<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 28, 1995
1933 ACT FILE NO. 2-90946
1940 ACT FILE NO. 811-4015
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
[X]
POST-EFFECTIVE AMENDMENT NO. 21
[X]
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
[X]
AMENDMENT NO. 24
[X]
EATON VANCE GOVERNMENT OBLIGATIONS TRUST
----------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
---------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
617-482-8260
-------------------------------
(REGISTRANT'S TELEPHONE NUMBER)
H. DAY BRIGHAM, JR.
24 FEDERAL STREET, BOSTON, MASSACHUSETTS 02110
---------------------------------
(NAME AND ADDRESS OF AGENT FOR SERVICE)
It is proposed that this filing will become effective on May 1, 1995
pursuant to paragraph (a) of Rule 485.
The exhibit index required by Rule 483(a) under the Securities Act of 1933
is located on page in the sequential numbering system of the manually
signed copy of this Registration Statement.
The Registrant has filed a Declaration pursuant to Rule 24f-2 and on
February 28, 1994 filed its "Notice" as required by that Rule for the fiscal
year ended December 31, 1993.
Government Obligations Portfolio has also executed this Registration
Statement.
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<PAGE>
This Amendment to the registration statement on Form N-1A consists of the
following documents and papers:
Cross Reference Sheets required by Rule 481(a) under Securities Act of 1933
Part A--The Prospectus of:
EV Classic Government Obligation Fund
Eaton Vance Short-Term Treasury Fund
Part B--Statement of Additional Information of:
EV Classic Government Obligations Fund
Eaton Vance Short-Term Treasury Fund
Part C--Other Information
Signatures
Exhibit Index Required by Rule 483(a) under the Securities Act of 1933
Exhibits
This Amendment is not intended to amend the Prospectuses and Statements of
Additional Information of any other Series of the Registrant not identified
above.
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS TRUST
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ----- ------- ------------------------------
1. ............. Cover Page Cover Page
2. ............. Synopsis Shareholder and Fund Expenses
3. ............. Condensed Financial The Fund's Financial
Information Highlights; Performance
Information
4. ............. General Description of The Fund's Investment
Registrant Objective; How the Fund and
the Portfolio Invest their
Assets; Active Management
Strategies; Organization of
the Fund and the Portfolio
5. ............. Management of the Fund Management of the Fund and the
Portfolio
5A.............. Management's Discussion of Not Applicable
Fund Performance
6. ............. Capital Stock and Other Organization of the Fund and
Securities the Portfolio; Report to
Shareholders; The Lifetime
Investing Account/
Distribution Options;
Distributions and Taxes
7. ............. Purchase of Securities Valuing Fund Shares; How to
Being Offered Buy Fund Shares; The
Lifetime Investing Account/
Distribution Options;
Distribution Plan; The Eaton
Vance Exchange Privilege;
Eaton Vance Shareholder
Services
8. ............. Redemption or Repurchase How to Redeem Fund Shares
9. ............. Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ----- ------- ------------------------------
10. ............. Cover Page Cover Page
11. ............. Table of Contents Table of Contents
12. ............. General Information and Other Information
History
13. ............. Investment Objectives and Additional Information about
Policies Investment Policies;
Investment Restrictions
14. ............. Management of the Fund Trustees and Officers; Fees
and Expenses
15. ............. Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............. Investment Advisory and Investment Adviser and
Other Services Administrator; Distribution
Plan; Custodian; Independent
Accountants; Fees and
Expenses
17. ............. Brokerage Allocation and Portfolio Security
Other Practices Transactions; Fees and
Expenses
18. ............. Capital Stock and Other Other Information
Securities
19. ............. Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal
Being Offered Underwriter; Service for
Withdrawal; Distribution
Plan; Fees and Expenses
20. ............. Tax Status Taxes
21. ............. Underwriters Principal Underwriter; Fees
and Expenses
22. ............. Calculation of Performance Investment Performance;
Data Performance Information
23. ............. Financial Statements Financial Statements
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS TRUST
EATON VANCE SHORT-TERM TREASURY FUND
CROSS REFERENCE SHEET
ITEMS REQUIRED BY FORM N-1A
---------------------------
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- ----- ------- ------------------------------
1. ............. Cover Page Cover Page
2. ............. Synopsis Shareholder and Fund Expenses
3. ............. Condensed Financial The Fund's Financial
Information Highlights; Performance
Information
4. ............. General Description of The Fund and its Investment
Registrant Objective; How the Fund
Invests its Assets;
Organization of the Fund
5. ............. Management of the Fund Management of the Fund
5A. ............ Management's Discussion of Not Applicable
Fund Performance
6. ............. Capital Stock and Other Organization of the Fund;
Securities Reports to Shareholders; The
Lifetime Investing Account/
Distribution Options;
Distributions and Taxes
7. ............. Purchase of Securities Valuing Fund Shares; How to
Being Offered Buy Fund Shares; The
Lifetime Investing Account/
Distribution Options;
Distribution Plan; The Eaton
Vance Exchange Privilege;
Eaton Vance Shareholder
Services
8. ............. Redemption or Repurchase How to Redeem Fund Shares
9. ............. Pending Legal Proceedings Not Applicable
PART B STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
- ----- ------- ------------------------------
10. ............. Cover Page Cover Page
11. ............. Table of Contents Table of Contents
12. ............. General Information and Not Applicable
History
13. ............. Investment Objectives and Investment Objective and
Policies Policies; Investment
Restrictions
14. ............. Management of the Fund Trustees and Officers
15. ............. Control Persons and Control Persons and Principal
Principal Holders of Holders of Securities
Securities
16. ............. Investment Advisory and Investment Adviser; Custodian;
Other Services Independent Accountants;
Distribution Plan; Other
Information
17. ............. Brokerage Allocation and Portfolio Security
Other Practices Transactions; Investment
Objective and Policies
18. ............. Capital Stock and Other Other Information
Securities
19. ............. Purchase, Redemption and Determination of Net Asset
Pricing of Securities Value; Principal Underwriter;
Being Offered Distribution Plan
20. ............. Tax Status Taxes
21. ............. Underwriters Principal Underwriter
22. ............. Calculation of Performance Investment Performance
Data
23. ............. Financial Statements Financial Statements
<PAGE>
PART A
INFORMATION REQUIRED IN A PROSPECTUS
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
IN SEEKING HIGH CURRENT RETURN, EV CLASSIC GOVERNMENT OBLIGATIONS FUND (THE
"FUND") IS A MUTUAL FUND SEEKING A HIGH CURRENT RETURN BY INVESTING IN U.S.
GOVERNMENT SECURITIES AND ENGAGING IN ACTIVE MANAGEMENT STRATEGIES. 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 BY DIRECTLY INVESTING IN AND MANAGING ITS OWN PORTFOLIO OF
SECURITIES. THE FUND IS A SERIES OF EATON VANCE GOVERNMENT OBLIGATIONS TRUST
(THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, 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.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated May 1, 1995 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 located at
24 Federal Street, Boston, MA 02110.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES 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 PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
--------------------
<TABLE>
<CAPTION>
Page Page
<S> <C> <C> <C>
Shareholder and Fund Expenses ..................... 2 How to Buy Fund Shares ........................ 17
The Fund's Financial Highlights ................... 3 How to Redeem Fund Shares ..................... 19
The Fund's Investment Objective ................... 4 Reports to Shareholders ....................... 20
How the Fund and the Portfolio Invest The Lifetime Investing Account/Distribution
their Assets .................................... 4 Options ..................................... 20
Active Management Strategies ...................... 6 The Eaton Vance Exchange Privilege ............ 21
Organization of the Fund and the Portfolio ........ 10 Eaton Vance Shareholder Services .............. 22
Management of the Fund and the Portfolio .......... 12 Distributions and Taxes ....................... 23
Distribution Plan ................................. 14 Performance Information ....................... 25
Valuing Fund Shares ............................... 17
</TABLE>
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PROSPECTUS DATED MAY 1, 1995
<PAGE>
<TABLE>
<CAPTION>
SHAREHOLDER AND FUND EXPENSES<F1>
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SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Fees to Exchange Shares None
Contingent Deferred Sales Charges Imposed on Redemption During
the First Year (as a percentage of redemption proceeds
exclusive of all reinvestments and capital appreciation in
the account)<F2> 100%
ANNUAL FUND AND ALLOCATED PORTFOLIO OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Adviser Fee 0.74%
Rule 12b-1 Distribution (and Service) Fees 1.00%
Interest Expense 0.57%
Other Expenses 0.41%
-----
Total Operating Expenses 2.72%
-----
-----
<CAPTION>
EXAMPLE: 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- -------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses (including a contingent deferred
sales charge in the case of redemption during the first year after purchase)
on a $1,000 investment, assuming (a) 5% annual return and (b) redemption at
the end of each period: $38 $84 $144 $305
An investor would pay the following expenses on the same investment,
assuming (a) 5% return and (b) no redemptions: $28 $84 $144 $305
Notes:
<FN>
<F1>The purpose of the above table and Example is to summarize the aggregate
expenses of the Fund and the Portfolio 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 percentages indicated as Annual Fund and Allocated
Portfolio Operating Expenses and the amounts included in the Example are
based on the Fund's and the Portfolio's results for the fiscal year ended
December 31, 1994. The table and Example should not be considered a
representation of future expenses and actual expenses may be greater or less
than those shown. 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 Fund Shares." Because the Fund makes payments under its
Distribution Plan adopted under Rule 12b-1, a long-term shareholder may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc.
See "Distribution Plan". 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".
<F2>The contingent deferred sales charge will be imposed on the redemption of
shares purchased on or after January 30, 1995. No contingent deferred sales
charge is imposed on (a) shares purchased more than one year prior to
redemption, (b) shares acquired through the reinvestment of dividends and
distributions or (c) any appreciation in value of other shares in the
account (see "How to Redeem Fund Shares"), an no such charge is imposed on
exchanges of Fund shares for shares of one or more other funds listed under
"The Eaton Vance Exchange Privilege."
</FN>
</TABLE>
<PAGE>
THE FUND'S FINANCIAL HIGHLIGHTS
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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 L.L.P.,
independent accountants, as experts in accounting and auditing. 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.
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YEAR ENDED DECEMBER 31,
------------------------
1994 1993*
------- -------
NET ASSET VALUE $ 9.9400 $10.0000
- -- Beginning of period
------- -------
INCOME FROM OPERATIONS:
Net investment income $ 0.6264 $ 0.1067
Net realized and unrealized loss (0.8763) (0.0514)
on investments
------- -------
Total income (loss) from operations $(0.2499) $ 0.0553
------- -------
Less distributions:
From net investment income $(0.6264) $(0.1067)
In excess of net investment income\1/ (0.0837) (0.0086)
------- -------
Total distributions $(0.7101) $(0.1153)
------- -------
NET ASSET VALUE -- End of period $ 8.9800 $ 9.9400
------- -------
------- -------
TOTAL RETURN\2/ (2.54)% 0.34%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to average net assets\3/ 0.57% 0.54%+
Ratio of other expenses to average net assets\3/ 2.15% 2.31%+
Ratio of net investment income to average net assets 6.60% 5.45%+
NET ASSETS AT END OF PERIOD (000's omitted) $ 39,586 $17,441
+Computed on an annualized basis.
\1/Please refer to "Distributions and Taxes" and "Performance Information" for
further information.
\2/Total return is calculated assuming a purchase at the net asset value on the
last day of each period reported. Dividends and distibutions, if any, are
assumed to be reinvested at the net asset value on the payable date.
\3/Includes the Fund's share of Government Obligations Portfolio's allocated
expenses.
*For the period from the start of business, November 1, 1993, to December 31,
1993.
<PAGE>
THE FUND'S INVESTMENT OBJECTIVE
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THE FUND'S INVESTMENT OBJECTIVE 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 also seeks to realize a high current return. 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
- ------------------------------------------------------------------------------
IN SEEKING HIGH CURRENT RETURN, THE PORTFOLIO 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 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.
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. 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.
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.
REPURCHASE AGREEMENTS. 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.
TEMPORARY INVESTMENTS. 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.
OTHER INVESTMENTS AND STRATEGIES. 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 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 discussed under "Active Management Strategies". A discussion of
the greater costs and risks which may result from the Portfolio's investment
policy with respect to leveraging through borrowing is also 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.
FLUCTUATIONS IN VALUE. 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.
INVESTMENT RESTRICTIONS. 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. 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.
ACTIVE MANAGEMENT STRATEGIES
- ------------------------------------------------------------------------------
DERIVATIVE INSTRUMENTS. The Portfolio may purchase or enter into the derivative
instruments described below to enhance return, to hedge against fluctuations in
interest rates, securities prices or currency exchange rates, to change the
duration of the Portfolio's fixed income portfolio or as a substitute for the
purchase or sale of securities or currency. The Portfolio's investments in
derivative securities may include certain mortgage-backed and indexed
securities. These securities will either be issued by the U.S. Government or one
of its agencies or instrumentalities or, if privately issued, collateralized by
mortgages that are insured, guaranteed or otherwise backed by the U.S.
Government or its agencies or instrumentalities. The Portfolio's transactions in
derivative contracts may include the purchase or sale of futures contracts on
securities, indices or currency; options on futures contracts; options on
securities, indices or currency; and forward contracts to purchase or sell
securities or currency.
All of the Portfolios' transactions in derivative instruments involve a risk
of loss or depreciation due to unanticipated adverse changes in interest rates,
securities prices or currency exchange rates. The loss on derivative contracts
(other than purchased options) may exceed the Portfolio's initial investment
in these contracts. In addition, the Portfolio may lose the entire premium paid
for purchased options that expire before they can be profitably exercised by the
Portfolio.
MORTGAGE-BACKED SECURITIES. Mortgage-backed securities represent participation
interests in pools of adjustable and fixed mortgage loans. Unlike conventional
debt obligations, mortgage-backed securities provide monthly payments derived
from the monthly interest and principal payments (including any prepayments)
made by the individual borrowers on the pooled mortgage loans. The mortgage
loans underlying mortgage-backed securities are generally subject to a greater
rate of principal prepayments in a declining interest rate environment and to a
lesser rate of principal prepayments in an increasing interest rate environment.
Under certain interest and prepayment rate scenarios, the Portfolio may fail to
recover the full amount of its investment in mortgage-backed securities,
not-withstanding any direct or indirect governmental or agency guarantee. Since
faster than expected prepayments must usually be invested in lower yielding
securities, mortgage-backed securities are less effective than conventional
bonds in "locking in" a specified interest rate. Conversely, in a rising
interest rate environment, a declining prepayment rate will extend the average
life of many mortgage-backed securities. This possibility is often referred to
as extension risk. Extending the average life of a mortgage-backed security
increases the risk of depreciation due to future increases in market interest
rates.
The Portfolio's investments in mortgage-backed securities may include
conventional mortgage passthrough securities, stripped mortgage-backed
securities("SMBS") and certain classes of multiple class collateralized mortgage
obligations ("CMOs"). Examples of SMBS include interest only and principal only
securities. Senior CMO classes will typically have priority over residual CMO
classes as to the receipt of principal and/or interest payments on the
underlying mortgages.
The CMO classes in which the Portfolio may invest include sequential and
parallel pay CMOs, including planned amortization class ("PAC") and target
amortization class ("TAC") securities. The Portfolio may also invest in the
floating rate mortgage-backed securities listed under "Indexed Securities."
INDEXED SECURITIES. The Portfolio may invest in indexed securities. The interest
rate or, in some cases, the principal payable at the maturity of an indexed
security may change positively or inversely in relation to one or more interest
rates, financial indices, currency rates or other financial indicators
("reference prices"). An indexed security may be leveraged to the extent that
the magnitude of any change in the interest rate or principal payable on an
indexed security is a multiple of the change in the reference price. Thus,
indexed securities may decline in value due to adverse market changes in
reference prices.
The indexed securities purchased by the Portfolio may include interest only
("IO") and principal only ("PO") securities, floating rate securities linked
to the Cost of Funds Index ("COFI floaters"), other "lagging rate"floating rate
securities, floating rate securities that are subject to a maximum interest rate
("capped floaters"), leveraged floating rate securities ("super floaters"),
leveraged inverse floating rate securities ("inverse floaters"), dual index
floaters, range floaters, index amortizing notes and various currency indexed
notes.
RISKS OF MORTGAGE-BACKED AND INDEXED SECURITIES. Different types of derivative
debt securities are subject to different combinations of prepayment, extension,
interest rate and/or other market risks. Conventional mortgage pass-through
securities and sequential pay CMOs are subject to all of these risks, but are
typically not leveraged. PACs, TACs and other senior classes of sequential and
parallel pay CMOs involve less exposure to prepayment, extension and interest
rate risk than other mortgage-backed securities, provided that prepayment rates
remain within expected prepayment ranges or "collars."
The risk of early prepayments is the primary risk associated with mortgage
IOs, super floaters and other leveraged floating rate mortgage-backed
securities. The primary risks associated with COFI floaters, other "lagging
rate" floaters, capped floaters, inverse floaters, POs and leveraged inverse IOs
are the potential extension of average life and/or depreciation due to rising
interest rates. Although not mortgage-backed securities, index amortizing notes
and other callable securities are subject to extension risk resulting from the
issuer's failure to exercise its option to call or redeem the notes before their
stated maturity date. The residual classes of CMOs are subject to both
prepayment and extension risk.
Other types of floating rate derivative debt securities present more complex
types of interest rate risks. For example, range floaters are subject to the
risk that the coupon will be reduced to below market rates if a designated
interest rate floats outside of a specified interest rate band or collar. Dual
index or yield curve floaters are subject to depreciation in the event of an
unfavorable change in the spread between two designated interest rates. The
market values of currency linked securities may be very volatile and may decline
during periods of unstable currency exchange rates.
DERIVATIVE CONTRACTS. The Portfolio may purchase and sell a variety of
derivative contracts, including futures contracts on securities, indices or
currency; options on futures contracts; options on securities, indices or
currency; and forward contracts to purchase or sell securities or currency. The
Portfolio incurs liability to a counterparty in connection with transactions in
futures contracts, forward contracts and in selling options. The Portfolio pays
a premium for purchased options. In addition, the Portfolio incurs transaction
costs in opening and closing positions in derivative contracts.
RISKS ASSOCIATED WITH DERIVATIVE SECURITIES AND CONTRACTS. The risks associated
with the Portfolio's transactions in derivative securities and contracts may
include some or all of the following: (1) market risk; (2) leverage and
volatility risk; (3) correlation risk; (4) credit risk; and (5) liquidity and
valuation risk.
MARKET RISK. Investments in mortgage-backed and indexed securities are subject
to the prepayment, extension, interest rate and other market risks described
above. Entering into a derivative contract involves a risk that the applicable
market will move against the Portfolio's position and that the Portfolio will
incur a loss. For derivative contracts other than purchased options, this loss
may exceed the amount of the initial investment made or the premium received by
the Portfolio.
LEVERAGE AND VOLATILITY RISK. Derivative instruments may sometimes increase or
leverage the Portfolio's exposure to a particular market risk. Leverage enhances
the price volatility of derivative instruments held by the Portfolio. The
Portfolio may partially offset the leverage inherent in derivative contracts by
maintaining a segregated account consisting of cash and liquid, high grade debt
securities, by holding offsetting portfolio securities or currency positions or
by covering written options.
CORRELATION RISK. The Portfolio's success in using derivative instruments to
hedge portfolio assets depends on the degree of price correlation between the
derivative instrument and the hedged asset. Imperfect correlation may be caused
by several factors, including temporary price disparities among the trading
markets for the derivative instrument, the assets underlying the derivative
instrument and the Portfolio's assets.
CREDIT RISK. Derivative securities and over-the-counter derivative contracts
involve a risk that the issuer or counterparty will fail to perform its
contractual obligations.
LIQUIDITY AND VALUATION RISK. Some derivative securities are not readily
marketable or may become illiquid under adverse market conditions. In addition,
during periods of extreme market volatility, a commodity or option exchange may
suspend or limit trading in an exchange-traded derivative contract, which may
make the contract temporarily illiquid and difficult to price. The staff of the
Securities and Exchange Commission ("SEC") takes the position that privately
issued IOs, POs and other SMBS and certain over-the-counter options are subject
to the Portfolio's 15% limit on illiquid investments. The Portfolio's ability to
terminate over-the-counter derivative contracts may depend on the cooperation of
the counterparties to such contracts. For thinly traded derivative securities
and contracts, the only source of price quotations may be the selling dealer or
counterparty.
SECURITIES LENDING. 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 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.
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 at December 31, 1994 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, 1994, was
$1,660,092 and the average daily 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.
ORGANIZATION OF THE FUND AND THE PORTFOLIO
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THE 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 Trust and redeemable as described under "How to Redeem 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.
THE PORTFOLIO IS ORGANIZED AS A TRUST UNDER THE LAWS OF THE STATE OF NEW
YORK 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, 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 exists and the Portfolio itself
is 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 "The Fund's Investment
Objective" and "How the Fund and the Portfolio Invest their Assets". Further
information regarding investment practices may 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, at
least when the assets of the Portfolio exceed $500 million.
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 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. If a shareholder redeems shares within one year of their purchase
because of a change in the nonfundamental objective or policies of the Fund,
those shares may be subject to a contingent deferred sales charge as described
in "How to Redeem Fund Shares." 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, such Trustees 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 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.
The Trustees of the Trust, including a majority of the noninterested
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 action 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.
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.
Acting under the general supervision of the Board of Trustees of the
Portfolio, BMR manages the Portfolio's investments and affairs. Under its
investment advisory agreement with the Portfolio, BMR receives a monthly
advisory fee of .0625% (equal to .75% annually) of the average daily net assets
of the Portfolio up to $500 million. On net assets of $500 million and over the
anual 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%
For the fiscal year ended December 31, 1994, the Portfolio paid BMR advisory
fees equivalent to .74% (annualized) of the Portfolio's average daily net assets
for such period.
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 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 of the Portfolio since it
commenced operations. She has been a Vice President of Eaton Vance and BMR since
1993 and an employee of Eaton Vance since 1985.
BMR OR EATON VANCE ACTS AS INVESTMENT ADVISER TO INVESTMENT COMPANIES AND
VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER MANAGEMENT OF
APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned subsidiary of Eaton
Vance Corp., a publicly held 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 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. As Administrator, 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 such services.
The Portfolio and the Fund, as the case may be, will each be responsible for
all 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 each of the Fund or the Portfolio, 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 Fund or the Portfolio, as the case may be, will also each bear expenses
incurred in connection with litigation in which the Fund or the Portfolio, as
the case may be, is a party and any legal obligation to indemnify its respective
officers and Trustees with respect thereto.
DISTRIBUTION PLAN
- ------------------------------------------------------------------------------
THE FUND FINANCES DISTRIBUTION ACTIVITIES AND HAS ADOPTED A DISTRIBUTION PLAN
(THE "PLAN") PURSUANT TO RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940.
Rule 12b-1 permits a mutual fund, such as the Fund, to finance distribution
activities and bear expenses associated with the distribution of its shares
provided that any payments made by the Fund are made pursuant to a written plan
adopted in accordance with the Rule. The Plan is also subject to and complies
with the sales charge rule of the National Association of Securities Dealers,
Inc. (the "NASD Rule"). The Plan is described in the Statement of Additional
Information, and the following is a brief description of the salient features of
the Plan. The Plan provides that the Fund, subject to the NASD Rule, will pay
sales commissions and distribution fees to the Principal Underwriter only after
and as a result of the sale of shares of the Fund. On each sale of Fund shares
(excluding reinvestment of distributions) the Fund will pay the Principal
Underwriter (i) sales commissions equal to 6.25% of the amount received by the
Fund for each share sold and (ii) distribution fees calculated by applying the
rate of 1% over the prime rate then reported in The Wall Street Journal to the
outstanding balance of Uncovered Distribution Charges (as described below) of
the Principal Underwriter. On sales made prior to January 30, 1995, the
Principal Underwriter currently pays monthly sales commissions to a financial
service firm (an "Authorized Firm") in amounts anticipated to be equivalent to
.75%, annualized, of the assets maintained in the Fund by the customers of such
Firm. On sales of shares made on January 30, 1995 and thereafter, the Principal
Underwriter currently expects to pay to an Authorized Firm (a) sales commissions
(except on exchange transactions and reinvestments) at the time of sale equal to
.75% of the purchase price of the shares sold by such Firm, and (b) monthly
sales commissions approximately equivalent to 1/12 of .75% of the value of
shares sold by such Firm and remaining outstanding for at least one year. The
Plan is designed to permit an investor to purchase Fund shares through an
Authorized Firm without incurring an initial sales charge and at the same time
permit the Principal Underwriter to compensate Authorized Firms in connection
with the sale of Fund shares.
THE NASD RULE REQUIRES THE FUND TO LIMIT ITS ANNUAL PAYMENTS OF SALES
COMMISSIONS AND DISTRIBUTION FEES TO THE PRINCIPAL UNDERWRITER TO AN AMOUNT NOT
EXCEEDING .75% OF THE FUND'S AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR.
Accordingly, the Fund accrues daily an amount at the rate of 1/365 of .75% of
the Fund's net assets, and pays such accrued amounts monthly to the Principal
Underwriter. The Plan requires such accruals to be automatically discontinued
during any period in which there are no outstanding Uncovered Distribution
Charges under the Plan. Uncovered Distribution Charges are calculated daily and,
briefly, are equivalent to all unpaid sales commissions and distribution fees to
which the Principal Underwriter is entitled under the Plan less all contingent
deferred sales charges theretofore paid to the Principal Underwriter. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts of all payments made to the Principal
Underwriter pursuant to the Plan, including any contingent deferred sales
charges, have exceeded the total expenses theretofore incurred by such
organization in distributing shares of the Fund. Total expenses for this purpose
will include an allocable portion of the overhead costs of such organization and
its branch offices.
The amount payable to the Principal Underwriter with respect to each day
will be accrued on such day as a liability of the Fund and will accordingly
reduce the Fund's net assets upon such accrual, all in accordance with generally
accepted accounting principles. The amount payable on each day is limited to
1/365 of .75% of the Fund's net assets on such day. The level of the Fund's net
assets changes each day and depends upon the amount of sales and redemptions of
Fund shares, the changes in the value of the investments held by the Portfolio,
the expenses of the Fund and the Portfolio accrued and allocated to the Fund on
such day, income on portfolio investments of the Portfolio accrued and allocated
to the Fund on such day, and any dividends and distributions declared on Fund
shares. The Fund does not accrue possible future payments as a liability of the
Fund or reduce the Fund's current net assets in respect of unknown amounts which
may become payable under the Plan in the future because the standards for
accrual of a liability under such accounting principles have not been satisfied.
The Fund's Plan provides that the Fund will receive all contingent deferred
sales charges and will make no payments to the Principal Underwriter in respect
of any day on which there are no outstanding Uncovered Distribution Charges of
the Principal Underwriter. Contingent deferred sales charges and accrued amounts
will be paid by the Fund to the Principal Underwriter whenever there exist
Uncovered Distribution Charges under the Fund's Plan.
The provisions of the Plan relating to payments of sales commissions and
distribution fees to the Principal Underwriter are also included in the
Distribution Agreement between the Trust on behalf of the Fund and the Principal
Underwriter. The Plan continues in effect through and including April 28, 1995,
and shall continue in effect indefinitely thereafter for so long as such
continuance is approved at least annually by the vote of both a majority of (i)
the Trustees of the Trust who are not interested persons of the Trust and who
have no direct or indirect financial interest in the operation of the Plan or
any agreements related to the Plan (the "Rule 12b-1 Trustees") and (ii) all of
the Trustees then in office, and the Distribution Agreement contains a similar
provision. The Plan and Distribution Agreement may be terminated at any time by
vote of a majority of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund.
Periods with a high level of sales of Fund shares accompanied by a low level
of early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter. Conversely,
periods with a low level of sales of Fund shares accompanied by a high level of
early redemptions of Fund shares resulting in the imposition of contingent
deferred sales charges will tend to reduce the time during which there will
exist Uncovered Distribution Charges of the Principal Underwriter.
Because of the NASD Rule limitation on the amount of sales commissions and
distribution fees paid to the Principal Underwriter during any fiscal year, a
high level of sales of Fund shares during the initial years of the Fund's
operations would cause a large portion of the sales commissions attributable to
a sale of Fund shares to be accrued and paid by the Fund to the Principal
Underwriter in fiscal years subsequent to the year in which such shares were
sold. This spreading of sales commissions payments under the Plan over an
extended period would result in the incurrence and payment of increased
distribution fees under the Plan.
For the fiscal year ended December 31, 1994, the Fund paid or accrued sales
commissions under the Plan equivalent to .75% (annualized) of the Fund's average
daily net assets. As of December 31, 1994 the outstanding Uncovered Distribution
Charges of the Principal Underwriter on such day calculated under the Plan
amounted to approximately $5,572,000 (which amount was equivalent to 14.07% of
the Fund's net assets on such day).
THE PLAN ALSO AUTHORIZES THE FUND TO MAKE PAYMENTS OF SERVICE FEES TO THE
PRINCIPAL UNDERWRITER, AUTHORIZED FIRMS AND OTHER PERSONS IN AMOUNTS NOT
EXCEEDING .25% OF AVERAGE DAILY NET ASSETS FOR EACH FISCAL YEAR. The Trustees of
the Trust have initially implemented this provision of the Plan by authorizing
the Fund to make monthly service fee payments to the Principal Underwriter in
amounts not expected to exceed .25% of the Fund's average daily net assets for
each fiscal year. The Fund accrues the service fee daily at the rate of 1/365 of
.25% of the Fund's net assets. On sales made prior to January 30, 1995, the
Principal Underwriter currently makes monthly service fee payments to an
Authorized Firm in amounts anticipated to be equivalent to .25% annualized, of
the assets maintained in the Fund by the customers of such Firm. On sales of
shares made on January 30, 1995 and thereafter, the Principal Underwriter
currently expects to pay to an Authorized Firm (a) a service fee (except on
exchange transactions and reinvestments) at the time of sale equal to .25% of
the purchase price of the shares sold by such Firm, and (b) monthly servce fees
approximately equivalent to 1/12 of .25% of the value of shares sold by such
Firm and remaining outstanding for at least one year. As permitted by the NASD
Rule, all service fee payments are made for personal services and/or the
maintenance of shareholder accounts. Service fees are separate and distinct from
the sales commissions and distribution fees payable by the Fund to the Principal
Underwriter, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of the Principal Underwriter.
During the first year after a purchase of Fund shares, the Principal Underwriter
will retain the service fee as reimbursement for the service fee payment made to
the Authorized Firm at the time of sale. For the fiscal year ended December 31,
1994, the Fund paid or accrued service fees under the Plan equivalent to 0.25%
(annualized) of the Fund's average daily net assets for such period.
The Plan as currently implemented by the Trustees authorizes payments of
sales commissions, distribution fees and service fees to the Principal
Underwriter which may be equivalent, on an aggregate basis during any fiscal
year of the Fund, to 1% of the Fund's average daily net assets for such year.
The Fund believes that the combined rate of all these payments may be higher
than the rate of payments made under distribution plans adopted by other
investment companies pursuant to Rule 12b-1. Although the Principal Underwriter
will use its own funds (which may be borrowed from banks) to pay sales
commissions and service fees at the time of sale, it is anticipated that the
Eaton Vance organization will profit by reason of the operation of the Plan
through increases in the Fund's assets (thereby increasing the advisory fees
payable to BMR by the Portfolio) resulting from sale of Fund shares and through
amounts paid under the Plan to the Principal Underwriter and contingent deferred
sales charges paid to the Principal Underwriter.
The Principal Underwriter may, from time to time, at its own expense,
provide additional incentives to Authorized 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 Authorized
Firms whose representatives are expected to sell significant amounts of shares.
In addition, the Principal Underwriter may from time to time increase or
decrease the sales commissions payable to Authorized Firms.
The Fund may, in its absolute discretion, suspend, discontinue or limit the
offering of its shares at any time. In determining whether any such action
should be taken, the Fund's management intends to consider all relevant factors,
including without limitation the size of the Fund, the investment climate and
market conditions, the volume of sales and redemptions of Fund shares and the
amount of Uncovered Distribution Charges of the Principal Underwriter. The Plan
may continue in effect and payments may be made under the Plan following any
such suspension, discontinuance or limitation of the offering of Fund shares;
however, the Fund is not contractually obligated to continue the Plan for any
particular period of time. Suspension of the offering of Fund shares would not,
of course, affect a shareholder's ability to redeem shares.
VALUING FUND SHARES
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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 (normally 4:00 p.m. New York time). The Fund's net asset value per
share is determined by Investors Bank & Trust Company ("IBT") (as agent for the
Fund) in the manner authorized by the Trustees of the Trust. 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).
Authorized Firms must communicate an investor's order to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per Fund share. It is the Authorized Firms'
responsibility to transmit orders promptly to the Principal Underwriter, which
is a wholly-owned subsidiary of Eaton Vance.
The Portfolio's net asset value is also determined as of the close of
regular trading on the Exchange by IBT (as custodian and 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 vthe 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 or at the
direction of the Trustees of the Portfolio. For further information regarding
the valuation of the Portfolio's assets, see "Determination of Net Asset Value"
in the Statement of Additional Information. Eaton Vance Corp. owns 77.3% of the
outstanding stock of IBT, the Fund's and the Portfolio's custodian.
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE.
