<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cogeneration -- 1.4%
- -----------------------------------------------------------------------------------------
NR BB+ $1,250 New Jersey EDA, (Vineland
Cogeneration) (AMT),
7.875%, 6/1/19 $ 1,370,263
- -----------------------------------------------------------------------------------------
$ 1,370,263
- -----------------------------------------------------------------------------------------
Colleges and Universities -- 1.1%
- -----------------------------------------------------------------------------------------
Aa AA- $1,700 University of Illinois, 0.00%, 4/1/15 $ 670,123
Aa AA- 1,000 University of Illinois, 0.00%, 4/1/16 371,090
- -----------------------------------------------------------------------------------------
$ 1,041,213
- -----------------------------------------------------------------------------------------
Economic Development Revenue -- 1.0%
- -----------------------------------------------------------------------------------------
NR BB- $ 950 Michigan State Strategic Fund,
6.25%, 8/1/12 $ 955,662
- -----------------------------------------------------------------------------------------
$ 955,662
- -----------------------------------------------------------------------------------------
Education -- 4.4%
- -----------------------------------------------------------------------------------------
NR NR $1,900 Arizona Educational Loan Marketing
Corp., (AMT), 6.25%, 6/1/06 $ 2,045,882
- -----------------------------------------------------------------------------------------
A NR 1,000 Arizona Student Loan Acquisition
Authority, (AMT), 7.625%, 5/1/10 1,109,760
- -----------------------------------------------------------------------------------------
Ba1 NR 1,000 New Hampshire Higher Education and
Health Facilities Authority (Colby-
Sawyer College), 7.20%, 6/1/12 1,062,360
- -----------------------------------------------------------------------------------------
$ 4,218,002
- -----------------------------------------------------------------------------------------
Escrowed/Prerefunded -- 1.9%
- -----------------------------------------------------------------------------------------
Aaa AAA $1,500 Grand Ledge, MI, Public School
District, (MBIA), Prerefunded to
5/1/04, 7.875%, 5/1/11 $ 1,817,490
- -----------------------------------------------------------------------------------------
$ 1,817,490
- -----------------------------------------------------------------------------------------
General Obligations -- 12.9%
- -----------------------------------------------------------------------------------------
Baa2 BBB $5,000 City of Detroit, Michigan,
6.50%, 4/1/02/(1)/ $ 5,382,399
Aaa AAA 1,000 Fort Bend, TX, Independent School
District, 5.00%, 2/15/17 968,590
NR NR $1,800 Pennsylvania Economic Development
Financing Authority, (Resource
Recovery for Northampton),
6.75%, 1/1/07 $ 1,901,106
Baa1 A 1,500 Puerto Rico Aqueduct and Sewer
Authority, 5.00%, 7/1/15 1,441,845
NR NR 2,540 Youngstown, OH, County School
District, 6.40%, 7/1/00 2,626,182
- -----------------------------------------------------------------------------------------
$12,320,122
- -----------------------------------------------------------------------------------------
Hospitals -- 6.7%
- -----------------------------------------------------------------------------------------
Aa3 AA $2,500 Greenville, SC Hospital System (Board
of Trustees), 5.25%, 5/1/17 $ 2,475,750
Baa3 BB+ 1,340 Massachusetts Health and Educational
Facilities Authority, (Milford
Whitinsville Hospital), Series B,
7.125%, 7/15/02 1,414,504
NR BBB 500 Michigan State Hospital (Gratiot
Community Hospital),
6.10%, 10/1/07 524,650
Baa BBB- 1,915 Richardson, TX, Hospital Authority,
(Richardson Medical Center),
6.50%, 12/1/12 2,007,399
- -----------------------------------------------------------------------------------------
$ 6,422,303
- -----------------------------------------------------------------------------------------
Housing -- 9.9%
- -----------------------------------------------------------------------------------------
A NR $1,005 Illinois Development Finance Authority,
Elderly Housing, (Mattoon Tower -
Section 8), 6.35%, 7/1/10 $ 1,036,477
Baa3 NR 1,125 Illinois Development Finance Authority,
Elderly Housing, (Rome Meadows),
6.40%, 2/1/03 1,151,348
Baa3 NR 1,145 Illinois Development Finance Authority,
