<PAGE>
Semiannual Report
as of March 31, 2000
Evergreen
Reserve Money Market Funds
[LOGO OF EVERGREEN FUNDS]
<PAGE>
Table of Contents
Letter to Shareholders .................................................... 1
Evergreen Reserve Money Market Fund
Fund at a Glance ......................................................... 2
Evergreen Reserve Tax-Exempt
Money Market Fund
Fund at a Glance ......................................................... 3
Evergreen Reserve U.S. Government
Money Market Fund
Fund at a Glance ......................................................... 4
Financial Highlights
Evergreen Reserve Money Market Fund ...................................... 5
Evergreen Reserve Tax-Exempt
Money Market Fund ........................................................ 6
Evergreen Reserve U.S. Government
Money Market Fund ........................................................ 7
Schedule of Investments
Evergreen Reserve Money Market Fund ...................................... 8
Evergreen Reserve Tax-Exempt
Money Market Fund ........................................................ 10
Evergreen Reserve U.S. Government
Money Market Fund ........................................................ 12
Statements of Assets and Liabilities ...................................... 14
Statements of Operations .................................................. 15
Statements of Changes in Net Assets ....................................... 16
Combined Notes to Financial
Statements ................................................................ 18
Additional Information .................................................... 22
- --------------------------------------------------------------------------------
EVERGREEN FUNDS
- --------------------------------------------------------------------------------
Evergreen Funds is one of the nation's fastest growing investment companies with
approximately $80 billion in assets under management.
With over 80 mutual funds to choose among and acclaimed service and operations
capabilities, investors enjoy a broad range of quality investment products and
services designed to meet their needs.
The Evergreen Funds employ intensive, research-driven investment strategies
executed by over 90 research analysts and portfolio managers. The fund company
remains dedicated to meeting the needs of investors and their advisors in a
global economy. Look to Evergreen Funds to provide a distinctive level of
service and excellence in investment management.
This semiannual report must be preceded or accompanied by a prospectus of an
Evergreen fund contained herein. The prospectus contains more complete
information, including fees and expenses, and should be read carefully before
investing or sending money.
Mutual Funds: NOT FDIC INSURED May lose value . Not bank guaranteed
Evergreen Distributor,Inc.
Evergreen Funds(SM) is a service mark of Evergreen Investment Services,Inc.
<PAGE>
Letter to Shareholders
----------------------
May 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Reserve Money Market Funds semiannual
report, which covers the six-month period ended March 31, 2000.
U.S. Markets Experience Volatility
During the past six months, U.S. equity markets experienced significant ups
and downs. Technology, communications and biotechnology stocks reigned supreme
during the first half of the period only to undergo a volatile environment
during the latter half of the period. While these sectors experienced sharp
corrections late in the period, they remain favored sectors.
The Federal Reserve Board increased interest rates three times during the
six-month period resulting in the highest Fed funds rate since May 1995.
Normally, the tightening of the money supply would curtail consumer spending,
however, investors in stocks and equity funds seemed to be ignoring the Fed's
actions to insulate the economy from the threat of inflation.
Despite the recent volatility, the threat of inflation and the Federal Reserve's
response to it, investors remain positive about the U.S. economy and the
long-term potential of the U.S. markets. At Evergreen, we believe the economy is
still fundamentally strong and that the Federal Reserve will continue to act
aggressively to contain inflation. We remain cautiously optimistic about
continued growth in the markets.
Website Enhancements
Please visit our enhanced website, evergreen-funds.com, for more information
about Evergreen Funds. The site offers an array of helpful information including
an investment education center, interactive calculators to assist your
investment planning and general information about Evergreen Funds.
We believe that sound investing is about taking steps to meet your long-term
financial needs and goals. We remind you to take advantage of your financial
advisor's expertise to develop and refine a financial plan that will enable you
to meet your objectives. Evergreen Funds offers a broad mix of stock, bond and
money market funds that should assist you in choosing the most appropriate for
your portfolio.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
<PAGE>
EVERGREEN
Reserve Money Market Fund
Fund at a Glance as of March 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of 3/31/2000 portfolio assets)
[GRAPH]
U.S. Government Agency Notes 43.8
Commercial Paper 20.9
Corporate Notes/Bonds 15.7
U.S. Treasury Obligations 11.2
VRDNs 3.7
Repurchase Agreements 3.6
Bankers Acceptances 1.1
Portfolio
Management
--------------------------
[PHOTO] [PHOTO]
Kellie Allen Bryan K. White
Tenure: June 1999 Tenure: June 1999
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
- --------------------------------------------------------------------------------
Portfolio Inception Date: 11/19/1997 Class R Class I
Class Inception Date 10/15/1998 11/19/1997
Average Annual Returns*
6 month 2.55% 2.78%
1 year 4.77% 5.30%
Since Portfolio Inception 4.98% 5.31%
7-day annualized yield 5.28% 5.66%
30-day annualized yield 5.24% 5.62%
6-month income dividends per share $0.03 $0.03
*The yield quotation more closely reflects the earnings of the Fund than the
total return quotation.
The Fund incurs 12b-1 expenses of 0.38% for Class R shares. Class I shares do
not pay a 12b-1 fee.
- --------------------------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
- --------------------------------------------------------------------------------
[GRAPH]
Class R Class I
10/31/99 4.66% 5.25%
11/30/99 4.92% 5.45%
12/31/99 5.24% 5.65%
1/31/00 5.08% 5.46%
2/29/00 5.29% 5.67%
3/31/00 5.28% 5.66%
Total Net Assets: $431,229,131
Average Maturity: 48 days
Past performance is no guarantee of future results.
The performance of each class may vary based on differences in loads, fees and
expenses paid by the shareholders investing in each class.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance includes the reinvestment of income distributions.
U.S. Government guarantees apply only to the underlying securities of the Fund's
portfolio and not to the Fund's shares.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
All data is as of March 31, 2000 and subject to change.
2
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
Fund at a Glance as of March 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of 3/31/2000 portfolio assets)
[GRAPH]
VRDNs 93.7
Revenue & General Obligation Notes/Bonds 6.3
Portfolio
Management
-----------------------
[PHOTO]
Steven C. Shachat
Tenure: June 1999
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS*1
- --------------------------------------------------------------------------------
Portfolio Inception Date: 10/15/1998 Class R
Class Inception Date 10/15/1998
Average Annual Returns*
6 month 1.49%
1 year 2.80%
Since Portfolio Inception 2.77%
7-day annualized yield 3.11%
30-day annualized yield 3.08%
6-month income dividends per share $0.01
*The yield quotation more closely reflects the earnings of the Fund than the
total return quotation.
The Fund incurs 12b-1 expenses of 0.33% for Class R shares.
