<PAGE>
INVESTMENT ADVISER AND
ADMINISTRATOR OF
EATON VANCE INCOME FUND OF BOSTON
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
89 South Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
First Data Investors Services Group
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
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, MA 02109
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-11/96
EATON VANCE
INCOME FUND
OF BOSTON
ANNUAL
SHAREHOLDER REPORT
SEPTEMBER 30, 1996
<PAGE>
To Shareholders
Eaton Vance Income Fund of Boston had a total return of 13.4% for the year ended
September 30, 1996. That return was the result of a rise in net asset value per
share to $8.12 on September 30, 1996, from $7.92 on September 30, 1995, and the
reinvestment of $0.809 per share in income dividends. For comparison, the Lehman
Brothers High Yield Bond Index,* an unmanaged index of corporate bonds, returned
10.9% for the same period. Shareholders who purchased the Fund during the fiscal
year would have had their return reduced by a sales charge of 3.75%. Based on
the Fund's most recent dividend and a net asset value of $8.12, the Fund had a
distribution rate of 9.79% at September 30.
RECORD HIGH-YIELD ISSUANCE HAS MET WITH STRONG INVESTOR DEMAND...
The high-yield market has witnessed another strong year for new issuance in
1996, with more than $55 billion of securities coming to market in the first
nine months alone. That far exceeds the pace set during the same period in 1995,
when $35 billion in new bonds were issued. Equally impressive has been the
demand by investors for high-yield bonds. A record $11 billion flowed into
high-yield bond funds from January through September, according to the
Investment Company Institute.
CROSSOVER BUYERS AND MERGERS HAVE PROVIDED FURTHER SUPPORT...
The high-yield market has received a further boost from non-traditional,
crossover buyers - pension funds, insurance companies, and other institutional
investors - that have historically focused on the investment-grade market. The
growing maturation of the high-yield market has attracted these yield-conscious
investors. Finally, an active merger-and-acquisition scene has contributed to
the market rise as several companies with outstanding high-yield debt were
acquired by investment-grade companies. Those acquisitions helped lift overall
bond prices while relieving supply pressures. In the pages that follow,
co-portfolio managers Hooker Talcott, Jr. and Michael Weilheimer review these
market trends, discuss recent changes within the Portfolio, and share their
outlook for the coming year.
Sincerely,
/s/ M. Dozier Gardner
M. Dozier Gardner
President
November 20, 1996
[Photo of M. Dozier Gardner]
*It is not possible to invest directly in the Index.
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INCOME FUND OF BOSTON: RATINGS BREAKDOWN OF BOND HOLDINGS*
Aaa 2.2%
Ba 9.1%
B1 10.9%
B2 24.3%
B3 43.4%
Caa 7.6%
Non-rated 2.5%
* Moody's Investors Services ratings; percentages based on market value as of
September 30, 1996. Portfolio is activity managed and percentages are subject
to change.
Source: Eaton Vance Management
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<PAGE>
Management Discussion
An interview with Hooker Talcott, Jr. and Michael Weilheimer, Vice Presidents
and Co-Portfolio Managers of Eaton Vance Income Fund of Boston.
Q. HOOKER, HOW WOULD YOU EVALUATE THE HIGH-YIELD MARKET DURING THE PERIOD?
MR. TALCOTT: Interestingly, while the past nine months did not present a very
good environment for the Treasury market, high-yield bonds continued to post
positive returns. A look at the numbers is helpful. Ten-year maturity U.S.
Treasury yields - which stood at 6.3% at the end of March - climbed to 6.7%
at September 30. However, yield spreads -- the difference between Treasury
yields and high-yield bonds of comparable maturity -- narrowed appreciably
during that same period, from 370 basis points in March to roughly 300 at
the end of September, according to Merrill Lynch High-Yield Master Index.
That tightening of spreads represented a strong outperformance by the
high-yield sector and kept the wind to our back during this period.
[Photo of Hooker Talcott, Jr.]
Q. HAS THE ECONOMY SHAPED UP WELL FOR THE HIGH-YIELD MARKET?
MR. WEILHEIMER: It certainly has. Despite the rise in interest rates, economic
conditions have been favorable for high-yield bonds. The economy, while far
from robust, has grown steadily, while inflation has remained well in check.
Not surprisingly, companies in the high-yield universe have fared well,
because a steady-growth, low-inflation economy tends to lead to improving
fundamentals.
Q. SUPPLY HAS BEEN VERY HEAVY IN 1996. HOW HAS THAT AFFECTED THE MARKET?
MR. TALCOTT: That's right. Through September 30, $55 billion in new issues came
to market, a sharp increase from the same period in 1995. Meanwhile, total
capitalization of the high-yield market has grown to around $325 billion
from $288 billion at the end of 1995. That is a fairly dramatic increase.
But investor demand has been more than adequate to balance the surge in
supply.
[Photo of Michael Weilheimer]
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Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- -----------------------------------------------------------------------------
<PAGE>
Q. WHERE HAVE YOU BEEN INVESTING?
MR. WEILHEIMER: During most of 1995, we were somewhat overweighted in cyclical
industrial companies. At the turn of the year, we lightened up considerably
on those companies, sensing an economic slowdown. However, as the year
progressed, we took note of the unexpected strength of the economy -- called
by some a "mini-boom," -- and benefited from a renewed commitment to
cyclicals. Some of our largest holdings during this period were chemicals
and paper and packaging companies, which responded well to the recovery we
saw through the third quarter of 1996. More recently, with some signs of
weakness re-appearing in the economy, we have made another mid-course
correction, reaccentuating more defensive sectors.
Another area where we had a significant investment was telecommunications
and media companies. These companies lagged the market early in the year due
to supply pressures, as many companies came to market to help finance the
enormous investment required in the construction of new paging, wireless and
cellular networks. However, with those supply pressures having eased, we've
recently seen better performance from media bonds.
