<PAGE>
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
EATON VANCE MUNICIPAL BOND FUND L.P.
SUPPLEMENT TO PROSPECTUSES DATED MAY 1, 1994
Effective August 1, 1994, Eaton Vance Municipal Bond Fund L.P. does not
permit the exchange privilege to be used for "Market Timing" and may terminate
the exchange privilege for any shareholder account engaged in Market Timing
activity. Any shareholder account for which more than two round-trip exchanges
are made within any twelve month period will be deemed to be engaged in Market
Timing. Furthermore, a group of unrelated accounts for which exchanges are
entered contemporaneously by a financial intermediary will be considered to be
engaged in Market Timing.
THE FOLLOWING SENTENCE IS ADDED TO "HOW TO BUY SHARES OF THE FUND FOR CASH":
Fund shares may be sold at net asset value where the amount invested
represents redemption proceeds from a mutual fund unaffiliated with
Eaton Vance, if the redemption occurred no more than 60 days prior to
the purchase of Fund shares and the redeemed shares were subject to a
sales charge.
IN ADDITION, THE FOLLOWING CHANGES (1-5) APPLY TO FUND SHARES PURCHASED ON
OR AFTER MARCH 27, 1995:
1. THE SHAREHOLDER TRANSACTION EXPENSES TABLE UNDER "SHAREHOLDER AND FUND
EXPENSES" IS REPLACED BY THE FOLLOWING TABLE:
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 3.75%
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemptions None
Based on the Shareholder Transaction Expenses shown above and on the
total operating expenses shown in the relevant Prospectus, an investor would
pay expenses $10 less than the expenses for one year and three years shown
in the Example under "Shareholder and Fund Expenses".
2. FOR EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND, THE $100,000 AMOUNTS IN
THE DESCRIPTIONS OF THE STATEMENT OF INTENTION AND THE RIGHT OF ACCUMULATION
UNDER "EATON VANCE SHAREHOLDER SERVICES" ARE REPLACED BY $50,000 AMOUNTS, AND
THE FIRST SENTENCE IN THE DESCRIPTION OF THE EXCHANGE PRIVILEGE UNDER "EATON
VANCE SHAREHOLDER SERVICES" IS REPLACED BY THE FOLLOWING SENTENCE:
Shares of the Fund may currently be exchanged for shares of any of the
following funds: Eaton Vance Cash Management Fund, Eaton Vance Income
Fund of Boston, Eaton Vance Municipal Bond Fund L.P., Eaton Vance Tax
Free Reserves and any fund in the Eaton Vance Traditional Group of Funds
on the basis of the net asset value per share of each fund at the time
of the exchange (plus, in the case of an exchange made within six months
of the date of purchase, an amount equal to the difference, if any,
between the sales charge previously paid on the shares being exchanged
and the sales charge payable on the shares being acquired).
<PAGE>
3. FOR EATON VANCE MUNICIPAL BOND FUND L.P., THE $100,000 AMOUNTS IN THE
DESCRIPTIONS OF THE STATEMENT OF INTENTION AND THE RIGHT OF ACCUMULATION UNDER
"SERVICES FOR HOLDERS OF SHARES" ARE REPLACED BY $50,000 AMOUNTS, AND THE FIRST
SENTENCE IN THE DESCRIPTION OF THE EXCHANGE PRIVILEGE UNDER "SERVICES FOR
HOLDERS OF SHARES" IS REPLACED BY THE FOLLOWING SENTENCE:
Shares of the Fund may currently be exchanged for shares of any of the
following funds: Eaton Vance Cash Management Fund, Eaton Vance Income
Fund of Boston, Eaton Vance Tax Free Reserves and any fund in the Eaton
Vance Traditional Group of Funds on the basis of the net asset value per
share of each fund at the time of the exchange (plus, in the case of an
exchange made within six months of the date of purchase, an amount equal
to the difference, if any, between the sales charge previously paid on
the shares being exchanged and the sales charge payable on the shares
being acquired).
4. THE SALES CHARGE TABLE UNDER "HOW TO BUY SHARES OF THE FUND FOR CASH" IS
REPLACED BY THE FOLLOWING TABLE:
The current sales charges and dealer commissions are:
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER COMMISSION
AS PERCENTAGE OF AS PERCENTAGE OF AS PERCENTAGE OF
AMOUNT OF PURCHASE OFFERING PRICE AMOUNT INVESTED OFFERING PRICE
<S> <C> <C> <C>
Less than $50,000 3.75% 3.90% 4.00%
$50,000 but less than $100,000 2.75% 2.83% 3.00%
$100,000 but less than $250,000 2.25% 2.30% 2.50%
$250,000 but less than $500,000 1.75% 1.78% 2.00%
$500,000 but less than
$1,000,000 1.25% 1.27% 1.50%
$1,000,000 or more 0.00%<F1> 0.00%<F1> 0.25%<F2>
<FN>
<F1> Fund shares purchased before March 27, 1995, at net asset value with no
initial sales charge by virtue of the purchase having been in the amount of
$1 million or more may be subject to a contingent deferred sales charge
upon redemption.
<F2> The Principal Underwriter may pay Authorized Firms that initiate and are
responsible for purchases of $1 million or more a commission at an annual
rate of 0.25% of average daily net assets paid quarterly for one year.
</TABLE>
5. REFERENCES TO A CONTINGENT DEFERRED SALES CHARGE OR "CDSC" DO NOT APPLY
TO FUND SHARES PURCHASED ON OR AFTER MARCH 27, 1995.
March 27, 1995 T-5/1PS
<PAGE>
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
A MUTUAL FUND SEEKING A HIGH CURRENT RETURN BY INVESTING
IN U.S. GOVERNMENT SECURITIES AND ENGAGING IN ACTIVE MANAGEMENT STRATEGIES
IN SEEKING HIGH CURRENT RETURN, EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
(THE "FUND") INVESTS ITS ASSETS IN GOVERNMENT OBLIGATIONS PORTFOLIO (THE
"PORTFOLIO"), A DIVERSIFIED OPEN-END INVESTMENT COMPANY HAVING THE SAME
INVESTMENT OBJECTIVE AS THE FUND, RATHER THAN, AS WITH AN HISTORICALLY
STRUCTURED MUTUAL FUND, DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. THE FUND IS A SERIES OF EATON VANCE GOVERNMENT OBLIGATIONS TRUST
(THE "TRUST").
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. Shares of
the Fund are not deposits or obligations of, or guaranteed or endorsed by, any
bank, and are not federally insured by the Federal Deposit Insurance
Corporation, the Federal Reserve Board or any other government agency. Shares of
the Fund involve investment risks, including fluctuations in value and the
possible loss of some or all of the principal investment.
A Statement of Additional Information dated May 1, 1994 for the Fund, as
supplemented from time to time, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. This Statement of Additional
Information is available without charge from the Fund's Principal Underwriter,
Eaton Vance Distributors, Inc., 24 Federal Street, Boston, MA 02110 (telephone
(800) 225-6265). The Portfolio's Investment Adviser is Boston Management and
Research (the "Investment Adviser"), a wholly-owned subsidiary of Eaton Vance
Management, and Eaton Vance Management is the Administrator (the
"Administrator") of the Fund. The offices of the Investment Adviser and the
Administrator are also located at 24 Federal Street, Boston, MA 02110.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURI-
TIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROS-
PECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Shareholder and Fund Expenses ............................................. 2
The Fund's Financial Highlights .......................................... 3
The Fund's Investment Objective ......................................... 4
How the Fund and the Portfolio Invest their Assets ....................... 4
Active Management Strategies ............................................. 11
Organization of the Fund and the Portfolio ................................ 16
Reports to Shareholders .................................................. 19
Management of the Fund and the Portfolio ................................. 20
How the Fund and the Portfolio Determine their Net Asset Values ......... 22
How to Buy Shares of the Fund for Cash .................................... 23
How to Acquire Fund Shares in Exchange for Securities ................... 25
The Lifetime Investing Account/Distribution Options ...................... 26
Eaton Vance Shareholder Services ....................................... 27
How to Redeem or Sell Fund Shares ........................................ 30
Service Plan .............................................................. 32
Distributions and Taxes .................................................. 33
Performance and Yield Information ......................................... 35
Statement of Intention and Escrow Agreement ............................. 36
Backup Withholding ...................................................... 37
Account Application Form .................................................. 39
Prospectus dated May 1, 1994
<PAGE>
SHAREHOLDER AND FUND EXPENSES (NOTE 1)
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) 4.75%
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
Contingent Deferred Sales Charges (on purchases over $1
million) Imposed on Redemptions During the First
Nineteen Months (as a percentage of redemption proceeds
exclusive of all reinvestments and capital appreciation
in the account) (Note 4) 1.00%-0%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average net assets)
Investment Adviser Fee (Note 3) 0.75%
Rule 12b-1 Fees (Service Plan) 0.15%
Other Expenses
Interest and Securities Lending Expenses 0.40%
Other Expenses 0.22% 0.62%
-----
Total Operating Expenses 1.52%
=====
Example: See Note (2) 1 year 3 years 5 years 10 years
------ ------- ------- --------
You would pay the following initial
maximum sales charge and expenses on a
$1,000 investment, assuming (a) 5%
annual return and (b) redemption at the
end of each time period: $62 $93 $126 $220
Notes:
(1) The purpose of the above table and Example is to summarize the aggregate
expenses of the Fund and the Portoflio and to assist investors in
understanding the various costs and expenses that investors in the Fund will
bear directly or indirectly. The Trustees of the Trust believe that over
time the aggregate per share expenses of the Fund and the Portfolio should
be approximately equal to the per share expenses which the Fund would incur
if the Trust retained the services of an investment adviser and the assets
of the Fund were invested directly in the type of securities being held by
the Portfolio. The costs and expenses in the table and Example are based on
the Fund's and Portfolio's fiscal year ended December 31, 1993. The table
and Example should not be considered a representation of past or future
expenses and actual expenses may be greater or less than those shown in the
table and Example. For further information regarding the expenses of both
the Fund and the Portfolio see "The Fund's Financial Highlights",
"Organization of the Fund and the Portfolio", "Management of the Fund and
the Portfolio" and "How to Redeem or Sell Fund Shares".
(2) The computation of Annual Fund and Allocated Portfolio Operating Expenses as
a percentage of average net assets and expenses incurred on a $1,000
investment in the above Example is based in part on interest expense
incurred by the Fund and the Portfolio on their borrowings and lending fees
incurred by the Fund and the Portfolio under a securities lending agreement
during the fiscal year ended December 31, 1993. The Portfolio's borrowings,
interest expense, securities lending activities and lending fees will vary
from year to year (see "Active Management Strategies"). If the Fund had not
incurred or been allocated interest expense and lending fees in 1993, its
annual operating expenses as a percentage of average net assets would have
been 1.12%, and expenses incurred on a $1,000 investment for one, three,
five and ten years would have been $58, $81, $106 and $177, respectively.
(3) As of the close of business October 27, 1993, the Fund transferred
substantially all of its assets to the Portfolio in exchange for an interest
in the Portfolio. Prior to such date, the Fund retained Eaton Vance
Management as its investment adviser. Other investment companies with
different distribution arrangements and fees are investing in the Portfolio
and additional such companies may do so in the future. See "Organization of
the Fund and the Portfolio".
(4) If shares have been purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or
more and are redeemed within 18 months after the end of the calendar month
in which the purchase was made, a contingent deferred sales charge of 1%
will be imposed on such redemption. See "How to Buy Shares of the Fund for
Cash", "How to Redeem or Sell Fund Shares" and "Eaton Vance Shareholder
Services".