HOW TO BUY FUND SHARES
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SHARES OF THE FUND MAY BE PURCHASED FOR CASH OR MAY BE ACQUIRED IN EXCHANGE FOR
SECURITIES. Investors may purchase shares of the Fund through Authorized Firms
at the net asset value per share of the Fund next determined an order is
effective. The Fund may suspend the offering of shares at any time and may
refuse any order for the purchase 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 (the "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".
In connection with employee benefit or other continuous group purchase plans
under which the average initial purchase by a participant of the plan is $1,000
or more, the Fund may accept initial investments of less than $1,000 on the part
of an individual participant. In the event a shareholder who is a participant of
such a plan terminates his or her participation in the plan, the shares will be
transferred to a regular individual account. However, such account will be
subject to the right of redemption by the Fund as described under "How to Redeem
Fund Shares."
ACQUIRING FUND SHARES IN EXCHANGE FOR SECURITIES. IBT, as escrow agent, will
receive securities acceptable to Eaton Vance, as Administrator, in exchange for
Fund shares at their net asset value as determined above. 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 net asset value per
Fund share on the day such proceeds are received. Eaton Vance will use
reasonable efforts to obtain the current market price for such securities but
does not guarantee the best available price. 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 Classic Government Obligations Fund
IN THE CASE OF PHYSICAL DELIVERY:
Investors Bank & Trust Company
Attention: EV Classic 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, must 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
or her tax adviser with respect to the particular Federal, state and local tax
consequences of exchanging securities for Fund shares.
IF YOU DON'T HAVE AN AUTHORIZED FIRM, EATON VANCE CAN RECOMMEND ONE.
HOW TO REDEEM FUND SHARES
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A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MASSACHUSETTS 02104, DURING ITS
BUSINESS HOURS A WRITTEN REQUEST FOR REDEMPTION IN GOOD ORDER, PLUS ANY SHARE
CERTIFICATES WITH EXECUTED STOCK POWERS. 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 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., 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
applicable contingent deferred sales charge described below and 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. The securities
so distributed would be valued pursuant to the Portfolio's valuation procedures.
If a shareholder received a distribution in kind, the shareholder could incur
brokerage or other charges in converting the securities to cash.
To sell shares at their net asset value through an Authorized Firm (a
repurchase), a shareholder can place a repurchase order with the Authorized
Firm, which may charge a fee. The value of such shares is based upon the net
asset value calculated after EVD, as the Fund's agent, receives the order. It is
the Authorized Firm's responsibility to transmit promptly repurchase orders to
EVD. Throughout this Prospectus, the word "redemption" is generally meant to
include a repurchase.
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 may be delayed up to 15 days from the purchase date when
the purchase check has not yet cleared. Redemptions or repurchases may result in
a taxable gain or loss.
Due to the high cost of maintaining small accounts, the Fund reserves the
right to redeem accounts with balances of less than $500. Prior to such a
redemption, shareholders will be given 60 days written notice to make additional
purchases. 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. No contingent deferred
sales charge will be imposed with respect to such involuntary redemptions.
CONTINGENT DEFERRED SALES CHARGE. Shares purchased on or after January 30, 1995
and redeemed within the first year of their purchase (except shares acquired
through the reinvestment of distributions) generally will be subject to a
contingent deferred sales charge. This contingent deferred sales charge is
imposed on any redemption the amount of which exceeds the aggregate value at the
time of redemption of (a) all shares in the account purchased more than one year
prior to the redemption, (b) all shares in the account acquired through
reinvestment of distributions, and (c) the increase, if any, of value in the
other shares in the account (nameley those purchased within the year preceding
the redemption) over the purchase price of such shares. Redemptions are
processed in a manner to maximize the amount of redemption proceeds which will
not be subject to a contingent deferred sales charge, i.e., each redemption will
be assumed to have been made first from the exempt amounts referred to in
clauses (a), (b) and (c) above, and second through liquidation of those shares
in the account referred to in clause (c) on a first-in-first out basis. Any
contingent deferred sales charge which is required to be imposed on share
redemptions will be equal to 1% of the net asset value of redeemed shares.
In calculating the contingent deferred sales charge upon the redemption of
Fund shares acquired in an exchange for shares of a fund currently listed under
"The Eaton Vance Exchange Privilege," the purchase of Fund shares acquired in
the exchange is deemed to have occurred at the time of the original purchase of
exchanged shares.
No contingent deferred sales charge will be imposed on Fund shares which
have been sold to Eaton Vance, its affiliates, to their respective employees or
clients. The contingent deferred sales charge will also be waived for shares
redeemed (1) pursuant to a Withdrawal Plan (see "Eaton Vance Shareholders
Services"), (2) as part of a distribution from a retirement plan qualified under
Seciton 401, 403(b) or 457 of the Internal Revenue Code, or (3) as part of a
minimum required distribution from other tax-sheltered retirements plans. The
contingent deferred sales charge will be paid to the Principal Underwriter or
the Fund. When paid to the Principal Underwriter it will reduce the amount of
Uncovered Distribution Charges calculated under the Fund's Distribution Plan.
See "Distribution Plan."
REPORTS TO SHAREHOLDERS
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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.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
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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.
At least quarterly, shareholders will receive a statement showing complete
details of any transaction and the current share balance in the account. THE
LIFETIME INVESTING ACCOUNT ALSO PERMITS A SHAREHOLDER TO MAKE ADDITIONAL
INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR MORE to The Shareholder
Services Group, Inc.
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 or in writing to The Shareholder Services Group, Inc., BOS725,
P.O. Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the
Fund and the account numbers).
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 account statement.
Share Option -- Dividends and capital gains will be reinvested in additional
shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those renvested, will be reduced by 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 in shares 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.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of the Fund are held in a "street name"
account with an Authorized Firm, all recordkeeping, transaction processing and
payments of distributions relating to the beneficial owner's account will be
performed by the Authorized Firm, and not by the Fund and its transfer agent.
Since the Fund will have no record of the beneficial owner's transactions, a
beneficial owner should contact the Authorized Firm to purchase, redeem or
exchange shares, to make changes in or give instructions concerning the account,
or to obtain information about the account. The transfer of shares in a "street
name" account to an account with another dealer or to an account directly with a
Fund involves special procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the account from the
Authorized Firm. 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.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of one or more other
funds in the Eaton Vance Classic Group of Funds and, when publicly available,
Eaton Vance Money Market Fund (availability expected on or about April 3, 1995)
which are distributed with a contingent deferred sales charge, on the basis of
the net asset value per share of each fund at the time of the exchange, provided
that such exchange offers are available only in states where shares of the fund
being acquired may be legally sold.
Each exchange must involve shares which hve a net asset value of at least
$1,000. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days notice prior to any termination or
material amendment of the exchange privilege. The Fund 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 Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. Applications and
prospectuses of other funds are available from Authorized Firms or the Principal
Underwriter. 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.
No contingent deferred sales charge is imposed on exchanges. For purposes of
calculating the contingent deferred sales charge upon redemption of shares
acquired in an exchange, the purchase of shares acquired in one or more
exchanges is deemed to have occurred at the time of the original purchase of the
exchanged shares.
Shares of the other funds in the Eaton Vance Classic Group of Funds and
Eaton Vance Money Market Fund (when available) may be 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.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.
provided 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). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as the shares
being exchanged. 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. An exchange may
result in a taxable gain or loss.
EATON VANCE SHAREHOLDER SERVICES
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THE FUND OFFERS THE FOLLOWING SERVICES, WHICH 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, are available from Authorized Firms or 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 dividends are reinvested.
The name of the shareholder, the Fund and the 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 these accounts.
WITHDRAWAL PLAN: A shareholder may draw on shareholdings systematically with
monthly or quarterly checks in an aggregate amount that does not exceed annually
12% of the account balance at the time the Plan is established. Such amount will
not be subject to a contingent deferred sales charge. See "How to Redeem Fund
Shares". A minimum deposit of $5,000 in shares is required.
REINVESTMENT PRIVILEGE: A SHAREHOLDER WHO HAS PURCHASED OR REDEEMED SHARES MAY
REINVEST, WITH CREDIT FOR ANY CONTINGENT DEFERRED SALES CHARGES PAID ON THE
REDEEMED OR REPURCHASED SHARES, ANY PORTION OR ALL OF THE REPURCHASE OR
REDEMPTION PROCEEDS (PLUS THAT AMOUNT NECESSARY TO ACQUIRE A FRACTIONAL SHARE TO
ROUND OFF THE PURCHASE TO THE NEAREST FULL SHARES) IN SHARES OF THE FUND,
provided that the reinvestment is effected within 30 days after such repurchase
or redemption. Shares are sold to a reinvesting shareholder at the next
determined net asset value following timely receipt of a written purchase order
by the Principal Underwriter or by the Fund (or by the Fund's Transfer Agent).
To the extent that any shares of the Fund are sold at a loss and the proceeds
are reinvested in shares of the Fund (or other shares of the Fund are acquired
within the period beginning 30 days before and ending 30 days after the date of
the redemption) some or all of the loss generally will not be allowed as a tax
deduction. Shareholders should consult their tax advisers concerning the tax
consequences of reinvestments.
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.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
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 AT THE TIME OF 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
twenty-second day of each month or the next business day thereafter. The Fund
anticipates that for tax purposes the entire distribution, whether paid in cash
or additional shares of the Fund, will constitute ordinary income to
shareholders. Shareholders reinvesting such distributions should treat the
amount of the entire distribution as the tax cost basis of the additional shares
acquired by reason of such reinvestment. 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. 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 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 allocated to the Fund and subsequently distributed to Fund
shareholders, will be taxable as ordinary income. Furthermore, because the
Portfolio 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.
Shareholders will receive annually tax information notices and Forms 1099 to
assist in the preparation of their Federal and state income tax returns 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 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
DOES NOT PAY FEDERAL INCOME OR EXCISE TAXES.
PERFORMANCE 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 (net asset value) 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 computing the average annual percentage change in value
of $1,000 invested at the maximum public offering price (net asset value) for
specified periods ending with the most recent calendar quarter, assuming
reinvestment of all distributions. The average annual total return calculation
assumes a complete redemption of the investment and the deduction of any
contingent deferred sales charges at the end of the period. The Fund may 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 net asset value
per share. 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 prescribed methods (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.
Performance figures published by the Fund which do not include the effect of
any applicable contingent deferred sales charge would be reduced if it were
included.
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. If the expenses of the Fund or the Portfolio are
paid by Eaton Vance, the Fund's performance will be higher.
<PAGE>
INVESTMENT ADVISER OF
GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC
GOVERNMENT OBLIGATIONS FUND EV Classic
Eaton Vance Management Government Obligations
24 Federal Street Fund
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(800) 225-6265
CUSTODIAN
Investors Bank & Trust Company Prospectus
24 Federal Street May 1, 1995
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
AUDITORS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EV CLASSIC
GOVERNMENT OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-GOP
<PAGE>
Part A
Information Required in a Prospectus
EATON VANCE SHORT-TERM TREASURY FUND
EATON VANCE SHORT-TERM TREASURY FUND (THE "FUND") IS A MUTUAL FUND SEEKING
CURRENT INCOME AND LIQUIDITY, BY INVESTING EXCLUSIVELY IN U.S. TREASURY
OBLIGATIONS. THE FUND IS A SERIES OF EATON VANCE GOVERNMENT OBLIGATIONS TRUST
(THE "TRUST").
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank or other insured depository institution, 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.
This Prospectus is designed to provide you with information you should know
before investing. Please retain this document for future reference. A Statement
of Additional Information dated May 1, 1995 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. (the "Principal Underwriter"), 24 Federal Street, Boston, MA
02110 (telephone (800) 225-6265). The Fund's investment adviser is Eaton Vance
Management (the "Investment Adviser") which is located at the same address.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
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 PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
<S> <C>
Shareholder and Fund Expenses ...................... 2 How to Redeem Fund Shares ...................... 9
The Fund's Financial Highlights .................... 3 Reports to Shareholders ........................ 11
The Fund and Its Investment Objective .............. 4 The Lifetime Investing Account/Distribution
How the Fund Invests Its Assets .................... 4 Options ...................................... 11
Organization of the Fund ........................... 5 The Eaton Vance Exchange Privilege ............. 12
Management of the Fund ............................. 5 Eaton Vance Shareholder Services ............... 13
Distribution Plan .................................. 7 Distributions and Taxes ........................ 14
Valuing Fund Shares ................................ 7 Performance Information ........................ 15
How to Buy Fund Shares ............................. 8
</TABLE>
- --------------------------------------------------------------------------------
PROSPECTUS DATED MAY 1, 1995
SHAREHOLDER AND FUND EXPENSES
- --------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Sales Charges Imposed on Redemptions None
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average daily net assets)
Investment Adviser Fee 0.00%*
Rule 12b-1 Distribution Fees 0.25%
Other Expenses 0.35%
---
Total Operating Expenses 0.60%
---
---
- ----------
*After reduction by Investment Adviser.
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
You would pay the following expenses on a
$1,000 investment, assuming (a) 5% annual
return and (b) redemption at the end
of each period: $6 $19 $33 $75
Notes:
\1/ The purpose of the above table and Example is to assist investors in
understanding the various costs and expenses that investors in the Fund may
bear directly or indirectly. The percentages indicated as Annual Fund
Operating Expenses and the amounts included in the Example are based on the
operating expenses for the fiscal year ended December 31, 1994. The table
and Example should not be considered a representation of past or future
expenses as the foregoing expenses and actual expenses may be greater or
less than those shown. For further information regarding the expenses of
the Fund, see "The Fund's Financial Highlights", "Management of the Fund"
and "How to Redeem Fund Shares". Because the Fund makes payments under its
Distribution Plan adopted under Rule 12b-1, a long-term shareholder may pay
more than the economic equivalent of the maximum front-end sales charge
permitted by a rule of the National Association of Securities Dealers, Inc.
See "Distribution Plan." If no reduction was made, the Annual Fund
Operating Expenses as a percentage of average daily net assets would be:
Investment Adviser Fees -- 0.22%, Rule 12b-1 Distribution Fees -- 0.25%,
Other Expenses -- 0.76%, and Total Operating Expenses -- 1.23%; and the
Example would read as follows:
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
You would pay the following expenses on a
$1,000 investment, assuming (a) 5% annual
return and (b) redemption at the end
of each period: $13 $39 $68 $149
\2/ The Fund's monthly advisory fee has two components, a fee based on daily
net assets and a fee based on daily gross income, as set forth in the fee
schedule on page 6.
<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, which have been
included in reliance upon the report of Coopers & Lybrand, independent
accountants, as experts in accounting and auditing. 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.
- ------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------
1994 1993 1992 1991++
---- ---- ---- ------
NET ASSET VALUE, beginning of
year ...................... $55.58 $54.30 $52.64 $50.18
----- ----- ----- -----
INCOME FROM OPERATIONS:
Net investment income ..... $ 1.80 $ 1.34 $ 1.61 $ 2.15
Net realized and unrealized
gain (loss) on investments .. 0.14 (0.06) 0.05 0.31
----- ----- ----- -----
Total income from
operations .............. $ 1.94 $ 1.28 $ 1.66 $ 2.46
----- ----- ----- -----
NET ASSET VALUE, end of year $57.52 $55.58 $54.30 $52.64
===== ===== ===== =====
TOTAL RETURN\1/ ............. 3.49% 2.36% 3.15% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year
(000's omitted) ............. $1,175 $1,743 $4,917 $100,976
Ratio of expenses to
average net assets** ........ 0.60% 0.60% 0.60% 0.60%*
Ratio of net investment
income to average net
assets** .................... 2.97% 2.48% 3.01% 4.66%*
**The expenses related to the operation of the Fund reflect a reduction of the
investment adviser fee and an allocation of expenses to the Investment
Adviser. Had such action not been taken, net investment income per share and
the ratios would have been as follows:
NET INVESTMENT INCOME PER
SHARE ....................... $ 1.56 $ 1.28 $ 1.56 $ 2.07
===== ===== ===== =====
RATIOS (As a percentage of
average net assets):
Expenses ................ 1.23% 0.70% 0.70% 0.78%*
===== ===== ===== =====
Net investment income ... 2.58% 2.38% 3.11% 4.49%*
===== ===== ===== =====
Note: Certain of the per share amounts have been computed using average shares
outstanding.
*Computed on an annualized basis.
++Period from the date of initial public offering, February 4, 1991, to December
31, 1991. For the period from the start of business, January 11, 1991, to
February 3, 1991, net investment income aggregating $0.18 per share ($367) was
earned by the Fund. The financial highlights for the period were audited by
the Fund's previous auditors.
\1/Total 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.
<PAGE>
THE FUND AND ITS INVESTMENT OBJECTIVE
- ------------------------------------------------------------------------------
The Fund is a no-load diversified mutual fund which continuously offers its
shares of beneficial interest to the public. The Fund's investment objective is
to seek current income and liquidity. The Fund invests exclusively in U.S.
Treasury obligations (bills, notes and bonds) with a remaining maturity of up to
five years and will maintain a dollar weighted average portfolio maturity of not
more than one year. The Fund's investment objective is a nonfundamental policy
which may be changed by Trustee vote. The Trustees, however, have indicated that
they intend to submit any material change in the investment objective to
shareholders for their approval. The Fund provides shareholders ease of
investment and redemption by allowing direct purchases, check-writing, wire
purchases and redemptions, and access through broker-dealers. No commissions or
redemption fees are charged on Fund purchases or redemptions.
HOW THE FUND INVESTS ITS ASSETS
- ------------------------------------------------------------------------------
The Fund invests exclusively in U.S. Treasury obligations with a remaining
maturity of up to five years. U.S. Treasury obligations include the following
(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). The Fund invests in U.S. Treasury notes and bonds only to the
extent that their remaining maturity is five years or less. U.S. Treasury bills,
notes and bonds, are supported by the full faith and credit of the United
States.
The Fund will maintain a dollar weighted average portfolio maturity of not
more than one year. In measuring the dollar weighted average portfolio maturity
of the Fund, the Fund will use the concept of "duration." Duration represents
the dollar weighted average maturity of expected cash flows (i.e., interest and
principal payments) on one or more debt obligations, discounted to their present
values. The duration of an obligation is always equal to or less than its stated
maturity and is related to the degree of volatility in the market value of the
obligation. Maturity measures only the time until a debt security provides its
final payment; it takes no account of the pattern of a security's payments over
time. Duration takes both interest and principal payments into account and,
thus, in the Investment Adviser's opinion, is a more accurate measure of a debt
security's longevity.
INVESTMENT CONSIDERATIONS
The net asset value of the Fund's shares will change in response to
interest rate fluctuations. When interest rates decline, the value of a
portfolio primarily invested in debt securities can be expected to rise.
Conversely, when interest rates rise, the value of a portfolio primarily
invested in debt securities can be expected to decline. However, a shorter
maturity is generally associated with a lower level of market value volatility.
Accordingly, the Investment Adviser expects that the net asset value of the
Fund's shares normally will fluctuate significantly less than that of a
longer-term bond fund since the dollar weighted average portfolio maturity of
the Fund at all times will not exceed one year.
The Fund has adopted certain fundamental investment restrictions and
policies which are enumerated in detail in the Statement of Additional
Information and which may not be changed unless authorized by a shareholder
vote. Except for such restrictions and policies, the investment policies of the
Fund are not fundamental policies and accordingly may be changed by the Trustees
without obtaining the approval of the Fund's shareholders. Among other
restrictions, the Fund may not, with respect to 75% of its total assets, invest
more than 5% of its total assets in the securities of a single issuer or
purchase more than 10% of the outstanding voting securities of an issuer (except
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities and except securities of other investment companies); or
invest 25% or more of its total assets in any single industry (provided there is
no limitation with respect to obligations issued or guaranteed by the U.S.
government or any of its agencies or instrumentalities).
The shareholders have authorized the Fund to invest substantially all of
its assets in an open-end management investment company having substantially the
same investment policies and restrictions as the Fund. The Board of Trustees,
should it implement the new investment policy, would invest substantially all of
the assets of the Fund in the Short-Term Treasury Portfolio (the "Portfolio").
The Portfolio is a trust which, like the Fund, would be registered as an
open-end management investment company under the Investment Company Act of 1940.
It is anticipated that the Fund, by investing substantially all of its assets in
the Portfolio, would be in a position to realize certain benefits from an
increase in the size of the underlying investment portfolio. There can be no
assurance that these anticipated benefits will be realized. This policy has not
been implemented given the current asset size of the Fund and the lack of other
investment vehicles available to invest in the Portfolio. Conversion to this
two-tier investment structure may, however, become attractive in the future.
ORGANIZATION OF THE FUND
- ------------------------------------------------------------------------------
THE FUND IS A SERIES OF THE TRUST, A BUSINESS TRUST ESTABLISHED UNDER
MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF TRUST DATED MAY 7, 1984, AS
AMENDED, IS A MUTUAL FUND -- AN OPEN-END DIVERSIFIED MANAGEMENT INVESTMENT
COMPANY. The Trustees of the Trust are responsible for the overall management
and supervision of the Fund's affairs. The Fund has one class of shares of
beneficial interest, an unlimited number of which may be issued by the Trustees.
Each share represents an equal proportionate beneficial interest in the Fund.
When issued and outstanding, the shares are fully paid and nonassessable by the
Trust and redeemable as described under "How to Redeem 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.
MANAGEMENT OF THE FUND
- ------------------------------------------------------------------------------
THE FUND ENGAGES 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. Eaton Vance's expertise in the management of
fixed-income securities ranges from government obligations, high-grade corporate
and municipal securities and bank loan interests to higher yielding instruments.
Acting under the general supervision of the Trustees of the Trust, Eaton Vance
manages the Fund's investments and affairs. Under its investment advisory
agreement with the Trust on behalf of the Fund, Eaton Vance will receive a
monthly advisory fee equal to the aggregate of
(a) a daily asset based fee computed by applying the annual asset rate
applicable to that portion of the total daily net assets in each Category as
indicated below, plus
(b) a daily income based fee computed by applying the daily income rate
applicable to that portion of the total daily gross income (which portion
shall bear the same relationship to the total daily gros income on such day
as that portion of the total daily net assets in the same Category bears to
the total daily net assets on such day) in each Category as indicated below:
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
- -------- ---------------- ---------- -----------
1 up to $20 million .......................... 0.150% 1.50%
2 $20 million but less than $40 million ...... 0.200% 2.00%
3 $40 million but less than $500 million ..... 0.250% 2.50%
4 $500 million but less than $1 billion ...... 0.225% 2.25%
5 $1 billion but less than $1.5 billion ...... 0.200% 2.00%
6 $1.5 billion but less than $2 billion ...... 0.190% 1.90%
7 $2 billion but less than $3 billion ........ 0.180% 1.80%
8 $3 billion and over ........................ 0.170% 1.70%
Total daily gross income is the total investment income, exclusive of capital
gains and losses and before deduction of expenses, earned each day by the Fund.
As at December 31, 1994, the Fund had net assets of $1,175,453. For the
fiscal year ended December 31, 1994, Eaton Vance would have earned, absent a fee
reduction, advisory fees equivalent to 0.22% of the Fund's average daily net
assets for such period. To enhance the net income of the Fund, Eaton Vance made
a reduction of its advisory fee in the full amount and Eaton Vance was allocated
a portion of the Fund's operating expenses in the amount of $31,702.
Eaton Vance also furnishes for the use of the Fund office space and all
necessary office facilities, equipment and personnel, and investment advisory,
statistical and research facilities for servicing the investments of the Fund
and has arranged for certain members of the Eaton Vance organization to serve
without salary as officers or Trustees of the Trust. The Fund is responsible for
the payment of all of its expenses other than those expressly stated to be
payable by Eaton Vance under the investment advisory agreement.
Most of the obligations which the Fund will acquire for its portfolio will
be normally traded on a net basis (without commission) through broker-dealers
and banks acting for their own account. Such firms attempt to profit from such
transactions by buying at the bid price and selling at the higher asked price of
the market, and the difference is customarily referred to as the spread. In
selecting firms which will execute Fund portfolio transactions Eaton Vance
judges their professional ability and quality of service and uses its best
efforts to obtain execution at prices which are advantageous to the Fund and at
reasonably competitive spreads. Subject to the foregoing, Eaton Vance may
consider sales of shares of the Fund or of other investment companies sponsored
by Eaton Vance as a factor in the selection of firms to execute portfolio
transactions.
Michael B. Terry has acted as the portfolio manager since January, 1991. He
has been a Vice President of Eaton Vance since 1984.
EATON VANCE OR ITS AFFILIATES ACT AS INVESTMENT ADVISER TO INVESTMENT
COMPANIES AND VARIOUS INDIVIDUAL AND INSTITUTIONAL CLIENTS WITH ASSETS UNDER
MANAGEMENT OF APPROXIMATELY $15 BILLION. Eaton Vance is a wholly-owned
subsidiary of Eaton Vance Corp. ("EVC"), a publicly held holding company. EVC
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. Eaton Vance Distributors, Inc. (the "Principal Underwriter"
or "EVD"), 24 Federal Street, Boston, MA 02110, a wholly-owned subsidiary of
Eaton Vance, acts as Principal Underwriter to the Fund.
DISTRIBUTION PLAN
- -------------------------------------------------------------------------------
IN ADDITION TO ADVISORY FEES AND OTHER EXPENSES, THE FUND PAYS FOR CERTAIN
EXPENSES PURSUANT TO A DISTRIBUTION PLAN (THE "PLAN") DESIGNED TO MEET THE
REQUIREMENTS OF RULE 12B-1 UNDER THE INVESTMENT COMPANY ACT OF 1940. The Plan
provides that the Fund will pay the Principal Underwriter a quarterly
distribution fee equal to .25% on an annual basis of the Fund's average daily
net assets. The Principal Underwriter may pay up to the entire amount of the
distribution fee to a financial service firm (including banking institutions)
(an "Authorized Firm") and their employees and to employees of the Principal
Underwriter and its affiliates for providing distribution services to the Fund
or services to shareholders. The Principal Underwriter may also pay all or a
portion of such distribution fee to employees of the Principal Underwriter or
any of its affiliates for providing any of such services. During the fiscal year
ended December 31, 1994, the Fund paid distribution fees under its Plan
equivalent to .25% to the Principal Underwriter. To the extent that the
distribution fee is not paid to Authorized Firms and other persons, the
Principal Underwriter may use such fee for its expenses of distribution of Fund
shares. If such fees exceed its expenses, the Principal Underwriter will realize
a profit from these arrangements.
Rule 12b-1 is broadly worded and currently permits mutual funds, such as
the Fund, to finance distribution activities and bear expenses associated with
the distribution of their shares. While the Rule does not describe in detail the
specific types of activities which may be financed or expenses which may be
borne by a fund, it currently states that such permissible activities include
the compensation of underwriters, dealers and sales personnel. Accordingly, the
Plan adopted by the Fund is designed to compensate the Principal Underwriter and
the Authorized Firms through which the Fund's shares are distributed.
VALUING FUND SHARES
- ------------------------------------------------------------------------------
THE FUND VALUES ITS SHARES ONCE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, AS OF THE CLOSE OF REGULAR TRADING ON THE
EXCHANGE (NORMALLY 4:00 P.M. NEW YORK TIME). The Fund's net asset value per
share is determined by its custodian, Investors Bank & Trust Company ("IBT") (as
agent for the Fund), in the manner authorized by the Trustees of the Trust. Net
asset value is computed by dividing the value of the Fund's total assets, less
its liabilities, by the number of shares outstanding. Debt securities (other
than short-term obligations maturing in sixty days or less), including listed
securities and securities for which price quotations are available, will
normally be valued on the basis of market valuations furnished by a pricing
service. Short-term obligations and money market securities maturing in sixty
days or less are valued at amortized cost, which approximates market. Other
assets are valued at fair value using methods determined in good faith by the
Trustees. For further information regarding the valuation of the Fund's assets,
see "Determination of Net Asset Value" in the Statement of Additional
Information.
Authorized Firms must communicate an investor's orders to the Principal
Underwriter prior to the close of the Principal Underwriter's business day to
receive that day's net asset value per share. It is the Authorized Firm's
responsibility to transmit orders promptly to the Principal Underwriter. Eaton
Vance Corp. owns 77.3% of the outstanding stock of IBT, the Fund's custodian.
- ------------------------------------------------------------------------------
SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY MULTIPLYING THE
NUMBER OF FUND SHARES OWNED BY THE CURRENT NET ASSET VALUE.
- ------------------------------------------------------------------------------
HOW TO BUY FUND SHARES
- ------------------------------------------------------------------------------
SHARES OF THE FUND ARE SOLD WITHOUT A SALES CHARGE AT THE NET ASSET VALUE NEXT
DETERMINED AFTER THE RECEIPT OF A PURCHASE ORDER AS DESCRIBED BELOW. The minimum
initial purchase of shares is $5,000. Once an account has been established the
investor may make additional investments of $50 or more at any time. The Fund
reserves the right to reject any order for the purchase of its shares or to
limit or suspend, without prior notice, the offering of its shares. See "Eaton
Vance Shareholder Services" below.
The initial net asset value at which shares were offered was $50 per share.
FUND SHARES MAY BE PURCHASED IN FOLLOWING WAYS:
* PURCHASES THROUGH AUTHORIZED FIRMS. Investors may purchase shares of the
Fund through Authorized Firms at the net asset value per share of the
Fund next determined after such purchase. Pursuant to its Distribution
Agreement with EVD, the Trust engages EVD to distribute the Fund's shares
on a "best efforts" basis through Authorized Firms. EVD will furnish the
names of Authorized Firms to an investor upon request. Authorized Firms
include financial service firms with whom the Principal Underwriter has
agreements.
* PURCHASES BY WIRE. Investors may also purchase shares by requesting their
bank to transmit immediately available funds (Federal Funds) by wire to:
ABA #011001438, Federal Reserve Bank of Boston, A/C Investors Bank &
Trust Company, Further Credit Eaton Vance Short-Term Treasury Fund, A/C #
[Insert your account number -- see below].
Upon making an initial investment by wire, you must first telephone the
Order Department of the Fund (800-225-6265, extension 3) to advise of
your action and to be assigned an account number. If you neglect to make
the telephone call, it may not be possible to process your order
promptly. In addition, the Account Application form which accompanies
this Prospectus should be promptly forwarded to the Fund's Transfer Agent
(the "Transfer Agent") as follows: The Shareholder Services Group, Inc.,
BOS725, P.O. Box 1559, Boston, MA 02104.
Additional investments may be made at any time through the wire
procedure described above. The Fund Order Department must be immediately
advised by telephone (800-225-6265, extension 3) of each transmission of
funds by wire.
Purchases received by wire before 4:00 P.M. on any business day are
invested at the net asset value determined at 4:00 P.M. the same day.
(See "Valuing Fund Shares").
* PURCHASES BY MAIL. For an initial purchase by mail, the Account
Application form which accompanies this Prospectus should be completed,
signed and mailed with a check, Federal Reserve Draft, or other
negotiable bank draft, drawn on a U.S. bank and payable in U.S. dollars,
to the order of Eaton Vance Short-Term Treasury Fund to the Fund's
Transfer Agent as follows: The Shareholder Services Group, Inc., BOS725,
P.O. Box 1559, Boston, MA 02104.
Additional purchases may be made at any time by mailing a check,
Federal Reserve Draft, or other negotiable bank draft, drawn on a U.S.
bank and payable in U.S. dollars, to the order of Eaton Vance Short-Term
Treasury Fund to the Fund's Transfer Agent at the above address. The
account to which the subsequent purchase is to be credited should be
identified as to the name(s) of the registered owner(s) and by account
number.
* OTHER PURCHASE PROCEDURES. Transactions in the U.S. Treasury obligations
in which the Fund invests require immediate settlement in Federal Funds.
The Fund intends at all times to be as fully invested as is feasible in
order to maximize its earnings. Accordingly, purchase orders will be
executed at the net asset value next determined after their receipt by
the Fund only if the Fund has received payment in cash or in Federal
Funds. If remitted in other than the foregoing manner, such as by money
order or personal check, purchase orders will be executed as of the close
of business on the second Boston business day after receipt. Information
on how to procure a Federal Reserve Draft or to transmit Federal Funds by
wire is available at your bank. The bank may charge for these services.
In connection with employee benefit or other continuous group purchase
plans under which the average initial purchase by a participant of the plan is
$5,000 or more, the Fund may accept initial investments of less than $5,000 on
the part of an individual participant. In the event a shareholder who is a
participant of such a plan terminates his participation in the plan, his shares
will be transferred to a regular individual account. However, such account will
be subject to the right of redemption by the Fund as described below under "How
to Redeem Fund Shares."
HOW TO REDEEM FUND SHARES
- ------------------------------------------------------------------------------
A SHAREHOLDER MAY REDEEM FUND SHARES BY DELIVERING TO THE SHAREHOLDER SERVICES
GROUP, INC., BOS725, P.O. BOX 1559, BOSTON, MA 02104, during its business hours
a written request for redemption in good order, plus any share certificates with
executed stock powers. The redemption price will be based on the net asset value
next computed after such delivery. Good order means that all relevant documents
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.
Payment will normally be made by check within one business day after
receipt of the redemption request and must, in any event, be made within seven
days of such receipt, unless expedited payment has been authorized and requested
by the shareholder. (See "Redemptions by Wire" below).
The right to redeem can be suspended and the payment of the redemption
price deferred when the Exchange is closed (other than for 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 Fund 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.
