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FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811-08342
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Strategic Income Portfolio
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(Exact Name of Registrant as Specified in Charter)
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
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(Address of Principal Executive Offices)
Alan R. Dynner
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
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(Name and Address of Agent for Services)
(617) 482-8260
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(Registrant's Telephone Number)
October 31
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Date of Fiscal Year End
October 31, 2003
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Date of Reporting Period
ITEM 1. REPORTS TO STOCKHOLDERS
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STRATEGIC INCOME PORTFOLIO AS OF OCTOBER 31, 2003
PORTFOLIO OF INVESTMENTS
BONDS & NOTES -- 98.2%
<Table>
<Caption>
SECURITY PRINCIPAL U.S. $ VALUE
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BRAZIL -- 3.7%
Republic of Brazil, 10.125%, 5/15/27 $ 4,000,000 $ 3,785,000
Republic of Brazil, 11.00%, 8/17/40 6,500,000 6,361,875
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TOTAL BRAZIL (IDENTIFIED COST $6,348,048) $ 10,146,875
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INDONESIA -- 2.6%
APP China Group Ltd., 14.00%, 3/15/10(1) $ 2,000,000 $ 400,000
APP Finance VI, 0.00%, 11/18/12(1)(2) 4,000,000 90,000
APP Finance VII, 3.50%, 4/30/03(1)(2) 2,000,000 85,000
DGS International Finance, 10.00%, 6/1/07(1) 2,000,000 60,000
Indah Kiat Finance Mauritius, Sr. Unsec. Notes,
10.00%, 7/1/07(1) 1,000,000 460,000
Indah Kiat International Finance,
12.50%, 6/15/06(1) 1,000,000 455,000
Indonesia Recapital, 14.00%, 6/15/09 IDR 45,000,000,000 5,633,937
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TOTAL INDONESIA (IDENTIFIED COST $13,457,539) $ 7,183,937
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MOROCCO -- 0.2%
Snap Ltd., 11.50%, 1/29/09 DEM 1,075,000 $ 608,984
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TOTAL MOROCCO (IDENTIFIED COST $541,239) $ 608,984
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NEW ZEALAND -- 2.4%
New Zealand Government,
6.50%, 4/15/13 NZD 10,700,000 $ 6,680,645
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TOTAL NEW ZEALAND (IDENTIFIED COST $4,522,373) $ 6,680,645
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PHILIPPINES -- 0.1%
Bayan Telecommunications,
13.50%, 7/15/06(1)(3) $ 2,000,000 $ 370,000
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TOTAL PHILIPPINES (IDENTIFIED COST $1,917,237) $ 370,000
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UNITED STATES -- 89.2%
CORPORATE BONDS & Notes -- 2.8%
Baltimore Gas and Electric, 6.73%, 6/12/12 $ 400,000 $ 444,698
BellSouth Capital Funding, 6.04%, 11/15/26 300,000 327,424
Coca-Cola Enterprise, 7.00%, 10/1/26 375,000 431,383
Eaton Corp., 8.875%, 6/15/19 500,000 650,301
Ford Holdings, 9.30%, 3/1/30 $ 1,000,000 $ 1,044,886
General Motors Acceptance Corp., 8.875%, 6/1/10 1,000,000 1,145,953
Ingersoll-Rand Co., 6.48%, 6/1/25 1,050,000 1,134,203
NBD Bank N.A., 8.25%, 11/1/24 610,000 762,811
US Bancorp, 7.50%, 6/1/26 840,000 987,097
Williamette Industries, 7.35%, 7/1/26 50,000 56,546
Worldcom, Inc., 6.95%, 8/15/28(1) 1,000,000 370,000
Worldcom, Inc., 7.75%, 4/1/27(1) 1,000,000 370,000
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TOTAL CORPORATE BONDS & Notes
(IDENTIFIED COST, $7,894,169) $ 7,725,302
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COLLATERALIZED MORTGAGE OBLIGATIONS -- 17.7%
Federal Home Loan Mortgage Corp.,
Series 1548, Class Z,
7.00%, 7/15/23 $ 2,611,511 $ 2,760,665
Federal Home Loan Mortgage Corp.,
Series 1817, Class Z,
6.50%, 2/15/26 2,534,333 2,640,367
Federal Home Loan Mortgage Corp.,
Series 1927, Class ZA,
6.50%, 1/15/27 9,679,576 10,106,688
Federal National Mortgage Association,
Series 1993-141, Class Z,
7.00%, 8/25/23 6,099,527 6,476,521
Federal National Mortgage Association,
Series 1993-16, Class Z,
7.50%, 2/25/23 10,268,953 10,973,116
Federal National Mortgage Association,
Series 1993-79, Class PL,
7.00%, 6/25/23 6,822,828 7,204,660
Federal National Mortgage Association,
Series 1994-89, Class ZQ,
8.00%, 7/25/24 5,661,736 6,124,928
Federal National Mortgage Association,
Series 1996-35, Class Z,
7.00%, 7/25/26 2,447,985 2,586,200
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TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS (IDENTIFIED COST, $49,261,867) $ 48,873,145
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MORTGAGE PASS-THROUGHS -- 68.0%
Federal Home Loan Mortgage Corp.:
6.50% with various maturities to 2024 $ 10,990,238 $ 11,585,562
7.00% with various maturities to 2024 9,967,266 10,624,525
7.50% with various maturities to 2025 29,622,703 31,916,107
7.95% with maturity at 2022 2,263,176 2,456,917
8.00% with various maturities to 2021 1,214,192 1,300,300
</Table>
See notes to financial statements.