<PAGE>
The Fund's Financial Highlights
- --------------------------------------------------------------------------------
The following information should be read in conjunction with the financial
statements included in the Statement of Additional Information, all of which has
been so included in reliance upon the report of Coopers & Lybrand, independent
accountants, as experts in accounting and auditing. The financial highlights for
each of the two years in the period ending December 31, 1991 and the six months
ended December 31, 1985 and for the period from August 24, 1984 (commencement of
operations) to December 31, 1985, presented here, were audited by other auditors
whose report dated February 7, 1992, expressed an unqualified opinion on such
financial highlights.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for a share outstanding
throughout the period) 1993<F7> 1992 1991 1990 1989
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................... $ 11.3800 $ 11.8000 $ 11.3700 $ 11.5200 $ 11.2300
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS:
Net investment income ................................ $ 0.9192 $ 0.9751 $ 1.1005 $ 1.1085 $ 1.1280
Net realized and unrealized gain (loss) on investments 0.1058 (0.3886) 0.4395 (0.1485) 0.2745
----------- ----------- ----------- ----------- -----------
Total income from operations ....................... $ 1.0250 $ 0.5865 $ 1.5400 $ 0.9600 $ 1.4025
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment income ........................... $ (0.9192) $ (1.0065) $ (1.1100) $ (1.1100) $ (1.1125)
In excess of net investment income ................... (0.0058) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions .................................. $ (0.9250) $ (1.0065) $ (1.1100) $ (1.1100) $ (1.1125)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, end of year .......................... $ 11.4800 $ 11.3800 $ 11.8000 $ 11.3700 $ 11.5200
=========== =========== =========== =========== ===========
TOTAL RETURN<F6> ...................................... 9.26% 5.29% 14.42% 8.97% 13.21%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets<F1> .. 0.40%<F4> 0.31% 0.78% 1.19% 1.11%
Ratio of other expenses to average net assets<F1> .... 1.12%<F4> 1.10% 1.18% 1.22% 1.22%
Ratio of net investment income to average net assets . 7.86%<F4> 8.52% 9.61% 9.86% 10.02%
PORTFOLIO TURNOVER<F8> ................................ 52% 26% 25% 22% 25%
NET ASSETS, end of period (000's omitted) ............. $ 503,150 $ 468,960 $ 352,480 $ 279,747 $ 296,405
LEVERAGE ANALYSIS:
Amount of debt outstanding at end
of period (000's omitted) .......................... --<F9> -- -- $ 4,695 $ 259
Average daily balance of debt outstanding
during period (000's omitted) ...................... $ 2,313<F9> $ 1,687 $ 2,321 $ 11,009 $ 3,218
Average weekly balance of shares outstanding
during period (000's omitted) ....................... 43,731<F9> 37,474 25,915 25,285 26,839
Average amount of debt per share during period ....... $ 0.053<F9> $ 0.045 $ 0.090 $ 0.435 $ 0.120
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (for a share outstanding
throughout the period) 1988 1987<F5> 1986<F5> 1985<F5><F3> 1985<F5><F2>
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year .................... $ 11.5400 $ 12.3600 $ 12.2600 $ 12.1800 $ 11.6600
----------- ----------- ----------- ----------- -----------
INCOME FROM OPERATIONS:
Net investment income ................................ $ 1.1260 $ 1.1360 $ 1.1580 $ 0.5990 $ 1.0140
Net realized and unrealized gain (loss) on investments (0.2960) (0.6610) 0.3920 0.2310 0.6260
----------- ----------- ----------- ----------- -----------
Total income from operations ......................... $ 0.8300 $ 0.4750 $ 1.5500 $ 0.8300 $ 1.6400
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
From net investment income ........................... $ (1.1400) $ (1.1600) $ (1.2000) $ (0.6000) $ (0.8700)
In excess of net investment income ................... -- (0.1350) (0.2500) (0.1500) (0.2500)
----------- ----------- ----------- ----------- -----------
Total distributions .................................. $ (1.1400) $ (1.2950) $ (1.4500) $ (0.7500) $ (1.1200)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, end of year .......................... $ 11.2300 $ 11.5400 $ 12.3600 $ 12.2600 $ 12.1800
=========== =========== =========== =========== ===========
Total Return<F6> ...................................... 7.46% 4.17% 13.37% 7.17% 14.56%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets<F1> .. 0.66% 0.22% 0.26% 0.51%<F4> 0.21%
Ratio of other expenses to average net assets<F1> .... 1.19% 1.19% 1.20% 1.23%<F4> 1.10%
Ratio of net investment income to average net assets . 9.82% 9.63% 9.40% 10.12%<F4> 9.70%
PORTFOLIO TURNOVER<F8> ................................ 42% 36% 37% 19% 82%
NET ASSETS, end of period (000's omitted) ............. $ 321,584 $ 374,936 $ 416,095 $ 336,859 $ 250,236
LEVERAGE ANALYSIS:
Amount of debt outstanding at end of
period (000's omitted)--<F9> ....................... $ 7,006 $ 18,285 $ 11,076 $ 16,356 $ 16,887
Average daily balance of debt outstanding
during period (000's omitted) ..................... $ 18,301 $ 10,900 $ 10,421 $ 11,722 $ 1,883
Average weekly balance of shares outstanding
during period (000's omitted) ...................... 30,570 34,372 27,263 17,874 6,633
Average amount of debt per share during period ....... $ 0.599 $ 0.317 $ 0.382 $ 0.656 $ 0.284
<FN>
Note: (a) Certain of the above per share figures are based on average shares
outstanding during the period.
(b) During each of the fiscal years shown above the Fund invested directly
in securities. As of the close of business October 27, 1993, the Fund
transferred substantially all of its assets to the Portfolio in
exchange for an interest in the Portfolio.
<F1> Includes the Fund's share of Government Obligations Portfolio's allocated
expenses for the period from October 28, 1993 to December 31, 1993.
<F2> Six months ended December 31, 1985 (The Fund changed its year end from June
30 to December 31, effective July 1, 1985).
<F3> August 24, 1984 to June 30, 1985.
<F4> Computed on an annualized basis.
<F5> Audited by the Fund's previous auditors.
<F6> The results do not include the sales charge. If the sales charge had been
included, the results would have been lower.
<F7> Further information regarding the performance of the Fund is contained in
the Fund's annual report to shareholders which may be obtained without
charge by contacting the Fund's Principal Underwriter, Eaton Vance
Distributors, Inc.
<F8> Portfolio Turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover for the period since the Fund transferred substantially all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included in the Fund's Statement of Additional
Information.
<F9> The Leverage Analysis is for the period prior to the date the Fund
transferred substantially all of its investable assets to the Portfolio.
For the period from October 28, 1993, to December 31, 1993, the leverage
analysis is shown in the Portfolio's financial statements which are
included in the Fund's Statement of Additional Information.
</TABLE>
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
- --------------------------------------------------------------------------------
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND (THE "FUND") IS A DIVERSIFIED SERIES
OF EATON VANCE GOVERNMENT OBLIGATIONS TRUST (THE "TRUST"). THE INVESTMENT
OBJECTIVE OF THE FUND IS TO REALIZE A HIGH CURRENT RETURN. The Fund seeks to
meet its investment objective by investing its assets in the Government
Obligations Portfolio (the "Portfolio"), a separate registered investment
company which invests in securities issued, guaranteed or otherwise backed by
the U.S. Government, including Government National Mortgage Association ("GNMA")
mortgage-backed certificates and issues of federal agencies and federally
chartered corporations, and by engaging in active management strategies,
including options on these securities. The Portfolio will also engage in futures
transactions and related techniques for hedging purposes. The Fund's and the
Portfolio's investment objective are nonfundamental and may be changed when
authorized by a vote of the Trustees of the Trust or the Portfolio,
respectively, without obtaining the approval of the Fund's shareholders or the
investors in the Portfolio, as the case may be. The Trustees of the Trust have
no present intention to change the Fund's objective and intend to submit any
proposed material change in the investment objective to shareholders in advance
for their approval.
HOW THE FUND AND THE PORTFOLIO INVEST THEIR ASSETS
- --------------------------------------------------------------------------------
The Portfolio's management believes that a high current return may be derived
from--
- --yields on U.S. Government securities, including market discount accrued on
obligations purchased below their stated redemption value
- --premiums from expired put and call options
- --net gains from closing purchase and sale transactions involving options on
securities
- --net gains from short-term sales of portfolio securities on exercises of
options or otherwise.
THE PORTFOLIO INVESTS IN U.S. GOVERNMENT SECURITIES.
THE FUND SEEKS TO ACHIEVE ITS OBJECTIVE BY INVESTING EITHER DIRECTLY OR
INDIRECTLY THROUGH ANOTHER OPEN-END MANAGEMENT INVESTMENT COMPANY WHICH INVESTS
IN ALL KINDS OF U.S. GOVERNMENT SECURITIES. U.S. Government securities include
(1) U.S. Treasury obligations, which differ in their interest rates, maturities
and times of issuance: U.S. Treasury bills (maturities of one year or less),
U.S. Treasury notes (maturities of one to ten years) and U.S. Treasury bonds
(generally maturities of greater than ten years) and (2) obligations issued or
guaranteed by U.S. Government agencies and instrumentalities which are supported
by any of the following: (a) the full faith and credit of the U.S. Treasury, (b)
the right of the issuer to borrow any amount limited to a specific line of
credit from the U.S. Treasury, (c) discretionary authority of the U.S.
Government to purchase certain obligations of the U.S. Government agency or
instrumentality or (d) the credit of the agency or instrumentality. The
Portfolio may also invest in any other security or agreement collateralized or
otherwise secured by U.S. Government securities. Agencies and instrumentalities
of the U.S. Government include but are not limited to: Federal Land Banks,
Federal Financing Banks, Banks for Cooperatives, Federal Intermediate Credit
Banks, Farm Credit Banks, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation, Federal National Mortgage Association, Government National Mortgage
Association ("GNMA"), Student Loan Marketing Association, United States Postal
Service, Small Business Administration, Tennessee Valley Authority and any other
enterprise established or sponsored by the U.S. Government.
Certain U.S. Government securities purchased by the Portfolio, including
U.S. Treasury bills, notes and bonds, GNMA Certificates and Federal Housing
Administration debentures, are supported by the full faith and credit of the
United States. Other U.S. Government securities are issued or guaranteed by
Federal agencies or government sponsored enterprises and are not supported by
the full faith and credit of the United States. These securities include
obligations that are supported by the right of the issuer to borrow from the
U.S. Treasury, such as obligations of Federal Home Loan Banks, and obligations
that are supported only by the creditworthiness of the particular
instrumentality, such as obligations of the Federal National Mortgage
Association or Federal Home Loan Mortgage Corporation. Because the U.S.
Government generally is not obligated to provide support to its
instrumentalities, the Portfolio will invest in obligations issued by these
instrumentalities only if the Investment Adviser determines that the credit risk
with respect to such obligations is minimal.
The principal of and/or interest on certain U.S. Government securities which
may be purchased by the Portfolio could be (a) payable in foreign currencies
rather than U.S. dollars or (b) increased or diminished as a result of changes
in the value of the U.S. dollar relative to the value of foreign currencies. The
value of such portfolio securities denominated in foreign currencies may be
affected favorably or unfavorably by changes in the exchange rate between
foreign currencies and the U.S. dollar. In order to limit the risk inherent in
this type of security, it is the current policy of the Portfolio not to purchase
any such security if after such purchase (i) more than 5% of its net assets
(taken at market value) would be invested in securities denominated in foreign
currencies or (ii) more than 2% of its net assets (taken at market value) would
be invested in securities denominated in any one foreign currency.
THE PORTFOLIO MAY INVEST IN MORTGAGE-BACKED SECURITIES, REPURCHASE AGREEMENTS
AND SHORT-TERM OBLIGATIONS.
The Portfolio may also invest in collateralized mortgage obligations
("CMOs") and various other mortgage-backed securities. If such obligations or
securities are privately issued they will currently be considered by the
Investment Adviser as possible investments for the Portfolio only when the
mortgage collateral is insured, guaranteed or otherwise backed by the U.S.
Government or one or more of its agencies or instrumentalities. The Portfolio
may enter into repurchase agreements. The Portfolio may from time to time have
temporary investments in short-term debt obligations (including certificates of
deposit, bankers' acceptances and commercial paper) pending the making of other
investments or as a reserve to service redemptions and repurchases of its
shares.
Since interest yields on U.S. Government securities and opportunities to
realize net gains from options and futures transactions may vary from time to
time because of general economic and market conditions and many other factors,
it is anticipated that the Fund's current return will fluctuate, and there can
be no assurance that the Fund's objective will be achieved. As a result of their
high credit quality and market liquidity, U.S. Government securities generally
provide a lower current return than obligations of other issuers. As with other
debt securities, the value of U.S. Government securities changes as interest
rates fluctuate. Fluctuations in the value of securities held by the Portfolio
will not affect interest income on existing portfolio securities but will be
reflected in the Fund's net asset value. Thus, a decrease in interest rates will
generally result in an increase in the value of Fund shares. Conversely, during
periods of rising interest rates, the value of Fund shares will generally
decline. The magnitude of these fluctuations will generally be greater at times
when the Portfolio's average maturity is longer.
THE PORTFOLIO MAY ENGAGE IN ACTIVE MANAGEMENT STRATEGIES.
The Portfolio may engage in several active management strategies, including
the lending of portfolio securities, forward commitment purchases of securities
and leverage through borrowing. The Portfolio may write covered call and covered
put options on U.S. Government securities, purchase such call and put options,
and enter into closing purchase and sales transactions with respect thereto. The
Portfolio may, for hedging or permissible non-hedging purposes, purchase and
sell forward foreign currency exchange contracts, purchase and sell options on
foreign currencies, purchase and sell futures contracts on various debt
securities (including U.S. Government securities), foreign currencies,
certificates of deposit, Eurodollar time deposits, economic indices (e.g., the
Consumer Price Indices and the Commodity Research Bureau Futures Price Index)
and other financial instruments or indices, purchase and write call and put
options on any of such futures contracts and enter into closing purchase and
sale transactions with respect to such contracts and options. Options, futures
contracts, forward contracts, and repurchase agreements involve credit and other
risks which are described below. A discussion of the greater costs and risks
which may result from the Portfolio's investment policy with respect to
leveraging through borrowing is set forth under "Active Management Strategies."
The Portfolio expects that various new types of investments, hedging techniques
and management strategies will be developed and made available to institutional
investors in the future. The Investment Adviser will consider making such
investments or adopting such techniques or strategies if it determines that they
are consistent with the Portfolio's investment objective and policies.
THE PORTFOLIO MAY INVEST IN VARIOUS TYPES OF MORTGAGE-BACKED SECURITIES OF THE
"PASS-THROUGH" TYPE, INCLUDING GNMA CERTIFICATES, FHLMC PARTICIPATION
CERTIFICATES AND FNMA MORTGAGE-BACKED CERTIFICATES.
