Investment Adviser of National
Limited Maturity Tax Free Portfolio
Boston Management and Research
24 Federal Street
Boston, MA 02110
Administrator of EV Traditional National
Limited Maturity Tax Free Fund
Eaton Vance Management
24 Federal Street
Boston, MA 02110
Principal Underwriter
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
Custodian
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
Transfer Agent
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
Independent Auditors
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EV Traditional National
Limited Maturity Tax Free Fund
24 Federal Street
Boston, MA 02110
T-LNASRC
EV Traditional
National
Limited Maturity
Tax Free Fund
[Photograph of Front Porch]
Annual
Shareholder report
March 31, 1995
<PAGE>
To Shareholders
EV Traditional National Limited Maturity Tax Free Fund had a total return of
3.5 percent for the period from inception on June 3, 1994 through March 31,
1995. That return was the result of a decline in net asset value per share to
$9.93 on March 31, 1995 from $10.00 on June 3, 1994, 1994, and the
reinvestment of $0.405 per share in dividends. That return does not include
the Fund's maximum current sales charge. Based on the Fund's most recent
dividend and a net asset value of $9.93, the Fund had a distribution rate of
4.93 percent at March 31. To equal that in a taxable investment, a couple
paying the 36 percent federal tax rate would need a yield of 7.70 percent.
During 1994 the economy remained stronger than economists and money managers
had anticipated at the start of the year. In response to this strength, and
in an attempt to keep inflation in check, the Federal Reserve raised
short-term interest rates six times in 1994 and once again in 1995. Long-term
rates moved upward as well and, as a result, the prices of municipal bonds
dropped.
But the market slide was not the only concern in 1994. Many shareholders of
Eaton Vance tax-free mutual funds may have wondered whether the problems that
surfaced in Orange County, California, had in any way affected their
investment. The answer is no, because the market realized that this was a
local problem.
Despite the difficulties that beset the market in 1994, we feel optimistic
about the prospects for 1995. The market now appears convinced that the
Federal Reserve is, in fact, keeping a tight watch on inflation. And, while
it is impossible to predict the outcomes of government initiatives, it
appears that proposals put forth by the new Congress to cut spending and
taxes could have an overall positive effect if enacted.
This report features some changes which we hope will help you to better
understand your investment, and how your Portfolio's holdings help provide
the means for the Federal government, as well as state and local governments,
to fund such projects as roads, bridges, hospitals and schools. We have
included a Portfolio Overview, or snapshot, as well as an interview with the
portfolio manager. In addition, we are profiling a specific
bond holding.
Regardless of what lies ahead for the economy, the goal of your Fund remains
the same:to provide you with a competitive distribution of tax-free income
from a portfolio of high-quality municipal bonds.+
Sincerely,
(signature of Thomas J. Fetter)
Thomas J. Fetter
President
May 19, 1995
[Photograph of Thomas J. Fetter]
Federal income tax
information on distributions...
For Federal income tax purposes, 99.93% of the total dividends paid by the
Fund from net investment income during the fiscal year ended March 31, 1995,
is designated as an exempt-interest dividend.
+ A portion of the Portfolio's income could be subject to Federal alternative
minimum tax
1
<PAGE>
Management Discussion
An interview with Raymond E. Hender, Vice President, and Portfolio Manager of
the National Limited Maturity Tax Free Portfolio.
Q. Ray, how would you describe the intermediate market of the past year?
R.H.: All municipal markets were battered in 1994, and the impact was
felt in the intermediate range of the market as well. According to
Municipal Market Data Inc., yields for 10-year municipal bonds rose from
5.35 percent at March 31, 1994 to 6.30 percent at their peak in
November, 1994, a 95 basis point increase. And five-year municipal
yields rose from 4.80 percent to 5.75 percent, also a 95 basis point
rise, in the same period. From those peak levels in November, 10-year
yields have since declined back to 5.35 percent, and 5-year yields to
4.95 percent at March 31, 1995. Interestingly, in the period since bond
yields reached their peaks in November 1994, they have regained much of
the ground lost in the previous market sell-off.
Q. Have investors continued to embrace the intermediate market?
R.H.: The intermediate range of the market was very attractive to
investors in the midst of the market turbulence of last year. Many
investors sought to shorten their durations and protect the value of
their portfolios. Another factor at work during the market sell-off was an
availability of higher quality bonds in the intermediate sector. That
brought many quality-conscious investors to the intermediate market.
Q. How did the market volatility affect your strategy?
R.H.: The Portfolio has always been somewhat cautious in its investment
style, and hence, was relatively well-positioned when the market started
to deteriorate. The premium, or cushion, bond holdings in the Portfolio
were part of a defensive strategy that served the Portfolio quite well.
We maintained a duration in the mid-to-lower part of our duration range
- around 5 years at March 31 - which limited the impact of rising rates
on the Portfolio. And finally, we took advantage of the opportunity to
improve the quality of the Portfolio as the market deteriorated.
Q. How does a shorter duration help to limit the Portfolio's volatility?
R.H.: Because duration measures the timing of cash flows from coupon
payments over the life of a bond, it provides an approximation of the
expected change in price of a bond from a given change in interest rate.
The average duration of a municipal bond fund provides a similar
approximation of the fund's volatility. A fund with a short duration,
such as our Portfolio, will be less responsive to interest rate
(photo of Raymond E. Hender)
2
<PAGE>
changes than a fund with a long duration. That's an important
consideration for investors who want to limit volatility in their
investments. In addition, we made a deliberate effort during this period
to consolidate our holdings within the Portfolio. Over time, we hope to
reduce the number of individual holdings in the Portfolio. That helps to
improve the liquidity of the Portfolio.
Q. What sectors offered special value in the market?
R.H.: Insured bonds and escrowed bonds offered especially good value in
this market. Even though insured bonds - which are insured as to
principal and interest payments by one of the major municipal bond
insurers - are top quality issues, they tend to trade in the A-to-Aa
range because of unusually large volume. Therefore, these bonds offer
especially attractive yields as well as the added liquidity that comes
with insurance. Of course, private insurance does not remove the market
risks associated with this investment.
Q. And what are escrowed bonds?
R.H.: Escrowed bonds are bonds that have been pre-refunded by the issuers
to take advantage of a lower interest rate environment. Refundings hit
the market in large supply in 1992 and 1993 as interest rates declined
sharply. The large number of refundings created a huge supply on the
market and an unusual opportunity in the intermediate range of the
market. For example, a bond with a maturity of 2020 that was refunded to
its call date in 2000 will trade to its 2000 call date. That in effect adds
supply to the intermediate term range of the market and an opportunity to
gain yield in that sector.
