<PAGE>
[LOGO OF Investing
EATON VANCE
APPEARS HERE] for the [EDUCATION SIGN
APPEARS HERE]
21st
Century
Annual Report December 31, 1997
EATON VANCE
[PICTURE OF
TRAFFIC TAX FREE
APPEARS HERE]
RESERVES
Eaton Vance
Global Management-Global Distribution
[PICTURE OF
BROOKLYN BRIDGE
APPEARS HERE]
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
INVESTMENT UPDATE
[PHOTO OF M. DOZIER GARDNER APPEARS HERE]
M. Dozier Gardner, President
Investment Environment
- --------------------------------------------------------------------------------
The Economy
. 1997 was a very good year for the U.S. economy, with gross domestic product
(GDP) increasing at a 3.8% rate. This exceeded the 2%--2.5% forecast at the
beginning of the year.
. Inflation was very low. The Consumer Price Index declined to 1.7% from 3.3% in
1996, while wholesale prices fell by 1.2%, the largest decline since 1986.
. The growing economy continued to generate new jobs at a healthy rate, and
unemployment remained low throughout the year, dropping to 4.7% in December
from 5.4% in January.
. The combination of continued economic growth, low unemployment, and declining
inflation has been unusual. Many economists, including Federal Reserve
Chairman Alan Greenspan, attribute it to increasing global competition and
higher productivity brought on by advances in technology.
The Market
. The twelve-month period was generally positive and stable for short-term
bonds. The exception was an increase in the Federal Funds target rate by 0.25%
to 5.50% on March 25. The Fed Funds rate is the rate for interbank overnight
loans and serves as a key interest rate barometer.
. During the course of the year, the difference between long-term and short-term
interest rates narrowed, resulting in a "flattening" of the yield curve. The
general decline in interest rates in 1997, which boosted bond prices, resulted
to solid total returns for fixed-income investors.
The Fund
- --------------------------------------------------------------------------------
The Past Year
. During the year ended December 31, 1997, shareholders of Eaton Vance Tax Free
Reserves received $0.0312 in income dividends, all free from federal income
tax./1/
. Based on the last monthly dividend paid and a $1.00 share price, the Fund's
distribution rate was 3.17% on December 31, 1997. The SEC 7-Day Yield on that
date was 3.26%./2/
. To equal that rate, a shareholder in the 36% federal income tax bracket would
need a yield of 4.95% from a taxable investment.
About Eaton Vance Tax Free Reserves
. Eaton Vance Tax Free Reserves invests only in dollar-denominated, high quality
securities which present minimal credit risk./3/
. To attain its objective, the Fund seeks to invest in short-term obligations
which are rated in one of the two highest short-term ratings categories.
. Tax rates continue to burden investors who seek to maximize their after-tax
investment dollars. A money market mutual fund that invests in high-quality
investments, free of federal taxation, can be a sensible way to earn income
while preserving capital and maintaining liquidity.
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/1/ A portion of the Fund's Income could be subject to federal alternative
minimum tax.
/2/ The Funds's SEC yield is calculated by dividing the net investment income
per share for the 7-day period by the net asset value at the end of the
period and annualizing the result.
/3/ An investment in one of the Portfolio's money market funds is neither
insured nor guaranteed by the U.S. Government, and there can be no assurance
that the Funds will be able to maintain a stable net asset value of $1.00
per share. The Fund has no sales charge.
- --------------------------------------------------------------------------------
Mutual fund shares are not insured by the FDIC and are not deposits or other
obligations of, or guaranteed by, any depository institution. Shares are subject
to investments risks, including possible loss of principal invested.
