<PAGE>
[LOGO]
[PHOTO]
Semiannual Report June 30, 1999
EATON VANCE
GOVERNMENT
OBLIGATIONS
FUND
Global Management-Global Distribution
[PHOTO]
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
INVESTMENT UPDATE
[PHOTO]
Susan Schiff
Portfolio Manager
INVESTMENT ENVIRONMENT
- -----------------------------
THE ECONOMY
- - Despite fears of a slowdown, the U.S. economy remained on track in the first
half of 1999. While inflation remained relatively tame, concerns over
preemptive actions by the Federal Reserve pushed interest rates sharply
higher, with three-year Treasury bond yields rising to 5.58% by June 30, 1999.
At month-end, the Fed raised the Federal Funds rate by 25 basis points (.25%).
- - Following one of the most difficult years on record, the outlook improved
significantly for the mortgage securities (MBS) market in the first half of
1999. Yield spreads - which had reached unusually wide levels in the fall of
1998 - narrowed significantly in early 1999, as investors recognized the
exceptional value in mortgage securities.
- - The seasoned sector of the MBS market - which suffered inordinately in the
market chaos of 1998 - has rebounded in the first half of the year. Contrary
to the fears of some investors, prepayment rates for seasoned MBS remained
well below those of generic MBS, consistent with their historic trends.
THE FUND
- -----------------------------
PERFORMANCE FOR THE PAST SIX MONTHS
- - The Fund's Class A shares had a total return of -0.62% during the six months
ended June 30, 1999.(1) This return resulted from a decrease in net asset
value per share (NAV) to $9.96 on June 30, 1999 from $10.40 on December 31,
1998, and the reinvestment of $0.377 in dividends.
- - The Fund's Class B shares had a total return of -1.02% during the six months
ended June 30, 1999.(1) This return resulted from a decrease in NAV to $8.57
on June 30, 1999 from $8.95 on December 31, 1998, and the reinvestment of
$0.29 in dividends.
- - The Fund's Class C shares had a total return of -1.02% during the six months
ended June 30, 1999.(1) This return resulted from a decrease in NAV to $8.58
on June 30, 1999 from $8.96 on December 31, 1998, and the reinvestment of
$0.29 in dividends.
MANAGEMENT DISCUSSION
- - As interest rates moved higher during the six-month period, mortgage
securities outperformed the Treasury market and shorter-maturity bonds
outperformed long-term bonds. The Lehman Brothers Intermediate Government Bond
Index(2) - an unmanaged index of intermediate-maturity U.S. government bond
issues - had a total return of -0.47% during the period, while the
longer-maturity Lehman Government/Corporate Bond Index had a return of
-2.28%.(2)
- - The Portfolio benefited from management's decision to use last year's market
correction as a buying opportunity. The sharp market retreat - and unwarranted
fears of a pick-up in seasoned prepayment rates - created unusually good
values within the seasoned segment of the MBS market.
- - The majority (59.3%) of the Portfolio's investments were in seasoned
LOW-COUPON MBS at June 30, 1999. With little incentive for homeowners to
refinance, these low interest rate mortgages continue to provide relatively
stable cash flows. A smaller segment of the Portfolio was again dedicated to
higher-coupon MBS, which provided an excellent yield advantage over similar
maturity Treasury bonds.
- - The Portfolio had a duration of 3.0 years at June 30, 1999, toward the middle
of the Portfolio's duration range. Duration is a measure of interest rate
sensitivity that factors average maturity and future cash flows.
- --------------------------------------------------------------------------------
MUTUAL FUND SHARES ARE NOT INSURED BY THE FDIC AND ARE NOT
DEPOSITS OR OTHER OBLIGATIONS OF, OR GUARANTEED BY, ANY DEPOSITORY INSTITUTION.
SHARES ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL
INVESTED.
- --------------------------------------------------------------------------------
FUND INFORMATION
AS OF JUNE 30, 1999
<TABLE>
<CAPTION>
Performance(3) Class A Class B Class C
- ----------------------------------------------------------------------------
Average Annual Total Returns (at net asset value)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
One Year 2.77% 2.01% 1.99%
Five Years 6.20 5.46 5.26
Ten Years 7.11 N.A. N.A.
Life of Fund+ 8.42 4.36 4.18
<CAPTION>
SEC Average Annual Total Returns (including sales charge or applicable CDSC)
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
One Year -2.11% -2.76% 1.04%
Five Years 5.17 5.16 5.26
Ten Years 6.59 N.A. N.A.
Life of Fund+ 8.07 4.24 4.18
</TABLE>
+Inception dates: Class A: 8/24/84; Class B: 11/1/93; Class C: 11/1/93
(1) These returns do not include the 4.75% maximum sales charge for the Fund's
Class A shares or the applicable contingent deferred sales charges (CDSC) for
the Fund's Class B and Class C shares. (2) It is not possible to invest directly
in an Index. (3) Returns are historical and are calculated by determining the
percentage change in net asset value with all distributions reinvested. SEC
average annual returns for Class A reflect a 4.75% sales charge; for Class B,
returns reflect applicable CDSC based on the following schedule: 5%-1st and 2nd
years; 4%-3rd year; 3%-4th year; 2%-5th year; 1%-6th year; for Class C, the
one-year return reflects a 1% CDSC.
Past performance is no guarantee of future results. Investment return and
principal value will fluctuate so that shares, when redeemed, may be worth more
or less than their original cost.