Q. How did escrowed bonds perform during the period?
R.H.: As investors sought higher quality issues for their Portfolios,
escrowed bonds performed well throughout the year. They are perceived as
higher quality issues by investors because the escrow agreements
typically stipulate that the collateral consist of 100 percent U.S.
Treasury securities. In addition, as debt issued during periods when
rates were significantly higher, they typically have higher coupons.
Therefore, investors have favored escrowed bonds in this environment.
Q. Looking ahead, what is your outlook for the intermediate-term market?
R.H.: While the economy has continued to grow and companies are
registering strong earnings reports, there have been some incremental
signs of weakening. First quarter GDP grew at a 2.8 percent annualized
rate, the slowest pace since 1993. Inventories are up and consumer
spending is down. As we noted earlier, the yield curve has flattened
considerably. We believe a weak economy and a flat yield curve suggest
that the intermediate-term segment of the bond market offers value. Of
course, there is no guarantee that past trends will be repeated in the
future. But for risk-averse investors who want a competitive level of
tax-free income, the intermediate range merits attention.
3
<PAGE>
Your investment at work
Texas A&M University
Revenue
Refunding Bonds
[Logo of graduation cap]
Texas A&M University is a highly-regarded educational institution, with a
strong faculty and a competitive student population. The net proceeds of
these bonds were used to pre-refund outstanding principal and interest
payments of previously issued Texas A&M bonds.The University has pledged its
full faith and credit to back the bonds. Principal and interest payments will
be paid by revenues generated by the University. The bonds are rated AA and
have a coupon of 7 percent. They represent an above average yield from a
well-regarded issuer.
Portfolio Overview
Based on market value as of March 31, 1995
Number of issues............................. 111
Average quality............................... AA
Investment grade........................... 94.4%
Effective maturity..................... 5.39 yrs.
Largest sectors:
General obligations................... 17.0%
Escrowed.............................. 12.0
Education revenue..................... 11.3
Utility revenue........................ 9.4
Hospitals.............................. 5.7
The National Economy:
The nation's economy has remained relatively robust in the past year as
inflation remained well under control. The Federal Reserve maintained a close
watch on inflation, raising interest rates through much of 1994. Inflation
for all of 1994 averaged only 2.4 percent, a sign that the Fed's actions were
having their desired effect. Unemployment remained low - 5.5 percent in March
- and averaged just 5.4 percent in 1994. Meanwhile, factory capacity remained
high - at 85.7 percent in March. Late in the year, there were some
incremental signs of a slowdown.
Third quarter gross domestic product slowed to a 2.8 percent growth rate, the
slowest pace since 1993. Elsewhere, consumer spending showed some signs of
weakness. Nonetheless, corporate earnings remained sound, with late cycle
companies registering strong growth. The dollar weakened significantly during
the period, falling more than 20 percent in the first quarter of 1995 alone.
While a weak dollar suggested help for the nation's exporters, it engendered
concerns among investors and inflation watchers that import prices could push
inflation higher.
4
<PAGE>
Comparison of change in Value of a $10,000 Investment in EV Traditional National
Limited Maturity Tax Free Fund (With and Without Sales Charge) and the Lehman
Brothers 7-Year Municipal Bond Index
From June 30, 1994, through March 31, 1995
CUMULATIVE Life of
TOTAL RETURN Fund*
With maximum 4.75% sales charge 0.9%
Without maximum sales charge 3.5%
<TABLE>
<CAPTION>
(Graphic--Line Chart)
date EV Limited Maturity EV Limited Maturity Lehman brothers 7-Year
Tax Free Fund at NAV Tax Free Fund with sales charge Municipal Bond Index
<S> <C> <C> <C>
6/94 10000 9753 10000
7/94 10133 9883 10141
8/94 10165 9914 10194
9/94 10074 9825 10096
10/94 9983 9737 9995
11/94 9881 9637 9849
12/94 10037 9790 9999
1/95 10205 9953 10186
2/95 10369 10113 10415
3/95 10434 10176 10524
</TABLE>
(end line graph}
Past performance is not indicative of future results. Investment returns and
principal will fluctuate so that an investor's shares, when redeemed, may be
worth more or less than their original cost. Source: Towers Data Systems,
Bethesda, MD.
*Investment operations commenced on 6/3/94
The total return figures
The blue line on the chart represents the Fund's performance at net asset
value. The Fund's total return figure reflects Fund expenses and transaction
costs, and assumes the reinvestment of income dividends and capital gain
distributions.
The black line represents the performance of the Lehman Brothers 7-Year
Municipal Bond Index, an unmanaged index of high yield bonds. The Index's
total return does not reflect any commissions or expenses that would be
incurred if an investor individually purchased or sold the securities
represented in the Index.
Fund performance
In accordance with guidelines issued by the Securities and Exchange
Commission, we are including a performance chart that compares your Fund's
total return with that of a broad-based investment index. The lines on the
chart represent the total returns of $10,000 hypothetical investments in EV
Traditional National Limited Maturity Tax Free Fund, with and without the
maximum sales charge, and the unmanaged Lehman Brothers 7-Year Municipal Bond
Index.
5
<PAGE>
EV Traditional National Limited Maturity Tax Free Fund
Financial Statements
Statement of Assets and Liabilities
March 31, 1995
<TABLE>
<S> <C> <C>
Assets:
Investment in National Limited Maturity Tax Free Portfolio, at value (Note 1A)
(identified cost, $7,715,723) $7,800,743
Receivable from the Administrator (Note 4) 33,570
Deferred organization expenses (Note 1D) 31,779
----------
Total assets $7,866,092
Liabilities:
Dividends payable $30,075
Payable to affiliate--Custodian fee 82
Accrued expenses 40,632
-------
Total liabilities 70,789
----------
Net Assets for 785,166 shares of beneficial interest $7,795,303
==========
Sources of Net Assets:
Paid-in capital $7,703,323
Accumulated net realized gain on investment and financial futures transactions (computed
on the basis of identified cost) 7,639
Accumulated distributions in excess of net investment income (679)
Unrealized appreciation of investments and financial futures contracts from
Portfolio
(computed on the basis of identified cost) 85,020
----------
Total $7,795,303
==========
Net Asset Value and Redemption Price Per Share
($7,795,303 / 785,166 shares of beneficial interest outstanding) $9.93
=====
Computation of Offering Price Per Share
offering price per share (100/97.50 of $9.93) $10.18
======
On sales of $100,000 or more, the offering price is reduced.
