<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
PORTFOLIO OF INVESTMENTS
TAX-EXEMPT INVESTMENTS -- 100.0%
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
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 $ 1,096,450
---------------------------------------------------------------------------------------
$ 1,096,450
---------------------------------------------------------------------------------------
Cogeneration -- 8.8%
---------------------------------------------------------------------------------------
NR BBB+ $ 470 Eastern Connecticut Resource Recovery
Authority, (Wheelabrator Lisbon), (AMT),
5.50%, 1/1/20 $ 465,084
NR BBB- 1,075 New Jersey EDA, (Trigen-Trenton), (AMT),
6.10%, 12/1/05 1,143,531
NR BB+ 1,250 New Jersey EDA, (Vineland Cogeneration)
(AMT), 7.875%, 6/1/19 1,349,663
NR NR 500 Palm Beach County, FL, (Okeelanta
Power), (AMT), 6.85%, 2/15/21(1) 385,000
NR NR 500 Palm Beach County, FL, (Osceola Power),
(AMT), 6.95%, 1/1/22(1) 380,000
NR NR 1,800 Pennsylvania EDA, (Resource Recovery
Northampton), 6.75%, 1/1/07 1,938,456
NR BBB- 2,000 Pennsylvania EDA, (Resources
Recovery-Colver), (AMT), 7.05%, 12/1/10 2,195,319
---------------------------------------------------------------------------------------
$ 7,857,053
---------------------------------------------------------------------------------------
Economic Development Revenue -- 1.0%
---------------------------------------------------------------------------------------
NR B+ $ 950 Michigan State Strategic Fund, (Crown
Paper), 6.25%, 8/1/12 $ 871,065
---------------------------------------------------------------------------------------
$ 871,065
---------------------------------------------------------------------------------------
Education -- 3.1%
---------------------------------------------------------------------------------------
Ba1 NR $1,000 New Hampshire HEFA, (Colby-Sawyer
College), 7.20%, 6/1/12 $ 1,085,830
NR BBB 500 New Hampshire HEFA, (Rivier College),
5.55%, 1/1/18 500,155
Aa3 AA- 1,700 University of Illinois, 0.00%, 4/1/15 755,922
Aa3 AA- 1,000 University of Illinois, 0.00%, 4/1/16 419,210
---------------------------------------------------------------------------------------
$ 2,761,117
---------------------------------------------------------------------------------------
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
AMOUNT
STANDARD (000'S
MOODY'S & POOR'S OMITTED) SECURITY VALUE
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Escrowed/Prerefunded -- 19.1%
---------------------------------------------------------------------------------------
NR A+ $3,500 California Statewide Communities
Development Corp., (Pacific Homes),
Prerefunded to 4/1/03, 5.90%, 4/1/09 $ 3,785,704
Aaa AAA 500 Grand Ledge, MI, Public School District,
(MBIA), Prerefunded to 5/1/04, 7.875%,
5/1/11 598,400
NR AAA 4,185 Illinois Development Finance Authority,
(Regency Park), Escrowed to Maturity,
0.00%, 7/15/25 932,125
NR NR 3,500 Maricopa County, AZ, IDA, Multifamily,
Escrowed to Maturity, 6.45%, 1/1/17 3,973,024
NR NR 945 Maricopa County, AZ, IDA, Multifamily,
Escrowed to Maturity, 7.876%, 1/1/11 1,133,253
Baa3 NR 1,107 Massachusetts HEFA, (Milford-
Whitinsville Hospital), Escrowed to
Maturity, 7.125%, 7/15/02 1,172,378
Aaa NR 3,000 Massachusetts Turnpike Authority,
Escrowed to Maturity, 5.00%, 1/1/20 3,036,629
Baa BBB+ 670 Richardson, TX, Hospital Authority
(Baylor/Richardson Medical Center),
Prerefunded to 12/01/03, 6.50%, 12/1/12 752,276
NR AAA 1,410 Saint Tammany Public Trust Finance
Authority, LA (Christwood), Escrowed to
Maturity, 8.75%, 11/15/05 1,648,135
---------------------------------------------------------------------------------------
$ 17,031,924
