<PAGE>
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SPECIAL ISSUE FINANCIAL REPORT
Virginia SNAPsm Annual Report
Summer 2000
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SNAPsm In Review
We are happy to provide the financial statements for the SNAPsm Fund--a series
of the Evergreen Select Money Market Trust.
ECONOMIC OUTLOOK
The Federal Reserve Open Market Committee ("FOMC") has raised the Fed Funds rate
three times since the beginning of the calendar year (a total of 100 basis
points) going from 5.50% in January to 6.50% at the end of June. The 3-month
Treasury bill went from 4.78% at the end of June 1999 to 5.85% on June 30, 2000.
The last interest rate increase, from 6.00% to 6.50%, seemed to be the one that
was needed to take some of the steam out of the economy. The last several months
of data seemed to have confirmed this as inflation continues to remain under
control. Significant signs of a slowdown became apparent in March which
portrayed an economy making a gradual transition from rapid growth toward a more
sustainable path with lessened demandled inflation pressure. Durable goods
orders were down substantially, consumer spending downshifted in March and the
monthly PPI (producer price index) and CPI (consumer price index) data continue
to show little signs of inflation.
On the employment front, Non-Farm Payrolls came in lower than expected in April
adding only 231,000 jobs and the unemployment rate rose from 3.9% to 4.1%.
Non-Farm Payrolls for the month of May, reported in June, were very weak
compared to prior months. The economy added 171,000 jobs for the month of May.
However, when census workers are excluded the economy actually lost 185,000
workers. The unemployment rate went from 4.1% to 4.0% and average hourly
earnings were up slightly.
Returns As Of 6/30/2000**
Portfolio Inception Date: July 24, 1995
SNAPsm Fund IBC's First Tier
Institutional
Average
Average Annual Returns
One year return 5.86% 5.54%*
Since Portfolio Inception 5.60% 5.65%
7-day net annualized yield 6.51% 6.21%
30-day net annualized yield 6.47% 6.15%
Weaker employment data in May was the primary reason the Fed did not change
interest rates at the June FOMC meeting. The verdict is still out whether
Greenspan will raise rates in August although the more economic data which
continues to show signs of a slowdown, the less likely that is to happen. The
consensus in the markets seems to be that the Fed is finished raising rates
through the end of this year.+ Many feel that the economy is beginning to slow,
but remain cautious.
GASB STATEMENT NO. 34- BASIC FINANCIAL STATEMENTS AND MANAGEMENT'S DISCUSSION
AND ANALYSIS FOR STATE AND LOCAL GOVERNMENTS
In June 1999, the Governmental Accounting and Standards Board released a
statement redefining the framework of the financial reporting model for state
and local governments. Among the changes enumerated in the statement is the
conversion from
Continued on page 2
* IBC First Tier Institutional Average return for the 12-month period is
provided by IBC Financial Data, Inc.
** Past performance is not indicative of future performance. Your investment
return and principal value will fluctuate so when shares are redeemed, they
may be worth more or less than the original cost. Mutual funds are not
obligations of or guaranteed by any bank and are not federally insured. An
investment in the Fund is neither insured nor guaranteed by the U.S.
government and there can be no assurance that the Fund will be able to
maintain a stable net asset value of$1.00 per share.
While the portfolio manager will endeavor to manage the portfolio in
accordance with the investment process, there are no guarantees that they
will be successful.
+ As of this writing, the FOMC policy-makers held rates steady at their
August 22nd meeting.
<PAGE>
Continued from front page
modified accrual accounting (i.e., expenditures) to full accrual accounting
(i.e., expenses). This change will have a direct effect on debt management
issues, including the following:
. Removing debt service principal outlays from the operating statement
. Removing the receipt of the proceeds of long-term debt from the operating
statement
. Reporting amortizations (e.g., issuance discounts and premiums, issuance
costs)
. Reporting interest on debt when incurred rather than "when due"
SNAPsm will be working with state and local governments to assess their needs
for statement reporting in order to comply with the new GASB framework.
