<PAGE>
[EATON VANCE LOGO]
[EDUCATION SIGN]
Semiannual Report June 30, 1999
EATON VANCE
[HIGHWAY AT NIGHT] TAX FREE
RESERVES
Global Management-Global Distribution
[BRIDGE]
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
INVESTMENT UPDATE
[PHOTO]
William H. Ahern, Jr.
Portfolio Manager
INVESTMENT ENVIRONMENT
- -----------------------------
THE ECONOMY
- - On the last day of June, the Federal Reserve Bank announced, as expected, that
it would raise the Federal Funds rate (the rate at which banks lend money to
each other overnight) by 25 basis points to 5.0%. At the same time, the Fed
indicated it had moved toward a neutral bias regarding future rate movements,
causing stock and bond markets to rally.
- - During the just-ended second quarter, U.S. economic growth remained strong,
aided by the beginning of a recovery in the manufacturing sector. In May, the
index of leading economic indicators rose by 0.3%, an improvement over April's
0.1% increase, suggesting the period of sustained growth could continue into
the next year.
- - The nation's gross domestic product increased by a stronger-than-expected 4.6%
in the first quarter of 1999. Weak export demand was offset by robust
construction activity and strong consumer spending.
THE MARKET
- - Even as money market rates went up, bond yields fell as the neutral bias
announcement caused the bond market to rally, with the 30-year Treasury bond
yield finishing the quarter just below the benchmark 6% level.
- - Prior to the interest rate announcement, investors had been expecting that the
Fed would announce rate hikes, as evidenced by the very steep yield curve.
- - Despite the Fed's neutral bias, the upward-sloping money market yield curves
reflect investor sentiment that the Fed will raise rates by at least 25 basis
points more. Federal Reserve Chairman Greenspan has reaffirmed the Fed's
commitment to stifle any reoccurrence of inflation, and has left open the
possibility that he will tighten rates in the coming months.
THE FUND
- -----------------------------
THE PAST SIX MONTHS
- - During the six months ended June 30, 1999, shareholders of Eaton Vance Tax
Free Reserves received $0.013 per share in dividend income, all of which was
free from regular federal income tax.(1)
- - Based on the last monthly dividend paid and the Fund's $1.00 share price, its
distribution rate was 2.70% on June 30, 1999.(2) The Fund's SEC 7-day yield on
that date was 2.76%.(3)
ABOUT EATON VANCE TAX FREE RESERVES
- - Eaton Vance Tax Free Reserves invests only in U.S. dollar-denominated,
high-quality municipal securities that present minimal credit risk.(4)
- - To attain its investment objective, the Fund seeks to invest in short-term
obligations that are rated in the two highest short-term ratings categories
and that provide income exempt from regular federal income tax.(1)
- - Many investors are interested in maximizing their after-tax investment
dollars. A money market mutual fund investing in high-quality assets, free of
federal taxation,(1) can be a prudent way of earning income while preserving
capital and maintaining liquidity.
(1) A portion of the Fund's income may at times be subject to federal
alternative minimum and/or regular income tax.
(2) The Fund's distribution rate represents actual distributions paid to
shareholders and is calculated by dividing the last distribution per share
(annualized) by the net asset value.
(3) The Fund'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.
(4) 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 Fund has no sales charge.
Past performance is no guarantee of future results. Investment return and yield
may vary.
- --------------------------------------------------------------------------------
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 INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL INVESTED.
