<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
----------
Boston Income Portfolio
-----------------------
(Exact Name of Registrant as Specified in Charter)
The Eaton Vance Building, 255 State Street, Boston, Massachusetts 02109
-----------------------------------------------------------------------
(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
------------
Date of Fiscal Year End
September 30, 2004
------------------
Date of Reporting Period
<Page>
ITEM 1. REPORTS TO STOCKHOLDERS
<Page>
BOSTON INCOME PORTFOLIO AS OF SEPTEMBER 30, 2004
PORTFOLIO OF INVESTMENTS
SENIOR, FLOATING RATE INTERESTS -- 0.4%(1)(2)
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------
BEVERAGE, FOOD AND TOBACCO -- 0.3%
New World Pasta, Term Loan B,
Maturing 1/28/06 $ 4,675,457 $ 4,310,771
- ---------------------------------------------------------------------------------------------------
$ 4,310,771
- ---------------------------------------------------------------------------------------------------
UTILITIES -- 0.1%
Mirant Corp., Revolving Term Loan,
Maturing 7/16/06(3) $ 2,400,000 $ 1,471,999
- ---------------------------------------------------------------------------------------------------
$ 1,471,999
- ---------------------------------------------------------------------------------------------------
TOTAL SENIOR, FLOATING RATE INTERESTS
(IDENTIFIED COST $6,434,022) $ 5,782,770
- ---------------------------------------------------------------------------------------------------
</Table>
CORPORATE BONDS & NOTES -- 86.5%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
AEROSPACE AND DEFENSE -- 0.4%
Argo Tech Corp., Sr. Notes, 9.25%, 6/1/11(4) $ 2,050 $ 2,208,875
Armor Holdings, Inc., Sr. Sub. Notes,
8.25%, 8/15/13 2,410 2,669,075
Standard Aero Holdings, Inc., Sr. Sub. Notes,
8.25%, 9/1/14(4) 1,200 1,248,000
- ---------------------------------------------------------------------------------------------------
$ 6,125,950
- ---------------------------------------------------------------------------------------------------
AIRLINES -- 1.2%
American Airlines, 7.80%, 10/1/06 $ 8,060 $ 6,708,547
American Airlines, 8.608%, 4/1/11 695 589,718
AMR Corp., 9.00%, 8/1/12 9,845 6,054,675
Continental Airlines, 7.033%, 6/15/11 4,758 3,677,868
Continental Airlines, 7.08%, 11/1/04 75 74,772
Continental Airlines, 8.00%, 12/15/05 715 657,800
Delta Air Lines, 7.779%, 11/18/05 3,485 1,507,897
Delta Air Lines, 8.30%, 12/15/29 1,125 270,000
Delta Air Lines, Series 02-1, 7.779%, 1/2/12 847 325,723
- ---------------------------------------------------------------------------------------------------
$ 19,867,000
- ---------------------------------------------------------------------------------------------------
APPAREL -- 1.8%
GFSI, Inc., Sr. Sub. Notes, Series B,
9.625%, 3/1/07 $ 1,945 $ 1,891,512
J Crew Operating Corp., Sr. Sub. Notes,
10.375%, 10/15/07 $ 7,955 $ 8,193,650
Levi Strauss & Co., 7.00%, 11/1/06 6,260 6,291,300
Perry Ellis International, Inc., Sr. Sub. Notes,
8.875%, 9/15/13 2,345 2,497,425
Phillips Van-Heusen, Sr. Notes, 7.25%, 2/15/11(4) 1,740 1,818,300
Phillips Van-Heusen, Sr. Notes, 8.125%, 5/1/13 4,000 4,300,000
William Carter, Series B, 10.875%, 8/15/11 4,838 5,454,845
- ---------------------------------------------------------------------------------------------------
$ 30,447,032
- ---------------------------------------------------------------------------------------------------
AUTO AND PARTS -- 2.4%
Dana Corp., 10.125%, 3/15/10 $ 8,195 $ 9,342,300
Dura Operating Corp., Series D, 9.00%, 5/1/09 1,000 895,000
Keystone Automotive Operations, Inc.,
Sr. Sub. Notes, 9.75%, 11/1/13 1,355 1,463,400
Metaldyne Corp., 11.00%, 6/15/12(4) 5,378 4,302,400
Metaldyne Corp., Sr. Notes, 10.00%, 11/1/13(4) 2,152 2,012,120
Rexnord Corp., 10.125%, 12/15/12 1,485 1,685,475
Tenneco Automotive, Inc., Series B,
10.25%, 7/15/13 5,570 6,377,650
Tenneco Automotive, Inc., Series B,
11.625%, 10/15/09 9,415 9,979,900
TRW Automotive, Inc., Sr. Sub. Notes,
11.00%, 2/15/13 2,125 2,539,375
United Components, Inc., Sr. Sub. Notes,
9.375%, 6/15/13 1,895 2,051,337
- ---------------------------------------------------------------------------------------------------
$ 40,648,957
- ---------------------------------------------------------------------------------------------------
BROADCAST MEDIA -- 0.8%
Rainbow National Services, LLC, Sr. Notes,
8.75%, 9/1/12(4) $ 2,855 $ 2,976,337
Rainbow National Services, LLC, Sr. Sub. Debs.,
10.375%, 9/1/14(4) 9,895 10,414,487
- ---------------------------------------------------------------------------------------------------
$ 13,390,824
- ---------------------------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 6.5%
Adelphia Communications, Sr. Notes,
10.25%, 11/1/06(3) $ 9,155 $ 8,285,275
Adelphia Communications, Sr. Notes, Series B,
9.25%, 10/1/02(3) 8,160 7,221,600
Avalon Cable Holdings LLC, Sr. Disc. Notes,
11.875%, 12/1/08 4,289 4,513,729
Cablevision Systems Corp., Sr. Notes,
8.00%, 4/15/12(4) 540 567,000
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
19
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
BROADCASTING AND CABLE (CONTINUED)
Century Communications, Sr. Notes,
8.75%, 10/1/07(3) $ 1,375 $ 1,436,875
Century Communications, Sr. Notes,
8.875%, 1/15/07(3) 6,472 6,900,770
Century Communications, Sr. Notes,
9.50%, 3/1/05(3) 6,255 6,724,125
Charter Communication Holdings, Sr. Disc. Notes,
12.125%, (0% until 2007), 1/15/12 415 234,475
Charter Communication Holdings, Sr. Notes,
10.00%, 4/1/09 1,405 1,145,075
Charter Communication Holdings, Sr. Notes,
10.00%, 5/15/11 1,040 806,000
Charter Communications, Inc., 5.75%, 10/15/05 4,000 3,580,000
CSC Holdings, Inc., Sr. Notes, 7.875%, 12/15/07 15 15,994
CSC Holdings, Inc., Sr. Sub. Notes,
10.50%, 5/15/16 6,085 6,936,900
Dex Media East LLC, 9.875%, 11/15/09 1,175 1,357,125
Dex Media West LLC, Sr. Sub. Notes,
9.875%, 8/15/13 8,482 10,008,760
Fisher Communications, Inc., Sr. Notes,
8.625%, 9/15/14(4) 1,625 1,698,125
Insight Communications, Sr. Disc. Notes,
12.25%, (0% until 2006) 2/15/11 18,815 17,686,100
Kabel Deutschland GMBH, 10.625%, 7/1/14(4) 10,160 11,125,200
LBI Media, Inc., Sr. Disc. Notes,
11.00%, 10/15/13 3,320 2,411,150
Muzak Holdings LLC, 9.875%, 3/15/09 2,185 1,616,900
Muzak LLC/Muzak Finance, Sr. Notes,
10.00%, 2/15/09 4,135 3,680,150
Nexstar Finance Holdings LLC, Inc.,
12.00%, 4/1/08 605 668,525
Nexstar Finance Holdings LLC, Inc., Sr. Disc. Notes,
11.375%, (0% until 2008), 4/1/13 6,950 5,360,187
Nextmedia Operating, Inc., 10.75%, 7/1/11 1,475 1,668,594
Paxson Communications Corp.,
12.25%, (0% until 2006), 1/15/09 2,275 1,962,187
Sinclair Broadcast Group, Inc., Convertible Bond,
4.875%, 7/15/18 1,585 1,444,331
- ---------------------------------------------------------------------------------------------------
$ 109,055,152
- ---------------------------------------------------------------------------------------------------
BUILDING AND CONSTRUCTION-MISCELLANEOUS -- 1.1%
Dayton Superior Corp., Sr. Notes, 10.75%, 9/15/08 $ 5,570 $ 5,987,750
Interline Brands, Inc., Sr. Sub. Notes,
11.50%, 5/15/11 5,395 6,015,425
Ply Gem Industries, Inc., Sr. Sub. Notes,
9.00%, 2/15/12(4) $ 3,935 $ 3,944,837
Ply Gem Industries, Inc., Sr. Sub. Notes,
9.00%, 2/15/12(4) 2,780 2,786,950
- ---------------------------------------------------------------------------------------------------
$ 18,734,962
- ---------------------------------------------------------------------------------------------------
