TO SHAREHOLDERS
Eaton Vance Income Fund of Boston had a total return of 3.4 percent for the six
months ended March 31, 1995, the result of a decline in net asset value per
share to $7.75 on March 31, 1995, from $7.90 on September 30, 1994, and the
reinvestment of $0.406 per share in dividends. The total return does not include
the effect of the Fund's 4.75 percent maximum sales charge. For comparison, the
Lehman Brothers High Yield Bond Index returned 5.6 percent for the six-month
period.
Based on the Fund's most recent dividend and a net asset value per share of
$7.75, the Fund had a distribution rate of 10.45 percent at March 31.
AMID A VOLATILE TREASURY MARKET, HIGH YIELD BONDS FARED WELL...
The high yield market, less sensitive to interest rates and bolstered by robust
corporate earnings, was considerably less volatile than the Treasury market
which has undergone large fluctuations in the past year.* Ten-year Treasury
yields, which were around 6.8 percent in March 1994, rose above 8 percent by
November as the Federal Reserve pushed rates higher in an effort to cut short
inflation. However, as inflation fears ebbed at year-end, Treasury yields fell
back to 7.2 percent by March 31.
*High yield bonds carry a higher degree of investment risk, while the principal
and interest of Treasury issues are guaranteed by the U.S. government. High
yield bonds are considered speculative because they present greater risks of
price volatility and default.
WITH A STRONGER ECONOMY, CREDIT QUALITY IMPROVED WITHIN THE HIGH YIELD SECTOR...
According to Securities Data Corp., issues rated B- or below comprised 18
percent of new high yield issuance in 1994. That is a significant improvement
from 1989, when nearly 30 percent of new debt was rated B- or below. In
addition, interest coverage for new high yield issues - the ratio of free cash
flow to interest payments - rose from 1.6 percent at the beginning of 1994 to
1.9 percent by the year-end, according to Chemical Securities Inc. That
statistic indicates a widening comfort margin for purchasers of high yield debt
and another sign of the improving credit quality of the $272 billion high yield
market.
In the following pages, portfolio manager Hooker Talcott provides additional
information that presents a strong case for Income Fund of Boston as a high
income, long-term investment.
INCOME FUND OF BOSTON: RATINGS BREAKDOWN OF BOND HOLDINGS*
Aaa 2.0%
Baa 0.6%
B1 23.0%
B2 24.8%
B3 28.1%
Caa 8.2%
Non-rated 3.5%
*Moody's Investors Services ratings; percentages based on market value as of
March 31, 1995. Source: Eaton Vance Management.
Sincerely,
[Photo of M. Dozier Gardner]
/s/ M. Dozier Gardner
M. Dozier Gardner
President
May 19, 1995
<PAGE>
Management Discussion
An interview with Hooker Talcott Jr., Vice President and Portfolio Manager of
Eaton Vance Income Fund of Boston.
Q. HOOKER, HOW WOULD YOU EVALUATE THE FUND'S PERFORMANCE DURING THE SIX-MONTH
PERIOD?
A. The Fund performed relatively well during the six-month period. The
principal reason for the Fund's positive performance was that our focus
remained on high-coupon bonds, which avoided much of the volatility that
characterized the Treasury market through much of 1994. Another reason for
the Fund's performance was an emphasis on cyclical issues, which have been
the clear market leaders.
Q. WHAT RECENT CHANGES HAVE YOU MADE TO THE PORTFOLIO?
A. After an extended recovery, the economy has recently showed signs of
slowing somewhat. Therefore, I have reduced the Portfolio's exposure to
early-cycle industries such as home builders and automobiles. While those
companies have fared well, they have seen sales decline modestly in recent
months. Meanwhile, we've increased the Portfolio's positions in late-stage
cyclicals such as chemicals, energy companies and paper and packaging
companies. In addition, since the beginning of the year, we have moved into
some more defensive issues such as cable television, casinos, and food
companies.
Q. WOULD A SUSTAINED, STABLE-GROWTH ECONOMY BE FAVORABLE FOR THE HIGH YIELD
MARKET?
A. In my view, it would. If interest rates remain stable, we should see
continued improvement in earnings, which would support interest payments
for debt service and help sustain principal payments.
Q. WHAT INDUSTRIES WILL BENEFIT?
A. If the economy maintains a slow but steady course for an extended period,
the late cyclical companies that we have emphasized would very likely
continue to prosper. Many late-cycle companies are beneficiaries of
increased capital spending and higher commodity prices that accompany an
advancing economic cycle.
Q. CAN YOU GIVE AN EXAMPLE?
A. Chemical companies are a good example. The industry is expected to operate
near 85 percent of capacity in 1995, an improvement over 1994, which was
another strong year. Yet, even with the increased capacity, chemical
producers may still be hard-pressed to meet rising demand. According to
the Chemical Manufacturers Association, industry sales could rise as much
as 8 percent in 1995.
Two Portfolio holdings, NL Industries and Agricultural Minerals & Chemicals
have each been able to raise prices, while benefiting from the wide-scale
cost cutting of recent years. NL Industries makes titanium dioxide, a
pigmentation chemical used in the manufacture of paints and plastics.