Q. COULD YOU NAME SOME OF THE FUND'S RECENT PURCHASES?
MR. TALCOTT: Yes. Some of our recent purchases are well-known names, including:
CalEnergy Company, the world's largest independent geothermal power
producer; First Nationwide Holdings, which owns the fourth largest thrift in
the U.S.; and Keebler Corporation, a nationally-known producer of cookies
and baked goods. A lesser-known company, Echostar Satellite Broadcasting
Corp. is active in direct-to-home satellite broadcasting and is becoming
increasingly well-known to users of direct broadcast services.
Q. COULD YOU FOCUS ON WHAT ATTRACTED YOU TO THESE BONDS?
MR. WEILHEIMER: Yes. We found the Keebler deal especially attractive. Keebler is
the nation's second largest maker of cookies and crackers behind Nabisco.
The company was purchased from United Biscuits, a U.K. company, by a joint
venture vehicle of Artal Group S.A., a European food products company, and
Flowers Industries, Inc., a large U.S. NYSE-listed food distributor. In a
second transaction, the company purchased Sunshine Biscuits, the
third-ranked U.S. cookie maker. By merging these two units, the new Keebler
expects to increase market share and improve pricing flexibility, while
achieving additional manufacturing and distribution efficiencies. There is
also a possibility of taking the combined company public at some point. In
summary, this deal encompassed many of the qualities that we find attractive
in a new issue: good business synergies, operating cost savings, improved
market visibility, and the potential for equitization down the road.
Q. THE ECONOMY POSTED A RELATIVELY WEAK 2.2% GROWTH RATE IN THE THIRD QUARTER.
ARE YOU BECOMING ANY MORE DEFENSIVE?
MR. TALCOTT: Yes, we have become somewhat more selective in recent months.
Clearly, the Federal Reserve was not impressed enough with the second
quarter's 4.6% surge to raise rates. The third-quarter report seemed to more
accurately reflect the actual level of business activity. Recent economic
reports -- including the Fed's Beige Book, an anecdotal survey of the
nation's economic areas - have detected signs of weakness in the economy.
Given the strong levels of new issuance year-to-date and the torrent of new
investment, there may be occasions when the differences in credit levels may
be blurred. That would become more obvious if the economy were to weaken
significantly at some point.
Q. TO WHAT DEGREE ARE YOUR INVESTMENT CHOICES AFFECTED BY ECONOMIC CHANGES?
MR. WEILHEIMER: Naturally, we are, first and foremost, bottom-up investors and
focus predominantly on individual credits. But we also monitor the economy
closely for an upturn that might favor economically-sensitive cyclical
companies or a slowdown that might signal the need for a more defensive
posture. Industries respond differently to changes in the economic cycle and
we are sensitive to those changes. Finally, we may occasionally alter the
quality mix of the Portfolio. For example, in September, we noted a
narrowing of spreads between B-rated and BB-rated bonds. With signs of a
weakening economy on the horizon, we slightly increased our holdings of
BB-rated bonds for defensive purposes.
Q. GOING FORWARD, HOOKER, WHAT IS YOUR OUTLOOK FOR THE HIGH-YIELD MARKET?
MR. TALCOTT: We believe the high-yield market should continue to do fairly well.
It now appears that the economy is not nearly as strong as some investors
feared in mid-summer. That should keep inflation from gaining momentum and
slow growth will continue to benefit some sectors of the economy. But from a
valuation standpoint, we believe it is wise to be selective.
Longer-term, the high-yield market remains very attractive. Naturally, past
trends don't guarantee future performance and investors should remember that
high-yield bonds carry a higher degree of risk than many other investments.
But in my view, the high-yield sector will continue to offer unusual
opportunities for income-oriented investors.
<PAGE>
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COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT IN
EATON VANCE INCOME FUND OF BOSTON AND THE LEHMAN BROTHERS HIGH YIELD BOND INDEX
From September 30, 1986, through September 30, 1996
- -------------------------------------------------------------------------------
AVERAGE ANNUAL 1 5 10 Value of
RETURNS Year Years Years Investment at 9/30
- -------------------------------------------------------------------------------
With Max. Sales Charge 9.1% 12.1% 10.2% $26,391
- -------------------------------------------------------------------------------
Without Max. Sales Ch. 13.4% 13.0% 10.6% $27,419
- -------------------------------------------------------------------------------
EATON VANCE INCOME FUND OF BOSTON VS.
LEHMAN BROTHERS HIGH YIELD BOND INDEX
Date Fund Fund w/SC Index
9/30/86 $10,000 $9,625 $10,000
10/31/86 $10,290 $9,904 $10,232
11/30/86 $10,420 $10,029 $10,204
12/31/86 $10,480 $10,087 $10,175
1/31/87 $10,939 $10,529 $10,596
2/28/87 $11,124 $10,707 $10,821
3/31/87 $11,153 $10,734 $10,895
4/30/87 $10,859 $10,452 $10,516
5/31/87 $10,796 $10,391 $10,592