BUILDING MATERIALS -- 0.5%
Coleman Cable, Inc., Sr. Notes,
9.875%, 10/1/12(4) $ 1,740 $ 1,776,975
Koppers, Inc., 9.875%, 10/15/13 75 83,250
Owens Corning, 7.50%, 8/1/18(3) 3,380 1,554,800
Owens Corning, 7.70%, 5/1/08(3) 3,155 1,451,300
THL Buildco (Nortek, Inc.), Sr. Sub. Notes,
8.50%, 9/1/14(4) 3,465 3,646,912
- ---------------------------------------------------------------------------------------------------
$ 8,513,237
- ---------------------------------------------------------------------------------------------------
BUSINESS SERVICES -- 2.2%
Advanstar Communciations, Sr. Sub. Notes,
Series B, 12.00%, 2/15/11 $ 2,000 $ 2,150,000
Advanstar Communications, Inc.,
10.75%, 8/15/10 8,085 8,994,562
Affinity Group, Inc., Sr. Sub. Notes,
9.00%, 2/15/12 4,955 5,326,625
Coinmach Corp., Sr. Notes, 9.00%, 2/1/10 1,065 1,110,262
Language Line, Inc., Sr. Sub. Notes,
11.125%, 6/15/12(4) 2,260 2,327,800
Mobile Mini, Inc., 9.50%, 7/1/13 1,310 1,460,650
Norcross Safety Products LLC/Norcross Capital Corp.,
Sr. Sub. Notes, Series B, 9.875%, 8/15/11 5,920 6,452,800
Synagro Technologies, Inc., Sr. Sub. Notes,
9.50%, 4/1/09 1,060 1,139,500
United Rentals North America, Inc.,
Sr. Sub. Notes, 7.00%, 2/15/14 3,510 3,132,675
Vertis, Inc., Sub. Notes, 13.50%, 12/7/09(4) 3,160 3,175,800
Williams Scotsman, Inc., Sr. Notes,
10.00%, 8/15/08 1,670 1,799,425
- ---------------------------------------------------------------------------------------------------
$ 37,070,099
- ---------------------------------------------------------------------------------------------------
CHEMICALS -- 7.0%
Acetex Corp., Sr. Notes, 10.875%, 8/1/09 $ 1,560 $ 1,723,800
Avecia Group PLC, 11.00%, 7/1/09 9,026 7,988,010
BCP Caylux Holdings, Sr. Sub. Notes,
9.625%, 6/15/14(4) 7,575 8,218,875
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
20
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
CHEMICALS (CONTINUED)
Borden U.S. Finance/Nova Scotia Finance,
Sr. Notes, 9.00%, 7/15/14(4) $ 2,760 $ 2,911,800
Crystal US Holdings/US Holdings 3, LLC,
Sr. Disc. Notes, 10.50%,
(0.00% until 2009), 10/1/14(4) 4,305 2,593,762
Equistar Chemical, Sr. Notes, 10.625%, 5/1/11 12,550 14,369,750
Hercules, Inc., 11.125%, 11/15/07 3,390 4,042,575
Huntsman Advanced Materials, Sr. Notes,
11.00%, 7/15/10(4) 850 990,250
Huntsman International LLC, Sr. Notes,
9.875%, 3/1/09 2,010 2,226,075
Huntsman LLC, 11.625%, 10/15/10 5,110 5,940,375
IMC Global, Inc., Sr. Notes, 10.875%, 8/1/13 7,065 8,954,887
Innophos, Inc., Sr. Sub. Notes,
8.875%, 8/15/14(4) 1,730 1,851,100
Lyondell Chemical Co., 9.50%, 12/15/08 510 559,087
Lyondell Chemical Co., 9.50%, 12/15/08 2,780 3,047,575
Lyondell Chemical Co., Series A, 9.625%, 5/1/07 585 639,844
Lyondell Chemical Co., Sr. Notes, 10.50%, 6/1/13 8,761 10,162,760
Millennium America, Inc., 9.25%, 6/15/08 2,000 2,215,000
Nalco Co., Sr. Sub. Notes, 8.875%, 11/15/13(4) 4,620 4,989,600
OM Group, Inc., 9.25%, 12/15/11 13,060 13,680,350
Polyone Corp., Sr. Notes, 8.875%, 5/1/12 3,590 3,679,750
Rhodia SA, Sr. Notes, 10.25%, 6/1/10 13,065 13,587,600
Rockwood Specialties Group, Sr. Sub. Notes,
10.625%, 5/15/11 2,170 2,397,850
- ---------------------------------------------------------------------------------------------------
$ 116,770,675
- ---------------------------------------------------------------------------------------------------
COMPUTER SERVICES -- 0.2%
DigitalNet, Inc., Sr. Notes, 9.00%, 7/15/10 $ 2,710 $ 3,157,150
- ---------------------------------------------------------------------------------------------------
$ 3,157,150
- ---------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES -- 1.0%
UGS Corp., Sr. Sub. Notes, 10.00%, 6/1/12(4) $ 15,280 $ 16,731,600
- ---------------------------------------------------------------------------------------------------
$ 16,731,600
- ---------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS -- 1.4%
Alderwoods Group, Inc., Sr. Notes,
7.75%, 9/15/12(4) $ 1,705 $ 1,811,562
Amscan Holdings, Inc., Sr. Sub. Notes,
8.75%, 5/1/14(4) 6,550 6,713,750
Fedders North America, Inc., 9.875%, 3/1/14 3,895 3,262,062
Jostens Holding Corp., Sr. Disc. Notes,
10.25%, 12/1/13 1,730 1,198,025
Jostens IH Corp., 7.625%, 10/1/12(4) 2,785 2,812,850
Rayovac Corp., Sr. Sub. Notes, 8.50%, 10/1/13 $ 1,070 $ 1,166,300
Riddell Bell Holdings, Sr. Sub. Notes,
8.375%, 10/1/12(4) 695 709,769
Samsonite Corp., Sr. Sub. Notes,
8.875%, 6/1/11(4) 4,845 5,087,250
- ---------------------------------------------------------------------------------------------------
$ 22,761,568
- ---------------------------------------------------------------------------------------------------
CONTAINERS AND PACKAGING -- 3.1%
Crown Euro Holdings SA, 9.50%, 3/1/11 $ 1,545 $ 1,730,400
Crown Euro Holdings SA, 10.875%, 3/1/13 13,895 16,222,412
Graham Packaging Co., Sr. Disc. Notes, Series B,
10.75%, 1/15/09 1,400 1,459,500
Graham Packaging Co., Sr. Notes,
8.50%, 10/15/12(4) 1,395 1,429,875
Graham Packaging Co., Sr. Sub. Notes,
9.875%, 10/15/14(4) 2,790 2,870,212
Intertape Polymer US, Inc., Sr. Sub. Notes,
8.50%, 8/1/14(4) 5,095 5,171,425
Jefferson Smurfit, 8.25%, 10/1/12 3,120 3,455,400
Plastipak Holdings, Inc., 10.75%, 9/1/11 1,975 2,212,000
Pliant Corp., 11.125%, (0% until 2006) 6/15/09 3,980 3,422,800
Pliant Corp., 11.125%, 9/1/09 4,500 4,702,500
Solo Cup Co., Sr. Sub. Notes, 8.50%, 2/15/14(4) 4,500 4,455,000
Tekni-Plex, Inc., Series B, 12.75%, 6/15/10 310 260,400
Tekni-Plex, Inc., Sr. Notes, 8.75%, 11/15/13(4) 2,410 2,301,550
US Can Corp., Sr. Notes, 10.875%, 7/15/10 2,155 2,225,037
- ---------------------------------------------------------------------------------------------------
$ 51,918,511
- ---------------------------------------------------------------------------------------------------
ELECTRONIC EQUIPMENT -- 0.4%
Danka Business Systems, Sr. Notes,
11.00%, 6/15/10 $ 3,675 $ 3,877,125
Hexcel Corp., 9.875%, 10/1/08 1,130 1,271,250
Hexcel Corp., Sr. Sub. Notes, 9.75%, 1/15/09 930 981,150
- ---------------------------------------------------------------------------------------------------
$ 6,129,525
- ---------------------------------------------------------------------------------------------------
ELECTRONICS-INSTRUMENTS -- 0.1%
Wesco Distribution, Inc., 9.125%, 6/1/08 $ 1,000 $ 1,036,250
- ---------------------------------------------------------------------------------------------------
$ 1,036,250
- ---------------------------------------------------------------------------------------------------
ENERGY SERVICES -- 0.6%
Port Arthur Finance Corp., 12.50%, 1/15/09 $ 9,410 $ 11,009,794
- ---------------------------------------------------------------------------------------------------
$ 11,009,794
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
21
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
ENGINEERING -- 0.1%
Shaw Group, Inc., Sr. Notes, 10.75%, 3/15/10 $ 1,050 $ 1,107,750
- ---------------------------------------------------------------------------------------------------
$ 1,107,750
- ---------------------------------------------------------------------------------------------------
ENTERTAINMENT -- 3.2%
LCE Acquisition Corp., Sr. Sub. Notes,
9.00%, 8/1/14(4) $ 7,020 $ 7,283,250
Marquee Holdings, Inc., Sr. Disc. Notes,
12.00%, (0.00% until 2009), 8/15/14(4) 9,335 5,577,662
Marquee, Inc., Sr. Notes, 8.625%, 8/15/12(4) 5,175 5,511,375
Royal Caribbean Cruises, Sr. Debs.,
7.25%, 3/15/18 1,660 1,759,600