Agricultural Minerals produces specialty chemicals, including nitrogen
fertilizers used in the agriculture sector.
Q. THE DOLLAR HAS WEAKENED SIGNIFICANTLY IN RECENT MONTHS AGAINST THE YEN AND
THE DEUTSCHMARK. WHAT KIND OF IMPACT MIGHT THAT HAVE ON CYCLICAL COMPANIES?
A. That surely helps the global competitiveness of U.S. manufacturers relative
to their counterparts abroad. But while the weaker dollar may help
marginally, the primary driver, by far, has been strong global economic
growth. Cyclical companies have been helped by an economic revival in
Europe as well as the growth in some emerging markets. American Standard,
for instance, a long-time Portfolio holding, has substantial operations in
Europe in their plumbing and transportation businesses. The company should
see significant growth in sales to the expanding markets in Europe.
Q. YOU MENTIONED ADDING SOME DEFENSIVE ISSUES TO THE PORTFOLIO. COULD YOU
EXPAND ON THAT THEME?
A. Certainly. Adding some defensive names to the Portfolio nicely complements
our late cyclical strategy. As I indicated earlier, it's impossible to
consistently predict turns in the economy. If the Fed is a bit overzealous
in combating inflation, the economy could slow significantly. In that
event, defensive issues would benefit. For example, the unit volumes and
pricing of food retailers like Food 4 Less Supermarkets, a large Portfolio
investment, are fairly immune from the fluctuations in the economy. That
stability serves the companies well in a slower economic environment, and
they, in turn, tend to attract the attention of investors.
Q. HOOKER, WHAT IS YOUR OUTLOOK FOR THE HIGH YIELD MARKET?
A. With an upbeat economic picture, the high yield market should continue to
fare well. The economy currently enjoys a climate of moderate growth:
neither weak enough to risk recession nor strong enough to prompt a
resurgence of inflation. Meanwhile, 10-year BB-rated bonds currently offer
a premium of 300 basis points over 10-year Treasuries, a very attractive
yield advantage. While past trends are not always repeated, high yield
bonds have been among the best-performing assets classes during the 1990s.
And I believe the high yield sector continues to represent a major
opportunity for investors seeking high current income.
[Photo of Hooker Talcott, Jr.]
HOOKER TALCOTT, JR.
<PAGE>
- ------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
MARCH 31, 1995
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CORPORATE BONDS & NOTES -- 94.3%
- ------------------------------------------------------------------------------------------------
SECURITY FACE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTOMOTIVE/TRUCK -- 6.1%
Exide Corporation, Sr. Notes, 10.75%, 12/15/02 $ 500,000 $ 502,500
JPS Automotive Prod. Corp., Sr. Notes, 11.125%, 6/15/01 1,450,000 1,413,750
Key Plastics, Sr. Notes, 14%, 11/15/99 1,000,000 1,090,000
SPX Corporation, Sr. Sub. Notes, 11.75%, 6/1/02 400,000 417,000
Terex Corp., Sr. Sub. Notes, 13.5%, 7/1/97 200,000 191,000
Terex Corp., Sr. Secured Notes, 13%, 8/1/96 812,600 792,285
Truck Components, Sr. Notes, 12.25%, 6/30/01 1,500,000 1,560,000
------------
$ 5,966,535
------------
BUILDING PRODUCTS -- 6.8%
American Standard, Sr. Notes, 11.375%, 5/15/04 $ 750,000 $ 813,750
American Standard, Sr. Sub. Debs., 10.5% (0% until 1998), 6/1/05 400,000 272,000
Building Materials Corp., Sr. Def. Cpn. Nts., 0%, 7/1/04 1,850,000 999,000
Eagle Industries Inc., Sr. Dist. Notes, 10.5%
(0% until 1998), 7/15/03 1,200,000 780,000
Overhead Door Corp., Sr. Notes, 12.25%, 2/1/00 1,000,000 1,030,000
Schuller International Group, Sr. Notes, 10.875%, 12/15/04 800,000 842,000
Southdown Inc., Sr. Sub. Notes., 14%, 10/15/01 750,000 827,813
Tarkett International, Sr. Sub. Notes, 9%, 3/1/02 900,000 841,500
USG Corp., Sr. Notes, 8.75%, 3/1/17 250,000 225,000
------------
$ 6,631,063
------------
