<PAGE>
Annual Report
as of September 30, 2000
Evergreen
Reserve Money Market Funds
[LOGO OF EVERGREEN FUNDS] [SEAL]
<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 ............................ 9
Evergreen Reserve U.S. Government Money Market Fund .......................11
Combined Notes to
Schedules of Investments .....................................................12
Statements of Assets and Liabilities .........................................13
Statements of Operations .....................................................14
Statements of Changes in Net Assets ..........................................15
Combined Notes to Financial
Statements ...................................................................17
Independent Auditors' Report .................................................21
Additional Information .......................................................22
Evergreen Funds
Evergreen Funds is one of the nation's fastest growing investment companies with
more than $80 billion in assets under management. We offer over 80 mutual funds
to choose among and acclaimed service and operations capabilities, giving
investors 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 annual 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 FundsSM is a service mark of Evergreen Investment Services, Inc.
<PAGE>
Letter to Shareholders
----------------------
November 2000
[PHOTO]
William M. Ennis
President and CEO
Dear Evergreen Shareholders,
We are pleased to provide the Evergreen Reserve Money Market Funds annual
report, which covers the twelve-month period ended September 30, 2000.
A Challenging Environment for Investors
During 2000, U.S. equity markets have challenged investors with a series of
turbulent ups and downs and a constant rotation from one particular sector for a
brief period of time to another. The market favored the new economy then the old
economy, large caps then mid-caps, value then growth, dot coms then technology
equipment, creating significant uncertainties for investors.
Concerns about wage-driven inflation, higher interest rates and increasing oil
prices also affected market valuations and volatility. Although these factors
have the potential to meaningfully slow the economy, many leading indicators
continue to demonstrate strength. We believe that the U.S. economy will slow
moderately, aided by the Federal Reserve's focus on interest rates, and will
ultimately create a soft landing, which should create the launch pad for a
continued expansion.
New Products and Services
Evergreen Funds is constantly striving to develop products and services to meet
the sophisticated demands of our investors. This year we launched two new Sector
Funds: Evergreen Health Care Fund and Evergreen Technology Fund. We are very
excited about the launch of these funds. Please consult with your financial
advisor to see if these funds would be appropriate in your portfolio or visit
evergreen-funds.com for more information.
The Value of Diversification
An environment like this year's offers many reasons for building a diversified
portfolio rather than trying to predict the market's movements. Diversification
provides exposure to many different opportunities while reducing the risk of any
single investment or strategy. We encourage you to talk to your financial
advisor to confirm that your investment portfolio is appropriately diversified
and structured to support your long-term investment objectives.
Thank you for your continued investment in Evergreen Funds.
Sincerely,
/s/ William M. Ennis
William M. Ennis
President and CEO
Evergreen Investment Company, Inc.
1
<PAGE>
EVERGREEN
Reserve Money Market Fund
Fund at a Glance as of September 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 9/30/2000 portfolio assets)
[GRAPH]
U.S. Government Agency Notes -- 44.6%
Corporate Notes/Bonds -- 30.3%
Commercial Paper -- 17.3%
Repurchase Agreements -- 4.8%
VRDNs -- 3.0%
Portfolio
Management
------------------------------------
[PHOTO] [PHOTO]
J. Kellie Allen Bryan K. White,
Tenure: May 1999 CFA
Tenure: May 1999
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
--------------------------------------------------------------------------------
Portfolio Inception Date: 11/19/1997 Class R Class I
Class Inception Date 10/15/1998 11/19/1997
Average Annual Returns*
1 year 5.50% 5.94%
Since Portfolio Inception 5.13% 5.46%
7-day annualized yield 5.82% 6.20%
30-day annualized yield 5.82% 6.20%
12-month income dividends per share $0.05 $0.06
* The yield quotation more closely reflects the current earnings of the fund
than the total return quotation.
The Fund incurs 12b-1 expenses for Class R shares. Class I shares do not pay a
12b-1 fee.
--------------------------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
--------------------------------------------------------------------------------
[GRAPH]
Fund Name class date 7-day yield
--------- ----- ---- -----------
Reserve Money Market Fund A 31-Oct-99 4.67%
Reserve Money Market Fund A 30-Nov-99 4.92%
Reserve Money Market Fund A 31-Dec-99 5.24%
Reserve Money Market Fund A 31-Jan-00 5.08%
Reserve Money Market Fund A 29-Feb-00 5.29%
Reserve Money Market Fund A 31-Mar-00 5.28%
Reserve Money Market Fund A 30-Apr-00 5.39%
Reserve Money Market Fund A 31-May-00 5.57%
Reserve Money Market Fund A 30-Jun-00 5.78%
Reserve Money Market Fund A 31-Jul-00 5.80%
Reserve Money Market Fund A 31-Aug-00 5.81%
Reserve Money Market Fund A 30-Sep-00 5.82%
Reserve Money Market Fund I 10/31/99 5.28%
Reserve Money Market Fund I 11/30/99 5.45%
Reserve Money Market Fund I 12/31/99 5.65%
Reserve Money Market Fund I 01/31/00 5.46%
Reserve Money Market Fund I 02/29/00 5.67%
Reserve Money Market Fund I 03/31/00 5.66%
Reserve Money Market Fund I 04/30/00 5.77%
Reserve Money Market Fund I 05/31/00 5.95%
Reserve Money Market Fund I 06/30/00 6.16%
Reserve Money Market Fund I 07/31/00 6.17%
Reserve Money Market Fund I 08/31/00 6.19%
Reserve Money Market Fund I 09/30/00 6.20%
Total Net Assets: $434,267,242
Average Maturity: 58 days
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investors' shares, when redeemed, may be worth more or
less than their original cost. Performance includes the reinvestment of income
dividends and capital gains.
The yield will fluctuate, and there can be no guarantee that the Fund will
achieve its objective.
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 FDIC 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 investment objective is non-fundamental and may be changed without
the approval of the Fund's shareholders.
All data is as of September 30, 2000 and subject to change.
