<Page>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number: 811- 02258
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Boston Income Portfolio
-----------------------
(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
--------------
(Registrant's Telephone Number)
September 30
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Date of Fiscal Year End
March 31, 2004
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Date of Reporting Period
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS
<Page>
BOSTON INCOME PORTFOLIO as of March 31, 2004
PORTFOLIO OF INVESTMENTS (Unaudited)
SENIOR, FLOATING RATE INTERESTS -- 1.2%(1)(2)
<Table>
<Caption>
PRINCIPAL
SECURITY AMOUNT VALUE
- --------------------------------------------------------------------------------------------------
CHEMICALS -- 0.5%
Huntsman Co., LLC, Term Loan A, Maturing 3/31/07 $ 4,760,694 $ 4,611,923
Huntsman Co., LLC, Term Loan B, Maturing 3/31/07 3,604,364 3,488,725
- --------------------------------------------------------------------------------------------------
$ 8,100,648
- --------------------------------------------------------------------------------------------------
FOODS -- 0.2%
New World Pasta, Term Loan B, Maturing 1/28/06 $ 4,675,457 $ 4,371,552
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$ 4,371,552
- --------------------------------------------------------------------------------------------------
UTILITIES -- 0.1%
Mirant Corp., Revolving Term Loan,
Maturing 7/16/06(3) $ 2,400,000 $ 1,365,600
- --------------------------------------------------------------------------------------------------
$ 1,365,600
- --------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.4%
IPCS Wireless, Revolving Term Loan,
Maturing 6/30/08(3)(4) $ 4,450,809 $ 4,068,929
IPCS Wireless, Term Loan B,
Maturing 6/30/08(3)(4) 2,392,310 2,187,050
- --------------------------------------------------------------------------------------------------
$ 6,255,979
- --------------------------------------------------------------------------------------------------
TOTAL SENIOR, FLOATING RATE INTERESTS
(IDENTIFIED COST $19,742,343) $ 20,093,779
- --------------------------------------------------------------------------------------------------
</Table>
CORPORATE BONDS & NOTES -- 89.9%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 1.0%
Armor Holdings, Inc., Sr. Sub. Notes, 8.25%, 8/15/13 $ 2,410 $ 2,681,125
BE Aerospace, Sr. Notes, 8.50%, 10/1/10 1,340 1,440,500
Dunlop Stand Aero Holdings, Sr. Notes,
11.875%, 5/15/09 9,450 10,111,500
Dunlop Stand Aero Holdings, Sr. Notes,
11.875%, 5/15/09(5) 2,550 2,728,500
- --------------------------------------------------------------------------------------------------
$ 16,961,625
- --------------------------------------------------------------------------------------------------
AIRLINES -- 2.4%
American Airlines, 7.80%, 10/1/06 $ 8,060 $ 7,586,272
American Airlines, 7.858%, 10/1/11 1,535 1,574,725
American Airlines, 8.608%, 4/1/11 695 667,361
AMR Corp., Debs., 9.00%, 8/1/12 9,845 8,442,087
Continental Airlines, 7.033%, 6/15/11 5,059 4,499,225
Continental Airlines, 7.08%, 11/1/04 87 85,573
Continental Airlines, 7.434%, 9/15/04 2,510 2,480,233
Continental Airlines, 8.00%, 12/15/05 715 668,525
Delta Air Lines, 7.70%, 12/15/05 2,550 2,180,250
Delta Air Lines, 8.30%, 12/15/29 1,125 652,500
Delta Air Lines, Series 00-1, 7.779%, 11/18/05 5,185 4,515,822
Delta Air Lines, Series 02-1, 7.779%, 1/2/12 847 687,847
Northwest Airlines, Inc., 8.875%, 6/1/06 2,415 2,101,050
Northwest Airlines, Inc., Sr. Notes, 9.875%, 3/15/07 3,960 3,405,600
- --------------------------------------------------------------------------------------------------
$ 39,547,070
- --------------------------------------------------------------------------------------------------
APPAREL -- 1.3%
GFSI, Inc., Sr. Sub. Notes, Series B, 9.625%, 3/1/07 $ 1,500 $ 1,462,500
J Crew Operating Corp., Sr. Sub. Notes, 10.375%,
10/15/07 5,355 5,435,325
Perry Ellis International, Inc., Sr. Sub. Notes, Series B,
8.875%, 9/15/13 2,345 2,450,525
Phillips Van-Heusen, Sr. Notes, 7.25%, 2/15/11(5) 1,740 1,809,600
Phillips Van-Heusen, Sr. Notes, 8.125%, 5/1/13 4,000 4,330,000
William Carter, Series B, 10.875%, 8/15/11 4,838 5,648,365
- --------------------------------------------------------------------------------------------------
$ 21,136,315
- --------------------------------------------------------------------------------------------------
AUTO AND PARTS -- 2.5%
CSK Auto, Inc., Sr. Notes, 7.00%, 1/15/14(5) $ 670 $ 676,700
Dana Corp., 10.125%, 3/15/10 8,195 9,506,200
Dura Operating Corp., Series D, 9.00%, 5/1/09 1,000 1,017,500
Keystone Automotive Operations, Inc., Sr. Sub.
Notes, 9.75%, 11/1/13(5) 1,355 1,490,500
Metaldyne Corp., 11.00%, 6/15/12 5,378 4,840,200
Metaldyne Corp., Sr. Notes, 10.00%, 11/1/13(5) 2,152 2,141,240
Rexnord Corp., 10.125%, 12/15/12 1,485 1,633,500
Tenneco Automotive, Inc., Series B, 11.625%, 10/15/09 9,415 10,238,812
Tenneco Automotive, Inc., Sr. Notes,
10.25%, 7/15/13(5) 4,610 5,324,550
TRW Automotive, Inc., Sr. Sub. Notes, 11.00%, 2/15/13 2,125 2,550,000
United Components, Inc., Sr. Sub. Notes,
9.375%, 6/15/13 1,895 2,056,075
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$ 41,475,277
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
14
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 8.9%
Adelphia Communications, Sr. Notes,
8.75%, 10/1/07(3) $ 1,375 $ 1,417,969
Adelphia Communications, Sr. Notes,
8.875%, 1/15/07(3) 6,472 6,771,330
Adelphia Communications, Sr. Notes,
9.50%, 3/1/05(3) 6,255 6,567,750
Adelphia Communications, Sr. Notes,
10.25%, 11/1/06(3) 9,155 8,788,800
Adelphia Communications, Sr. Notes, Series B,
9.25%, 10/1/02(3) 8,160 7,711,200
Atlantic Broadband Fincancial, Sr. Sub. Notes,
9.375%, 1/15/14(5) 940 928,250
Avalon Cable Holdings, LLC, Sr. Disc. Notes,
11.875%, (0% until 2003), 12/1/08 4,289 4,545,894
Cablevision Systems Corp., Sr. Notes,
5.65%, 4/1/09(5) 1,920 1,927,200
Cablevision Systems Corp., Sr. Notes,
8.00%, 4/15/12(5) 5,295 5,308,237
Charter Communication Holdings, Sr. Disc. Notes,
12.125%, (0% until 2007), 1/15/12 415 255,225
Charter Communication Holdings, Sr. Disc. Notes,
13.50%, (0% until 2007), 1/15/11 10,405 7,491,600
Charter Communication Holdings, Sr. Notes,
10.00%, 4/1/09 4,635 3,986,100
Charter Communication Holdings, Sr. Notes,
10.00%, 5/15/11 5,510 4,600,850
Charter Communication Holdings, Sr. Notes,
10.75%, 10/1/09 1,325 1,166,000
CSC Holdings, Inc., Sr. Notes, 6.75%, 4/15/12(5) 3,530 3,591,775
CSC Holdings, Inc., Sr. Notes, 7.875%, 12/15/07 15 16,200
CSC Holdings, Inc., Sr. Sub. Debs., 9.875%, 4/1/23 1,000 1,047,500
CSC Holdings, Inc., Sr. Sub. Notes, 9.875%, 2/15/13 2,925 3,056,625
CSC Holdings, Inc., Sr. Sub. Notes, 10.50%, 5/15/16 6,085 7,058,600
Dex Media East LLC/FIN, 9.875%, 11/15/09 1,175 1,327,750
Dex Media West LLC, Sr. Sub. Notes,
9.875%, 8/15/13(5) 10,010 11,161,150
DirecTV Holdings, Sr. Notes, 8.375%, 3/15/13 1,415 1,620,175
Echostar DBS Corp., Sr. Notes, 9.125%, 1/15/09 231 262,185
Insight Communications, Sr. Disc. Notes,
12.25%, (0% until 2006) 2/15/11 10,770 9,154,500
LBI Media, Inc., Sr. Disc. Notes, 0.00%, 10/15/13 3,320 2,344,750
Mediacom LLC/Capital Corp., Sr. Notes,
9.50%, 1/15/13 16 15,920
Muzak Holdings LLC, 9.875%, 3/15/09 2,185 2,116,719
Muzak Holdings LLC, Sr. Disc. Notes, 13.00%,
(0% until 2004), 3/15/10 2,812 2,713,580
Muzak LLC/Muzak Finance, Sr. Notes,
10.00%, 2/15/09 $ 4,135 $ 4,305,569
Nexstar Finance Holdings LLC, Inc., 12.00%, 4/1/08 605 683,650