</TABLE>
See notes to financial statements
6
<PAGE>
Statement of Operations
For the period from the start of business, June 3, 1994, to March 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
Investment Income (Note 1B):
Interest income allocated from Portfolio $ 79,855
Expenses allocated from Portfolio (7,978)
--------
Net investment income from Portfolio $ 71,877
Expenses--
Custodian fees (Note 4) $ 749
Printing and postage 21,800
Amortization of organization expenses (Note 1D) 5,815
Registration costs 3,750
Transfer and dividend disbursing agent fees 1,148
Legal and accounting services 525
Miscellaneous 581
-------
Total expenses $34,368
Deduct allocation of expenses to the Administrator (Note 4) 33,570
-------
Net expenses 798
--------
Net investment income $ 71,079
--------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) from Portfolio--
Investment transactions (identified cost basis) $ 7,757
Financial futures contracts (118)
-------
Net realized gain $ 7,639
Unrealized appreciation of investments 85,020
--------
Net realized and unrealized gain $ 92,659
--------
Net increase in net assets from operations $163,738
========
</TABLE>
See notes to financial statements
7
<PAGE>
Financial Statements (continued)
Statement of Changes in Net Assets
For the period from the start of business, June 3, 1994, to March 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Increase (Decrease) in Net Assets:
From operations--
Net investment income $ 71,079
Net realized gain on investments 7,639
Unrealized appreciation of investments 85,020
----------
Net increase in net assets from operations $ 163,738
----------
Distributions to shareholders (Note 2)--
From net investment income $ (71,079)
In excess of net investment income (679)
----------
Total distributions to shareholders $ (71,758)
----------
Transactions in shares of beneficial interest (Note 3)--
Proceeds from sales of shares $7,741,061
Net asset value of shares issued to shareholders in payment of distributions declared 10,456
Cost of shares redeemed (48,204)
----------
Increase in net assets from Fund share transactions $7,703,313
----------
Net increase in net assets $7,795,293
Net Assets:
At beginning of period 10
----------
At end of period (including distributions in excess of net investment income of $679) $7,795,303
==========
</TABLE>
See notes to financial statements
8
<PAGE>
Financial Highlights
For the period from the start of business, June 3, 1994, to March 31, 1995
<TABLE>
<CAPTION>
<S> <C>
Net asset value, beginning of period $10.000
-------
Income from operations:
Net investment income $ 0.402
Net realized and unrealized loss on investments (0.066)++
-------
Total income from operations $ 0.336
-------
Less distributions:
From net investment income $(0.402)
In excess of net investment income (0.004)
-------
Total distributions $(0.406)
-------
Net asset value, end of period $ 9.930
=======
Total Return( (1)) 3.48%
Ratios/Supplemental Data*:
Net assets, end of period (000 omitted) $ 7,795
Ratio of net expenses to average daily net assets( (2)) 0.58%+
Ratio of net investment income to average daily net assets 4.68%+
*For the period from the start of business, June 3, 1994, to March 31, 1995, the operating expenses
of the Fund reflect an allocation of expenses to the Administrator. Had such action not been taken,
net investment income per share and the ratios would have been as follows:
Net investment income per share $ 0.212
=======
Ratios (As a percentage of average daily net assets):
Expenses( (2)) 2.79%+
Net investment income 2.47%+
</TABLE>
+ Computed on an annualized basis.
++ The per share amount is not in accord with the net realized and unrealized
gain (loss) for the period because of timing of sales of Fund shares and the
amount of per share realized and unrealized gains and losses at such time.
(1) Total investment return is calculated assuming a purchase at the net
asset value on the first day and a sale at the net asset value on the last
day of each period reported. Dividends and distributions, if any, are assumed
to be reinvested at the net asset value on the payable date. Total return is
computed on a nonannualized basis.
(2)Includes the Fund's share of National Limited Maturity Tax Free
Portfolio's allocated expenses.
See notes to financial statements
9
<PAGE>
Notes to Financial Statements
(1) Significant Accounting Policies
EV Traditional National Limited Maturity Tax Free Fund (the Fund) is a
diversified series of Eaton Vance Investment Trust (the Trust). The Trust is
an entity of the type commonly known as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an
open-end management investment company. The Fund invests all of its
investable assets in interests in the National Limited Maturity Tax Free
Portfolio (the Portfolio), a New York Trust, having the same investment
objective as the Fund. The value of the Fund's investment in the Portfolio
reflects the Fund's proportionate interest in the net assets of the Portfolio
(4.6% at March 31, 1995). The performance of the Fund is directly affected by
the performance of the Portfolio. The financial statements of the Portfolio,
including the portfolio of investments, are included elsewhere in this report
and should be read in conjunction with the Fund's financial statements. The
following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. Investment Valuation--Valuations of securities by the Portfolio is
discussed in Note 1 of the Portfolio's Notes to Financial Statements which
are included elsewhere in this report.
B. Income--The Fund's net investment income consists of the Fund's pro rata
share of the net investment income of the Portfolio, less all actual and
accrued expenses of the Fund determined in accordance with generally accepted
accounting principles.
C. Federal Taxes--The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders each year all of its taxable and tax-exempt
income, including any net realized gain on investments. Accordingly, no
provision for federal income or excise tax is necessary. At March 31, 1995,
the Fund, for federal income tax purposes, had a capital loss carryover of
$891 which will reduce the Fund's taxable income arising from future net
realized gain on investments, if any, to the extent permitted by the Internal
Revenue Code, and thus will reduce the amount of distributions to
shareholders which will otherwise be necessary to relieve the Fund of any
liability for federal income taxes. Such capital loss carryover will expire
on March 31, 2003. Dividends paid by the Fund from net interest on tax-exempt
municipal bonds allocated from the Portfolio are not includable by
shareholders as gross income for federal income tax purposes because the Fund
and Portfolio intend to meet certain requirements of the Internal Revenue
Code applicable to regulated investment companies which will enable the Fund
to pay exempt-interest dividends. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986, may be
considered a tax preference item to shareholders.
D. Deferred Organization Expenses--Costs incurred by the Fund in connection
with its organization, including registration costs, are being amortized on
the straight-line basis over five years.
E. Other--Investment transactions are accounted for on a trade date basis.
10
<PAGE>
(2) Distributions to Shareholders
The net income of the Fund is determined daily and substantially all of the
net income so determined is declared as a dividend to shareholders of record
at the time of declaration. Distributions are paid monthly. Distributions of
allocated realized capital gains, if any, are made at least annually.