CHEMICALS -- 6.7%
Agricultural Minerals & Chemicals, Sr. Notes, 10.75%, 9/30/03 $ 1,000,000 $ 1,025,000
GI Holdings, Sr. Discount Notes, 11.125% (0% until 1995), 10/1/98 1,200,000 774,000
Indspec Chemical Co., Sr. Sub. Notes, 11.50%
(0% until 1998), 12/1/03 1,000,000 590,000
NL Industries Inc., Sr. Sec. Notes, 11.75%, 10/15/03 1,200,000 1,230,000
NL Industries Inc., Sr. Disc. Notes, 13%
(0% until 1998), 10/15/05 850,000 548,250
Rexene Corp., Sr Notes, 11.75%, 12/01/04 1,000,000 1,020,000
UCC Investors Holding Inc., Sub Disc. Debs., 10.5%, 5/1/02 500,000 502,500
UCC Investors Holding Inc., Sub Disc. Debs., 11%, 5/1/03 800,000 804,000
------------
$ 6,493,750
------------
COMMUNICATIONS -- 4.2%
Cablevision Industries, Sr. Notes, 10.75%, 1/30/02 $ 1,000,000 $ 1,050,000
CF Cable TV, Senior Notes 11.625%, 2/15/05 700,000 717,500
Dial Call Communications Inc., Sr. Red. Notes, 12.25%
(0% until 1999), 4/15/04 1,800,000 693,000
Diamond Cable Communications Co., Sr Disc. Notes 13.25%
(0% until 1999), 9/30/04 1,000,000 570,000
United International Holdings Inc., Sr. Sec. Disc. Notes,
0%, 11/15/99 1,960,000 1,029,000
------------
$ 4,059,500
------------
ENERGY -- 8.2%
Empire Gas Corp., Sr. Sec. Notes, 7%, 7/15/04 $ 1,000,000 $ 680,000
Gulf Canada Resources Ltd., Sr. Sub. Notes, 9.25%, 1/15/04 1,400,000 1,330,000
Mesa Capital Corp., Sec. Disc. Notes,
12.75%, (0% until 6/30/95), 6/30/98 1,200,000 1,158,000
Midland Funding II, Subordinated Secured Lease Oblig.,
11.75%, 7/23/2005 800,000 776,000
Midland Cog Venture, Sr. Sec. Lease Oblig., 10.33%, 7/23/02 850,885 846,631
Petroleum Heat & Power Inc., Sub. Debs. 12.25%, 2/1/05 400,000 414,000
Synergy Group Inc., Sr. Notes, 9.5%, 9/15/00 (1) 893,000 625,100
Trans Texas Gas Corp., Sr. Sec. Notes, 10.5%, 9/1/00 1,500,000 1,509,375
Tuboscope Vetco, Sr. Sub. Deb., 10.75%, 4/15/03 500,000 502,500
YPF Sociedad Anonima, Negot. Olig. Notes, 8%, 2/15/04 200,000 158,000
------------
$ 7,999,606
------------
FOOD/RESTAURANTS/HOTELS -- 7.9%
American Restaurant Group Inc., Sr. Sec. Notes, 12%, 9/15/98 $ 1,200,000 $ 1,092,000
BFI Acquisition Corp., Sr. Sub. Notes Series A 12%, 12/1/01 1,500,000 1,440,000
Flagstar Corp., Sub. Debs., 11.25%, 11/1/04 2,300,000 1,932,000
Host Marriott, Sr. Notes., 11.25%, 7/18/05 506,500 509,033
Purina Mills, Sr. Sec. Sub. Notes, 10.25%, 9/1/03 1,050,000 1,023,750
Seven Up/RC Bottling Co., Sr. Sec. Notes, 11.5%, 8/1/99 1,000,000 865,000
Specialty Foods Corp., Sr. Disc. Debs., 13%,
(0% until 1999) 8/15/05 1,600,000 800,000
------------
$ 7,661,783
------------
HEALTHCARE -- 3.7%
Dade International, Inc., Sr. Sub. Notes, 13%, 2/1/05+ $ 1,000,000 $ 1,022,500
National Medical Enterprises, Inc., Sr. Notes, 10.125%, 3/1/05 600,000 615,750
Ordna Corp., Sr. Sub. Notes, 11.375%, 8/15/04 1,825,000 1,939,063
------------
$ 3,577,313
------------
HIGH TECH -- 1.8%
Blue Bell Funding Inc., Sec. Ext. Notes, 11.85%, 5/1/99 $ 750,000 $ 780,000
Unisys Corp., Sr. Notes, 13.5%, 7/1/97 900,000 983,250
------------
$ 1,763,250
------------
METALS -- 11.0%
Acme Metals Inc., Sr. Notes, 12.5%, 8/1/02 $ 1,650,000 $ 1,650,000
AK Steel Corp., Sr. Notes, 10.75%, 4/1/04 500,000 504,375
Federal Industries Ltd., Sr. Notes, 10.25%, 6/15/00 1,000,000 945,000
Inland Steel Corp., First Mtg. Bonds, 12%, 12/1/98 750,000 804,375
Jorgensen Earle Co., Sr. Notes, 10.75%, 3/1/00 1,000,000 967,500
Kaiser Aluminum & Chemical Corp., Sr. Sub. Notes, 12.75%, 2/1/03 1,000,000 1,035,000
Maxxam Group Inc., Sr. Sec. Notes, 11.25%, 8/1/03 700,000 661,500
Maxxam Group Inc., Sr. Sec. Disc. Notes, 12.25%
(0% until 1998), 8/1/03 700,000 399,000
Republic Engineered Steels Inc., First Mtg., 9.875%, 12/15/01 1,600,000 1,456,000
Stelco Inc., SF Debentures, 13.5%, 10/01/00 CAD 381,720 275,621
Ucar Global Enterprises, Sr. Sub. Notes, 12%, 1/15/05+ 1,000,000 1,050,000
Weirton Steel Corp., Sr. Notes, 11.5%, 3/1/98 500,000 501,250