Royal Caribbean Cruises, Sr. Notes, 8.75%, 2/2/11 7,820 9,168,950
Six Flags, Inc., Sr. Notes, 8.875%, 2/1/10 4,382 4,130,035
Six Flags, Inc., Sr. Notes, 9.625%, 6/1/14 1,865 1,753,100
True Temper Sports, Inc., Sr. Sub. Notes,
8.375%, 9/15/11 1,055 986,425
Universal City Development Partners, Sr. Notes,
11.75%, 4/1/10 14,295 16,725,150
- ---------------------------------------------------------------------------------------------------
$ 52,895,547
- ---------------------------------------------------------------------------------------------------
FOOD, BEVERAGES AND TOBACCO -- 0.2%
WH Holdings Ltd./WH Capital Corp., Sr. Notes,
9.50%, 4/1/11 $ 2,815 $ 3,061,312
- ---------------------------------------------------------------------------------------------------
$ 3,061,312
- ---------------------------------------------------------------------------------------------------
FOODS -- 1.6%
American Seafood Group LLC, 10.125%, 4/15/10 $ 6,115 $ 6,543,050
Chiquita Brands International, Sr. Notes,
7.50%, 11/1/14(4) 695 698,475
Merisant Co., Sr. Notes, 9.50%, 7/15/13(4) 2,190 2,091,450
Michael Foods, Sr. Sub. Notes, 8.00%, 11/15/13 1,530 1,610,325
Pinnacle Foods Holdings Corp., Sr. Sub. Notes,
8.25%, 12/1/13(4) 345 326,887
Pinnacle Foods Holdings Corp., Sr. Sub. Notes,
8.25%, 12/1/13(4) 6,835 6,476,162
UAP Holding Corp., Sr. Disc. Notes,
10.75%, (0% until 2008) 7/15/12(4) 8,265 6,364,050
United Agricultural Products, Sr. Notes,
8.25%, 12/15/11(4) 2,265 2,457,525
- ---------------------------------------------------------------------------------------------------
$ 26,567,924
- ---------------------------------------------------------------------------------------------------
GAMING -- 1.9%
Chukchansi EDA, Sr. Notes, 14.50%, 6/15/09(4) $ 6,630 $ 8,320,650
OED Corp./Diamond Jo LLC, 8.75%, 4/15/12(4) 5,765 5,361,450
Penn National Gaming, Inc, Sr. Sub. Notes,
11.125%, 3/1/08 $ 3,605 $ 3,911,425
Seneca Gaming Corp., Sr. Notes,
7.25%, 5/1/12(4) 3,760 3,901,000
Trump Holdings and Funding, Sr. Notes,
11.625%, 3/15/10 9,885 10,329,825
- ---------------------------------------------------------------------------------------------------
$ 31,824,350
- ---------------------------------------------------------------------------------------------------
HEALTH SERVICES -- 4.2%
Ardent Health Services, Inc., Sr. Sub. Notes,
10.00%, 8/15/13 $ 5,075 $ 5,151,125
Concentra Operating Corp., Sr. Notes,
9.50%, 8/15/10 1,595 1,770,450
Curative Health Services, Sr. Notes,
10.75%, 5/1/11(4) 1,450 1,334,000
Healthsouth Corp., 7.625%, 6/1/12 3,495 3,398,887
Healthsouth Corp., Sr. Notes, 8.375%, 10/1/11 8,165 8,154,794
Magellan Health Services, Inc., Sr. Notes, Series A,
9.375%, 11/15/08 2,423 2,635,303
National Nephrology Association, Sr. Sub. Notes,
9.00%, 11/1/11(4) 2,675 3,106,344
Pacificare Health System, 10.75%, 6/1/09 3,354 3,882,255
Quintiles Transnational Corp., Sr. Sub. Notes,
10.00%, 10/1/13 10,060 10,713,900
Rotech Healthcare, Inc., 9.50%, 4/1/12 1,750 1,881,250
Tenet Healthcare Corp., Sr. Notes,
9.875%, 7/1/14(4) 10,480 11,004,000
US Oncology, Inc., Sr. Notes,
9.00%, 8/15/12(4) 3,455 3,593,200
US Oncology, Inc., Sr. Sub. Notes,
10.75%, 8/15/14(4) 4,835 4,992,137
Vanguard Health Holdings II, Sr. Sub. Notes,
9.00%, 10/1/14(4) 7,820 7,878,650
- ---------------------------------------------------------------------------------------------------
$ 69,496,295
- ---------------------------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS -- 0.1%
Interface, Inc., Sr. Sub. Notes, 9.50%, 2/1/14 $ 965 $ 1,003,600
- ---------------------------------------------------------------------------------------------------
$ 1,003,600
- ---------------------------------------------------------------------------------------------------
INFORMATION TECHNOLOGY -- 0.4%
New ASAT (Finance) Ltd., Sr. Notes,
9.25%, 2/1/11(4) $ 3,715 $ 3,139,175
Stratus Technologies, Inc., Sr. Notes,
10.375%, 12/1/08 3,805 3,462,550
- ---------------------------------------------------------------------------------------------------
$ 6,601,725
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
22
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
INVESTMENT SERVICES -- 0.7%
E*Trade Financial Corp., Sr. Notes,
8.00%, 6/15/11(4) $ 3,740 $ 3,908,300
Refco Finance Holdings, LLC, Sr. Sub. Notes,
9.00%, 8/1/12(4) 6,835 7,330,537
- ---------------------------------------------------------------------------------------------------
$ 11,238,837
- ---------------------------------------------------------------------------------------------------
LODGING -- 0.2%
Felcor Lodging L.P., Sr. Notes, Variable Rate,
5.84%, 6/1/11(4) $ 2,170 $ 2,202,550
Host Marriott L.P., Series I, 9.50%, 1/15/07 940 1,045,750
- ---------------------------------------------------------------------------------------------------
$ 3,248,300
- ---------------------------------------------------------------------------------------------------
LODGING AND GAMING -- 4.0%
Ameristar Casinos, Inc., 10.75%, 2/15/09 $ 2,110 $ 2,405,400
Boyd Gaming Corp., Sr. Sub. Notes,
8.75%, 4/15/12 2,400 2,688,000
Hollywood Casino Shreveport, First Mortgage Bonds,
13.00%, 8/1/06(3) 870 740,588
Inn of the Mountain Gods, Sr. Notes,
12.00%, 11/15/10 8,100 9,315,000
Majestic Star Casino LLC, 9.50%, 10/15/10 5,930 6,078,250
MGM Grand, Inc., 6.875%, 2/6/08 1,750 1,914,063
MTR Gaming Group, Series B, 9.75%, 4/1/10 2,570 2,814,150
Park Place Entertainment, Sr. Sub. Notes,
8.875%, 9/15/08 140 159,950
Premier Entertainment Biloxi, LLC/Premier Finance
Biloxi Corp., 10.75%, 2/1/12(4) 705 747,300
Sun International Hotels, Sr. Sub. Notes,
8.875%, 8/15/11 6,360 7,003,950
Trump Atlantic City Associates, Inc.,
11.25%, 5/1/06(3) 8,965 7,777,138
Venetian Casino/Las Vegas Sands,
11.00%, 6/15/10 10,205 11,863,313
Waterford Gaming LLC, Sr. Notes,
8.625%, 9/15/12(4) 12,258 13,054,770
- ---------------------------------------------------------------------------------------------------
$ 66,561,872
- ---------------------------------------------------------------------------------------------------
MACHINERY -- 2.0%
Case New Holland, Inc., Sr. Notes,
9.25%, 8/1/11(4) $ 4,450 $ 5,006,250
Flowserve Corp., 12.25%, 8/15/10 2,422 2,748,970
Manitowoc Co., Inc. (The), 10.50%, 8/1/12 1,180 1,365,850
Milacron Escrow Corp., 11.50%, 5/15/11(4) 6,990 7,444,350
Terex Corp., 10.375%, 4/1/11 6,920 7,854,200
Thermadyne Holdings Corp., Sr. Sub. Notes,
9.25%, 2/1/14 8,790 8,592,225
- ---------------------------------------------------------------------------------------------------
$ 33,011,845
- ---------------------------------------------------------------------------------------------------
MANUFACTURING -- 2.2%
Aearo Co. I, Sr. Sub. Notes, 8.25%, 4/15/12(4) $ 2,525 $ 2,588,125
Amsted Industries, Inc., Sr. Notes,
10.25%, 10/15/11(4) 9,085 10,038,925
Dresser, Inc., 9.375%, 4/15/11 4,170 4,607,850
MAAX Corp., Sr. Sub. Notes, 9.75%, 6/15/12(4) 2,085 2,220,525
Motors and Gears, Inc., Sr. Notes,
10.75%, 11/15/06 1,275 1,185,750
Mueller Group, Inc., Sr. Sub. Notes,
10.00%, 5/1/12(4) 3,515 3,813,775
Mueller Holdings, Inc., Disc. Notes,
14.75%, (0.00% until 2009), 4/15/14(4) 3,070 1,987,825
Oxford Industries, Inc., Sr. Notes,
8.875%, 6/1/11(4) 6,105 6,654,450
Roller Bearing Holdings Co., Sr. Disc. Notes,
13.00%, 6/15/09(4) 3,467 3,553,675
Venture Holding Trust, Sr. Notes,
9.50%, 7/1/05(3) 3,683 165,735
- ---------------------------------------------------------------------------------------------------