Nexstar Finance Holdings LLC, Inc., Sr. Disc. Notes,
11.375%, (0% until 2008), 4/1/13 6,950 5,143,000
Nextmedia Operating, Inc., 10.75%, 7/1/11 1,475 1,659,375
Paxson Communications Corp., 10.75%, 7/15/08 3,340 3,515,350
Paxson Communications Corp., 12.25%,
(0% until 2006), 1/15/09 2,275 1,945,125
Pegasus Communications Corp., Sr. Notes,
9.625%, 10/15/05 280 250,950
Pegasus Communications Corp., Sr. Notes,
9.75%, 12/1/06 640 567,200
Pegasus Communications Corp., Sr. Notes,
11.25%, 1/15/10(5) 7,175 5,856,594
Pegasus Communications Corp., Sr. Notes, 12.50%,
8/1/07 1,035 915,975
Pegasus Satellite, 12.375%, 8/1/06 3,745 3,323,687
Telewest Communication PLC, Sr. Debs., 11.00%,
10/1/07(3) 7,595 4,860,800
Telewest Communication PLC, Sr. Disc. Notes, 9.25%,
(0% until 2004), 4/15/09 6,860 3,567,200
Young Broadcasting, Inc., Sr. Sub. Notes, 8.75%,
1/15/14(5) 2,625 2,716,875
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$ 146,265,184
- --------------------------------------------------------------------------------------------------
BUILDING AND CONSTRUCTION - MISCELLANEOUS -- 0.9%
Dayton Superior Corp., Sr. Notes,
10.75%, 9/15/08(5) $ 5,570 $ 5,764,950
Interline Brands, Inc., Sr. Sub. Notes,
11.50%, 5/15/11 5,080 5,511,800
Ply Gem Industries, Inc., Sr. Sub. Notes,
9.00%, 2/15/12(5) 3,935 3,974,350
- --------------------------------------------------------------------------------------------------
$ 15,251,100
- --------------------------------------------------------------------------------------------------
BUILDING MATERIALS -- 0.7%
Koppers, Inc., Sr. Notes, 9.875%, 10/15/13(5) $ 75 $ 82,875
Norcraft Companies LP/Norcroft Finance Corp.,
Sr. Sub. Notes, 9.00%, 11/1/11(5) 1,010 1,080,700
Nortek Holdings, Inc., Sr. Notes, (0% until 2007),
10.00%, 5/15/11(5) 5,740 4,391,100
Owens Corning, 7.50%, 8/1/18(3) 3,380 1,499,875
Owens Corning, 7.70%, 5/1/08(3) 3,155 1,400,031
US Concrete, Inc., Sr. Sub. Notes, 8.375%, 4/1/14(5) 2,525 2,588,125
- --------------------------------------------------------------------------------------------------
$ 11,042,706
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
15
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 0.4%
Norcross Safety Products LLC/Norcross Capital Corp.,
Sr. Sub. Notes, Series B, 9.875%, 8/15/11 $ 5,920 $ 6,467,600
- --------------------------------------------------------------------------------------------------
$ 6,467,600
- --------------------------------------------------------------------------------------------------
BUSINESS SERVICES - MISCELLANEOUS -- 1.8%
Advanstar Communciations, Sr. Sub. Notes, Series B,
12.00%, 2/15/11 $ 2,000 $ 2,132,500
Advanstar Communications, 10.75%, 8/15/10 8,085 8,923,819
Affinity Group, Inc., Sr. Sub. Notes, 9.00%, 2/15/12(5) 4,955 5,301,850
Interface, Inc., Sr. Sub. Notes, 9.50%, 2/1/14(5) 965 960,175
Mobile Mini, Inc., 9.50%, 7/1/13 1,835 2,009,325
R.H. Donnelley Finance Corp., 10.875%, 12/15/12 1,430 1,712,425
R.H. Donnelley Finance Corp., Sr. Notes,
8.875%, 12/15/10(5) 5 5,650
R.H. Donnelley Finance Corp., Sr. Sub. Notes,
10.875%, 12/15/12(5) 4,290 5,137,275
Synagro Technologies, Inc., Sr. Sub. Notes,
9.50%, 4/1/09 1,060 1,152,750
Williams Scotsman, Inc., Sr. Notes, 10.00%, 8/15/08 1,670 1,820,300
- --------------------------------------------------------------------------------------------------
$ 29,156,069
- --------------------------------------------------------------------------------------------------
CHEMICALS -- 5.8%
Acetex Corp., Sr. Notes, 10.875%, 8/1/09 $ 1,560 $ 1,716,000
Avecia Group PLC, 11.00%, 7/1/09 5,796 4,955,580
Equistar Chemical, Sr. Notes, 10.625%, 5/1/11 12,550 13,585,375
Hercules, Inc., 11.125%, 11/15/07 3,390 4,084,950
Hercules, Inc., Sr. Sub. Notes, 6.75%, 10/15/29(5) 6,490 6,522,450
Huntsman Adventure Materials, Sr. Notes,
11.00%, 7/15/10(5) 850 964,750
Huntsman International LLC, Sr. Notes,
9.875%, 3/1/09 2,010 2,221,050
Huntsman LLC, 11.625%, 10/15/10 2,260 2,384,300
IMC Global, Inc., Sr. Notes, 10.875%, 8/1/13 7,065 8,884,237
Kraton Polymers LLC/Capital Corp., Sr. Sub Notes,
8.125%, 1/15/14(5) 2,265 2,423,550
Lyondell Chemical Co., 9.50%, 12/15/08 925 950,437
Lyondell Chemical Co., 9.50%, 12/15/08 2,780 2,856,450
Lyondell Chemical Co., Series B, 9.875%, 5/1/07 9,735 10,148,737
Methanex Corp., Sr. Notes, 8.75%, 8/15/12 2,330 2,679,500
Nalco Co., Sr. Notes, 7.75%, 11/15/11(5) 4,275 4,488,750
Nalco Co., Sr. Sub. Notes, 8.875%, 11/15/13(5) 4,620 4,839,450
Nalco Finance Holdings, Inc., Sr. Notes,
(0% until 2009), 0.00%, 2/1/14(5) 5,575 3,345,000
Noveon, Inc., 11.00%, 2/28/11 1,140 1,311,000
OM Group, Inc., 9.25%, 12/15/11 $ 12,810 $ 13,258,350
Rockwood Specialties Group, Sr. Sub. Notes,
10.625%, 5/15/11 2,170 2,408,700
Texas Petrochemical Corp., Sr. Sub. Notes,
11.125%, 7/1/06(3) 2,330 920,350
- --------------------------------------------------------------------------------------------------
$ 94,948,966
- --------------------------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.2%
DigitalNet, Inc., Sr. Notes, 9.00%, 7/15/10 $ 2,710 $ 2,936,962
- --------------------------------------------------------------------------------------------------
$ 2,936,962
- --------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 1.2%
American Achievement Corp., Sr. Sub. Notes,
8.25%, 4/1/12(5) $ 1,080 $ 1,115,100
Amscan Holdings, Inc., Sr. Sub. Notes,
9.875%, 12/15/07 3,600 3,739,500
Bombardier Recreational Products, Inc., Sr. Sub. Notes,
8.375%, 12/15/13(5) 2,265 2,338,612
Fedders North America, Sr. Notes, 9.875%, 3/1/14(5) 3,540 3,455,925
FTD, Inc., Sr. Sub. Notes, 7.75%, 2/15/14(5) 1,050 1,055,250
Hockey Co., 11.25%, 4/15/09 2,030 2,278,675
Jostens Holding Corp., Sr. Disc. Notes,
0.00%, 12/1/13 1,730 1,141,800
Rayovac Corp., Sr. Sub. Notes, 8.50%, 10/1/13 2,340 2,533,050
Sealy Mattress Co., Sr. Sub. Notes,
8.25%, 6/15/14(5) 2,120 2,130,600
- --------------------------------------------------------------------------------------------------
$ 19,788,512
- --------------------------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 2.4%
Consolidated Container Co., Sr. Sub Notes,
10.125%, 7/15/09 $ 2,025 $ 1,640,250
Crown Euro Holdings SA, 9.50%, 3/1/11 1,545 1,741,987
Crown Euro Holdings SA, 10.875%, 3/1/13 13,895 16,257,150
Graham Packaging Co., 8.75%, 1/15/08 820 844,600
Graham Packaging Co., Sr. Disc. Notes, Series B,
10.75%, 1/15/09 1,400 1,452,500
Jefferson Smurfit, 8.25%, 10/1/12 3,120 3,416,400
Pliant Corp., 11.125%, 9/1/09 4,500 4,725,000
Pliant Corp., Sr. Disc. Notes, 0.00%, 6/15/09(5) 3,980 3,203,900
Solo Cup Co., Sr. Sub. Notes, 8.50%, 2/15/14(5) 4,065 4,232,681
US Can Corp., Sr. Notes, 10.875%, 7/15/10 2,155 2,284,300
- --------------------------------------------------------------------------------------------------
$ 39,798,768
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
16
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
DRUGS -- 0.2%
Valeant Pharmaceuticals International, Sr. Notes,
7.00%, 12/15/11(5) $ 2,435 $ 2,526,312
- --------------------------------------------------------------------------------------------------
$ 2,526,312
- --------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.4%
Danka Business Systems, Sr. Notes, 11.00%, 6/15/10 $ 3,675 $ 3,766,875
Hexcel Corp., 9.875%, 10/1/08 1,130 1,262,775
Hexcel Corp., Sr. Sub. Notes, 9.75%, 1/15/09 930 971,850
- --------------------------------------------------------------------------------------------------
$ 6,001,500
- --------------------------------------------------------------------------------------------------
