<PAGE>
TO SHAREHOLDERS
EV Traditional Government Obligations Fund had a total return of -2.0 percent
for the year ending December 31, 1994. The return included a decline in net
asset value per share from $11.48 on December 31, 1993, to $10.42 on December
31, 1994, and the reinvestment of $0.832 per share in income dividends. That
return did not include the effect of a sales charge.
For comparison, the average intermediate U.S. Government fund had a total return
of -3.7 percent for the same period, according to Lipper Analytical Services,
Inc., an independent mutual fund monitoring service.
Based on the Fund's most recent dividend and its net asset value per share of
$10.42 on December 31, 1994, the Fund's annualized distribution rate was 7.77
percent.
The last year was a period of considerable market volatility, spurred by the
Federal Reserve's decisions to raise short-term interest rates six times. In
response, rates on fixed-income securities of all maturities rose with resulting
price declines and a decrease in the Fund's net asset value.
However, the Fund's price remained relatively stable compared to that of other
similar investments because of the Portfolio's intermediate effective maturity
and its investments in seasoned mortgage-backed securities. As can be seen in
the chart on the next page, the Fund's rate of return was greater than the rates
of return earned by similar and longer maturity investments.
The economy continued to grow vigorously in 1994. Third-quarter gross domestic
product rose 4.1 percent, matching the second quarter gain. The economy was
fueled by an increase in capital spending by business, which was up
significantly during the year, according to the U.S. Department of Commerce. The
nation's improved economic activity was reflected in brisk job growth as well,
with November unemployment down to 5.6 percent.
By most measures, inflation continued to be modest. Core inflation -- which
excludes the volatile energy and food categories -- remained at 2.7 percent
during 1994.
Most economists believe that short-term rates will continue to rise during the
first half of 1995, and, as a result, economic growth will moderate thereafter.
While past performance is no guarantee of future results, if the economy behaves
in this way, intermediate and long-term interest rates, along with the net asset
value of the Fund, are likely to remain relatively stable during the year.
Sincerely,
[Photo of /s/ M. Dozier Gardner
M. Dozier Gardner] M. Dozier Gardner
President
February 21, 1995
<PAGE>
MANAGEMENT REPORT
An Interview with Susan Schiff, Portfolio Manager of Government Obligations
Portfolio.
Q. SUSAN, HOW WOULD YOU DESCRIBE 1994 IN TERMS OF INVESTMENTS?
A. It was a challenging year, to say the least. Of course, nearly everyone is
aware of the Federal Reserve's actions during the year, raising its Federal
funds target rate, the key benchmark for short-term interest rates, six
times. Yields rose nearly 300 basis points in the intermediate part of the
yield curve. Of course, this did not have a positive effect on the Fund. In
fact, this was the first year in its history that the Fund had a negative
total rate of return.
Q. CAN YOU COMPARE THE PORTFOLIO'S RESULTS TO THOSE OF OTHER INVESTMENTS DURING
THIS PERIOD OF TIME?
A. The Fund's total rate of return was better than those of a number of similar
and longer maturity investments. The chart on this page provides the
details.
Q. WHAT MADE THE FUND'S PRICE MORE STABLE?
A. To a certain extent, it was because the Portfolio's duration, or interest
rate sensitivity, was slightly lower than that of the alternative
investments. But the primary reason is because a majority of the Portfolio
is invested in very seasoned mortgage-backed securities.
Q. WHAT FACTORS MAKE THESE SEASONED MORTGAGES DIFFERENT?
A. The fact that they're seasoned means that their prepayment rates are
relatively stable when compared to most mortgage-backed securities. These
securities exhibit prepayment rates that are typically more predictable than
the prepayment rates on generic mortgage-backed securities. Here's how they
work: When interest rates are rising, the prepayment rates on these seasoned
mortgage pools remain relatively stable. Prepayment rates for generic, or
unseasoned pools of mortgages have a tendency to slow down as interest rates
rise. This results in longer average maturities and increased volatility.
The seasoned mortgage-backed securities have become more attractive to
market participants who now recognize their value and may have been hurt by
other mortgage-backed products, including derivatives.
A. Chart page 2. This chart, entitled, "1994, a Difficult Year for Bonds," is a
bar chart comparing the total rates of return in 1994 for the 30-year, 10-year
and 5-year Merrill Lynch taxable bond indices and the Fund. The chart also
explains that: "Principal and interest payments of Treasury securities are
guaranteed by the U.S. Government. This guarantee applies to the underlying
securities of the Fund and not the Fund itself. Past performance is no guarantee
of future results." The chart cites the Merrill Lynch Taxable Bond Indices as
the source of the data. The data points are: 30-year Treasuries, -12.0%; 10-year
Treasuries, -8.3%; 5-year Treasuries, -4.3%; EV Traditional Government
Obligations Fund, -2.0%.
Q. HOW DOES THE TENDENCY TOWARD LESS VOLATILITY HELP THE FUND IN THE CURRENT
ECONOMIC ENVIRONMENT?
A. The U.S. Federal Reserve already has raised the Federal funds rate once in
early 1995. The Fund is likely to experience less volatility because of the
Portfolio's lower relative interest rate sensitivity. So in a period of
rising rates, its price may fall less than a longer maturity investment
would.
Q. WHAT IS THE INVESTMENT PHILOSOPHY OF THE PORTFOLIO?
A. The philosophy of the Portfolio remains unchanged: to provide an attractive
income through a relatively stable investment vehicle. We believe that a
government fund should not make big bets on the direction of interest rates.
No one can consistently make winning bets on interest rates. So we've
avoided some very high-yielding, esoteric mortgage-backed securities because
we felt they weren't worth the risk. We believe our investors are typically
risk-averse. They wouldn't be investing in such vehicles if they were
investing their money themselves, so we try not to expose them to those
risks.
