<PAGE>
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.
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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.
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<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <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/
How the Fund Invests Its Assets ........ 4 Distribution 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 ............. 13
Valuing Fund Shares .................... 7 Performance Information ............. 15
How to Buy Fund Shares ................. 8
</TABLE>
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PROSPECTUS DATED MAY 1, 1995
<PAGE>
SHAREHOLDER AND FUND EXPENSES(1)
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SHAREHOLDER TRANSACTION EXPENSES
Sales Charges Imposed on Purchases of Shares None
Sales Charges Imposed on Reinvested Distributions None
Redemption Fees None
Fees to Exchange Shares None
ANNUAL FUND OPERATING EXPENSES(2)
(as a percentage of average daily net assets)
Investment Adviser Fee(3) (after fee reduction) 0.00%
Rule 12b-1 Distribution Fees 0.25%
Other Expenses (after expense reduction) 0.35%
----
Total Operating Expenses (after reductions) 0.60%
====
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
An investor would pay the
following expenses on a $1,000
investment, assuming (a) 5%
annual return and (b)
redemption at the end
of each time 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 will
bear directly or indirectly. The percentages indicated as Annual Fund
Operating Expenses in the table and the amounts included in the Example are
based on the Fund's projected fees and expenses for the fiscal year ending
December 31, 1995. The Example should not be considered a representation of
past or future expenses and actual expenses may be greater or less than
those shown. The Example assumes a 5% annual return, and the Fund's actual
performance may result in an annual return greater or less than 5%. 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."
(2) Annual Fund Operating Expenses reflect the Investment Adviser's intention to
reduce its advisory fee (and accept an allocation of other expenses) so that
aggregate expenses of the Fund are 0.60% of average daily net assets for the
current fiscal year. Total Operating Expenses borne by the Fund for the most
recent fiscal year were 0.84% of average daily net assets. For such year,
the Investment Adviser reduced its fee and a portion of the Fund's expenses
was allocated to the Investment Adviser. Had such action not been taken
Annual Fund Operating Expenses would have been: Investment Adviser Fee --
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:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
An investor would pay the
following expenses on a $1,000
investment, assuming (a) 5%
annual return and (b) redemption
at the end of each time period: $13 $39 $68 $149
(3) 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
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The following information should be read in conjunction with the audited
financial statements included in the Statement of Additional Information, all of
which have been so included in reliance upon the report of Coopers & Lybrand
L.L.P., independent accountants, as experts in accounting and auditing, which
report is contained in the Statement of Additional Information. 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 Principal Underwriter.
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YEAR ENDED DECEMBER 31,
------------------------------------
1994 1993 1992 1991<F3>
------ ------ ------ ------
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<F4> .................. 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
daily net assets<F1> .......... 0.84% 0.60% 0.60% 0.60%<F2>
Ratio of net investment income to
average daily net assets<F1> .. 2.97% 2.48% 3.01% 4.66%<F2>
<F1> 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
daily net assets):
Expenses ...................... 1.23% 0.70% 0.70% 0.78%<F2>
====== ====== ====== ======
Net investment income ......... 2.58% 2.38% 2.91% 4.49%<F2>
====== ====== ====== ======
Note: Certain of the per share amounts have been computed using average shares
outstanding.
<F2> Computed on an annualized basis.
<F3> 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.
<F4> 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 record date.
<PAGE>
THE FUND AND ITS INVESTMENT OBJECTIVE
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Eaton Vance Short-Term Treasury 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, same-day 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
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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 generally 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 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 enumerated restrictions and policies, the investment
objective and 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.
The shareholders have authorized the Fund to invest 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 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 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 would 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
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THE FUND IS A DIVERSIFIED SERIES OF EATON VANCE GOVERNMENT OBLIGATIONS TRUST, A
BUSINESS TRUST ESTABLISHED UNDER MASSACHUSETTS LAW PURSUANT TO A DECLARATION OF
TRUST DATED MAY 7, 1984, AS AMENDED AND RESTATED. 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 Trust
may issue an unlimited number of shares of beneficial interest (no par value per
share) in one or more series and because the Trust can offer separate series
(such as the Fund) it is known as a "series company." 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. In the event of the 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
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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 receives 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 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:
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 year. 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 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 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
normally be 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.
