Inc., Sr. Notes,
11.25%, 3/15/10 2,950 2,669,750
MGC Communications, Inc., Sr. Notes,
13.00%, 4/1/10 5,062 2,860,030
Nextlink Communications, Inc., Sr.
Notes, 12.50%, 4/15/06 8,720 8,240,400
Nextlink Communications, Sr. Disc.
Notes, 12.125%, (0% until 2004), 12/1/09 11,025 5,374,688
Nextlink Communications, Sr. Disc.
Notes, 12.25%, (0% until 2004), 6/1/09 1,000 527,500
Nextlink Communications, Sr. Notes,
10.50%, 12/1/09 250 217,500
Primus Telecommunications Group, Sr.
Notes, 11.25%, 1/15/09 3,750 1,856,250
Primus Telecommunications Group, Sr.
Notes, 11.75%, 8/1/04 4,600 2,277,000
RSL Communications PLC, 9.125%, 3/1/08 3,920 612,500
RSL Communications PLC, 10.125%, (0%
until 2003), 3/1/08 6,500 666,250
RSL Communications PLC, 12.875%, 3/1/10 1,810 371,050
RSL Communications PLC, Sr. Notes,
12.25%, 11/15/06 4,190 775,150
Tele1 Europe BV, Sr. Notes,
13.00%, 5/15/09 8,460 7,148,700
Teligent, Inc., Sr. Disc. Notes,
11.50%, (0% until 2003), 3/1/08 3,400 833,000
Teligent, Inc., Sr. Notes,
11.50%, 12/1/07 14,025 6,100,875
Versatel Telecom BV, 4.00%, 3/30/05(1) 3,960 2,348,854
Versatel Telecom BV, Sr. Notes,
11.875%, 7/15/09 1,091 801,885
Versatel Telecom BV, Sr. Notes,
13.25%, 5/15/08 11,710 8,958,150
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES (CONTINUED)
--------------------------------------------------------------------------------
Versatel Telecom BV, Sr. Notes,
13.25%, 5/15/08 $ 6,160 $ 4,712,400
Viatel, Inc., Sr. Disc. Notes,
12.50%, (0% until 2003), 4/15/08 6,415 1,924,500
Viatel, Inc., Sr. Notes,
11.25%, 4/15/08 1,805 911,525
Viatel, Inc., Sr. Notes,
11.50%, 3/15/09 1,675 845,875
Viatel, Inc., Sr. Notes, 11.50%, 3/15/09 10,120 5,110,600
Winstar Communications, Sr. Notes,
12.75%, 4/15/10(1) 6,300 4,473,000
World Access, Inc., Sr. Notes,
13.25%, 1/15/08 3,845 2,710,725
Worldwide Fiber, Inc., Sr. Notes,
12.00%, 8/1/09 6,000 4,770,000
--------------------------------------------------------------------------------
$ 167,918,936
--------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(IDENTIFIED COST $1,190,620,393) $ 971,064,400
--------------------------------------------------------------------------------
</TABLE>
COMMON STOCKS, WARRANTS AND RIGHTS -- 2.0%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 0.2%
--------------------------------------------------------------------------------
Ono Finance PLC, Warrants(3)(4) 10,870 $ 760,900
Ono Finance PLC, Warrants, Exp.