* REDEMPTIONS BY WIRE. Shareholders who have given authorization in advance
may request that redemption proceeds of $1,000 or more be wired directly
to their bank account. This request may generally be made by letter or
telephone to the Fund Order Department at 800-225-6265, extension 3.
However, shareholders holding certificates for shares in the Fund must
return such certificates in properly endorsed form requesting redemption
prior to being eligible to have redemption proceeds wired directly to
their bank account.
To use this service a shareholder must designate his bank and bank
account number on the Account Application form used to open his account.
The bank designated may be any bank in the United States.
Redemption requests received before 4:00 p.m. on any business day will
be processed at 4:00 p.m. and the proceeds will be wired on the next
business day. The shareholder may be required to pay any costs of such
transaction; however, no such costs are currently charged. The Fund will
limit this method of payment to shares purchased with cash, Federal
Reserve Draft, by wire with Federal Funds, or by other means when payment
for shares purchased has been assured. The Fund reserves the right at any
time to suspend or terminate the expedited payment procedure; however,
the Fund would provide reasonable advance notice (in no event less than
30 days) of its intention to suspend or terminate this procedure. The
Fund will process redemption instructions received by telephone if the
shareholder has authorized telephone redemptions when completing the
Account Application form. However, the Fund will not process redemption
requests by telephone if share certificates have been issued to such
shareholders. The responsibility for the authenticity of redemption
instructions received by telephone is discussed under "The Eaton Vance
Exchange Privilege". (See "Valuing Fund Shares").
* REPURCHASE THROUGH AUTHORIZED FIRMS. To sell shares at their net asset
value through an Authorized Firm (a repurchase), a shareholder can place
a repurchase order with the Firm, who may charge a fee. Net asset value
is calculated on the day the Authorized 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. It is the Authorized Firm's responsibility to
promptly transmit repurchase orders to EVD.
* REDEMPTIONS BY CHECK. To sell shares by writing a check, shareholders
holding shares for which certificates have not been issued may appoint
Boston Safe Deposit and Trust Company ("Boston Safe") their agent and may
request on the Account Application form that Boston Safe provide them
with special forms of checks drawn on Boston Safe. These checks may be
made payable by the shareholder to the order of any person in any amount
of $500 or more. When a check is presented to Boston Safe for payment,
the number of full and fractional shares required to cover the amount of
the check will be redeemed from the shareholder's account by Boston Safe
as the shareholder's agent. Through this procedure the shareholder will
continue to be entitled to distributions paid on his shares up to the
time the check is presented to Boston Safe for payment. If the amount of
the check is greater than the value of the shares held in the
shareholder's account, for which the Fund has collected payment, the
check will be returned and the shareholder may be subject to extra
charges.
The shareholder will be required to execute signature cards and will be
subject to Boston Safe's rules and regulations governing such checking
accounts. There is no charge to shareholders for this service. This
service may be terminated or suspended at any time by the Fund or Boston
Safe.
OTHER REDEMPTION PROCEDURES. If shares were recently purchased by check,
the proceeds of 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 (for up to fifteen days from the purchase date) will be no longer than
required to verify that the purchase check has cleared. The value of shares
redeemed or repurchased may be more or less than their cost depending on
portfolio performance during the period they were owned. Redemptions and
repurchases of shares are taxable events on which shareholders may realize a
gain or a loss.
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
calendar year, the Fund will furnish all shareholders with information necessary
for preparing Federal and state income tax returns.
THE LIFETIME INVESTING ACCOUNT/DISTRIBUTION OPTIONS
- ------------------------------------------------------------------------------
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. However, certificates may not be issued to shareholders who
have authorized redemption by telephone or who have requested redemptions by
check.
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 be sent only quarterly). THE LIFETIME INVESTING ACCOUNT ALSO
PERMITS A SHAREHOLDER TO MAKE ADDITIONAL INVESTMENTS OF $50 OR MORE to The
Shareholder Services Group, Inc.
Any questions concerning a shareholder's account or services available may
be directed by telephone to EATON VANCE SHAREHOLDER SERVICES at 800-225-6265,
extension 2, or in writing to The Shareholder Services Group, Inc., BOS725, P.O.
Box 1559, Boston, MA 02104 (please provide the name of the shareholder, the Fund
and the account number).
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 will be reinvested in
additional shares.
Income Option -- Dividends will be paid in cash, and capital gains will be
reinvested in additional shares.
Cash Option -- Dividends and capital gains will be paid in cash.
The Share Option will be assigned if no other option is specified.
Distributions, including those reinvested, will be reduced by 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.
DISTRIBUTION INVESTMENT OPTION. In addition to the distribution options set
forth above, dividends and/or capital gains may be invested in additional shares
of another Eaton Vance fund. Before selecting this option, a shareholder should
obtain a prospectus of the other Eaton Vance fund and consider its objectives
and policies carefully.
"STREET NAME" ACCOUNTS. If shares of a Fund are held in a "street name" account
with an Authorized Firm, all recordkeeping, transaction processing and payments
of distributions relating to the beneficial owner's account will be performed by
the Authorized Firm, and not by the Fund and its transfer agent. Since the Fund
will have no record of the beneficial owner's transactions, a beneficial owner
should contact the Authorized Firm to purchase, redeem or exchange shares, to
make changes in or give instructions concerning the account, or to obtain
information about the account. The transfer of shares in a "street name" account
to an account with another dealer or to an account directly with the Fund
involves special procedures and will require the beneficial owner to obtain
historical purchase information about the shares in the account from the
Authorized Firm. 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.
THE EATON VANCE EXCHANGE PRIVILEGE
- ------------------------------------------------------------------------------
Shares of the Fund currently may be exchanged for shares of Eaton Vance Cash
Management Fund on the basis of net asset value per share of each fund at the
time of the exchange, provided that such exchange offers are available only in
states where shares of Eaton Vance Cash Management Fund being acquired may be
legally sold.
An exchange must involve shares with an aggregate net asset value of $5,000
or more. The exchange privilege may be changed or discontinued without penalty.
Shareholders will be given sixty (60) days notice prior to any termination or
material amendment of the exchange privilege. The Fund 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 imtermediary will be considered to be engaged
in Market Timing.
The Shareholder Services Group, Inc. makes exchanges at the next determined
net asset value after receiving an exchange request in good order (see "How to
Redeem Fund Shares"). Consult The Shareholder Services Group, Inc. for
additional information concerning the exchange privilege. The prospectus for
Eaton Vance Cash Management 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 application
and prospectus for other funds are available from Authorized Firms or the
Principal Underwriter.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.
provided 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). Shares acquired by telephone exchange
must be registered in the same name(s) and with the same address as are
registered with Eaton Vance Cash Management Fund. 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 of the shares
which you exchange.
EATON VANCE SHAREHOLDER SERVICES
- ------------------------------------------------------------------------------
THE FUND OFFERS THE FOLLOWING SERVICES, WHICH 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, are available from Authorized Firms or 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 $5,000 minimum
investment has been made, checks of $50 or more payable to the order of Eaton
Vance Short-Term Treasury 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 dividends are reinvested. The name of the shareholder, the Fund
and the account number should accompany each investment.
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; and
--403(b) Retirement Plans for employees of public school systems,
hospitals, colleges and other 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, all
distributions will be automatically reinvested in additional shares.
DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
The Fund has elected to be treated, has qualified and intends to continue to
qualify each year as a regulated investment company under the Internal Revenue
Code (the "Code"). Accordingly, the Fund intends to satisfy certain requirements
relating to sources of its income and diversification of its assets and to
distribute a sufficient amount of its investment company taxable income so as to
effect such qualification. The Fund may also distribute part or all of its net
investment income and realized capital gains in accordance with the timing
requirements imposed by the Code, so as to reduce or avoid Federal income or
excise tax to the Fund.
Under the Code, the redemption or exchange of shares of a regulated
investment company would normally result in capital gain or loss if such shares
are held as capital assets. However, the Omnibus Budget Reconciliation Act of
1993, signed into law on August 10, 1993, adds new Section 1258 to the Code,
which recharacterizes capital gain from the disposition or other termination of
a position held as part of a "conversion transaction" as ordinary income to the
extent of an imputed income amount on a deemed interest computation. Section
1258 applies to conversion transactions entered into after April 30, 1993. A
conversion transaction is defined to include, among other things, a transaction
which is marketed or sold as producing a capital gain if substantially all of a
taxpayer's expected return from the transaction is "attributable to the time
value of the taxpayer's net investment in such transaction." The Secretary of
the Treasury is also authorized to specify other transactions to be included in
the definition of a conversion transaction in regulations to be effective when
promulgated by the Secretary. Section 1258 contains many ambiguities and its
scope is unclear; it may be clarified or refined in future regulations or other
official pronouncements. Until further guidance is issued, it is unclear whether
a purchase and subsequent disposition of Fund shares would be treated as a
conversion transaction under Section 1258. Investors should consult their own
tax advisers concerning whether or not Section 1258 may apply to their
transactions in Fund shares.
The Fund distributes its net investment income and capital gains to
shareholders as dividends annually to the extent required for the Fund to
qualify as a regulated investment company under the Code and generally avoid
Federal income or excise tax to the Fund. Under current law, the Fund intends on
its tax return to treat as a distribution of investment company taxable income
and net capital gain the portion of redemption proceeds paid to redeeming
shareholders that represents the redeeming shareholders' portion of the Fund's
undistributed investment company taxable income and net capital gain. This
practice, which involves the use of equalization accounting, will have the
effect of reducing the amount of income and gains that the Fund is required to
distribute as dividends to shareholders in order for the Fund to avoid Federal
income and excise tax. This practice may also reduce the amount of distributions
required to be made to nonredeeming shareholders and defer the recognition of
taxable income by such shareholders. However, since the amount of any
undistributed income will be reflected in the value of the Fund's shares, the
total return on a shareholder's investment will not be reduced as a result of
the Fund's distribution policy. Investors who purchase shares shortly before the
record date of a distribution will pay the full price for the shares and then
receive some portion of the price back as a taxable distribution.
Capital gains, if any, realized by the Fund on sales of investments during
the Fund's taxable year, which ends on December 31, will be offset by any
capital loss carryovers and will usually be distributed after the close of such
taxable year, in compliance with the distribution requirements of the Internal
Revenue Code. Distributions of net long-term capital gains included therein are
taxable to shareholders as such, whether paid in cash or additional shares of
the Fund and regardless of the length of time Fund shares have been owned by the
shareholder. Distributions of net short-term capital gains included therein are
taxable to shareholders as ordinary income, whether paid in cash or additional
shares of the Fund. Certain distributions declared in October, November or
December and paid the following January will be taxable to shareholders as if
received on December 31 of the year in which they are declared.
Shareholders will receive annually tax information notices and Forms 1099
to assist in the preparation of their Federal and state income tax returns 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.
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. For the taxable year ended December 31,
1994 the Fund did not incur any Federal income or excise tax although it may
incur such taxes in the future if management determines that retention of some
income or gains is appropriate. Under current law, provided that the Fund
qualifies as a regulated investment company for Federal income tax purposes, the
Fund is not liable for any income, corporate excise or franchise tax in the
Commonwealth of Massachusetts. The Fund incurred no state tax liability in
respect of its taxable year ended December 31, 1994.
STATE, LOCAL AND FOREIGN TAXES
Distributions of the Fund which are derived from interest on obligations of
the U.S. Government will be exempt from personal and/or corporate income taxes
in most states. The Fund will inform shareholders of the proportion of its
distributions which are derived from interest on such obligations. Shareholders
are urged to consult their tax advisers regarding the proper treatment of such
portion of their distributions for state and local income tax purposes and with
respect to state, local or foreign tax consequences of investing in the Fund.
PERFORMANCE 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 (net asset value) of the Fund on the last day of the
period and annualizing the resulting figure. Yield should not be considered the
equivalent of dividends. The Fund's average annual total return is determined by
computing the average annual percentage change in value of $1,000 invested at
the maximum public offering price (net asset value) for specified periods ending
with the most recent calendar quarter, assuming reinvestment of all
distributions. The total return calculation assumes a complete redemption of the
investment. The Fund may also publish annual and cumulative total return figures
from time to time.
Investors should note that the investment results of the Fund will
fluctuate over time, and any presentation of the Fund's current yield or total
return for any prior period should not be considered as a representation of what
an investment may earn or what an investor's yield or total return may be in any
future period. If the expenses of the Fund are paid by the Investment Adviser,
the Fund's performance will be higher.
<PAGE>
INVESTMENT ADVISER
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 L.L.P.
One Post Office Square
Boston, MA 02109
EATON VANCE SHORT-TERM TREASURY FUND
24 FEDERAL STREET
BOSTON, MA 02110
TYP
EATON VANCE
SHORT-TERM
TREASURY FUND
PROSPECTUS
MAY 1, 1995
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1995
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
This Statement of Additional Information consists of two parts. Part I
provides information about EV Classic Government Obligations Fund (the "Fund")
and certain other series of Eaton Vance Government Obligations Trust (the
"Trust"). Part II provides information solely about the Fund. Where appropriate,
Part I includes cross-references to the relevant sections of Part II that
provide additional, Fund-specific information.
TABLE OF CONTENTS Page
PART I
Investment Objective ........................................... 2
Additional Information about Investment Policies ............... 2
Investment Restrictions ........................................ 11
Trustees and Officers .......................................... 12
Investment Adviser and Administrator ........................... 14
Custodian ...................................................... 16
Service for Withdrawal ......................................... 17
Determination of Net Asset Value ............................... 17
Investment Performance ......................................... 17
Taxes .......................................................... 18
Portfolio Security Transactions ................................ 21
Other Information .............................................. 22
Independent Certified Public Accountants ....................... 23
Glossary of Option Terms ....................................... 24
PART II
Fees and Expenses .............................................. a-1
Performance Information ........................................ a-2
Principal Underwriter .......................................... a-3
Distribution Plan .............................................. a-3
Control Persons and Principal Holders of Securities ............ a-4
Financial Statements ........................................... a-5
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE FUNDS' PROSPECTUS DATED MAY 1, 1995, AS SUPPLEMENTED FROM
TIME TO TIME. THIS STATEMENT OF ADDITIONAL INFORMATION SHOULD BE READ IN
CONJUNCTION WITH SUCH PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE
BY CONTACTING EATON VANCE DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE
BACK COVER FOR ADDRESS AND PHONE NUMBER).
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
PART I
INVESTMENT OBJECTIVE
The following provides information about the Fund and certain other series
of the Trust. The investment objective of the Fund is to realize a high current
return. It seeks to meet its investment objective by investing its assets in the
Government Obligations Portfolio (the "Portfolio"), a separate registered
investment company which was organized as a Trust under the laws of the State of
New York. The Portfolio has the same investment objective as the Fund. Except
for the fundamental investment restrictions and policies specifically identified
in the Prospectus or enumerated in this Statement of Additional Information, 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 shareholders of the Fund
or the investors in the Portfolio, including those policies concerning security
transactions. If any changes were made, 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.
ADDITIONAL INFORMATION ABOUT INVESTMENT POLICIES
Since the investment characteristics of the Fund will correspond directy to
those of the Portfolio, the following is a discussion of the various investments
of and techniques employed by the Portfolio.
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.
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.
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. 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.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"). 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.
The key feature of the CMO structure is the prioritization of the cash flows
from a pool of mortgages among the several classes of CMO holders, thereby
creating a series of obligations with varying rates and maturities appealing to
a wide range of investors. CMOs generally are secured by an assignment to a
trustee under the indenture pursuant to which the bonds are issued of collateral
consisting of a pool of mortgages. Payments with respect to the underlying
mortgages generally are made to the trustee under the indenture. Payments of
principal and interest on the underlying mortgages are not passed through to the
holders of the CMOs as such (that is, the character of payments of principal and
interest is not passed through and therefore payments to holders of CMOs
attributable to interest paid and principal repaid on the underlying mortgages
do not necessarily constitute income and return of capital, respectively, to
such holders), but such payments are dedicated to payment of interest on and
repayment of principal of the CMOs. CMOs are issued in two or more classes or
series with varying maturities and stated rates of interest determined by the
issuer. Because the interest and principal payments on the underlying mortgages
are not passed through to holders of CMOs, CMOs of varying maturities may be
secured by the same pool of mortgages, the payments on which are used to pay
interest to each class and to retire successive maturities in sequence. CMOs are
designed to be retired as the underlying mortgages 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 maturity. Therefore, although in
most cases the issuer of CMOs will not supply additional collateral in the event
of such prepayments, there will be sufficient collateral to secure CMOs that
remain outstanding. Currently, Boston Management & Research (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).
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"). The Portfolio may invest in 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.
WHEN-ISSUED SECURITIES AND FORWARD COMMITMENTS
The Portfolio may purchase and sell securities on a "forward commitment" or
"when-issued" basis. Forward commitment or when-issued transactions arise when
securities are purchased or sold by the Portfolio with payment and delivery
taking place in the future in order to secure what is considered to be an
advantageous price and yield to the Portfolio at the time of entering into the
transaction. However, the yield on a comparable security when the transaction is
consummated may vary from the yield on the security at the time that the forward
commitment or when-issued transaction was made. When the Portfolio engages in
forward commitment or when-issued transactions, the Portfolio relies on the
seller or buyer, as the case may be, to consummate the sale. Failure to do so
may result in the Portfolio missing the opportunity of obtaining a price or
yield considered to be advantageous. Forward commitment or when-issued
transactions may be expected to occur a month or more before delivery is due.
However, no payment or delivery is made by the Portfolio until it receives
payment or delivery from the other party to the transaction. The Portfolio will
maintain in a segregated account with its custodian cash, U.S. Government
securities or other liquid high grade debt securities having an aggregate value
equal to the amount of such purchase commitments until payment is made. To the
extent the Portfolio engages in forward commitment or when-issued transactions,
it will do so for the purpose of acquiring or disposing of securities held by
the Portfolio consistent with the Portfolio's investment objective and policies
and not for the purpose of investment leverage.
LENDING PORTFOLIO SECURITIES
The Portfolio may seek to increase its income by lending portfolio
securities to broker-dealers or other institutional borrowers. Under present
regulatory policies of the Securities and Exchange Commission, such loans are
required to be secured continuously by collateral in cash, cash equivalents or
U.S. Government securities held by the Portfolio's custodian and maintained on a
current basis at an amount at least equal to the market value of the securities
loaned, which will be marked to market daily. Cash equivalents include
certificates of deposit, commercial paper and other short-term money market
instruments. The Portfolio would have the right to call a loan and obtain the
securities loaned at any time on up to five business days' notice. The Portfolio
would not have the right to vote any securities having voting rights during the
existence of a loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or the giving or withholding of
their consent on a material matter affecting the investment.
WRITING AND PURCHASING CALL AND PUT OPTIONS
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. The Portfolio
will write a covered call option on a security for the purpose of increasing its
return on such security and/or to partially hedge against a decline in the value
of the security. In particular, when the Portfolio writes an option which
expires unexercised or is closed out by the Portfolio at a profit, it will
retain the premium paid for the option, which will increase its gross income and
will offset in part the reduced value of the portfolio security underlying the
option, or the increased cost of acquiring the security for its portfolio.
However, if the price of the underlying security moves adversely to the
Portfolio's position, the option may be exercised and the Portfolio will be
required to purchase or sell the underlying security at a disadvantageous price,
which may only be partially offset by the amount of the premium, if at all. The
Portfolio does not intend to write a covered option on U.S. Government
securities if after such transaction more than 25% of its net assets, as
measured by the aggregate value of such securities underlying all covered calls
and puts written by the Portfolio, would be subject to such options.
The Portfolio will only write a put option on a security which it intends to
ultimately acquire for its investment portfolio. 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.
The Portfolio may terminate its obligations under a 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 or call options on U.S. Government securities
in anticipation of changes in the value of its existing portfolio securities or
in the prices of securities that the Portfolio intends to purchase at a later
date. In the event that the expected changes occur, the Portfolio may be able to
offset adverse changes in the value of its portfolio, in whole or in part,
through the options purchased. The premium paid for a put or call option plus
any transaction costs will reduce the benefit, if any, realized by the Portfolio
upon exercise or liquidation of the option. Unless the price of the underlying
security changes sufficiently, the option may expire without value to the
Portfolio. The Portfolio does not intend to purchase an option on any security
if after such transaction more than 5% of its net assets, as measured by the
aggregate of all premiums paid for all options held by the Portfolio, would be
so invested.
The Portfolio would normally purchase call options in anticipation of an
increase in the market value of securities of the type in which the Portfolio
may invest. 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 Portfolio would ordinarily realize a gain if,
during the option period, the value of such securities exceeded the sum of the
exercise price, the premium paid and transaction costs; otherwise the Portfolio
would realize a loss on the purchase of the call option.
The Portfolio would normally purchase put options in anticipation of a
decline in the market value of securities in its portfolio ("protective puts")
or securities of the type in which it is permitted to invest. 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. The
purchase of protective puts is designed merely to offset or hedge against a
decline in the market value of the securities held by the Portfolio. The
Portfolio would ordinarily realize a gain if, during the option period, the
value of the underlying securities decreased below the exercise price
sufficiently to cover the premium and transaction costs; otherwise the Portfolio
would realize a loss on the purchase of the put option. Gains and losses on the
purchase of protective put options would tend to be offset by countervailing
changes in the value of underlying portfolio securities.
The Portfolio would also be able to enter into closing sale transactions in
order to realize gains or minimize losses on options purchased by the Portfolio.
The Portfolio would write and purchase put call options on securities
indices for the same purposes as the purchase of options on securities. Options
on securities indices are similar to options on securities, except that the
exercise of securities index options requires cash payments and does not involve
the actual purchase or sale of securities. In addition, securities index options
are designed to reflect price fluctuations in a group of securities or segment
of the securities market rather than price fluctuations in a single security.
OPTIONS ON SPECIFIC SECURITIES
TREASURY BONDS AND NOTES. Because trading interest in Treasury bonds and notes
tends to center on the most recently auctioned issues, the securities exchanges
on which the call and put options on U.S. Government securities are traded will
not continue indefinitely to introduce options with new expiration dates to
replace expiring options on particular issues. Instead, the expirations
introduced on the commencement of options trading on a particular issue will be
allowed to run their course, with the possible addition of a limited number of
new expirations as the original ones expire. Options trading on such issue of
bonds or notes will thus be phased out as new options are listed on more recent
issues, and a full range of expirations will not ordinarily be available for
every issue on which options are traded.
TREASURY BILLS. Because the deliverable Treasury bill changes from week to week,
writers of Treasury bill call options cannot provide in advance for their
potential exercise settlement obligations by acquiring and holding the
underlying security. However, if the Portfolio holds a long position in Treasury
bills with a principal amount corresponding to the amount of the option, it will
be in approximately the same position as if it held the optioned securities. In
addition, the Portfolio will maintain Treasury bills maturing no later than
those which would be deliverable, in the event of the options exercise, in a
segregated account with its custodian, so that it will be treated as being
covered for margin purposes.
CERTAIN MORTGAGE-BACKED SECURITIES. Securities dealers make over-the-counter
markets in options on certain "pass-through" mortgage-backed securities, such as
GNMA Certificates, FHLMC PCs and FNMA Mortgage-Backed Certificates. These
dealers buy and sell call and put options on such securities, and the Portfolio
may enter into option transactions with such dealers. Since the remaining
principal balance of a "pass-through" mortgage-backed security declines each
month as a result of regular scheduled payments and early unscheduled
prepayments of principal, the Portfolio, as a writer of a call option holding
such a security as "cover" to satisfy its delivery obligation in the event of
exercise, may find that the security it holds no longer has a sufficient
remaining principal balance for this purpose. Should this occur, the Portfolio
will purchase additional securities in order to maintain its "cover."
SPECIAL RISKS ASSOCIATED WITH OPTIONS. An exchange-traded option position may be
closed out only on an exchange which provides a secondary market for an option
of the same series. Although the Portfolio will generally purchase or write only
those options for which there appears to be an active secondary market, there is
no assurance that a liquid secondary market on an exchange will exist for any
particular option, or at any particular time. For some options no secondary
market on an exchange may exist. In such event, it might not be possible to
effect closing transactions in particular options, with the result that the
Portfolio would have to exercise its options in order to realize any profit and
would incur transaction costs upon the sale of underlying securities pursuant to
the exercise of put options. If the Portfolio as a covered call option writer is
unable to effect a closing purchase transaction in a secondary market, it will
not be able to sell the underlying security until the option expires or it
delivers the underlying security upon exercise.
Reasons for the absence of a liquid secondary market on an exchange include
the following: (i) there may be insufficient trading interest in certain
options; (ii) restrictions may be imposed by an exchange on opening transactions
or closing transactions or both; (iii) trading halts, suspensions or other
restrictions may be imposed with respect to particular classes or series of
options or underlying securities; (iv) unusual or unforeseen circumstances may
interrupt normal operations on an exchange; (v) the facilities of an exchange or
the clearing corporation may not at all times be adequate to handle current
trading volume; or (vi) one or more exchanges could, for economic or other
reasons, decide or be compelled at some future date to discontinue the trading
of options (or a particular class or series of options), in which event the
secondary market on that exchange (or in that class or series of options) would
cease to exist, although outstanding options on that exchange that had been
issued by the clearing corporation as a result of trades on that Exchange would
continue to be exercisable in accordance with their terms.
There is no assurance that higher than anticipated trading activity or other
unforeseen events might not, at times, render certain of the facilities of the
clearing corporation inadequate, and thereby result in the institution by an
Exchange of special procedures which may interfere with the timely execution of
customers' orders.
If the Portfolio writes (sells) an option in the over-the-counter market, it
may terminate its option position only by negotiating a termination arrangement
with the other party to the transaction, which arrangement may involve
additional costs to the Portfolio. There is no assurance that the Portfolio
would be able to negotiate a termination of any written option position in the
over-the-counter market. 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 amount of the premiums which the Portfolio may pay or receive may be
adversely affected as new or existing institutions, including other investment
companies, engage in or increase their option purchasing and writing activities.
FUTURES TRANSACTIONS
Futures Contracts. A change in the level of interest rates or the rate of
inflation may affect the value of the securities held by the Portfolio (or of
securities that the Portfolio expects to purchase). To hedge against changes in
any of such rates or for non-hedging purposes, the Portfolio may enter into
futures contracts for the purchase or sale of debt securities and futures
contracts on foreign currencies, certificates of deposit, Eurodollar time
deposits, economic indices (such as the Consumer Price Indices compiled by the
U.S. Department of Labor) and other financial instruments and indices. All
futures contracts entered into by the Portfolio are traded on exchanges or
boards of trade that are licensed and regulated by the Commodity Futures Trading
Commission ("CFTC") or on foreign exchanges, if the Portfolio's investment
adviser has determined that trading on such an exchange does not subject the
Portfolio to risks, including credit and liquidity risks, that are materially
greater than risks associated with trading on exchanges regulated by the CFTC.
Futures Contracts on Debt Securities and Currencies. A futures contract on a
debt security or a currency is a binding contractual commitment which, if held
to maturity, will result in an obligation to make or accept delivery, during a
particular month, of securities having a standardized face value and rate of
return or of the specified currency. By purchasing futures on securities or
currencies, the Portfolio will legally obligate itself to accept delivery of the
underlying security or currency and pay the agreed price; by selling futures on
debt securities or currencies, it will legally obligate itself to make delivery
of the security or currency against payment of the agreed price. Open futures
positions on debt securities or currencies are valued at the most recent
settlement price, unless such price does not reflect the fair value of the
contract, in which case the positions will be valued by or under the direction
of the Trustees of the Portfolio.
Positions taken in the futures market are not normally held to maturity, but
are instead liquidated through offsetting transactions which may result in a
profit or a loss. While the Portfolio's futures positions on debt securities or
currencies taken by the Portfolio will usually be liquidated in this manner, it
may instead make or take delivery of the underlying securities or currencies
whenever it appears economically advantageous for the Portfolio to do so. A
clearing corporation associated with the exchange on which futures on debt
securities or currencies are traded assumes responsibility for closing- out and
guarantees that, if still open, the sale or purchase will be performed on the
settlement date.
Other Futures Contracts. Futures contracts on certificates of deposit,
Eurodollar time deposits and economic or securities indices do not require the
physical delivery of securities, but merely provide for profits and losses
resulting from changes in the market value of a contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular futures contract reflect changes in the value
or level of the instrument, deposit or index on which the futures contact is
based.
Hedging Strategies. Hedging by use of futures contracts seeks to establish
more certainly than would otherwise be possible the effective rate of return on
portfolio securities or securities that the Portfolio proposes to acquire. The
Portfolio may, for example, take a "short" position in the futures market by
selling futures contracts in order to hedge against an anticipated rise in
interest or inflation rates that would adversely affect the value of the
securities held by the Portfolio. Such futures contracts may include contracts
for the future delivery of securities held by the Portfolio or securities with
characteristics similar to those of the securities held by the Portfolio. If, in
the opinion of the Portfolio's investment adviser, Boston Management and
Research (the "Investment Adviser") there is sufficient degree of correlation
between price trends for the securities held by the Portfolio and futures
contracts based on certificates of deposit, Eurodollar time deposits, economic
indices and other financial instruments and indices, the Portfolio may also
enter into such other futures contracts as part of its hedging strategy. When
hedging of this character is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position.
On other occasions, the Portfolio may take a "long" position by purchasing
such futures contracts. This would be done, for example, when the Portfolio
anticipates the purchase of particular securities when it has the necessary
cash, but expects the rate of return then available in the securities market to
be less favorable than rates that are currently available in the futures
markets.
OPTIONS ON FUTURES CONTRACTS
The Portfolio may purchase and write call and put options on futures
contracts which are traded on a United States exchange or board of trade or any
foreign exchange on which the Portfolio is permitted to trade futures contracts.
An option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract at a specified exercise
price at any time during the option period. Upon exercise of the option, the
writer of the option is obligated to convey the appropriate futures position to
the holder of the option. If an option is exercised on the last trading day
before the expiration date of the option, a cash settlement will be made in an
amount equal to the difference between the closing price of the futures contract
and the exercise price of the option.
The Portfolio may use options on futures contracts solely for bona fide
hedging purposes as defined below or for non-hedging purposes subject to the
limitations imposed by CFTC regulations. If the Portfolio purchases a call (put)
option on a futures contract, it benefits from any increase (decrease) in the
value of the futures contract, but is not subject to the risk of decrease
(increase) in value of the futures contract. The benefits received are reduced
by the amount of the premium and transaction costs paid by the Portfolio for the
option. If market conditions do not favor the exercise of the option, the
Portfolio's loss is limited to the amount of such premium and transaction costs
paid by the Portfolio for the option.
If the Portfolio writes call (put) options on a futures contract, the
Portfolio receives a premium but assumes the risk of a rise (decline) in value
in the underlying futures contract. If the option is not exercised, the
Portfolio gains the amount of the premium, which may partially offset
unfavorable changes in the value of securities held or to be acquired for the
Portfolio. If the option is exercised, the Portfolio will incur a loss, which
will be reduced by the amount of the premium it receives. However, depending on
the degree of correlation between changes in the value of its portfolio
securities and changes in the value of futures positions, the Portfolio's losses
from writing options on futures may be partially offset by favorable changes in
the value of portfolio securities.
The holder or writer of an option on a futures contract may terminate its
position by selling or purchasing an offsetting option of the same series. There
is no guarantee that such closing transactions can be effected. The Portfolio's
ability to establish and close out positions on such options will be subject to
the development and maintenance of a liquid market. The Portfolio will not
purchase or write options on futures contracts unless, in the opinion of the
Portfolio's management, the market for such options has developed sufficiently
that the risks associated with such options transactions are not greater than
the risks associated with futures transactions.
LIMITATIONS ON THE USE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The Portfolio will engage in futures and related options transactions for
bona fide hedging or non-hedging purposes as defined in or permitted by CFTC
regulations. To ensure that its futures and related options transactions meet
this standard, the Portfolio will enter into them for the purposes or with the
hedging intent specified in CFTC regulations. It will further determine that the
price fluctuations in the futures contracts and options on futures used for
hedging purposes are substantially related to price fluctuations in securities
held by the Portfolio or which it expects to purchase. Except as stated below,
the Portfolio's futures transactions will be entered into for traditional
hedging purposes -- that is, futures contracts will be sold to protect against a
decline in the price of securities that the Portfolio owns, or futures contracts
will be purchased to protect the Portfolio against an increase in the price of
securities it intends to purchase. As evidence of this hedging intent, the
Portfolio expects that on 75% or more of the occasions on which it takes a long
futures (or option) position (involving the purchase of futures contracts), the
Portfolio will have purchased, or will be in the process of purchasing,
equivalent amounts of related securities at the time when the futures (or
option) position is closed out. However, in particular cases, when it is
economically advantageous for the Portfolio to do so, a long futures position
may be terminated (or an option may expire) without the corresponding purchase
of securities. As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits the Portfolio to elect to comply with a
different test, under which the aggregate initial margin and premiums required
to establish non-hedging positions in futures contracts and options on futures
will not exceed 5% of the Portfolio's net asset value after taking into account
unrealized profits and losses on such positions and excluding the in-the-money
amount of such options. The Portfolio will engage in transactions in futures
contracts and related options only to the extent such transactions are
consistent with the requirements of the Internal Revenue Code for maintaining
the qualification of the Fund as a regulated investment company for Federal
income tax purposes (see "Taxes").
