<PAGE>
To Our Shareholders
"TAX FREE RESERVES SHAREHOLDERS HAVE ALREADY SEEN THE BENEFIT OF RISING RATES IN
THE FORM OF HIGHER RETURNS..."
During the year that ended December 31, 1994, shareholders of Eaton Vance Tax
Free Reserves received $0.023 per share in income dividends, all of which was
free of Federal income tax. Based on the last monthly dividend paid and the
Fund's $1.00 share price, its distribution rate was 3.48 percent on December 31,
1994. To equal that rate, a shareholder in the 36 percent Federal income tax
bracket would need a yield of 5.44 percent from a taxable investment.
Of course, an investment in the Fund is neither insured nor guaranteed by the
U.S. government and there can be no assurance that the Fund will be able to
maintain a stable net asset value of $1.00 per share.
The U.S. economy grew steadily throughout 1994. Third-quarter gross domestic
product rose 4.1 percent, matching the gain in the second quarter.
In an effort to moderate inflation caused by economic growth, the Federal
Reserve raised short-term rates six times during 1994. The Fed's actions caused
interest rates in general and short-term interest rates in particular to rise
throughout the period.
For Federal income tax purposes, 100 percent of the total dividends paid by the
Fund from net investment income during the fiscal year that ended December 31,
1994, is designated as an exempt interest dividend.
The Fed has indicated its willingness to again raise short-term rates to head
off any further prospect of inflation. Because of this resolve, Eaton Vance
believes that inflation does not pose a significant threat to the economy.
Many economists believe that, in fact, the Fed will have to increase short-term
rates at least once more in 1995. Tax Free Reserves shareholders already have
seen the benefits of rising rates in the form of higher returns; the Fund
remains positioned to provide increased returns should further interest rate
increases occur.
During the last few years, tax increases have caused many investors to gravitate
to tax free money market funds. With the uncertainty that comes with changing
Congressional leadership in Washington, burdensome taxes remain a reality
confronting many taxpayers.
To ensure shareholders will have the advantage of high-quality investments, the
majority of the Fund's investments in securities were focused in the two highest
quality categories as defined by Moody's and Standard & Poor's, two leading
independent credit rating agencies.
Sincerely,
[PHOTOGRAPH OF THOMAS J. FETTER]
/s/Thomas J. Fetter
Thomas J. Fetter
President
February 21, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS
- --------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- -------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND OBLIGATIONS - 72.2%
<S> <C> <C> <C> <C>
NR/A1+ NR/AA $1,000 Adams County, Colorado Floating
Rate Weekly Demand Industrial
Development Revenue Bonds,
(City View Park Project),
Letter of Credit: Barclays Bank $1,000,000
MIG1/NR Aa3/NR 1,000 City of Biddeford, Maine Variable
Rate Demand Resource Revenue
Bonds, (Maine Energy Recovery
Company Project Series 1985),
Letter of Credit: Bank of
America 1,000,000
P1/A Aa2/NR 1,050 Billings Montana Series 1984
Adjustable Tender Industrial D
Revenue Bonds, (CFS Continental
Project), Letter of Credit:
Toronto Dominion Bank 1,050,000
MIG1/A1+ Aaa/AAA 700 Clark County, Nevada Airport
System Refunding Revenue Bonds,
Series 1993A, Municipal Bond
Investors Assurance
Corporation, Letter of Credit:
Industrial Bank of Japan,
Limited 700,000
MIG1/A1+ Aaa/AAA 1,500 Colorado Student Obligation Bond