Shareholders may reinvest capital gain distributions in additional shares of
the Fund at the net asset value as of the ex-dividend date. Distributions are
paid in the form of additional shares or, at the election of the shareholder,
in cash. The Fund distinguishes between distributions on a tax basis and a
financial reporting basis. Generally accepted accounting principles require
that only distributions in excess of tax basis earnings and profits be
reported in the financial statements as a return of capital. Differences in
the recognition or reclassification of income between the financial
statements and tax earnings and profits which result in temporary over
distributions for financial statements purposes are classified as
distributions in excess of net investment income or accumulated net realized
gains. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
(3) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares for the period from the start of business, June
3, 1994, to March 31, 1995, were as follows:
<TABLE>
<S> <C>
Sales 789,126
Issued to shareholders electing to receive payments of distributions in Fund shares 1,066
Redemptions (5,027)
-------
Net increase 785,165
=======
</TABLE>
(4) Transactions with Affiliates
Eaton Vance Management (EVM) serves as the administrator of the Fund, but
receives no compensation. The Portfolio has engaged Boston Management and
Research (BMR), a subsidiary of EVM, to render investment advisory services.
See Note 2 of the Portfolio's Notes to Financial Statements which are
included elsewhere in this report. To enhance the net income of the Fund,
$33,570 of expenses related to the operation of the Fund were allocated to
EVM. Except as to Trustees of the Fund and the Portfolio who are not members
of EVM's or BMR's organization, officers and Trustees receive remuneration
for their services to the Fund out of such investment adviser fee. Investors
Bank & Trust Company (IBT), an affiliate of EVM, serves as custodian to the
Fund and the Portfolio. Pursuant to the respective custodian agreements, IBT
receives a fee reduced by credits which are determined based on the average
cash balances the Fund or the Portfolio maintains with IBT. Certain of the
officers and Trustees of the Fund and of the Portfolio are officers and
directors/trustees of the above organizations (Note 5).
11
<PAGE>
Notes to Financial Statements (Continued)
(5) Service Plan
The Fund adopted a service plan on April 14, 1994 designed to meet the
requirements of Rule 12b-1 under the Investment Company Act of 1940 and the
service fee requirements of the revised sales charge rule of The National
Association of Securities Dealers, Inc. The Service Plan provides that the
Fund may make service fee payments to the Principal Underwriter, Eaton Vance
Distributors, Inc. (EVD), a subsidiary of Eaton Vance Management, Authorized
Firms or other persons in amounts not exceeding 0.25% of the Fund's average
daily net assets for any fiscal year. The Trustees have initially implemented
the Plan by authorizing the Fund to make quarterly service fee payments to
the Principal Underwriter and Authorized Firms in amounts not exceeding 0.15%
of the Fund's average daily net assets for any fiscal year which is
attributable to shares of the Fund sold by such persons and remaining
outstanding for at least one year. Service fee payments are made for personal
services and/or the maintenance of shareholder accounts. No provision for
service fee payments was made for the period from the start of business, June
3, 1994, to March 31, 1995.
Certain of the officers and Trustees of the Funds are officers or directors
of EVD.
(6) Investment Transactions
Increases and decreases in the Fund's investment in the Portfolio for the period
from the start of business, June 3, 1994, to March 31, 1995 aggregated
$7,742,783 and $106,576, respectively.
12
<PAGE>
Independent Auditors' Report
To the Trustees and Shareholders of
Eaton Vance Investment Trust:
We have audited the accompanying statement of assets and liabilities of EV
Traditional National Limited Maturity Tax Free Fund (one of the series
constituting the Eaton Vance Investment Trust) as of March 31, 1995, and the
related statement of operations, the statement of changes in net assets and
financial highlights for the period from the start of business, June 3, 1994,
to March 31, 1995. These financial statements and financial highlights are
the responsibility of the Trust's management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of EV Traditional
National Limited Maturity Tax Free Fund series of the Eaton Vance Investment
Trust at March 31, 1995, the results of its operations, the changes in its
net assets, and its financial highlights for the period from the start of
business, June 3, 1994, to March 31, 1995, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 5, 1995
13
<PAGE>
National Limited Maturity Tax Free Portfolio
Portfolio of Investments
March 31, 1995
<TABLE>
<CAPTION>
Tax-Exempt Investments--100%
Ratings (unaudited)
-------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ----------- -------- -----
<S> <C> <C> <C> <C>
Education Revenue--11.3%
Aa NR $1,500 Arizona Educational Loan Marketing Corporation, (AMT), 6.00%,
9/1/01 $ 1,531,800
A NR 1,000 Arizona Student Loan Acquisition Authority, (AMT), 7.625%,
5/1/10 1,086,570
Baa NR 500 Louisiana Public Facilities Authority, Louisiana Association of
Independent Colleges & Universities, 6.20%, 12/1/99 506,380
A NR 1,770 Louisiana Public Facilities Authority Student Loan Revenue