Futures contracts on U.S. Treasury bonds, U.S. Treasury notes and GNMA
Certificates are traded on the Chicago Board of Trade, futures contracts on
foreign currencies, U.S. Treasury bills, domestic certificates of deposit and
Eurodollar time deposits are traded on the International Monetary Market at the
Chicago Mercantile Exchange, futures contracts on the Consumer Price Index for
Urban Wage Earners and Clerical Workers are traded on the Coffee, Sugar and
Cocoa Exchange and futures contracts on the Commodity Research Bureau Futures
Price Index are traded on the New York Futures Exchange. The Portfolio will
incur brokerage fees in connection with its futures and options transactions,
and it will be required to deposit and maintain funds with its brokers as margin
to guarantee performance of its futures and options obligations. In addition,
while futures contracts and options on futures will be traded to reduce certain
risks, such trading itself entails certain other risks. Thus, while the
Portfolio may benefit from the use of futures and options on futures,
unanticipated changes in interest or inflation rates may result in a poorer
overall performance for the Portfolio than if it had not entered into any
futures contracts or options transactions. Moreover, in the event of an
imperfect correlation between the futures position and portfolio position which
is intended to be protected, the desired protection may not be obtained and the
Portfolio may be exposed to risk of loss.
To compensate for the imperfect correlation of movements in the price of
debt securities being hedged and movements in the price of futures contracts,
the Portfolio may buy or sell futures contracts in a greater dollar amount than
the dollar amount of the securities being hedged if the historical volatility of
the prices of such securities has been greater than the historical volatility of
the futures contracts. Conversely, the Portfolio may buy or sell fewer futures
contracts if the historical volatility of the price of the securities being
hedged is less than the historical volatility of the futures contracts.
A futures contract involving the purchase of securities will be offset by
cash or high grade liquid debt securities held in a segregated account in an
amount equal to the underlying value of the futures contract.
FORWARD FOREIGN CURRENCY EXCHANGE TRANSACTIONS
The Portfolio may enter into forward foreign currency exchange contracts. A
forward foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at the
time of entering into the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no deposit
requirement, and no commissions are charged at any stage for trades.
At the maturity of a forward contract the Portfolio may either accept or
make delivery of the currency specified in the contract or, at or prior to
maturity, enter into a closing transaction involving the purchase or sale of an
offsetting contract. Closing transactions with respect to forward contracts are
usually effected with the currency trader who is a party to the original forward
contract.
The Portfolio may enter into forward foreign currency exchange contracts in
several circumstances. First, when the Portfolio enters into a contract for the
purchase or sale of a security denominated in a foreign currency, or when the
Portfolio anticipates the receipt in a foreign currency of dividend or interest
payments on such a security which it holds, the Portfolio may desire to "lock
in" the U.S. dollar price of the security or the U.S. dollar equivalent of such
dividend or interest payment, as the case may be. By entering into a forward
contract for the purchase or sale, for a fixed amount of dollars, of the amount
of foreign currency involved in the underlying transactions, the Portfolio will
attempt to protect itself against an adverse change in the relationship between
the U.S. dollar and the subject foreign currency during the period between the
date on which the security is purchased or sold, or on which the dividend or
interest payment is declared, and the date on which such payments are made or
received.
Additionally, when management of the Portfolio believes that the currency of
a particular foreign country may suffer a substantial decline against the U.S.
dollar, it may enter into a forward contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some or all
of the securities held by the Portfolio denominated in such foreign currency.
The precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible because the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date on which the
contract is entered into and the date it matures. The precise projection of
short-term currency market movements is not possible and short-term hedging
provides a means of fixing the dollar value of only a portion of the Portfolio's
foreign assets. The Portfolio will not enter into forward contracts or maintain
a net exposure to such contracts where the consummation of the contracts would
obligate the Portfolio to deliver an amount of foreign currency in excess of the
value of the securities held by the Portfolio or other assets denominated in
that currency.
The Portfolio's custodian will place cash or liquid high grade debt
securities in a segregated account of the Portfolio in an amount equal to the
value of the Portfolio's total assets committed to the consummation of forward
foreign currency exchange contracts requiring the Portfolio to purchase foreign
currencies. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account on a daily
basis so that the value of the account will equal the amount of the Portfolio's
commitments with respect to such contracts.
The Portfolio generally will not enter into a forward contract with a term
of greater than one year. It also should be realized that this method of
protecting the value of the securities held by the Portfolio against a decline
in the value of a currency does not eliminate fluctuations in the underlying
prices of the securities. It simply establishes a rate of exchange which the
Portfolio can achieve at some future point in time.
While the Portfolio will enter into forward contracts to reduce currency
exchange rate risks, transactions in such contracts involve certain other risks.
Thus, while the Portfolio may benefit from such transactions, unanticipated
changes in currency exchange rates may result in a poorer overall performance
for the Portfolio than if it had not engaged in any such transactions. Moreover,
there may be imperfect correlation between the securities held by the Portfolio
denominated in a particular currency and forward contracts entered into by the
Portfolio. Such imperfect correlation may prevent the Portfolio from achieving a
complete hedge or expose the Portfolio to risk of foreign exchange loss.
SPECIAL RISKS ASSOCIATED WITH FORWARD CONTRACTS, FOREIGN CURRENCY FUTURES
CONTRACTS AND OPTIONS THEREON AND OPTIONS ON FOREIGN CURRENCIES
Transactions in forward contracts, as well as futures and options on foreign
currencies, are subject to the risk of government actions affecting trading in
or the prices of currencies underlying such contracts, which could restrict or
eliminate trading and could have a substantial adverse effect on the value of
positions held by the Portfolio. In addition, the value of such positions could
be adversely affected by a number of other complex political and economic
factors applicable to the countries issuing the underlying currencies.
Further, unlike trading in most other types of instruments, there is no
systematic reporting of last sale information with respect to the foreign
currencies underlying forward contracts, futures contracts and options. As a
result, the available information on which the Portfolio's trading systems will
be based may not be as complete as the comparable data on which the Portfolio
makes investment and trading decisions in connection with securities and other
transactions. Moreover, because the foreign currency market is a global,
twenty-four hour market, events could occur on that market which will not be
reflected in the forward, futures or options markets until the following day,
thereby preventing the Portfolio from responding to such events in a timely
manner.
Settlements of over-the-counter forward contracts or of an exercise of
foreign currency options generally must occur within the country issuing the
underlying currency, which in turn requires traders to accept or make delivery
of such currencies in conformity with any United States or foreign restrictions
and regulations regarding the maintenance of foreign banking relationships,
fees, taxes or other charges.
Unlike currency futures contracts and exchange-traded options, options on
foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) the Securities and Exchange Commission ("SEC"). To the contrary, such
instruments are traded through financial institutions acting as market-makers.
(Foreign currency options are also traded on the Philadelphia Stock Exchange
subject to SEC regulation). In an over-the-counter trading environment, many of
the protections associated with transactions on exchanges will not be available.
For example, there are no daily price fluctuation limits, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
Although the purchaser of an option cannot lose more than the amount of the
premium plus related transaction costs, this entire amount could be lost.
Moreover, an option writer could lose amounts substantially in excess of its
initial investment due to the margin and collateral requirements associated with
such option positions. Similarly, there is no limit on the amount of potential
losses on forward contracts to which the Portfolio is a party.
In addition, over-the-counter transactions can only be entered into with a
financial institution willing to take the opposite side, as principal, of the
Portfolio's position unless the institution acts as broker and is able to find
another counterparty willing to enter into the transaction with the Portfolio.
Where no such counterparty is available, it will not be possible to enter into a
desired transaction. There also may be no liquid secondary market in the trading
of over-the-counter contracts, and the Portfolio may be unable to close out
options purchased or written, or forward contracts entered into, until their
exercise, expiration or maturity. This in turn could limit the Portfolio's
ability to realize profits or to reduce losses on open positions and could
result in greater losses.
Further, over-the-counter transactions are not backed by the guarantee of an
exchange clearing house, and the Portfolio will therefore be subject to the risk
of default by, or the bankruptcy of, the financial institution serving as its
counterparty. One or more such institutions also may decide to discontinue their
role as market-makers in a particular currency, thereby restricting the
Portfolio's ability to enter into desired hedging transactions. The Portfolio
will enter into over-the-counter transactions only with parties whose
creditworthiness has been reviewed and found satisfactory by its investment
adviser.
Over-the-counter options on foreign currencies, like exchange-traded
commodity futures contracts and commodity option contracts, are within the
exclusive regulatory jurisdiction of the CFTC, which currently permits the
trading of such options, but only subject to a number of conditions regarding
the commercial purpose of the purchaser of such option. The Portfolio is not
able to determine at this time whether or to what extent the CFTC may impose
additional restrictions on the trading of over-the-counter options on foreign
currencies at some point in the future, or the effect that any such restrictions
may have on the hedging strategies to be implemented by the Portfolio.
CFTC regulations require that the Portfolio not enter into transactions in
commodity futures contracts or commodity option contracts for which the
aggregate initial margin and premiums exceed 5% of the fair market value of the
Portfolio's assets. Premiums paid to purchase over-the-counter options on
foreign currencies, and margin deposited in connection with the writing of such
options, are required to be included in determining compliance with this
requirement which could, depending upon the Portfolio's existing positions in
futures contracts and options on futures contracts, limit the Portfolio's
ability to purchase or write options on foreign currencies. Conversely, the
existence of open positions in options on foreign currencies could limit the
ability of the Portfolio to enter into desired transactions in other options or
futures contracts.
While forward contracts are not presently subject to regulation by the CFTC,
the CFTC may in the future assert or be granted authority to regulate such
instruments. In such event, the Portfolio's ability to utilize forward contracts
in the manner set forth above could be restricted.
Options on foreign currencies traded on a national securities exchange are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the
Portfolio to liquidate open positions at a profit prior to exercise or
expiration, or to limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures for
exercise and settlement, such as technical changes in the mechanics of delivery
of currency, the fixing of dollar settlement prices or prohibitions on exercise.
PORTFOLIO TURNOVER
If the Portfolio writes a substantial number of call options and the market
prices of the underlying securities appreciate, or if the Portfolio writes a
substantial number of put options and the market prices of the underlying
securities depreciate, there may be a very substantial turnover of securities
held by the Portfolio. Although it is not anticipated that the annual portfolio
turnover rate will exceed 200% under such circumstance, portfolio turnover may
be greater than 200% but is not expected to exceed 300%. A 200% turnover rate
would occur if all of the securities held by the Portfolio were sold and either
repurchased or replaced twice within one year. High portfolio turnover involves
correspondingly greater brokerage commissions and other transaction costs, which
will be borne directly by the Portfolio. The Portfolio pays brokerage
commissions in connection with futures transactions and the writing of options
and effecting of closing purchase or sale transactions, as well as for purchases
and sales of portfolio securities. Reference is made to "Portfolio Security
Transactions" for a discussion of the Portfolio's brokerage practices.
INVESTMENT RESTRICTIONS
The following investment restrictions are designated as fundamental policies
and as such cannot be changed without the approval of the holders of a majority
of the Fund's outstanding voting securities, which as used in this Statement of
Additional Information means the lesser of (a) 67% of the shares of the Fund
present or represented by proxy at a meeting if the holders of more than 50% of
the shares are present or represented at the meeting or (b) more than 50% of the
shares of the Fund. Accordingly, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of a single 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
total assets in any single industry (other than securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities);
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial or maintenance margin
in connection with futures contracts or related options transactions is not
considered the purchase of a security on margin;
(4) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(5) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(6) Purchase or sell physical commodities or contracts for the purchase or
sale of physical commodities;
(7) Make loans to any person except by (a) the acquisition of debt
instruments and making portfolio investments, (b) entering into repurchase
agreements and (c) lending portfolio securities; or
(8) Buy investment securities from or sell them to any of its officers or
Trustees of the Trust, the investment adviser or its underwriter, as principal;
however, any such person or concerns may be employed as a broker upon customary
terms.
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Portfolio has adopted substantially the same fundamental investment
restrictions as the foregoing numbered investment restrictions adopted by the
Fund; such restrictions cannot be changed without the approval of a "majority of
the outstanding voting securities" of the Portfolio, which as used in this
Statement of Additional Information means the lesser of (a) 67% of the
outstanding voting securities of the Portfolio present or represented by proxy
at a meeting if the holders of more than 50% of the outstanding voting
securities of the Portfolio are present or represented at the meeting or (b)
more than 50% of the outstanding voting securities of the Portfolio. The term
"voting securities" as used in this paragraph has the same meaning as in the
Investment Company Act of 1940 (the "1940 Act"). Whenever the Trust is requested
to vote on a change in the investment restrictions of the Portfolio, the Trust
will hold a meeting of Fund shareholders and will cast its vote as instructed by
the shareholders.
The Fund and the Portfolio have each adopted the following nonfundamental
investment policies which may be changed with respect to the Fund by the
Trustees of the Trust without approval by the Fund's shareholders or may be
changed with respect to the Portfolio by the Trustees of the Portfolio with or
without the approval of the Fund or the Portfolio's other investors. As a matter
of nonfundamental policy, the Fund and the Portfolio may not: (a) purchase put
or call options on U.S. Government securities if after such purchase more than
5% or its net assets, as measured by the aggregate of the premiums paid for such
options held by the Fund or the Portfolio, would be so invested; (b) purchase
any put options, long futures contracts, or call options on a futures contract
if at the date of such purchase realized net losses from such transactions
during the fiscal year to date exceed 5% of its average net assets during such
period; (c) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 25% of its net
assets (taken at current value) is held as collateral for such sales at any one
time. (The Fund and the Portfolio will make such sales only for the purpose of
deferring realization of gain or loss for Federal income tax purposes and such
sales would not be made of securities subject to outstanding options); (d)
purchase securities of any issuer which, including predecessors, has not been in
continuous operation for at least three years, except that 5% of its total
assets (taken at market value) may be invested in certain issuers not in such
continuous operation but substantially all of whose assets are (i) securities of
one or more issuers which have had a record of three years' continuous operation
or (ii) assets of an independent division of an issuer which division has had a
record of three years' continuous operation; provided, however, that exempted
from this restriction are U.S. Government securities, securities of issuers
which are rated by at least one nationally recognized statistical rating
organization, municipal obligations and obligations issued or guaranteed by any
foreign government or its agencies or instrumentalities; (e) invest more than
15% of net assets in investments which are not readily marketable, including
restricted securities and repurchase agreements maturing in more than seven
days. Restricted securities for the purposes of this limitation do not include
securities elegible for resale pursuant to Rule 144A of the Securities Act of
1933 that the Board of Trustees of the Trust or the Portfolio, or its delegate,
determine to be liquid, based upon the trading markets for the specific
security; (f) purchase or retain in its portfolio any securities issued by an
issuer any of whose officers, directors, trustees or security holders is an
officer or Trustee of the Trust or the Portfolio or is a member, officer,
director or trustee of any investment adviser of the Trust or the Portfolio, if
after the purchase of the securities of such issuer by the Fund or the Portfolio
one or more of such persons owns beneficially more than 1/2 of 1% of the shares
or securities or both (all taken at market value) of such issuer and such
persons owning more than 1/2 of 1% of such shares or securities together own
beneficially more than 5% of such shares or securities or both (all taken at
market value); or (g) purchase oil, gas or other mineral leases or purchase
partnership interests in oil, gas or other mineral exploration or development
programs.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the fundamental policies
described above. Should the Fund determine that any such commitment is no longer
in the best interests of the Fund and its shareholders, it will revoke the
commitment by terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust and the Portfolio are listed below.
Except as indicated, each individual has held the office shown or other offices
in the same company for the last five years. Unless otherwise noted, the
business address of each Trustee and officer is 24 Federal Street, Boston,
Massachusetts 02110, which is also the address of the Portfolio's investment
adviser, Boston Management and Research ("BMR") which is a wholly-owned
subsidiary of Eaton Vance Management ("Eaton Vance"); Eaton Vance's parent,
Eaton Vance Corp. ("EVC"); and of BMR's and Eaton Vance's trustee, Eaton Vance,
Inc. ("EV"). Eaton Vance and EV are both wholly-owned subsidiaries of EVC. Those
Trustees and officers who are "interested persons" of the Trust, the Portfolio,
BMR, Eaton Vance, EVC or EV, as defined in the 1940 Act, by virtue of their
affiliation with any one or more of the Trust, the Portfolio, BMR, Eaton Vance,
EVC or EV, are indicated by an asterisk(*).
TRUSTEES OF THE TRUST AND THE PORTFOLIO
M. DOZIER GARDNER (61), President and Trustee*
President and Chief Executive Officer of BMR, Eaton Vance, EVC and EV, and a
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), Trustee President of Dwight Partners, Inc. (a corporate
relations and communications company) founded in 1988. Director or Trustee of
various investment companies managed by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (53), Vice President and Trustee*
Executive Vice President, BMR, Eaton Vance, EVC and EV and a Director of EVC and
EV. Director, Trustee and officer of various investment companies managed by
Eaton Vance or BMR. Mr. Hawkes was elected Vice President and Trustee of the
Trust on December 16, 1991.
SAMUEL L. HAYES, III (60), Trustee Jacob H. Schiff, Professor of Investment
Banking at Harvard University Graduate School of Business Administration.
Director or Trustee of various investment companies managed by Eaton Vance or
BMR.
Address: Harvard Business School, Soldiers Field Road, Boston, Massachusetts
02134
NORTON H. REAMER (59), Trustee
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, The Regis Fund, Inc. (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), Trustee
Director, Fiduciary Trust Company. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), Trustee Investment Adviser and Consultant. Director or
Trustee of various investment companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
OFFICERS OF THE TRUST AND THE PORTFOLIO
SUSAN SCHIFF (34), Vice President* Vice President of BMR, Eaton Vance and EV.
Ms. Schiff was elected Vice President of the Trust on February 24, 1992.
MICHAEL B. TERRY (52), Vice President of the Trust* Vice President of BMR, Eaton
Vance and EV. Officer of various other investment companies managed by Eaton
Vance or BMR. Mr. Terry was elected Vice President of the Trust on December
17, 1990.
MARK S. VENEZIA (45), Vice President*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (50), Treasurer*
Vice President of BMR, Eaton Vance and EV. Officer of various other investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), Secretary*
Vice President and Secretary of BMR, Eaton Vance, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JANET E. SANDERS (59), Assistant Secretary*
Vice President of BMR, Eaton Vance and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust and of the Portfolio. The
Special Committee's functions include a continuous review of the Trust's
contractual relationship with the administrator and the Portfolio's contractual
relationship with the investment adviser, making recommendations to the Trustees
regarding the compensation of those Trustees who are not members of the Eaton
Vance organization, and making recommendations to the Trustees regarding
candidates to fill vacancies, as and when they occur, in the ranks of those
Trustees who are not "interested persons" of the Trust, the Portfolio, or the
Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust and of the Portfolio. The Audit Committee's
functions include making recommendations to the Trustees regarding the selection
of the independent accountants, and reviewing with such accountants and the
Treasurer of the Trust and of the Portfolio matters relative to accounting and
auditing practices and procedures, accounting records, internal accounting
controls, and the functions performed by the custodian and transfer agent of the
Fund and of the Portfolio.
Trustees of the Portfolio that are not affiliated with the Investment
Adviser may elect to defer receipt of all or a percentage of their annual fees
in accordance with the terms of a Trustees Deferred Compensation Plan (the
"Plan"). Under the Plan, an eligible Trustee may elect to have his deferred fees
invested by the Portfolio in the shares of one or more funds in the Eaton Vance
Family of Funds, and the amount paid to the Trustees under the Plan will be
determined based upon the performance of such investments. Deferral of Trustees'
fees in accordance with the Plan will have a negligible effect on the
Portfolio's assets, liabilities, and net income per share, and will not obligate
the Portfolio to retain the services of any Trustee or obligate the Portfolio to
pay any particular level of compensation to the Trustee. For the compensation
received by the Trustees of the Trust and the Portfolio, see "Fees and Expenses"
in Part II of this Statement of Additional Information.
INVESTMENT ADVISER AND ADMINISTRATOR
The Portfolio engages BMR as investment adviser pursuant to an Investment
Advisory Agreement. BMR or Eaton Vance acts as investment adviser to investment
companies and various individual and institutional clients with combined assets
under management of approximately $15 billion.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. They maintain a large staff of experienced fixed-income
and equity investment professionals to service the needs of their clients. The
fixed-income division focuses on all kinds of taxable investment-grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
BMR manages the investments and affairs of the Portfolio subject to the
supervision of the Portfolio's Board of Trustees. BMR furnishes to the Portfolio
investment research, advice and supervision, furnishes an investment program and
determines what securities will be purchased, held or sold by the Portfolio and
what portion, if any, of the Portfolio's assets will be held uninvested. The
Investment Advisory Agreement requires BMR to pay the salaries and fees of all
officers and Trustees of the Portfolio who are members of the BMR organization
and all personnel of BMR performing services relating to research and investment
activities. The Portfolio is responsible for all expenses not expressly stated
to be payable by BMR under the Investment Advisory Agreement, including, without
implied limitation, (i) expenses of maintaining the Portfolio and continuing its
existence, (ii) registration of the Portfolio under the 1940 Act, (iii)
commissions, fees and other expenses connected with the acquisition, holding and
disposition of securities and other investments, (iv) auditing, accounting and
legal expenses, (v) taxes and interest, (vi) governmental fees, (vii) expenses
of issue, sale and redemption of interests in the Portfolio, (viii) expenses of
registering and qualifying the Portfolio and interests in the Portfolio under
Federal and state securities laws and of preparing and printing registration
statements or other offering statements or memoranda for such purposes and for
distributing the same to investors, and fees and expenses of registering and
maintaining registrations of the Portfolio and of the Portfolio's placement
agent as broker-dealer or agent under state securities laws, (ix) expenses of
reports and notices to investors and of meetings of investors and proxy
solicitations therefor, (x) expenses of reports to governmental officers and
commissions, (xi) insurance expenses, (xii) association membership dues, (xiii)
fees, expenses and disbursements of custodians and subcustodians for all
services to the Portfolio (including without limitation safekeeping of funds,
securities and other investments, keeping of books, accounts and records, and
determination of net asset values, book capital account balances and tax capital
account balances), (xiv) fees, expenses and disbursements of transfer agents,
dividend disbursing agents, investor servicing agents and registrars for all
services to the Portfolio, (xv) expenses for servicing the accounts of
investors, (xvi) any direct charges to investors approved by the Trustees of the
Portfolio, (xvii) compensation and expenses of Trustees of the Portfolio who are
not members of BMR's organization, and (xviii) such non-recurring items as may
arise, including expenses incurred in connection with litigation, proceedings
and claims and the obligation of the Portfolio to indemnify its Trustees,
officers and investors with respect thereto.
The Investment Advisory Agreement between BMR and the Portfolio provides for
a monthly advisory fee of .0625% (equivalent to .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%
This fee is higher than that paid by most investment companies due to the
additional research and management efforts required in connection with the
writing and purchase of options, the formation and implementation of option
investment strategies and the structuring of transactions in futures contracts
and related options. For additional information about the Investment Advisory
Agreement, including the net assets of the Portfolio and the investment advisory
fees that the Portfolio paid BMR under the Investment Advisory Agreement, see
"Fees and Expenses" in Part II of this Statement of Additional Information.
The Investment Advisory Agreement with BMR may be continued indefinitely so
long as such continuance is approved at least annually (i) by the vote of a
majority of the Trustees of the Portfolio who are not interested persons of the
Portfolio or of BMR cast in person at a meeting specifically called for the
purpose of voting on such approval and (ii) by the Board of Trustees of the
Portfolio or by vote of a majority of the outstanding voting securities of the
Portfolio. The Agreement may be terminated at any time without penalty on sixty
(60) days' written notice by the Board of Trustees of either party, or by vote
of the majority of the outstanding voting securities of the Portfolio, and the
Agreement will terminate automatically in the event of its assignment. The
Agreement provides that BMR may render services to others and engage in other
business activities and may permit other fund clients and other corporations and
organizations to use the words "Eaton Vance" or "Boston Management and Research"
in their names. The Agreement also provides that BMR shall not be liable for any
loss incurred in connection with the performance of its duties, or action taken
or omitted under that Agreement, in the absence of willful misfeasance, bad
faith, gross negligence in the performance of its duties or by reason of its
reckless disregard of its obligations and duties thereunder, or for any losses
sustained in the acquisition, holding or disposition of any security or other
investment.
As indicated in the Prospectus, Eaton Vance serves as Administrator of the
Fund, but receives no compensation for providing administrative services to the
Fund. Under its Administrative Services Agreement with the Fund, Eaton Vance has
been engaged to administer the Fund's affairs, subject to the supervision of the
Trustees of the Trust, and shall furnish for the use of the Fund office space
and all necessary office facilities, equipment and personnel for administering
the affairs of the Fund.
The Fund pays all of its own expenses including, without limitation, (i)
expenses of maintaining the Fund and continuing its existence, (ii) registration
of the Trust under the 1940 Act, (iii) commissions, fees and other expenses
connected with the purchase or sale of securities and other investments, (iv)
auditing, accounting and legal expenses, (v) taxes and interest, (vi)
governmental fees, (vii) expenses of issue, sale, repurchase and redemption of
shares, (viii) expenses of registering and qualifying the Fund and its shares
under federal and state securities laws and of preparing and printing
prospectuses for such purposes and for distributing the same to shareholders and
investors, and fees and expenses of registering and maintaining registrations of
the Fund and of the Fund's principal underwriter, if any, as broker-dealer or
agent under state securities laws, (ix) expenses of reports and notices to
shareholders and of meetings of shareholders and proxy solicitations therefor,
(x) expenses of reports to governmental officers and commissions, (xi) insurance
expenses, (xii) association membership dues, (xiii) fees, expenses and
disbursements of custodians and subcustodians for all services to the Fund
(including without limitation safekeeping of funds, securities and other
investments, keeping of books and accounts and determination of net asset
values), (xiv) fees, expenses and disbursements of transfer agents, dividend
disbursing agents, shareholder servicing agents and registrars for all services
to the Fund, (xv) expenses for servicing shareholder accounts, (xvi) any direct
charges to shareholders approved by the Trustees of the Trust, (xvii)
compensation and expenses of Trustees of the Trust who are not members of the
Eaton Vance organization, and (xviii) such non-recurring items as may arise,
including expenses incurred in connection with litigation, proceedings and
claims and the obligation of the Trust to indemnify its Trustees and officers
with respect thereto.
BMR is a wholly-owned subsidiary of Eaton Vance. Eaton Vance and EV are both
wholly-owned subsidiaries of EVC. BMR and Eaton Vance are both Massachusetts
business trusts, and EV is the trustee of BMR and Eaton Vance. The Directors of
EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier Gardner, James B. Hawkes
and Benjamin A. Rowland, Jr. The Directors of EVC consist of the same persons
and John G. L. Cabot and Ralph Z. Sorenson. Mr. Clay is chairman and Mr. Gardner
is president and chief executive officer of EVC, BMR, Eaton Vance and EV. All of
the issued and outstanding shares of Eaton Vance and EV are owned by EVC. All of
the issued and outstanding shares of BMR are owned by Eaton Vance. All shares of
the outstanding Voting Common Stock of EVC are deposited in a Voting Trust which
expires on December 31, 1996, the Voting Trustees of which are Messrs. Clay,
Brigham, Gardner, Hawkes and Rowland. The Voting Trustees have unrestricted
voting rights for the election of Directors of EVC. All of the outstanding
voting trust receipts issued under said Voting Trust are owned by certain of the
officers of BMR and Eaton Vance who are also officers and Directors of EVC and
EV. As of January 31, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of
such voting trust receipts, and Messrs. Rowland and Brigham owned 15% and 13%,
respectively, of such voting trust receipts. Messrs. Gardner, Hawkes and Otis
are officers or Trustees of the Trust and the Portfolio and are members of the
EVC, BMR, Eaton Vance and EV organizations. Messrs. O'Connor, Terry and Venezia
and Ms. Sanders and Ms. Schiff, are officers or Trustees of the Trust and/or the
Portfolio and are also members of the BMR, Eaton Vance and EV organizations. BMR
will receive the fees paid under the Investment Advisory Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which is engaged
in oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which engages in oil and gas operations) and 77.3% of the stock of Investors
Bank & Trust Company, custodian of the Fund and the Portfolio which provides
custodial, trustee and other fiduciary services to investors, including
individuals, employee benefit plans, corporations, investment companies, savings
banks and other institutions. In addition, Eaton Vance owns all the stock of
Northeast Properties, Inc., which is engaged in real estate investment,
management and consulting. EVC owns all of the stock of Fulcrum Management, Inc.
and MinVen, Inc., which are engaged in the development of precious metal
properties. EVC, BMR, Eaton Vance and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the custodian of the Fund and
the Portfolio, Investors Bank & Trust Company. It is Eaton Vance's opinion that
the terms and conditions of such transactions were not and will not be
influenced by existing or potential custodial or other relationships between the
Trust or the Portfolio and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund
and the Portfolio. IBT has the custody of all cash and securities representing
the Fund's interest in the Portfolio, has custody of all the Portfolio's assets,
its subsidiary. IBT Fund Services (Canada) Inc. in Toronto, Canada maintains the
general ledger of the Portfolio and the Fund and computes the daily net asset
value of interests in the Portfolio and the net asset value of shares of the
Fund. In its capacity as custodian it attends to details in connection with the
sale, exchange, substitution, transfer or other dealings with the Portfolio's
investments, receives and disburses all funds and performs various other
ministerial duties upon receipt of proper instructions from the Fund and the
Portfolio. IBT charges fees which are competitive within the industry. A portion
of the fee relates to custody, bookkeeping and valuation services and is based
upon a percentage of Fund and Portfolio net assets and a portion of the fee
relates to activity charges, primarily the number of portfolio transactions.
These fees are then reduced by a credit for cash balances of the particular
investment company at the custodian equal to 75% of the 91-day, U.S. Treasury
Bill auction rate applied to the particular investment company's average daily
collected balances for the week. In view of the ownership of EVC in IBT, the
Portfolio is treated as a self-custodian pursuant to Rule 17f-2 under the 1940
Act, and the Portfolio's investments held by IBT as custodian are thus subject
to the additional examinations by the Portfolio's independent accountants as
called for by such Rule. For the custody fees that the Portfolio and the Fund
paid to IBT, see "Fees and Expenses" in Part II of this Statement of Additional
Information.
SERVICE FOR WITHDRAWAL
By a standard agreement, the Trust's Transfer Agent will send to the
shareholder regular monthly or quarterly payments of any designated amount based
upon the value of the shares held. The checks will be drawn from share
redemptions and hence, although they are a return of principal may give rise to
gain or loss for tax purposes. Income dividends and capital gains distributions
in connection with withdrawal accounts will be credited at net asset value as of
the record date for each distribution. Continued withdrawals in excess of
current income will eventually use up principal, particularly in a period of
declining market prices.
To use this service, at least $5,000 in cash or shares at the public
offering price (i.e., net asset value) will have to be deposited with the
Transfer Agent. A shareholder may not have a withdrawal plan in effect at the
same time he has authorized Bank Draft Investing or is otherwise making regular
purchases of Fund shares. Either the shareholder, the Transfer Agent or the
Principal Underwriter will be able to terminate the withdrawal plan at any time
without penalty.
DETERMINATION OF NET ASSET VALUE
The net asset value of the Portfolio and of shares of the Fund is determined
by the Custodian (as agent for the Fund and the Portfolio) in the manner
described under "Valuing Fund Shares" in the Prospectus. The Fund and the
Portfolio will be closed for business and will not price their respective shares
or interests on the following business holidays: New Year's Day, Washington's
Birthday, Good Friday (a New York Stock Exchange holiday), Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
Each investor in the Portfolio, including the Fund, may add to or reduce its
investment in the Portfolio on each day the New York Stock Exchange (the
"Exchange") is open for trading ("Portfolio Business Day") as of the close of
regular trading on the Exchange (the "Portfolio Valuation Time"). The value of
each investor's interest in the Portfolio will be determined by multiplying the
net asset value of the Portfolio by the percentage, determined on the prior
Portfolio Business Day, which represented that investor's share of the aggregate
interests in the Portfolio on such prior day. Any additions or withdrawals for
the current Portfolio Business Day will then be recorded. The investor's
percentage of the aggregate interest in the Portfolio will then be recomputed as
a percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the Portfolio Valuation Time
on the prior Portfolio Business Day plus or minus, as the case may be, the
amount of any additions to or withdrawals from the investor's investment in the
Portfolio on the current Portfolio Business Day and (ii) the denominator of
which is the aggregate net asset value of the Portfolio as of the Portfolio
Valuation Time on the prior Portfolio Business Day plus or minus, as the case
may be, the amount of the net additions to or withdrawals from the aggregate
investment in the Portfolio on the current Portfolio Business Day by all
investors in the Portfolio. The percentage so determined will then be applied to
determine the value of the investor's interest in the Portfolio for the current
Portfolio Business Day.
INVESTMENT PERFORMANCE
The average annual total return is determined by multiplying a hypothetical
initial purchase order of $1,000 by the average annual compound 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 that all dividends and distributions are reinvested at net
asset value on the reinvestment dates during the period and a complete
redemption of the investment and, if applicable, the deduction of the contingent
deferred sales charge at the end of the period. For information concerning the
total return of the Fund, see "Performance Information" in Part II of this
Statement of Additional Information.
