<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
89 South Street
P.O. Box 1537
Boston, MA 02205-1537
TRANSFER AGENT
First Data Investor Services Group, Inc.
Attn: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
(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-2/97
EATON VANCE [Logo]
TAX FREE
RESERVES
ANNUAL
SHAREHOLDER REPORT
DECEMBER 31, 1996
<PAGE>
To Our Shareholders
During the year ended December 31, 1996, shareholders of Eaton Vance Tax Free
Reserves received $0.0303 per share in income dividends, all free from federal
income tax.* Based on the last monthly dividend paid and the Fund's $1.00 share
price, its distribution rate was 3.13% on December 31, 1996. To equal that rate,
a shareholder in the 36% federal income tax bracket would need a yield of 4.89%
from a taxable investment. Eaton Vance Tax Free Reserves has no sales charge.
- --------------------------------------------------------------------------------
"The Fund invests only in dollar-denominated, high-quality securities which
present minimal credit risk."
- --------------------------------------------------------------------------------
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 in 1996 experienced a year of respectable growth, low
inflation, and rising employment. The annualized rate of economic growth, as
measured by the U.S. Commerce Department's quarterly report of Gross Domestic
Product (GDP), was 2.0%, 4.7%, 2.1%, and 4.7% for the four quarters of the year,
respectively. Inflation, as measured by the Consumer Price Index (CPI), was 3.3%
for the year as a whole (not seasonally adjusted). Unemployment remained at a
low level of 5.3% in December.
- --------------------------------------------------------------------------------
For federal income tax purposes, 100% of the total dividends paid by the Fund
from net investment income during the fiscal year that ended December 31, 1996,
is designated as an exempt-interest dividend.
- --------------------------------------------------------------------------------
The perennial issue for investors in money market securities is the movement of
short-term interest rates, which is, to a large extent, influenced by the
Federal Reserve Board's Fed Funds Rate. After lowering the Fed Funds Rate twice
in 1995 and a third time in January, 1996, the Federal Reserve left it untouched
for the remainder of the year, unconvinced that the rate of inflation was
sufficient to warrant an increase.
Tax rates continue to burden investors who seek to maximize their after-tax
investment dollars. We believe that a money market mutual fund investing in
high-quality investments, free of federal taxation, is a sensible way to earn
income while preserving capital and maintaining liquidity.
The Eaton Vance Tax Free Reserves Fund invests only in dollar-denominated,
high-quality securities which present minimal credit risk. To attain this goal,
the Fund seeks to invest in short-term obligations which are rated in one of the
two highest short-term ratings categories by at least two nationally recognized
rating services.
[Photo of Sincerely,
Thomas J. Fetter] /s/Thomas J. Fetter
Thomas J. Fetter
President
February 7, 1997
*A portion of the Fund's income could be subject to federal alternative minimum
tax.
- --------------------------------------------------------------------------------
Fund shares are not guaranteed by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investment risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