Elderly Housing, (Rome Meadows),
6.65%, 2/1/06 1,176,522
NR A 3,500 Maricopa County, AZ, Industrial
Development Authority, Multifamily,
6.45%, 1/1/17 3,754,589
NR NR 1,025 Maricopa County, AZ, Industrial
Development Authority, Multifamily,
7.876%, 1/1/11 1,038,684
Aa1 AA+ 1,300 Virginia State Housing Development
Authority, Multi-Family Housing,
5.95%, 5/1/16 1,352,481
- -----------------------------------------------------------------------------------------
$ 9,510,101
- -----------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
9
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- -------------------
Principal
Amount
Standard (000
Moody's & Poor's omitted) Security Value
- --------------------------------------------------------------------------------
Industrial Development Revenue/Pollution Control Revenue -- 16.4%
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NR NR $ 690 Austin, TX (Cargoport
Development LLC) (AMT),
7.50%, 10/1/07 $ 714,771
NR NR 455 Austin, TX (Cargoport
Development LLC) (AMT),
8.30%, 10/1/21 486,017
A3 A- 2,450 Columbus, NC (International
Paper Co.), 5.80%, 12/1/16 2,499,098
A3 A- 750 Essex County, NY, LOC,
(International Paper Co.),
(AMT), 5.70%, 7/1/16 782,850
NR NR 3,465 Jackson, TN, Solid Waste
Disposal (Owens-Corning
Fiberglass), (AMT), 6.25%,
3/31/04(1) 3,559,871
NR NR 500 Kimball, NE, Economic
Development Authority,
(Clean Harbors Inc.) (AMT),
10.75%, 9/1/26 542,490
NR NR 1,000 New Jersey Economic
Development Authority,
8.00%, 10/1/07 1,027,180
NR NR 1,000 New Jersey EDA, Holt
Hauling and Warehousing
System, Inc.,
7.90%, 3/1/27 1,104,820
NR BBB- 2,000 Pennsylvania Economic
Development Financing
Authority, (Resources
Recovery - Culver Project),
(AMT), 7.05%, 12/1/10 2,197,020
NR NR 500 Robbins, IL, Resources
Recovery, (AMT), 8.375%,
10/15/10 526,785
NR NR 1,395 Santa Fe, NM (Crow Hobbs),
8.25%, 9/1/05 1,439,975
NR NR 750 State of Ohio, Solid Waste,
(Republic Engineered Steels
Inc.), (AMT), 9.00%, 6/1/21 779,813
- --------------------------------------------------------------------------------
$15,660,690
- --------------------------------------------------------------------------------
Insured-Colleges and Universities -- 1.7%
Aaa AAA $1,500 Allegheny County, PA,
Higher Education Building
Authority, (Dusquesne
University), (AMBAC),
5.00%, 3/1/16 $ 1,454,280
Aaa AAA 500 Southern Illinois
University, Housing and
Auxiliary Facilities,
(MBIA), 0.00%, 4/1/17 174,205
- --------------------------------------------------------------------------------
$ 1,628,485
- --------------------------------------------------------------------------------
Insured-General Obligations -- 3.6%
- --------------------------------------------------------------------------------
Aaa AAA $1,000 Kalamazoo, MI, Public
Library, (MBIA), 5.40%,
5/1/14 $ 1,038,380
Aaa AAA 2,500 Willow Run, MI, Community
School District, (AMBAC),
5.00%, 5/1/16 2,423,400
- --------------------------------------------------------------------------------
$ 3,461,780
- --------------------------------------------------------------------------------
Insured-Housing -- 2.3%
- --------------------------------------------------------------------------------
Aaa AAA $2,115 Massachusetts Housing
Finance Agency,
(Harborpoint Development),
(AMBAC), (AMT), 6.20%,
12/1/10 $ 2,243,634
- --------------------------------------------------------------------------------
$ 2,243,634
- --------------------------------------------------------------------------------
Insured-Special Tax Revenue -- 2.1%
- --------------------------------------------------------------------------------
Aaa AAA $2,000 Los Angeles County
California Public Works
(MBIA), 5.25%, 9/1/12 $ 2,019,780
- --------------------------------------------------------------------------------
$ 2,019,780
- --------------------------------------------------------------------------------
Insured-Transportation -- 6.2%
- --------------------------------------------------------------------------------
Aaa AAA $3,000 Chicago, IL (O'Hare
International Airport),
(AMBAC), 5.50%, 1/1/16 $ 3,003,450
Aaa AAA 500 Indiana Transportation
Finance Authority, (AMBAC),
5.25%, 6/1/15 508,335
Aaa AAA 2,270 Texas Turnpike Authority
(FGIC), 6.00%, 1/1/03(2) 2,446,220
- --------------------------------------------------------------------------------
$ 5,958,005
- --------------------------------------------------------------------------------