2
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- -------------------------------------------------------
Investment in Government Obligations
Portfolio, at value
(identified cost, $392,627,165) $ 386,782,311
Receivable for Fund shares sold 159,854
- -------------------------------------------------------
TOTAL ASSETS $ 386,942,165
- -------------------------------------------------------
Liabilities
- -------------------------------------------------------
Dividends payable $ 1,104,007
Payable for Fund shares redeemed 541,760
Payable to affiliate for Trustees' fees 2,946
Other accrued expenses 497,627
- -------------------------------------------------------
TOTAL LIABILITIES $ 2,146,340
- -------------------------------------------------------
NET ASSETS $ 384,795,825
- -------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------
Paid-in capital $ 449,922,690
Accumulated net realized loss from
Portfolio
(computed on the basis of identified
cost) (58,231,377)
Accumulated distributions in excess of
net investment income (1,050,634)
Net unrealized depreciation from
Portfolio
(computed on the basis of identified
cost) (5,844,854)
- -------------------------------------------------------
TOTAL $ 384,795,825
- -------------------------------------------------------
Class A Shares
- -------------------------------------------------------
NET ASSETS $ 226,639,893
SHARES OUTSTANDING 22,746,352
NET ASSET VALUE AND REDEMPTION PRICE PER
SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 9.96
MAXIMUM OFFERING PRICE PER SHARE
(100 DIVIDED BY 95.25 of $9.96) $ 10.46
- -------------------------------------------------------
Class B Shares
- -------------------------------------------------------
NET ASSETS $ 125,552,203
SHARES OUTSTANDING 14,644,932
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 8.57
- -------------------------------------------------------
Class C Shares
- -------------------------------------------------------
NET ASSETS $ 32,603,729
SHARES OUTSTANDING 3,800,294
NET ASSET VALUE, OFFERING PRICE AND
REDEMPTION PRICE PER SHARE
(net assets DIVIDED BY shares of
beneficial interest outstanding) $ 8.58
- -------------------------------------------------------
</TABLE>
On sales of $25,000 or more, the offering price of Class A shares is reduced.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- -------------------------------------------------------
Interest allocated from Portfolio $ 17,641,023
Expenses allocated from Portfolio (1,722,499)
- -------------------------------------------------------
NET INVESTMENT INCOME FROM PORTFOLIO $ 15,918,524
- -------------------------------------------------------
Expenses
- -------------------------------------------------------
Trustees fees and expenses $ 3,128
Distribution and service fees
Class A 299,788
Class B 645,076
Class C 167,771
Transfer and dividend disbursing agent
fees 131,425
Custodian fee 44,890
Registration fees 40,240
Printing and postage 18,551
Legal and accounting services 15,419
Miscellaneous 15,812
- -------------------------------------------------------
TOTAL EXPENSES $ 1,382,100
- -------------------------------------------------------
NET INVESTMENT INCOME $ 14,536,424
- -------------------------------------------------------
Realized and Unrealized
Gain (Loss) from Portfolio
- -------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ (4,233,218)
Financial futures contracts 38,803
- -------------------------------------------------------
NET REALIZED LOSS $ (4,194,415)
- -------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments $ (13,362,462)
Financial futures contracts (29,342)
- -------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ (13,391,804)
- -------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (17,586,219)
- -------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
OPERATIONS $ (3,049,795)
- -------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 14,536,424 $ 31,051,596
Net realized gain (loss) (4,194,415) 4,112,519
Net change in unrealized
appreciation (depreciation) (13,391,804) (12,945,586)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (3,049,795) $ 22,218,529
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income
Class A $ (8,931,192) $ (20,440,557)
Class B (4,295,675) (8,144,144)
Class C (1,116,546) (2,378,819)
From tax return capital
Class A -- (194,792)
Class B -- (89,948)
Class C -- (23,787)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (14,343,413) $ (31,272,047)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest --
Proceeds from sale of shares
Class A $ 32,427,561 $ 95,924,125
Class B 14,750,141 68,635,046
Class C 3,268,567 17,843,615
Issued in reorganization of EV
Marathon and EV Classic
Government Obligations Fund
Class B -- 121,843,468
Class C -- 36,536,485
Net asset value of shares issued to
shareholders in payment of
distributions declared
Class A 4,168,487 8,923,556
Class B 1,861,505 3,356,428
Class C 723,098 1,401,542
Cost of shares redeemed
Class A (51,309,440) (124,199,142)
Class B (17,500,538) (59,242,911)
Class C (4,659,770) (20,290,499)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS $ (16,270,389) $ 150,731,713
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (33,663,597) $ 141,678,195
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
At beginning of period $ 418,459,422 $ 276,781,227
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 384,795,825 $ 418,459,422
- --------------------------------------------------------------------------------
Accumulated
distributions in excess
of net investment income
included in net assets
- --------------------------------------------------------------------------------
AT END OF PERIOD $ (1,050,634) $ (1,243,645)
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999
(UNAUDITED)(1)
--------------------------------------
CLASS A CLASS B CLASS C
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------
Net asset value -- Beginning of period $ 10.400 $ 8.950 $ 8.960
- -----------------------------------------------------------------------------------------------
Income (loss) from operations
- -----------------------------------------------------------------------------------------------
Net investment income $ 0.381 $ 0.295 $ 0.295
Net realized and unrealized gain (loss) (0.444) (0.385) (0.385)
- -----------------------------------------------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.063) $ (0.090) $(0.090)
- -----------------------------------------------------------------------------------------------
Less distributions
- -----------------------------------------------------------------------------------------------
From net investment income $ (0.377) $ (0.290) $(0.290)
In excess of net investment income -- -- --
From tax return of capital -- -- --
- -----------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.377) $ (0.290) $(0.290)