<PAGE>
DISTRIBUTION PLAN
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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 the Principal Underwriter distribution
fees under the Plan equivalent to .25% of the Fund's average daily net assets
for such year. 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. The Plan
is described further in the Statement of Additional Information.
VALUING FUND SHARES
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THE FUND VALUES ITS SHARES TWICE EACH DAY THE NEW YORK STOCK EXCHANGE (THE
"EXCHANGE") IS OPEN FOR TRADING, AT NOON AND 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, 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. Other assets are valued at fair value
using methods determined in good faith by the Trustees.
The net asset value so determined is effective for orders received by
Authorized Firms prior to the price determination (which for this purpose shall
be deemed to have been made at noon and as of the close of regular trading on
the Exchange, except under extraordinary circumstances) and communicated by the
Authorized Firm to the Principal Underwriter (see "How to Buy Fund Shares") at
noon or prior to the close of the Principal Underwriter's business day. 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.
<PAGE>
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SHAREHOLDERS MAY DETERMINE THE VALUE OF THEIR INVESTMENT BY
MULTIPLYING THE NUMBER OF FUND SHARES OWNED BY THE CURRENT NET
ASSET VALUE PER SHARE.
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HOW TO BUY FUND SHARES
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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.
FUND SHARES MAY BE PURCHASED IN THE 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 noon on any business day are
invested at the net asset value determined at noon on that day. Those
purchases received by wire between noon and 4:00 p.m. on any business day
are invested at the net asset value determined at 4:00 p.m. on that 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 transmit Federal Funds by wire is available at your bank.
The bank may charge a fee 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 participation in the plan, his or her
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
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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 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).
* 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 or her bank and
bank account number on the Account Application form used to open the
account. The bank designated may be any bank in the United States.
Proceeds of redemption requests received before noon on any business day
will be wired that same day, if so requested by the shareholder. Redemption
requests received between noon and 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 or her 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 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 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
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 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.
"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
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.
------------------------------------------------------------------
UNDER A LIFETIME INVESTING ACCOUNT A SHAREHOLDER CAN MAKE
ADDITIONAL INVESTMENTS IN SHARES BY SENDING A CHECK FOR $50 OR
MORE.
------------------------------------------------------------------
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 the net asset value per share of each fund at
the time of the exchange, provided that such exchange offer is available only in
states where shares of Eaton Vance Cash Management Fund 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 objective and
policies, and shareholders should obtain a prospectus and consider the objective
and policies carefully before requesting an exchange. The application and
prospectus for Eaton Vance Cash Management Fund is available from Authorized
Firms or the Principal Underwriter.
Telephone exchanges are accepted by The Shareholder Services Group, Inc.
provided that 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. An exchange may result in a taxable gain or loss.
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 distributions 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 of 1986, as amended (the "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 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.
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 to 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 tax 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.
Distributions of taxable net investment income are taxable to shareholders
as ordinary income, whether paid in cash or additional shares of the Fund.
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 Code.
Distributions from net long-term capital gains included therein are taxable to
shareholders as such, whether paid in cash or reinvested in additional shares of
the Fund and regardless of the length of time Fund shares have been owned by the
shareholder. Distributions from net short-term capital gains included therein
are taxable to shareholders as ordinary income, whether paid in cash or
reinvested in additional shares of the Fund. Certain distributions declared by
the Fund 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 should consult their own tax advisors with respect to
special tax rules, such as Section 1258 of the Code, that may apply in their
particular situations.