Authority, Student Loan Revenue
Bonds, 1993 Series C-1, Letter
of Credit: Student Loan
Marketing Association 1,500,000
NR/A1+ NR/NR 425 City of Columbia, Missouri
Adjustable Rate Certificates of
Participation, Series 1986,
Letter of Credit: Sanwa Bank 425,000
MIG1/A1+ Aa3/AA- 750 Dade County, Florida Special
Assessment Revenue Bonds,
(Various Purpose Improvement
Projects), Series 1990A,
Financial Security Assurance
Inc., Letter of Credit: Sanwa
Bank, Limited 750,000
MIG1/NR Aa3/NR 1,035 Dade County Industrial Development
Authority, Florida Industrial
Development Revenue Bonds,
(Stephen M. Greene Project),
Series 1989A, Letter of Credit:
Sun Bank, Miami 1,035,000
NR/A1+ NR/AA- 1,000 Housing Authority of the County of
DeKalb, Georgia Guaranteed
Multifamily Housing Revenue
Bonds, (Wood Hills Apartment
Project), Series 1985P, Letter
of Credit: Bank of Montreal 1,000,000
NR/A1+ NR/AA+ 1,100 Development Authority of
Fulton County Georgia Revenue
B(American National Red Cross
Project), Series 1990,Letter of
Credit: Wachovia Bank 1,100,000
NR/A1+ NR/AA 500 Indiana Employment Development
Commission Industrial D Revenue
Bonds, (Miles Lab), Series
1984B, Letter of Credit:
Barclays Bank PLC 500,000
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (Continued)
- --------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- -------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND OBLIGATIONS (Continued)
<S> <C> <C> <C> <C>
MIG1/A1+ Aa/AA 1,600 State of Kansas Department of
Transportation Adjustable
Tender Highway Revenue Bonds,
Series 1994B Liquidity: Pooled
Money Investment Board, State
of Kansas 1,600,000
NR/A1+ NR/AA- 1,000 Village of Lisle, Illinois
Multi-Family Housing Revenue
Bonds (Ashley of Lisle
Project), Letter of Credit:
Algemene Bank Nederland 1,000,000
NR/A1+ Aaa/AAA 1,500 City of Little Rock, Arkansas
Health Facilities Board
(Southwest Hospital), Revenue
Bonds, Series 1988, Capital
Guarantee Insurance
Corporation, Letter of Credit:
National Westminster Bank PLC,
San Francisco Overseas Branch 1,500,000
MIG1/NR Aaa/NR 1,500 Minnesota Higher Education
Coordination Board,
Supplemental Student Loan
Program Variable Rate Refunding
Revenue Bonds, Series 1994A
(Non-AMT), Letter of Credit:
Norwest Bank 1,500,000
MIG1/A1+ Aaa/AAA 1,100 Montgomery County Higher Education
and Health Authority Variable
Rate Demand Hospital Revenue
Bonds, Series 1988 AMBAC
Insurance, Liquidity: Swiss
Bank 1,100,000
MIG1/NR Aa1/NR 1,000 Industrial Development Authority
of the County of Pima,
Industrial Development Revenue
Refunding Bonds (Tuscon
Retirement Center Project)
Series 1988 Letter of Credit:
Swiss Bank Corporation 1,000,000
MIG1/A2 Aa2/A- 500 The Industrial Development
Authority of The County of Pima
(Arizona), Floating Rate
Monthly Demand Industrial
Revenue Bonds, 1982 Series A,
(Tucson Electric Power Company
Projects), Letter of Credit:
Societe Generale International,
Limited 500,000
NR/A1+ NR/AA- 1,300 Regional Transportation District,
(Colorado) Weekly
Adjustable/Fixed Rate Special
Passenger Fare Revenue Bonds,
Series 1989A, Letter of Credit:
Banque Nationale de Paris 1,300,000
MIG1/NR Aa3/NR 1,400 Tulsa Industrial Authority Revenue
Bonds, (Holland Hall Project),
Series 1989, Letter of Credit:
National Australia Bank 1,400,000
-----------
TOTAL VARIABLE RATE DEMAND OBLIGATIONS $20,960,000
-----------
GENERAL OBLIGATION NOTES/BONDS - 21.8%
NR/NR Aa/AA $ 500 County of Burlington, New Jersey
General Obligation Bonds of 1991,
6.30% 3/15/ 95 $ 502,888
NR/NR Aa1/AA+ 500 State of Delaware, General
Obligation Bonds, Series 1993A,
4.25% 3/1/95 500,000
