<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited)
Tax-Exempt Investments -- 100.0%
<TABLE>
<CAPTION>
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assisted Living -- 1.2%
- ------------------------------------------------------------------------------------------
NR NR $1,000 New Jersey EDA, (Chelsea at
East Brunswick), (AMT),
8.00%, 10/1/07 $ 1,121,300
- ------------------------------------------------------------------------------------------
$ 1,121,300
- ------------------------------------------------------------------------------------------
Cogeneration -- 4.2%
- ------------------------------------------------------------------------------------------
NR BBB $ 470 Eastern Connecticut
Resource Recovery
Authority, (Wheelabrator Lisbon),
(AMT), 5.50%, 1/1/20 $ 472,425
NR BBB- 1,120 New Jersey EDA,
(Trigen-Trenton), (AMT), 6.10%, 12/1/05 1,215,838
NR BB+ 1,250 New Jersey EDA, (Vineland
Cogeneration) (AMT),
7.875%, 6/1/19 1,374,575
NR NR 500 Palm Beach County, FL,
(Okeelanta Power), (AMT),
6.85%, 2/15/21/(1)/ 400,000
NR NR 500 Palm Beach County, FL, (Osceola
Power), (AMT), 6.95%, 1/1/22/(1)/ 395,000
- ------------------------------------------------------------------------------------------
$ 3,857,838
- ------------------------------------------------------------------------------------------
Economic Development Revenue -- 1.0%
- ------------------------------------------------------------------------------------------
NR BB- $ 950 Michigan State Strategic Fund,
(Crown Paper), 6.25%, 8/1/12 $ 897,019
- ------------------------------------------------------------------------------------------
$ 897,019
- ------------------------------------------------------------------------------------------
Education -- 3.0%
- ------------------------------------------------------------------------------------------
Ba1 NR $1,000 New Hampshire HEFA, (Colby-Sawyer
College), 7.20%, 6/1/12 $ 1,099,910
NR BBB 500 New Hampshire HEFA, (Rivier
College), 5.55%, 1/1/18 511,940
Aa AA- 1,700 University of Illinois, 0.00%, 4/1/15 778,379
Aa AA- 1,000 University of Illinois, 0.00%, 4/1/16 432,250
- ------------------------------------------------------------------------------------------
$ 2,822,479
- ------------------------------------------------------------------------------------------
Escrowed / Prerefunded -- 14.4%
- ------------------------------------------------------------------------------------------
Aaa AAA $1,500 Grand Ledge, MI, Public School
District, (MBIA), Prerefunded to
5/1/04, 7.875%, 5/1/11 $ 1,822,920
NR NR 3,500 Maricopa County, AZ, IDA,
Multifamily, Escrowed to
Maturity, 6.45%, 1/1/17 3,968,369
</TABLE>
<TABLE>
<CAPTION>
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escrowed / Prerefunded (continued)
- ------------------------------------------------------------------------------------------
NR NR $ 990 Maricopa County, AZ, IDA, Multifamily,
Escrowed to Maturity,
7.876%, 1/1/11 $ 1,197,623
Baa3 NR 1,340 Massachusetts HEFA, (Milford-
Whitinsville Hospital), Escrowed to
Maturity, 7.125%, 7/15/02 1,421,003
Aaa NR 3,000 Massachusetts Turnpike Authority,
Escrowed to Maturity,
5.00%, 1/1/20/(2)/ 3,109,679
NR NR 1,550 Saint Tammany Public Trust Finance
Authority, LA (Christwood), Escrowed
to Maturity, 8.75%, 11/15/05 1,824,986
- ------------------------------------------------------------------------------------------
$13,344,580
- ------------------------------------------------------------------------------------------
General Obligations -- 12.0%
- ------------------------------------------------------------------------------------------
Baa2 BBB+ $4,000 Detroit, MI, 6.50%, 4/1/02/(3)/ $ 4,322,479
A3 A- 750 New York City, NY, 0.00%, 8/1/07 512,325
Aa1 AA+ 750 Ohio State, 0.00%, 8/1/08 496,875
NR NR 1,800 Pennsylvania EDA, (Resource Recovery
for Northampton), 6.75%, 1/1/07 1,982,304
Baa1 A 1,500 Puerto Rico Aqueduct and Sewer
Authority, 5.00%, 7/1/15 1,522,455
NR NR 500 San Juan, NM, Pueblo Development
Authority, 7.00%, 10/15/06 500,005
NR NR 1,755 Youngstown, OH, County School
District, 6.40%, 7/1/00 1,808,212
- ------------------------------------------------------------------------------------------
$11,144,655
- ------------------------------------------------------------------------------------------
Hospital -- 6.9%
- ------------------------------------------------------------------------------------------
NR NR $1,900 Colorado Health Facilities Authority,
(Steamboat Springs Health),
5.00%, 9/15/03 $ 1,951,528
NR NR 500 Colorado Health Facilities Authority,
(Steamboat Springs Health),
5.30%, 9/15/09 513,630
Baa BBB- 450 Illinois Health Facilities Authority,
