<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED)
U.S. GOVERNMENT AGENCY DEBENTURES -- 23.2%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Federal Home Loan Mortgage Corp.,
6.45%, 4/29/09 $ 2,000 $ 1,863,740
Federal Home Loan Mortgage Corp.,
6.625%, 9/15/09(1) 69,000 66,638,820
Federal National Mortgage Assn.,
6.25%, 5/15/29 5,000 4,496,100
-----------------------------------------------------------------------
Total U.S. Government Agency Debentures
(identified cost, $75,002,800) $ 72,998,660
-----------------------------------------------------------------------
</TABLE>
MORTGAGE PASS-THROUGHS -- 89.6%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Federal Home Loan Mortgage Corp.:
5.00%, with various maturities to
2003 $ 83 $ 81,478
5.25%, with various maturities to
2005 43 41,734
5.50%, with various maturities to
2011 161 156,458
6.00%, with various maturities to
2022 718 703,877
6.25%, with various maturities to
2013 185 181,977
6.50%, with various maturities to
2022 8,337 8,169,892
6.75%, with various maturities to
2008 185 183,070
7.00%, with various maturities to
2019 4,075 4,043,387
7.25%, with maturity at 2003 335 334,973
7.50%, with various maturities to
2020 7,007 7,019,420
7.75%, with various maturities to
2018 1,416 1,416,024
8.00%, with various maturities to
2026 31,488 31,806,839
8.15%, with maturity at 2019 1,000 1,007,939
8.25%, with various maturities to
2017 10,869 11,023,151
8.50%, with various maturities to
2018 13,582 13,878,539
8.75%, with various maturities to
2016 8,218 8,395,905
9.00%, with various maturities to
2020 12,733 13,081,244
9.25%, with various maturities to
2010 3,877 4,017,718
9.50%, with various maturities to
2016 4,830 5,031,211
9.75%, with maturity at 2011 566 585,808
10.00%, with various maturities to
2017 96 101,468
11.00%, with various maturities to
2019 3,573 3,856,122
11.50%, with maturity at 2015 337 368,657
12.00%, with various maturities to
2019 1,057 1,169,090
12.25%, with various maturities to
2019 1,098 1,218,686
12.50%, with various maturities to
2019 7,724 8,647,550
12.75%, with various maturities to
2015 403 450,896
13.00%, with various maturities to
2019 2,302 2,615,098
13.25%, with various maturities to
2019 184 210,054
13.50%, with various maturities to
2015 1,999 2,257,947
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
14.00%, with various maturities to
2016 $ 961 $ 1,102,878
14.50%, with various maturities to
2014 122 140,231
14.75%, with maturity at 2010 342 391,602
15.00%, with various maturities to
2013 447 524,424
15.25%, with maturity at 2012 38 44,725
15.50%, with various maturities to
2012 51 59,237
16.00%, with maturity at 2012 53 63,103
16.25%, with various maturities to
2012 101 120,939
-----------------------------------------------------------------------
$134,503,351
-----------------------------------------------------------------------
Federal National Mortgage Assn.:
0.25%, with maturity at 2014 41 33,035
3.50%, with maturity at 2007 40 37,281
5.00%, with various maturities to
2017 139 130,875
5.25%, with maturity at 2006 87 82,741
5.50%, with various maturities to
2006 70 67,981
5.75%, with maturity at 2003 10 10,387
6.00%, with various maturities to
2010 576 557,008
6.25%, with various maturities to
2007 135 133,749
6.50%, with various maturities to
2017 356 348,307
6.75%, with various maturities to
2007 168 167,110
7.00%, with various maturities to
2018 1,264 1,252,771
7.25%, with various maturities to
2017 1,630 1,623,608
7.50%, with various maturities to
2020 5,054 5,062,984
7.75%, with various maturities to
2008 530 532,119
8.00%, with various maturities to
2022 25,615 25,875,979
8.25%, with various maturities to
2025 10,440 10,608,101
8.50%, with various maturities to
2020 8,391 8,571,290
8.75%, with various maturities to
2017 601 615,851
9.00%, with various maturities to
2022 16,571 17,186,651
9.25%, with various maturities to
2016 1,938 2,016,617
9.50%, with various maturities to
2016 3,735 3,916,674
9.75%, with maturity at 2019 215 227,738
10.00%, with maturity at 2025 2,968 3,173,098
11.00%, with various maturities to
2020 1,721 1,871,783
11.50%, with various maturities to
2016 2,345 2,577,046
11.75%, with various maturities to
2017 1,535 1,695,856
12.00%, with various maturities to
2020 8,007 8,907,718
12.25%, with various maturities to
2015 1,344 1,499,043
12.50%, with various maturities to
2021 5,538 6,191,756
12.75%, with various maturities to
2014 715 798,059
13.00%, with various maturities to
2027 6,259 7,043,117
13.25%, with various maturities to
2015 965 1,097,330
13.50%, with various maturities to
2015 3,367 3,865,411
13.75%, with various maturities to
2014 75 86,314
14.00%, with various maturities to
2014 181 210,093
14.25%, with maturity at 2014 34 40,020