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (Continued)
- --------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- -------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------
GENERAL OBLIGATION NOTES/BONDS (Continued)
<S> <C> <C> <C> <C>
NR/NR Aa1/NR 300 Board of Education of Granite
School District, Salt Lake County,
Utah General Obligation Refunding
Bonds,Series 1992, 4.00% 6/1/95 300,051
MIG1/Sp1+ NR/NR 750 Harris County, Texas Tax
Anticipation Notes, Series 1994,
4.00% 2/28/95 750,456
MIG1/Sp1+ NR/NR 250 State of Illinois, General
Obligation Certificates of August
1994, 4.75% 5/15/95 250,697
MIG1/Sp1+ NR/NR 500 State of Illinois, General
Obligation Certificates of August
1994, 4.75% 6/15/95 501,530
NR/Sp1+ NR/NR 1,000 The Indianapolis Local Public
Improvement Bond Bank Notes,
Series F, 5.25% 7/ 14/95 1,002,073
NR/NR Aaa/AAA 500 State of Maryland, General
Obligation Bonds, State and Local
Facilities Loan of 1991, First
Series, 5.50% 3/15/95 501,823
NR/NR Aa/AA+ 500 City of Milwaukee, Milwaukee
County, Wisconsin General
Obligation Corporate Purpose
Bonds, Series A,6.70% 6/15/95 506,024
MIG1/Sp1+ NR/NR 1,500 The State of New Jersey, Tax and
Revenue Anticipation Notes
(Commercial Paper), Series Fiscal
1995D,5.00% 6/15/95 1,506,461
-----------
TOTAL GENERAL OBLIGATION NOTES/BONDS $ 6,322,003
-----------
PUT BONDS - 1.7%
NR/Sp1+ NR/NR $ 500 Arapahoe County, Colorado Capital
Improvement Trust Fund Highway
Revenue Bonds (E-470 Project)
Series D, Letter of Credit: Union
Bank of Switzerland $ 500,000
-----------
TOTAL PUT BONDS $ 500,000
-----------
REVENUE NOTES/BONDS - 8.4%
NR/NR Aa/AA $ 750 Salt River Project Agricultural
Improvement and Power District,
Arizona Salt River Project
Electric System Revenue Bonds,
1990 Series A, 7.20% 1/1/95 $750,000
NR/NR Aaa/AAA 500 Metropolitan Atlanta Rapid
Transit Authority (Georgia), Sales
Tax Revenue Bonds, Refunding
Series 517,310
NR/NR Aaa/AAA 500 Southern Minnesota Municipal Power
Agency Revenue Bonds Series 1984B,
Prerefunded 11.0% 1/1/95 515,000
NR/NR Aaa/AA 655 San Antonio, Texas Electric and
Gas Revenue Bonds,7.0% 2/1/95 655,000
-----------
TOTAL REVENUE NOTES/BONDS $ 2,437,310
-----------
<PAGE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS (Continued)
- --------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
- -------------------
PRINCIPAL
MOODY'S/S&P MOODY'S/S&P AMOUNT
SHORT-TERM LONG-TERM (000 OMITTED) SECURITY VALUE
- --------------------------------------------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER - 11.4%
<S> <C> <C> <C> <C>
MIG1/A1+ Aaa/AAA $1,500 City of Burlington, Kansas $ 1,500,000
Customized Purchase Pollution
Control Revenue Refunding Bonds,
Kansas City Power and Light
Company Project, Series 1978B
Letter of Credit: Deutsche Bank
NR/NR NR/NR 300 City of Rochester, Minnesota
Health Care Facilities Revenue
Bonds (Mayo Foundation/Mayo
Medical Center), Adjustable Tender
Series 1988E and 1988F 300,000
MIG1/NR Aa3/NR 1,000 SSM Health Care Obligated Group
Health Facilities Revenue ACES,
Health and Educational Facilities
Authority of the State of Missouri
Health Facilities Revenue Bonds,
Series 1988C, Letter of Credit:
Mitsubishi Bank, LTD 1,000,000
MIG1/A1+ Aaa/AAA 500 Lincoln County, Wyoming,
(PacifiCorp Project) Series 1991,
Letter of Credit: Union Bank of
Switzerland 500,000
TOTAL TAX-EXEMPT COMMERCIAL PAPER $ 3,300,000
-----------
TOTAL INVESTMENTS, AT AMORTIZED
COST - 115.5% $33,519,313<F1>
OTHER ASSETS, LESS LIABILITIES -
(15.5%) (4,498,768)
-----------
TOTAL NET ASSETS - 100% $29,020,545
===========
<F1> Federal tax cost basis.
