<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.0%
Ratings (Unaudited)
- ------------------- Principal
Standard Amount
& Poor's (000's
Moody's omitted) Security Value
- ---------------------------------------------------------------------------
Assisted Living -- 1.2%
- ---------------------------------------------------------------------------
NR NR $1,000 New Jersey Economic
Development Authority,
(Chelsea at East
Brunswick), (AMT),
8.00%, 10/1/07 $ 1,107,710
- ---------------------------------------------------------------------------
$ 1,107,710
- ---------------------------------------------------------------------------
Cogeneration -- 4.3%
- ---------------------------------------------------------------------------
NR BBB $ 650 Eastern Connecticut
Resource Recovery
Authority, (Wheelabrator
Lisbon), (AMT), 5.50%,
1/1/20 $ 643,435
NR BBB- 1,120 New Jersey EDA,
(Trigen-Trenton), (AMT),
6.10%, 12/1/05 1,207,102
NR BB+ 1,250 New Jersey EDA, (Vineland
Cogeneration) (AMT),
7.875%, 6/1/19 1,376,313
NR NR 500 Palm Beach County, FL,
Okeelanta Power Project,
(AMT),
6.85%, 2/15/21 400,000
NR NR 500 Palm Beach County, FL,
Osceola Power Project,
(AMT),
6.95%, 1/1/22 395,000
- ---------------------------------------------------------------------------
$ 4,021,850
- ---------------------------------------------------------------------------
Colleges and Universities -- 1.2%
- ---------------------------------------------------------------------------
Aa AA- $1,700 University of Illinois,
0.00%, 4/1/15 $ 707,948
Aa AA- 1,000 University of Illinois,
0.00%, 4/1/16 394,140
- ---------------------------------------------------------------------------
$ 1,102,088
- ---------------------------------------------------------------------------
Economic Development Revenue -- 1.0%
- ---------------------------------------------------------------------------
NR BB- $ 950 Michigan State Strategic
Fund, 6.25%, 8/1/12 $ 981,065
- ---------------------------------------------------------------------------
$ 981,065
- ---------------------------------------------------------------------------
Education -- 1.2%
- ---------------------------------------------------------------------------
Ba1 NR $1,000 New Hampshire Higher
Education and Health
Facilities Authority
(Colby-Sawyer College),
7.20%, 6/1/12 $ 1,086,240
- ---------------------------------------------------------------------------
$ 1,086,240
- ---------------------------------------------------------------------------
Escrowed / Prerefunded -- 10.7%
- ---------------------------------------------------------------------------
Aaa AAA $1,500 Grand Ledge, MI, Public
School District, (MBIA),
Prerefunded to 5/1/04,
7.875%, 5/1/11 $ 1,809,690
NR NR 3,500 Maricopa County, AZ, IDA,
Multifamily, 6.45%, 1/1/17 3,954,964
NR NR 990 Maricopa County, AZ, IDA,
Multifamily, 7.876%, 1/1/11 1,194,683
Aaa NR 3,000 Massachusetts Turnpike
Authority, 5.00%, 1/1/20/(1)/ 2,990,759
- ---------------------------------------------------------------------------
$ 9,950,096
- ---------------------------------------------------------------------------
General Obligations -- 11.7%
- ---------------------------------------------------------------------------
Baa2 BBB+ $4,000 Detroit, MI, 6.50%,
4/1/02/(2)/ $ 4,306,559
Aa1 AA+ 750 Ohio State, 0.00%, 8/1/08 468,068
NR NR 1,800 Pennsylvania Economic
Development Financing
Authority, (Resource
Recovery for Northampton),
6.75%, 1/1/07 1,966,824
Baa1 A 1,500 Puerto Rico Aqueduct and
Sewer Authority, 5.00%,
7/1/15 1,474,365
NR NR 2,540 Youngstown, OH, County
School District, 6.40%,
7/1/00 2,633,802
- ---------------------------------------------------------------------------
