<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS
<TABLE>
<S> <C> <C>
U.S. GOVERNMENT AGENCY DEBENTURES -- 21.3%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
6.45%, 4/29/09 $ 2,000 $ 1,866,560
Federal Home Loan Mortgage Corp.,
6.625%, 9/15/09(1) 69,000 67,037,640
Federal National Mortgage Assn.,
6.25%, 5/15/29 5,000 4,450,000
- -----------------------------------------------------------------------
Total U.S. Government Agency Debentures
(identified cost, $75,002,800) $ 73,354,200
- -----------------------------------------------------------------------
MORTGAGE PASS-THROUGHS -- 90.5%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.00%, with various maturities to
2003 $ 114 $ 111,221
5.25%, with various maturities to
2005 55 53,700
5.50%, with various maturities to
2011 244 237,712
6.00%, with various maturities to
2022 940 922,401
6.25%, with various maturities to
2013 234 230,181
6.50%, with various maturities to
2022 9,467 9,331,794
6.75%, with various maturities to
2008 225 223,230
7.00%, with various maturities to
2019 4,913 4,894,838
7.25%, with maturity at 2003 438 438,792
7.50%, with various maturities to
2020 8,058 8,093,419
7.75%, with various maturities to
2018 1,661 1,669,046
8.00%, with various maturities to
2026 34,237 34,701,574
8.25%, with various maturities to
2017 12,644 12,883,193
8.50%, with various maturities to
2018 15,299 15,692,166
8.75%, with various maturities to
2016 9,331 9,573,512
9.00%, with various maturities to
2020 13,795 14,226,503
9.25%, with various maturities to
2010 4,344 4,514,066
9.50%, with various maturities to
2016 5,346 5,588,426
9.75%, with maturity at 2011 629 654,710
10.00%, with various maturities to
2017 99 104,054
11.00%, with various maturities to
2019 2,787 3,007,431
11.50%, with maturity at 2015 396 434,540
12.00%, with various maturities to
2019 1,159 1,281,206
12.25%, with various maturities to
2019 1,221 1,359,001
12.50%, with various maturities to
2019 8,916 10,006,754
12.75%, with various maturities to
2015 430 481,106
13.00%, with various maturities to
2019 2,636 2,986,754
13.25%, with various maturities to
2019 197 224,759
13.50%, with various maturities to
2015 2,282 2,578,080
14.00%, with various maturities to
2016 1,100 1,266,059
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
14.50%, with various maturities to
2014 $ 126 $ 145,302
14.75%, with maturity at 2010 395 453,738
15.00%, with various maturities to
2013 487 572,941
15.25%, with maturity at 2012 88 104,990
15.50%, with various maturities to
2012 80 94,299
16.00%, with maturity at 2012 53 63,112
16.25%, with various maturities to
2012 101 120,781
- -----------------------------------------------------------------------
$149,325,391
- -----------------------------------------------------------------------
Federal National Mortgage Assn.:
0.25%, with maturity at 2014 $ 57 $ 47,116
3.50%, with maturity at 2007 50 47,530
5.00%, with various maturities to
2017 188 179,726
5.25%, with maturity at 2006 93 89,019
5.50%, with various maturities to
2006 89 86,698
5.75%, with maturity at 2003 25 25,142
6.00%, with various maturities to
2010 654 635,712
6.25%, with various maturities to
2007 175 173,025
6.50%, with various maturities to
2017 444 436,646
6.75%, with various maturities to
2007 223 221,737
7.00%, with various maturities to
2018 1,471 1,463,420
7.25%, with various maturities to
2017 906 906,333
7.50%, with various maturities to
2020 5,799 5,836,478
7.75%, with various maturities to
2008 617 622,682
8.00%, with various maturities to
2022 26,881 27,285,739
8.25%, with various maturities to
2025 11,658 11,901,133
8.50%, with various maturities to
2026 14,112 14,459,273
8.75%, with various maturities to
2017 678 697,282
9.00%, with various maturities to
2022 17,974 18,664,902
9.25%, with various maturities to
2016 2,135 2,226,565
9.50%, with various maturities to
2016 4,240 4,465,688
9.75%, with maturity at 2019 217 229,932
10.00%, with maturity at 2020 2,152 2,278,090
11.00%, with various maturities to
2020 2,005 2,181,514
11.50%, with various maturities to
2016 2,711 2,981,860
11.75%, with various maturities to
2015 870 959,438
12.00%, with various maturities to
2020 7,421 8,242,265
12.25%, with various maturities to
2015 1,578 1,764,958
12.50%, with various maturities to
2021 6,262 7,016,501
12.75%, with various maturities to
2014 782 876,296
13.00%, with various maturities to
2027 6,959 7,856,138
13.25%, with various maturities to
2015 1,145 1,302,572
13.50%, with various maturities to