2
<PAGE>
EVERGREEN
Reserve Tax - Exempt Money Market Fund
Fund at a Glance as of September 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 9/30/2000 portfolio assets)
[GRAPH]
VRDNs -- 93.1%
Revenue & General Obligation Notes/Bonds -- 6.9%
Portfolio Management
-----------------------------------------
[PHOTO]
Steve C. Shachat
Tenure: May 1999
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
--------------------------------------------------------------------------------
Portfolio Inception Date: 10/15/1998 Class R
Class Inception Date 10/15/1998
Average Annual Returns*
1 year 3.37%
Since Portfolio Inception 3.01%
7-day annualized yield 4.21%
30-day annualized yield 3.69%
12-month income dividends per share $0.03
* The yield quotation more closely reflects the current earnings of the fund
than the total return quotation.
The Fund incurs 12b-1 expenses.
--------------------------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
--------------------------------------------------------------------------------
[GRAPH]
Reserve Tax-Exempt Money Market Fund A 31-Oct-99 2.72%
Reserve Tax-Exempt Money Market Fund A 30-Nov-99 3.12%
Reserve Tax-Exempt Money Market Fund A 31-Dec-99 4.12%
Reserve Tax-Exempt Money Market Fund A 31-Jan-00 2.62%
Reserve Tax-Exempt Money Market Fund A 29-Feb-00 3.19%
Reserve Tax-Exempt Money Market Fund A 31-Mar-00 3.11%
Reserve Tax-Exempt Money Market Fund A 30-Apr-00 4.07%
Reserve Tax-Exempt Money Market Fund A 31-May-00 3.65%
Reserve Tax-Exempt Money Market Fund A 30-Jun-00 4.04%
Reserve Tax-Exempt Money Market Fund A 31-Jul-00 3.60%
Reserve Tax-Exempt Money Market Fund A 31-Aug-00 3.58%
Reserve Tax-Exempt Money Market Fund A 30-Sep-00 4.21%
Total Net Assets: $97,035,427
Average Maturity: 13 days
/1/ Past performance is no guarantee of future results. The investment return
and principal value will fluctuate so that an investors' shares, when redeemed,
may be worth more or less than their original cost. Performance includes the
reinvestment of income dividends and capital gains.
The yield will fluctuate, and there can be no guarantee that the Fund will
achieve its objective or any particular tax-exempt yield. Income may be subject
to federal alternative minimum tax.
An investment in the Fund is not insured or guaranteed by the FDIC 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 objective is non-fundamental and may be changed without the approval
of the Fund's shareholders.
All data is as of September 30, 2000 and subject to change.
U.S. government guarantees apply only to the underlying securities of the Fund's
portfolio and not to the Fund's shares.
3
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
Fund at a Glance as of September 30, 2000
--------------------------------------------------------------------------------
PORTFOLIO COMPOSITION
--------------------------------------------------------------------------------
(as a percentage of 9/30/2000 portfolio assets)
[GRAPH]
U.S. Government Agency Notes -- 62.8%
Repurchase Agreements -- 34.3%
Commercial Paper-- 2.9%
Portfolio
Management
----------------------------------------------
[PHOTO] [PHOTO]
J. Kellie Allen Bryan K. White,
Tenure: May 1999 CFA
Tenure: May 1999
--------------------------------------------------------------------------------
PERFORMANCE AND RETURNS/1/
--------------------------------------------------------------------------------
Portfolio Inception Date: 6/27/1997 Class R Class I
Class Inception Date 10/15/1998 6/27/1997
Average Annual Returns*
1 year 5.36% 5.76%
Since Portfolio Inception 5.06% 5.34%
7-day annualized yield 5.77% 6.14%
30-day annualized yield 5.79% 6.16%
12-month income dividends per share $0.05 $0.06
* The yield quotation more closely reflects the current earnings of the fund
than the total return quotation.
The Fund incurs 12b-1 expenses for Class R shares. Class I shares do not pay a
12b-1 fee.
--------------------------------------------------------------------------------
ANNUALIZED 7-DAY YIELD
--------------------------------------------------------------------------------
[GRAPH]
Reserve U.S. Government Money Market Fund A 10/31/99 4.65%
Reserve U.S. Government Money Market Fund A 11/30/99 4.83%
Reserve U.S. Government Money Market Fund A 12/31/99 4.79%
Reserve U.S. Government Money Market Fund A 01/31/00 4.89%
Reserve U.S. Government Money Market Fund A 02/29/00 5.23%
Reserve U.S. Government Money Market Fund A 03/31/00 5.17%
Reserve U.S. Government Money Market Fund A 04/30/00 5.28%
Reserve U.S. Government Money Market Fund A 05/31/00 5.41%
Reserve U.S. Government Money Market Fund A 06/30/00 5.56%
Reserve U.S. Government Money Market Fund A 07/31/00 5.61%
Reserve U.S. Government Money Market Fund A 08/31/00 5.73%
Reserve U.S. Government Money Market Fund A 09/30/00 5.77%
Reserve U.S. Government Money Market Fund I 10/31/99 5.02%
Reserve U.S. Government Money Market Fund I 11/30/99 5.23%
Reserve U.S. Government Money Market Fund I 12/31/99 5.21%
Reserve U.S. Government Money Market Fund I 01/31/00 5.27%
Reserve U.S. Government Money Market Fund I 02/29/00 5.61%
Reserve U.S. Government Money Market Fund I 03/31/00 5.56%
Reserve U.S. Government Money Market Fund I 04/30/00 5.66%
Reserve U.S. Government Money Market Fund I 05/31/00 5.79%
Reserve U.S. Government Money Market Fund I 06/30/00 5.93%
Reserve U.S. Government Money Market Fund I 07/31/00 5.99%
Reserve U.S. Government Money Market Fund I 08/31/00 6.11%
Reserve U.S. Government Money Market Fund I 09/30/00 6.14%
Total Net Assets: $161,410,397
Average Maturity: 22 days
/1/ Past performance is no guarantee of future results. The performance of each
class may vary based on differences in fees and expenses paid by the
shareholders investing in each class. The investment return and principal value
will fluctuate so that an investors' shares, when redeemed, may be worth more or
less than their original cost. Performance includes the reinvestment of income
dividends and capital gains.