MORTGAGE-BACKED SECURITIES
GNMA Certificates are mortgage-backed securities representing part ownership
of a pool of mortgage loans. These loans -- issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations -- are either
insured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group or such mortgages is assembled and, after
being approved by GNMA, is offered to investors through securities dealers. Once
such pool is approved by GNMA, the timely payment of interest and principal on
the Certificates issued representing such pool is guaranteed by the full faith
and credit of the U.S. Government. As mortgage-backed securities, GNMA
Certificates differ from bonds in that the principal is paid back by the
borrower over the length of the loan rather than returned in a lump sum at
maturity. GNMA Certificates are called "pass-through" securities because a pro
rata share of both regular interest and principal payments, as well as
unscheduled early prepayments, on the underlying mortgage pool is passed through
monthly to the holder of the Certificate (i.e., the Portfolio). As indicated
below, since the unscheduled prepayment rate of the underlying mortgage pool
covered by a "pass-through" security cannot be predicted with accuracy, the
average life of a particular issue of GNMA Certificates cannot be accurately
predicted. The Portfolio may purchase GNMA Certificates and various other
mortgage-backed securities on a when-issued basis subject to certain limitations
and requirements.
The Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate
instrumentality of the U.S. Government created by Congress for the purposes of
increasing the availability of mortgage credit for residential housing, issues
participation certificates ("PCs") representing undivided interests in FHLMC's
mortgage portfolio. While FHLMC guarantees the timely payment of interest and
ultimate collection of the principal of its PCs, its PCs are not backed by the
full faith and credit of the U.S. Government. FHLMC PCs differ from GNMA
Certificates in that the mortgages underlying the PCs are mostly "conventional"
mortgages rather than mortgages insured or guaranteed by a federal agency or
instrumentality. However, in several other respects, such as the monthly
pass-through of interest and principal (including unscheduled prepayments) and
the unpredictability of future unscheduled prepayments on the underlying
mortgage pools, FHLMC PCs are similar to GNMA Certificates. As of December 31,
1993, the Portfolio had approximately 45% of its net assets invested in FHLMC
PCs.
The Federal National Mortgage Association ("FNMA"), a federally chartered
corporation owned entirely by private stockholders, purchases both conventional
and federally insured or guaranteed residential mortgages from various entities,
including savings and loan associations, savings banks, commercial banks, credit
unions and mortgage bankers, and packages pools of such mortgages in the form of
pass-through securities generally called FNMA Mortgage-Backed Certificates,
which are guaranteed as to timely payment of principal and interest by FNMA but
are not backed by the full faith and credit of the U.S. Government. Like GNMA
Certificates and FHLMC PCs, these pass-through securities are subject to the
unpredictability of unscheduled prepayments on the underlying mortgage pools. As
of December 31, 1993 the Portfolio had approximately 45% of its net assets
invested in FNMA Mortgage- Backed Certificates.
MORTGAGE-BACKED "PASS-THROUGH" SECURITIES HELD BY THE PORTFOLIO ARE SUBJECT TO
REGULAR PAYMENTS OF PRINCIPAL AND EARLY PREPAYMENTS OF PRINCIPAL, WHICH WILL
AFFECT THE FUND'S CURRENT AND TOTAL RETURNS.
While it is not possible to accurately predict the life of a particular
issue of a mortgage-backed "pass-through" security held by the Portfolio, the
actual life of any such security is likely to be substantially less than the
average maturity of the mortgage pool underlying the security. This is because
unscheduled early prepayments of principal on the security owned by the
Portfolio will result from the prepayment, refinancing or foreclosure of the
underlying mortgage loans in the mortgage pool. For example, mortgagors may
speed up the rate at which they prepay their mortgages when interest rates
decline sufficiently to encourage refinancing. The Portfolio, when the monthly
payments (which may include unscheduled prepayments) on such a security are
passed through to it, may be able to reinvest them only at a lower rate of
interest. Because of the regular scheduled payments of principal and the early
unscheduled prepayments of principal, the mortgage-backed "pass-through"
security is less effective than other types of obligations as a means of
"locking-in" attractive long-term interest rates. As a result, this type of
security may have less potential for capital appreciation during periods of
declining interest rates than other U.S. Government securities of comparable
maturities, although many issues of mortgage-backed "pass-through" securities
may have a comparable risk of decline in market value during periods of rising
interest rates. If such a security has been purchased by the Portfolio at a
premium above its par value, both a scheduled payment of principal and an
unscheduled prepayment of principal, which would be made at par, will accelerate
the realization of a loss equal to that portion of the premium applicable to the
payment or prepayment and will reduce the Fund's total return. If such a
security has been purchased by the Portfolio at a discount from its par value,
both a scheduled payment of principal and an unscheduled prepayment of principal
will increase current and total returns and will accelerate the recognition of
income, which, when distributed to shareholders, will be taxable as ordinary
income. The Portfolio intends to acquire the majority of its holdings of
mortgage-backed "pass-through" securities at a discount from par value.
THE PORTFOLIO MAY INVEST IN CMOS OF FHLMC AND OTHER ISSUERS.
CMOs are debt securities issued by the FHLMC and by financial institutions
and other mortgage lenders which are generally fully collateralized by a pool of
mortgages held under an indenture. CMOs are issued with a number of classes or
series which have different maturities and are retired in sequence and are the
general obligations of the issuers thereof. CMOs are designed to be retired as
the underlying mortgage loans in the mortgage pool are repaid. In the event of
sufficient early prepayments on such mortgages, the class or series of CMO first
to mature generally will be retired prior to its maturity. Thus the early
retirement of a particular class or series of a CMO held by the Portfolio would
affect the Fund's current and total returns in the manner indicated above.
Currently, the Investment Adviser will consider privately issued CMOs or other
mortgage-backed securities as possible investments for the Portfolio only when
the mortgage collateral is insured, guaranteed or otherwise backed by the U.S.
Government or one or more of its agencies or instrumentalities (e.g., insured by
the Federal Housing Administration or Farmers Home Administration or guaranteed
by the Administrator of Veterans Affairs or consisting in whole or in part of
U.S. Government securities).
THE PORTFOLIO MAY ALSO INVEST IN REMIC CERTIFICATES.
The Portfolio may also invest in CMOs issued by entities which qualify under
the Internal Revenue Code as Real Estate Mortgage Investment Conduits, or
REMICs. As indicated above, the Investment Adviser will currently consider REMIC
certificates as possible investments for the Portfolio only when the mortgage
collateral is insured, guaranteed or otherwise backed by the U.S. Government or
one or more of its agencies or instrumentalities. The Portfolio will not invest
in residual interests in REMICs. Under the Internal Revenue Code, unless a CMO
created after 1991 qualifies as a REMIC, the issuing entity will be subject to
Federal income tax as a "taxable mortgage pool."
The Portfolio may invest in stripped mortgage-backed securities ("SMBS"),
which are derivative multiclass mortgage securities. The Portfolio may only
invest in SMBS issued or guaranteed by the U.S. Government, its agencies or
instrumentalities. SMBS are usually structured with two classes that receive
different proportions of the interest and principal distributions from a pool of
mortgages. A common type of SMBS will have one class receiving all of the
interest from the mortgages, while the other class will receive all of the
principal. However, in some instances, one class will receive some of the
interest and most of the principal while the other class will receive most of
the interest and the remainder of the principal. If the underlying mortgages
experience greater than anticipated prepayments of principal, the Portfolio may
fail to fully recoup its initial investment in these securities. Although the
market for such securities is increasingly liquid, certain SMBS may not be
readily marketable and will be considered illiquid for purposes of the
Portfolio's limitation on investments in illiquid securities. The determination
of whether a particular SMBS is liquid will be made by the Investment Adviser
under guidelines and standards established by the Trustees of the Portfolio. The
market value of the class consisting entirely of principal payments generally is
unusually volatile in response to changes in interest rates. The yields on a
class of SMBS that receives all or most of the interest from mortgages are
generally higher than prevailing market yields on other mortgage-backed
securities because their cash flow patterns are more volatile and there is a
greater risk that the initial investment will not be fully recouped. The
Investment Adviser will seek to manage these risks (and potential benefits) by
investing in a variety of such securities and by using certain hedging
techniques.
THE FUND AND THE PORTFOLIO HAVE ADOPTED CERTAIN FUNDAMENTAL INVESTMENT
RESTRICTIONS WHICH ARE ENUMERATED IN DETAIL IN THE STATEMENT OF ADDITIONAL
INFORMATION AND WHICH MAY NOT BE CHANGED UNLESS AUTHORIZED BY A SHAREHOLDER VOTE
AND AN INVESTOR VOTE, RESPECTIVELY. AMONG OTHER RESTRICTIONS, THE PORTFOLIO MAY
NOT WITH RESPECT TO 75% OF ITS TOTAL ASSETS, INVEST MORE THAN 5% OF ITS TOTAL
ASSETS IN THE SECURITIES OF ANY ONE ISSUER OR PURCHASE MORE THAN 10% OF THE
OUTSTANDING VOTING SECURITIES OF A SINGLE ISSUER (EXCEPT OBLIGATIONS ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES AND EXCEPT
SECURITIES OF OTHER INVESTMENT COMPANIES); OR INVEST MORE THAN 25% OF ITS ASSETS
IN ANY ONE INDUSTRY. EXCEPT FOR SUCH ENUMERATED RESTRICTIONS, THE INVESTMENT
OBJECTIVE AND POLICIES OF THE FUND AND THE PORTFOLIO ARE NOT FUNDAMENTAL
POLICIES, AND ACCORDINGLY MAY BE CHANGED BY THE TRUSTEES OF THE TRUST AND THE
PORTFOLIO WITHOUT OBTAINING THE APPROVAL OF THE FUND'S SHAREHOLDERS OR THE
INVESTORS IN THE PORTFOLIO, AS THE CASE MAY BE. IF ANY CHANGES WERE MADE IN THE
FUND'S INVESTMENT OBJECTIVE, THE FUND MIGHT HAVE INVESTMENT OBJECTIVES DIFFERENT
FROM THE OBJECTIVES WHICH AN INVESTOR CONSIDERED APPROPRIATE AT THE TIME THE
INVESTOR BECAME A SHAREHOLDER OF THE FUND.
THE PORTFOLIO MAY ENGAGE IN SHORT-TERM TRADING. Securities may be sold in
anticipation of a market decline (a rise in interest rates) or purchased in
anticipation of a market rise (a decline in interest rates) and later sold. In
addition, a security may be sold and another purchased at approximately the same
time to take advantage of what the Portfolio believes to be a temporary
disparity in the normal yield relationship between the two securities. Yield
disparities may occur for reasons not directly related to the investment quality
of particular issues or the general movement of interest rates, such as changes
in the overall demand for or supply of various types of fixed-income securities
or changes in the investment objectives of investors. The portfolio turnover
rate of the Portfolio for the period from the start of business, October 28,
1993, to the fiscal year ended December 31, 1993, was 42%. The Fund's portfolio
turnover rates for the period January 1, 1993, to October 27, 1993, and for the
fiscal years ended December 31, 1992 and 1991, were 52%, 26% and 25%,
respectively.
THE PORTFOLIO MAY ENTER INTO REPURCHASE AGREEMENTS WITH RESPECT TO U.S.
GOVERNMENT SECURITIES. Under a repurchase agreement, the seller agrees to
repurchase such securities at the Portfolio's cost plus interest within a
specified time (normally one day). While repurchase agreements involve certain
risks not associated with direct investments in U.S. Government securities, the
Portfolio follows procedures designed to moderate such risks. These procedures
include effecting repurchase transactions only with large, well- capitalized
banks. In addition, the Portfolio's repurchase agreements will provide that the
value of the collateral underlying the repurchase agreements will always be at
least equal to the repurchase price, including any accrued interest earned on
the repurchase agreement. In the event of a default or bankruptcy by a selling
bank, the Portfolio will seek to liquidate such collateral. However, the
exercise of the Portfolio's right to liquidate such collateral would involve
certain costs or delays and, to the extent that proceeds from any sale upon a
default of the obligation to repurchase are less than the repurchase price, the
Portfolio could suffer a loss.
ACTIVE MANAGEMENT STRATEGIES
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THE PORTFOLIO MAY EARN ADDITIONAL INCOME BY LENDING PORTFOLIO SECURITIES TO
CERTAIN INSTITUTIONS.
The Portfolio may seek to increase its income by lending portfolio securities to
broker-dealers or other institutional borrowers. During the existence of a loan,
the Portfolio will continue to receive the equivalent of the interest paid by
the issuer on the securities loaned and will also receive a fee, or all or a
portion of the interest on investment of the collateral, if any. However, the
Portfolio may pay lending fees to such borrowers. As with other extensions of
credit there are risks of delay in recovery or even loss of rights in the
securities loaned if the borrower of the securities fails financially. However,
the loans will be made only to organizations deemed by the Portfolio's
management to be of good standing and when, in the judgment of the Portfolio's
management, the consideration which can be earned from securities loans of this
type justifies the attendant risk. The financial condition of the borrower will
be monitored by the Investment Adviser on an ongoing basis. If the Portfolio
decides to make securities loans, it is intended that the value of the
securities loaned would not exceed 30% of the Portfolio's total assets.
THE PORTFOLIO MAY PURCHASE SECURITIES ON A FORWARD COMMITMENT BASIS.
The Portfolio may enter into contracts to purchase securities for a fixed
price at a future date beyond the customary settlement time if the Portfolio
holds and maintains until the settlement date in a segregated account cash or
liquid high-grade debt obligations in an amount sufficient to meet the purchase
price, or if the Portfolio enters into offsetting contracts for the forward sale
of other securities it owns. Such contracts are customarily referred to as
"forward commitments" and involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date.