- --------------------------------------------------------------------------------
2
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
PORTFOLIO OF INVESTMENTS (UNAUDITED)
TAX-EXEMPT INVESTMENTS -- 96.3%
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ---------------------------------------------------------------------------
Commercial Paper -- 10.8%
- ---------------------------------------------------------------------------
$1,500 Lincoln County, WY Municipal Parking,
3.10%, 9/7/99 $ 1,500,000
2,000 Rochester, MN Health Care Facilities,
(Mayo Clinic), 2.85%, 7/12/99 2,000,000
- ---------------------------------------------------------------------------
$ 3,500,000
- ---------------------------------------------------------------------------
General Obligation Notes/Bonds -- 17.7%
- ---------------------------------------------------------------------------
$1,000 Connecticut State, 4.50%, 8/15/99 $ 1,000,772
1,000 Glenview, IL Bond Anticipation Bonds,
5.55%, 9/1/99 1,003,799
500 Jefferson County, CO, (FGIC), 5.00%,
12/15/99 504,203
700 Minnesota State, 6.70%, 8/1/99 702,141
1,200 Montgomery County, MD Consolidated
Public, 6.80%, 11/1/99 1,238,632
800 Texas State Veteran's Housing
Assistance, Variable Rate, 12/1/16 800,000
500 Washington State, 5.00%, 7/1/99 500,000
- ---------------------------------------------------------------------------
$ 5,749,547
- ---------------------------------------------------------------------------
Revenue Notes / Bonds -- 10.4%
- ---------------------------------------------------------------------------
$1,500 Colorado Health Facilities Authority,
(Porter Memorial Hospital), 7.40%,
2/1/00 $ 1,533,855
1,000 Harris County, TX, (AMBAC), 7.10%,
8/15/99 1,036,384
400 Maricopa County, AZ Transportation Board
of Excise Tax Authority, (AMBAC), 5.50%,
6/24/00 407,392
400 Texas University, 6.30%, 8/15/99 401,506
- ---------------------------------------------------------------------------
$ 3,379,137
- ---------------------------------------------------------------------------
Variable Rate Demand Obligations -- 57.4%
- ---------------------------------------------------------------------------
$1,100 Austin, TX Airport, (LOC: Morgan
Guaranty Trust), 3.40%, 11/15/17 $ 1,100,000
500 Bexar County, TX Health Facilities,
(LOC: Rabobank Nederland), 3.70%, 7/1/11 500,000
750 California PCR, (Wadham Energy), (LOC:
Banque Paribas), 3.80%, 11/1/17 750,000
500 Chicago, IL Multi-family, (LOC: Swiss
Bank), 3.40%, 11/1/10 500,000
750 Clark County, NV Airport, (LOC:
Westduetsche Landesbank), 3.30%, 7/1/25 750,000
500 Delaware EDA, IDR, (Star Enterprise),
(LOC: Canadian Imperial Bank), 3.70%,
8/1/29 500,000
800 Delaware Valley, PA Regional Finance
Authority, (LOC: Credit Suisse), 3.35%,
12/1/20 800,000
500 Florida HFA, (Monterey Meadows Apt.),
(LOC: Citibank, N.A.), 3.35%, 12/1/07 500,000
<CAPTION>
PRINCIPAL AMOUNT
(000'S OMITTED) SECURITY VALUE
<C> <S> <C>
- ---------------------------------------------------------------------------
Variable Rate Demand Obligations (continued)
- ---------------------------------------------------------------------------
$ 500 Fulton County, GA IDR, (American
National Red Cross), (LOC: Wachovia Bank
of GA, N.A.), 3.65%, 8/1/05 $ 500,000
700 Fulton County, GA Residential Care,
(Canterbury Court), (LOC: Suntrust
Bank), 3.75%, 10/1/99 700,000
900 Galveston, TX IDR, (Mitchell Interests),
(LOC: Banc One), 3.45%, 9/1/13 900,000
965 Illinois DFA, (Cinnamon Lake Towers),
(LOC: The First National Bank of
Chicago), 3.75%, 4/15/37 965,000
1,000 Illinois DFA, (Profile Plastics), (LOC:
Lasalle National Bank), 3.75%, 7/1/18 1,000,000
1,000 Kansas City, MO IDA, (Willow Creek IV
Apartments), Fannie Mae, 3.50%, 9/1/25 1,000,000
600 Lee County, FL IDA, Health Care
Facilities, (Cypress Cove HealthPark),
(LOC: Kredietbank, N.V.), 3.35%, 10/1/04 600,000
750 Maricopa County, AZ PCR, (LOC: Toronto
Dominion Bank), 3.45%, 5/1/29 750,000
750 Maryland State HEFA, (MBIA), 3.60%,
1/1/28 750,000
1,000 Metropolitan Government Nashville and
Davidson County, TN IDR, (Dixie
Graphics, Inc.), (LOC: Suntrust Bank,
Nashville, N.A.), 3.75%, 5/1/09 1,000,000
1,300 Missouri State HEFA, 3.45%, 6/1/15 1,300,000
750 Nebhelp, Inc., NE, (LOC: Student Loan
Marketing), 3.65%, 12/1/16 750,000
500 Panhandle-Plains, TX HEFA, (LOC: Student
Loan Marketing), 3.40%, 6/1/21 500,000
2,070 Putnam County, FL PCR, (Seminole
Electric), 3.55%, 3/15/14 2,070,000
500 South Carolina EDA (Baptist HealthCare),
3.30%, 8/1/17 500,000
- ---------------------------------------------------------------------------
$ 18,685,000
- ---------------------------------------------------------------------------
Total Tax-Exempt Investments -- 96.3%
(identified cost $31,313,684) $31,313,684(1)
- ---------------------------------------------------------------------------
Other Assets, Less Liabilities -- 3.7% $ 1,216,885
- ---------------------------------------------------------------------------
Net Assets -- 100% $ 32,530,569
- ---------------------------------------------------------------------------
</TABLE>
At June 30, 1999, the concentration of the Fund's investments in various states,
determined as a percentage of total investments, is as follows:
Texas 16.7%
Illinois 11.1%
Maryland 10.5%
Florida 10.1%
Others (less than 10% individually) 51.6%
(1) Cost for Federal income tax purposes is the same.