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
11
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
PORTFOLIO OF INVESTMENTS (UNAUDITED) CONT'D
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
14.50%, with various maturities to
2014 $ 105 $ 122,189
14.75%, with maturity at 2012 2,039 2,389,642
15.00%, with various maturities to
2013 2,159 2,551,878
15.50%, with maturity at 2012 372 442,903
15.75%, with maturity at 2011 13 15,160
16.00%, with maturity at 2012 132 158,972
-----------------------------------------------------------------------
$123,796,245
-----------------------------------------------------------------------
Government National Mortgage Assn.:
7.25%, with various maturities to
2022 2,160 2,171,329
7.50%, with maturity at 2017 472 479,770
8.00%, with various maturities to
2017 6,142 6,218,909
8.25%, with maturity at 2008 215 219,251
8.50%, with various maturities to
2018 1,056 1,083,060
9.00%, with maturity at 2011 234 244,540
11.50%, with maturity at 2013 105 115,087
12.00%, with various maturities to
2015 1,631 1,817,212
12.50%, with various maturities to
2019 7,502 8,419,906
13.00%, with various maturities to
2014 539 610,411
13.50%, with various maturities to
2012 137 156,192
14.00%, with maturity at 2015 33 38,900
14.50%, with various maturities to
2014 115 135,231
15.00%, with various maturities to
2013 391 464,853
16.00%, with various maturities to
2012 175 211,865
-----------------------------------------------------------------------
$ 22,386,516
-----------------------------------------------------------------------
Collateralized Mortgage Obligations:
Federal Home Loan Mortgage Corp.
Series B Class 3 100% FHLMC PC
Collateral, 12.50%, due 2013 65 69,613
Salomon Brothers Mortgage Securities
II, Inc., Series 1984-3, Class Z,
11.50%, due 2015 556 569,323
-----------------------------------------------------------------------
$ 638,936
-----------------------------------------------------------------------
Total Mortgage Pass-Throughs
(identified cost $287,701,712) $281,325,048
-----------------------------------------------------------------------
</TABLE>
U.S. TREASURY OBLIGATIONS -- 2.1%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
U.S. Treasury Bond, 7.125%, 2/15/23(2) $ 6,000 $ 6,668,460
-----------------------------------------------------------------------
Total U.S. Treasury Obligations
(identified cost, $6,328,094) $ 6,668,460
-----------------------------------------------------------------------
</TABLE>
SHORT-TERM INVESTMENTS -- 1.0%
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
SECURITY (000'S OMITTED) VALUE
<S> <C> <C>
-----------------------------------------------------------------------
Banque National De Paris Euro
Time-Deposit Cayman Island, 6.75%,
7/3/00 $ 3,200 $ 3,200,000
-----------------------------------------------------------------------
Total Short-Term Investments
(at amortized cost, $3,200,000) $ 3,200,000
-----------------------------------------------------------------------
Total Investments -- 115.9%
(identified cost $372,232,606) $364,192,168
-----------------------------------------------------------------------
Other Assets, Less Liabilities -- (15.9)% $(49,978,646)
-----------------------------------------------------------------------
Net Assets -- 100.0% $314,213,522
-----------------------------------------------------------------------
</TABLE>
(1) A portion of this security is on loan at June 30, 2000.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
SEE NOTES TO FINANCIAL STATEMENTS
12
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
<S> <C>
Assets
------------------------------------------------------
Investments, at value
(identified cost, $372,232,606) $364,192,168
Cash 65,824
Receivable for investments sold 930,641
Interest receivable 4,068,557
------------------------------------------------------
TOTAL ASSETS $369,257,190
------------------------------------------------------
Liabilities
------------------------------------------------------
Collateral for securities loaned $ 54,908,151
Payable for daily variation margin on
open financial futures contracts 61,262
Payable to affiliate for Trustees' fees 11,681
Accrued expenses 62,574
------------------------------------------------------
TOTAL LIABILITIES $ 55,043,668
------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $314,213,522
------------------------------------------------------
Sources of Net Assets
------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $323,600,305
Net unrealized depreciation (computed on
the basis of identified cost) (9,386,783)
------------------------------------------------------
TOTAL $314,213,522
------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 2000
<S> <C>
Investment Income