$10,849,618
- ---------------------------------------------------------------------------
Hospitals -- 10.0%
- ---------------------------------------------------------------------------
NR NR $1,900 Colorado Health Facilities
Authority, (Steamboat
Springs Health),
5.00%, 9/15/03 $ 1,914,839
NR NR 500 Colorado Health Facilities
Authority, (Steamboat
Springs Health),
5.30%, 9/15/09 500,625
Baa3 NR 1,340 Massachusetts Health and
Educational Facilities
Authority,
(Milford-Whitinsville
Hospital), Series B,
7.125%, 7/15/02 1,427,328
- ---------------------------------------------------------------------------
NR BBB 500 Michigan State Hospital
(Gratiot Community
Hospital),
6.10%, 10/1/07 539,310
- ---------------------------------------------------------------------------
NR BB- 500 New Hampshire Higher
Educational And Health
Facilities Authority,
(Littleton Hospital
Association), 5.45%, 5/1/08 502,865
See notes to financial statements
13
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
Hospitals (continued)
- ---------------------------------------------------------------------------
NR BBB- $1,390 New Hampshire Higher
Educational And Health
Facilities Authority,
(Monadnock Community
Hospital), 5.60%, 10/1/12 $ 1,412,991
Baa BBB- 1,830 Richardson, TX, Hospital
Authority, (Richardson
Medical Center),
6.50%, 12/1/12 1,969,867
NR BBB 500 Valley, AL, Special Tax
Care Facilities Financing
Authority, (Lanier Memorial
Hospital), 5.45%, 11/1/11 502,320
NR BBB 530 Valley, AL, Special Tax
Care Facilities Financing
Authority, (Lanier Memorial
Hospital), 5.50%, 11/1/07 546,902
- ---------------------------------------------------------------------------
$ 9,317,047
- ---------------------------------------------------------------------------
Housing -- 5.8%
- ---------------------------------------------------------------------------
A2 NR $1,005 Illinois Development
Finance Authority, Elderly
Housing, (Mattoon Tower),
(Section 8), 6.35%, 7/1/10 $ 1,045,059
Baa3 NR 1,035 Illinois Development
Finance Authority, Elderly
Housing, (Rome Meadows),
6.40%, 2/1/03 1,065,129
Baa3 NR 1,145 Illinois Development
Finance Authority, Elderly
Housing, (Rome Meadows),
6.65%, 2/1/06 1,187,239
Aa2 AA 2,000 Wisconsin Housing and
Economic Development
Authority, (Home
Ownership), (AMT), 6.45%,
9/1/27 2,137,560
- ---------------------------------------------------------------------------
$ 5,434,987
- ---------------------------------------------------------------------------
Industrial Development Revenue /
Pollution Control Revenue -- 18.1%
- ---------------------------------------------------------------------------
NR NR $ 690 Austin, TX (Cargoport
Development LLC) (AMT),
7.50%, 10/1/07 $ 735,071
NR NR 455 Austin, TX (Cargoport
Development LLC) (AMT),
8.30%, 10/1/21 506,602
A1 NR 1,060 Boise, ID, (Western Trailer
Co.), (LOC: First Security
Bank), (AMT),
5.05%, 9/1/06 1,047,439
NR BBB- 1,000 Clark County, NV, (Nevada
Power Co.), (AMT), 5.90%,
10/1/30 1,026,170
A3 A- 1,000 Columbus, NC (International
Paper Co.), 5.80%, 12/1/16 1,048,340
A3 A- 750 Essex County, NY, LOC,
(International Paper Co.),
(AMT), 5.70%, 7/1/16 800,850
NR NR 900 Iowa Finance Authority,
Commercial Development
Revenue, (Southbridge
Mall), 6.375%, 12/1/13 906,129
NR NR 3,445 Jackson, TN, Solid Waste
Disposal (Owens-Corning
Fiberglass), (AMT), 6.25%,
3/31/04/(2)/ 3,564,472
A3 A- 500 Jones County,
(International Paper Co.),
5.80%, 10/1/21 514,810
NR NR 500 Kimball, NE, EDA, (Clean
Harbors Inc.) (AMT),
10.75%, 9/1/26 549,765
NR NR 1,000 New Jersey EDA, (Holt
Hauling), 7.90%, 3/1/27 1,142,860
NR NR 750 Ohio Solid Waste Revenue,
(Republic Engineered Steels
Inc.), (AMT), 9.00%, 6/1/21 808,665