16
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<Table>
<Caption>
SECURITY PRINCIPAL U.S. $ VALUE
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UNITED STATES (CONTINUED)
8.15% with maturity at 2021 $ 1,816,013 $ 1,943,157
8.30% with maturity at 2021 1,248,993 1,382,797
8.47% with maturity at 2018 1,174,205 1,301,421
8.50% with various maturities to 2019 337,915 373,693
9.00% with various maturities to 2027 3,451,042 3,857,286
9.25% with various maturities to 2016 1,051,151 1,141,886
9.50% with various maturities to 2027 2,013,487 2,267,809
9.75% with various maturities to 2020 230,850 258,434
10.00% with maturity at 2021 526,421 614,146
10.25% with maturity at 2013 589,166 654,126
10.50% with various maturities to 2021 2,350,409 2,785,855
11.00% with various maturities to 2019 4,277,684 5,071,542
11.25% with maturity at 2010 38,970 44,790
12.50% with various maturities to 2019 618,201 744,534
12.75% with maturity at 2013 32,415 38,374
13.25% with maturity at 2013 14,532 17,533
13.50% with maturity at 2019 73,807 88,490
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$ 80,469,284
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Federal National Mortgage Association:
6.50% with various maturities to 2028 $ 19,925,293 $ 20,953,249
7.00% with various maturities to 2024 5,318,886 5,677,936
7.50% with various maturities to 2025 5,733,514 6,152,053
8.00% with various maturities to 2020 735,042 801,187
8.00% with maturity at 2033 (TBA) 2,687,000 2,938,911
8.50% with various maturities to 2026 1,463,970 1,591,574
8.881% with maturity at 2010 705,891 773,235
9.00% with various maturities to 2024 4,147,361 4,609,021
9.50% with various maturities to 2026 2,603,740 2,913,099
10.50% with maturity at 2020 488,722 579,953
11.00% with maturity at 2025 130,773 155,266
11.50% with maturity at 2019 451,261 536,813
12.00% with maturity at 2015 236,956 284,718
12.50% with maturity at 2015 1,360,736 1,638,127
12.75% with maturity at 2014 68,479 84,865
13.00% with various maturities to 2015 546,269 667,079
13.25% with maturity at 2014 79,693 100,035
13.50% with various maturities to 2015 296,968 356,330
14.75% with maturity at 2012 813,325 1,021,157
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$ 51,834,608
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Government National Mortgage Association:
6.00% with maturity at 2033 (TBA) $ 16,000,000 $ 16,643,588
7.00% with various maturities to 2024 10,181,501 10,866,903
7.50% with various maturities to 2028 10,085,163 10,872,928
7.75% with maturity at 2019 214,311 234,465
8.00% with various maturities to 2023 2,461,997 2,693,348
8.30% with various maturities to 2020 1,211,241 1,336,470
8.50% with various maturities to 2021 859,556 942,555
9.00% with various maturities to 2016 414,678 456,514
9.50% with various maturities to 2026 $ 10,020,350 $ 11,246,813
12.50% with maturity at 2019 665,045 803,127
13.50% with maturity at 2014 53,504 67,220
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$ 56,163,931
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TOTAL MORTGAGE PASS-THROUGHS
(IDENTIFIED COST, $186,839,994) $ 188,467,823
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U.S. TREASURY OBLIGATIONS -- 0.7%
United States Treasury Bond,
7.875%, 2/15/21(4) --
(identified cost, $1,853,631) $ 1,500,000 $ 1,981,173
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TOTAL UNITED STATES
(IDENTIFIED COST $245,849,661) $ 247,047,443
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TOTAL BONDS & NOTES
(IDENTIFIED COST, $272,636,097) $ 272,037,884
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WARRANTS -- 0.0%
<Caption>
SECURITY SHARES VALUE
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INDONESIA -- 0.0%
Asia Pulp and Paper(1) 2,000 $ 0
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$ 0
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TOTAL INDONESIA (IDENTIFIED COST $0) $ 0
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TOTAL WARRANTS (IDENTIFIED COST $0) $ 0
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</Table>
See notes to financial statements.
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SHORT-TERM INVESTMENTS -- 9.2%
<Table>
<Caption>
SECURITY PRINCIPAL VALUE
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Autobahn funding, 1.12%, 11/6/03 $ 11,000,000 $ 10,998,289
Investors bank & Trust Company Time Deposit,
1.08%, 11/3/03 14,521,000 14,521,000
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TOTAL SHORT-TERM INVESTMENTS
(AT AMORTIZED COST, $25,519,289) $ 25,519,289
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TOTAL INVESTMENTS -- 107.4%
(IDENTIFIED COST $298,155,386) $ 297,557,173
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OTHER ASSETS, LESS LIABILITIES -- (7.4)% $ (20,476,057)
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NET ASSETS -- 100.0% $ 277,081,116
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</Table>
DEM - Deutsche Mark
NZD - New Zealand Dollar
IDR - Indonesian Rupiah
(1) Defaulted security.
(2) Convertible bond.
(3) 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.
(4) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements.