---------------------------------------------------------------------------------------
General Obligations -- 9.6%
---------------------------------------------------------------------------------------
Baa1 A- $4,000 Detroit, MI, 6.50%, 4/1/02(2) $ 4,268,399
A3 A- 750 New York City, NY, 0.00%, 8/1/07 518,033
Aa1 AA+ 750 Ohio State, 0.00%, 8/1/08 499,628
Baa1 A 1,500 Puerto Rico Aqueduct and Sewer
Authority, 5.00%, 7/1/15 1,507,050
NR NR 1,755 Youngstown, OH, County School District,
6.40%, 7/1/00 1,790,188
---------------------------------------------------------------------------------------
$ 8,583,298
---------------------------------------------------------------------------------------
Hospital -- 7.1%
---------------------------------------------------------------------------------------
NR NR $1,900 Colorado Health Facilities Authority,
(Steamboat Springs Health), 5.00%,
9/15/03 $ 1,934,466
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
14
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
AMOUNT
STANDARD (000'S
MOODY'S & POOR'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Hospital (continued)
---------------------------------------------------------------------------------------
Aa3 AA- $ 500 Cuyahoga County, OH, Hospital Authority,
(Cleveland Health Clinic), 5.25%, 1/1/12 $ 516,050
NR NR 750 Forsyth County, GA, Hospital Authority,
(Georgia Baptist Health Care System),
6.00%, 10/1/08 747,855
Baa BBB- 450 Illinois Health Facilities Authority,
(Proctor Community Hospital), 7.375%,
1/1/23 473,882
NR BBB 500 Michigan Hospital Finance Authority,
(Gratiot Community Hospital), 6.10%,
10/1/07 532,440
NR BB- 500 New Hampshire HEFA, (Littleton Hospital
Association), 5.45%, 5/1/08 505,865
Baa BBB+ 1,070 Richardson, TX, Hospital Authority
(Baylor/Richardson Medical Center),
6.50%, 12/1/12 1,159,035
NR NR 465 San Gorgonio, CA, Memorial Health Care
District, 5.60%, 5/1/11 460,755
---------------------------------------------------------------------------------------
$ 6,330,348
---------------------------------------------------------------------------------------
Housing -- 6.5%
---------------------------------------------------------------------------------------
NR NR $ 500 Arkansas Development Finance Authority,
MFMR, (Park Apartments), (AMT), 5.95%,
12/1/28 $ 496,505
A2 NR 1,005 Illinois Development Finance Authority,
Elderly Housing, (Mattoon Tower),
(Section 8), 6.35%, 7/1/10 1,049,019
Baa3 NR 855 Illinois Development Finance Authority,
Elderly Housing, (Rome Meadows), 6.40%,
2/1/03 881,787
Baa3 NR 1,145 Illinois Development Finance Authority,
Elderly Housing, (Rome Meadows), 6.65%,
2/1/06 1,197,178
Aa2 AA 2,000 Wisconsin Housing and Economic
Development Authority, (Home Ownership),
(AMT), 6.45%, 9/1/27 2,148,720
---------------------------------------------------------------------------------------
$ 5,773,209
---------------------------------------------------------------------------------------
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
AMOUNT
STANDARD (000'S
MOODY'S & POOR'S OMITTED) SECURITY VALUE
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Industrial Development Revenue -- 14.8%
---------------------------------------------------------------------------------------
NR NR $ 690 Austin, TX, (Cargoport Development LLC),
(AMT), 7.50%, 10/1/07 $ 727,481
NR NR 455 Austin, TX, (Cargoport Development LLC),
(AMT), 8.30%, 10/1/21 501,155
Baa2 BB+ 500 Chicago, IL, O'Hare International
Airport, (United Airlines, Inc.), 5.35%,
9/1/16 498,015
NR BBB- 1,000 Clark County, NV, (Nevada Power Co.),
(AMT), 5.90%, 10/1/30 1,021,420
A3 BBB+ 1,000 Columbus, NC (International Paper Co.),
5.80%, 12/1/16 1,042,740
NR NR 1,100 Eagle County, CO, Airport Terminal Corp.