Bonds, (AMT), 7.00%, 9/1/06 1,861,863
A A- 1,275 Massachusetts Industrial Financing Agency, Clark University,
6.80%, 7/1/06 1,364,837
A1 A+ 1,730 Massachusetts Health and Educational Facilities Authority,
Tufts University Issue, 7.40%, 8/1/18 1,856,567
Aa AA 1,615 Metropolitan Government Nashville & Davidson Counties,
Tennessee, Health & Education Facilities, (Vanderbilt Univ.),
7.625%, 5/1/08 1,746,929
Aaa NR 1,000 The New England Education Loan Marketing Corporation, 5.80%,
3/1/02 1,025,040
Baa1 BBB+ 250 New York Dormitory Authority, State University Education
Facilities, 7.00%, 5/15/02 265,793
A1 A+ 1,000 State of New York Dormitory Authority, University of Rochester,
6.50%, 7/1/09 1,033,010
A1 AA 1,000 Texas A & M University Revenue Bonds, 7.00%, 5/15/09 1,074,140
A NR 1,610 The State of Texas, Texas College Student Loan Senior Lien,
7.45%, 10/1/06 1,732,376
Aa1 AA 2,000 University of Texas Financing System, 7.00%, 8/15/07 2,192,880
NR AA 1,500 Wyoming Student Loan Corporation, 6.25%, 12/1/99 1,552,920
-----------
$18,831,105
-----------
Escrowed--12.0%
Aaa AA $1,000 Arizona Transportation Board Subordinated Highway Revenue
Bonds, Prerefunded to 7/1/02, 6.50%, 7/1/08 $ 1,094,120
Aaa AAA 2,000 DuPage County, Illinois, (Stormwater Project), Prerefunded to
1/1/02, 6.55%, 1/1/21 2,185,820
Aaa AAA 4,000 City of Houston, Texas, (Water and Sewer System Prior Lien),
Prerefunded to 12/1/00, 7.40%, 12/1/18 4,517,040
NR NR 1,275 Jefferson County, Alabama, Unlimited Tax Warrant, Prerefunded
to 4/1/99, 6.40%, 4/1/09 1,350,174
Aaa A+ 2,000 The Commonwealth of Massachusetts, Prerefunded to 8/1/01,
6.75%, 8/1/06 2,210,920
14
<PAGE>
Tax-Exempt Investments (Continued)
Ratings (unaudited)
------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ------------- -------- -----
Escrowed--(Continued)
Aaa NR 1,500 Metropolitan Atlanta Rapid Transit Authority of Georgia,
Prerefunded to 7/1/98, 7.75%, 7/1/05 1,659,015
Aaa AAA 1,000 Rhode Island Depositors Economic Protection Corporation,
(MBIA), Prerefunded to 8/1/01, 6.70%, 8/1/04 1,099,930
Aaa AAA 1,350 Schuykill County, Pennsylvania, Redevelopment Authority,
(AMBAC), Prerefunded to 6/1/01, 6.75%, 6/1/02 1,475,186
Aaa A+ 1,000 Southern Minnesota Municipal Power Agency, Prerefunded to
1/1/96, 6.75%, 1/1/13 1,037,160
Aaa AAA 3,000 Western Michigan University, (AMBAC), Prerefunded to 7/15/01,
6.50%, 7/15/21 3,274,950
-----------
$19,904,315
-----------
General Obligations--17.0%
Aa AA $2,150 Arlington, Texas, Permanent Improvement, 6.00%, 8/15/01 $ 2,253,737
Aaa AAA 1,500 Austin Independent School District of Travis County, Texas,
5.20%, 8/1/01 1,508,700
Aaa AA+ 1,500 Baltimore County, Maryland, 6.00%, 7/1/05 1,586,955
Aaa AAA 1,000 Dallas County, Texas, Unlimited Tax (Road Improvement), 6.50%,
8/15/08 1,041,520
Aa1 AAA 1,000 City of Dallas, Texas (Dallas County), 5.75%, 5/1/02 1,008,170
Aa1 AAA 2,000 City of Dallas, Texas (Dallas, Denton and Collin Counties),
5.90%, 2/15/01 2,078,940
Aa1 AAA 1,450 City of Dallas, Texas (Dallas, Denton and Collin Counties),
5.90%, 2/15/02 1,511,175
Aaa AA+ 2,000 State of Georgia, 5.95%, 3/1/01 2,103,220
Aaa AA+ 1,000 State of Georgia, 6.00%, 3/1/04 1,062,210
Baa1 A- 1,000 New York City, 6.00%, 8/1/00 1,007,120
Aa A+ 975 Pima County, Arizona, 6.20%, 7/1/99 1,023,974
A1 AA- 3,500 State of Rhode Island and Providence Plantations, 6.00%,
5/15/01 3,602,235
Aa AA 1,200 Texas Public Finance Authority, 5.375%, 10/1/00 1,223,064
Aa AA 3,000 State of Texas, Veterans Program, (AMT), 7.625%, 12/1/13 3,274,230
NR NR 3,950 Youngstown, Ohio County School District, 6.40%, 7/1/00 3,994,872
-----------
$28,280,122
-----------
Health Care--1.5%
Baa BBB $1,500 Colorado Health Facilities Authority, (Rocky Mountain Adventist
Project), 6.00%, 2/1/98 $ 1,506,375
NR NR 1,000 Vermont Industrial Development Authority, (Wake Robins Corp
Project), 8.00%, 4/1/99 1,021,230
-----------
$ 2,527,605
-----------
15
<PAGE>
Portfolio of Investments (continued)
Tax-Exempt Investments (Continued)
Ratings (unaudited)
-------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ------------- -------- -----
Hospitals--5.7%
A1 AA- $1,500 Anchorage, Alaska, Hospital Revenue Bonds, (Sisters of
Providence Project), 6.75%, 10/1/00 $1,599,375
A1 AA- 1,400 California Health Facilities Financing Authority, (Sisters of
Providence), 7.50%, 10/1/10 1,521,226
A A 1,385 Kent County, Michigan, Hospital Finance Authority, (Blodgett
Memorial Medical Center), 7.25%, 7/1/05 1,479,374
NR BBB+ 575 County of Lucas, Ohio, Hospital Facilities (Flower Hospital),
5.70%, 12/1/00 564,357
NR BBB+ 425 County of Lucas, Ohio, Hospital Facilities (Flower Hospital),
5.80%, 12/1/01 418,302
Baa1 BBB 500 Massachusetts Health and Educational Facilities Authority,
(Sisters of Providence Health System), 6.00%, 11/15/00 499,490
NR A- 500 Massachusetts Health and Educational Facilities Authority,
(Melrose-Wakefield Hospital), 5.70%, 7/1/00 493,955
Aa AA 300 North Central Texas Health Facilities Development Corporation,
(Baylor Health Care System Project), 6.00%, 5/15/02 310,305
A BBB+ 500 St. John's County, Florida, Industrial Development Authority,
(Flagler Hospital Project), 5.60%, 8/1/01 500,745
Aa AA 700 Virginia Beach, Virginia, Development Authority, (Sentara
Bayside Hospital), 5.65%, 11/1/98 717,416
Aa AA 610 The Rector and Visitors of the University of Virginia, Hospital
Revenue Bonds, 7.00%, 6/1/10 646,911
A1 A+ 375 Wisconsin Health and Educational Facilities Authority, (St.
Catherine's Hospital, Inc. Project), 5.80%, 11/15/02 374,063
A1 A+ 365 Wisconsin Health and Educational Facilities Authority, (St.