ELECTRONICS - INSTRUMENTS -- 0.1%
Wesco Distribution, Inc., 9.125%, 6/1/08 $ 1,000 $ 1,030,000
- --------------------------------------------------------------------------------------------------
$ 1,030,000
- --------------------------------------------------------------------------------------------------
ENERGY SERVICES -- 0.8%
Hornbeck Leevac Marine Service, Sr. Notes,
10.625%, 8/1/08 $ 1,347 $ 1,488,435
Port Arthur Finance Corp., 12.50%, 1/15/09 10,095 11,962,907
- --------------------------------------------------------------------------------------------------
$ 13,451,342
- --------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 3.6%
AMF Bowling Worldwide, Sr. Sub. Notes,
10.00%, 3/1/10(5) $ 2,795 $ 2,906,800
Carmike Cinemas, Sr. Sub. Notes, 7.50%, 2/15/14(5) 5,400 5,521,500
Hollywood Entertainment, 9.625%, 3/15/11 4,075 4,747,375
Intrawest Corp., Sr. Notes, 7.50%, 10/15/13 5,010 5,197,875
Royal Caribbean Cruises, Debs., 7.50%, 10/15/27 6,970 7,109,400
Royal Caribbean Cruises, Sr. Debs., 7.25%, 3/15/18 1,660 1,743,000
Royal Caribbean Cruises, Sr. Notes, 8.00%, 5/15/10 4,435 5,033,725
Royal Caribbean Cruises, Sr. Notes, 8.75%, 2/2/11 8,660 10,175,500
Six Flags, Inc., Sr. Notes, 8.875%, 2/1/10 4,382 4,546,325
Six Flags, Inc., Sr. Notes, 9.50%, 2/1/09 335 355,100
Six Flags, Inc., Sr. Notes, 9.625%, 6/1/14(5) 6,835 7,296,362
Six Flags, Inc., Sr. Notes, 9.75%, 4/15/13 2,775 2,962,312
True Temper Sports, Inc., Sr. Sub. Notes,
8.375%, 9/15/11(5) 1,055 1,081,375
- --------------------------------------------------------------------------------------------------
$ 58,676,649
- --------------------------------------------------------------------------------------------------
FINANCIAL SERVICES -- 0.1%
Poster Financial Group, Inc., 8.75%, 12/1/11(5) $ 2,075 $ 2,189,125
- --------------------------------------------------------------------------------------------------
$ 2,189,125
- --------------------------------------------------------------------------------------------------
FOOD AND BEVERAGES -- 0.2%
Tabletop Holdings, Inc., Sr. Sub. Notes, (0% until 2008),
0.00%, 5/15/14(5) $ 7,130 $ 3,885,850
- --------------------------------------------------------------------------------------------------
$ 3,885,850
- --------------------------------------------------------------------------------------------------
FOOD, BEVERAGES AND TOBACCO -- 0.2%
WH Holdings Ltd. and WH Capital Corp., Sr. Notes,
9.50%, 4/1/11(5) $ 2,460 $ 2,583,000
- --------------------------------------------------------------------------------------------------
$ 2,583,000
- --------------------------------------------------------------------------------------------------
FOODS -- 2.8%
American Seafood Group LLC, 10.125%, 4/15/10 $ 6,115 $ 7,338,000
B&G Foods, Inc., 9.625%, 8/1/07 115 118,737
Burns Philip Capital, Sr. Notes, 9.50%, 11/15/10(5) 2,830 3,042,250
Dole Foods Co., Sr. Notes, 8.875%, 3/15/11 2,625 2,874,375
Luigino's, Inc., Sr. Sub. Notes, 10.00%, 2/1/06 1,675 1,721,062
Merisant Co., Sr. Notes, 9.50%, 7/15/13(5) 4,040 3,999,600
Michael Foods, Sr. Sub. Notes, 8.00%, 11/15/13(5) 4,110 4,377,150
Pinnacle Foods Holdings Corp., Sr. Sub. Notes,
8.25%, 12/1/13(5) 1,730 1,846,775
Pinnacle Foods Holdings Corp., Sr. Sub. Notes,
8.25%, 12/1/13(5) 5,050 5,390,875
Premier International Foods, Sr. Notes,
12.00%, 9/1/09 4,273 4,636,205
Reddy Ice Group, Inc., Sr. Sub. Notes,
8.875%, 8/1/11 2,295 2,472,862
UAP Holding Corp., Sr. Disc. Notes, (0% until 2008),
0.00%, 7/15/12(5) 8,265 5,578,875
United Agricultural Products, Sr. Notes,
8.25%, 12/15/11(5) 2,265 2,386,744
- --------------------------------------------------------------------------------------------------
$ 45,783,510
- --------------------------------------------------------------------------------------------------
GAMING -- 2.6%
Chukchansi EDA, Sr. Notes, 14.50%, 6/15/09(5) $ 6,630 $ 7,806,825
Global Cash Access LLC/Global Cash Finance Corp.,
Sr. Sub. Notes, 8.75%, 3/15/12(5) 1,055 1,102,475
Isle of Capri Casinos, Sr. Sub. Notes, 7.00%, 3/1/14(5) 1,535 1,550,350
OED Corp./Diamond Jo LLC, 8.75%, 4/15/12(5) 5,765 5,721,762
Penn National Gaming, Inc., 11.125%, 3/1/08 4,010 4,521,275
Trump Holdings and Funding, Sr. Notes,
11.625%, 3/15/10 6,940 6,974,700
Universal City Development, Sr. Notes, 11.75%, 4/1/10 13,335 15,585,281
- --------------------------------------------------------------------------------------------------
$ 43,262,668
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
17
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
HEALTH AND PERSONAL CARE -- 0.0%
Elizabeth Arden, Inc., Sr. Sub. Notes,
7.75%, 1/15/14(5) $ 700 $ 736,750
- --------------------------------------------------------------------------------------------------
$ 736,750
- --------------------------------------------------------------------------------------------------
HEALTH SERVICES -- 3.1%
Ardent Health Services, Sr. Sub. Notes,
10.00%, 8/15/13 $ 5,075 $ 5,658,625
Concentra Operating Corp., Sr. Notes, 9.50%, 8/15/10 1,595 1,778,425
Healthsouth Corp., 7.625%, 6/1/12 2,335 2,305,812
Healthsouth Corp., Sr. Notes, 8.375%, 10/1/11 7,005 6,987,487
Magellan Health Services, Inc., Sr. Notes, Series A,
9.375%, 11/15/08 2,423 2,592,896
National Nephrology Association, Sr. Sub. Notes,
9.00%, 11/1/11(5) 2,675 3,116,375
Pacificare Health System, 10.75%, 6/1/09 3,354 3,957,720
Quintiles Transnational, Sr. Sub. Notes,
10.00%, 10/1/13(5) 10,060 10,512,700
Rotech Healthcare, Inc., 9.50%, 4/1/12 3,385 3,655,800
Vanguard Health Systems, 9.75%, 8/1/11 9,280 10,045,600
- --------------------------------------------------------------------------------------------------
$ 50,611,440
- --------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.7%
New Asat (Finance) Ltd., Sr. Notes,
9.25%, 2/1/11(5) $ 3,715 $ 4,002,912
Stratus Technologies, Inc., Sr. Notes,
10.375%, 12/1/08(5) 7,095 7,165,950
- --------------------------------------------------------------------------------------------------
$ 11,168,862
- --------------------------------------------------------------------------------------------------
LODGING -- 0.2%
Felcor Lodging, 10.00%, 9/15/08 $ 400 $ 428,000
Host Marriott L.P., 9.25%, 10/1/07 1,200 1,350,000
Host Marriott L.P., Series I, 9.50%, 1/15/07 1,885 2,120,625
- --------------------------------------------------------------------------------------------------
$ 3,898,625
- --------------------------------------------------------------------------------------------------
LODGING AND GAMING -- 3.6%
Ameristar Casinos, Inc., 10.75%, 2/15/09 $ 2,110 $ 2,450,237
Boyd Gaming Corp., Sr. Sub. Notes, 8.75%, 4/15/12 2,400 2,658,000
Hollywood Casino Shreveport, First Mortgage Bonds,
13.00%, 8/1/06(3) 870 622,050
Inn of the Mountain Gods, Sr. Notes,
12.00%, 11/15/10(5) 8,100 8,808,750
Majestic Star Casino LLC, 9.50%, 10/15/10 5,850 6,201,000
Mandalay Resort Group, Sr. Sub. Notes,
10.25%, 8/1/07 860 1,016,950
MGM Grand, Inc., 9.75%, 6/1/07 $ 1,150 $ 1,334,000
MTR Gaming Group, Series B, 9.75%, 4/1/10 2,570 2,737,050
Park Place Entertainment, Sr. Sub. Notes,
8.875%, 9/15/08 140 160,300
Premier Entertainment Biloxi LLC/Premier Finance
Biloxi Corp., 10.75%, 2/1/12(5) 705 764,925
Sun International Hotels, Sr. Sub. Notes,
8.875%, 8/15/11 6,360 7,091,400
Venetian Casino/Las Vegas Sands, 11.00%, 6/15/10 10,205 11,786,775
Waterford Gaming LLC, Sr. Notes, 8.625%, 9/15/12(5) 12,691 13,642,825
- --------------------------------------------------------------------------------------------------
$ 59,274,262
- --------------------------------------------------------------------------------------------------