(American Airlines), (AMT), 6.75%,
5/1/06 1,162,282
Baa1 BBB 500 Gulf Coast, TX, Waste Disposal,
(Champion International Corp.), (AMT),
6.875%, 12/1/28 542,675
NR NR 900 Iowa Finance Authority, (Southbridge
Mall), 6.375%, 12/1/13 917,982
A3 BBB+ 500 Jones County, MS, (International Paper
Co.), 5.80%, 10/1/21 512,645
NR NR 500 Kimball, NE, EDA, (Clean Harbors, Inc.),
10.75%, 9/1/26 543,975
NR NR 620 Los Angeles, CA, Regional Airport
Improvement Corporate Lease, (TransWorld
Airlines), 6.125%, 5/15/00 620,223
Aa2 AA 500 Missouri State Development Finance
Board, Solid Waste Disposal Revenue,
(Proctor and Gamble), (AMT), 5.20%,
3/15/29 498,855
NR NR 1,000 New Jersey EDA, (Holt Hauling), (AMT),
7.90%, 3/1/27 1,120,630
NR NR 750 Ohio Solid Waste Revenue, (Republic
Engineered Steels, Inc.), (AMT), 9.00%,
6/1/21 803,175
NR NR 500 Peru, IL, (Freightways Corp.), 5.25%,
11/1/03 497,665
Baa2 BBB 1,000 Saint Charles Parish, LA, Pollution
Control Revenue, (Union Carbide Corp.),
5.10%, 1/1/12 996,770
NR NR 1,195 Santa Fe, NM (Crow Hobbs), 8.25%, 9/1/05 1,238,761
---------------------------------------------------------------------------------------
$ 13,246,449
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
15
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
AMOUNT
STANDARD (000'S
MOODY'S & POOR'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Insured-Education -- 1.0%
---------------------------------------------------------------------------------------
Aaa AAA $ 620 Golden West Schools Financing Authority,
(MBIA), 5.80%, 2/1/16(3) $ 687,568
Aaa AAA 500 Southern Illinois University, Housing
and Auxiliary Facilities, (MBIA), 0.00%,
4/1/17 198,455
---------------------------------------------------------------------------------------
$ 886,023
---------------------------------------------------------------------------------------
Insured-General Obligations -- 1.1%
---------------------------------------------------------------------------------------
Aaa AAA $1,000 Paw Paw, MI, Public School District,
(FGIC), 5.00%, 5/1/21(2) $ 999,290
---------------------------------------------------------------------------------------
$ 999,290
---------------------------------------------------------------------------------------
Insured-Hospital -- 1.6%
---------------------------------------------------------------------------------------
Aaa AAA $2,000 El Paso County, TX, Hospital District,
(MBIA), 0.00%, 8/15/06 $ 1,448,960
---------------------------------------------------------------------------------------
$ 1,448,960
---------------------------------------------------------------------------------------
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(3) $ 533,260
---------------------------------------------------------------------------------------
$ 533,260
---------------------------------------------------------------------------------------
Insured-Transportation -- 1.1%
---------------------------------------------------------------------------------------
Aaa AAA $2,500 E-470 Public Highway Authority, CO,
(MBIA), 0.00%, 9/1/17 $ 981,800
---------------------------------------------------------------------------------------
$ 981,800
---------------------------------------------------------------------------------------
Miscellaneous -- 1.8%
---------------------------------------------------------------------------------------
Baa3 NR $ 500 Mashantucket, CT, (Western Pequot
Tribe), 5.55%, 9/1/08 $ 523,490
NR NR 500 San Juan, NM, Pueblo Development
Authority, 7.00%, 10/15/06 491,990
NR NR 595 Tax Revenue Exempt Securities Trust,
Community Health Provider, (Pooled Loan
Program Various States Trust
Certificates), 6.00%, 12/1/36 595,900
---------------------------------------------------------------------------------------
$ 1,611,380
---------------------------------------------------------------------------------------
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
AMOUNT
STANDARD (000'S
MOODY'S & POOR'S OMITTED) SECURITY VALUE
<S> <C> <C> <C> <C>
---------------------------------------------------------------------------------------
Nursing Home -- 5.7%
---------------------------------------------------------------------------------------
NR NR $1,105 Arizona Health Facilities Authority
Assisted Living Facilites, (Mesa),
7.625%, 1/1/06 $ 1,142,669
NR NR 650 Citrus County, FL, IDA, (Beverly
Enterprises), 5.00%, 4/1/03 648,603
NR NR 965 Clovis, NM, IDR, (Retirement Ranches,
Inc.), 7.75%, 4/1/19 1,054,977
NR NR 680 Fairfield, OH, EDA, (Beverly
Enterprises), 8.50%, 1/1/03 723,901
NR NR 1,455 Massachusetts IFA, (Age Institute of
Massachusetts), 7.60%, 11/1/05 1,543,886
---------------------------------------------------------------------------------------
$ 5,114,036
---------------------------------------------------------------------------------------
Pooled Loans -- 4.7%
---------------------------------------------------------------------------------------
Aa2 NR $1,900 Arizona Educational Loan Marketing
Corp., (AMT), 6.25%, 6/1/06 $ 2,079,702
A NR 1,000 Arizona Student Loan Acquisition
Authority, (AMT), 7.625%, 5/1/10 1,096,790
A NR 1,000 Arkansas Student Loan Authority, (AMT),
6.25%, 6/1/10 1,039,340
---------------------------------------------------------------------------------------
$ 4,215,832
---------------------------------------------------------------------------------------
Senior Living/Life Care -- 6.7%