- --------------------------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
- --------------------------------------------------------------------------------
[GRAPH]
Class R
10/31/99 2.70%
11/30/99 3.12%
12/31/99 4.12%
1/31/00 2.62%
2/29/00 3.19%
3/31/00 3.11%
Total Net Assets: $96,878,210
Average Maturity: 10 days
Past performance is no guarantee of future results.
The investment return and principal value will fluctuate so that an investor's
shares, when redeemed, may be worth more or less than their original cost.
Performance includes the reinvestment of income distributions.
U.S. Government guarantees apply only to the underlying securities of the Fund's
portfolio and not to the Fund's shares.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
The Fund's yield will fluctuate and there can be no guarantee that the Fund will
achieve its objective or any particular tax-exempt yield.
All data is as of March 31, 2000 and subject to change.
3
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
Fund at a Glance as of March 31, 2000
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
- --------------------------------------------------------------------------------
(as a percentage of 3/31/2000 portfolio assets)
[GRAPH]
U.S. Government Agency Notes 84.7
Repurchase Agreements 15.3
Portfolio
Management
---------------------
[PHOTO] [PHOTO]
Kellie Allen Bryan K.White
Tenure: June 1999 Tenure: June 1999
- --------------------------------------------------------------------------------
PERFORMANCE AND RETURNS1
- --------------------------------------------------------------------------------
Portfolio Inception Date: 6/27/1997 Class R Class I
Class Inception Date 10/15/1998 6/27/1997
Average Annual Returns*
6 month 2.47% 2.67%
1 year 4.65% 5.12%
Since Portfolio Inception 4.95% 5.20%
7-day annualized yield 5.17% 5.56%
30-day annualized yield 5.14% 5.52%
6-month income dividends per share $0.02 $0.03
*The yield quotation more closely reflects the earnings of the fund than the
total
return quotation.
The Fund incurs 12b-1 expenses of 0.38% for Class R shares. Class I shares do
not pay a 12b-1 fee.
- --------------------------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
- --------------------------------------------------------------------------------
[GRAPH]
Class R Class I
10/31/99 4.62% 4.99%
11/30/99 4.83% 5.23%
12/31/99 4.79% 5.21%
1/31/00 4.89% 5.27%
2/29/00 5.23% 5.61%
3/31/00 5.17% 5.56%
Total Net Assets: $136,314,366
Average Maturity: 57 days
Past performance is no guarantee of future results.
The performance of each class may vary based on differences in loads, fees and
expenses paid by the shareholders investing in each class. The investment return
and principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. Performance includes the
reinvestment of income distributions.
U.S. Government guarantees apply only to the underlying securities of the Fund's
portfolio and not to the Fund's shares.
An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.
All data is as of March 31, 2000 and subject to change.
4
<PAGE>
EVERGREEN
Reserve Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30,
(Unaudited) 1999 (a)
<S> <C> <C>
CLASS R
Net asset value, beginning of period $ 1.00 $ 1.00
-------- --------
Income from investment operations
Net investment income 0.03 0.04
Less distributions to shareholders from
Net investment income (0.03) (0.04)
-------- --------
Net asset value, end of period $ 1.00 $ 1.00
-------- --------
Total return 2.55% 4.93%
Ratios and supplemental data
Net assets, end of period (thousands) $400,121 $323,392
Ratios to average net assets
Expenses++ 0.75%+ 0.83%+
Net investment income 5.05%+ 4.32%+
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended Year Ended September 30,
March 31, 2000 ----------------------------
(Unaudited) 1999 1998 (b)
<S> <C> <C> <C>
CLASS I
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00
------- ------------ ------------
Income from investment
operations
Net investment income 0.03 0.05 0.05
Less distributions to
shareholders from
Net investment income (0.03) (0.05) (0.05)
------- ------------ ------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
------- ------------ ------------
Total return 2.78% 4.95% 4.74%
Ratios and supplemental data
Net assets, end of period
(thousands) $31,108 $ 37,506 $ 40,970
Ratios to average net assets
Expenses++ 0.29%+ 0.32% 0.33%+
Net investment income 5.50%+ 4.82% 5.35%+
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
(b) For the period from November 19, 1997 (commencement of class operations) to
September 30, 1998.
++ The ratio of expenses to average net assets excludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
5
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30,
(Unaudited) 1999 (a)
<S> <C> <C>
CLASS R
Net asset value, beginning of period $ 1.00 $ 1.00
------- -------
Income from investment operations
Net investment income 0.01 0.03
Less distributions to shareholders from
Net investment income (0.01) (0.03)
------- -------
Net asset value, end of period $ 1.00 $ 1.00
------- -------
Total return 1.49% 2.53%
Ratios and supplemental data
Net assets, end of period (thousands) $96,878 $66,047
Ratios to average net assets
Expenses++ 0.72%+ 0.74%+
Net investment income 2.33%+ 2.51%+
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
++ The ratio of expenses to average net assets excludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
6
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30,
(Unaudited) 1999 (a)
<S> <C> <C>
CLASS R
Net asset value, beginning of period $ 1.00 $ 1.00
-------- -------
Income from investment operations
Net investment income 0.02 0.04
Less distributions to shareholders from
Net investment income (0.02) (0.04)
-------- -------
Net asset value, end of period $ 1.00 $ 1.00
-------- -------
Total return 2.47% 4.93%
Ratios and supplemental data
Net assets, end of period (thousands) $114,746 $99,417
Ratios to average net assets
Expenses++ 0.71%+ 0.80%+
Net investment income 4.91%+ 4.23%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
Six Months Ended ---------------------------
March 31, 2000
(Unaudited) 1999 1998 1997 (b)
<S> <C> <C> <C> <C>
CLASS I
Net asset value, beginning of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------
Income from investment
operations
Net investment income 0.03 0.05 0.05 0.01
Less distributions to
shareholders from
Net investment income (0.03) (0.05) (0.05) (0.01)
------- -------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------
Total return 2.67% 4.80% 5.42% 1.39%
Ratios and supplemental data
Net assets, end of period
(thousands) $21,568 $109,102 $106,273 $61,805
Ratios to average net assets
Expenses++ 0.31%+ 0.33% 0.33% 0.33%+
Net investment income 5.13%+ 4.69% 5.27% 5.26%+
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
(b) For the period from June 27, 1997 (commencement of class operations) to
September 30, 1997.
++ The ratio of expenses to average net assets excludes expense reductions.
+ Annualized.
See Combined Notes to Financial Statements.