[Photograph of Susan Schiff]
B. Chart Page 3. This chart, entitled "Relative share price stability provides
an advantage," is a horizontal line chart. Its text reads as follows, "The
Fund's seasoned, mortgage-backed securities have helped contribute to its
relative share price stability. The colored line represents the annualized
monthly principal prepayment rates of the Fund's seasoned, mortgage-backed
securities. The black line represents the annualized monthly principal
prepayment rates of generic mortgage-backed securities." The chart cites Lehman
Brothers, Bloomberg, L.P. and Eaton Vance Management as sources of its data. The
plot points for this chart are attached.
<TABLE>
Generic morgage-backed securities Seasoned mortgage-backed securities Date
- --------------------------------- ----------------------------------- --------
<S> <C> <C>
6.6 16.5 July 91
6.2 16.1 Aug 91
5.5 15.2 Sept 91
6.3 15.5 Oct 91
7.8 14.1 Nov 91
10.3 15.4 Dec 91
13.2 15.7 Jan 92
19.7 18.1 Feb 92
26.5 22.4 Mar 92
22.8 22.5 April 92
18.3 22.2 May 92
18.1 19.5 June 92
19.2 14.2 July 92
31.1 16.5 Aug 92
46.9 14.1 Sept 92
52.4 17.3 Oct 92
50.2 17.8 Nov 92
45.5 18.5 Dec 92
29.5 18.1 Jan 93
25.3 15.3 Feb 93
42.3 17.2 Mar 93
58.3 18.2 April 93
61.9 18.7 May 93
63 21.4 June 93
54.3 22.4 July 93
56 21.9 Aug 93
57.2 24.6 Sept 93
58 21.2 Oct 93
62.2 22.6 Nov 93
62.7 27.6 Dec 93
50.9 23.9 Jan 94
43.2 21.1 Feb 94
49.7 23.5 Mar 94
40.7 23.4 April 94
32 23.3 May 94
25 20.5 June 94
19.5 17.2 July 94
20.1 15.9 Aug 94
17.5 14.3 Sept 94
14.1 14.5 Oct 94
12.1 11.8 Nov 94
10.8 13.1 Dec 94
</TABLE>
Comparison of Change in Value of a $10,000 Investment in EV Traditional
Government Obligations Fund (after sales charge) and Lehman Brothers
Intermediate Government Bond Index
From December 31, 1984 through December 31, 1994
1 5 10
Average Annual Returns Year Year Year
- ------------------------------- ----- ---- ----
With 4.75% Max. Sales Charge -6.7% 6.0% 8.1%
Without 4.75% Max. Sales Charge -2.0% 7.0% 8.6%
Traditional Government
Obligations Fund Lehman Lipper
---------------------- ------ ------
12/84 9525 10000 10000
12/85 10782 11800 11693
12/86 12224 13342 13211
12/87 12733 13823 13533
12/88 13683 14707 14397
12/89 15491 16572 16022
12/90 16880 18156 17403
12/91 19314 20717 19862
12/92 20336 22153 21052
12/93 22219 23963 22791
12/94 21767 23545 21943
Past performance is not indicative of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Source: Tower Data Systems,
Bethesda, MD. *Investment operations commenced on 8/24/84.
FUND PERFORMANCE
The above chart compares your Funds total return with that of a broad-based
securities market index. The lines on the chart represent the total returns of
$10,000 hypothetical investments in the Fund and the unmanaged Lehman Brothers
Intermediate Government Bond Index.
TOTAL RETURN FIGURES
The bold solid line on the chart represents the Funds performance and includes
the Funds 4.75% current maximum sales charge. The Funds total return figure
reflects Fund expenses and Portfolio transaction costs, and assumes the
reinvestment of income dividends and capital gain distributions.
The dashed line represents the performance of the Lehman Brothers Intermediate
Government Bond Index, a broad-based, widely recognized, unmanaged index of
government funds. The Indexs total return does not reflect any commissions or
expenses that would be incurred if an investor individually purchased or sold
the securities represented in the Index.
The dotted line represents the performance of the Lipper Intermediate U.S.
Government Fund average. Its performance is included to indicate how the Fund
has performed relative to its competitive universe. However, the average total
rate of return shown does not include any commissions that would be incurred if
an investor individually purchased or sold the Funds represented in the average.
<PAGE>
<TABLE>
--------------------------------------------------------------------------------------------------
EV TRADITIONAL GOVERNMENT OBLIGATIONS FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------------------------
December 31, 1994
--------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS:
Investment in Government Obligations Portfolio (Portfolio),
at value (Note 1A) $388,694,602
Receivable for Fund shares sold 172,098
------------
Total assets $388,866,700
LIABILITIES:
Dividends payable $1,324,671
Payable for Fund shares redeemed 1,077,461
Payable to affiliates --
Trustees' fees 827
Custodian fee 4,331
Accrued expenses 273,851
----------
Total liabilities 2,681,141
------------
NET ASSETS for 37,058,362 shares of beneficial interest outstanding $386,185,559
============
SOURCES OF NET ASSETS:
Paid-in capital $457,653,688
Accumulated net realized loss on
investments, options and financial
futures transactions
(computed on the basis of identified cost) (61,094,290)
Unrealized depreciation of investments
from Portfolio
(computed on the basis of identified cost) (9,049,168)
Distributions in excess of net investment
income (Note 2) (1,324,671)
------------
Total $386,185,559
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($386,185,559 / 37,058,362 shares of beneficial interest) $10.42
======
COMPUTATION OF OFFERING PRICE: Offering price per share (100/95.25 of $10.42)
On sales of $100,000 or more, the offering price is reduced. $10.94
======
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS (continued)
STATEMENT OF OPERATIONS
-------------------------------------------------------------------------------------------------
For the Year Ended December 31, 1994
-------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B):
Interest income allocated from Portfolio $ 43,294,200
Expenses allocated from Portfolio (6,238,006)
------------
Total investment income $ 37,056,194
Expenses --
Compensation of Trustees not members of the
Administrator's organization (Note 5) $ 2,810
Custodian fees (Note 5) 41,940
Distribution fees (Note 6) 991,684
Transfer and dividend disbursing agent fees 417,529
Printing and postage 117,395
Registration fees 37,402
Legal and accounting services 14,511
Miscellaneous 64,893
------------
Total expenses 1,688,164
------------
Net investment income $ 35,368,030
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (loss) (identified cost basis) --
Investment transactions $ (6,432,962)