At December 31, 1994, the concentration of the Fund's investments in the various
states, determined as a percentage oftotal investments, is as follows:
Colorado 13%
Kansas 10%
Others representing less than 9% individually 77%
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1994
- --------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost and value (Note 1A) $33,519,313
Cash 723
Receivable for Trust shares sold 1,985,505
Interest receivable 282,372
Receivable from the Investment Adviser 41,525
-----------
Total assets $35,829,438
LIABILITIES:
Demand note payable (Note 5) $ 6,117,000
Dividend payable 73,148
Payable for Trust shares redeemed 601,882
Accrued expenses 16,863
-----------
Total liabilities 6,808,893
-----------
NET ASSETS for 29,040,853 shares
outstanding (Note 4) $29,020,545
===========
SOURCES OF NET ASSETS:
Paid-in capital $29,040,853
Accumulated net realized loss on investments (computed
on the basis of identified cost) (20,308)
-----------
Total $29,020,545
===========
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE
(net assets divided by shares outstanding) $1.00
=====
The accompanying notes are an integral part of the financial statements
<PAGE>
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
For the Year Ended December 31, 1994
- --------------------------------------------------------------------------------
Interest Income $1,148,677
Expenses:
Investment adviser fee (Note 3) $204,513
Trustees' compensation (Note 3) 2,334
Custodian fee (Note 3) 45,547
Printing and postage 27,183
Transfer and dividend disbursing agent fees 11,710
Registration fees 27,818
Interest 26,636
Legal and accounting services 21,028
Miscellaneous 15,208
--------
Total expenses $381,977
Deduct --
Reduction of investment adviser fee (Note 3) 162,287
Net expenses -------- 219,690
----------
Net income $ 928,987
Net realized loss on investments (identified cost basis) (20,308)
----------
Net increase in net assets resulting from operations $ 908,679
==========
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C>
1994 1993
------------ -----------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS:
Net income $ 928,987 $ 888,434
Net realized loss on investments (20,308) --
Dividends paid to shareholders from net income (Note 2) (928,987) (888,434)
------------ ------------
Increase (decrease) in net assets resulting from operations $ (20,308) $ --
------------ ------------
FROM TRUST SHARE (PRINCIPAL) TRANSACTIONS AT NET ASSET VALUE OF $1.00 PER SHARE
(Note 4):
Proceeds from sale of shares $135,383,669 $166,667,209
Net asset value of shares issued to shareholders in payment of dividends 240,791 255,383
Cost of shares redeemed (166,830,592) (151,012,381)
------------ ------------
Increase (decrease) in net assets from Trust share transactions $(31,206,132) $ 15,910,211
------------ ------------
Net increase (decrease) in net assets $(31,226,440) $ 15,910,211
NET ASSETS:
Beginning of year 60,246,985 44,336,774
------------ ------------
End of year $ 29,020,545 $ 60,246,985
============ ============
The accompanying notes are an integral part of the financial statements
<PAGE>
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991<F1> 1990<F1>
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, beginning of year $1.00 $1.00 $1.00 $1.00 $1.00
----- ----- ----- ----- -----
INCOME FROM OPERATIONS:
Net investment income $ 0.023548 $ 0.018399 $ 0.023468 $ 0.038797 $ 0.051929
---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
From net investment income $(0.023548) $(0.018399) $(0.023468) $(0.038797) $(0.051929)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of year $1.00 $1.00 $1.00 $1.00 $1.00
===== ===== ===== ===== =====
TOTAL RETURN<F2> 2.36% 1.86% 2.36% 3.92% 5.30%
RATIOS/SUPPLEMENTAL DATA:<F3>
Net assets, end of year
(000's omitted) $29,021 $60,247 $44,337 $47,140 $53,753
Interest expense to average net assets 0.07% 0.03% 0.06% 0.09% 0.05%
Net other expenses to average
net assets 0.47% 0.62% 0.53% 0.49% 0.70%
Net investment income to average net 2.27% 1.82% 2.34% 3.92% 5.19%
assets
<FN>
<F1>Audited by the Trust's previous auditors.
<F2>Total investment return is calculated assuming a purchase at the net asset
value on the first day and a sale at the net asset value on the last day of
each period reported. Dividends and distributions, if any, are assumed to be
reinvested at the net asset value on the payable date.
