<PAGE>
Government Obligations Portfolio as of December 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Principal
Amount
(000's
omitted) Value
- -----------------------------------------------------------------------------
13.50%, with various maturities to 2013 $ 164 $ 192,515
14.00%, with maturity at 2015 62 74,520
14.50%, with various maturities to 2014 216 263,461
15.00%, with various maturities to 2013 461 563,861
16.00%, with various maturities to 2012 214 266,699
- -----------------------------------------------------------------------------
$ 38,772,245
- -----------------------------------------------------------------------------
Collateralized Mortgage Obligations:
Federal Home Loan Mortgage Corp.
Series B Class 3, 12.5%, due 2013
Collateral 100% FHLMC PC $ 116 $ 123,940
Salomon Brothers Mortgage Securities
II, Inc. 11.5%, due 2015 901 952,590
- -----------------------------------------------------------------------------
$ 1,076,530
- -----------------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost, $414,503,992) $417,454,753
- -----------------------------------------------------------------------------
U.S. Government Agency Debentures -- 18.4%
Principal
Amount
(000's
omitted) Value
- -----------------------------------------------------------------------------
Federal National Mortgage Assn., 6.00%,
5/15/08(1) $73,000 $ 77,330,651
- -----------------------------------------------------------------------------
Total U.S. Government
Agency Debentures
(identified cost, $73,840,961) $ 77,330,651
- -----------------------------------------------------------------------------
U.S. Treasury Obligations -- 1.7%
Principal
Amount
(000's
omitted) Value
- -----------------------------------------------------------------------------
U.S. Treasury Bond, 7.125%, 2/15/23(2) $ 6,000 $ 7,391,249
- -----------------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost, $6,328,126) $ 7,391,249
- -----------------------------------------------------------------------------
Total Investments -- 119.3%
(identified cost $494,673,079) $502,176,653
- -----------------------------------------------------------------------------
Other Assets, Less Liabilities-- (19.3)% $(81,165,858)
- -----------------------------------------------------------------------------
Net Assets-- 100% $421,010,795
- -----------------------------------------------------------------------------
(1) A portion of this security is on loan at December 31, 1998.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
See notes to financial statements
14
<PAGE>
Government Obligations Portfolio as of December 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1998
Assets
- --------------------------------------------------------------------------------
Investments, at value
(identified cost, $494,673,079) $502,176,653
Cash 109
Receivable for investments sold 1,782,571
Interest receivable 4,313,882
- --------------------------------------------------------------------------------
Total assets $508,273,215
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Collateral for securities loaned $ 78,369,150
Demand note payable 8,799,000
Payable for daily variation margin on open
financial futures contracts 3,135
Payable to affiliate for Trustees' fees 13,900
Other accrued expenses 77,235
- --------------------------------------------------------------------------------
Total liabilities $ 87,262,420
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in
Portfolio $421,010,795
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and
withdrawals $413,456,809
Net unrealized appreciation (computed on the basis
of identified cost) 7,553,986
- --------------------------------------------------------------------------------
Total $421,010,795
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1998
Investment Income
- --------------------------------------------------------------------------------
Interest $ 37,955,761
- --------------------------------------------------------------------------------
Total investment income $ 37,955,761
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee $ 3,257,584
Trustees fees and expenses 30,790
Interest expense 289,920
Custodian fee 224,987
Legal and accounting services 42,938
Amortization of organization expenses 3,141
Miscellaneous 16,326
- --------------------------------------------------------------------------------
Total expenses $ 3,865,686
- --------------------------------------------------------------------------------
Net investment income $ 34,090,075
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss)
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 6,505,030
Financial futures contracts (2,199,011)
Options (193,500)
- --------------------------------------------------------------------------------
Net realized gain $ 4,112,519
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $(13,363,386)
Financial futures contracts 417,800
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $(12,945,586)
- --------------------------------------------------------------------------------
Net realized and unrealized loss $ (8,833,067)
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 25,257,008
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
Government Obligations Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1998 December 31, 1997
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 34,090,075 $ 35,025,042
Net realized gain (loss) 4,112,519 (6,844,606)
Net change in unrealized
appreciation (depreciation) (12,945,586) 4,415,017
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 25,257,008 $ 32,595,453
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 187,817,118 $ 163,961,740
Withdrawals (225,170,325) (218,972,747)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $ (37,353,207) $ (55,011,007)
- --------------------------------------------------------------------------------
Net decrease in net assets $ (12,096,199) $ (22,415,554)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 433,106,994 $ 455,522,548
- --------------------------------------------------------------------------------
At end of year $ 421,010,795 $ 433,106,994
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
Government Obligations Portfolio as of December 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses 0.89% 0.83% 0.82% 0.82% 0.80%
Net investment income 7.85% 7.95% 7.88% 7.82% 8.03%
Portfolio Turnover 48% 20% 11% 19% 35%
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $421,011 $433,107 $455,523 $521,789 $ 515,670
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
17
<PAGE>
Government Obligations Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
----------------------------------------------------------------------------
Government Obligations Portfolio (the Portfolio) is registered under the
Investment Company Act of 1940 as a diversified open-end investment company
which was organized as a trust under the laws of the State of New York in
1992. The Declaration of Trust permits the Trustees to issue beneficial
interests in the Portfolio. 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
18
<PAGE>
Government Obligations Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
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 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.