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STRATEGIC INCOME PORTFOLIO AS OF OCTOBER 31, 2003
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF OCTOBER 31, 2003
<Table>
ASSETS
Investments, at value (identified cost, $298,155,386) $ 297,557,173
Cash 105
Receivable for investments sold 86,706
Receivable for open swap contracts 529,954
Interest receivable 2,259,459
Receivable for open forward foreign currency contracts 1,278,307
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TOTAL ASSETS $ 301,711,704
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LIABILITIES
Payable for investments purchased, including
when-issued securities of $19,676,374 $ 24,098,374
Payable for daily variation margin on open financial futures contracts 120,273
Payable for open forward foreign currency contracts 383,550
Payable to affiliate for Trustees' fees 185
Accrued expenses 28,206
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TOTAL LIABILITIES $ 24,630,588
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NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $ 277,081,116
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SOURCES OF NET ASSETS
Net proceeds from capital contributions and withdrawals $ 278,453,956
Net unrealized depreciation (computed on the basis of identified cost) (1,372,840)
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TOTAL $ 277,081,116
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</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED
OCTOBER 31, 2003
<Table>
INVESTMENT INCOME
Interest $ 9,112,876
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TOTAL INVESTMENT INCOME $ 9,112,876
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EXPENSES
Investment adviser fee $ 1,053,507
Administration fee 335,533
Trustees' fees and expenses 11,493
Custodian fee 91,778
Legal and accounting services 91,347
Miscellaneous 14,680
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TOTAL EXPENSES $ 1,598,338
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NET INVESTMENT INCOME $ 7,514,538
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REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 5,872,776
Financial futures contracts (1,037,192)
Written options 251,688
Swap contracts 4,292,036
Foreign currency and forward foreign currency exchange
contract transactions (329,638)
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NET REALIZED GAIN $ 9,049,670
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Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 7,316,866
Financial futures contracts (538,824)
Written options 85,812
Swap contracts 839,871
Foreign currency and forward foreign currency exchange contracts 1,101,542
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NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 8,805,267
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NET REALIZED AND UNREALIZED GAIN $ 17,854,937
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 25,369,475
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</Table>
See notes to financial statements.
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STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED YEAR ENDED
OCTOBER 31, 2003 OCTOBER 31, 2002
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INCREASE (DECREASE)
IN NET ASSETS
From operations --
Net investment income $ 7,514,538 $ 10,912,356
Net realized gain 9,049,670 1,956,204
Net change in unrealized
appreciation (depreciation) 8,805,267 (3,749,032)
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NET INCREASE IN NET ASSETS FROM OPERATIONS $ 25,369,475 $ 9,119,528
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Capital transactions --
Contributions $ 139,366,724 $ 80,054,746
Withdrawals (78,107,725) (78,213,706)
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NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 61,258,999 $ 1,841,040
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NET INCREASE IN NET ASSETS $ 86,628,474 $ 10,960,568
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NET ASSETS
At beginning of year $ 190,452,642 $ 179,492,074
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AT END OF YEAR $ 277,081,116 $ 190,452,642
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</Table>
See notes to financial statements.
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SUPPLEMENTARY DATA
<Table>
<Caption>
YEAR ENDED OCTOBER 31,
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2003 2002(1) 2001 2000 1999
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RATIOS/SUPPLEMENTAL DATA
Ratios (As a percentage of average daily net assets):
Expenses 0.71% 0.77% 0.79% 0.83% 0.86%
Net investment income 3.36% 5.88% 8.10% 8.36% 9.14%
Portfolio Turnover 71% 63% 54% 49% 47%
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TOTAL RETURN(2) 12.97% 5.25% -- -- --
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NET ASSETS, END OF YEAR (000'S OMITTED) $ 277,081 $ 190,453 $ 179,492 $ 154,712 $ 150,282
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</Table>
(1) The Portfolio adopted the provisions of the AICPA Audit and Accounting
Guide for Investment Companies and began amortizing market premiums on
fixed-income securities, excluding mortgage-backed securities, and
accreting certain discounts using a different methodology. Additionally,
the Portfolio reclassified net losses realized on prepayments received on
mortgage-backed securities that were previously included in realized
gains/losses to interest income. The effect of these changes for the year
ended October 31, 2002 was a decrease in the ratio of net investment income
to average net assets from 7.32% to 5.88%. Ratios for the periods prior to
October 31, 2001 have not been restated to reflect this change in
presentation.
(2) Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.
See notes to financial statements.
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STRATEGIC INCOME PORTFOLIO AS OF OCTOBER 31, 2003
NOTES TO FINANCIAL STATEMENTS
1 SIGNIFICANT ACCOUNTING POLICIES
Strategic Income Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a non-diversified open-end investment
company. The Portfolio, which was organized as a trust under the laws of
the State of New York in 1992, seeks to achieve a high level of income by
investing in a global portfolio consisting primarily of high grade debt
securities. The Declaration of Trust permits the Trustees to issue
beneficial interests in the Portfolio. At October 31, 2003, Eaton Vance
Strategic Income Fund held an approximate 99.9% interest 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 VALUATION -- Seasoned mortgage backed, pass-through securities
are valued using an independent matrix pricing system applied by the
advisor which takes into account closing bond valuations, yield
differentials, anticipated prepayments and interest rates provided by
dealers. Debt securities (other than seasoned mortgage-backed, pass-through
securities and short-term obligations maturing in sixty days or less),
including listed securities and securities for which price quotations are
available and forward contracts, will normally be valued on the basis of
market valuations furnished by pricing services. Marketable securities that
are listed on foreign or U.S. securities exchanges are valued at closing
sale prices on the exchange where such securities are principally traded.