6/30/87 $10,972 $10,561 $10,727
7/31/87 $11,037 $10,623 $10,756
8/31/87 $11,284 $10,861 $10,823
9/30/87 $11,111 $10,694 $10,482
10/31/87 $10,537 $10,142 $10,139
11/30/87 $10,735 $10,333 $10,431
12/31/87 $10,838 $10,432 $10,683
1/31/88 $11,160 $10,742 $11,040
2/28/88 $11,470 $11,040 $11,397
3/31/88 $11,469 $11,038 $11,279
4/30/88 $11,554 $11,121 $11,364
5/31/88 $11,652 $11,215 $11,382
6/30/88 $11,872 $11,427 $11,548
7/31/88 $11,986 $11,536 $11,624
8/31/88 $11,998 $11,548 $11,606
9/30/88 $12,150 $11,694 $11,753
10/31/88 $12,305 $11,843 $11,895
11/30/88 $12,344 $11,881 $11,965
12/31/88 $12,486 $12,018 $12,021
1/31/89 $12,700 $12,223 $12,233
2/28/89 $12,740 $12,262 $12,260
3/31/89 $12,779 $12,300 $12,164
4/30/89 $12,889 $12,405 $12,215
5/31/89 $13,112 $12,620 $12,452
6/30/89 $13,205 $12,710 $12,607
7/31/89 $13,300 $12,801 $12,590
8/31/89 $13,368 $12,866 $12,633
9/30/89 $13,335 $12,835 $12,421
10/31/89 $13,112 $12,621 $12,127
11/30/89 $13,004 $12,517 $12,102
12/31/89 $13,015 $12,527 $12,122
1/31/90 $12,707 $12,230 $11,861
2/28/90. $12,154 $11,698 $11,617
3/31/90 $12,057 $11,605 $11,921
4/30/90 $12,116 $11,662 $11 901
5/31/90 $12,382 $11,918 $12 130
6/30/90 $12,650 $12,176 $12,424
7/31/90 $12,939 $12,454 $12,758
8/31/90 $12,354 $11,891 $12,032
9/30/90 $11,593 $11,159 $11,154
10/31/90 $11,235 $10,814 $10,568
11/30/90 $11,042 $10,628 $10,898
12/31/90 $10,998 $10,585 $10,959
1/31/91 $10,971 $10,559 $11,260
2/28/91 $11,675 $11,238 $12,492
3/31/91 $12,306 $11,845 $13,228
4/30/91 $13,271 $12,773 $13,771
5/31/91 $13,341 $12,841 $13,795
6/30/91 $13,727 $13,212 $14,204
7/31/91 $14,294 $13,758 $14,658
8/31/91 $14,521 $13.977 $14,995
9/30/91 $14,902 $14,343 $15,204
10/31/91 $15,430 $14,851 $15,712
11/30/91 $15,616 $15,030 $15,793
12/31/91 $15,709 $15.120 $16,021
1/31/92 $16,368 $15,754 $16,585
2/28/92 $16,756 $16,127 $16,994
3/31/92 $17,151 $16,508 $17,205
4/30/92 $17,378 $16,726 $17,270
5/31/92 $17,570 $16,911 $17,514
6/30/92 $17,843 $17,174 $17,678
7/31/92 $18,125 $17,445 $17,945
8/31/92 $18,366 $17,677 $18,180
9/30/92 $18,515 $17,821 $18,368
10/31/92 $18,316 $17,630 $18,107
11/30/92 $18,401 $17,711 $18,335
12/31/92 $18,580 $17,883 $18,544
1/31/93 $19,012 $18,299 $19,084
2/28/93 $19,408 $18,680 $19,420
3/31/93 $19,685 $18,947 $19,670
4/30/93 $19,865 $19,120 $19,841
5/31/93 $20,171 $19,415 $20,077
6/30/93 $20,588 $19,816 $20,499
7/31/93 $20,797 $20,017 $20,698
8/31/93 $20,861 $20.079 $20,872
9/30/93 $20,847 $20,065 $20,926
10/31/93 $21,309 $20,510 $21,349
11/30/93 $21,595 $20,785 $21,451
12/31/93 $21,920 $21,098 $21,717
1/31/94 $22,427 $21,586 $22,188
2/28/94 $22,599 $21,751 $22,131
3/31/94 $21,936 $21,113 $21,294
4/30/94 $21,678 $20,865 $21,149
5/31/94 $21,794 $20,977 $21,160
6/30/94 $21,896 $21,075 $21,226
7/31/94 $21,817 $20,998 $21,406
8/31/94 $21,737 $20,922 $21,557
9/30/94 $21,732 $20,917 $21,559
10/31/94 $21,761 $20,945 $21,610
11/30/94 $21,502 $20,695 $21,338
12/31/94 $21,638 $20,827 $21,495
1/31/95 $21,832 $21,014 $21,786
2/28/95 $22,352 $21,513 $22,533
3/31/95 $22,463 $21,621 $22,775
4/30/95 $23,091 $22,225 $23,355
5/31/95 $23,677 $22,789 $24,010
6/30/95 $23,701 $22,812 $24,170
7/31/95 $24,119 $23,214 $24,468
8/31/95 $24,030 $23,129 $24,544
9/30/95 $24,176 $23,270 $24,846
10/31/95 $24,300 $23,389 $24,928
11/30/95 $24,541 $23,620 $25,219
12/31/95 $24,946 $24,011 $25,616
1/31/96 $25,410 $24,458 $26,067
2/28/96 $25,833 $24,865 $26,087
3/31/96 $25,668 $24,706 $26,070
4/30/96 $25,848 $24,879 $26,127
5/31/96 $26,134 $25,154 $26,284
6/30/96 $26,153 $25,173 $26,501
7/31/96 $26,342 $25,354 $26,625
8/31/96 $26,765 $25,761 $26,912
9/30/96 $27,419 $26,391 $27,561
Past performance is not indicative of future results. Investment returns and
principal value will fluctuate so that an investor's shares, when redeemed, may
be worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
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FUND PERFORMANCE
In accordance with Securities and Exchange Commission guidelines, we are
including a performance chart that compares your Fund's total return with that
of a broad-based securities market index. The lines on the chart represent the
total returns of $10,000 hypothetical investments in the Fund and the unmanaged
Lehman Brothers High Yield Bond Index.
THE TOTAL RETURN FIGURES
The solid purple line on the chart represents the Fund's performance. The Fund's
total return figure reflects Fund expenses and portfolio transaction costs, and
assumes the reinvestment of income dividends and capital gain distributions. The
dotted purple line on the chart represents the Fund's performance, after
deducting the Fund's 3.75% current maximum sales charge.
The black line represents the performance of the Lehman Brothers High Yield Bond
Index, a broad-based, widely recognized unmanaged index of high yield bonds. The
Index's total return does not reflect any management, transaction or custody
expenses, or commissions that would be incurred if an investor individually
purchased or sold the securities represented in the Index. It is not possible to
invest directly in the Index.