<PAGE>
------------------------------
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT INVESTMENTS
- ------------------------------------------------------------------------------------------------------------------------------
RATINGS (UNAUDITED)
PRINCIPAL
- -------------------------------- AMOUNT
MOODY'S/S&P MOODY'S/S&P (000'S
SHORT-TERM LONG-TERM OMITTED) SECURITY VALUE
- ------------------------------------------------------------------------------------------------------------------------------
VARIABLE RATE DEMAND OBLIGATIONS - 59.1%
<C> <C> <C> <S> <C>
VMIG1/A1+ Aa3/AA $1,000 City of Albuquerque, New Mexico, Gross Receipts/Lodgers;
Tax Adjustable Tender Revenue Bonds Series 1994, Letter
of Credit: Canadian Imperial Bank of Commerce $ 1,000,000
VMIG1/A1+ Aa2/AA+ 900 Development Authority of Fulton County Georgia Revenue
Bonds (American National Red Cross Project), Series 1990,
Letter of Credit: Wachovia Bank 900,000
VMIG1/A1+ Aa3/AA- 945 Residential Care Facilities for the Elderly Authority of
Fulton County Revenue Bonds (Canterbury Court Project)
Series 1989A, Letter of Credit: Sun Trust 945,000
P-1/A1+ Aaa/AAA 2,600 The Industrial Development Authority of the City of Kansas
City, Missouri Variable Rate Demand Multifamily Housing
Revenue Refunding Bonds (Willow Creek IV Apartments
Project) Series 1995, Letter of Credit: FNMA 2,600,000
VMIG1/A1+ Aa3/AA- 1,170 Metropolitan Government of Nashville & Davidson Counties
Tennessee Industrial Development Board Refunding Revenue Bonds
(Dixie Graphics Inc. Project) Letter of Credit: Sun Trust 1,170,000
VMIG1/A1+ Aa/AA 1,715 Minnesota Higher Education Coordinating Board Supplemental
Student Loan Program Variable Rate Refunding Revenue Bonds,
Series 1994A, Stand By Purchase Agreement: Norwest Bank 1,715,000
VMIG1/A1+ Aaa/AAA 800 Montgomery County Higher Education and Health Authority
Variable Rate Demand Hospital Revenue Bonds, Series 1988
AMBAC Insurance, Liquidity: Swiss Bank 800,000
VMIG1/A1+ Aa2/AA+ 1,400 Port Development Corporation (Texas) Adjustable Tender
Marine Terminal Refunding Revenue Bonds (Stolt Terminals
Inc. Project) Series 1989, Letter of Credit: Credit Suisse 1,400,000
MIG1/A1+ NR/AA- 1,100 Putnam County Florida Development Authority Pollution
Control Revenue Bonds Series S (Seminole Electric)
Guaranty Agreement: Cooperative Finance Corporation 1,100,000
MIG1/A1+ NR/AA- 1,170 Putnam County Florida Development Authority Pollution
Control Revenue Bonds Series S (Seminole Electric)
Guaranty Agreement: Cooperative Finance Corporation 1,170,000
VMIG1/A1+ Aaa/AAA 1,000 City of Rock Hill, South Carolina, Combined Utility System
Revenue Bonds, Series 1994, Stand By Purchase Agreement: FGIC 1,000,000
-----------
Total Variable Rate Demand Obligations $13,800,000
-----------
GENERAL OBLIGATION NOTES/BONDS - 7.5%
NR/NR Aa/AA 500 State of Arkansas College Savings General Obligation Bonds,
Series 1996C, 3.75%, 06/01/97 $ 500,000
NR/NR Aa/AA+ 1,250 City of Little Rock, Arkansas Capital Improvement Bonds,
Series 1995B, 5.10%, 02/01/97 1,251,604
-----------
Total General Obligation Notes/Bonds $ 1,751,604
-----------
PUT BOND - 2.1%
VMIG1/A1+ Aa1/AAA 500 City of Houston, Texas, Variable Rate Demand General
Obligation Bonds, Series 1992E, Optional Put 04/01/97,
Stand By Purchase Agreement: Canadian Imperial Bank of
Commerce $ 500,000
-----------
REVENUE NOTES/BONDS - 8.6%
MIG1/SP1+ NR/NR 1,000 Arapahoe County, Colorado, Cherry Creek School District No.