Marketable securities listed in the NASDAQ National Market System are
valued at the NASDAQ official closing price. Unlisted or listed securities
for which closing sale prices are not available are valued at the mean
between the latest available bid and ask prices. For foreign investments,
if trading or events occurring in other markets after the close of the
principal exchange in which the securities are traded are expected to
materially affect the value of the investments, then those investments are
valued, taking into consideration these events, at their fair value
following procedures approved by the Trustees. Financial futures contracts
listed on commodity exchanges and exchange-traded options are valued at
closing settlement prices. Short-term obligations and money-market
securities maturing in sixty days or less are valued at amortized cost
which approximates value. Non-U.S. dollar denominated short-term
obligations are valued at amortized cost as calculated in the base currency
and translated to U.S. dollars at the current exchange rate. Investments
for which market quotations are unavailable 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
and discount earned, adjusted for amortization of premium or accretion of
discount. Dividend income is recorded on the ex-dividend date for dividends
received in cash and/or securities. However, if the ex-dividend date has
passed, certain dividends from foreign securities are recorded as the
Portfolio is informed of the ex-dividend date. Dividend income may include
dividends that represent returns of capital for federal income tax
purposes.
C GAINS AND LOSSES FROM INVESTMENT TRANSACTIONS -- Realized gains and
losses from investment transactions are recorded on the basis of identified
cost. For book purposes, gains and losses are not recognized until
disposition. For federal tax purposes, the Portfolio is subject to special
tax rules that may affect the amount, timing and character of gains
recognized on certain of the Portfolio's investments.
D INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes
on any taxable income of the Portfolio because each investor in the
Portfolio is ultimately responsible for the payment of any taxes. Since at
least one of the Portfolio's investors is a regulated investment company
that invests all or substantially all of its 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 investment income, net realized capital gains, and any
other items of income, gain, loss, deduction or credit. Withholding taxes
on foreign dividends and capital gains have been provided for in accordance
with the Portfolio's understanding of the applicable countries' tax rules
and rates.
E FINANCIAL FUTURES CONTRACTS -- Upon entering into a financial futures
contract, the Portfolio is required to deposit an amount (initial margin),
either in cash or securities, equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio (variation margin) 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 for
both hedging against anticipated future changes in interest or currency
exchange rates and investment purposes. Should interest or currency
exchange rates move
22
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unexpectedly, the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. If the Portfolio enters
into a closing transaction, the Portfolio will realize, for book purposes,
a gain or loss equal to the difference between the value of the financial
futures contract to sell and financial futures contract to buy.
F WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS -- The Portfolio may engage
in when-issued and delayed delivery transactions. The Portfolio records
when-issued securities on trade date and maintains security positions such
that sufficient liquid assets will be available to make payments for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin earning interest on
settlement date.
G 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.
H WRITTEN OPTIONS -- The Portfolio may write call or put options for which
premiums are received and are recorded as liabilities, and are subsequently
adjusted to the current value of the options written. Premiums received
from writing options which expire are treated as realized gains. Premiums
received from writing options which are exercised or closed are offset
against the proceeds or amount paid on the transaction to determine the
realized gain or loss. If a put option is exercised, the premium reduces
the cost basis of the securities purchased by the Portfolio. The Portfolio
as writer of an option may have no control over whether the underlying
securities may be sold (call) or purchased (put) and as a result bears the
market risk of an unfavorable change in the price of the securities
underlying the written option.
I 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.
J REVERSE REPURCHASE AGREEMENTS -- The Portfolio may enter into reverse
repurchase agreements. Under such an agreement, the Portfolio temporarily
transfers possession, but not ownership, of a security to a counterparty,
in return for cash. At the same time, the Portfolio agrees to repurchase
the security at an agreed-upon price and time in the future. The Portfolio
may enter into reverse repurchase agreements for temporary purposes, such
as to fund withdrawals, or for use as hedging instruments where the
underlying security is denominated in a foreign currency. As a form of
leverage, reverse repurchase agreements may increase the risk of
fluctuation in the market value of the Portfolio's assets or in its yield.
Liabilities to counterparties under reverse repurchase agreements are
recognized in the Statement of Assets and Liabilities at the same time at
which cash is received by the Portfolio. The securities underlying such
agreements continue to be treated as owned by the Portfolio and remain in
the Portfolio of Investments. Interest charged on amounts borrowed by the
Portfolio under reverse repurchase agreements is accrued daily.
K TOTAL RETURN SWAPS -- The Portfolio may enter into swap agreements to
enhance return, to hedge against fluctuations in securities prices or
interest rates or as substitution for the purchase or sale of securities.
Pursuant to these agreements, the Portfolio makes monthly payments at a
rate equal to a predetermined spread to the one-month LIBOR. In exchange,
the Portfolio receives payments based on the rate of return of a benchmark
industry index. During the term of the outstanding swap agreement, changes
in the underlying value of the swap are recorded as unrealized gains and
losses. Payments received or made at the end of the measurement period are
recorded as realized gains and losses. The value of the swap is determined
by changes in the relationship between the rate of interest and the
benchmark industry index. The Portfolio is exposed to credit loss in the
event of non-performance by the swap counterparty. However, the Portfolio
does not anticipate non-performance by the counterparty. Risk may also
arise from the unanticipated movements in value of interest rates or the
index.
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L EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balance the Portfolio maintains with IBT. All significant
credits used to reduce the Portfolio's custodian fees are reported
separately as a reduction of total expenses in the Statement of Operations.