The required implementation date will vary according to the size of the
government. Size will be based upon the total annual revenues of the primary
government's governmental and enterprise funds in the first fiscal year ending
after June 15, 1999. The implementation schedule is as follows:
. Governments with total revenues of $100 million or more will start with the
fiscal year ended June 30, 2002
. Governments with total revenues of $10 million or more, but less than $100
million, will start with the fiscal year ended June 30, 2003
. Governments with total revenues of less than $10 million will start with the
fiscal year ended June 30, 2004
For complete information on GASB No. 34, please visit the Government Finance
Officers Association ("GFOA") homepage at www.gfoa.org.
CUSTODY TRANSITION
On May 14, 2000, custody responsibilities of the SNAP Program transferred to
State Street Bank and Trust Company, N.A., based in Boston, Massachusetts. State
Street replaced Wachovia Bank, N.A., who has held the contract since the
inception of the program. Wachovia retains its responsibilities as Depository
for the SNAP Program.
WEBSITE UPDATE
The SNAP Program has contracted with Metrosoft to enhance our website to include
participant interaction, such as online account balances and statement review.
We are beginning the testing phase of the process and hope to roll out the
production phase in mid-October 2000.
SNAP SPOTLIGHT
Vartina B. Keith, Program Coordinator
Ms. Keith's primary responsibility is to maintain the highest standards of daily
client service to SNAP program participants. This includes responding to client
inquiries, depositing bond proceeds, handling depository reconciliations, and
posting participant transactions. She also works closely with the SNAP Arbitrage
Analyst in the production and verification of arbitrage compliance reports.
Prior to joining Mentor Advisors, Ms. Keith worked as an Assistant Branch
Manager for consolidated Mortgage Corporation. BEfore that she was employed as a
Senior Credit Analyst for Capital One Financial Corporation and also has
previous experience as a Courthouse Researcher. She is a 1993 graduate of J.
Sargeant Reynolds Community College and is currently attending Virginia
Commonwealth University, where she studies Business Administration.
<TABLE>
<CAPTION>
=====================================================================================================================
Thank You to the January through June 2000 SNAPsm Participants!
<S> <C> <C>
Botetourt County IDA City of Winchester Virginia College Building Authority
Chesterfield County County of Wise 21st Century Program
City of Hampton Covington-Allegheny IDA Virginia Public School Authority
City of Newport News Mathews County Virginia Resource Authority Pooled
City of South Boston Middlesex County IDA Bond Program
City of Suffolk Powahatan County Virginia Small Business Finance Authority
City of Tappahannock Town of Purcellville
City of Virginia Beach Virginia College Building Authority
=====================================================================================================================
</TABLE>
2
<PAGE>
SNAPsm Fund
Schedule of Investments
June 30, 2000
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Principal
Amount Value
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Certificates of Deposit - 3.2%
Diversified Financials - 3.2%
Branch Banking & Trust Co.,
7.06%, 9/5/2000 (cost $40,000,000) $ 40,000,000 $ 40,000,000
================================================================================
Commercial Paper - 33.1%
Financials - 33.1%
Diversified Financials - 33.1%
Crown Point Capital Co.:
6.17%, 7/5/2000 35,000,000 34,988,003
6.59%, 7/20/2000 35,000,000 34,891,082
Delaware Funding Corp.,
6.59%, 7/24/2000 50,000,000 49,807,792
Dorada Fin. Co.,
6.79%, 9/15/2000 50,000,000 50,000,000
Greenwich Funding Corp.,
6.55%, 7/13/2000 45,000,000 44,918,125
Halogen Capital Co.,
6.58%, 7/14/2000 55,000,000 54,889,420
Lyon Short Term Funding Corp.,
6.60%, 7/19/2000 50,647,000 50,498,435
Thames Asset Global Securitization, Inc.,
6.67%, 8/9/2000 24,939,000 24,768,036
Thunder Bay Funding, Inc.,
6.55%, 7/10/2000 32,642,000 32,600,427