(Proctor Community Hospital),
7.375%, 1/1/23 480,758
NR BBB 500 Michigan Hospital Finance Authority,
(Gratiot Community Hospital),
6.10%, 10/1/07 544,660
NR BB- 500 New Hampshire HEFA, (Littleton
Hospital Association),
5.45%, 5/1/08 517,330
</TABLE>
See notes to financial statements
10
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ---------------------------------------------------------------------------
Hospital (continued)
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Baa BBB- $1,830 Richardson, TX, Hospital
Authority, (Richardson
Medical Center),
6.50%, 12/1/12 $ 1,977,974
NR NR 465 San Gorgonio, CA, Memorial
Health Care District,
5.60%, 5/1/11 472,105
- ---------------------------------------------------------------------------
$ 6,457,985
- ---------------------------------------------------------------------------
Housing -- 5.8%
- ---------------------------------------------------------------------------
A2 NR $1,005 Illinois Development
Finance Authority, Elderly
Housing, (Mattoon Tower),
(Section 8), 6.35%, 7/1/10 $ 1,056,587
Baa3 NR 945 Illinois Development
Finance Authority, Elderly
Housing, (Rome Meadows),
6.40%, 2/1/03 981,014
Baa3 NR 1,145 Illinois Development
Finance Authority, Elderly
Housing, (Rome Meadows),
6.65%, 2/1/06 1,205,857
Aa2 AA 2,000 Wisconsin Housing and
Economic Development
Authority, (Home
Ownership), (AMT), 6.45%,
9/1/27 2,169,440
- ---------------------------------------------------------------------------
$ 5,412,898
- ---------------------------------------------------------------------------
Industrial Development Revenue -- 18.4%
- ---------------------------------------------------------------------------
NR NR $ 690 Austin, TX, (Cargoport
Development LLC), (AMT),
7.50%, 10/1/07 $ 743,289
NR NR 455 Austin, TX, (Cargoport
Development LLC), (AMT),
8.30%, 10/1/21 514,332
NR BBB- 1,000 Clark County, NV, (Nevada
Power Co.), (AMT), 5.90%,
10/1/30 1,025,400
A3 A- 1,000 Columbus, NC (International
Paper Co.), 5.80%, 12/1/16 1,070,850
NR NR 1,100 Eagle County, CO, Airport
Terminal Corp. (American
Airlines), (AMT), 6.75%,
5/1/06 1,186,328
NR NR 900 Iowa Finance Authority,
(Southbridge Mall), 6.375%,
12/1/13 925,398
NR NR 3,435 Jackson, TN, (Owens-Corning
Fiberglass), (AMT),
6.25%, 3/31/04(3) 3,555,224
A3 BBB+ 500 Jones County, MS,
(International Paper Co.),
5.80%, 10/1/21 525,965
NR NR 500 Kansas City, MO, IDR,
(Kingswood Manor), 5.80%,
11/15/17(4) 495,700
NR NR 500 Kimball, NE, EDA, (Clean
Harbors, Inc.), (AMT),
10.75%, 9/1/26 554,280
NR NR 620 Los Angeles, CA, Regional
Airport Improvement
Corporate Lease,
(TransWorld Airlines),
6.125%, 5/15/00 620,186
NR NR 1,000 New Jersey EDA, (Holt
Hauling), 7.90%, 3/1/27 1,145,920
NR NR 750 Ohio Solid Waste Revenue,
(Republic Engineered
Steels, Inc.), (AMT),
9.00%, 6/1/21 815,318
NR BBB- 2,000 Pennsylvania EDA,
(Resources Recovery),
(AMT), 7.05%, 12/1/10 2,241,260
NR NR 500 Robbins, IL, Resource
Recovery, (AMT), 8.375%,
10/15/10 400,000
NR NR 1,265 Santa Fe, NM (Crow Hobbs),
8.25%, 9/1/05 1,334,512
- ---------------------------------------------------------------------------
$17,153,962
- ---------------------------------------------------------------------------
Insured-Education -- 0.2%
- ---------------------------------------------------------------------------
Aaa AAA $ 500 Southern Illinois
University, Housing and
Auxiliary Facilities,
(MBIA), 0.00%, 4/1/17 $ 204,900
- ---------------------------------------------------------------------------
$ 204,900
- ---------------------------------------------------------------------------
Insured-General Obligations -- 2.3%
- ---------------------------------------------------------------------------
Aaa AAA $1,000 Kalamazoo, MI, (MBIA),
5.40%, 5/1/14 $ 1,093,530
Aaa AAA 1,000 New York State Local
Government Assistance
Corp., (MBIA),
5.00%, 4/1/21 1,003,910
- ---------------------------------------------------------------------------
$ 2,097,440
- ---------------------------------------------------------------------------
Insured-Hospital -- 2.6%
- ---------------------------------------------------------------------------
Aaa AAA $2,000 El Paso County, TX,
Hospital District, (MBIA),
0.00%, 8/15/06 $ 1,447,280
Aaa AAA 1,000 Massachusetts HEFA,
(Caregroup), (MBIA), 5.00%,
7/1/18 998,750
- --------------------------------------------------------------------------
$ 2,446,030
- --------------------------------------------------------------------------
Insured-Housing -- 2.5%
- --------------------------------------------------------------------------
Aaa AAA $2,115 Massachusetts HFA,
(Harborpoint Development),
(AMBAC), (AMT), 6.20%,
12/1/10 $ 2,318,040