Financial futures contracts 3,644,943
------------
Net realized loss on investments $ (2,788,019)
Change in unrealized appreciation of investments (41,383,130)
------------
Net realized and unrealized loss on investments (44,171,149)
------------
Net decrease in net assets from operations $ (8,803,119)
============
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1994 1993
------------------ -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 35,368,030 $ 39,908,413
Net realized loss on investments (2,788,019) (3,844,306)
Change in unrealized appreciation of investments (41,383,130) 7,227,078
---------- ------------
Net increase (decrease) in net assets from
operations $ (8,803,119) $ 43,291,185
------------- ------------
Distributions to shareholders --
From net investment income $ (35,368,030) $(39,908,413)
In excess of net investment income (1,359,464) (533,664)
------------- ------------
Total distributions to shareholders $ (36,727,494) $(40,442,077)
------------- ------------
Net increase (decrease) in net assets from Fund share
transactions (Note 3) $ (71,433,387) $ 31,340,207
------------- ------------
Net increase (decrease) in net assets $(116,964,000) $ 34,189,315
NET ASSETS:
At beginning of year 503,149,559 468,960,244
------------- ------------
At end of year $ 386,185,559 $503,149,559
============= ============
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
<TABLE>
FINANCIAL STATEMENTS (continued)
FINANCIAL HIGHLIGHTS
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
NET ASSET VALUE --
Beginning of year $11.4800 $11.3800 $11.8000 $11.3700 $11.5200
-------- -------- -------- -------- --------
INCOME FROM OPERATIONS:
Net investment income $ 0.8052 $ 0.9192 $ 0.9751 $ 1.1005 $ 1.1085
Net realized and unrealized gain
(loss) on investments (1.0290) 0.1058 (0.3886) 0.4395 (0.1485)
-------- -------- -------- -------- --------
Total income (loss) from operations $(0.2238) $ 1.0250 $ 0.5865 $ 1.5400 $ 0.9600
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
From net investment income $(0.8052) $(0.9192) $(1.0065) $(1.1100) $(1.1100)
In excess of net investment income (0.0310) (0.0058) -- -- --
-------- -------- -------- -------- --------
Total distributions $(0.8362) $(0.9250) $(1.0065) $(1.1100) $(1.1100)
-------- -------- -------- -------- --------
NET ASSET VALUE -- End of year $10.4200 $11.4800 $11.3800 $11.8000 $11.3700
======== ======== ======== ======== ========
TOTAL RETURN<F3> (2.03)% 9.26% 5.29% 14.42% 8.97%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets 0.56%<F1> 0.40%<F1> 0.31% 0.78% 1.19%
Ratio of other expenses to average net assets 1.17%<F1> 1.12%<F1> 1.10% 1.18% 1.22%
Ratio of net investment income to average net assets 7.70% 7.86% 8.52% 9.61% 9.86%
PORTFOLIO TURNOVER<F2> -- 52% 26% 25% 22%
NET ASSETS, end of year (000 omitted) $386,186 $503,150 $468,960 $352,480 $ 279,747
LEVERAGE ANALYSIS:<F4>
Amount of debt outstanding at end of period
(000 omitted) -- -- -- -- $ 4,695
Average daily balance debt outstanding during
period (000 omitted) -- $ 2,313 $ 1,687 $ 2,321 11,009
Average weekly balance of shares outstanding
during period (000 omitted) -- 43,731 37,474 25,915 25,285
Average amount of debt per share during period -- $ 0.053 $ 0.045 $ 0.090 $ 0.435
<FN>
<F1>Includes the Fund's share of Government Obligations Portfolio's allocated expenses.
<F2>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 elsewhere in this report.
<F3>Total investment return is calculated assuming a purchase at the net asset value on the first day and a sale at
the net asset value on the last day of each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date.
<F4>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 year ended December 31, 1994, the leverage analysis is shown in the
Portfolio's financial statements which are included elsewhere in this report.
As of January 1, 1994 the Fund discontinued the use of equalization accounting (See Note 1D).
</FN>
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Traditional Government Obligations Fund (the Fund) is a diversified entity of
the type commonly known as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund is a series in the Eaton Vance Government
Obligations Trust. On October 28, 1993, the Fund transferred substantially all
of its investable assets to the Government Obligations Portfolio (the
Portfolio). Prior to this date the Fund's name was Eaton Vance Government
Obligations Fund. The Fund invests all of its investable assets in interests in
the Government Obligations Portfolio (the Portfolio), a New York Trust, having
the same investment objective as the Fund. The value of the Fund's investment in
the Portfolio reflects the Fund's proportionate interest in the net assets of
the Portfolio (75.4% at December 31, 1994). The performance of the Fund is
directly affected by the performance of the Portfolio. The financial statements
of the Portfolio, including the portfolio of investments, are included elsewhere
in this report and should be read in conjunction with the Fund's financial
statements. The following is a summary of significant accounting policies
consistently followed by the Fund in the preparation of its financial
statements. The policies are in conformity with generally accepted accounting
principles.
A. INVESTMENT VALUATIONS -- Valuations of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B. INCOME -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and accrued
expenses of the Fund.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments, options and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary. At
December 31, 1994, the Fund, for federal income and excise tax purposes, had a
capital loss carryover of $54,745,817 which will reduce the Fund's taxable
income arising from future net realized gain on investment transactions, if any,
to the extent permitted by the Internal Revenue Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be necessary
to relieve the Fund of any liability for federal income or excise tax. Such
capital loss carryovers will expire on December 31, 1995 ($14,761,169), December
31, 1996 ($6,997,379), December 31, 1997 ($4,277,560), December 31, 1998
($6,941,299), December 31, 1999 ($1,545,746), December 31, 2000 ($5,952,987) and
December 31, 2002 ($14,269,677).