$ 36,816,635
- ---------------------------------------------------------------------------------------------------
MEDICAL PRODUCTS -- 1.3%
Inverness Medical Innovations, Inc.,
Sr. Sub. Notes, 8.75%, 2/15/12(4) $ 4,470 $ 4,514,700
Medical Device Manufacturing, Inc.,
Sr. Sub. Notes, 10.00%, 7/15/12(4) 3,710 3,951,150
Medquest, Inc., 11.875%, 8/15/12 6,770 7,751,650
VWR International, Inc., Sr. Sub. Notes,
8.00%, 4/15/14(4) 4,915 5,222,188
- ---------------------------------------------------------------------------------------------------
$ 21,439,688
- ---------------------------------------------------------------------------------------------------
METALS-INDUSTRIAL -- 0.1%
General Cable Corp., Sr. Notes,
9.50%, 11/15/10 $ 2,075 $ 2,313,625
- ---------------------------------------------------------------------------------------------------
$ 2,313,625
- ---------------------------------------------------------------------------------------------------
METALS-STEEL -- 0.4%
Ispat Inland ULC, Sr. Notes, 9.75%, 4/1/14(4) $ 5,890 $ 6,523,175
- ---------------------------------------------------------------------------------------------------
$ 6,523,175
- ---------------------------------------------------------------------------------------------------
MINING-COAL -- 0.1%
Alpha Natural Resources, Sr. Notes,
10.00%, 6/1/12(4) $ 2,155 $ 2,386,663
- ---------------------------------------------------------------------------------------------------
$ 2,386,663
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
23
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
OIL AND GAS-EQUIPMENT AND SERVICES -- 4.7%
ANR Pipeline Co., 8.875%, 3/15/10 $ 1,575 $ 1,779,750
Dynegy Holdings, Inc., Sr. Notes,
10.125%, 7/15/13(4) 13,695 15,817,725
Dynergy Holdings, Inc., Sr. Debs.,
7.625%, 10/15/26 850 739,500
Giant Industries, Sr. Sub. Notes, 8.00%, 5/15/14 2,350 2,408,750
Gulfterra Energy Partner, 10.625%, 12/1/12 875 1,102,500
Gulfterra Energy Partner, Series B, 8.50%, 6/1/10 2,425 2,834,219
Hanover Compressor Co., Sr. Notes,
8.625%, 12/15/10 2,030 2,212,700
Hanover Compressor Co., Sr. Sub. Notes,
0.00%, 3/31/07 10,245 8,708,250
Northwest Pipeline Corp., 8.125%, 3/1/10 2,490 2,804,363
Parker Drilling Co., Sr. Notes, 9.625%, 10/1/13 3,485 3,903,200
Premcor Refining Group, Sr. Notes, 9.50%, 2/1/13 4,775 5,646,438
Premcor Refining Group, Sr. Sub. Notes,
7.75%, 2/1/12 1,710 1,872,450
Ram Energy, Inc., Sr. Notes, 11.50%, 2/15/08 3,459 3,545,475
SESI, LLC, 8.875%, 5/15/11 8,912 9,780,920
Southern Natural Gas, 8.00%, 3/1/32 3,345 3,470,438
Southern Natural Gas, 8.875%, 3/15/10 1,180 1,333,400
Transmontaigne, Inc., Sr. Sub. Notes,
9.125%, 6/1/10 9,240 10,418,100
- ---------------------------------------------------------------------------------------------------
$ 78,378,178
- ---------------------------------------------------------------------------------------------------
OIL AND GAS-EXPLORATION AND PRODUCTION -- 0.8%
Belden & Blake Corp., Sr. Notes,
8.75%, 7/15/12(4) $ 1,055 $ 1,128,850
Continental Resources, 10.25%, 8/1/08 6,005 6,245,200
Denbury Resources, Inc., 7.50%, 4/1/13 480 511,200
Petrobras International Finance, Sr. Notes,
9.125%, 7/2/13 2,255 2,474,863
Plains E&P Co., 8.75%, 7/1/12 2,580 2,908,950
- ---------------------------------------------------------------------------------------------------
$ 13,269,063
- ---------------------------------------------------------------------------------------------------
PAPER AND FOREST PRODUCTS -- 2.4%
Ainsworth Lumber, Sr. Notes, 7.25%, 10/1/12(4) $ 3,470 $ 3,522,050
Caraustar Industries, Inc., Sr. Sub. Notes,
9.875%, 4/1/11 8,325 8,949,375
Georgia-Pacific Corp., 9.375%, 2/1/13 4,495 5,315,338
Georgia-Pacific Corp., 9.50%, 12/1/11 5,520 6,858,600
Longview Fibre Co., Sr. Sub. Notes,
10.00%, 1/15/09 2,535 2,775,825
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(4) $ 7,160 $ 7,410,600
- ---------------------------------------------------------------------------------------------------
$ 41,034,563
- ---------------------------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 0.5%
Merrill Corp., Series A, (PIK), 12.00%, 5/1/09 $ 1,477 $ 1,565,779
Merrill Corp., Series B, (PIK), 12.00%, 5/1/09 6,443 6,829,101
Xerox Corp., Sr. Notes, 7.125%, 6/15/10 65 69,713
- ---------------------------------------------------------------------------------------------------
$ 8,464,593
- ---------------------------------------------------------------------------------------------------
PRINTING OR PUBLISHING-DIVERSIFICATION -- 0.8%
Hollinger Participation Trust, Sr. Notes, (PIK),
12.125%, 11/15/10(4) $ 11,844 $ 13,590,980
- ---------------------------------------------------------------------------------------------------
$ 13,590,980
- ---------------------------------------------------------------------------------------------------
PUBLISHING -- 1.8%
American Media, Inc., Series B, 10.25%, 5/1/09 $ 5,556 $ 5,875,470
CanWest Media, Inc., Sr. Sub. Notes,
10.625%, 5/15/11 5,050 5,769,625
Houghton Mifflin Co., Sr. Sub. Notes,
9.875%, 2/1/13 5,665 5,976,575
Liberty Group Operating, 9.375%, 2/1/08 5,275 5,340,938
Primedia, Inc., 8.875%, 5/15/11 6,885 6,919,425
- ---------------------------------------------------------------------------------------------------
$ 29,882,033
- ---------------------------------------------------------------------------------------------------
REITS -- 0.6%
CB Richard Ellis Services, Inc., Sr. Notes,
9.75%, 5/15/10 $ 1,398 $ 1,590,225
CB Richard Ellis Services, Inc., Sr. Sub. Notes,
11.25%, 6/15/11 6,000 7,035,000
Omega Healthcare Investors, Inc., Sr. Notes,
7.00%, 4/1/14(4) 1,765 1,800,300
- ---------------------------------------------------------------------------------------------------
$ 10,425,525
- ---------------------------------------------------------------------------------------------------
RETAIL -- 0.9%
Home Interiors & Gifts, 10.125%, 6/1/08 $ 4,025 $ 3,501,750
Jafra Cosmetics International, 10.75%, 5/15/11 2,125 2,417,188
PCA LLC/PCA Finance Corp., Sr. Notes,
11.875%, 8/1/09 9,002 9,677,150
- ---------------------------------------------------------------------------------------------------
$ 15,596,088
- ---------------------------------------------------------------------------------------------------
RETAIL-APPAREL -- 0.2%
Mothers Work, Inc., 11.25%, 8/1/10 $ 3,750 $ 3,712,500
- ---------------------------------------------------------------------------------------------------
$ 3,712,500
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
24
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
RETAIL-FOOD AND DRUG -- 0.6%
General Nutrition Center, Sr. Sub. Notes,
8.50%, 12/1/10(4) $ 1,730 $ 1,777,575
Jean Coutu Group, Inc., Sr. Sub. Notes,
8.50%, 8/1/14(4) 4,220 4,209,450
Pierre Foods Inc., Sr. Sub. Notes,
9.875%, 7/15/12(4) 4,385 4,538,475
- ---------------------------------------------------------------------------------------------------
$ 10,525,500
- ---------------------------------------------------------------------------------------------------
RETAIL-TRUCK STOP -- 0.2%
Petro Stopping Centers LP/Petro Financial Corp.,
Sr. Notes, 9.00%, 2/15/12 $ 2,690 $ 2,864,850
- ---------------------------------------------------------------------------------------------------
$ 2,864,850
- ---------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 1.6%
AMI Semiconductor, Inc., Sr. Sub. Notes,
10.75%, 2/1/13 $ 2,786 $ 3,259,620
Amkor Technologies, Inc., 5.75%, 6/1/06 8,945 7,871,600