7
<PAGE>
EVERGREEN
Reserve Money Market Fund
Schedule of Investments
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
BANKERS' ACCEPTANCES - 1.1%
$ 5,000,000 Commerzbank AG NY Branch,
5.17%, 4/19/2000
(cost $4,999,937)........................... $ 4,999,937
-------------
COMMERCIAL PAPER - 21.7%
Asset Backed - 13.2%
15,000,000 Bavaria Universal Funding,
5.97%, 4/10/2000............................ 14,982,588
17,000,000 Greenwich Funding Corp.,
5.85%, 4/4/2000............................. 16,997,237
10,000,000 Special Purpose Accounts Receivables,
5.91%, 4/7/2000............................. 9,993,433
15,000,000 Thunder Bay Funding, Inc.,
5.92%, 4/24/2000............................ 14,948,200
-------------
56,921,458
-------------
Finance & Insurance - 8.5%
20,000,000 Concord Minutemen Capital Corp.,
6.06%, 4/10/2000............................ 19,976,434
16,582,000 Enterprise Funding Corp.,
(LOC: Bank of America Corp.),
5.86%, 4/3/2000............................. 16,582,000
-------------
36,558,434
-------------
Total Commercial Paper
(cost $93,479,892).......................... 93,479,892
-------------
CORPORATE BONDS - 18.5%
Banks - 4.4%
1,173,000 Bank of America Corp.,
Sub. Notes,
9.75%, 7/1/2000............................. 1,183,981
8,000,000 Norwest Corp.,
MTN, Ser. F,
6.75%, 5/12/2000............................ 8,007,070
10,000,000 U.S. Bank, NA MN, Bank Notes,
6.72%, 2/8/2001............................. 9,994,916
-------------
19,185,967
-------------
Brokers - 2.0%
Lehman Brothers Holdings, Inc.,
MTN, Ser. E:
4,000,000 6.50%, 7/18/2000............................ 4,002,962
2,250,000 7.08%, 5/22/2000............................ 2,252,791
1,400,000 8.15%, 5/15/2000............................ 1,403,141
1,000,000 Morgan Stanley Dean Witter,
MTN, Ser. C,
5.875%, 2/28/2001........................... 991,051
-------------
8,649,945
-------------
Electronic Equipment & Services - 0.5%
2,000,000 Texas Instruments, Inc.,
Unsecd. Notes,
6.875%, 7/15/2000........................... 2,003,394
-------------
Finance & Insurance - 11.3%
10,000,000 AT&T Capital Corp., MTN, Ser. F,
7.37%, 6/7/2000............................. 10,017,979
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
CORPORATE BONDS - continued
Finance & Insurance - continued
$13,000,000 Dorada Fin. Corp.,
6.835%, VRDN.................................. $ 13,000,000
2,000,000 Ford Motor Credit Co., MTN,
6.95%, 5/15/2000.............................. 2,002,390
10,000,000 General Electric Capital Corp.,
5.915%, 4/17/2000............................. 9,999,453
1,300,000 Hilander Fin. LLC,
(LOC: American Bank & Trust)
6.20%, VRDN................................... 1,300,000
Household Fin. Corp.:
3,285,000 Sr. Notes
7.15%, 6/15/2000.............................. 3,291,869
6,000,000 Sr. Sub. Notes
9.55%, 4/1/2000............................... 6,000,000
3,100,000 Transamerica Fin. Corp.,
Sub. Notes,
6.75%, 6/1/2000............................... 3,104,314
------------
48,716,005
------------
Other - 0.3%
1,100,000 CCM Properties, LLC,
Ser. 96-A, (Insd. by AMBAC)
6.20%, VRDN .................................. 1,100,230
------------
Total Corporate Bonds
(cost $79,655,541)............................ 79,655,541
------------
MUNICIPAL - 0.2%
1,000,000 Catholic Hlth. Initiatives RB,
Taxable, Ser. C,
(LOC: Morgan Gty. Trust Co.)
6.25%, VRDN
(cost $1,000,000)............................. 1,000,000
------------
U.S. AGENCY OBLIGATIONS - 45.2%
25,000,000 FAMC Disc. Notes,
5.84%, 4/13/2000.............................. 24,959,444
FHLB:
19,250,000 5.50%, 7/14/2000.............................. 19,221,774
10,000,000 6.35%, 2/1/2001............................... 9,994,825
16,000,000 6.75%, 4/6/2001............................... 16,000,000
FHLMC:
Disc. Notes,
30,000,000 5.71%, 4/13/2000.............................. 29,952,417
MTN,
15,000,000 6.35%, 1/5/2001............................... 14,999,309
50,000,000 FNMA Disc. Notes,
5.72%, 4/6/2000............................... 49,976,167
30,000,000 SLMA, FRN, Ser. HC,
6.585%, 4/4/2000.............................. 30,031,404
------------
Total U.S. Agency Obligations
(cost $195,135,340)........................... 195,135,340
------------
U.S. TREASURY OBLIGATIONS - 11.6%
50,000,000 U.S. Treasury Bills,
0.00% (Eff. yield 6.09%)(c), 4/18/2000
(cost $49,875,312)............................ 49,875,312
------------
</TABLE>
8
<PAGE>
EVERGREEN
Reserve Money Market Fund
Schedule of Investments(continued)
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
YANKEE OBLIGATIONS - 1.4%
$ 6,000,000 Household Finl. Corp. Ltd.,
Sr. Notes,
7.45%, 4/1/2000
(cost $6,000,000)................................. $ 6,000,000
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 3.8%
$16,286,374 Goldman Sachs & Co.,
6.15%, dated 03/31/2000,
due 04/03/2000, maturity
value $16,294,721
(cost $16,286,374) (a)............................ $ 16,286,374
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $446,432,396)........................ 103.5% 446,432,396
Other Assets and
Liabilities - net.......................... (3.5) (15,203,265)
----- ------------
Net Assets - ............................... 100.0% $431,229,131
===== ============
</TABLE>
See Combined Notes to Schedules of Investments.