The yield will fluctuate, and there can be no guarantee that the Fund will
achieve its objective.
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 FDIC 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 objective is non-fundamental and may be changed without the approval
of the Fund's shareholders.
All data is as of September 30, 2000 and subject to change.
4
<PAGE>
EVERGREEN
Reserve Money Market Fund
Financial Highlights
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended Period Ended
September 30, 2000 September 30, 1999 (a)
<S> <C> <C>
CLASS R
Net asset value, beginning of
period $ 1.00 $ 1.00
-------- --------
Income from investment operations
Net investment income 0.05 0.04
Less distributions to shareholders
from
Net investment income (0.05) (0.04)
-------- --------
Net asset value, end of period $ 1.00 $ 1.00
-------- --------
Total return 5.50% 4.93%
Ratios and supplemental data
Net assets, end of period
(thousands) $409,560 $323,392
Ratios to average net assets
Expenses++ 0.70% 0.83%+
Net investment income 5.51% 4.32%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
--------------------------
2000 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 0.06 0.05 0.05
Less distributions to shareholders from
Net investment income (0.06) (0.05) (0.05)
------- ------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00
------- ------- -------
Total return 5.94% 4.95% 4.74%
Ratios and supplemental data
Net assets, end of period (thousands) $24,707 $37,506 $40,970
Ratios to average net assets
Expenses++ 0.27% 0.32% 0.33%+
Net investment income 5.87% 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 but
includes fee waivers.
+ 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>
Year Ended Period Ended
September 30, 2000 September 30, 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 0.03
Less distributions to shareholders
from
Net investment income (0.03) (0.03)
------- -------
Net asset value, end of period $ 1.00 $ 1.00
------- -------
Total return 3.37% 2.53%
Ratios and supplemental data
Net assets, end of period
(thousands) $97,035 $66,047
Ratios to average net assets
Expenses++ 0.70% 0.74%+
Net investment income 3.35% 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 but
includes fee waivers.
+ 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>
Year Ended Period Ended
September 30, 2000 September 30, 1999 (a)
<S> <C> <C>
CLASS R
Net asset value, beginning of period $ 1.00 $ 1.00
-------- -------
Income from investment operations
Net investment income 0.05 0.04
Less distributions to shareholders
from
Net investment income (0.05) (0.04)
-------- -------
Net asset value, end of period $ 1.00 $ 1.00
-------- -------
Total return 5.36% 4.93%
Ratios and supplemental data
Net assets, end of period
(thousands) $141,257 $99,417
Ratios to average net assets
Expenses++ 0.69% 0.80%+
Net investment income 5.35% 4.23%+
</TABLE>
<TABLE>
<CAPTION>
Year Ended September 30,
------------------------------------
2000 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 0.06 0.05 0.05 0.01
Less distributions to shareholders from
Net investment income (0.06) (0.05) (0.05) (0.01)
------- -------- -------- -------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- -------- -------- -------
Total return 5.76% 4.80% 5.42% 1.39%
Ratios and supplemental data
Net assets, end of period (thousands) $20,153 $109,102 $106,273 $61,805
Ratios to average net assets
Expenses++ 0.27% 0.33% 0.33% 0.33%+
Net investment income 5.47% 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 but
includes fee waivers.
+ Annualized.
See Combined Notes to Financial Statements.
7
<PAGE>
EVERGREEN
Reserve Money Market Fund
Schedule of Investments
September 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COMMERCIAL PAPER - 17.3%
Asset Backed - 17.3%
$15,000,000 Asset Backed Capital Fin., Inc., 6.55%, 10/4/2000.. $ 14,994,542
20,000,000 Concord Minutemen Capital Corp., 6.51%, 10/3/2000.. 19,996,383
20,000,000 Crown Point Capital Co., 6.54%, 10/6/2000.......... 19,985,467
20,000,000 Lexington Parker Capital Corp., 6.51%, 10/6/2000... 19,985,533
------------
Total Commercial Paper (cost $74,961,925).......... 74,961,925
------------
CORPORATE BONDS - 33.2%
Asset Backed - 2.3%
10,000,000 VW Credit, Inc.,
6.795%, 9/21/2001 144A............................ 10,000,000
------------
Banks - 17.2%
15,000,000 Bankamerica Corp., 6.76%, 12/29/2000............... 15,004,086
20,000,000 Branch Banking & Trust Co., 6.62%, 12/27/2000...... 20,001,498
20,000,000 Compass Security, 6.51%, 10/5/2000................. 19,989,150
10,000,000 Lyon Short Term Funding Corp., 6.52%, VRDN......... 10,000,000
10,000,000 U.S. Bank Natl. Assn., 6.72%, 2/8/2001............. 9,997,891
------------
74,992,625
------------
Brokers - 3.7%
15,000,000 Bear Stearns Co., Inc., 7.12%, 8/21/2001........... 15,000,000
1,000,000 Morgan Stanley Dean Witter, MTN, Ser. C,
5.875%, 2/28/2001................................. 995,972
------------
15,995,972
------------
Diversified Financials - 7.2%
Countrywide Home Loan Corp., MTN,
5,000,000 5.62%, 10/16/2000.................................. 4,997,850
15,053,000 6.43%, 10/23/2000.................................. 15,048,540
10,000,000 Donaldson Lufkin & Jenrette, MTN,
6.92%, 11/3/2000.................................. 10,001,040
1,200,000 Hilander Fin. LLC, (LOC: American Bank & Trust)
6.65%, VRDN, ..................................... 1,200,000
------------
31,247,430
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
CORPORATE BONDS - continued
Diversified Telecommunication Services - 2.3%
$10,000,000 AT&T Corp.,
7.27%, 6/14/2001.................................. $ 10,000,000
------------
Real Estate - 0.3%
1,100,000 CCM Properties, LLC, Ser. 96-A, 6.70%, VRDN, (Insd.