Catherine's Hospital, Inc. Project), 5.70%, 11/15/01 364,179
-----------
$9,489,698
-----------
Housing--5.1%
Aa AA $2,250 Connecticut Housing Finance Authority, (Housing Mortgage
Finance Program), 6.90%, 11/15/98 $2,365,830
Aa AA+ 3,500 Minnesota Housing Finance Agency, (Single Family Mortgage
Bonds), 7.55%, 7/1/04 (1) 3,789,835
NR A+ 1,000 New Jersey Housing and Mortgage Finance Agency, 6.40%, 11/1/02 1,062,670
NR A+ 1,250 New Jersey Housing and Mortgage Finance Agency, 6.45%, 11/1/07 1,293,175
-----------
$8,511,510
-----------
Industrial Development Revenue--1.8%
Baa1 NR $ 400 Jackson, Alabama, Industrial Development Board, Solid Waste
Disposal (Boise Cascade), 7.875%, 8/1/00 $ 415,828
16
<PAGE>
Tax-Exempt Investments (Continued)
Ratings (unaudited)
-------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ------------- -------- -----
Industrial Development Revenue--(Continued)
NR NR 1,150 Michigan Job Development Authority, Pollution Control Revenue
Bonds, Chrysler Corporation Project, 5.70%, 11/1/99 1,171,655
NR A+ 300 Ohio Industrial Development Revenue Bonds, (Specko Corporation)
(AMT), 6.25%, 6/1/00 302,589
A1 A- 1,000 Richland County, South Carolina, Pollution Control Revenue
(Union Camp Corporation Project), 5.875%, 11/1/02 1,028,510
-----------
$2,918,582
-----------
Insured Transportation--4.2%
Aaa AAA $3,000 State of Hawaii Airport System, (MBIA), 5.80%, 7/1/01 $3,102,570
Aaa AAA 1,100 Metropolitan Washington D.C. Airport Authority, (MBIA), 7.60%,
10/1/14 1,213,388
Aaa AAA 1,500 Port of Houston Authority of Harris County, Texas, (MBIA),
5.75%, 5/1/02 1,545,315
Aaa AAA 1,000 New Jersey Turnpike Authority, (AMBAC), 6.40%, 1/1/07 1,058,170
$6,919,443
Insured Education--2.5%
Aaa AAA $2,150 Illinois State University Auxiliary Facilities System, (MBIA),
6.20%, 4/1/01 $2,270,615
Aaa AAA 1,840 Pennsylvania State Higher Education Assistance Agency, (FGIC),
6.80%, 12/1/00 1,936,416
-----------
$4,207,031
-----------
Insured General Obligations--3.6%
Aaa AAA $3,000 Corpus Christi, Texas, (FGIC), 6.70%, 3/1/08 $3,170,700
Aaa AAA 1,000 District of Columbia, (MBIA), 6.00%, 6/1/01 1,030,960
Aaa AAA 1,500 Grand Ledge, Michigan, Public School District, (MBIA), 7.875%,
5/1/11 1,760,475
-----------
$5,962,135
-----------
Insured Hospitals--3.6%
Aaa AAA $3,700 Connecticut Development Authority, (Hartford Hospital Real
Estate Corporation Project), (MBIA), (AMT), 6.875%, 10/1/06 $3,946,753
Aaa AAA 1,000 Kentucky Development Finance Authority, (St. Luke's Hospital)
(MBIA), 7.30%, 10/1/03 1,087,990
Aaa AAA 1,000 Massachusetts Health & Education Facilities Authority, (Metro
West Health Inc.), (AMBAC), 5.70%, 11/15/01 1,036,060
-----------
$6,070,803
-----------
17
<PAGE>
Portfolio of Investments (continued)
Tax-Exempt Investments (Continued)
Ratings (unaudited)
-------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ------------- -------- -----
Insured Housing--1.9%
Aaa AAA $1,650 Iowa Finance Authority, Single Family Mortgage, (AMBAC), 5.55%,
7/1/00 $1,667,737
Aaa AAA 1,460 Massachusetts State Housing Finance Authority, (AMBAC), (AMT),
6.00%, 1/1/04 1,492,675
----------
$3,160,412
----------
Insured Industrial Development Revenue--3.4%
Aaa AAA $1,500 Alabama Water Pollution Control Authority, Revolving Fund
(AMBAC), 6.50%, 8/15/04 $1,567,875
Aaa AAA 3,725 Monroe County, Michigan Pollution Control, (Detroit Edison
Project), (AMBAC), (AMT), 7.50%, 12/1/19 4,111,841
----------
$5,679,716
----------
Insured Lease Revenue/Certificates of Participation--2.7%
Aaa AAA $1,750 Anchorage, Alaska, Certificates of Participation, (BIGI),
7.55%, 2/15/98 $1,831,025
Aaa AAA 1,000 Philadelphia Municipal Authority, Justice Lease Revenue Bonds,
(MBIA), 6.60%, 11/15/00 1,063,260
Aaa AAA 1,500 Texas, Public Finance Authority, (AMBAC), 5.60%, 2/1/00 1,543,140
----------
$4,437,425
----------
Insured Utilities--2.0%
Aaa AAA $1,000 Intermountain Power Agency, Utah, (FGIC), 7.00%, 7/1/15 $1,051,960
Aaa AAA 2,150 Washington Public Power Supply System, Nuclear Project No. 3,
(FGIC), 7.00%, 7/1/05 2,318,603
----------
$3,370,563
----------
Insured Special Tax--2.0%
Aaa AAA $1,000 Arizona State Transportation Board, (Maricopa County Area
Regional Road Fund), (MBIA), 7.00%, 7/1/00 $1,095,190
Aaa AAA 1,090 City of Dallas (Dallas, Denton and Collin Counties), Civic
Center Convention Complex, (AMBAC), 6.20%, 1/1/99 1,144,151
Aaa AAA 1,000 Harris County Municipal Utility District No. 238, (MBIA),
6.00%, 9/1/09 1,004,140
----------
$3,243,481
----------
Insured Water & Sewer--1.4%
Aaa AAA $1,000 Boston Water and Sewer Commission, (FSA), 5.50%, 11/1/01 $1,020,360
Aaa AAA 1,170 City of Vallejo, California, (Water Improvement Project),
(FGIC), 6.00%, 11/1/00 1,231,413
----------
$2,251,773
----------
18
<PAGE>
Tax-Exempt Investments (Continued)
Ratings (unaudited)
-------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ------------- -------- -----
Miscellaneous--2.0%
A A+ $1,000 Metropolitan Pier and Exposition Authority of Illinois,
McCormick Place Expansion Project, 5.75%, 6/15/02 $1,025,320
A A+ 500 Metropolitan Pier and Exposition Authority of Illinois,
McCormick Place Expansion Project, 5.90%, 6/15/03 516,320
A A- 300 The Pennsylvania Industrial Development Authority, Economic
Development Revenue Bonds, 6.80%, 1/1/01 325,044
Aa AA 1,400 Virginia State Public School Authority, 6.00%, 8/1/01 1,461,054
----------
$3,327,738
----------
Solid Waste--2.0%
NR A+ $1,500 Fairfax County Economic Development Authority, (Ogden Martin
Systems of Fairfax, Inc. Project), (AMT), 7.75%, 2/1/11 $1,646,250
NR NR 1,800 Pennsylvania Economic Development Authority, Resource Recovery,
(Northampton), 6.75%, 1/1/07 1,754,316
----------
$3,400,566
----------
Special Tax Revenue--0.6%
Aa AA- $1,000 Municipal Assistance Corporation for New York City, New York,
6.75%, 7/1/06 $1,045,690
----------
Transportation--3.6%
Baa BB $2,000 Denver, Colorado City & County Airport, (AMT),7.00%, 11/15/99 $2,049,420
Aa AA- 3,700 Los Angeles, California, Department of Airports, 7.40%, 5/1/10 3,894,065
----------
$5,943,485
----------
Utility Revenue--9.4%
Aa AA $1,545 Conservation and Renewable Energy System, Washington
Conservation Project, 5.55%, 10/1/02 $1,560,975
Aa3 AA- 1,000 Chicago, Illinois, Gas Supply Revenue Bonds, (The Peoples Gas
Light and Coke Company Project), 7.50%, 3/1/15 1,092,010
Aa A+ 1,000 Grant County, Washington, Public Utility District No. 2, 5.30%,
1/1/02 988,220
Aa AA 1,000 Intermountain Power Agency, Power Supply Revenue Bonds, 7.20%,
7/1/11 1,067,460
Aa1 AA 1,000 Jacksonville Electric Authority, St. John's River Power System,
6.75%, 10/1/05 1,082,440