MORTGAGE ROLLS
The Portfolio may enter into mortgage "dollar rolls" in which the Portfolio
sells mortgage-backed securities for delivery in the current month and
simultaneously contracts to repurchase substantially similar (same type, coupon
and maturity) securities on a specified future date. During the roll period, the
Portfolio foregoes principal and interest paid on the mortgage-backed
securities. The Portfolio is compensated by the difference between the current
sales price and the lower forward price for the future purchase (often referred
to as the "drop") as well as by the interest earned on the cash proceeds of the
initial sale. A "covered roll" is a specific type of dollar roll for which there
is an offsetting cash position or a cash equivalent security position which
matures on or before the forward settlement date of the dollar roll transaction.
The Portfolio will only enter into covered rolls. Covered rolls are not treated
as a borrowing or other senior security and will be excluded from the
calculation of the Portfolio's borrowings and other senior securities.
THE PORTFOLIO MAY BORROW FOR LEVERAGE AND OTHER PURPOSES.
LEVERAGE THROUGH BORROWING
The Portfolio may borrow from banks to increase its portfolio holdings of
debt securities on which call options may be written and to acquire U.S.
Treasury bills which may be deposited with the Portfolio's custodian or a
broker-dealer in connection with various Portfolio investments. Such borrowings
will be unsecured. The Investment Company Act of 1940 requires the Portfolio to
maintain continuous asset coverage of not less than 300% with respect to such
borrowings. This allows the Portfolio to borrow for such purposes an amount
(when taken together with any borrowings for temporary extraordinary or
emergency purposes as described below) equal to as much as 50% of the value of
its net assets (not including such borrowings). If such asset coverage should
decline to less than 300% due to market fluctuations or other reasons, the
Portfolio may be required to sell some of its portfolio holdings within three
days in order to reduce the Portfolio's debt and restore the 300% asset
coverage, even though it may be disadvantageous from an investment standpoint to
sell securities at that time. Leveraging will exaggerate any increase or
decrease in the net asset value of the securities held by Portfolio, and in that
respect may be considered a speculative practice. Money borrowed for leveraging
will be subject to interest costs which may or may not exceed the option
premiums and interest received from the securities purchased. The Portfolio may
also be required to maintain minimum average balances in connection with such
borrowings or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.
The Portfolio and the other investment companies managed by BMR or Eaton
Vance Management participate in a Line of Credit Agreement (the "Credit
Agreement") with Citibank, N.A. ("Citibank"). Citibank agrees, in the Credit
Agreement, to consider requests from the Portfolio and such other investment
companies that Citibank make advances ("Advances") to the Portfolio and such
other investment companies from time to time. The aggregate amount of all such
Advances to all such borrowers will not exceed $120,000,000, $100,000,000 of
which is a discretionary facility and $20,000,000 a committed facility. The
Portfolio has currently determined that its borrowings under the Credit
Agreement will not exceed, at any one time outstanding, the lesser of (a) 1/3 of
the current market value of the net assets of the Portfolio or (b) $7,500,000
(the "Amount Available to the Portfolio"). The Portfolio is obligated to pay to
Citibank, in addition to interest on Advances made to it, a quarterly fee on the
average daily unused portion of the Amount Available to the Portfolio at the
rate of 1/4 of 1% per annum. The Credit Agreement may be terminated by Citibank
or the borrowers at any time upon 30 days' prior written notice. The Portfolio
expects to use the proceeds of the Advances primarily for leveraging purposes.
As of the close of business October 27, 1993, the Fund had no outstanding loans
pursuant to the Credit Agreement. The average daily loan balance for the period
from January 1, 1993 to October 27, 1993 was $2,313,237 and the average interest
rate was 4.50%.
Since October 28, 1993, the Portfolio participates in the Credit Agreement.
As at December 31, 1993 the Portfolio had no outstanding loans pursuant to the
Credit Agreement. The average daily loan balance for the period from the start
of business, October 28, 1993, to the fiscal year ended December 31, 1993, was
$1,660,092 and the average interest rate was 4.64%.
The Portfolio, like many other investment companies, may also borrow money
for temporary extraordinary or emergency purposes. Such borrowings may not
exceed 5% of the value of the Portfolio's total assets at the time of borrowing.
The Portfolio may pledge up to 10% of the lesser of cost or value of its total
assets to secure such borrowings.
THE PORTFOLIO MAY ENHANCE ITS INCOME BY WRITING COVERED CALL AND PUT OPTIONS.
WRITING COVERED OPTIONS ON U.S. GOVERNMENT SECURITIES
The Portfolio may write (sell) covered call options and covered put options
on U.S. Government securities with respect to up to 25% of its net assets. A
call option written by the Portfolio obligates the Portfolio to sell specified
securities to the holder of the option at a specified price upon exercise of the
option at any time before the expiration date. All call options written by the
Portfolio are covered, which means that the Portfolio will own the securities
subject to the option or an offsetting call option so long as the option is
outstanding.
A put option written by the Portfolio would obligate the Portfolio to
purchase specified securities from the option holder at a specified price upon
exercise of the option at any time before the expiration date. All put options
written by the Portfolio would be covered, which means that the Portfolio will
own an offsetting put option or will have deposited with its custodian cash,
U.S. Government securities or other liquid high-grade debt securities with a
value at least equal to the exercise price of the put option.
The Portfolio may terminate its obligations under an exchange traded call or
put option by purchasing an option identical to the one it has written. Such
purchases are referred to as "closing purchase transactions."
THE PORTFOLIO MAY PURCHASE PUT AND CALL OPTIONS ON SECURITIES.
PURCHASING OPTIONS ON U.S. GOVERNMENT SECURITIES
The Portfolio may purchase put and call options on U.S. Government
securities. The Portfolio will not purchase put or call options on U.S.
Government securities if after such purchase more than 5% of its net assets, as
measured by the aggregate of the premiums paid for all such options held by the
Portfolio, would be so invested. The Portfolio would also be able to enter into
closing sale transactions in order to realize gains or minimize losses on
exchange traded options purchased by the Portfolio.
The purchase of a call option would entitle the Portfolio, in return for the
premium paid, to purchase specified securities at a specified price during the
option period. The purchase of a put option would entitle the Portfolio, in
exchange for the premium paid, to sell specified securities at a specified price
during the option period.
RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS
There is no assurance that a liquid secondary market on an options exchange
will exist for any particular option, or at any particular time, and for some
options no secondary market on an exchange or elsewhere may exist. If the
Portfolio is unable to effect a closing purchase transaction with respect to
covered options it has written, the Portfolio will not be able to sell the
underlying securities or dispose of assets held in a segregated account until
the options expire or are exercised. Similarly, if the Portfolio is unable to
effect a closing sale transaction with respect to options it has purchased, it
would have to exercise the options in order to realize any profit and will incur
transaction costs upon the purchase or sale of underlying securities. The
Portfolio anticipates that its options transactions will generally be conducted
on options exchanges. In certain instances, however, the Portfolio may purchase
and sell options in the over-the-counter market (subject to limitations imposed
by certain state securities authorities). The Portfolio's ability to terminate a
written option position in the over-the-counter market is dependent upon the
consent of the other party to the transaction and therefore is more limited than
for exchange-traded options. Option transactions in the over-the-counter market
also subject the Portfolio to the additional risk that securities dealers
participating in such transactions may fail to meet their obligations to the
Portfolio.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. In the event of unanticipated
changes in securities prices, the Portfolio may recognize losses on call and put
options written by the Portfolio to the extent it is required to sell or
purchase the underlying securities or to terminate the option at a loss. The
Portfolio may recognize a loss of the premium on an option it has purchased to
the extent that the option cannot be profitably exercised before its expiration.
The successful use of options for hedging purposes depends in part on the
Investment Adviser's ability to predict future price fluctuations and the degree
of correlation between the options and securities markets. The Portfolio pays
brokerage commissions or spreads in connection with its options transactions, as
well as for purchases and sales of underlying securities. The writing of options
could result in significant increases in the portfolio turnover rate of the
Portfolio.
FUTURES CONTRACTS AND OPTIONS ON FUTURES MAY BE USED TO MANAGE INTEREST RATE,
CURRENCY AND MARKET RISKS.
USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
To hedge against changes in interest rates, currency exchange rates or
securities prices or for non-hedging purposes, the Portfolio may purchase and
sell various kinds of futures contracts, and purchase and write call and put
options on any of such futures contracts; it may also enter into closing
purchase and sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various securities (such as U.S.
Government securities), foreign currencies, certificates of deposit, Eurodollar
time deposits, securities indices, economic indices (such as the Consumer Price
Indices compiled by the U.S. Department of Labor) and other financial
instruments and indices. The Portfolio will engage in futures and related
options transactions only for bona fide hedging or non-hedging purposes as
defined in or permitted by regulations of the Commodity Futures Trading
Commission. The Portfolio will engage in such transactions for non- hedging
purposes in order to enhance total return by using a futures position as a lower
cost substitute for a securities position that the Portfolio is otherwise
authorized to enter into.
The Portfolio does not intend to purchase or sell futures contracts or
purchase or sell related options, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of margin deposits
on the Portfolio's outstanding non-hedging positions in futures and related
options and the amount of premiums paid for outstanding non-hedging positions in
options on futures would exceed 5% of the market value of the Portfolio's net
assets. These transactions involve brokerage costs, require margin deposits and,
in the case of contracts and options obligating the Portfolio to purchase
securities, require the Portfolio to segregate liquid high grade debt securities
in an amount equal to the underlying value of such contracts and options.
Each of these active management techniques involves (1) liquidity risk that
contractual positions cannot be easily closed out in the event of market
changes, (2) correlation risk that changes in the value of hedging positions may
not match the securities market and foreign currency fluctuations intended to be
hedged, (3) market risk that an incorrect prediction by the Investment Adviser
of securities prices or exchange rates may cause the Portfolio to perform less
well than if such positions had not been entered into, and (4) skills different
from those needed to select portfolio securities.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
The Portfolio may enter into contracts for the purchase or sale of a
specific currency at a future date at a fixed price (a "Forward Contract"). The
Portfolio will enter into Forward Contracts only for hedging or permissible
non-hedging purposes, in a manner similar to its use of foreign currency futures
contracts. These transactions will include forward sales or purchases of foreign
currencies for the purpose of protecting the dollar value of securities held or
to be acquired by the Portfolio that are denominated in a foreign currency or
protecting the dollar equivalent of interest or other payments on such
securities. By entering into such transactions, however, the Portfolio may be
required to forego the benefits of advantageous changes in exchange rates.
Forward Contracts are traded over-the-counter, instead of on organized
commodities or securities exchanges, and involve liquidity and credit risks
which may not be present in the case of exchange-traded instruments.
OPTIONS ON FOREIGN CURRENCIES
The Portfolio may write covered put and call options and purchase put and
call options on foreign currencies for the purpose of protecting against
declines in the dollar value of portfolio securities and against increases in
the dollar cost of securities to be acquired. As with other types of options,
however, the writing of an option on foreign currency will constitute only a
partial hedge, up to the amount of the premium received, and the Portfolio could
be required to purchase or sell foreign currencies at disadvantageous exchange
rates, thereby incurring losses. The purchase of an option on foreign currency
may provide a hedge against fluctuations in exchange rates although, in the
event of exchange rate movements adverse to the Portfolio's position, it may
forfeit the entire amount of the premium plus related transaction costs. As with
Forward Contracts, certain options on foreign currencies are traded
over-the-counter and involve liquidity and credit risks which may not be present
in the case of exchange-traded currency options.
The Portfolio's activities in options, futures contracts and Forward
Contracts may be limited by the requirements of the Internal Revenue Code in
order to enable the Fund to maintain its qualification as a regulated investment
company.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE TRUSTEES OF THE TRUST ARE RESPONSIBLE FOR THE OVERALL MANAGEMENT AND
SUPERVISION OF ITS AFFAIRS.
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND IS A DIVERSIFIED SERIES OF EATON
VANCE GOVERNMENT OBLIGATIONS TRUST (THE "TRUST"), A BUSINESS TRUST ESTABLISHED
PURSUANT TO MASSACHUSETTS LAW UNDER A DECLARATION OF TRUST DATED MAY 7, 1984, AS
AMENDED. THE TRUST IS A MUTUAL FUND - AN OPEN-END MANAGEMENT INVESTMENT COMPANY.
The Trustees of the Trust are responsible for the overall management and
supervision of its affairs. The Fund has one class of shares of beneficial
interest, an unlimited number of which may be issued. Each Share represents an
equal proportionate beneficial interest in the Fund. When issued and
outstanding, the shares are fully paid and nonassessable by the Fund and
redeemable as described under "How to Redeem or Sell Fund Shares". Shareholders
are entitled to one vote for each full share held. Fractional shares may be
voted proportionately. Shares have no preemptive or conversion rights and are
freely transferable. Upon liquidation of the Fund, shareholders are entitled to
share pro rata in the net assets of the Fund available for distribution to
shareholders.
As permitted by Massachusetts law, there will normally be no meeting of
shareholders for the purpose of electing Trustees unless and until such time as
less than a majority of the Trustees of the Trust holding office have been
elected by shareholders. In such an event the Trustees then in office will call
a shareholders' meeting for the election of Trustees. Except for the foregoing
circumstances and unless removed by action of the shareholders in accordance
with the Trust's by-laws, the Trustees shall continue to hold office and may
appoint successor Trustees.
The Trust's by-laws provide that no person shall serve as a Trustee if
shareholders holding two-thirds of the outstanding shares have removed him from
that office either by a written declaration filed with the Trust's custodian or
by votes cast at a meeting called for that purpose. The by-laws further provide
that under certain circumstances the shareholders may call a meeting to remove a
Trustee and that the Trust is required to provide assistance in communicating
with shareholders about such a meeting.