Weirton Steel Corp., Sr. Notes, 10.875%, 10/15/99 489,000 476,775
------------
$ 10,726,396
------------
MFG/MACHINERY -- 5.4%
Applied Extrusion Inc., Sr. Notes, 11.5%, 4/1/02 $ 800,000 $ 816,000
Essex Group, Inc., Sr. Notes, 10%, 5/1/03 1,525,000 1,479,250
Newflo Corp., Sub. Notes, 13.25%, 11/15/02 1,400,000 1,386,000
Waters Corp., Sr. Sub. Notes, 12.75%, 9/30/04 1,500,000 1,530,000
------------
$ 5,211,250
------------
MISCELLANEOUS -- 7.2%
Alliant Tech Systems, Inc., Sr. Sub. Notes, 11.75%, 3/01/03+ $ 1,000,000 $ 1,020,000
Corporate Express Inc., Sr. Sub. Notes, 9.125%, 3/15/04 1,300,000 1,235,000
Imax Corp., Sr. Notes 10% (7% until 1997), 3/1/01 600,000 504,000
Pace Industries Inc., Sr. Notes, 10.625%, 12/1/02 600,000 549,000
Plastic Specialties & Tech., Sr. Sec. Notes, 11.25%, 12/1/03 1,000,000 885,000
Roadmaster Industries Inc., Sr. Sub. Notes, 11.75%, 7/15/02 1,600,000 1,540,000
Williamhouse-Regency of Del., Sr. Sub. Deb., 11.5%, 6/15/05 1,300,000 1,254,500
------------
$ 6,987,500
------------
PAPER/PACKAGING -- 10.9%
Container Corp., Sr. Notes (Ser. B), 10.75%, 5/1/02 $ 600,000 $ 618,000
Fort Howard Corp., Sr. Sec. Notes, 11%, 1/2/02 655,633 668,745
Gaylord Container Corp., Sr. Sub. Disc. Debs., 12.75%
(0% until 1996), 5/15/05 1,500,000 1,425,000
Owens Illinois Inc., Sr. Notes, 11%, 12/1/03 1,000,000 1,067,500
Riverwood International, Sr. Sub. Notes, 10.375%, 6/30/04 1,100,000 1,127,500
S.D. Warren Company Inc., Sr. Sub. Notes, 12%, 12/15/04+ 1,000,000 1,055,000
Silgan Corp., Sr. Notes, 13.25% (0% until 1996), 12/15/02 1,000,000 890,000
Silgan Corp., Sr. Sub. Notes, 11.75%, 6/15/02 500,000 522,500
Stone Container Corp., 1st Mtg. Bonds, 9.875%, 2/1/01 600,000 582,000
Stone Container Corp., Sr. Sub. Debs., 10.75%, 4/1/02 400,000 400,000
Stone Container Corp., Sr. Notes, 10.75%, 10/1/02 500,000 515,000
Stone Container Corp., Sr. Notes, 12.625%, 7/15/98 800,000 860,000
U.S. Can Company, Sr. Sub. Notes, 13.5%, 1/15/02 750,000 832,500
------------
$ 10,563,745
------------
RECREATION -- 2.4%
Bally's Park Place, First Mtg Bonds, 9.25%, 3/15/04 $ 600,000 $ 531,000
Trump Plaza Funding, First Mtg Notes, 10.875%, 6/15/01 1,400,000 1,134,000
Trump Taj Mahal, First Mtg Bonds, 11.35%, 11/15/99 906,315 686,534
------------
$ 2,351,534
------------
RETAILING -- 7.9%
Apparel Retailers Inc., Sr. Disc. Debs., 12.75%
(0% until 1998) 8/15/05 $ 1,000,000 $ 580,000
Duane Reade, G.P., Sr. Notes, 12%, 9/15/02 1,000,000 750,000
Food 4 Less Supermarkets Inc., Sr. Sub. Notes, 13.75%, 6/15/01 1,500,000 1,612,500
Levitz Furniture Corp., Sr. Sub. Notes, 9.625%, 7/15/03 2,075,000 1,494,000
Pathmark Stores Inc., Jr. Sub., Disc. Notes, 10.75%
(0% until 1999), 11/1/03 2,100,000 1,123,500
Purity Supreme, Sr. Sec. Notes, 11.75%, 8/1/99 1,600,000 1,336,000
Specialty Retailers, Inc., Sr. Sub. Notes, 11%, 8/15/03 900,000 828,000
------------
$ 7,724,000
------------
TEXTILES -- 2.9%
Dan River Inc., Sr. Sub. Notes, 10.125%, 12/15/03 $ 1,450,000 $ 1,373,875
Westpoint Stevens, Sr. Sub. Debs., 9.375%, 12/15/05 1,600,000 1,464,000
------------
$ 2,837,875
------------
TRANSPORTATION -- 1.2%
Delta Air Lines, Inc., Trust Certs., 10.5%, 4/30/16 $ 500,000 $ 531,833
Moran Transportation, 1st Mtg. Notes, 11.75%, 7/15/04 700,000 672,000
------------
$ 1,203,833
------------
TOTAL CORPORATE BONDS AND NOTES
(identified cost, $94,444,668) $ 91,758,933
------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
PREFERRED STOCK -- 0.5%
- ------------------------------------------------------------------------------------------------
SECURITY FACE AMOUNT VALUE
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
Grand Union Holding, Series C, 12% PFD Stock-PIK+ $ 1,800 $ 0
SD Warren Company 14% PFD Stock W / Warrants+ 12,000 360,000
Terex Corp., 13% CV PFD+ 8,000 128,000
------------
TOTAL PREFERRED STOCK
(identified cost, $725,500) $ 488,000