<F3>During each of the years in the five year period ended December 31, 1994,
the expenses related to the operation of the Trust were reduced either by a
reduction of the investment adviser fee, an allocation of expenses to the
Investment Adviser, or both. Had such actions not been undertaken, net
investment income per share and the ratios would have been as follows:
</FN>
</TABLE>
<TABLE>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1994 1993 1992 1991<F1> 1990<F1>
--------- --------- --------- --------- ---------
NET INVESTMENT INCOME PER SHARE $0.018948 $0.016668 $0.020133 $0.034647 $0.050052
========= ========= ========= ========= =========
RATIOS (as a percentage of average net assets):
Other expenses 0.87% 0.82% 0.92% 0.91% 0.85%
========= ========= ========= ========= =========
Net investment income 1.88% 1.65% 2.01% 3.50% 5.04%
========= ========= ========= ========= =========
From time to time it has been necessary for the Trust to borrow from banks as a
temporary measure to facilitate the orderly sale of portfolio securities to
accommodate redemption requests. The following table summarizes such temporary
borrowings.
YEAR ENDED AMOUNT OF DEBT OUTSTANDING AVERAGE DAILY BALANCE OF AVERAGE WEEKLY BALANCE OF AVERAGE AMOUNT OF DEBT
DECEMBER 31, AT END OF YEAR DEBT OUTSTANDING DURING YEAR SHARES OUTSTANDING DURING YEAR PER SHARE DURING YEAR
- ------------------------------------------------------------------------------------------------------------------------------------
1990<F1> $ -- $192,000 31,243,924 $0.006
1991<F1> -- 379,000 31,686,707 0.012
1992 -- 367,000 38,904,763 0.009
1993 2,428,000 285,000 48,697,998 0.006
1994 6,117,000 440,145 40,463,382 0.011
<FN>
<F1>Audited by the Trust's previous auditors.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end, management investment company. The following is a
summary of significant accounting policies consistently followed by the Trust in
the preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles.
A. INVESTMENT VALUATIONS - The Trustees have determined that the best method
currently available for valuing portfolio investments is amortized cost. The
Trust's use of the amortized cost method to value its portfolio investments is
subject to the Trust's compliance with certain conditions as specified under
Rule 2a-7 of the Investment Company Act of 1940.
B. INTEREST INCOME - Interest income consists of interest accrued, less the
amortization of any premium, on the investments of the Trust, accrued ratably to
the date of maturity.
C. FEDERAL TAXES - The Trust's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders each year all of its net income, including any
netrealized gain on investments. Accordingly, no provision forfederal income or
excise tax is necessary. At December 31, 1994, the Trust, for federal income tax
purposes, had a capital loss carryover of $20,308, which will reduce the Trust's
taxable income arising from future net realized gain on investment transactions,
if any, to the extent permitted by the Internal Revenue Code, and thus will
reduce the amount of the distributions to shareholders which would otherwise be
necessary to relieve the Trust of any liability for federal income or excise
tax. Such capital loss carryover will expire on December 31, 2002. Dividends
paid by the Trust from net interest earned on tax-exempt municipal bonds are not
includable by shareholders as gross income for federal income tax purposes
because the Trust intends to meet certain requirements of the Internal Revenue
Code applicable to regulated investment companies which will enable the Trust to
pay exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item for shareholders.
D. OTHER - Investment transactions are accounted for on the date the investments
are purchased or sold, or the date that they mature.
- --------------------------------------------------------------------------------
(2) DIVIDENDS
The net income of the Trust is determined daily, and all of the net income so
determined is declared as a dividend to shareholders of record at the time of
declaration. Such dividends are paid monthly. Dividends are distributed in the
form of additional shares of the Trust or, at the election of the shareholder,
in cash.
- --------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONSWITH AFFILIATES
The investment adviser fee was earned by Eaton Vance Management (EVM) as
compensation for management, investment advisory, and other services rendered to
the Trust and is computed at the monthly rate of 1/24 of 1%(1/2 of 1% per annum)
of the Trust's average monthly net assets. To enhance the net income of the
Trust, EVM made a reduction of its fee in the amount of $162,287 during the year
ended December 31, 1994. Except as to Trustees of the Trust who are not members
of EVM's organization, officers and Trustees receive remuneration for their
services to the Trust out of such investment adviser fee. The custodian fee was
paid to Investors Bank & Trust Company (IBT), an affiliate of EVM, for its
services as custodian to the Trust. Pursuant to the custodian agreement, IBT
receives a fee reduced by credits which are determined based on the average
daily cash balances the Trust maintains with IBT. Certain of the officers and
Trustees of the Trust are officers and directors/trustees of the above
organizations.