D. EQUALIZATION -- Prior to January 1, 1994, the Fund followed the accounting
practice known as equalization by which a portion of the proceeds from the sales
and costs of reacquisitions of Fund shares was allocated to undistributed net
investment income. As a result, undistributed net investment income per share
was unaffected by sales or reacquisitions of Fund shares. As of January 1, 1994,
the Fund discontinued the use of equalization. This change had no effect on the
Fund's net assets, net asset value per share, or its net increase or (decrease)
in net assets from operations. Discontinuing the use of equalization will result
in a simpler and more meaningful financial statement presentation. The
cumulative effect of the change was to decrease undistributed net investment
income and increase paid-in capital previously reported through December 31,
1993, by $1,206,596.
- --------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net income of the Fund is determined daily and substantially all of the net
income so determined is declared as a dividend to shareholders of record at the
time of declaration. Distributions are paid monthly. Distributions of allocated
realized capital gains, if any, are made at least annually. Shareholders may
reinvest capital gain distributions in additional shares of the Fund at the net
asset value as of the ex-dividend date. Distributions are paid in the form of
additional shares or, at the election of the shareholder, in cash. The Fund
distinguishes between distributions on a tax basis and a financial reporting
basis. Generally accepted accounting principles require that only distributions
in excess of tax basis earnings and profits be reported in the financial
statements as a return of capital. Differences in the recognition or
classification of income between the financial statements and tax earnings and
profits which result in over-distributions for financial statement purposes only
are classified as distributions in excess of net investment income or
accumulated net realized gains. Permanent differences between book and tax
accounting relating to distributions are reclassified to paid-in capital.
- ------------------------------------------------------------------------------
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1994 1993
-------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Sales 8,690,993 $ 96,537,132 16,683,225 $193,722,092
Issued to shareholders
electing to receive
payment of distributions
in Trust shares 1,549,319 16,841,652 1,619,450 18,706,173
Redemptions (17,019,496) (184,812,171) (15,662,522 (181,088,058)
---------- ------------- ---------- ------------
Net increase (decrease) (6,779,184) $ (71,433,387) 2,640,153 $ 31,340,207
========== ============= ========== ============
</TABLE>
- --------------------------------------------------------------------------------
(4) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio for the year
ended December 31, 1994, aggregated $99,828,977 and $207,186,499, respectively.
- --------------------------------------------------------------------------------
(5) TRANSACTIONS WITH AFFILIATES
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services. See
Note 3 of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report. Except as to Trustees of the Fund and the Portfolio
who are not members of EVM's of BMR's organization, officers and Trustees
receive remuneration for their services to the Fund out of such investment
adviser fee. Investors Bank & Trust Company (IBT), an affiliate of EVM, serves
as custodian of the Fund and the Portfolio. Pursuant to the respective custodian
agreements, IBT receives a fee reduced by credits which are determined based on
the average cash balances the Portfolio maintains with IBT. Certain of the
officers and Trustees of the Fund and Portfolio are officers and
directors/trustees of the above organizations.
- ------------------------------------------------------------------------------
(6) SERVICE PLAN
The Fund adopted a Service Plan on July 7, 1993 designed to meet the
requirements of Rule 12b-1 under the Investment Company Act of 1940 and the
service fee requirements of the revised sales charge rule of The National
Association of Securities Dealers, Inc. The Service Plan replaced the Fund's
distribution plan which became effective on July 9, 1984. The Service Plan
provides that the Fund may make service fee payments to the Principal
Underwriter, Eaton Vance Distributors, Inc., a subsidiary of Eaton Vance
Management, Authorized Firms or other persons in amounts not exceeding 0.25% of
the Fund's average daily net assets for any fiscal year. The Trustees have
implemented the Service Plan by authorizing the Fund to make quarterly service
fee payments to the Principal Underwriter and Authorized Firms in amounts not
expected to exceed 0.25% of the Fund's average daily net assets for any fiscal
year which is attributable to shares of the Fund sold by such persons and
remaining outstanding for at least twelve months. Such payments are made for
personal services and/or the maintenance of shareholder accounts. Provision for
service fee payments amounted to $991,684 for the year ended December 31, 1994.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Shareholders and Trustees of
EV Traditional Government Obligations Fund,
a series of Eaton Vance Government Obligations Trust:
We have audited the accompanying statement of assets and liabilities of EV
Traditional Government Obligations Fund (formerly Eaton Vance Government
Obligations Fund), a series of Eaton Vance Government Obligations Trust, as of
December 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period ended December 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities held as of
December 31, 1994 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Traditional Government Obligations Fund, a series of Eaton Vance Government
Obligations Trust, as of December 31, 1994, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period ended December 31, 1994, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
- -----------------------------------------------------------------------------
GOVERNMENT OBLIGATIONS PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
-------------------------------------
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGHS -- 97.2%
------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL HOME LOAN MORTGAGE
CORP. PARTICIPATION CERTIFICATES:
4.5s, with maturity at 2000 $ 240,219 $ 229,101
4.75s, with various maturities to 2002 206,727 195,974
5s, with various maturities to 2003 1,300,504 1,205,867
5.25s, with various maturities to 2005 667,506 615,665
5.5s, with various maturities to 2011 3,010,723 2,834,321
5.75s, with maturity at 1998 115,147 110,648
6s, with various maturities to 2022 5,627,750 5,247,829
6.25s, with various maturities to 2013 1,321,202 1,237,615
6.5s, with various maturities to 2022 24,401,448 23,016,740
6.75s, with various maturities to 2011 13,633,734 12,983,353