For the year ended October 31, 2003, $284 in credits were used to reduce
the Portfolio's custodian fee.
M 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 amounts of income and expense
during the reporting period. Actual results could differ from those
estimates.
N OTHER -- Investment transactions are accounted for on a trade date basis.
2 INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Boston Management and Research
(BMR), a 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
investments and paydown gains/losses). Such percentages are reduced as
average daily net assets exceed certain levels. For the year ended October
31, 2003, the fee was equivalent to 0.47% of the Portfolio's average net
assets for such period and amounted to $1,053,507. An administration fee,
computed at an effective annual rate of 0.15% of average daily net assets
was also paid to BMR for administrative services and office facilities.
Such fee amounted to $335,533 for the year ended October 31, 2003.
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. 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 October 31, 2003, no significant amounts have been deferred. Certain
officers and Trustees of the Portfolio are officers of the above
organizations.
3 LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR
or 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 portfolio or fund
based on its borrowings at an amount above 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 October 31, 2003.
4 INVESTMENT TRANSACTIONS
The Portfolio invests primarily in foreign government and U.S. Government
debt securities. The ability of the issuers of the debt securities to meet
their obligations may be affected by economic developments in a specific
industry or country. The Portfolio regularly invests in lower rated and
comparable quality unrated high yield securities. These investments have
different risks than investments in debt securities rated investment grade
and held by the Portfolio. Risk of loss upon default by the borrower is
significantly greater with respect to such debt securities than with other
debt securities because these securities are generally unsecured and are
more sensitive to adverse economic conditions, such as recession or
increasing interest rates, than are investment grade issuers. At October
31, 2003, the Portfolio had invested 6.74% of its net assets or
approximately $18,700,000 in high yield securities. Purchases and sales of
investments, other than short-term obligations, and including paydowns on
mortgage backed securities, for the year ended October 31, 2003 were as
follows:
<Table>
PURCHASES
Investments (non-U.S. Government) $ 18,374,699
U.S. Government Securities 206,077,687
---------------------------------------------------
$ 224,452,386
---------------------------------------------------
SALES
Investments (non-U.S. Government) $ 50,801,352
U.S. Government Securities 99,056,190
---------------------------------------------------
$ 149,857,542
---------------------------------------------------
</Table>
24
<Page>
5 FINANCIAL INSTRUMENTS
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities and to assist
in managing exposure to various market risks. These financial instruments
include written options, forward foreign currency contracts, financial
futures contracts and swaps 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, 2003 is as follows:
<Table>
<Caption>
NET UNREALIZED
SETTLEMENT DATES DELIVER IN EXCHANGE FOR APP/DEP.
----------------------------------------------------------------------------------
1/28/04 Czech Republic Koruna United States Dollar
173,417,000 6,134,312 $ (139,344)
11/03/03 - 9/20/04 Euro Dollar United States Dollar
21,600,000 24,942,051 (88,020)
1/15/04 Euro Dollar Hungarian Forint
5,365,333 1,451,430,000 152,780
11/26/03 Euro Dollar Slovakia Koruna
5,700,000 241,281,000 127,173
9/27/04 Hong Kong Dollar United States Dollar
50,400,000 6,514,153 14,436
11/25/03 Japanese Yen United States Dollar
1,083,600,000 9,841,604 (59,728)
11/21/03 Mexican Peso United States Dollar
35,000,000 3,085,468 (76,990)
- ---------------------------------------------------------------------------------------
$ (69,693)
- ---------------------------------------------------------------------------------------
<Caption>
NET UNREALIZED
SETTLEMENT DATES IN EXCHANGE FOR DELIVER APP/DEP.
-----------------------------------------------------------------------------------
11/12/03 Columbian Peso United States Dollar
16,000,000 5,463,529 $ 82,439
1/15/04 Euro Dollar Czech Republic Koruna
5,380,424 170,513,700 67,152
11/3/03 Euro Dollar United States Dollar
7,950,000 9,252,210 (16,695)
1/28/04 Hungarian Forint United States Dollar
1,485,594 6,136,282 368,524
12/8/03 - 1/30/04 Indonesian Rupiah United States Dollar
107,000,000,000 12,288,212 148,804
12/8/03 Indian Rupee United States Dollar
282,500,000 6,131,973 103,142
1/30/04 Korean Won United States Dollar
3,686,000,000 3,091,763 1,109
9/20/04 Slovakia Koruna United States Dollar
243,219,000 6,402,810 190,568
1/30/04 Taiwan United States Dollar
107,000,000 3,160,071 (2,773)
1/30/04 Thai Baht United States Dollar
130,000,000 3,235,843 22,180
----------------------------------------------------------------------------------
$ 964,450
----------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
WRITTEN CALL OPTIONS NUMBER OF CONTRACTS PREMIUMS
-----------------------------------------------------------------
Outstanding, beginning of year 250 $ 251,688
-----------------------------------------------------------------
Options expired (250) (251,688)
-----------------------------------------------------------------
Outstanding, end of year -- $ --
-----------------------------------------------------------------
</Table>
FUTURES CONTRACTS
<Table>
<Caption>
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION DEPRECIATION
----------------------------------------------------------------------
12/03 17 Japan Bond 10 year Short $ (311,625)
12/03 884 U.S. Treasury 5 year Note Short (1,889,155)
----------------------------------------------------------------------
$ (2,200,780)
----------------------------------------------------------------------
</Table>
At October 31, 2003, the Portfolio had sufficient cash and/or securities to
cover potential obligations arising from open futures and forward
contracts, as well as margin requirements on open futures contracts.