<PAGE>
-------------------------------------------
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
- -------------------------------------------------------------------------------
CORPORATE BONDS AND NOTES -- 93.4%
- -------------------------------------------------------------------------------
SECURITY FACE
AMOUNT VALUE
- -------------------------------------------------------------------------------
AUTOMOTIVE/TRUCK -- 2.0%
JPS Automotive Prod. Corp., Senior Notes, 11.125%,
6/15/01 $1,100,000 $ 1,133,000
Key Plastics, Inc., Senior Notes, 14%, 11/15/99 1,500,000 1,552,500
Speedy Muffler King Incorporated, Senior Notes,
10.875%, 10/1/06 200,000 206,000
------------
$ 2,891,500
------------
BUILDING PRODUCTS -- 3.7%
Building Materials Corp.,
Sr. Sub. Notes, 11.75% (0% until 2000), 7/1/04 $1,000,000 $ 805,000
Overhead Door Corp., Senior Notes, 12.25%, 2/1/00 1,900,000 2,052,000
Southdown Inc., Sr. Sub. Notes., 10%, 3/1/06 1,500,000 1,515,000
Tarkett International, AG, Sr. Sub. Notes, 9%,
3/1/02 900,000 922,500
------------
$ 5,294,500
------------
CABLE -- 7.5%
American Telecasting, Inc., Sr. Disc. Notes, 14.5%
(0% until 2000), 8/15/05 $1,200,000 $ 780,000
Cablevision Systems Corp., Sr. Sub. Notes, 9.25%,
11/1/05 700,000 677,250
Cablevision Systems Corp., Sr. Sub. Notes, 10.75%,
4/1/04 500,000 513,750
Diamond Cable Communications Co., Sr. Disc. Notes,
13.25% (0% until 1999), 9/30/04 400,000 304,000
Diamond Cable Co., Senior Notes, 11.75% (0% until
2000), 12/15/05 1,500,000 967,500
Groupe Videotron Ltd., Senior Notes, 10.625%,
2/15/05 1,000,000 1,087,500
International Cabletel, Inc., Senior Notes, 11.5%,
(0% until 2001), 2/1/06 1,450,000 870,000
Marcus Cable Co., Sr. Disc. Notes, 14.25% (0% until
2000), 12/15/05 2,500,000 1,700,000
Marcus Cable Co., Senior Debs., 11.875%, 10/1/05 200,000 211,500
United International Holdings Inc.,
Sr. Sec. Disc. Notes, 0%, 11/15/99 2,710,000 1,897,000
Videotron Holdings, PLC, Sr. Disc. Notes, 11% (0%
until 1999), 8/15/05 2,600,000 1,722,500
------------
$ 10,731,000
------------
CHEMICALS -- 5.4%
Agricultural Minerals & Chemicals, Inc., Senior
Notes, 10.75%, 9/30/03 $1,000,000 $ 1,060,000
GI Holdings Corp., Sr. Disc. Notes, 10%, 2/15/06 1,215,000 1,215,000
Pioneer Americas Acq. Corp., Senior Notes, 13.375%,
4/1/05 1,250,000 1,378,125
Sterling Chemicals Inc., Sr. Sub. Notes, 11.75%,
8/15/06 800,000 836,000
Sterling Chemical Holdings, Inc., Sr. Sub. Disc.
Notes, 13.5% (0% until 2001), 8/15/08 800,000 474,000
Terra Industries Inc., Senior Notes, 10.5%, 6/15/05 700,000 745,500
Texas Petrochemical Corp., Sr. Sub. Notes 11.125%,
7/1/06(1) 1,100,000 1,160,500
UCC Investors Corp., Sr. Sub. Notes, 11%, 5/1/03 800,000 838,000
------------
$ 7,707,125
------------
COMMUNICATIONS -- 15.0%
Allbriton Communications Co., Sr. Sub. Notes,
9.75%, 11/30/07 $1,750,000 $ 1,693,125
Arch Communications Group, Inc., Sr. Disc Notes,
10.875% (0% until 2001), 3/15/08 1,000,000 560,000
Australis Media LTD., Sub. Disc. Notes, 14% (0%
until 2000), 5/15/03 1,700,000 986,000
Brooks Fiber Prop., Inc., Sr. Disc. Notes, 10.875%
(0% until 2001), 3/1/06 1,500,000 922,500
CS Wireless Systems, Inc., Sr. Disc. Notes, 11.375%
(0% until 2001), 3/1/06(1) 720,000 370,800
Dial Call Communications Inc., Sr. Red. Notes,
12.25% (0% until 1999), 4/15/04 1,800,000 1,242,000
Echostar Satellite Broadcasting Corp.,
Sr. Disc. Notes, 13.125% (0% until 2000), 3/15/04 800,000 546,000
EZ Communications, Inc., Senior Notes, 9.75%,
12/1/05 1,900,000 1,928,500
Galaxy Telecom LP., Sr. Sub. Notes, 12.375%,
10/1/05 1,000,000 1,070,000
Heartland Wireless Communications Corp., Senior
Notes, 14%, 4/15/03 1,550,000 1,689,500
Microcell Telecommunications, Inc., Sr. Disc.
Notes, 14% (0% until 2001), 6/1/06(1) 2,800,000 1,568,000
Millicom International Cellular, Inc., Sr. Sub.
Notes, 13.5% (0% until 2001), 6/1/06(1) 1,200,000 685,500
Mobilemedia Corporation, Sr. Sub. Notes, 9.375%,
11/1/07 800,000 640,000
Mobilemedia Communications Corp., Sr. Sub. Notes,
10.5% (0% until 1998), 12/1/03 1,000,000 660,000
Newsquest Cap., PLC, Sr. Sub. Notes, 11%, 5/1/06 1,895,000 1,956,588
Nextlink Communications, Inc., Senior Notes, 12.5%,
4/15/06 1,400,000 1,442,000
Orbcomm Global LP, Senior Notes, 14%, 8/15/04(1) 1,000,000 1,030,000
Pricellular Wireless Comm. Corp., Sr Sub.