NR BBB- 2,000 Pennsylvania Economic
Development Financing
Authority, (Resources
Recovery - Culver Project),
(AMT), 7.05%, 12/1/10 2,227,220
NR NR 500 Robbins, IL, Resources
Recovery, (AMT), 8.375%,
10/15/10 523,575
NR NR 1,330 Santa Fe, NM (Crow Hobbs),
8.25%, 9/1/05 1,391,193
- ---------------------------------------------------------------------------
$16,793,161
- ---------------------------------------------------------------------------
Insured-Colleges and Universities -- 0.2%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 Southern Illinois
University, Housing and
Auxiliary Facilities,
(MBIA), 0.00%, 4/1/17 $ 186,100
- ---------------------------------------------------------------------------
$ 186,100
- ---------------------------------------------------------------------------
Insured-General Obligations -- 1.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 Kalamazoo, MI, (MBIA),
5.40%, 5/1/14 $ 528,720
Aaa AAA 1,000 Willow Run, MI, Community
School District, (AMBAC),
5.00%, 5/1/16 984,750
- ---------------------------------------------------------------------------
$ 1,513,470
- ---------------------------------------------------------------------------
See notes to financial statements
14
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
Insured-Housing -- 2.5%
- ---------------------------------------------------------------------------
Aaa AAA $2,115 Massachusetts HFA,
(Harborpoint Development),
(AMBAC), (AMT), 6.20%,
12/1/10 $ 2,290,630
- ---------------------------------------------------------------------------
$ 2,290,630
- ---------------------------------------------------------------------------
Insured-Industrial Development Revenue -- 0.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 260 Arkansas Development
Finance Authority, (ADFA
Guaranty Program), (AMBAC),
(AMT), 5.40%, 11/1/12 $ 261,227
Aaa AAA 260 Arkansas Development
Finance Authority, (AEDC
Guaranty Program), (AMBAC),
(AMT), 5.40%, 11/1/12 261,227
- ---------------------------------------------------------------------------
$ 522,454
- ---------------------------------------------------------------------------
Insured-Special Tax Revenue -- 0.6%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 George L. Smith, (Georgia
World Congress Center -
Domed Stadium Project),
(MBIA), (AMT),
6.00%, 7/1/06/(3)/ $ 527,020
- ---------------------------------------------------------------------------
$ 527,020
- ---------------------------------------------------------------------------
Insured-Transportation -- 1.1%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Chicago, IL (O'Hare
International Airport),
(AMBAC), 5.50%, 1/1/16 $ 1,020,660
- ---------------------------------------------------------------------------
$ 1,020,660
- ---------------------------------------------------------------------------
Lease Revenue /
Certificates of Participation -- 0.6%
- ---------------------------------------------------------------------------
Baa3 NR $ 500 Mashantucket Western Pequot
Tribe, CT, 5.55%, 9/1/08 $ 525,410
- ---------------------------------------------------------------------------
$ 525,410
- ---------------------------------------------------------------------------
Life Care -- 4.0%
- ---------------------------------------------------------------------------
NR NR $1,065 Florence, KY, Housing
Facilities, (Bluegrass
Housing),
7.25%, 5/1/07 $ 1,134,470
NR NR 2,000 Illinois Health Facilities
Authority, (Lutheran Social
Services),
6.125%, 8/15/10 2,090,160
NR NR 475 Vermont State Industrial
Development Authority,
(Wake Robins),
8.00%, 4/1/99 478,392
- ---------------------------------------------------------------------------