- -----------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 9.960 $ 8.570 $ 8.580
- -----------------------------------------------------------------------------------------------
TOTAL RETURN(2) (0.62)% (1.02)% (1.02)%
- -----------------------------------------------------------------------------------------------
Ratios/Supplemental Data
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $226,640 $125,552 $32,604
Ratios (As a percentage of average daily net assets):
Expenses(3) 1.24%(4) 1.99%(4) 1.99%(4)
Net investment income 7.53%(4) 6.78%(4) 6.78%(4)
- -----------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
1998(1) 1997 1996 1995
-------------------------------------- --------- --------- ---------
CLASS A CLASS B CLASS C CLASS A CLASS A CLASS A
<S> <C>
- -------------------------------------------------------
Net asset value -- Beginning of period $ 10.620 $ 9.140 $ 9.130 $ 10.680 $ 11.020 $ 10.420
- -------------------------------------------------------
Income (loss) from operations
- -------------------------------------------------------
Net investment income $ 0.783 $ 0.602 $ 0.607 $ 0.799 $ 0.810 $ 0.807
Net realized and unrealized gain (loss) (0.215) (0.182) (0.172) (0.051) (0.340) 0.603
- -------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ 0.568 $ 0.420 $ 0.435 $ 0.748 $ 0.470 $ 1.410
- -------------------------------------------------------
Less distributions
- -------------------------------------------------------
From net investment income $ (0.781) $ (0.603) $(0.599) $ (0.801) $ (0.810) $ (0.810)
In excess of net investment income -- -- -- -- -- --
From tax return of capital (0.007) (0.007) (0.006) (0.007) -- --
- -------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.788) $ (0.610) $(0.605) $ (0.808) $ (0.810) $ (0.810)
- -------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 10.400 $ 8.950 $ 8.960 $ 10.620 $ 10.680 $ 11.020
- -------------------------------------------------------
TOTAL RETURN(2) 5.56% 4.76% 4.92% 7.26% 4.52% 13.97%
- -------------------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------------------
Net assets, end of period (000's omitted) $251,727 $132,013 $34,719 $276,781 $302,963 $359,738
Ratios (As a percentage of average daily net assets):
Expenses(3) 1.32% 2.07% 2.07% 1.24% 1.16% 1.16%
Net investment income 7.46% 6.66% 6.71% 7.57% 7.59% 7.53%
- -------------------------------------------------------
<CAPTION>
1994
---------
CLASS A
- -------------------------------------------------------
Net asset value -- Beginning of period $ 11.480
- -------------------------------------------------------
Income (loss) from operations
- -------------------------------------------------------
Net investment income $ 0.805
Net realized and unrealized gain (loss) (1.029)
- -------------------------------------------------------
TOTAL INCOME (LOSS) FROM OPERATIONS $ (0.224)
- -------------------------------------------------------
Less distributions
- -------------------------------------------------------
From net investment income $ (0.805)
In excess of net investment income (0.031)
From tax return of capital --
- -------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.836)
- -------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 10.420
- -------------------------------------------------------
TOTAL RETURN(2) (2.03)%
- -------------------------------------------------------
Ratios/Supplemental Data
- -------------------------------------------------------
Net assets, end of period (000's omitted) $386,186
Ratios (As a percentage of average daily net assets):
Expenses(3) 1.17%
Net investment income 7.70%
- -------------------------------------------------------
</TABLE>
(1) Net investment income per share was computed using average shares
outstanding.
(2) 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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
(3) Includes the Fund's share of the Portfolio's allocated expenses.
(4) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
- -------------------------------------------
Eaton Vance Government Obligations Fund (the Fund) is a diversified entity of
the type commonly known as a Massachusetts business trust and is registered
under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund is a series of Eaton Vance Mutual
Funds Trust. The Fund offers three classes of shares. Class A shares are
generally sold subject to a sales charge imposed at time of purchase. Class B
and Class C shares are sold at net asset value and are subject to a
contingent deferred sale charge (see Note 7). Each class represents a pro
rata interest in the Fund, but votes separately on class-specific matters and
(as noted below) is subject to different expenses. Realized and unrealized
gains and losses are allocated daily to each class of shares based on the
relative net assets of each class to the total net assets of the Fund. Net
investment income, other than class specific expenses, is allocated daily to
each class of shares based upon the ratio of the value of each class' paid
shares to the total value of all paid shares. Each class of shares differs in
its distribution plan and certain other class specific expenses. The Fund
invests all of its investable assets in interests in the Government
Obligations Portfolio (the Portfolio), a New York Trust, having the same
investment objective as the Fund. The value of the Fund's investment in the
Portfolio reflects the Fund's proportionate interest in the net assets of the
Portfolio (100.0% at June 30, 1999). The performance of the Fund is directly
affected by the performance of the Portfolio. The financial statements of the
Portfolio, including the portfolio of investments, are included elsewhere in
this report and should be read in conjunction with the Fund's financial
statements.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A Investment Valuation -- Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report.
B Income -- The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable income, including any
net realized gain on investments. Accordingly, no provision for federal
income or excise tax is necessary. At December 31, 1998, the Fund, for
federal income tax purposes, had a capital loss carryover of $48,318,452
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 distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income tax. A portion of the capital loss carryovers
were acquired through the Fund Reorganization (see Note 8) and may be subject
to certain limitations. The capital loss carryovers will expire on December
31, 1999 ($1,545,746), December 31, 2000 ($5,952,987), December 31, 2001
($70,869), December 31, 2002 ($17,954,518), December 31, 2003 ($2,688,390),
December 31, 2004 ($10,207,058), December 31, 2005 ($4,786,337) and December
31, 2006 ($5,112,547).
D Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results could
differ from those estimates.