- --------------------------------------------------------------------------------
2
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
PORTFOLIO OF INVESTMENTS
Tax-Exempt Investments -- 100.1%
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------------------- Principal
Amount
Moody's/S&P Moody's/S&P (000
Short-Term Long-Term omitted) Security Value
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Commercial Paper -- 14.4%
- -----------------------------------------------------------------------------------------
P-1/A-1+ Aa3/AA $ 1,900 Jacksonville Electric
Authority Municipal Parking,
3.70%, 1/12/98 $ 1,900,000
VMIG1/A-1+ Aa1/AAA 1,500 Lincoln, NE Electric
Municipal Parking, 3.75%,
2/11/98 1,500,000
NR/A-1+ NR/AA+ 1,500 Rochester, MN (Mayo Clinic)
Municipal Parking,
3.75%, 2/25/98 1,500,000
- -----------------------------------------------------------------------------------------
$ 4,900,000
- -----------------------------------------------------------------------------------------
General Obligation Notes/Bonds -- 20.2%
- -----------------------------------------------------------------------------------------
NR/NR Aaa/AAA $ 305 Belknap County, NH,
4.80%, 6/15/98 $ 306,111
MIG1/SP1+ NR/NR 1,000 Idaho State Tax Revenue
Anticipation Program,
4.625%, 6/30/98 1,003,536
MIG1/SP1+ NR/NR 1,000 Iowa State School District
Cash Anticipation Program,
Series 1997, 4.25%, 1/30/98 1,000,458
MIG1/SP1+ NR/NR 2,000 Iowa State School District
Cash Anticipation Program,
Series 1997, 4.50%, 6/26/98 2,006,500
NR/SP1+ NR/NR 1,000 Michigan Municipal Bond
Authority, 4.50%, 7/2/98 1,003,360
NR/NR Aaa/AAA 1,000 Minnesota State
Infrastructure, 6.80%, 8/1/98 1,016,923
NR/NR Aa2/AA 500 Wisconsin State Series A,
6.40%, 5/1/98 504,188
- -----------------------------------------------------------------------------------------
$ 6,841,076
- -----------------------------------------------------------------------------------------
Revenue Notes/Bonds -- 13.6%
- -----------------------------------------------------------------------------------------
NR/NR Aaa/AAA $ 1,005 Illinois State Sales Tax
Revenue, 7.80%, 6/15/98 $ 1,042,972
NR/NR Aaa/NR 500 Ohio State Building
Authority, 8.00%, 2/1/98 511,693
NR/SP1 NR/NR 1,000 Oshkosh, WI School District,
4.15%, 8/24/98 1,001,868
NR/NR Aaa/AAA 1,985 Rutgers State University, NJ,
8.00%, 5/1/98 2,051,839
- -----------------------------------------------------------------------------------------
$ 4,608,372
- -----------------------------------------------------------------------------------------
Variable Rate Demand Obligations -- 51.9%
- -----------------------------------------------------------------------------------------
NR/A-1+ NR/AAA $ 1,500 Eddy County, NM Pollution,
Series 1993, 4.15%, 2/1/03 $ 1,500,000
VMIG1/NR Aa2/NR 1,000 Fort Wayne, IN Hospital
Authority, (Parkview),
3.65%, 1/1/16 1,000,000
NR/A-1+ NR/AA+ 800 Fulton County, GA Development
Authority, Series 1990,
4.20%, 8/1/05 800,000
P-1/NR Aa3/NR 845 Fulton County, GA Residential
Care, Series 1989,
4.20%, 10/1/99 845,000
NR/A-1+ NR/AA 1,000 Galveston, TX Industrial
Development Corp., (Mitchell
Interest), 3.75%, 9/1/13 1,000,000
NR/A-1+ NR/AA- 1,465 Illinois Development Finance
Authority, (Cinnamon Lake
Towers), 3.95%, 4/1/37 1,465,000
NR/A-1+ NR/AAA 2,600 Kansas City, MO Industrial
Development Authority,
3.70%, 9/1/25 2,600,000
P-1/A-1+ NR/AA 500 Maricopa County, AZ
Pollution, (AZ Public Service),
4.80%, 5/1/29 500,000
P-1/NR Aa3/NR 1,360 Metro Government Nashville
and Davidson County, TN,
Series 1989, 4.20%, 5/1/09 1,360,000
</TABLE>
See notes to financial statements
3
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
PORTFOLIO OF INVESTMENTS CONT'D
<TABLE>
<CAPTION>
Ratings (Unaudited)
- ------------------------------- Principal
Amount
Moody's/S&P Moody's/S&P (000
Short-Term Long-Term omitted) Security Value
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Variable Rate Demand Obligations (continued)
- --------------------------------------------------------------------------------------------
VMIG1/A-1+ Aaa/AAA $ 600 Missouri State Health and
Educational Facilities
Authority, 5.00%, 6/1/15 $ 600,000
VMIG1/A-1+ Aaa/AAA 200 Montgomery County, PA
Education and Health
Authority, 3.65%, 9/1/18 200,000
NR/A-1+ NR/AA- 1,500 Port Corpus Christi, TX
Industrial Development
Revenue, (Valero Energy), 1,500,000
3.70%, 4/1/18
MIG1/A-1+ NR/AA- 2,270 Putnam County, FL Development
Authority, (Seminole
Electric), 3.85%, 3/15/14 2,270,000
VMIG1/A-1+ Aaa/AAA 1,000 Rock Hill, SC Utility System
Revenue, 3.70%, 1/1/22 1,000,000
VMIG1/A-1+ Aa1/AA+ 1,000 South Carolina Jobs Economic
Development, (Baptist