by AMBAC)......................................... 1,100,098
------------
Hospital - 0.2%
1,000,000 Catholic Hlth. Initiatives RB, 6.70%, VRDN......... 1,000,000
------------
Total Corporate Bonds (cost $144,336,125).......... 144,336,125
------------
U.S. AGENCY OBLIGATIONS - 44.5%
FHLB:
10,000,000 6.35%, 2/1/2001.................................... 9,997,923
25,000,000 6.573%, 10/4/2000.................................. 25,000,000
16,000,000 6.75%, 4/6/2001.................................... 16,000,000
FHLMC:
50,000,000 6.41%, 10/11/2000.................................. 49,919,875
40,000,000 6.45%, 10/19/2000.................................. 39,878,356
7,525,000 6.45%, 1/4/2001.................................... 7,399,445
15,000,000 FHLMC, MTN,
6.35%, 1/5/2001................................... 14,999,763
30,000,000 SLMA, FRN, Ser. HC,
6.883%, 10/4/2000................................. 30,000,342
------------
Total U.S. Agency Obligations (cost $193,195,704).. 193,195,704
------------
REPURCHASE AGREEMENTS - 4.7%
20,606,334 State Street Bank & Trust Co., Dated 09/29/2000,
6.58%, maturing 10/02/2000, maturity
value $20,617,633, (cost $20,606,334) #1.......... 20,606,334
------------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -(cost $433,100,088)....... 99.7% 433,100,088
Other Assets and Liabilities - net........... 0.3 1,167,154
----- ------------
Net Assets................................... 100.0% $434,267,242
===== ============
</TABLE>
See Combined Notes to Schedules of Investments.
8
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
Schedule of Investments
September 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - 99.7%
Alabama - 1.6%
$1,560,000 Birmingham, AL Med. Clinic Board RB, Med. Advancement
Foundation, (LOC: First Comml. Bank & Columbus Bank
& Trust),
5.79%, VRDN......................................... $ 1,560,000
-----------
Arizona - 1.2%
1,215,000 Maricopa Cnty., AZ IDA CP, Citizens Utilities Proj.,
4.55%, 10/26/2000................................... 1,215,000
-----------
District of Columbia - 7.4%
District of Columbia GO:
300,000 Ser. A-3, (LOC: Societe Generale),
5.60%, VRDN.......................................... 300,000
1,500,000 Ser. A-4, (LOC: Societe Generale),
5.60%, VRDN.......................................... 1,500,000
1,600,000 Ser. A-5, (LOC: Bank of Nova Scotia),
5.60%, VRDN.......................................... 1,600,000
3,800,000 Ser. A-6, (LOC: Bank of America),
5.60%, VRDN.......................................... 3,800,000
-----------
7,200,000
-----------
Florida - 21.1%
2,200,000 Brevard Cnty., FL HFA MHRB, Shore View Apts. Proj.,
(LOC: Harris Trust & Savings Bank),
5.55%, VRDN......................................... 2,200,000
1,000,000 Escambia Cnty., FL HFA SFHRB,
PFOTER 1228, (SPA: Merrill Lynch & Co. & Insd. by
FNMA, GNMA),
5.67%, VRDN......................................... 1,000,000
3,800,000 Florida Board Edl. GO, Ser. 1998-9, (SPA: ABN Amro
Bank & Insd. by FSA),
5.67%, VRDN......................................... 3,800,000
5,275,000 Florida HFA MHRB, Banyon Bay Apts., (Insd. by FNMA),
5.50%, VRDN......................................... 5,275,000
990,000 Hillsborough Cnty., FL Sch. Board COP, Ser. 2000 E,
(SPA: Bank of America & Insd. by MBIA),
5.67%, VRDN......................................... 990,000
Orange Cnty., FL Hlth. Facs. Auth. RB:
1,500,000 (Liq. Merrill Lynch & Co.),
5.62%, VRDN.......................................... 1,500,000
2,645,000 Presbyterian Retirement Proj.,
5.75%, VRDN.......................................... 2,645,000
1,100,000 Saint Lucie Cnty., FL PCRB, Florida Pwr. & Light Co.
Proj.,
5.65%, VRDN......................................... 1,100,000
2,000,000 Tampa Bay, FL Wtr. Util. Sys. RB, (SPA: Merrill Lynch
& Co. & Insd. by FGIC),
5.62%, VRDN......................................... 2,000,000
-----------
20,510,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Illinois - 12.3%
$1,170,000 Aurora Kane & Du Page Cntys., IL IDRB, A&B Holdings
LLC Proj., Ser. 97-A, (LOC: Lasalle National Bank),
5.85%, VRDN......................................... $ 1,170,000
4,735,000 Gurnee, IL IDRB, Kenall Manufacturing Co. Proj.,
(LOC: Harris Trust & Savings Bank),
5.55%, VRDN......................................... 4,735,000
2,500,000 Illinois Dev. Fin. Auth. IDRB, United Methodist Homes
Proj., Ser. A, (LOC: Harris Trust & Savings Bank),
5.55%, VRDN......................................... 2,500,000
1,500,000 Illinois Hlth. Facs. Auth. RB, Central Dupage Hlth.,
Ser. B, (SPA: American National Bank & Trust),
5.60%, VRDN......................................... 1,500,000
2,000,000 Illinois Toll Hwy. Auth. RB, Refunding Highway
Revenue Tolls, Ser. B, (SPA: Landesbank Hessen &
Insd. by FSA),
5.45%, VRDN......................................... 2,000,000
-----------
11,905,000
-----------
Indiana - 3.5%
1,300,000 Indiana Dev. Fin. Auth. EDRB, Edgewater Sys., Inc.