-----------------------------------------------------
Interest $13,513,991
Security lending income 634,127
-----------------------------------------------------
TOTAL INVESTMENT INCOME $14,148,118
-----------------------------------------------------
Expenses
-----------------------------------------------------
Investment adviser fee $ 1,207,923
Trustees fees and expenses 16,258
Custodian fee 78,311
Legal and accounting services 23,830
Interest expense 20,575
Miscellaneous 7,222
-----------------------------------------------------
TOTAL EXPENSES $ 1,354,119
-----------------------------------------------------
NET INVESTMENT INCOME $12,793,999
-----------------------------------------------------
Realized and Unrealized Gain (Loss)
-----------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $(2,610,882)
Financial futures contracts 499,620
-----------------------------------------------------
NET REALIZED LOSS $(2,111,262)
-----------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ 264,365
Financial futures contracts (1,638,354)
-----------------------------------------------------
NET CHANGE IN UNREALIZED
APPRECIATION (DEPRECIATION) $(1,373,989)
-----------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $(3,485,251)
-----------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 9,308,748
-----------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
13
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
INCREASE (DECREASE) JUNE 30, 2000 YEAR ENDED
IN NET ASSETS (UNAUDITED) DECEMBER 31, 1999
<S> <C> <C>
-----------------------------------------------------------------------------
From operations --
Net investment income $ 12,793,999 $ 30,329,400
Net realized loss (2,111,262) (11,191,123)
Net change in unrealized
appreciation (depreciation) (1,373,989) (15,566,780)
-----------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 9,308,748 $ 3,571,497
-----------------------------------------------------------------------------
Capital transactions --
Contributions $ 21,926,011 $ 96,382,421
Withdrawals (62,221,185) (175,764,765)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM
CAPITAL TRANSACTIONS $ (40,295,174) $ (79,382,344)
-----------------------------------------------------------------------------
NET DECREASE IN NET ASSETS $ (30,986,426) $ (75,810,847)
-----------------------------------------------------------------------------
Net Assets
-----------------------------------------------------------------------------
At beginning of period $ 345,199,948 $ 421,010,795
-----------------------------------------------------------------------------
AT END OF PERIOD $ 314,213,522 $ 345,199,948
-----------------------------------------------------------------------------
</TABLE>
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 2000
INCREASE (DECREASE) IN CASH (UNAUDITED)
<S> <C>
----------------------------------------------------------
Cash Flows From (Used For) Operating
Activities --
Purchase of investments $ (13,493,333)
Proceeds from sales of investments
and principal repayments 42,463,628
Interest received, including net
securities lending income 14,354,537
Interest paid (20,575)
Operating expenses paid (1,350,081)
Net increase in short-term
investments (3,200,000)
Financial futures contracts
transactions 663,999
Net repayments for securities lending 3,408,350
Increase in unrealized gain/loss from
futures transactions (1,638,354)
----------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES $ 41,188,171
----------------------------------------------------------
Cash Flows From (Used For) Financing
Activities --
Proceeds from capital contributions $ 21,926,011
Payments for capital withdrawals (62,221,185)
Demand note payable (800,000)
----------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES $ (41,095,174)
----------------------------------------------------------
NET DECREASE IN CASH $ 92,997
----------------------------------------------------------
CASH AT BEGINNING OF YEAR $ (27,173)
----------------------------------------------------------
CASH AT END OF YEAR $ 65,824
----------------------------------------------------------
Reconciliation of Net Increase in Net Assets
From Operations to Net Cash From
Operating Activities
----------------------------------------------------------
Net increase in net assets from
operations $ 9,308,748
Decrease in receivable for investments
sold 278,047
Decrease in interest receivable 248,837
Decrease in variation margin 164,379
Increase in payable to affiliate 4,576
Decrease in accrued expenses (21,113)
Increase in collateral securities loaned 3,408,350
Net decrease in investments 27,796,347
----------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES $ 41,188,171