Disc. Nts. 12.25% 0% until 1998), 10/1/03 1,500,000 1,207,500
Sullivan Broadcasting Co., Sr. Sub. Notes, 10.25%,
12/15/05 1,350,000 1,356,750
------------
$ 21,554,763
------------
ENERGY -- 8.3%
AES Corporation, Sr. Sub. Notes, 10.25%, 7/15/06 $ 400,000 $ 425,000
Cal Energy, Inc., Senior Notes, 9.5%, 9/15/06(1) 1,500,000 1,522,500
Chesapeake Energy Corporation, Senior Notes,
9.125%, 4/15/06 800,000 790,000
Clark USA Inc., Senior Notes 10.875%, 12/1/05 600,000 610,500
Coda Energy Inc., Sr. Sub. Notes, 10.5%, 4/1/06 600,000 618,000
El Paso Electric Company, First Mtg. Notes, 9.4%,
5/1/11 650,000 669,500
Mariner Energy Corporation, Sr. Sub. Notes, 10.5%,
8/1/06 1,900,000 1,966,500
Mesa Operating Company, Sr. Sub. Notes, 10.625%,
7/1/06 900,000 945,000
Midland Cogeneration Venture, Sr. Sec. Lease
Oblig., 10.33%, 7/23/02 720,496 756,521
Midland Funding II, Sec. Lease Oblig., 11.75%,
7/23/05 200,000 215,486
Plains Resources, Inc., Sr. Sub. Notes, 10.25%,
3/15/06 1,500,000 1,560,000
Trans Texas Gas Corp., Sr. Sec. Notes, 11.5%,
6/15/02 1,300,000 1,381,250
Tuboscope Vetco, Intl. Corp., Sr. Sub. Debs.,
10.75%, 4/15/03 500,000 531,250
------------
$ 11,991,507
------------
FOOD/RESTAURANTS/HOTELS -- 5.5%
Flagstar Corp., Sub. Debs., 10.75%, 9/15/01 $1,400,000 $ 1,242,500
Inflo Holdings, Inc., Promissory Notes,
10% (0% until 1999), 1/27/07+ 1,100,000 770,000
Keebler Corporation, Sr. Sub. Notes, 10.75%,
7/1/06(1) 1,500,000 1,597,500
PM Holdings Corp., Sr. Sub. Notes, 11.5% (0% until
2000), 9/1/05 1,000,000 600,000
Purina Mills, Inc., Sr. Sec. Sub. Notes, 10.25%,
9/1/03 1,000,000 1,020,000
Specialty Foods Corp., Sr. Sub. Notes, 10.25%,
8/15/01 1,500,000 1,380,000
Van De Kamps, Inc., Sr. Sub. Notes, 12%, 9/15/05 1,200,000 1,305,000
------------
$ 7,915,000
------------
HEALTHCARE -- 4.2%
Dade International Inc., Sr. Sub. Notes, 11.125%,
5/1/06 $1,200,000 $ 1,284,000
Maxxim Medical, Inc., Sr. Sub. Notes, 10.5%,
8/1/06(1) 1,300,000 1,348,750
Ordna Corp., Sr. Sub. Notes, 11.375%, 8/15/04 1,425,000 1,588,875
Owens & Minor, Inc., Sr. Sub. Notes, 10.875%,
6/1/06 800,000 836,000
Paracelsus Healthcare Corp., Sr. Sub. Notes, 10%,
8/15/06 800,000 828,000
Unilab Corp., Senior Notes, 11%, 4/1/06 200,000 158,000
------------
$ 6,043,625
------------
HIGH TECH -- 2.9%
Blue Bell Funding Inc., Sec. Ext. Notes, 11.85%,
5/1/99 $ 738,000 $ 738,000
GS Technologies Corp., Senior Notes, 12.25%,
10/1/05 1,500,000 1,552,500
Unisys Corp., Senior Notes, 12%, 4/15/03 800,000 828,000
Unisys Corp., Senior Notes, Variable, 7/1/97 1,000,000 1,057,500
------------
$ 4,176,000
------------
METALS -- 3.0%
Euramax International Plastics LTD, Sr. Sub. Notes,
11.25%, 10/1/06(1) $1,000,000 $ 1,025,000
Gulf States Steel, Inc., First Mtg. Notes, 13.5%,
4/15/03 1,000,000 890,000
Kaiser Aluminum Corp., Sr. Sub. Notes, 12.75%,
2/1/03 1,200,000 1,302,000
Maxxam Group Inc., Sr. Sec. Notes, 11.25%, 8/1/03 500,000 512,500
Oregon Steel Mills, Inc., First Mtg. Notes, 11%,
6/15/03 600,000 630,750
------------
$ 4,360,250
------------
MANUFACTURING/MACHINERY -- 9.2%
Alvey Systems Inc., Sr. Sub. Notes, 11.375%,
1/31/03 $ 600,000 $ 628,500
Applied Extrusion Inc., Sr. Notes, 11.5%, 4/1/02 1,500,000 1,556,250
Day International Group, Inc., Sr. Sub. Notes,
11.125%, 6/1/05 1,000,000 1,045,000
Dictaphone Corp., Sr. Sub. Notes, 11.75%, 8/1/05 500,000 455,000
Essex Group, Inc., Senior Notes, 10%, 5/1/03 1,000,000 1,025,000
Imo Industries, Inc., Sr. Sub. Notes,
11.75%, 5/1/06 2,070,000 2,173,500
K & F Industries, Inc., Sr. Sub. Notes,
10.375%, 9/1/04 500,000 517,500
Monarch Acquisition Corp., Senior Notes,
12.5%, 7/1/03 1,300,000 1,443,000
Newflo Corp., Sub. Notes, 13.25%, 11/15/02 1,400,000 1,547,000
Plastic Specialties & Tech, Inc., Sr. Sec. Notes,
11.25%, 12/1/03 1,150,000 1,167,250
Shared Tech/Fairchild, Inc., Sr. Disc. Notes,
12.25%, (0% until 1999), 3/1/06 2,200,000 1,716,000
------------
$ 13,274,000
------------
MISCELLANEOUS -- 5.1%
Alliance Entertainment Corp., Sr. Sub. Notes,
11.25%, 7/15/05 $ 600,000 $ 570,000
Alliant Tech Systems Inc., Sr. Sub. Notes, 11.75%,
3/1/03 1,000,000 1,082,500
First Nationwide Escrow, Inc., Sr. Sub. Notes,
10.625%, 10/1/03(1) 1,400,000 1,464,750