Amkor Technologies, Inc., Sr. Notes,
7.125%, 3/15/11 3,375 2,784,375
Amkor Technologies, Inc., Sr. Notes,
7.75%, 5/15/13 6,980 5,758,500
Amkor Technologies, Inc., Sr. Sub. Notes,
10.50%, 5/1/09 1,505 1,286,775
Chippac International Ltd., 12.75%, 8/1/09 5,560 5,914,450
- ---------------------------------------------------------------------------------------------------
$ 26,875,320
- ---------------------------------------------------------------------------------------------------
SERVICES -- 0.1%
Allied Security Escrow, Sr. Sub. Notes,
11.375%, 7/15/11(4) $ 1,055 $ 1,113,025
- ---------------------------------------------------------------------------------------------------
$ 1,113,025
- ---------------------------------------------------------------------------------------------------
SERVICES-MOVERS -- 0.4%
Amerco, Inc., 9.00%, 3/15/09 $ 6,420 $ 6,708,900
- ---------------------------------------------------------------------------------------------------
$ 6,708,900
- ---------------------------------------------------------------------------------------------------
TELECOMMUNICATION EQUIPMENT -- 1.8%
Inmarsat Finance PLC, 7.625%, 6/30/12(4) $ 7,945 $ 7,925,138
Nortel Networks Ltd., 4.25%, 9/1/08 19,915 19,317,550
Nortel Networks Ltd., 6.125%, 2/15/06 3,315 3,397,875
- ---------------------------------------------------------------------------------------------------
$ 30,640,563
- ---------------------------------------------------------------------------------------------------
TELECOMMUNICATIONS -- 0.4%
PanAmSat Corp., Sr. Notes, 9.00%, 8/15/14(4) $ 6,930 $ 7,241,850
- ---------------------------------------------------------------------------------------------------
$ 7,241,850
- ---------------------------------------------------------------------------------------------------
TOBACCO -- 0.2%
North Atlantic Trading Co., Sr. Notes,
9.25%, 3/1/12 $ 2,980 $ 2,875,700
- ---------------------------------------------------------------------------------------------------
$ 2,875,700
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.7%
Horizon Lines, LLC, 9.00%, 11/1/12(4) $ 3,685 $ 3,906,100
OMI Corp., Sr. Notes, 7.625%, 12/1/13 5,075 5,233,594
Petroleum Helicopters, Series B, 9.375%, 5/1/09 205 221,400
Quality Distribution LLC/QD Capital Corp.,
9.00%, 11/15/10(4) 1,770 1,692,563
- ---------------------------------------------------------------------------------------------------
$ 11,053,657
- ---------------------------------------------------------------------------------------------------
UTILITIES -- 2.4%
Illinois Power, 7.50%, 6/15/09 $ 3,190 $ 3,652,550
National Waterworks, Inc., Series B,
10.50%, 12/1/12 2,600 2,964,000
NRG Energy, Inc., Sr. Notes, 8.00%, 12/15/13(4) 13,115 14,115,019
Orion Power Holdings, Inc., Sr. Notes,
12.00%, 5/1/10 14,185 17,802,175
Reliant Energy, Inc., 9.25%, 7/15/10 1,480 1,596,550
- ---------------------------------------------------------------------------------------------------
$ 40,130,294
- ---------------------------------------------------------------------------------------------------
UTILITY-ELECTRIC POWER GENERATION -- 3.6%
AES Corp., 10.00%, 7/15/05(4) $ 1,190 $ 1,214,211
AES Corp., Sr. Notes, 8.75%, 6/15/08 5,816 6,310,360
AES Corp., Sr. Notes, 8.75%, 5/15/13(4) 6,180 6,998,850
AES Corp., Sr. Notes, 8.875%, 2/15/11 322 359,835
AES Corp., Sr. Notes, 9.00%, 5/15/15(4) 1,890 2,140,425
AES Corp., Sr. Notes, 9.375%, 9/15/10 4,521 5,114,381
AES Corp., Sr. Sub. Notes, 8.50%, 11/1/07 3,470 3,574,100
AES Eastern Energy, Series 99-A, 9.00%, 1/2/17 2,995 3,371,651
Calpine Corp., 8.75%, 7/15/13(4) 6,655 5,057,800
Calpine Corp., Sr. Notes, 7.625%, 4/15/06 10,560 9,820,800
Calpine Corp., Sr. Notes, 8.25%, 8/15/05 8,761 8,651,488
Calpine Corp., Sr. Notes, 8.50%, 7/15/10(4) 2,890 2,225,300
Calpine Corp., Sr. Notes, 8.75%, 7/15/07 710 566,225
Calpine Corp., Sr. Notes, 10.50%, 5/15/06 1,235 1,197,950
Mission Energy Holding Co., 13.50%, 7/15/08 3,275 4,159,250
- ---------------------------------------------------------------------------------------------------
$ 60,762,626
- ---------------------------------------------------------------------------------------------------
WASTE MANAGEMENT -- 0.7%
Allied Waste Industries, Series B, 9.25%, 9/1/12 $ 3,675 $ 4,106,813
Waste Services, Inc., Sr. Sub. Notes,
9.50%, 4/15/14(4) 7,680 7,334,400
- ---------------------------------------------------------------------------------------------------
$ 11,441,213
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
25
<Page>
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 6.0%
American Tower Corp., Sr. Notes,
9.375%, 2/1/09 $ 9,027 $ 9,613,755
Centennial Cellular Operating Co., LLC,
Sr. Sub. Notes, 10.75%, 12/15/08 2,790 2,915,550
Centennial Cellular Operating Co./Centennial
Communications Corp., Sr. Notes,
10.125%, 6/15/13 13,835 14,630,513
Crown Castle International Corp.,
Sr. Disc. Notes, 11.25%, 8/1/11 4,405 4,630,756
Crown Castle International Corp., Sr. Notes,
10.75%, 8/1/11 880 983,400
IWO Holdings, Inc., 14.00%, 1/15/11(3) 5,600 2,492,000
LCI International, Inc., Sr. Notes,
7.25%, 6/15/07 9,955 9,083,938
Nextel Communications, Inc., Sr. Notes,
7.375%, 8/1/15 2,710 2,926,800
Nextel Partners, Inc., Sr. Notes,
12.50%, 11/15/09 4,102 4,758,320
Ono Finance PLC, Sr. Notes, 14.00%, 7/15/10 EUR 4,000 5,489,640
Ono Finance PLC, Sr. Notes, 14.00%, 2/15/11 3,133 3,622,531
Ono Finance PLC, Sr. Notes, 14.00%, 2/15/11 EUR 2,470 3,347,671
PTC International Finance II SA,
11.25%, 12/1/09 625 668,750
PTC International Finance II SA,
11.25%, 12/1/09 EUR 1,125 1,490,979
SBA Telecommunications, Sr. Disc. Notes,
9.75%, (0.00% until 2007), 12/15/11 3,960 3,227,400
Telemig Celular SA/Amazonia Celular SA,
8.75%, 1/20/09(4) 2,600 2,600,000
TSI Telecommunication, Series B,
12.75%, 2/1/09 1,200 1,350,000
UbiquiTel Operating Co., Sr. Notes,
9.875%, 3/1/11 5,140 5,377,725
US Unwired, Inc., Series B, 10.00%, 6/15/12 7,150 7,453,875
Western Wireless Corp., Sr. Notes,
9.25%, 7/15/13 12,535 12,848,375
- ---------------------------------------------------------------------------------------------------
$ 99,511,978
- ---------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATIONS -- 0.6%
Alamosa Delaware, Inc., Sr. Disc. Notes,
12.00%, (0.00% until 2005), 7/31/09 $ 2,130 $ 2,204,550
Alamosa Delaware, Inc., Sr. Notes,
8.50%, 1/31/12 4,990 5,077,325
Alamosa Delaware, Inc., Sr. Notes,
11.00%, 7/31/10 2,590 2,946,125
- ---------------------------------------------------------------------------------------------------
$ 10,228,000
- ---------------------------------------------------------------------------------------------------
WIRELINE COMMUNICATION SERVICES -- 1.1%
Qwest Capital Funding, Inc., 7.00%, 8/3/09 $ 1,275 $ 1,173,000
Qwest Capital Funding, Inc., 7.75%, 8/15/06 5,720 5,770,050
Qwest Capital Funding, Inc., 7.90%, 8/15/10 1,800 1,669,500
Qwest Services Corp., 13.50%, 12/15/10(4) 7,782 9,124,395
U.S. West Communications, 7.20%, 11/10/26 670 587,925
- ---------------------------------------------------------------------------------------------------
$ 18,324,870
- ---------------------------------------------------------------------------------------------------
TOTAL CORPORATE BONDS & NOTES
(IDENTIFIED COST $1,370,573,220) $ 1,444,119,298
- ---------------------------------------------------------------------------------------------------
</Table>
CONVERTIBLE BONDS -- 0.2%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