25
<Page>
The Portfolio has entered into a total return swap agreement with Credit
Suisse First Boston International whereby the Portfolio makes monthly
payments at a rate equal to the one-month LIBOR plus 0.05% on the notional
amount of $10,000,000. In exchange, the Portfolio receives payments equal
to the total returns on the Lehman Brothers U.S. Corporate High Yield Bond
Index on the same notional amount. The value of the contract, which
terminates on December 1, 2003 is recorded as a receivable for open swap
contracts of $191,877 at October 31, 2003.
The Portfolio has entered into a total return swap agreement with Lehman
Brothers whereby the Portfolio makes monthly payments at a rate equal to
the one-month LIBOR minus 0.10% on the notional amount of $20,000,000. In
exchange, the Portfolio receives payments equal to the total returns on the
Lehman Brothers U.S. Corporate High Yield Bond Index on the same notional
amount. The value of the contract, which terminates on May 1, 2004 is
recorded as a receivable for open swap contracts of $386,338 at October 31,
2003.
The Portfolio has entered into a total return swap agreement with Morgan
Stanley Capital Services whereby the Portfolio makes quarterly payments at
a rate equal to the three-month LIBOR minus 1.50% on the notional amount of
$1,000,000. In exchange, the Portfolio receives payments equal to the total
returns on the MSCI Poland Gross Dividend Reinvested Index on the same
notional amount. The value of the contract, which terminates on October 7,
2004 is recorded as a receivable for open swap contracts of $(36,107) at
October 31, 2003.
The Portfolio has entered into a total return swap agreement with Morgan
Stanley Capital Services whereby the Portfolio makes quarterly payments at
a rate equal to the three-month LIBOR minus 1.50% on the notional amount of
$1,100,000. In exchange, the Portfolio receives payments equal to the total
returns on the MSCI Hungary Gross Dividend Reinvested Index on the same
notional amount. The value of the contract, which terminates on October 7,
2004 is recorded as a receivable for open swap contracts of $(12,154) at
October 31, 2003.
6 FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION)
The cost and unrealized appreciation (depreciation) in value of the
investments at October 31, 2003, as computed on a federal income tax basis,
were as follows:
<Table>
AGGREGATE COST $ 299,180,060
-----------------------------------------------------
Gross unrealized appreciation $ 8,920,622
Gross unrealized depreciation (10,543,509)
----------------------------------------------------
NET UNREALIZED DEPRECIATION $ (1,622,887)
----------------------------------------------------
</Table>
The net unrealized appreciation on foreign currency, swaps, forwards and
futures contracts at October 31, 2003 on a federal income tax basis was
$249,722.
7 INTERESTHOLDER MEETING (UNAUDITED)
The Portfolio held a Special Meeting of Interestholders on June 6, 2003 to
elect Trustees. The results of the vote were as follows:
<Table>
<Caption>
INTEREST IN THE PORTFOLIO
NOMINEE FOR TRUSTEE AFFIRMATIVE WITHHOLD
------------------------------------------------------------
Jessica M. Bibliowicz 99% 1%
Donald R. Dwight 99% 1%
James B. Hawkes 99% 1%
Samuel L. Hayes, III 99% 1%
William H. Park 99% 1%
Norton H. Reamer 99% 1%
Lynn A. Stout 99% 1%
</Table>
Results are rounded to the nearest whole number. Donald R. Dwight retired
as a Trustee effective July 1, 2003 pursuant to the mandatory retirement
policy of the Portfolio.
26
<Page>
STRATEGIC INCOME PORTFOLIO AS OF OCTOBER 31, 2003
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS OF STRATEGIC INCOME PORTFOLIO:
In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations and of
changes in net assets and the supplementary data present fairly, in all material
respects, the financial position of Strategic Income Portfolio (the "Portfolio")
at October 31, 2003, and the results of its operations, the changes in its net
assets, and the supplementary data for the periods presented, in conformity with
accounting principles generally accepted in the United States of America. These
financial statements and supplementary data (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at October 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 16, 2003
27
<Page>
EATON VANCE STRATEGIC INCOME FUND
MANAGEMENT AND ORGANIZATION
Fund Management. The Trustees of Eaton Vance Mutual Funds Trust (the Trust) and
Strategic Income Portfolio and High Income Portfolio (the Portfolios) are
responsible for the overall management and supervision of the Trust's and
Portfolios' affairs. The Trustees and officers of the Trust and the Portfolios
are listed below. Except as indicated, each individual has held the office shown
or other offices in the same company for the last five years. Trustees and
officers of the Trust and the Portfolios hold indefinite terms of office. The
"noninterested Trustees" consist of those Trustees who are not "interested
persons" of the Trust and the Portfolio, as that term is defined under the 1940
Act. The business address of each Trustee and officer is The Eaton Vance
Building, 255 State Street, Boston, Massachusetts 02109. As used below, "EVC"
refers to Eaton Vance Corp., "EV" refers to Eaton Vance, Inc., "EVM" refers to
Eaton Vance Management, "BMR" refers to Boston Management and Research and "EVD"
refers to Eaton Vance Distributors, Inc. EVC and EV are the corporate parent and
trustee, respectively, of EVM and BMR. EVD is the Fund's principal underwriter,
the Portfolios' placement agent and a wholly-owned subsidiary of EVM.