SEE NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
FINANCIAL STATEMENTS (UNAUDITED)
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999
<S> <C>
Assets
- ------------------------------------------------------
Investments, at value
(identified cost, $31,313,684) $ 31,313,684
Cash 1,811,209
Receivable for Fund shares sold 353,184
Interest receivable 245,153
- ------------------------------------------------------
TOTAL ASSETS $ 33,723,230
- ------------------------------------------------------
Liabilities
- ------------------------------------------------------
Payable for Fund shares redeemed $ 1,115,986
Dividends payable 53,653
Payable to affiliate for Trustees' fees 2,867
Other accrued expenses 20,155
- ------------------------------------------------------
TOTAL LIABILITIES $ 1,192,661
- ------------------------------------------------------
NET ASSETS FOR 32,548,256 SHARES OF
BENEFICIAL INTEREST OUTSTANDING $ 32,530,569
- ------------------------------------------------------
Sources of Net Assets
- ------------------------------------------------------
Paid-in capital $ 32,548,256
Accumulated net realized loss (computed
on the basis of identified cost) (17,687)
- ------------------------------------------------------
TOTAL $ 32,530,569
- ------------------------------------------------------
Net Asset Value, Offering and
Redemption Price Per Share
- ------------------------------------------------------
($32,530,569 DIVIDED BY 32,548,256
SHARES OF
BENEFICIAL INTEREST OUTSTANDING) $ 1.00
- ------------------------------------------------------
</TABLE>
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED
JUNE 30, 1999
<S> <C>
Investment Income
- ---------------------------------------------------
Interest $ 879,971
- ---------------------------------------------------
TOTAL INVESTMENT INCOME $ 879,971
- ---------------------------------------------------
Expenses
- ---------------------------------------------------
Investment adviser fee $ 143,709
Trustees fees and expenses 2,868
Custodian fee 26,867
Legal and accounting services 13,573
Registration fees 8,603
Printing and postage 6,338
Transfer and dividend disbursing agent
fees 6,331
Interest 804
Miscellaneous 12,101
- ---------------------------------------------------
TOTAL EXPENSES $ 221,194
- ---------------------------------------------------
Deduct --
Preliminary reduction of investment
adviser fee $ 87,879
Reduction of custodian fee 22,499
- ---------------------------------------------------
TOTAL EXPENSE REDUCTIONS $ 110,378
- ---------------------------------------------------
NET EXPENSES $ 110,816
- ---------------------------------------------------
NET INVESTMENT INCOME $ 769,155
- ---------------------------------------------------
NET INCREASE IN NET ASSETS FROM
OPERATIONS $ 769,155
- ---------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
4
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
Increase (Decrease) JUNE 30, 1999 YEAR ENDED
in Net Assets (UNAUDITED) DECEMBER 31, 1998
<S> <C> <C>
- --------------------------------------------------------------------------------
From operations --
Net investment income $ 769,155 $ 1,669,523
Net realized gain -- 321
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS $ 769,155 $ 1,669,844
- --------------------------------------------------------------------------------
Distributions to shareholders --
From net investment income $ (769,155) $ (1,669,523)
- --------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS TO SHAREHOLDERS $ (769,155) $ (1,669,523)
- --------------------------------------------------------------------------------
Transactions in shares of beneficial
interest at Net Asset Value of $1.00
per share --
Proceeds from sale of shares $ 77,013,592 $ 175,926,805
Net asset value of shares issued to
shareholders in payment of
distributions declared 349,716 825,544
Cost of shares redeemed (92,104,438) (163,440,839)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM FUND SHARE TRANSACTIONS $ (14,741,130) $ 13,311,510
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS $ (14,741,130) $ 13,311,831
- --------------------------------------------------------------------------------
<CAPTION>
Net Assets
<S> <C> <C>
- --------------------------------------------------------------------------------
At beginning of period $ 47,271,699 $ 33,959,868
- --------------------------------------------------------------------------------
AT END OF PERIOD $ 32,530,569 $ 47,271,699
- --------------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS
5
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
FINANCIAL STATEMENTS CONT'D
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 1999 ------------------------------------------
(UNAUDITED) 1998 1997 1996
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value -- Beginning of period $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