MACHINERY -- 1.6%
Case New Holland, Inc., Sr. Notes, 9.25%, 8/1/11(5) $ 4,450 $ 5,050,750
Flowserve Corp., 12.25%, 8/15/10 2,422 2,803,465
Manitowoc Co., Inc. (The), 10.50%, 8/1/12 1,180 1,357,000
Terex Corp., 9.25%, 7/15/11 1,975 2,221,875
Terex Corp., 10.375%, 4/1/11 6,920 7,923,400
Thermadyne Holdings Corp., Sr. Sub. Notes,
9.25%, 2/1/14(5) 6,870 7,041,750
- --------------------------------------------------------------------------------------------------
$ 26,398,240
- --------------------------------------------------------------------------------------------------
MANUFACTURING -- 2.3%
Amsted Industries, Inc., Sr. Notes,
10.25%, 10/15/11(5) $ 9,085 $ 10,311,475
Avondale Mills, Inc., Sr. Sub. Notes, 10.25%, 7/1/13 2,835 1,842,750
Dresser, Inc., 9.375%, 4/15/11 4,170 4,566,150
General Cable Corp., Sr. Notes, 9.50%, 11/15/10(5) 2,075 2,292,875
Motors and Gears, Inc., Sr. Notes, 10.75%, 11/15/06 1,275 1,102,875
Oxford Industries, Inc., Sr. Notes, 8.875%, 6/1/11(5) 5,805 6,269,400
Roller Bearing Holdings Co., Sr. Disc. Notes,
13.00%, 6/15/09(5) 3,467 3,414,995
Tekni-Plex, Inc., Series B, 12.75%, 6/15/10 310 326,275
Tekni-Plex, Inc., Sr. Notes, 8.75%, 11/15/13(5) 2,410 2,410,000
Trinity Industries, Inc., Sr. Notes, 6.50%, 3/15/14(5) 4,295 4,316,475
Venture Holding Trust, Sr. Notes, 9.50%, 7/1/05(3) 3,683 165,735
- --------------------------------------------------------------------------------------------------
$ 37,019,005
- --------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 0.7%
Inverness Medical Innovations, Sr. Sub. Notes,
8.75%, 2/15/12(5) $ 3,780 $ 3,855,600
Medquest, Inc., 11.875%, 8/15/12 6,770 7,751,650
- --------------------------------------------------------------------------------------------------
$ 11,607,250
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
18
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
METALS - STEEL -- 0.2%
Ispat Inland ULC, Sr. Notes, 9.75%, 4/1/14(5) $ 3,595 $ 3,756,775
- --------------------------------------------------------------------------------------------------
$ 3,756,775
- --------------------------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.8%
Lucent Technologies, Inc., Debs., 6.45%, 3/15/29 $ 10,800 $ 9,180,000
Lucent Technologies, Inc., Debs., 6.50%, 1/15/28 4,565 3,868,837
- --------------------------------------------------------------------------------------------------
$ 13,048,837
- --------------------------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 5.9%
ANR Pipeline Co., 8.875%, 3/15/10 $ 1,575 $ 1,756,125
DI Industries, Inc., (Grey Wolf, Inc.), Sr. Notes,
8.875%, 7/1/07 274 282,563
Dynegy Holdings, Inc., Sr. Notes, 6.875%, 4/1/11 12,920 11,305,000
Dynegy Holdings, Inc., Sr. Notes, 8.75%, 2/15/12 3,420 3,249,000
Dynegy Holdings, Inc., Sr. Notes, 10.125%, 7/15/13(5) 13,695 15,098,738
Gulfterra Energy Partner, 10.625%, 12/1/12 875 1,102,500
Gulfterra Energy Partner, Series B, 8.50%, 6/1/10 2,425 2,813,000
Hanover Compress Co., Sr. Notes, 8.625%, 12/15/10 2,030 2,192,400
Hanover Compressor Co., Sub. Notes, 0.00%, 3/31/07 6,635 5,142,125
NGC Corp., Sr. Debs., 7.625%, 10/15/26 850 692,750
Northwest Pipeline Corp., 8.125%, 3/1/10 2,490 2,763,900
Parker Drilling Co., Sr. Notes, 9.625%, 10/1/13 1,175 1,295,438
Petro Stopping Centers LP / Petro Financial Corp.,
Sr. Notes, 9.00%, 2/15/12(5) 2,690 2,784,150
Premcor Refining Group, Sr. Notes, 9.50%, 2/1/13 4,775 5,586,750
Premcor Refining Group, Sr. Sub. Notes, 7.75%, 2/1/12 1,710 1,881,000
Ram Energy, Inc., Sr. Notes, 11.50%, 2/15/08 3,459 2,957,445
SESI, LLC, 8.875%, 5/15/11 8,912 9,758,640
Southern Natural Gas, 8.00%, 3/1/32 3,345 3,453,713
Southern Natural Gas, 8.875%, 3/15/10 1,180 1,315,700
Transmontaigne, Inc., Sr. Sub. Notes, 9.125%, 6/1/10(5) 8,000 8,600,000
Williams Cos., Inc., Sr. Notes, 8.625%, 6/1/10 10,710 11,834,550
- --------------------------------------------------------------------------------------------------
$ 95,865,487
- --------------------------------------------------------------------------------------------------
OIL AND GAS - EXPLORATION AND PRODUCTION -- 0.8%
Continental Resources, 10.25%, 8/1/08 $ 6,005 $ 6,185,150
Encore Acquisition Co., Sr. Sub. Notes, 6.25%,
4/15/14(5) 1,410 1,429,388
Grey Wolf, Inc., Series C, 8.875%, 7/1/07 158 162,938
Petrobras International Finance, Sr. Notes,
9.125%, 7/2/13 2,255 2,401,575
Plains E&P Co., 8.75%, 7/1/12 2,580 2,915,400
- --------------------------------------------------------------------------------------------------
$ 13,094,451
- --------------------------------------------------------------------------------------------------
OIL AND GAS - REFINING -- 0.0%
Western Gas Resources, 10.00%, 6/15/09 $ 300 $ 318,000
- --------------------------------------------------------------------------------------------------
$ 318,000
- --------------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 2.1%
Ainsworth Lumber, Sr. Notes, 6.75%, 3/15/14(5) $ 1,050 $ 1,060,500
Caraustar Industries, Inc., Sr. Sub. Notes,
9.875%, 4/1/11 1,350 1,356,750
Georgia-Pacific Corp., 9.375%, 2/1/13 4,495 5,315,338
Georgia-Pacific Corp., 9.50%, 12/1/11 5,520 6,679,200
Longview Fibre Co., Sr. Sub. Notes,
10.00%, 1/15/09 2,535 2,763,150
MDP Acquisitions/JSG Funding PLC, Sr. Notes,
9.625%, 10/1/12 5,465 6,202,775
Newark Group, Inc., Sr. Sub. Notes,
9.75%, 3/15/14(5) 5,020 4,969,800
Norske Skog Canada Ltd., Sr. Notes,
7.375%, 3/1/14(5) 5,105 5,283,675
- --------------------------------------------------------------------------------------------------
$ 33,631,188
- --------------------------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 0.5%
American Color Graphics, 10.00%, 6/15/10 $ 175 $ 154,875
Merrill Corp., Series A, (PIK), 12.00%, 5/1/09 1,477 1,388,521
Merrill Corp., Series B, (PIK), 12.00%, 5/1/09 6,443 6,055,995
Xerox Corp., Sr. Notes, 7.125%, 6/15/10 65 69,225
- --------------------------------------------------------------------------------------------------
$ 7,668,616
- --------------------------------------------------------------------------------------------------
PRINTING OR PUBLISHING - DIVERSIFICATION -- 0.8%
Hollinger Participation, Sr. Notes, (PIK),
12.125%, 11/15/10(5) $ 11,171 $ 12,944,037
- --------------------------------------------------------------------------------------------------
$ 12,944,037
- --------------------------------------------------------------------------------------------------
PUBLISHING -- 1.1%
American Media, Inc., Series B, 10.25%, 5/1/09 $ 3,366 $ 3,542,715
Canwest Media, Inc., Sr. Sub. Notes, 10.625%,
5/15/11 5,050 5,757,000
CBD Media/CBD Finance, 8.625%, 6/1/11 2,350 2,590,875
Liberty Group Operating, 9.375%, 2/1/08 5,275 5,387,094
Reader's Digest Association, Inc., Sr. Notes,
6.50%, 3/1/11(5) 1,400 1,449,000
- --------------------------------------------------------------------------------------------------
$ 18,726,684
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
19
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
REITS -- 0.7%
CB Richard Ellis Services, Inc., Sr. Notes,
9.75%, 5/15/10 $ 2,150 $ 2,424,125
CB Richard Ellis Services, Inc., Sr. Sub. Notes,
11.25%, 6/15/11 6,000 6,810,000
Omega Healthcare Investors, Inc., Sr. Notes,
7.00%, 4/1/14(5) 1,765 1,817,950
- --------------------------------------------------------------------------------------------------
$ 11,052,075
- --------------------------------------------------------------------------------------------------
RETAIL -- 0.8%
Couche-Tard US, Sr. Sub. Notes, 7.50%, 12/15/13(5) $ 3,400 $ 3,655,000