- --------------------------------------------------------------------------
$ 2,318,040
- --------------------------------------------------------------------------
Insured-Lease Revenue /
Certificates of Participation -- 1.1%
- --------------------------------------------------------------------------
Aaa AAA $1,000 West Valley City, UT,
(AMBAC), 4.45%, 4/15/10 $ 995,530
- --------------------------------------------------------------------------
$ 995,530
- --------------------------------------------------------------------------
</TABLE>
See notes to financial statements
11
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
PORTFOLIO OF INVESTMENTS (Unaudited) CONT'D
<TABLE>
<CAPTION>
Amount
Standard (000's
Moody's & Poor's omitted) Security Value
- ----------------------------------------------------------------------------------
<C> <C> <C> <S> <C>
Insured-Special Tax Revenue -- 0.6%
- ----------------------------------------------------------------------------------
Aaa AAA $ 500 George L. Smith, (Georgia World
Congress Center-Domed Stadium),
(MBIA), (AMT), 6.00%, 7/1/06(4) $ 533,315
- ----------------------------------------------------------------------------------
$ 533,315
- ----------------------------------------------------------------------------------
Miscellaneous -- 1.2%
- ----------------------------------------------------------------------------------
Baa3 NR $ 500 Mashantucket, CT, (Western Pequot
Tribe), 5.55%, 9/1/08 $ 536,650
NR NR 600 Tax Revenue Exempt Securities
Trust, Community Health Provider,
(Pooled Loan Program Various States
Trust Certificates), 6.00%, 12/1/36 627,924
- ----------------------------------------------------------------------------------
$ 1,164,574
- ----------------------------------------------------------------------------------
Nursing Home -- 10.0%
- ----------------------------------------------------------------------------------
NR NR $1,105 Arizona Health Facilities Authority
Assisted Living Facilities, (Mesa),
7.625%, 1/1/06 $ 1,163,112
NR A+ 3,500 California Statewide Communities
Development Corp., (Pacific Homes),
5.90%, 4/1/09 3,814,929
NR NR 650 Citrus County, FL, IDA, (Beverly
Enterprises), 5.00%, 4/1/03 661,525
NR NR 985 Clovis, NM, IDR, (Retirement
Ranches, Inc.), 7.75%, 4/1/19 1,099,999
NR NR 850 Fairfield, OH, EDA, (Beverly
Enterprises), 8.50%, 1/1/03 919,989
NR NR 1,500 Massachusetts IFA, (Age Institute
of Massachusetts), 7.60%, 11/1/05 1,622,400
- ----------------------------------------------------------------------------------
$ 9,281,954
- ----------------------------------------------------------------------------------
Pooled Loans -- 4.6%
- ----------------------------------------------------------------------------------
Aa2 NR $1,900 Arizona Educational Loan Marketing
Corp., (AMT), 6.25%, 6/1/06 $ 2,112,211
A NR 1,000 Arizona Student Loan Acquisition
Authority, (AMT), 7.625%, 5/1/10 1,108,580
A NR 1,000 Arkansas State Student Loan
Authority, (AMT), 6.25%, 6/1/10 1,056,240
- ----------------------------------------------------------------------------------
$ 4,277,031
- ----------------------------------------------------------------------------------
Senior Living / Life Care -- 4.2%
- ----------------------------------------------------------------------------------
NR NR $1,025 Florence, KY, Housing Facilities,
(Bluegrass Housing), 7.25%, 5/1/07 $ 1,097,509
NR NR 2,000 Illinois Health Facilities
Authority, (Lutheran Social
Services), 6.125%, 8/15/10 2,106,840
NR NR 250 Massachusetts IFA, (Forge Hill),
(AMT), 6.75%, 4/1/30 247,265
NR NR $ 475 Vermont IDA, (Wake Robins),
8.00%, 4/1/99 $ 476,131
- ----------------------------------------------------------------------------------
$ 3,927,745
- ----------------------------------------------------------------------------------
Transportation -- 3.8%
- ----------------------------------------------------------------------------------
Baa1 BBB $2,000 Denver, CO City and County Airport,
(AMT), 7.00%, 11/15/99 $ 2,070,220
NR NR 260 Memphis-Shelby County, TN, Airport
Authority, 6.125%, 12/1/16 270,824
NR NR 1,000 Northwest Arkansas Regional Airport
Authority, (AMT), 7.625%, 2/1/27 1,160,380
- ----------------------------------------------------------------------------------
$ 3,501,424
- ----------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $86,616,559) $92,960,699
- ----------------------------------------------------------------------------------
</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, 1998,
11.2% 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
3.6% to 7.6% of total investments.
At September 30, 1998, the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments is as follows:
Arizona 11%
Massachusetts 12%
Michigan 10%
Others, representing less than 10% individually 67%
AMT - Interest earned from these securities may be considered a tax preference
item for purposes of the Federal Alternative Minimum Tax.
(1) Non-income producing security.
(2) Security (or a portion thereof) has been segregated to cover margin
requirements on open financial futures contracts.
(3) Security (or a portion thereof) has been segregated to cover when-issued
securities.
(4) When-issued security.
See notes to financial statements
12
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
FINANCIAL STATEMENTS (Unaudited)
Statement of Assets and Liabilities
<TABLE>
As of September 30, 1998
Assets
- -------------------------------------------------------------------------
<S> <C>
Investments, at value (identified cost, $86,616,559) $92,960,699
Cash 1,955,937
Interest receivable 1,677,421
Other assets 19,800
- -------------------------------------------------------------------------
Total assets $96,613,857
- -------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------
Payable for investments purchased $ 4,026,665
Payable for daily variation margin on open
financial futures contracts 37,067
Other accrued expenses 5,485
- -------------------------------------------------------------------------
Total liabilities $ 4,069,217
- -------------------------------------------------------------------------
Net Assets applicable to investors' interest in Portfolio $92,544,640
- -------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------
Net proceeds from capital contributions and withdrawals $86,249,140
Net unrealized appreciation (computed on the basis
of identified cost) 6,295,500
- -------------------------------------------------------------------------
Total $92,544,640
- -------------------------------------------------------------------------
</TABLE>
Statement of Operations
<TABLE>
<CAPTION>
For the Six Months Ended
September 30, 1998
Investment Income
- -------------------------------------------------------------------------
<S> <C>
Interest $ 2,707,045
- -------------------------------------------------------------------------
Total Investment income $ 2,707,045
- -------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------
Investment adviser fee $ 217,609
Trustees fees and expenses 3,264
Custodian fee 28,311
Legal and accounting services 21,874
Amortization of organization expenses 219
Miscellaneous 15,018
- -------------------------------------------------------------------------
Total expenses $ 286,295
- -------------------------------------------------------------------------
Deduct--
Reduction of custodian fee $ 6,590
- -------------------------------------------------------------------------
Total expense reductions $ 6,590
- -------------------------------------------------------------------------
Net expenses $ 279,705
- -------------------------------------------------------------------------
Net investment income $ 2,427,340
- -------------------------------------------------------------------------
Realized and Unrealized Gain (Loss)
- -------------------------------------------------------------------------
Net realized gain (loss)--
Investment transactions (Identified cost basis) $ 231,482
Financial futures contracts (244,201)
- -------------------------------------------------------------------------
Net realized loss $ (12,719)
- -------------------------------------------------------------------------
Change in unrealized appreciation (depreciation)--
Investments (identified cost basis) $ 694,952
Financial futures contracts (28,833)
- -------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) $ 666,119
- -------------------------------------------------------------------------
Net realized and unrealized gain $ 653,400
- -------------------------------------------------------------------------
Net increase in net assets from operations $ 3,080,740
- -------------------------------------------------------------------------
</TABLE>
See notes to financial statements
13
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months Ended
Increase (Decrease) September 30, 1998 Year Ended
in Net Assets (Unaudited) March 31, 1998
- ----------------------------------------------------------------------------
<S> <C> <C>
From operations--
Net investment income $ 2,427,340 $ 5,333,661
Net realized loss (12,719) (161,876)
Net change in unrealized
appreciation (depreciation) 666,119 4,669,424
- ----------------------------------------------------------------------------
Net increase in net assets
from operations $ 3,080,740 $ 9,841,209