---------------------------------------------------------------------------------------
NR NR $ 785 Albuquerque, NM, Retirement Facility
Revenue, 6.60%, 12/15/28 $ 780,847
NR NR 985 Florence, KY, Housing Facilities,
(Bluegrass Housing), 7.25%, 5/1/07 1,103,318
NR NR 2,000 Illinois Health Facilities Authority,
(Lutheran Social Services), 6.125%,
8/15/10 2,068,980
NR NR 500 Kansas City, MO, IDR, (Kingswood Manor),
5.80%, 11/15/17 483,130
NR NR 250 Massachusetts IFA, (Forge Hill), (AMT),
6.75%, 4/1/30 238,493
NR NR 500 North Miami, FL, HFA, (Imperial Club),
6.75%, 1/1/33 490,865
NR NR 305 Okaloosa County, FL, Retirement Rental
Housing, (Encore Retirement Partners),
5.25%, 2/1/04 305,107
NR NR 475 Vermont IDA, (Wake Robins), 8.00%,
4/1/99 475,000
---------------------------------------------------------------------------------------
$ 5,945,740
---------------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
16
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
RATINGS
(UNAUDITED)
----------- PRINCIPAL
AMOUNT
STANDARD (000'S
MOODY'S & POOR'S OMITTED) SECURITY VALUE
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Solid Waste -- 0.3%
---------------------------------------------------------------------------------------
NR NR $ 500 Robbins, Cook County, IL, (Robbins
Resource Recovery Partners, L.P.),
8.375%, 10/15/10 $ 270,000
---------------------------------------------------------------------------------------
$ 270,000
---------------------------------------------------------------------------------------
Special Tax Revenue -- 0.3%
---------------------------------------------------------------------------------------
NR NR $ 250 Frederick County, MD, Urbana Community
Development Authority, 6.625%, 7/1/25 $ 254,525
---------------------------------------------------------------------------------------
$ 254,525
---------------------------------------------------------------------------------------
Transportation -- 3.9%
---------------------------------------------------------------------------------------
Baa1 BBB+ $2,000 Denver, CO, City and County Airport,
(AMT), 7.00%, 11/15/99 $ 2,042,580
NR NR 260 Memphis-Shelby County, TN, Airport
Authority, 6.12%, 12/1/16 264,350
NR NR 1,000 Northwest Arkansas Regional Airport
Authority, (AMT), 7.625%, 2/1/27 1,150,780
---------------------------------------------------------------------------------------
$ 3,457,710
---------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.0%
(identified cost $84,822,504) $ 89,269,469
---------------------------------------------------------------------------------------
</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 March 31, 1999, 6.1%
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 1.1% to 5.0%
of total investments.
At March 31, 1999, the concentration of the Portfolio's investments in the
various states, determined as a percentage of total investments is as follows:
Arizona 11%
Illinois 10%
Others, representing less than 10% individually 79%
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 when-issued
securities.
(3) When-issued security.
SEE NOTES TO FINANCIAL STATEMENTS
17
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value (identified cost,
$84,822,504) $ 89,269,469
Cash 314,518
Receivable for investments sold 20,000
Interest receivable 1,568,431
- ------------------------------------------------------
TOTAL ASSETS $ 91,172,418
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for when-issued securities $ 1,200,119
Other accrued expenses 5,905
- ------------------------------------------------------
TOTAL LIABILITIES $ 1,206,024
- ------------------------------------------------------
NET ASSETS APPLICABLE TO INVESTORS'
INTEREST IN PORTFOLIO $ 89,966,394
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Net proceeds from capital contributions
and withdrawals $ 85,519,429
Net unrealized appreciation (computed on
the basis of identified cost) 4,446,965
- ------------------------------------------------------
TOTAL $ 89,966,394
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
MARCH 31, 1999
<S> <C>
Investment Income
- ------------------------------------------------------
Interest $ 5,373,501
- ------------------------------------------------------
TOTAL INVESTMENT INCOME $ 5,373,501
- ------------------------------------------------------
Expenses
- ------------------------------------------------------
Investment adviser fee $ 433,524
Trustees fees and expenses 8,080
Custodian fee 59,215
Legal and accounting services 24,619
Amortization of organization expenses 219
Miscellaneous 29,654
- ------------------------------------------------------
TOTAL EXPENSES $ 555,311
- ------------------------------------------------------
Deduct --
Reduction of custodian fee $ 11,956
- ------------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 11,956
- ------------------------------------------------------
NET EXPENSES $ 543,355
- ------------------------------------------------------
NET INVESTMENT INCOME $ 4,830,146
- ------------------------------------------------------
Realized and Unrealized Gain (Loss)
- ------------------------------------------------------
Net realized gain (loss) --
Investment transactions (identified
cost basis) $ 650,727
Financial futures contracts (278,032)
- ------------------------------------------------------
NET REALIZED GAIN $ 372,695
- ------------------------------------------------------
Change in unrealized appreciation
(depreciation) --