E Interim Financial Statements -- The interim financial statements relating to
June 30, 1999 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distributions to Shareholders
- -------------------------------------------
The net income of the Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest capital gain distributions in additional shares of
the Fund at the net asset value as of the ex-dividend date. Distributions are
paid in the form of additional shares or, at the election of the shareholder,
in cash. The Fund distinguishes between distributions on a tax basis and a
financial reporting basis. Generally accepted accounting principles require
that only distributions in excess of tax basis earnings and profits be
6
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
reported in the financial statements as a return of capital. Differences in
the recognition or classification of income between the financial statements
and tax earnings and profits which result in over-distributions for financial
statement purposes only are classified as distributions in excess of net
investment income or accumulated net realized gain on investments. Permanent
differences between book and tax accounting relating to distributions are
reclassified to paid-in capital.
3 Shares of Beneficial Interest
- -------------------------------------------
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). Such
shares may be issued in a number of different series (such as the Fund) and
classes. Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS A (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
Sales 3,173,924 9,108,147
Issued to shareholders electing to
receive payments of distribution in
Fund shares 408,849 849,495
Redemptions (5,033,838) (11,833,295)
- ------------------------------------------------------------------------------
NET DECREASE (1,451,065) (1,875,653)
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS B (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
Sales 1,677,652 7,600,366
Issued to shareholders electing to
receive payments of distributions in
Fund shares 212,196 371,618
Redemptions (1,995,534) (6,557,844)
Issued to EV Marathon Government
Obligations Fund shareholders -- 13,336,478
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) (105,686) 14,750,618
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1999 YEAR ENDED
CLASS C (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
Sales 371,347 1,967,561
Issued to shareholders electing to
receive payments of distributions in
Fund shares 82,317 155,019
Redemptions (529,983) (2,246,435)
Issued to EV Classic Government
Obligations Fund shareholders -- 4,000,468
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) (76,319) 3,876,613
- ------------------------------------------------------------------------------
</TABLE>
4 Investment Transactions
- -------------------------------------------
Increases and decreases in the Fund's investment in the Portfolio for the six
months ended June 30, 1999, aggregated $50,680,296 and $83,241,064,
respectively.
5 Transactions with Affiliates
- -------------------------------------------
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 3 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. Certain officers and Trustees of the Fund
and of the Portfolio are officers of the above organizations. Except as to
Trustees of the Fund and the Portfolio who are not members of EVM's of BMR's
organization, officers and Trustees receive remuneration for their services
to the Fund out of the investment adviser fee earned by BMR. Eaton Vance
Distributors, Inc. (EVD), a subsidiary of EVM and the Fund's principal
underwriter, received $11,611 as its portion of the sales charge on sales of
Class A shares for the six months ended June 30, 1999.
6 Distribution and Service Plans
- -------------------------------------------
The Fund has adopted distribution plans (Class B Plan and Class C Plan, the
Plans) pursuant to Rule 12b-1 under the Investment Company Act of 1940 and a
service plan (Class A Plan). The Plans require the Fund to pay the Principal
Underwriter, Eaton Vance Distributors, Inc. (EVD) amounts equal to 1/365 of
0.75% of the Fund's average daily net assets attributable to Class B and
Class C shares for providing ongoing distribution services and facilities to
the Fund. The Fund will automatically discontinue payments to EVD during any
period in which there are no outstanding Uncovered Distribution Charges,
which are equivalent to the sum of (i) 5.00% and 6.25% of the
7
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
aggregate amount received by the Fund for the Class B and Class C shares
sold, respectively, plus (ii) interest calculated by applying the rate of 1%
over the prevailing prime rate to the outstanding balance of Uncovered
Distribution Charges of EVD of each respective class reduced by the aggregate
amount of contingent deferred sales charges (see Note 7) and daily amounts
theretofore paid to EVD by each respective class. The Fund paid or accrued
$483,807 and $125,828 for Class B and Class C shares, respectively, for the
six months ended June 30, 1999, to or payable to EVD representing 0.75%
(annualized) of average daily net assets for Class B and Class C shares. At
June 30, 1999, the amount of Uncovered Distribution Charges of EVD calculated
under the Plan was approximately $4,679,000 and $10,278,000 for Class B and
Class C shares, respectively.
In addition, the Plans authorize the Fund to make payments of service fees to
EVD, investment dealers and other persons in amounts not exceeding 0.25% of
the Fund's average daily net assets attributable to Class A (Service Plan),
Class B and Class C shares for each fiscal year. The Trustees have initially
implemented the Plans by authorizing the Fund to make quarterly service fee
payments to EVD and investment dealers in amounts not expected to exceed
0.25% per annum of the Fund's average daily net assets attributable to Class
A and Class B shares based on the value of Fund shares sold by such persons
and remaining outstanding for at least twelve months. The Class C Plan
permits the Fund to make monthly payments of service fees in amounts not
expected to exceed 0.25% of the Fund's average daily net assets attributable
to Class C shares for any fiscal year. Such payments are made for personal
services and/or the maintenance of shareholder accounts. Service fees are
separate and distinct from the sales commissions and distributions fees
payable by the Fund to EVD, and as such are not subject to automatic
discontinuance when there are no outstanding Uncovered Distribution Charges
of EVD. Service fee payments for the six months ended June 30, 1999 amounted
to $299,788, $161,269 and $41,943 for Class A, Class B and Class C shares,
respectively.
7 Contingent Deferred Sales Charge
- -------------------------------------------
A contingent deferred sales charge (CDSC) generally is imposed on redemptions
of Class B shares made within six years of purchase and on redemptions of
Class C shares made within one year of purchase. Generally, the CDSC is based
upon the lower of the net asset value at date of redemption or date of
purchase. No charge is levied on shares acquired by reinvestment of dividends
or capital gain distributions. The Class B CDSC is imposed at declining rates
that begin at 5% in the first and second year of redemption after purchase,
declining one percentage point in each subsequent year. Class C shares will
be subject to a 1% CDSC if redeemed within one year of purchase. No CDSC is
levied on shares which have been sold to EVM or its affiliates or to their
respective employees or clients and may be waived under certain other limited
conditions. CDSC charges are paid to EVD to reduce the amount of Uncovered
Distribution Charges calculated under the Fund's Distribution Plans (see Note
6). CDSC charges received when no Uncovered Distribution Charges exist will
be credited to the Fund. EVD received approximately $224,000 and $4,300 of
CDSC paid by shareholders for Class B shares and Class C shares,
respectively, for the six months ended June 30, 1999.