Healthcare), 3.65%, 8/1/17 1,000,000
- --------------------------------------------------------------------------------------------
$ 17,640,000
- --------------------------------------------------------------------------------------------
Total Tax-Exempt Investments -- 100.1%
(identified cost $33,989,448) $ 33,989,448(1)
- --------------------------------------------------------------------------------------------
Other Assets, Less Liabilities-- (0.1)% $ (29,580)
- --------------------------------------------------------------------------------------------
Net Assets -- 100% $ 33,959,868
- --------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1997, the concentration of the Fund's investments in various
states, determined as a percentage of total investments, is as follows:
Florida 12.3%
Others (less than 10% individually) 87.7%
(1) Cost for Federal income tax purposes is the same.
See notes to financial statements
4
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
As of December 31, 1997
Assets
- -------------------------------------------------------------------------
Investments, at value (Note 1A) $33,989,448
Cash 27,993
Receivable for Fund shares sold 198,904
Interest receivable 306,484
- -------------------------------------------------------------------------
Total assets $34,522,829
- -------------------------------------------------------------------------
Liabilities
- -------------------------------------------------------------------------
Payable for Fund shares redeemed $ 494,371
Distributions payable 61,189
Payable to affiliate for Trustees' fees (Note 3) 1,091
Accrued expenses 6,310
- -------------------------------------------------------------------------
Total liabilities $ 562,961
- -------------------------------------------------------------------------
Net Assets for 33,977,876 shares of beneficial
interest outstanding $33,959,868
- -------------------------------------------------------------------------
Sources of Net Assets
- -------------------------------------------------------------------------
Paid-in capital $33,977,876
Accumulated net realized loss on investments
(computed on the basis of identified cost) (18,008)
- -------------------------------------------------------------------------
Total $33,959,868
- -------------------------------------------------------------------------
Net Asset Value, Offering Price and
Redemption Price Per Share
- -------------------------------------------------------------------------
($33,959,868 / 33,977,876 shares of
beneficial interest outstanding) $ 1.00
- -------------------------------------------------------------------------
Statement of Operations
For the Year Ended
December 31, 1997
Investment Income (Note 1B)
- -------------------------------------------------------------------------
Interest income $ 2,305,713
- -------------------------------------------------------------------------
Total investment income $ 2,305,713
- -------------------------------------------------------------------------
Expenses
- -------------------------------------------------------------------------
Investment adviser fee (Note 3) $ 320,793
Compensation of Trustees not members of the
Investment Adviser's organization (Note 3) 3,491
Custodian fee (Note 1E) 41,034
Legal and accounting services 26,667
Transfer and dividend disbursing agent fees 14,581
Registration fees 11,446
Interest expense 8,776
Printing and postage 7,907
Miscellaneous 7,520
- -------------------------------------------------------------------------
Total expenses $ 442,215
- -------------------------------------------------------------------------
Deduct --
Waiver of investment adviser fee (Note 3) $ 99,776
Reduction of custodian fee (Note 1E) 41,034
- -------------------------------------------------------------------------
Total expense reductions $ 140,810
- -------------------------------------------------------------------------
Net expenses $ 301,405
- -------------------------------------------------------------------------
Net investment income $ 2,004,308
- -------------------------------------------------------------------------
Realized and Unrealized
Gain (Loss) on Investments
- -------------------------------------------------------------------------
Net realized loss on investment transactions
(identified cost basis) $ (1,479)
- -------------------------------------------------------------------------
Net realized loss on investment transactions $ (1,479)
- -------------------------------------------------------------------------
Net increase in net assets from operations $ 2,002,829
- -------------------------------------------------------------------------