Proj., (LOC: Bank One Indiana),
5.60%, VRDN......................................... 1,300,000
2,085,000 Indianapolis, IN MHRB, Refunding Hsg. GNMA Canal
Square Proj., Ser. A, (LOC: National City Bank &
Insd. by GNMA),
5.80%, VRDN......................................... 2,085,000
-----------
3,385,000
-----------
Kansas - 0.3%
300,000 Butler Cnty., KS Solid Wst. Disp. & Congeneration RB,
Texaco Refining Proj., Ser. B,
5.75%, VRDN......................................... 300,000
-----------
Kentucky - 2.5%
2,400,000 Ohio Cnty., KY PCRB, Big Rivers Elec. Corp. Proj.,
(SPA: Credit Suisse First Boston & Insd. by AMBAC),
5.60%, VRDN......................................... 2,400,000
-----------
Minnesota - 2.4%
2,300,000 Minnesota HFA RB, PFOTER 114,
4.44%, 2/22/2001.................................... 2,300,000
-----------
Missouri - 1.1%
1,050,000 Kansas City, MO Land Clearance Dev. Auth. RB,
Landmark Bank Proj., (LOC: Mercantile Bank),
5.59%, VRDN......................................... 1,050,000
-----------
</TABLE>
9
<PAGE>
EVERGREEN
Reserve Tax-Exempt Money Market Fund
Schedule of Investments (continued)
September 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
New York - 3.7%
$3,200,000 New York City, NY Transitional Fin. Auth. RB, Ser.
98-27, (Liq. Bank of America),
4.40%, 1/25/2001................................... $ 3,200,000
382,500 NY State Dormitory Auth. RB, Ser. 340, (Liq. Morgan
Stanley Dean Witter & Insd. by MBIA),
5.72%, VRDN........................................ 382,500
-----------
3,582,500
-----------
Pennsylvania - 31.8%
4,000,000 Allegheny Cnty., PA Hosp. Dev. Auth. RB, Saint
Margaret Mem. Hosp. Proj., (LOC: Mellon Bank),
5.58%, VRDN........................................ 4,000,000
2,700,000 Allegheny Cnty., PA IDA RB, Allegheny Ludlum Corp.
Proj.,
5.60%, VRDN........................................ 2,700,000
Emmaus, PA Gen. Auth. RB:
6,300,000 Derry School Proj., Ser. G-15, (LOC: Bayerische
Hypo),
5.65%, VRDN......................................... 6,300,000
3,300,000 Lower Paxton Township, Ser. B-20, (LOC: KBC Bank),
5.65%, VRDN......................................... 3,300,000
3,400,000 Methacton School Proj., Ser. B-21, (LOC: KBC Bank),
5.65%, VRDN......................................... 3,400,000
2,500,000 Mifflin School Proj., Ser. F-15, (LOC: KBC Bank),
5.65%, VRDN......................................... 2,500,000
170,000 Pennsylvania HFA, PFOTER 119B,
5.58%, VRDN........................................ 170,000
4,800,000 Philadelphia, PA Arpt. RB, Municipal Securities
Trust, Ser. 118,
5.61%, VRDN........................................ 4,800,000
3,700,000 Washington Cnty., PA Auth. Lease RB, Eye & Ear Hosp.
of Pittsburgh, Ser. B1, (LOC: Allied Irish Bank),
5.58%, VRDN........................................ 3,700,000
-----------
30,870,000
-----------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
MUNICIPAL OBLIGATIONS - continued
Texas - 1.1%
$1,100,000 Brazos River, TX Harbor Navigation Dist. Harbor RB,
Dow Chemical Co. Proj., Ser. 1993,
5.75%, VRDN........................................ $ 1,100,000
-----------
West Virginia - 5.6%
5,400,000 West Virginia State Hosp. Fin. Auth. RB, VHA Mid-
Atlantic, Ser. G, (SPA: Mellon Bank & Ins. by
AMBAC),
5.70%, VRDN........................................ 5,400,000
-----------
Wyoming - 2.6%
2,500,000 Lincoln Cnty., WY PCRB, Pacific Corp., Ser. 1991,
5.60%, VRDN........................................ 2,500,000
-----------
Other - 1.5%
1,485,000 Koch Fixed Rate Trust,
5.72%, VRDN........................................ 1,485,000
-----------
</TABLE>
<TABLE>
<C> <S> <C> <C>
Total Investments -(cost $96,762,500)......... 99.7% 96,762,500
Other Assets and Liabilities - net............ 0.3 272,927
----- -----------
Net Assets.................................... 100.0% $97,035,427
===== ===========
</TABLE>
See Combined Notes to Schedules of Investments.
10
<PAGE>
EVERGREEN
Reserve U.S. Government Money Market Fund
Schedule of Investments
September 30, 2000
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
COMMERCIAL PAPER - 3.1%
Banks - 3.1%
$ 5,000,000 Inter-American Dev. Bank, 5.125%, 2/22/2001......... $ 4,962,643
------------
Total Commercial Paper (cost $4,962,643)............ 4,962,643
------------
U.S. AGENCY OBLIGATIONS - 66.5%
FHLB:
15,000,000 6.58%, 10/4/2000.................................... 15,000,000
5,000,000 6.75%, 4/6/2001..................................... 5,000,000
5,000,000 FHLMC,
6.35%, 1/5/2001.................................... 4,999,921
FNMA:
30,000,000 6.43%, 10/26/2000................................... 29,871,400
FRN
25,000,000 6.53%, 10/2/2000.................................... 25,000,000
MTN
2,500,000 6.57%, 2/22/2001.................................... 2,499,472
10,000,000 SLMA, MTN
6.69%, 10/3/2000................................... 10,000,000
15,000,000 SLMA, Ser. HC, FRN 6.88%, 10/3/2000................. 15,000,171
------------
Total U.S. Agency Obligations (cost $107,370,964)... 107,370,964
------------
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount Value
<C> <S> <C>
REPURCHASE AGREEMENTS - 36.3%
$58,572,834 State Street Bank & Trust Co., Dated 09/29/2000,
6.58%, maturing 10/02/2000, maturity
value $58,604,951, (cost $58,572,834) #2......... $ 58,572,834
------------
</TABLE>
<TABLE>
<S> <C> <C>
Total Investments -(cost $170,906,441)...... 105.9% 170,906,441
Other Assets and Liabilities - net.......... (5.9) (9,496,044)
----- ------------
Net Assets.................................. 100.0% $161,410,397
===== ============
</TABLE>
See Combined Notes to Schedules of Investments.