------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS -- 1.4%
- ------------------------------------------------------------------------------------------------
SHARES/WARRANTS
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
AUTO/TRUCK -- 0.5%
Bucyrus - Erie Company, Common Stock* 87,279 $ 430,285
------------
CHEMICALS -- 0.1%
UCC Invt. Hldgs, Class A Common Stock+* 7,431 $ 83,599
------------
COMMUNICATIONS -- 0.1%
Dial Call Communications, Wts.+* 1,800 $ 450
United International Hldg. Inc., Warrants+* 1,960 63,700
------------
$ 64,150
------------
ENERGY -- 0.0%
Empire Gas Corp., Wts.+* 1,380 $ 1,380
------------
FOOD -- 0.0%
Servam Corp., Common Stock* 884 $ 0
Servam Corp., $2.00 Wts. Exp. 4/1/2001+* 7,864 0
Servam Corp., $4.50 Wts. Exp. 4/1/2001+* 1,768 0
Specialty Foods Acq., Common Stock+* 12,000 28,500
------------
$ 28,500
------------
INDUSTRIAL -- 0.0%
Thermadyne Holdings Corporation, Common Stock+* 777 $ 11,072
------------
MANUFACTURING -- 0.7%
Pullman Company, Common Stock+ 43,702 $ 393,317
Southdown Inc., Wts.+* 7,500 31,875
Terex Corporation, Rights, Exp. 8/1/96+* 2,700 1,013
Terex Corporation, Rights, Exp. 8/1/96+* 375 188
Terex Corporation, Rights, Exp. 7/1/97+* 1,790 1,343
Terex Corp., Wts.+* 8,000 94,000
Triangle Wire & Cable, Wts.+* 7,500 0
Triangle Wire and Cable, Common Stock+* 31,667 190,002
------------
$ 711,738
------------
RETAILING -- 0.0%
Purity Supreme, Wts., Exp. 8/1/1999+* 1,733 $ 35
Waxman Industries, Warrants+* 14,000 700
------------
$ 735
------------
TOTAL COMMON STOCKS, WARRANTS AND RIGHTS
(IDENTIFIED COST, $3,648,961) $ 1,331,459
------------
<CAPTION>
- ------------------------------------------------------------------------------------------------
SHORT-TERM OBLIGATION -- 1.9%
- ------------------------------------------------------------------------------------------------
FACE AMOUNT
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
CXC, Inc., 6.32%, 4/03/95, at amortized cost $ 1,884,000 $ 1,883,008
------------
TOTAL INVESTMENTS
(IDENTIFIED COST, $100,702,137) $ 95,461,400
OTHER ASSETS, LESS LIABILITIES -- 1.9% 1,888,893
------------
NET ASSETS -- 100% $ 97,350,293
============
* Non-income producing security.
+ Restricted Security (Note 8).
(1) Security valued at fair value using methods determined in good faith by or
at the directions of the Trustees.
CAD -- The principal amount of these securities is stated in Canadian Dollars,
the currency in which the security is denominated.
</TABLE>
The accompanying notes are an integral part of
the financial statements
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 1995
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost,
$100,702,137) $ 95,461,400
Cash 1,154
Receivable for investments sold 1,687,608
Receivable for Trust shares sold 199,165
Interest and dividends receivable 2,390,128
------------
Total assets $ 99,739,455
LIABILITIES:
Dividends payable $ 369,626
Payable for investments purchased 1,864,108
Payable for Trust shares redeemed 84,692
Trustees' fees payable 1,343
Custodian fee payable 2,485
Accrued expenses 66,908
----------
Total liabilities 2,389,162
------------
NET ASSETS for 12,568,089 shares of beneficial interest
outstanding $ 97,350,293
============
SOURCES OF NET ASSETS:
Paid-in capital $117,912,826
Accumulated net realized loss on investment transactions
(computed on the basis of identified cost) (14,636,252)
Unrealized depreciation of investments (computed on the
basis of identified cost) (5,240,737)
Accumulated distributions in excess of net investment income (685,544)
------------
Total $ 97,350,293
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($97,350,293 / 12,568,089 shares of beneficial interest) $7.75
=====
COMPUTATION OF OFFERING PRICE:
Offering price per share (100/96.25 of $7.75) $8.05
=====
On sales of $50,000 or more, the offering price is reduced.