Lease Revenue/Certificates of Participation -- 0.5%
- --------------------------------------------------------------------------------
Baa3 NR $ 500 Mashantucket Western Pequot
Tribe, CT, 5.55%, 9/1/08 $ 499,245
- --------------------------------------------------------------------------------
$ 499,245
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
10
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------- Principal
Standard Amount
Moody's & (000
Poor's omitted) Security Value
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Life Care -- 4.6%
- --------------------------------------------------------------------------------
Baa BBB $ 805 Colorado Health Facilities
Authority, (Rocky Mountain
Adventist), 6.00%, 2/1/98 $ 810,281
NR NR 1,095 Florence, KY, Housing Facilities,
(Bluegrass Housing), 7.25%,
5/1/07 1,103,913
NR NR 2,000 Illinois Health Facilities
Authority, 6.125%, 8/15/10 2,040,460
NR NR 475 Vermont State Industrial
Development Authority,
(Wake Robins), 8.00%, 4/1/99 480,672
- --------------------------------------------------------------------------------
$ 4,435,326
- --------------------------------------------------------------------------------
Nursing Homes -- 9.5%
- --------------------------------------------------------------------------------
NR NR $1,105 Arizona Health Facilities
Authority Assisted Living
Facilities, (Mesa), 7.625%,
1/1/06 $ 1,128,979
NR A 3,500 California Statewide
Communities Development
Corporation, (Pacific
Homes), 5.90%, 4/1/09 3,648,399
NR NR 1,000 Fairfield, OH, Economic
Development Revenue,
(Beverly Enterprises
Project), 8.50%, 1/1/03 1,094,070
NR NR 1,500 Massachusetts Industrial
Finance Agency, Health Care
Facilities, (Age Institute
of Massachusetts), 7.60%, 11/1/05 1,546,425
NR NR 1,550 Saint Tammany Public Trust
Finance Authority, Louisiana
(Christwood), 8.75%, 11/15/05 1,682,355
- --------------------------------------------------------------------------------
$ 9,100,228
- --------------------------------------------------------------------------------
Pooled Loans -- 1.1%
- --------------------------------------------------------------------------------
A NR $1,000 Arkansas State Student Loan
Authority, (AMT), 6.25%,
6/1/10 $ 1,044,070
- --------------------------------------------------------------------------------
$ 1,044,070
- --------------------------------------------------------------------------------
Solid Waste -- 1.3%
- --------------------------------------------------------------------------------
NR BBB- $1,120 New Jersey Economic
Development Authority,
Heating and Cooling,
(Trigen-Trenton), (AMT),
6.10%, 12/1/05 $ 1,193,371
- --------------------------------------------------------------------------------
$ 1,193,371
- --------------------------------------------------------------------------------
Transportation -- 11.4%
- --------------------------------------------------------------------------------
Baa1 BBB $2,000 Denver, CO City and County
Airport, (AMT), 7.00%,
11/15/99 $ 2,107,160
NR NR 1,225 Eagle County, CO, Airport
Terminal Corp. (American
Airlines), (AMT), 6.75%,
5/1/06 1,290,648
NR NR 900 Los Angeles, CA, Regional
Airport Improvement Corporate
Lease, (TransWorld Airlines),
6.125%, 5/15/00 899,901
A1 NR 3,000 Massachusetts Turnpike
Authority, 5.00%, 1/1/20(3) 2,936,670
Baa2 BBB 500 Memphis-Shelby County, TN,
(Federal Express Co.),
5.35%, 9/1/12 511,980
NR NR 1,000 Northwest Arkansas Regional
Airport Authority, (AMT),
7.625%, 2/1/27 1,012,550
Aa2 AA 2,000 Wisconsin Housing and Economic
Development Authority,
6.45%, 9/1/27 2,108,920
- --------------------------------------------------------------------------------
$10,867,829
- --------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100%
(identified cost $91,515,736) $95,767,599
- --------------------------------------------------------------------------------
</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 of such economic developments, at September 30, 1997,
15.9% 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
2.6% to 10.1% of total investments.
At September 30, 1997 the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments is as follows:
Michigan 13%
Illinois 11%
Others, representing less than 10% individually 76%
(1) Security has been segregated to cover when-issued securities.
(2) When-issued security.
(3) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