Howmet Corp., Sr. Sub. Notes, 10%, 12/1/03 650,000 697,125
Imax Corp., Sr. Notes, 10%
(7% until 1997), 3/1/01 600,000 598,500
Iron Mountain, Inc., Sr. Sub. Notes, 10.125%,
10/1/06 200,000 200,000
Lifestyle Furnishings Inc., Sr. Sub. Notes,
10.875%, 8/1/06(1) 1,000,000 1,035,000
Selmer Company, Inc., Sr. Sub. Notes, 11%, 5/15/05 1,600,000 1,680,000
------------
$ 7,327,875
------------
PAPER/PACKAGING -- 7.9%
American Pad & Paper Co., Sr. Sub. Notes, 13%,
11/15/05 $ 650,000 $ 745,875
Container Corp., Sr. Notes (Ser. B), 10.75%, 5/1/02 1,000,000 1,050,000
Fort Howard Corp., Sr. Sec. Notes, 11%, 1/2/02 636,123 661,568
Gaylord Container Corp., Sr. Sub. Disc. Debs.,
12.75% (0% until 1996), 5/15/05 1,700,000 1,865,750
Repap Wisconsin, Inc., 2nd Prty Sr. Sec. Notes,
9.875%, 5/1/06 500,000 490,000
Riverwood International Corp., Sr. Sub. Notes,
10.875%, 4/1/08 2,150,000 2,117,750
S.D. Warren Company Inc., Sr. Sub. Notes, 12%,
12/15/04 1,000,000 1,077,500
Silgan Corp., Sr. Notes, 11.75%, 6/15/02 500,000 530,000
Silgan Corp., Sr. Sub. Notes, 13.25%, 12/15/02 167,000 169,505
Stone Container Corp., First Mtg. Notes, 10.75%,
10/1/02 1,000,000 1,050,000
Stone Container Corp., Sr. Notes, 12.625%, 7/15/98 800,000 840,000
U.S. Can Company, Sr. Sub. Notes, 13.5%, 1/15/02 750,000 789,375
------------
$ 11,387,323
------------
RECREATION -- 4.9%
Aztar Corp., Sr. Sub. Notes, 13.75%, 10/1/04 $1,000,000 $1,130,000
Cinemark USA, Inc., Sr. Sub. Notes, 9.625%,
8/1/08(1) 1,200,000 1,200,000
E & S Holdings Corporation, Sr. Sub. Notes,
10.375%, 10/1/06(1) 300,000 300,000
Eldorado Resorts LLC, Sr. Sub. Notes, 10.5%,
8/15/06(1) 1,000,000 1,035,000
Harvey Casinos, Inc., Sr. Sub. Notes, 10.625%,
6/1/06 1,500,000 1,565,625
Trump Atlantic City, Inc., 1st Mtg. Notes, 11.25%,
5/1/06 600,000 591,000
Trump Holdings & Funding, Inc.,
Senior Notes, 15.50%, 6/15/05 1,000,000 1,160,000
------------
$ 6,981,625
------------
RETAILING -- 5.8%
Apparel Retailers Inc., Sr. Disc. Debs., 12.75%,
(0% until 1998) 8/15/05 $1,300,000 $ 1,144,000
Duane Reade, G.P., Sr. Notes, 12%, 9/15/02 1,200,000 1,164,000
Knoll Inc., Sr. Sub Notes, 10.875%, 3/15/06 1,200,000 1,272,000
Levitz Furniture Corp., Sr. Sub. Notes, 9.625%,
7/15/03 450,000 333,000
Levitz Furniture Corp., Senior Notes, 13.375%,
10/15/98 200,000 194,000
Pathmark Stores Inc., Jr. Sub., Disc. Notes,
10.75%, (0% until 1999) 11/1/03 400,000 265,000
Ralphs Grocery Company, Inc.,
Sr. Sub. Notes, 13.75%, 6/15/05 1,500,000 1,590,000
Smith Food & Drug, Inc., Sr. Sub. Notes, 11.25%,
5/15/07 1,000,000 1,062,500
Specialty Retailers, Inc., Sr. Sub. Notes, 11%,
8/15/03 1,350,000 1,390,500
------------
$ 8,415,000
------------
TEXTILES -- 3.0%
Clark-Schwebel, Inc., Senior Notes, 10.5%, 4/15/06 $1,300,000 $ 1,365,000
Collins & Aikman Corp., Sr. Sub. Notes, 11.5%,
4/15/06 500,000 526,250
Dan River Inc., Sr. Sub. Notes, 10.125%, 12/15/03 1,450,000 1,435,500
Westpoint Stevens, Inc., Sr. Sub. Debs., 9.375%,
12/15/05 1,000,000 1,002,500
------------
$ 4,329,250
------------
TOTAL CORPORATE BONDS AND NOTES
(identified cost, $131,188,048) $134,380,343
------------
- -------------------------------------------------------------------------------
PREFERRED STOCKS -- 0.8%
- -------------------------------------------------------------------------------
SHARES/WARRANTS
- -------------------------------------------------------------------------------
Cablevision Systems Corp., 11.125% (PIK), 2/15/96 7,424 $ 721,984
S.D. Warren Company w/Warrants, 14%, 12/15/06* 12,000 432,000
------------
TOTAL PREFERRED STOCK
(identified cost, $1,034,304) $ 1,153,984
------------
- -------------------------------------------------------------------------------
COMMON STOCKS, WARRANTS AND RIGHTS -- 0.9%
- -------------------------------------------------------------------------------
SECURITY SHARES/WARRANTS VALUE
- -------------------------------------------------------------------------------
AUTO/TRUCK -- 0.6%
Bucyrus - Erie Company, Common* 87,279 $ 774,601
------------
CABLE -- 0.0%
American Telecasting, Inc., Wts.* 1,400 $ 37,800
------------
CHEMICALS -- 0.1%
UCC Invt. Hldgs. Corp.,
Class A Common(1)* 7,431 $ 106,821
------------
COMMUNICATIONS -- 0.0%
In Flight Phone Corp., Wts.