----------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 --------------------------------------------------------
(UNAUDITED) 1999 1998 1997 1996 1995
<S> <C> <C> <C> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------------------------
Ratios (As a percentage of
average daily net assets):
Operating expenses 0.83%(1) 0.83% 0.82% 0.83% 0.82% 0.82%
Interest expense 0.01%(1) 0.02% 0.07% -- -- --
Net investment income 7.95%(1) 7.79% 7.85% 7.95% 7.88% 7.82%
Portfolio Turnover 4% 18% 48% 20% 11% 19%
--------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(000'S OMITTED) $314,214 $345,200 $421,011 $433,107 $455,523 $521,789
--------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Annualized.
Certain prior year ratios have been restated to conform to current year
presentation.
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
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.
The Portfolio which was organized as a trust under the laws of the State of
New York in 1992, seeks to achieve a high current return by investing
primarily in mortgaged-backed securities (MBS) issued, backed or otherwise
guaranteed by the U.S. government or its agencies or instrumentalities. 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 at least 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
investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction
or credit.
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 six months ended June 30, 2000, $59
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.
16
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 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.
K Interim Financial Statements -- The interim financial statements relating to
June 30, 2000 and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the
Portfolio'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 $13,493,333, $6,411,666 and $36,051,962,
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 six months ended June 30,
2000, the fee was equivalent to 0.75% (annualized) of the Portfolio's average
net assets for such period and amounted to $1,207,923. 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, 2000, no
significant amounts have been deferred.
Certain officers and Trustees of the Portfolio are officers of the above
organizations.
17
<PAGE>
GOVERNMENT OBLIGATIONS PORTFOLIO AS OF JUNE 30, 2000
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
4 Line of Credit
-------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR and
EVM and its affiliates in a $150 million unsecured line of credit agreement
with a group of banks. Borrowing will be made by the Portfolio solely to
facilitate the handling of unusual and/or unanticipated short term cash
requirements. Interest is charged to each participating portfolio or fund
based on its borrowings at an amount above either 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 Portfolio
did not have any significant borrowings or allocated fees during the six
months ended June 30, 2000. The average daily loan balance for the six months
ended June 30, 2000 was $625,824 and the average interest rate was 6.61%.
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 $1,617,632 for the
six months ended June 30, 2000. At June 30, 2000, the value of the securities
loaned and the value of the collateral amounted to approximately $55,000,000
and $54,908,000, 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 June 30, 2000 as computed on a federal income tax basis,
were as follows:
<TABLE>
<S> <C>
AGGREGATE COST $371,991,413
------------------------------------------------------
Gross unrealized appreciation $ 1,053,772
Gross unrealized depreciation (8,853,017)
------------------------------------------------------
NET UNREALIZED DEPRECIATION $ (7,799,245)
------------------------------------------------------
</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 Portfolio 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, 2000 is as follows:
<TABLE>
<CAPTION>
FUTURES CONTRACTS
-------------------------------------------------------------------------------------
EXPIRATION NET UNREALIZED
DATE(S) CONTRACTS POSITION DEPRECIATION
<S> <C> <C> <C>
-------------------------------------------------------------------------------------
9/00 560 US Treasury Five Year Note Futures Short (1,346,345)
</TABLE>
At June 30, 2000, the Portfolio had sufficient cash and/or securities to
cover margin requirements on any open futures contracts.
18
<PAGE>
EATON VANCE GOVERNMENT OBLIGATIONS FUND AS OF JUNE 30, 2000
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. 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 of the Board,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
Jack L. Treynor
Investment Adviser and Consultant
19