Shareholders will receive annually tax information notices and Forms 1099
to assist in the preparation of their Federal and state 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 taxes 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 the 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 Fund's current yield is 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
average annual 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 the Fund's yield or total return may be in any
future period. If the expenses related to the operation of the Fund are
allocated to Eaton Vance, 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>
STATEMENT OF
ADDITIONAL INFORMATION
May 1, 1995
EATON VANCE SHORT-TERM TREASURY FUND
24 Federal Street
Boston, Massachusetts 02110
(800) 225-6265
- --------------------------------------------------------------------------------
TABLE OF CONTENTS Page
Investment Objective and Policies ............................ 2
Investment Restrictions ...................................... 2
Trustees and Officers ........................................ 3
Control Persons and Principal Holders of Securities .......... 6
Investment Adviser ........................................... 6
Custodian .................................................... 8
Independent Accountants ...................................... 8
Determination of Net Asset Value ............................. 9
Investment Performance ....................................... 9
Taxes ........................................................ 10
Principal Underwriter ........................................ 12
Distribution Plan ............................................ 12
Portfolio Security Transactions .............................. 13
Other Information ............................................ 15
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).
<PAGE>
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 (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 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 (the "1940 Act").
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).
<PAGE>
Notwithstanding the investment policies and restrictions of the Fund, the
Fund may invest its 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 has no current intention 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" or the "Investment Adviser"); of Eaton Vance's
wholly-owned subsidiary, Boston Management and Research ("BMR"); of 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 who are "interested persons" of the Trust,
Eaton Vance, BMR, EVC or EV, as defined in the 1940 Act, 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 a
Director of EVC and EV. Director or 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 of Eaton Vance, BMR, EVC and EV and a Director of EVC
and EV. Director or 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 University Graduate
School of Business Administration. Director or Trustee of various investment
companies managed by Eaton Vance or BMR.
Address: Harvard University Graduate School of Business Administration, 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, 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 Company Incorporated. 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. Officer of various investment
companies managed by Eaton Vance or BMR. 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.
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.
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.
JOHN MURPHY (32), ASSISTANT SECRETARY
Assistant Vice President of Eaton Vance, EV and BMR since March 1, 1994;
employee of Eaton Vance since March 1993. (State Regulations Supervisor, The
Boston Company, 1991-1993 and Registration Specialist, Fidelity Management &
Research Co., 1986-1991.) Officer of various investment companies managed by
Eaton Vance or BMR. Mr. Murphy was elected Assistant Secretary of the Trust
on March 27, 1995.
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 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 or the Eaton Vance organization.
Messrs. Treynor (Chairman) and Dwight are members of the Audit Committee of
the Board of Trustees of the Trust. 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 (the noninterested Trustees) are paid by the Fund
(and the other series of the Trust). (The Trustees of the Trust who are members
of the Eaton Vance organization receive no compensation from the Fund.) During
the fiscal year ended December 31, 1994, the noninterested Trustees of the Trust
earned the following compensation in their capacities as Trustees from the Trust
and the other funds in the Eaton Vance fund complex (1):
AGGREGATE RETIREMENT TOTAL COMPENSATION
COMPENSATION BENEFIT ACCRUED FROM TRUST AND
NAME FROM FUND FROM FUND COMPLEX FUND COMPLEX
- --- ------------ ----------------- ------------------
Donald R. Dwight .... $68(2) $8,750 $135,000
Samuel L. Hayes, III 65(3) 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
- ---------
(1) The Eaton Vance fund complex consists of 201 registered investment companies
or series thereof.
(2) Includes $3 of deferred compensation.
(3) Includes $3 of deferred compensation.
Trustees of the Trust who 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 of March 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
March 31, 1995, Eaton Vance owned 56.99% of the outstanding shares of the Fund;
Eaton Vance is a Massachusetts business trust and a wholly-owned subsidiary of
EVC. In addition, as of March 31, 1995, Jupiter & Co., c/o Investors Bank &
Trust Co., Boston, MA owned beneficially and of record 12.94% of the Fund's
outstanding shares.To the Trust's knowledge, no other person owned of record or
beneficially 5% or more of the Fund's outstanding shares as of such date.