9
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
Schedule of Investments
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 99.7%
Alabama - 3.9%
$3,800,000 Columbia, AL IDA PCRB,
(Gtd. by Alabama Pwr.),
4.00%, VRDN..................................... $ 3,800,000
-----------
Arizona - 1.3%
1,215,000 Maricopa CDA Ser. 1988,
(LOC: Citizen Utility),
4.20%, 7/11/2000................................ 1,215,000
-----------
District of Columbia - 9.9%
District of Columbia GO:
1,050,000 4.00%, VRDN..................................... 1,050,000
1,200,000 Ser. 1992A-1,
(LOC: Societe Generale Bank),
4.00%, VRDN..................................... 1,200,000
3,000,000 Ser. 1992A-2,
(LOC: Canadian Imperial Bank),
4.00%, VRDN..................................... 3,000,000
2,700,000 Ser. 1992A-4,
(LOC: Societe Generale Bank),
4.00%, VRDN..................................... 2,700,000
1,600,000 Ser. 1992A-5,
(LOC: Bank of Nova Scotia),
4.00%, VRDN..................................... 1,600,000
-----------
9,550,000
-----------
Florida - 9.7%
900,000 Alachua Cnty, FL Hlth. Facs. Auth. RB,
(SPA: Suntrust Banks & Insd. by MBIA),
3.85%, VRDN..................................... 900,000
1,000,000 Collier Cnty., FL Hlth. Facs. Auth Hosp. RB,
(LOC: Bank One, NA),
4.00%, VRDN..................................... 1,000,000
2,900,000 Gulf Breeze, FL RB,
(LOC: Morgan Keegan & Insd. by FGIC),
3.95%, VRDN..................................... 2,900,000
4,590,000 Hillsborough Cnty., FL Sch. Board,
Ser. E, (SPA: Bank of America & Insd. by MBIA),
4.01%, VRDN..................................... 4,590,000
-----------
9,390,000
-----------
Illinois - 3.8%
2,000,000 Illinois Toll Hwy. Auth. RB,
Ser. B, (SPA: Landesbank Hessen & Insd. by FSA),
3.95%, VRDN..................................... 2,000,000
1,700,000 Madison Cnty., IL Env. Impt. RB,
Ser. A, (Gtd. by Shell Oil, Inc.),
4.05%, VRDN..................................... 1,700,000
-----------
3,700,000
-----------
Indiana - 4.8%
1,300,000 Indiana Hlth. Facs. Fin. Auth. RB
(LOC: Comerica Bank),
3.90%, VRDN..................................... 1,300,000
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Indiana - continued
$1,300,000 Indiana State Dev. EDRB, Edgewater Sys., Inc.
Proj., (LOC: Bank One, NA),
4.00%, VRDN..................................... $ 1,300,000
2,085,000 Indianapolis, IN
MHRB, (LOC: National City Bank),
4.00%, VRDN..................................... 2,085,000
-----------
4,685,000
-----------
Iowa - 2.5%
2,400,000 Iowa Fin. Auth. RB, Burlington Med. Ctr. Proj.,
(SPA: Firstar Bank & Insd. by FSA),
4.10%, VRDN..................................... 2,400,000
-----------
Kentucky - 4.8%
2,300,000 Louisville & Jefferson Cnty., KY
RB, (Gtd. by United Parcel Service),
4.00%, VRDN..................................... 2,300,000
2,400,000 Ohio Cnty., KY
PCRB, Big Rivers Elec. Corp.,
Ser. 1985, (SPA: Credit Suisse & Insd. by
AMBAC),
3.90%, VRDN..................................... 2,400,000
-----------
4,700,000
-----------
Louisiana - 11.4%
7,550,000 Ascension Parish, LA PCRB,
(LOC: Bank of Tokyo-Mitsubishi),
4.10%, VRDN..................................... 7,550,000
860,000 New Orleans, LA Aviation Board RB, (Insd. by
FSA),
4.50%, 9/1/2000................................. 861,356
2,600,000 South Louisiana Port Commission,
RB, Holnam, Inc. Proj.,
(LOC: Wachovia Bank NA),
3.90%, VRDN..................................... 2,600,000
-----------
11,011,356
-----------
Michigan - 1.4%
1,400,000 Detroit, MI Swr. Disp. RB, Ser. B, (SPA: Morgan
Gty. Trust & Insd. by MBIA),
3.85%, VRDN..................................... 1,400,000
-----------
Minnesota - 2.4%
2,300,000 Minnesota Hsg. Fin. Agcy.,
(Liq: Merrill Lynch & Co., Inc.),
3.96%, VRDN..................................... 2,300,000
-----------
Missouri - 5.7%
1,050,000 Kansas City, MO Land Clearance RB, Landmark Bank
Proj., (LOC: Mercantile Bank),
3.97%, VRDN..................................... 1,050,000
750,000 Missouri State Env. Impt. & Energy RB,
(LOC: Dresdner Bank),
4.00%, 6/1/2000................................. 750,000
Missouri State Hlth. & Edl. Facs. RB:
1,900,000 3.90%, VRDN..................................... 1,900,000
1,800,000 Ser A, (LOC: Morgan Gty. Trust),
4.00%, VRDN..................................... 1,800,000
-----------
5,500,000
-----------
</TABLE>
10
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
Schedule of Investments(continued)
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
New York - 5.6%
$1,250,000 Madrid Waddington, NY Central Sch. Dist.
GO,(Insd. by FGIC),
4.50%, 6/15/2000................................ $ 1,252,058
4,200,000 New York Thruway Auth. Gen. RB,
(LOC: Societe Generale Bank),
4.05%, VRDN..................................... 4,200,000
-----------
5,452,058
-----------
North Carolina - 1.5%
1,500,000 Raleigh Durham, NC Arpt. Auth. Spl. Facs. RB,
American Airlines Proj., Ser. A, (LOC: Bank of
America),
4.00%, VRDN..................................... 1,500,000
-----------
Pennsylvania - 6.1%
Emmaus, PA Gen. Auth. RB (LOC: KBC Bank),
5,900,000 3.95%, VRDN..................................... 5,900,000
-----------
Tennessee - 5.2%
2,000,000 Knoxville, TN Util. Board RB, (SPA: Suntrust
Banks & Insd. by FSA),
3.95%, VRDN..................................... 2,000,000
3,000,000 Sevier Cnty., TN Pub. Bldg. Auth. RB, (SPA:
Landesbank Hessen & Insd. by AMBAC),
3.90%, VRDN..................................... 3,000,000
-----------
5,000,000
-----------
Texas - 12.2%
5,500,000 Brazos River Auth. TX PCRB, Texas Util. Elec.
Co.,
4.05%, VRDN..................................... 5,500,000
2,650,000 Brazos River, TX Harbor Navigation Dist. RB, Dow
Chemical Co. Proj.: (Gtd. by Dow Chemical Co.),
4.10%, VRDN..................................... 2,650,000
1,500,000 Gulf Coast, TX Wst. Disp. Auth. RB, Amoco Oil
Co., (Gtd. by Amoco Oil),
4.05%, VRDN..................................... 1,500,000
1,200,000 Harris Cnty., TX Hlth. Facs. Hosp. RB, (LOC:
Morgan Gty. Trust),
3.95%, VRDN..................................... 1,200,000
1,000,000 San Antonio, TX GO,
8.00%, 8/1/2000................................. 1,012,771
-----------
11,862,771
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C> <C>
MUNICIPAL OBLIGATIONS - continued
Virginia - 0.6%
$ 600,000 Lynchburg, VA IDA Hosp. Fac. RB, Ser. D, (SPA:
Mellon Bank & Insd. by AMBAC),
3.95%, VRDN..................................... $ 600,000
-----------
Washington - 0.8%
750,000 Kent, WA EDA PCRB, (LOC: Dresdner Bank),
4.00%, 6/1/2000................................. 750,000
-----------
Other - 6.1%
4,500,000 Koch Fixed Rate Trust, (Liq: Merrill Lynch & Co.,
Inc. & Insd. by MBIA), 4.12%, VRDN.............. 4,500,000
1,415,000 PFOTER, PPT-4, (SPA: Credit Suisse Bank & Insd.