8 Transfer of Net Assets
- -------------------------------------------
On January 1, 1998, EV Traditional Government Obligations Fund acquired the
net assets of the EV Marathon Government Obligations Fund and EV Classic
Government Obligations Fund pursuant to an Agreement and Plan of
Reorganization dated June 23, 1997. In accordance with the agreement, EV
Traditional Government Obligations Fund, at the closing, issued 13,336,478
Class B shares and 4,000,468 Class C shares of the Fund having an aggregate
value of $121,843,468 and $36,536,485, respectively. As a result, the Fund
issued one Class B share and one Class C share for each share of EV Marathon
Government Obligations Fund and EV Classic Government Obligations Fund,
respectively. The transaction was structured for tax purposes to qualify as a
tax free reorganization under the Internal Revenue Code. The EV Marathon
Government Obligations Fund's and EV Classic Government Obligations Fund's
net assets at the date of the transaction were $121,843,468 and $36,536,485,
respectively, including $2,093,697 and $(697,901) of unrealized appreciation
(depreciation). Directly after the merger, the combined net assets of the
Eaton Vance Government Obligations Fund (formerly "EV Traditional Government
Obligations Fund") were $435,161,180 with a net asset value of $10.62, $9.14
and $9.13 for Class A, Class B and Class C, respectively.
8
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED)
<TABLE>
<S> <C> <C>
MORTGAGE PASS-THROUGHS -- 95.5%
<CAPTION>
PRINCIPAL
AMOUNT
(000'S
OMITTED) VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.00%, with various maturities to 2003 $ 145 $ 143,699
5.25%, with various maturities to 2005 75 73,969
5.50%, with various maturities to 2011 300 296,662
6.00%, with various maturities to 2022 1,180 1,173,211
6.25%, with various maturities to 2013 300 299,234
6.50%, with various maturities to 2022 10,770 10,772,882
6.75%, with various maturities to 2008 283 283,895
7.00%, with various maturities to 2019 5,877 5,920,564
7.25%, with maturity at 2003 584 590,855
7.50%, with various maturities to 2020 9,678 9,834,517
7.75%, with various maturities to 2018 1,928 1,965,587
8.00%, with various maturities to 2026 39,767 40,864,498
8.25%, with various maturities to 2017 14,774 15,228,355
8.50%, with various maturities to 2018 17,403 18,106,586
8.75%, with various maturities to 2016 10,906 11,310,623
9.00%, with various maturities to 2020 15,536 16,198,599
9.25%, with various maturities to 2010 4,951 5,201,534
9.50%, with various maturities to 2016 6,070 6,409,291
10.00%, with various maturities to 2017 101 107,386
11.00%, with various maturities to 2019 3,081 3,363,992
11.50%, with maturity at 2015 513 568,696
12.00%, with various maturities to 2019 1,334 1,494,548
12.25%, with various maturities to 2019 1,399 1,575,793
12.50%, with various maturities to 2019 10,385 11,779,498
12.75%, with various maturities to 2015 580 657,807
13.00%, with various maturities to 2019 3,060 3,511,645
13.25%, with various maturities to 2019 202 233,079
13.50%, with various maturities to 2015 2,584 2,955,229
13.75%, with maturity at 2010 25 28,103
14.00%, with various maturities to 2016 1,237 1,435,235
14.50%, with various maturities to 2014 129 151,222
14.75%, with maturity at 2010 472 548,394
15.00%, with various maturities to 2013 595 707,324
15.25%, with maturity at 2012 140 167,548
15.50%, with various maturities to 2012 86 102,570
16.00%, with various maturities to 2012 66 79,417
16.25%, with various maturities to 2012 104 126,837
- ------------------------------------------------------------------------------
$ 174,268,884
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
(000'S
OMITTED) VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Federal National Mortgage Assn.:
0.25%, with maturity at 2014 $ 74 $ 64,085
3.50%, with maturity at 2007 64 60,842
5.00%, with various maturities to 2017 246 239,325
5.25%, with maturity at 2006 99 96,538
5.50%, with various maturities to 2006 113 110,831
5.75%, with maturity at 2003 36 35,431
6.00%, with various maturities to 2010 803 793,039
6.25%, with various maturities to 2007 233 232,181
6.50%, with various maturities to 2017 569 569,256
6.75%, with various maturities to 2007 304 305,251
7.00%, with various maturities to 2018 1,674 1,686,662
7.25%, with various maturities to 2017 1,053 1,065,839
7.50%, with various maturities to 2020 6,825 6,941,663
7.75%, with various maturities to 2008 703 716,197
8.00%, with various maturities to 2022 30,743 31,581,327
8.25%, with various maturities to 2025 13,217 13,643,843
8.50%, with various maturities to 2020 16,261 16,846,216
8.75%, with various maturities to 2017 766 796,406
9.00%, with various maturities to 2022 20,688 21,762,319
9.25%, with various maturities to 2016 2,425 2,553,358
9.50%, with various maturities to 2016 5,193 5,521,316
9.75%, with maturity at 2019 289 309,266
10.00%, with maturity at 2020 2,543 2,721,233
11.00%, with various maturities to 2020 2,348 2,586,736
11.50%, with various maturities to 2016 3,013 3,354,610
11.75%, with various maturities to 2015 972 1,085,851
12.00%, with various maturities to 2020 8,786 9,880,462
12.25%, with various maturities to 2015 1,798 2,031,806
12.50%, with various maturities to 2021 8,773 9,939,802
12.75%, with various maturities to 2014 866 983,485
13.00%, with various maturities to 2027 7,845 8,962,752
13.25%, with various maturities to 2015 1,294 1,492,422
13.50%, with various maturities to 2015 4,424 5,157,434
13.75%, with various maturities to 2014 103 118,657
14.00%, with various maturities to 2014 289 339,730
14.25%, with various maturities to 2014 102 119,443
14.50%, with various maturities to 2014 174 205,603
14.75%, with various maturities to 2012 2,417 2,844,369
15.00%, with various maturities to 2013 2,798 3,333,813
15.50%, with various maturities to 2012 551 659,674
15.75%, with maturity at 2011 18 21,741
16.00%, with various maturities to 2012 194 235,520
- ------------------------------------------------------------------------------
$ 162,006,334
- ------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
9
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
(000'S
OMITTED) VALUE
- ------------------------------------------------------------------------------
<S> <C> <C>
Government National Mortgage Assn.:
7.25%, with various maturities to 2022 $ 2,354 $ 2,401,183
7.50%, with maturity at 2017 611 629,897
8.00%, with various maturities to 2017 12,387 12,750,830
8.25%, with various maturities to 2008 285 294,774
8.50%, with various maturities to 2018 1,522 1,585,428
9.00%, with maturity at 2011 285 301,222
11.50%, with maturity at 2013 127 141,917
12.00%, with various maturities to 2015 2,068 2,335,229
12.50%, with various maturities to 2019 8,654 9,843,526
13.00%, with various maturities to 2014 711 817,585
13.50%, with various maturities to 2012 151 173,449