See notes to financial statements
11
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
<TABLE>
<CAPTION>
As of September 30, 1997
Assets
- --------------------------------------------------------------------------------
<S> <C>
Investments, at value (Note 1A) (identified cost,
$91,515,736) $95,767,599
Cash 1,048,236
Interest receivable 1,789,711
Receivable for daily variation margin on open
financial futures contracts (Note 1E) 8,594
Deferred organization expenses (Note 1D) 1,450
- --------------------------------------------------------------------------------
Total assets $98,615,590
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Payable for when-issued securities (Note 1G) $ 2,821,024
Payable to affiliate for Trustees' fees (Note 2) 2,203
Accrued expenses 3,755
- --------------------------------------------------------------------------------
Total liabilities $ 2,826,982
- --------------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $95,788,608
- --------------------------------------------------------------------------------
Sources of Net Assets
- --------------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $91,574,251
Net unrealized appreciation of investments (computed
on the basis of identified cost) 4,214,357
- --------------------------------------------------------------------------------
Total $95,788,608
- --------------------------------------------------------------------------------
<CAPTION>
Statement of Operations
For the Six Months Ended
September 30, 1997
Investment Income
- --------------------------------------------------------------------------------
<S> <C>
Interest income $ 3,016,465
- --------------------------------------------------------------------------------
Total income $ 3,016,465
- --------------------------------------------------------------------------------
Expenses
- --------------------------------------------------------------------------------
Investment adviser fee (Note 2) $ 237,865
Compensation of Trustees not members of the
Investment Adviser's organization (Note 2) 4,345
Custodian fee (Note 1H) 28,116
Legal and accounting services 21,421
Amortization of organization expenses (Note 1D) 1,237
Miscellaneous 10,765
- --------------------------------------------------------------------------------
Total expenses $ 303,749
- --------------------------------------------------------------------------------
Deduct --
Reduction of custodian fee (Note 1H) $ 6,438
- --------------------------------------------------------------------------------
Total expense reductions $ 6,438
- --------------------------------------------------------------------------------
Net expenses $ 297,311
- --------------------------------------------------------------------------------
Net investment income $ 2,719,154
- --------------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- --------------------------------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified cost basis) $ 199,859
Financial futures contracts (942,728)
- --------------------------------------------------------------------------------
Net realized loss on investments $ (742,869)
- --------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) --
Investments (identified cost basis) $ 3,430,669
Financial futures contracts (176,269)
- --------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation)
of investments $ 3,254,400
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments $ 2,511,531
- --------------------------------------------------------------------------------
Net increase in net assets from operations $ 5,230,685
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
12
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) September 30, 1997 Year Ended
in Net Assets (Unaudited) March 31, 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
From operations --
Net investment income $ 2,719,154 $ 6,518,710
Net realized loss
on investments (742,869) (1,129,741)
Net change in unrealized
appreciation
(depreciation)
of investments 3,254,400 (150,139)
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 5,230,685 $ 5,238,830
- --------------------------------------------------------------------------------
Capital transactions --
Contributions $ 22,675,316 $ 8,914,088
Withdrawals (34,620,909) (46,425,770)
- --------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions $(11,945,593) $ (37,511,682)