PCA LLC/PCA Finance Corp., Sr. Notes,
11.875%, 8/1/09 8,302 9,215,220
- --------------------------------------------------------------------------------------------------
$ 12,870,220
- --------------------------------------------------------------------------------------------------
RETAIL - APPAREL -- 0.5%
Mothers Work, Inc., 11.25%, 8/1/10 $ 3,750 $ 4,050,000
Payless Shoesource, Inc., Sr. Sub. Notes,
8.25%, 8/1/13 3,620 3,538,550
- --------------------------------------------------------------------------------------------------
$ 7,588,550
- --------------------------------------------------------------------------------------------------
RETAIL - FOOD AND DRUG -- 0.1%
General Nutrition Center, Sr. Sub. Notes,
8.50%, 12/1/10(5) $ 1,730 $ 1,825,150
- --------------------------------------------------------------------------------------------------
$ 1,825,150
- --------------------------------------------------------------------------------------------------
RETAIL - GENERAL -- 0.6%
Home Interiors & Gifts, 10.125%, 6/1/08 $ 2,570 $ 2,614,975
Jafra Cosmetics International, 10.75%, 5/15/11 2,125 2,422,500
Jo-Ann Stores, Inc., Sr. Sub. Notes, 7.50%, 3/1/12(5) 1,430 1,462,175
Shopko Stores, Inc., Sr. Notes, 9.25%, 3/15/22 2,785 2,729,300
- --------------------------------------------------------------------------------------------------
$ 9,228,950
- --------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.7%
AMI Semiconductor, Inc., 10.75%, 2/1/13 $ 2,786 $ 3,266,585
Amkor Technologies, Inc., 5.75%, 6/1/06 1,195 1,196,494
Amkor Technologies, Inc., Sr. Notes,
9.25%, 2/15/08 325 359,938
Amkor Technologies, Inc., Sr. Sub. Notes,
10.50%, 5/1/09 3,325 3,507,875
Chippac International Ltd., 12.75%, 8/1/09 5,560 6,088,200
ON Semiconductor Corp., 13.00%, 5/15/08 7,936 9,642,240
SCG Holding & Semiconductor Corp., 12.00%, 8/1/09 3,415 3,705,275
- --------------------------------------------------------------------------------------------------
$ 27,766,607
- --------------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 1.6%
Inmarsat Finance PLC, 7.625%, 6/30/12(5) $ 2,095 $ 2,194,513
Marconi Corp. PLC, Series A, 8.00%, 4/30/08(5) 9,900 10,772,040
Nortel Networks Ltd., 4.25%, 9/1/08 12,680 12,949,450
- --------------------------------------------------------------------------------------------------
$ 25,916,003
- --------------------------------------------------------------------------------------------------
TELEPHONE - INTEGRATED -- 0.2%
Cincinnati Bell, Inc., Sr. Sub. Notes, 8.375%, 1/15/14 $ 2,570 $ 2,531,450
Level 3 Communications, Inc., Sr. Disc. Notes,
(0% until 2005), 0.00%, 3/15/10 1,090 844,750
- --------------------------------------------------------------------------------------------------
$ 3,376,200
- --------------------------------------------------------------------------------------------------
TOBACCO -- 0.2%
North Atlantic Trading Co., Sr. Notes,
9.25%, 3/1/12(5) $ 3,680 $ 3,698,400
- --------------------------------------------------------------------------------------------------
$ 3,698,400
- --------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.4%
OMI Corp., Sr. Notes, 7.625%, 12/1/13 $ 4,160 $ 4,336,800
Petroleum Helicopters, Series B, 9.375%, 5/1/09 205 226,269
Quality Distribution LLC/QD Capital Corp.,
9.00%, 11/15/10(5) 1,420 1,434,200
- --------------------------------------------------------------------------------------------------
$ 5,997,269
- --------------------------------------------------------------------------------------------------
UTILITIES -- 3.0%
El Paso Corp., Sr. Notes, 7.00%, 5/15/11 $ 1,080 $ 931,500
Illinois Power, 7.50%, 6/15/09 3,190 3,620,650
National Waterworks, Inc., Series B, 10.50%, 12/1/12 2,600 2,951,000
NRG Energy, Inc., Sr. Notes, 8.00%, 12/15/13(5) 22,015 22,840,563
Orion Power Holdings, Inc., Sr. Notes, 12.00%, 5/1/10 14,185 17,624,863
Reliant Resources, Inc., 9.25%, 7/15/10 1,480 1,613,200
- --------------------------------------------------------------------------------------------------
$ 49,581,776
- --------------------------------------------------------------------------------------------------
UTILITY - ELECTRIC POWER GENERATION -- 4.3%
AES Corp., 10.00%, 7/15/05(5) $ 1,214 $ 1,250,886
AES Corp., Sr. Notes, 8.75%, 6/15/08 5,816 6,135,880
AES Corp., Sr. Notes, 8.75%, 5/15/13(5) 6,180 6,828,900
AES Corp., Sr. Notes, 8.875%, 2/15/11 322 345,345
AES Corp., Sr. Notes, 9.00%, 5/15/15(5) 1,890 2,095,538
AES Corp., Sr. Notes, 9.375%, 9/15/10 4,521 4,950,495
AES Corp., Sr. Sub. Notes, 8.50%, 11/1/07 4,720 4,838,000
AES Eastern Energy, Series 99-A, 9.00%, 1/2/17 3,058 3,503,372
Calpine Corp., 8.75%, 7/15/13(5) 6,655 6,122,600
</Table>
See notes to financial statements
20
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
UTILITY - ELECTRIC POWER GENERATION (CONTINUED)
Calpine Corp., Sr. Notes, 7.625%, 4/15/06 $ 8,680 $ 7,681,800
Calpine Corp., Sr. Notes, 7.875%, 4/1/08 940 689,725
Calpine Corp., Sr. Notes, 8.25%, 8/15/05 16,736 16,066,560
Calpine Corp., Sr. Notes, 8.50%, 7/15/10(5) 8,625 7,978,125
Calpine Corp., Sr. Notes, 8.75%, 7/15/07 710 564,450
Calpine Corp., Sr. Notes, 10.50%, 5/15/06 1,855 1,762,250
- --------------------------------------------------------------------------------------------------
$ 70,813,926
- --------------------------------------------------------------------------------------------------
WASTE MANAGEMENT -- 0.3%
Allied Waste Industries, Series B, 9.25%, 9/1/12 $ 3,675 $ 4,198,688
- --------------------------------------------------------------------------------------------------
$ 4,198,688
- --------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 7.7%
American Tower Corp., Sr. Notes, 9.375%, 2/1/09 $ 13,810 $ 14,638,600
Centennial Cellular Communications, Sr. Sub. Notes,
10.75%, 12/15/08 1,705 1,768,938
Centennial Cellular Operating Co./Centennial
Communications Corp., Sr. Notes, 10.125%, 6/15/13 11,980 12,399,300
Crown Castle International Corp., Sr. Disc. Notes,
11.25%, (0% until 2004), 8/1/11 4,405 4,630,756
Crown Castle International Corp., Sr. Notes,
10.75%, 8/1/11 880 990,000
Insight Midwest/Insight Capital, Sr. Notes,
10.50%, 11/1/10 1,820 1,965,600
IWO Holdings, Inc., 14.00%, 1/15/11 5,600 1,260,000
LCI International, Inc., Sr. Notes, 7.25%, 6/15/07 9,955 9,158,600
Level 3 Financing, Inc., Sr. Notes,
10.75%, 10/15/11(5) 12,925 12,666,500
Nextel Communications, Inc., 6.00%, 6/1/11 5,325 5,917,406
Nextel Communications, Inc., Sr. Notes,
7.375%, 8/1/15 2,710 2,947,125
Nextel Partners, Inc., Sr. Notes, 8.125%, 7/1/11 2,375 2,523,438
Nextel Partners, Inc., Sr. Notes, 11.00%, 3/15/10 7,240 8,072,600
Nextel Partners, Inc., Sr. Notes, 11.00%, 3/15/10 800 892,000
Nextel Partners, Inc., Sr. Notes, 12.50%, 11/15/09 4,102 4,840,360
Ono Finance PLC, 13.00%, 5/1/09 3,030 3,226,950
Ono Finance PLC, Sr. Notes, 14.00%, 7/15/10 EUR 4,000 5,382,582
Ono Finance PLC, Sr. Notes, 14.00%, 2/15/11 3,133 3,438,468
Ono Finance PLC, Sr.Notes, 14.00%, 2/15/11 EUR 2,470 3,338,921
PTC International Finance II SA, 11.25%, 12/1/09 625 671,875
PTC International Finance II SA, 11.25%, 12/1/09 EUR 1,125 1,503,182
Rural Cellular Corp., Sr. Notes, 8.25%, 3/15/12(5) 3,175 3,262,313
SBA Telecommunications, Sr. Disc. Notes,
(0% until 2007), 0.00%, 12/19/11(5) 3,960 2,801,700
Telemig Celular SA/Amazonia Celular SA,
8.75%, 1/20/09(5) $ 2,600 $ 2,528,500
TSI Telecommunication, Series B, 12.75%, 2/1/09 1,200 1,320,000
US Unwired, Inc., Sr. Sub. Disc. Notes, Series B,
(0% until 2004), 0.00%, 11/1/09 2,410 2,265,400