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
----------------------------------------------------------------------------------------------------------------------
For the Six Months Ended March 31, 1995
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Income --
Interest $ 5,760,684
Other 42,358
-----------
Total income $ 5,803,042
Expenses --
Investment adviser fee (Note 4) $ 307,027
Compensation of Trustees not members of the Investment
Adviser's organization 17,887
Service fees (Note 5) 57,103
Custodian fees (Note 4) 32,365
Printing and postage 42,806
Transfer and dividend disbursing agent fees 39,905
Legal and accounting services 29,126
Registration costs 14,745
Miscellaneous 15,992
-----------
Total expenses 556,956
-----------
Net investment income $ 5,246,086
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investment transactions
(identified cost basis)
($2,067,944 net loss for federal income tax purposes) $(2,067,944)
Change in unrealized depreciation of investments (131,395)
-----------
Net realized and unrealized loss on investments (2,199,339)
-----------
Net increase in net assets from operations $ 3,046,747
===========
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30, 1994
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 5,246,086 $ 10,066,646
Net realized gain (loss) on investment transactions (2,067,944) 147,154
Change in unrealized depreciation of investments (131,395) (6,048,456)
------------ ------------
Net increase in net assets from operations $ 3,046,747 $ 4,165,344
------------ ------------
Distributions to shareholders --
From net investment income $ (5,156,290) $(10,066,646)
In excess of net investment income -- (563,437)
------------ ------------
Total distributions to shareholders $ (5,156,290) $(10,630,083)
------------ ------------
Net increase (decrease) from Trust share
transactions (Note 2) $ (4,022,437) $ 14,824,209
------------ ------------
Net increase (decrease) in net assets $ (6,131,980) $ 8,359,470
NET ASSETS:
At beginning of period 103,482,273 95,122,803
------------ ------------
At end of period (including distributions in excess
of net investment income of $685,544 and
$775,340, respectively). $ 97,350,293 $103,482,273
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------------------------------------------------
1995<F1> 1994 1993 1992 1991 1990
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 7.90 $ 8.40 $ 8.33 $ 7.56 $ 6.89 $ 9.16
------- ------- ------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.41 $ 0.83 $ 0.92 $ 0.97 $ 1.04 $ 1.15
Net realized and unrealized gain (loss) on investments (0.15) (0.47) 0.07 0.77 0.71 (2.26)
------- ------- ------- ------- ------- -------
Total income from operations $ 0.26 $ 0.36 $ 0.99 $ 1.74 $ 1.75 $ (1.11)
------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
From net investment income $ (0.41) $ (0.81) $ (0.92) $ (0.97) $ (1.04) $ (1.15)
From paid-in capital -- -- -- -- (0.04) (0.01)
In excess of net investment income -- (0.05) -- -- -- --
------- ------- ------- ------- ------- -------
Total distributions $ (0.41) $ (0.86) $ (0.92) $ (0.97) $ (1.08) $ (1.16)
------- ------- ------- ------- ------- -------
NET ASSET VALUE, end of year $ 7.75 $ 7.90 $ 8.40 $ 8.33 $ 7.56 $ 6.89
======= ======= ======= ======= ======= =======
TOTAL RETURN<F3> 3.36% 4.25% 12.59% 24.25% 28.53% (13.06)%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000 omitted) $97,350 $103,482 $95,123 $85,778 $70,773 $65,588
Ratio of net expenses to average daily net assets 1.14%<F2> 1.04% 1.03% 1.08% 1.15% 1.05%
Ratio of net investment income to average daily net assets 10.71%<F2> 9.75% 11.01% 12.02% 15.36% 14.26%
PORTFOLIO TURNOVER 32% 70% 102% 90% 80% 67%
<FN>
<F1> For the six months ended March 31, 1995.
<F2> Computed on an annualized basis.
<F3> Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to
be reinvested at the net asset value on the payable date.
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Income Fund of Boston (the Trust), a Massachusetts business trust,
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end, management investment company. The following is a summary
of significant accounting policies consistently followed by the Trust in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Investments listed on securities exchanges or in the
NASDAQ National Market are valued at closing sale prices. Listed or unlisted
investments for which closing sale prices are not available are valued at the
mean between the latest bid and asked prices. Fixed income investments (other
than short-term obligations), including listed investments and investments for
which price quotations are available, will normally be valued on the basis of
market valuations furnished by a pricing service. 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 or discount when required for federal
income tax purposes. Dividend income is recorded on the ex-dividend date.
C. FEDERAL TAXES -- The Trust's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investments. Accordingly, no provision for federal income or excise tax
is necessary. At September 30, 1994, the Trust, for federal income tax purposes,
had a capital losscarryover of $12,556,308 which will reduce the Trust's taxable
income arising from future net realized gains on investments, if any, to the
extent permitted by the Internal Revenue Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Trust of any liability for federal income or excise tax. Such
capital loss carryovers will expire on September 30, 1999 ($7,407,810) and 2000
($5,148,498).