Aa1 AA 1,225 Jacksonville Electric Authority, St. John's River Power System,
6.50%, 10/1/01 1,330,472
Aa2 AA 2,500 Jefferson County, Kentucky, Louisville Gas and Electric Company
Project, 7.75%, 2/1/19 2,682,775
19
<PAGE>
Tax-Exempt Investments (Continued)
Ratings (unaudited)
-------------------
Principal
Standard Amount
Moody's & Poor's (000 omitted) Security Value
------- -------- ------------- -------- -----
Utility Revenue--(Continued)
Aa3 AA- 1,000 Joliet Illinois, Gas Supply Revenue, Peoples Gas Light & Coke,
8.00%, 6/1/99 1,101,250
A BBB+ 800 Massachusetts Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, 5.70%, 7/1/01 817,576
A BBB+ 200 Massachusetts Municipal Wholesale Electric Company, Power
Supply System Revenue Bonds, 5.70%, 7/1/01 204,394
Aa A+ 1,000 Platte River Power Authority (Colorado), 6.50%, 6/1/01 1,050,210
Aa AA 1,000 Washington Public Power Supply System, Nuclear Project No. 3,
7.375%, 7/1/04 1,092,030
Aa AA 1,500 Washington Public Power Supply System, Nuclear Project No. 1,
7.50%, 7/1/15 1,619,040
------------
$ 15,688,852
------------
Water & Sewer Revenue--0.7%
Aa AA+ $1,000 Harris County, Texas, Flood Control District, 7.125%, 10/1/00 $ 1,099,800
------------
Total Investments (identified cost $164,657,310) $166,271,850
============
</TABLE>
The Portfolio invests primarily in debt securities issued by municipalities.
The ability of the issuers of the debt securities to meet their obligations
may be affected by economic developments in a specific industry or
municipality. In order to reduce the risk associated with such economic
developments, at March 31, 1995, 27.3% of the securities in the portfolio of
investments are backed by bond insurance of various financial institutions
and financial guaranty assurance agencies. The aggregate percentage by
financial institution ranged from 6.7% to 12.2% of total investments.
At March 31, 1995, the concentration of the Portfolio's invesments in the
various states, determined as a percentage of total investments, is as
follows:
Texas 20%
Others, representing less than 10% individually 80%
(1) At March 31, 1995, the market value of securities segregated to cover
margin requirements for open financial futures contracts amounted to $3,789,835.
See notes to financial statements
20
<PAGE>
Financial Statements
Statement of Assets and Liabilities
March 31, 1995
<TABLE>
<S> <C> <C>
Assets:
Investments, at value (Note 1A) (identified cost, $164,657,310) $166,271,850
Cash 226,609
Interest receivable 3,051,487
Receivable for investments sold 75,000
Deferred organization expenses (Note 1D) 7,628
------------
Total assets $169,632,574
Liabilities:
Payable to affiliates--
Custodian fee $7,011
Trustees' fees 1,767
Accrued expenses 2,992
------
Total liabilities 11,770
------------
Net Assets applicable to investors' interest in Portfolio $169,620,804
============
Sources of Net Assets:
Net proceeds from capital contributions and withdrawals $168,150,770
Unrealized appreciation of investments and financial futures
contracts
(computed on the basis of identified cost) 1,470,034
------------
Total $169,620,804
============
</TABLE>
See notes to financial statements
21
<PAGE>
Financial Statements (Continued)
Statement of Operations
Year Ended March 31, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Interest income $ 9,717,360
Expenses--
Investment adviser fee (Note 2) $ 817,082
Compensation of Trustees not members of the Investment Adviser's
organization 10,760
Custodian fees (Note 2) 33,898
Bond pricing 20,631
Legal and accounting services 19,696
Printing and postage 2,723
Amortization of organization expenses (Note 1D) 2,468
Miscellaneous 12,798
----------
Total expenses 920,056
-----------
Net investment income $ 8,797,304
-----------
Realized and Unrealized Gain (Loss):
Net realized loss--
Investment transactions (identified cost basis) $(4,468,407)
Financial futures contracts (40,770)
------------
Net realized loss $(4,509,177)
Change in unrealized appreciation (depreciation) of--
Investments $ 4,812,671
Financial futures contracts (144,506)
------------
Net change in unrealized appreciation 4,668,165
-----------
Net realized and unrealized gain $ 158,988
-----------
Net increase in net assets from operations $ 8,956,292
===========
</TABLE>
See notes to financial statements
22
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1995 1994*
------ ------
<S> <C> <C>
Increase (Decrease) in Net Assets:
From operations--
Net investment income $ 8,797,304 $ 5,828,043
Net realized gain (loss) on investments (4,509,177) 350,267
Change in unrealized appreciation (depreciation) of investments 4,668,165 (5,375,092)
------------ ------------
Net increase in net assets from operations $ 8,956,292 $ 803,218
------------ ------------
Capital transactions--
Contributions $ 53,163,573 $201,859,544
Withdrawals (70,340,668) (24,921,175)
------------ ------------
Increase (decrease) in net assets resulting from capital transactions $(17,177,095) $176,938,369
------------ ------------
Total increase (decrease) in net assets $ (8,220,803) $177,741,587
Net Assets:
At beginning of period 177,841,607 100,020
------------ ------------
At end of period $169,620,804 $177,841,607
============ ============
*For the period from the start of business, May 3, 1993, to March 31, 1994
</TABLE>
Supplementary Data
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------
1995 1994*
---- -----
<S> <C> <C>
Ratios (As a percentage of average daily net assets):
Expenses 0.53% 0.52%+
Net investment income 5.02% 4.74%+
Portfolio Turnover 56% 21%
Net Assets, end of period (000 omitted) $169,621 $177,842
+Annualized
*For the period from the start of business, May 3, 1993, to March 31, 1994
</TABLE>
See notes to financial statements
23
<PAGE>
Notes to Financial Statements
(1) Significant Accounting Policies
National Limited Maturity Tax Free 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 on May 1, 1992. The Declaration of Trust permits the Trustees to issue
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--Municipal bonds are normally valued on the basis of
valuations furnished by a pricing service. Taxable obligations, if any, for
which price quotations are readily available are normally valued at the mean
between the latest bid and asked prices. Futures contracts listed on
commodity exchanges are valued at closing settlement prices. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates value. Investments for which valuations or market
quotations are unavailable are valued at fair value using methods determined
in good faith by or at the direction of the Trustees.