Exp. 8/31/02* 400 0
Nextel Communications, Inc., Wts.
Exp. 4/25/99* 1,800 450
United International Hldg. Inc., Wts. Exp. 11/15/99* 1,960 39,200
------------
$ 39,650
------------
FOOD -- 0.0%
Servam Corp., Common* 884 $ 0
Servam Corp., $2.00 Wts. Exp. 4/1/01* 7,864 0
Servam Corp., $4.50 Wts. Exp. 4/1/01* 1,768 0
Specialty Foods Acquisition Corp., Common(1)* 12,000 9,000
------------
$ 9,000
------------
INDUSTRIAL -- 0.0%
Thermadyne Holdings Corp., Common+* 777 $ 16,511
------------
MANUFACTURING -- 0.2%
Southdown Inc., Wts. Exp. 10/31/96+* 4,500 40,500
Terex Corporation, Rights, Exp. 7/1/97+* 1,791 179
Terex Corp., Wts. Exp. 12/31/00+* 8,000 176,000
Triangle Wire & Cable, Inc., Common+* 31,667 63,334
------------
$ 280,013
------------
METALS -- 0.0%
Gulf States Steel, Inc., Wts.* 1,000 $ 50
------------
MISCELLANEOUS -- 0.0%
Australis Media LTD, Wts.+* 1,700 $ 0
------------
PAPER/PACKAGING -- 0.0%
S.D. Warren Company,
Wts. Exp. 12/15/06* 12,000 $ 48,000
------------
TOTAL COMMON STOCKS, WARRANTS AND
RIGHTS (identified cost, $2,396,673) $ 1,312,446
------------
- -------------------------------------------------------------------------------
SHORT-TERM OBLIGATION -- 2.1%
- -------------------------------------------------------------------------------
SECURITY FACE AMOUNT VALUE
- -------------------------------------------------------------------------------
COMMERCIAL PAPER
Associates Corp. of North America, 5.80%, 10/1/96,
at amortized cost $2,973,000 $ 2,973,000
------------
TOTAL INVESTMENTS
(identified cost, $137,592,025) $139,819,773
OTHER ASSETS, LESS LIABILITIES -- 2.8% 4,023,945
------------
NET ASSETS -- 100% $143,843,718
------------
------------
* Non-income producing security.
+ Restricted Security (Note 8).
(1) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At the period
end, the value of these securities amounted to $15,459,121 or 10.7% of net
assets.
The accompanying notes are an integral part of
the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- -------------------------------------------------------------------------------
September 30, 1996
- ------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) (identified cost,
$137,592,025) $139,819,773
Cash 1,290
Receivable for investments sold 2,240,194
Receivable for Trust shares sold 542,509
Interest and dividends receivable 3,409,647
Tax reclaim receivable 478
------------
Total assets $146,013,891
LIABILITIES:
Dividends payable $ 615,431
Payable for investments purchased 1,358,250
Payable for Trust shares redeemed 105,068
Payable to affiliate --
Trustees' fee (Note 4) 6,619
Accrued expenses 84,805
----------
Total liabilities 2,170,173
------------
NET ASSETS for 17,705,669 shares of beneficial
interest outstanding $143,843,718
============
SOURCES OF NET ASSETS:
Paid-in capital $158,898,961
Accumulated net realized loss on investment
transactions (computed on the basis
of identified cost) (16,377,956)
Unrealized appreciation of investments (computed
on the basis of identified cost) 2,227,748
Accumulated distributions in excess of net
investment income (905,035)
------------
Total $143,843,718
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($143,843,718 / 17,705,669 shares of beneficial
interest) $8.12
=====
COMPUTATION OF OFFERING PRICE:
(Offering price per share 100/96.25 of $8.12) $8.44
=====
On sales of $50,000 or more, the offering price is reduced.
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------
For the Year Ended September 30, 1996
- ------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income $13,466,285
Expenses --
Investment adviser fee (Note 4) $ 762,899
Compensation of Trustees not members of the
Investment Adviser's organization 36,724
Service fees (Note 5) 141,099
Custodian fees (Note G) 78,881
Transfer and dividend disbursing agent fees 104,711
Legal and accounting services 64,362
Printing and postage 55,149
Registration costs 33,388
Miscellaneous 26,158
-----------
Total expenses 1,303,371
-----------
Net investment income $12,162,914
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized loss on investment transactions
(identified cost basis)
($2,446,478 net loss for federal income tax
purposes) $(1,311,602)
Change in unrealized appreciation of investments 4,839,422
-----------
Net realized and unrealized gain on
investments 3,527,820
-----------
Net increase in net assets from
operations $15,690,734
===========
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------
1996 1995
------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 12,162,914 $ 10,558,509
Net realized loss on investment transactions (1,311,602) (2,502,141)
Change in unrealized appreciation of
investments 4,839,422 2,497,668
------------ ------------
Net increase in net assets from operations $ 15,690,734 $ 10,554,036
------------ ------------
Distributions to shareholders --
From net investment income $(12,162,914) $(10,503,271)
In excess of net investment income (180,838) --
------------ ------------
Total distributions to shareholders $(12,343,752) $(10,503,271)
------------ ------------
Net increase from Trust share transactions
(Note 2) $ 34,082,765 $ 2,880,933
------------ ------------
Net increase in net assets $ 37,429,747 $ 2,931,698
NET ASSETS:
At beginning of year 106,413,971 103,482,273
------------ ------------
At end of year (including accumulated
distributions in excess of net investment
income of $905,035 and $726,629
respectively) $143,843,718 $106,413,971
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1996 1995 1994 1993 1992
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $ 7.92 $ 7.90 $ 8.40 $ 8.33 $ 7.56
------------ ------------ ------------ ----------- -----------
INCOME FROM OPERATIONS:
Net investment income $ 0.80 $ 0.82 $ 0.83 $ 0.92 $ 0.97
Net realized and unrealized gain
(loss) on investments 0.21 0.02 (0.47) 0.07 0.77
------------ ------------ ------------ ----------- -----------
Total income from operations $ 1.01 $ 0.84 $ 0.36 $ 0.99 $ 1.74
------------ ------------ ------------ ----------- -----------
LESS DISTRIBUTIONS:
From net investment income $ (0.80) $ (0.82) $ (0.81) $ (0.92) $ (0.97)
In excess of net investment income (0.01) -- (0.05) -- --
------------ ------------ ------------ ----------- -----------
Total distributions $ (0.81) $ (0.82) $ (0.86) $ (0.92) $ (0.97)
------------ ------------ ------------ ----------- -----------
NET ASSET VALUE, end of year $ 8.12 $ 7.92 $ 7.90 $ 8.40 $ 8.33
============ ============ ============ =========== ===========
TOTAL RETURN(1) 13.41% 11.25% 4.25% 12.59% 24.25%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's
omitted) $143,844 $106,414 $103,482 $95,123 $85,778
Ratio of net expenses to average
daily net assets 1.07% 1.09% 1.04% 1.03% 1.08%
Ratio of net investment income to
average daily net assets 9.96% 10.50% 9.75% 11.01% 12.02%
PORTFOLIO TURNOVER 81% 84% 70% 102% 90%
<FN>
(1) 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
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 (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,
1996, the Trust, for federal income tax purposes, had a capital loss carryover
of $15,003,963 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), 2000 ($5,148,498),
2003 ($1,177) and 2004 ($2,446,478). Additionally, at September 30, 1996, net
capital losses of $1,318,745 attributable to security transactions incurred
after October 31, 1995, are treated as arising on the first day of the Fund's
next taxable year.