<Table>
<Caption>
NUMBER OF
POSITION(S) TERM OF PORTFOLIOS
WITH THE OFFICE AND IN FUND COMPLEX
NAME AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY
DATE OF BIRTH THE PORTFOLIOS SERVICE DURING PAST FIVE YEARS TRUSTEE(1) OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE(S)
Jessica M. Bibliowicz Trustee Since 1998 Chairman,President and 192 Director of National
11/28/59 Chief Executive Officer Financial Partners
of National Financial
Partners (financial
services company) (since
April 1999). President and
Chief Operating Officer
of John A. Levin & Co.
(registered investment
adviser) (July 1997 to
April 1999) and a Director
of Baker, Fentress&
Company, which owns John
A. Levin& Co. (July 1997
to April 1999).
Ms. Bibliowicz is an
interested person because
of her affiliation with a
brokerage firm.
James B. Hawkes Trustee Trustee of Chairman, President and 194 Director of EVC
11/9/41 the Trust Chief Executive Officer
since 1991; of BMR, EVC, EVM and EV;
of the Director of EV; Vice
Portfolios President and Director of
since 1992 EVD. Trustee and/or
officer of 194
registered investment
companies in the Eaton
Vance Fund Complex.
Mr. Hawkes is an interested
person because of his
positions with BMR, EVM,
EVC and EV, which are
affiliates of the Trust and
the Portfolios.
NONINTERESTED TRUSTEE(S)
Samuel L. Hayes, III Trustee Trustee of Jacob H. Schiff Professor 194 Director of Tiffany &
2/23/35 the Trust of Investment Banking Co. (specialty
since 1986; Emeritus, Harvard retailer) and
of the University Graduate Telect, Inc.
Portfolios School of Business (telecommunication
since 1993 Administration. services company)
William H. Park Trustee Since 2003 President and Chief 191 None
9/19/47 Executive Officer, Prizm
Capital Management, LLC
(investment management
firm) (since 2002).
Executive Vice President
and Chief Financial
Officer, United Asset
Management Corporation (a
holding company owning
institutional investment
management firms)
(1982-2001).
Ronald A. Pearlman Trustee Since 2003 Professor of Law, 191 None
7/10/40 Georgetown University Law
Center (since 1999). Tax
Partner Covington &
Burling, Washington, DC
(1991-2000).
</Table>
28
<Page>
<Table>
<Caption>
NUMBER OF
POSITION(S) TERM OF PORTFOLIOS
WITH THE OFFICE AND IN FUND COMPLEX
NAME AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY
DATE OF BIRTH THE PORTFOLIOS SERVICE DURING PAST FIVE YEARS TRUSTEE(1) OTHER DIRECTORSHIPS HELD
- ---------------------------------------------------------------------------------------------------------------------------------
NONINTERESTED
TRUSTEE(S) (CONTINUED)
Norton H. Reamer Trustee Trustee of President and Chief 194 None
9/21/35 the Trust Executive Officer of
since 1986; Asset Management Finance
of the Corp. (a specialty
Portfolios finance company serving
since 1993 the investment management
industry) (since
October 2003). President,
Unicorn Corporation (an
investment and financial
advisory services
company) (since
September 2000). Formerly,
Chairman, Hellman, Jordan
Management Co., Inc. (an
investment management
company) (2000-2003).
Formerly, Advisory
Director of Berkshire
Capital Corporation
(investment banking firm)
(2002-2003). Formerly,
Chairman of the Board,
United Asset Management
Corporation (a holding
company owning
institutional investment
management firms) and
Chairman, President and
Director, UAM Funds
(mutual funds)
(1980-2000).
Lynn A. Stout Trustee Since 1998 Professor of Law, 194 None
9/14/57 University of California
at Los Angeles School of
Law (since July 2001).
Formerly, Professor of
Law, Georgetown
University Law Center.
</Table>
PRINCIPAL OFFICERS WHO ARE NOT TRUSTEES
<Table>
<Caption>
POSITION(S) TERM OF
WITH THE OFFICE AND
NAME AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH THE PORTFOLIOS SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------------
Thomas E. Faust Jr. President of the Trust Since 2002 Executive Vice President of EVM, BMR, EVC and EV; Chief
5/31/58 Investment Officer of EVM and BMR and Director of EVC.
Chief Executive Officer of Belair Capital Fund LLC,
Belcrest Capital Fund LLC, Belmar Capital Fund LLC,
Belport Capital Fund LLC and Belrose Capital Fund LLC
(private investment companies sponsored by EVM). Officer
of 53 registered investment companies managed by EVM or
BMR.
William H. Ahern, Jr. Vice President of the Since 1995 Vice President of EVM and BMR. Officer of 35 registered
7/28/59 Trust investment companies managed by EVM or BMR.
Thomas J. Fetter Vice President of the Since 1997 Vice President of EVM and BMR. Trustee and President of
8/20/43 Trust The Massachusetts Health & Education Tax-Exempt Trust.
Officer of 127 registered investment companies managed by
EVM or BMR.
Thomas P. Huggins Vice President of the Since 2000 Vice President of EVM and BMR. Officer of 8 registered
3/7/66 High Income Portfolio investment companies managed by EVM or BMR.