5/31/09(3)(4) 3,800 225,395
Pegasus Communications Corp., Common(4) 21,838 776,614
UIH Australia/Pacific, Inc.,
Warrants(3)(4) 3,600 6,710
--------------------------------------------------------------------------------
$ 1,769,619
--------------------------------------------------------------------------------
CHEMICALS -- 0.0%
--------------------------------------------------------------------------------
Sterling Chemicals, Inc., Common(4) 9,600 $ 15,600
--------------------------------------------------------------------------------
$ 15,600
--------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.0%
--------------------------------------------------------------------------------
Jordan Telecommunications, Deferred
Cash Rights(4) 2,500 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES -- 0.0%
--------------------------------------------------------------------------------
Cybernet Internet Services
International, Inc., Warrants(3)(4) 4,825 $ 24,125
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
INFORMATION TECHNOLOGY SERVICES (CONTINUED)
--------------------------------------------------------------------------------
Diva Systems Corp., Warrants(4) $ 37,725 $ 0
Equinix, Inc., Warrants(3)(4) 4,500 495,000
--------------------------------------------------------------------------------
$ 519,125
--------------------------------------------------------------------------------
LODGING AND GAMING -- 0.0%
--------------------------------------------------------------------------------
Peninsula Gaming LLC, Convertible
Preferred Membership Interests(3)(4) 25,351 $ 152,107
--------------------------------------------------------------------------------
$ 152,107
--------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 0.3%
--------------------------------------------------------------------------------
Key Energy Services, Inc., Warrants(4) 1,900 $ 114,000
R&B Falcon Corp., Warrants(4) 5,400 2,970,000
--------------------------------------------------------------------------------
$ 3,084,000
--------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 0.0%
--------------------------------------------------------------------------------
Merrill Corp., Warrants(3)(4) 5,250 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
RETAIL - FOOD AND DRUG -- 0.7%
--------------------------------------------------------------------------------
Pathmark Stores Inc., Common 480,119 $ 7,576,902
--------------------------------------------------------------------------------
$ 7,576,902
--------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.0%
--------------------------------------------------------------------------------
Asat Finance, Warrants(3) 6,350 $ 511,175
--------------------------------------------------------------------------------
$ 511,175
--------------------------------------------------------------------------------
Services -- 0.0%
--------------------------------------------------------------------------------
HF Holdings, Inc., Warrants(4) 13,600 $ 0
--------------------------------------------------------------------------------
$ 0
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.1%
--------------------------------------------------------------------------------
Jazztel PLC, ADR(4) 38,264 $ 675,601
Leap Wireless International,
Warrants(3)(4) 5,875 2,938
PF.Net Communications, Warrants(3)(4) 7,800 0
Ubiquitel Operating Co., Warrants,
Exp. 4/15/10(4) 11,225 280,625
--------------------------------------------------------------------------------
$ 959,164
--------------------------------------------------------------------------------
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 0.7%
--------------------------------------------------------------------------------
Carrier1 International SA,
Warrants(3)(4)(5) 16,375 $ 1,908,179
Completel Europe NV, Common(3)(4) 392,000 2,205,000
GT Group Telecom, Warrants (3)(4) 13,250 563,125
Intermedia Communications, Inc.,
Common(4) 2,090 46,241
Primus Telecommunications Group,
Warrants,
Exp. 8/1/04(4) 4,600 7,039
Tele1 Europe Holding AB-ADR, Common(4) 56,270 443,126
Versatel Telecom BV, Warrants(4)(5) 14,000 3,195,137
World Access, Inc., Common(4) 11,579 56,448
--------------------------------------------------------------------------------
$ 8,424,295
--------------------------------------------------------------------------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS
(IDENTIFIED COST $10,912,900) $ 23,011,987
--------------------------------------------------------------------------------
</TABLE>
PREFERRED STOCKS -- 9.9%
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
APPAREL -- 0.0%
--------------------------------------------------------------------------------
Cluett American Corp., 12.50% (PIK) 190 $ 6,382
--------------------------------------------------------------------------------
$ 6,382
--------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 3.1%