11
<PAGE>
Combined Notes to Schedules of Investments
September 30, 2000
144A Securities may be sold to "qualified institutional buyers" under Rule 144A
of the Securities Act of 1933, as amended. These securities have been de-
termined to be liquid under guidelines established by the Board of Trust-
ees.
#1 Collaterized by $645,000 GNMA, 7.50%, 07/15/2030, value including accrued
interest is $619,532; $19,850,000 U.S. Treasury Bond, 6.25%, 08/15/2023,
value including accrued interest is $20,415,873.
#2 Collateralized by $62,235,000 GNMA, 4.50%, 07/20/2029; value including ac-
crued interest is $59,777,717.
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 September 30, 2000.
Summary of Abbreviations:
AMBAC American Municipal Bond Assurance Corp.
CDA Community Development Authority
COP Certificates of Participation
CP Commercial Paper
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.
GNMA Government National Mortgage Association
GO General Obligation
HFA Housing Finance Authority
IDA Industrial Development Authority
IDRB Industrial Development Revenue Bond
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
SFHRB Single Family Housing Revenue Bond
SLMA Student Loan Marketing Association
SPA Security Purchase Agreement
VHA Veterans Housing Authority
VRDN Variable Rate Demand Note
12
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Assets and Liabilities
September 30, 2000
<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............ $412,493,754 $96,762,500 $112,333,607
Investments in repurchase
agreements.......................... 20,606,334 0 58,572,834
--------------------------------------------------------------------------------
Investments at amortized cost........ 433,100,088 96,762,500 170,906,441
Interest receivable.................. 3,613,204 568,167 1,209,958
Deferred organization expenses....... 4,090 0 7,165
Prepaid expenses and other assets.... 12,589 40,161 9,461
--------------------------------------------------------------------------------
Total assets......................... 436,729,971 97,370,828 172,133,025
--------------------------------------------------------------------------------
Liabilities
Distributions payable................ 2,115,786 316,686 679,206
Payable for securities purchased..... 0 0 10,000,000
Advisory fee payable................. 5,884 1,685 2,314
Distribution Plan expenses payable... 12,852 2,641 4,412
Due to other related parties......... 714 160 266
Accrued expenses and other
liabilities......................... 327,493 14,229 36,430
--------------------------------------------------------------------------------
Total liabilities.................... 2,462,729 335,401 10,722,628
--------------------------------------------------------------------------------
Net assets............................ $434,267,242 $97,035,427 $161,410,397
--------------------------------------------------------------------------------
Net assets represented by
Paid-in capital...................... $433,746,700 $97,035,427 $161,279,721
Undistributed net investment income.. 520,542 0 130,676
--------------------------------------------------------------------------------
Total net assets...................... $434,267,242 $97,035,427 $161,410,397
--------------------------------------------------------------------------------
Net assets consists of
Class R.............................. $409,559,980 $97,035,427 $141,257,543
Class I.............................. 24,707,262 0 20,152,854
--------------------------------------------------------------------------------
$434,267,242 $97,035,427 $161,410,397
--------------------------------------------------------------------------------
Shares outstanding
Class R.............................. 409,089,718 97,035,427 141,165,248
Class I.............................. 24,669,102 0 20,127,798
--------------------------------------------------------------------------------
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.
13
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Operations
Year Ended September 30, 2000
<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............................. $25,802,996 $3,484,926 $8,931,798
--------------------------------------------------------------------------------
Expenses
Advisory fee......................... 692,416 183,105 268,143
Distribution Plan expenses........... 1,462,503 283,629 447,043
Administrative services fees......... 83,142 17,190 29,913
Transfer agent fee................... 230,538 28,661 24,024
Trustees' fees and expenses.......... 6,313 1,237 2,787
Printing and postage expenses........ 60,565 14,991 16,941
Custodian fee........................ 116,413 21,999 35,151
Registration and filing fees......... 95,212 34,069 45,395
Professional fees.................... 25,679 16,742 19,084
Organization expenses................ 6,068 0 4,110
Interest expense..................... 3,059 0 0
Other................................ 6,717 1,911 6,140
--------------------------------------------------------------------------------
Total expenses....................... 2,788,625 603,534 898,731
Less: Expense reductions............. (18,619) (7,153) (5,708)
--------------------------------------------------------------------------------
Net expenses......................... 2,770,006 596,381 893,023
--------------------------------------------------------------------------------
Net investment income................ 23,032,990 2,888,545 8,038,775
Net realized gains or losses on
securities.......................... 5,225 (1,203) 0
--------------------------------------------------------------------------------
Net increase in net assets resulting
from operations..................... $23,038,215 $2,887,342 $8,038,775
--------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
14
<PAGE>
EVERGREEN
Reserve Money Market Funds
Statements of Changes in Net Assets
Year Ended September 30, 2000
<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............ $ 23,032,990 $ 2,888,545 $ 8,038,775
Net realized gains or losses on
securities...................... 5,225 (1,203) 0
---------------------------------------------------------------------------------
Net increase in net assets
resulting from operations....... 23,038,215 2,887,342 8,038,775
---------------------------------------------------------------------------------
Distributions to shareholders from
Net investment income
Class R.......................... (20,757,022) (2,888,545) (6,198,222)
Class I.......................... (1,772,760) 0 (1,723,202)
---------------------------------------------------------------------------------
Total distributions to
shareholders.................... (22,529,782) (2,888,545) (7,921,424)
---------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold........ 578,074,073 143,915,287 186,838,914
Net asset value of shares issued
in reinvestment of
distributions................... 1,786,801 171 1,840,270
Payment for shares redeemed...... (507,000,259) (112,925,851) (235,905,940)
---------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from capital
share transactions.............. 72,860,615 30,989,607 (47,226,756)
---------------------------------------------------------------------------------
Total increase (decrease) in net
assets......................... 73,369,048 30,988,404 (47,109,405)
Net assets
Beginning of period.............. 360,898,194 66,047,023 208,519,802
---------------------------------------------------------------------------------
End of period.................... $ 434,267,242 $ 97,035,427 $ 161,410,397
---------------------------------------------------------------------------------
Undistributed net investment
income........................... $ 520,542 $ 0 $ 130,676
---------------------------------------------------------------------------------
</TABLE>
See Combined Notes to Financial Statements.