Trident Capital Fin., Inc.,
6.56%, 8/8/2000 40,000,000 39,737,600
--------------------------------------------------------------------------------
Total Commercial Paper (cost $417,098,920) 417,098,920
================================================================================
Corporate Bonds - 21.6%
Financials - 20.6%
Banks - 6.1%
First Chicago Corp.,
9.88%, 8/15/2000 9,400,000 9,440,336
Inter-American Dev. Bank,
5.13%, 2/22/2001 38,000,000 37,535,408
U.S. Bank Natl. Assn., Minneapolis,
6.72%, 2/8/2001 30,000,000 29,989,210
--------------------------------------------------------------------------------
76,964,954
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3
<PAGE>
SNAPsm Fund
Schedule of Investments (continued)
June 30, 2000
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Principal
Amount Value
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Corporate Bonds (continued)
Diversified Financials - 14.5%
CIT Group, Inc.,
5.00%, 10/6/2000 $ 21,700,000 $ 21,637,625
General Electric Capital Corp.,
6.73%, 8/21/2000 50,000,000 49,996,415
Goldman Sachs Group, LP,
6.94%, 7/13/2001 20,000,000 20,000,000
John Deere Capital Corp.,
6.64%, 8/7/2000 20,000,000 20,000,411
Lexington Parker Capital Corp.,
6.19%, 7/11/2000 30,805,000 30,762,626
Toyota Motor Credit Corp.,
6.84%, 9/1/2000 40,000,000 39,998,689
--------------------------------------------------------------------------------
182,395,766
--------------------------------------------------------------------------------
Telecommunication Services - 1.0%
Diversified Telecommunication Services - 1.0%
AT&T Corp.,
7.27%, 6/14/2001 13,400,000 13,400,000
--------------------------------------------------------------------------------
Total Corporate Bonds (cost $272,760,720) 272,760,720
================================================================================
Municipal Obligations - 5.8%
Hospital - 2.6%
Catholic Health Initiatives,
6.70%, 7/5/2000 32,800,000 32,800,000
--------------------------------------------------------------------------------
Housing - 3.2%
Virginia State Hsg. Dev. Auth.,
6.60%, 7/5/2000 40,000,000 40,000,000
--------------------------------------------------------------------------------
Total Municipal Obligations (cost $72,800,000) 72,800,000
================================================================================
4
<PAGE>
SNAPsm Fund
Schedule of Investments (continued)
June 30, 2000
--------------------------------------------------------------------------------
Principal
Amount Value
--------------------------------------------------------------------------------
U.S. Government & Agency Obligations - 35.4%
FHLB:
6.60%, 1/26/2001 $ 25,000,000 $ 25,000,000
6.75%, 4/6/2001 15,000,000 15,000,000
FHLMC:
5.62%, 7/7/2000 10,000,000 10,000,000
6.35%, 1/5/2001 20,000,000 19,999,381
6.45%, 7/25/2000 75,000,000 74,704,375
FNMA:
6.41%, 8/8/2000 45,000,000 44,711,550
6.42%, 8/3/2000 26,412,000 26,265,986
9.20%, 9/11/2000 30,000,000 30,151,697
SLMA:
6.54%, 9/15/2000 100,000,000 99,994,080
6.55%, 10/4/2000 100,000,000 100,030,592
--------------------------------------------------------------------------------
Total U.S. Government & Agency Obligations
(cost $445,857,661) 445,857,661
================================================================================
Short-Term Investments - 0.1%
Repurchase Agreements - 0.1%
State Street Bank & Trust Co.
6.50%, dated 6/30/2000, due 7/3/2000,
maturity value 1,017,749
(cost $1,017,198) (a) 1,017,198 1,017,198
--------------------------------------------------------------------------------
Total Investments (cost $1,249,534,499) 99.2% 1,249,534,499
Other Assets and Liabilities 0.8 9,764,787
--------------------------------------------------------------------------------
Net Assets 100.0% $1,259,299,286
================================================================================
(a) This repurchase agreement is fully collateralized by $1,045,000 FNMA,
6.00%, 11/15/2001; market value $1,039,775
Summary of Abbreviations:
FHLB Federal Home Loan Bank
FHLMC Federal Home Loan Mortgage Corporation
FNMA Federal National Mortgage Association
SLMA Student Loan Marketing Association
See Notes to Financial Statements.