--------------------------------------------------------------------------------
Adelphia Communications Corp., 13% 48,000 $ 4,608,000
CSC Holdings, Inc., Series M, 11.125%
(PIK) 149,608 15,933,252
Granite Broadcasting Corp., 12.75% (PIK) 8,062 4,837,200
Pegasus Communications Corp., Series A,
12.75% (PIK) 10,357 10,823,065
--------------------------------------------------------------------------------
$ 36,201,517
--------------------------------------------------------------------------------
BUSINESS SERVICES - RENTAL & LEASING -- 0.9%
--------------------------------------------------------------------------------
Crown Castle International Corp., 12.75%
(PIK) 9,964 $ 9,964,000
--------------------------------------------------------------------------------
$ 9,964,000
--------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 1.3%
--------------------------------------------------------------------------------
R&B Falcon Corp., 13.875% (PIK) 11,327 $ 14,725,100
--------------------------------------------------------------------------------
$ 14,725,100
--------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
PORTFOLIO OF INVESTMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
SECURITY SHARES VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 2.4%
--------------------------------------------------------------------------------
Dobson Communications Corp., 12.25%
(PIK) 3,351 $ 2,999,145
Nextel Communications Corp., 13.0% (PIK) 8,875 8,919,375
Nextel Communications, Inc., 11.125%
(PIK) 6,318 5,780,970
Rural Cellular Corp., 11.375% (PIK) 7,682 6,145,600
Rural Cellular Corp., 12.25% 5,099 4,079,200
--------------------------------------------------------------------------------
$ 27,924,290
--------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 2.2%
--------------------------------------------------------------------------------
Broadwing Communications, Series B,
12.50% (PIK) 9,547 $ 9,547,000
Global Crossing Holding Ltd., 10.5%
(PIK) 117,000 11,232,000
Global Crossing Holding Ltd., 6.75% 20,700 4,230,565
Intermedia Communications, Inc., 7%(3) 36,250 743,125
Nextlink Communications, 14% (PIK) 929 41,805
--------------------------------------------------------------------------------
$ 25,794,495
--------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $121,360,938) $ 114,615,784
--------------------------------------------------------------------------------
</TABLE>
COMMERCIAL PAPER -- 1.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C> <C>
--------------------------------------------------------------------------------
General Electric Capital Corp., 6.65%,
11/1/00 $ 14,124 $ 14,124,000
--------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(AT AMORTIZED COST, $14,124,000) $ 14,124,000
--------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 96.5%
(IDENTIFIED COST $1,337,018,231) $1,122,816,171
--------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- 3.5%
$ 40,989,896
--------------------------------------------------------------------------------
NET ASSETS -- 100.0% $1,163,806,067
--------------------------------------------------------------------------------
</TABLE>
(PIK) - Payment in kind.
EUR - Euro Dollar
GBP - British Pound
(1) Security exempt from registration under Rule 144A of the Securities Act
of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers.
(2) Defaulted security.
(3) Restricted security.
(4) Non-income producing security.
(5) Security valued at fair value using methods determined in good faith by
or at the direction of the Trustees.
SEE NOTES TO FINANCIAL STATEMENTS
21
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF OCTOBER 31, 2000
(EXPRESSED IN UNITED STATES DOLLARS)
<S> <C>
ASSETS
--------------------------------------------------------
Investments, at value
(identified cost, $1,337,018,231) $1,122,816,171
Cash 117,965
Receivable for investments sold 16,484,793
Interest receivable 32,762,306
Receivable for open forward foreign
currency contracts 1,365,370
Prepaid expenses 11,439
--------------------------------------------------------
TOTAL ASSETS $1,173,558,044
--------------------------------------------------------
LIABILITIES
--------------------------------------------------------
Payable for investments purchased $ 9,619,549
Payable to affiliate for Trustees' fees 2,258
Accrued expenses 130,170
--------------------------------------------------------
TOTAL LIABILITIES $ 9,751,977
--------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $1,163,806,067
--------------------------------------------------------
SOURCES OF NET ASSETS
--------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $1,376,859,198
Net unrealized depreciation (computed on
the basis of identified cost) (213,053,131)
--------------------------------------------------------
TOTAL $1,163,806,067
--------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED
(EXPRESSED IN UNITED STATES DOLLARS) OCTOBER 31, 2000(1) MARCH 31, 2000