7s, with various maturities to 2019 26,491,954 25,308,818
7.25s, with maturity at 2003 2,473,141 2,385,734
7.5s, with various maturities to 2019 24,461,688 23,676,671
7.75s, with maturity at 2009 3,348,693 3,260,655
8s, with various maturities to 2022 26,257,789 25,674,594
8.25s, with various maturities to 2011 18,633,555 18,426,861
8.5s, with various maturities to 2018 13,453,143 13,379,525
8.75s, with various maturities to 2014 3,140,574 3,150,951
9s, with various maturities to 2010 2,979,510 2,991,355
9.25s, with various maturities to 2010 822,705 835,950
9.5s, with maturity at 2010 280,362 286,939
10s, with various maturities to 2017 535,632 555,280
11s, with various maturities to 2019 3,667,268 3,962,193
12s, with various maturities to 2019 2,728,755 2,981,340
12.25s, with various maturities to 2019 3,608,325 3,978,585
12.5, with various maturities to 2016 13,244,447 14,603,582
12.75s, with various maturities to 2015 2,457,385 2,715,910
13s, with various maturities to 2019 6,730,062 7,582,463
13.25s, with various maturities to 2019 1,129,939 1,287,560
13.5s, with various maturities to 2015 7,720,572 8,728,208
13.75s, with various maturities to 2014 294,492 337,099
14s, with various maturities to 2016 4,327,115 4,977,561
14.5s, with various maturities to 2014 289,865 337,741
14.75s, with maturity at 2010 828,325 962,052
15s, with various maturities to 2013 1,542,065 1,835,086
15.25s, with maturity at 2012 204,045 244,767
15.5s, with various maturities to 2012 390,931 467,077
16s, with maturity at 2012 298,107 361,263
16.25s, with various maturities to 2012 330,812 403,471
------------
$223,376,404
------------
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
-------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGHS (Continued)
------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE
ASSOCIATION MORTGAGE BACKED
SECURITIES:
0.25s, with maturity at 2014 $ 379,604 $ 302,794
3.5s, with maturity at 2007 218,750 190,791
4.5s, with maturity at 1999 40,474 38,633
5s, with various maturities to 2017 1,640,137 1,481,633
5.25s, with various maturities to 2006 626,291 583,331
5.5s, with various maturities to 2008 3,275,525 3,090,994
5.75s, with maturity at 2003 271,089 252,491
6s, with various maturities to 2010 39,326,506 36,561,425
6.25s, with various maturities to 2007 4,725,720 4,428,261
6.5s, with various maturities to 2017 18,701,565 17,613,630
6.75s, with various maturities to 2008 3,921,678 3,712,706
7s, with various maturities to 2018 10,825,566 10,290,685
7.25s, with various maturities to 2017 2,739,981 2,620,041
7.5s, with various maturities to 2020 12,903,012 12,454,035
7.75s, with various maturities to 2008 2,149,109 2,089,113
8s, with various maturities to 2017 22,256,614 21,832,845
8.25s, with various maturities to 2020 10,144,642 10,011,029
8.50s, with various maturities to 2015 17,916,262 17,840,698
8.75s, with various maturities to 2017 1,942,088 1,949,261
9s, with various maturities to 2020 6,064,056 6,166,350
9.5s, with maturity at 2009 397,260 408,547
11s, with maturity at 2010 39,757 42,719
11.75s, with various maturities to 2015 3,305,012 3,635,995
12s, with various maturities to 2020 7,477,216 8,217,928
12.25s, with maturity at 2011 264,226 290,401
12.5s, with various maturities to 2021 5,741,960 6,356,727
12.75s, with various maturities to 2014 2,638,498 2,922,291
13s, with various maturities to 2019 7,397,063 8,336,923
13.25s, with various maturities to 2015 3,291,652 3,710,791
13.5s, with various maturities to 2015 5,769,470 6,598,626
13.75s, with various maturities to 2014 269,683 305,773
14s, with various maturities to 2014 1,115,075 1,294,225
14.25s, with maturity at 2014 421,265 492,120
14.5s, with various maturities to 2014 363,544 426,347
14.75s, with maturity at 2012 6,151,440 7,253,214
15s, with various maturities to 2013 591,668 703,302
15.5s, with maturity at 2012 1,540,725 1,859,316
15.75s, with maturity at 2011 44,585 53,984
16s, with maturity at 2012 535,081 654,264
------------
$207,074,239
------------
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
-------------------------------------
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGHS (Continued)
------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE
ASSOCIATION MORTGAGE BACKED
SECURITIES:
5.5s, with maturity at 1999 $ 131,522 $ 124,796
6.5s, with maturity at 2002 798,219 755,132
7.25s, with various maturities to 2022 9,043,487 8,494,528
8s, with various maturities to 2017 16,117,456 15,767,047
8.25s, with maturity at 2008 831,562 823,580
8.5s, with maturity at 2017 1,547,158 1,547,862
12s, with various maturities to 2015 5,777,410 6,301,565
12.5s, with various maturities to 2015 2,708,366 2,994,111
13s, with various maturities to 2013 1,221,409 1,381,720
13.5s, with various maturities to 2013 566,966 637,991
14s, with maturity at 2015 347,626 404,867
14.5s, with maturity at 2014 272,411 321,977
15s, with various maturities to 2013 1,202,104 1,436,571
16s, with various maturities to 2012 457,811 561,592
------------
$ 41,553,339
------------
COLLATERALIZED MORTGAGE
OBLIGATIONS:
Federal Home Loan Mtg. Corp. Series 1983-B3, 12.5%, due 2013,
Collateral 100% FHLMC PC $ 328,663 $ 363,121
Federal Home Loan Mtg. Corp. Series 1327-F, 7.5%, due 2003,
Collateral 100% FHLMC PC 5,027,000 4,681,394
Federal Home Loan Mtg. Corp. Series 1058-F, 8.0%, due 2004,
Collateral 100% FHLMC PC 8,300,000 8,274,063
Federal Home Loan Mtg. Corp. Series 1188-GC, 7.5%, due
2019, Collateral 100% FHLMC PC 10,000,000 9,150,000
Federal National Mtg. Association Series 93-73E, 6.35%, due
2019 Collateral 100% FNMA MBS 3,000,000 2,568,750
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
-------------------------------------
<TABLE>
<CAPTION>
MORTGAGE PASS-THROUGHS (Continued)
------------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT VALUE
------------------------------------------------------------------------------------------------
<S> <C> <C>
COLLATERALIZED MORTGAGE
OBLIGATIONS (Continued)
Guaranteed Mtg. Corp. III Series H2, 9% due 2015,
Collateral 100% FNMA MBS 1,293,209 1,297,857
Salomon Brothers Mortgage Securities II, Inc. Series III,
Class Z, 11.50%, due 2015 Collateral 100% GNMA/FNMA MBS 2,496,441 2,761,688
------------
$ 29,096,873
------------
TOTAL MORTGAGE PASS-THROUGHS
(identified cost, $522,323,986) $501,100,855
------------
------------------------------------------------------------------------------------------------
UNITED STATES TREASURY BONDS -- 15.7%
------------------------------------------------------------------------------------------------
U.S. Treasury Bond, 12s, 8/15/13<F2> $50,000,000 $ 66,484,400
U.S. Treasury Bond, 7.125s, 2/15/23<F1> 16,000,000 14,557,504
------------
TOTAL UNITED STATES TREASURY BONDS
(identified cost, $77,988,881) $ 81,041,904
------------
TOTAL INVESTMENTS -- 112.9%
(identified cost, $600,316,020) $582,142,759
OTHER ASSETS, LESS LIABILITIES -- (12.9%) (66,473,246)
------------
NET ASSETS -- 100% $515,669,513
============
<FN>
<F1>Collateral for financial futures contracts held at December 31, 1994 (See Note 7).