D. DISTRIBUTIONS TO SHAREHOLDERS -- The net investment income of the Trust is
determined daily, and substantially all of the net investment income so
determined is declared daily as a dividend to shareholders of record at the time
of declaration. Distributions are paid monthly. Distributions of realized
capital gains, if any, are made at least annually. Shareholders may reinvest
capital gain distributions in additional shares of the Trust at the net asset
value as of the ex-dividend date. Distributions are paid in the form of
additional shares of the Trust or, at the election of the shareholder, in cash.
The Trust distinguishes between distributions on a tax basis and a financial
reporting basis. Generally accepted accounting principles require that only
distributions in excess of tax basis earnings and profits be reported in the
financial statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in temporary over-distributions for financial statement
purposes are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
E. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold.
- ------------------------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Trust shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
MARCH 31, 1995 SEPTEMBER 30, 1994
-------------------------------- --------------------------------
SHARES AMOUNT SHARES AMOUNT
------------ -------------- ------------ ---------------
<S> <C> <C> <C> <C>
Sales 791,481 $ 6,122,082 3,376,464 $28,296,646
Issued to shareholders electing to
receive payment of
distributions in Trust shares 377,664 2,919,916 743,312 6,186,563
Repurchases (1,694,695) (13,064,435) (2,351,168) (19,659,000)
---------- ----------- --------- -----------
Net increase (decrease) (525,550) $(4,022,437) 1,768,608 $14,824,209
========== =========== ========= ===========
</TABLE>
- --------------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS
The Trust invests primarily in debt securities. The ability of the issuers of
the debt securities held by the Trust 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 $30,681,270 and $35,814,849, respectively.
- --------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 5/96 of 1% ( 5/8 of
1% annually) of the Trust's average monthly net assets, was earned by Eaton
Vance Management (EVM) as compensation for management and investment advisory
services rendered to the Trust. Except as to Trustees of the Trust who are not
members of EVM's organization, officers and Trustees receive remuneration for
their services to the Trust out of such investment adviser fee. Eaton Vance
Distributors, Inc., a subsidiary of EVM and the Trust's principal underwriter,
received approximately $17,450 as its portion of the sales charge on sales of
Trust shares during the six months ended March 31, 1995. Investors Bank & Trust
Company (IBT), an affiliate of EVM, serves as custodian of the Trust. Pursuant
to the custodian agreement, IBT receives a fee reduced by credits which are
determined based on the average daily cash balances the Trust maintains with
IBT. Certain of the officers and Trustees of the Trust are officers and
directors/trustees of the above organizations.
- ------------------------------------------------------------------------------
(5) SERVICE PLAN
The Trustees of the Trust on behalf of the Fund have adopted a Service Plan
designed to meet the requirements of Rule 12b-1 under the Investment Company Act
of 1940 and the service fee requirements of the revised sales charge rule of The
National Association of Securities Dealers Inc. The Service Plan provides that
the Trust may make service fee payments to the Principal Underwriter, Eaton
Vance Distributors, Inc., a subsidiary of Eaton Vance Management, Authorized
Firms or other persons in amounts not exceeding 0.25% of the Trust's average
daily net assets for any fiscal year. The Trustees have implemented the Service
plan by authorizing the Fund to make quarterly service fee payments to the
Principal Underwriter and Authorized Firms in amounts not expected to exceed
0.25% of that portion of the Trust's average daily net assets for any fiscal
year which is attributable to shares of the Trust sold on or after May 22, 1989
by such persons and remaining outstanding for at least twelve months. Such
payments are made for personal services and/or the maintenance of shareholder
accounts. Pursuant to the Plan, the Trust made provisions of $57,103 under the
Plan to the Principal Underwriter and Authorized Firms during the six months
ended March 31, 1995.
- ------------------------------------------------------------------------------
(6) LINE OF CREDIT
The Trust participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of a
$20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Trust solely to facilitate the handling of
unusual and/or unanticipated short term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of deposit
rate, or a federal funds effective rate. In addition, a fee computed at an
annual rate of 1/4 of 1% on the $20 million committed facility and on the daily
unused portion of the $100 million discretionary facility is allocated among the
participating funds at the end of each quarter. The Trust did not have any
significant borrowings or allocated fees during the period.
- ------------------------------------------------------------------------------
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized depreciation/appreciation in value of the investments
owned at March 31, 1995, as computed on a federal income tax basis, are as
follows:
Aggregate cost $100,702,137
============
Gross unrealized depreciation $ 7,033,843
Gross unrealized appreciation 1,793,106
------------
Net unrealized depreciation $ 5,240,737
============
- -------------------------------------------------------------------------------
(8) NOT READILY MARKETABLE SECURITIES
At March 31, 1995, the Trust owned the following securities (constituting 5.7%
of net assets) which were not readily marketable at such date. The Trust 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>
DESCRIPTION DATES OF ACQUISITION SHARES/FACE COST FAIR VALUE
----------- -------------------- ----------- ---- ----------
<S> <C> <C> <C> <C>
CORPORATE BONDS AND NOTES
-------------------------
Alliant Tech Systems,
Inc., Sr. Sub. Notes,
11.75%, 3/01/2003 3/7/95 1,000,000 $1,005,000 $1,020,000
Dade International,
Inc., Sr. Sub. Notes,
13%, 2/01/2005 12/9/94 1,000,000 1,000,000 1,022,500
S.D. Warren Company,
Inc., Sr. Sub. Notes,
12%, 12/15/2004 12/31/94-12/20/94 1,000,000 1,003,375 1,055,000
Ucar Global
Enterprises, Sr. Sub.