GOVERNMENT OBLIGATIONS PORTFOLIO (THE "PORTFOLIO"), IN WHICH THE ASSETS OF THE
FUND WILL BE INVESTED, WAS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF
NEW YORK IN 1992 AND IS TREATED AS A PARTNERSHIP FOR FEDERAL TAX PURPOSES. The
Portfolio, as well as the Trust, intends to comply with all applicable Federal
and state securities laws. The Portfolio's Declaration of Trust provides that
the Fund and other entities permitted to invest in the Portfolio (e.g., other
U.S. and foreign investment companies, insurance company separate accounts and
common and commingled trust funds) will each be liable for all obligations of
the Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate insurance
existed and the Portfolio itself were unable to meet its obligations.
Accordingly, the Trustees of the Trust believe that neither the Fund nor its
shareholders will be adversely affected by reason of the Fund investing in the
Portfolio.
SPECIAL INFORMATION ON THE FUND/PORTFOLIO INVESTMENT STRUCTURE. An investor in
the Fund should be aware that the Fund, unlike mutual funds which directly
acquire and manage their own portfolios of securities, seeks to achieve its
investment objective by investing its assets in an interest in the Portfolio,
which is a separate investment company with an identical investment objective.
Therefore, the Fund's interest in the securities owned by the Portfolio is
indirect. In addition to selling an interest to the Fund, the Portfolio may sell
interests to other affiliated and non-affiliated mutual funds or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to sell
their shares at the same public offering price as the Fund due to variations in
sales commissions and other operating expenses. Therefore, investors in the Fund
should be aware that these differences may result in differences in returns
experienced by investors in the different funds that invest in the Portfolio.
Such differences in returns are also present in other mutual fund structures,
including funds that have multiple classes of shares. For information regarding
the investment objective, policies and restrictions, see "How the Fund and the
Portfolio Invest their Assets". Further information regarding the investment
practices of the Portfolio may also be found in the Statement of Additional
Information.
The Trustees of the Trust have considered the advantages and disadvantages
of investing the assets of the Fund in the Portfolio, as well as the advantages
and disadvantages of the two-tier format. The Trustees believe that the
structure offers opportunities for substantial growth in the assets of the
Portfolio, and affords the potential for economies of scale for the Fund. The
shareholders of the Fund have previously approved the policy of investing the
Fund's assets in an interest in the Portfolio.
The Fund may withdraw (completely redeem) all its assets from the Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interest of the Fund to do so. The investment objective and the
nonfundamental investment policies of the Fund and the Portfolio may be changed
by the Trustees of the Trust and the Portfolio without obtaining the approval of
the shareholders of the Fund or the investors in the Portfolio. Any such change
of the investment objective of the Fund or the Portfolio will be preceded by
thirty days advance written notice to the shareholders of the Fund or the
investors in the Portfolio, as the case may be. In the event the Fund withdraws
all of its assets from the Portfolio, or the Board of Trustees of the Trust
determines that the investment objective of the Portfolio is no longer
consistent with the investment objective of the Fund, the Board of Trustees of
the Trust would consider what action might be taken, including investing all the
assets of the Fund in another pooled investment entity or retaining an
investment adviser to manage the Fund's assets in accordance with its investment
objective. The Fund's investment performance may be affected by a withdrawal of
all its assets from the Portfolio.
Information regarding other pooled investment entities or funds which may,
in the future, invest in the Portfolio may be obtained by contacting Eaton Vance
Distributors, Inc. (the "Principal Underwriter" or "EVD"), 24 Federal Street,
Boston, MA 02110, (617) 482-8260. Smaller funds investing in the Portfolio may
be adversely affected by the actions of larger funds investing in the Portfolio.
For example, if a large fund withdraws from the Portfolio, the remaining funds
may experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, the Portfolio may become less diverse, resulting in
increased portfolio risk, and experience decreasing economies of scale. However,
this possibility exists as well for historically structured funds which have
large or institutional investors.
Until recently, the Administrator sponsored and advised historically
structured funds. Funds which invest all their assets in interests in a separate
investment company are a relatively new development in the mutual fund industry
and, therefore, the Fund may be subject to additional regulations than
historically structured funds.
The Declaration of Trust of the Portfolio provides that the Portfolio will
terminate 120 days after the complete withdrawal of the Fund or any other
investor in the Portfolio, unless either the remaining investors, by unanimous
vote at a meeting of such investors, or a majority of the Trustees of the
Portfolio, by written instrument consented to by all investors, agree to
continue the business of the Portfolio. This provision is consistent with
treatment of the Portfolio as a partnership for Federal income tax purposes. See
"Distributions and Taxes" for further information. Whenever the Fund as an
investor in the Portfolio is requested to vote on matters pertaining to the
Portfolio (other than the termination of the Portfolio's business, which may be
determined by the Trustees of the Portfolio without investor approval), the Fund
will hold a meeting of Fund shareholders and will vote its interest in the
Portfolio for or against such matters proportionately to the instructions to
vote for or against such matters received from Fund shareholders. The Fund shall
vote shares for which it receives no voting instructions in the same proportion
as the shares for which it receives voting instructions. Other investors in the
Portfolio may alone or collectively acquire sufficient voting interests in the
Portfolio to control matters relating to the operation of the Portfolio, which
may require the Fund to withdraw its investment in the Portfolio or take other
appropriate action. Any such withdrawal could result in a distribution "in kind"
of portfolio securities (as opposed to a cash distribution from the Portfolio).
If securities are distributed, the Fund could incur brokerage, tax or other
charges in converting the securities to cash. In addition, the distribution in
kind may result in a less diversified portfolio of investments or adversely
affect the liquidity of the Fund. Notwithstanding the above, there are other
means for meeting shareholder redemption requests, such as borrowing.
In accordance with the Declaration of Trust of the Portfolio, there will
normally be no meetings of the investors for the purpose of electing Trustees
unless and until such time as less than a majority of the Trustees holding
office have been elected by investors. In such an event the Trustees of the
Portfolio then in office will call an investors' meeting for the election of
Trustees. Except for the foregoing circumstances and unless removed by action of
the investors in accordance with the Portfolio's Declaration of Trust, the
Trustees shall continue to hold office and may appoint successor Trustees.
The Declaration of Trust of the Portfolio provides that no person shall
serve as a Trustee if investors holding two-thirds of the outstanding interests
have removed him from that office either by a written declaration filed with the
Portfolio's custodian or by votes cast at a meeting called for that purpose. The
Declaration of Trust further provides that under certain circumstances the
investors may call a meeting to remove a Trustee and that the Portfolio is
required to provide assistance in communicating with investors about such a
meeting. The Trustees of the Trust, including a majority of disinterested
Trustees, have approved written procedures designed to identify and address any
potential conflicts of interest arising from the fact that the Trustees of the
Trust, and the Trustees of the Portfolio are the same. Such procedures require
each Board to take actions to resolve any conflict of interest between the Fund
and the Portfolio, and it is possible that the creation of separate boards may
be considered. For further information concerning the Trustees and officers of
each of the Trust and the Portfolio, see the Statement of Additional
Information.
REPORTS TO SHAREHOLDERS
- --------------------------------------------------------------------------------
THE FUND WILL ISSUE TO ITS SHAREHOLDERS SEMI-ANNUAL AND ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS. Financial statements included in annual reports
are audited by the Fund's independent accountants. Shortly after the end of each
year, the Fund will furnish all shareholders with information necessary for
preparing Federal and state income tax returns.
MANAGEMENT OF THE FUND AND THE PORTFOLIO
- --------------------------------------------------------------------------------
THE PORTFOLIO ENGAGES BOSTON MANAGEMENT AND RESEARCH ("BMR"), A WHOLLY-OWNED
SUBSIDIARY OF EATON VANCE MANAGEMENT ("EATON VANCE"), AS ITS INVESTMENT ADVISER.
EATON VANCE, ITS AFFILIATES AND ITS PREDECESSOR COMPANIES HAVE BEEN MANAGING
ASSETS OF INDIVIDUALS AND INSTITUTIONS SINCE 1924 AND MANAGING INVESTMENT
COMPANIES SINCE 1931.
BMR, ACTING UNDER SUPERVISION OF THE TRUSTEES, MANAGES THE PORTFOLIO'S
INVESTMENTS AND AFFAIRS.
BMR, acting under the general supervision of the Board of Trustees of the
Portfolio, manages the Portfolio's investments and affairs. The investment
advisory agreement between BMR and the Portfolio provides for a monthly advisory
fee of 0.0625% (0.75% annually) of the average daily net assets of the
Portfolio. For the period from the start of business, October 28, 1993, to the
fiscal year ended December 31, 1993, the Portfolio paid BMR advisory fees of
equivalent to 0.75% (annualized) of the Portfolio's average daily net assets for
such period. Prior to October 28, 1993 (when the Fund transferred all its assets
to the Portfolio in exchange for an interest in the Portfolio), the Fund
retained Eaton Vance as its investment adviser. For the period from January 1,
1993, to October 27, 1993, the Fund paid Eaton Vance advisory fees equivalent to
0.75% (annualized) of the Fund's average net assets for such period.
On March 28, 1994, the Trustees of the Portfolio voted to accept a waiver of
BMR's compensation by the institution of breakpoints in the effective advisory
fee rate provided for in the existing Investment Advisory Agreement so that
effective as of April 1, 1994, the aggregate advisory fees paid by the Portfolio
under the Investment Advisory Agreement will be a monthly advisory fee of
0.0625% (0.75% annually) of the average daily net assets of the Portfolio up to
$500 million. On net assets of $500 million and over the annual fee is reduced
as follows:
ANNUALIZED FEE RATE
AVERAGE DAILY NET ASSETS FOR THE MONTH (FOR EACH LEVEL)
- -------------------------------------- -------------------
$500 million but less than $1 billion ....................... 0.6875%
$1 billion but less than $1.5 billion ....................... 0.6250%
$1.5 billion but less than $2 billion ....................... 0.5625%
$2 billion but less than $3 billion ......................... 0.5000%
$3 billion and over ......................................... 0.4375%
BMR also furnishes for the use of the Portfolio office space and all
necessary office facilities, equipment and personnel for servicing the
investments of the Portfolio. The Portfolio is responsible for the payment of
all of its expenses other than those expressly stated to be payable by BMR under
the investment advisory agreement.
BMR places the portfolio transactions of the Portfolio with many
broker-dealer firms and uses its best efforts to obtain execution of such
transactions at prices which are advantageous to the Portfolio and at reasonably
competitive commission rates. Subject to the foregoing, BMR may consider sales
of shares of the Fund or of other investment companies sponsored by BMR or Eaton
Vance as a factor in the selection of broker-dealer firms to execute portfolio
transactions.
Susan Schiff has acted as the portfolio manager since inception of the
Portfolio. Ms. Schiff has been a Vice President of BMR since inception and a
Vice President of Eaton Vance since 1993.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
OVER $16 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton Vance Corp.,
a holding company. Eaton Vance Corp. through its subsidiaries and affiliates,
engages in investment management and marketing activities, fiduciary and banking
services, oil and gas operations, real estate investment, consulting and
management, and development of precious metals properties.
The Trust has retained the services of Eaton Vance under an administrative
services agreement to act as Administrator of the Fund. The Trust has not
retained the services of an investment adviser since the Trust seeks to achieve
the investment objective of the Fund by investing the Fund's assets in the
Portfolio. Under the administrative services agreement, Eaton Vance provides the
Fund with general office facilities and supervises the overall administration of
the Fund. For these services Eaton Vance currently receives no compensation. The
Trustees of the Trust may determine, in the future, to compensate Eaton Vance
for its services under the administrative services agreement.
The Portfolio and the Fund, as the case may be, will each be responsible for
all of its respective costs and expenses not expressly stated to be payable by
BMR under the investment advisory agreement, by Eaton Vance under the
administrative services agreement, or by EVD under the distribution agreement.
Such costs and expenses to be borne by the Portfolio and the Fund, as the case
may be, include, without limitation: custody and transfer agency fees and
expenses, including those incurred for determining net asset value and keeping
accounting books and records; expenses of pricing and valuation services; the
cost of share certficates; membership dues in investment company organizations;
expenses of acquiring, holding and disposing of securities and other
investments; fees and expenses of registering under the securities laws and the
governmental fees; expenses of reporting to shareholders and investors; proxy
statements and other expenses of shareholders' or investors' meetings; insurance
premiums; printing and mailing expenses; interest, taxes and corporate fees;
legal and accounting expenses; compensation and expenses of Trustees not
affiliated with BMR or Eaton Vance; and investment advisory fees, and, if any,
administrative services fees. The Portfolio and the Fund will also each bear
expenses incurred in connection with litigation in which the Portfolio or the
Fund, as the case may be, is a party and any legal obligation to indemnify its
respective officers and Trustees with respect thereto.
HOW THE FUND AND THE PORTFOLIO DETERMINE THEIR NET ASSET VALUES
- --------------------------------------------------------------------------------
THE FUND'S NET ASSET VALUE IS COMPUTED DAILY.