<F2>This security is on loan at December 31, 1994 (See Note 5).
</FN>
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------------------------
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value (Note 1A) (identified cost, $600,316,020) $582,142,759
Cash 967
Receivable for investments sold 924,415
Interest receivable 6,785,757
Deferred organization expenses (Note 1H) 14,583
------------
Total assets $589,868,481
LIABILITIES:
Liability for collateral received for securities loaned
(Note 5) $70,162,000
Demand note payable (Note 4) 3,924,000
Payable for daily variation margin on financial futures
contracts (Note 1G) 28,125
Payable to affiliates --
Trustees' fees 5,196
Custodian fee 9,429
Accrued expenses 70,218
-----------
Total liabilities 74,198,968
------------
NET ASSETS applicable to investors' interest in Portfolio $515,669,513
============
SOURCES OF NET ASSETS:
Net proceeds from capital contributions and withdrawals $533,640,352
Unrealized depreciation of investments and financial
futures contracts (computed on the basis of identified
cost) (17,970,839)
------------
Total $515,669,513
============
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
-----------------------------------------------------------------
For the year ended December 31, 1994
-----------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest income -- $ 53,735,067
Expenses --
Investment adviser fee (Note 3) $ 4,259,500
Compensation of Trustees not members of the
Administrator's organization (Note 3) 20,725
Custodian fee (Note 3) 181,138
Interest (Note 5) 3,220,825
Legal and accounting services 32,833
Amortization of organization expenses (Note 1H) 3,789
Miscellaneous 48,242
----------
Total expenses 7,767,052
------------
Net investment income $ 45,968,015
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) (identified cost basis) --
Investment transactions $ (8,711,023)
Financial futures contracts 4,494,315
------------
Net realized loss on investments $ (4,216,708)
Change in unrealized appreciation of investments (50,227,104)
------------
Net realized and unrealized loss on investments $(54,443,812)
------------
Net decrease in net assets from operations $ (8,475,797)
============
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS (continued)
----------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1993<F1>
------------ ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 45,968,015 $ 7,856,183
Net realized loss on investments (4,216,708) (861,136)
Change in unrealized appreciation of investments (50,227,104) (7,359,654)
------------ ------------
Net decrease in net assets from operations $ (8,475,797) $ (364,607)
------------ ------------
Capital transactions --
Contributions $272,129,376 $621,258,936
Withdrawals (285,281,160) (83,697,255)
------------ ------------
Increase (decrease) in net assets resulting from
capital transactions $(13,151,784) $537,561,681
------------ ------------
Total increase (decrease) in net assets $(21,627,581) $537,197,074
NET ASSETS:
At beginning of period 537,297,094 100,020
------------ ------------
At end of period $515,669,513 $537,297,094
============ ============
<FN>
<F1>For the period from the start of business, October 28, 1993, to December 31, 1993.
</FN>
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
SUPPLEMENTARY DATA
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------
1994 1993*
------- -------
RATIOS (As a percentage of average net assets):
Interest expense 0.56% 0.63%+
Other expenses 0.80% 0.86%+
Net investment income 8.03% 8.46%+
PORTFOLIO TURNOVER 35% 42%
LEVERAGE ANALYSIS:
Amount of debt outstanding at end of period
(000 omitted) $3,924 --
Average daily balance of debt outstanding during
period (000 omitted) $ 982 $1,660
*For the period from the start of business, October 28, 1993, to December 31,
1993.
+Computed on an annualized basis.
The accompanying Notes are an integral part of the financial statements
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Government Obligations Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end investment company
which was organized as a trust under the laws of the State of New York in 1992.
The Declaration of Trust permits the Trustees to issue beneficial interests in
the Portfolio. Investment operations began on October 28, 1993, with the
acquisition of net assets of $564,244,545 in exchange for an interest in the
Portfolio by one of the Portfolio's investors. The following is a summary of
significant accounting policies of the Portfolio. The policies are in conformity
with generally accepted accounting principles.
A. INVESTMENT VALUATIONS -- Mortgage backed, "pass-through" securities are
valued using a matrix pricing system which takes into account closing bond
valuations, yield differentials, anticipated prepayments, and interest rates.