2 Purchases and Sales of Investments
----------------------------------------------------------------------------
Purchases, sales and paydowns of investments, other than short-term
obligations, aggregated $253,254,556, $124,985,962 and $112,210,267,
respectively.
3 Investment Adviser Fee and Other Transactions with Affiliates
----------------------------------------------------------------------------
The investment adviser fee, computed at the monthly rate of 0.0625% (0.75%
per annum) of the Portfolio's average daily net assets up to $500 million
and at reduced rates as daily net assets exceed that level, is earned by
Boston Management and Research (BMR), a wholly-owned subsidiary of Eaton
Vance Management (EVM), as compensation for management and investment
advisory services rendered to the Portfolio. For the year ended December
31, 1998, the fee was equivalent to 0.75% of the Portfolio's average net
assets for such period and amounted to $3,257,584. 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. Certain of the officers and Trustees of the
Portfolio are officers and directors/trustees of the above organizations.
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 year ended December 31, 1998, no significant amounts have
been deferred.
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 year ended December 31, 1998 was $4,752,627 and
the average interest rate was 6.10%. The maximum borrowing outstanding at
any time during the year ended
19
<PAGE>
Government Obligations Portfolio as of December 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
December 31, 1998 was $33,665,000. As of December 31, 1998, $8,799,000 was
outstanding.
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 December 31, 1998, the value of
the securities loaned and the value of the collateral amounted to
approximately $77,000,000 and $78,000,000, respectively.
6 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investment
securities owned at December 31, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $500,350,386
---------------------------------------------------------------------------
Gross unrealized appreciation $ 5,288,617
Gross unrealized depreciation (3,462,350)
---------------------------------------------------------------------------
Net unrealized appreciation $ 1,826,267
---------------------------------------------------------------------------
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 December 31,
1998 is as follows:
Futures Contracts
----------------------------------------------------------------------------
Expiration Net Unrealized
Date Contracts Position Appreciation
----------------------------------------------------------------------------
3/99 200 US Treasury Five Year
Note Futures Long $ 50,412
----------------------------------------------------------------------------
At December 31, 1998, the Portfolio had sufficient cash and/or securities
to cover margin requirements on any open futures contracts.
20
<PAGE>
Government Obligations Portfolio as of December 31, 1998
INDEPENDENT ACCOUNTANTS' REPORT
To the Trustees and Investors
of Government Obligations Portfolio:
- --------------------------------------------------------------------------------
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments and the related statements of operations and of
changes in net assets and supplementary data present fairly, in all material
respects, the financial position of Eaton Vance Government Obligations Portfolio
(the "Portfolio") at December 31, 1998, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the supplementary data for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
These financial statements and supplementary data (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits which included confirmation of securities at December
31, 1998 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 5, 1999
21
<PAGE>
Government Obligations Portfolio as of December 31, 1998
Government Obligations Portfolio
Officers Independent Trustees
James B. Hawkes Jessica M. Bibliowicz
President and Trustee President and Chief Operating Officer,
John A. Levin & Co. Director,
Susan Schiff Baker, Fentress & Co.
Vice President and
Portfolio Manager Donald R. Dwight
President, Dwight Partners, Inc.
Mark S. Venezia
Vice President Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
James L. O'Connor Banking, Harvard University Graduate School of
Treasurer Business Administration
Alan R. Dynner Norton H. Reamer
Secretary Chairman and Chief Executive Officer, United Asset
Management Corporation
Lynn A. Stout
Professor of Law
Georgetown University Law Center
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
22