THE FUND VALUES ITS SHARES ONCE ON EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, AS OF THE CLOSE OF REGULAR TRADING ON THE
EXCHANGE. The Fund's net asset value per share is determined by Investors Bank &
Trust Company (as agent for the Fund) ("IBT") in the manner authorized by the
Trustees of the Trust. The net asset value is computed by dividing the value of
the Fund's total assets, less its liabilities, by the number of shares
outstanding. Because the Fund invests substantially all of its assets in the
Portfolio, the Fund's net asset value will reflect the value of its interest in
the Portfolio (which in turn, reflects the underlying value of the Portfolio's
assets and liabilities). For further information regarding the valuation of the
Fund's interest in the Portfolio, see "Determination of Net Asset Value" in the
Statement of Additional Information.
The net asset value per Fund share so determined and the public offering
prices based thereon are effective for orders received by certain financial
service firms ("Authorized Firms") prior to the price determination (which for
this purpose shall be deemed to have been made as of the close of regular
trading on the Exchange -- normally 4:00 p.m. New York time) and communicated by
the Authorized Firm to the Principal Underwriter prior to the close of the
Principal Underwriter's business day. See "How to Buy Shares of the Fund for
Cash". It is the Authorized Firms' responsibility to transmit orders promptly to
the Principal Underwriter. Authorized Firms include financial service firms with
whom the Principal Underwriter has agreements. Eaton Vance Corp. owns 77.3% of
the outstanding stock of IBT, the Fund's and the Portfolio's Custodian.
THE PORTFOLIO'S NET ASSET VALUE IS ALSO DETERMINED AS OF THE CLOSE OF
REGULAR TRADING ON THE EXCHANGE. The Portfolio's net asset value is determined
by its custodian, IBT (as agent for the Portfolio), in the manner authorized by
the Trustees of the Portfolio. The net asset value is computed by subtracting
the liabilities of the Portfolio from the value of its total assets. Except as
described below, debt securities for which the over-the-counter market is the
primary market are normally valued at the mean between the latest available bid
and asked prices. Over-the-counter options are valued at the mean between the
bid and asked prices provided by dealers. Financial futures contracts listed on
commodity exchanges and exchange-traded options are valued at closing settlement
prices. Short-term obligations having remaining maturities of less than 60 days
are valued at amortized cost, which approximates value, unless the Trustees
determine that under particular circumstances such method does not result in
fair value. As authorized by the Trustees, debt securities (other than
short-term obligations) may be valued on the basis of valuations furnished by a
pricing service which determines valuations based upon market transactions for
normal, institutional-size trading units of such securities. Mortgage-backed
"pass-through" securities are valued through use of a matrix pricing system
which takes into account closing bond valuations, yield differentials,
anticipated prepayments and interest rates. Securities for which there is no
such quotation or valuation and all other assets are valued at fair value as
determined in good faith by the Trustees, although the actual calculations may
be made by persons acting pursuant to the direction of the Trustees. For further
information regarding the valuation of the Portfolio's assets, see
"Determination of Net Asset Value" in the Statement of Additional Information.
SHAREHOLDERS OF THE FUND MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY
MULTIPLYING THE NUMBER OF FUND SHARES OWNED AS SHOWN BY THEIR LAST CONFIRMATION
STATEMENT BY THEIR CURRENT NET ASSET VALUE PER SHARE. SHAREHOLDERS WILL BE SENT
CONFIRMATION STATEMENTS AT LEAST QUARTERLY.
HOW TO BUY SHARES OF THE FUND FOR CASH
- --------------------------------------------------------------------------------
THE INITIAL INVESTMENT MUST BE AT LEAST $1,000. SHAREHOLDERS CAN MAKE ADDITIONAL
INVESTMENTS AT ANY TIME FOR AS LITTLE AS $50.
INVESTORS MAY PURCHASE SHARES OF THE FUND THROUGH AUTHORIZED FIRMS AT THE
EFFECTIVE PUBLIC OFFERING PRICE, which price is based on the effective net asset
value per share plus the applicable sales charge. The Fund receives the net
asset value, while the sales charge is divided between the investor's financial
service firm and EVD, 24 Federal Street, Boston, MA 02110, a wholly-owned
subsidiary of Eaton Vance. EVD will furnish the names of Authorized Firms to an
investor upon request.
The sales charge may vary depending on the size of the purchase and the
number of shares of Eaton Vance funds the investor may already own, any
arrangement to purchase additional shares during a 13-month period or special
purchase programs. Complete details of how investors may purchase shares at
reduced sales charges under a Statement of Intention, Right of Accumulation, or
various Employee Benefit Plans are available from Authorized Firms or from the
Principal Underwriter.
The current sales charges are:
<TABLE>
<CAPTION>
Sales Charge as Sales Charge as Dealer Discount as
Percentage of Percentage of Percentage of
Amount of Purchase Amount Invested Offering Price Offering Price
<S> <C> <C> <C> <C>
Less than $100,000 4.99% 4.75% 4.00%
$100,000 but less than $250,000 3.90 3.75 3.15
$250,000 but less than $500,000 2.83 2.75 2.30
$500,000 but less than $1,000,000 2.04 2.00 1.70
$1,000,000 or more 0<F1> 0<F1> 0<F2>
<FN>
<F1> No sales charge is payable at the time of purchase on investments of $1
million or more. A contingent deferred sales charge ("CDSC") of 1% will be
imposed on such investments, as described below, in the event of certain
redemption transactions within 18 months of purchase.
<F2> The Principal Underwriter may pay a commission to Authorized Firms who
initiate and are responsible for purchases of $1 million or more as
follows: 1.00% on sales up to $2 million, plus 0.80% on the next $1
million, 0.20% on the next $2 million and 0.08% on the excess over $5
million.
</TABLE>
However, the Principal Underwriter may allow, upon notice to all Authorized
Firms, discounts up to the full sales charge during the periods specified in the
notice. During periods when the discount includes the full sales charge, such
Firms may be deemed to be underwriters as that term is defined in the Securities
Act of 1933.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to financial service firms which employ registered
representatives who sell a minimum dollar amount of the Fund's shares and/or
shares of other funds distributed by the Principal Underwriter. In some
instances, such additional incentives may be offered only to certain financial
service firms whose representatives are expected to sell significant amounts of
shares.
An initial investment in the Fund must be at least $1,000. Once an account
has been established the investor may send investments of $50 or more at any
time directly to the Fund's Transfer Agent as follows: The Shareholder Services
Group, Inc., BOS725, P.O. Box 1559, Boston, MA 02104. The $1,000 minimum initial
investment is waived for Bank Draft Investing accounts, which may be established
with an investment of $50 or more. See "Eaton Vance Shareholder Services" below.
Shares of the Fund may be sold at net asset value to current and retired
Directors and Trustees of Eaton Vance funds, including the Portfolio; to
officers and employees and clients of Eaton Vance and its affiliates; to
registered representatives and employees of Authorized Firms and bank employees
who refer customers to registered representatives of Authorized Firms; and to
such persons' spouses and children under the age of 21 and their beneficial
accounts. Shares may also be issued at net asset value in connection with the
merger of an investment company with the Fund and to investors making an
investment as part of a fixed fee program whereby an entity unaffiliated with
the investment adviser provides multiple investment services, such as
management, brokerage and custody.
No initial sales charge and no contingent deferred sales charge will be
payable or imposed with respect to shares of the Fund purchased by retirement
plans qualified under Section 401, 403(b) or 457 of the Internal Revenue Code
("Eligible Plans"). In order to purchase shares without a sales charge, the plan
sponsor of an Eligible Plan must notify the transfer agent of the Fund of its
status as an Eligible Plan. Participant accounting services (including trust
fund reconciliation services) will be offered only through third party
recordkeepers and not by EVD. The Fund's Principal Underwriter may pay
commissions to Authorized Firms who initiate and are responsible for purchases
of shares of the Fund by Eligible Plans of up to 1.00% of the amount invested in
such shares.
The Fund may suspend the offering of shares at any time and may refuse an
order for the purchase of shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
How to Acquire Fund Shares in Exchange for Securities
- --------------------------------------------------------------------------------
IN EXCHANGING SECURITIES FOR FUND SHARES, THE MINIMUM AMOUNT OF SECURITIES
ACCEPTABLE TO EATON VANCE IS $5,000. COMPLIANCE WITH CERTAIN OTHER CONDITIONS IS
ALSO REQUIRED TO MAKE AN EXCHANGE.
IBT, AS ESCROW AGENT, WILL RECEIVE SECURITIES ACCEPTABLE TO EATON VANCE, AS
ADMINISTRATOR, IN EXCHANGE FOR FUND SHARES AT THE APPLICABLE PUBLIC OFFERING
PRICE SHOWN UNDER THE HEADING "HOW TO BUY SHARES OF THE FUND FOR CASH" IN THIS
PROSPECTUS. The minimum value of securities or securities and cash accepted for
deposit is $5,000. Securities accepted will be sold by IBT as agent for the
account of their owner on the day of their receipt by IBT or as soon thereafter
as possible. The number of Fund shares to be issued in exchange for securities
will be the aggregate proceeds from the sale of such securities, divided by the
applicable public offering price per Fund share on the day such proceeds are
received. EATON VANCE WILL ABSORB ANY TRANSACTION COSTS, SUCH AS COMMISSIONS, ON
THE SALE OF THE SECURITIES.
Securities determined to be acceptable should be transferred via book entry
or physically delivered, in proper form for transfer, through an Authorized
Firm, together with a completed and signed Letter of Transmittal in approved
form (available from Authorized Firms), as follows:
In the case of book entry:
Deliver through Depository Trust Co.
Broker #2212
Investors Bank & Trust Company
For A/C EV Traditional Government Obligations Fund
In the case of physical delivery:
Investors Bank & Trust Company
Attention: EV Traditional Government Obligations Fund
Physical Securities Processing Settlement Area
89 South Street
Boston, MA 02111
Investors who are contemplating an exchange of securities for shares of the
Fund, or their representatives, are advised to contact Eaton Vance to determine
whether the securities are acceptable before forwarding such securities to IBT.
Eaton Vance reserves the right to reject any securities.
EXCHANGING SECURITIES FOR FUND SHARES MAY CREATE A TAXABLE GAIN OR LOSS. EACH
INVESTOR SHOULD CONSULT HIS TAX ADVISER WITH RESPECT TO THE PARTICULAR FEDERAL,
STATE AND LOCAL TAX CONSEQUENCES OF EXCHANGING SECURITIES FOR FUND SHARES.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- --------------------------------------------------------------------------------
THE TRANSFER AGENT AUTOMATICALLY SETS UP AN ACCOUNT FOR YOU. EACH TIME A
TRANSACTION TAKES PLACE YOU WILL RECEIVE A STATEMENT SHOWING COMPLETE DETAILS OF
THE TRANSACTION AND THE ACCOUNT'S CURRENT BALANCE.
AFTER AN INVESTOR MAKES AN INITIAL PURCHASE OF FUND SHARES, THE FUND'S TRANSFER
AGENT, THE SHAREHOLDER SERVICES GROUP, INC., WILL SET UP A LIFETIME INVESTING
ACCOUNT FOR THE INVESTOR ON THE FUND'S RECORDS. This account is a complete
record of all transactions between the investor and the Fund which at all times
shows the balance of shares owned. The Fund will not issue share certificates
except upon request.
Each time a transaction takes place in a shareholder's account, the
shareholder will receive a statement showing complete details of the transaction
and the current share balance in the account. (Under certain investment plans,
statements may only be sent quarterly). The Lifetime Investing Account also
permits a shareholder to make additional investments by sending a check for $50
or more to The Shareholder Services Group, Inc. Inquiries regarding a
shareholder's account should identify the shareholder's name and account number
and be addressed in writing to The Shareholder Services Group, Inc., BOS725,
P.O. Box 1559, Boston, MA 02104.
Any questions concerning a shareholder's account or services available may
also be directed by telephone to Eaton Vance Shareholder Services at 800-225-
6265, extension 2.
SHAREHOLDERS MAY CHOOSE WHETHER TO RECEIVE DIVIDENDS AND CAPITAL GAINS
DISTRIBUTIONS IN CASH OR SHARES.
THE FOLLOWING DISTRIBUTION OPTIONS WILL BE AVAILABLE TO ALL LIFETIME
INVESTING ACCOUNTS and may be changed as often as desired by written notice to
the Fund's dividend disbursing agent, The Shareholder Services Group, Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104. The currently effective option will
appear on each confirmation statement.
Share Option -- Dividends and capital gains in additional shares. This
option will be assigned if no other option is specified.
Income Option -- Dividends in cash; capital gains in additional shares.
Cash Option -- Dividends in cash; capital gains in cash.
Under the Share Option, dividends will be reinvested (net of any withholding
required under the Federal income tax laws) on the payment date in additional
full and fractional shares at net asset value as of the record date.
Under Share and Income Options, all distributions from capital gains
(whether long or short-term) will be paid in additional full and fractional
shares at the net asset value as of the record date of each such distribution,
net of any withholding required under the Federal income tax laws.
If the Income Option or Cash Option has been selected, dividend and/or
capital gains distribution checks which are returned by the United States Postal
Service as not deliverable or which remain uncashed for six months or more will
be reinvested in the account at the then current net asset value. Furthermore,
the distribution option on the account will be automatically changed to the
Share Option until such time as the shareholder selects a different option.
A beneficial owner of shares who holds his shares in a "street name" account
at an investment firm is reminded that all recordkeeping, transaction processing
and payments of distributions to his account will be done by the firm holding
the shares, and not by the Fund or its transfer agent. Year end forms required
for tax purposes (1099-DIV, 1099-B, etc.) are also provided by that investment
firm. The Fund will have no record of transactions for a beneficial owner of
shares while shares held for him are in a "street name" account. Requests for
any such information regarding the shares or the account should be directed to
that investment firm.