INVESTMENT ADVISER
The Fund engages Eaton Vance as its 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 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:
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%
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 year). 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 daily net
assets for such year). 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 daily net
assets for such year). 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 March 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, Murphy, 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. 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 is engaged 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 of the stock of Northeast
Properties, Inc., which is engaged in real estate investment, consulting and
management. EVC owns all of 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 1940 Act, and the Fund's investments held by IBT as
custodian are thus subject to 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 ("SEC").
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, Presidents' Day, 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
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 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 prescribed
methods, 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 ended
December 31, 1994, the yield of the Fund was 2.22%. If a portion of the expenses
related to the operation of the Fund had not been allocated to the Investment
Adviser, the Fund would have had a lower yield.
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 period from the date of the initial public offering, February
4, 1991, to December 31, 1994, and the one-year period ended December 31, 1994.
VALUE OF A $1,000 INVESTMENT
VALUE OF
INVESTMENT INVESTMENT AMOUNT OF INVESTMENT TOTAL RETURN
PERIOD DATE INVESTMENT ON 12/31/94 CUMULATIVE ANNUALIZED
- --------------------------------------------------------------------------------
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%
<PAGE>
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 expenses related to the operation of the Fund had not
been allocated to the Investment Adviser, 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
See "Distribution and Taxes" in the Fund's current Prospectus.
Each series of the 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 ("RIC") 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 RIC
under the Code for its taxable year ended December 31, 1994 (see Notes to
Financial Statements).
In order to avoid Federal excise tax, the Code requires the Fund distribute
(or be deemed to have distributed) 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 or 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 the Fund qualifies as a
regulated investment company for Federal tax purposes, the Fund is not liable
for any income, corporate excise or franchise tax in the Commonwealth of
Massachusetts.
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 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. Distributions made by the Fund will not qualify for the
dividends-received deduction for corporations subject to applicable limitations
under the Code.
Under the Code, the redemption or exchange of shares of a regulated
investment company normally results in capital gain or loss if such shares are
held as capital assets. Section 1258 of the Code recharacterizes all or a
portion of any capital gain from the disposition or other termination of a
position held as part of a "conversion transaction" as ordinary income.
Conversion transactions include, among other things, certain transactions which
are marketed or sold as producing a capital gain. Investors should consult their
own tax advisers concerning whether Section 1258 may apply to their transactions
in Fund shares.
Any loss realized upon the redemption or exchanges 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. In addition, a loss realized on a redemption of Fund shares may be
disallowed under certain "wash sale" rules if other shares of the Fund are
required within a period beginning 30 days before and ending 30 days after the
date of such redemption. Any disallowed loss will result in an adjustment to the
shareholder's tax basis in some or all of the other shares acquired.
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 IRAs and other 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 Authorized 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 1940 Act. The
following supplements the discussion of the Plan contained in the Prospectus.
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 both a majority of (i) those Trustees 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 it (the "Rule 12b-1 Trustees") and (ii)
all of the Trustees then in office, cast in person at a meeting (or meetings)
called for the purpose of voting on this Plan. The Plan may be terminated at any
time by vote of the Rule 12b-1 Trustees or by a vote of a majority of the
outstanding voting securities of the Fund. 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 as required by Rule 12b-1.
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 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.
Pursuant to such Rule, the Plan has been approved by the Fund's shareholders and
by the Trustees, including a majority of the Rule 12b-1 Trustees.
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 in
the Prospectus 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.
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.
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 securities 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.
The right to redeem can be suspended and the payment of the redemption
price deferred when the New York Stock Exchange is closed (other than for
customary weekend and holiday closings), during periods when trading on the
Exchange is restricted as determined by the SEC, or during any emergency as
determined by the SEC 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 SEC for the protection of investors.
<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>
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>
FINANCIAL STATEMENTS (Continued)
- ---------------------------------------------------------------------------
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 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.
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.
<PAGE>
-----------------------------------------------------------------
(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
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
TYSAI
EATON VANCE
SHORT-TERM
TREASURY FUND
STATEMENT OF
ADDITIONAL
INFORMATION
MAY 1, 1995