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. USE OF ESTIMATES -- The preparation of financial statements in conformity
with generally accepted accounting principles 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 revenue and expense during the reporting period. Actual results could
differ from those estimates.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Gains and losses on securities sold are
determined on the basis of identified cost.
G. EXPENSE REDUCTION -- Investors Bank and Trust Company (IBT) serves as
custodian of the Fund. Prior to November 10, 1995, IBT was an affiliate of
EVM. Pursuant to the Custodian Agreement, IBT receives a fee reduced by
credits which are determined based on the average daily cash balance the Fund
maintains with IBT. Any significant credit balance used to reduce the Fund's
custodian fee is reflected as a reduction of operating expenses in the
Statement of Operations.
- ------------------------------------------------------------------------------
(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>
YEAR ENDED YEAR ENDED
SEPTEMBER 30, 1996 SEPTEMBER 30, 1995
-------------------------------- -------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sales 5,726,284 $45,698,870 2,247,830 $17,720,814
Issued to shareholders electing
to receive payment of
distributions in Trust shares 793,091 6,333,668 748,929 5,876,531
Repurchases (2,248,018) (17,949,773) (2,656,086) (20,716,412)
--------- ----------- --------- -----------
Net increase 4,271,357 $34,082,765 340,673 $ 2,880,933
========= =========== ========= ===========
</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 $122,229,934 and $94,274,630, respectively, for the
year ended September 30, 1996.
- ------------------------------------------------------------------------------
(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. (EVD), a subsidiary of EVM and the Trust's principal
underwriter, did not receive any of the sales charge on sales of Trust shares
during the year ended September 30, 1996. 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
(the "Plan") designed to meet the 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
initially 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 $141,099 under the Plan to the Principal
Underwriter and Authorized Firms during the year ended September 30, 1996.
- ------------------------------------------------------------------------------
(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 September 30, 1996, as computed on a federal income tax basis, are as
follows:
Aggregate cost $137,647,273
============
Gross unrealized depreciation $ 4,241,966
Gross unrealized appreciation 6,414,466
------------
Net unrealized appreciation $ 2,172,500
============
- ------------------------------------------------------------------------------
(8) RESTRICTED SECURITIES
At September 30, 1996, the Trust owned the following securities (representing
0.7% of net assets) which were restricted as to public resale and not
registered under the Securities Act of 1933 (excluding Rule 144A Securities).
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
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CORPORATE NOTE
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<S> <C> <C> <C> <C>
Inflo Holdings, Inc., Promissory Notes, 10%, 1/27/07 9/13/96 1,100,000 $ 721,000 $ 770,000
COMMON STOCKS, WARRANTS AND RIGHTS
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Australis Media, Wts. 5/26/95 1,700 0 0
Southdown, Inc., Wts., Exp. 10/31/96 10/28/91 4,500 13,500 40,500
Terex Corp., Rights, Exp. 7/1/97 11/7/94 1,791 0 179
Terex Corp., Wts., Exp. 12/31/00 12/15/93 8,000 1,600 176,000
Thermadyne Holdings Corp., Common 5/17/94 777 18,900 16,511
Triangle Wire & Cable Inc., Common 5/2/94 31,667 750,000 63,334
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$1,505,000 $1,066,524
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<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
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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 portfolio of investments, as
of September 30, 1996, and the related statement of operations for the year
then ended, the statements of changes in net assets for each of the two years
in the period then ended, and the financial highlights for each of the five
years in the period then ended. 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 September 30, 1996 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 September 30, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the five years in the period then ended, in conformity with generally
accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
OCTOBER 25, 1996
<PAGE>
INVESTMENT MANAGEMENT
EATON VANCE OFFICERS INDEPENDENT TRUSTEES
INCOME FUND
OF BOSTON M. DOZIER GARDNER KENNETH C. KNIGHT
24 Federal Street President and Trustee Consultant
Boston, MA 02110
HOOKER TALCOTT, JR. DONALD R. DWIGHT
Vice President and President, Dwight
Co-Portfolio Manager Partners, Inc.
Chairman, Newspapers of
MICHAEL W. WEILHEIMER New England, Inc.
Vice President and
Co-Portfolio Manager ROBERT GLUCK
Management Consultant
JAMES L. O'CONNOR
Treasurer SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
THOMAS OTIS Investment Banking,
Secretary Harvard University Graduate
School of Business Administration
NORTON H. REAMER
President and Director,
United Asset Management Corporation
JOHN L. THORNDIKE
Director,
Fiduciary Company Incorporated