<S> <C> <C>
-----------------------------------------------------------------------------------
INVESTMENT INCOME
-----------------------------------------------------------------------------------
Interest $ 77,510,657 $ 111,585,707
Dividends 7,082,923 11,271,175
Miscellaneous 1,525,895 1,579,587
-----------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 86,119,475 $ 124,436,469
-----------------------------------------------------------------------------------
EXPENSES
-----------------------------------------------------------------------------------
Investment adviser fee $ 4,416,424 $ 6,676,593
Trustees fees and expenses 17,520 32,571
Custodian fee 182,430 315,994
Legal and accounting services 70,440 125,602
Amortization of organization expenses -- 736
Miscellaneous 61,417 10,884
-----------------------------------------------------------------------------------
TOTAL EXPENSES $ 4,748,231 $ 7,162,380
-----------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 81,371,244 $ 117,274,089
-----------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
-----------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (46,454,100) $ 9,220,755
Foreign currency and forward foreign
currency exchange
contract transactions 7,806,170 5,668,832
-----------------------------------------------------------------------------------
NET REALIZED GAIN (LOSS) $ (38,647,930) $ 14,889,587
-----------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (158,384,186) $ (53,816,671)
Foreign currency and forward foreign
currency exchange contracts (1,213,514) 2,362,443
-----------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $ (159,597,700) $ (51,454,228)
-----------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (198,245,630) $ (36,564,641)
-----------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (116,874,386) $ 80,709,448
-----------------------------------------------------------------------------------
</TABLE>
(1) For the seven months ended October 31, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
22
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
(EXPRESSED IN UNITED STATES DOLLARS)
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS OCTOBER 31, 2000(1) MARCH 31, 2000 MARCH 31, 1999
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------
From operations --
Net investment income $ 81,371,244 $ 117,274,089 $ 99,349,959
Net realized gain (loss) (38,647,930) 14,889,587 (13,513,235)
Net change in unrealized
appreciation (depreciation) (159,597,700) (51,454,228) (53,977,702)
-----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS FROM OPERATIONS $ (116,874,386) $ 80,709,448 $ 31,859,022
-----------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 349,093,037 $ 465,123,511 $ 376,878,683
Withdrawals (253,410,519) (400,057,623) (330,015,816)
-----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 95,682,518 $ 65,065,888 $ 46,862,867
-----------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS $ (21,191,868) $ 145,775,336 $ 78,721,889
-----------------------------------------------------------------------------------------
NET ASSETS
-----------------------------------------------------------------------------------------
At beginning of period $1,184,997,935 $1,039,222,599 $ 960,500,710
-----------------------------------------------------------------------------------------
AT END OF PERIOD $1,163,806,067 $1,184,997,935 $1,039,222,599
-----------------------------------------------------------------------------------------
</TABLE>
(1) For the seven months ended October 31, 2000.
SEE NOTES TO FINANCIAL STATEMENTS
23
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
PERIOD ENDED
OCTOBER 31, YEAR ENDED MARCH 31,
------------ -----------------------------------------------------------------
2000(1) 2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Expenses 0.67%(2) 0.64% 0.65% 0.63% 0.67% 0.71%
Net investment income 11.46%(2) 10.54% 10.23% 9.63% 10.02% 10.41%
Portfolio Turnover 41% 113% 150% 137% 78% 88%
-------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $1,163,806 $1,184,998 $1,039,223 $960,501 $706,711 $511,347
-------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the seven-month period ended October 31, 2000.
(2) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
24
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS
(EXPRESSED IN UNITED STATES DOLLARS)
1 SIGNIFICANT ACCOUNTING POLICIES
-----------------------------------------------------
High Income Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940 as a diversified open-end management investment company
which was organized as a trust under the laws of the State of New York on
May 1, 1992. The Declaration of Trust permits the Trustees to issue interests
in the Portfolio. The following is a summary of significant accounting
policies of the Portfolio. The policies are in conformity with accounting
principles generally accepted in the United States of America.