2015 3,763 4,318,401
13.75%, with various maturities to
2014 101 115,348
14.00%, with various maturities to
2014 257 297,820
14.25%, with maturity at 2014 99 116,054
14.50%, with various maturities to
2014 154 180,199
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
14.75%, with maturity at 2012 $ 2,188 $ 2,559,147
15.00%, with various maturities to
2013 2,409 2,860,295
15.50%, with maturity at 2012 434 516,589
15.75%, with maturity at 2011 15 17,624
16.00%, with maturity at 2012 150 180,132
- -----------------------------------------------------------------------
$137,323,019
- -----------------------------------------------------------------------
Government National Mortgage Assn.:
7.25%, with various maturities to
2022 $ 2,246 $ 2,252,838
7.50%, with maturity at 2017 517 524,038
8.00%, with various maturities to
2017 6,708 6,835,423
8.25%, with maturity at 2008 258 264,460
8.50%, with various maturities to
2018 1,264 1,301,509
9.00%, with maturity at 2011 256 267,780
11.50%, with maturity at 2013 123 135,409
12.00%, with various maturities to
2015 1,797 2,002,696
12.50%, with various maturities to
2019 8,537 9,607,288
13.00%, with various maturities to
2014 667 756,951
13.50%, with various maturities to
2012 142 161,686
14.00%, with maturity at 2015 34 39,234
14.50%, with various maturities to
2014 133 156,480
15.00%, with various maturities to
2013 397 469,562
16.00%, with various maturities to
2012 184 221,674
- -----------------------------------------------------------------------
$ 24,997,028
- -----------------------------------------------------------------------
Collateralized Mortgage Obligations:
Federal Home Loan Mortgage Corp.
Series B Class 3 100% FHLMC PC
Collateral, 12.50%, due 2013 $ 75 $ 80,678
Salomon Brothers Mortgage Securities
II, Inc., Series 1984-3, Class Z,
11.50%, due 2015 650 661,659
- -----------------------------------------------------------------------
$ 742,337
- -----------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost $318,962,393) $312,387,775
- -----------------------------------------------------------------------
U.S. TREASURY OBLIGATIONS -- 1.8%
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
- -----------------------------------------------------------------------
U.S. Treasury Bond, 7.125%, 2/15/23(2) $ 6,000 $ 6,246,540
- -----------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost, $6,328,125) $ 6,246,540
- -----------------------------------------------------------------------
Total Investments -- 113.6%
(identified cost $400,293,318) $391,988,515
- -----------------------------------------------------------------------
Other Assets, Less Liabilities -- (13.6)% $(46,788,567)
- -----------------------------------------------------------------------
Net Assets -- 100.0% $345,199,948
- -----------------------------------------------------------------------
</TABLE>
(1) A portion of this security is on loan at December 31, 1999.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF DECEMBER 31, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $400,293,318) $391,988,515
Receivable for investments sold 1,208,688
Interest receivable 4,317,394
Receivable for daily variation margin on
open financial futures contracts 103,117
- ------------------------------------------------------
TOTAL ASSETS $397,617,714
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Collateral for securities loaned $ 51,499,801
Demand note payable 800,000
Payable to affiliate for Trustees' fees 7,105
Due to bank 27,173
Accrued expenses 83,687
- ------------------------------------------------------
TOTAL LIABILITIES $ 52,417,766
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $345,199,948
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $353,212,742
Net unrealized depreciation (computed on
the basis of identified cost) (8,012,794)
- ------------------------------------------------------
TOTAL $345,199,948
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1999
<S> <C>
Investment Income
- ------------------------------------------------------
Interest $ 31,663,415
Security lending income 1,958,871
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $ 33,622,286
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment adviser fee $ 2,923,359
Trustees' fees and expenses 22,087
Custodian fee 206,414
Legal and accounting services 43,321
Interest expense 78,858
Miscellaneous 18,847
- ------------------------------------------------------
TOTAL EXPENSES $ 3,292,886