- --------------------------------------------------------------------------------
Net decrease in net assets $ (6,714,908) $ (32,272,852)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of period $102,503,516 $ 134,776,368
- --------------------------------------------------------------------------------
At end of period $ 95,788,608 $ 102,503,516
- --------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
<CAPTION>
Six Months Ended Year Ended March 31,
September 30, 1997 -------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994*
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ratios to average daily net assets
- ----------------------------------------------------------------------------------------------------------------------------------
Expenses (1) 0.61%+ 0.60% 0.57% 0.53% 0.52%+
Expenses after custodian fee reduction 0.60%+ 0.58% 0.56% -- --
Net investment income 5.50%+ 5.45% 5.08% 5.02% 4.74%+
Portfolio Turnover 25% 68% 68% 56% 21%
- ----------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $95,789 $ 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 ratio 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
14
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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.
H Expense Reduction -- Investors Bank & Trust Company (IBT) serves as
custodian of the Portfolio.
15
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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 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.
K Interim Financial Information -- The interim financial statements relating
to September 30, 1997 and for the six months then ended have not been
audited by independent certified public accountants, but in the opinion of
the Portfolio's management reflect all adjustments consisting only of normal
recurring adjustments, necessary for the fair presentation of the financial
statements.
2 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 six months ended September 30, 1997, the fee
was equivalent to 0.48% of the Portfolio's average net assets for such
period and amounted to $237,865. 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 six months ended September 30, 1997, 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 $120 million unsecured line of credit
agreement with a group of banks. The Portfolio may temporarily borrow from
the line of credit to satisfy redemption requests or settle investment
transactions. Interest is charged to each portfolio or fund based on its
borrowings at an amount above the bank's adjusted certificate of deposit
rate, eurodollar rate or federal funds rate. In addition, a fee computed at
an annual rate of 0.15% 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 $24,411,911 and $33,893,326,
respectively.
5 Federal Income Tax Basis of Investments
----------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the
investments owned at September 30, 1997, as computed on a federal income tax
basis, were as follows:
<TABLE>
<S> <C>
Aggregate cost $91,515,736
---------------------------------------------------------------------------
Gross unrealized appreciation $ 4,252,618
---------------------------------------------------------------------------
Gross unrealized depreciation (755)
---------------------------------------------------------------------------
Net unrealized appreciation $ 4,251,863
---------------------------------------------------------------------------
</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 September 30, 1997 were as follows:
<TABLE>
<CAPTION>
Futures
Contracts Net Unrealized
Expiration Date Contracts Position Depreciation
-----------------------------------------------------------------------
<S> <C> <C> <C>
12/97 25 U.S. Treasury Bonds Short $ (37,506)
-----------------------------------------------------------------------
</TABLE>
16
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1997
INVESTMENT MANAGEMENT
National Limited Maturity Municipals Portfolio
Officers
Thomas J. Fetter
President
James B. Hawkes
Vice President and Trustee
Robert B. MacIntosh
Vice President
Raymond E. Hender
Vice President and
Portfolio Manager
James L. O'Connor
Treasurer
Alan R. Dynner
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
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
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