by FHA), 4.12%, VRDN............................ 1,415,000
-----------
5,915,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $96,631,185)............................ 99.7% 96,631,185
Other Assets and
Liabilities - net............................. 0.3 247,025
----- -----------
Net Assets..................................... 100.0% $96,878,210
===== ===========
</TABLE>
See Combined Notes to Schedules of Investments
11
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
Schedule of Investments
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
U.S. AGENCY OBLIGATIONS - 87.8%
$25,000,000 FAMC Disc. Notes,
5.84%, 4/13/2000................................... $ 24,959,444
5,000,000 FHLB,
6.75%, 4/6/2001.................................... 5,000,000
FHLMC,
5,000,000 6.35%, 1/5/2001..................................... 4,999,770
Disc. Notes:
30,000,000 5.825%, 5/2/2000.................................... 29,859,229
15,000,000 5.90%, 4/18/2000.................................... 14,963,125
FNMA, MTN:
3,000,000 5.12%, 5/26/2000.................................... 2,999,666
2,500,000 6.57%, 2/22/2001.................................... 2,498,801
Ser. B:
4,451,000 5.65%, 4/28/2000.................................... 4,450,680
15,000,000 5.80%, 8/17/2000.................................... 14,993,757
15,000,000 SLMA, FRN, Ser. HC,
6.647%, 10/4/2000.................................. 15,015,702
------------
Total U.S. Agency Obligations
(cost $119,740,174)................................ 119,740,174
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENT - 15.8%
$21,547,548 Goldman Sachs & Co.,
6.15%, dated 03/31/2000,
due 04/03/2000, maturity value
$21,558,591 (cost $21,547,548) (b)......... $ 21,547,548
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -
(cost $141,287,722)........................ 103.6% 141,287,722
Other Assets and Liabilities - net.......... (3.6) (4,973,356)
----- ------------
Net Assets.................................. 100.0% $136,314,366
===== ============
</TABLE>
See Combined Notes to Schedules of Investments.
12
<PAGE>
EVERGREEN
Reserve Money Market Funds
Combined Notes to Schedules of Investments
March 31, 2000 (Unaudited)
(a) Collateralized by $40,137,186 GNMA, 6.00% to 9.00%, 04/15/2011 to
04/15/2030; value including accrued interest--$16,612,102.
(b) Collateralized by $32,128,312 GNMA, 7.50% to 8.50%, 11/15/2023 to
03/20/2030; value including accrued interest--$21,978,499.
(c) Effective yield (calculated at the date of the purchase) is the yield at
which the bond accretes on an annual basis until maturity date.
Variable Rate Demand Notes are payable on demand on no more than seven calendar
days notice given by the Fund to the issuer or other parties not affiliated
with the issuer. Interest rates are determined and reset by the issuer daily,
weekly, or monthly depending upon the terms of the security. Interest rates
presented for these securities are those in effect at March 31, 2000.
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
CDA Community Development Authority
EDA Economic Development Authority
EDRB Economic Development Revenue Bond
FAMC Federal Agricultural Mortgage Corp.
FGIC Financial Guaranty Insurance Co.
FHA Federal Housing Authority
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corp.
FNMA Federal National Mortgage Association
FRN Floating Rate Note
FSA Financial Security Assurance, Inc.
GO General Obligation
IDA Industrial Development Authority
LOC Letter of Credit
MBIA Municipal Bond Investors Assurance Corp.
MHRB Multifamily Housing Revenue Bond
MTN Medium Term Note
PCRB Pollution Control Revenue Bond
PFOTER Puttable Floating Option Tax Exempt Receipts
PPT Pooled Puttable Trust
RB Revenue Bond
SLMA Student Loan Marketing Association
SPA Security Purchase Agreement
VRDN Variable Rate Demand Note
13
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Assets and Liabilities
March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Reserve Reserve
Reserve Tax-Exempt U.S. Government
Money Market Money Money Market
Fund Market Fund Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets
Investments in securities............ $430,146,022 $96,631,185 $119,740,174
Investments in repurchase
agreements.......................... 16,286,374 0 21,547,548
- --------------------------------------------------------------------------------
Investments at amortized cost........ 446,432,396 96,631,185 141,287,722
Interest receivable.................. 2,953,637 431,851 617,940
Deferred organization expenses....... 7,132 0 9,213
Prepaid expenses and other assets.... 46,877 87,959 55,247
- --------------------------------------------------------------------------------
Total assets......................... 449,440,042 97,150,995 141,970,122
- --------------------------------------------------------------------------------
Liabilities
Distributions payable................ 1,867,900 251,851 563,121
Payable for securities purchased..... 16,000,000 0 5,000,000
Advisory fee payable................. 5,894 1,690 1,975
Distribution Plan expenses payable... 12,544 2,650 3,624
Due to other related parties......... 710 161 226
Accrued expenses and other
liabilities......................... 323,863 16,433 86,810
- --------------------------------------------------------------------------------
Total liabilities.................... 18,210,911 272,785 5,655,756
- --------------------------------------------------------------------------------
Net assets............................ $431,229,131 $96,878,210 $136,314,366
- --------------------------------------------------------------------------------
Net assets represented by
Paid-in capital...................... $431,225,271 $96,878,210 $136,314,366
Undistributed net investment income.. 223 0 0
Accumulated net realized gains on
securities.......................... 3,637 0 0
- --------------------------------------------------------------------------------
Total net assets...................... $431,229,131 $96,878,210 $136,314,366
- --------------------------------------------------------------------------------
Net assets consists of
Class R.............................. $400,121,233 $96,878,210 $114,746,599
Class I.............................. 31,107,898 0 21,567,767
- --------------------------------------------------------------------------------
$431,229,131 $96,878,210 $136,314,366
- --------------------------------------------------------------------------------
Shares outstanding
Class R.............................. 400,118,136 96,878,210 114,746,635
Class I.............................. 31,107,135 0 21,567,731
- --------------------------------------------------------------------------------
Net asset value per share
Class R.............................. $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
Class I.............................. $ 1.00 -- $ 1.00
- --------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Operations
Six Months Ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Reserve
Tax-Exempt Reserve
Reserve Money U.S. Government
Money Market Money Market
Market Fund Fund Fund
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Investment income
Interest............................. $11,400,999 $1,403,535 $4,314,878
- --------------------------------------------------------------------------------
Expenses
Advisory fee......................... 329,750 82,317 141,326
Distribution Plan expenses........... 683,259 125,777 213,265
Administrative services fees......... 39,326 7,623 15,504
Transfer agent fee................... 137,969 37,631 42,152
Trustees' fees and expenses.......... 3,889 745 1,567
Printing and postage expenses........ 44,141 500 13,876
Custodian fee........................ 58,097 8,379 15,850
Registration and filing fees......... 61,207 3,469 9,111
Professional fees.................... 7,617 6,514 7,101
Organization expenses................ 3,026 0 2,062
Other................................ 30,289 892 2,584