15
<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
Net asset value of shares issued
in reinvestment of
distributions.................. 6,830,633 629,692 7,406,128
Payment for shares redeemed..... (163,032,119) (53,024,680) (238,249,650)
-------------------------------------------------------------------------------
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.
16
<PAGE>
Combined Notes to Financial Statements
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. Mentor Funds is an open-end management investment
company organized on January 20, 1992 and registered under the Investment Com-
pany 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 until maturity.
B. Repurchase Agreements
Securities pledged as collateral for repurchase agreements are held in a segre-
gated 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 collateral 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 ad-
visor 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 intend to comply with the provisions of the Internal Revenue Code ap-
plicable to regulated investment companies and to distribute all of their net
investment company taxable income, net tax-exempt income and net capital gains,
if any, to their shareholders. Accordingly, no provision for federal income or
excise tax is required.
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. 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. Distributions to shareholders are recorded at the close of business on
the ex-dividend date.
17
<PAGE>
Combined Notes to Financial Statements (continued)
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. Reclassifications have been made to the Funds' components
of net assets to reflect income and gains available for distribution under in-
come tax regulations.
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. Currently class specific expenses are limited to
expenses incurred under the Distribution Plans for 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.
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 with amounts determined by applying percentage rates
starting at 0.22% and declining to 0.15% per annum as net assets increase, to
the average daily net assets of the Funds.
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, Reserve U.S. Government Money Market Fund and Re-
serve Tax-Exempt Money Market Fund Class R shares incur distribution fees all
of which are 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.
18
<PAGE>
Combined Notes to Financial Statements (continued)
Prior to October 18, 1999, Mentor Distributors, LLC ("Mentor") served as prin-
cipal underwriter to the Funds.
During the year ended September 30, 2000, amounts paid or accrued pursuant to
each Fund's Class R Distribution Plan were as follows:
<TABLE>
<CAPTION>
EDI Mentor
<S> <C> <C>
Reserve Money Market Fund.................... $1,401,784 $60,719
Reserve Tax-Exempt Money Market Fund......... 273,407 10,222
Reserve U.S. Government Money Market Fund.... 429,203 17,840
</TABLE>
5. CAPITAL SHARE TRANSACTIONS
The Funds have an unlimited number of shares of beneficial interest and $1.00
par value authorized. Shares of beneficial interest of the Funds are currently
divided into Class R and/or Class I shares. During the year ended September 30,
2000, transactions in shares (valued at $1.00 per share) of the Funds were as
follows:
Reserve Money Market Fund
<TABLE>
<CAPTION>
Year Ended Period Ended
September 30, 2000 September 30, 1999 (a)
------------------------------------------------------------------------------
<S> <C> <C>
Class R
Shares sold......................... 573,222,548 426,462,250
Shares issued in reinvestment of
distributions...................... 556 4,850,538
Shares redeemed..................... (487,525,811) (107,920,363)
------------------------------------------------------------------------------
Net increase........................ 85,697,293 323,392,425
------------------------------------------------------------------------------
<CAPTION>
Year Ended Year Ended
September 30, 2000 September 30, 1999
------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold......................... 4,851,525 49,667,152
Shares issued in reinvestment of
distributions...................... 1,786,245 1,980,095
Shares redeemed..................... (19,474,448) (55,111,756)
------------------------------------------------------------------------------
Net decrease........................ (12,836,678) (3,464,509)
------------------------------------------------------------------------------
Reserve Tax-Exempt Money Market Fund
<CAPTION>
Year Ended Period Ended
September 30, 2000 September 30, 1999 (a)
------------------------------------------------------------------------------
<S> <C> <C>
Class R
Shares sold......................... 143,915,287 118,440,808
Shares issued in reinvestment of
distributions...................... 171 629,692
Shares redeemed..................... (112,925,851) (53,024,680)
------------------------------------------------------------------------------
Net increase........................ 30,989,607 66,045,820
------------------------------------------------------------------------------
Reserve U.S. Government Money Market Fund
<CAPTION>
Year Ended Period Ended
September 30, 2000 September 30, 1999 (a)
------------------------------------------------------------------------------
<S> <C> <C>
Class R
Shares sold......................... 171,333,633 162,628,419
Shares issued in reinvestment of
distributions...................... 0 1,720,088
Shares redeemed..................... (129,585,763) (64,931,129)
------------------------------------------------------------------------------
Net increase........................ 41,747,870 99,417,378
------------------------------------------------------------------------------
<CAPTION>
Year Ended Year Ended
September 30, 2000 September 30, 1999
------------------------------------------------------------------------------
<S> <C> <C>
Class I
Shares sold......................... 15,505,281 170,461,867
Shares issued in reinvestment of
distributions...................... 1,840,270 5,686,040
Shares redeemed..................... (106,320,177) (173,318,521)
------------------------------------------------------------------------------
Net increase (decrease)............. (88,974,626) 2,829,386
------------------------------------------------------------------------------
</TABLE>
(a) For the period from October 15, 1998 (commencement of class operations) to
September 30, 1999.
19
<PAGE>
Combined Notes to Financial Statements (continued)
6. SECURITIES TRANSACTIONS
On September 30, 2000 the cost of investments for federal income tax purposes
of each Fund was the same as for financial reporting purposes.