A INVESTMENT VALUATIONS -- Investments listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. Fixed income investments (other
than short-term obligations), including listed investments and investments
for which price quotations are available, will normally be valued on the
basis of market valuations furnished by a pricing service. Financial futures
contracts listed on commodity exchanges are valued at closing settlement
prices. Short-term obligations, maturing in sixty days or less, are valued at
amortized cost, which approximates fair value. Investments for which there
are no quotations or valuations are valued at fair value using methods
determined in good faith by or at the direction of the Trustees.
B INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date for
dividends received in cash and/or securities.
C INCOME TAXES -- The Portfolio has elected to be treated as a partnership for
United States Federal tax purposes. No provision is made by the Portfolio for
federal or state taxes on any taxable income of the Portfolio because each
investor in the Portfolio is ultimately responsible for the payment of any
taxes. Since some of the Portfolio's investors are regulated investment
companies that invest all or substantially all of their assets in the
Portfolio, the Portfolio normally must satisfy the applicable source of
income and diversification requirements (under the Internal Revenue Code) in
order for its investors to satisfy them. The Portfolio will allocate at least
annually among its investors each investor's distributive share of the
Portfolio's net taxable investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
D FINANCIAL FUTURES CONTRACTS -- Upon the entering of a financial futures
contract, the Portfolio is required to deposit (initial margin) either in
cash or securities an amount equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio (margin maintenance) each day, dependent on
the daily fluctuations in the value of the underlying security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
The Portfolio's investment in financial futures contracts is designed only to
hedge against anticipated future changes in interest rates. Should interest
rates move unexpectedly, the Portfolio may not achieve the anticipated
benefits of the financial futures contracts and may realize a loss.
E FOREIGN CURRENCY TRANSLATION -- Investment valuations, other assets, and
liabilities initially expressed in foreign currencies are converted each
business day into U.S. dollars based upon current exchange rates. Purchases
and sales of foreign investment securities and income and expenses are
converted into U.S. dollars based upon currency exchange rates prevailing on
the respective dates of such transactions. Recognized gains or losses on
investment transactions attributable to changes in foreign currency exchange
rates are recorded for financial statement purposes as net realized gains and
losses on investments. That portion of unrealized gains and losses on
investments that results from fluctuations in foreign currency exchange rates
is not separately disclosed.
F FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Portfolio may enter into
forward foreign currency exchange contracts for the purchase or sale of a
specific foreign currency at a fixed price on a future date. Risks may arise
upon entering these contracts from the potential inability of counterparties
to meet the terms of their contracts and from movements in the value of a
foreign currency relative to the U.S. dollar. The Portfolio will enter into
forward contracts for hedging purposes as well as non-hedging purposes. The
forward foreign currency exchange contracts are adjusted by the daily
exchange rate of the underlying currency and any gains or losses are recorded
for financial statement purposes as unrealized until such time as the
contracts have been closed.
G USE OF ESTIMATES -- The preparation of the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amount of revenue and expense during the
reporting period. Actual results could differ from those estimates.
H OTHER -- Investment transactions are accounted for on a trade date basis.
Realized gains and losses are computed based on the specific identification
of the securities sold.
25
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
2 INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
-----------------------------------------------------
The investment adviser fee is earned by Boston Management and Research (BMR),
a wholly-owned subsidiary of Eaton Vance Management (EVM), as compensation
for management and investment advisory services rendered to the Portfolio.
The fee is based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sale of
securities). For the period from April 1, 2000 to October 31, 2000, the fee
was equivalent to 0.62% (annualized) of the Portfolio's average daily net
assets and amounted to $4,416,424. For the year ended March 31, 2000, the fee
was equivalent to 0.60% of the Portfolio's average daily net assets and
amounted to $6,676,593. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment
adviser fee. Certain officers and Trustees of the Portfolio are officers of
the above organizations. Trustees of the Portfolio that are not affiliated
with the Investment Adviser may elect to defer receipt of all or a portion of
their annual fees in accordance with the terms of the Trustees Deferred
Compensation Plan. For the period from April 1, 2000 to October 31, 2000, no
significant amounts have been deferred.