5 Tax Anticipation Notes Series 1996 $ 1,003,115
MIG1/SP1+ Aaa/AAA 1,000 Iowa School Corporation Warrant Certificates Series 95-96B,
4.25%, 01/30/97, FSA 1,000,654
-----------
Total Revenue Notes/Bonds $ 2,003,769
-----------
PREREFUNDED/ESCROWED BONDS - 13.3%
NR/NR Aaa/AAA 575 Fulton County, Georgia School District, 7.625%, 05/01/17,
Prerefunded 05/01/97 $ 599,031
NR/NR Aaa/AA+ 500 State of Georgia General Obligation Bonds Series 1987C,
6.90%, 05/01/07, Prerefunded 05/01/97 515,166
NR/NR Aaa/AAA 2,000 Lewisville, Texas Independent School District 3.75%, 08/15/97,
Permanent School Fund Guarantee, Escrowed to Maturity 1,997,944
-----------
Total Prerefunded/Escrowed Bonds $ 3,112,141
-----------
TAX-EXEMPT COMMERCIAL PAPER - 9.0%
P-1/A1+ Aa2/AA+ 1,100 Jacksonville (Florida) Electric Authority Electric System
Tax-Exempt Commercial Paper Notes Series D 3.45%, 03/05/97,
Standby Purchase Agreement: Credit Suisse $ 1,100,000
P-1/A1+ Aa1/AAA 1,000 City of Lincoln, Nebraska Lincoln Electric System, Electric
System Revenue Commercial Paper Notes Series 1995, 3.50%,
04/04/97, Standby Purchase Agreement: Morgan Guaranty
Trust Company 1,000,000
-----------
Total Tax-Exempt Commercial Paper $ 2,100,000
-----------
TOTAL INVESTMENTS, AT VALUE - 99.6% $23,267,514(1)
OTHER ASSETS, LESS LIABILITIES - 0.4% 87,222
-----------
TOTAL NET ASSETS - 100% $23,354,736
===========
(1) Cost for Federal income tax purposes is the same.
At December 31, 1996, the concentration of the Fund's investments in various states, determined as a percentage of total
investments, is as follows:
Texas 16.8%
Florida 14.5
Georgia 12.7
Missouri 11.2
Others (less than 10% individually) 44.8
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
------------------------------
FINANCIAL STATEMENTS
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
December 31, 1996
- --------------------------------------------------------------------------------
ASSETS:
Investments, at value (Note 1A) $23,267,514
Cash 45,440
Receivable for Fund shares sold 336,375
Interest receivable 212,354
-----------
Total assets $23,861,683
LIABILITIES:
Dividend payable $ 45,803
Payable for Fund shares redeemed 457,055
Payable for Trustees' fees 1,457
Accrued expenses 2,632
--------
Total liabilities 506,947
-----------
NET ASSETS for 23,371,265 shares outstanding (Note 4) $23,354,736
===========
SOURCES OF NET ASSETS:
Paid-in capital $23,371,265
Accumulated net realized loss on investment
transactions (computed on the basis of
identified cost) (16,529)
-----------
Total net assets $23,354,736
===========
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, 1996
- -------------------------------------------------------------------------------
Investment Income (Note 1B) $2,049,088
Expenses:
Investment adviser fee (Note 3) $308,030
Trustees' compensation (Note 3) 5,855
Custodian fee 36,416
Transfer and dividend disbursing agent fees 9,670
Printing and postage 16,643
Legal and accounting services 25,676
Registration fees 14,626
Interest 11,794
Miscellaneous 9,200
--------
Total expenses $437,910
Deduct --
Reduction of investment adviser fee
(Note 3) $226,940
Reduction of custodian fee (Note 1E) 35,416 262,356
-------- --------
Net expenses 175,554
----------
Net investment income $1,873,534
Net realized gain on investment
transactions (identified cost basis) 3,779
----------
Net increase in net assets resulting
from operations $1,877,313
==========
- -------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
---------------------------------
1996 1995
------------- ------------
INCREASE (DECREASE) IN NET ASSETS:
FROM OPERATIONS --
Net income $ 1,873,534 $ 1,777,950
Net realized gain on investment
transactions 3,779 --
Dividends paid to shareholders from net
income (Note 2) (1,873,534) (1,777,950)
------------- ------------
Increase in net assets resulting from
operations $ 3,779 $ --
------------- ------------
FROM FUND SHARE (PRINCIPAL) TRANSACTIONS AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 4):
Proceeds from sale of shares $ 164,099,713 $151,505,071
Net asset value of shares issued to
shareholders in payment of dividends 1,236,374 354,164
Cost of shares redeemed (165,897,527) (156,967,383)
------------- ------------
Decrease in net assets from Fund share
transactions $ (561,440) $ (5,108,148)
------------- ------------
Net decrease in net assets $ (557,661) $ (5,108,148)
NET ASSETS:
Beginning of year 23,912,397 29,020,545
------------- ------------
End of year $ 23,354,736 $ 23,912,397
============= ============
The accompanying notes are an integral part of the financial statements