Kerzner International Ltd., 2.375%, 4/15/24(4) $ 3,595 $ 3,509,619
Texas Petrochemical L.P., 7.25%, 4/30/09 322 378,350
- ---------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS
(IDENTIFIED COST, $3,917,000) $ 3,887,969
- ---------------------------------------------------------------------------------------------------
</Table>
COMMON STOCKS -- 1.5%
<Table>
<Caption>
SECURITY SHARES VALUE
- ---------------------------------------------------------------------------------------------------
BROADCASTING AND CABLE -- 0.5%
Sinclair Broadcast Group, Inc., Class A 150,000 $ 1,095,000
Telewest Global, Inc.(5) 557,586 6,479,149
- ---------------------------------------------------------------------------------------------------
$ 7,574,149
- ---------------------------------------------------------------------------------------------------
BUSINESS SERVICES-MISCELLANEOUS -- 0.1%
R.H. Donelley Corp.(5) 40,000 $ 1,974,400
- ---------------------------------------------------------------------------------------------------
$ 1,974,400
- ---------------------------------------------------------------------------------------------------
CHEMICALS -- 0.1%
Texas Petrochemicals, Inc.(5)(6) 76,615 $ 737,420
- ---------------------------------------------------------------------------------------------------
$ 737,420
- ---------------------------------------------------------------------------------------------------
LODGING AND GAMING -- 0.1%
Kerzner International Ltd. 50,000 $ 2,198,500
Peninsula Gaming LLC, Convertible Preferred
Membership Interests(5)(7) 6,338 38,027
- ---------------------------------------------------------------------------------------------------
$ 2,236,527
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
26
<Page>
<Table>
<Caption>
SECURITY SHARES VALUE
- ---------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.7%
Crown Castle International Corp.(5) 33,156 $ 493,361
NTL, Inc.(5) 186,847 11,597,593
- ---------------------------------------------------------------------------------------------------
$ 12,090,954
- ---------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(IDENTIFIED COST $23,600,166) $ 24,613,450
- ---------------------------------------------------------------------------------------------------
</Table>
CONVERTIBLE PREFERRED STOCKS -- 0.8%
<Table>
<Caption>
SECURITY SHARES VALUE
- ---------------------------------------------------------------------------------------------------
OIL AND GAS-EQUIPMENT AND SERVICES -- 0.3%
Chesapeake Energy Corp. 13,925 $ 1,611,819
Williams Holdings of Delaware(4) 51,125 3,629,875
- ---------------------------------------------------------------------------------------------------
$ 5,241,694
- ---------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.5%
Crown Castle International Corp. (PIK) 191,935 $ 8,805,018
- ---------------------------------------------------------------------------------------------------
$ 8,805,018
- ---------------------------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS
(IDENTIFIED COST $12,415,944) $ 14,046,712
- ---------------------------------------------------------------------------------------------------
</Table>
WARRANTS -- 0.1%
<Table>
<Caption>
SECURITY SHARES VALUE
- ---------------------------------------------------------------------------------------------------
EXERCISE EQUIPMENT -- 0.0%
HF Holdings, Inc., Exp. 9/27/09(5)(6) 3,400 $ 0
- ---------------------------------------------------------------------------------------------------
$ 0
- ---------------------------------------------------------------------------------------------------
MANUFACTURING -- 0.0%
Mueller Holdings, Inc., Exp. 4/15/14(5) 3,070 $ 185,735
- ---------------------------------------------------------------------------------------------------
$ 185,735
- ---------------------------------------------------------------------------------------------------
PRINTING AND BUSINESS PRODUCTS -- 0.0%
Merrill Corp., Class A, Exp. 1/1/10(5)(6) 3,182 $ 0
- ---------------------------------------------------------------------------------------------------
$ 0
- ---------------------------------------------------------------------------------------------------
</Table>
<Table>
<Caption>
SECURITY SHARES VALUE
- ---------------------------------------------------------------------------------------------------
RESTAURANTS -- 0.0%
New World Coffee, Exp. 6/15/06(5)(7) 845 $ 9
- ---------------------------------------------------------------------------------------------------
$ 9
- ---------------------------------------------------------------------------------------------------
SEMICONDUCTORS -- 0.0%
Asat Finance, Exp. 11/1/06(5)(6) 3,900 $ 6,045
- ---------------------------------------------------------------------------------------------------
$ 6,045
- ---------------------------------------------------------------------------------------------------
TRANSPORTATION -- 0.0%
Quality Distribution, Inc., Exp.1/15/07(5)(6) 817 $ 4,796
- ---------------------------------------------------------------------------------------------------
$ 4,796
- ---------------------------------------------------------------------------------------------------
WIRELESS COMMUNICATION SERVICES -- 0.1%
American Tower Corp., Exp. 8/1/08(5) 4,825 $ 909,512
Ono Finance PLC, Exp. 3/16/11(5)(6) 2,520 0
Ono Finance PLC, Exp. 5/31/09(5)(6) 3,440 0
Ono Finance PLC, Exp. 5/31/09(5)(6) 1,200 0
- ---------------------------------------------------------------------------------------------------
$ 909,512
- ---------------------------------------------------------------------------------------------------
TOTAL WARRANTS
(IDENTIFIED COST $654,314) $ 1,106,097
- ---------------------------------------------------------------------------------------------------
</Table>
COMMERCIAL PAPER -- 8.5%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------------------------
American General Finance Corp., 1.76%, 10/4/04 $ 33,000 $ 32,995,160
Barton Capital Co., 1.75%, 10/4/04 22,000 21,996,792
CRC Funding LLC, 1.75%, 10/27/04 12,160 12,144,631
Household Finance, 1.76%, 11/2/04 40,000 39,937,422
Kitty Hawk Fund, 1.78%, 10/20/04 10,223 10,213,396
Yorktown Capital, 1.78%, 10/4/04 25,000 24,996,292
- ---------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(AT AMORTIZED COST, $142,283,693) $ 142,283,693
- ---------------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
27
<Page>
SHORT-TERM INVESTMENTS -- 2.0%
<Table>
<Caption>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
- ---------------------------------------------------------------------------------------------------
Investors Bank & Trust Company Time Deposit,
1.90%, 10/1/04 $ 32,953 $ 32,953,000
- ---------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM INVESTMENTS
(AT AMORTIZED COST, $32,953,000) $ 32,953,000
- ---------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS -- 100.0%
(IDENTIFIED COST $1,592,831,359) $ 1,668,792,989
- ---------------------------------------------------------------------------------------------------
OTHER ASSETS, LESS LIABILITIES -- 0.0% $ 460,943
- ---------------------------------------------------------------------------------------------------
NET ASSETS -- 100.0% $ 1,669,253,932
- ---------------------------------------------------------------------------------------------------
</Table>
EUR - Euro
PIK - Payment In Kind.