The Fund's yield is computed pursuant to a standardized formula by dividing
its net investment income per share earned during a recent thirty-day period by
the maximum offering price (net asset value) per share on the last day of the
period and annualizing the resulting figure. Net investment income per share is
calculated from the yields to maturity of all obligations held by the Portfolio
based on the market value of such obligations at the beginning of such period,
reduced by accrued Fund expenses for the period with the resulting number being
divided by the average daily number of Fund shares outstanding and entitled to
receive distributions during the period. This yield figure does not reflect the
deduction of the contingent deferred sales charge imposed on certain redemptions
of shares within one year of their purchase. For the yield of the Fund, see
"Performance Information" in Part II of this Statement of Additional
Information.
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 net asset value
per share. The Fund's effective distribution rate is computed by dividing the
distribution rate by the ratio (the days in a year divided by the accrual days
of the monthly period) 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 obligations in
the securities 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.
The Fund's total return may be compared to the Consumer Price Index and
various domestic securities indices. The Fund's total return and comparisons
with these indices may be used in advertisements and in information furnished to
present or prospective shareholders. The Fund's performance may differ from that
of other investors in the Portfolio, including any other investment companies.
From time to time, information, charts and illustrations showing the effects
of compounding interest may be included in advertisements and other material
furnished to present and prospective shareholders. Compounding is the process of
earning interest on principal plus interest that was earned earlier. Interest
can be compounded annually, semi-annually, quarterly or daily, e.g. $1,000
compounded annually at 9% will grow to $1,090 at the end of the first year and
$1,188 at the end of the second year. The extra $8, which was earned on the $90
interest from the first year, is the compound interest. $1,000 compounded
annually at 9% grows to $2,367 at the end of 10 years and $5,604 at the end of
20 years. Other examples of compounding $1,000 annually are 7% grows to $1,967
at the end of 10 years and $3,870 at the end of 20 years. At 12% the $1,000
grows to $3,106 at the end of 10 years and $9,646 at the end of 20 years. All of
these examples are for illustrative purposes only and are not meant to indicate
performance of the Fund.
From time to time, information, charts and illustrations relating to
inflation and the effects of inflation on the dollar may be included in
advertisements and other material furnished to present and prospective
shareholders. For example: After 10 years, the purchasing power of $25,000 would
shrink to $16,621, $14,968, $13,465 and $12,100, if the annual rates of
inflation during such period were 4%, 5%, 6% and 7%, respectively. (To calculate
the purchasing power, the value at the end of each year is reduced by the above
inflation rates for 10 consecutive years.)
From time to time, evaluations of the Fund's performance may be made by
independent sources, e.g. Lipper Analytical Services, Inc., CDA/Wiesenberger and
Morningstar, Inc., may be used in advertisements and in information furnished to
present or prospective shareholders.
From time to time, information about the portfolio allocation and holdings
of the Portfolio at a particular date may be included in advertisements and
other material furnished to present and prospective shareholders. Such
information, for example, may include the Portfolio's diversification by asset
type, including mortgage-backed securities which have pools of individual
mortgages originated 15 to 20 years ago having interest rates of 4-8% and having
balances of approximately $10,000 ("low-coupon seasoned mortgages"); and
mortgage-backed securities which have pools of individual mortgages originated 5
to 10 years ago having interest rates of 11-16% and having balances of
approximately $25,000 ("high-coupon seasoned mortgages"). For an example of the
Portfolio's diversification by asset type, see "Performance Information" in Part
II of this Statement of Additional Information.
For additional information, charts and illustrations relating to the Fund's
investment performance, see "Performance Information" in Part II of this
Statement of Additional Information,
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
TAXES
See "Distributions and Taxes" in the Fund's current prospectus.
Each series of Eaton Vance Government Obligations Trust is treated as a
separate entity for Federal income tax purposes. The Fund is treated as a
separate entity for tax and accounting purposes and has elected to be treated,
has qualified, and intends to continue to qualify each year, as a regulated
investment company under the Internal Revenue Code (the "Code"). Accordingly,
the Fund intends to satisfy certain requirements relating to sources of its
income and diversification of its assets and to distribute all of its net
investment income and net realized capital gains (after reduction by any
available capital loss carryforwards) in accordance with the timing requirements
imposed by the Code, so as to avoid any Federal income or excise tax to the
Fund. Because the Fund invests substantially all of its assets in the Portfolio,
the Portfolio normally must satisfy the applicable source of income and
diversification requirements in order for the Fund to satisfy them. The
Portfolio will allocate at least annually among its investors, including the
Fund, each investor's distributive share of the Portfolio's net investment
income, net realized capital gains, and any other items of income, gain, loss,
deduction or credit. The Portfolio will make allocations to the Fund in
accordance with the Code and applicable regulations and will make moneys
available for withdrawal at appropriate times and in sufficient amounts to
enable the Fund to satisfy the tax distribution requirements that apply to the
Fund and that must be satisfied in order to avoid Federal income and/or excise
tax on the Fund. For purposes of applying the requirements of the Code regarding
qualification as a regulated investment company, the Fund will be deemed (i) to
own its proportionate share of each of the assets of the Portfolio and (ii) to
be entitled to the gross income of the Portfolio attributable to such share.
In order to avoid Federal excise tax, the Code requires that the Fund
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses, generally
computed on the basis of the one-year period ending on October 31 of such year,
after reduction by any available capital loss carryforwards, and 100% of any
income and capital gains from the prior year (as previously computed) that was
not paid out during such year and on which the Fund paid no Federal income tax.
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.
The Portfolio's transactions in foreign currency, foreign currency
denominated debt securities, payables and receivables, options and futures on
foreign currency and forward foreign currency exchange contracts are subject to
special tax rules that may convert capital gain or loss into ordinary income or
loss and may affect the amount, timing and character of the Portfolio's income
or loss and hence of allocations and/or distributions to the Fund's
shareholders.
Positions held by the Portfolio which consist of one or more debt securities
and one or more listed options or futures contracts which substantially diminish
the risk of loss of the Portfolio with respect to such debt securities will be
treated as "mixed straddles" for Federal income tax purposes. Such straddles are
ordinarily subject to the provisions of Section 1092 of the Code, the operation
of which can result in deferral of losses, adjustments in the holding periods of
the debt securities and conversion of short-term capital losses into long-term
capital losses. The operation of these rules can be mitigated or eliminated by
means of various elections which are available to the Portfolio for Federal
income tax purposes.
To eliminate the application of these rules, the Portfolio has elected mixed
straddle accounting for one or more designated classes of activities involving
mixed straddles. Under this method of accounting, figures are derived for
aggregate short-term and long-term capital gains and losses associated with all
positions in a mixed straddle account on a daily basis. Specifically, gains and
losses are computed for all positions disposed of on a given day, and all
outstanding positions on such day are marked to market (subject to subsequent
adjustments to reflect the gain or loss realized thereby). Gains and losses from
all positions in debt securities in the account are netted, as are gains and
losses from all positions in options and futures. If the two resulting figures
both represent net gains or net losses, the net gain or loss attributable to the
debt securities is treated as short-term capital gain or loss, and the net gain
or loss attributable to the options and futures contracts is treated as 60%
long-term and 40% short-term capital gain or loss. Alternatively, if the
resulting figures represent a net gain and a net loss, the two figures are
further netted to arrive at a single figure for the day. This figure is treated
as 60% long-term and 40% short-term capital gain or loss unless it reflects the
fact that the net gain or loss from the debt securities outweighed the net gain
or loss from the options and futures, in which case this figure is treated as
short-term capital gain or loss.
On the last business day of the taxable year the annual account net gain or
loss for each mixed straddle account is determined by netting the daily net
gains or losses for each business day during the taxable year. (The annual
account net gain or loss is adjusted to take into account any interest and
carrying charges incurred in connection with positions in the account which were
required to be capitalized.) Annual account net gains or losses are then netted
for all mixed straddle accounts to yield the total annual account net gain or
loss. This figure is subject to an overall limitation such that no more than 50%
of it will be treated as long-term capital gain and no more than 40% of it will
be treated as short-term capital loss.
The Portfolio may make other tax elections with respect to mixed straddles
which do not properly belong in any of its mixed straddle accounts.
In the absence of a mixed straddle election, futures or currency forward
contracts entered into by the Portfolio and listed nonequity options written or
purchased by the Portfolio (including options on debt securities, options on
futures contracts, options on securities indexes and options on broad-based
stock indexes, but possibly excluding certain foreign currency-related options,
futures or forward contracts) will be governed by Section 1256 of the Code.
Absent a tax election to the contrary, gain or loss attributable to the lapse,
exercise or closing out of any such position will be treated as 60% long-term
and 40% short-term capital gain or loss, and on the last trading day of the
Portfolio's taxable year all outstanding Section 1256 positions will be marked
to market (i.e., treated as if such positions were closed out at their closing
price on such day), and any resulting gain or loss will be recognized as 60%
long-term and 40% short-term capital gain or loss. Under certain circumstances,
entry into a futures contract to sell a security or the purchase of a put option
with respect to a security may constitute a short sale for Federal income tax
purposes, causing an adjustment in the holding period of the underlying security
or a substantially identical security held by the Portfolio.
The Portfolio will monitor its transactions in options, futures contracts
and forward contracts in order to enable the Fund to maintain its qualification
as a regulated investment company for Federal income tax purposes.
The Portfolio's investment in securities acquired at a market discount, or
zero coupon and certain other securities with original issue discount will cause
it to realize income prior to the receipt of cash payments with respect to these
securities. Such income will be allocated daily to interests in the Portfolio
and, in order to enable the Fund to distribute its proportionate share of this
income and avoid a tax payable by the Fund, the Portfolio may be required to
liquidate portfolio securities that it might otherwise have continued to hold in
order to generate cash that the Fund may withdraw from the Portfolio for
subsequent distribution to Fund shareholders.
Any loss realized upon the redemption or exchange of shares of the Fund with
a tax holding period of 6 months or less will be treated as a long-term capital
loss to the extent of any distribution of net long-term capital gains with
respect to such shares. All or a portion of a loss realzed upon taxable
disposition of Fund shares may be disallowed under "wash sale" rules if other
Fund shares are purchased (whether through reinvestment of dividends or
otherwise) within 30 days before or after the disposition. Any disallowed loss
will result in an adjustement to the shareholder's tax basis in some or all of
the other shares acquired.
Distributions by the Fund reduce the net asset value of the Fund's shares.
Should a distribution reduce the net asset value below a shareholder's cost
basis, such distribution would be taxable to the shareholder even though, from
an investment standpoint, it may constitute a return of capital. Therefore,
investors should consider the tax implications of buying shares immediately
before a distribution.
Distributions of the Fund will not qualify for the dividends received
deduction available to certain corporations, subject to applicable limitations
under the Code. Distributions of the Fund which are derived from interest on
obligations of the U.S. Government may be exempt from personal and/or corporate
income taxes in certain states. In other states, arguments can be made on the
basis of the decision of the U.S. Supreme Court in American Bank and Trust
Company v. Dallas County to the effect that such distributions should be exempt
from state and local taxes. The Fund will inform shareholders of the proportion
of its distributions which are derived from interest on such obligations.
Shareholders are urged to consult their tax advisers regarding the proper
treatment of such portion of their distributions for state and local income tax
purposes.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans, and persons investing through such plans should consult
their tax advisers for more information. The deductibility of such contributions
may be restricted or eliminated for particular shareholders.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of Federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
entities generally will be subject to a U.S. withholding tax at a rate of 30% on
the Fund's distributions from its ordinary income and the excess of its net
short-term capital gain over its net long-term capital loss, unless the tax is
reduced or eliminated by an applicable tax treaty. Distributions from the excess
of the Fund's net long-term capital gain over its net short-term capital loss
received by such shareholders and any gain from the sale or other disposition of
shares of the Fund generally will not be subject to U.S. Federal income
taxation, provided that non-resident alien status has been certified by the
shareholder. Different U.S. tax consequences may result if the shareholder is
engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
The foregoing discussion does not describe many of the tax rules applicable
to certain classes of investors, such as other retirement plans, tax-exempt
entities, insurance companies and financial institutions. Shareholders should
consult their own tax advisers with respect to these or other special tax rules
that may apply in their particular situations, as well as the state, local or
foreign tax consequences of investing in the Fund.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of portfolio security transactions,
including the selection of the market and the firm, are made by BMR. BMR is also
responsible for the execution of transactions for all other accounts managed by
it.
BMR places the portfolio security transactions of the Portfolio and of all
other accounts managed by it for execution with many firms. Eaton Vance uses its
best efforts to obtain execution of portfolio security transactions at prices
which are advantageous to the Portfolio and at reasonably competitive spreads or
(when a disclosed commission is being charged) at reasonably competitive
commission rates. In seeking such execution, BMR will use its best judgment in
evaluating the terms of a transaction, and will give consideration to various
relevant factors, including without limitation the size and type of the
transaction, the general execution and operational capabilities of the executing
firm, the nature and character of the market for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, reliability, experience and financial condition of
the firm, the value and quality of the services rendered by the firm in other
transactions, and the reasonableness of the commission or spread, if any. The
debt securities and obligations purchased and sold by the Portfolio are
generally traded in the domestic over-the-counter markets on a net basis (i.e.
without commission) through broker-dealers and banks acting for their own
accounts rather than as brokers, or otherwise involve transactions with the
issuer of such obligations. Such firms attempt to profit from such transactions
by buying at the bid price and selling at the higher asked price of the market
for such obligations, and the difference between the bid and asked price is
customarily referred to as the spread. The Portfolio may also purchase such
obligations from domestic underwriters, the cost of which may include
undisclosed fees and concessions to the underwriters. Although spreads or
commissions paid on portfolio security transactions will, in the judgment of
BMR, be reasonable in relation to the value of the services provided, spreads or
commissions exceeding those which another firm might charge may be paid to firms
who were selected to execute transactions on behalf of the Portfolio and BMR's
other clients for providing brokerage and research services to BMR.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio security transaction on behalf of the
Portfolio may receive compensation which is in excess of the amount of
compensation another broker or dealer would have charged for effecting that
transaction if BMR determines in good faith that such compensation was
reasonable in relation to the value of the brokerage and research services
provided. This determination may be made on the basis of either that particular
transaction or on the basis of overall responsibilities which BMR and its
affiliates have for accounts over which they exercise investment discretion. In
making any such determination, BMR will not attempt to place a specific dollar
value on the brokerage and research services provided or to determine what
portion of the compensation should be related to such services. Brokerage and
research services may include advice as to the value of securities, the
advisability of investing in, purchasing, or selling securities, and the
availability of securities or purchasers or sellers of securities; furnishing
analyses and reports concerning issuers, industries, securities, economic
factors and trends, portfolio strategy and the performance of accounts;
effecting securities transactions and performing functions incidental thereto
(such as clearance and settlement); and the "Research Services" referred to in
the next paragraph.
It is a common practice of the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealer firms which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, BMR receives Research Services from many broker-dealer firms with
which BMR places the Portfolio transactions and from third parties with which
these broker-dealers have arrangements. These Research Services include such
matters as general economic and market reviews, industry and company reviews,
evaluations of securities and portfolio strategies and transactions,
recommendations as to the purchase and sale of securities and other portfolio
transactions, financial, industry and trade publications, news and information
services, pricing and quotation equipment and services, and research oriented
computer hardware, software, data bases and services. Any particular Research
Service obtained through a broker-dealer may be used by BMR in connection with
client accounts other than those accounts which pay commissions to such
broker-dealer. Any such Research Service may be broadly useful and of value to
BMR in rendering investment advisory services to all or a significant portion of
its clients, or may be relevant and useful for the management of only one
client's account or of a few clients' accounts, or may be useful for the
management of merely a segment of certain clients' accounts, regardless of
whether any such account or accounts paid commissions to the broker-dealer
through which such Research Service was obtained. The advisory fee paid by the
Portfolio is not reduced because BMR receives such Research Services. BMR
evaluates the nature and quality of the various Research Services obtained
through broker-dealer firms and attempts to allocate sufficient commissions to
such firms to ensure the continued receipt of Research Services which BMR
believes are useful or of value to it in rendering investment advisory services
to its clients.
Subject to the requirement that BMR shall use its best efforts to seek to
execute portfolio security transactions at advantageous prices and at reasonably
competitive spreads or commission rates, BMR is authorized to consider as a
factor in the selection of any broker-dealer firm with whom portfolio orders may
be placed the fact that such firm has sold or is selling shares of the Fund or
of other investment companies sponsored by BMR or Eaton Vance. This policy is
not inconsistent with a rule of the National Association of Securities Dealers,
Inc., which rule provides that no firm which is a member of the Association
shall favor or disfavor the distribution of shares of any particular investment
company or group of investment companies on the basis of brokerage commissions
received or expected by such firm from any source.
Securities considered as investments for the Portfolio may also be
appropriate for other investment accounts managed by BMR or its affiliates. BMR
will attempt to allocate equitably portfolio security transactions among the
Portfolio and the portfolios of its other investment accounts whenever decisions
are made to purchase or sell securities by the Portfolio and one or more of such
other accounts simultaneously. In making such allocations, the main factors to
be considered are the respective investment objectives of the Portfolio and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Portfolio
and such accounts, the size of investment commitments generally held by the
Portfolio and such accounts and the opinions of the persons responsible for
recommending investments to the Portfolio and such accounts. While this
procedure could have a detrimental effect on the price or amount of the
securities available to the Portfolio from time to time, it is the opinion of
the Trust's and the Portfolio's Board of Trustees that the benefits available
from the BMR organization outweigh any disadvantage that may arise from exposure
to simultaneous transactions. For the brokerage commissions paid by the
Portfolio on portfolio transactions, see "Fees and Expenses" in Part II of this
Statement of Additional Information.
OTHER INFORMATION
Eaton Vance, pursuant to its agreement with the Trust, controls the use of
the words "Eaton Vance" in the Fund's name and may use the words "Eaton Vance"
in other connections and for other purposes.
As permitted by Massachusetts law, there will normally be no meetings 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
circumstancesa 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 Amended and Restated Declaration of Trust may be amended by the
Trustees when authorized by vote of a majority of the outstanding voting
securities of the Trust, the financial interests of which are affected by the
amendment. The Trustees may also amend the Declaration of Trust without the vote
or consent of shareholders to change the name of the Trust or any series or to
make such other changes as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable Federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class thereof,
or by an instrument or instruments in writing without a meeting, consented to by
the holders of two-thirds of the shares of the Trust or a series or class
thereof, provided, however, that, if such termination is recommended by the
Trustees, the vote of a majority of the outstanding voting securities of the
Trust or a series or class thereof entitled to vote thereon shall be sufficient
authorization; or (2) by means of an instrument in writing signed by a majority
of the Trustees, to be followed by a written notice to shareholders stating that
a majority of the Trustees has determined that the continuation of the Trust or
a series or a class thereof is not in the best interest of the Trust, such
series or class or of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-Laws also provide that the Trustees shall promptly call a
meeting of Shareholders for the purpose of voting upon a question of removal of
a Trustee when requested so to do by the record holders of not less than 10 per
centum of the outstanding shares.
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 interest
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 right to redeem shares of the Fund can be suspended and the payment of
the redemption price deferred when the Exchange is closed (other than for
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.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts are
the independent accountants of the Fund, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange Commission. Coopers & Lybrand Chartered
Accountants, Toronto, Canada, are the independent accountants of the Portfolio.
GLOSSARY OF OPTION TERMS
CLASS OF OPTIONS: Options covering the same underlying security.
CLEARING CORPORATION: The Options Clearing Corporation.
CLOSING PURCHASING TRANSACTION: A transaction in which an investor who is
obligated as a writer of an option terminates his obligation by purchasing on an
Exchange an option of the same series as the option previously written. (Such a
purchase does not result in the ownership of an option.)
CLOSING SALE TRANSACTION: A transaction in which an investor who is the holder
of an outstanding option liquidates his position as a holder by selling an
option of the same series as the option previously purchased. (Such sale does
not result in the investor assuming the obligations of a writer.)
COVERED CALL OPTION WRITER: A writer of a call option who, so long as he remains
obligated as a writer, owns the underlying securities.
COVERED PUT OPTION WRITER: A writer of a put option who, so long as he remains
obligated as a writer, has deposited Treasury bills with a value equal to or
greater than the exercise price with a securities depository and has pledged
them to the Options Clearing Corporation for the account of the broker-dealer
carrying the writer's position.
EXCHANGE: A national securities exchange on which call and put options on U.S.
Government securities are traded. As of the date of this Statement of Additional
Information, the Exchanges are as follows. The Chicago Board Options Exchange
and American Stock Exchange.
EXERCISE PRICE: The price per unit at which the holder of a call option may
purchase the underlying security upon exercise or the holder of a put option may
sell the underlying security upon exercise.
EXPIRATION DATE: The latest date when an option may be exercised.
HEDGING: An action taken by an investor to neutralize an investment risk by
taking an investment position the value of which will move in a direction
opposite to the position being hedged so that a loss (or gain) on one will tend
to be offset by a gain (or loss) on the other.
OPTION: As used in the Fund's Prospectus and this Statement of Additional
Information and unless the context otherwise requires, the term "option"
includes a call or put option issued by the Options Clearing Corporation and
traded on one or more Exchanges. A call option gives a holder the right to buy
the underlying security covered by the option at the stated exercise price by
filing an exercise notice prior to the expiration date of the call. A put option
gives a holder the right to sell the underlying security covered by the put at
the stated exercise price by filing an exercise notice prior to the expiration
date of the put.
OPTION PERIOD: The time during which an option may be exercised, generally from
the date the option is written through its expiration date.
PREMIUM: The price of an option agreed upon between the buyer and writer or
their agents in a transaction on the floor of an Exchange.
SERIES OF OPTIONS: Options covering the same underlying security and having the
same exercise price and expiration date.
UNDERLYING SECURITY: The security subject to being purchased or sold upon the
exercise of an option.
STATEMENT OF ADDITIONAL INFORMATION
PART II
This Part II provides information about EV Classic Government Obligations
Fund.
FEES AND EXPENSES
INVESTMENT ADVISER
As of December 31, 1994, the Portfolio had net assets of $515,669,513. For
the fiscal year ended December 31, 1994, the Adviser earned advisory fees of
$4,259,500 (equivalent to 0.74% of the Portfolio's average daily net assets for
such period). For the period from the start of business, October 28, 1993, to
the fiscal year ended December 31, 1993, the Adviser earned advisory fees of
$727,254 (equivalent to 0.75% (annualized) of the Portfolio's average daily net
assets for such period). The Portfolio's Investment Advisory Agreement with BMR
is dated October 28, 1993 and remains in effect until February 28, 1996. The
Agreement may be continued as described under "Investment Adviser and
Administrator" in Part I of this Statement of Additional Information.
DISTRIBUTION PLAN
The Distribution Plan and Distribution Agreement remain in effect until
April 28, 1995 and may be continued as described under "Distribution Plan" in
the Prospectus. For the fiscal year ended December 31, 1994, the Fund accrued
sales commission payments under the Plan aggregating $365,704 of which $361,009
was paid to the Principal Underwriter. The Principal Underwriter paid $360,374
as sales commissions to Authorized Firms and the balance was retained by the
Principal Underwriter. As at December 31, 1994, the outstanding uncovered
distribution charges of the Principal Underwriter calculated under the Plan
amounted to approximately $5,572,000 (which amount was equivalent to 14.07% of
the Fund's net assets on such day). For the fiscal year ended December 31, 1994,
the Fund accrued service fee payments under the Plan aggregating $121,154, of
which $119,640 was paid to the Principal Underwriter. The Principal Underwriter
paid $119,442 as service fee payments to Authorized Firms and the balance was
retained by the Principal Underwriter.
PRINCIPAL UNDERWRITER
For the fiscal year ended December 31, 1994, the Fund paid the Principal
Underwriter $ for repurchase transactions handled by the Principal Underwriter
(being $2.50 for each such transaction).
CUSTODIAN
For the fiscal year ended December 31, 1994, the Portfolio paid IBT
$181,138. For the fiscal year ended December 31, 1994, the Fund paid IBT
$11,984.
BROKERAGE
For the fiscal year ended December 31, 1994, and for the period from the
start of business, October 28, 1993, to the fiscal year ended December 31, 1993,
the Portfolio paid no brokerage commissions on portfolio transactions.
TRUSTEES
The fees and expenses of those Trustees of the Trust and of the Portfolio
who are not members of the Eaton Vance organization are paid by the Fund (and
the other series of the Trust) and the Portfolio, respectively. During the
fiscal year ended December 31, 1994, the Trustees of the Trust and the Portfolio
earned the following compensation in their capacities as Trustees of the Trust,
the Portfolio and the other funds in the Eaton Vance Fund Complex<F1>:
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM PORTFOLIO FROM FUND COMPLEX FUND COMPLEX
---- ------------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C>
Donald R. Dwight $295 $4,119<F2> $8,750 $135,000
Samuel L. Hayes, III 287 4,079<F3> 8,865 142,500
Norton H. Reamer 276 4,002 --0-- 135,000
John L. Thorndike 284 4,140 --0-- 140,000
Jack L. Treynor 303 4,247 --0-- 140,000
<FN>
<F1> The Eaton Vance Fund Complex consists of 201 registered investment
companies or series thereof.
<F2> Includes $331 of deferred compensation.
<F3> Includes $334 of deferred compensation.
</TABLE>
PERFORMANCE INFORMATION
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the life of the Fund from November 1, 1993 through December 31,
1994.
<TABLE>
VALUE OF A $1,000 INVESTMENT
<CAPTION>
VALUE OF TOTAL RETURN
INVESTMENT AMOUNT OF INVESTMENT --------------------------------
INVESTMENT PERIOD DATE INVESTMENT ON 12/31/94 CUMULATIVE ANNUALIZED
- ----------------- ---------- ---------- ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Life of the Fund* 11/01/93 $1,000 $977.90 -2.21% -1.90%
1 Year Ended 12/31/94 12/31/93 1,000 $974.56 -2.54% -2.54%
</TABLE>
<TABLE>
PERCENTAGE CHANGES
NOVEMBER 1, 1993 -- DECEMBER 31, 1994
<CAPTION>
NET ASSET VALUE TO NET ASSET VALUE
WITH ALL DISTRIBUTIONS REINVESTED
-----------------------------------------------------------------------------------------
FISCAL YEAR ENDED ANNUAL CUMULATIVE AVERAGE ANNUAL
- ----------------- ------ ---------- --------------
<S> <C> <C> <C>
12/31/93* -- 0.34% --
12/31/94 -2.54% -2.21% -1.90%
</TABLE>
Past performance is not indicative of future results. Investment return and
principal value will fluctuate and shares, when redeemed, may be worth more or
less than their original cost.
- ----------
*Investment operations began on November 1, 1993.
**If the contingent deferred sales charge applicable to shares purchased on or
after January 30, 1995 had been imposed, the Fund would have had lower returns.
For the thirty-day period ended December 31, 1994, the yield of the Fund
was 4.70%. The Fund's distribution rate (calculated on December 31, 1994 and
based on the Fund's monthly distribution paid December 22, 1994) was 6.93%, and
the Fund's effective distribution rate (calculated on the same date and based on
the same monthly distribution) was 7.16%.
From time to time, advertisements and other material furnished to present
and prospective shareholders may include information, charts and/or
illustrations of the Fund's net asset value per share history.
MONTH - NET ASSET VALUES
INCEPTION DATE: NOVEMBER 1, 1993 - PRICE $10.00
1993 1994
---- ----
January n/a 9.96
February n/a 9.81
March n/a 9.61
April n/a 9.45
May n/a 9.38
June n/a 9.31
July n/a 9.35
August n/a 9.32
September n/a 9.16
October n/a 9.11
November 9.97 9.00
December 9.94 8.98
For example, the Portfolio's diversification by asset type as of January 31,
1995 was:
PORTFOLIO ASSET ALLOCATION PERCENT OF INVESTMENTS
-------------------------- ----------------------
Mortgage-Backed Securities
Low Coupons: 4-8% 58%
High Coupons: 12-16% 22%
Other 5%
U.S. Treasuries, U.S. Government Agency
Debentures & Other Mortgage-Backed Securities 15%
---
TOTAL 100%
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expenses of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
is borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its Distribution Plan as described in the Fund's current
prospectus; the provisions of the Fund's Distribution Plan relating to such
payments are included in the Distribution Agreement. The Distribution Agreement
is renewable annually by the Trust's Board of Trustees (including a majority of
its Trustees who are not interested persons of the Trust and who have no direct
or indirect financial interest in the operation of the Fund's Distribution Plan
or the Distribution Agreement), may be terminated on sixty days' notice either
by such Trustees or by vote of a majority of the outstanding voting securities
of the Fund or on six months' notice by the Principal Underwriter and is
automatically terminated upon assignment. The Principal Underwriter distributes
Fund shares on a "best efforts" basis under which it is required to take and pay
for only such shares as may be sold. The Fund has authorized the Principal
Underwriter to act as its agent in repurchasing shares at the rate of $2.50 for
each repurchase transaction handled by the Principal Underwriter. The Principal
Underwriter estimates that the expenses incurred by it in acting as repurchase
agent for the Fund will exceed the amounts paid therefor by the Fund. For the
amount paid by the Fund to the Principal Underwriter for acting as repurchase
agent, see "Fees and Expenses" in Part II of this Statement of Additional
Information.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the prospectus and is
designed to meet the requirements of Rule 12b-1 under the 1940 Act and the sales
charge rule of the National Association of Securities Dealers, Inc. (the "NASD
Rule"). The purpose of the Plan is to compensate the Principal Underwriter for
its distribution services and facilities provided to the Fund by paying the
Principal Underwriter sales commissions and a separate distribution fee in
connection with sales of Fund shares. The following supplements the discussion
of the Plan contained in the Fund's Prospectus.
In calculating daily the amount of uncovered distribution charges,
distribution charges will include the aggregate amount of sales commissions and
distribution fees theretofore paid plus the aggregate amount of sales
commissions and distribution fees which the Principal Underwriter is entitled to
be paid under the Plan since its inception. Payments theretofore paid or payable
under the Plan by the Fund to the Principal Underwriter and contingent deferred
sales charges theretofore paid or payable to the Principal Underwriter will be
subtracted from such distribution charges; if the result of such subtraction is
positive, a distribution fee (computed at 1% over the prime rate then reported
in The Wall Street Journal) will be computed on such amount and added thereto,
with the resulting sum constituting the amount of outstanding uncovered
distribution charges with respect to such day. The amount of outstanding
uncovered distribution charges of the Principal Underwriter calculated on any
day does not constitute a liability recorded on the financial statements of the
Fund.
It is anticipated that the Eaton Vance organization will profit by reason of
the operation of the Plan through an increase in the Fund's assets (thereby
increasing the advisory fee payable to BMR by the Portfolio) resulting from sale
of Fund shares and through the amounts paid to the Principal Underwriter,
including contingent deferred sales charges, pursuant to the Plan. The Eaton
Vance organization may be considered to have realized a profit under the Plan if
at any point in time the aggregate amounts theretofore paid to the Principal
Underwriter under the Plan and from contingent deferred sales charges have
exceeded the total expenses theretofore incurred by such organization in
distributing shares of the Fund. Total expenses for this purpose will include an
allocable portion of the overhead costs of such organization and its branch
offices, which costs will include without limitation leasing expense,
depreciation of building and equipment, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Eaton Vance
organization in a manner deemed equitable to the Fund.
The amount of uncovered distribution charges of the Principal Underwriter at
any particular time depends upon various changing factors, including the level
and timing of sales of Fund shares, the nature of such sales (i.e., whether they
result from exchange transactions, reinvestments or from cash sales through
Authorized Firms), the level and timing of redemptions of Fund shares upon which
a contingent deferred sales charge will be imposed, the level and timing of
redemptions of Fund shares upon which no contingent deferred sales charge will
be imposed (including redemptions involving exchanges of Fund shares for shares
of another fund in the Eaton Vance Classic Group of Funds which result in a
reduction of uncovered distribution charges), changes in the level of the net
assets of the Fund, and changes in the interest rate used in the calculation of
the distribution fee under the Plan. (For shares sold prior to January 30, 1995,
Plan payments are as follows: the Principal Underwriter pays monthly sales
commissions and service fee payments to Authorized Firms equivalent to
approximately .75% and .25%, respectively, annualized of the assets maintained
in the Fund by their customers beginning at the time of sale. No payments were
made at the time of sale and there is no contingent deferred sales charge.) The
Plan also authorizes the Fund to make payments of service fees.
Pursuant to Rule 12b-1, the Plan has been approved by the Trust's initial
sole shareholder (Eaton Vance). Under the Plan the President or a Vice President
of the Trust shall provide to the Trustees for their review, and the Trustees
shall review at least quarterly, a written report of the amount expended under
the Plan and the purposes for which such expenditures were made. The Plan may
not be amended to increase materially the payments described therein without
approval of the shareholders of the Fund, and all material amendments of the
Plan must also be approved by the Trustees as required by Rule 12b-1. So long as
the Plan is in effect, the selection and nomination of Trustees who are not
interested persons of the Trust shall be committed to the discretion of the
Trustees who are not such interested persons.
The Trustees believe that the Plan will be a significant factor in the
expected growth of the Fund's assets, and will result in increased investment
flexibility and advantages which will benefit the Fund and its shareholders.