$ 3,703,022
- ---------------------------------------------------------------------------
Miscellaneous -- 0.6%
- ---------------------------------------------------------------------------
NR NR $ 600 Tax Revenue Exempt
Securities Trust, Community
Health Provider, (Pooled
Loan Program Various States
Trust Certificates), 6.00%,
12/1/36 $ 605,010
- ---------------------------------------------------------------------------
$ 605,010
- ---------------------------------------------------------------------------
Nursing Homes -- 11.7%
- ---------------------------------------------------------------------------
NR NR $1,105 Arizona Health Facilities
Authority Assisted Living
Facilities, (Mesa), 7.625%,
1/1/06 $ 1,141,399
NR A+ 3,500 California Statewide
Communities Development
Corporation, (Pacific
Homes), 5.90%, 4/1/09 3,724,559
NR NR 650 Citrus County, FL,
Industrial Development
Authority, (Beverly
Enterprises), 5.00%,
4/1/03/(3)/ 650,572
NR NR 1,000 Clovis, NM, Industrial
Development Revenue,
(Retirement Ranches, Inc.),
7.75%, 4/1/19 1,022,420
NR NR 850 Fairfield, OH, EDR,
(Beverly Enterprises),
8.50%, 1/1/03 926,798
NR NR 1,500 Massachusetts Industrial
Finance Agency, Health Care
Facilities, (Age Institute
of Massachusetts),
7.60%, 11/1/05 1,605,300
NR NR 1,550 Saint Tammany Public Trust
Finance Authority, LA
(Christwood),
8.75%, 11/15/05 1,799,287
- ---------------------------------------------------------------------------
$10,870,335
- ---------------------------------------------------------------------------
Pooled Loans -- 4.6%
- ---------------------------------------------------------------------------
Aa2 NR $1,900 Arizona Educational Loan
Marketing Corp., (AMT),
6.25%, 6/1/06 $ 2,076,130
A NR 1,000 Arizona Student Loan
Acquisition Authority,
(AMT), 7.625%, 5/1/10 1,112,750
A NR 1,000 Arkansas State Student Loan
Authority, (AMT), 6.25%,
6/1/10 1,056,120
- ---------------------------------------------------------------------------
$ 4,245,000
- ---------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
PORTFOLIO OF INVESTMENTS CONT'D
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
Transportation -- 6.7%
- ---------------------------------------------------------------------------
Baa1 BBB $2,000 Denver, CO City and County
Airport, (AMT), 7.00%,
11/15/99 $ 2,094,760
NR NR 1,225 Eagle County, CO, Airport
Terminal Corp. (American
Airlines), (AMT), 6.75%,
5/1/06 1,309,268
NR NR 900 Los Angeles, CA, Regional
Airport Improvement
Corporate Lease,
(TransWorld Airlines),
6.125%, 5/15/00 900,117
NR NR 260 Memphis-Shelby County, TN
Airport Authority, 6.125%,
12/1/16 266,578
Baa2 BBB 500 Memphis-Shelby County, TN,
(Federal Express Co.),
5.35%, 9/1/12 512,115
NR NR 1,000 Northwest Arkansas Regional
Airport Authority, (AMT),
7.625%, 2/1/27 1,154,370
- ---------------------------------------------------------------------------
$ 6,237,208
- ---------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $87,240,993) $92,890,181
- ---------------------------------------------------------------------------
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 of such economic
developments, at March 31, 1998, 8.5% 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 insured by financial institutions ranged from 3.3% to 5.2% of total
investments.
At March 31, 1998, the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments is
as follows:
Arizona 10%
Michigan 10%
Others, representing less than 10% individually 80%
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
/(1)/ Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
/(2)/ Security has been segregated to cover when-issued securities.
/(3)/ When-issued security.