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<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 $ 0.030316 $ 0.034693 $ 0.023548 $ 0.018399 $ 0.023468
LESS DISTRIBUTIONS:
From net investment income $(0.030316) $(0.034693) $(0.023548) $(0.018399) $(0.023468)
---------- ---------- ---------- ---------- ----------
NET ASSET VALUE, end of year $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
====== ====== ====== ====== ======
TOTAL RETURN(1) 3.08% 3.53% 2.36% 1.86% 2.36%
RATIOS/SUPPLEMENTAL DATA:*
Net assets, end of year (000's omitted) $23,355 $23,912 $29,021 $60,247 $44,337
Interest expense to average net assets 0.02% 0.05% 0.07% 0.03% 0.06%
Net other expense to average net assets(2) 0.33% 0.34% 0.47% 0.62% 0.53%
Net other expense to average net assets
after custodian fee reduction 0.27% -- -- -- --
Net investment income to average net assets 3.04% 3.47% 2.27% 1.82% 2.34%
<FN>
*The expenses related to the operation of the Fund 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 taken, net investment income per share
and the ratios would have been as follows:
</FN>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
NET INVESTMENT INCOME PER SHARE $ 0.026626 $ 0.030291 $ 0.018948 $ 0.016668 $ 0.020133
========== ========== ========== ========== ==========
RATIOS (as a percentage of average net assets):
Other expenses(2) 0.69% 0.73% 0.87% 0.82% 0.92%
========== ========== ========== ========== ==========
Other expenses after custodian fee
reduction 0.63% -- -- -- --
========== ========== ========== ========== ==========
Net investment income 2.66% 3.02% 1.88% 1.65% 2.01%
========== ========== ========== ========== ==========
From time to time it has been necessary for the Fund 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.
<CAPTION>
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
- ------------ -------------------------- ---------------------------- ------------------------------ ----------------------
<C> <C> <C> <C> <C>
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
1995 1,266,000 279,586 51,107,215 0.005
1996 -- 116,757 61,730,866 0.002
<FN>
(1) 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 record date.
(2) The expense ratios for the year ended December 31, 1996 have been adjusted to reflect a change in reporting requirements. The
new reporting guidelines require the Fund to increase its expense ratio by the effect of any expense offset arrangements with
its service providers. The expense ratios for each of the periods ended on or before December 31, 1995 have not been adjusted
to reflect this change.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
-----------------------------------
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Eaton Vance Mutual Funds Trust (the Trust) is an entity of the type known as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940 (1940 Act), as amended, as an open-end management investment company.
The Trust presently consists of fifteen Funds, of which Eaton Vance Tax Free
Reserves (the Fund) is one. The Fund is registered under the 1940 Act, as
amended, as an open-end management investment company. The Fund seeks to earn as
high a rate of income exempt from regular federal income tax while preserving
capital and maintaining liquidity. The following is a summary of significant
accounting policies consistently followed by the Fund 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
Fund's use of the amortized cost method to value its portfolio investments is
subject to the Fund'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, adjusted
for amortization of any discount or premium, on the investments of the Fund,
accrued ratably to the date of maturity or call.
C. FEDERAL TAXES -- The Fund'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 investment income,
including any net realized gain on investment transactions. Accordingly, no
provision for federal income or excise tax is necessary. At December 31, 1996,
the Fund, for federal income tax purposes, had a capital loss carryover of
$16,529, which will reduce the Fund'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 Fund of any liability for federal income or excise tax. Such capital loss
carryover will expire on December 31, 2002. Dividends paid by the Fund from
net interest earned on tax-exempt municipal bonds are not includable by
shareholders as gross income for federal income tax purposes because the Fund
intends to meet certain requirements of the Internal Revenue Code applicable
to regulated investment companies which will enable the Fund 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.