- --------------------------------------------------------------------------------
Total expenses....................... 1,398,570 273,847 464,398
Less: Expense reductions............. (8,800) (3,331) (3,024)
- --------------------------------------------------------------------------------
Net expenses......................... 1,389,770 270,516 461,374
- --------------------------------------------------------------------------------
Net investment income................ 10,011,229 1,133,019 3,853,504
Net realized gains or losses on
securities.......................... 3,648 (1,203) 0
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations..................... $10,014,877 $1,131,816 $3,853,504
- --------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
15
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Changes in Net Assets
Six Months Ended March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Reserve Reserve
Tax-Exempt U.S. Government
Reserve Money Money Market Money Market
Market Fund Fund Fund
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income............. $ 10,011,229 $ 1,133,019 $ 3,853,504
Net realized gains or losses on
securities....................... 3,648 (1,203) 0
- ---------------------------------------------------------------------------------
Net increase in net assets
resulting from operations........ 10,014,877 1,131,816 3,853,504
- ---------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class R........................... (9,085,659) (1,133,019) (2,755,781)
Class I........................... (925,347) 0 (1,097,723)
- ---------------------------------------------------------------------------------
Total distributions to
shareholders..................... (10,011,006) (1,133,019) (3,853,504)
- ---------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold......... 328,372,480 80,254,506 97,167,566
Net asset value of shares issued
in reinvestment of
distributions.................... 1,008,353 37 1,216,518
Payment for shares redeemed....... (259,053,767) (49,422,153) (170,589,520)
- ---------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from capital
share transactions............... 70,327,066 30,832,390 (72,205,436)
- ---------------------------------------------------------------------------------
Total increase (decrease) in net
assets.......................... 70,330,937 30,831,187 (72,205,436)
Net assets
Beginning of period............... 360,898,194 66,047,023 208,519,802
- ---------------------------------------------------------------------------------
End of period..................... $ 431,229,131 $ 96,878,210 $ 136,314,366
- ---------------------------------------------------------------------------------
Undistributed net investment
income............................ $ 223 $ 0 $ 0
- ---------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
16
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Changes In Net Assets
Year Ended September 30, 1999
<TABLE>
<CAPTION>
Reserve Tax- Reserve U.S.
Reserve Money Exempt Money Government
Market Market Money Market
Fund Fund (a) Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations
Net investment income........... $ 8,039,458 $ 768,832 $ 7,894,355
Net realized gains or losses on
securities..................... (11) 1,203 0
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from operations..... 8,039,447 770,035 7,894,355
- -------------------------------------------------------------------------------
Distributions to shareholders
from
Net investment income
Class R........................ (6,023,478) (768,832) (2,098,702)
Class I........................ (2,015,980) 0 (5,795,653)
- -------------------------------------------------------------------------------
Total distributions to
shareholders.................. (8,039,458) (768,832) (7,894,355)
- -------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold....... 476,129,402 118,440,808 333,090,286
Payment for shares redeemed..... (163,032,119) (53,024,680) (238,249,650)
Net asset value of shares issued
in reinvestment of
distributions.................. 6,830,633 629,692 7,406,128
- -------------------------------------------------------------------------------
Net increase in net assets
resulting from capital share
transactions.................. 319,927,916 66,045,820 102,246,764
- -------------------------------------------------------------------------------
Total increase in net assets... 319,927,905 66,047,023 102,246,764
Net assets
Beginning of period............. 40,970,289 0 106,273,038
- -------------------------------------------------------------------------------
End of period................... $ 360,898,194 $ 66,047,023 $ 208,519,802
- -------------------------------------------------------------------------------
Undistributed net investment
income......................... $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 15, 1998 (commencement of operations) to Sep-
tember 30, 1999.
See Combined Notes to Financial Statements.
17
<PAGE>
Combined Notes to Financial Statements(Unaudited)
1. ORGANIZATION
Evergreen Reserve Money Market Funds consist of Evergreen Reserve Money Market
Fund ("Reserve Money Market Fund"), Evergreen Reserve Tax-Exempt Money Market
Fund ("Reserve Tax-Exempt Money Market Fund") and Evergreen Reserve U.S. Gov-
ernment Money Market Fund ("Reserve U.S. Government Money Market Fund"), (col-
lectively, the "Funds"). Each Fund is a diversified series of Mentor Funds, a
Massachusetts business trust, an open-end management investment company orga-
nized on January 20, 1992 and registered under the Investment Company Act of
1940, as amended (the "1940 Act").
The Funds offer Retail ("Class R") and/or Institutional ("Class I") classes of
shares. Class R shares are sold without a front-end sales charge, but pay an
ongoing distribution fee.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently fol-
lowed by the Funds in the preparation of their financial statements. The poli-
cies are in conformity with generally accepted accounting principles, which re-
quire management to make estimates and assumptions that affect amounts reported
herein. Actual results could differ from these estimates.
A. Valuation of Securities
As permitted under Rule 2a-7 of the 1940 Act, and certain conditions therein,
securities are valued utilizing the amortized cost method, which approximates
market value. The amortized cost of an instrument is determined by valuing it
at its original cost and thereafter assuming a constant accretion of any dis-
count or amortization of any premium from its face value at a constant rate un-
til maturity.
Short-term investments with remaining maturities of 60 days or less are carried
at amortized cost, which approximates market value.
B. Repurchase Agreements
Each Fund may invest in repurchase agreements. Securities pledged as collateral
for repurchase agreements are held in a segregated account by the custodian on
the Fund's behalf. Collateral for certain tri-party repurchase agreements is
held at the counterparty's custodian in a segregated account for the benefit of
the Fund and the counterparty. Each Fund monitors the adequacy of the collat-
eral daily and will require the seller to provide additional collateral in the
event the market value of the securities pledged falls below the carrying value
of the repurchase agreement, including accrued interest. Each Fund will only
enter into repurchase agreements with banks and other financial institutions,
which are deemed by the investment advisor to be creditworthy pursuant to
guidelines established by the Board of Trustees.
C. Security Transactions and Investment Income
Securities transactions are accounted for no later than one business day after
the trade date. Realized gains and losses are computed on the identified cost
basis. Interest income is recorded on the accrual basis and includes accretion
of discounts and amortization of premiums.