B. Income--Interest income is determined on the basis of interest accrued,
adjusted for amortization of premium or discount when required for federal
income tax purposes.
C. 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 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 taxable (if any) and
tax-exempt investment income, net realized capital gains, and any other items
of income, gain, loss, deduction or credit. Interest income received by the
Portfolio on investments in municipal bonds, which is excludable from gross
income under the Internal Revenue Code, will retain its status as income
exempt from federal income tax when allocated to the Portfolio's investors.
The portion of such interest, if any, earned on private activity bonds issued
after August 7, 1986 may be considered a tax preference item for investors.
D. Deferred Organization Expenses--Costs incurred by the Portfolio in
connection with its organization are being amortized on the straight-line
basis over five years.
E. Financial Futures Contracts--Upon the entering of a financial futures
contract, the Portfolio is required to deposit ("initial margin") either in
cash or securities an amount 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 security, and are
recorded for book purposes as unrealized gains or losses by the Portfolio.
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.
F. Other--Investment transactions are accounted for on a trade date basis.
24
<PAGE>
(2) 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 based upon a percentage of average daily net assets plus a
percentage of gross income (i.e., income other than gains from the sale of
securities). For the year ended March 31, 1995, the fee was equivalent to
0.46% of the Portfolio's average net assets for such period and amounted to
$817,082. 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. Investors Bank
& Trust Company (IBT), an affiliate of EVM and BMR, serves as custodian of
the Portfolio. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balances the Portfolio maintains with IBT. 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 Advisor 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 March 31, 1995, no significant amounts
have been deferred.
(3) Line of Credit
The Portfolio participates with other portfolios and funds managed by BMR or
EVM in a $120 million unsecured line of credit agreement with a bank. The
line of credit consists of a $20 million committed facility and a $100
million discretionary facility. Borrowings will be made by the Portfolio
solely to facilitate the handling of unusual and/or unanticipated short-term
cash requirements. Interest is charged to each portfolio or fund based on its
borrowings at an amount above either the bank's adjusted certificate of
deposit rate, a variable adjusted certificate of deposit rate, or a federal
funds effective rate. In addition, a fee computed at an annual rate of 1/4 of
1% on the $20 million committed facility and on the daily unused portion of
the $100 million discretionary facility is allocated among the participating
funds and portfolios at the end of each quarter. The Portfolio did not have
any significant borrowings or allocated fees during the year.
(4) Investments
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $96,920,876 and $105,148,521,
respectively.
(5) Federal Income Tax Basis of Investments
The cost and unrealized appreciation/depreciation in value of the investments
owned at March 31, 1995, as computed on a federal income tax basis, were as
follows:
<TABLE>
<S> <C>
Aggregate cost $164,657,310
============
Gross unrealized appreciation $ 2,049,017
Gross unrealized depreciation 434,477
------------
Net unrealized appreciation $ 1,614,540
============
</TABLE>
(6) 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 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
March 31, 1995, is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Futures contract expiration date Contracts Position Net unrealized depreciation
6/95 85 U.S. Treasury Bonds Short $144,506
========
</TABLE>
At March 31, 1995 the Portfolio had sufficient cash and/or securities to
cover margin requirements on open futures contracts.
25
<PAGE>
Independent Auditors' Report
To the Trustees and Investors of
National Limited Maturity Tax Free Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of National Limited Maturity Tax Free
Portfolio as of March 31, 1995, the related statement of operations for the
year ended March 31, 1995, and the statements of changes in net assets, and
the supplementary data for the year ended March 31, 1995 and for the period
from the start of business, May 3, 1993, to March 31, 1994. These financial
statements and supplementary data are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and supplementary data based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and supplementary
data are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned at
March 31, 1995, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and supplementary data present
fairly, in all material respects, the financial position of National Limited
Maturity Tax Free Portfolio as of March 31, 1995, the results of its
operations, changes in its net assets and its supplementary data for the
respective stated periods, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 5, 1995
26
<PAGE>
Investment Management
EV Traditional
National
Limited Maturity
Tax Free Fund
24 Federal Street
Boston, MA 02110
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
James F. Alban
Assistant Treasurer
Douglas C. Miller
Assistant Treasurer
Janet E. Sanders
Assistant Treasurer and
Assistant Secretary
A. John Murphy
Assistant Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of
New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of
Investment Banking, Harvard
University Graduate School of
Business Administration
Norton H. Reamer
President and Director,
United Asset Management
Corporation
John L. Thorndike
Director,
Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and
Consultant
<PAGE>
National
Limited Maturity Tax Free
Portfolio
24 Federal Street
Boston, MA 02110
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President, Trustee
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Thomas Otis
Secretary
James F. Alban
Assistant Treasurer
Janet E. Sanders
Assistant Treasurer and
Assistant Secretary
A. John Murphy
Assistant Secretary
Portfolio Manager
Raymond E. Hender
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Chairman, Newspapers of
New England, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of
Investment Banking, Harvard
University Graduate School of
Business Administration
Norton H. Reamer
President and Director,
United Asset Management
Corporation
John L. Thorndike
Director,
Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and
Consultant
27