See notes to financial statements
5
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Statements of Changes in Net Assets
Increase (Decrease) Year Ended Year Ended
in Net Assets December 31, 1997 December 31, 1996
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 2,004,308 $ 1,873,534
Net realized gain (loss)
on investments (1,479) 3,779
- --------------------------------------------------------------------------------
Net increase in net assets
from operations $ 2,002,829 $ 1,877,313
- --------------------------------------------------------------------------------
Distributions to shareholders (Note 2) --
From net investment income $ (2,004,308) $ (1,873,534)
- --------------------------------------------------------------------------------
Total distributions to shareholders $ (2,004,308) $ (1,873,534)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest at Net Asset Value of $1.00
per share (Note 4) --
Proceeds from sale of shares $ 181,218,594 $ 164,099,713
Net asset value of shares issued
to shareholders in payment of
distributions declared 1,177,904 1,236,374
Cost of shares redeemed (171,789,887) (165,897,527)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from Fund share transactions $ 10,606,611 $ (561,440)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets $ 10,605,132 $ (557,661)
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
At beginning of year $ 23,354,736 $ 23,912,397
- --------------------------------------------------------------------------------
At end of year $ 33,959,868 $ 23,354,736
- --------------------------------------------------------------------------------
See notes to financial statements
6
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
FINANCIAL STATEMENTS CONT'D
Financial Highlights
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value -- Beginning of year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
- ---------------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.0312 $ 0.0303 $ 0.0347 $ 0.0235 $ 0.0184
- ---------------------------------------------------------------------------------------------------------------------------------
Total income from operations $ 0.0312 $ 0.0303 $ 0.0347 $ 0.0235 $ 0.0184
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions
- ---------------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.0312) $ (0.0303) $ (0.0347) $ (0.0235) $ (0.0184)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions $ (0.0312) $ (0.0303) $ (0.0347) $ (0.0235) $ (0.0184)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value -- End of year $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return/(1)/ 3.16% 3.08% 3.53% 2.36% 1.86%
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of year (000 omitted) $ 33,960 $ 23,355 $ 23,912 $ 29,021 $ 60,247
Ratio of interest expense to average daily net assets 0.01% 0.02% 0.05% 0.07% 0.03%
Ratio of other expenses to average daily net assets/(2)/ 0.52% 0.33% 0.34% 0.47% 0.62%
Ratio of other expenses to average net assets after
custodian fee reduction/(2)/ 0.46% 0.27% -- -- --
Ratio of net investment income to average daily
net assets 3.12% 3.04% 3.47% 2.27% 1.82%
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
+ The operating expenses of the Fund may reflect a reduction of the
Investment Adviser fee, an allocation of expenses to the Investment
Adviser, or both. Had such actions not been taken, the ratios and net
investment income per share would have been as follows:
<TABLE>
<CAPTION>
Ratios (as a percentage of average daily net assets):
<S> <C> <C> <C> <C> <C>
Other expenses/(2)/ 0.67% 0.69% 0.73% 0.87% 0.82%
Other expenses after custodian fee reduction/(2)/ 0.61% 0.63% -- -- --
Net investment income 2.96% 2.66% 3.02% 1.88% 1.65%
Net investment income per share $ 0.0296 $ 0.0266 $ 0.0303 $ 0.0189 $ 0.0167
- ---------------------------------------------------------------------------------------------------------------------------------
Leverage Analysis
- ---------------------------------------------------------------------------------------------------------------------------------
Amount of debt outstanding at end of year $ -- $ -- $ 1,266,000 $ 6,117,000 $ 2,428,000
Average daily balance of debt outstanding during year $ 134,611 $ 116,757 $ 279,586 $ 440,145 $ 285,000
Average weekly balance of shares outstanding during year 64,279,572 61,730,866 51,107,215 40,463,382 48,697,998
Average amount of debt per share during year $ 0.002 $ 0.002 $ 0.005 $ 0.011 $ 0.006
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ Total 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. Total return is not
computed on an annualized basis.