- ------------------------------------------------------
NET INVESTMENT INCOME $ 30,329,400
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $(11,686,488)
Financial futures contracts 495,365
- ------------------------------------------------------
NET REALIZED LOSS $(11,191,123)
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $(15,808,377)
Financial futures contracts 241,597
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $(15,566,780)
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(26,757,903)
- ------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 3,571,497
- ------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
INCREASE (DECREASE) YEAR ENDED YEAR ENDED
IN NET ASSETS DECEMBER 31, 1999 DECEMBER 31, 1998
<S> <C> <C>
- ------------------------------------------------------------------------------
From operations --
Net investment income $ 30,329,400 $ 34,090,075
Net realized gain (loss) (11,191,123) 4,112,519
Net change in unrealized appreciation
(depreciation) (15,566,780) (12,945,586)
- ------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 3,571,497 $ 25,257,008
- ------------------------------------------------------------------------------
Capital transactions --
Contributions $ 96,382,421 $ 187,817,118
Withdrawals (175,764,765) (225,170,325)
- ------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ (79,382,344) $ (37,353,207)
- ------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS $ (75,810,847) $ (12,096,199)
- ------------------------------------------------------------------------------
Net Assets
- ------------------------------------------------------------------------------
At beginning of year $ 421,010,795 $ 433,106,994
- ------------------------------------------------------------------------------
AT END OF YEAR $ 345,199,948 $ 421,010,795
- ------------------------------------------------------------------------------
</TABLE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
Increase (Decrease) in Cash DECEMBER 31, 1999
<S> <C>
- -----------------------------------------------------------
Cash Flows From (Used For) Operating
Activities --
Purchase of investments $ (108,535,923)
Proceeds from sales of investments
and principal repayments 191,983,780
Interest received, including net
securities lending income 33,438,073
Interest paid (90,207)
Operating expenses paid (3,203,022)
Financial futures contracts
transactions 389,113
Increase in unrealized gain/loss from
futures transactions 241,597
Net repayments for securities lending (26,869,349)
- -----------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES $ 87,354,062
- -----------------------------------------------------------
Cash Flows From (Used For) Financing
Activities --
Proceeds from capital contributions $ 96,382,421
Payments for capital withdrawals (175,764,765)
Demand note payable (7,999,000)
- -----------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES $ (87,381,344)
- -----------------------------------------------------------
NET DECREASE IN CASH $ (27,282)
- -----------------------------------------------------------
CASH AT BEGINNING OF YEAR $ 109
- -----------------------------------------------------------
CASH AT END OF YEAR $ (27,173)
- -----------------------------------------------------------
Reconciliation of Net Increase in Net Assets
From Operations to Net Cash From
Operating Activities
- -----------------------------------------------------------
Net increase in net assets from
operations $ 3,571,497
Decrease in receivable for investments
sold 573,883
Increase in interest receivable (3,512)
Increase in variation margin (106,252)
Decrease in payable to affiliate (6,795)
Increase in accrued expenses 6,452
Decrease in collateral for securities
loaned (26,869,349)
Net decrease in investments 110,188,138
- -----------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES $ 87,354,062
- -----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------
Operating expenses 0.83% 0.82% 0.83% 0.82% 0.82%
Interest expense 0.02% 0.07% -- -- --
Net investment income 7.79% 7.85% 7.95% 7.88% 7.82%
Portfolio Turnover 18% 48% 20% 11% 19%
- ----------------------------------------------------------------------------------------------------
NET ASSETS, END OF YEAR (000'S
OMITTED) $345,200 $421,011 $433,107 $455,523 $521,789
- ----------------------------------------------------------------------------------------------------
</TABLE>
Certain prior year ratios have been restated to conform to current year
presentation.