Payments for sales commissions and distribution fees made to the Principal
Underwriter under the Plan will compensate the Principal Underwriter for its
services and expenses in distributing shares of the Fund. Service fee payments
made to the Principal Underwriter and Authorized Firms under the Plan provide
incentives to provide continuing personal services to investors and the
maintenance of shareholder accounts. By providing incentives to the Principal
Underwriter and Authorized Firms, the Plan is expected to result in the
maintenance of, and possible future growth in, the assets of the Fund. Based on
the foregoing and other relevant factors, the Trustees have determined that in
their judgment there is a reasonable likelihood that the Plan will benefit the
Fund and its shareholders.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 31, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
January 31, 1995, Merrill Lynch, Pierce, Fenner & Smith, Inc., New Brunswick, NJ
was the record owner of approximately 35.6% of the outstanding shares, which it
held on behalf of its customers who are the beneficial owners of such shares,
and as to which it had voting power under certain limited circumstances. To the
knowledge of the Trust, no other person beneficially owns 5% or more of the
Fund's outstanding shares.
<PAGE>
------------------------------------------------
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
------------------------------------------------------------------------------
December 31, 1994
------------------------------------------------------------------------------
ASSETS:
Investment in Government Obligations Portfolio
(Portfolio), at value (Note 1A) $40,684,398
Receivable for Fund shares sold 218,716
Deferred organization expenses (Note 1D) 17,910
-----------
Total assets $40,921,024
LIABILITIES:
Dividends payable $ 71,205
Payable for Fund shares redeemed 1,227,311
Payable to affiliates -
Custodian fee 848
Trustees' fees 413
Accrued expenses 34,849
---------
Total liabilities 1,334,626
-----------
NET ASSETS for 4,407,276 shares of beneficial
interest outstanding $39,586,398
-----------
-----------
SOURCES OF NET ASSETS:
Paid-in capital $44,379,284
Accumulated net realized loss on investments,
options and financial futures transactions
from Portfolio (computed on the basis of
identified cost) (632,587)
Unrealized depreciation of investments from
Portfolio (computed on the basis of
identified cost) (4,089,094)
Distributions in excess of net investment
income (71,205)
-----------
Total $39,586,398
-----------
-----------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE
PER SHARE
($39,586,398 / 4,407,276 shares of beneficial
interest) $8.98
----
----
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 (NOTE 1B):
Interest income allocated from Portfolio $ 4,547,571
Expenses allocated from Portfolio (659,054)
-----------
Total investment income $ 3,888,517
Expenses --
Compensation of Trustees not members of the
Administrator's organization
(Note 5) $ 1,460
Custodian fees (Note 5) 11,984
Distribution fees (Note 6) 486,858
Printing and postage 48,544
Transfer and dividend disbursing agent fees 56,389
Legal and accounting services 18,699
Registration fees 19,091
Amortization of organization expenses (Note 1D) 4,117
Miscellaneous 23,173
-----------
Total expenses 670,315
-----------
Net investment income $ 3,218,202
REALIZED AND UNREALIZED GAIN (LOSS) FROM PORTFOLIO:
Net realized gain (loss) (identified cost basis) --
Investment transactions $(1,119,808)
Financial futures contracts 389,433
-----------
Net realized loss on investments $ (730,375)
Change in unrealized depreciation of investments (4,054,551)
-----------
Net realized and unrealized loss on investments (4,784,926)
-----------
Net decrease in net assets from operations $(1,566,724)
-----------
-----------
</TABLE>
The accompanying Notes are an integral part of the financial statements
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31
--------------------------------
1994 1993*
-------------- -------------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 3,218,202 $ 78,385
Net realized loss from Portfolio (730,375) (18,933)
Change in unrealized depreciation from
Portfolio (4,054,551) (34,543)
----------- -----------
Net increase (decrease) in net assets
from operations $(1,566,724) $ 24,909
----------- -----------
Distributions to shareholders --
From net investment income $ (3,218,202) $ (78,385)
In excess of net investment income (430,267) (15,118)
----------- -----------
Total distributions to shareholders $ (3,648,469) $ (93,503)
----------- -----------
Net increase in net assets from Fund share
transactions (Note 3) $27,360,876 $17,509,299
----------- -----------
Net increase in net assets $22,145,683 $17,440,705
NET ASSETS:
At beginning of period 17,440,715 10
----------- -----------
At end of period $39,586,398 $17,440,715
----------- -----------
----------- -----------
*For the period from the start of business, November 1, 1993, to December 31,
1993.
The accompanying Notes are an integral part of the financial statements
<PAGE>
-----------------------------------------------------------------
FINANCIAL HIGHLIGHTS
-----------------------------------------------------------------
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1993*
--------- ------------
NET ASSET VALUE --
Beginning of period $ 9.9400 $10.0000
-------- ------------
INCOME FROM OPERATIONS:
Net investment
income $ 0.6264 $ 0.1067
Net realized and
unrealized loss
on investments (0.8763) (0.0514)
-------- ------------
Total income
(loss) from operations $ (0.2499) $ 0.0553
-------- ------------
LESS DISTRIBUTIONS:
From net investment
income $ (0.6264) $ (0.1067)
In excess of net
investment income (0.0837) (0.0086)
-------- ------------
Total distributions $ (0.7101) $ (0.1153)
-------- ------------
NET ASSET VALUE -- End of period $ 8.9800 $ 9.9400
-------- ------------
-------- ------------
TOTAL RETURN(1) (2.54)% 0.34%
RATIOS/SUPPLEMENTAL DATA:
Ratio of interest expense to
average net assets(2) 0.57% 0.54%+
Ratio of other expenses to
average net assets(2) 2.15% 2.31%+
Ratio of net investment income to
average net assets 6.60% 5.45%+
Net Assets end of period
(000 omitted) $ 39,586 $ 17,441
+Computed on an annualized basis.
(1)Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date.
(2)Includes the Fund's share of Government Obligations Portfolio's allocated
expenses.
*For the period from the start of business, November 1, 1993, to December 31,
1993.
The accompanying Notes are an integral part of the financial statements
<PAGE>
------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
----------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
EV Classic 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 of Eaton Vance Government Obligations
Trust. 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 (7.9% 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, option and financial futures transactions.
Accordingly, no provision for federal income or excise tax is necessary. At
December 31, 1994, the Fund, for federal income tax purposes, had a capital loss
carryover of $1,854,964, 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, 2001 ($32,316) and December 31, 2002
($1,822,648).
D. DEFERRED ORGANIZATION EXPENSES -- Costs incurred by the Fund in connection
with its organization are being amortized on the straight-line basis over five
years.
E. DISTRIBUTION COSTS -- For book purposes, commissions paid on the sale of Fund
shares and other distribution costs are charged to operations. For tax purposes,
commissions paid are charged to paid-in capital. (Note 6).
-----------------------------------------------------------------
(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. In addition, the Fund declares each day an amount equal to
the excess of tax basis net income over book net income, which amount is charged
to distributions in excess of net investment income. 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. During
the year ended December 31, 1994, $365,704 was reclassified from distributions
in excess of net investment income to paid-in capital, due to the differences
between book and tax accounting for distribution fees being considered as
permanent differences. Net investment income, net realized gains and net assets
were not affected by this reclassification.
-----------------------------------------------------------------
(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<F1>
------------------------------- ------------------------------
SHARES AMOUNT SHARES AMOUNT
------------- -------------- ------------ --------------
<S> <C> <C> <C> <C>
Sales 8,155,362 $79,148,122 1,865,690 $18,608,309
Issued to shareholders electing to receive payments of
distributions in Fund shares 248,209 2,325,806 4,776 47,613
Redemptions (5,751,695) (54,113,052) (115,067) (1,146,623)
------------- -------------- ------------ --------------
Net increase 2,651,876 $27,360,876 1,755,399 $17,509,299
------------- -------------- ------------ --------------
------------- -------------- ------------ --------------
<FN>
<F1>For the period from the start of business November 1, 1993, to December 31, 1993.
</FN>
</TABLE>
------------------------------------------------------------------------------
(4) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio aggregated
$82,630,154 and $56,216,905, 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 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 Fund or 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 (Note 6).
-----------------------------------------------------------------
(6) DISTRIBUTION PLAN
The Fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan requires the Fund to pay the
principal underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal to
1/365 of 0.75% of the Fund's daily net assets, for providing ongoing
distribution services and facilities to the Fund. The Fund will automatically
discontinue payments to EVD during any period in which there are no outstanding
Uncovered Distribution Charges, which are equivalent to the sum of (i) 6.25% of
the aggregate amount received by the Fund for shares sold plus, (ii)
distribution fees calculated by applying the rate of 1% over the prevailing
prime rate to the outstanding balance of Uncovered Distribution Charges of EVD,
reduced by amounts theretofore paid to EVD. The amount payable to EVD with
respect to each day is accrued on such day as a liability of the Fund and,
accordingly, reduces the Fund's net assets. The Fund paid or accrued $365,704 to
or payable to EVD for the year ended December 31, 1994, representing 0.75%
(annualized) of average daily net assets. At December 31, 1994, the amount of
Uncovered Distribution Charges of EVD calculated under the Plan was
approximately $5,572,000. In addition, the Plan permits the Fund to make monthly
payments of service fees to the Principal Underwriter in amounts not expected to
exceed 0.25% of the Fund's average daily net assets for any fiscal year. The
Trustees have initially implemented the Plan by authorizing the Fund to make
monthly service fee payments to the Principal Underwriter in amounts not
expected to exceed 0.25% of the Fund's average daily net assets for any fiscal
year. The Fund paid or accrued service fees to or payable to EVD for the year
ended December 31, 1994, in the amount of $121,154. EVD makes monthly service
fee payments to Authorized Firms in amounts anticipated to be equivalent to
0.25%, annualized, of the assets maintained in the Fund by their customers.
Service fee payments are made for personal services and/or the maintenance of
shareholder accounts. Service fees paid to EVD and Authorized Firms are separate
and distinct from the sales commissions and distribution fees payable by the
Fund to EVD, and as such are not subject to automatic discontinuance when there
are no outstanding Uncovered Distribution Charges of EVD.
Certain officers and Trustees of the Fund are officers or directors of EVD.
------------------------------------------------------------------------------
(7) SUBSEQUENT EVENT
Shares purchased on or after January 30, 1995 and redeemed during the first year
after purchase (except shares acquired through the reinvestment of
distributions) generally will be subject to a contingent deferred sales charge
at a rate of one percent of redemption proceeds, exclusive of all reinvestments
and capital appreciation in the account. No contingent deferred sales charge is
imposed on exchanges for shares of other funds in the Eaton Vance Classic Group
of Funds or Eaton Vance Money Market Fund which are distributed with a
contingent deferred sales charge.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
-----------------------------------------------------------------
To the Shareholders and Trustees of
EV Classic Government Obligations Fund,
a series of Eaton Vance Government Obligations Trust:
We have audited the accompanying statement of assets and liabilities of EV
Classic Government Obligations Fund, a series of Eaton Vance Government
Obligations Trust, as of December 31, 1994, the related statements of
operations, the statement of changes in net assets and financial highlights for
the year ended December 31, 1994, and for the period from November 1, 1993
(start of business) to December 31, 1993. 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 owned 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 audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of EV
Classic Government Obligations Fund, a series of Eaton Vance Government
Obligations Trust, as of December 31, 1994, the results of its operations, the
changes in its net assets and financial highlights for the year ended December
31, 1994, and for the period from November 1, 1993 (start of business) to
December 31, 1993, 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>
-------------------------------------
<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>
------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
-----------------------------------------------------------------
December 31, 1994
-----------------------------------------------------------------------------
<TABLE>
<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>
----------------------------------------------------------------
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 avera
ge 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 ADVISER OF
GOVERNMENT OBLIGATIONS PORTFOLIO
Boston Management and Research
24 Federal Street
Boston, MA 02110
ADMINISTRATOR OF
EV CLASSIC
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 L.L.P.
One Post Office Square
Boston, MA 02109
EV CLASSIC
GOVERNMENT OBLIGATIONS FUND
24 FEDERAL STREET
BOSTON, MA 02110
C-GOSAI
EV CLASSIC
GOVERNMENT OBLIGATIONS
FUND
STATEMENT OF
ADDITIONAL
INFORMATION
MAY 1, 1995
<PAGE>
PART B
INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1995
EATON VANCE SHORT-TERM TREASURY FUND
24 Federal Street
Boston, Massachusetts 02110
(617) 482-8260
- ------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Objective and Policies ................................... 2
Investment Restrictions ............................................. 2
Trustees and Officers ............................................... 3
Control Persons and Principal Holders of Securities ................. 5
Investment Adviser .................................................. 6
Custodian ........................................................... 8
Independent Accountants ............................................. 8
Determination of Net Asset Value .................................... 8
Investment Performance .............................................. 9
Taxes ............................................................... 10
Principal Underwriter ............................................... 11
Distribution Plan ................................................... 11
Portfolio Security Transactions ..................................... 12
Other Information ................................................... 14
Financial Statements ................................................ 16
- ------------------------------------------------------------------------------
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY THE PROSPECTUS OF EATON VANCE SHORT-TERM TREASURY FUND (THE
"FUND") DATED MAY 1, 1995, AS SUPPLEMENTED FROM TIME TO TIME. THIS STATEMENT OF
ADDITIONAL INFORMATION SHOULD BE READ IN CONJUNCTION WITH SUCH PROSPECTUS, A
COPY OF WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING EATON VANCE
DISTRIBUTORS, INC. (THE "PRINCIPAL UNDERWRITER") (SEE BACK COVER FOR ADDRESS AND
PHONE NUMBER).
INVESTMENT OBJECTIVE AND POLICIES
INVESTMENT OBJECTIVE
The investment objective of Eaton Vance Short-Term Treasury Fund (the
"Fund"), a series of Eaton Vance Government Obligations Trust (the "Trust"), is
to seek current income and liquidity. The Fund invests exclusively in U.S.
Treasury obligations having a remaining maturity of up to five years and will
maintain a dollar weighted average portfolio maturity of not more than one year.
The Fund's investment objective is a nonfundamental policy which may be changed
by Trustee vote. The Trustees, however, have indicated that they intend to
submit any material change in the investment objective to shareholders for their
approval. The securities in which the Fund may invest are described in the
Prospectus under "How the Fund Invests its Assets."
PORTFOLIO TURNOVER
The Fund cannot accurately predict its portfolio turnover rate, but it is
anticipated that the annual turnover rate will generally not exceed 25%
(excluding maturity of securities). The Fund engages in portfolio trading
(including short-term trading) if it believes that a transaction including all
costs will help in achieving its investment objective either directly by
increasing income or indirectly by enhancing the Fund's net asset value.
INVESTMENT RESTRICTIONS
The following investment restrictions have been adopted by the Fund and may
be changed only by the vote of a majority of the Fund's outstanding voting
securities as defined in the Investment Company Act of 1940.
As a matter of fundamental investment policy, the Fund may not:
(1) With respect to 75% of its total assets, invest more than 5% of its
total assets in the securities of a single 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 instrumentalitites and
except securities of other investment companies;
(2) Borrow money or issue senior securities except as permitted by the
Investment Company Act of 1940;
(3) Underwrite or participate in the marketing of securities of others,
except insofar as it may technically be deemed to be an underwriter in selling a
portfolio security under circumstances which may require the registration of the
same under the Securities Act of 1933;
(4) Purchase or sell real estate, although it may purchase and sell
securities which are secured by real estate and securities of companies which
invest or deal in real estate;
(5) Purchase or sell physical commodities or futures contracts for the
purchase or sale of physical commodities, provided that the Fund may enter into
all types of futures and forward contracts on currency, securities and
securities, economic and other indices and may purchase and sell options on such
futures contracts;
(6) Make loans to any person, except by (a) the acquisition of debt
securities and making portfolio investments, (b) entering into repurchase
agreements or (c) lending portfolio securities;
(7) Purchase securities on margin (but the Fund may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities). The deposit or payment by the Fund of initial, maintenance or
variation margin in connection with all types of options and futures contract
transactions is not considered the purchase of a security on margin; or
(8) Invest 25% or more of its total assets in any single industry (provided
there is no limitation with respect to obligations issued or guaranteed by the
U.S. Government or any of its agencies or instrumentalities).
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest all of its investable assets in an open-end management
investment company with substantially the same investment objective, policies
and restrictions as the Fund.
The Fund has adopted the following nonfundamental investment policies which
may be changed by the Trustees of the Trust without approval by the Fund's
shareholders. As a matter of nonfundamental policy, the Fund may not: (a) invest
more than 15% of its net assets (taken at current value) in the aggregate in
securities for which there is no readily available market and repurchase
agreements which have a maturity longer than seven days; (b) invest more than 5%
of its total assets (taken at current value) in the securities of issuers which,
including their predecessors, have been in operation for less than three years;
(c) purchase put or call options on securities if after such purchase more than
5% of its net assets, as measured by the aggregate of the premiums paid for such
options, would be invested in such options; (d) purchase warrants with a value
in excess of 5% of net assets, or warrants which are not listed on the New York
or American Stock Exchange with a value in excess of 2% of the Fund's net
assets; (e) make short sales of securities or maintain a short position, unless
at all times when a short position is open the Fund owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 25% of the Fund's
net assets (taken at current value) is held as collateral for such sales at any
time. (The Fund will make such sales only for the purpose of deferring
realization of gain or loss for Federal income tax purposes); (f) purchase or
retain in its portfolio any securities issued by an issuer any of whose
officers, directors, trustees or security holder is an officer or Trustee of the
Trust or is a member, officer, director or trustee of any investment adviser of
the Fund, if after the purchase of the securities of such issuer by the Fund one
or more of such persons owns benefically more than 1/2 of 1% of the shares of
securities or both (all taken at market value) of such issuer and such persons
owning more than 1/2 of 1% of such shares or securities together own benefically
more than 5% of such shares or securities or both (all taken at market value);
or (g) purchase oil, gas or other mineral leases or purchase partnership
interests in oil, gas or other mineral exploration or development programs.
The Fund has no current intention during the coming year of lending
portfolio securities, entering into futures or options contracts, investing in
other investment companies or engaging in short sales. The Fund has the
authority, pending the investment of uninvested cash in Treasury obligations; to
invest up to 5% of its assets in repurchase agreements with respect to U.S.
Treasury obligations, however, the Fund does not intend to exercise that
authority.
In order to permit the sale of shares of the Fund in certain states, the
Fund may make commitments more restrictive than the policies described above.
Should the Fund determine that any such commitment is no longer in the best
interests of the Fund and its shareholders, it may revoke the commitment by
terminating sales of its shares in the state(s) involved.
TRUSTEES AND OFFICERS
The Trustees and officers of the Trust are listed below. Except as
indicated, each individual has held the office shown or other offices in the
same company for the last five years. Unless otherwise noted, the business
address of each Trustee and officer is 24 Federal Street, Boston, Massachusetts
02110, which is also the address of the Fund's investment adviser, Eaton Vance
Management ("Eaton Vance"); Eaton Vance's wholly-owned subsidiary, Boston
Management and Research ("BMR"); Eaton Vance's parent, Eaton Vance Corp.
("EVC"); and of Eaton Vance's and BMR's trustee, Eaton Vance, Inc. ("EV"). Eaton
Vance and EV are both wholly-owned subsidiaries of EVC. Those Trustees and
officers who are "interested persons" of the Trust, Eaton Vance, BMR, EVC or EV,
as defined in the Investment Company Act of 1940, by virtue of their affiliation
with any one or more of the Trust, Eaton Vance, BMR, EVC or EV, are indicated by
an asterisk(*).
M. DOZIER GARDNER (61), PRESIDENT AND TRUSTEE*
President and Chief Executive Officer of Eaton Vance, BMR, EVC and EV and
Director of EVC and EV. Director, Trustee and officer of various investment
companies managed by Eaton Vance or BMR.
DONALD R. DWIGHT (64), TRUSTEE
President of Dwight Partners, Inc. (a corporate relations and communications
company) founded in 1988; Chairman of the Board of Newspapers of New England,
Inc., since 1983. Director or Trustee of various investment companies managed
by Eaton Vance or BMR.
Address: Clover Mill Lane, Lyme, New Hampshire 03768
JAMES B. HAWKES (53), VICE PRESIDENT AND TRUSTEE*
Executive Vice President, Eaton Vance, BMR, EVC and EV and a Director of EVC and
EV. Director, Trustee and officer of various investment companies managed by
Eaton Vance or BMR. Mr. Hawkes was elected Vice President and Trustee of the
Trust on December 16, 1991.
SAMUEL L. HAYES, III (60), TRUSTEE
Jacob H. Schiff, Professor of Investment Banking, Harvard Business School.
Director or Trustee of various investment companies managed by Eaton Vance
or BMR.
Address: Harvard Business School, Soldiers Field Road, Boston, Massachusetts
02163
NORTON H. REAMER (59), TRUSTEE
President and Director, United Asset Management Corporation, a holding company
owning institutional investment management firms. Chairman, President and
Director, The Regis Fund (mutual fund). Director or Trustee of various
investment companies managed by Eaton Vance or BMR.
Address: One International Place, Boston, Massachusetts 02110
JOHN L. THORNDIKE (68), TRUSTEE
Director, Fiduciary Trust Company. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 175 Federal Street, Boston, Massachusetts 02110
JACK L. TREYNOR (65), TRUSTEE
Investment Adviser and Consultant. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: 504 Via Almar, Palos Verdes Estates, California 90274
SUSAN SCHIFF (34), VICE PRESIDENT*
Vice President of Eaton Vance, BMR and EV. Ms. Schiff was elected Vice
President of the Trust on February 24, 1992.
MICHAEL B. TERRY (52), VICE PRESIDENT*
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
MARK VENEZIA (45), VICE PRESIDENT*
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
JAMES L. O'CONNOR (49), TREASURER*
Vice President of Eaton Vance, BMR and EV. Officer of various investment
companies managed by Eaton Vance or BMR.
THOMAS OTIS (63), SECRETARY*
Vice President and Secretary of Eaton Vance, BMR, EVC and EV. Officer of various
investment companies managed by Eaton Vance or BMR.
JAMES F. ALBAN (33), ASSISTANT TREASURER*
Assistant Vice President of Eaton Vance and EV since January 17, 1992, and BMR
since August 11, 1992, employee of Eaton Vance (since September 23, 1991). Tax
Consultant and Audit Senior with Deloitte & Touche (1987-1991). Officer of
various investment companies managed by Eaton Vance or BMR. Mr. Alban was
elected Assistant Treasurer of the Trust on December 16, 1991.
JANET E. SANDERS (59), ASSISTANT TREASURER AND ASSISTANT SECRETARY* Vice
President of Eaton Vance, BMR and EV. Officer of various investment companies
managed by Eaton Vance or BMR.
Messrs. Thorndike (Chairman), Hayes and Reamer are members of the Special
Committee of the Board of Trustees of the Trust. The Special Committee's
functions include a continuous review of the Trust's contractual relationship
with the investment adviser, making recommendations to the Trustees regarding
the compensation of those Trustees who are not members of the investment
adviser's organization, and making recommendations to the Trustees regarding
candidates to fill vacancies, as and when they occur, in the ranks of those
Trustees who are not "interested persons" of the Trust or the investment
adviser.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees. The Audit Committee's functions include making
recommendations to the Board regarding the selection of the independent
accountants, and reviewing with such accountants and the Treasurer of the Trust
matters relative to accounting and auditing practices and procedures, accounting
records, internal accounting controls, and the functions performed by the
custodian, transfer agent and dividend disbursing agent of the Trust.
The fees and expenses of those Trustees of the Trust who are not members of
the Eaton Vance organization are paid by the Fund (and the other series of the
Trust). During the fiscal year ended December 31, 1994, the Trustees of the
Trust earned the following compensation in their capacities as Trustees of the
Trust and the other funds in the Eaton Vance Fund Complex<F1>:
<TABLE>
<CAPTION>
AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM FUND COMPLEX FUND COMPLEX
- --- ------- --------- ---------
<S> <C> <C> <C>
Donald R. Dwight ........................................... $68<F2> $8,750 $135,000
Samuel L. Hayes, III ....................................... 65<F3> 8,865 142,500
Norton H. Reamer ........................................... 63 --0-- 135,000
John L. Thorndike .......................................... 64 --0-- 140,000
Jack L. Treynor ............................................ 68 --0-- 140,000
<FN>
- ---------
<F1>The Eaton Vance Fund Complex consists of 201 registered investment
companies or series thereof.
<F2> Includes $3 of deferred compensation.
<F3> Includes $3 of deferred compensation.
</TABLE>
Trustees of the Trust that are not affiliated with the investment adviser
may elect to defer receipt of all or a percentage of their annual fees in
accordance with the terms of a Trustees Deferred Compensation Plan (the "Plan").
Under the Plan, an eligible Trustee may elect to have his deferred fees invested
by the Trust in the shares of one or more funds in the Eaton Vance Family of
Funds, and the amount paid to the Trustees under the Plan will be determined
based upon the performance of such investments. Deferral of Trustees' fees in
accordance with the Plan will have a negligible effect on the Fund's assets,
liabilities, and net income per share, and will not obligate the Trust to retain
the services of any Trustee or obligate the Trust to pay any particular level of
compensation to the Trustee.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As at January 31, 1995, the Trustees and officers of the Trust, as a group,
owned in the aggregate less than 1% of the outstanding shares of the Fund. As of
January 31, 1995, the following shareholders owned of record the percentages of
shares indicated after their names: Robert A. Bryant and Kay D. Bryant, JTWROS,
1286 Preserve Circle, Golden, CO 80401 (17.3%); Clayton L. Scroggins Associates
Inc., 5825 Graves Lake Drive, Cincinnati, OH 45243 (13.7%). To the knowledge of
the Trust, no other person owns of record or beneficially 5% or more of the
Fund's outstanding shares.
INVESTMENT ADVISER
The Fund engages Eaton Vance as investment adviser pursuant to an Investment
Advisory Agreement dated February 4, 1991. Eaton Vance or its affiliates act as
investment adviser to investment companies and various individual and
institutional clients with combined assets under management of approximately $15
billion. Eaton Vance is a wholly-owned subsidiary of EVC, a publicly held
holding company.
Eaton Vance, its affiliates and its predecessor companies have been managing
assets of individuals and institutions since 1924 and managing investment
companies since 1931. It maintains a large staff of experienced fixed-income and
equity investment professionals to service the needs of its clients. The
fixed-income division focuses on all kinds of taxable investment- grade and
high-yield securities, tax-exempt investment-grade and high-yield securities,
and U.S. Government securities. The equity division covers stocks ranging from
blue chip to emerging growth companies.
Eaton Vance manages the investments and affairs of the Fund subject to the
supervision of the Trust's Board of Trustees. Eaton Vance furnishes to the Fund
investment advice and assistance, administrative services, office space,
equipment and personnel, and investment advisory, statistical and research
facilities, and has arranged for certain members of the Eaton Vance organization
to serve without salary as officers or Trustees of the Trust.
The Fund pays Eaton Vance as compensation under the Investment Advisory
Agreement a monthly fee equal to the aggregate of (a) a daily asset based fee
computed by applying the annual asset rate applicable to that portion of the
total daily net assets in each Category as indicated below, plus (b) a daily
income based fee computed by applying the daily income rate applicable to that
portion of the total daily gross income (which portion shall bear the same
relationship to the total daily gross income on such day as that portion of the
total daily net assets in the same Category bears to the total daily net assets
on such day) in each Category as indicated below:
<TABLE>
<CAPTION>
ANNUAL DAILY
CATEGORY DAILY NET ASSETS ASSET RATE INCOME RATE
-------- ---------------- ---------- -----------
<S> <C> <C> <C>
1 up to $20 million .......................................... 0.150% 1.50%
2 $20 million but less than $40 million ...................... 0.200% 2.00%
3 $40 million but less than $500 million ..................... 0.250% 2.50%
4 $500 million but less than $1 billion ...................... 0.225% 2.25%
5 $1 billion but less than $1.5 billion ...................... 0.200% 2.00%
6 $1.5 billion but less than $2 billion ...................... 0.190% 1.90%
7 $2 billion but less than $3 billion ........................ 0.180% 1.80%
8 $3 billion and over ........................................ 0.170% 1.70%
</TABLE>
As at December 31, 1994, the Fund had net assets of $1,175,453. For the
fiscal year ended December 31, 1994, Eaton Vance would have earned, absent a fee
reduction, advisory fees of $42,301 (equivalent to 0.22% of the Fund's average
daily net assets for such period). To enhance the net income of the Fund, Eaton
Vance made a reduction of its fee in the full amount and was allocated a portion
of the Fund's operating expenses in the amount of $31,702. For the fiscal year
ended December 31, 1993, Eaton Vance would have earned, absent a fee reduction,
advisory fees of $198,724 (equivalent to 0.27% of the Fund's average net assets)
for such period. To enhance the net income of the Fund, Eaton Vance made a
reduction of its fee in the amount of $73,896. For the fiscal year ended
December 31, 1992, Eaton Vance would have earned, absent a fee reduction,
advisory fees of $773,484 (equivalent to 0.33% of the Fund's average net assets
for such period). To enhance the net income of the Fund, Eaton Vance made a
reduction of its fee in the amount of $232,707.
A commitment has been made to a state securities authority that Eaton Vance
will take certain actions, if necessary, so that the Fund's expenses will not
exceed expense limitation requirements of such state. The commitment may be
amended or rescinded by Eaton Vance in response to changes in the requirements
of the state or for other reasons.
The Investment Advisory Agreement with Eaton Vance remains in effect through
and including February 28, 1996. It may be continued indefinitely thereafter so
long as such continuance after February 28, 1996 is approved at least annually
(i) by the vote of a majority of the Trustees who are not interested persons of
the Trust or of Eaton Vance cast in person at meeting specifically called for
the purpose of voting on such approval and (ii) by the Board of Trustees of the
Trust or by vote of a majority of the outstanding voting securities of the Fund.
The Agreement may be terminated at any time without penalty on sixty (60) days'
written notice by the Board of Trustees of either party, or by vote of the
majority of the outstanding voting securities of the Fund, and the Agreement
will terminate automatically in the event of its assignment. The Agreement
provides that Eaton Vance may render services to others and may permit other
fund clients and other corporations and organizations to use the words "Eaton
Vance" in their names. The Agreement also provides that, in the absence of
willful misfeasance, bad faith, gross negligence or reckless disregard of
obligations or duties under the Agreement on the part of Eaton Vance, Eaton
Vance shall not be liable to the Fund or to any shareholder for any act or
omission in the course of or connected with rendering services or for any losses
sustained in the purchase, holding or sale of any security. The Agreement was
last approved by the Board of Trustees at a meeting held on February 21, 1995,
and by the sole initial shareholder of the Fund (Eaton Vance) on January 10,
1991.
The Fund will be responsible for all costs and expenses not expressly stated
to be payable by Eaton Vance under the Investment Advisory Agreement or by Eaton
Vance Distributors, Inc. under its Distribution Agreement with the Fund. Such
costs and expenses to be borne by the Fund include, without limitation, the fees
and expenses of the Fund's custodian and transfer agent, including those
incurred for determining the Fund's net asset value and keeping the Fund's
books; expenses of pricing and valuation services; the cost of share
certificates; membership dues in investment company organizations; brokerage
commissions and fees; fees and expenses of registering its shares; expenses of
reports to shareholders, proxy statements, and other expenses of shareholders'
meetings; insurance premiums; printing and mailing expenses; interest, taxes and
corporate fees; legal and accounting expenses; compensation and expenses of
Trustees not affiliated with Eaton Vance; and investment advisory fees. The Fund
will also bear expenses incurred in connection with litigation in which the Fund
is a party and the legal obligation the Fund may have to indemnify the Trust's
officers and Trustees with respect thereto.
Eaton Vance and EV are both wholly-owned subsidiaries of EVC. BMR is a
wholly-owned subsidiary of Eaton Vance. Eaton Vance and BMR are both
Massachusetts business trusts, and EV is the Trustee of Eaton Vance and BMR.
The Directors of EV are Landon T. Clay, H. Day Brigham, Jr., M. Dozier
Gardner, James B. Hawkes, and Benjamin A. Rowland, Jr. The Directors of EVC
consist of the same persons and John G. L. Cabot and Ralph Z. Sorenson. Mr.
Clay is chairman and Mr. Gardner is president and chief executive officer of
EVC, Eaton Vance, BMR and EV. All of the issued and outstanding shares of
Eaton Vance and EV are owned by EVC. All of the issued and outstanding shares
of BMR are owned by Eaton Vance. All shares of the outstanding Voting Common
Stock of EVC are deposited in a Voting Trust which expires on December 31,
1996, the Voting Trustees of which are Messrs. Clay, Brigham, Gardner, Hawkes
and Rowland. The Voting Trustees have unrestricted voting rights for the
election of Directors of EVC. All of the outstanding voting trust receipts
issued under said Voting Trust are owned by certain of the officers of Eaton
Vance and BMR who are also officers and Directors of EVC and EV. As of January
31, 1995, Messrs. Clay, Gardner and Hawkes each owned 24% of such voting trust
receipts, and Messrs. Rowland and Brigham, owned 15% and 13%, respectively, of
such voting trust receipts. Messrs. Hawkes, Gardner and Otis who are officers
or Trustees of the Trust, are also members of the EVC, Eaton Vance, BMR and EV
organizations. Messrs. Alban, O'Connor, Terry and Venezia and Ms. Schiff and
Ms. Sanders, are officers of the Trust, and are also members of the Eaton
Vance, BMR and EV organizations. Mr. Terry is also the portfolio manager of
the Fund. Eaton Vance will receive the fees paid under the Investment Advisory
Agreement.