Note: The Portfolio has made commitments to fund specified amounts under certain
existing credit arrangements. Pursuant to the terms of these arrangements, the
Portfolio had unfunded loan commitments of $20,000,000 as of September 30, 2004.
(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 three 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 more European banks such as the London
Inter-Bank Offered Rate (LIBOR).
(3) Defaulted security.
(4) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be sold in transactions exempt from
registration, normally to qualified institutional buyers. At September 30,
2004, the aggregate value of the securities is $443,871,598 or 26.6% of the
Portfolio's net assets.
(5) Non-income producing security.
(6) Security valued at fair value using methods determined in good faith by or
at the direction of the Trustees.
(7) Restricted security.
SEE NOTES TO FINANCIAL STATEMENTS
28
<Page>
BOSTON INCOME PORTFOLIO AS OF SEPTEMBER 30, 2004
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 2004
<Table>
ASSETS
Investments, at value (identified cost, $1,592,831,359) $ 1,668,792,989
Cash 1,717,372
Receivable for investments sold 9,254,985
Interest and dividends receivable 33,284,507
- -------------------------------------------------------------------------
TOTAL ASSETS $ 1,713,049,853
- -------------------------------------------------------------------------
LIABILITIES
Payable for investments purchased $ 43,651,212
Payable for open forward foreign currency contracts 105,576
Accrued expenses 39,133
- -------------------------------------------------------------------------
TOTAL LIABILITIES $ 43,795,921
- -------------------------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN PORTFOLIO $ 1,669,253,932
- -------------------------------------------------------------------------
SOURCES OF NET ASSETS
Net proceeds from capital contributions and withdrawals $ 1,593,394,644
Net unrealized appreciation (computed on the basis of
identified cost) 75,859,288
- -------------------------------------------------------------------------
TOTAL $ 1,669,253,932
- -------------------------------------------------------------------------
</Table>
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2004
<Table>
INVESTMENT INCOME
Interest $ 137,427,803
Dividends (net of foreign taxes, $4,365) 2,056,181
Other income 1,163,362
- -------------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 140,647,346
- -------------------------------------------------------------------------
EXPENSES
Investment adviser fee $ 9,824,594
Trustees' fees and expenses 24,084
Custodian fee 371,585
Legal and accounting services 60,325
Miscellaneous 38,874
- -------------------------------------------------------------------------
TOTAL EXPENSES $ 10,319,462
- -------------------------------------------------------------------------
Deduct --
Reduction of custodian fee $ 1,382
- -------------------------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 1,382
- -------------------------------------------------------------------------
NET EXPENSES $ 10,318,080
- -------------------------------------------------------------------------
NET INVESTMENT INCOME $ 130,329,266
- -------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS)
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 19,923,832
Foreign currency and forward foreign currency
exchange contract transactions 100,283
- -------------------------------------------------------------------------
NET REALIZED GAIN $ 20,024,115
- -------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 38,521,407
Foreign currency and forward foreign currency
exchange contracts (46,971)
- -------------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ 38,474,436
- -------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN $ 58,498,551
- -------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 188,827,817
- -------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
29
<Page>
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
- --------------------------------------------------------------------------------------------
INCREASE (DECREASE)
IN NET ASSETS
From operations --
Net investment income $ 130,329,26 $ 101,071,832
Net realized gain from investments,
foreign currency and forward
foreign currency exchange
contract transactions 20,024,115 19,687,824
Net change in unrealized appreciation
(depreciation) from investments,
foreign currency and forward
foreign currency exchange contracts 38,474,436 132,228,527
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 188,827,817 $ 252,988,183
- --------------------------------------------------------------------------------------------
Capital transactions --
Contributions $ 651,850,288 $ 736,904,337
Withdrawals (539,410,862) (418,618,018)
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ 112,439,426 $ 318,286,319
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS $ 301,267,243 $ 571,274,502
- --------------------------------------------------------------------------------------------
NET ASSETS
At beginning of year $ 1,367,986,689 $ 796,712,187
- --------------------------------------------------------------------------------------------
AT END OF YEAR $ 1,669,253,932 $ 1,367,986,689
- --------------------------------------------------------------------------------------------
</Table>
SEE NOTES TO FINANCIAL STATEMENTS
30
<Page>
SUPPLEMENTARY DATA
<Table>
<Caption>
YEAR ENDED SEPTEMBER 30,
-------------------------------------------------------------
2004 2003 2002(1) 2001(2)
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA
Ratios (As a percentage of average
daily net assets):
Expenses 0.66% 0.66% 0.68% 0.69%(3)
Net investment income 8.29% 9.51% 9.91% 10.38%(3)
Portfolio Turnover 79% 116% 91% 16%
- -------------------------------------------------------------------------------------------------------
TOTAL RETURN(4) 13.28% 26.96% 2.09% --
- -------------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S OMITTED) $ 1,669,254 $ 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
31
<Page>
BOSTON INCOME PORTFOLIO as of September 30, 2004
NOTES TO FINANCIAL STATEMENTS
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 September 30, 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 or
NASDAQ are valued at closing sale prices. Listed or unlisted investments for
which closing sale prices are not available are valued at the mean between
the latest bid and asked prices. Fixed income investments 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 credit balances used to reduce
the Portfolio's custodian fees are reported as a reduction of expenses on the
Statement of Operations. For the year ended September 30, 2004, the
Portfolio's custodian fee was reduced by $1,382 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 income and expense during the
reporting period. Actual results could differ from those estimates.
32
<Page>
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.
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 year
ended September 30, 2004, the advisory fee amounted to $9,824,594. 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 year ended September 30, 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 $1,287,949,062 and $1,168,615,690,
respectively, for the year ended September 30, 2004.
4 FEDERAL INCOME TAX BASIS OF UNREALIZED APPRECIATION (DEPRECIATION)
The cost and unrealized appreciation (depreciation) in value of the
investments owned at September 30, 2004, as computed on a federal income tax
basis, were as follows:
<Table>
AGGREGATE COST $ 1,596,738,854
--------------------------------------------------------
Gross unrealized appreciation $ 99,249,342
Gross unrealized depreciation (27,195,207)
--------------------------------------------------------
NET UNREALIZED APPRECIATION $ 72,054,135
--------------------------------------------------------
</Table>
The net unrealized appreciation on foreign currency is $3,234.
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 do 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 September 30, 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
-----------------------------------------------------------------------------
10/29/04 Euro
8,535,398 $ 10,493,461 $ (105,576)
-----------------------------------------------------------------------------
$ 10,493,461 $ (105,576)
-----------------------------------------------------------------------------
</Table>
33
<Page>
At September 30, 2004, the Portfolio had sufficient cash and/or securities to
cover commitments under these contracts.
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 year
ended September 30, 2004.