3 INVESTMENTS
-----------------------------------------------------
The Portfolio invests primarily in debt securities. The ability of the
issuers of the debt securities held by the Portfolio to meet their
obligations may be affected by economic developments in a specific industry.
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $665,793,918 and $492,469,628,
respectively, for the period from April 1, 2000 to October 31, 2000.
4 LINE OF CREDIT
-----------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. Borrowings will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short-term cash
requirements. Interest is charged to each participating portfolio or fund
based on its borrowings at an amount above either the Eurodollar rate or
federal funds rate. In addition, a fee computed at an annual rate of 0.10% on
the daily unused portion of the line of credit is allocated among the
participating portfolios and funds at the end of each quarter. The Portfolio
did not have any significant borrowings or allocated fees during the period
from April 1, 2000 to October 31, 2000.
5 FINANCIAL INSTRUMENTS
-----------------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options, forward foreign currency contracts and financial
futures contracts and may involve, to a varying degree, elements of risk in
excess of the amounts recognized for financial statement purposes. The
notional or contractual amounts of these instruments represent the investment
the Portfolio has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered. A summary of
obligations under these financial instruments at October 31, 2000 is as
follows:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
<TABLE>
<CAPTION>
SALES
----------------------------------------------------------------------------------------
NET UNREALIZED
SETTLEMENT IN EXCHANGE FOR APPRECIATION
DATE(S) DELIVER (IN U.S. DOLLARS) (DEPRECIATION)
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
11/27/00 British Pound Sterling
1,684,966 $ 2,447,952 $ (346)
11/2/00- Euro Dollar
12/4/00 54,553,143 47,775,304 1,502,500
----------------------------------------------------------------------------------------
$ 50,223,256 $ 1,502,154
----------------------------------------------------------------------------------------
<CAPTION>
PURCHASES
----------------------------------------------------------------------------------------
NET UNREALIZED
SETTLEMENT DELIVER APPRECIATION
DATE(S) IN EXCHANGE FOR (IN U.S. DOLLARS) (DEPRECIATION)
<C> <S> <C> <C>
----------------------------------------------------------------------------------------
11/27/00 British Pound Sterling
165,281 $ 239,715 $ 442
11/13/00 Euro Dollar
13,957,239 11,971,301 (137,226)
----------------------------------------------------------------------------------------
$ 12,211,016 $ (136,784)
----------------------------------------------------------------------------------------
</TABLE>
6 FEDERAL INCOME TAX BASIS OF INVESTMENTS
-----------------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at October 31, 2000 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $1,340,497,185
--------------------------------------------------------
Gross unrealized appreciation $ 26,277,750
Gross unrealized depreciation (243,958,764)
--------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (217,681,014)
--------------------------------------------------------
</TABLE>
26
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
NOTES TO FINANCIAL STATEMENTS CONT'D
(EXPRESSED IN UNITED STATES DOLLARS)
7 RESTRICTED SECURITIES
-----------------------------------------------------
At October 31, 2000, the Portfolio owned the following securities
(representing 1.76% of net assets) which were restricted as to public resale
and not registered under the Securities Act of 1933 (excluding Rule 144A
securities). The Portfolio has various registration rights (exercisable under
a variety of circumstances) with respect to these securities. The fair value
of these securities is determined based on valuations provided by brokers
when available, or if not available, they are valued at fair value using
methods determined in good faith by or at the direction of the Trustees.