<PAGE>
- --------------------------------------------------------------------------------
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
- --------------------------------------------------------------------------------
(5) LINE OF CREDIT
The Trust participates with other funds managed by EVM in a $120 million
unsecured line of credit agreement with a bank. The line of credit consists of a
$20 million committed facility and a $100 million discretionary facility.
Borrowings will be made by the Trust solely to facilitate the handling of
unusual and/or unanticipated short-term cash requirements. Interest is charged
to each fund based on its borrowings at an amount above either the bank's
adjusted certificate of deposit rate, a variable adjusted certificate of deposit
rate, or a federal funds effective rate. In addition, a fee computed at an
annual rate of 1/4 of 1% on the $20 million committed facility and on the daily
unused portion of the $100 million discretionary facility is allocated among the
participating funds at the end of each quarter. As of December 31, 1994, the
Trust had an outstanding balance pursuant to the line of credit of $6,117,000.
The average daily loan balance for the year ended December 31, 1994 was
$440,145, and the average interest rate was 5.74%.
- --------------------------------------------------------------------------------
(6) PURCHASES AND SALES OF INVESTMENTS
The Trust invests primarily in debt securities. The ability of the issuers of
the debt securities held by the Trust to meet their obligations may be affected
by economic developments in a specific industry or municipality. Purchases and
sales (including maturities) of investments aggregated $77,893,889 and
$106,177,830, respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
Eaton Vance Tax Free Reserves:
We have audited the accompanying statement of assets and liabilities of Eaton
Vance Tax Free Reserves, including the investment portfolio, as of December 31,
1994, and the related statement of operations for the year then ended and the
statements of changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the three years in the period
then ended. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the two years in the period ended
December 31, 1991, presented herein, were audited by other auditors whose report
dated January 24, 1992, expressed an unqualified opinion on such financial
highlights.
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 financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994 by correspondence with the custodian and brokers. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Eaton
Vance Tax Free Reserves as of December 31, 1994, the results of its operations
for the year then ended and the changes in its net assets for each of the two
years in the period then ended, and the financial highlights for each of the
three years in the period then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 3, 1995
<PAGE>
INVESTMENT MANAGEMENT
EATON VANCE OFFICERS TRUSTEES
TAX FREE RESERVES
24 Federal Street THOMAS J. FETTER DONALD R. DWIGHT
Boston, MA 02110 President, Trustee President, Dwight Partners,
Inc.
H. DAY BRIGHAM, JR. Chairman, Newspapers of New
Vice President, Trustee England, Inc.
JAMES L. O'CONNOR JAMES B. HAWKES
Treasurer Executive Vice President,
Eaton Vance Management
THOMAS OTIS
Secretary SAMUEL L. HAYES, III
Jacob H. Schiff Professor of
JAMES F. ALBAN Investment Banking, Harvard
Assistant Treasurer University Graduate School
of Business Administration
JANET E. SANDERS
Assistant Treasurer and NORTON H. REAMER
Assistant Secretary President and Director,
United Asset
PORTFOLIO MANAGER Management Corporation
WILLIAM H. AHERN, JR. JOHN L. THORNDIKE
Director,
Fiduciary Trust Company
JACK L. TREYNOR
Investment Adviser and
Consultant
<PAGE>
INVESTMENT ADVISER
Eaton Vance Management
24 Federal Street
Boston, MA 02110
PRINCIPAL UNDERWRITER
Eaton Vance Distributors, Inc.
24 Federal Street
Boston, MA 02110
(617) 482-8260
CUSTODIAN
Investors Bank & Trust Company
24 Federal Street
Boston, MA 02110
TRANSFER AGENT
The Shareholder Services Group, Inc.
BOS725
P.O. Box 1559
Boston, MA 02104
(800) 262-1122
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its distribution plan,
sales charges and expenses. Please read the prospectus carefully before you
invest or send money.
EATON VANCE TAX FREE RESERVES
24 FEDERAL STREET
BOSTON, MA 02110
T-TRSRC
EATON VANCE
TAX FREE
RESERVES
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1994