- ----------------------------------------------------------------------------
Capital transactions--
Contributions $ 15,792,322 $ 44,850,231
Withdrawals (19,455,682) (64,067,696)
- ----------------------------------------------------------------------------
Net decrease in net assets from
capital transactions $ (3,663,360) $ (19,217,465)
- ----------------------------------------------------------------------------
Net decrease in net assets $ (582,620) $ (9,376,256)
- ----------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------
At beginning of period $ 93,127,260 $ 102,503,516
- ----------------------------------------------------------------------------
At end of period $ 92,544,640 $ 93,127,260
- ----------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
FINANCIAL STATEMENTS CONT'D
Supplementary Data
<TABLE>
Six Months Ended Year Ended March 31,
September 30, 1998 -----------------------------------------------------------
(Unaudited) 1998 1997 1996 1995 1994(1)
- -----------------------------------------------------------------------------------------------------------------------------
Ratios to average daily net assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Expenses (2) 0.62%(3) 0.60% 0.60% 0.57% 0.53% 0.52%(3)
Expenses after custodian fee reduction 0.61%(3) 0.59% 0.58% 0.56% -- --
Net investment income 5.31%(3) 5.53% 5.45% 5.08% 5.02% 4.74%(3)
Portfolio Turnover 11% 41% 68% 68% 56% 21%
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $92,545 $93,127 $102,504 $134,776 $169,621 $177,842
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the period from the start of business, May 3, 1993, to March 31, 1994.
(2) 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.
(3) Annualized.
See notes to financial statements
15
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
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.
16
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) 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.
K Interim Financial Statements -- The interim financial statements relating to
September 30, 1998, and for the six months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund'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, 1998, the fee was equivalent to 0.48% of
the Portfolio's average net assets for such period and amounted to $217,609.
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, 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 $10,149,157 and $11,059,312 respectively,
for the six months ended September 30, 1998.
5 Federal Income Tax Basis of Investments
------------------------------------------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned at September 30, 1998, as computed on a federal income tax basis, were
as follows:
<TABLE>
<CAPTION>
<S>
<C>
Aggregate cost $ 86,616,559
------------------------------------------------------------------------------
Gross unrealized appreciation $ 6,518,847
Gross unrealized depreciation (174,707)
------------------------------------------------------------------------------
Net unrealized appreciation $ 6,344,140
------------------------------------------------------------------------------
</TABLE>
17
<PAGE>
National Limited Maturity Municipals Portfolio as of September 30, 1998
NOTES TO FINANCIAL STATEMENTS (Unaudited) CONT'D
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, 1998 were as
follows:
Futures
Contracts Net Unrealized
Expiration Date Contracts Position Depreciation
----------------------------------------------------------------------------
12/98 29 U.S. Treasury Bonds Short $ (48,640)
----------------------------------------------------------------------------
At September 30, 1998, the Portfolio had sufficient cash and/or securities
to cover margin requirements on open futures contracts.
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National Limited Maturity Municipals Portfolio as of September 30, 1998
INVESTMENT MANAGEMENT
National Limited Maturity Municipals Portfolio
Officers Independent Trustees
Thomas J. Fetter Donald R. Dwight
President President, Dwight Partners, Inc.
James B. Hawkes Samuel L. Hayes, III
Vice President and Jacob H. Schiff Professor of Investment
Trustee Banking, Harvard University Graduate
School of Business Administration
William H. Ahern, Jr.
Vice President and Norton H. Reamer
Portfolio Manager Chairman and Chief Executive Officer,
United Asset Management Corporation
Robert B. MacIntosh
Vice President John L. Thorndike
Formerly Director, Fiduciary Company
James L. O'Connor Incorporated
Treasurer
Jack L. Treynor
Alan R. Dynner Investment Adviser and Consultant
Secretary
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