- ----------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income $ 0.0133 $ 0.0305 $ 0.0312 $ 0.0303
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 0.0133 $ 0.0305 $ 0.0312 $ 0.0303
- ----------------------------------------------------------------------------------------------------------------------------
Less distributions
- ----------------------------------------------------------------------------------------------------------------------------
From net investment income $ (0.0133) $ (0.0305) $ (0.0312) $ (0.0303)
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.0133) $ (0.0305) $ (0.0312) $ (0.0303)
- ----------------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN(1) 1.34% 3.09% 3.16% 3.08%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/Supplemental Data+
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000's omitted) $ 32,531 $ 47,272 $ 33,960 $ 23,355
Ratios (As a percentage of average daily net assets):
Expenses(2) 0.47%(3) 0.48% 0.52% 0.33%
Expenses after custodian fee reduction(2) 0.39%(3) 0.40% 0.46% 0.27%
Interest expense --(3)(4) 0.01% 0.01% 0.02%
Net investment income 2.68%(3) 3.04% 3.12% 3.04%
- ----------------------------------------------------------------------------------------------------------------------------
+ The operating expenses of the Fund may reflect a reduction of the investment adviser fee, an allocation of expenses to the
Investment Advisor, or both. Had such actions not been taken, the ratios and net investment income per share would have
been as follows:
Ratios (As a percentage of average daily net assets):
Expenses(2) 0.77%(3) 0.76% 0.67% 0.69%
Expenses after custodian fee reduction(2) 0.69%(3) 0.68% 0.61% 0.63%
Net investment income 2.38%(3) 2.76% 2.96% 2.66%
Net investment income per share $ 0.0118 $ 0.0277 $ 0.0296 $ 0.0266
- ----------------------------------------------------------------------------------------------------------------------------
Leverage Analysis
- ----------------------------------------------------------------------------------------------------------------------------
Amount of debt outstanding at end of year $ -- $ -- $ -- $ --
Average daily balance of debt outstanding during year $ 29,663 $ 109,382 $ 134,611 $ 116,757
Average weekly balance of shares outstanding during year 57,960,700 54,796,165 64,279,572 61,730,866
Average amount of debt per share during year $ --(5) $ 0.002 $ 0.002 $ 0.002
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994
<S> <C> <C>
- ------------------------------------------------------------
Net asset value -- Beginning of period $ 1.0000 $ 1.0000
- ------------------------------------------------------------
Income (loss) from operations
- ------------------------------------------------------------
Net investment income $ 0.0347 $ 0.0235
- ------------------------------------------------------------
TOTAL INCOME FROM OPERATIONS $ 0.0347 $ 0.0235
- ------------------------------------------------------------
Less distributions
- ------------------------------------------------------------
From net investment income $ (0.0347) $ (0.0235)
- ------------------------------------------------------------
TOTAL DISTRIBUTIONS $ (0.0347) $ (0.0235)
- ------------------------------------------------------------
NET ASSET VALUE -- END OF PERIOD $ 1.0000 $ 1.0000
- ------------------------------------------------------------
TOTAL RETURN(1) 3.53% 2.36%
- ------------------------------------------------------------
Ratios/Supplemental Data+
- ------------------------------------------------------------
Net assets, end of period (000's omitted) $ 23,912 $ 29,021
Ratios (As a percentage of average daily net assets):
Expenses(2) 0.34% 0.47%
Expenses after custodian fee reduction(2) -- --
Interest expense 0.05% 0.07%
Net investment income 3.47% 2.27%
- ------------------------------------------------------------
+ The operating expenses of the Fund may reflect a reduction
Investment Advisor, or both. Had such actions not been tak
been as follows:
Ratios (As a percentage of average daily net assets):
Expenses(2) 0.73% 0.87%
Expenses after custodian fee reduction(2) -- --
Net investment income 3.02% 1.88%
Net investment income per share $ 0.0303 $ 0.0189
- ------------------------------------------------------------
Leverage Analysis
- ------------------------------------------------------------
Amount of debt outstanding at end of year $ 1,266,000 $ 6,117,000
Average daily balance of debt outstanding during year $ 279,586 $ 440,145
Average weekly balance of shares outstanding during year 51,107,215 40,463,382
Average amount of debt per share during year $ 0.005 $ 0.011
- ------------------------------------------------------------
</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
reinvested at the net asset value on the reinvestment date. Total return is
not computed on an annualized basis.