5
<PAGE>
SNAPsm Fund
Statement of Assets and Liabilities
June 30, 2000
--------------------------------------------------------------------------------
Assets
Investments in securities $1,248,517,301
Investments in repurchase agreements 1,017,198
--------------------------------------------------------------------------------
Investments at amortized cost 1,249,534,499
Interest receivable 10,369,880
Prepaid expenses and other assets 74,128
--------------------------------------------------------------------------------
Total assets $1,259,978,507
--------------------------------------------------------------------------------
Liabilities
Advisory fee payable 86,568
Distributions payable 469,540
Accrued expenses and other liabilities 123,113
--------------------------------------------------------------------------------
Total liabilities 679,221
--------------------------------------------------------------------------------
Net assets 1,259,299,286
(represented entirely by paid-in-capital)
================================================================================
Shares outstanding 1,259,299,286
--------------------------------------------------------------------------------
Net asset value per share $1.00
================================================================================
Statement of Operations
Year Ended June 30, 2000
--------------------------------------------------------------------------------
Investment income
Interest $66,321,600
--------------------------------------------------------------------------------
Expenses
Advisory fee 884,885
Custodian fee 179,453
Professional fees 33,723
Printing and postage expenses 26,308
Registration and filing fees 48,551
Organization expenses 81,095
Other 9,702
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Total expenses 1,263,717
--------------------------------------------------------------------------------
Net investment income 65,057,883
--------------------------------------------------------------------------------
Net increase in net assets resulting from operations $65,057,883
================================================================================
See Notes to Financial Statements.
6
<PAGE>
<TABLE>
<CAPTION>
SNAPsm Fund
Statements of Changes in Net Assets
-----------------------------------------------------------------------------------------------------------------------
Year Ended Year Ended
June 30, 2000 June 30, 1999
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations
Net investment income $65,057,883 $55,899,130
-----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (65,057,883) (55,899,130)
-----------------------------------------------------------------------------------------------------------------------
Capital share transactions
Proceeds from shares sold 1,087,007,610 1,231,354,819
Payment for shares redeemed (1,162,632,449) (1,105,481,392)
Net asset value of shares issued in reinvestment of distributions 69,787,279 55,899,130
-----------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from
capital share transactions (5,837,560) 181,772,557
-----------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (5,837,560) 181,772,557
Net assets
Beginning of period 1,265,136,846 1,083,364,289
-----------------------------------------------------------------------------------------------------------------------
End of period $1,259,299,286 1,265,136,846
=======================================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
SNAPsm Fund
Financial Highlights (For a share outstanding throughout each period)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended June 30,
---------------------------------------------------------------------------------
2000 1999 1998 1997 1996 (a)
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
------------------------------------------------------------------------------------------------------------------------------
Income from investment operations
Net investment income 0.06 ++ 0.05 ++ 0.06 ++ 0.05 ++ 0.05 ++
------------------------------------------------------------------------------------------------------------------------------
Less distributions to shareholders from
net investment income (0.06)++ (0.05)++ (0.06)++ (0.05)++ (0.05)++
------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
==============================================================================================================================
Total Return 5.86% 5.30% 5.71% 5.51% 5.29%
==============================================================================================================================
Ratios and Supplemental Data
Net assets, end of period (thousands) $ 1,259,299 $ 1,265,137 $ 1,083,364 $ 1,045,583 $ 954,777
Ratios to average net assets
Expenses 0.11% 0.11% 0.11% 0.11% 0.12%+
Net investment income 5.73% 5.17% 5.56% 5.38% 5.53%+
==============================================================================================================================
</TABLE>
(a) For the period from July 24, 1995 (commencement of operations) to June 30,
1996.
+ Annualized.
++ Includes net realized capital gains and losses which were less than 0.005
per share.
See notes to financial statements.
8
<PAGE>
SNAPsm Fund
Notes to Financial Statements
June 30, 2000
--------------------------------------------------------------------------------
Note 1: Organization
SNAPsm Fund (the "Fund"), is a series of the Evergreen Select Money Market
Trust (the "Trust"), a Delaware business trust, organized on September 18, 1997.
The Trust is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as a diversified, open-end management investment company. On
July 24, 1995, the Fund commenced operations through an exchange of shares with
the Virginia State Non-Arbitrage Program ("SNAP") in the amount of $628,335,685.
Prior to October 15, 1999, the Fund was organized as a series of the Mentor
Institutional Trust, a Massachusetts business trust.
Note 2: Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles, which
require 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. The amortized cost of
an instrument is determined by valuing it at original cost and thereafter
assuming a constant accretion of any discount or amortization of any premium
from its face value at a constant rate until maturity.