D. Federal Taxes
The Funds have qualified and intend to continue to qualify as regulated invest-
ment companies under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Funds will not incur any federal income tax liability since
they are expected to distribute all of their net investment company taxable in-
come, net tax-exempt income and net capital gains, if any, to their sharehold-
ers. The Funds also intend to avoid any excise tax liability by making the re-
quired distributions under the Code. Accordingly, no provision for federal
taxes is required. To the extent that realized capital gains can be offset by
capital loss carryforwards, it is each Fund's policy not to distribute such
gains.
18
<PAGE>
Combined Notes to Financial Statements(Unaudited) (continued)
E. Distributions
Distributions from net investment income for the Funds are declared daily and
paid monthly. Distributions from net realized capital gains, if any, are paid
at least annually. Distributions to shareholders are recorded at the close of
business on the ex-dividend date.
Income and capital gains distributions to shareholders are determined in accor-
dance with income tax regulations, which may differ from generally accepted ac-
counting principles.
F. Class Allocations
Income, expenses (other than class specific expenses) and realized and
unrealized gains and losses are prorated among the classes based on the rela-
tive net assets of each class. For the Reserve Money Market Fund and the Re-
serve U.S. Government Money Market Fund, class specific expenses are currently
limited to expenses incurred under the Distribution Plans for the Class R
shares.
G. Organization Expenses
Organization expenses for the Funds, except for the Reserve Tax-Exempt Money
Market Fund, are amortized to operations over a five-year period on a straight-
line basis. In the event any of the initial shares of the Funds are redeemed by
any holder during the five-year amortization period, redemption proceeds will
be reduced by any unamortized organization expenses in the same proportion as
the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of the redemption. Organization expenses in-
curred by the Reserve Tax-Exempt Money Market Fund were reflected in the Fund's
operating results for its initial fiscal year.
3. INVESTMENT ADVISORY AGREEMENT AND OTHER AFFILIATED TRANSACTIONS
Mentor Investment Advisors, LLC ("Mentor Advisors"), a subsidiary of First
Union Corporation ("First Union"), is the investment advisor for each Fund and
is paid a management fee that is computed and paid daily based on the combined
average daily net assets of each Fund and its comparable fund within Evergreen
CRT Money Market Funds as follows: 0.22% of the first $500 million, 0.20% of
the next $500 million, 0.175% of the next $1 billion, 0.16% of the next $1 bil-
lion, and 0.15% of any amounts over $3 billion.
Evergreen Investment Services ("EIS"), an indirect, wholly-owned subsidiary of
First Union is the administrator to the Funds. As administrator, EIS provides
the Funds with facilities, equipment and personnel. EIS is entitled to a fee at
an annual rate of 0.02% of the average daily net assets of each Fund.
Officers of the Funds and affiliated Trustees receive no compensation directly
from the Funds.
Evergreen Service Company ("ESC"), an indirectly, wholly owned subsidiary of
First Union, is the transfer and dividend disbursing agent for the Funds.
4. DISTRIBUTION PLANS
Evergreen Distributor, Inc. ("EDI"), a wholly owned subsidiary of The BISYS
Group, Inc. ("BISYS") serves as principal underwriter to the Funds.
Each Fund has adopted a Distribution Plan, as allowed by the Rule 12b-1 of the
1940 Act, for its Class R shares. Distribution Plans permit a Fund to compen-
sate its principal underwriter for costs related to selling shares of the Fund
and for various other services. These costs, which consist primarily of commis-
sions and service fees to broker-dealers who sell shares of the Fund, are paid
by the Fund through "Distribution Plan expenses". Under the Distribution Plan,
Reserve Money Market Fund and Reserve U.S. Government Money Market Fund Class R
shares incur distribution fees equal to 0.38% and Reserve Tax-Exempt Money Mar-
ket Fund Class R shares incurs distribution fees equal to 0.33% of the average
daily net assets of the class, all of which is used to pay for shareholder
service fees. The Distribution Plan expenses are calculated and paid daily.
The Distribution Plans may be terminated at any time by vote of the Independent
Trustees or by vote of a majority of the outstanding voting shares.
19
<PAGE>
Combined Notes to Financial Statements(continued)
During the six months ended March 31, 2000, amounts paid or accrued to EDI pur-
suant to each Fund's Class R Distribution Plan were as follows:
<TABLE>
<S> <C>
Reserve Money Market Fund............................... $569,920
Reserve Tax-Exempt Money Market Fund.................... 114,834
Reserve U.S. Government Money Market Fund............... 194,898
</TABLE>
Prior to October 18, 1999, Mentor Distributors, LLC ("Mentor Distributors")
served as principal underwriter to the Funds. Mentor Distributors is a wholly
owned subsidiary of BISYS Fund Services, Inc.
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest with $1.00
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class R and Class I shares. During the six months ended March 31,
2000, transactions in shares (valued at $1.00 per share) of the Funds were as
follows:
Reserve Money Market Fund
<TABLE>
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30, 1999 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Class R
Shares sold........................... 323,975,581 426,462,250
Shares issued in reinvestment of
distributions........................ 195 4,850,538
Shares redeemed....................... (247,250,065) (107,920,363)
- ------------------------------------------------------------------------------
Net increase.......................... 76,725,711 323,392,425
- ------------------------------------------------------------------------------
<CAPTION>
Six Months Ended Year Ended
March 31, 2000 September 30, 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold........................... 4,396,899 49,667,152
Shares issued in reinvestment of
distributions........................ 1,008,158 1,980,095
Shares redeemed....................... (11,803,702) (55,111,756)
- ------------------------------------------------------------------------------
Net decrease.......................... (6,398,645) (3,464,509)
- ------------------------------------------------------------------------------
Reserve Tax-Exempt Money Market Fund
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30, 1999 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Class R
Shares sold........................... 80,254,506 118,440,808
Shares issued in reinvestment of
distributions........................ 37 629,692
Shares redeemed....................... (49,422,153) (53,024,680)
- ------------------------------------------------------------------------------
Net increase.......................... 30,832,390 66,045,820
- ------------------------------------------------------------------------------
Reserve U.S. Government Money Market Fund
<CAPTION>
Six Months Ended Period Ended
March 31, 2000 September 30, 1999 (a)
- ------------------------------------------------------------------------------
<S> <C> <C>
Class R
Shares sold........................... 81,690,837 162,628,419
Shares issued in reinvestment of
distributions........................ 0 1,720,088
Shares redeemed....................... (66,361,580) (64,931,129)
- ------------------------------------------------------------------------------
Net increase.......................... 15,329,257 99,417,378
- ------------------------------------------------------------------------------
<CAPTION>
Six Months Ended Year Ended
March 31, 2000 September 30, 1999
- ------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold........................... 15,476,729 170,461,867
Shares issued in reinvestment of
distributions........................ 1,216,518 5,686,040
Shares redeemed....................... (104,227,940) (173,318,521)
- ------------------------------------------------------------------------------
Net increase (decrease)............... (87,534,693) 2,829,386
- ------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
20
<PAGE>
Combined Notes to Financial Statements(continued)
6. EXPENSE REDUCTIONS
The Funds have entered into expense offset arrangements with ESC and their cus-
todian whereby credits realized as a result of uninvested cash balances were
used to reduce a portion of each Fund's related expenses. The assets deposited
with ESC and the custodian under these expense offset arrangements could have
been invested in income-producing assets. The amount of expense reductions re-
ceived by each Fund and the impact of the total expense reductions on each
Fund's annualized expense ratio represented as a percentage of its average net
assets were as follows:
<TABLE>
<CAPTION>
Total
Expense % of Average
Reductions Net Assets
-----------------------
<S> <C> <C>
Reserve Money Market Fund............... $8,800 0.00%
Reserve Tax-Exempt Money Market Fund.... 3,331 0.01%
Reserve U.S. Government Money Market
Fund................................... 3,024 0.00%
</TABLE>
7. DEFERRED TRUSTEES' FEES
Each Independent Trustee of each Fund may defer any or all compensation related
to performance of their duties as Trustees. The Trustees' deferred balances are
allocated to deferral accounts, which are included in the accrued expenses for
the Fund. The investment performance of the deferral accounts are based on the
investment performance of certain Evergreen Funds. Any gains earned or losses
incurred in the deferral accounts are reported in the Fund's Trustees' fees and
expenses. At the election of the Trustees, the deferral account will be paid
either in one lump sum or in quarterly installments for up to ten years.