Debt securities (other than mortgage backed, "pass-through" securities) are
normally valued at the mean between the latest available bid and asked prices
for securities for which the over-the-counter market is the primary market. Debt
securities may also be valued on the basis of valuations furnished by a pricing
service. Options are valued at last sale price on a U.S. exchange or board of
trade or, in the absence of a sale, at the mean between the last bid and asked
price. Financial futures contracts listed on commodity exchanges are valued at
closing settlement prices. Securities for which there is no such quotation or
valuation are valued at fair value using methods determined in good faith by or
at the direction of the Trustees. Short-term obligations having remaining
maturities of less than 60 days are valued at amortized cost, which approximates
value.
B. INCOME -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of discount when required for federal
income tax purposes.
C. GAINS AND LOSSES FROM SECURITY TRANSACTIONS -- For book purposes, gains or
losses are not recognized until disposition. For federal tax purposes, the
Portfolio has elected, under Section 1092 of the Internal Revenue Code, to
utilize mixed straddle accounting for certain designated classes of activities
involving options and financial futures contracts in determining recognized
gains or losses. Under this method, Section 1256 positions (financial futures
contracts and options on investments or financial futures contracts) and non-
Section 1256 positions (bonds, etc.) are marked-to-market on a daily basis
resulting in the recognition of taxable gains or losses on a daily basis. Such
gains or losses are categorized as short-term or long-term based on aggregation
rules provided in the Code.
D. INCOME TAXES -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements (under
the Code) in order for its investors to satisfy them. The Portfolio will
allocate at least annually among its investors each investors' distributive
share of the Portfolio's net investment income, net realized capital gains, and
any other items of income, gain, loss, deduction or credit.
E. WRITTEN OPTIONS -- Upon the writing of a call or a put option, an amount
equal to the premium received by the Portfolio is included in the Statement of
Assets and Liabilities as a liability. The amount of the liability is
subsequently marked-to-market to reflect the current market value of the option
written in accordance with the Portfolio's policies on investment valuations
discussed above. Premiums received from writing options which expire are treated
as realized gains. Premiums received from writing options which are exercised or
are closed are added to or offset against the proceeds or amount paid on the
transaction to determine the realized gain or loss. If a put option is
exercised, the premium reduces the cost basis of the securities purchased by the
Portfolio. The Portfolio, as writer of an option, may have no control over
whether the underlying securities may be sold (call) or purchased (put) and, as
a result, bears the market risk of an unfavorable change in the price of the
securities underlying the written option.
F. PURCHASED OPTIONS -- Upon the purchase of a call or put option, the premium
paid by the Portfolio is included in the Statement of Assets and Liabilities as
an investment. The amount of the investment is subsequently marked-to-market to
reflect the current market value of the option purchased, in accordance with the
Portfolio's policies on investment valuations discussed above. If an option
which the Portfolio has purchased expires on the stipulated expiration date, the
Portfolio will realize a loss in the amount of the cost of the option. If the
Portfolio enters into a closing sale transaction, the Portfolio will realize a
gain or loss, depending on whether the sales proceeds from the closing sale
transaction are greater or less than the cost of the option. If the Portfolio
exercises a put option, it will realize a gain or loss from the sale of the
underlying security, and the proceeds from such sale will be decreased by the
premium originally paid. If the Portfolio exercises a call option, the cost of
the security which the Portfolio purchases upon exercise will be increased by
the premium originally paid. For tax purposes, the Portfolio's options are
generally subject to the mixed straddle rules described in Note 1C, and
unrealized gains or losses are recognized on a daily basis.
G. FINANCIAL FUTURES CONTRACTS -- Upon entering into a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase price
indicated in the financial futures contract. Subsequent payments are made or
received by the Portfolio ("margin maintenance") each day, dependent on the
daily fluctuations in the value of the underlying securities, and are recorded
for book purposes as unrealized gains or losses by the Portfolio.
If the Portfolio enters into a closing transaction, the Portfolio will
realize, for book purposes, a gain or loss equal to the difference between the
value of the financial futures contract to sell and the financial futures
contract to buy. The Portfolio's investment in financial futures contracts is
designed only to hedge against anticipated future changes in interest or
currency exchange rates. Should interest or currency exchange rates move
unexpectedly, the Portfolio may not achieve the anticipated benefits of the
financial futures contracts and may realize a loss. For tax purposes, such
futures contracts are generally subject to the mixed straddle rules described in
Note 1C, and unrealized gains or losses are recognized on a daily basis.
H. DEFERRED ORGANIZATION EXPENSE -- Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line basis
over five years.
I. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold.
- --------------------------------------------------------------------------------
(2) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term obligations,
aggregated $271,104,426 and $225,418,353, respectively.
- --------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee, computed at the monthly rate of 0.0625% (0.75% per
annum) of the Portfolio's average daily net assets up to $500 million and at
reduced rates as daily net assets exceed that level, is earned by Boston
Management and Research (BMR), a wholly-owned subsidiary of Eaton Vance
Management (EVM), as compensation for management and investment advisory
services rendered to the Portfolio. For the year ended December 31, 1994, the
fee was equivalent to .74% (annualized) of the Portfolio's average net assets
for such period and amounted to $4,259,500. Except as to Trustees of the
Portfolio who are not members of EVM's or BMR's organization, officers and
Trustees receive remuneration for their service to the Portfolio out of such
investment adviser fee. Investors Bank & Trust Company (IBT), an affiliate of
EVM and BMR, serves as custodian of the Portfolio. Pursuant to the custodian
agreement, IBT receives a fee reduced by credits which are determined based on
the average daily cash balances the Portfolio maintains with IBT. Certain of the
officers and Trustees of the Portfolio are officers and directors/trustees of
the above organizations.