14.00%, with maturity at 2015 34 40,254
14.50%, with various maturities to 2014 173 206,488
15.00%, with various maturities to 2013 414 498,130
16.00%, with various maturities to 2012 187 229,819
- ------------------------------------------------------------------------------
$ 32,249,731
- ------------------------------------------------------------------------------
Collateralized Mortgage Obligations:
Federal Home Loan Mortgage Corp.
Series B Class 3, 12.5%, due 2013
Collateral 100% FHLMC PC $ 96 $ 103,926
Salomon Brothers Mortgage Securities II, Inc.
11.5%, due 2015 747 774,759
- ------------------------------------------------------------------------------
$ 878,685
- ------------------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost, $372,849,693) $ 369,403,634
- ------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY DEBENTURES -- 18.4%
<CAPTION>
PRINCIPAL
AMOUNT
(000'S
OMITTED) VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
Federal National Mortgage Assn., 6.00%, 5/15/08(1) $ 73,000 $ 71,015,348
- ------------------------------------------------------------------------------
Total U.S. Government Agency Debentures
(identified cost, $73,840,960) $ 71,015,348
- ------------------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.7%
<CAPTION>
PRINCIPAL
AMOUNT
(000'S
OMITTED) VALUE
<S> <C> <C>
- ------------------------------------------------------------------------------
U.S. Treasury Bond, 7.125%, 2/15/23(2) $ 6,000 $ 6,650,628
- ------------------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost, $6,328,125) $ 6,650,628
- ------------------------------------------------------------------------------
Total Investments -- 115.6%
(identified cost $453,018,778) $ 447,069,610
- ------------------------------------------------------------------------------
Other Assets, Less Liabilities -- (15.6)% $ (60,287,278)
- ------------------------------------------------------------------------------
Net Assets -- 100% $ 386,782,332
- ------------------------------------------------------------------------------
</TABLE>
(1) A portion of this security is on loan at June 30, 1999.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
SEE NOTES TO FINANCIAL STATEMENTS
10
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- ----------------------------------------------------------------------
Investments, at value (identified cost, $453,018,778) $ 447,069,610
Cash 92,329
Receivable for investments sold 1,836,958
Interest receivable 3,962,246
- ----------------------------------------------------------------------
TOTAL ASSETS $ 452,961,143
- ----------------------------------------------------------------------
Liabilities
- ----------------------------------------------------------------------
Collateral for securities loaned $ 63,158,401
Demand note payable 2,800,000
Payable for daily variation margin on open
financial futures contracts 150,010
Payable to affiliate for Trustees' fees 18,261
Other accrued expenses 52,139
- ----------------------------------------------------------------------
TOTAL LIABILITIES $ 66,178,811
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS' INTEREST IN
PORTFOLIO $ 386,782,332
- ----------------------------------------------------------------------
Sources of Net Assets
- ----------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $ 392,620,150
Net unrealized depreciation (computed on the basis of
identified cost) (5,837,818)
- ----------------------------------------------------------------------
TOTAL $ 386,782,332
- ----------------------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- ----------------------------------------------------------------------
Interest $ 17,641,023
- ----------------------------------------------------------------------
TOTAL INVESTMENT INCOME $ 17,641,023
- ----------------------------------------------------------------------
Expenses
- ----------------------------------------------------------------------
Investment adviser fee $ 1,528,807
Trustees fees and expenses 19,369
Custodian fee 110,605
Legal and accounting services 19,116
Miscellaneous 44,602
- ----------------------------------------------------------------------
TOTAL EXPENSES $ 1,722,499
- ----------------------------------------------------------------------
NET INVESTMENT INCOME $ 15,918,524
- ----------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ----------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ (4,233,218)
Financial futures contracts 38,803
- ----------------------------------------------------------------------
NET REALIZED LOSS $ (4,194,415)
- ----------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ (13,452,742)
Financial futures contracts 60,938
- ----------------------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) $ (13,391,804)
- ----------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (17,586,219)
- ----------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM OPERATIONS $ (1,667,695)
- ----------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 15,918,524 $ 34,090,075
Net realized gain (loss) (4,194,415) 4,112,519
Net change in unrealized
appreciation (depreciation) (13,391,804) (12,945,586)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS $ (1,667,695) $ 25,257,008
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 50,680,296 $ 187,817,118
Withdrawals (83,241,064) (225,170,325)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (32,560,768) $ (37,353,207)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS $ (34,228,463) $ (12,096,199)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $ 421,010,795 $ 433,106,994
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 386,782,332 $ 421,010,795
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 -----------------------------------------------------------------
(UNAUDITED) 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- -------------------------------------------------------------------------------------------------------------------------------
Expenses 0.85%(1) 0.89% 0.83% 0.82% 0.82% 0.80%
Net investment income 7.88%(1) 7.85% 7.95% 7.88% 7.82% 8.03%
Portfolio turnover 6% 48% 20% 11% 19% 35%
- -------------------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (000'S
OMITTED) $386,782 $421,011 $433,107 $455,523 $521,789 $515,670
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1 Significant Accounting Policies
- -------------------------------------------
Government Obligations Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end investment company
which was organized as a trust under the laws of the State of New York in
1992. The Declaration of Trust permits the Trustees to issue beneficial
interests in the Portfolio. The following is a summary of significant
accounting policies of the Portfolio. The policies are in conformity with
generally accepted accounting principles.