Western Wireless Corp., Sr. Notes, 9.25%, 7/15/13 10,915 11,269,738
- --------------------------------------------------------------------------------------------------
$ 125,680,852
- --------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 0.1%
Alamosa Delaware, Inc., Sr. Notes,
8.50%, 1/31/12(5) $ 2,505 $ 2,392,275
- --------------------------------------------------------------------------------------------------
$ 2,392,275
- --------------------------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 2.8%
Qwest Capital Funding, 7.00%, 8/3/09 $ 1,275 $ 1,125,188
Qwest Capital Funding, 7.75%, 8/15/06 6,785 6,852,850
Qwest Capital Funding, 7.75%, 2/15/31 12,210 10,073,250
Qwest Capital Funding, 7.90%, 8/15/10 7,845 7,099,725
Qwest Services Corp., 13.50%, 12/15/10(5) 17,447 20,369,373
U.S. West Communications, Debs., 7.20%, 11/10/26 670 619,750
- --------------------------------------------------------------------------------------------------
$ 46,140,136
- --------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(IDENTIFIED COST $1,386,138,143) $ 1,472,061,696
- --------------------------------------------------------------------------------------------------
</Table>
CONVERTIBLE BONDS -- 0.7%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
Charter Communications, Inc., 5.75%, 10/15/05 $ 2,400 $ 2,340,000
Sinclair Broadcast Group, Inc., 4.875%, 7/15/18 1,840 1,881,400
Kerzner International Ltd., 2.375%, 4/15/24(4)(5) 3,595 3,646,678
Wynn Resorts, 6.00%, 7/15/15(5) 2,350 4,162,438
- --------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST, $10,206,519) $ 12,030,516
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
21
<Page>
COMMON STOCKS AND WARRANTS -- 1.4%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 0.1%
Sinclair Broadcast Group, Inc., Class A, Common(6) $ 150,000 $ 1,875,000
- --------------------------------------------------------------------------------------------------
$ 1,875,000
- --------------------------------------------------------------------------------------------------
BUSINESS SERVICES - MISCELLANEOUS -- 0.1%
R.H. Donelley Corp., Common(6) $ 40,000 $ 1,868,000
- --------------------------------------------------------------------------------------------------
$ 1,868,000
- --------------------------------------------------------------------------------------------------
CHEMICALS -- 0.0%
Pioneer Companies, Inc., Common(4)(6) $ 64,758 $ 352,931
Sterling Chemicals, Inc., Common 511 13,286
- --------------------------------------------------------------------------------------------------
$ 366,217
- --------------------------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.2%
DigitalNet Holdings, Inc., Common(6) $ 137,600 $ 2,807,040
- --------------------------------------------------------------------------------------------------
$ 2,807,040
- --------------------------------------------------------------------------------------------------
LODGING AND GAMING -- 0.1%
Kerzner International Ltd., Common $ 50,000 $ 2,217,500
Peninsula Gaming LLC, Convertible Preferred
Membership Interests(4)(6)(7) 6,338 38,027
- --------------------------------------------------------------------------------------------------
$ 2,255,527
- --------------------------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 0.0%
Merrill Corp., Warrants, Class A, Exp. 1/1/10(4)(6) $ 3,182 $ 0
- --------------------------------------------------------------------------------------------------
$ 0
- --------------------------------------------------------------------------------------------------
RESTAURANTS -- 0.0%
New World Coffee, Warrants, Exp. 6/15/06(4)(6)(7) $ 386 $ 4
New World Coffee, Warrants, Exp. 6/20/06(4)(6)(7) 459 5
- --------------------------------------------------------------------------------------------------
$ 9
- --------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.0%
Asat Finance, Warrants, Exp. 11/1/06(4)(6) $ 3,900 $ 84,162
- --------------------------------------------------------------------------------------------------
$ 84,162
- --------------------------------------------------------------------------------------------------
SERVICES -- 0.0%
HF Holdings, Inc., Warrants, Exp. 9/27/09(4)(6) $ 3,400 $ 0
- --------------------------------------------------------------------------------------------------
$ 0
- --------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.0%
Quality Distribution, Inc., Warrants, Exp.1/15/07(4)(6) $ 817 $ 15,654
VS Holdings, Inc., Common(4)(6)(7) 206,125 103,062
- --------------------------------------------------------------------------------------------------
$ 118,716
- --------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.9%
American Tower Corp., Warrants, Exp. 8/1/08(6) $ 4,825 $ 687,562
Crown Castle International Corp., Common(6) 11,129 140,559
NII Holdings, Inc., Class B(6) 52,056 1,823,522
NTL, Inc., Common(6) 186,847 11,108,054
Ono Finance PLC, Warrants, Exp. 3/16/11(4)(6) 2,520 0
Ono Finance PLC, Warrants, Exp. 5/31/09(4)(6) 3,440 0
Ono Finance PLC, Warrants, Exp. 5/31/09(4)(6) 1,200 0
- --------------------------------------------------------------------------------------------------
$ 13,759,697
- --------------------------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 0.0%
Primus Telecommunications Group, Warrants,
Exp. 8/1/04(4)(6) $ 1,150 $ 0
- --------------------------------------------------------------------------------------------------
$ 0
- --------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS AND WARRANTS
(IDENTIFIED COST $20,475,591) $ 23,134,368
- --------------------------------------------------------------------------------------------------
</Table>
CONVERTIBLE PREFERRED STOCKS -- 0.9%
<Table>
<Caption>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 0.1%
Six Flags, Inc. 69,495 $ 1,678,304
- --------------------------------------------------------------------------------------------------
$ 1,678,304
- --------------------------------------------------------------------------------------------------
NETWORKING PRODUCTS -- 0.1%
Lucent Technologies Capital Trust I 910 $ 1,152,242
- --------------------------------------------------------------------------------------------------
$ 1,152,242
- --------------------------------------------------------------------------------------------------
OIL AND GAS - EQUIPMENT AND SERVICES -- 0.3%
Chesapeake Energy Corp. 13,925 $ 1,540,453
Williams Cos., Inc.(5) 51,125 3,272,000
- --------------------------------------------------------------------------------------------------
$ 4,812,453
- --------------------------------------------------------------------------------------------------
</Table>
See notes to financial statements
22
<Page>
<Table>
<Caption>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.4%
Crown Castle International Corp. 167,645 $ 7,606,892
- --------------------------------------------------------------------------------------------------
$ 7,606,892
- --------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $13,445,077) $ 15,249,891
- --------------------------------------------------------------------------------------------------
</Table>
PREFERRED STOCKS -- 1.1%
<Table>
<Caption>
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 0.8%
CSC Holdings, Inc., Series M, 11.125% 126,233 $ 13,210,283
- --------------------------------------------------------------------------------------------------
$ 13,210,283
- --------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES 0.3%
Rural Cellular Corp., 12.25% (PIK) 5,177 $ 3,830,980