7. EXPENSE REDUCTIONS
Through expense offset arrangements with ESC and their custodian, a portion of
the fund expenses have been reduced. The amount of expense reductions received
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............ $18,619 0.00%
Reserve Tax-Exempt Money Market
Fund................................ 7,153 0.01%
Reserve U.S. Government Money Market
Fund................................ 5,708 0.00%
</TABLE>
8. 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.
9. FINANCING AGREEMENTS
On July 27, 1999, certain Evergreen Funds and a group of banks (the "Lenders")
entered into a credit agreement. Under this agreement, the Lenders provided an
unsecured revolving credit commitment in the aggregate amount of $1.050 bil-
lion. On August 6, 1999 the Funds became party to this agreement. The credit
facility was allocated, under the terms of the financing agreement, among the
Lenders. The credit facility was accessed by the Funds for temporary or emer-
gency 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 bore interest 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 commit-
ment fee of 0.10% per annum was incurred on the average daily unused portion of
the revolving credit commitment. The commitment fee was allocated to all funds.
For its assistance in arranging this financing agreement, First Union Capital
Markets Corp. was paid a one-time arrangement fee of $250,000. State Street
Bank and Trust Co. ("State Street") served as paying agent for the funds and as
paying agent was entitled to a fee of $20,000 per annum which was allocated to
all the funds.
On July 25, 2000, this agreement was renewed, amended and restated among cer-
tain Evergreen Funds and the Lenders. Under this renewed agreement, the Lenders
provide an unsecured revolving credit commitment in the aggregate amount of
$755 million. The credit facility is allocated, under the terms of the financ-
ing agreement, among the Lenders. The credit facility is accessed by the Funds
to temporarily finance the purchase or sale of securities for prompt delivery,
including funding redemption of their shares, as permitted by each Fund's bor-
rowing restrictions. Borrowings under this facility bear interest at 0.50% per
annum above the Federal Funds rate. A commitment fee of 0.10% per annum contin-
ues to be incurred on the average daily unused portion of the revolving credit
commitment and is allocated to all funds. For its assistance in renewing this
financing agreement, First Union Capital Markets Corp. was paid a one-time ar-
rangement fee of $150,000. State Street continues as paying agent for the funds
and receives a fee of $20,000 per annum which is allocated to all the funds.
During the year ended September 30, 2000, the Reserve Money Market Fund had av-
erage borrowings outstanding of $42,984 at a rate of 7.10% and paid interest of
$3,059.
20
<PAGE>
Independent Auditors' Report
Board of Trustees and Shareholders
Mentor Funds
We have audited the accompanying statements of assets and liabilities, in-
cluding the schedules of investments of the Evergreen Reserve Money Market
Fund, Evergreen Reserve Tax-Exempt Money Market Fund, and Evergreen Reserve
U.S. Government Money Market Fund, portfolios of Mentor Funds, as of September
30, 2000, and the related statements of operations for the year then ended,
statements of changes in net assets for each of the years or periods in the
two-year period then ended, and the financial highlights for each of the years
or periods in the four-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our re-
sponsibility is to express an opinion on these financial statements and finan-
cial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation
of securities owned as of September 30, 2000 by correspondence with the custo-
dian and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights, referred
to above, present fairly, in all material respects, the financial position of
the portfolios of Mentor Funds, referred to above, as of September 30, 2000,
the results of their operations, changes in their net assets and financial
highlights for each of the years or periods described above in conformity with
accounting principles generally accepted in the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
November 3, 2000
21
<PAGE>
Additional Information (unaudited)
FEDERAL TAX STATUS OF DIVIDENDS
For the fiscal year ended September 30, 2000, the percentage representing the
portion of dividends exempt from federal income tax, other than alternative
minimum tax for Reserve Tax-Exempt Money Market Fund is 100%.
22
<PAGE>
Evergreen Funds
Money Market Funds
Florida Municipal Money Market Fund
Money Market Fund
Municipal Money Market Fund
New Jersey Municipal Money Market Fund
Pennsylvania Municipal Money Market Fund
Treasury Money Market Fund
State Municipal Bond Funds
Connecticut Municipal Bond Fund
Florida High Income Municipal Bond Fund
Florida Municipal Bond Fund
Georgia Municipal Bond Fund
Maryland Municipal Bond Fund
New Jersey Municipal Bond Fund
North Carolina Municipal Bond Fund
Pennsylvania Municipal Bond Fund
South Carolina Municipal Bond Fund
Virginia Municipal Bond Fund
National Municipal Bond Funds
High Grade Municipal Bond Fund
High Income Municipal Bond Fund
Municipal Bond Fund
Short Intermediate Municipal Fund
Short and Intermediate Bond Funds
Intermediate Term Bond Fund
Short-Duration Income Fund
Intermediate and Long Term Bond Funds
Diversified Bond Fund
High Yield Bond Fund
Quality Income Fund
Strategic Income Fund
U.S. Government Fund
Balanced Funds
Balanced Fund
Foundation Fund
Tax Strategic Foundation Fund
Growth & Income Funds
Blue Chip Fund
Equity Income Fund
Equity Index Fund
Growth and Income Fund
Small Cap Value Fund
Value Fund
Domestic Growth Funds
Aggressive Growth Fund
Capital Growth Fund
Evergreen Fund
Growth Fund
Large Company Growth Fund
Masters Fund
Omega Fund
Small Company Growth Fund
Special Equity Fund
Stock Selector Fund
Tax Strategic Equity Fund
Sector Funds
Health Care Fund
Technology Fund
Utility Fund
Global & International Funds
Emerging Markets Growth Fund
Global Leaders Fund
Global Opportunities Fund
International Growth Fund
Latin America Fund
Perpetual Global Fund
Perpetual International Fund
Precious Metals Fund
Express Line
800.346.3858
Investor Services
800.343.2898
www.evergreen-funds.com
47720 551385 11/2000
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