A Investment Valuation -- Mortgage backed, "pass-through" securities are valued
using an independent matrix pricing system applied by the adviser which takes
into account closing bond valuations, yield differentials, anticipated
prepayments and interest rates provided by dealers. Debt securities (other
than mortgage backed, "pass-through" securities) are normally valued at the
mean between the latest available bid and asked prices for securities for
which the over-the-counter market is the primary market. Debt securities may
also be valued on the basis of valuations furnished by a pricing service.
Options are valued at last sale price on a U.S. exchange or board of trade
or, in the absence of a sale, at the mean between the last bid and asked
price. Financial futures contracts listed on commodity exchanges are valued
at closing settlement prices. Securities for which there is no such quotation
or valuation are valued at fair value using methods determined in good faith
by or at the direction of the Trustees. Short-term obligations having
remaining maturities of less than 60 days are valued at amortized cost, which
approximates value.
B Income -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of discount when required for
federal income tax purposes.
C Gains and Losses From Security Transactions -- For book purposes, gains or
losses are not recognized until disposition. For federal tax purposes, the
Portfolio has elected, under Section 1092 of the Internal Revenue Code, to
utilize mixed straddle accounting for certain designated classes of
activities involving options and financial futures contracts in determining
recognized gains or losses. Under this method, Section 1256 positions
(financial futures contracts and options on investments or financial futures
contracts) and non-Section 1256 positions (bonds, etc.) are marked-to-market
on a daily basis resulting in the recognition of taxable gains or losses on a
daily basis. Such gains or losses are categorized as short-term or long-term
based on aggregation rules provided in the Code.
D Income Taxes -- The Portfolio is treated as a partnership for federal tax
purposes. No provision is made by the Portfolio for federal or state taxes on
any taxable income of the Portfolio because each investor in the Portfolio is
ultimately responsible for the payment of any taxes. Since some of the
Portfolio's investors are regulated investment companies that invest all or
substantially all of their assets in the Portfolio, the Portfolio normally
must satisfy the applicable source of income and diversification requirements
(under the Code) in order for its investors to satisfy them. The Portfolio
will allocate at least annually among its investors each investors'
distributive share of the Portfolio's net investment income, net realized
capital gains, and any other items of income, gain, loss, deduction or
credit.
E Written Options -- Upon the writing of a call or a put option, an amount
equal to the premium received by the Portfolio is included in the Statement
of Assets and Liabilities as a liability. The amount of the liability is
subsequently marked-to-market to reflect the current value of the option
written in accordance with the Portfolio's policies on investment valuations
discussed above. Premiums received from writing options which expire are
treated as realized gains. Premiums received from writing options which are
exercised or are closed are added to or offset against the proceeds or amount
paid on the transaction to determine the realized gain or loss. If a put
option is exercised, the premium reduces the cost basis of the securities
purchased by the Portfolio. The Portfolio, as writer of an option, may have
no control over whether the underlying securities may be sold (call) or
purchased (put) and, as a result, bears the market risk of an unfavorable
change in the price of the securities underlying the written option.
F Purchased Options -- Upon the purchase of a call or put option, the premium
paid by the Portfolio is included in the Statement of Assets and Liabilities
as an investment. The amount of the investment is subsequently
marked-to-market to reflect the current market value of the option purchased,
in accordance with the Portfolio's policies on investment valuations
discussed above. If an option which the Portfolio has purchased expires on
the stipulated expiration date, the Portfolio will realize a loss in the
amount of the cost of the option. If the Portfolio enters into a closing sale
transaction, the Portfolio will realize a gain or loss, depending on whether
the sales proceeds from the closing sale transaction are greater or less than
the cost of the option. If a Portfolio exercises a put option, it will
realize a gain or loss from the sale of the underlying security, and the
proceeds from such sale will be decreased by the premium originally paid. If
the Portfolio exercises a
14
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
call option, the cost of the security which the Portfolio purchases upon
exercise will be increased by the premium originally paid. For tax purposes,
the Portfolio's options are generally subject to the mixed straddle rules
described in Note 1C, and unrealized gains or losses are recognized on a
daily basis.