See notes to financial statements
16
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of March 31, 1998
Assets
- ---------------------------------------------------------------------------
Investments, at value (Note 1A)
(identified cost, $87,240,993) $92,890,181
Cash 459
Receivable for investments sold 20,000
Interest receivable 1,720,255
Deferred organization expenses (Note 1D) 219
- ---------------------------------------------------------------------------
Total assets $94,631,114
- ---------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------
Payable for when-issued securities (Note 1G) $ 1,173,564
Demand note payable (Note 3) 297,000
Payable for daily variation margin on open
financial futures contracts (Notes 1E and 6) 21,562
Payable to affiliate for Trustees' fees (Note 2) 1,945
Accrued expenses 9,783
- ---------------------------------------------------------------------------
Total liabilities $ 1,503,854
- ---------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $93,127,260
- ---------------------------------------------------------------------------
Sources of Net Assets
- ---------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $87,497,879
Net unrealized appreciation of investments (computed
on the basis of identified cost) 5,629,381
- ---------------------------------------------------------------------------
Total $93,127,260
- ---------------------------------------------------------------------------
Statement of Operations
For the Year Ended
March 31, 1998
Investment Income (Note 1B)
- ---------------------------------------------------------------------------
Interest income $ 5,904,500
- ---------------------------------------------------------------------------
Total investment income $ 5,904,500
- ---------------------------------------------------------------------------
Expenses
- ---------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 466,594
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 7,331
Custodian fee (Note 1H) 57,976
Legal and accounting services 21,214
Amortization of organization expenses (Note 1D) 2,468
Miscellaneous 27,479
- ---------------------------------------------------------------------------
Total expenses $ 583,062
- ---------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1H) $ 12,223
- ---------------------------------------------------------------------------
Total expense reductions $ 12,223
- ---------------------------------------------------------------------------
Net expenses $ 570,839
- ---------------------------------------------------------------------------
Net investment income $ 5,333,661
- ---------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- ---------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 1,034,776
Financial futures contracts (1,196,652)
- ---------------------------------------------------------------------------
Net realized loss on investment transactions $ (161,876)
- ---------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 4,827,994
Financial futures contracts (158,570)
- ---------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 4,669,424
of investments
- ---------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 4,507,548
- ---------------------------------------------------------------------------
Net increase in net assets from operations $ 9,841,209
- ---------------------------------------------------------------------------
See notes to financial statements
17
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets March 31, 1998 March 31, 1997
- ----------------------------------------------------------------------------
From operations --
Net investment income $ 5,333,661 $ 6,518,710
Net realized loss on
investment transactions (161,876) (1,129,741)
Net change in unrealized
appreciation (depreciation)
of investments 4,669,424 (150,139)
- ----------------------------------------------------------------------------
Net increase in net assets
from operations $ 9,841,209 $ 5,238,830
- ----------------------------------------------------------------------------
Capital transactions --
Contributions $ 44,850,231 $ 8,914,088
Withdrawals (64,067,696) (46,425,770)
- ----------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $(19,217,465) $ (37,511,682)
- ----------------------------------------------------------------------------
Net decrease in net assets $ (9,376,256) $ (32,272,852)
- ----------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------
At beginning of year $102,503,516 $ 134,776,368
- ----------------------------------------------------------------------------
At end of year $ 93,127,260 $ 102,503,516
- ----------------------------------------------------------------------------
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Year Ended March 31,
--------------------------------------------------------------------------------
1998 1997 1996 1995 1994*
- -------------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Expenses /(1)/ 0.60% 0.60% 0.57% 0.53% 0.52%+
Expenses after custodian fee reduction 0.59% 0.58% 0.56% -- --
Net investment income 5.53% 5.45% 5.08% 5.02% 4.74%+
Portfolio Turnover 41% 68% 68% 56% 21%
- -------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000's omitted) $93,127 $ 102,504 $ 134,776 $ 169,621 $ 177,842
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ Annualized.
* For the period from the start of business, May 3, 1993, to March 31, 1994.
(1) The expense ratios for the year ended March 31, 1996 and periods thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolio to increase its expense ratios by
the effect of any expense offset arrangements with its service providers.
The expense ratios for each of the prior periods have not been adjusted to
reflect this change.