(2) The expense ratios for the year ended December 31, 1996 and periods
thereafter 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 ratio for the prior period has not been
adjusted to reflect this change.
(3) Annualized.
(4) Represents less than 0.01%.
(5) Represents less than $0.001 per share.
SEE NOTES TO FINANCIAL STATEMENTS
6
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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 an entity of the type known as a
Massachusetts business trust and is registered under the Investment Company
Act of 1940, 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, accrued ratably to the date of
maturity or call when required for federal income tax purposes.
C Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code (the Code) applicable to regulated investment companies
and to distribute to shareholders each year all of its net investment income,
including any net realized gain on investments. Accordingly, no provision for
federal income or excise tax is necessary. At December 31, 1998, the Fund,
for federal income tax purposes, had a capital loss carryover of $17,687,
which will reduce the Fund's taxable income arising from future net realized
gain on investments, 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
($16,208) 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 income 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 a trade date basis.
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
balances 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.
G Interim Financial Statements -- The interim financial statements relating to
June 30, 1999 and for the six-months then ended have not been audited by
independent certified public accountants, but in the opinion of the Fund's
management, reflect all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the financial statements.
2 Distribution to Shareholders
- -------------------------------------------
The net investment income of the Fund is determined daily, and substantially
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. Distributions are paid in the form of additional shares of the Fund,
or, at the election of the shareholder, in cash.
7
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) CONT'D
3 Investment Adviser Fee and Other Transactions with Affiliates
- -------------------------------------------
The investment adviser fee is 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 $87,879 for the six-months ended June 30, 1999. 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 officers and Trustees of the Fund are officers of the
above organization.
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 its
affiliates in a $130 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
six-months ended June 30, 1999 was $29,663, and the average interest rate was
5.47%.
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 $53,490,776 and $69,445,000, respectively.
8
<PAGE>
EATON VANCE TAX FREE RESERVES AS OF JUNE 30, 1999
INVESTMENT MANAGEMENT
EATON VANCE TAX FREE RESERVES
Officers
James B. Hawkes
President and Trustee
William H. Ahern, Jr.
Vice President and
Portfolio Manager
Thomas J. Fetter
Vice President
Armin J. Lang
Vice President
Robert B. MacIntosh
Vice President
Edward E. Smiley, Jr.
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
Jack L. Treynor
Investment Adviser and Consultant
9
<PAGE>
INVESTMENT ADVISER
EATON VANCE MANAGEMENT
The Eaton Vance Building
255 State Street
Boston, MA 02109
PRINCIPAL UNDERWRITER
EATON VANCE DISTRIBUTORS, INC.
The Eaton Vance Building
255 State Street
Boston, MA 02109
(617) 482-8260
CUSTODIAN
INVESTORS BANK & TRUST COMPANY
200 Clarendon Street
Boston, MA 02116
TRANSFER AGENT
FIRST DATA INVESTOR SERVICES GROUP
Attention: Eaton Vance Funds
P.O. Box 5123
Westborough, MA 01581-5123
EATON VANCE TAX FREE RESERVES
The Eaton Vance Building
255 State Street
Boston, MA 02109
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
3-4264 TRSRC-8/99