7 RESTRICTED SECURITIES
At September 30, 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 COST FAIR VALUE
------------------------------------------------------------------------------------------------
COMMON STOCKS AND WARRANTS
------------------------------------------------------------------------------------------------
Peninsula Gaming LLC,
Convertible Preferred
Membership Interests 7/08/99 6,338 $ 0 $ 38,027
New World Coffee, 1/06/03 -
Exp. 6/15/06 5/13/03 845 0 9
------------------------------------------------------------------------------------------------
$ 0 $ 38,036
------------------------------------------------------------------------------------------------
</Table>
34
<Page>
BOSTON INCOME PORTFOLIO as of September 30, 2004
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE TRUSTEES AND INVESTORS OF BOSTON 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 Boston Income Portfolio (the "Portfolio") at
September 30, 2004, and the results of its operations, the changes in its net
assets and the supplementary data for each of the periods indicated, 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 the standards of the Public Company Accounting
Oversight Board (United States). Those standards 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
September 30, 2004 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 24, 2004
35
<Page>
EATON VANCE INCOME FUND OF BOSTON
MANAGEMENT AND ORGANIZATION
FUND MANAGEMENT. The Trustees of Eaton Vance Series Trust II (the Trust) and the
Boston Income Portfolio (the Portfolio) are responsible for the overall
management and supervision of the Trust's and Portfolio's affairs. The Trustees
and officers of the Trust and the Portfolio 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
Portfolio 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
Portfolio's placement agent and a wholly-owned subsidiary of EVM.
<Table>
<Caption>
POSITION(s) TERM OF NUMBER OF PORTFOLIOS
WITH THE OFFICE AND IN FUND COMPLEX
NAME AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S) OVERSEEN BY
DATE OF BIRTH THE PORTFOLIO SERVICE DURING PAST FIVE YEARS TRUSTEE(1) OTHER DIRECTORSHIPS HELD
- ------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
James B. Hawkes Trustee Trustee of the Chairman, President and Chief 195 Director of EVC
11/9/41 Trust since Executive Officer of BMR, EVC, EVM
1998; of the and EV; Director of EV; Vice
Portfolio President and Director of EVD.
since 2001 Trustee and/or officer of 195
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 Fund and the Portfolio.
NONINTERESTED TRUSTEE(S)
Samuel L. Hayes, Trustee Trustee of the Jacob H. Schiff Professor of 195 Director of Tiffany & Co.
III Trust since Investment Banking Emeritus, Harvard (specialty retailer) and
2/23/35 1989; of the University Graduate School of Telect, Inc.
Portfolio Business Administration. (telecommunication
since 2001 services company)
William H. Park Trustee Since 2003 President and Chief Executive 194 None
9/19/47 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, Georgetown 194 None
7/10/40 University Law Center (since 1999).
Tax Partner, Covington & Burling,
Washington, DC (1991-2000).
Norton H. Reamer Trustee Trustee of the President, Chief Executive Officer 195 None
9/21/35 Trust since and a Director of Asset Management
1989; of the Finance Corp. (a specialty finance
Portfolio company serving the investment
since 2001 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 2001 Professor of Law, University of 195 None
9/14/57 California at Los Angeles School of
Law (since July 2001). Formerly,
Professor of Law, Georgetown
University Law Center.
</Table>
36
<Page>
<Table>
<Caption>
POSITION(S) TERM OF
WITH THE OFFICE AND
NAME AND TRUST AND LENGTH OF PRINCIPAL OCCUPATION(S)
DATE OF BIRTH THE PORTFOLIO SERVICE DURING PAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------
Michael W. Weilheimer President Since 2002(2) Vice President of EVM and BMR. Officer of 10
2/11/61 registered investment companies managed by
EVM or BMR.
Thomas P. Huggins Vice President Vice President of the Vice President of EVM and BMR. Officer of 7
3/7/66 Trust since 2000; of registered investment companies managed by
the Portfolio since EVM or BMR.
2001
Cliff Quisenberry, Vice President Since 2003 Vice President and Global Portfolio Manager
Jr. of Parametric Portfolio Associates
1/1/65 ("Parametric"). Officer of 2 registered
investment companies managed by EVM or BMR.
Alan R. Dynner Secretary Secretary of the Trust Vice President, Secretary and Chief Legal
10/10/40 since 1997; of the Officer of BMR, EVM, EVD, EV and EVC. Officer
Portfolio since 2001 of 195 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 195
6/19/57 Portfolio registered investment companies managed by
EVM or BMR.
Bryan J. Doddy Treasurer of the Since 2003 Vice President of EVM and BMR. Previously,
3/7/59 Trust Vice President and Tax Director at PFPC Inc.
(2000-2003) and Director of Taxation for John
Hancock Advisers, Inc. (1997-2000). Officer
of 5 registered investment companies managed
by EVM or BMR.
Paul M. O'Neil Chief Compliance Since 2004 Vice President of EVM and BMR. Officer of 195
7/11/53 Officer 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.Weilheimer served as Vice President of the Trust since
1996 and of the Portfolio since 2001 and Ms. Campbell served as Assistant
Treasurer of the Trust since 1994 and of the Portfolio since 2001.
The SAI for the Fund includes additional information about the Trustees and
officers of the Trust and the Portfolio and can be obtained without charge by
calling 1-800-225-6265.
37
<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
(a)-(d)
The following table presents aggregate fees billed to the registrant for the
fiscal years ended September 30, 2003, and September 30, 2004 by the
registrant's principal accountant for professional services rendered for the
audit of the registrant's annual financial statements and fees billed for other
services rendered by the principal accountant during those periods.
<Table>
<Caption>
FISCAL YEARS ENDED 09/30/03 09/30/04
- ---------------------------------------------------------
Audit Fees $ 38,300 $ 47,800
Audit-Related Fees(1) $ 0 $ 0
Tax Fees(2) $ 5,500 $ 5,650
All Other Fees(3) $ 0 $ 0
-----------------------------
Total $ 43,800 $ 53,450
=============================
</Table>
<Page>
(1) Audit-related fees consist of the aggregate fees billed for assurance and
related services that are reasonably related to the performance of the audit of
the registrant's financial statements and are not reported under the category of
audit fees.
(2) Tax fees consist of the aggregate fees billed for professional services
rendered by the principal accountant relating to tax compliance, tax advice, and
tax planning and specifically include fees for tax return preparation.
(3) All other fees consist of the aggregate fees billed for products and
services provided by the registrant's principal accountant other than audit,
audit-related, and tax services. (e)(1) The registrant's audit committee has
adopted policies and procedures relating to the pre-approval of services
provided by the registrant's principal accountant (the "Pre-Approval Policies").
The Pre-Approval Policies establish a framework intended to assist the audit
committee in the proper discharge of its pre-approval responsibilities. As a
general matter, the Pre-Approval Policies (i) specify certain types of audit,
audit-related, tax, and other services determined to be pre-approved by the
audit committee; and (ii) delineate specific procedures governing the mechanics
of the pre-approval process, including the approval and monitoring of audit and
non-audit service fees. Unless a service is specifically pre-approved under the
Pre-Approval Policies, it must be separately pre-approved by the audit
committee.
The Pre-Approval Policies and the types of audit and non-audit services
pre-approved therein must be reviewed and ratified by the registrant's audit
committee at least annually. The registrant's audit committee maintains full
responsibility for the appointment, compensation, and oversight of the work of
the registrant's principal accountant.
(e)(2) No services described in paragraphs (b)-(d) above were approved by the
registrant's audit committee pursuant to the "de minimis exception" set forth in
Rule 2-01 (c)(7)(i)(C) of Regulation S-X.
(f) Not applicable.
(g) The following table presents (i) the aggregate non-audit fees (i.e., fees
for audit-related, tax, and other services) billed to the registrant by the
registrant's principal accountant for the last two fiscal years of the
registrant; and (ii) the aggregate non-audit fees (i.e., fees for audit-related,
tax, and other services) billed to the Eaton Vance organization by the
registrant's principal accountant for the last two fiscal years of the
registrant.
<Table>
<Caption>
FISCAL YEARS ENDED 09/30/03 09/30/04
- ---------------------------------------------------------
Registrant $ 5,500 $ 5,650
Eaton Vance (1) $ 0 $ 84,490
</Table>
(1) The investment adviser to the registrant, as well as any of its
affiliates that provide ongoing services to the registrant, are
subsidiaries of Eaton Vance Corp.
<Page>
(h) The registrant's audit committee has considered whether the provision by the
registrant's principal accountant of non-audit services to the registrant's
investment adviser and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant that
were not pre-approved pursuant to Rule 2-01(c)(7)(ii) of Regulation S-X is
compatible with maintaining the principal accountant's independence.
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.
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,
<Page>
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: November 19, 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: November 19, 2004
By: /s/ Michael W. Weilheimer
--------------------------------------
Michael W. Weilheimer
President
Date: November 19, 2004