Eaton Vance owns all of the stock of Energex Corporation, which is engaged
in oil and gas operations. EVC owns all of the stock of Marblehead Energy Corp.
(which engages in oil and gas operations and 77.3% of the stock of Investors
Bank & Trust Company, custodian of the Fund, which provides custodial, trustee
and other fiduciary services to investors, including individuals, employee
benefit plans, corporations, investment companies, savings banks and other
institutions. In addition, Eaton Vance owns all the stock of Northeast
Properties, Inc., which is engaged in real estate investment, consulting and
management. EVC owns all the stock of Fulcrum Management, Inc. and MinVen, Inc.,
which are engaged in the development of precious metal properties. EVC, Eaton
Vance, BMR and EV may also enter into other businesses.
EVC and its affiliates and their officers and employees from time to time
have transactions with various banks, including the Fund's custodian, Investors
Bank & Trust Company. It is Eaton Vance's opinion that the terms and conditions
of such transactions were not and will not be influenced by existing or
potential custodial or other relationships between the Fund and such banks.
CUSTODIAN
Investors Bank & Trust Company ("IBT"), 24 Federal Street, Boston,
Massachusetts (a 77.3% owned subsidiary of EVC) acts as custodian for the Fund.
IBT has the custody of all cash and securities of the Fund, maintains the Fund's
general ledger and computes the daily per share net asset value. In such
capacity it attends to details in connection with the sale, exchange,
substitution, transfer or other dealings with the Fund's investments, receives
and disburses all funds and performs various other ministerial duties upon
receipt of proper instructions from the Fund. IBT charges fees which are
competitive within the industry. A portion of the fee relates to custody,
bookkeeping and valuation services and is based upon a percentage of the Fund's
net assets and a portion of the fee relates to activity charges, primarily the
number of portfolio transactions. These fees are then reduced by a credit for
cash balances of the particular investment company at the custodian equal to 75%
of the 91-day, U.S. Treasury Bill auction rate applied to the particular
investment company's average daily collected balances for the week. In view of
the ownership of EVC in IBT, the Fund is treated as a self-custodian pursuant to
Rule 17f-2 under the Investment Company Act of 1940, and the Fund's investments
held by IBT as custodian are thus subject to the additional examinations by the
Fund's independent accountants as called for by such Rule. During the fiscal
year ended December 31, 1994, the Fund paid IBT $19,248.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., One Post Office Square, Boston, Massachusetts are
the Fund's independent accountants, providing audit services, tax return
preparation, and assistance and consultation with respect to the preparation of
filings with the Securities and Exchange Commission.
DETERMINATION OF NET ASSET VALUE
The Fund's net asset value is determined by the Fund's custodian (as agent
for the Fund) in the manner described under "Valuing Fund Shares" in the Fund's
current prospectus. The Fund will be closed for business and will not price its
shares on the following business holidays: New Year's Day, Washington's
Birthday, Good Friday (a New York Stock Exchange holiday), Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day.
INVESTMENT PERFORMANCE
The Fund's average annual total return is determined by multiplying a
hypothetical initial purchase order of $1,000 by the average annual compound
rate of return (including capital appreciation/depreciation, and dividends and
distributions paid and reinvested) for the stated period and annualizing the
results. The calculation assumes that all dividends and distributions are
reinvested at net asset value on the reinvestment dates during the period, and a
complete redemption of the investment at the end of the period.
The Fund's yield is computed pursuant to a standardized formula by dividing
its net investment income per share earned during a recent thirty-day period by
the net asset value per share on the last day of the period and annualizing the
resulting figure. Net investment income per share is calculated from the yields
to maturity of all debt obligations in the Fund's portfolio based on the market
value of such obligations, reduced by accrued Fund expenses for the period, with
the resulting number being divided by the average daily number of Fund shares
outstanding and entitled to receive dividends during the period. For the
thirty-day period ending December 31, 1994 the yield of the Fund was 2.22%. If a
portion of the Fund's expenses had not been allocated to the investment adviser,
the Fund would have had a lower yield.
The tables below indicate the total return (capital changes plus
reinvestment of all distributions) on a hypothetical investment of $1,000 in the
Fund covering the period from the date of the initial public offering, February
4, 1991 to December 31, 1994 and for the one year period ended December 31,
1994.
<TABLE>
<CAPTION>
VALUE OF A $1,000 INVESTMENT
INVESTMENT INVESTMENT AMOUNT OF VALUE OF TOTAL RETURN
PERIOD DATE INVESTMENT INVESTMENT CUMULATIVE ANNUALIZED
-------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Life of the
Fund** 02/04/91* $1,000.00 $1,146.26 14.63% 3.56%
1 Year Ended
12/31/94** 12/13/93 $1,000.00 $1,034.90 3.49% 3.49%
</TABLE>
PERCENTAGE CHANGES
FEBRUARY 4, 1991 -- DECEMBER 31, 1994
NET ASSET VALUE TO
NET ASSET VALUE WITH
ALL DISTRIBUTIONS REINVESTED
FISCAL ------------------------------------------------------
YEAR AVERAGE
ENDED ANNUAL CUMULATIVE ANNUAL
----- ------ ---------- ------
12/31/91** -- 4.90% --
12/31/92** 3.15% 8.21% 4.22%
12/31/93** 2.36% 10.76% 3.58%
12/31/94** 3.49% 14.63% 3.56%
Past performance is not indicative of future results. Investment return and
principal value will fluctuate; shares, when redeemed, may be worth more or less
than their original cost.
- ---------
*Date of the initial public offering February 4, 1991.
**If a portion of the Fund's expenses had not been subsidized, the Fund would
have had lower returns.
The Fund's yield and total return may be compared to the Consumer Price
Index and various domestic, international and global securities indices. The
Fund's yield and total return and comparisons with these indices may be used in
advertisements and in information furnished to present or prospective
shareholders.
From time to time evaluations of the Fund's performance made by independent
sources, e.g. Lipper Analytical Services, Inc., CDA/Weisenberger and
Morningstar, Inc., may be used in advertisements and in information furnished to
present or prospective shareholders.
Information used in advertisements and in materials furnished to present and
prospective shareholders may include statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds which may be employed
to meet specific financial goals, such as (1) funding retirement, (2) paying for
children's education, and (3) financially supporting aging parents. These three
financial goals may be referred to in such advertisements or materials as the
"Triple Squeeze."
TAXES
FEDERAL INCOME TAXES
Each series of Eaton Vance Government Obligations Trust is treated as a
separate entity for Federal income tax purposes. The Fund has elected to be
treated, has qualified, and intends to continue to qualify each year as a
regulated investment company under the Internal Revenue Code (the "Code").
Accordingly the Fund intends to satisfy certain requirements relating to sources
of its income and diversification of its assets and to distribute a sufficient
amount of its investment company taxable income so as to effect such
qualification. The Fund may also distribute part or all of its net investment
income and net realized capital gains in accordance with the timing requirements
imposed by the Code, so as to reduce or avoid any Federal income or excise tax
to the Fund. The Fund qualified as a regulated investment company under the Code
for its fiscal year ended December 31, 1994. See the Notes to Financial
Statements.
In order to avoid a 4% Federal excise tax, the Code requires the Fund to
distribute by December 31 of each calendar year at least 98% of its ordinary
income (not including tax-exempt income) for such year, at least 98% of the
excess of its realized capital gains over its realized capital losses (computed
on the basis of the one-year period ending on October 31 of such year, absent an
election to use the calendar year) and 100% of any income or capital gains from
the prior year (as previously computed) that was not paid out during such year
and on which the Fund was not taxed.
Distributions of taxable net investment income and of excess of net
short-term capital gains over net long-term capital losses are taxable to
shareholders as ordinary income whether paid in cash or reinvested in additional
shares. Distributions made by the Fund will not qualify for the
dividends-received deduction for corporations subject to applicable limitations
under the Code.
Distributions of the excess of net long-term capital gains over net
short-term capital losses (reduced by any capital losses carried forward from
prior years) are taxable to shareholders as long-term capital gains, whether
received in cash or in additional shares and regardless of the length of time
their shares of the Fund have been held.
Any loss realized upon the redemption of shares with a tax holding period of
6 months or less will be treated as a long-term capital loss to the extent of
any distribution of net long-term capital gains with respect to such shares. All
or a portion of any loss realized upon a taxable disposition of Fund shares may
be disallowed under "wash sale" rules if other shares of the Fund are purchased
(whether through the reinvestment of distributions or otherwise) within 30 days
before or after such disposition.
Amounts paid by the Fund to individuals and certain other shareholders who
have not provided the Fund with their correct taxpayer identification number and
certain required certifications, as well as shareholders with respect to whom
the Fund has received notification from the Internal Revenue Service or a
broker, may be subject to "backup" withholding of Federal income tax from the
Fund's dividends and distributions and the proceeds of redemptions (including
repurchases and exchanges), at a rate of 31%. An individual's taxpayer
identification number is generally his or her social security number.
Non-resident alien individuals and certain foreign corporations and other
foreign entities generally will be subject to a U.S. withholding tax at a rate
of 30% on the Fund's distributions from its ordinary income and the excess of
its net short-term capital gain over its net long-term capital loss, unless the
tax is reduced or eliminated by an applicable tax treaty. Distributions from the
excess of the Fund's net long-term capital gain over its net short-term capital
loss received by such shareholders and any gain from the sale or other
disposition of shares of the Fund generally will not be subject to U.S. Federal
income taxation, provided that non-resident alien status has been certified by
the shareholder. Different U.S. tax consequences may result if the shareholder
is engaged in a trade or business in the United States, is present in the United
States for a sufficient period of time during a taxable year to be treated as a
U.S. resident, or fails to provide any required certifications regarding status
as a non-resident alien investor. Foreign shareholders should consult their tax
advisers regarding the U.S. and foreign tax consequences of an investment in the
Fund.
Special tax rules apply to Individual Retirement Accounts ("IRAs") and to
other retirement plans, and persons investing through such plans should consult
their tax advisers for more information. The deductibility of such contributions
may be restricted or eliminated for particular shareholders.
The foregoing discussion does not address the special tax rules applicable
to certain classes of investors, such as retirement plans, tax-exempt entities,
insurance companies and financial institutions. Shareholders should consult
their own tax advisers with respect to special tax rules that may apply in their
particular situations, as well as the state, local or foreign tax consequences
of investing in the Fund.
PRINCIPAL UNDERWRITER
Under the Distribution Agreement the Principal Underwriter acts as principal
in selling shares of the Fund. The expense of printing copies of prospectuses
used to offer shares to financial service firms or investors and other selling
literature and of advertising is borne by the Principal Underwriter. The fees
and expenses of qualifying and registering and maintaining qualifications and
registrations of the Fund and its shares under Federal and state securities laws
are borne by the Fund. In addition, the Fund makes payments to the Principal
Underwriter pursuant to its distribution plan as described in the Fund's current
Prospectus. The Distribution Agreement is renewable annually by the Trust's
Board of Trustees (including a majority of its Trustees who are not interested
persons of the Fund and who have no direct or indirect financial interest in the
operation of the Fund's distribution plan or the Distribution Agreement), may be
terminated on sixty days' notice either by such Trustees or by vote of a
majority of the outstanding voting securities of the Fund or on six months'
notice by the Principal Underwriter and is automatically terminated upon
assignment. The Principal Underwriter distributes Fund shares on a "best
efforts" basis under which it is required to take and pay for only such shares
as may be sold.
DISTRIBUTION PLAN
The Distribution Plan (the "Plan") is described in the Prospectus and is
designed to meet the requirements of Rule 12b-1 under the Investment Company Act
of 1940. The following supplements the discussion of the Plan contained in the
Prospectus.
Pursuant to such Rule, the Plan has been approved by the Fund's shareholders
and by the Trustees, including a majority of the Trustees who are not interested
persons of the Trust and who have no direct or indirect financial interest in
the operation of the Plan (the "Rule 12b-1 Trustees"). Under the Plan the
President or a Vice President of the Trust shall provide to the Trustees for
their review, and the Trustees shall review at least quarterly, a written report
of the amount expended under the Plan and the purposes for which such
expenditures were made. The Plan remains in effect through and including April
28, 1996 and from year to year thereafter, provided such continuance is approved
annually by a vote of the Trustees in the manner described above. The Plan may
not be amended to increase materially the amount to be spent for the services
described therein without approval of the shareholders of the Fund, and all
material amendments of the Plan must also be approved by the Trustees in the
manner described above. The Plan may be terminated at any time without payment
of any penalty by vote of the Rule 12b-1 Trustees or by a vote of a majority of
the outstanding voting securities of the Fund. So long as the Plan is in effect,
the selection and nomination of Trustees who are not interested persons of the
Trust shall be committed to the discretion of the Trustees who are not such
interested persons. The Trustees have determined that in their judgment there is
a reasonable likelihood that the Plan will benefit the Fund and its
shareholders.
The Plan provides that the Fund will pay the Principal Underwriter a
quarterly distribution fee equal to .25% on an annual basis of the Fund's
average daily net assets. The Principal Underwriter may pay up to the entire
amount of the distribution fee to Authorized Firms (including banking
institutions) and their employees and to employees of the Principal Underwriter
and its affiliates for providing distribution services to the Fund or services
to shareholders. The Principal Underwriter may also pay all or a portion of such
distribution fee to employees of the Principal Underwriter or any of its
affiliates for providing any of such services. During the fiscal year ended
December 31, 1994, the Fund paid $47,483 in distribution fees to the Principal
Underwriter and the Principal Underwriter in turn paid $42,774 of this amount to
Authorized Firms or others as described above and used the balance of $4,709 to
compensate employees of the Principal Underwriter and its affiliates and to
defray part of its expenses associated with distributing shares of the Fund. The
maximum amount which may be paid to any such Authorized Firm is .25% (on an
annual basis) of the net asset value of Fund shares owned by customers of such
Firm. To the extent such fee is not paid to such Authorized Firms or other
persons, the Principal Underwriter may use such fee for its expenses of
distribution of Fund shares. If such fee exceeds its expenses, the Principal
Underwriter may realize a profit from these arrangements.
PORTFOLIO SECURITY TRANSACTIONS
Decisions concerning the execution of Fund portfolio security transactions,
including the selection of the market and the executing firm, are made by Eaton
Vance. Eaton Vance is also responsible for the execution of transactions for all
other accounts managed by it.
Eaton Vance places the portfolio security transactions of the Fund and of
all other accounts managed by it for execution with many firms. Eaton Vance uses
its best efforts to obtain execution of portfolio security transactions at
prices which are advantageous to the Fund and (when a disclosed commission is
being charged) at reasonably competitive commission rates. In seeking such
execution, Eaton Vance will use its best judgment in evaluating the terms of a
transaction, and will give consideration to various relevant factors including
without limitation the size and type of the transaction, the general execution
and operational capabilities of the executing firm, the nature and character of
the market for the security, the confidentiality, speed and certainty of
effective execution required for the transaction, the reputation, reliability,
experience and financial condition of the firm, the value and quality of
services rendered by the firm in other transactions, and the reasonableness of
the commission or spread, if any. The U.S. Treasury bills, notes and bonds
purchased and sold by the Fund are generally traded in the over-the-counter
market on a net basis (i.e., without commission) through dealers and banks
acting for their own account rather than as brokers, and the Fund may also
acquire such obligations in the periodic auctions of the U.S. Treasury. Firms
acting for their own account attempt to profit from such transactions by buying
at the bid price and selling at a higher asked price for such obligations, and
the difference between such prices is customarily referred to as the spread.
While it is anticipated that the Fund will not pay significant brokerage
commissions in connection with such portfolio security transactions, on occasion
it may be necessary or appropriate to purchase or sell a security through a
broker on an agency basis, in which case the Fund will incur a brokerage
commission. Although spreads or commissions on portfolio security transactions
will, in the judgment of Eaton Vance, be reasonable in relation to the value of
the services provided, spreads or commissions exceeding those which another firm
might charge may be paid to firms who were selected to execute transactions on
behalf of the Fund and Eaton Vance's other clients for providing brokerage and
research services to Eaton Vance.
As authorized in Section 28(e) of the Securities Exchange Act of 1934, a
broker or dealer who executes a portfolio transaction on behalf of the Fund may
receive a commission which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Eaton
Vance determines in good faith that such commission was reasonable in relation
to the value of the brokerage and research services provided. This determination
may be made on the basis of either that particular transaction or on the basis
of overall responsibilities which Eaton Vance and its affiliates have for
accounts over which they exercise investment discretion. In making any such
determination, Eaton Vance will not attempt to place a specific dollar value on
the brokerage and research services provided or to determine what portion of the
commission should be related to such services. Brokerage and research services
may include advice as to the value of securities, the advisability of investing
in, purchasing, or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and the performance of accounts; effecting securities transactions and
performing functions incidental thereto (such as clearance and settlement); and
the "Research Services" referred to in the next paragraph.
It is a common practice in the investment advisory industry for the advisers
of investment companies, institutions and other investors to receive research,
statistical and quotation services, data, information and other services,
products and materials which assist such advisers in the performance of their
investment responsibilities ("Research Services") from broker-dealers which
execute portfolio transactions for the clients of such advisers and from third
parties with which such broker-dealers have arrangements. Consistent with this
practice, Eaton Vance receives Research Services from many broker-dealer firms
with which Eaton Vance places the Fund's portfolio transactions and from third
parties with which these broker-dealers have arrangements. These Research
Services include such matters as general economic and market reviews, industry
and company reviews, evaluations of securities and portfolio strategies and
transactions, recommendations as to the purchase and sale of securities and
other portfolio transactions, financial, industry and trade publications, news
and information services, pricing and quotation equipment and services, and
research oriented computer hardware, software, data bases and services. Any
particular Research Service obtained through a broker-dealer may be used by
Eaton Vance in connection with client accounts other than those accounts which
pay commissions to such broker-dealer. Any such Research Service may be broadly
useful and of value to Eaton Vance in rendering investment advisory services to
all or a significant portion of its clients, or may be relevant and useful for
the management of only one client's account or of a few clients' accounts, or
may be useful for the management of merely a segment of certain clients'
accounts, regardless of whether any such account or accounts paid commissions to
the broker-dealer through which such Research Service was obtained. The advisory
fee paid by the Fund is not reduced because Eaton Vance receives such Research
Services. Eaton Vance evaluates the nature and quality of the various Research
Services obtained through broker-dealer firms and attempts to allocate
sufficient commissions to such firms to ensure the continued receipt of Research
Services which Eaton Vance believes are useful or of value to it in rendering
investment advisory services to its clients.
Subject to the requirement that Eaton Vance shall use its best efforts to
seek to execute Fund portfolio security transactions at advantageous prices and
at reasonably competitive commission rates or spreads, Eaton Vance is authorized
to consider as a factor in the selection of any broker-dealer firm with whom
Fund portfolio orders may be placed the fact that such firm has sold or is
selling shares of the Fund or of other investment companies sponsored by Eaton
Vance. This policy is not inconsistent with a rule of the National Association
of Securities Dealers, Inc., which rule provides that no firm which is a member
of the Association shall favor or disfavor the distribution of shares of any
particular investment company or group of investment companies on the basis of
brokerage commissions received or expected by such firm from any source.
Securities considered as investments for the Fund may also be appropriate
for other investment accounts managed by Eaton Vance or its affiliates. Eaton
Vance will attempt to allocate equitably portfolio security transactions among
the Fund and the portfolios of its other investment accounts whenever decisions
are made to purchase or sell securities by the Fund and one or more of such
other accounts simultaneously. In making such allocations, the main factors to
be considered are the respective investment objectives of the Fund and such
other accounts, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment by the Fund and
such accounts, the size of investment commitments generally held by the Fund and
such accounts and the opinions of the persons responsible for recommending
investments to the Fund and such accounts. While this procedure could have a
detrimental effect on the price or amount of the securities available to the
Fund from time to time, it is the opinion of the Board of Trustees of the Trust
that the benefits available from the Eaton Vance organization outweigh any
disadvantage that may arise from exposure to simultaneous transactions.
During the fiscal year ended December 31, 1994, the Fund's purchases and
sales of portfolio securities were with major dealers in U.S. Treasury
obligations. The prices for which securities are purchased from and sold to such
dealers usually include an undisclosed dealer spread. The Fund paid no brokerage
commissions for the fiscal years ended December 31, 1994, 1993 and 1992 on
portfolio transactions.
OTHER INFORMATION
Eaton Vance, pursuant to the Investment Advisory Agreement, controls the use
of the Fund's name and may use the words "Eaton Vance" in other connections and
for other purposes. Eaton Vance may require the Fund or the Trust to cease using
such words in its name if Eaton Vance or any other subsidiary or affiliate of
EVC ceases to act as investment adviser of the Fund.
As permitted by Massachusetts law, there will normally be no meetings of
shareholders 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
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 Amended and Restated Declaration of Trust may be amended by the
Trustees when authorized by vote of a majority of the outstanding voting
securities of the Trust, the financial interests of which are affected by the
amendment. The Trustees may also amend the Declaration of Trust without the vote
or consent of shareholders to change the name of the Trust or any series or to
make such other changes as do not have a materially adverse effect on the
financial interests of shareholders or if they deem it necessary to conform it
to applicable Federal or state laws or regulations. The Trust or any series or
class thereof may be terminated by: (1) the affirmative vote of the holders of
not less than two-thirds of the shares outstanding and entitled to vote at any
meeting of shareholders of the Trust or the appropriate series or class thereof,
or by an instrument or instruments in writing without a meeting, consented to by
the holders of two-thirds of the shares of the Trust or a series or class
thereof, provided, however, that, if such termination is recommended by the
Trustees, the vote of a majority of the outstanding voting securities of the
Trust or a series or class thereof entitled to vote thereon shall be sufficient
authorization; or (2) by means of an instrument in writing signed by a majority
of the Trustees, to be followed by a written notice to shareholders stating that
a majority of the Trustees has determined that the continuation of the Trust or
series or a class thereof is not in the best interest of the Trust, such series
or class or of their respective shareholders.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law; but nothing in the
Declaration of Trust protects a Trustee against any liability to which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. In addition, the By-Laws of the Trust provide that no natural person
shall serve as a Trustee of the Trust after the holders of record of not less
than two-thirds of the outstanding shares have declared that he be removed from
office either by declaration in writing filed with the custodian of the assets
of the Trust or by votes cast in person or by proxy at a meeting called for the
purpose. The By-Laws also provide that the Trustees shall promptly call a
meeting of Shareholders for the purpose of voting upon a question of removal of
a Trustee when requested so to do by the record holders of not less than 10 per
centum of the outstanding shares.
<PAGE>
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
- ---------------------------------------------------------------------------
U.S. TREASURY OBLIGATION -- 101.7%
- ---------------------------------------------------------------------------
PRINCIPAL
SECURITY AMOUNT VALUE
- ---------------------------------------------------------------------------
U.S. Treasury Bill, 5.088%, 2/2/95 $1,200,000 $1,195,440
----------
TOTAL U.S. TREASURY OBLIGATIONS,
AND TOTAL INVESTMENTS
(identified cost, $1,194,647) $1,195,440
OTHER ASSETS,
LESS LIABILITIES --(1.7)% (19,987)
----------
NET ASSETS -- 100.0% $1,175,453
==========
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
- ---------------------------------------------------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- ---------------------------------------------------------------------------
December 31, 1994
- ---------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A)
(identified cost, $1,194,647) $1,195,440
Cash 51,228
Receivable from Investment Adviser 44,164
Deferred organization expenses (Note 1D) 12,205
----------
Total assets $1,303,037
LIABILITIES:
Payable for Fund shares redeemed $112,645
Accrued expenses 14,939
--------
Total liabilities 127,584
----------
NET ASSETS for 20,434 shares of
beneficial interest outstanding $1,175,453
==========
SOURCES OF NET ASSETS:
Paid-in capital $1,178,476
Accumulated net realized loss on investment
transactions (identified cost basis) (3,816)
Net unrealized appreciation of investments
(identified cost basis) 793
----------
Total $1,175,453
==========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
($1,175,453 / 20,434 shares of capital
stock outstanding) $57.52
======
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
STATEMENT OF OPERATIONS
- ---------------------------------------------------------------------------
For the Year Ended December 31, 1994
- ---------------------------------------------------------------------------
INVESTMENT INCOME:
Interest income $723,193
Expenses --
Investment adviser fee (Note 4) $ 42,301
Trustees' compensation (Note 4) 771
Custodian fee (Note 4) 19,248
Distribution expenses (Note 5) 47,011
Legal and accounting fees 27,590
Printing and postage 20,527
Registration fees 18,355
Amortization of organization
expenses (Note 1D) 17,542
Professional fees 16,500
Transfer and dividend disbursing
agent fees 12,000
Miscellaneous 10,892
--------
Total expenses $232,737
Deduct --
Reduction of investment
adviser fee (Note 4) $42,301
Allocation of expenses to
Investment Adviser (Note 4) 31,702 74,003
------- --------
Net expenses 158,734
--------
Net investment income $564,459
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investment
transactions (identified cost basis) $ 41,684
Change in unrealized appreciation
of investments 880
--------
Net realized and unrealized
gain on investments 42,564
--------
Net increase in net assets
resulting from operations $607,023
========
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
- ---------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-----------------------------
1994 1993
---------- -----------
INCREASE (DECREASE) IN NET ASSETS:
From operations --
Net investment income $ 564,459 $ 1,767,828
Net realized gain (loss) on
investment transactions 41,684 (45,501)
Change in unrealized appreciation
(depreciation) of investments 880 (8,634)
---------- -----------
Increase in net assets
from operations $ 607,023 $ 1,713,693
Net decrease in net assets from Fund
share transactions (Note 2) (1,174,981) (4,887,313)
---------- -----------
Net decrease in net assets $ (567,958) $(3,173,620)
NET ASSETS:
At beginning of year 1,743,411 4,917,031
---------- -----------
At end of year $1,175,453 $ 1,743,411
========== ===========
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
FINANCIAL STATEMENTS (Continued)
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993 1992 1991<F1>
------ ------ ------ ------
<S> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $55.58 $54.30 $52.64 $50.18
------ ------ ------ ------
INCOME FROM OPERATIONS:
Net investment income $ 1.80 $ 1.34 $ 1.61 $ 2.15
Net realized and unrealized gain
(loss) on investments 0.14 (0.06) 0.05 0.31
------ ------ ------ ------
Total income from operations $ 1.94 $ 1.28 $ 1.66 $ 2.46
------ ------ ------ ------
NET ASSET VALUE, end of year $57.52 $55.58 $54.30 $52.64
====== ====== ====== ======
TOTAL RETURN<F2> 3.49% 2.36% 3.15% 4.90%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of year (000's
omitted) $1,175 $1,743 $4,917 $100,976
Ratio of expenses to average
net assets<F4> 0.60% 0.60% 0.60% 0.60%<F3>
Ratio of net investment income
to average net assets<F4> 2.97% 2.48% 3.01% 4.66%<F3>
<FN>
<F1>Period from the date of initial public offering, February 4, 1991, to
December 31, 1991. For the period from the start of business, January 11,
1991, to February 3, 1991, net investment income aggregating $0.18 per share
($367) was earned by the Fund. The financial highlights for the period were
audited by the Fund's previous auditors.
<F2>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.
<F3>Computed on an annualized basis.
<F4>The expenses related to the operation of the Fund reflect a reduction of the
investment adviser fee and an allocation of expenses to the Investment
Adviser. Had such action not been taken, net investment income per share and
the ratios would have been as follows:
NET INVESTMENT INCOME PER SHARE $ 1.56 $ 1.28 $ 1.56 $ 2.07
====== ====== ====== ======
RATIOS (As a percentage of
average net assets):
Expenses 1.23% 0.70% 0.70% 0.78%<F1>
====== ====== ====== ======
Net investment income 2.58% 2.38% 3.11% 4.49%<F1>
====== ====== ====== ======
</FN>
Note: Certain of the per share amounts have been computed using average shares
outstanding.
</TABLE>
The accompanying Notes are an integral part of the Financial Statements
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Short-Term Treasury Fund (the Fund) is a series of Eaton Vance
Government Obligations Trust (the Trust). The Trust is an entity of the type
commonly known as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company. The following is a summary of significant
accounting policies consistently followed by the Fund in the preparation of its
financial statements. The policies are in conformity with generally accepted
accounting principles.
A. INVESTMENT VALUATIONS - Debt securities, including listed securities and
securities for which price quotations are available, will normally be valued on
the basis of market valuations furnished by a pricing service. Short-term
obligations and money market securities maturing in 60 days or less are valued
at amortization cost, which approximates value. Other assets are valued at fair
value using methods determined in good faith by the Trustees.
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. FEDERAL TAXES - The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies. The Fund is
not subject to Federal income or excise tax to the extent it distributes to
shareholders each year its taxable net income, including any net realized gain
on investments in accordance with the timing requirements imposed by the Code.
Accordingly, no provision for federal income or excise tax is neessary. At
December 31, 1994, the Fund, for federal income tax purposes, had a capital loss
carryover of $3,816, 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
carryover will expire on December 31, 2001. The Fund intends on its tax return
to treat as a distribution of net investment income and realized capital gains
the portion of redemption proceeds paid to redeeming shareholders that
represents their share of the Fund's undistributed income and gains. For the
year ended December 31, 1994, the Fund utilized earnings and profits distributed
to shareholders on redemptions of Fund shares as a part of the dividends paid
deduction for income tax purposes. For the year ended December 31, 1994, the
Fund reclassified $564,459 from undistributed net investment income to
additional paid-in capital in connection with the dividend paid deduction. This
practice, which involves the use of equalization accounting, will have the
effect of reducing the amount of income and gains that the Fund is required to
distribute as a dividend to shareholders each year in order to avoid federal
income and excise tax.
D. DEFERRED ORGANIZATION EXPENSES - Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on the
straight-line basis through February 1996. E. OTHER - Investment transactions
are accounted for on the date the investments are purchased or sold. Dividends
to shareholders are recorded on the ex-dividend date.
-----------------------------------------------------------------
(2) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------
1994 1993
---------------------------------- ----------------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- -------------
<S> <C> <C> <C> <C>
Sales 4,306,765 $ 242,492,314 8,500,273 $ 466,141,165
Redemptions (4,317,699) (243,667,295) (8,559,462) (471,028,478)
---------- ------------- ---------- -------------
Net decrease (10,934) $ (1,174,981) (59,189) $ (4,887,313)
---------- ------------- ---------- -------------
---------- ------------- ---------- -------------
</TABLE>
<PAGE>
----------------------------------------------------------------------------
(3) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales (including maturities) of U.S. Government Securities,
aggregated $352,033,834 and $353,299,573, respectively.
- ------------------------------------------------------------------------------
(4) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee is earned by Eaton Vance Management (EVM) as
compensation for management and investment advisory services rendered to the
Fund. The fee is based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sales of
securities). For the year ended December 31, 1994, the fee was equivalent to
0.22% (annualized) of the Fund's average net assets and amounted to $42,301. To
enhance the net income of the Fund, EVM made a preliminary reduction of its fee
in the amount of $42,301 and $31,702 of the expenses related to the operation of
the Fund were allocated to EVM. Except as to Trustees of the Fund who are not
members of EVM's organization, officers and Trustees receive remuneration for
their services to the Fund out of such investment adviser fee. The custodian fee
is paid to Investors Bank & Trust Company (IBT), an affiliate of EVM, for its
services as custodian of the Fund. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Fund maintains with IBT. Certain of the officers and
Trustees of the Fund are officers and directors/trustees of the above
organizations.
----------------------------------------------------------------------------
(5) DISTRIBUTION PLAN
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Plan provides that the Fund will
pay the Principal Underwriter, Eaton Vance Distributors, Inc. (EVD), a
subsidiary of EVM, a quarterly distribution fee equal to 0.25% on an annual
basis of the Fund's average daily net assets. EVD may pay up to the entire
amount of the distribution fee to Authorized Firms for providing services to
shareholders. The Plan is designed to compensate EVD and the Authorized Firms
through which the Fund's shares are distributed. For the year ended December 31,
1994 the Fund paid $47,011 in distribution fees to EVD, and EVD in turn paid a
substantial portion of this amount to Authorized Firms.
----------------------------------------------------------------------------
(6) LINE OF CREDIT
The Fund participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of a
$20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Fund solely to facilitate the handling of unusual
and/or unanticipated short-term cash requirements. Interest is charged to each
fund based on its borrowings at an amount above either the bank's adjusted
certificate of deposit rate, a variable adjusted certificate of deposit rate, or
a federal funds effective rate. In addition, a fee computed at an annual rate of
1/4 of 1% on the $20 million committed facility and on the daily unused portion
of the $100 million discretionary facility is allocated among the participating
funds at the end of each quarter. The Fund did not have any significant
borrowings or allocated fees during the year.