<TABLE>
<CAPTION>
DATE OF
DESCRIPTION ACQUISITION SHARES/FACE COST FAIR VALUE
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------------
CORPORATE BONDS & NOTES
---------------------------------------------------------------------------------------------
Roller Bearing Holdings Co., Sr. Disc. 8/01/97-
Notes, 13.00%, (0% until 2002), 6/15/09 10/09/97 12,875,000 $11,142,480 $ 8,240,000
Von Hoffman Press, Inc., Sr. Sub. Notes, 5/15/97-
10.875%, 5/15/07 11/04/98 5,095,000 5,106,900 4,610,975
---------------------------------------------------------------------------------------------
$16,249,380 $12,850,975
---------------------------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS
---------------------------------------------------------------------------------------------
Asat Finance, Warrants 10/20/00 6,350 $ 0 $ 511,175
9/09/99-
Carrier1 International SA, Warrants 2/25/00 16,375 1,593,750 1,908,179
Completel Europe NV, Common 9/12/00 392,000 0 2,205,000
Cybernet Internet Services 10/20/99-
International, Inc., Warrants 10/28/99 4,825 195,000 24,125
Equinix, Inc., Warrants 6/01/00 4,500 0 495,000
GT Group Telecom, Warrants 9/15/00 13,250 0 563,125
Leap Wireless International, Warrants 7/12/00 5,875 0 2,938
Merrill Corp., Warrants 6/02/00 5,250 0 0
Ono Finance PLC, Warrants 10/12/99 10,870 0 760,900
Ono Finance PLC, Warrants, Exp. 5/31/09 11/05/99 3,800 0 225,395
Peninsula Gaming LLC, Convertible
Preferred Membership Interests 7/08/99 25,351 0 152,107
PF.Net Communications, Warrants 7/21/00 7,800 0 0
UIH Australia/Pacific, Inc., Warrants 3/05/98 3,600 0 6,710
---------------------------------------------------------------------------------------------
$ 1,788,750 $ 6,854,654
---------------------------------------------------------------------------------------------
PREFERRED STOCKS
---------------------------------------------------------------------------------------------
Intermedia Communications, Inc., 7% 10/24/97 36,250 $ 906,250 $ 743,125
---------------------------------------------------------------------------------------------
$18,944,380 $20,448,754
---------------------------------------------------------------------------------------------
</TABLE>
8 FISCAL YEAR END CHANGE
-----------------------------------------------------
Effective April 1, 2000, the Portfolio changed its fiscal year-end to
October 31.
27
<PAGE>
HIGH INCOME PORTFOLIO AS OF OCTOBER 31, 2000
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS
OF HIGH INCOME PORTFOLIO:
---------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of High Income Portfolio (the Portfolio) as of
October 31, 2000, and the related statement of operations for the period from
April 1, 2000 to October 31, 2000 and for the year ended March 31, 2000, the
statements of changes in net assets for the period from April 1, 2000 to
October 31, 2000 and for the years ended March 31, 2000 and 1999 and the
supplementary data for the period from April 1, 2000 to October 31, 2000 and for
each of the years in the five-year period ended March 31, 2000 (all expressed in
United States dollars). These financial statements and supplementary data are
the responsibility of the Portfolio's management. Our responsibility is to
express an opinion on these financial statements and supplementary data based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and supplementary data are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities held as of October 31, 2000 by correspondence with the custodian and
brokers; where replies were not received from brokers, we performed other audit
procedures. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present fairly,
in all material respects, the financial position of the High Income Portfolio at
October 31, 2000, the results of its operations, the changes in its net assets
and the supplementary data for the respective stated periods in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 8, 2000
28
<PAGE>
EATON VANCE HIGH INCOME FUND AS OF OCTOBER 31, 2000
INVESTMENT MANAGEMENT
HIGH INCOME PORTFOLIO
OFFICERS
James B. Hawkes
President and Trustee
Thomas P. Huggins
Vice President and
Co-Portfolio Manager
Michael W. Weilheimer
Vice President and
Co-Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
TRUSTEES
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking Emeritus, Harvard University
Graduate School of Business Administration
Norton H. Reamer
Chairman and Chief Operating Officer,
Hellman, Jordan Management Co., Inc.
President, Jordan Simmons Capital LLC and Unicorn Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
29