Transactions in a "street name" account will be reflected on the records of
the Fund only upon the instructions of the investment firm which is the record
owner of the shares. A beneficial owner of shares in a "street name" account
should contact his investment firm representative if he wants to purchase or
redeem shares or make other changes in his account. A transfer of a "street
name" account at one investment firm to a "street name" account at another firm
may require approval by the transferee firm. There are no fees charged by the
Fund for an account transfer, but transfer fees may be charged by the investment
firms.
Before establishing a "street name" account with an investment firm, or
transferring the account to another investment firm, an investor wishing to
reinvest distributions should determine whether the firm which will hold the
shares allows reinvestment of distributions in "street name" accounts.
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE ADDITIONAL INVESTMENTS
BY SENDING A CHECK FOR $50 OR MORE.
EATON VANCE SHAREHOLDER SERVICES
- --------------------------------------------------------------------------------
FULL INFORMATION ON THESE SERVICES IS AVAILABLE FROM EATON VANCE DISTRIBUTORS,
INC.
THE FOLLOWING SERVICES ARE VOLUNTARY, INVOLVE NO EXTRA CHARGE, AND MAY BE
CHANGED OR DISCONTINUED WITHOUT PENALTY AT ANY TIME. Full information on each of
the services described below and an application, where required, is available
from Authorized Firms or from the Principal Underwriter. The cost of
administering such services for the benefit of shareholders who participate in
them is borne by the Fund as an expense to all shareholders.
INVEST-BY-MAIL -- FOR PERIODIC SHARE ACCUMULATION: Once the $1,000 minimum
investment has been made, checks of $50 or more payable to the order of the Fund
may be mailed directly to The Shareholder Services Group, Inc., BOS725, P.O. Box
1559, Boston, MA 02104 at any time -- whether or not distributions are
reinvested. The name of the shareholder and his account number should accompany
each investment.
BANK DRAFT INVESTING -- FOR REGULAR SHARE ACCUMULATION: Cash investments of $50
or more may be made through the shareholder's checking account via bank draft
each month or quarter. The $1,000 minimum initial investment and small account
redemption policy are waived for Bank Draft Investing accounts.
STATEMENT OF INTENTION: You are eligible for reduced sales charges on
purchases of $100,000 or more made over a 13-month period.
RIGHT OF ACCUMULATION: You can qualify for reduced sales charges when the
current market value of holdings (shares at current offering price), plus new
purchases, reaches $100,000 or more. Shares of the Eaton Vance funds mentioned
below under "Exchange Privilege" may be combined under the Statement of
Intention and Right of Accumulation.
WITHDRAWAL PLAN: You can draw on your shareholdings systematically with
monthly or quarterly checks in the amount you specify. A minimum deposit of
$5,000 in shares is required.
EXCHANGE PRIVILEGE: You may currently exchange Fund shares for shares of any of
the following funds at their respective net asset per share: Eaton Vance Cash
Management Fund, Eaton Vance Growth Fund, Eaton Vance Income Fund of Boston,
Eaton Vance Municipal Bond Fund L.P., Eaton Vance Special Equities Fund, Eaton
Vance Stock Fund, Eaton Vance Tax Free Reserves and any fund in the Eaton Vance
Traditional Group of Funds. Shares of certain other open-end funds for which
Eaton Vance acts as adviser or administrator may be similarly exchanged for Fund
shares at their respective net asset values per share, but subject to any
restrictions or qualifications set forth in the current prospectus of any such
fund. An exchange must involve shares with an aggregate net asset value of
$1,000 or more. The prospectus for each fund describes its investment objectives
and policies, and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange. The exchange
privilege may be changed or discontinued without penalty. Shareholders will be
given 60 days notice prior to any termination or material amendment of the
exchange privilege. These offers are available only in states where shares of
the fund being acquired may be legally sold.
Shares of the Fund which are subject to a CDSC may be exchanged into any of
the above funds without incurring the CDSC. The shares acquired in an exchange
may be subject to a CDSC upon redemption. For purposes of computing the CDSC
payable upon redemption of shares acquired in an exchange, the holding period of
the original shares is added to the holding period of the shares acquired in the
exchange.
The Shareholder Services Group, Inc. makes exchanges at the next
determination of net asset value after receiving an exchange request in good
order (see "How to Redeem or Sell Fund Shares"), and share certificates, if any.
The Shareholder Services Group, Inc. will require additional documentation if
shares are registered in the name of a corporation, partnership or fiduciary.
Consult The Shareholder Services Group, Inc. for additional information
concerning the exchange privilege. Applications and prospectuses of the other
funds are available from your financial service firm or from the Principal
Underwriter.
Telephone exchanges within the group of funds listed above are also accepted
if the exchange involves shares on deposit with The Shareholder Services Group,
Inc. and the investor has not disclaimed in writing the use of the privilege. To
effect such exchanges, call The Shareholder Services Group, Inc. at 800-262-1122
or, within Massachusetts, 617-573-9403, Monday through Friday, 9:00 a.m. to 4:00
p.m. (Eastern Standard Time). All such telephone exchanges must be registered in
the same name(s) and with the same address as are registered with the fund from
which the exchange is being made. Neither the Fund, the Principal Underwriter,
nor The Shareholder Services Group, Inc. will be responsible for the
authenticity of exchange instructions received by telephone; provided that
reasonable procedures to confirm that instructions communicated are genuine have
been followed. Telephone instructions will be tape recorded. In times of drastic
economic or market changes, a telephone exchange may be difficult to implement.
For Federal and state income tax purposes, an exchange is a sale which may
result in realization of a gain or loss, depending on the cost and net asset
value on the exchange date of the shares which you exchange. Special rules may
apply to the computation of gain or loss on an exchange of shares pursuant to
the exchange privilege. See "Distributions and Taxes."
REINVESTMENT PRIVILEGE: A shareholder who has had his shares repurchased or
redeemed may reinvest any portion or all of his repurchase or redemption
proceeds (plus that amount necessary to acquire a fractional share to round off
his purchase to the nearest full share) in shares of the Fund, or, provided that
the shares repurchased or redeemed have been held for at least 30 days, in
shares of any of the other funds offered by the Principal Underwriter with an
initial sales charge at net asset value, provided that the reinvestment is
effected within 30 days after such repurchase or redemption. Shares are sold to
a reinvesting shareholder at the net asset value next determined following
timely receipt of a written purchase order by the Principal Underwriter or by
the fund whose shares are to be purchased (or by such fund's transfer agent).
The privilege is also available to holders of shares of the other funds offered
with an initial sales charge by the Principal Underwriter who wish to reinvest
such redemption or repurchase proceeds in shares of the Fund. If a shareholder
reinvests redemption proceeds within the 30 day period the shareholder's account
will be credited with the amount of any CDSC paid on such redeemed shares. A
reinvesting shareholder may realize a gain or loss for Federal tax purposes as a
result of such repurchase or redemption. Special rules may apply to the
computation of gain or loss and to the deduction of loss on a repurchase or
redemption followed by a reinvestment. See "Distributions and Taxes."
TAX-SHELTERED RETIREMENT PLANS: Shares of the Fund are available for purchase
in connection with the following tax-sheltered retirement plans:
--Pension and Profit Sharing Plans for self-employed individuals,
corporations and non-profit organizations
--Individual Retirement Account Plans for individuals and their non-
employed spouses
--403(b) Retirement Plans for employees of public school systems, hospitals,
colleges and non-profit organizations meeting certain requirements of the
Internal Revenue Code.
Detailed information concerning these plans, including certain exceptions to
minimum investment requirements, and copies of the plans are available from the
Principal Underwriter. This information should be read carefully and
consultation with an attorney or tax adviser may be advisable. The information
sets forth the service fee charged for retirement plans and describes the
Federal income tax consequences of establishing a plan. Under all plans,
dividends and distributions will be automatically reinvested in additional
shares.
HOW TO REDEEM OR SELL FUND SHARES
- --------------------------------------------------------------------------------
THE REDEMPTION PRICE WILL BE BASED ON THE NET ASSET VALUE NEXT COMPUTED AFTER
DELIVERY OF THE SHARE CERTIFICATES OR STOCK POWERS.
A SHAREHOLDER MAY REDEEM HIS FUND SHARES BY DELIVERING TO THE SHAREHOLDER
SERVICES GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, EITHER
THE CERTIFICATES, OR A STOCK POWER if no certificates have been issued, in good
order for transfer, with a separate written request for redemption. The
redemption price will be based on the net asset value next computed after such
delivery. Good order means that the certificates or stock powers must be
endorsed by the record owner(s) exactly as the shares are registered and the
signature(s) must be guaranteed by a member of either the Securities Transfer
Association's STAMP program or the New York Stock Exchange's Medallion Signature
Program, or certain banks, savings and loan institutions, credit unions,
securities dealers, securities exchanges, clearing agencies and registered
securities associations as required by a regulation of the Securities and
Exchange Commission (the "Commission") and acceptable to The Shareholder
Services Group, Inc. In addition, in some cases, good order may require the
furnishing of additional documents such as where shares are registered in the
name of a corporation, partnership or fiduciary.
Within seven days after receipt of a redemption request by The Shareholder
Services Group, Inc., in "good order", the Fund will make payment in cash for
the net asset value of the shares as of the date determined above, reduced by
the amount of any Federal income tax required to be withheld. Although the Fund
normally expects to make payment in cash for redeemed shares, the Trust, subject
to compliance with applicable regulations, has reserved the right to pay the
redemption price of shares of the Fund, either totally or partially, by a
distribution in kind of readily marketable securities withdrawn by the Fund from
the Portfolio (instead of cash). The securities so distributed would be valued
at the same amount as that assigned to them in calculating the net asset value
for the shares being sold. If a shareholder received a distribution in kind, the
shareholder could incur brokerage or other charges in converting the securities
to cash.
The right to redeem can be suspended and the payment of the redemption price
deferred when the Exchange is closed (other than customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the Commission, or during any emergency as determined by the
Commission which makes it impracticable for the Portfolio to dispose of its
securities or value its assets, or during any other period permitted by order of
the Commission for the protection of investors.
To sell shares at their net asset value through an Authorized Firm (a
repur-chase), a shareholder can place a repurchase order with the Firm, who may
charge a fee. Net asset value is calculated on the day the Firm places the order
with EVD, as the Fund's agent, if the Firm receives the order prior to the close
of regular trading on the Exchange and communicates it to EVD on the same day
before EVD closes.
If shares were recently purchased, the proceeds of a redemption or
repurchase will not be sent until the check (including a certified or cashier's
check) received for the shares purchased has cleared. Payment for shares
tendered for redemption or repurchase may result in a delay of more than seven
days when the purchase check has not yet cleared, but the delay (anticipated not
to exceed fifteen days, but possibly longer) will be no longer than required to
verify that the purchase check has cleared. The value of Fund shares redeemed or
repurchased may be more or less than their cost depending on investment
performance during the period they were owned.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem Fund accounts with balances of less than $500. Prior to such a
redemption, shareholders will be notified in writing and will be allowed 60 days
to make additional purchases to bring the account up to the Fund's $1,000
minimum investment requirement. Thus, an investor making an initial investment
of $1,000 would not be able to redeem shares without being subject to this
policy. However, no such redemption would be required by the Fund if the cause
of the low account balance was a reduction in the net asset value of Fund
shares.
If shares have been purchased at net asset value with no initial sales
charge by virtue of the purchase having been in the amount of $1 million or more
and are redeemed within 18 months after the end of the calendar month in which
the purchase was made, a CDSC of 1% will be imposed on such redemption. The CDSC
will be retained by the Principal Underwriter.
The CDSC will be imposed on an amount equal to the lesser of the current
market value or the original purchase price of the shares redeemed. Accordingly,
no CDSC will be imposed on increases in account value above the initial purchase
price, including any dividends or distributions that have been reinvested in
additional shares.
In determining whether a CDSC is applicable to a redemption, the calculation
will be made in a manner that results in the lowest possible rate being charged.
Accordingly, it will be assumed that redemptions are made first from any shares
in the shareholder's account that are not subject to a CDSC.
The CDSC is waived for redemptions involving certain liquidation, merger or
acquisition transactions involving other investment companies. If a shareholder
reinvests redemption proceeds within the 30 day period and in accordance with
the conditions set forth under "Eaton Vance Shareholder Services -- Reinvestment
Privilege," the shareholder's account will be credited with the amount of any
CDSC paid on such redeemed shares.
THE REDEMPTION OR REPURCHASE WILL BE TREATED AS A SALE FOR FEDERAL INCOME TAX
PURPOSES.
TAX CONSEQUENCES OF REDEMPTION
Redemptions and repurchases of shares are taxable events on which you may
realize a gain or loss. Such gain or loss will be long-term capital gain or loss
if the shares are a capital asset in your hands and have been held for tax
purposes for more than one year.
SERVICE PLAN
- --------------------------------------------------------------------------------
IN ADDITION TO ADVISORY FEES AND OTHER EXPENSES, THE FUND PAYS SERVICE FEES
PURSUANT TO A SERVICE PLAN (THE "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 Plan is further described in the Statement of
Additional Information, and the following is a description of the salient
features of the Plan.