- ------------------------------------------------------------------------------
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/depreciation in value of the investments
owned at December 31, 1994, as computed on a federal income tax basis, are as
follows:
Aggregate cost $1,194,647
---------
---------
Gross unrealized appreciation $ 793
Gross unrealized depreciation --
---------
Net unrealized appreciation $ 793
---------
---------
<PAGE>
- -----------------------------------------------------------------------------
INDEPENDENT ACCOUNTANTS' REPORT
----------------------------------------------------------------------------
To the Trustees and Shareholders of Eaton Vance Government Obligations Trust;
Short-Term Treasury Fund series:
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Short-Term Treasury Fund (one of the series constituting Eaton Vance
Government Obligations Trust), including the investment portfolio, 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 three years in
the period then ended. 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. The financial highlights for the period from January 11, 1991 (start of
business) to December 31, 1991 presented herein, were audited by other auditors
whose report dated January 24, 1992, expressed an unqualified opinion on such
financial highlights.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
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 financial highlights referred to
above present fairly, in all material respects, the financial position of the
Eaton Vance Short-Term Treasury Fund as of December 31, 1994, the results of its
operations for the year then ended and 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 three years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
INVESTMENT ADVISER
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
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
EATON VANCE SHORT-TERM
TREASURY FUND
24 FEDERAL STREET
BOSTON, MA 02110
TYSAI
EATON VANCE
SHORT-TERM
TREASURY FUND
STATEMENT OF
ADDITIONAL
INFORMATION
MAY 1, 1995
<PAGE>
PART C
OTHER INFORMATION
ITEM 24: FINANCIAL STATEMENTS AND EXHIBITS
(A) FINANCIAL STATEMENTS
INCLUDED IN PART A:
FOR EV CLASSIC GOVERNMENT OBLIGATIONS FUND:
Financial Highlights for the one year ended December 31, 1994 and for
the period from the start of business, November 1, 1993, to December
31, 1993.
FOR EATON VANCE SHORT-TERM TREASURY FUND:
Financial Highlights for the three years ended December 31, 1994 and
for the period from the start of business, January 11, 1991, to
December 31, 1991.
INCLUDED IN PART B:
FOR EV CLASSIC GOVERNMENT OBLIGATIONS FUND:
Financial Statements for EV Classic Government Obligations Fund:
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the year ended December 31,
1994 and for the period from the start of business, November 1,
1993, to December 31, 1993
Financial Highlights
Notes to Financial Statements
Independent Accountants' Reports
Financial Statements for Government Obligations Portfolio:
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the year ended December 31,
1994 and for the period from the start of business, October 28,
1993, to December 31, 1993
Supplementary Data for the period for the year ended December 31,
1994 and for the start of business, October 28, 1993, to December
31, 1993
Notes to Financial Statements
Independent Accountants' Report
FOR EATON VANCE SHORT-TERM TREASURY FUND:
Portfolio of Investments as of December 31, 1994
Statement of Assets and Liabilities as of December 31, 1994
Statement of Operations for the year ended December 31, 1994
Statement of Changes in Net Assets for the two years ended December
31 1994
Financial Highlights
Notes to Financial Statements
Independent Accountants' Report
(B) EXHIBITS:
(1)(a) Amended and Restated Declaration of Trust dated August 17, 1993
filed as Exhibit (1)(a) to Post-Effective Amendment No. 17 and
incorporated herein by reference.
(b) Establishment and Designation of Series dated February 1, 1991 filed
as Exhibit 1 (b) to Post-Effective Amendment No. 11 and incorporated
herein by reference.
(c) Amendment and Restatement of Establishment and Designation of Series
dated July 21, 1992 filed as Exhibit 1(c) to Post-Effective
Amendment No. 16 and incorporated herein by reference.
(d) Amendment and Restatement of Establishment and Designation of Series
dated September 27, 1993 filed as Exhibit (1)(d) to Post-Effective
Amendment No. 18 and incorporated herein by reference.
(2)(a) By-Laws (As Amended November 31, 1986) filed as Exhibit (2) to
Post-Effective Amendment No. 9 and incorporated herein by reference.
(b) Amendment to By-Laws of Eaton Vance Government Obligations Trust
dated December 13, 1993 filed as Exhibit (2)(b) to Post-Effective
Amendment No. 19 and incorporated herein by reference.
(3) Not applicable
(4) Not applicable
(5) Investment Advisory Agreement with Eaton Vance Management for Eaton
Vance Short-Term Treasury Fund dated February 4, 1991 filed as
Exhibit (5)(b) to Post-Effective Amendment No. 11 and incorporated
herein by reference.
(6)(a)(1)Distribution Agreement with Eaton Vance Distributors, Inc. dated
July 9, 1984 filed as Exhibit (6) to Post-Effective Amendment No. 6
and incorporated herein by reference.
(a)(2)Distribution Agreement with Eaton Vance Distributors, Inc. for
Eaton Vance Short-Term Treasury Fund dated February 4, 1991 as
Amended and Restated February 25, 1991 filed as Exhibit (6)(a)(2) to
Post-Effective Amendment No. 12 and incorporated herein by
reference.
(a)(3)Distribution Agreement with Eaton Vance Distributors, Inc. for EV
Classic Government Obligations Fund dated October 28, 1993 filed as
Exhibit (6)(a)(3) to Post-Effective Amendment No. 19 and
incorporated herein by reference.
(a)(4)Distribution Agreement with Eaton Vance Distributors, Inc. for EV
Marathon Government Obligations Fund dated October 28, 1993 filed as
Exhibit (6)(a)(4) to Post-Effective Amendment No. 19 and
incorporated herein by reference.
(b) Selling Group Agreement between Eaton Vance Distributors, Inc. and
Authorized Dealers filed as Exhibit (6)(b) to Post-Effective
Amendment No. 19 and incorporated herein by reference.
(c) Schedule of Dealer Discounts and Sales Charges filed as Exhibit
(6)(c) to Post-Effective Amendment No. 19 and incorporated by
reference.
(7) Not applicable
(8) Custodian Agreement with Investors Bank & Trust Company dated
December 17, 1990 filed as Exhibit (8) to Post-Effective Amendment
No. 11 and incorporated herein by reference.
(9)(a) Administrative Services Agreement with Eaton Vance Management for
EV Traditional Government Obligations Fund dated October 28, 1993
filed as Exhibit (9)(a) to Post-Effective Amendment No. 19 and
incorporated herein by reference.
(b) Administrative Services Agreement with Eaton Vance Management for EV
Classic Government Obligations Fund dated October 28, 1993 filed as
Exhibit (9)(b) to Post-Effective Amendment No. 19 and incorporated
herein by reference.
(c) Administrative Services Agreement with Eaton Vance Management for EV
Marathon Government Obligations Fund dated October 28, 1993 filed as
Exhibit (9)(c) to Post-Effective Amendment No. 19 and incorporated
herein by reference.
(10) Not applicable
(11)(a) Consent of Independent Accountants for EV Classic Government
Obligations Fund filed herewith.
(b) Consent of Independent Accountants for Eaton Vance Short-Term
Treasury Fund filed herewith.
(12) Not applicable
(13) Agreement with Eaton Vance Management, Inc. in consideration of
providing initial capital, dated July 5, 1984 filed as Exhibit (13)
to Post-Effective Amendment No. 6 and incorporated herein by
reference.
(14)(a) Vance, Sanders Profit Sharing Retirement Plan for Self-Employed
Persons with Adoption Agreement and instructions filed as Exhibit
#14(1) to Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated herein by
reference.
(b) Eaton & Howard, Vance Sanders Defined Contribution Prototype Plan
and Trust with Adoption Agreements (1) Basic Profit-Sharing
Retirement Plan, (2) Basic Money Purchase Pension Plan, (3) Thrift
Plan Qualifying as Profit Sharing Plan, (4) Thrift Plan Qualifying
as Money Purchase Plan, (5) Integrated Profit Sharing Retirement
Plan, (6) Integrated Money Purchase Pension Plan filed as Exhibit
14(2) to Post-Effective Amendment #22 on Form N-1 under the
Securities Act of 1933 (File No. 2-28471) and incorporated herein by
reference.
(c) Individual Retirement Custodial Account (Form 5305-A) and Investment
Instruction Form filed as Exhibit 14(3) to Post-Effective Amendment
#22 on Form N-1 under the Securities Act of 1933 (File No. 2-28471)
and incorporated herein by reference.
(d) Eaton & Howard, Vance Sanders Variable Pension Prototype Plan and
Trust with Adoption Agreement filed as Exhibit 14(b) to
Post-Effective Amendment #22 on Form N-1 under the Securities Act of
1933 (File No. 2-28471) and incorporated herein by reference.
(15)(a) Service Plan for Eaton Vance Government Obligations Fund dated July
7, 1993 pursuant to Rule 12b-1 under the Investment Company Act of
1940 filed as Exhibit (15)(a) to Post-Effective Amendment No. 17 and
incorporated herein by reference.
(b) Distribution Plan pursuant to Rule 12b-1 under the Investment
Company Act of 1940 for Eaton Vance Short-Term Treasury Fund dated
February 4, 1991 as Amended and Restated February 25, 1991 filed as
Exhibit (15)(b) to Post-Effective Amendment No. 12 and incorporated
herein by reference.
(c) Distribution Plan for EV Classic Government Obligations Fund
pursuant to Rule 12b-1 under the Investment Company Act of 1940
dated October 28, 1993 filed as Exhibit (15)(c) to Post-Effective
Amendment No. 19 and incorporated herein by reference.
(d) Distribution Plan for EV Marathon Government Obligations Fund
pursuant to Rule 12b- 1 under the Investment Company Act of 1940
dated October 28, 1993 filed as Exhibit (15)(d) to Post-Effective
Amendment No. 19 and incorporated herein by reference.
(16) Schedules for Computation of Performance Quotations filed herewith.
(17)(a) Power of Attorney for Eaton Vance Government Obligations Trust dated
February 25, 1994 filed as Exhibit (17)(a) to Post-Effective
Amendment No. 19 and incorporated herein by reference.
(b) Power of Attorney for Government Obligations Portfolio dated
February 25, 1994 filed as Exhibit (17)(b) to Post-Effective
Amendment No. 19 and incorporated herein by reference.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
Not applicable
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
(1) (2)
TITLE OF CLASS NUMBER OF RECORD HOLDERS
Shares of beneficial interest without par value as of January 31, 1995
Eaton Vance Short-Term Treasury Fund 51
EV Classic Government Obligations Fund 1,177
EV Marathon Government Obligations Fund 2,901
EV Traditional Government Obligations Fund 12,231
ITEM 27. INDEMNIFICATION
No change from the information set forth in Item 4 of Form N-1A filed as
Pre-Effective Amendment No. 1 which information is incorporated herein by
reference.
Registrant's Trustees and officers are insured under a standard mutual fund
errors and omissions insurance policy covering loss incurred by reason of
negligent errors and omissions committed in their capacities as such.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Reference is made to the information set forth under the caption "Investment
Adviser and Administrator" in the Statement of Additional Information which
information is incorporated herein by reference.
ITEM 29. PRINCIPAL UNDERWRITERS
(A) Registrant's principal underwriter, Eaton Vance Distributors, Inc., a
wholly-owned subsidiary of Eaton Vance Management, is the principal
underwriter for each of the mutual funds named below:
<TABLE>
<S> <C>
EV Classic Alabama Tax Free Fund EV Classic New Jersey Tax Free Fund
EV Classic Arizona Tax Free Fund EV Classic New York Limited Maturity
EV Classic Arkansas Tax Free Fund Tax Free Fund
EV Classic California Limited Maturity EV Classic New York Tax Free Fund
Tax Free Fund EV Classic North Carolina Tax Free Fund
EV Classic California Municipals Fund EV Classic Ohio Limited Maturity Tax Free Fund
EV Classic Colorado Tax Free Fund EV Classic Ohio Tax Free Fund
EV Classic Connecticut Limited Maturity EV Classic Oregon Tax Free Fund
Tax Free Fund EV Classic Pennsylvania Limited Maturity
EV Classic Connecticut Tax Free Fund Tax Free Fund
EV Classic Florida Insured Tax Free Fund EV Classic Pennsylvania Tax Free Fund
EV Classic Florida Limited Maturity EV Classic Rhode Island Tax Free Fund
Tax Free Fund EV Classic Short-Term Strategic Income Fund
EV Classic Florida Tax Free Fund EV Classic South Carolina Tax Free Fund
EV Classic Georgia Tax Free Fund EV Classic Special Equities Fund
EV Classic Government Obligations Fund EV Classic Stock Fund
EV Classic Greater China Growth Fund EV Classic Tennessee Tax Free Fund
EV Classic Growth Fund EV Classic Texas Tax Free Fund
EV Classic Hawaii Tax Free Fund EV Classic Total Return Fund
EV Classic High Income Fund EV Classic Virginia Tax Free Fund
EV Classic Investors Fund EV Classic West Virginia Tax Free Fund
EV Classic Kansas Tax Free Fund EV Marathon Alabama Tax Free Fund
EV Classic Kentucky Tax Free Fund EV Marathon Arizona Limited Maturity
EV Classic Louisiana Tax Free Fund Tax Free Fund
EV Classic Maryland Tax Free Fund EV Marathon Arizona Tax Free Fund
EV Classic Massachusetts Limited Maturity EV Marathon Arkansas Tax Free Fund
Tax Free Fund EV Marathon California Limited Maturity
EV Classic Massachusetts Tax Free Fund Tax Free Fund
EV Classic Michigan Limited Maturity EV Marathon California Municipals Fund
Tax Free Fund EV Marathon Colorado Tax Free Fund
EV Classic Michigan Tax Free Fund EV Marathon Connecticut Limited Maturity
EV Classic Minnesota Tax Free Fund Tax Free Fund
EV Classic Mississippi Tax Free Fund EV Marathon Connecticut Tax Free Fund
EV Classic Missouri Tax Free Fund EV Marathon Emerging Markets Fund
EV Classic National Limited Maturity Eaton Vance Equity - Income Trust
Tax Free Fund EV Marathon Florida Insured Tax Free Fund
EV Classic National Municipals Fund V Marathon Florida Limited Maturity
EV Classic New Jersey Limited Maturity Tax Free Fund
Tax Free Fund EV Marathon Florida Tax Free Fund
EV Marathon Georgia Tax Free Fund EV Marathon South Carolina Tax Free Fund
EV Marathon Gold & Natural Resources Fund EV Marathon Special Equities Fund
EV Marathon Government Obligations Fund EV Marathon Stock Fund
EV Marathon Greater China Growth Fund EV Marathon Tennessee Tax Free Fund
EV Marathon Greater India Fund EV Marathon Texas Tax Free Fund
EV Marathon Growth Fund EV Marathon Total Return Fund
EV Marathon Hawaii Tax Free Fund EV Marathon Virginia Limited Maturity
EV Marathon High Income Fund Tax Free Fund
EV Marathon Investors Fund EV Marathon Virginia Tax Free Fund
EV Marathon Kansas Tax Free Fund EV Marathon West Virginia Tax Free Fund
EV Marathon Kentucky Tax Free Fund EV Traditional California Municipals Fund
EV Marathon Louisiana Tax Free Fund EV Traditional Connecticut Tax Free Fund
EV Marathon Maryland Tax Free Fund EV Traditional Emerging Markets Fund
EV Marathon Massachusetts Limited Maturity EV Traditional Florida Insured Tax Free Fund
Tax Free Fund EV Traditional Florida Limited Maturity
EV Marathon Massachusetts Tax Free Fund Tax Free Fund
EV Marathon Michigan Limited Maturity EV Traditional Florida Tax Free Fund
Tax Free Fund EV Traditional Government Obligations Fund
EV Marathon Michigan Tax Free Fund EV Traditional Greater China Growth Fund
EV Marathon Minnesota Tax Free Fund EV Traditional Greater India Fund
EV Marathon Mississippi Tax Free Fund EV Traditional Growth Fund
EV Marathon Missouri Tax Free Fund Eaton Vance Income Fund of Boston
EV Marathon National Limited Maturity EV Traditional Investors Fund
Tax Free Fund Eaton Vance Municipal Bond Fund L.P.
EV Marathon National Municipals Fund EV Traditional National Limited Maturity
EV Marathon New Jersey Limited Maturity Tax Free Fund
Tax Free Fund EV Traditional National Municipals Fund
EV Marathon New Jersey Tax Free Fund EV Traditional New Jersey Tax Free Fund
EV Marathon New York Limited Maturity EV Traditional New York Limited Maturity
Tax Free Fund Tax Free Fund
EV Marathon New York Tax Free Fund EV Traditional New York Tax Free Fund
EV Marathon North Carolina Limited Maturity EV Traditional Pennsylvania Tax Free Fund
Tax Free Fund EV Traditional Special Equities Fund
EV Marathon North Carolina Tax Free Fund EV Traditional Stock Fund
EV Marathon Ohio Limited Maturity EV Traditional Total Return Fund
Tax Free Fund Eaton Vance Cash Management Fund
EV Marathon Ohio Tax Free Fund Eaton Vance Liquid Assets Trust
EV Marathon Oregon Tax Free Fund Eaton Vance Prime Rate Reserves
EV Marathon Pennsylvania Limited Maturity Eaton Vance Short-Term Treasury Fund
Tax Free Fund Eaton Vance Tax Free Reserves
EV Marathon Pennsylvania Tax Free Fund Massachusetts Municipal Bond Portfolio
EV Marathon Rhode Island Tax Free Fund
EV Marathon Short-Term Strategic
Income Fund
</TABLE>
<PAGE>
(b)
<TABLE>
<CAPTION>
(1) (2) (3)
NAME AND PRINCIPAL POSITIONS AND OFFICES POSITIONS AND OFFICE
BUSINESS ADDRESS WITH PRINCIPAL UNDERWRITER WITH REGISTRANT
---------------- -------------------------- --------------------
<S> <C> <C>
James B. Hawkes* Vice President and Director Vice President and
Trustee
William M. Steul* Vice President and Director None
Wharton P. Whitaker* President and Director None
Howard D. Barr Vice President None
2750 Royal View Court
Oakland, Michigan
Nancy E. Belza Vice President None
463-1 Buena Vista East
San Francisco, California
Chris Berg Vice President None
45 Windsor Lane
Palm Beach Gardens, Florida
H. Day Brigham, Jr.* Vice President None
Susan W. Bukima Vice President None
106 Princess Street
Alexandria, Virginia
Jeffrey W. Butterfield Vice President None
9378 Mirror Road
Columbus, Indiana
Mark A. Carlson* Vice President None
Jeffrey Chernoff Vice President None
115 Concourse West
Bright Waters, New York
William A. Clemmer* Vice President None
James S. Comforti Vice President None
1859 Crest Drive
Encinitas, California
Mark P. Doman Vice President None
107 Pine Street
Philadelphia, Pennsylvania
Michael A. Foster Vice President None
850 Kelsey Court
Centerville, Ohio
William M. Gillen Vice President None
280 Rea Street
North Andover, Massachusetts
Hugh S. Gilmartin Vice President None
1531-184th Avenue, NE
Bellevue, Washington
Richard E. Houghton* Vice President None
Brian Jacobs* Senior Vice President None
Stephen D. Jonhson Vice President None
13340 Providence Lake Drive
Alpharetta, Georgia
Thomas J. Marcello Vice President None
553 Belleville Avenue
Glen Ridge, New Jersey
Timothy D. McCarthy Vice President None
9801 Germantown Pike
Lincoln Woods Apt. 416
Lafayette Hill, Pennsylvania
Morgan C. Mohrman* Senior Vice President None
Gregory B. Norris Vice President None
6 Halidon Court
Palm Beach Gardens, Florida
Thomas Otis* Secretary and Clerk Secretary
George D. Owen Vice President None
1911 Wildwood Court
Blue Springs, Missouri
F. Anthony Robinson Vice President None
510 Gravely Hill Road
Wakefield, Rhode Island
Benjamin A. Rowland, Jr.* Vice President, None
Treasurer and Director
John P. Rynne* Vice President None
George V.F. Schwab, Jr. Vice President None
9501 Hampton Oaks Lane
Charlotte, North Carolina
Cornelius J. Sullivan* Vice President None
Maureen C. Tallon Vice President None
518 Armistead Drive
Nashville, Tennessee
David M. Thill Vice President None
126 Albert Drive
Lancaster, New York
William T. Toner Vice President None
747 Lilac Drive
Santa Barbara, California
Chris Volf Vice President None
6517 Thoroughbred Loop
Odessa, Florida
Donald E. Webber* Senior Vice President None
Sue Wilder Vice President None
141 East 89th Street
New York, New York
- ---------
*Address is 24 Federal Street, Boston, MA 02110
(c) Not applicable
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
All applicable accounts, books and documents required to be maintained by
the Registrant by Section 31(a) of the Investment Company Act of 1940 and the
Rules promulgated thereunder are in the possession and custody of the
Registrant's custodian, Investors Bank & Trust Company, 24 Federal Street,
Boston, MA 02110 and 89 South Street, Boston, MA 02111 and its transfer agent,
The Shareholder Services Group, Inc., 53 State Street, Boston, MA 02104, with
the exception of certain corporate documents and portfolio trading documents
which are in the possession and custody of Eaton Vance Management, 24 Federal
Street, Boston, MA 02110. Certain corporate documents of Government Obligations
Portfolio (the "Portfolio") are also maintained by The Bank of Nova Scotia Trust
Company (Cayman) Ltd., The Bank of Nova Scotia Building, P.O. Box 501, George
Town, Grand Cayman, Cayman Islands, British West Indies, and certain investor
account, Portfolio and the Registrant's accounting records are held by IBT Fund
Services (Canada) Inc., 1 First Canadian Place, King Street West, Suite 2800,
P.O. Box 231, Toronto, Ontario, Canada M5X 1C8. Registrant is informed that all
applicable accounts, books and documents required to be maintained by registered
investment advisers are in the custody
and possession of Eaton Vance Management.
ITEM 31. MANAGEMENT SERVICES
Not applicable
ITEM 32. UNDERTAKINGS
The Registrant undertakes to furnish to each person to whom a prospectus is
delivered a copy of the latest annual report to shareholders, upon request and
without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston, and the Commonwealth of
Massachusetts, on the 21st day of February, 1995.
EATON VANCE GOVERNMENT OBLIGATIONS TRUST
By: /s/ M. DOZIER GARDNER
--------------------------------
M. DOZIER GARDNER, President
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment to the Registration Statement has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
President, Principal
Executive Officer and
/s/ M. DOZIER GARDNER Trustee February 21, 1995
- ------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
/s/ JAMES L. O'CONNOR Officer February 21, 1995
- ------------------------------
JAMES L. O'CONNOR
/s/ JAMES B. HAWKES Trustee February 21, 1995
- ------------------------------
JAMES B. HAWKES
DONALD R. DWIGHT* Trustee February 21, 1995
- ------------------------------
DONALD R. DWIGHT
SAMUEL L. HAYES, III* Trustee February 21, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 21, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 21, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 21, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ H. DAY BRIGHAM, JR.
-------------------------
H. DAY BRIGHAM, JR.
As Attorney-in-fact
<PAGE>
SIGNATURES
Government Obligations Portfolio has duly caused this Amendment to the
Registration Statement on Form N-1A of Eaton Vance Government Obligations Trust
(File No. 2-90946) to be signed on its behalf by the undersigned, thereunto duly
authorized, in Toronto, Ontario, Canada, on the 22nd day of February, 1995.
GOVERNMENT OBLIGATIONS PORTFOLIO
By: /s/ M. DOZIER GARDNER
--------------------------------------
M. DOZIER GARDNER, President
This Amendment to the Registration Statement on Form N-1A of Eaton Vance
Government Obligations Trust (File No. 2-90946) has been signed below by the
following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
Trustee, President and
Principal Executive
/s/ M. DOZIER GARDNER Officer February 22, 1995
- ------------------------------
M. DOZIER GARDNER
Treasurer and Principal
Financial and Accounting
JAMES L. O'CONNOR* Officer February 22, 1995
- ------------------------------
JAMES L. O'CONNOR
DONALD R. DWIGHT* Trustee February 22, 1995
- ------------------------------
DONALD R. DWIGHT
JAMES B. HAWKES* Trustee February 22, 1995
- ------------------------------
JAMES B. HAWKES
SAMUEL L. HAYES, III* Trustee February 22, 1995
- ------------------------------
SAMUEL L. HAYES, III
NORTON H. REAMER* Trustee February 22, 1995
- ------------------------------
NORTON H. REAMER
JOHN L. THORNDIKE* Trustee February 22, 1995
- ------------------------------
JOHN L. THORNDIKE
JACK L. TREYNOR* Trustee February 22, 1995
- ------------------------------
JACK L. TREYNOR
*By: /s/ M. DOZIER GARDNER
-------------------------
M. DOZIER GARDNER
As Attorney-in-fact
<PAGE>
EXHIBIT INDEX
The following exhibits are filed as part of this Amendment to the
Registration Statement pursuant to General Instructions E of Form N-1A.
PAGE IN SEQUENTIAL
EXHIBIT NO. DESCRIPTION NUMBERING SYSTEM
- ----------- ----------- ----------------
11(a) Consent of Independent Accountants for
EV Classic Government Obligations Fund
11(b) Consent of Independent Accountants for
Eaton Vance Short-Term Treasury Fund
16 Schedules for Computation of Performance
Quotations
<PAGE>
EXHIBIT 11(A)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A (1933 Act File Number 2-90946) of Eaton
Vance Government Obligations Trust: EV Classic Government Obligations Fund (the
"Fund") of our report dated February 3, 1995 on our audit of the financial
statements and financial highlights of the Fund and of our report on our audit
of the financial statements and supplementary data of Government Obligations
Portfolio dated February 3, 1995, which reports are included in the Annual
Report to Shareholders for the year ended December 31, 1994, which is
included in this Registration Statement.
We also consent to the reference to our Firm under the caption "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/ COOPERS & LYBRAND L.L.P.
--------------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 24, 1995
<PAGE>
EXHIBIT 11(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Post-Effective Amendment No. 21 to the
Registration Statement on Form N-1A (1933 Act File Number 2-90946) of Eaton
Vance Government Obligations Trust: Eaton Vance Short-Term Treasury Fund (the
"Fund") of our report dated February 3, 1995 on our audit of the financial
statements and financial highlights of the Fund, which report is included in the
Annual Report to Shareholders for the year ended December 31, 1994, which is
included in this Registration Statement.
We also consent to the reference to our Firm under the caption "The Fund's
Financial Highlights" in the Prospectus and under the caption "Independent
Accountants" in the Statement of Additional Information of the Registration
Statement.
/s/ COOPERS & LYBRAND L.L.P.
---------------------------
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 24, 1995
<PAGE>
<TABLE>
EXHIBIT 16
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
INVESTMENT PERFORMANCE
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the life of the fund ending December 31, 1994. Past performance is not
indicative of future results. Investment return and principal value will
fluctuate and shares, when redeemed, may be worth more or less than their
original cost.
<CAPTION>
NUMBER OF
SHARES GAINED TOTAL
NAV THROUGH TOTAL RETURN
INVEST- INVEST- AMT OF NUMBER DATE OF REINVESTMENT OF NUMBER OF 12/31/94 12/31/94 THROUGH
MENT MENT INVEST- OF SHARES INVEST- ALL DISTRIBUTIONS SHARES AS NET ASSET VALUE OF 12/31/94
PERIOD DATE MENT PURCHASED MENT THROUGH 12/31/94 OF 12/31/94 VALUE + INVESTMENT CUMULATIVE^ ANNUALIZED ++
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFE OF 11/01/93 $1,000 100.000 $10.00 8.898 108.898 $8.98 $977.90 -2.21% -1.90%
THE FUND
(1.16 YR)
1 YEAR
ENDING 12/31/93 $1,000 100.604 $9.94 7.922 108.526 $8.98 $974.56 -2.54% -2.54%
12/31/94
^ Cumulative total return (net asset value to net asset value) is calculated
by dividing the cumulative net asset value on 12/31/94 by the initial net
asset value.
+ 12/31/94 Net Asset Value is an unaudited figure.
++ Average annual total return is the average annual compounded rate of return
based on the cumulative value for each period. It is calculated by taking
the nth root of 1 + the cumulative total return, where n = the number of
years invested.
</TABLE>
<PAGE>
Exhibit 16
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/94:
Interest Income Earned: $266,499
Plus Dividend Income Earned:
----------
Equal Gross Income: $266,499
Minus Expenses: $105,316
----------
Equal Net Investment Income: $161,183
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 4,629,583
----------
Equal Net Investment Income Earned Per Share: $0.0348
Maximum Offering Price Per Share 12/31/94: $8.98
30 Day Yield*: 4.70%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.0348/$8.98)+1) -1]
<PAGE>
EV CLASSIC GOVERNMENT OBLIGATIONS FUND
CALCULATION OF DISTRIBUTION RATE
AND EFFECTIVE DISTRIBUTION RATE
AS OF 12/31/94
DISTRIBUTION RATE
Annualize
Most Recent
Monthly : ( $0.051164400 / 30) x 365
Distribution
Divide by
Current Maximum : $8.98
Offering Price
Distribution
Rate Equals : 0.0693 ( or 6.93% )
EFFECTIVE DISTRIBUTION RATE
Divide
Distribution : 0.0693
Rate by 365/30 ------ + 1
( or 12.167 ) 12.167
and Add1.
The Resulting
Number Equals : 1.0057
Take this
Number to the 12.167
365/30th ( or : ( 1.0026 ) - 1
12.167 ) power
and Subtract 1.
Effective
Distribution : 0.0716 ( or 7.16% )
Rate Equals
<PAGE>
<TABLE>
EATON VANCE SHORT-TERM TREASURY FUND
INVESTMENT PERFORMANCE
The table below indicates the total return (capital changes plus reinvestment of
all distributions) on a hypothetical investment of $1,000 in the Fund covering
the life of the fund ending December 31, 1994. Past performance is not
indicative of future results. Investment return and principal value will
fluctuate and shares, when redeemed, may be worth more or less than their
original cost.
<CAPTION>
NUMBER OF
SHARES GAINED
NAV THROUGH TOTAL
INVEST- INVEST- AMT OF NUMBER DATE OF REINVESTMENT OF NUMBER OF 12/31/94 12/31/94 TOTAL RETURN
MENT MENT INVEST- OF SHARES INVEST- ALL DISTRIBUTIONS SHARES AS NET ASSET VALUE OF THROUGH 12/31/94
PERIOD DATE MENT PURCHASED MENT THROUGH 12/31/94 OF 12/31/94 VALUE + INVESTMENT CUMULATIVE^ ANNUALIZED ++
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
LIFE OF 02/04/91 $1,000 19.928 $50.18 0.000 19.928 $57.52 $1,146.26 14.63% 3.56%
THE FUND
(3.91 YRS)
1 YEAR
ENDING 12/31/93 $1,000 17.992 $55.58 0.000 17.992 $57.52 $1,034.90 3.49% 3.49%
12/31/94
^ Cumulative total return (net asset value to net asset value) is calculated by
dividing the cumulative net asset value on 12/31/94 by the initial net asset
value.
+ 12/31/94 Net Asset Value is an unaudited figure.
++ Average annual total return is the average annual compounded rate of return
based on the cumulative value for each period. It is calculated by taking the
nth root of 1 + the cumulative total return, where n = the number of years
invested.
</TABLE>
<PAGE>
Exhibit 16
EATON VANCE SHORT TERM TREASURY FUND
CALCULATION OF YIELD
For the 30 days ended 12/31/94:
Interest Income Earned: $91,618
Plus Dividend Income Earned:
--------
Equal Gross Income: $91,618
Minus Expenses: $51,583
----------
Equal Net Investment Income: $40,035
Divided by Average daily number of shares
outstanding that were entitled
to receive dividends: 377,679
--------
Equal Net Investment Income Earned Per Share: $0.1060
Maximum Offering Price Per Share 6/30/94: $57.52
30 Day Yield*: $2.22%
* Yield is calculated on a bond equivalent rate as follows:
6
2[(($0.1060/$57.52)+1) -1]
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<INVESTMENTS-AT-COST> 600316
<INVESTMENTS-AT-VALUE> 582142
<RECEIVABLES> 7710
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<OTHER-ITEMS-ASSETS> 0
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<OTHER-ITEMS-LIABILITIES> 74199
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<INVESTMENTS-AT-COST> 44773
<INVESTMENTS-AT-VALUE> 40684
<RECEIVABLES> 218
<ASSETS-OTHER> 18
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<OTHER-ITEMS-LIABILITIES> 1334
<TOTAL-LIABILITIES> 1334
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 44379
<SHARES-COMMON-STOCK> 4407
<SHARES-COMMON-PRIOR> 3000
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (72)
<ACCUMULATED-NET-GAINS> (632)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (4089)
<NET-ASSETS> 39586
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 3888
<EXPENSES-NET> 670
<NET-INVESTMENT-INCOME> 3218
<REALIZED-GAINS-CURRENT> (730)
<APPREC-INCREASE-CURRENT> (4055)
<NET-CHANGE-FROM-OPS> (1567)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3218
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 430
<NUMBER-OF-SHARES-SOLD> 8155
<NUMBER-OF-SHARES-REDEEMED> 5751
<SHARES-REINVESTED> 248
<NET-CHANGE-IN-ASSETS> 27360
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<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 670
<AVERAGE-NET-ASSETS> 47787
<PER-SHARE-NAV-BEGIN> 9.94
<PER-SHARE-NII> 0
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0.63
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.98
<EXPENSE-RATIO> 2.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<NAME> EATON VANCE SHORT TERM TREASURY FUND
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 1195
<INVESTMENTS-AT-VALUE> 1195
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<OTHER-ITEMS-LIABILITIES> 128
<TOTAL-LIABILITIES> 128
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<PAID-IN-CAPITAL-COMMON> 1179
<SHARES-COMMON-STOCK> 20
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<ACCUMULATED-NET-GAINS> (3)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1)
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<ACCUMULATED-NII-PRIOR> 0
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<PER-SHARE-NAV-BEGIN> 55.58
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<EXPENSE-RATIO> .60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