(b) Repurchase Agreements
The 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. The 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. The 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 Fund has qualified and intends to continue to qualify as a regulated
investment company under the Internal Revenue Code of 1986, as amended (the
"Code"). Thus, the Fund will not incur any federal income tax liability since it
expects to distribute all of its net investment company taxable income and net
capital gains, if any, to its shareholders. The Fund also intends to avoid any
excise tax liability by making the required distributions under the Code.
Accordingly, no provision for federal taxes is required.
(e) Distributions
Distributions from net investment income for the Fund 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
accordance with income tax regulations, which may differ from generally accepted
accounting principles.
(f) Organization Expenses
Organization expenses of the Fund are amortized to operations over a five-year
period on a straight-line basis.
Note 3: Investment Advisory Agreement
Mentor Investment Advisors, LLC ("Mentor Advisors"), a subsidiary of First Union
Corporation ("First Union"), is the investment advisor to the Fund and is paid a
management fee that is computed and paid monthly based on amounts determined by
applying percentage rates, starting at 0.08% and declining to 0.04% per annum as
net assets increase, to the average daily net assets of the Fund.
9
<PAGE>
SNAPsm Fund
Notes to Financial Statements (Continued)
--------------------------------------------------------------------------------
Note 4: Governmental Accounting and Financial Reporting for Investments Pools
Governmental accounting standards state that credit risk that an Investor
may not be able to obtain possession of its instrument or collateral at
maturity. A portfolio of a subject entity is required to be characterized into
certain categories. Risk category 1 includes investments that are insured or
registered or for which the securities are held by the investor or its agent in
the investor's name. Risk category 2 includes uninsured or unregistered
investments for which the securities are held by the broker's or dealer's trust
department or agent in the investor's name. Risk category 3 includes uninsured
or unregistered investments for which the securities are held by the broker or
dealer, or by its trust department or agent but not in the investor's name. All
investments held at June 30, 2000 are in risk category 2.
Note 5: Capital Share Transactions
Net assets consist entirely of paid-in-capital applicable to
$1,259,299,286. The Fund has an unlimited number of shares of beneficial
interest with $0.001 par value authorized.
10
<PAGE>
Independent Auditors' Report
The Board of Trustees and Shareholders
Evergreen Select Money Market Trust:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of the SNAP Fund, a portfolio of Evergreen Select
Money MarketTrust, as of June 30, 2000, and the related statement of operations
for the year then ended, statements of changes in net assets for each of the
years in the two-year period then ended and financial highlights for each of the
years in the four-year period then ended and for the period from July 24, 1995
(commencement of operations as a registrant under the Investment Company Act of
1940) to June 30, 1996. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 2000 by correspondence with the custodian. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
SNAP Fund, a portfolio of Evergreen Select Money Market Trust, as of June 30,
2000, and the results of its operations for the year then ended, changes in its
net assets for each of the years in the two-year period then ended and financial
highlights for each of the years in the four-year for the period from July 25,
1995 (commencement of operations as a Investment Company Act of 1940) to June
30, 1996, in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
Boston, Massachusetts
August 25, 2000
<PAGE>
SNAPsm Advisory Board
Alfred C. Anderson
Josephine Blakenship
Ellen V. Booker
Barbara O. Carraway
Richard A. Cordle
John J. Cusimano
Terry W. Forehand
Christopher E. Martino
W. Forrest Matthews, Jr.
Mary G. Morris
Marie G. Neal
Gyles R. Norwood
Francis X. O'Leary
Fred W. Parker
John H. Tuohy
Ronald H. Williams
H. Roger Zurn, Jr.
Commonwealth of Virginia Treasury Board
Mary G. Morris, Chairperson
Whitney Adams
Diana F. Cantor
Spencer H. Elmore
William E. Landsidle
Danny M. Payne
Dr. Charles D. Whyte
[LOGO OF MENTOR INVESTMENT ADVISORS]
------------------------------------
Our Commitment
To form a partnership that benefits the state,
program participants, and taxpayers of Virginia.
951 East Byrd Street, P.O. Box 1357, Richmond, VA 23218-1357
(804) 782-3770 (800) 570-SNAPsm FAX (804) 782-6604
This publication must be preceded or accompanied by an Evergreen Institutional
Trust prospectus which contains complete information regarding fees, sales
charges, and expenses. Please read it carefully before investing or sending
money. The SNAPsm fund is neither insured nor guaranteed by the U.S. Government
and there can be no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share.