Investments (identified cost basis) $ (1,202,223)
Financial futures contracts 19,807
- ------------------------------------------------------
NET CHANGE IN UNREALIZED APPRECIATION
(DEPRECIATION) $ (1,182,416)
- ------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS $ (809,721)
- ------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 4,020,425
- ------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
18
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Increase (Decrease) YEAR ENDED YEAR ENDED
in Net Assets MARCH 31, 1999 MARCH 31, 1998
<S> <C> <C>
- ---------------------------------------------------------------------------
From operations --
Net investment income $ 4,830,146 $ 5,333,661
Net realized gain (loss) 372,695 (161,876)
Net change in unrealized appreciation
(depreciation) (1,182,416) 4,669,424
- ---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 4,020,425 $ 9,841,209
- ---------------------------------------------------------------------------
Capital transactions --
Contributions $ 26,384,868 $ 44,850,231
Withdrawals (33,566,159) (64,067,696)
- ---------------------------------------------------------------------------
NET DECREASE IN NET ASSETS FROM CAPITAL
TRANSACTIONS $ (7,181,291) $ (19,217,465)
- ---------------------------------------------------------------------------
NET DECREASE IN NET ASSETS $ (3,160,866) $ (9,376,256)
- ---------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------
At beginning of year $ 93,127,260 $ 102,503,516
- ---------------------------------------------------------------------------
AT END OF YEAR $ 89,966,394 $ 93,127,260
- ---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
19
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
FINANCIAL STATEMENTS CONT'D
SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31,
------------------------------------------------------------------------
1999 1998 1997 1996 1995
<C> <C> <C> <C> <C>
---------------------------------------------------------------------------
Ratios to
average daily
net assets
---------------------------------------------------------------------------
Expenses(1) 0.61% 0.60% 0.60% 0.57% 0.53%
Expenses
after
custodian
fee
reduction 0.60% 0.59% 0.58% 0.56% --
Net
investment
income 5.32% 5.53% 5.45% 5.08% 5.02%
Portfolio
Turnover 26% 41% 68% 68% 56%
---------------------------------------------------------------------------
NET
ASSETS,
END
OF
YEAR
(000'S
OMITTED) $ 89,966 $ 93,127 $102,504 $134,776 $169,621
---------------------------------------------------------------------------
</TABLE>
(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 ratio for the year ended March 31, 1995 has not been adjusted
to reflect this change.
SEE NOTES TO FINANCIAL STATEMENTS
20
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
- -------------------------------------------
National Limited Maturity Municipals Portfolio (the Portfolio) seeks to
provide (1) a high level of current 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.
21
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
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, 1999, the fee was equivalent to
0.48% of the Portfolio's average net assets for such period and amounted to
$433,524. 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, 1999, 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 $130 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 $23,904,996 and $26,745,151 respectively,
for the year ended March 31, 1999.
5 Federal Income Tax Basis of Investments
- -------------------------------------------
The cost and unrealized appreciation/depreciation in value of the investments
owned at March 31, 1999, as computed on a federal income tax basis, were as
follows:
<TABLE>
<S> <C>
AGGREGATE COST $ 84,822,504
- ------------------------------------------------------
Gross unrealized appreciation $ 4,906,724
Gross unrealized depreciation (459,759)
- ------------------------------------------------------
NET UNREALIZED APPRECIATION $ 4,446,965
- ------------------------------------------------------
</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.
At March 31, 1999, there were no outstanding obligations under these
financial instruments.
22
<PAGE>
NATIONAL LIMITED MATURITY MUNICIPALS PORTFOLIO AS OF MARCH 31, 1999
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, 1999, the related statement of operations for the year then
ended, the statements of changes in net assets for the years ended March 31,
1999 and 1998 and the supplementary data for each of the years in the five-year
period ended March 31, 1999. These financial statements and supplementary data
are the responsibility of the Portfolio'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 audit 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, 1999 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, 1999, 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
April 30, 1999
23
<PAGE>
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
Trustees
Jessica M. Bibliowicz
President and Chief Executive Officer,
National Financial Partners
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment Banking
Emeritus, Harvard University Graduate School of
Business Administration
Norton H. Reamer
Chairman and Chief Executive Officer,
United Asset Management Corporation
Lynn A. Stout
Professor of Law,
Georgetown University Law Center
John L. Thorndike
Former Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
24