Notes,
12%, 1/15/2005 1/20/95 1,000,000 1,023,000 1,050,000
COMMON STOCKS, WARRANTS AND RIGHTS
----------------------------------
Dial Call Communications, Warrants 10/04/94 1,800 0 450
Empire Gas Corporation,
Warrants 1/27/95 1,380 0 1,380
Pullman Company, Common Stock 2/22/95 43,702 1,267,788 393,318
Purity Supreme,
Warrants, Exp. 8/1/1999 7/29/92 1,733 0 35
Servam Corp., $2.00
Warrants, Exp. 4/1/2001 8/28/91 7,864 0 0
Servam Corp., $4.50
Warrants, Exp. 4/1/2001 8/28/91 1,768 0 0
Southdown, Inc., Warrants 10/28/91 7,500 22,500 31,875
Specialty Foods, Acq. Common Stock 8/10/93 12,000 8,722 28,500
Terex Corp., Rights, Exp. 7/1/97 11/07/94 1,791 0 1,343
Terex Corp., Rights,
Exp 8/1/96 8/20/92, 7/01/94, 8/02/94 375 0 188
Terex Corp., Rights,
Exp. 8/1/96 7/24/92, 11/7/94 2,700 0 1,013
Terex Corp., Warrants 12/15/93 8,000 1,600 94,000
Thermadyne Holdings
Corp., Common Stock 5/17/94 777 18,900 11,072
Triangle Wire & Cable,
Common Stock 5/02/94 31,667 750,000 190,002
Triangle Wire & Cable, Warrants 10/28/91 7,500 0 0
UCC Invt. Holdings,
Class A Common 12/05/89 7,431 7,431 83,599
United International
Holdings Inc., Warrants 11/16/94 1,960 55,546 63,700
Waxman Industries, Inc., Warrants 10/01/91 14,000 14,000 700
PREFERRED STOCKS
----------------
Grand Union Holdings, Series C,
12% Preferred 3/17/94 1,800 215,100 0
S.D. Warren Company,
14% w/warrants 12/13/93-1/26/95 12,000 312,000 360,000
Terex Corp., CV Preferred 12/15/93 8,000 198,400 128,000
---------- ----------
$6,903,362 $5,536,675
========== ==========
</TABLE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Income Fund of Boston:
We have audited the accompanying statement of assets and liabilities of
Eaton Vance Income Fund of Boston, including the investment portfolio, as of
March 31, 1995, the related statement of operations for the six months then
ended, the statements of changes in net assets for the six months then ended and
for the year ended September 30, 1994, and the financial highlights for the six
months ended March 31, 1995 and for each of the five years in the period ended
September 30, 1994. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1995 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Eaton Vance Income Fund of Boston as of March 31, 1995, the results of its
operations for the six months then ended, the changes in its net assets for the
six months then ended and for the year ended September 30, 1994, and the
financial highlights for the six months ended March 31, 1995 and for each of the
five years in the period ended September 30, 1994, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
April 21, 1995
<PAGE>
-----------------------------------------------
INVESTMENT MANAGEMENT
EATON VANCE OFFICERS INDEPENDENT
INCOME FUND TRUSTEES
OF BOSTON M. DOZIER GARDNER
24 Federal Street President and KENNETH C. KNIGHT
Boston, MA 02110 Trustee Consultant
HOOKER TALCOTT, JR. DONALD R. DWIGHT
Vice President President, Dwight
and Portfolio Partners, Inc.
Manager Chairman, Newspapers
of New England, Inc.
JAMES L. O'CONNOR
Treasurer ROBERT GLUCK
Management Consultant
THOMAS OTIS
Secretary SAMUEL L. HAYES, III
Jacob H. Schiff
BARBARA E. CAMPBELL Professor of
Assistant Treasurer Investment Banking,
Harvard University
JANET E. SANDERS Graduate School of
Assistant Treasurer Business Administration
and Assistant
Secretary JEROME PRESTON, JR.
Partner, Foley,
A. JOHN MURPHY Hoag & Eliot
Assistant Secretary
NORTON H. REAMER
President and Director,
United Asset Management
Corporation
JOHN L. THORNDIKE
Director,
Fiduciary Company
Incorporated
<PAGE>
ADMINISTRATOR OF
EATON VANCE
INCOME FUND OF BOSTON
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
LEGAL COUNSEL
Gordon Altman Butowsky Weitzen
Shalov & Wein
114 West 47th Street
New York, NY 10036
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, Ma02109
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EATON VANCE
INCOME FUND OF BOSTON
24 FEDERAL STREET
BOSTON, MA 02110
T-IBSRC
EATON VANCE
INCOME FUND
OF BOSTON
SEMI-ANNUAL
SHAREHOLDER REPORT
MARCH 31, 1995