G Financial Futures Contracts -- Upon entering into a financial futures
contract, the Portfolio is required to deposit an amount ("initial margin")
either in cash or securities equal to a certain percentage of the purchase
price indicated in the financial futures contract. Subsequent payments are
made or received by the Portfolio ("margin maintenance") each day, dependent
on the daily fluctuations in the value of the underlying securities, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
If the Portfolio enters into a closing transaction, the Portfolio will
realize, for book purposes, a gain or loss equal to the difference between
the value of the financial futures contract to sell and the financial futures
contract to buy. The Portfolio's investment in financial futures contracts is
designed only to hedge against anticipated future changes in interest rates.
Should interest rates move unexpectedly, the Portfolio may not achieve the
anticipated benefits of the financial futures contracts and may realize a
loss. For tax purposes, such futures contracts are generally subject to the
mixed straddle rules described in Note 1C, and unrealized gains or losses are
recognized on a daily basis.
H Other -- Investment transactions are accounted for on the date the
investments are purchased or sold.
I Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of income and expense during the reporting period. Actual results could
differ from those estimates.
J Interim Financial Statements -- The interim financial statements relating to
June 30, 1999 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Purchases and Sales of Investments
- -------------------------------------------
Purchases, sales and paydowns of investments, other than short-term
obligations, aggregated $30,527,517, $3,897,382 and $64,158,890,
respectively.
3 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee, computed at the monthly rate of 0.0625% (0.75%
per annum) of the Portfolio's average daily net assets up to $500 million and
at reduced rates as daily net assets exceed that level, is earned by Boston
Management and Research (BMR), a wholly-owned subsidiary of Eaton Vance
Management (EVM), as compensation for management and investment advisory
services rendered to the Portfolio. For the six months ended June 30, 1999,
the fee was equivalent to 0.75% (annualized) of the Portfolio's average net
assets for such period and amounted to $1,528,807. Except as to Trustees of
the Portfolio who are not members of EVM's or BMR's organization, officers
and Trustees receive remuneration for their services to the Portfolio out of
such investment adviser fee. Trustees of the Portfolio that are not
affiliated with the Investment Adviser may elect to defer receipt of all or a
percentage of their annual fees in accordance with the terms of the Trustees
Deferred Compensation Plan. For the six months ended June 30, 1999, no
significant amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above
organizations.
4 Line of Credit
- -------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a committed $130 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the Eurodollar rate or federal funds rate. In
addition, a fee computed at an annual rate of 0.10% on the daily unused
portion of the line of credit is allocated among the participating portfolios
and funds at the end of each quarter. The average daily loan balance for the
six months ended June 30, 1999 was $1,415,017 and the average interest rate
was 5.09%. The maximum borrowing outstanding at any time during the six
months ended June 30, 1999 was $11,346,000. As of June 30, 1999, $2,800,000
was outstanding.
15
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
5 Securities Lending Agreement
- -------------------------------------------
The Portfolio has established a securities lending agreement with a broker in
which the Portfolio lends portfolio securities to the broker in exchange for
collateral consisting of either cash or U.S. government securities. Under the
agreement, the Portfolio continues to earn interest on the securities loaned.
Collateral received is generally cash, and the Portfolio invests the cash and
receives any interest on the amount invested but it must also pay the broker
a loan rebate fee computed as a varying percentage of the collateral
received. The loan rebate fee paid by the Fund offsets a portion of the
interest income received. At June 30, 1999, the value of the securities
loaned and the value of the collateral amounted to approximately $63,000,000
and $64,000,000, respectively.
6 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investment
securities owned at June 30, 1999, as computed on a federal income tax basis,
were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $ 451,938,282
- -------------------------------------------------------
Gross unrealized appreciation $ 2,079,266
Gross unrealized depreciation (6,947,938)
- -------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (4,868,672)
- -------------------------------------------------------
</TABLE>
7 Financial Instruments
- -------------------------------------------
The Portfolio regularly trades in financial instruments with off-balance
sheet risk in the normal course of its investing activities to assist in
managing exposure to various market risks. These financial instruments
include written options and financial futures contracts, and may involve, to
a varying degree, elements of risk in excess of the amounts recognized for
financial statement purposes. The notional or contractual amounts of these
instruments represent the investment the Fund has in particular classes of
financial instruments and does not necessarily represent the amounts
potentially subject to risk. The measurement of the risks associated with
these instruments is meaningful only when all related and offsetting
transactions are considered. A summary of obligations under these financial
instruments at June 30, 1999 is as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
- ---------------------------------------------------------------------------
EXPIRATION NET UNREALIZED
DATE CONTRACTS POSITION APPRECIATION
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
9/99 200 US Treasury Five Year
Note Futures Short $111,350
</TABLE>
At June 30, 1999, the Portfolio had sufficient cash and/or securities to
cover margin requirements on any open futures contracts.
16
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 1999
INVESTMENT MANAGEMENT
EATON VANCE GOVERNMENT OBLIGATIONS FUND
Officers
James B. Hawkes
President and Trustee
William H. Ahern, Jr.
Vice President
Thomas J. Fetter
Vice President
Armin J. Lang
Vice President
Robert B. MacIntosh
Vice President
Edward E. Smiley, Jr.
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
GOVERNMENT OBLIGATIONS PORTFOLIO
Officers
James B. Hawkes
President and Trustee
Susan Schiff
Vice President and
Portfolio Manager
Mark S. Venezia
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
17
<PAGE>
INVESTMENT ADVISER OF
GOVERNMENT OBLIGATIONS PORTFOLIO
BOSTON MANAGEMENT AND RESEARCH
The Eaton Vance Building
255 State Street
Boston, MA 02109
ADMINISTRATOR OF EATON VANCE
GOVERNMENT OBLIGATIONS FUND
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
FIRST DATA INVESTOR SERVICES GROUP
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
EATON VANCE GOVERNMENT OBLIGATIONS FUND
THE EATON VANCE BUILDING
255 STATE STREET
BOSTON, MA 02109
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This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
3-4257 GOSRC-8/99