See notes to financial statements
19
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------------------------------------------
National Limited Maturity Municipals Portfolio (the Portfolio) seeks to
provide (1) a high level of income exempt from regular federal income tax
and (2) limited principal fluctuation. The Portfolio is registered under the
Investment Company Act of 1940 as a diversified open-end management
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
the 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 Options on Financial Futures Contracts -- Upon the purchase of a put
option on a financial futures contract by the Portfolio, the premium paid is
recorded as an investment, the value of which is marked-to-market daily.
When a purchased option expires, a Portfolio will realize a loss in the
amount of the cost of the option. When a Portfolio enters into a closing
sales transaction, the Portfolio will realize a gain or loss depending on
whether the sales proceeds from the closing sales transaction is greater or
less than the cost of the option. When the Portfolio exercises a put option,
settlement is made in cash. The risk associated with purchasing options is
limited to the premium originally paid.
G When-issued and Delayed Delivery Transactions -- The Portfolio may engage
in when-issued and delayed delivery transactions. The Portfolio records
when-issued securities on trade date and maintains security positions such
that sufficient liquid assets will be available to make payments for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked-to-market daily and begin earning interest on
settlement date.
20
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
NOTES TO FINANCIAL STATEMENTS CONT'D
H Expense Reduction -- Investors Bank & Trust Company (IBT) 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. All significant credit
balances used to reduce the Portfolio's custodian fees are reported as a
reduction of operating expenses on the Statement of Operations.
I 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 revenue and expense during the reporting period. Actual results
could differ from those estimates.
J Other -- Investment transactions are accounted for on a trade date basis.
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, 1998, the fee was
equivalent to 0.48% of the Portfolio's average net assets for such period
and amounted to $466,594. Except as to Trustees of the Portfolio who are not
members of EVM's or BMR's organization, officers and Trustees receive
remuneration for their services to the Portfolio out of such investment
adviser fee. Certain of the officers and Trustees of the Portfolio are
officers and directors/trustees of the above organizations. Trustees of the
Portfolio that are not affiliated with the Investment Adviser may elect to
defer receipt of all or a percentage of their annual fees in accordance with
the terms of the Trustees Deferred Compensation Plan. For the year ended
March 31, 1998, no significant amounts have been deferred.
3 Line of Credit
----------------------------------------------------------------------------
The Portfolio participates with other portfolios and funds managed by BMR
and EVM and its affiliates in a $100 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above 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 period.
4 Investments
----------------------------------------------------------------------------
Purchases and sales of investments, other than U.S. Government securities
and short-term obligations, aggregated $39,870,169 and $55,540,077,
respectively, for the year ended March 31, 1998.
5 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at March 31, 1998, as computed on a federal income tax
basis, were as follows:
Aggregate cost $ 87,240,993
----------------------------------------------------------------------------
Gross unrealized appreciation $ 5,673,416
Gross unrealized depreciation (24,228)
----------------------------------------------------------------------------
Net unrealized appreciation $ 5,649,188
----------------------------------------------------------------------------
6 Financial Instruments
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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, 1998 were as follows:
Futures
Contracts Net Unrealized
Expiration Date Contracts Position Appreciation
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6/98 46 U.S. Treasury Bonds Short $ 19,807
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21
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
INDEPENDENT AUDITORS' REPORT
To the Trustees and Investors of
National Limited Maturity Municipals Portfolio:
- -------------------------------------------------------------------------------
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of National Limited Maturity Municipals Portfolio
as of March 31, 1998, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended March 31,
1998 and 1997 and the supplementary data for each of the years in the four-year
period ended March 31, 1998 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 securities held as of March
31, 1998 by correspondence with the custodian and brokers; where replies were
not received, alternative procedures were performed. 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
Municipals Portfolio at March 31, 1998, the results of its operations, the
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 1, 1998
22
<PAGE>
National Limited Maturity Municipals Portfolio as of March 31, 1998
INVESTMENT MANAGEMENT
National Limited Maturity Municipals Portfolio
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
William H. Ahern, Jr.
Vice President and
Portfolio Manager
Robert B. MacIntosh
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, 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
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
23