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
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 premium or accretion 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 one of the
Portfolio's investors is a regulated investment company that invests all or
substantially all of its assets in the Portfolio, the Portfolio normally must
satisfy the applicable source of income and diversification requirements
(under the Internal Revenue 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. Withholding taxes on foreign dividends and capital gains have been
provided for in accordance with the Portfolios understanding of the
applicable countries tax rules and rates.
E Expense Reduction -- Investors Bank & Trust Company (IBT) serves as custodian
to the Trust. Pursuant to the respective custodian agreements, IBT receives a
fee reduced by credits which are determined based on the average daily cash
balances the Trust maintains with IBT. All significant credit balances used
to reduce the Trust's custodian fees are reported as a reduction of expenses
on the Statement of Operations. For the year ended December 31, 1999, $3,461
credit balances were used to reduce the Portfolio's custodian fee.
F 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.
20
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
G 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 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.
H 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.
I Other -- Investment transactions are accounted for on the date the securities
are purchased or sold. Realized gains and losses are computed based on the
specific identification of securities sold.
J Use of Estimates -- The preparation of the 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 $108,535,923, $79,838,343 and $111,571,554,
respectively.
3 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee 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.
The fee is 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. For the year ended December 31, 1999,
the fee was equivalent to 0.75% of the Portfolio's average net assets for
such period and amounted to $2,923,359. 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 year ended December 31, 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 $150 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
21
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
NOTES TO FINANCIAL STATEMENTS CONT'D
and funds at the end of each quarter. The average daily loan balance for the
year ended December 31, 1999 was $959,701 and the average interest rate was
8.22%. As of December 31, 1999, $800,000 was outstanding.
5 Securities Lending Agreement
- -------------------------------------------
The Portfolio has established a securities lending agreement with brokers in
which the Portfolio lends portfolio securities to a broker in exchange for
collateral consisting of either cash or U.S. government securities in an
amount at least equal to the market value of the securities on loan. 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 Portfolio offsets a
portion of the interest income received and amounted to $3,335,673 for the
year ended December 31, 1999. At December 31, 1999, the value of the
securities loaned and the value of the collateral amounted to approximately
$51,000,000 and $51,500,000, respectively. In the event of counterparty
default, the Portfolio is subject to potential loss if it is delayed or
prevented from exercising its right to dispose of the collateral. The
Portfolio bears risk in the event that invested collateral is not sufficient
to meet obligations due on the loans.
6 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation (depreciation) in value of the
investments owned at December 31, 1999 as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $399,985,745
------------------------------------------------------
Gross unrealized appreciation $ 1,189,191
Gross unrealized depreciation (9,186,421)
------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (7,997,230)
------------------------------------------------------
</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 December 31, 1999 is as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
-------------------------------------------------------------------------------
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION APPRECIATION
<C> <S> <C> <C>
-------------------------------------------------------------------------------
3/00 330 US Treasury Five Year Note Futures Short $ 292,009
</TABLE>
At December 31, 1999, the Portfolio had sufficient cash and/or securities to
cover margin requirements on any open futures contracts.
22
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF DECEMBER 31, 1999
INDEPENDENT ACCOUNTANTS' REPORT
TO THE TRUSTEES AND INVESTORS
OF GOVERNMENT OBLIGATIONS PORTFOLIO
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In our opinion, the accompanying statement of assets and liabilities, including
the portfolio of investments, and the related statements of operations, of
changes in net assets and of cash flows and supplementary data present fairly,
in all material respects, the financial position of Government Obligations
Portfolio (the "Portfolio") at December 31, 1999, and the results of its
operations, the changes in its net assets, its cash flows and the supplementary
data for the periods indicated, in conformity with accounting principles
generally accepted in the United States. 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 auditing standards
generally accepted in the United States, 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, 1999 by correspondence with the custodian and brokers, provide a reasonable
basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 9, 2000
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EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF DECEMBER 31, 1999
INVESTMENT MANAGEMENT
GOVERNMENT OBLIGATIONS PORTFOLIO
Officers
James B. Hawkes
President and Trustee
Susan Schiff
Vice President and
Portfolio Manager
Mark S. Venezia
Vice President
James L. OConnor
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
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