E. EXPENSE REDUCTION -- Investors Bank & Trust Company (IBT) serves as
custodian of the Fund. Pursuant to the custodian agreement, IBT receives a fee
reduced by credits which are determined based on the average daily cash
balance the Fund maintains with IBT. All significant credit balances used to
reduce the Fund's custodian fee are reported as a reduction of expenses in the
Statement of Operations.
F. USE OF ESTIMATES -- The preparation of 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 income and expense during the reporting period. Actual results could differ
from those estimates.
- --------------------------------------------------------------------------------
(2) DISTRIBUTIONS TO SHAREHOLDERS
The net investment income of the Fund is determined daily, and all of the net
investment 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 Fund, or, at the
election of the shareholder, in cash.
- --------------------------------------------------------------------------------
(3) INVESTMENT ADVISER FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser fee was earned by Eaton Vance Management (EVM) as
compensation for management, investment advisory, and other services rendered
to the Fund and is computed at the monthly rate of 1/24 of 1% (1/2 of 1% per
annum) of the Fund's average monthly net assets. To enhance the net investment
income of the Fund, EVM made a reduction of its fee in the amount of $226,940
for the year ended December 31, 1996. Except as to Trustees of the Fund who
are not members of EVM's organization, officers and Trustees receive
remuneration for their services to the Fund out of such investment adviser
fee. Certain of the officers and Trustees of the Trust are officers and
directors/trustees of the above organizations.
- --------------------------------------------------------------------------------
(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 Fund participates with other portfolios and funds managed by EVM and
affiliates in a $120 million unsecured line of credit agreement with a bank.
Borrowings will be made by the Fund solely to facilitate the handling of unusual
and/or unanticipated short-term cash requirements. Interest is charged to each
participating portfolio or fund based on its borrowings at the bank's base rate
or at an amount above either the bank's adjusted certificate of deposit rate, a
Eurodollar rate, or a federal funds effective rate. In addition, a fee computed
at an annual rate of 0.15% on the daily unused portion of the line of credit is
allocated among the participating Portfolios and funds at the end of each
quarter. The average daily loan balance for the year ended December 31, 1996 was
$116,757, and the average interest rate was 6.74%.
- --------------------------------------------------------------------------------
(6) PURCHASES AND SALES OF INVESTMENTS
The Fund invests primarily in state and municipal debt securities. The ability
of the issuers of the debt securities held by the Fund to meet their obligations
may be affected by economic developments in a specific industry or municipality.
Purchases and sales (including maturities) of investments aggregated
$131,665,041 and $82,002,825, respectively.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE BOARD OF 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, one of the Funds constituting Eaton Vance Mutual
Funds Trust, including the portfolio of investments, as of December 31, 1996,
the related statement of operations for the year then ended, the statements of
changes in net assets for each of the two years then ended, and the financial
highlights for each of the five years then ended. These financial statements
and financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements and 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, 1996 by correspondence with the custodian. 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, 1996, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years then ended, and the financial highlights for each of the five
years then ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
BOSTON, MASSACHUSETTS
JANUARY 31, 1997
<PAGE>
------------------------------
INVESTMENT MANAGEMENT
EATON VANCE OFFICERS TRUSTEES
MUTUAL FUNDS TRUST
24 Federal Street M. DOZIER GARDNER DONALD R. DWIGHT
Boston, MA 02110 President, Trustee President, Dwight
Partners, Inc.
JAMES B. HAWKES Chairman, Newspapers
Vice President, of New England, Inc.
Trustee
SAMUEL L. HAYES, III
WILLIAM H. AHERN, JR. Jacob H. Schiff
Vice President and Professor of
Portfolio Manager Investment Banking,
Harvard University
MICHAEL B. TERRY Graduate
Vice President School of Business
Administration
JAMES L. O'CONNOR
Treasurer NORTON H. REAMER
President and
THOMAS OTIS Director,
Secretary United Asset
Management
Corporation
JOHN L. THORNDIKE
Director, Fiduciary
Company Incorporated
JACK L. TREYNOR
Investment Adviser
and Consultant