Michael R. Mach Vice President of the Since 1999 Vice President of EVM and BMR. Previously, Managing
7/15/47 Trust Director and Senior Analyst for Robertson Stephens
(1998-1999). Officer of 25 registered investment
companies managed by EVM or BMR.
Robert B. MacIntosh Vice President of the Since 1998 Vice President of EVM and BMR. Officer of 127 registered
1/22/57 Trust investment companies managed by EVM or BMR.
Duncan W. Richardson Vice President of the Since 2001 Senior Vice President and Chief Equity Investment
10/26/57 Trust Officer of EVM and BMR. Officer of 41 registered
investment companies managed by EVM or BMR.
Walter A. Row, III Vice President of the Since 2001 Director of Equity Research and a Vice President of EVM
7/20/57 Trust and BMR. Officer of 22 registered investment companies
managed by EVM or BMR.
</Table>
29
<Page>
<Table>
<Caption>
POSITION(S) TERM OF
WITH THE OFFICE AND
NAME AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH THE PORTFOLIOS SERVICE DURING PAST FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------------
Judith A. Saryan Vice President of the Since 2003 Vice President of EVM and BMR. Previously, Portfolio
8/21/54 Trust Manager and Equity Analyst for State Street Global
Advisers (1980-1999). Officer of 24 registered investment
companies managed by EVM or BMR.
Susan Schiff Vice President of the Since 2002 Vice President of EVM and BMR. Officer of 26 registered
3/13/61 Trust and investment companies managed by EVM or BMR.
the Strategic
IncomePortfolio
Mark S. Venezia President of Since 2002(2) Vice President of EVM and BMR. Officer of 3 registered
5/23/49 Strategic Income investment companies managed by EVM or BMR.
Portfolio
Michael W. Weilheimer President of High Since 2002(2) Vice President of EVM and BMR. Officer of 10 registered
2/11/61 Income Portfolio investment companies managed by EVM or BMR.
Alan R. Dynner Secretary Since 1997 Vice President, Secretary and Chief Legal Officer of
10/10/40 BMR, EVM, EVD, EV and EVC. Officer of 194 registered
investment companies managed by EVM or BMR.
Barbara E. Campbell Treasurer of the Since 2002(2) Vice President of EVM and BMR. Officer of 194 registered
6/19/57 Portfolios investment companies managed by EVM or BMR.
James L. O'Connor Treasurer of the Trust Since 1989 Vice President of BMR, EVM and EVD. Officer of 115
4/1/45 registered investment companies managed by EVM or BMR.
</Table>
(1) Includes both master and feeder funds in a master-feeder structure.
(2) Prior to 2002, Mr. Venezia served as Vice President of Strategic Income
Portfolio since 1992, Mr. Weilheimer served as Vice President of High
Income Portfolio since 1995, Ms. Campbell served as Assistant Treasurer of
High Income Portfolio since 1993 and Strategic Income Portfolio since 1998.
The SAI for the Fund includes additional information about the Trustees and
officers of the Fund and the Portfolios and can be obtained without charge by
calling 1-800-225-6265.
30
<Page>
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics applicable to its Principal
Executive Officer, Principal Financial Officer and Principal Accounting Officer.
The registrant undertakes to provide a copy of such code of ethics to any person
upon request, without charge, by calling 1-800-262-1122.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
The registrant's Board has designated William H. Park, Samuel L. Hayes, III and
Norton H. Reamer, each an independent trustee, as its audit committee financial
experts. Mr. Park is a certified public accountant who is the President and
Chief Executive Officer of Prizm Capital Management, LLC (a fixed income
investment management firm). Previously, he served as Executive Vice President
and Chief Financial Officer of United Asset Management Corporation ("UAM") (a
holding company
<Page>
owning institutional investment management firms). Mr. Hayes is the Jacob H.
Schiff Professor of Investment Banking Emeritus of the Harvard University
Graduate School of Business Administration. Mr. Reamer is the President of
Unicorn Capital (an investment and financial advisory services company),
Chairman of Hellman, Jordan Management Co., Inc. (an investment management
company) and Advisory Director of Berkshire Capital Corporation (an investment
banking firm). Previously, Mr. Reamer was Chairman of the Board of UAM and
Chairman, President and Director of the UAM Funds (mutual funds).
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not required in this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not required in this filing.
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not required in this filing.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) It is the conclusion of the registrant's principal executive officer and
principal financial officer that the effectiveness of the registrant's current
disclosure controls and procedures (such disclosure controls and procedures
having been evaluated within 90 days of the date of this filing) provide
reasonable assurance that the information required to be disclosed by the
registrant has been recorded, processed, summarized and reported within the time
period specified in the Commission's rules and forms and that the information
required to be disclosed by the registrant has been accumulated and communicated
to the registrant's principal executive officer and principal financial officer
in order to allow timely decisions regarding required disclosure.
(b) There have been no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS
(a)(1) Registrant's Code of Ethics - Not applicable (please see Item 2).
(a)(2)(i) Treasurer's Section 302 certification.
(a)(2)(ii) President's Section 302 certification.
(b) Combined Section 906 certification.
<Page>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Strategic Income Portfolio
- --------------------------
By: /s/ Mark S. Venezia
---------------------------
Mark S. Venezia
President
Date: December 19, 2003
-----------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Barbara E. Campbell
---------------------------
Barbara E. Campbell
Treasurer
Date: December 19, 2003
-----------------
By: /s/ Mark S. Venezia
---------------------------
Mark S. Venezia
President
Date: December 19, 2003
-----------------