THE PLAN PROVIDES THAT THE FUND MAY MAKE SERVICE FEE PAYMENTS FOR PERSONAL
SERVICES AND/OR THE MAINTENANCE OF SHAREHOLDER ACCOUNTS TO THE PRINCIPAL
UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT EXCEEDING .25% OF
THE FUND'S AVERAGE DAILY NET ASSETS FOR ANY FISCAL YEAR. The Trustees of the
Trust have implemented the Plan by authorizing the Fund to make quarterly
service fee payments to the Principal Underwriter and Authorized Firms in
amounts not expected to exceed .25% of the Fund's average daily net assets for
any fiscal year based on the value of Fund shares sold by such persons and
remaining outstanding for at least twelve months. However, the Plan authorizes
the Trustees of the Trust on behalf of the Fund to increase payments to the
Principal Underwriter, Authorized Firms and other persons from time to time
without further action by shareholders of the Fund, provided that the aggregate
amount of payments made to such persons under the Plan in any fiscal year of the
Fund does not exceed .25% of the Fund's average daily net assets. The Plan
replaced the Fund's distribution plan which originally became effective on July
9, 1984. During the fiscal year ended December 31, 1993, the Fund paid or
accrued service fees under the Plan equivalent to 0.15% of the Fund's average
daily net assets for such year.
DISTRIBUTIONS AND TAXES
- --------------------------------------------------------------------------------
DIVIDENDS WILL BE DECLARED DAILY AND PAID MONTHLY. ANY CAPITAL GAINS WILL BE
DISTRIBUTED AT LEAST ANNUALLY. THE FUND IS NOT EXPECTED TO HAVE ANY FEDERAL OR
STATE TAX LIABILITY.
SUBSTANTIALLY ALL OF THE INVESTMENT INCOME ALLOCATED TO THE FUND BY THE
PORTFOLIO, LESS THE FUND'S DIRECT AND ALLOCATED EXPENSES, WILL BE DECLARED DAILY
AS A DISTRIBUTION TO FUND SHAREHOLDERS OF RECORD AS OF THE TIME OF THE
DECLARATION AND WILL BE TAXABLE TO SHAREHOLDERS AS ORDINARY INCOME. Such
distributions, whether taken in cash or reinvested in additional shares, will
ordinarily be paid on the fifteenth day of each month or the next business day
thereafter. Daily distribution crediting will commence on the day that collected
funds for the purchase of Fund shares are available at the Transfer Agent.
Distributions of long-term capital gains are taxable to shareholders as such,
whether received in cash or additional shares of the Fund and regardless of the
length of time Fund shares have been owned by the shareholders. Certain
distributions declared by the Fund in October, November or December and paid the
following January will be taxed to shareholders as if received on December 31 of
the year in which they are declared. Gains or losses attributable to
transactions by the Portfolio in options on securities, certain currency forward
contracts, futures contracts and options on futures may be treated as 40%
short-term and 60% long-term capital gains or losses or, in the case of certain
of such transactions relating to foreign currencies, as ordinary income or loss
for Federal income tax purposes. The Portfolio may have to limit its activities
in these transactions in order to enable the Fund to maintain its qualification
as a regulated investment company. The Fund has received an exemptive order from
the Securities and Exchange Commission allowing it to make distributions of
long-term capital gains allocated to the Fund by the Portfolio as frequently as
monthly.
The amount of the Fund's distributions will vary from time to time depending
on general economic and market conditions, the composition of the Portfolio's
investments, its current investment strategies and the operating expenses of the
Fund and the Portfolio. While distributions will vary from time to time in
response to the factors referred to above, the Fund's management will attempt to
pursue a policy of maintaining a relatively stable monthly distribution payment
to its shareholders. The distributions paid by the Fund during any particular
period may be more or less than the amount of net investment income and
short-term capital gain actually earned by the Portfolio and allocated to the
Fund during such period. The Portfolio has elected mixed straddle accounting
under the Internal Revenue Code (the "Code") for one or more designated classes
of activities involving mixed straddles.
The Portfolio is required to accrue original issue discount on zero coupon
and certain other securities and has elected to accrue market discount on debt
obligations which are purchased at a market discount. While enhancing the Fund's
current return, such accrual will also accelerate the recognition of interest
income which, when distributed to Fund shareholders, will be taxable as ordinary
income. Furthermore, because the Fund seeks to stabilize monthly distribution
payments and make supplemental distributions, and has elected mixed straddle
accounting under the Code, it is possible that a portion of the Fund's aggregate
distributions during any year will be treated as nontaxable distributions of
capital rather than taxable distributions of dividends or capital gains. The
Fund will inform the shareholders after the end of each year what portion, if
any, of such distributions constitutes a nontaxable return of capital.
Sales charges paid upon a purchase of shares of the Fund cannot be taken
into account for purposes of determining gain or loss on a redemption or
exchange of the shares before the 91st day after their purchase to the extent
shares of the Fund or of another fund are subsequently acquired pursuant to the
Fund's reinvestment or exchange privilege. In addition, losses realized on a
redemption of Fund shares may be disallowed under certain "wash sale" rules if
within a period beginning 30 days before and ending 30 days after the date of
redemption other shares of the Fund are acquired. Any disregarded or disallowed
amounts will result in an adjustment to the shareholder's tax basis in some or
all of any other shares acquired.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their Federal and state income tax return for the
prior calendar year's distributions, proceeds from the redemption or exchange of
Fund shares, and Federal income tax (if any) withheld by the Fund's Transfer
Agent.
In order to qualify as a regulated investment company under the the Code,
the Fund must satisfy certain requirements relating to the sources of its
income, the distribution of its income, and the diversification of its assets.
In satisfying these requirements, the Fund will treat itself as owning its
proportionate share of each of the Portfolio's assets and as entitled to the
income of the Portfolio properly attributable to such share.
AS A REGULATED INVESTMENT COMPANY UNDER THE CODE, THE FUND DOES NOT PAY FEDERAL
INCOME OR EXCISE TAXES TO THE EXTENT THAT IT DISTRIBUTES TO SHAREHOLDERS ITS NET
INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS IN ACCORDANCE WITH THE TIMING
REQUIREMENTS IMPOSED BY THE CODE. AS A PARTNERSHIP UNDER THE CODE, THE PORTFOLIO
ALSO DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES. FURTHER, UNDER CURRENT LAW,
PROVIDED THAT THE FUND QUALIFIES AS A REGULATED INVESTMENT COMPANY FOR FEDERAL
INCOME TAX PURPOSES AND THE PORTFOLIO IS TREATED AS A PARTNERSHIP FOR
MASSACHUSETTS AND FEDERAL TAX PURPOSES, NEITHER THE FUND NOR THE PORTFOLIO IS
LIABLE FOR ANY INCOME, CORPORATE EXCISE OR FRANCHISE TAX IN THE COMMONWEALTH OF
MASSACHUSETTS.
PERFORMANCE AND YIELD INFORMATION
- --------------------------------------------------------------------------------
FROM TIME TO TIME, THE FUND MAY ADVERTISE ITS YIELD AND/OR AVERAGE ANNUAL TOTAL
RETURN. The current yield for the Fund will be calculated by dividing the net
investment income per share during a recent 30 day period by the maximum
offering price per share of the Fund on the last day of the period and
annualizing the resulting figure. The Fund's average annual total return is
determined by multiplying a hypothetical initial purchase order of $1,000 by the
average annual compounded rate of return (including capital appreciation/
depreciation, and dividends and distributions paid and reinvested) for the
stated period and annualizing the result. The calculation assumes the maximum
sales charge is deducted from the initial $1,000 purchase order and that all
dividends and distributions are reinvested at net asset value on the
reinvestment dates during the period. The Fund may also publish annual and
cumulative total return figures from time to time.
The Fund may also publish its distribution rate and/or its effective
distribution rate. The Fund's distribution rate is computed by dividing the most
recent monthly distribution per share annualized, by the current maximum
offering price per share (including the maximum sales charge). The Fund's
effective distribution rate is computed by dividing the distribution rate by the
ratio used to annualize the most recent monthly distribution and reinvesting the
resulting amount for a full year on the basis of such ratio. The effective
distribution rate will be higher than the distribution rate because of the
compounding effect of the assumed reinvestment. Investors should note that the
Fund's yield is calculated using a standardized formula the income component of
which is computed from the yields to maturity of all debt obligations held by
the Portfolio based on the market value of such obligations on the day preceding
the 30 day period (with all purchases and sales of securities during such period
included in the income calculation on a settlement date basis), whereas the
distribution rate is based on the Fund's last monthly distribution which tends
to be relatively stable and may be more or less than the amount of net
investment income and short-term capital gain actually earned by the Fund during
the month (see "Distributions and Taxes").
The Fund may also furnish total return calculations based on investments at
various sales charge levels or at net asset value. Any performance data which is
based on the Fund's net asset value per share would be reduced if a sales charge
were taken into account.
Investors should note that the investment results of the Fund will fluctuate
over time, and any presentation of the Fund's yield, total return, distribution
rate or effective distribution rate for any prior period should not be
considered as a representation of what an investment may earn or what an
investor's yield, total return, distribution rate or effective distribution rate
may be in any future period.
STATEMENT OF INTENTION AND ESCROW AGREEMENT
- --------------------------------------------------------------------------------
TERMS OF ESCROW
If the investor, on his application, makes a Statement of Intention to
invest a specified amount over a thirteen month period, then out of the initial
purchase (or subsequent purchases if necessary) 5% of the dollar amount
specified on the application shall be held in escrow by the escrow agent in the
form of shares (computed to the nearest full share at the public offering price
applicable to the initial purchase hereunder) registered in the investor's name.
All income dividends and capital gain distributions on escrowed shares will be
paid to the investor or to his order.
When the minimum investment so specified is completed, the escrowed shares
will be delivered to the investor. If the investor has an accumulation account
the shares will remain on deposit under his account.
If total purchases under this Statement of Intention are less than the
amount specified, the investor will promptly remit to EVD any difference between
the sales charge on the amount specified and on the amount actually purchased.
If the investor does not within 20 days after written request by EVD or the
financial service firm pay such difference in sales charge, the escrow agent
will redeem an appropriate number of the escrowed shares in order to realize
such difference. Full shares remaining after any such redemption together with
any excess cash proceeds of the shares so redeemed will be delivered to the
investor or to his order by the escrow agent.
In signing the application, the investor irrevocably constitutes and
appoints the escrow agent his attorney to surrender for redemption any or all
escrowed shares with full power of substitution in the premises.
PROVISION FOR RETROACTIVE PRICE ADJUSTMENT
If total purchases made under this Statement are large enough to qualify for
a lower sales charge than that applicable to the amount specified, all
transactions will be computed at the expiration date of this Statement to give
effect to the lower charge. Any difference in sales charge will be refunded to
the investor in cash, or applied to the purchase of additional shares at the
lower charge if specified by the investor. This refund will be made by the
financial service firm and by EVD. If at the time of the recomputation a firm
other than the original firm is placing the orders, the adjustment will be made
only on those shares purchased through the firm then handling the account.
BACKUP WITHHOLDING
- --------------------------------------------------------------------------------
PROCEEDS OF VARIOUS DISTRIBUTIONS
It is required under Federal income tax laws that taxable distributions and
proceeds of redemptions and exchanges be reported to the Internal Revenue
Service ("IRS"). It is also required that 31% of taxable distributions and
certain proceeds of redemption requests received directly from shareholders and
of redemptions under any exchange privilege be withheld if (i) a correct and
certified Taxpayer Identification Number (TIN) is not provided for your account,
(ii) you fail to certify that you have not been notified by the IRS that you
underreported taxable interest or dividend payments or (iii) the Fund is
notified by the IRS (or a broker) that the TIN provided is incorrect or you are
otherwise subject to backup withholding. Amounts withheld and forwarded to the
IRS can be credited as a payment of tax when completing your Federal income tax
return.
For most individual taxpayers, the TIN is the social security number. An
investor may furnish the Transfer Agent with such number and the required
certifications by completing and sending to the Transfer Agent either the Fund's
Account Application form at the back of this prospectus or IRS Form W- 9.
Special rules apply for certain accounts. For example, for an account
established under the Uniform Gift to Minors Act, the TIN of the minor should be
furnished.
TO APPLY FOR A TIN
If you do not have a TIN or do not know your number, you may apply for one
using Form SS-5, "Application for a Social Security Card" or Form SS-4,
"Application for Employer Identification Number." These forms are available at
local offices of the Social Security Administration or the IRS. We will forward
a certification form to you which you should use to notify us of your number.
Withholding may apply to payments made to your account before we receive your
certified number.
EXEMPT RECIPIENTS AND FOREIGN PAYEES
Exempt recipients should provide their TIN and underline 2(a) in the TIN
section of the application to avoid possible erroneous withholding. A partial
listing of exempt classes of investors follows: corporations, financial
institutions, IRAs, the U.S. Government, a State or possession of the U.S., a
foreign government, international organizations, and 501(a) exempt entities such
as colleges, churches and charitable organizations. If you are a non-resident
alien, check the appropriate box on the application. Non-resident aliens and
foreign entities may be subject to non-resident alien withholding of up to 30%
(instead of backup withholding of 31%) on certain distributions received from
the Fund and will be required to provide certain certifications on IRS Form W-8
to avoid 31% backup withholding with respect to other payments. For further
information, see Code Sections 1441, 1442, and 3406 and/ or consult your tax
adviser.
<PAGE>
INVESTMENT ADVISER OF
GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF EV TRADITIONAL
GOVERNMENT OBLIGATIONS FUND
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
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
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand
One Post Office Square
Boston, MA 02109
EV TRADITIONAL
GOVERNMENT OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
T-GOP
EV TRADITIONAL
GOVERNMENT OBLIGATIONS FUND
PROSPECTUS
MAY 1, 1994