- --------------------------------------------------------------------------------------------------
$ 3,830,980
- --------------------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(IDENTIFIED COST $17,222,498) $ 17,041,263
- --------------------------------------------------------------------------------------------------
</Table>
SHORT-TERM INVESTMENTS -- 3.3%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
Investors Bank and Trust Time Deposit,
1.06%, 4/1/04 $ 52,979 $ 52,979,000
- --------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(AT AMORTIZED COST, $52,979,000) $ 52,979,000
- --------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 98.5%
(IDENTIFIED COST $1,520,209,171) $ 1,612,590,513
- --------------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- 1.5% $ 24,860,912
- --------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 1,637,451,425
- --------------------------------------------------------------------------------------------------
</Table>
EUR - Euro Dollar
(1) Senior floating-rate interests often require prepayments from excess cash
flows or permit the borrower to repay at its election. The degree to which
borrowers repay, whether as a contractual requirement or at their election,
cannot be predicted with accuracy. As a result, the actual remaining
maturity may be substantially less than the stated maturities shown.
However, it is anticipated that the senior floating-rate interests will have
an expected average life of approximately two to four years.
(2) Interest rates are periodically predetermined by a reference to a base
lending rate plus a premium. These base lending rates are generally (i) the
prime rate offered by one or more major United States banks or (ii) the
lending rate offered by one or moreEuropean banks such as the London
Inter-Bank Offered Rate (LIBOR).
(3) Defaulted security.
(4) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
(5) 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.
(6) Non-income producing security.
(7) Restricted security.
See notes to financial statements
23
<Page>
BOSTON INCOME PORTFOLIO as of March 31, 2004
FINANCIAL STATEMENTS (Unaudited)
STATEMENT OF ASSETS AND LIABILITIES
AS OF MARCH 31, 2004
<Table>
ASSETS
Investments, at value
(identified cost, $1,520,209,171) $ 1,612,590,513
Cash 13,428
Receivable for investments sold 25,350,739
Interest and dividends receivable 33,360,527
- -----------------------------------------------------------------------------------------
TOTAL ASSETS $ 1,671,315,207
- -----------------------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $ 33,682,549
Payable for open forward foreign currency contracts 138,315
Accrued expenses 42,918
- -----------------------------------------------------------------------------------------
TOTAL LIABILITIES $ 33,863,782
- -----------------------------------------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $ 1,637,451,425
- -----------------------------------------------------------------------------------------
SOURCES OF NET ASSETS
Net proceeds from capital contributions and withdrawals $ 1,545,207,845
Net unrealized appreciation (computed on the basis of identified cost) 92,243,580
- -----------------------------------------------------------------------------------------
TOTAL $ 1,637,451,425
- -----------------------------------------------------------------------------------------
</Table>
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED
MARCH 31, 2004
<Table>
INVESTMENT INCOME
Interest $ 68,683,715
Dividends (net of foreign taxes, $4,365) 1,268,292
- -----------------------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 69,952,007
- -----------------------------------------------------------------------------------------
EXPENSES
Investment adviser fee $ 4,824,695
Trustees' fees and expenses 13,101
Custodian fee 192,609
Legal and accounting services 31,613
Miscellaneous 3,903
- -----------------------------------------------------------------------------------------
TOTAL EXPENSES $ 5,065,921
- -----------------------------------------------------------------------------------------
NET INVESTMENT INCOME $ 64,886,086
- -----------------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 13,552,342
Foreign currency and forward foreign currency
exchange contract transactions 311,188
- -----------------------------------------------------------------------------------------
NET REALIZED GAIN $ 13,863,530
- -----------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 54,941,119
Foreign currency and forward foreign currency exchange contracts (82,391)
- -----------------------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 54,858,728
- -----------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 68,722,258
- -----------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 133,608,344
- -----------------------------------------------------------------------------------------
</Table>
See notes to financial statements
24
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
SIX MONTHS ENDED
INCREASE (DECREASE) MARCH 31, 2004 YEAR ENDED
IN NET ASSETS (UNAUDITED) SEPTEMBER 30, 2003
- -------------------------------------------------------------------------------------
From operations --
Net investment income $ 64,886,086 $ 101,071,832
Net realized gain 13,863,530 19,687,824
Net change in unrealized
appreciation (depreciation) 54,858,728 132,228,527
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 133,608,344 $ 252,988,183
- -------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 393,373,993 $ 736,904,337
Withdrawals (257,517,601) (418,618,018)
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ 135,856,392 $ 318,286,319
- -------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 269,464,736 $ 571,274,502
- -------------------------------------------------------------------------------------
NET ASSETS
At beginning of period $ 1,367,986,689 $ 796,712,187
- -------------------------------------------------------------------------------------
AT END OF PERIOD $ 1,637,451,425 $ 1,367,986,689
- -------------------------------------------------------------------------------------
</Table>
See notes to financial statements
25
<Page>
SUPPLEMENTARY DATA
<Table>
<Caption>
SIX MONTHS ENDED YEAR ENDED SEPTEMBER 30,
MARCH 31, 2004 -----------------------------------------------
(UNAUDITED) 2003 2002(1) 2001(2)
- ------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratios (As a percentage of average daily net assets):
Expenses 0.66%(3) 0.66% 0.68% 0.69%(3)
Net investment income 8.40%(3) 9.51% 9.91% 10.38%(3)
Portfolio Turnover 36% 116% 91% 16%
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) 9.45% 26.96% 2.09% --
- ------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S OMITTED) $ 1,637,451 $ 1,367,987 $ 796,712 $ 752,620
- ------------------------------------------------------------------------------------------------------------------------------
</Table>
(1) The Portfolio adopted the provisions of the revised AICPA Audit and
Accounting Guide for Investment Companies and changed its methodology for
accreting market discount for certain securities. It also began amortizing
premiums on fixed-income securities using the interest method of
amortization. Prior to October 1, 2001, the Portfolio did not amortize
market premiums on fixed-income securities. The effect of these changes for
the year ended September 30, 2002 was to decrease the ratio of net
investment income to average net assets from 10.12% to 9.91%.