/(2)/ The expense ratios for the year ended December 31, 1996 and thereafter
have been adjusted to reflect a change in reporting requirements. The new
reporting guidelines require the Portfolio to increase its expense ratio
by the effect of any expense offset arrangements with its service
providers. The expense ratios for each of the prior years have not been
adjusted to reflect this change.
See notes to financial statements
7
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS
1 Significant Accounting Policies
-----------------------------------------------------------------------------
Eaton Vance Tax Free Reserves (the Fund) is a series of Eaton Vance Mutual
Funds Trust (the Trust). The Trust is a 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 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 (the 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,
1997, the Fund, for federal income tax purposes, had a capital loss carryover
of $18,008, 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 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 tax. Such capital loss carryover will expire on
December 31, 2002 ($16,529) and December 31, 2005 ($1,479). Dividends paid by
the Fund from net interest earned on tax-exempt municipal bonds are not
includable by shareholders as gross income for federal tax purposes because
the Fund intends to meet certain requirements of the 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 and 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. Any 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 Distribution 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 forms 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% (0.50%
annually) 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 $99,776 for the year ended December 31, 1997. Except as to Trustees of the
8
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
NOTES TO FINANCIAL STATEMENTS CONT'D
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 committed $100 million unsecured line of credit agreement
with a group of banks. 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 an amount above 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 average
daily loan balance for the year ended December 31, 1997 was $134,611, and the
average interest rate was 6.51%.
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 $153,725,682 and $142,792,995, respectively.
9
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
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 (the Fund) (one of the series constituting the Eaton
Vance Mutual Funds Trust), including the portfolio of investments, as of
December 31, 1997, and the related statement of operations for the year then
ended, 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 five years in the
period 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 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, 1997 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 (one of the series of Eaton Vance Mutual Funds Trust) as
of December 31, 1997, the results of its operations for the year then ended, 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 five years in the period then
ended, in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
February 6, 1998
10
<PAGE>
Eaton Vance Tax Free Reserves as of December 31, 1997
INVESTMENT MANAGEMENT
Eaton Vance Tax Free Reserves
Officers
M. Dozier Gardner
President and Trustee
James B. Hawkes
Vice President and Trustee
Thomas J. Fetter
Vice President
William H. Ahern, Jr.
Vice President and
Portfolio Manager
Michael B. Terry
Vice President
James L. O'Connor
Treasurer
Alan R. Dynner
Secretary
Independent Trustees
Donald R. Dwight
President, Dwight Partners, Inc.
Samuel L. Hayes, III
Jacob H. Schiff Professor of Investment
Banking, Harvard University Graduate School of Business Administration
Norton H. Reamer
President and Director, United Asset
Management Corporation
John L. Thorndike
Formerly Director, Fiduciary Company Incorporated
Jack L. Treynor
Investment Adviser and Consultant
11
<PAGE>
Investment Advisor
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
200 Clarendon Street, 16th Floor
Boston, MA 02116
Transfer Agent
First Data Investor Services Group
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
Independent Accountants
Coopers & Lybrand L.L.P.
One Post Office Square
Boston, MA 02109
Eaton Vance Tax Free Reserves
24 Federal Street
Boston, MA 02110
- --------------------------------------------------------------------------------
This report must be preceded or accompanied by a current prospectus which
contains more complete information on the Fund, including its sales charges and
expenses. Please read the prospectus carefully before you invest or send money.
- --------------------------------------------------------------------------------
T-TRSRC-2/98