8. FINANCING AGREEMENT
On July 27, 1999, certain Evergreen Funds and a group of banks (the "Lenders")
entered into a credit agreement. Under this agreement, effective for certain
Evergreen Funds on July 27, 1999, the Lenders provide an unsecured revolving
credit commitment in the aggregate amount of $1.050 billion. On August 6, 1999
the Funds became party to this agreement. The credit facility is allocated, un-
der the terms of the financing agreement, among the Lenders. The credit facil-
ity is accessed by the Funds for temporary or emergency purposes to fund the
redemption of their shares or for general working capital purposes as permitted
by each Fund's borrowing restrictions. Borrowings under this facility bear in-
terest at 0.75% per annum above the Federal Funds rate (1.50% per annum above
the Federal Funds rate during the period from and including December 1, 1999
through and including January 31, 2000). A commitment fee of 0.10% per annum is
incurred on the average daily unused portion of the revolving credit commit-
ment. The commitment fee is allocated to all Funds. For its assistance in ar-
ranging this financing agreement, First Union Capital Markets Corp. was paid a
one-time arrangement fee of $250,000. State Street Bank and Trust Company
serves as paying agent for the Funds and as paying agent is entitled to a fee
of $20,000 per annum, which is allocated to all the Funds.
During the six months ended March 31, 2000, the Reserve Money Market Fund had
average borrowings outstanding of $85,038 at a rate of 7.10% and paid interest
of $3,059.
21
<PAGE>
Additional Information(Unaudited)
On December 15, 1999, a special meeting of shareholders for the Funds was held
to consider a number of proposals.
<TABLE>
<CAPTION>
Reserve
Reserve Tax-Exempt Reserve
Money Money U.S. Government
Market Market Money Market
Fund Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Record Date Shares Outstanding as of
October 15, 1999...................... 366,368,037 64,980,236 228,332,931
Shares represented at the meeting on
December 15, 1999..................... 330,275,546 62,315,472 181,653,491
Percentage of record date shares
represented at the meeting on December
15, 1999.............................. 90.14% 95.89% 79.56%
The votes recorded at the meeting, by proposal, were as follows:
Proposal 1 Election of Directors
Laurence B. Ashkin
Shares voted "For"..................... 326,854,149 61,871,122 180,727,755
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,421,397 444,350 925,736
Charles A. Austin III
Shares voted "For"..................... 327,022,683 61,871,122 180,885,866
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,252,863 444,350 767,625
K. Dun Gifford
Shares voted "For"..................... 327,250,583 61,739,982 181,165,696
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,024,963 575,490 487,795
Leroy Keith, Jr.
Shares voted "For"..................... 327,205,330 61,892,200 181,165,696
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,070,216 423,272 487,795
Gerald M. McDonnell
Shares voted "For"..................... 327,267,884 61,871,122 181,165,696
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,007,662 444,350 487,795
Thomas L. McVerry
Shares voted "For"..................... 327,267,884 61,871,122 181,143,203
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,007,662 444,350 510,288
William Walt Pettit
Shares voted "For"..................... 327,267,884 61,871,122 181,114,408
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,007,662 444,350 539,083
David M. Richardson
Shares voted "For"..................... 327,267,884 61,739,982 181,165,696
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,007,662 575,490 487,795
Russell A. Salton, III MD
Shares voted "For"..................... 327,266,053 61,892,200 181,165,696
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,009,493 423,272 487,795
Michael S. Scofield
Shares voted "For"..................... 327,267,884 61,892,200 181,114,408
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,007,662 423,272 539,083
Richard J. Shima
Shares voted "For"..................... 327,261,655 61,871,122 181,143,203
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 3,013,891 444,350 510,288
Arnold H. Dreyfuss
Shares voted "For"..................... 327,386,769 61,769,333 180,773,357
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 2,888,777 546,139 880,134
Louis W. Moelchert, Jr.
Shares voted "For"..................... 327,800,505 61,892,200 181,163,793
Shares voted "Against"................. 0 0 0
Shares voted "Abstain"................. 2,475,041 423,272 489,698
</TABLE>
22
<PAGE>
Additional Information(Unaudited) (continued)
<TABLE>
<CAPTION>
Reserve
Reserve Tax-Exempt Reserve
Money Money U.S. Government
Market Market Money Market
Fund Fund Fund
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Proposal 2--To transact any other
business that may properly come before
the meeting or any adjournment
thereof:
Shares voted "For"..................... 325,390,002 61,816,467 180,605,037
Shares voted "Against"................. 2,332,358 100,500 632,032
Shares voted "Abstain"................. 2,553,186 398,505 416,422
</TABLE>
23
<PAGE>
Evergreen Funds
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Treasury Money Market Fund
Money Market Fund
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Tax Advantaged
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Tax-Free High Income Fund
Income
Short-Duration Income Fund
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Balanced
Tax Strategic Foundation Fund
Foundation Fund
Balanced Fund
Growth & Income
Utility Fund
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