(2) For the period from the start of business, July 23, 2001, to September 30,
2001.
(3) Annualized.
(4) Total return is required to be disclosed for fiscal years beginning after
December 15, 2000.
See notes to financial statements
26
<Page>
BOSTON INCOME PORTFOLIO as of March 31, 2004
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1 SIGNIFICANT ACCOUNTING POLICIES
Boston Income Portfolio (the Portfolio) is registered under the Investment
Company Act of 1940, as amended, as a diversified open-end investment
company. The Portfolio, which was organized as a trust under the laws of the
state of New York on March 13, 2001, seeks to achieve high current income.
The Declaration of Trust permits the Trustees to issue interests in the
Portfolio. At March 31, 2004, the Eaton Vance Income Fund of Boston held an
approximate 99.9% interest in the Portfolio. The following is a summary of
significant accounting policies consistently followed by the Portfolio in the
preparation of its financial statements. The policies are in conformity with
accounting principles generally accepted in the United States of America.
A INVESTMENT VALUATION -- Investments listed on securities exchanges are
valued at closing sale prices. Investments listed on the NASDAQ National
Market system are valued at the NASDAQ official closing price. 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 and senior floating-rate loan interests (other than short-term
obligations), including listed investments and investments for which
quotations are available, will normally be valued on the basis of market
valuations furnished by a pricing service. Short-term obligations, maturing
in sixty days or less, are valued at amortized cost, which approximates
value. Investments for which there is no quotation or valuation are valued at
fair value using methods determined in good faith by or at the direction of
the Trustees.
B INCOME -- Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium and accretion of discount. Dividend
income is recorded on the ex-dividend date for dividends received in cash
and/or securities.
C INCOME TAXES -- The Portfolio has elected to be treated as a partnership
for federal tax purposes. No provision is made by the Portfolio for federal
or state taxes on any taxable income of the Portfolio because each investor
in the Portfolio is ultimately responsible for the payment of any taxes on
its share of taxable income. Since 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.
D 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.
E 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.
F 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
balances the Portfolio maintains with IBT. All significant credit balances
used to reduce the Portfolio's custodian fees are reported as a reduction of
expenses on the Statement of Operations. For the six months ended March 31,
2004, the Portfolio's custodian fee was reduced by $1,068 as a result of this
arrangement.
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 amounts of
27
<Page>
income and expense during the reporting period. Actual results could differ
from those estimates.
H INDEMNIFICATIONS -- Under the Portfolio's organizational documents, its
officers and Trustees may be indemnified against certain liabilities and
expenses arising out of the performance of their duties to the Portfolio.
Interestholders in the Portfolio are jointly and severally liable for the
liabilities and obligations of the Portfolio in the event that the Portfolio
fails to satisfy such liabilities and obligations; provided, however, that,
to the extent assets are available in the Portfolio, the Portfolio may, under
certain circumstances, indemnify interestholders from and against any claim
or liability to which such holder may become subject by reason of being or
having been an interestholder in the Portfolio. Additionally, in the normal
course of business, the Portfolio enters into agreements with service
providers that may contain indemnification clauses. The Portfolio's maximum
exposure under these arrangements is unknown as this would involve future
claims that may be made against the Portfolio that have not yet occurred.
I OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Gains and losses on securities are
determined on the basis of identified cost.
J INTERIM FINANCIAL STATEMENTS -- The interim financial statements relating
to March 31, 2004 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the
Portfolio's management reflect all adjustments, consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
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.
BMR receives a monthly advisory fee in the amount of 5/96th of 1% (equal to
0.625% annually) of average daily net assets of the Portfolio. For the six
months ended March 31, 2004, the advisory fee amounted to $4,824,695. 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 the investment adviser fee. Trustees of the Portfolio
who are not affiliated with BMR may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the six months ended March 31, 2004, no
significant amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above
organizations.
3 INVESTMENT TRANSACTIONS
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 $698,506,406 and $516,727,955,
respectively, for the six months ended March 31, 2004.
4 FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION)
The cost and unrealized appreciation (depreciation) in value of the
investments owned at March 31, 2004, as computed on a federal income tax
basis, were as follows:
<Table>
AGGREGATE COST $ 1,524,441,413
----------------------------------------------------------------------------
Gross unrealized appreciation $ 112,109,387
Gross unrealized depreciation (23,960,287)
----------------------------------------------------------------------------
NET UNREALIZED APPRECIATION $ 88,149,100
----------------------------------------------------------------------------
</Table>
5 FINANCIAL INSTRUMENTS
The Portfolio may trade 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 exchange 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
28
<Page>
under these financial instruments at March 31, 2004 is as follows:
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
SALES
<Table>
<Caption>
IN EXCHANGE FOR NET UNREALIZED
SETTLEMENT DATE(s) DELIVER (IN U.S. DOLLARS) DEPRECIATION
-------------------------------------------------------------------------
4/30/04 Euro Dollar
8,444,732 $ 10,231,638 $ (138,314)
-------------------------------------------------------------------------
$ 10,231,638 $ (138,314)
-------------------------------------------------------------------------
</Table>
6 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 six
months ended March 31, 2004.
7 RESTRICTED SECURITIES
At March 31, 2004, the Portfolio owned the following securities (representing
less than 0.01% 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
---------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS
New World Coffee,
Warrants, Exp. 6/15/06 5/13/03 386 $ 0 $ 4
New World Coffee,
Warrants, Exp. 6/20/06 1/06/03 459 0 5
Peninsula Gaming LLC,
Convertible Preferred
Membership Interests 7/08/99 6,338 0 38,027
VS Holdings, Inc., Common 3/28/02 206,125 2,554,000 103,062
---------------------------------------------------------------------------------------
$ 2,554,000 $ 141,098
---------------------------------------------------------------------------------------
</Table>
29
<Page>
INVESTMENT MANAGEMENT
BOSTON INCOME PORTFOLIO
OFFICERS
Michael W. Weilheimer
President
Thomas P. Huggins
Vice President
Barbara E. Campbell
Treasurer
Alan R. Dynner
Secretary
TRUSTEES
James B. Hawkes
Samuel Hayes, III
William H. Park
Ronald A. Pearlman
Norton H. Reamer
Lynn A. Stout
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 (investment management
firm). Previously, he served as Executive Vice President and Chief Financial
Officer of United Asset Management Corporation ("UAM") (a holding company 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, Chief Executive
Officer and a Director of Asset Management Finance Corp. (a specialty finance
company serving the investment management industry) and is President of Unicorn
Corporation (an investment and financial advisory services company). Formerly,
Mr. Reamer was Chairman of Hellman, Jordan Management Co., Inc. (an investment
management company) and Advisory Director of Berkshire Capital Corporation (an
investment banking firm), 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. SCHEDULE OF INVESTMENTS
Please see schedule of investments contained in the Report to Stockholders
included under Item 1 of this Form N-CSR.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES
Not required in this filing.
ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not required in this filing.
<Page>
ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Effective February 9, 2004, the Governance Committee of the Board of Trustees
formalized the procedures by which a Fund's shareholders may recommend nominees
to the registrant's Board of Trustees. The Governance Committee shall, when
identifying candidates for the position of Independent Trustee, consider any
such candidate recommended by a shareholder of a Fund if such recommendation
contains sufficient background information concerning the candidate, and is
received in a sufficiently timely manner (and in any event no later than the
date specified for receipt of shareholder proposals in any applicable proxy
statement with respect to a Fund). Shareholders shall be directed to address any
such recommendations to the attention of the Governance Committee, c/o the
Secretary of the Fund.
ITEM 10. 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 changes in the registrant's internal controls over
financial reporting during the period that has materially affected, or is
reasonably likely to materially affect the registrant's internal control over
financial reporting.
ITEM 11. 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.
BOSTON INCOME PORTFOLIO
By: /s/ Michael W. Weilheimer
-----------------------------------
Michael W. Weilheimer
President
Date: May 21, 2004
--------------
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: May 21, 2004
--------------
By: /s/ Michael W. Weilheimer
-----------------------------------
Michael W. Weilheimer
President
Date: May 21, 2004
--------------