- --------------------------------------------------------------------------------
(4) LINE OF CREDIT
The Portfolio participates with other portfolios and funds managed by BMR or EVM
in a $120 million unsecured line of credit agreement with a bank. The line of
credit consists of a $20 million committed facility and an $100 million
discretionary facility. Interest is charged to each portfolio or fund based on
its borrowings at an amount above either the bank's adjusted certificate of
deposit rate, a variable adjusted certificate of deposit rate, or a federal
funds effective rate. In addition, a fee computed at an annual rate of 1/4 of 1%
on the $20 million committed facility and on the daily unused portion of the
$100 million discretionary facility is allocated among the participating
portfolios and funds at the end of each quarter. The average daily loan balance
for the year ended December 31, 1994, was $981,635 and the average interest rate
was 5.87%. The maximum borrowings outstanding at any month end during the year
ended December 31, 1994 was $11,823,000.
- --------------------------------------------------------------------------------
(5) SECURITIES LENDING AGREEMENT
The Portfolio has established a securities lending agreement with a broker in
which the Portfolio lends portfolio securities to the broker in exchange for
collateral consisting of either cash or U.S. government securities. Under the
agreement, the Portfolio continues to earn interest on the securities loaned. If
the collateral received is U.S. government securities, the Portfolio will also
receive from the broker an additional loan premium fee computed as a varying
percentage of the market value of the securities loaned. If the collateral
received is cash, the Portfolio may invest the cash and receive any interest on
the amount invested but it must also pay the broker a loan rebate fee computed
as a varying percentage of the collateral received. The Portfolio did not
receive any loan premium fee during the year ended December 31, 1994, but did
incur $3,159,903 of loan rebate fees which have been included in interest
expense. The maximum liability for cash collateral received for securities
loaned at any month end during the period ended December 31, 1994, was
$79,592,900.
- --------------------------------------------------------------------------------
(6) FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES
The cost and unrealized appreciation/depreciation in the value of investment
securities owned at December 31, 1994, as computed on a federal income tax
basis, were as follows:
Aggregate cost $604,168,776
============
Gross unrealized depreciation $(29,362,529)
Gross unrealized appreciation 7,336,512
-------------
Net unrealized depreciation $(22,026,017)
============
- --------------------------------------------------------------------------------
(7) FINANCIAL INSTRUMENTS
The Portfolio regularly trades in financial instruments with off-balance sheet
risk in the normal course of its investing activities to assist in managing
exposure to various market risks. These financial instruments include written
options, forward foreign currency exchange contracts, and financial futures
contracts and may involve, to a varying degree, elements of risk in excess of
the amounts recognized for financial statement purposes.
The notional or contractual amounts of these instruments represent the
investment the Fund has in particular classes of financial instruments and does
not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when all related and offsetting transactions are considered.
A summary of obligations under these financial instruments at December 31, 1994
is as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACT NET UNREALIZED
EXPIRATION DATE CONTRACTS POSITION APPRECIATION
- --------------- --------- -------- --------------
<S> <C> <C> <C> <C>
3/95 900 U.S. Treasury Five Year Note Futures Short $202,422
========
</TABLE>
At December 31, 1994, the Fund had sufficient cash and/or securities to cover
margin requirements on any open futures contracts.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------
To the Trustees and Investors of
Government Obligations Portfolio:
We have audited the accompanying statement of assets and liabilities of
Government Obligations Portfolio, including the portfolio of investments, as of
December 31, 1994, and the related statement of operations for the year then
ended, the statement of changes in net assets and supplementary data for the
year ended December 31, 1994, and for the period from the start of business,
October 28, 1993, to December 31, 1993. These financial statements and
supplementary data are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements and
supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and supplementary data referred to
above present fairly, in all material respects, the financial position of
Government Obligations Portfolio as of December 31, 1994, the results of its
operations for the year then ended, the changes in its net assets and
supplementary data for the year ended December 31, 1994, and for the period from
the start of business, October 28, 1993, to December 31, 1993, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
-----------------------------------------------
INVESTMENT MANAGEMENT
EV TRADITIONAL OFFICERS TRUSTEES
GOVERNMENT M. DOZIER GARDNER DONALD R. DWIGHT
OBLIGATIONS FUND President, Trustee President, Dwight
24 Federal Street JAMES B. HAWKES Partners, Inc.
Boston, MA 02110 Vice President, Chairman,
Trustee Newspapers of
SUSAN M. SCHIFF New England, Inc.
Vice President SAMUEL L. HAYES,III
MICHAEL B. TERRY Jacob H. Schiff
Vice President Professor of
MARK S. VENEZIA Investment Banking,
Vice President Harvard
JAMES L. O'CONNOR University Graduate
Treasurer School of
THOMAS OTIS Business
Secretary Administration
JAMES F. ALBAN NORTON H. REAMER
Assistant Treasurer President and
JANET E. SANDERS Director, United Asset
Assistant Treasurer Management
and Assistant Corporation
Secretary JOHN L. THORNDIKE
Director, Fiduciary
Trust Company
JACK L. TREYNOR
Investment Adviser
and Consultant
-----------------------------------------
GOVERNMENT OFFICERS TRUSTEES
OBLIGATIONS M. DOZIER GARDNER DONALD R. DWIGHT
PORTFOLIO President, Trustee President, Dwight
24 Federal Street JAMES B. HAWKES Partners, Inc.
Boston, MA 02110 Vice President, Chairman,
Trustee Newspapers of
SUSAN M. SCHIFF New England, Inc.
Vice President and SAMUEL L. HAYES, III
Portfolio Manager Jacob H. Schiff
MARK S. VENEZIA Professor of
Vice President Investment Banking,
JAMES L. O'CONNOR Harvard
Treasurer University Graduate
THOMAS OTIS School of
Secretary Business
JAMES F. ALBAN Administration
Assistant Treasurer NORTON H. REAMER
JANET E. SANDERS President and
Assistant Treasurer Director,
and Assistant United Asset
Secretary Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Trust Company
JACK L. TREYNOR
Investment Adviser
and Consultant
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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
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV TRADITIONAL GOVERNMENT
OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110 T-GOSRC
EV TRADITIONAL
GOVERNMENT
OBLIGATIONS
FUND
[Photograph]
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1994
